Elon Musk’s Twitter Purchase of the World’s Richest Man Was Almost Too Big and Too Small: The Implications for Economic Uncertainty
Elon Musk’s planned acquisition of Twitter looked like the deal of the year back in April. Investment banks and Silicon Valley bigwigs clamored to be a part of it. He was the world’s richest man and they collectively promised billions to him.
Mr. Musk tore it all up. He lambasted the company he asked for help purchasing after announcing that he no longer wanted to go through with his bid.
The same amount that Mr. Musk proposed in April could be more expensive due to high interest rates, the war in Europe, and economic uncertainty.
Wall Street analysts are warning about loan growth and capital adequacy in the U.S. banks during the epoch of economic uncertainty
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When the market swings, investors are rattled by economic uncertainty. There’s a chance of a recession on the horizon and the outlook is cloudy. Some of the fog could be cleared with big bank earnings this Friday.
Four of the nation’s largest banks will report third-quarter earnings before the bell on Friday. Their CEOs will also answer questions from investors, analysts and reporters about their views on the wider economy.
Banks are able to charge more for customers to borrow when interest rates go up — so in theory, this should be a good environment for them. Demand for loans is drying up because of a weak economy. According to Refinitiv, analysts think profits at all four banks will fall from a year earlier.
Beyond disappointing headline figures, Wall Street analysts are focusing on three important factors: loan growth, capital adequacy, and the economic outlook.
Loan growth: The rate at which businesses borrow money from big banks doesn’t just tell us about the health of a financial institution itself. It also tells us a lot about whether businesses plan to expand over the next few months or if they’re preparing for a slowdown.
Analysts think that the loan growth was strong in the third quarter. “Credit risk and loan loss exposure are beginning to creep into the picture, but will not be front and center for Q3 2022 results,” wrote CFRA Research Director Kenneth Leon in a note.
Capital adequacy: Expect banks to take questions about how much money they have on hand. Recent upheaval in UK bond markets and negative headlines about Credit Suisse have caused concern about a “contagion” effect in the United States.
The Dodd-Frank Act forced banks to double their capital ratios and they probably won’t be affected by the turmoil. The Federal Reserve conducts annual stress tests on banks to measure capital adequacy.
The other issue, wrote UBS analysts in a note, “is that while banks have sufficient capital and deposit flows to support loan growth, it is less robust than it has been in recent years, and we expect banks to be less well positioned to return capital to shareholders through buybacks.” That will likely weigh on stock valuations.
Jamie Dimon knows how to move the markets when he predicts the economic downturn. This week, stocks plummeted after he warned that the US could enter recession within the next six months. Expect more commentary on future outlook, and warnings from CEOs attempting to prepare investors for weaker days ahead.
Source: https://www.cnn.com/2022/10/13/investing/premarket-trading-stocks/index.html
Do Federal Government Officials Influence Inflationary Policy? The Case of the U.S. Producer Price Index Rises 7.4% in September
A key measure of inflation increased in September, raising fears that the Federal Reserve’s aggressive rate hikes are having a limited impact on bringing prices under control.
The Labor Department reported Wednesday that the US Producer Price Index rose 8.5% in September, down slightly from the 8.7% increase in August. But the report showed prices rose 0.4% month-over-month.
Economists surveyed by Refinitiv had been expecting the 12-month rise in wholesale prices to slow to an 8.4% increase, and the month-to-month increase to come in at 0.2%, compared to the 0.1% decline in August.
The fight to bring down decades-high inflation is a major concern for the Fed as it tries to cool the economy. But there are concerns that the Fed is raising rates too quickly, and that it could soon plunge the US economy into a recession.
The minutes said that many participants thought that the cost of taking too little action to bring down inflation outweighs the cost of taking too much action. “Several participants underlined the need to maintain a restrictive stance for as long as necessary.”
More than one in five senior federal employees across 50 federal agencies, from the Commerce Department to the Treasury Department in both Republican and Democratic administrations have invested in companies actively lobbying their agencies for policy changes, the investigation found.
Public health and food safety, diplomatic relations and regulating trade are some of the things that federal agency officials wield “immense power and influence over,” according to Don Fox. These trades present a clear conflict of interest and violate the spirit of the law, he told the Journal.
The bottom line: This report highlights the need for greater disclosure and trading regulations throughout the government. The same issues are also to be found in the legislative branch: There’s currently no federal statute, regulation, or rule that absolutely prohibits a Member or House employee from holding assets that might conflict with or influence the performance of official duties.
The Real Estate Economy in China: What’s Going on in the Near-term Future of China’s Second-largest Economy?
There were more empty properties in China during the late summer. The world’s second-largest economy has been hit badly this year by a sharp slowdown in the crucial property sector. Real estate development accounted for about a quarter of China’s G.D.P. over the past decade, but a squeeze on the industry caused seemingly impregnable companies to teeter and prompted rare social unrest among unhappy property owners. There are structural questions that still hang over the economy, as evidenced by the challenges facing the debt-financed housing industry.