A man watches two crude oil tankers remaining anchored on Lake Maracaibo, near Maracaibo, Zulia state, Venezuela on Dec. 17, 2025. On Dec. 16, President Donald Trump ordered a “total and complete blockade” of sanctioned oil tankers Venezuela has been using to bypass a six-year-old US oil embargo.
ALEJANDRO PAREDES
AFP via Getty Images
The U.S. imposed new sanctions Wednesday on four companies operating in Venezuela’s oil sector and blocked four oil tankers accused of helping the Nicolás Maduro regime evade international restrictions and generate revenue for what U.S. officials described as an “illegitimate narco-terrorist regime.”
The measures, announced by the Treasury Department’s Office of Foreign Assets Control, target companies and vessels involved in transporting Venezuelan crude as part of what officials say is a growing “shadow fleet” used to bypass sanctions and move oil through opaque global networks.
“President Trump has been clear: We will not allow the illegitimate Maduro regime to profit from exporting oil while it floods the United States with deadly drugs,” Treasury Secretary Scott Bessent said in a statement. “The Treasury Department will continue to implement President Trump’s campaign of pressure on Maduro’s regime.”
According to Treasury, the newly sanctioned entities include Corniola Limited, Krape Myrtle Co. Ltd., Winky International Limited and Aries Global Investment Ltd., all accused of operating in Venezuela’s oil sector in violation of U.S. sanctions. Four oil tankers linked to those companies — Nord Star, Rosalind (also known as Lunar Tide), Della and Valiant — were also designated as blocked property.
U.S. officials said the vessels have been used to transport Venezuelan crude in defiance of sanctions first imposed in 2019, when Washington targeted PDVSA, the state-run oil company, as part of a broader effort to pressure the Maduro regime.
“Maduro’s regime increasingly relies on a shadow fleet of vessels to evade sanctions, disguise the origin of oil shipments and generate revenue for its destabilizing activities,” the Treasury Department said.
Under the sanctions, all property and interests belonging to the designated companies that fall under U.S. jurisdiction are blocked. U.S. persons and entities are generally prohibited from engaging in transactions involving the sanctioned firms unless authorized by the Treasury Department. The measures also extend to any entities that are owned, directly or indirectly, 50 percent or more by the designated parties.
Treasury officials warned that violations of U.S. sanctions could result in civil or criminal penalties, including for non-U.S. persons who facilitate prohibited transactions. Financial institutions and shipping companies that do business with the sanctioned entities also risk enforcement action.
The latest designations build on a series of recent U.S. moves targeting Venezuela’s energy sector. In December, Treasury sanctioned additional individuals, companies and vessels tied to PDVSA, citing efforts to disrupt revenue streams that help sustain the Maduro regime.
U.S. officials have long argued that oil exports remain the primary financial lifeline for Maduro’s administration, which Washington accuses of drug trafficking, corruption, human rights abuses and undermining democratic institutions. Both the Biden and Trump administrations have relied on sanctions as a central tool to pressure Caracas, though limited licenses have at times been granted to allow restricted energy transactions.
Earlier this month, President Trump ordered what he described as a “complete blockade” of sanctioned oil tankers traveling to and from Venezuela, escalating pressure on the Caracas socialist regime. “Venezuela is completely surrounded by the largest armada ever assembled in the history of South America,” Trump said in a social media post. “It will only get bigger, and the shock to them will be like nothing they have ever seen before.”
The sanctions move could significantly disrupt Venezuela’s oil exports, the backbone of its economy. The country relies almost entirely on tanker shipments to move crude to international markets. According to the tracking firm TankerTrackers, more than 30 vessels operating in or near Venezuelan waters this month have already been sanctioned by the United States.
The U.S. military has also expanded its presence in the region in recent months, with American forces carrying out operations in the Caribbean and eastern Pacific. Since September, U.S. forces have conducted dozens of strikes on vessels suspected of trafficking narcotics, actions that U.S. officials say are part of a broader campaign to counter drug trafficking networks linked to Venezuela.
Galardonado periodista con más de 30 años de experiencia, especializado en la cobertura de temas sobre Venezuela. Amante de la historia y la literatura.
According to reports, Evernorth — a Ripple-backed treasury firm — has agreed to merge with Armada Acquisition Corp II and plans to list under the XRPN ticker.
The SPAC deal aims to raise $1 billion to build what Evernorth calls a large XRP treasury. Ripple and co-founder Chris Larsen contributed XRP to the project.
Nine days after the SPAC announcement, reports said Evernorth had already received $1 billion worth of XRP. The merger is targeted to close in Q1 2026.
On Contributions & Cash Buying
Because the early inputs were paid in XRP rather than cash, immediate upward pressure on exchange order books did not happen.
Market purchases require fiat or cash to be placed into public markets. SBI’s announced $300 million cash pledge is one example of money that could be used to buy XRP outright.
But so far most of the headline amounts are XRP moved into a treasury, not fresh cash hitting exchanges.
It is my understanding the new @evernorthxrp venture will raise $1BN through XRP direct investment, as announced and as we’ve seen on the chain.
So you thinking “how will that affect open market XRP?”. Let me explain.
There next plan is to IPO on stock exchange. This will raise…
Vincent Van Code, a software engineer and active voice in the XRP community, told followers on X that the bigger event may still be ahead.
He said the IPO itself could bring billions in new cash. If those funds are later used to buy XRP on the open market, he warned, existing supply could tighten and a “supply shock” might follow.
Van Code did not offer a fixed timetable. Other commentators, including a market voice known as Nietzbux, have already framed the development as strongly bullish for XRP.
Why The Timing Matters
Based on reports, the sequence is what could change prices: cash raised first, then purchases on public markets. If that order is reversed — cash arrives and large buys follow quickly — liquidity could be tested.
Exchanges have varying depth. A single large buyer can move prices more in thin markets than in thick ones. That is simple market mechanics. It is also why some community members are watching the SPAC schedule closely.
There will come a time where XRP and XRPL is just where you keep most of your wealth. That is called Treasury.
A number of developers and analysts now speak of XRP not only as a payment bridge but also as a treasury asset inside the XRPL ecosystem.
Van Code suggested that a time may come when people keep a big share of their wealth in XRP and on the XRP Ledger.
Ripple’s CTO David Schwartz has emphasized similar ideas about self-custody and on-ledger utility. Those themes are being reused as part of the argument for long-term demand.
Featured image from Gemini, chart from TradingView
SALEM, Ore. — Thousands of Oregonians could soon find unexpected money in their mailboxes, thanks to a $3.5 million initiative from the Oregon State Treasury.
State Treasurer Elizabeth Steiner, MD, announced Tuesday that the Treasury will automatically return unclaimed funds to verified residents this month through its annual “Checks Without Claims” program.
“At Treasury, we are pleased to reunite thousands of Oregonians with their forgotten cash—especially since they don’t have to lift a finger to get it,” said Treasurer Steiner. “Our mission is to do more than just hold these funds—it’s to put them back in people’s pockets so they can thrive financially.”
The checks—ranging from $50 to $10,000—will be sent to individuals whose unclaimed property was reported to the state between 2019 and 2023. Along with the check, recipients will also receive a confirmation letter from the Treasurer’s office.
This is the second round of “Checks Without Claims” in 2025. Earlier this year, the Treasury reconnected more than 20,000 people with nearly $11 million in unclaimed money.
Unclaimed property includes funds such as:
More than $1 billion in unclaimed assets is currently held by the Oregon Treasury. While most people must file a claim to retrieve their funds, “Checks Without Claims” proactively sends money to individuals whose information the agency can confidently verify.
According to national data, 1 in 7 Americans has unclaimed property. Oregon residents are encouraged to search for theirs anytime here.
They say journalists never truly clock out. But for Christian, that’s not just a metaphor, it’s a lifestyle. By day, he navigates the ever-shifting tides of the cryptocurrency market, wielding words like a seasoned editor and crafting articles that decipher the jargon for the masses. When the PC goes on hibernate mode, however, his pursuits take a more mechanical (and sometimes philosophical) turn.
Christian’s journey with the written word began long before the age of Bitcoin. In the hallowed halls of academia, he honed his craft as a feature writer for his college paper. This early love for storytelling paved the way for a successful stint as an editor at a data engineering firm, where his first-month essay win funded a months-long supply of doggie and kitty treats – a testament to his dedication to his furry companions (more on that later).
Christian then roamed the world of journalism, working at newspapers in Canada and even South Korea. He finally settled down at a local news giant in his hometown in the Philippines for a decade, becoming a total news junkie. But then, something new caught his eye: cryptocurrency. It was like a treasure hunt mixed with storytelling – right up his alley!
So, he landed a killer gig at NewsBTC, where he’s one of the go-to guys for all things crypto. He breaks down this confusing stuff into bite-sized pieces, making it easy for anyone to understand (he salutes his management team for teaching him this skill).
Think Christian’s all work and no play? Not a chance! When he’s not at his computer, you’ll find him indulging his passion for motorbikes. A true gearhead, Christian loves tinkering with his bike and savoring the joy of the open road on his 320-cc Yamaha R3. Once a speed demon who hit 120mph (a feat he vowed never to repeat), he now prefers leisurely rides along the coast, enjoying the wind in his thinning hair.
Speaking of chill, Christian’s got a crew of furry friends waiting for him at home. Two cats and a dog. He swears cats are way smarter than dogs (sorry, Grizzly), but he adores them all anyway. Apparently, watching his pets just chillin’ helps him analyze and write meticulously formatted articles even better.
Here’s the thing about this guy: He works a lot, but he keeps himself fueled by enough coffee to make it through the day – and some seriously delicious (Filipino) food. He says a delectable meal is the secret ingredient to a killer article. And after a long day of crypto crusading, he unwinds with some rum (mixed with milk) while watching slapstick movies.
Looking ahead, Christian sees a bright future with NewsBTC. He says he sees himself privileged to be part of an awesome organization, sharing his expertise and passion with a community he values, and fellow editors – and bosses – he deeply respects.
So, the next time you tread into the world of cryptocurrency, remember the man behind the words – the crypto crusader, the grease monkey, and the feline philosopher, all rolled into one.
Chinese networks are laundering billions of dollars in drug cartel cash through the U.S. financial system, according to a new report from the Treasury Department.
Treasury’s Financial Crimes Enforcement Network said banks flagged about $312 billion in transactions from suspected Chinese money laundering networks from January 2020 to December 2024. That came from 137,153 Bank Secrecy Act reports from financial institutions.
Treasury also linked Chinese money laundering networks to U.S. real estate transactions, casinos, human trafficking and even laundering through assisted living homes in New York. The networks also use Chinese students studying in the U.S. to help facilitate some schemes. Real estate alone accounted for about 13% of the total, but the vast majority was U.S. banks.
“Money laundering networks linked to individual passport holders from the People’s Republic of China enable cartels to poison Americans with fentanyl, conduct human trafficking, and wreak havoc among communities across our great nation,” Under Secretary for Terrorism and Financial Intelligence John Hurley said.
The report comes after Treasury Secretary Scott Bessent suspended a Biden-era small business rule in March designed to curb money laundering that small businesses had challenged in court. President Donald Trump said the Corporate Transparency Act, which Congress passed in 2021, was “outrageous and invasive.” Bessent said it was costly for small businesses. The CTA would have required small businesses to report information about their beneficial owners to Treasury’s FinCEN. The rules remain in place for foreign businesses.
The FinCEN report noted that laws and regulations in Mexico and China also play a role.
“Mexico’s currency restrictions prevent large amounts of U.S. dollars from being deposited into Mexican financial institutions, hindering the cartels’ ability to launder funds through the formal Mexican financial system,” according to the report. The [People’s Republic of China] currency control laws limit the amount of money Chinese citizens can transfer abroad each year.”
The two groups have learned to work well together in recent years. FinCEN refers to Chinese money laundering networks as CMLNs.
“Ultimately, Chinese citizens’ demand for large quantities of U.S. dollars and the cartels’ need to launder their illicit U.S. dollar proceeds has resulted in a mutualistic relationship wherein the cartels sell off their illicitly obtained U.S. dollars to CMLNs who, in turn, sell the U.S. dollars to Chinese citizens seeking to evade China’s currency control laws,” the report said.
Scott Greytak, an anticorruption attorney and the deputy executive director for Transparency International U.S., said the U.S. is considered one of the best places in the world for money laundering because of its strong property rights and rule of law.
“Even though they don’t like the rule of law, they certainly like their money being protected by it,” he told The Center Square. “So we just tend to attract a ton of dirty money.”
Greytak said that U.S. law enforcement officials can’t track the money without stricter financial, business, and real estate reporting.
The FinCEN report highlighted China’s capital flight restrictions, which limit the amount of money Chinese citizens can transfer abroad annually to $50,000 for investment and financial purposes. That limit has sprouted its own underground banking network.
“Many Chinese citizens have turned to alternative methods, like the Chinese underground banking system (CUBS), to bypass these restrictions. The CUBS consists of various individuals and businesses from different industries who collaborate through ‘mirror transfers’ to move money across borders, as part of informal value transfer system schemes. The CUBS, in turn, depend on CMLNs to secure foreign currency.”
If you search for “home still” on Amazon, you will see a bunch of products that are explicitly advertised as tools for producing liquor. But while it is legal to make beer, cider, or wine at home for your own consumption or to share with friends, unlicensed production of distilled spirits remains a federal felony punishable by up to five years in prison, a $10,000 fine, or both.
That law is unconstitutional, a federal judge in Texas ruled last week. In addition to potentially protecting at least some DIY distillers from a daunting threat, the decision offers hope of constraining a federal government that has expanded far beyond the limited and enumerated powers granted by the Constitution.
“This decision is a victory for personal freedoms and for federalism,” said Dan Greenberg, general counsel at the Competitive Enterprise Institute (CEI), which represented the hobbyists who challenged the ban on home distilling. The ruling, he noted, “reminds us that, as Americans, we live under a government of limited powers.”
That is easy to forget, given the chilling arrogance exemplified by the unsolicited letter that one of the plaintiffs in this case, Scott McNutt, received from the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB). The TTB said it had learned that McNutt “may have purchased a still capable of producing alcohol,” warned that “unlawful production of distilled spirits is a criminal offense,” and noted the potential penalties.
To avoid those penalties, the TTB explained, anyone who wants to concentrate the alcohol in a fermented beverage must first obtain the requisite federal permits. But those permits are not available to home distillers.
That policy, the government argued, is justified by the need to safeguard federal revenue by preventing evasion of liquor taxes. But U.S. District Judge Mark T. Pittman concluded that the challenged provisions, which apply to noncommercial producers who owe no such taxes, do not count as revenue collection or as a “necessary and proper” means of achieving that goal.
One of those laws makes “distilling on prohibited premises” a crime, while the other prohibits stills in “any dwelling house.” Those provisions, Pittman notes, make “no reference to any mechanism or process that operates to protect revenue.” And while “prohibiting the possession of an at-home still” meant to produce alcoholic beverages “might be convenient to protect tax revenue,” he says, “it is not a sufficiently clear corollary to the positive power of laying and collecting taxes.”
Pittman also rejected the government’s claim that the ban was authorized by the power to regulate interstate commerce, which Congress routinely invokes to justify legislation. He notes that “neither of these provisions connect[s] the prohibited behavior to interstate commerce.”
Home distilling, the government argued, “substantially affects interstate commerce in the aggregate.” But to justify regulation of noncommercial activity under that “substantial effects” test, Pittman says, requires showing that it is necessary to execute “a comprehensive statute that regulates commerce on its face,” which is not true in this case.
In that respect, Pittman thinks, the ban on home distilling differs from the medical marijuana ban that the Supreme Court upheld in 2005, which supposedly was justified as part of a comprehensive regulatory scheme established by the Controlled Substances Act. Dissenting from that decision, Justice Clarence Thomas warned that its logic would allow Congress to “regulate virtually anything.”
As Pittman sees it, however, the Commerce Clause is still not quite the blank check that Congress would like it to be. He issued a permanent injunction that bars the government from enforcing the home-distilling ban against McNutt or other members of the Texas-based Hobby Distillers Association.
“While the federal government has become more enthusiastic about inflating the scope of its powers over the last century, this case shows that there are limits to the government’s authority,” said CEI attorney Devin Watkins. “If the government appeals this decision to a higher court, we look forward to illuminating those limits.”
WASHINGTON (Reuters) – The U.S. Treasury Department has set a minimum of $492 million in total it is seeking in next week’s auctions to sell warrants to purchase shares in U.S. airlines the government received in exchange for COVID-19 assistance.
Congress approved $54 billion in COVID-19 air carrier bailouts in 2020 and 2021. Airlines were required to repay $14 billion of that total and Treasury received warrants to purchase stock at the share price of the time of the awards.
American Airlines received $12.6 billion in government assistance, followed by Delta Air Lines $11.9 billion, United Airlines $10.9 billion, and Southwest Airlines at $7.2 billion.
Seven other airlines received smaller awards, including $2.2 billion for Alaska Airlines.
Treasury plans to auction its warrants in the 11 airlines starting Monday. The air carriers declined comment or did not immediately answer if they plan to take part in the auction.
Treasury set reserve prices of $221 million for its Delta warrants, $159 million for United, $59 million for American Airlines, $30 million for SkyWest, $17 million for Alaska Air, $2.9 million for Hawaiian Airlines, $1.9 million for Frontier Group and $1.7 million for Southwest.
The Treasury is seeking at least $50,000 per airline for its warrants in Allegiant, Spirit Airlines, and JetBlue. Those warrants and others are priced below the current trading prices of the carriers’ stocks.
The warrants expire between April 2025 and June 2026.
The U.S. government also extended $25 billion in low-cost loans to airlines. Treasury said “the proceeds of these sales will provide additional returns to the American taxpayer from the financial assistance and liquidity that Treasury provided to these airlines during the pandemic.”
The pandemic prompted a historic collapse in air travel demand. U.S. air passenger travel fell by 60% in 2020 to its lowest since 1984, down more than 550 million passengers, as airlines slashed costs and struggled to survive.
(Reporting by David Shepardson; Editing by David Gregorio)
The benchmark 10-year Treasury yield is hovering below levels that caused a massive crash last fall.
Yet, persistent inflation and weak Treasury auctions could boost yields past the 5% mark.
Once this threshold is crossed, investors could be in for a sharp correction in stocks.
Treasury bonds might not be the most high-octane trade, but yields rising not that far from current levels could eventually make things all but boring.
While this year’s equity momentum has kept Wall Street distracted, the benchmark 10-year rate has crept up as much as 83 basis points since 2023.
That’s taken it as high as 4.7% in April, not far from the threshold level that broke markets last fall: 5%. When this 16-year high was breached in October, it triggered one of history’s worst market crashes. While Treasurys fell on Friday after a so-so jobs report, markets are still warily eyeing further moves upward amid sticky inflation and broad economic strength.
Could a rerun of 5% yields happen? For analysts, it all hinges on fiscal policy and inflation.
Where yields are headed
“Bond king” Bill Gross is among those touting caution, telling investors that high federal borrowing will push yields to 5% levels within the next 12 months.
Yields move inversely to bond prices, meaning that lackluster demand sends rates up. That’s why Treasury auctions have become attention-grabbers for markets, as investors watch to see if there are enough willing buyers.
“Sloppy” auctions are what caused the bond rout last fall, market veteran Ed Yardeni told Business Insider. Many buyers have been turned off by America’s exploding debt, and with few efforts to clamp it down, more disappointing auctions could be in store, he said.
Both the Treasury Department and Federal Reserve have made liquidity adjustments this week to take pressure off buyers, but it’s to be seen whether these efforts are enough.
In the case 5% is ever breached for this reason, the Yardeni Research president said it could go differently: “This time, you know, we may find that 5% lingers and then we’ll all be wondering whether the next move is towards six, or back to four.”
Investment firm SEI had similar concerns in April, and added that this year’s stubborn inflation data only compounds the problem in the near term. With consumer prices remaining elevated, interest rates have stayed put, halting a rush to buy fixed-income:
“We would not be surprised to see the 10-year Treasury yield retest the 5% level even with the prospect of rate cuts on the horizon,” it wrote in a note.
But to Eric Sterner of Apollon Wealth Management, more pessimism would have to hit markets to justify a move past 5%. Only if inflation pushes the Fed to hike interest rates would that be a concern, but that doesn’t seem likely.
Still, yields aren’t coming down any time soon while inflation stays sticky, he told BI:
“If we can get that one rate cut in, potentially we can get closer down to 4%,” he said. “But I don’t think we’re getting below 4%.”
The dangers of 5%
When 10-year yields broke through the 5% mark last fall, traders panicked and the S&P 500 nosedived nearly 6% from October’s peak-to-trough.
Some of that is on account of how quickly the yield moved up, Yardeni said, which is not the case this time around.
“It’s been a more stealth kind of move, happening at a more slow pace; it hasn’t gotten anybody’s attention in the stock market,” he said. “Even the growth stocks have done well, even though they’re not supposed to do well when bond yields are going up.”
But moving past 5% could change that. According to a Goldman Sachs note, highs beyond 5% have historically triggered negativity for stocks. In 1994, even strong earnings had difficulty pushing equities up against higher yields.
Even Sterner agreed that it’s a risk, though only in the short term: “Hypothetically speaking, if we do cross 5%, I think that could trigger a market correction or a sell off of 10% or more.”
NEW YORK (Reuters) – Relentless selling of U.S. government bonds has brought Treasury yields to their highest level in more than a decade and a half, roiling everything from stocks to the real estate market.
The yield on the benchmark 10 year Treasury – which moves inversely to prices – briefly hit 5% late Thursday, a level last seen in 2007. Expectations that the Federal Reserve will keep interest rates elevated and mounting U.S. fiscal concerns are among the factors driving the move.
Because the $25-trillion Treasury market is considered the bedrock of the global financial system, soaring yields on U.S. government bonds have had wide-ranging effects. The S&P 500 is down about 7% from its highs of the year, as the promise of guaranteed yields on U.S. government debt draws investors away from equities. Mortgage rates, meanwhile, stand at more than 20-year highs, weighing on real estate prices.
“Investors have to take a very hard look at risky assets,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York. “The longer we remain at higher interest rates, the more likely something is to break.”
Fed Chairman Jerome Powell on Thursday said monetary policy does not feel “too tight,” bolstering the case for those who believe interest rates are likely to stay elevated.
Powell also nodded to the “term premium” as a driver for yields. The term premium is the added compensation investors expect for owning longer-term debt and is measured using financial models. Its rise was recently cited by one Fed president as a reason why the Fed may have less need to raise rates.
Here is a look at some of the ways rising yields have reverberated throughout markets.
Higher Treasury yields can curb investors’ appetite for stocks and other risky assets by tightening financial conditions as they raise the cost of credit for companies and individuals.
Elon Musk warned that high interest rates could sap electric-vehicle demand, which knocked shares of the sector on Thursday. Tesla’s shares closed the day down 9.3%, as some analysts questioned whether the company can maintain the runaway growth that has for years set it apart from other automakers.
With investors gravitating to Treasuries, where some maturities currently offer far above 5% to investors holding the bonds to term, high-dividend paying stocks in sectors such as utilities and real estate have been among the worst hit.
The U.S. dollar has advanced an average of about 6.4% against its G10 peers since the rise in Treasury yields accelerated in mid-July. The dollar index, which measures the buck’s strength against six major currencies, stands near an 11-month high. A stronger dollar helps tighten financial conditions and can hurt the balance sheets of U.S. exporters and multinationals. Globally, it complicates the efforts of other central banks to tamp down inflation by pushing down their currencies. For weeks, traders have been watching for a possible intervention by Japanese officials to combat a sustained depreciation in the yen, down 12.5% against the dollar this year.
“The correlation of the USD with rates has been positive and strong during the current policy tightening cycle,” BofA Global Research strategist Athanasios Vamvakidis said in a note on Thursday.
The interest rate on the 30-year fixed-rate mortgage – the most popular U.S. home loan – has shot to the highest since 2000, hurting homebuilder confidence and pressuring mortgage applications. In an otherwise resilient economy featuring a strong job market and robust consumer spending, the housing market has stood out as the sector most afflicted by the Fed’s aggressive actions to cool demand and undercut inflation.
U.S. existing home sales dropped to a 13-year low in September.
As Treasury yields surge, credit market spreads have widened with investors demanding a higher yield on riskier assets such as corporate bonds. Credit spreads blew out after a banking crisis this year, then they narrowed in subsequent months.
The rise in yields, however, has taken the ICE BofA High Yield Index near a four-month high, adding to funding costs for prospective borrowers.
Volatility in U.S. stocks and bonds has bubbled up in recent weeks as expectations have shifted for Fed policy. Anticipation of a surge in U.S. government deficit spending and debt issuance to cover those expenditures has also unnerved investors.
The MOVE index, measuring expected volatility in U.S. Treasuries, is near its highest in more than four months. Volatility in equities has also picked up, taking the Cboe Volatility Index to a five-month peak.
(This story has been refiled to add the dropped word ‘briefly’ in paragraph 2)
(Reporting by Saqib Iqbal Ahmed; Writing by Ira Iosebashvili; Editing by Stephen Coates)
United States Treasury Secretary Janet Yellen gave congressional lawmakers a momentary reprieve on Friday, pushing back a projected debt ceiling deadline to June 5. Previously, Yellen had estimated that funds could run out by the first of the month.
“Based on the most recent available data, we now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5,” Yellen wrote in a letter to Congressional leaders. She added that the Treasury Department is scheduled to make $130 billion in payments on the first two days of the month, including payments for Social Security and Medicare, which will “leave Treasury with an extremely low level of resources.”
Yellen’s letter comes as negotiators in Congress and the White House have still failed to come to an agreement to raise the $31.4 trillion debt ceiling. Republicans are determined to extract spending cuts and impose work requirements on recipients of social services. Though President Joe Bidenclaimed on Friday a deal was “very close,” the weeks-long negotiations continued into the weekend. On Saturday morning, Speaker of the House Kevin McCarthysaid Republicans were “closer to an agreement” but didn’t offer a timeline for an ultimate compromise.
In her letter, Yellen reiterated that a default would “cause severe hardship to American families.” Earlier this month, she warned that the country was facing “economic catastrophe” if congressional leaders failed to come to an agreement. On Wednesday, one of three major ratings agencies put the U.S.’s AAA credit rating on “negative watch.”
The few extra days offer a little breathing room, but not much. “No one can guarantee there won’t be a default, if for no other reason than the clock is ticking down here pretty quickly,” G. William Hoagland, senior vice president at the Bipartisan Policy Center, toldThe New York Times on Friday. “We are on thin ice in a big way.”
The run on Silicon Valley Bank (SVB) SIVB— on which nearly half of all venture-backed tech start-ups in the United States depend — is in part a rerun of a familiar story, but it’s more than that. Once again, economic policy and financial regulation has proven inadequate.
The news about the second-biggest bank failure in U.S. history came just days after Federal Reserve Chair Jerome Powell assured Congress that the financial condition of America’s banks was sound. But the timing should not be surprising. Given the large and…
Citi Treasury and Trade Solutions, a division of Citi’s Institutional Clients Group, increased technology spend about 40% over the past two and a half years, and will continue to invest in its platform during the next three to four years, said Shahmir Khaliq, global head of Citi Treasury and Trade Solutions, during Credit Suisse’s Financial […]
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.
Company treasurers and chief financial officers are worried about access to cash and the risks associated with keeping cash on hand amid drastic changes to the investment market during the past six months that have followed the pandemic, stimulus payments and rising inflation. “Everything you knew about investing, which really means zero rates on cash […]
President Joe Biden speaks about the March jobs report in the State Dining Room of the White House, Friday, April 1, 2022, in Washington. (AP Photo/Patrick Semansky)
ASSOCIATED PRESS
What Happened
On March 28th, 2022, the Department of Treasury issued the 2023 Fiscal Year Revenue Proposal (The Green book) outlining a number of proposed tax policies designed to increase revenues, improve tax administration, and make the tax system more equitable and efficient. The proposal had several key policies that will have a direct impact on crypto taxpayers if adapted as proposed.
Key Concepts
Tax Policy Changes Targeted Towards High-income Taxpayers
The proposal has three major tax policy changes focused on high income earner in the US. First, the treasury wants the highest marginal income tax rate to increase from 37% to 39.6% effective December 31, 2022. This increased marginal rate would apply to taxable income over $450,00 for married filers and $400,000 for individual filers. If your total taxable income is above these thresholds, your short-term cryptocurrency gains (coins & NFTs sold after holding them for less than 12 months) and other types of crypto income such as staking, mining & interest would be subject to this higher rate.
Second, the proposal is planning to subject long-term capital gains (which are generally subject to a lower tax rate than ordinary income tax rate) to a higher tax rate for taxpayers with over 1 million of taxable income. For example, if your overall taxable income is over 1 million, long-term gains in excess of 1 million would be subject to a much higher ordinary income tax rate vs the maximum 20% rate under the current law. Furthermore, the proposal aims to make transfers of appreciated property as gift and at death as taxable events for wealthy individuals.
Third and arguably the most aggressive tax proposal included in the document is the 20% minimum tax on “Total income” for taxpayer’s worth over 100 million. Total income includes regular taxable income such as wages and investment income and surprisingly unrealized capital gains on assets you own.
Specific Policy Changes For Digital Assets
The proposal includes four digital assets specific tax policy changes. Let’s first go through the three policies that have a direct impact on taxpayers.
The first proposal talks about cryptocurrency lending activity which has expanded rapidly over the past several years. The treasury aims to make cryptocurrency-based loans tax-free similar to loans based on stocks & securities, as a long as certain criteria is met. This is good news for taxpayers who are involved in lending activity.
Certain specified financial assets (foreign bank accounts, brokerages, etc.) held by US individuals in foreign countries have been subject to IRS reporting for many years. To comply with the rules, US taxpayers with foreign accounts in excess of $50,000 are required to file a Form 8938 (Statement of Specified Foreign Financial Assets) disclosing various information about those assets. Whether digital assets held in overseas exchanges are subject to Form 8938 reporting has been a grey area for several years. The treasury proposal finally adds clarity to this lingering question and want to subject digitals assets to Form 8939 reporting.
The next digital asset-specific tax policy change involves day traders of cryptocurrency. Section 475(f) tax election has been a taxpayer-friendly election active day traders of stocks have been enjoying for many years. When this election is properly made, day traders can mark-to-market their positions at year end and treat gains and losses as ordinary income. This allows them to deduct unlimited amounts of losses and override the $3,000 annual cap on capital loss deduction other taxpayers are subject to. If we strictly follow the current law, this favorable tax election is only applicable to stocks and commodity traders. The treasury has clearly identified the growth of crypto markets and proposed to extend this favorable election to active digital asset traders. This is another positive policy change.
The final proposal related to cryptocurrency is aimed at US cryptocurrency exchanges. To effectively combat offshore tax evasion, the US tax regulators heavily rely on information shared by foreign financial institutions and governments on financial accounts owned by US individuals in foreign countries. The success of this system heavily depends on reciprocity. In simple terms, the US must share information about US financial accounts owned by foreign individuals to those respective countries; Foreign countries must report to the US when US individuals hold financial accounts in foreign countries. This continuous information sharing enables regulators to catch bad actors using offshore strategies to evade taxes.
To strengthen reciprocity when it comes to crypto-related information sharing, the treasury would require US digital asset exchanges to report account balance for all financial accounts maintained at a US office held by a foreign person to the IRS.
“This would allow the United States to share such information on an automatic basis with appropriate partner jurisdictions, in order to reciprocally receive information on U.S. taxpayers”
All aforementioned proposals would be effective after December 31, 2022, except the rule that mandates US exchanges to report foreign account holder information, which is planned to be effective after December 31, 2023. According to treasury estimates, these digital assets specific rules will raise approximately 11 billion in tax revenue between 2023 and 2032.
Next Steps
Monitor how the proposed rules are processed through the legislative process in the coming months.
