Raphael Stevens

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    in Finance

    China's economic numbers come in better than expected, but 'difficulties and challenges' remain

    Industrial production rose mildly by 0.7% in May from a year ago, versus an expected 0.7% drop, according to analysts polled by Reuters. In April, industrial production unexpectedly fell, down by 2.9% year-on-year.
    Fixed asset investment for the January to May period rose by 6.2%, topping expectations of 6% growth.
    Still, China’s National Bureau of Statistics warned: “We must be aware that the international environment is to be even more complicated and grim, and the domestic economy is still facing difficulties and challenges for recovery.”

    BEIJING — China released economic data for May that topped muted expectations for a month hampered by Covid controls.Industrial production rose mildly by 0.7% in May from a year ago, versus an expected 0.7% drop, according to analysts polled by Reuters. In April, industrial production unexpectedly fell, down by 2.9% year-on-year.Retail sales fell less than expected, down by 6.7% in May from a year ago. Retail sales were estimated to have declined by 7.1% in May from a year ago, according to the Reuters poll. In April, retail sales fell by 11.1% from a year ago.Fixed asset investment for the January to May period rose by 6.2%, topping expectations of 6% growth.
    China’s National Bureau of Statistics said in a statement that the economy “showed a good momentum of recovery” in May, “with negative effects from Covid-19 pandemic gradually overcome and major indicators improved marginally.”

    “However, we must be aware that the international environment is to be even more complicated and grim, and the domestic economy is still facing difficulties and challenges for recovery,” the bureau said.

    New energy vehicles, which include hybrid and battery-powered cars, have seen sales surge in China despite a slump in the overall car market. Pictured here is an unnamed new energy vehicle factory in Jiangsu province on June 13, 2022.
    Wan Shanchao | Visual China Group | Getty Images

    China’s exports accelerated in May to a better-than-expected 16.9% increase from a year ago in U.S. dollar terms. Imports also rose by a greater-than-expected 4.1%.
    Shanghai and Beijing, China’s two largest cities by gross domestic product, have both had to reinstate tighter Covid controls this month after persistent spikes in Covid cases.
    Shanghai had locked down in April and May, with only some major businesses operating. The city began to fully reopen on June 1.

    Read more about China from CNBC Pro

    For about a month in May, Beijing had told people in its biggest business district to work from home, while restaurants across the capital could only operate on a takeout or delivery basis. Most restaurants in Beijing were allowed to resume in-store dining in early June and employees could return to work, but schools have delayed resuming in-person classes.

    The uncertainty, especially about future income, has weighed on consumer spending. The unemployment rate in China’s 31 largest cities surpassed 2020 highs to reach 6.7% in April — the highest on record going back to 2018. That rate rose further in May to 6.9%, while the overall unemployment rate in cities ticked lower to 5.9%.
    The unemployment rate for young people aged 16 to 24 rose further to 18.4% in May, up from 18.2% in April.
    “I think as the restrictions are being eased and we have monetary policy support going forward, the unemployment rate should come down a little considering we’re well above the government target,” Francoise Huang, senior economist at Allianz Trade, said in a phone interview last week.
    “At the moment my scenario is that we should see some recovery in the second half of the year,” she said. “It’s not [a] V-shaped rebound, quick and strong rebound, or post-Covid recovery like we had seen in 2020, because the policy easing is not that strong and external demand is not that strong.”

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    in Business

    Travelers are upset about rising costs, but most aren't canceling their plans just yet

    Summer travel talk sure isn’t what it used to be.
    Rather than sun, sand and surf, many travel discussions now center on inflation, rising fuel costs and flight cancellations, a situation which could derail a much-needed 2022 summer travel comeback.

    Travel conversations on Twitter decreased 75% from April to May, while discussions related to gas prices and travel — half of which were negative — climbed 680% on the website from the winter months into the spring, according to the social media analytics company Sprout Social.
    Yet despite the potential problems ahead, the outlook for summer travel remains strong, said industry insiders, with many travelers saying they’re concerned but undeterred about their upcoming plans.

    Are travelers canceling plans?

    No, said James Thornton, CEO of Intrepid Travel, a Melbourne-based travel company which focuses on small group adventure vacations around the globe.
    He said the company hasn’t seen higher cancellation rates this summer.
    “In the last few months, global concerns about shortages, sanctions and higher costs have had economists sounding alarms,” said Thornton. “Despite the rise in costs, travel bookings have more than doubled.”

    David Mann, chief economist at the Mastercard Economics Institute, said higher prices won’t stop travelers this summer, especially in parts of the world that have recently reopened, such as Asia-Pacific.
    “Think of it literally like a pressure cooker where you are lifting up the lid and the steam is coming out hot,” he told CNBC’s “Squawk Box Asia” in May. Inflation “does matter, but that’s only after we’ve had some of that release of the pent-up demand.”
    A new survey indicates Singaporeans, for example, aren’t willing to sacrifice their summer travel plans in the face of rising costs. Despite 77% indicating they were either “extremely” or “very” concerned about rising costs, nearly 40% more people plan to travel this summer than in the last, according to a Tripadvisor Travel Index released in May.
    Nearly two in three Singaporeans said they’d be willing to spend less on dining out and clothing to fund their travel too.
    Conversely, travel resiliency may be less robust in places where pent-up demand has dissipated some, such as Europe and North America.
    According to a March survey published in the Country Financial Security Index Report, nearly a quarter (23%) of Americans indicated plans to cancel or put off travel plans in response to inflation.
    Still, Americans are expected to travel in large numbers this summer. More than half (55%) say they’re traveling for the Fourth of July holiday, according to a survey by the travel website The Vacationer — an 8% increase over last year’s survey, the company said.  

    Changes, not cancellations

    “More people are pivoting their plans to accommodate price hikes and additional costs, rather than canceling [travel] altogether,” said Eric Bamberger, senior vice president of hospitality at the marketing technology company Zeta Global. 
    Demand for “pampering” travel, such as spas, is rising, while interest in “educational” travel to museums and national parks is down by more than 50%, according to a Zeta Global company representative.
    Car rentals are declining, with rental rates dropping the fastest in the United States in places where gas prices are highest, such as California, Oregon and Washington, according to Zeta Global.
    However, “hotels are on fire,” said Bamberger. “Some hotels in Las Vegas are at 95% occupancy rates, and this past Memorial Day was the best ever recorded day — revenue-wise — for many of the top hotel chains in the U.S.”

    ‘Still going to travel’

    Rising costs are affecting travel expenditures this summer, with 74% of American consumers actively searching for ways to save on travel, according to Zeta Global. Nearly one in four say they are seeking out cheaper transportation, hotels or vacation destinations, according to the company.
    But Expedia CEO Peter Kern told CNBC that other travelers are ready to spend more to travel.

    “We all know there was lots of pent-up savings and underspend during Covid on services and travel,” he said. “So far it seems to be bearing out, that people are interested in spending — and if anything, spending more.”
    When asked about reports that people are opting for cheaper vacations, he said: “We haven’t that so far … particularly in the middle and upper end of the market.”
    Kern said if inflation starts to affect travelers, he agreed they will likely change, but not eliminate, their plans.
    “If anything, perhaps travelers take a little bit off what their ambition is — of where they were going or what they were staying in — but they’re still going to travel,” he said.

    ‘Gangbusters’ summer

    Marriott CEO Anthony Capuano said the company, which operates in nearly 140 countries according to its website, is now seeing strong demand not just from leisure travelers, but also from group and business travelers.
    “We think the summer is going to be gangbusters,” he told CNBC’s “Squawk on the Street” in May. “We feel great about this summer.”
    After two consecutive months of negative demand, business travel interest in the United States increased by 365% in May, according to Zeta Global, which tracks website usage as well as location and transactional data from credit card and loyalty program purchases.

    Business travel is increasing faster among younger travelers than older, senior-level ones, according to Zeta Global.
    Goodlifestudio | E+ | Getty Images

    International travel interest from Americans also rose in May, it said, with interest in going to Asia, Europe and South America up more than 200% from the month prior, according to the company.   
    That was before the Biden Administration dropped pre-departure Covid test requirements to enter the United States, a move which is expected to kickstart travel into and out of the U.S.
    “Removing the testing requirement eliminates a source of stress for travelers which may have been holding them back,” said Expedia Group’s Head of Global PR Melanie Fish. “We expect demand will only grow from here.”  More

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    in Business

    Netflix, once the great disruptor, is now taking ideas from the industry it upended to jumpstart growth

    Netflix is considering pivoting toward how old media does business as it looks to reinvigorate growth.
    The company’s shares have fallen about 70% this year.
    Netflix has held several core tenets throughout its streaming existence that executives are now rethinking.

    Reed Hastings, co-founder and chief executive officer of Netflix Inc., during the Milken Institute Global Conference in Beverly Hills, California, U.S., on Monday, Oct. 18, 2021.
    Kyle Grillot | Bloomberg | Getty Images

    In the foreword to Hamilton Helmer’s “7 Powers: The Foundations of Business Strategy,” published in 2016, Netflix co-founder and co-CEO Reed Hastings describes what happens when market leaders don’t adjust to new competitive forces.
    “Throughout my business career, I have often observed powerful incumbents, once lauded for their business acumen, failing to adjust to a new competitive reality,” Hastings writes. “The result is always a stunning fall from grace.”

    Six years later, Hastings finds himself in the role of an incumbent that has, for the moment, experienced a stunning fall from grace. Netflix shares have fallen more than 70% year to date. The company announced in April it expects to lose 2 million subscribers in the second quarter. Investors have sold in droves as they question the size of the total addressable streaming market — a number Netflix has previously said could be as high as 800 million. As of the latest count, Netflix has about 222 million global subscribers.

    Netflix executives are now reflecting on how they failed to adjust to a new competitive reality, one which was masked by massive subscriber gains during the Covid pandemic when billions of people around the world were stuck at home. While the company has consistently churned out big hits, such as “Stranger Things” and “Squid Game,” Netflix is rethinking many of the philosophies that disrupted the industry more than a decade ago.
    The change in strategy, even on the margins, is a surprising one for a company best known for disrupting two industries — first video rental and then cable TV. Instead of inventing new ways to upend what’s become a crowded streaming video industry, Netflix is reconsidering nearly all of the ways it stood out from legacy media companies in the first place.
    In other words, Hastings has decided his best strategy now is to un-disrupt.
    “It’s notable that Netflix is seeking growth by rethinking many of its firmly held beliefs,” said Joel Mier, Netflix’s director of marketing from 1999 to 2006 and a lecturer in marketing at the University of Richmond. “These decisions will clearly help revenue and subscriber growth in the short- to mid-term. The larger question is how they will impact the firm’s brand over the long-term.”

    Netflix declined to comment.

    Embracing advertising

    Hastings has long proclaimed Netflix’s aversion to advertising is due to the added complexity of the business.
    “Advertising looks easy until you get in it,” Hastings said in 2020. “Then you realize you have to rip that revenue away from other places because the total ad market isn’t growing, and in fact right now it’s shrinking. It’s hand-to-hand combat to get people to spend less on, you know, ABC and to spend more on Netflix. We went public 20 years ago at about a dollar a share, and now we’re [more than] $500. So I would say our subscription-focused strategy’s worked pretty well.”
    Netflix is no longer more than $500 a share. It closed at $169.69 on Monday.
    Since making that comment in 2020, Hastings has watched other streaming services, including Warner Bros. Discovery’s HBO Max, NBCUniversal’s Peacock and Paramount Global’s Paramount+, launch lower-priced services with ads without a consumer backlash. Disney plans to unveil a cheaper ad-supported Disney+ later this year.

    A sign is posted in front of Netflix headquarters on April 20, 2022 in Los Gatos, California.
    Justin Sullivan | Getty Images

    In April, Hastings announced he’d changed his mind. An ad-supported Netflix “makes a lot of sense” for “consumers who would like to have a lower price and are advertising tolerant,” he said.
    Netflix has previously argued it found a gap in the market by not worrying about advertising. Niche shows, which wouldn’t play well with advertisers, who want scale, could be valuable for Netflix if they brought in enough subscribers relative to production budgets.
    It remains to be seen whether Netflix will offer its full slate of content on an ad-supported service or if certain shows will be walled off for no-ad subscribers only.

    Developing shows

    Part of Netflix’s pitch to content creators has been ordering “straight to series,” rather than making traditional pilot episodes of shows and judging them based on a hard product. Other streamers have followed suit after seeing Netflix attract A-list talent by skipping pilots.
    “If you’re a typical studio, you raise money for a pilot, and if it tests well, you pick up the show, maybe you make a few more episodes, and you wait for the ratings,” Barry Enderwick, who worked in Netflix’s marketing department from 2001 to 2012 and who was director of global marketing and subscriber acquisition, told CNBC in 2018.
    “At Netflix, our data made our decisions for us, so we’d just order two seasons. Show creators would ask us, ‘Do you want to see notes? Don’t you want to see a pilot?’ We’d respond, ‘If you want us to.’ Creators were gobsmacked.”
    Ordering projects straight to series gave writers and producers certainty and, frequently, more money. The downside, Netflix has found, is it’s also led to series that didn’t turn out to be very good. Deadline noted 47 different examples of Netflix ordering straight to series in 2020-21 and 20 for 2022. While a few are notable, such as “The Witcher: Blood Origin” and “That ’90s Show,” most have generated little buzz.
    Netflix plans to start ordering more pilots and slow down on its straight-to-series development process, according to people familiar with the matter. The hope is the end result will lead to higher-quality programming and less fluff.
    Netflix doesn’t plan to lower its overall budget on content. Still, it does intend to reallocate money to focus on quality after years of adding quantity to fill its library, the people said. Executives have added more original programming in recent years to avoid a lasting reliance on licensed content — much of which has been pulled back by the media companies who own it to fill their own streaming services.

    Appointment viewing

    Another Netflix hallmark has been its long-held decision to release full seasons of series all at once, allowing users to watch episodes at their own pace.
    “There’s no reason to release it weekly,” co-CEO Ted Sarandos said in 2016. “The move away from appointment television is enormous. So why are you going to drag people back to something they’re abandoning in huge numbers?”

    Netflix co-CEO Ted Sarandos attends the Allen & Company Sun Valley Conference on July 08, 2021 in Sun Valley, Idaho.
    Kevin Dietsch | Getty Images

    Still, in recent years, Netflix has experimented with weekly releases for some reality shows instead of bulk drops. Thus far, this hasn’t extended to scripted streaming.
    “We fundamentally believe that we want to give our members the choice in how they view,” Peter Friedlander, Netflix’s head of scripted series for U.S. and Canada, said earlier this month. “And so giving them that option on these scripted series to watch as much as they want to watch when they watch it, is still fundamental to what we want to provide.”
    But people familiar with the matter said Netflix will continue to play around with weekly releases for certain types of series, such as reality TV and other shows based on competition.
    Netflix’s resistance to weekly scripted release may be the next thing to go.

    Live sports

    Netflix has always rejected bidding on live sports, a staple of legacy media companies.
    “To follow a competitor, never, never, never,” Hastings said in 2018. “We have so much we want to do in our area, so we’re not trying to copy others, whether that’s linear cable, there’s lots of things we don’t do. We don’t do (live) news, we don’t do (live) sports. But what we do do, we try to do really well.”
    Yet, last year, Hastings said Netflix will consider bidding on live Formula One rights to pair with the success of its documentary series “Drive to Survive,” which profiles each racing season.

    Max Verstappen of the Netherlands driving the (1) Oracle Red Bull Racing RB18 to the grid before the F1 Grand Prix of Emilia Romagna at Autodromo Enzo e Dino Ferrari on April 24, 2022 in Imola, Italy.
    Dan Istitene – Formula 1 | Formula 1 | Getty Images

    “A few years ago, the rights to Formula 1 were sold,” Hastings said to German magazine Der Spiegel in September. “At that time we were not among the bidders, today we would think about it.”
    This month, Business Insider reported Netflix has been holding talks with Formula One for months for U.S. broadcast rights.
    Adding live sports may give Netflix a new audience base, but it flies in the face of Netflix’s recent aversion to spending big money on licensed programming.

    Limiting password sharing

    For many years, Netflix dismissed password sharing as a quirky side issue that merely demonstrated the popularity of its product. In 2017, Netflix’s corporate account tweeted “Love is sharing a password.”
    But as Netflix’s growth has slowed, executives see password-sharing crackdowns as a new engine to reinvigorate revenue growth. “We’re working on how to monetize sharing. We’ve been thinking about that for a couple of years,” Hastings said during the company’s April earnings conference call. “But when we were growing fast, it wasn’t the high priority to work on. And now, we’re working super hard on it.”
    Over the next year, Netflix plans to charge accounts that are clearly shared with users outside the home additional fees.
    “We’re not trying to shut down that sharing, but we’re going to ask you to pay a bit more to be able to share with her and so that she gets the benefit and the value of the service, but we also get the revenue associated with that viewing,” Chief Operating Officer Greg Peters said during the same call, adding it will “allow us to bring in revenue for everyone who’s viewing and who gets value from the entertainment that we’re offering.”
    CNBC reported earlier on how the password-sharing crackdown is likely to work.

    No longer pure-play streaming

    Netflix has become famous for its 2009 culture presentation, which laid out the company’s values. One of the company’s core tenets speaks to innovation. “You keep us nimble by minimizing complexity and finding time to simplify.”
    Netflix has benefited from being a pure-play streaming company for years. While other media companies, such as Disney, have lagged because of a conglomerate discount and slow-growing or declining legacy assets, investors have loved Netflix’s one-trick pony: streaming growth.
    But that, too, is slowly changing. Netflix announced last year it’s dabbling in video games. Netflix currently has 22 video games on its platform and aims to have 50 by year end.
    Adding a new vertical to streaming video may help Netflix give investors a new reason to bet on the company’s future growth. But it also potentially cuts at a long-held Hastings’ tenet: that focusing on movies and TV shows is what sets Netflix apart.
    “What we have to do is be the specialty play,” Hastings told CNBC in 2017. “We focus on how do we be, really, the embodiment of entertainment, and joy, and movies and TV shows.”
    WATCH: Netflix is probably best positioned among streamers in recession environment, traders say

    — CNBC’s Sarah Whitten contributed to this story.
    Disclosure: NBCUniversal is the parent company of NBC and CNBC.

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    in Finance

    Luxury brands say China's latest Covid wave has whacked consumer demand

    Luxury brands have slashed expectations for their China business this year after the country’s latest Covid lockdowns, according to an Oliver Wyman survey shared exclusively with CNBC.
    Premium consumer and luxury goods brands now only expect 3% year-on-year growth in their mainland China business this year, down sharply from an 18% surge they forecast a few months ago, the report said.
    “There is a huge doubt about whether the consumer confidence [can] recover quickly, as in 2020 and 2021,” said Oliver Wyman principal Kenneth Chow, citing the firm’s interviews with executives.

    China’s retail sales plunged 11.1% in April from a year ago as Covid controls kept many people at home and malls closed. Pictured here is a luxury store in Shanghai on June 4, 2022, just a few days after the city officially began to reopen.
    Hugo Hu | Getty Images News | Getty Images

    BEIJING — Luxury brands have slashed expectations for their China business this year after the country’s latest Covid lockdowns, according to an Oliver Wyman survey shared exclusively with CNBC.
    Forecasted growth for luxury and premium consumer brands was cut by 15 percentage points, and down nearly 25 percentage points for luxury brands alone, according to survey results released Wednesday.

    Premium and luxury goods businesses now expect only 3% year-on-year growth in their mainland China business this year, down sharply from an 18% surge they forecast a few months ago, the report said. That’s based on a weighted average of the survey results.
    Oliver Wyman said its survey of executives in May covered more than 30 of the consulting firm’s clients across premium consumer and luxury goods, representing more than $50 billion in retail sales.

    Uncertain future

    Shanghai, the city with the largest gross domestic product in China and a hub for foreign business, faced the brunt of China’s Covid outbreak this spring — the country’s worst since the initial shock of the pandemic in early 2020. The city ordered people to stay home and most businesses to shut for two months, before attempting to reopen on June 1.
    “There is still a very high uncertainty of what will be the future Covid [measures] in China,” Kenneth Chow, principal at Oliver Wyman, said in a phone interview this week.

    “There is a huge doubt about whether the consumer confidence [can] recover quickly, as in 2020 and 2021,” he said, citing the firm’s interviews with executives.

    China’s retail sales plunged by 11.1% in April from a year ago, following a 3.3% increase during the first three months of the year. Consumer spending in China never fully recovered from the initial phase of the pandemic, and as Covid drags into its third year, people are increasingly worried about future income.
    The unemployment rate in China’s 31 largest cities surpassed 2020 highs to reach 6.7% in April — the highest since records began in 2018.
    “It seems that this time around, the affluent Gen Z [age 25 or younger] may react differently, especially since a lack of job security may be something that they have to deal with for the very first time,” the report said. “Another common view from our interviewees is that the longer the restrictions, the longer the upcoming U-trough will last.”
    Even in areas not locked down, client anecdotes said in-store traffic fell by more than 50%, and the percentage of those visitors actually making a purchase was up to 30% lower, according to the Oliver Wyman report.
    China has maintained a strict “dynamic zero-Covid” policy that uses travel restrictions and swift lockdowns to try to control the virus. While the strategy helped the country quickly return to growth in 2020, the higher transmissibility of this year’s omicron variant has made the virus harder to control.
    Looking ahead to next year, survey respondents were more cautious about future growth, with only 12% — down from 40% previously — expecting their China business to grow by more than 20%.
    The brands on average now expect 11% growth next year in their mainland China business, with only 6% not planning for growth, the report said.

    Bright spots

    Many of the luxury and premium consumer brands surveyed were optimistic about growth opportunities from domestic travel and e-commerce, Chow said. He said once domestic travel is allowed to pick up, Hainan tends to benefit.
    The tropical Chinese island has become a luxury goods shopping hub since most Chinese travelers cannot go overseas.
    He added that many luxury brands were using e-commerce to reach smaller Chinese cities, while brands in a lower range of the market were exploring new store openings. But “when speaking with some of our clients, the Covid lockdown in Shanghai and some other cities have been their primary concern, rather than store expansion,” Chow said.

    Read more about China from CNBC Pro

    Looking longer-term, high levels of Chinese consumer saving has historically been a good predictor of future spending, the report said.
    In the first quarter, Chinese household inclinations to save reached the highest since 2002, according to a survey by the People’s Bank of China.
    “Once consumer confidence is resumed and also the Covid lockdown measures have been relieved, there will be a much better spending level to be unlocked,” Chow said. But “the question still remains on when the Covid measures will be relieved.”
    Oliver Wyman’s survey found that the most optimistic expect China to make a full recovery as early as July, while pessimists don’t expect a return to normal until next year. “The neutral view puts an end to the restrictive policies to occur around October this year,” the report said.

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    in Finance

    Wall Street is on a one way trip to misery until Fed hikes stop, market forecaster Jim Bianco warns

    Monday – Friday, 5:00 – 6:00 PM ET

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    Until inflation peaks and the Federal Reserve stops hiking rates, market forecaster Jim Bianco warns Wall Street is on a one way trip to misery.
    “The Fed only has one tool to bring in inflation and that is they have to slow demand,” the Bianco Research president told CNBC “Fast Money” on Tuesday. “We may not like what’s happening, but over in the Eccles building in Washington, I don’t think they’re too upset with what they’ve seen in the stock market for the last few weeks.”

    The S&P 500 dropped for the fifth day in a row and tripped deeper into a bear market on Tuesday. The index is now off 23% from its all-time high hit on Jan. 4. The Nasdaq is off 33% and the Dow 18% from their respective record highs.
    “We’re in a bad news is good news scenario because you’ve got 390,000 jobs in May,” said Bianco. “They [the Fed] feel like they can make the stock market miserable without creating unemployment.”
    Meanwhile, the benchmark 10-year Treasury Note yield hit its highest level since April 2011. It’s now around 3.48%, up 17% over just the past week.

    ‘Complete mess right now’

    “The bond market, and I’ll use a very technical term, it’s a complete mess right now,” he said. “The losses that you’ve seen in the bond market year-to-date are the greatest ever. This is shaping up to be the worst year in bond market history. The mortgage-backed market is no better. Liquidity is terrible.”
    Bianco has been bracing for an inflation comeback for two years. On CNBC’s “Trading Nation” in December 2020, he warned inflation would surge to highs not seen in a generation.

    “You’ve got quantitative tightening coming. The biggest buyer of bonds is leaving. And, that’s the Federal Reserve,” said Bianco. “You’ve got them intending on being very hawkish in raising rates.”
    Bianco expects the Fed will hike rates by 75 basis points on Wednesday, which falls in line with Wall Street estimates. He’s also forecasting another 75 basis point hike at the next meeting in July.
    “You could raise rates enough and you could butcher the economy and you can have demand fall off a cliff and you can have inflation go down. Now, that’s not the way you or I want it to be done,” said Bianco. “There’s a high degree of chance that they’re going to wind up going too far and making a bigger mess of this.”
    He contends the Fed needs to see serious damage to the economy to back off its tightening policy. With inflation affecting every corner of the economy, he warns virtually every financial asset is vulnerable to sharp losses. According to Bianco, the odds are against a soft or even a softish landing.
    His exception is commodities, which are positioned to beat inflation. However, Bianco warns there are serious risks there, too.
    “You’re not there in demand destruction yet. And so, I think that until you do, commodities will continue to go higher,” he said. “But the caveat I would give people about commodities is they’ve got crypto levels of volatility.”
    For those with a low tolerance for risks, Bianco believes government-insured money market accounts should start looking more attractive. Based on a 75 basis points hike, he sees them jumping 1.5% within two weeks. The current national average rate is 0.08% on a money market account, according to Bankrate.com’s latest weekly survey of institutions.
    It would hardly keep up with inflation. But Bianco sees few alternatives for investors.
    “Everything is a one way street in the wrong direction right now,” Bianco said.
    Disclaimer

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    in Business

    Cramer's lightning round: Stay away from Equinix for now

    Monday – Friday, 6:00 – 7:00 PM ET

    It’s that time again! “Mad Money” host Jim Cramer rings the lightning round bell, which means he’s giving his answers to callers’ stock questions at rapid speed.

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    Bausch Health Companies Inc: “I can not believe that this has worked out as bad as it has. It’s one of the worst picks I’ve had. … [CEO Joe Papa’s] got to come back on the show. That’s the only way to clear the air.”

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    Equinix Inc: “I thought that Equinix would be a good stock, but you know what, we’re in a situation now where anything that’s just a building with plumbing in it’s not doing it for people. We’re going to have to stay away for now.”

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    Mosaic Co: “I can not recommend buy or sell, because it is at a level that is just right at the precipice of either going back up or going down big.”

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    Farmland Partners Inc: “I like Farmland Partners. … It just is very, very expensive, and that’s the problem.”

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    Saverone 2014 Ltd: “I find myself loathe to recommend something that is not making money. …. I’ve got to be cut and dry in this bear market. I just have to.”
    Disclosure: Cramer’s Charitable Trust owns shares of Bausch Health.

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    Jim Cramer says to consider buying these 10 cheap, high growth stocks with dividend protection

    Monday – Friday, 6:00 – 7:00 PM ET

    CNBC’s Jim Cramer on Tuesday offered investors a list of stocks he believes will help investors’ portfolios withstand the geopolitical and economic issues currently roiling the stock market.
    “When the market comes down so far, so fast, you can find genuinely good buying opportunities,” the “Mad Money” host said.

    CNBC’s Jim Cramer on Tuesday offered investors a list of stocks he believes will help investors’ portfolios withstand the geopolitical and economic issues currently roiling the stock market.
    “When the market comes down so far, so fast, you can find genuinely good buying opportunities,” the “Mad Money” host said.

    “You’ve got to be selective because the market remains horrific. That means picking at the kind of defensive stocks that can hold up just fine even with inflation and the very real possibility of a Fed-mandated recession,” he said.
    The S&P 500 slipped deeper into bear market territory on Tuesday, while the Dow Jones Industrial Average saw a small decline. The Nasdaq Composite saw a slight gain.
    Cramer said that investors will want to pick up cheap names with dividend protection and healthy growth, and came up with a list of stocks in the S&P 500 he believes they should be eyeing.
    To create the list, he first ran a screen on the index for companies that fit the following three criteria:

    Its stock trades at less than 16.5 times earnings (the average stock in the S&P 500 currently trades at 16.5 times earnings, according to Cramer)
    It is expected to grow earnings both this year and next year
    Its stock yields more than 3.5%, in order to stay above the benchmark 10-year Treasury yield

    Left with 23 names that fit the above requirements, Cramer picked out his 10 favorites.

    Here is the list:

    Devon Energy
    ONEOK
    Verizon
    Huntington Bancshares
    VICI Properties
    Newell Brands
    IBM
    Cisco
    Advance Auto Parts
    NRG Energy

    Disclosure: Cramer’s Charitable Trust owns shares of Cisco and Devon Energy.
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    Stock futures rise slightly as investors brace for a big Fed rate hike

    Stock futures rose slightly in overnight trading Tuesday as investors anxiously awaited the Federal Reserve’s aggressive action to tame surging inflation.
    Futures on the Dow Jones Industrial Average gained 70 points. S&P 500 futures edged up 0.3% and Nasdaq 100 futures rose 0.4%.

    The S&P 500 suffered a five-day losing streak on Tuesday, dipping deeper into bear market territory. The equity benchmark has fallen more than 4% this week already and is now off over 22% from its all-time time hit in early January. The blue-chip Dow slid about 150 points Tuesday, also falling for a fifth straight day Tuesday. The Nasdaq Composite ended Tuesday slightly higher.
    The rate-setting Federal Open Market Committee will conclude its two-day meeting on Wednesday. The market is betting on a 94% chance of a 75-basis-point rate hike, the biggest increase since 1994, according to the CME Group’s FedWatch tool. (1 basis point equals 0.01%)
    The shift to price in a larger-than-usual rate hike came after headlines that Fed officials were contemplating such a move following a surprisingly hot inflation reading as well as worsening economic outlook.
    “The change in the headline from 50 basis points to 75 basis points reflects a stark reality but it also reflects the Fed’s determination to underscore its commitment to its mandate to maintain price stability,” said Quincy Krosby, chief equity strategist at LPL Financial. “It’s neither a trial balloon nor a lead balloon — it’s reality.”
    Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. ET following the central bank’s policy decision. Investors will be monitoring his language and tone about the Fed’s tightening path forward. The central bank will also release its outlook for its benchmark rate, inflation and GDP.

    Treasury yields have jumped dramatically this week in anticipation of the big rate hike. The two-year rate, most sensitive to changes in monetary policy, surged 40 basis points this week alone to hit its highest level since 2007. The benchmark 10-year yield popped more than 30 basis points to top 3.48%, a high not seen since April 2011.
    Some notable investors believe the central bank can regain credibility by acting aggressively to show its seriousness in combating inflation.
    The Fed “has allowed inflation to get out of control. Equity and credit markets have therefore lost confidence in the Fed,” wrote Pershing Square’s Bill Ackman in a tweet Tuesday. “Market confidence can be restored if the Fed takes aggressive action with 75 bps tomorrow and in July” and makes a commitment to aggressive increases until inflation “has been tamed.”

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