Finance

It was a French politician, Valéry Giscard d’Estaing, who coined the term “exorbitant privilege” in the 1960s. He was referring to the benefits received by America as issuer of the world’s reserve currency—namely, the ability to run high deficits comfortably. These days France is reminded that it has no such privilege. Ahead of parliamentary elections on June 30th and July 7th, its hefty deficit and growing debt are central to the campaign. On June 19th the European Commission is expected to put France into an excessive-deficit procedure (EDP), the EU’s fiscal torture chamber, meaning that the country’s politicians will have to come up with a plan to fix things.The commission’s officials have good reason to do so. France has an American-style deficit of 5% of GDP, which its central bank and the IMF expect to come down only slowly. The country’s debt-to-GDP ratio of 111% is similar to Italy’s before the euro crisis in the early 2010s, and is set to rise. S&P Global, a ratings agency, downgraded the French government’s sovereign-debt rating from AA to AA- on May 31st—before Emmanuel Macron, France’s president, gambled on snap elections that may bring the hard-right National Rally (RN) or the left-wing New Popular Front (NPF) to power, under his continuing presidency. More

It was a French politician, Valéry Giscard d’Estaing, who coined the term “exorbitant privilege” in the 1960s. He was referring to the benefits received by America as issuer of the world’s reserve currency—namely, the ability to run high deficits comfortably. These days France is reminded that it has no such privilege. Ahead of parliamentary elections on June 30th and July 7th, its hefty deficit and growing debt are central to the campaign. On June 19th the European Commission is expected to put France into an excessive-deficit procedure (EDP), the EU’s fiscal torture chamber, meaning that the country’s politicians will have to come up with a plan to fix things.The commission’s officials have good reason to do so. France has an American-style deficit of 5% of GDP, which its central bank and the IMF expect to come down only slowly. The country’s debt-to-GDP ratio of 111% is similar to Italy’s before the euro crisis in the early 2010s, and is set to rise. S&P Global, a ratings agency, downgraded France’s sovereign-debt rating from AA to AA- on May 31st—before Emmanuel Macron, France’s president, gambled on snap elections that may bring the hard-right National Rally (RN) or the left-wing New Popular Front (NPF) to power, under his continuing presidency. More

Warren Buffett walks the floor and meets with Berkshire Hathaway shareholders ahead of their annual meeting in Omaha, Nebraska, on May 3, 2024.
David A. Grogan

Warren Buffett’s Berkshire Hathaway has scooped up more shares of Occidental Petroleum over each of the past nine trading sessions, driving his gigantic stake in the Houston-based oil and gas producer to almost 29%, according to regulatory filings.
The Omaha, Nebraska-based conglomerate purchased Occidental shares every trading day from June 5 to Monday, totaling an additional 7.3 million shares with purchase prices slightly under or above $60, filings showed.

The purchases brought Berkshire’s holding to over 255 million shares, representing a 28.8% stake. Occidental is Berkshire’s sixth-biggest stock holding, and the conglomerate has become Occidental’s biggest institutional investor by far.
Berkshire also owns $10 billion of Occidental preferred stock and has warrants to buy another 83.9 million common shares for $5 billion, or $59.62 each. The warrants were obtained as part of the company’s 2019 deal that helped finance Occidental’s purchase of Anadarko Petroleum.
The stock closed at $60.2 Monday, making Buffett’s warrants “in the money.” A full redemption of the preferred equity could lift Berkshire’s ownership of Occidental above 40%.
Buffett has clarified that he wouldn’t take full control of the oil company, once known for being founded by legendary oilman Armand Hammer. There had been speculation of a takeover after Berkshire received regulatory approval to purchase as much as a 50% stake. 
‘Read every word’
The “Oracle of Omaha” previously said he started buying Occidental after reading a transcript of the oil company’s earnings conference call.

“I read every word, and said this is exactly what I would be doing,” Buffett told CNBC.
Occidental CEO Vicki Hollub is “running the company the right way,” he added.
Occidental also pays a 1.5% dividend yield. The stock is about flat this year after dipping 5% in 2023.
The legendary investor said he took advantage of the elevated volatility in the market in early 2022 to acquire 14% of the energy firm, worth more than $7 billion, in just two weeks.
“I find it just incredible. You couldn’t do that with Berkshire. … Overwhelmingly, large companies in America, they became poker chips,” Buffett said in 2022. “Imagine trying to [buy] 14% of the farms in this country; 14% of the apartment houses; 14% of the auto dealerships, or just anything, when already 40% were locked up some other place.”

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Sen. Elizabeth Warren is accusing Fed Chair Jerome Powell of doing the financial industry’s bidding in considering changes to Basel III Endgame regulations.
In a letter first obtained by CNBC, Warren asked Powell for a response to reports that “you are advocating for slashing in half” the increase in capital required under the proposals.
Bank CEOs and their lobbying groups have said the increases are unnecessarily aggressive and would force the industry to curtail lending.

Sen. Elizabeth Warren, D-Mass., speaks during the Senate Armed Services Committee hearing on security in Afghanistan and in the regions of South and Central Asia, in the Dirksen Building in Washington, D.C., on Oct. 26, 2021.
Tom Williams | CQ-Roll Call, Inc. | Getty Images

Sen. Elizabeth Warren, D-Mass., is accusing Federal Reserve Chair Jerome Powell of doing the financial industry’s bidding by considering changes to a sweeping set of regulations aimed at boosting the capital cushion that large American banks would be required to hold.
In a June 17 letter first obtained by CNBC, Warren asked Powell for a response to reports that “you are advocating for slashing in half” the increase in capital required under the proposals, known as the Basel III Endgame.

“I am disappointed by press reports indicating that you are personally intervening—after numerous meetings with big bank CEOs—to delay and water down the Basel III capital rules,” said Warren.
Last year, three U.S. banking regulators including the Federal Reserve unveiled the proposed rules, a long-expected regime shift around bank capital and risky activities such as trading and lending. The regulations incorporate new international standards created as a response to the 2008 global financial crisis.
“These rules are critical and long overdue, particularly in the wake of the Silicon Valley and Signature Bank failures, and as risks from the weak commercial real estate market and other economic threats ripple through the banking system,” Warren said.
Bank CEOs and their lobbying groups have said the increases are unnecessarily aggressive and would force the industry to curtail lending.
In March, Powell told lawmakers that he expected “broad and material changes” to the proposal in the wake of the industry’s campaign against the rules. JPMorgan Chase CEO Jamie Dimon coordinated efforts to weaken the rules, urging CEOs to appeal directly to Powell, The Wall Street Journal reported last month.

“It now appears that you are directly doing the bank industry’s bidding, rewarding them for their extensive personal lobbying of you,” Warren said in her letter. “Taking orders from the industry that caused the 2008 economic meltdown would sacrifice the financial security of middle-class and working families to line the pockets of wealthy investors and CEOs.”
She further criticized Powell, saying “regulatory rollbacks” under the Fed chair allowed the regional banking crisis of 2023 to happen and “enriched Jamie Dimon and his Wall Street cronies.”
Warren urged Powell to allow a Federal Reserve Board vote on the original, tougher Basel proposal by the end of this month. The window to finalize and approve the rules ahead of U.S. elections in November is closing, and analysts have said that the proposal could be delayed or killed if Donald Trump is reelected president.
“Instead of doing Mr. Dimon’s bidding, you should do your job and allow the Board to convene for a vote on a 16% capital increase by June 30th, as global regulators determined was necessary to prevent another financial crisis,” Warren said.
When asked for a response to Warren’s letter, a Fed spokesperson had this statement on Tuesday morning: “We have received the letter and plan to respond.”

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Games and movies on Google Play Store apps can now be viewed in three dimensions via a new Android mobile device from augmented reality glasses maker Xreal, the Alibaba-backed startup said Tuesday.
“We’re hoping this one can finally became the hero product that people gonna really like,” Chi Xu, founder and CEO of Xreal, told CNBC in an interview.
The Beam Pro comes with two cameras that can capture pictures and videos for three-dimensional viewing in AR glasses.

Xreal, an augmented reality glasses maker, has launched a connected Beam Pro mobile device that allows users to capture spatial video and 3D images.

BEIJING — Games and movies on Google Play Store apps can now be viewed in three dimensions via a new Android mobile device from augmented reality glasses maker Xreal, the Alibaba-backed startup said Tuesday.
The Beam Pro, the company’s latest product, is a smartphone-like device that can be used with AR glasses as a virtual mouse, and links the headset to Google Play Store apps including those for gaming, movie streaming and social media.

Augmented reality imposes digital images over the real world, giving someone wearing AR glasses the impression of being in a 3D virtual space.
Xreal’s latest product launch is an indication of how Alphabet is keeping afoot in the headset space after retiring Google Glass, even as Apple launched its widely anticipated VR offering this year.
Apple’s Vision Pro allows users to see apps and a digitally captured version of the real world using what the company calls spatial computing technology.
Xreal sells a range of AR glasses, some as light as 72 grams (2.5 ounces), that can display the screen of a connected laptop, smartphone or gaming console. The Beam Pro, which connects to the glasses via a cord, is set to begin U.S. deliveries by August and has a starting price of $199.
“We’re hoping this one can finally became the hero product that people gonna really like,” Chi Xu, founder and CEO of Xreal, told CNBC in an interview.

“I think this actually [is] gonna be the new category standard,” he said, adding some smartphone makers might “actually want to go this route.”
Xu said part of the challenge for wider AR glasses adoption has been the lack of content, and the inability to incorporate user-generated images.
That’s starting to change this year. The Beam Pro has two cameras that can capture pictures and videos for three-dimensional viewing in AR glasses, similar to Apple Vision Pro’s advertised ability to capture “3D spatial photos and videos.”
Xreal said the Beam Pro uses Nvidia CloudXR technology for image rendering and Qualcomm’s Snapdragon spatial computing platform. The startup said it is also collaborating with Amazon Web Services to explore ways for improving the product’s processing power and functions.
According to IDC Research, Xreal had the largest market share in global AR headsets in 2023.
“Companies such as XREAL and Rokid demonstrated that there is an audience for AR glasses to consume gaming and multimedia content without spending thousands of dollars, and this will no doubt attract the attention of other companies seeking to do the same,” Ramon T. Llamas, research director with IDC’s Augmented Reality/Virtual Reality team, said in a report in April.
A pair of Xreal AR glasses costs around $200 to $400, depending on the model and sales promotion.
That means a set of Xreal AR glasses and Beam Pro costs significantly less than $1,000. Apple charges $3,500 for its Vision Pro.

Different glasses by user

Xu said Xreal has sold “really close to 400,000” AR glasses since the company launched in 2017. He said average weekly usage is about 4 hours, with the top 15% exceeding 10 hours a week.
The company said in January it had shipped 350,000 AR glasses. Around the same time, Xreal said it received a $60 million injection that valued the startup at more than $1 billion.

I think this one [is going to] bring the cloud gaming to the next level.

founder and CEO, Xreal

Xu said he expects tech glasses will evolve in three directions at the same time, ranging from a heavier and pricier virtual reality headset to a light-weight frame that can be worn all the time.
“Unfortunately, we won’t see the kind of iPhone moment where everybody is converging to just one point,” he said, noting the variety of headset experiences. “I believe different people find different kind of flavor and combination there. But all of them haven’t taken off yet.”
It’s unclear how many Vision Pros Apple has sold since it launched in the U.S. earlier this year. The headset is due to launch outside the U.S. on June 28, beginning in mainland China, Hong Kong, Japan and Singapore.
The Beam Pro launched in China in late May. As of June 12, it had reached just under 5,000 orders, Xu said, adding he hoped that by the end of a mid-June promotional period, orders would reach about 10,000.

Cloud gaming potential

By late August or early September, Xu expects the Xreal Beam Pro will be able to use 5G cellular networks in addition to Wifi.
Xu said 5G support creates new opportunities for the development of cloud gaming, and that Xreal is already in talks with major global cloud gaming companies.
“I think this one [is going to] bring the cloud gaming to the next level because, honestly, if you only play cloud gaming on a cell phone, the size of the screen didn’t make that much sense, but [when] you can put AR glasses there, you have a massive screen,” Xu said.
Cloud gaming relies on remote servers and an internet connection to offer people a smooth gaming experience with just a small file download.
As for non-gaming applications, Xu said Xreal’s strategy is to build on people’s existing technological habits using smartphones and changing that slowly into a 3D space.
“We’re not trying to change people’s way of using technology dramatically, right?” he said. “We’re trying to take small steps and make that faster.” More

The meme stock closed lower by about 12%, as GameStop’s rescheduled shareholder event wrapped up with no detailed remarks about the company’s strategies.
No shareholders got to ask their questions during the meeting, which lasted about 30 minutes.
In brief introductory remarks, CEO Ryan Cohen reiterated the company’s plans to focus on cutting costs and boosting profits and intimated that more store closures could be on the horizon.

Traders work at the post where GameStop is traded on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., June 12, 2024. 
Brendan McDermid | Reuters

GameStop shares slid on Monday after the company’s highly anticipated annual meeting failed to offer any concrete updates on the video game retailer’s future plans.
The meme stock ended the session lower by 12.1%, as the company’s rescheduled shareholder event wrapped up with no detailed remarks about its strategies. No shareholders got to ask their questions during the meeting, which lasted about 30 minutes. Shares were down as much as 17% at $23.79.

Stock chart icon

In brief introductory remarks, CEO Ryan Cohen reiterated the company’s plans to focus on cutting costs and boosting profits and intimated that more store closures could be on the horizon.
“Revenues without profits and prospects of future cash flows are of no value to shareholders. This means a smaller network of stores with an expanded assortment of higher value items that fit into our trade-in model,” he said.
Cohen didn’t provide more specifics on the company’s future growth strategies. He spoke about the importance of having a “strong balance sheet” and called it a “strategic advantage” — especially in times of economic uncertainty. As of May 4, GameStop had about $1 billion in cash and cash equivalents on its balance sheet.
“While the future is always uncertain, the last decade’s monetary and fiscal policies both within the U.S. and globally are historic anomalies. Exiting from an ultra-low interest rate environment is likely to have unforeseen reverberating effects across the economy, as seen with inflation hitting 40-year highs in 2022,” Cohen said.
“Under the current interest rates, an investment made in today’s economic climate must bear a higher return threshold,” he added. “As my father always said, actions speak louder than words. We are focused on building shareholder value over the long term. We are not here to make promises or hype things up, we’re here to work.”

The event was disrupted by computer problems and postponed on Thursday as servers crashed due to overwhelming interest in the stream.
GameStop came into the limelight again as Reddit ringleader Roaring Kitty, whose legal name is Keith Gill, stirred up another trading frenzy. Gill gained notoriety in the online trading realm in 2021 for touting his large positions in GameStop, both in common shares and risky options. Since coming back on the scene, his position has topped 9 million shares in GameStop after exiting a gigantic call option position before expiration.
The stock has gained seven out of the past eight weeks after more than doubling in May. Year to date, it’s up about 44%.
GameStop is still struggling with a transition to online gaming and away from brick-and-mortar video game purchases, with investors banking on Cohen to eventually reinvent the company.
The retailer recently raised more than $2 billion in an at-the-market equity sale as the video game company took advantage of the revived meme rally. GameStop said it intends to use the money for general corporate purposes, which may include acquisitions and investments. More

Activist Starboard Value has a $500 million stake in software maker Autodesk and is weighing legal action over the company’s delayed disclosure of an internal investigation into accounting malfeasance.
Autodesk moved its chief financial officer to a new role after an internal probe found that executives reversed a shift in billing structure to inflate the company’s free cash flow and operating margin numbers.
Those two metrics determine executive pay and measure company success.
Starboard is concerned that Autodesk delayed disclosing an internal probe until shortly after the nominating deadline for the company’s board, which would potentially limit a shareholder’s ability to nominate its own candidates in a contested fight.

Jeffrey Smith, CEO and chief investment officer at Starboard Value LP.
David Paul Morris | Bloomberg | Getty Images

Starboard Value, the activist fund run by Jeff Smith, has taken a sizable stake in graphics design firm Autodesk and has spoken with the company’s board in recent weeks over several serious concerns involving its disclosures around an internal investigation that led to the ouster of its chief financial officer.
Starboard’s stake is valued at roughly $500 million, according to people familiar with the matter. The activist, which has a long track record of investing in the technology sector, is particularly concerned about the timing of Autodesk’s disclosure of an internal investigation. That investigation revealed that executives misled investors about the company’s free cash flow metrics and operating margins, according to the people, who requested anonymity to discuss confidential information freely.

After the probe results came out, Autodesk’s then-CFO Deborah Clifford was ousted from her role and moved to a different executive role within Autodesk. The probe found that executives manipulated reporting tied to the company’s contract billing structure, as Autodesk shifted back to upfront payments from annualized payments, to improve those metrics.
Autodesk first disclosed in April that it had begun an internal investigation into disclosure issues around those metrics, almost a month after first beginning the investigation and informing the Securities and Exchange Commission about the probe into its financial reports. Autodesk shares slid 20% over the next few weeks. The company’s market cap now sits slightly below $50 billion.
The delayed disclosure came a little more than a week after the deadline to nominate directors closed. The tight window and timing of the disclosure raised significant concerns inside Starboard, the people said, that Autodesk’s board deliberately chose not to inform shareholders ahead of its annual meeting. Such a delay would potentially limit a shareholder’s ability to nominate its own candidates in a contested fight.
Starboard is weighing legal action in the Delaware Court of Chancery to compel the reopening of Autodesk’s nominating window and the delay of Autodesk’s annual meeting, the people said. Autodesk’s shareholder meeting is currently scheduled for July 16.
The activist also believes that the company can drive actual margin improvement and improve investor communications to help bolster Autodesk’s stock, the people said.

Starboard has built stakes in other major technology companies, including Marc Benioff’s Salesforce and Splunk, which was sold to Cisco in 2023 for $28 billion.
News of Starboard’s stake and plans was reported earlier by The Wall Street Journal.
Autodesk has faced activist scrutiny before. In 2016, it settled with two activist investors at Sachem Head Capital Management and Eminence Capital to stave off a proxy contest.
Autodesk disclosed earlier this year that it is facing probes from the Justice Department and SEC.
An Autodesk spokesperson said the company welcomed “constructive input” from shareholders.
“We are confident in our strategic direction, significant margin opportunity, and our corporate governance,” the spokesperson said.

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Warren Buffett speaks during the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska, on May 4, 2024.

Berkshire Hathaway, an early investor in BYD thanks to the late Charlie Munger, continued to trim its massive stake in China’s biggest electric vehicle maker.
Warren Buffett’s conglomerate has sold an additional 1.3 million Hong Kong-listed shares of BYD for $39.8 million, according to a filing to the Hong Kong Stock Exchange. The sale reduced Berkshire’s holding to 6.9%, from 7%.

The conglomerate first bought about 225 million shares of Shenzhen-based BYD in 2008 for about $230 million. The bet turned out to be extremely lucrative as the EV market saw explosive growth in China and elsewhere.

Arrows pointing outwards

Berkshire had offloaded half its holding through sales in 2022 and 2023 after BYD skyrocketed nearly 600% to a record high in April 2022 from the start of 2008.
Hong Kong’s rules only require a filing when a stake percentage crosses a whole number, so if Berkshire’s stake falls below 6%, there will be another filing.
Munger’s influence
Founded by Wang Chuanfu, BYD started making batteries for mobile phones back in the 1990s. By 2003, the company had pivoted to autos and has since become the top car brand in China, as well as a major producer of EV batteries.
In the fourth quarter of 2023, BYD dethroned Tesla as the world’s top EV maker, selling more battery-powered vehicles than its U.S. rival.
Buffett said in 2010 that Munger, the late vice chairman of Berkshire, “deserves 100 percent of the credit for BYD.” Munger was introduced to BYD by his friend Li Lu, founder of Seattle-based asset manager Himalaya Capital.

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