Finance

It’s an exchange-traded fund designed to profit from higher rates.
But even if the Federal Reserve starts to cut this year, Horizon Kinetics’ James Davolos thinks his firm’s Inflation Beneficiaries ETF (INFL) is in a sweet spot. 

“We’re actually going into the mature phase of inflation,” the firm’s portfolio manager Davolos told CNBC’s “ETF Edge” this week. “I think we’re actually ideally positioned.”
Davolos expects a new world stuck with inflation between three and five percent.
“The Federal Reserve basically just admitted last week that we’re going to prioritize the economy and employment and accept these higher inflation levels,” Davolos said. “I don’t think most portfolios are properly designed for that.”
Horizon Kinetics created the Inflation Beneficiaries ETF in January 2021 as inflation started to rise after the Covid-19 pandemic quarantine. Today, Davolos sees the fund as a strategic tool to help diversify investors’ portfolios.
According to Davolos, the ETF’s goal is to cushion portfolios in a higher for longer environment by investing in companies that are considered “asset light” and “capital light.” As of April 30, FactSet shows the Inflation Beneficiaries ETF’s top holdings include Wheaton Precious Metals, PrairieSky Royalty and Viper Energy.

So far this year, the ETF has underperformed the S&P 500 by about five percent. But Davolos thinks the gains from inflation-oriented ETFs have more long-term stability than the current megacap rally.
“We’re in a new reality. People keep buying tech, not realizing we’re higher for longer, and there’s a duration aspect to those names,” Davolos said. “So, I expect this to continue reversing and reversing sharply as we get through the remainder of this year.”
As of Friday’s close, the Inflation Beneficiaries ETF is up 30% since its inception.
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Artist Yu Shu creates sculptures of Charlie Munger. 
Courtesy: Yu Shu

OMAHA, Neb. — A 24-inch tall, bronze bust sculpture of the late Charlie Munger became a conversation piece for guests who lodged at the Omaha Marriott last weekend for the Berkshire Hathaway annual meeting.
The hotel, next to Berkshire-owned jewelry store Borsheims, was the preferred quarters for the investment icon, who passed away in November at the age of 99, whenever he visited his hometown and the Berkshire headquarters of his longtime partner and confidante Warren Buffett.

The sculpture, placed in the lobby accompanied by glasses of champagne and brochures, soon grabbed the attention of numerous Berkshire shareholders who walked by and also two special admirers — Munger’s own daughter Wendy and his longtime executive assistant Doerthe Obert.
“I got back to the lobby and the hotel staff was like ‘Doerthe came down twice to look for you,'” Yu Shu, the 39-year-old artist behind the sculpture, told CNBC in an interview. “Then they called Doerthe and she came down. I gave her a hug, and I told her ‘nice to see you again’ and she’s like ‘we’ve never met before.'”

Arrows pointing outwards

Artist, Yu Shu poses for a photo with busts of Charlie Munger.
Courtesy: Yu Shu

This was indeed not the first time Yu met Obert. The real estate agent-turned artist, herself a Berkshire a shareholder, paid an unexpected visit to Munger’s home in Los Angeles in March 2023, hoping to meet Munger and tell him about the sculpture in the works. While she was declined a meeting, she asked for close-up shots of his profile from Obert in order to fine tune the facial details.
It took a total of 12 months and a number of attempts for Yu to finish the final version of the Munger bust. A visitor to 10 Berkshire annual meetings, she said she was inspired by a piece of life advice from Warren Buffett to turn her love for art — and Berkshire — into a business.

Artist Yu Shu creates sculptures of Charlie Munger. 
Courtesy: Yu Shu

“His words at the 2022 annual meeting resonated with me; ‘If you do what you love, you will never work a day in your life.’ I was like ‘how could I transform my passion into a business?’ Yu said.

Copies of the full-sized bronze busts are available for $19,500 each, while half-sized cold cast bronze busts are priced at $595. The artist, who grew up in Chengdu, China and currently divides her time between Denver and Taiwan, said she’s working on big-sized Buffett sculptures right now.
“Charlie Munger has always been a personal hero of mine, so he was the subject of my first sculpture,” Yu said. “Creating a bronze sculpture is so similar to value investing; it requires patience and persistence.”
Last weekend, a longtime Berkshire shareholder purchased the Munger bust, the one that once adorned the Marriott lobby. The buyer preferred to remain anonymous but said he hopes to give the artwork to the Munger family.

Arrows pointing outwards

Yu Shu poses for a photo with Greg Abel during the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska.
Courtesy: Yu Shu More

The U.S. banking industry won a key victory in its effort to block the implementation of a Consumer Financial Protection Bureau rule that would’ve drastically limited the fees that credit card companies can charge for late payment.
A federal court on late Friday approved the industry’s last-minute legal effort to pause the implementation of a regulation that was announced in March and set to go into effect on Tuesday.
In his order, Judge Mark Pittman of the Northern District of Texas sided with plaintiffs including the U.S. Chamber of Commerce in their suit against the CFPB.

Rohit Chopra, director of the Consumer Financial Protection Bureau, speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, D.C., Dec. 15, 2022.
Ting Shen | Bloomberg | Getty Images

The U.S. banking industry won a key victory in its effort to block the implementation of a Consumer Financial Protection Bureau rule that would’ve drastically limited the fees that credit card companies can charge for late payment.
A federal court on late Friday approved the industry’s last-minute legal effort to pause the implementation of a regulation that was announced in March and set to go into effect on Tuesday.

In his order, Judge Mark Pittman of the Northern District of Texas sided with plaintiffs including the U.S. Chamber of Commerce in their suit against the CFPB, saying they cleared hurdles in arguing for a preliminary injunction to freeze the rule.
The outcome preserves, at least for now, a key revenue stream for the U.S. card industry. The CFPB estimates that the rule would’ve saved American families $10 billion a year in fees paid by those who fall behind on their bills. It would’ve capped late fees that are typically $32 per incident to $8 each and limited the industry’s ability to hike the fees.
It is now unclear when, or if, the new regulation will go into effect.
“Consumers will shoulder $800 million in late fees every month that the rule is delayed — money that pads the profit margins of the largest credit card issuers,” a CFPB spokesman told CNBC on Friday.
The industry’s lawsuit is an effort to block a regulation “in order to continue making tens of billions of dollars in profits by charging borrowers late fees that far exceed their actual costs,” the spokesman said.

The CFPB has said the industry profits off borrowers with low credit scores by charging them ever higher late penalties over the past decade, while trade groups have argued that the fee caps are a misguided effort that redistributes costs to those who pay their bills on time.
The Consumer Bankers Association, which is one of the groups that sued the CFPB, said it was “pleased with the District Court’s decision to grant a preliminary injunction to stop the CFPB’s credit card late fee rule from going into effect next week.”
The CBA said it will continue to press its case in the courts on why the CFPB rule should be “thrown out entirely.” More

Sweetgreen shares jumped by 34% on Friday after the company reported better-than-expected revenue results for its fiscal first quarter.
The salad chain also raised its revenue and adjusted EBITDA guidance for fiscal year 2024.
The company announced earlier this week that it’s adding steak to its menu in an expansion of its protein offerings.

People dine outside a Sweetgreen in Manhattan.
Jeenah Moon | The Washington Post | Getty Images

Sweetgreen shares surged nearly 34% on Friday after the company topped Wall Street’s revenue expectations for the fiscal first quarter and raised its full-year forecast. The salad chain also announced earlier this week an expansion to add meat to its menu for the first time.
The salad chain reported $158 million in revenue, beating the LSEG consensus estimate of $152 million. Revenue jumped 26% from $125.1 million in the year-earlier period.

The company reported a net loss of $26.1 million, a loss of 23 cents per share. In the year-ago quarter, the company’s net loss was $33.7 million, a loss of 30 cents per share.
Sweetgreen also raised revenue and adjusted EBITDA guidance for the full year. Shares of the company are up 179% so far in 2024.
Here’s how the company did compared to LSEG analyst estimates:

Loss per share: 23 cents
Revenue: $158 million vs. $152 million expected

Jonathan Neman, Sweetgreen CEO and co-founder, said on an earnings call with analysts that the company opened six new restaurants in the first quarter. Neman highlighted the success of the South Lake Union location in Seattle, which “had one of the strongest opening weeks in the company’s recent history.”
“Openings like these demonstrate that our brand has significantly greater reach than our current physical footprint and that there is massive white space for our category-defining concept,” he told analysts during the earnings call after the close of trading on Thursday.

Sweetgreen began deploying robots for tasks like dispensing greens and mixing salads in its restaurants last year. Dubbed the “Infinite Kitchen,” the robotic technology was first implemented in May 2023 with the opening of the company’s pilot store in Naperville, Illinois.
Neman added that the company remains “on track” to open about seven new automated Infinite Kitchen restaurants in 2024 and plans to establish more next year. Analysts were “impressed” by the early results from the Infinite Kitchen locations, according to StreetAccount.
The company announced Tuesday it’s adding steak to its menu in an expansion of its protein offerings with a caramelized garlic steak protein plate, a steakhouse chopped warm bowl, and a kale Caesar steak salad.
“During our testing phase in Boston, we saw Caramelized Garlic Steak quickly become a dinnertime favorite, with steak making up nearly 1 in 5 dinner orders,” said Nicolas Jammet, Sweetgreen’s chief concept officer and co-founder, in a press release. “We’re thrilled to bring customers more of what they are craving at every part of the day.”

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Jim Simons attends the IAS Einstein Gala at Pier 60 at Chelsea Piers in New York City.
Sylvain Gaboury | Patrick Mcmullan | Getty Images

Jim Simons, a mathematician who founded the most successful quantitative hedge fund of all time, passed away on Friday in New York City, his foundation announced on its website.
Pioneering mathematical models and algorithms to make investment decisions, Simons left behind a track record at Renaissance Technologies that rivaled that of legends such as Warren Buffett and George Soros. His flagship Medallion Fund enjoyed annual returns of 66% between 1988 to 2018, according to Gregory Zuckerman’s book “The Man Who Solved the Market.”

During the Vietnam War, he worked as a codebreaker for U.S. intelligence, monitoring the Soviet Union and successfully cracking a Russian code.
Simons received a bachelor’s degree in mathematics from the Massachusetts Institute of Technology in 1958 and earned his Ph.D in mathematics from the University of California, Berkeley at the age of 23. The quant guru founded what became Renaissance in 1978 at the age of 40 after he quit academia and decided to give a shot at trading.
Unlike most investors who studied fundamentals such as sales and earnings and profit margins to evaluate a company’s worth, Simons relied entirely on an automated trading system to take advantage of market inefficiencies and trading patterns.
“I have no opinion on any stocks. … The computer has its opinions and we slavishly follow them,” Simons said in a CNBC interview in 2016.

His Medallion Fund earned more than $100 billion in trading profits between 1988 and 2018, with an annualized return of 39% after fees. The fund was closed to new money in 1993, and Simons allowed his employees to invest in it starting only in 2005.

Quantitative strategies that depend on trend-following models have gained popularity on Wall Street since Simons revolutionized trading starting in the 1980s. Quant funds now account for more than 20% of all equity assets, according to an estimate from JPMorgan.
Simons’ net worth was estimated to total some $31.4 billion when he died, according to Forbes.
The quant guru previously chaired the math department at Stony Brook University in New York, and his mathematical breakthroughs are instrumental to fields such as string theory, topology and condensed matter physics, his foundation said.
Simons and his wife established the Simons Foundation in 1994 and have given away billions of dollars to philanthropic causes, including those supporting math and science research.
He was active in the work of the foundation until the end of his life. Simons is survived by his wife, three children, five grandchildren and a great-grandchild.

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European companies in China are finding it harder to make money in the country as growth slows and overcapacity pressures increase, according to a survey released Friday by the EU Chamber of Commerce in China.
In the metropolis of Shanghai, business members even reported delays in getting paid as it became more difficult to enforce contracts versus the prior year, according to chapter head Carlo D’Andrea.
EU Chamber President Jens Eskelund noted how Beijing’s recent visa-free policy for several EU countries has allowed executives the flexibility to plan China trips one week in advance, instead of two to three months previously.

A robot is producing auto parts on the production line of an auto parts company in Minhou County, Fuzhou, China, on May 7, 2024.
Nurphoto | Nurphoto | Getty Images

BEIJING — European companies in China are finding it harder to make money in the country as growth slows and overcapacity pressures increase, according to a survey released Friday by the EU Chamber of Commerce in China.
In the metropolis of Shanghai, business members even reported delays in getting paid as it became more difficult to enforce contracts versus the prior year, according to chapter head Carlo D’Andrea.

“State-owned enterprises, they postponed payments and they are using this in order to get some defacto loans from companies, especially from small, medium enterprise,” D’Andrea said, citing members’ comments.
China’s growth has slowed in recent years amid geopolitical tensions. A slump in the real estate sector, which has close ties to local government finances, has also dragged down the economy.
Only 30% of EU Chamber survey respondents said their profit margins were higher in China than their company’s worldwide average — an eight-year low.

Back in 2016, just 24% of respondents said their profit margins were better in China than they were globally, the report said.
That reflected a crash in the Chinese stock market in the summer of 2015, alongside a slowdown in the real estate market at the time, EU Chamber President Jens Eskelund pointed out to reporters.

He said the current slowdown in Chinese growth had similar cyclical aspects, but there are questions about how long and deep it would be this time.
The Chamber’s latest survey covered 529 respondents and was conducted from mid-January to early February.
This year’s questionnaire included a new question about whether members faced difficulties in transferring dividends back to their headquarters. While more than 70% reported no issues, 4% said they were unable to do so, and about one-fourth said they experienced some difficulties or delays.
It was not immediately clear whether this was due to a new regulatory stance or typical tax audit requirements.

What is happening now is that companies are beginning to realize some of these pressures … are taking on perhaps a more permanent nature.

Jens Eskelund
EU Chamber of Commerce in China, president

China’s economy is now far bigger than it was in 2015 and 2016. Trade tensions with the U.S. have also escalated in recent years, with Beijing doubling down on manufacturing to bolster tech self-sufficiency.
“Our members saw to some extent that their ability to grow and make profit in the Chinese market — [the] correlation with the GDP figure is becoming weaker,” Eskelund said.
“What is important to foreign companies is not necessarily sort of a headline GDP figure, 5.3% or whatever, but the composition of GDP,” he said. “If you have a GDP figure that is growing because more investment is being made into manufacturing capacity, that is not good for foreign companies. But if you have a GDP that is growing because domestic demand is growing, then that is a good thing.”
China’s National Bureau of Statistics is due to release fixed asset investment, industrial production and retail sales for April next Friday.

Overcapacity overhang

China’s emphasis on manufacturing, coupled with modest domestic demand, has led to growing global concerns that overproduction will reduce profit margins.
More than one-third of EU Chamber survey respondents said they observed overcapacity in their industry in the last year, and another 10% expect to see it in the near future.
The civil engineering, construction and automotive industries had the highest share of respondents reporting overcapacity.
More than 70% of respondents said overcapacity in their industry resulted in price drops.
“This is not just European companies whining,” Eskelund said. “This is equally, if not more painful, for Chinese companies.”

Market opening in some industries

Chinese authorities have meanwhile bolstered high-level efforts to attract foreign investment.
Eskelund noted how Beijing’s recent visa-free policy for several EU countries has allowed executives the flexibility to plan China trips one week in advance, instead of two to three months previously.
He added that Beijing’s extension of tax exemption policies has also encouraged more international staff and their families to stay in China.

Cosmetics and food and beverage companies have benefited from China’s recent efforts to open its market, he said, noting that a record high of 39% of respondents said the local market was fully open in their industry.
China has restricted the extent to which foreign businesses can own or operate in certain industries. Beijing removes some off-limits categories each year via a “negative list.”

Record high skepticism

However, the EU Chamber and other business organizations have said that China can do much more to implement its 24 measures for improving the environment for foreign companies.
The Chamber’s latest survey found a historically large number of respondents said conditions were worsening:

a record high said they were skeptical about their growth potential in China in the next two years
a record high of respondents expect competitive pressure to intensify
a record share doubt their profitability in China
a record high plan to cut costs this year, primarily by reducing headcount and trimming marketing budgets
a record number of respondents said they missed opportunities in China due to regulatory barriers, the size of which was equal to over half their annual revenue
a record low in expectations that regulatory obstacles will decrease

“When you compare to the previous years we can see that a lot of the concerns actually remain the same regarding the predictability, the visibility of the regulatory environment,” Eskelund said. “These concerns pretty much remain the same.”
“What is happening now is that companies are beginning to realize some of these pressures that we have seen in the local market, whether it’s competition, whether it’s lower demand, that they are taking on perhaps a more permanent nature,” he said. “That is something that is beginning to impact investment decisions and the way the go about thinking about developing the local market.” More

A Consumer Financial Protection Bureau regulation that promised to save Americans billions of dollars in late fees on credit cards faces a last-ditch effort to stave off its implementation.
Led by the U.S. Chamber of Commerce, the industry in March sued the CFPB in federal court to prevent the new rule from taking effect.
A judge in the Northern District of Texas is expected to announce by Friday whether the court will grant the industry’s request for a freeze just days before it was to take effect on Tuesday.

Epoxydude | Fstop | Getty Images

A Consumer Financial Protection Bureau regulation that promised to save Americans billions of dollars in late fees on credit cards faces a last-ditch effort to stave off its implementation.
Led by the U.S. Chamber of Commerce, the card industry in March sued the CFPB in federal court to prevent the new rule from taking effect.

That effort, which bounced between venues in Texas and Washington, D.C., for weeks, is now about to reach a milestone: a judge in the Northern District of Texas is expected to announce by Friday evening whether the court will grant the industry’s request for a freeze.
That could hold up the regulation, which would slash what most banks can charge in late fees to $8 per incident, just days before it was to take effect on Tuesday.
“We should get some clarity soon about whether the rule is going to be allowed to go into effect,” said Tobin Marcus, lead policy analyst at Wolfe Research.
The credit card regulation is part of President Joe Biden’s broader election-year war against what he deems junk fees.
Big card issuers have steadily raised the cost of late fees since 2010, profiting off users with low credit scores who rack up $138 in fees annually per card on average, according to CFPB Director Rohit Chopra.

New fees, higher rates

As expected, the industry has mounted a campaign to derail the regulations, deeming them a misguided effort that redistributes costs to those who pay their bills on time, and ultimately harms those it purports to benefit by making it more likely for users to fall behind.
Up for grabs is the $10 billion in fees per year that the CFPB estimates the rule would save American families by pushing down late penalties to $8 from a typical $32 per incident.
Card issuers including Capital One and Synchrony have already talked about efforts to offset the revenue hit they would face if the rule takes effect. They could do so by raising interest rates, adding new fees for things like paper statements, or changing who they choose to lend to.
Capital One CEO Richard Fairbank said last month that, if implemented, the CFPB rule would impact his bank’s revenue for a “couple of years” as the company takes “mitigating actions” to raise revenue elsewhere.
“Some of these mitigating actions have already been implemented and are underway,” Fairbank told analysts during the company’s first-quarter earnings call. “We are planning on additional actions once we learn more about where the litigation settles out.”

Trial ahead?

Like some other observers, Wolfe Research’s Marcus believes the Chamber of Commerce is likely to prevail in its efforts to hold off the rule, either via the Northern District of Texas or through the 5th Circuit Court of Appeals. If granted, a preliminary injunction could hold up the rule until the dispute is settled, possibly through a lengthy trial.
The industry group, which includes Washington, D.C.-based trade associations like the American Bankers Association and the Consumer Bankers Association, filed its lawsuit in Texas because it is widely viewed as a friendlier venue for corporations, Marcus said.
“I would be very surprised if [Texas Judge Mark T.] Pittman denies that injunction on the merits,” he said. “One way or another, I think implementation is going to be blocked before the rule is supposed to go into effect.”
The CFPB declined to comment, and the Chamber of Commerce didn’t immediately respond to a request for comment.

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Bank of England Governor Andrew Bailey is speaking at a press conference following the U.K. central bank’s latest monetary policy decision.

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