MidWeek Commentary

HI Market View Commentary 04-01-2024

HI Market View Commentary 04-01-2024

Let’s start with MU

Technical Analysis:  Overbought, extended from the 50 Day SMA – What’s normal for the dispersion of the 50 Day?= over 10% is considered extended 10-12.5% is the range we see a pullback is to the 50

$124.30 – 50 SMA $92.83 = $31.47 / 92.83= 33.9% Higher than the 50 SMA =

Today because MU is soooo overextended we purchased $123 Long put April 28

We will probably double up on the way down until we hit the $105 stock price

 

Yesterday the futures called for a +0.42% opening on the S&P 500

Finished today -0.20%

Right Now HI is letting stocks run and we have done so since the earnings season.

https://www.briefing.com/the-big-picture

The Big Picture

Last Updated: 14-Mar-24 15:29 ET | Archive

Lots of loose ends to deal with

In approximately two weeks, the first quarter of 2024 will come to an end. Per usual, there have been a share of surprises for the stock market — some good, some bad, and some that are indeterminate.

  • AI chip leader NVIDIA (NVDA) has gained as much as 97%. That’s good.
  • EV leader Tesla (TSLA) has dropped as much as 35%. That’s bad.
  • Inflation has come down a bit, but it has a way to go to reach the Fed’s 2% target. That’s indeterminate.

There are a lot of loose ends out there on the geopolitical, economic, monetary policy, fiscal policy, and election fronts. By default, that means there are loose ends out there, too, for the stock market. Nonetheless, the stock market has been running with a sense of ease so far in 2024.

The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have all set new record highs. Small-cap, mid-cap, and large-cap indices are all higher for the year, albeit in varying degrees. Growth stocks are up, but so are value stocks.

In brief, the stock market has been governed by a bullish bias so far in 2024 amid the surprises and the ongoing loose ends, more of which can be expected in coming months. What that means for the stock market’s performance over the coming months will depend on which way the surprises break and how those loose ends get tied up — or don’t.

No Threat Yet

Arguably, the biggest surprise so far in 2024 has been the shift in the market’s rate cut outlook. Carrying that idea a bit further, the biggest surprise is that the stock market has run to record highs even though the market has adjusted its thinking to expect three rate cuts before the end of the year instead of the six rate cuts expected when 2024 began.

Although there has been a downshift in rate cut expectations, we suspect the stock market hasn’t downshifted because it hasn’t felt a threat to the earnings outlook.

On the whole, economic data has come in with a soft landing/no landing glow to it. Accordingly, analysts have not been given a data-based reason to cut their full-year earnings outlook in any meaningful way. When the year began, the consensus FY24 S&P 500 EPS estimate was $243.32. Today, it sits at $242.79, according to FactSet, which is 11.1% above FY23 earnings versus 11.4% when the year began.

The forward 12-month EPS estimate, meanwhile, has climbed to $249.31 from $243.19 at the end of 2023. The corresponding P/E multiple is 20.7x. That is a 17% premium to the 10-year average.

In other words, there has been multiple expansion with the price of the market-cap weighted S&P 500 rising at a faster rate than the earnings estimate. As of this writing, the market-cap weighted S&P 500 is up 8.0% for the year. It is pricey from a valuation standpoint, which is its own restrictive factor as market participants concern themselves with paying too much for earnings growth that might not be realized.

That is a key reason why it is important for earnings estimates to keep going up, because a market (or an individual stock) trading at a premium valuation is at risk of a stronger dislocation if negative surprises appear that upend the earnings growth outlook.

The valuation constraint for the equal-weighted S&P 500 is a lot less demanding. It trades at 16.8x forward 12-month earnings versus a 10-yr average of 16.4x. The discount to the market-cap weighted S&P 500 underscores the outsized influence of the mega-cap stocks on the market-cap weighted S&P 500.

Bull Market Behavior

Notwithstanding the valuation gap, the stock market has been seeing some welcome rotation into other corners of the market. Granted the communication services (+12.2%) and information technology (+12.0%) sectors have paced year-to-date gains for the market, but the first half of March has seen the energy, materials, utilities, and consumer staples sectors exhibit relative strength. The same goes for the Russell 3000 Value Index versus the Russell 3000 Growth Index.

The rotation has occurred as some of the so-called Magnificent 7 stocks have faltered, namely Apple (AAPL) and Tesla (TSLA). This is actually a good sign. It is the type of behavior one would expect to see in a bull market.

Former leadership stocks breaking down could be construed as an ominous trend for the broader market, but thus far the earnings results and outlooks from other mega-cap stocks have enabled investors to excuse shortcomings elsewhere as an isolated situation. Therefore, it would appear that stocks elsewhere are benefiting at the expense of a rotation away from the likes of Apple and Tesla, although it would be remiss not to add that NVIDIA and the semiconductor stocks have been among those beneficiaries on a momentum trade that has been of great benefit to the market.

In any case, the look and feel of the gains so far in 2024 still has a mega-cap/growth stock edge to it, but it is not devoid of participation from other parts of the market. That, again, can be attributed to the resilient economy, which is fostering some renewed attention on value stocks and/or stocks outside the information technology sector.

Eye on Inflation

Where there is plenty of attention is on the inflation story. It is much improved, but the Federal Reserve is looking for more (as are consumers).

The PCE Price Index, which is the Fed’s preferred inflation gauge, was up 2.4% year-over-year in January versus 2.6% in December. The core-PCE Price Index, which excludes food and energy, and which is what the Fed feels it has some control over with its policy actions, was up 2.8% year-over-year in January versus 2.9% in December.

The Fed’s inflation target is 2.0%, so these readings remain above target, but are headed in the right direction. The Fed has noted as much, but still wants to have more confidence that inflation is moving back to 2.0% on a sustainable basis. Notably, Fed Chair Powell said in his semiannual monetary policy testimony that the Fed doesn’t necessarily need to see better data in coming months, only more of the same data it has seen recently to feel inflation is on track to its 2% target.

The market thinks the Fed will get that, which is another reason stocks have remained in favor on the comforting thought that the Fed will soon start dialing back its restrictive policy. The prevailing expectation is that the first rate cut will come at the June FOMC meeting. The CME FedWatch Tool shows a 59.9% probability of the first cut in June, but that is down from 73.6% only a week ago as some sticky CPI and PPI data for February have tempered things a bit.

Thus far, the market has managed the idea of seeing fewer rate cuts this year reasonably well. A risk in this regard would be even fewer rate cuts or no rate cuts at all if the inflation data heat up and move away from the 2.0% target, possibly even causing the Fed to raise rates again.

Rates Rising

The Treasury market has been a bit more skittish to begin the year than the stock market has been. That’s because (1) it has recalibrated for fewer rate cuts and (2) recent inflation data hasn’t been as encouraging as expected.

The 2-yr note yield, which began the year at 4.25% and is more sensitive to changes in the fed funds rate, has risen to 4.69%. The 10-yr note yield, which began the year at 3.88% and is more sensitive to inflation, has risen to 4.30%. That move has also stymied the improvement that had been seen in mortgage rates, which has continued to pressure the housing market.

Higher interest rates can be a headwind for the stock market, yet the move since the start of the year has been tolerated because the momentum that has powered stocks like NVIDIA, and other assets like bitcoin, has been hard to compete with, relative to much lower returns offered by Treasuries, for investors aiming for, and achieving, much higher rates of return.

It may take risk-free rates closer to 5.00% to cause some real pullback waves in the stock market.

What It All Means

It was a fast start to the year for many of the mega-cap stocks, which in turn made for a fast start for the market-cap weighted S&P 500 and Nasdaq Composite. Naturally, there are now a lot of calls that suggest the market is due for a consolidation period or correction (generally defined as a 10% pullback from a high).

The churning we have been seeing in the market more recently is part of a consolidation process, but a corrective move at the index level has yet to unfold.

Still, the market has come a long way in a short time, so it is unreasonable to think it will keep running at the pace it has been. The valuation for the market-cap weighted S&P 500 is stretched, but for the equal-weighted S&P 500 it is still in relatively attractive form.

There could be great reward chasing after the momentum stocks, but there is an inherently larger degree of risk in doing so at this point if the crowd looks elsewhere, interest rates keep rising, or growth disappoints.

To be sure, no one knows what surprises lurk around the corner, but right in front of investors is an equal-weighted opportunity to stay invested with a lower risk profile as loose ends get tied up.

Patrick J. O’Hare, Briefing.com

(Editor’s Note: The next installment of The Big Picture will be posted the week of April 1)

 

Earnings dates:

 

Where will our markets end this week?

Lower

 DJIA – Bullish

SPX –Bullish

COMP – Bullish

 

 

Where Will the SPX end April 2024?

04-01-2024            -2.0%

 

 

Earnings:   

Mon:           

Tues:           

Wed:            LEVI, SPWH

Thur:          

Fri:               

 

 

Econ Reports:

Mon:            Construction Spending, ISM Manufacturing   

Tue              Factory Orders

Wed:            MBA, ADP Employment

Thur:           Initial Claims, Continuing Claims, Trade Balance

Fri:               Average Workweek, Non-Farm Payroll, Private Payroll, Hourly Earnings, Unemployment Rate, Cosumer Credit

 

How am I looking to trade?

Letting stock runs as the trend is bullish

 

www.myhurleyinvestment.com = Blogsite

info@hurleyinvestments.com = Email

 

Questions???

 

 

https://www.cnbc.com/2024/03/26/israel-gaza-us-abstention-on-un-cease-fire-vote-triggers-netanyahu-rage.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

An extraordinary thing’: U.S. break with Israel on UN cease-fire vote triggers Netanyahu rage

PUBLISHED TUE, MAR 26 20245:21 AM EDTUPDATED WED, MAR 27 202411:57 AM EDT

Natasha Turak@NATASHATURAK

KEY POINTS

  • Israeli Prime Minister Benjamin Netanyahu had warned before the vote that if the U.S. did not veto it, the visit of a high-level Israeli delegation to Washington would be pulled.
  • The abstention from the U.S. signals a widening divide between the White House and Israel’s current government, the most right-wing in its history, nearly six months into its war against Hamas in the Gaza Strip that has killed tens of thousands of people.

Council on Monday adopted a resolution demanding an immediate cease-fire between Israel and Palestinian militant group Hamas, after the United States abstained from the vote — prompting Israel to cancel the visit of a high-level delegation to Washington.

Israeli Prime Minister Benjamin Netanyahu had warned before the vote that the delegation’s visit would be pulled, if Washington did not veto the motion. The U.S. abstention signals a widening divide between the White House and Israel’s current government, the most right-wing in its history, nearly six months into its war against Hamas in the Gaza Strip. Israel’s offensive into the Gaza enclave, which comes in response to the Oct. 7 Hamas terror attacks, has killed tens of thousands of people, according to Gaza’s Hamas-run Health Ministry.

“This is a clear retreat from the consistent position of the U.S. in the Security Council since the beginning of this war,” a statement from Netanyahu’s office said, adding that “this withdrawal hurts both the war effort and the effort to release the abductees.”

The U.S. denied that the abstention marked a shift in its policy. Some observers see it differently.

“It’s a breakthrough. An abstention from a UN Security Council permanent member is a yes vote, because it means they are not exercising their veto and basically agree with the text, even if they don’t want to say so,” Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute in Washington, told CNBC.

“The U.S. declining to protect Israel from a resolution it passionately objects to by not providing a veto is an extraordinary thing.”

The first of its kind passed since the onset of the war, the resolution called for an immediate cessation of hostilities between Israel and Palestinian militant group Hamas for two weeks, breaking a five-month impasse during which the U.S. vetoed three U.N. calls for a halt in fighting. The motion also called for the immediate and unconditional release of all hostages held by Hamas in the Gaza Strip.

State Department spokesman Matthew Miller said Washington’s reasons to not approve the measure included its lack of condemnation for the Hamas terror attack, which led to roughly 1,200 deaths in Israel and took around 240 more people hostage.

But, Miller added, “the reason we didn’t veto it is because there were also things in that resolution that were consistent with our long-term position, most importantly, that there should be a cease-fire and that there should be a release of hostages, which is what we understood also to be the government of Israel’s position. So it is a bit surprising and unfortunate that they are not going to apparently attend these meetings.”

‘The United States is losing patience’

The move follows condemnations of Netanyahu from a number of U.S. lawmakers — most notably, Senate majority leader Chuck Schumer, the highest-ranking Jewish member of Congress, who is known for steadfastly standing by Israel’s government over the years.

“In this case, the abstention is a very strong signal to Israel that the United States is losing patience,” Ibish said.

The canceled Israeli delegation’s visit to Washington was set to discuss Israel’s planned military operation in Rafah, the southernmost corner of Gaza, where more than a million displaced Palestinians are taking shelter and where Israel says the bulk of Hamas’ remaining fighters are located.

The Biden administration has warned against a Rafah operation, already frustrated by Israel’s hindering of aid deliveries into the besieged strip. At the start of the year, the U.N. warned that half a million Palestinians were facing famine.

For former Israeli Foreign Minister Shlomo Ben-Ami, the rift between the two longtime allies is a grave threat to Israel’s security — and the blame lies with Netanyahu.

Asked by CNBC’s Dan Murphy if the U.S. and Israel are now at a turning point in the war, Ben-Ami said:

“I think we definitely are. This is a crisis, [and] Americans are conveying the powerful message that they disagree on the way Israel is conducting the war, that they think this is the moment to move to a political process.”

He added, “The whole attitude of confronting Americans instead of serving with their interests, which are essentially Israel’s interests, is working against the nation’s security. Netanyahu has become a threat to Israel’s security by conducting war from the very first day. With him, political domestic consideration is more [important] than catering to the strategic interest of Israel.”

“America is fed up with this war,” the former minister said, “fed up particularly with Netanyahu who doesn’t behave as loyal ally, lacking gratitude for America’s political and military help in this war.”

CNBC has reached out to the Israeli prime minister’s office for comment.

Ryan Bohl, a senior Middle East and North African analyst at the RANE Network, echoed Ben-Ami’s sentiments on the U.S. position.

“This is the first time that the U.S. has removed its diplomatic shielding from Israel at the U.N. Security Council and signals that it is preparing to further pull back diplomatic cover for Israel’s military campaign in Gaza,” he said. “That in turn is already causing political repercussions within Israel itself as both its defense establishment and many of its politicians are concerned about a widening gulf between Israel and the U.S. that could eventually touch on strategic ties.”

“With this U.N. vote, the United States has said that the diplomatic clock is nearly out for Israel,” Bohl added, “and such an attrition campaign doesn’t really have much time.”

Correction: Shlomo Ben-Ami is a former Israeli foreign minister. An earlier version misspelled his name.

 

https://www.cnbc.com/2024/03/20/salary-single-person-needs-to-live-comfortably-in-major-us-cities.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

The salary a single person needs to live comfortably in 25 major U.S. cities

Published Wed, Mar 20 20249:58 AM EDTUpdated Wed, Mar 20 20243:49 PM EDT

Mike Winters@MIKE_WINTRS

To live “comfortably” as a single person in 99 of the largest U.S. metro areas, you’ll need a median income of $93,933, according to a recent SmartAsset analysis.

“Comfortable” is defined as the income needed to cover a 50/30/20 budget, which assumes 50% of your monthly income can pay for necessities like housing and utility costs, 30% can cover discretionary spending and 20% can be set aside for savings or investments.

SmartAsset extrapolated the income needed for a 50/30/20 budget based on the cost of necessities, using data from the MIT Living Wage Calculator.

Here’s the income a single person needs to live comfortably in the 25 U.S. cities with the highest cost of living:

  1. New York City:$138,570
  2. San Jose, California:$136,739
  3. Irvine, California:$126,797
  4. Santa Ana, California:$126,797
  5. Boston:$124,966
  6. San Diego:$122,803
  7. Chula Vista, California:$122,803
  8. San Francisco:$119,558
  9. Seattle:$119,392
  10. Oakland, California:$118,768
  11. Arlington, Virginia:$117,686
  12. Newark, New Jersey:$116,646
  13. Jersey City, New Jersey:$116,646
  14. Long Beach, California:$114,691
  15. Anaheim, California:$114,691
  16. Honolulu:$111,904
  17. Los Angeles:$110,781
  18. Aurora, Colorado:$110,115
  19. Portland, Oregon:$110,032
  20. Riverside, California:$109,408
  21. Atlanta:$107,453
  22. Sacramento, California:$104,790
  23. Raleigh, North Carolina:$102,752
  24. Gilbert, Arizona:$102,752
  25. Glendale, Arizona:$102,752

New York City ranks first overall, requiring an income of $138,570 for a single person to live comfortably. In contrast, single people in Houston need to earn $75,088 — the lowest amount of all major U.S. cities examined.

Other large coastal cities follow NYC in the rankings. In Los Angeles, Honolulu, San Francisco, Seattle and Boston, you’d need to earn $110,000 or more to live comfortably as a single person. All of these cities command some of the highest living costs in the country, particularly for housing, according to The Council for Community and Economic Research.

Californians, in particular, have suffered from a longstanding housing shortage that’s worse than the U.S. overall, so it’s not surprising that 11 cities from the state are among the most expensive places to live, thus requiring higher salaries to live comfortably.

While employers in large, high-cost cities tend to offer higher-than-average salaries as a way to attract and retain talent, housing costs can make it difficult to maintain a 50/30/20 budget.

In New York City, a third of residents spend half of their income on rent, according to the Community Service Society. To compensate for high housing costs, residents commonly find room elsewhere in their budgets, whether that’s skipping out on homeownership or spending less on discretionary purchases.

Either way, those who live alone pay a significant “singles tax” in large cities when it comes to the costs of food, shelter and transportation.

Correction: A previous version of this article misstated the name of Jersey City, New Jersey.

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https://www.cnbc.com/2024/03/26/blackrocks-larry-fink-sees-social-security-crisis-says-65-retirement-age-a-bit-crazy.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

BlackRock’s Larry Fink sees Social Security crisis, says 65 retirement age ‘a bit crazy’

PUBLISHED TUE, MAR 26 20248:59 AM EDTUPDATED TUE, MAR 26 202412:13 PM EDT

Alex Harring@ALEX_HARRING

KEY POINTS

  • In his annual letter to shareholders, Fink called the decreasing ability to retire in a financially sound way one of the biggest economic challenges of the mid-21st century.
  • “Today in America, the retirement message that the government and companies tell their workers is effectively: ‘You’re on your own,’” Fink wrote.
  • A federal law that will require employers with 401(k) plans to auto enroll new workers provides a bright spot, he said.

BlackRock Chair Larry Fink said capital markets can help solve a crisis brewing around the ability of Americans to afford retirement as lifespans elongate, and that the government can provide a basic safety net.

In his annual letter to shareholders of the investing company overseeing $10 trillion in assets, Fink called the decreasing ability to retire in a financially sound way one of the biggest economic challenges of the mid-21st century. He said access to investing can help solve this conundrum, while also pondering if the expectation for everyone to receive Social Security benefits at age 65 has become archaic.

“Today in America, the retirement message that the government and companies tell their workers is effectively: ‘You’re on your own,’” Fink wrote. “And before my generation fully disappears from positions of corporate and political leadership, we have an obligation to change that.”

Fink pointed to a U.S. Census Bureau survey that found nearly half of Americans between ages 55 and 65 have no savings in personal retirement accounts. The investing firm’s leader noted tens of millions of Americans work part-time or gig jobs that do not offer clear retirement contribution plans.

Worsening the outlook is a Social Security system that has said it will not be able to pay full benefits by 2034.

The 71-year-old believes the American retirement system has entered such a deep crisis that it has become a once-in-a-generation issue. He said it is on government and business leaders to start trying to fix it right away.

A federal law that will require employers with 401(k) plans to auto enroll new workers provides a bright spot, he said. Hundreds of companies have already taken this step, Fink noted.

But corporations also have a duty to provide benefits such as fund matching or financial education to workers, he said. Fink also said employees should be able to easily transfer 401(k) savings when they change jobs.

About 20 states in the U.S. have established retirement systems that include gig and part-time workers. Fink said more states should look into creating specific programs and act as “laboratories of retirement.” That is because this both can benefit individuals and help ensure the long-term health of Social Security.

Increasing lifespans create further difficulties when trying to improve the retirement system, Fink said. This issue is of increasing relevance as blockbuster weight loss drugs have already begun drastically reshaping the health-care landscape, he said.

As a result, Fink said it is worth taking a look at when Americans are expected to start accessing Social Security benefits, typically a sensitive topic that no politician wants to touch. He noted potential solutions including either raising the age for benefits or finding ways to encourage working later.

“No one should have to work longer than they want to,” he said. “But I do think it’s a bit crazy that our anchor idea for the right retirement age, 65 years old, originates from the time of the Ottoman Empire.”

https://www.cnbc.com/2024/03/27/sec-scores-big-win-in-lawsuit-against-crypto-exchange-coinbase.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

SEC scores big win in lawsuit against crypto exchange Coinbase

PUBLISHED WED, MAR 27 202410:31 AM EDTUPDATED THU, MAR 28 20242:58 AM EDT

MacKenzie Sigalos@KENZIESIGALOS

Dan Mangan@_DANMANGAN

KEY POINTS

  • The Securities and Exchange Commission scored a major win in its lawsuit against Coinbase.
  • A judge ruled that the SEC’s claim that the cryptocurrency exchange engaged in unregistered sales of securities could be heard by a jury at trial.
  • Coinbase shares were trading around 2.5% lower on news of the ruling in Manhattan federal court.

The Securities and Exchange Commission scored a major win in its lawsuit against Coinbase on Wednesday, as a judge ruled that its claim that the cryptocurrency exchange engaged in unregistered sales of securities could be heard by a jury at trial.

Coinbase’s shares fell around 2.5% on news of the ruling in Manhattan federal court rejecting its bid to dismiss the SEC’s complaint.

The regulator first filed suit against Coinbase in June, alleging the company was acting as an unregistered broker and exchange. The agency also demanded the company be “permanently restrained and enjoined” from continuing to do so.

In her ruling Wednesday, U.S. District Judge Katherine Polk Failla wrote, “The ‘crypto’ nomenclature may be of recent vintage, but the challenged transactions fall comfortably within the framework that courts have used to identify securities for nearly eighty years.”

“The Court finds that the SEC adequately alleges that Coinbase, through its Staking Program, engaged in the unregistered offer and sale of securities,” Failla wrote.

The judge elsewhere in that ruling agreed to dismiss the SEC’s claim in the lawsuit that Coinbase acted as an unregistered broker by making its Wallet application available to customers.

The company responded to CNBC’s request for comment with a link to a series of posts on social media platform X by Coinbase’s chief legal officer, Paul Grewal.

“We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation,” Grewal wrote.

The SEC later Wednesday filed a notice of Failla’s decision in the Coinbase case on the docket of a lawsuit it has pending in federal court in the District of Columbia against Binance, another major cryptocurrency exchange. The SEC in that suit accuses Binance of making multiple unregistered offers and sales of crypto asset securities.

Wednesday’s decision news comes as Coinbase takes on a bigger role in Wall Street’s adoption of cryptocurrency.

In January, the SEC approved a raft of U.S. spot bitcoin exchange-traded funds. Many of these ETFs have partnered with Coinbase as their custody partner.

These U.S. spot funds have seen record flows since launching in January. Collectively, they have brought in around $52 billion.

In June, SEC Chair Gary Gensler said on CNBC that trading platforms like Coinbase “call themselves exchanges” but were “commingling a number of functions.”

“We don’t see the New York Stock Exchange operating a hedge fund,” Gensler said at the time.

 

https://www.cnbc.com/2024/03/27/how-ftxs-sam-bankman-fried-went-from-crypto-king-to-convicted-conman-.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

Penthouse to prison: Sam Bankman-Fried’s journey from crypto king to convicted conman

PUBLISHED WED, MAR 27 20244:33 PM EDTUPDATED THU, MAR 28 20244:04 PM EDT

MacKenzie Sigalos@KENZIESIGALOS

KEY POINTS

  • On Thursday morning in Manhattan, U.S. District Judge Lewis Kaplan will deliver his decision on how many years Sam Bankman-Fried will spend in prison.
  • The FTX founder was convicted in November of all seven criminal counts against him.
  • Just two years ago, Bankman-Fried was revered as a titan in the crypto industry.

Two years ago, Sam Bankman-Fried was a 30-year-old multibillionaire living in a $35 million Bahamas penthouse, partying with his pals while running one of the world’s most valuable crypto companies.

Today, he’s a 32-year-old inmate at the Metropolitan Detention Center in Brooklyn, waiting for a judge to tell him how long he’ll spend behind bars for masterminding “one of the biggest financial frauds in American history,” in the words of U.S. Attorney Damian Williams.

Bankman-Fried, the founder and former CEO of failed crypto exchange FTX, will head on Thursday to a federal court in downtown Manhattan, where U.S. District Judge Lewis Kaplan will deliver his sentencing. Prosecutors have recommended a prison sentence of 40 to 50 years.

It took jurors only about three hours of deliberations in November to find Bankman-Fried guilty of all seven criminal accounts against him. For a high-profile monthlong trial that involved nearly 20 witnesses and hundreds of exhibits, experts said at the time that they’d never seen such a speedy decision. Bankman-Fried plans to appeal his conviction and sentence.

It was a steep and swift fall from grace for Bankman-Fried, who was once hailed as a titan in the industry and had a peak net worth — on paper — of roughly $26 billion.

Bitcoin arbitrage

It started with the Kimchi Swap.

In 2017, as a quant trader at Jane Street, Bankman-Fried noticed something funny when he looked at bitcoin pricing on CoinMarketCap.com. Instead of a uniform price across exchanges, Bankman-Fried would sometimes see a 60% difference in the value of the digital currency. His immediate instinct, he said, was to get in on the arbitrage trade — buying bitcoin on one exchange and selling it back on another, pocketing the difference.

“That’s the lowest hanging fruit,” Bankman-Fried told CNBC in September 2022.

The arbitrage opportunity was especially compelling in South Korea, where the exchange-listed price of bitcoin was significantly higher than in other countries. It was dubbed the Kimchi Premium, a reference to the traditional Korean side dish of salted and fermented cabbage.

After a month of personally dabbling in the market, Bankman-Fried launched Alameda Research, named after the California county that housed his first office. Bankman-Fried told CNBC that the firm sometimes made as much as a million dollars a day trading bitcoin.

Alameda’s success spurred the launch of FTX. In April 2019, Bankman-Fried co-founded FTX.com, an international cryptocurrency exchange that offered customers innovative trading features, a responsive platform and a reliable experience. FTX’s success led to a $2 billion venture fund that seeded other crypto firms.

The FTX logo soon adorned everything from Formula One race cars to a Miami basketball arena. Bankman-Fried talked about one day buying Goldman Sachs, and he became a fixture in Washington as one of the Democratic Party’s top donors.

Then the market turned.

The so-called crypto winter of 2022 wiped out hedge funds and lenders across the crypto universe. Bankman-Fried boasted that he and his enterprise were immune. Behind the scenes, Alameda was borrowing money to invest in failing digital asset firms to keep the industry afloat.

May of 2022 brought the crash of stablecoin Luna, creating a domino effect that sent crypto prices plunging, devastating other lenders.

Alameda had borrowed from lenders including Voyager Digital and BlockFi, which both ended up going bankrupt. Alameda secured its loans with FTT tokens, minted by FTX. Bankman-Fried’s empire controlled the vast majority of the available currency, with only a small amount of FTT actually circulating at any time.

Alameda marked its entire hoard of FTT at the prevailing market price despite it being a virtually illiquid asset. The fund employed the same methodology with other coins as well, including Solana and Serum (a token created and promoted by FTX and Alameda), using them to collateralize billions of dollars in loans. Industry insiders called the tokens “Sam coins.”

Virtual bank run

When faced with margin calls due to falling prices, Bankman-Fried turned to FTX customers’ deposits to the tune of billions of dollars by the middle of 2022. According to the firm’s own bankruptcy filings, it possessed almost nothing in the way of record keeping.

On Nov. 2, 2022, crypto trade site CoinDesk publicized details of Alameda’s balance sheet, which showed $14.6 billion in assets. Over $7 billion of those assets were either FTT tokens or Bankman-Fried-backed coins like Solana or Serum. Another $2 billion worth were locked away in equity investments.

Investors began withdrawing their holdings from FTX, creating the threat of a virtual bank run. Alameda and FTX now both faced a liquidity crunch.

On Nov. 6, four days after the CoinDesk article, Binance founder Changpeng Zhao dropped the hammer. Binance was the first outside investor in FTX in 2019. Two years later, FTX bought back its stake with a combination of FTT and other coins, according to Zhao.

Zhao wrote in a tweet that, because of “recent revelations that have came [sic] to light, we have decided to liquidate any remaining FTT on our books.” FTX executives scrambled to contain the damage, and Alameda traders managed to fend off outflows for a couple days.

On Nov. 7, Bankman-Fried tried to show confidence, tweeting, “FTX is fine. Assets are fine.” The post was deleted.

Internal discussions were different. Bankman-Fried and other executives admitted to each other that “FTX customer funds were irrevocably lost because Alameda had appropriated them.” By Nov. 8, the client shortfall had grown to $8 billion. Bankman-Fried was courting outside investors for a rescue package but found no suitors.

FTX issued a pause on all customer withdrawals that day. FTT’s price plummeted by over 75%. Out of options, Bankman-Fried turned to Zhao, who announced that he’d signed a “non-binding” letter of intent to acquire FTX.com.

But a day later, on Nov. 9, Binance said it wouldn’t go through with the acquisition, citing reports of “mishandled customer funds” and federal investigations.

FTX filed for bankruptcy on Nov. 11, and Bankman-Fried resigned as CEO of FTX and associated entities. He immediately lost 94% of his personal wealth.

Sullivan & Cromwell, FTX’s longtime attorneys, approached John J. Ray, who oversaw Enron through its bankruptcy, to assume Bankman-Fried’s former position.

On Dec. 12, Bankman-Fried was arrested by Bahamian authorities and extradited to the U.S., where he was taken into custody. Federal prosecutors and regulators accused Bankman-Fried of perpetrating a fraud “from the start,” according to a filing from the Securities and Exchange Commission.

Bankman-Fried was released on a $250 million bond and was initially living under house arrest with a court-ordered ankle monitor at his parents’ home in Palo Alto, California, on the Stanford University campus. He was soon taken back into custody for alleged witness tampering.

While Bankman-Fried awaited trial, many of his closest friends and confidants turned into key witnesses for the prosecution, leaving the former crypto billionaire to defend himself. Less than a year after his arrest, the 12-person jury found Bankman-Fried guilty on all criminal charges against him.

— CNBC’s Rohan Goswami contributed to this report.

 

https://www.cnbc.com/2024/04/01/china-april-2024-caixin-manufacturing-pmi.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

Caixin survey shows China’s March factory activity at its most robust in 13 months

PUBLISHED SUN, MAR 31 20249:54 PM EDTUPDATED MON, APR 1 20241:04 AM EDT

Clement Tan@IN/CLEMTAN@CLEMTAN

KEY POINTS

  • Caixin/S&P Global China manufacturing purchasing managers’ index was 51.1 in March — its strongest since February 2023 — after coming in at 50.9 in February.
  • China’s National Bureau of Statistics released survey data on Sunday that showed the country’s official manufacturing PMI coming in at 50.8 in March, its strongest reading since March last year.

China’s factory activity in March expanded by its strongest pace in more than a year, a private survey showed on Monday, in signs of stabilizing growth in the world’s second-largest economy.

The Caixin/S&P Global China manufacturing purchasing managers’ index was 51.1 in March — its strongest since February 2023 — after coming in at 50.9 in February. Economists had expected the reading to hit 51, according to a Reuters poll. The 50-point mark separates expansion from contraction.

This reading corroborates another official survey of manufacturing activity that surpassed market expectations and came at its strongest in 11 months. The official survey for non-manufacturing activity in China recorded its most robust reading since June, adding to encouraging recent export and retail sales data.

“Overall, the manufacturing sector continued to improve in March, with expansion in supply and demand accelerating, and overseas demand picking up,” Wang Zhe, a senior economist at Caixin Insight Group, said in the survey release.

China’s National Bureau of Statistics released survey data on Sunday that showed the country’s official manufacturing PMI coming in at 50.8 in March, its strongest reading since March last year that was also stronger than expectations for 49.9 in a Reuters poll.

These surveys are typically the first economic data points available each month and provide insights on the state of the Chinese economy.

China has set a growth target of “around 5%” for 2024, while setting a deficit-to-GDP ratio of 3% for the year and reiterating a plan to double down on “high-quality growth” and manufacturing.

Given the high base of 2023 data, several economists have cautioned Beijing may have to resort to more robust stimulus to achieve its 2024 growth goals.

Some lingering concerns

The latest data point to some lingering concerns, particularly about prices.

China’s producer prices have dipped for well more than a year now, while consumer prices have declined in four of the last five months.

“Manufacturers increased purchases and raw material inventories amid continued improvement in business optimism. However, employment remained in contraction and a depressed price level worsened,” Caixin’s Wang said.

“Prices remained low. A drop in raw material prices reduced production costs for manufacturers, providing leeway for them to lower prices amid fierce market competition. Both gauges for input costs and output prices reached new lows since July 2023,” Wang added.

https://www.cnbc.com/video/2024/04/01/disney-has-done-so-much-in-the-past-6-months-to-try-to-appease-shareholders-pucks-matt-belloni.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

Disney has done so much in the past 6 months to try to appease shareholders: Puck’s Matt Belloni

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