Raphael Stevens

Imagine that you are about to enter a room with a group of nine other people. You will display a number—any between, say, 2,500 and 3,000. Once the group enters the room other players will start to come in. Each will choose one of your group, picking the lowest number. You do not know how quickly or slowly the other players will trickle in to pick from the group. What is the highest number you can display while still getting picked quickly? More

Not long ago central bankers everywhere were jacking up interest rates. No longer. In June the European Central Bank reduced rates for the first time since before the covid-19 pandemic. In July policymakers at the Bank of England voted to cut rates. Other central banks, ranging from those in Canada and Chile to Denmark, are also in on the action. Before long America will follow. On August 23rd Jerome Powell, chair of the Federal Reserve, noted that “the time has come for policy to adjust”. And as central bankers loosen policy, they are daring to dream, for a “soft landing” is within reach. More

U.S. President Joe Biden and Chinese President Xi Jinping are set to speak over the phone in “coming weeks,” the White House said Wednesday.
The announcement came amid U.S. national security advisor Jake Sullivan’s trip to Beijing this week to meet with Wang Yi, China’s top diplomat.
The last official trip to China by a U.S. president’s national security advisor was in 2016, when Susan Rice traveled to Beijing under the Obama administration.

China’s Foreign Minister Wang Yi (R) shakes hands with US National Security Advisor Jake Sullivan at Yanqi Lake in Beijing on August 27, 2024. 
Ng Han Guan | Afp | Getty Images

BEIJING — U.S. President Joe Biden and Chinese President Xi Jinping are set to speak over the phone in “coming weeks,” the White House said Wednesday.
The announcement came amid U.S. national security advisor Jake Sullivan’s trip to Beijing this week to meet with Wang Yi, China’s top diplomat.

Both sides said their military leaders would also hold a call in the near future.
Chin added that plans for the second round of U.S.-China talks on artificial intelligence are underway. The White House noted John Podesta, senior advisor to the president for international climate policy, would soon travel to China, without specifying a date.
In official readouts of Sullivan’s trip, the two nations maintained their positions on tech restrictions, Taiwan, the South China Sea and Ukraine.

Biden is not running for reelection in November after this summer, ceding the nomination to his vice president, Kamala Harris. The White House statement did not name the presidents, instead it noted plans for a “leader-level call.”
The Chinese side’s statement used its typical language of “two heads of state,” and said both sides were discussing “a new round of interaction,” according to a CNBC translation of the Chinese.

Biden and Xi held a nearly two-hour phone call in early April, after the two leaders had met in November 2023 on the sidelines of a summit in Woodside, California.
High-level communication between the world’s two largest economies hasn’t been easy in recent years amid heightened tensions and Covid-19 restrictions.
Then-U.S. Speaker of the House Nancy Pelosi’s trip to Taiwan in August 2022 and a high-profile “balloon incident” in February 2023 had further strained their relationship, suspending some planned talks.

First U.S. security advisor visit since 2016

Sullivan arrived in Beijing Tuesday, wrapped up two days of meetings with Wang on Wednesday and is set to depart Thursday. This is his first trip to China as national security advisor, despite multiple meetings with Wang in recent years.
The last official trip to China by a U.S. president’s national security advisor was in 2016, when Susan Rice traveled to Beijing under the Obama administration.
While the outcome of November’s presidential election remains unclear, being tough on Beijing is a rare issue that both U.S. political parties agree on.
Harris’ current national security advisor, Phil Gordon, said in May at a Council on Foreign Relations event that the “China challenge” is much greater than Taiwan, and requires ensuring that Beijing “doesn’t have the advanced technology, intelligence and military capabilities that can challenge us.” More

Price wars aside, Chinese electric car companies are now competing on driver-assist and other tech powered by semiconductors.
“It’s hard to point to your product being superior when your competitors use the exact same silicon to power their infotainment and intelligent driving systems,” said Tu Le, founder of consulting firm Sino Auto Insights.
Over the last few years, Nvidia has already built a $300 million business in automotive chips, with many of the major Chinese electric car companies as partners.

Shaoqing Ren, vice president, autonomous driving development, at Nio speaks about the electric company’s 5nm chip at its tech day in Shanghai on July 27, 2024.
CNBC | Evelyn Cheng

BEIJING — Chinese electric car companies that are already engaged in an intense price war are turning up the heat on another front: Chip-powered tech features such as the driver-assist function.
Nio and Xpeng have announced that their in-house designed auto chips are ready for production. So far, many of the major Chinese electric car makers have relied on Nvidia chips, with the company’s automotive chips business over the past few years bringing in more than $300 million in revenue a quarter.

“It’s hard to point to your product being superior when your competitors use the exact same silicon to power their infotainment and intelligent driving systems,” said Tu Le, founder of consulting firm Sino Auto Insights, explaining why EV makers are turning to in-house chips.
Le said he expected Tesla and Chinese electric car startups to compete on designing their own chips, while traditional automakers will likely still rely on Nvidia and Qualcomm “for the foreseeable future.”
Nvidia reported a 37% year-on-year increase in automotive segment revenue to $346 million in the latest quarter.
“Automotive was a key growth driver for the quarter as every auto maker developing autonomous vehicle technology is using NVIDIA in their Data Centers,” company management said on an earnings call, according to a FactSet transcript.

“I think the main reason why Chinese [automakers] pay attention [to] self-development system-on-chip is the success of Tesla in full-self driving,” said Alvin Liu, a Shanghai-based senior analyst for Canalys.

In 2019, Tesla reportedly shifted from Nvidia to its own chip for advanced driver-assist functions.
By designing their own chips, Chinese automakers can customize features, as well as reduce supply chain risk from geopolitical tensions, Liu said.
Liu does not expect significant impact to Nvidia in the short-term, however, as Chinese automakers will likely test new tech in small batches in the higher-end of the market.

Leveraging latest tech

Nio in late July said it had finished designing an automotive-grade chip, the NX9031, that uses a highly advanced 5 nanometer production technology.
“It is the first time that the five-nanometer process technology has been used in the Chinese automotive industry,” said Florence Zhang, consulting director at China Insights Consultancy, according to a CNBC translation of her Mandarin-language remarks. “It has broken through the bottleneck of domestic intelligent driving chip research and development.”
Nio, which had teased the chip in December, plans to use it in the high-end ET9 sedan, set for delivery in 2025.
The 5 nanometers technology is the most advanced one for autos because the 3 nanometer tech is mostly used for smartphone, personal computer and artificial intelligence-related applications, CLSA analyst Jason Tsang, said following the Nio chip announcement.
Xpeng at its event on Tuesday did not disclose the nanometer technology it was using for its Turing chip. The company’s driver-assist technology is widely considered one of the best currently available in China. 
While Xpeng revealed its chip on Tuesday, Brian Gu, Xpeng president, emphasized in a CNBC interview the day before that his company will primarily partner with Nvidia for chips.
The two companies have a close relationship, and Xpeng’s former head of autonomous driving joined Nvidia last year.
Giants in China’s electric car industry are also recognizing the importance of chips for autos.
If batteries were the foundation for the first phase of electric car development, semiconductors are the basis for the industry’s second phase, as it focuses on smart connected vehicles, BYD’s founder, Wang Chuanfu, said in April at a press conference held by Chinese driver-assist chip company Horizon Robotics.
Wang said more than 1 million BYD vehicles use Horizon Robotics chips.
BYD on Tuesday announced its Fang Cheng Bao off-road vehicle brand would use Huawei’s driver-assist system.
U.S. restrictions on Nvidia chip sales to China haven’t directly affected automakers since the cars haven’t required the most advanced semiconductor technology so far.
But with increasing focus on driver-assist tech, which relies more on artificial intelligence — a segment at the center of U.S.-China tech competition — Chinese automakers are turning to in-house tech.
Looking ahead to the next decade, Xpeng Founder He Xiaopeng said Tuesday the company plans to become a global artificial intelligence car company.
When asked about the availability of computing power for training driver-assist tech, Xpeng’s Gu told reporters Monday that prior to the U.S. restrictions the company had been working with Alibaba Cloud. He claimed that access now probably gives Xpeng the largest cloud computing capacity among all car manufacturers in China.

Creating new tech and standards

Government incentives, from subsidies to support for building out a battery charging network, have helped electric cars take off in China, the world’s largest auto market.
In July, penetration of new energy vehicles, which includes battery-only and hybrid-powered cars, exceeded 50% of new passenger cars sold in China for the first time, according to industry data.
That scale means that companies involved in the country’s electric car development are also contributing to new standards on tech for cars, such as removing the need for a physical key to unlock the door. Instead, drivers can use a smartphone app.
How that app or device securely connects drivers to their cars is part of the forthcoming set of standards that the California-based Car Connectivity Consortium is working on, according to president Alysia Johnson.
A quarter of the organization’s members are based in China, including Nio, BYD, Zeekr and Huawei. Apple, Google and Samsung are also members, Johnson revealed.
She said the organization is looking to enable a driver of a Nio car that uses a Huawei phone to securely send the car “key” to a partner who uses an Apple phone and drives a Zeekr car, for example.
“Digital key tech is becoming a lot more accessible than people would think,” she said. More

Warren Buffett tours the grounds at the Berkshire Hathaway Annual Shareholders Meeting in Omaha Nebraska.
David A. Grogan | CNBC

Warren Buffett’s Berkshire Hathaway reached a $1 trillion market capitalization on Wednesday, the first nontechnology company in the U.S. to score the coveted milestone.
Shares of the Omaha, Nebraska-based conglomerate have rallied more than 28% in 2024, far above the S&P 500’s 18% gain. The $1 trillion threshold was crossed just two days before the “Oracle of Omaha” turns 94 years old.

The shares were up 0.8% to $696,502.02 on Wednesday, allowing it to top the $1 trillion mark, per FactSet.
The milestone “is a testament to the firm’s financial strength and franchise value,” said Cathy Seifert, Berkshire analyst at CFRA Research. “This is significant at a time when Berkshire represents one of the few remaining conglomerates in existence today.”
Unlike the six other companies in the trillion-dollar club (Apple, Nvidia, Microsoft, Alphabet, Amazon and Meta), Berkshire is known for its old-economy focus as the owner of BNSF Railway, Geico Insurance and Dairy Queen. (Although its sizable Apple position has helped drive recent gains.)
Buffett, chairman and CEO, took control of Berkshire, a struggling textile business, in the 1960s and transformed the company into a sprawling empire that encompasses insurance, railroad, retail, manufacturing and energy with an unmatched balance sheet and cash fortress.
“It’s a tribute to Mr. Buffet and his management team, as ‘old economy’ businesses … are what built Berkshire. Yet, these businesses trade at relatively much lower valuations, versus tech companies which are not a major part of Berkshire’s business mix,” said Andrew Kligerman, TD Cowen’s Berkshire analyst. “Moreover, Berkshire has achieved this through a conglomerate structure, a model that many view as ‘archaic,’ as corporations have increasingly moved to specialization over the decades.”

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Berkshire Hathaway

Greg Abel, vice chairman of Berkshire’s non-insurance operations, has been named Buffett’s successor. At this year’s annual meeting, Buffett told shareholders that Abel, 62, will have the final say on Berkshire’s investing decisions when he’s no longer at the helm.
Selling spree
Buffett has been in a defensive mode as of late, dumping a massive amount of stock, including half of his Apple stake, while raising Berkshire’s cash pile to a record $277 billion at the end of June.
While Buffett famously never times the market and advises others to not try to either, these recent moves served as a wake-up call to some of his followers on Wall Street, who believe he saw some things he did not like about the economy and market valuation.
Berkshire invests the majority of its cash in short-term Treasury bills, and its holding in such securities — valued at $234.6 billion at the end of the second quarter — has exceeded the amount the U.S. Federal Reserve owns.
So it’s hard to judge why investors are rewarding Berkshire with the $1 trillion crown today, whether it’s a bet on the American economy and Buffett’s sprawling group of businesses poised to benefit if it keeps chugging along or whether they see Berkshire as a cash fortress that will generate steady income in the face of an uncertain macro environment.
The conglomerate also started a selling spree of Bank of America shares in mid-July, dumping more than $5 billion worth of the bank stock. Buffett bought BofA’s preferred stock and warrants in 2011 in the aftermath of the financial crisis, shoring up confidence in the embattled lender struggling with losses tied to subprime mortgages.
Strong earnings
After Berkshire’s latest strong second-quarter earnings, UBS analyst Brian Meredith increased his 2024 and 2025 earnings estimates because of two factors: higher investing income and higher underwriting results at the insurance group including Geico. Insurance stocks have been on a tear this year as the group continues to raise prices coming out of the pandemic.
Meredith sees Berkshire’s market value rising far above $1 trillion, raising his 12-month price target to $759,000 for the A shares, almost 9% higher than Wednesday’s level.
“We continue to believe BRK’s shares are an attractive play in an uncertain macro environment,” he wrote in the note earlier this month.
High price tag
Berkshire’s original Class A shares carry one of the highest price tags on Wall Street. Today, each one sells for 68% more than the median price of a home in the U.S. 

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Berkshire Hathaway A shares, long term

That’s because Buffett has never split the stock, contending that the high share price attracts and retains more long-term, quality-oriented investors. The Benjamin Graham protégé has said that many Berkshire shareholders use their stock as a savings account.
Still, Berkshire issued Class B shares in 1996 at a price equal to one-thirtieth of a Class A share to cater to smaller investors wanting a small piece of the Buffett’s performance.

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401(k) plan policies like auto-enrollment and auto-escalation have become popular.
They aim to boost workers’ retirement savings.
Pioneering researchers found that the policies may be less effective than they’d previously thought. However, the effects are still positive, they said.

Images By Tang Ming Tung | Digitalvision | Getty Images

Employers are increasingly putting workers’ 401(k) plan savings on autopilot.
But the positive impact of automated retirement savings is more muted than initially thought, new research finds.

Previously “underexamined” factors — like workers cashing out 401(k) balances when they leave a job — “meaningfully reduce” the long-term impact of policies like automatic enrollment and automatic escalation, according to a new paper published by the National Bureau of Economic Research.
Importantly, some of the paper’s co-authors — James Choi of Yale University, and David Laibson and John Beshears of Harvard University — are behavioral economists who pioneered early research into the positive effects of automatic enrollment.
“They are like the OGs [originals],” said David Blanchett, head of retirement research at PGIM, an investment manager. “These are the people who’ve been doing research on this topic now for decades.”

‘Not as positive as we had previously thought’

Automated savings has been a cornerstone of 401(k) policy since Congress passed the Pension Protection Act of 2006.
Policies like auto-enrollment and auto-escalation aim to boost the size of employees’ nest eggs, by automatically enrolling workers in their company 401(k) and then raising (or “escalating”) their savings rate over time.

In this way, people’s tendency towards inertia works in their favor.

About two-thirds of 401(k) plans were using auto-enrollment as of 2022, according to survey data from the Plan Sponsor Council of America, a trade group. Of them, 78% used auto-escalation.
Overall, their effect on savings is positive, “just not as positive as we had previously thought based on the research we had done before,” Choi said in an interview.
The group’s initial research didn’t track results for workers who left jobs where they’d been automatically enrolled.
This research update sought to do a broader analysis, incorporating factors like job turnover, Choi said.
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Overall, Choi and his co-authors recently found that auto-enrollment raised average 401(k) contribution rates by 0.6 percentage points of income over workers’ careers.
That’s a 72% decrease in effectiveness from the 2.2-percentage-point boost that was extrapolated by the “results of early pioneering papers,” the paper said.
“You’re talking 1.6% of income less saved per year,” Choi said. “If you were to just add that up over a 40-year career, you’re talking more than a half year of income saved.”
When also accounting for compounding interest on those savings, it can amount to a “quite substantial” financial difference, he added.

The impact of 401(k) leakage

The disparity is largely a function of so-called “leakage” from 401(k) plans. meaning the early withdrawal of funds before retirement.
About 40% of workers who leave a job cash out their 401(k) plans each year, according to the Employee Benefit Research Institute. Such leakage amounted to $92.4 billion in 2015, according to EBRI’s most recent data.
Workers may withdraw 401(k) plan funds before their employer match is fully vested, meaning they’d forgo that free money.

Additionally, just 43% of workers defaulted into auto-escalation of their savings rates ultimately accepted a higher contribution rate after one year, the National Bureau of Economic Research paper found.
By comparison, early research conducted by behavioral economists like Richard Thaler and Shlomo Benartzi estimated that share around 85%.
Job turnover also complicates auto-escalation in addition to auto-enrollment, PGIM’s Blanchett said.
For example, a worker’s escalated contribution rate may reset at a lower savings rate if they were to join a new employer’s 401(k) plan.
While auto-escalation isn’t necessarily a reliable way to get people to save more money, auto-enrollment has proven “very successful,” Blanchett said.

He believes the effectiveness of auto-enrollment shouldn’t be judged based on 401(k) leakage, which is a separate policy issue, he said.
“I think auto-enrollment does a spectacular job at getting individuals in the plan,” Blanchett said. “But we still have this massive leakage issue. It still exists whether you have auto-enrollment or you don’t.”
That said, there’s room for improvement with automated savings.
“I’d like us to get to a point where 7% or 8% is the median default savings rate,” Blanchett said.
When coupled with an employer match, the typical worker would be saving 10% or more of their salaries, a bar workers should generally strive for, he said. More