stock in the wake of the group’s quarterly earnings, which supported the narrative that the Chinese tech company’s recovery is on track. But a familiar challenge may be returning.
Shares in Alibaba Group Holding (ticker: BABA) lost almost half their market value in 2021 as Beijing cracked down on the Chinese technology sector. Things were equally difficult in 2022. Regulatory pressure continued, while economic growth slowed on the mainland, battering Alibaba’s bottom line, as a result of broad lockdowns intended to stamp out Covid-19.
China has announced new rules on overseas IPOs, potentially sparking the resumption of Chinese companies listing in New York.
Under the new rules, the China Securities Regulatory Commission (CSRC) will vet any overseas listing applications, effective from March 31. The regulator has the power to block such IPOs, and the rules make clear listings must not endanger national security.
I currently own one home, no mortgage with rental income. I own another home that will be paid off the year I turn 55. Both valued at $750,000. I have a 401(k) and other stocks and investments totaling another $750,000. My debt will be all paid by the year I turn 55.
I have been on my job for 27 years. It will be 30 years when I’m 55. What are the disadvantages and advantages of not working after 55 years of age?
It is completely understandable that you would want to retire after working for 30 years, especially when you have rental income, but I would caution you to take this decision very seriously and find a few backup plans.
One big pro of waiting until 55 is the fact that you get to withdraw from your current 401(k) at that age. It’s called the Rule of 55, and not everyone knows about it. Usually, savers have to wait until they’re 59 ½ years old in order to take distributions from their retirement accounts, such as 401(k) plans and IRAs. An early distribution incurs a 10% penalty, plus taxes.
The Rule of 55 gives workers a break if they want to tap into their 401(k) and have separated from their current job for any reason.
But you probably don’t want to tap into that 401(k) — or at least, you shouldn’t want to do that.
If you stop working at 55, you’re halting a major source of income. Rental property is great, and having no mortgage over your head is a huge plus, but will it be enough to cover your everyday expenses and the unexpected for decades to come? Retirement isn’t what it used to be — people are living longer, which means every dollar you have for retirement needs to last until you die. If you retire at 55, you could potentially be in retirement for 30 years — or more. Do you think your nest egg and any other sources of income, like Social Security and rental income, could cover you for that long?
Some people would say $750,000 in a retirement account is more than enough, but others would argue it is not. Of course, it also depends on what your annual expenses are, what future spending could look like if you were to fall ill or need to change something from your current lifestyle. And do you have any other money set aside for various circumstances, like repairs on either of your homes?
You could look to see what other sources of income may look like (for example, what can you expect from Social Security?) but you should still find a few backup plans for income so that you’re not sweating it out later in life. Not to be a Debbie Downer, but rental income may not be enough to make ends meet or keep you from distributing too much from your retirement accounts. Also, do you have money set aside to offset your costs if your property is vacant for a little while?
Check out MarketWatch’s column “Retirement Hacks” for actionable pieces of advice for your own retirement savings journey
Also, don’t forget about healthcare. If you’re not married to a spouse who has health insurance through an employer, what would you do? Medicare eligibility starts at age 65, which means you would need your own health insurance for an entire decade, and that can be quite expensive.
Instead of retiring fully, is there another job you may be happier working? Or some type of part-time gig you could take on? A huge bonus would be if this job comes with health benefits, as well as another retirement account you could keep putting money into until you’re ready to fully retire.
I know this may not have been the answer you wanted to hear, but it’s absolutely worth considering every possible good and bad thing that could come out of retiring early. But as with everything else in life, you need to strike a balance — finding work you can do that brings in an income, while also enjoying your life now. It’s not easy, but it’s worth it to plan this out a bit more before you celebrate the big 55.
Readers: Do you have suggestions for this reader? Add them in the comments below.
David Rosenberg, the former chief North American economist at Merrill Lynch, has been saying for almost a year that the Fed means business and investors should take the U.S. central bank’s effort to fight inflation both seriously and literally.
Rosenberg, now president of Toronto-based Rosenberg Research & Associates Inc., expects investors will face more pain in financial markets in the months to come.
“The recession’s just starting,” Rosenberg said in an interview with MarketWatch. “The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle.” Investors can expect to endure more uncertainty leading up to the time — and it will come — when the Fed first pauses its current run of interest rate hikes and then begins to cut.
Fortunately for investors, the Fed’s pause and perhaps even cuts will come in 2023, Rosenberg predicts. Unfortunately, he added, the S&P 500 SPX, -0.61%
could drop 30% from its current level before that happens. Said Rosenberg: “You’re left with the S&P 500 bottoming out somewhere close to 2,900.”
At that point, Rosenberg added, stocks will look attractive again. But that’s a story for 2024.
In this recent interview, which has been edited for length and clarity, Rosenberg offered a playbook for investors to follow this year and to prepare for a more bullish 2024. Meanwhile, he said, as they wait for the much-anticipated Fed pivot, investors should make their own pivot to defensive sectors of the financial markets — including bonds, gold and dividend-paying stocks.
MarketWatch: So many people out there are expecting a recession. But stocks have performed well to start the year. Are investors and Wall Street out of touch?
Rosenberg: Investor sentiment is out of line; the household sector is still enormously overweight equities. There is a disconnect between how investors feel about the outlook and how they’re actually positioned. They feel bearish but they’re still positioned bullishly, and that is a classic case of cognitive dissonance. We also have a situation where there is a lot of talk about recession and about how this is the most widely expected recession of all time, and yet the analyst community is still expecting corporate earnings growth to be positive in 2023.
In a plain-vanilla recession, earnings go down 20%. We’ve never had a recession where earnings were up at all. The consensus is that we are going to see corporate earnings expand in 2023. So there’s another glaring anomaly. We are being told this is a widely expected recession, and yet it’s not reflected in earnings estimates – at least not yet.
There’s nothing right now in my collection of metrics telling me that we’re anywhere close to a bottom. 2022 was the year where the Fed tightened policy aggressively and that showed up in the marketplace in a compression in the price-earnings multiple from roughly 22 to around 17. The story in 2022 was about what the rate hikes did to the market multiple; 2023 will be about what those rate hikes do to corporate earnings.
“ You’re left with the S&P 500 bottoming out somewhere close to 2,900. ”
When you’re attempting to be reasonable and come up with a sensible multiple for this market, given where the risk-free interest rate is now, and we can generously assume a roughly 15 price-earnings multiple. Then you slap that on a recession earning environment, and you’re left with the S&P 500 bottoming out somewhere close to 2900.
This is just pure mathematics. All the stock market is at any point is earnings multiplied by the multiple you want to apply to that earnings stream. That multiple is sensitive to interest rates. All we’ve seen is Act I — multiple compression. We haven’t yet seen the market multiple dip below the long-run mean, which is closer to 16. You’ve never had a bear market bottom with the multiple above the long-run average. That just doesn’t happen.
David Rosenberg: ‘You want to be in defensive areas with strong balance sheets, earnings visibility, solid dividend yields and dividend payout ratios.’
Rosenberg Research
MarketWatch: The market wants a “Powell put” to rescue stocks, but may have to settle for a “Powell pause.” When the Fed finally pauses its rate hikes, is that a signal to turn bullish?
Rosenberg: The stock market bottoms 70% of the way into a recession and 70% of the way into the easing cycle. What’s more important is that the Fed will pause, and then will pivot. That is going to be a 2023 story.
The Fed will shift its views as circumstances change. The S&P 500 low will be south of 3000 and then it’s a matter of time. The Fed will pause, the markets will have a knee-jerk positive reaction you can trade. Then the Fed will start to cut interest rates, and that usually takes place six months after the pause. Then there will be a lot of giddiness in the market for a short time. When the market bottoms, it’s the mirror image of when it peaks. The market peaks when it starts to see the recession coming. The next bull market will start once investors begin to see the recovery.
But the recession’s just starting. The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle when the central bank has cut interest rates enough to push the yield curve back to a positive slope. That is many months away. We have to wait for the pause, the pivot, and for rate cuts to steepen the yield curve. That will be a late 2023, early 2024 story.
MarketWatch: How concerned are you about corporate and household debt? Are there echoes of the 2008-09 Great Recession?
Rosenberg: There’s not going to be a replay of 2008-09. It doesn’t mean there won’t be a major financial spasm. That always happens after a Fed tightening cycle. The excesses are exposed, and expunged. I look at it more as it could be a replay of what happened with nonbank financials in the 1980s, early 1990s, that engulfed the savings and loan industry. I am concerned about the banks in the sense that they have a tremendous amount of commercial real estate exposure on their balance sheets. I do think the banks will be compelled to bolster their loan-loss reserves, and that will come out of their earnings performance. That’s not the same as incurring capitalization problems, so I don’t see any major banks defaulting or being at risk of default.
But I’m concerned about other pockets of the financial sector. The banks are actually less important to the overall credit market than they’ve been in the past. This is not a repeat of 2008-09 but we do have to focus on where the extreme leverage is centered.
It’s not necessarily in the banks this time; it is in other sources such as private equity, private debt, and they have yet to fully mark-to-market their assets. That’s an area of concern. The parts of the market that cater directly to the consumer, like credit cards, we’re already starting to see signs of stress in terms of the rise in 30-day late-payment rates. Early stage arrears are surfacing in credit cards, auto loans and even some elements of the mortgage market. The big risk to me is not so much the banks, but the nonbank financials that cater to credit cards, auto loans, and private equity and private debt.
MarketWatch: Why should individuals care about trouble in private equity and private debt? That’s for the wealthy and the big institutions.
Rosenberg: Unless private investment firms gate their assets, you’re going to end up getting a flood of redemptions and asset sales, and that affects all markets. Markets are intertwined. Redemptions and forced asset sales will affect market valuations in general. We’re seeing deflation in the equity market and now in a much more important market for individuals, which is residential real estate. One of the reasons why so many people have delayed their return to the labor market is they looked at their wealth, principally equities and real estate, and thought they could retire early based on this massive wealth creation that took place through 2020 and 2021.
Now people are having to recalculate their ability to retire early and fund a comfortable retirement lifestyle. They will be forced back into the labor market. And the problem with a recession of course is that there are going to be fewer job openings, which means the unemployment rate is going to rise. The Fed is already telling us we’re going to 4.6%, which itself is a recession call; we’re going to blow through that number. All this plays out in the labor market not necessarily through job loss, but it’s going to force people to go back and look for a job. The unemployment rate goes up — that has a lag impact on nominal wages and that is going to be another factor that will curtail consumer spending, which is 70% of the economy.
“ My strongest conviction is the 30-year Treasury bond. ”
At some point, we’re going to have to have some sort of positive shock that will arrest the decline. The cycle is the cycle and what dominates the cycle are interest rates. At some point we get the recessionary pressures, inflation melts, the Fed will have successfully reset asset values to more normal levels, and we will be in a different monetary policy cycle by the second half of 2024 that will breathe life into the economy and we’ll be off to a recovery phase, which the market will start to discount later in 2023. Nothing here is permanent. It’s about interest rates, liquidity and the yield curve that has played out before.
MarketWatch: Where do you advise investors to put their money now, and why?
Rosenberg: My strongest conviction is the 30-year Treasury bond TMUBMUSD30Y, 3.674%.
The Fed will cut rates and you’ll get the biggest decline in yields at the short end. But in terms of bond prices and the total return potential, it’s at the long end of the curve. Bond yields always go down in a recession. Inflation is going to fall more quickly than is generally anticipated. Recession and disinflation are powerful forces for the long end of the Treasury curve.
As the Fed pauses and then pivots — and this Volcker-like tightening is not permanent — other central banks around the world are going to play catch up, and that is going to undercut the U.S. dollar DXY, +0.70%.
There are few better hedges against a U.S. dollar reversal than gold. On top of that, cryptocurrency has been exposed as being far too volatile to be part of any asset mix. It’s fun to trade, but crypto is not an investment. The crypto craze — fund flows directed to bitcoin BTCUSD, +0.35%
and the like — drained the gold price by more than $200 an ounce.
“ Buy companies that provide the goods and services that people need – not what they want. ”
I’m bullish on gold GC00, +0.22%
– physical gold — bullish on bonds, and within the stock market, under the proviso that we have a recession, you want to ensure you are invested in sectors with the lowest possible correlation to GDP growth.
Invest in 2023 the same way you’re going to be living life — in a period of frugality. Buy companies that provide the goods and services that people need – not what they want. Consumer staples, not consumer cyclicals. Utilities. Health care. I look at Apple as a cyclical consumer products company, but Microsoft is a defensive growth technology company.
You want to be buying essentials, staples, things you need. When I look at Microsoft MSFT, -0.61%,
Alphabet GOOGL, -1.79%,
Amazon AMZN, -1.17%,
they are what I would consider to be defensive growth stocks and at some point this year, they will deserve to be garnering a very strong look for the next cycle.
You also want to invest in areas with a secular growth tailwind. For example, military budgets are rising in every part of the world and that plays right into defense/aerospace stocks. Food security, whether it’s food producers, anything related to agriculture, is an area you ought to be invested in.
You want to be in defensive areas with strong balance sheets, earnings visibility, solid dividend yields and dividend payout ratios. If you follow that you’ll do just fine. I just think you’ll do far better if you have a healthy allocation to long-term bonds and gold. Gold finished 2022 unchanged, in a year when flat was the new up.
In terms of the relative weighting, that’s a personal choice but I would say to focus on defensive sectors with zero or low correlation to GDP, a laddered bond portfolio if you want to play it safe, or just the long bond, and physical gold. Also, the Dogs of the Dow fits the screening for strong balance sheets, strong dividend payout ratios and a nice starting yield. The Dogs outperformed in 2022, and 2023 will be much the same. That’s the strategy for 2023.
The omicron subvariant that became dominant in the U.S. several weeks ago continued to extend its lead over other variants in the latest week, according to Centers for Disease Control and Prevention data that was updated on Friday.
XBB.1.5, the omicron sublineage that first emerged in small numbers in October, accounted for 66.4% of cases in the week through Feb. 4, the data shows. That’s up from 61.3% the previous week. The prior dominant variants, BQ.1.1 and BQ.1, together accounted for 27.2% of new cases, down from 31.1% the previous week.
In the CDC’s Region 2, which includes New York, New Jersey, the U.S. Virgin Islands and Puerto Rico, XBB.1.5 accounted for 92.4% of new cases, up from 91.1% the previous week.
The World Health Organization is monitoring XBB and its sublineages and has said that so far, it shows a growth advantage over other circulating variants — in other words, it’s more infectious — but there is still no data to suggest it’s any more lethal, or likely to cause severe illness or death.
The WHO said this week the pandemic is not yet over, although the world may be reaching an inflection point as higher immunity rates lower death rates. But it also urged countries to stay the course, while President Joe Biden has pledged to end twin COVID emergencies on May 11, a move that has dismayed healthcare experts.
Travel between Hong Kong and China will no longer require COVID-19 PCR tests nor be held to a daily limit, authorities announced Friday, as both places seek to drive economic growth, the Associated Press reported.
Hong Kong’s tourism industry has suffered since 2019 after months of political strife that at times turned into violent clashes between protesters and police, as well as harsh entry restrictions implemented during the pandemic.
The announcement came a day after Lee unveiled a tourism campaign aimed at attracting travelers to Hong Kong that includes 500,000 free air tickets for tourists to visit the semi-autonomous Chinese city.
In the U.S., the seven-day average of new U.S. COVID cases stood at 41,412 on Thursday, according to a New York Times tracker. That’s down 19% from two weeks ago. The daily average for hospitalizations was down 21% at 31,394. The average for deaths was 462, down 7% from two weeks ago.
Cases are now rising in 17 states, the tracker shows, led by Minnesota, where they are up 63% from two weeks ago. On a per capita basis, cases are highest in Kentucky at 22 per 100,000 residents.
• China’s COVID lockdowns, and the ending of them in December that sparked a wave of cases, are featuring prominently in U.S. fourth-quarter earnings, with Starbucks SBUX, -2.68% the latest company to highlight their impact on its performance. The coffee-shop chain’s stock was down 3.8% Friday, after it said same-store sales in China, a key market, fell 29% because of the case surge. That was enough to drag down international same-store sales, which had an overall drop of 13%. Still, Chief Financial Officer Rachel Ruggeri said on the call that, “excluding China, we had tremendous growth across markets.” She also said the company’s fiscal 2023 outlook remains unchanged.
• Some Georgia senators want to permanently block schools and most state and local government agencies from requiring people to get vaccinated against COVID, the AP reported. In 2022, lawmakers put a one-year ban into law, part of a nationwide conservative backlash against mandates meant to prevent the spread of the respiratory illness. But that ban expires on June 30 in Georgia if lawmakers don’t act. The Senate Health and Human Services Committee voted 7-2 this week to advance Senate Bill 1, which makes the ban permanent, to the full Senate.
• After a two-year hiatus due to the coronavirus pandemic that brutally brought one of Europe’s oldest Mardi Gras celebrations in Binche, Belgium to a halt, celebrations are back with a vengeance this winter, the AP reported. The earliest records of the Binche Mardi Gras, which draws thousands of revelers, date to the 14th century. Many Belgian towns hold ebullient carnival processions before Lent. But what makes Binche unique are the “Gilles”—local men deemed fit to wear the Mardi Gras costumes. Under rules established by the local folklore defense association, only men from Binche families or having resided there for at least five years are eligible to wear the Gille costume. Other characters—the Peasant, the Sailor, the Harlequin, the Pierrot or the Gille’s Wife—also play a role in the carnival.
The U.S. leads the world with 102.5 million cases and 1,110,856 fatalities.
The CDC’s tracker shows that 229.6 million people living in the U.S., equal to 69.2% of the total population, are fully vaccinated, meaning they have had their primary shots.
So far, just 51.4 million Americans, equal to 15.5% of the overall population, have had the updated COVID booster that targets both the original virus and the omicron variants.
The World Health Organization said nearly 20 million new COVID cases were recorded in the 28 days through Jan. 29, down 78% from the previous 28 days.
The WHO counted more than 114,000 deaths in the period, up 65% from the previous one.
The agency is switching to a 28-day interval to smooth out weekly fluctuations in cases and deaths, but it continues to caution that a reduction in testing and delays in reporting in many countries are distorting the numbers.
“Current trends in reported COVID-19 cases are underestimates of the true number of global infections and reinfections as shown by prevalence surveys,” the WHO said in its weekly epidemiological update.
The other three are BF.7, BQ.1 and BA.2.75, along with their sublineages. These are currently the ones showing a growth-rate advantage in some countries compared with other circulating variants.
U.S. cases are still declining. The seven-day average of new cases stood at 41,771 on Wednesday, according to a New York Times tracker. That’s down 23% from two weeks ago.
The daily average for hospitalizations was down 22% at 31,593. The average for deaths was 453, down 6% from two weeks ago, but still an undesirably high number heading into the third year of the pandemic and ahead of President Joe Biden’s plan to end the twin COVID emergencies on May 11.
• Quest Diagnostics Inc. DGX, -1.55%
is the latest healthcare company to report a steep drop in revenue from COVID-related products, in this instance a 74.6% slide in tests in its fourth quarter. Revenue from COVID tests fell to $184 million in the quarter from $722 million a year ago, when the omicron wave was about to crest. But the company still posted better-than-expected earnings, raised its quarterly dividend and added $1 billion to its share-buyback authorization, which has $311 million already available.
• Hong Kong will give away air tickets and vouchers to woo tourists back to the international financial hub as it races to catch up with other popular travel destinations in a fierce regional competition, the Associated Press reported. During the pandemic, the city largely aligned itself with mainland China’s zero-COVID strategy and has relaxed its entry rules months later than rival destinations such as Singapore, Japan and Taiwan. Even after it reopened its border with mainland China in January, tourism recovery was sluggish. On Thursday, Chief Executive John Lee launched a tourism campaign, “Hello Hong Kong,” saying the city will offer 500,000 free air tickets to welcome tourists from around the world in what he called “probably the world’s biggest welcome ever.”
• Washington state Gov. Jay Inslee has tested positive for COVID-19 for the second time, the AP reported separately. Inslee’s office said in a statement Wednesday that he had tested positive and was experiencing very mild symptoms, including a cough. He is consulting with his doctor about whether to receive Paxlovid antiviral treatments, according to the statement. He plans to continue working. Trudi Inslee, his spouse, has tested negative.
The U.S. leads the world with 102.5 million cases and 1,109,687 fatalities.
The CDC’s tracker shows that 229.6 million people living in the U.S., equal to 69.2% of the total population, are fully vaccinated, meaning they have had their primary shots.
So far, just 51.4 million Americans, equal to 15.5% of the overall population, have had the updated COVID booster that targets both the original virus and the omicron variants.
The federal government on Wednesday hit Amazon.com Inc. with worker-safety related citations and penalties at three more warehouses, two weeks after issuing citations at the company’s warehouses in three different states.
The latest citations are the result of the Occupational Safety and Health Administration’s investigation of Amazon AMZN, +1.96%
warehouses stemming from referrals from the U.S. Attorney’s Office for the Southern District of New York. At all six locations, OSHA investigators cited the company for exposing warehouse workers to a high risk of low back injuries and other musculoskeletal disorders and asked for a multitude of changes and corrections.
“Amazon’s operating methods are creating hazardous work conditions and processes, leading to serious worker injuries,” said OSHA Assistant Secretary Doug Parker in a statement Wednesday. “They need to take these injuries seriously and implement a company-wide strategy to protect their employees from these well-known and preventable hazards.”
The newest citations come from investigations into Amazon warehouses in Aurora, Colo.; Nampa, Idaho; and Castleton, N.Y. At all three sites, OSHA inspectors concluded that workers are suffering from musculoskeletal injuries “as a result of lifting heavy items while attempting to meet pace of work and production quotas,” according to each of the hazard letters that were sent to those warehouses’ operations managers. Those concerns were similar to those raised by OSHA at the three other Amazon warehouses in Florida, Illinois and a different warehouse in New York a couple of weeks ago.
In Aurora and Nampa, inspectors also found evidence that injuries may not have been reported because Amazon’s on-site first-aid clinic “was not staffed appropriately.” In Castleton, staffers at the company’s on-site clinic, known as AmCare, “question whether workers are actually injured, pressure injured workers to work through their injuries, and steer injured workers to Amazon-preferred doctors,” Rita Young, OSHA area director, wrote in the hazard letter.
The penalties associated with the citations at the three sites total $46,875. OSHA also asked Amazon to detail the changes it makes in response, and said the company’s response will determine whether more evaluation is needed. In addition, the agency’s inspectors may do follow-up visits within the next six months.
Just like with the first three citations, Amazon intends to appeal.
“We take the safety and health of our employees very seriously, and we don’t believe the government’s allegations reflect the reality of safety at our sites,” Amazon spokeswoman Kelly Nantel said in an emailed statement.
A company spokeswoman also referred to several safety-related efforts by the company, including its partnership with the National Safety Council; equipment that’s supposed to help reduce the need for twisting, bending and reaching; and “process improvements” designed by Amazon’s robotics team.
In anticipation of Wednesday’s OSHA citations, a group of worker advocates held a virtual news conference Tuesday. Among the panelists was Debbie Berkowitz, a former chief of staff at OSHA and now a fellow at the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University.
“I want to make it clear to everybody that these OSHA citations are incredibly historic and significant,” Berkowitz said. “Don’t get thrown by the low amount of penalties,” she added, saying the Occupational Safety and Health Act is a “weak law.”
She went on to say that “OSHA really grounded their investigations using doctors, experts, and what to do to mitigate the hazards… They show that Amazon needs to take action.”
Also present on the news conference was Amazon warehouse worker Jennifer Crane, from St. Peters, Mo.
“I’m glad to see OSHA investigate the safety crisis at Amazon,” she said. “The company blames us for getting injured. They push us to work at unrealistic speeds.”
The initial version of this story had incorrect price changes for 2023. It is now updated with information as of the market close on Jan. 31.
Investors staged a January rally, with solid gains for the S&P 500 and an even better showing for technology stocks that led the dismal downward action in 2022.
President Joe Biden will end the twin national emergencies for addressing COVID-19 on May 11, as most of the world gets closer to normalcy nearly three years after the emergencies were first declared, the Associated Press reported.
The move would formally overturn the federal response to the virus and change it to one where COVID is treated as an endemic threat to public health, much like the flu, which returns seasonally but can be managed without major disruption to the healthcare system.
The coronavirus pandemic is still a global health emergency, according to the World Health Organization, but an advisory panel has determined that it may be nearing an inflection point where higher levels of immunity will lead to fewer deaths.
But Tedros cautioned that weekly reported deaths have been climbing since the beginning of December, at a cost of more than 170,000 lives.
“And that’s just the reported deaths; we know the actual number is much higher,” Tedros said at the meeting. “We can’t control the virus, but we can do more to address the vulnerabilities in populations and health systems.”
Vaccination remains the key tool, he said, and countries must vaccinate 100% of their most at-risk groups and increase access to testing and early antiviral use. When there is a surge in cases, countries need context-specific measures, including maintaining and expanding laboratory networks.
“And it means fighting misinformation,” he said. “We remain hopeful that in the coming year, the world will transition to a new phase in which we reduce hospitalizations and deaths to the lowest possible level, and health systems are able to manage COVID-19 in an integrated and sustainable way. “
His comments comes as U.S. cases, hospitalizations and deaths continue to fall, with the seven-day average of new cases standing at 46,021 on Sunday, according to a New York Times tracker. That’s down 25% from two weeks ago.
The daily average for hospitalizations was down 22% to 33,451. The average for deaths was 521, down 8% from two weeks ago.
Cases are currently rising in just nine states, as well as in the U.S. Virgin Islands. Tennessee is leading with total case counts, which are up 104% in two weeks, and also on a per capita basis, with 51 cases per 100,000 residents.
• Chinese health officials are saying that the wave of cases that emerged after the government dropped strict COVID restrictions in December is “coming to an end,” BBC News reported. China’s Center for Disease Control and Prevention said there had been “no obvious rebound” in cases during Lunar New Year holiday gatherings last week. “In this time, no new variant has been discovered, and the country’s current wave is coming to an end,” said China’s CDC. China has understated its COVID numbers throughout the pandemic, but experts say the decline reported now corresponds with the expected timing of an end to this major wave.
What’s seen as the world’s largest annual human migration is under way again in China for the Lunar New Year, after the country lifted pandemic restrictions. The Wall Street Journal’s Yoko Kubota reports on how it’s expected to boost the economy — and the risk of new COVID-19 outbreaks. Photo: Cfoto/Zuma Press
• China announced it would resume issuing visas for Japanese travelers beginning Sunday, ending its nearly three-week suspension that was an apparent protest of Tokyo’s tougher entry requirements for tourists from China, the Associated Press reported. The statement was posted on the Chinese Embassy’s website. Japan reopened its borders for individual tourists in October, allowing travelers to show proof of vaccination instead of testing at airports unless they show symptoms, but on Dec. 30, Japan began requiring all travelers from China to show a predeparture negative test and take an additional test upon arrival.
• A former Russian Orthodox monk who denied that the coronavirus existed and defied the Kremlin was handed a seven-year prison sentence Friday, the AP reported separately. Nikolai Romanov, 67, who was known as Father Sergiy until his excommunication by the Russian Orthodox Church, urged his followers to disobey the Russian government’s lockdown measures and spread conspiracy theories about a global plot to control the masses. A court in Moscow convicted him of inciting hatred. His lawyer immediately announced plans to appeal.
The U.S. leads the world with 102.3 million cases and 1,107,646 fatalities.
The CDC’s tracker shows that 229.6 million people living in the U.S., equal to 69.2% of the total population, are fully vaccinated, meaning they have had their primary shots.
So far, just 51.4 million Americans, equal to 15.5% of the overall population, have had the updated COVID booster that targets both the original virus and the omicron variants.
The panel responsible for the nation’s first state-level exploration of reparations for Black Americans discussed an important question this weekend: How will the state pay for reparations?
The California reparations task force listened to testimony from experts who suggested possible sources for compensation, after previous meetings had touched on the potential for hundreds of thousands of dollars in monetary reparations for specific harms. The experts’ suggestions included taxing the rich, such as through a state estate tax or a “mansion tax”; incentivizing the wealthy to help fund reparations by providing tax breaks, akin to how charitable giving minimizes one’s tax burden; or helping all taxpayers with below-median wealth by means of a tax credit, which would in turn help Black households.
Suggestions from the expert testimony, given at the task force’s meeting at San Diego State University on Friday, could be incorporated into the body’s final recommendations to the state legislature, which are due this summer.
“This is incredibly insightful and provocative,” said Lisa Holder, a task force member. “It gives us lots to think about.”
The experts’ suggestions about possible sources of funding were based on their testimony that current U.S. tax laws favor the wealthy — who are most likely to be white.
“Our tax laws as written have a disparate impact,” said Dorothy Brown, a tax professor at Georgetown Law and author of the book, “The Whiteness of Wealth: How the Tax System Impoverishes Black Americans and How We Can Fix It.” She said “Black people are likely to pay higher taxes” because they are less likely to gain access to the same tax breaks as their white peers.
Brown said what would be ideal is a reparations tax credit designed to compensate Black taxpayers, but she thinks it would face legal challenges. So she said the next best thing would be “a wealth tax credit applicable to all taxpayers in households with below-median wealth.”
“Given the racial wealth disparity, this will result in a disproportionate percentage of Black households receiving the credit,” she testified
A pair of estate planners who testified introduced the idea of taxing “swollen” wealth to replace “stolen” wealth, and showed that the racial wealth gap widened after 1981 — when the biggest tax cut in American history was enacted. They cited Federal Reserve figures from 2019 that showed the average white household had $812,000 more wealth than the average Black household.
One of their suggestions for sources of money for reparations is a state estate tax. (Under federal law, the lifetime estate-tax exemption is $12.9 million for individuals this year.) Their other suggestions include: a mansion tax, a graduated-property tax — which they acknowledged may not be likely in California because Proposition 13 taxes properties based on their value when they were sold — or even a tax on the fledgling “metaverse.”
Sarah Moore Johnson, founding partner at Washington, D.C.-based Birchstone Moore, is one of the estate planners who testified. She proposed a state-sponsored reparations tax fund that could receive charitable contributions.
“Charitable contributions are currently permitted to the state or federal government, but only for public purposes,” she said. “If racial repair is recognized as a public purpose,” it could be tax-deductible in the same manner as charitable contributions, she said.
Acknowledging that the idea of reparations continues to be controversial, task force member state Sen. Steven Bradford asked the experts whether they think wealthy people, like their clients, would be opposed to such ideas.
“What I hear from my clients is a level of guilt about being able to give this much money to their heirs,” Moore Johnson said. “From where I sit and what I see, I see some support.”
Raymond Odom, an estate-tax lawyer and director of Wealth Transfer Services at Northern Trust in Chicago who co-presented with Moore Johnson, echoed that sentiment.
Odom said he has helped “wealth get concentrated” for decades, and how that happens is through very wealthy people setting up foundations and charities that allow them to avoid taxes. “It’s a joy being able to talk to people who could change that,” he said, adding that he has “talked to wealthy white folks who are behind this.”
“I can tell you unequivocally: Very wealthy people have lots of trouble figuring out what to do with their wealth,” Odom told the task force.
Addressing the possibility of relying on charitable sources, task force member Don Tamaki said, “I can’t argue with the fact that charity is not reparations. But in my humble opinion, we need to explore every avenue of funding.”
Wherever any possible compensation comes from, Brown, the tax professor and author, had two key suggestions for the task force. First, she said reparations should not be treated as taxable income, citing precedent such as tax-free treatment of Holocaust payments, and Japanese-Americans who received compensation because of their mass incarceration during World War II. And her second suggestion was that Black Americans should not have to pay for their own reparations, which she said “would be entirely inconsistent with the intent and spirit of the task force’s goals.”
The nine-member task force, established by a 2020 law and responsible for studying and developing reparations for Black Americans because of slavery, released a preliminary report last year. It is set to disband when it submits its final report and recommendations to the state legislature by its July 1 deadline, but on Saturday the task force voted to remain intact for another year — until July 1, 2024 — to help with the implementation of its proposals, despite questions from some of its members about whether it had the authority to decide to do so.
The task force also voted to change the dates of its next meeting, which was previously scheduled for the end of February. In what could be the final in-person meeting before the report is due will be held March 3 and 4 in Sacramento.
A Food and Drug Administration advisory panel voted unanimously Thursday for Americans to get a once-a-year booster against COVID-19, with the strain to be decided midyear for a fall campaign, the Associated Press reported.
“This is a consequential meeting to determine if we’ve reached the point in the pandemic that allows for simplifying the use of current COVID-19 vaccines,” said the FDA’s Dr. David Kaslow.
The panel agreed that people should get the same vaccine formula whether they’re receiving their initial vaccinations or a booster. Today, Americans get one formula based on the original coronavirus strain that emerged in 2020 for their first two or three doses, and their latest booster is a combination shot made by Pfizer PFE, -0.33%
or Moderna MRNA, -0.90%
that adds protection against omicron.
The FDA would have to decide how to phase in that change.
COVID-19 vaccines have saved millions of lives, and booster doses remain the best protection against severe disease and death. But Americans are tired of getting vaccinated. While more than 80% of the U.S. population has had at least one COVID-19 shot, only 16% of those eligible for the latest boosters — so-called bivalent doses updated to better match more recent virus strains — have gotten one.
Separately, the Centers for Disease Control and Prevention offered an update Friday on the strains that are dominant in the U.S., showing that XBB.1.5, the omicron sublineage that first emerged in small numbers in October, has extended its lead over other variants.
XBB.1.5 accounted for 61.3% of cases in the week through Jan. 28, the data shows, up from 49.1% a week ago. The prior dominant variants, BQ.1.1 and BQ.1, together accounted for 31.1% of new cases.
In the CDC’s Region 2, which includes New York, New Jersey, the U.S. Virgin Islands and Puerto Rico, XBB.1.5 accounted for 91.1% of new cases, up from 86.8% the previous week.
The World Health Organization said this week that it now has data on XBB.1.5 from 54 countries, showing it has a growth advantage over other circulating strains but still appears no more severe.
In its weekly epidemiological update, the agency said it has raised the confidence level of its risk assessment for XBB.1.5 to “moderate” from “low,” using these additional reports. The highest number of XBB.1.5 cases are showing up in the U.S., the U.K., Canada, Denmark, Germany, Ireland and Austria.
The news comes as the seven-day average of new cases stood at 46,300 on Thursday, according to a New York Times tracker. That’s down 24% from two weeks ago. The daily average for hospitalizations was down 24%, at 34,833. The average number of deaths was 549, down 3% from two weeks ago.
Cases are currently climbing in eight states — Illinois, Tennessee, Minnesota, Alaska, South Dakota, Vermont, Kentucky and Kansas — as well as in the U.S. Virgin Islands and Washington, D.C.
• China’s claim that COVID cases and deaths have peaked and are falling fast is failing to take on board that testing is not keeping up with infections, the Guardian reported. China ended its zero-COVID policy in December and promptly saw a wave of cases spread across the nation. Its health authorities said this week that the worst is behind it, but experts are wary that it is underreporting numbers, as it has since the start of the pandemic. Now the pullback in testing is a factor, according to the Guardian. Daily tests had dropped to 280,000 by Monday, down from 150 million on Dec. 9, and 7.54 million on Jan. 1. Some provinces had enacted systems for collecting the results of residents or allowing residents to self-report, but the figures were “affected by the willingness of residents to test.”
What’s seen as the world’s largest annual human migration is under way again in China for the Lunar New Year, after the country lifted pandemic restrictions. WSJ’s Yoko Kubota reports on how it’s expected to boost the economy–and the risk of new Covid-19 outbreaks. Photo: Cfoto/Zuma Press
• South Korea says it will continue to restrict the entry of short-term travelers from China through the end of February over concerns that the spread of COVID may worsen following the Lunar New Year holidays, the AP reported. South Korea in early January stopped issuing most short-term visas at its consulates in China, citing concerns about the virus surge in the country.
• Spain is set to end the mandatory use of face masks on public transport nearly three years after the start of the pandemic, the AP reported separately. Spanish Health Minister Carolina Darias said Thursday she would recommend that the government remove the health regulation when the cabinet meets on Feb. 7. Face masks will remain obligatory inside hospitals, health clinics, dentist offices and pharmacies.
The U.S. leads the world with 102.3 million cases and 1,107,559 fatalities.
The CDC’s tracker shows that 229.6 million people living in the U.S., equal to 69.2% of the total population, are fully vaccinated, meaning they have had their primary shots.
So far, just 51.4 million Americans, equal to 15.5% of the overall population, have had the updated COVID booster that targets both the original virus and the omicron variants.
Bed Bath & Beyond Inc. shares plunged more than 20% and were halted Thursday afternoon, after the retailer disclosed in a filing that it was in default on loans that have been called in.
Included in the filing is news that Bed Bath & Beyond BBBY, -22.22%
had defaulted on loans earlier this month, and executives were informed on Wednesday by banker JP Morgan Chase & Co. JPM, +0.62%
that the debt was due immediately.
“On or around January 13, 2023, certain events of default were triggered under the Company’s Credit Facilities as a result of the Company’s failure to prepay an overadvance and satisfy a financial covenant, among other things,” the filing reads.
“As a result of the continuance of such events of default, on January 25, 2023, the administrative agent under the Amended Credit Agreement notified the Company that (i) the principal amount of all outstanding loans under the Credit Facilities, together with accrued interest thereon, the FILO Applicable Premium and all fees (including, for the avoidance of doubt, any break funding payments) and other obligations of the Company accrued under the Amended Credit Agreement, are due and payable immediately.”
Shares had traded between $3.25 and $3.47 on the day until about 5 minutes after the filing was released, when shares suddenly dove, triggering a halt. The stock fell as low as $2.10 and was halted three times between 2:46 p.m. and 3:14 p.m. before closing at $2.52, a 22.2% daily decline.
The struggling retailer admitted earlier this year that it has “substantial doubt” about its “ability to continue as a going concern” and may need to declare bankruptcy. The home goods retailer also said that it expects to record lower sales for the latest quarter than analysts were anticipating.
“As we consider all paths and strategic alternatives, we continue to work with our advisors and implement actions to manage our business as efficiently as possible,” a Bed Bath & Beyond spokesperson said in an email Thursday. “As is our practice, we do not comment on speculation. We will update all stakeholders on our plans as they develop and finalize.”
Bed Bath & Beyond stock has become popular with “meme” traders and short sellers, who have been betting on opposite sides of the trade as the retailer reported a poor holiday season and plans to shut down stores. Shares have traded as high as $30.06 and as low as $1.27 in the past 12 months, while declining 81.8% overall in that time. The S&P 500 index SPX, +1.10%
has declined 7.7% in the past 12 months.
A few days into the first Lunar New Year holiday since the lifting of pandemic restrictions in China, Chinese consumers are eager to travel but are also wary as a major COVID wave sweeps the nation, MarketWatch’s Tanner Brown reported.
The 15-day festival is considered the world’s largest annual migration, during which students and workers return to their hometowns in droves — that is, until COVID shut down travel in 2020.
The Food and Drug Administration is recommending that the U.S. decide each June which SARS-CoV-2 strains should be included in an annual fall booster shot.
Doing so would allow updated COVID-19 vaccines to be ready for distribution “no later than September” each year, according to documents published by the regulator.
The U.S. Justice Department is preparing to sue Alphabet Inc. in the coming days over its dominance in the online ad market, according to a report late Monday.
Citing sources familiar with the matter, Bloomberg News reported the antitrust suit is expected to be filed in federal court before the end of this week, and as soon as Tuesday.
It would be the second antitrust suit filed by the Justice Department against Google parent Alphabet. In October 2020, the DOJ accused Google of being “a monopolist in the general search services, search advertising, and general search text advertising markets.” In a 2020 blog post, Google called that suit “deeply flawed” and said people use Google because they choose to, not because they are forced to. That case is set for trial in the fall.
Alphabet faces a number of other lawsuits targeting its business practices, including a $16.3 billion class-action suit filed in the U.K. in November accusing the tech giant of reaping “super profits” at the expense of thousands of smaller companies. Google called that lawsuit “speculative and opportunistic.”
Alphabet’s Class A shares GOOGL, +1.81%
are down 24% over the past 12 months while its Class C shares GOOG, +1.94%
have fallen about 22%, compared to the S&P 500’s SPX, +1.19%
9% dip over the past year. Both classes of Alphabet shares dipped nearly 1% in after-hours trading Monday after the Bloomberg report was published.
“It’s like being robbed in a library, but you can’t shout ‘Thief!’ because there are ‘Silence, please’ signs everywhere.”
That’s how Roger Hamilton, chief executive of Genius Group Ltd. GNS, +55.02%,
describes the powerlessness he feels as U.S. securities rules prevent him from discussing his company’s share price, even as it comes under attack from a group of naked short sellers.
The Singapore-based education company on Thursday announced it had appointed a former FBI director to lead a task force investigating alleged illegal trading in its stock that it first addressed in early January.
The news sent the stock up a record 290% on Thursday, and it climbed another 59% on Friday. Volume of about 270 million shares traded in Thursday’s session crushed the daily average of about 634,000 — another indicator, Hamilton told MarketWatch in an interview Friday, of wrongdoing, given that the company’s float is just 10.9 million shares. “Clearly, that’s far more shares than we created,” he said.
Genius Group has evidence from Warshaw Burstein LLP and Christian Levine Law Group, with tracking from Share Intel, that certain individuals and/or companies sold but failed to deliver a “significant” amount of its shares as part of a scheme seeking to artificially depress the stock price.
The company is now exploring legal action and is planning an extraordinary general meeting in the coming weeks to get shareholder approval for its planned actions. These include paying a special dividend as a way to flush out bad actors and working with regulators to share information.
Share Intel uses tracking software in real time to determine exactly where there are discrepancies in the market and where brokers are opening large positions, Hamilton said. The software can measure the number of shares that are being naked shorted and has found multiple instances where significant amounts of fake shares were being created, said Hamilton.
Naked short selling is illegal under Securities and Exchange Commission rules, but that hasn’t stopped the practice, which Hamilton said affects far more companies than is generally known.
In regular short trading, an investor borrows shares from someone else, then sells them and waits for the stock price to fall. When that happens the shares are bought cheaper and returned to the prior owner, with the short seller pocketing the difference as profit.
In naked short selling, investors don’t bother borrowing the stock first and simply sell shares with a promise to deliver them at a later date. When that promise is not fulfilled, it’s known as failure to deliver.
By repeating that process again and again, bad actors can generate massive profits and manipulate a stock’s price lower, with an ultimate goal of driving a company to bankruptcy, at which point all the equity is wiped out and the naked shorts no longer need to be covered.
Hamilton said the evidence gathered by Genius Group shows a great deal of the illegal activity is happening on U.S. exchanges, but there’s also activity happening off-exchange and involving dark pools.
The company is fighting back “because we want this to stop,” Hamilton told MarketWatch. “They’re taking value away from our shareholders. They’re predators. They’re doing something illegal, and we want it to stop, whether that means getting regulators to enforce existing regulations or put new ones in place.”
Public companies have to have committees to monitor and report internal fraud to protect shareholders, he said. But there is no such team looking for external fraud and many retail investors see stocks being manipulated, he said.
“Hopefully, regulations will change and regulators will see there are as many, if not more, threats from outside a company,” he said.
Genius Group is not alone, said Hamilton. He cited among other examples Torchlight, an oil- and gas-exploration company that decided to merge with Metamaterial Inc. to thwart a naked-short-selling attack.
The stock rose from 30 cents to $11 in the six months after the deal was completed, and the company was able to raise about $183 million through a combination of convertible debt and equity. An interview Hamilton conducted with Torchlight’s former CEO, John Brda, can be found below.
Then there’s Jeremy Frommer, CEO of Creatd Inc. CRTD, +4.14%,
which aims to unlock creativity for creators, brands and consumers, who is behind Ceobloc, a website that aims to end the practice of naked short selling.
“Illegal naked short selling is the biggest risk to the health of today’s public markets,” is how the site introduces its mission.
On Friday, the stock of Helbiz Inc. HLBZ, +65.48%
joined Genius Group in rocketing higher in high volume, after that company said it, too, was taking on naked short sellers.
The New York–based maker of e-scooters and e-bicyles said that it was following Genius Group’s example and that it believes “certain individuals and/or companies may have engaged in illegal short selling practices that have artificially depressed the stock price.” The stock had plummeted 64% over the three months through Thursday’s close at 12.31 cents.
Genius Group’s stock, which went public in April 2022 at $6 a share, has gained more than 600% this week. The S&P 500 SPX, +1.89%
has gained 1.1% over the same four trading sessions.
The XBB.1.5 omicron subvariant that became dominant in the U.S. last week has gained more ground, according to data from the nation’s main health agency, accounting for 49.1% of new cases in the latest week, up from 43% a week ago.
BQ.1.1 accounted for 26.9% of new cases, down from 28.8% a week ago, while BQ.1 accounted for 13.3%, down from 15.9% a week ago.
In the New York region, which includes New Jersey, Puerto Rico and the U.S. Virgin Islands, XBB.1.5 accounted for 86.8% of new cases, up from 82.7% a week ago.
The World Health Organization has acknowledged that XBB.1.5, which was first detected in tiny numbers in the U.S. in October, has become the most transmissible variant yet thanks to a growth advantage. The agency said that it appears to have a greater ability to evade immunity than earlier variants.
In its weekly epidemiological update, the agency said the XBB line is one of four omicron subvariants that are showing transmission advantage over other circulating variants. The other three are BF.7, BQ.1 and BA.2.75.
For now, the WHO said it has no additional data on XBB.1.5, but BA.2.75.2 is showing the most neutralization resistance to sera from vaccinated and COVID-infected patients.
In the U.S., the seven-day average of new COVID cases stood at 50,839 on Thursday, according to a New York Times tracker. That’s down 20% from two weeks ago and below the recent peak of 70,508 on Christmas Eve.
The daily average for hospitalizations was down 18% at 39,272. The average for deaths was 498, up 5% from two weeks ago.
Cases are rising in just six states, as well as the U.S. Virgin Islands, Washington, D.C., and Puerto Rico, a significant improvement from recent trends. On a per capita basis, Illinois now has the most cases at 31 per 100,000 residents, followed by Kentucky at 30 and Rhode Island at 27.
• Japanese Prime Minister Fumio Kishida on Friday announced plans to downgrade the legal status of COVID-19 to the equivalent of seasonal influenza in the spring, a move that would further relax mask requirements and other preventive measures as the country seeks to return to normalcy, the Associated Press reported. Kishida said he has instructed experts and government officials to discuss the details on changing the status of COVID-19. A change would also remove self-isolation rules and other antivirus requirements and allow COVID-19 patients to seek treatment at any hospital instead of restricting them to specialized facilities.
• As Chinese people crowd onto trains and buses ahead of the Lunar New Year holiday, which begins on Jan. 21, officials are playing down fears that widespread travel over the popular family holiday will lead to a spreader event, Reuters reported. In comments reported by state media late Thursday, Vice Premier Sun Chunlan said the virus was at a “relatively low” level, while health officials said the number of COVID patients in the hospital and in critical condition was on the decline. But there are doubts about China’s official account of an outbreak that has overwhelmed hospitals and funeral homes since Beijing abandoned strict COVID controls and mass testing last month.
What’s seen as the world’s largest annual human migration is under way again in China for the Lunar New Year after the country lifted pandemic restrictions. The Wall Street Journal’s Yoko Kubota reports on how it’s expected to boost the economy — and the risk of new COVID-19 outbreaks. Photo: Cfoto/Zuma Press
• CureVac’s CVAC, +1.06%
promising Phase 1 data for flu and COVID-19 vaccine candidates is a signal to investors that its messenger RNA technology is competitive, according to UBS Securities analysts, who upgraded the company’s stock to buy from neutral on Thursday, as MarketWatch’s Jaimy Lee reported. They also more than doubled the price target, to $18 from $8. CureVac had attempted to develop a first-generation COVID vaccine but failed. “As the first data of the 2nd-gen platform’s immunogenicity in humans, this is a major inflection point for the story, and suggests potentially competitive mRNA platform relative to mRNA peers,” the analysts wrote.
The U.S. leads the world with 101.9 million cases and 1,103,681 fatalities.
The Centers for Disease Control and Prevention’s tracker shows that 229.5 million people living in the U.S., equal to 69.1% of the total population, are fully vaccinated, meaning they have had their primary shots.
So far, just 50.7 million Americans, equal to 15.3% of the overall population, have had the updated COVID booster that targets both the original virus and the omicron variants.
Bed Bath & Beyond Inc. has received a warning that it is not in compliance for continued Nasdaq listing because the company has not yet filed its Form 10-Q quarterly report with the Securities and Exchange Commission.
In an SEC filing Thursday, the troubled home-goods retailer said it had received the Nasdaq notice on Jan. 12. The notice has no immediate effect on the listing or trading of Bed Bath & Beyond’s BBBY, -4.09%
common stock on the Nasdaq COMP, +0.86%,
the filing said. “The Notice states that the Company has 60 calendar days from the date of the Notice, or March 13, 2023, to submit a plan to regain compliance with the Listing Rule,” Bed Bath & Beyond said in the filing.
The stock of a Singapore-based ed-tech and education company called Genius Group Ltd. rallied more than 200% on Thursday, after it said it appointed a former F.B.I. director to lead a task force investigating alleged illegal trading in its stock that it first disclosed in early January.
The stock was last up 264% to mark its biggest-ever one-day percentage gain. Volume of 197.76 million shares traded crushed the 65-day average of just 634,17. Genius Group GNS, +290.29%
also said it would issue a special dividend to shareholders to help expose the wrongdoing and is considering a dual listing that would make illegal naked short selling more difficult.
The task force will be led by Timothy Murphy, a former deputy director of the F.B.I. who is also on the board. It will include Richard Berman, also a Genius Group Director and chair of the company’s Audit Committee, and Roger Hamilton, the chief executive officer of Genius Group.
“The company has been in communication with government regulatory authorities and is sharing information with these authorities to assist them,” the company said in a statement.
Genius Group said it has proof from Warshaw Burstein LLP and Christian Levine Law Group, with tracking from Share Intel, that certain individual and/or companies sold but failed to deliver a “significant” amount of its shares as part of a scheme seeking to artificially depress the stock price.
It will now explore legal action and will hold an extraordinary general meeting in the coming weeks to get shareholder approval for its planned actions.
Genius’ IPO priced at $6 a share in April of 2022, he wrote in a blog. The company, which aims to develop an entrepreneur education system, then completed five acquisitions of education companies to build out its portfolio and reported more than 60% growth in its last earnings report.
Analysts at Diamond Equity assigned it an $11.28 stock price target, while Zacks assigned it a $19.20 stock price target.
“By all measures, we believed we were doing all the right things to justify a rising share price,” said Hamilton.
The company then announced two funding rounds totaling $40 million to grow its balance sheet to more than $60 million, yet its stock fell to under 40 cents, or less than 25% of the cash raised and less than 20% of its net assets.
“This didn’t happen gradually,” the executive wrote. “It happened in two month intervals from our IPO, in June, August, October and December. Each time, over a period of a few days, massive selling volume that was a multiple of our float (As most of our shares are on lock up, only around 4 million are tradeable) was sold into the market, making our share price drop by 50% or more.”
The company has since drawn on Wes Christian, a short-selling litigator from Christian Levine Law Group, who has helped it understand how naked short selling works, and then Share Intel helped find the proof that that’s what has happened.
Individuals or groups get together and sell shares in a target company that they don’t own, with the aim of getting the share price to fall 50% in a short period. They use small-cap firms that have low buying volume, allowing them to scare off buyers.
“The broker doesn’t bother to find shares to borrow,” said Hamilton. “They simply sell shares they don’t have and after a few days book them as FTDs (failure to deliver) or hide them as long sales instead of short sales. The people who bought the shares have no idea they bought a fake share, and suddenly there’s plenty more shares in the market than there should be.”
If these groups sell 6 million shares from $12 to $6 each, and then buy back over two months at under $6, they double their money. That allows them to make up to $30 million out of thin air. They can then repeat the whole process a few months later.
“If they don’t buy back all the shares, they simply leave them as FTDs or hide them in offshore accounts,” he wrote. “At no point do they need to put up any cash to make this happen, as they’re making money from the moment they start selling fake shares.”
The ultimate goal is to push a company into bankruptcy, where the equity will be wiped out, meaning they never have to cover the short position on the fake shares.
By issuing a special dividend, Genius is hoping to find who is responsible, as all brokers are forced to disclose to the Depository Trust & Clearing Corp. (DTCC) how many shares their clients hold and how many dividends will be paid. Theoretically, that should expose the oversold shares and dishonest brokers will be forced to cover their position, said Hamilton.
In practice, dishonest brokers will not declare the fake shares and just pay the dividend out of their own pockets.
“If you issue a dividend that isn’t straight cash—such as a spinoff of a company so you are issuing shares, or a blockchain based asset, then the brokers can’t do that are a forced to either cover or be exposed,” he wrote.
