Finance

Dalio has joined a growing list of economists criticizing the measures proposed by Liz Truss’ administration.
The founder of Bridgewater, one of the world’s largest hedge funds, said it isn’t possible to make wealth by running large deficits because a country needs lenders willing to own that debt.

Ray Dalio, founder of Bridgewater Associates LP, speaks during a panel session on day three of the World Economic Forum (WEF) in Davos, Switzerland, on Wednesday, May 25, 2022.
Bloomberg | Bloomberg | Getty Images

The financial market turmoil resulting from the U.K. government’s spending plan “suggests incompetence,” according to billionaire investor Ray Dalio. 
“I can’t imagine that this is intended – and if it’s not intended then it’s an understanding question,” Dalio said on BBC Radio 4′s “Today” program Wednesday.

His comments referred to the market turbulence that followed Finance Minister Kwasi Kwarteng’s fiscal announcements late last week. The measures included large swathes of unfunded tax cuts that have drawn global criticism, including from the International Monetary Fund.
The Bank of England on Wednesday stepped in to try to calm markets, saying it would purchase government bonds on a temporary basis to help “restore orderly market conditions.”
Dalio has joined a growing list of economists criticizing the measures proposed by Liz Truss’ administration.
The founder of Bridgewater, one of the world’s largest hedge funds, said it isn’t possible to make wealth by running large deficits because a country needs lenders willing to own that debt.
“It doesn’t stimulate the economy, productivity is what stimulates the economy over the long run,” Dalio said.

“I would think there would be an understanding of the mechanics of that by the government and that’s why it’s concerning,” Dalio said. 

Speaking via Twitter, Dalio said the panic selling driving the plunge in U.K. bonds, sterling and financial assets was “due to the recognition that the big supply of debt that will have to be sold by the government is much too much for the demand.”
“That makes people want to get out of the debt and currency. I can’t understand how those who were behind this move didn’t understand that. It suggests incompetence,” he added.
A Downing Street spokesperson was not immediately available to comment when contacted by CNBC.
The U.K. Treasury said Monday that the government would set out its medium-term fiscal plan on Nov. 23.
Jonathan Portes, professor of economics and public policy at King’s College London, told CNBC on Wednesday that the U.K. government’s spending plans put the country’s debt and deficit “on an unsustainable path.”
“It has rightly, I think, been regarded by economists across the political spectrum as unnecessary and damaging,” Portes told CNBC’s “Squawk Box Europe.”

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Check out the companies making headlines before the bell:
Biogen (BIIB) – Biogen soared 45.6% in premarket trading after Biogen and Japanese partner Eisai said their experimental Alzheimer’s drug dramatically slowed the disease’s progression in a study, reducing cognitive and functional decline by 27%.

Thor Industries (THO) – Thor Industries gained 3.6% in the premarket after the recreational vehicle maker reported better-than-expected profit and revenue for its latest quarter. Thor saw particular strength in its motorized RV segment, with a 24.5% gain over the prior year.
Lyft (LYFT) – Lyft said it would freeze hiring through the end of this year. That follows the ride-hailing company’s previous statement that it would slow hiring “dramatically” as it seeks to cut costs. Lyft slid 2.5% in premarket trading.
Apple (AAPL) – Apple is said to be backing off plans to increase production of its new iPhone 14 line, according to people familiar with the matter who spoke to Bloomberg. That comes after an anticipated surge in demand failed to materialize. Apple declined 3.7% in premarket action.
Ocugen (OCGN) – Ocugen surged 8.2% in premarket trading after the drug maker announced a licensing agreement with Washington University in St. Louis to develop, commercialize and manufacture its intranasal Covid-19 vaccine.
Walt Disney (DIS) – Walt Disney is shutting its four Florida theme parks and related properties as the state braces for Hurricane Ian, which was upgraded to a Category 4 storm this morning.

BlackBerry (BB) – BlackBerry reported a smaller-than-expected quarterly loss and revenue that exceeded analyst forecasts, but the communications software company’s cybersecurity revenue fell amid cautious spending by customers.
Canopy Growth (CGC) – Canopy Growth announced plans to divest its retail operations in Canada, selling stores to partner OEG Retail Cannabis and cannabis retailer 420 Investments. The sales come after the cannabis producer announced earlier this year that it was extending its time frame to achieve profitability. Canopy Growth shares slipped 1.8% in the premarket.

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A new game called “Sheep a Sheep” that sits within Tencent’s WeChat surged in popularity earlier this month despite ongoing restrictions on China’s gaming industry.
“WeChat and ByteDance don’t currently require a game license to publish their HTML5 games on their platforms,” said Rich Bishop, CEO of AppInChina, which publishes international software in China.
Beijing’s heightened scrutiny of the gaming industry meant the National Administration of Press and Publication stopped approving publishers’ new games between July 2021 and April 2022.

A young Beijing company’s game called “Sheep a Sheep” went viral in China in September 2022.
Evelyn Cheng | CNBC

BEIJING — A new game that’s gone viral in China hit people’s screens with surprising speed at a time when gaming giants such as NetEase have waited months for approval to launch games.
That’s because the new game, called Sheep a Sheep, sits inside ByteDance’s Douyin and Tencent’s messaging app WeChat as a mini-program. Users can play the game within the apps.

“WeChat and ByteDance don’t currently require a game license to publish their HTML5 games on their platforms,” said Rich Bishop, CEO of AppInChina, which publishes international software in China.
“But this is likely to change over the next few months as enforcement of existing regulations intensifies,” he said.
HTML5 games are built with coding tools similar to those used for websites and can be easily distributed across platforms.
WeChat and ByteDance did not respond to a CNBC request for comment.

Sheep a Sheep just went viral these past few days. Very fresh to everyone, especially regulators.

Brian Tycangco
analyst, Stansberry Research

Approvals for gaming software

Sheep a Sheep’s developer, Beijing Jianyou Technology, was founded in January 2021.
The company registered the game’s software in late July this year, according to business database Tianyancha. Weeks later in early September, Jianyou had launched the sheep game, according to posts on its official Weibo, a Twitter-like social media platform in China.
In contrast, NetEase’s first game approval in more than a year came 10 months after the company registered the software, according to Tianyancha data.
Beijing’s heightened scrutiny of the gaming industry meant the National Administration of Press and Publication stopped approving publishers’ new games between July 2021 and April 2022. A search for “sheep” on the approval list only yielded results for other games from the year 2018 or older.
The administration and Jianyou did not immediately respond to a request for comment.

Money from ads

But it’s less clear what the rules are for games like Sheep a Sheep that are free to play and supported by advertisements.
A surge in social media attention around a long weekend in mid-September helped attract players —reportedly in the tens of millions — who were eager to win the game as soon as possible, even if they had to watch what in aggregate ended up to be hours of ads.

The impact isn’t that clear yet … People might lose interest in it just as fast as they were attracted.

Brian Tycangco
analyst, Stansberry Research

The game is “completely free” to play, said Xiaofeng Wang, senior analyst at Forrester. “The only trick is you have to spend 30 seconds to watch a commercial.”
“For a developer it’s very cost-effective and I think they are generating revenue already,” she said. “Even [if] the popularity cannot last for a long time, it’s still a good thing, nothing to lose for them. They already gained a lot of out of this.”
WeChat mini-program games are not new.

Piqued curiosity

Part of Sheep a Sheep’s allure is a sense of challenge — a puzzle the developer claims has a 0.1% success rate — and competition.
The game requires players to eliminate tiles of the same category in groups of three. People who succeed win a cartoon sheep that then joins a virtual herd based on the player’s region, thereby boosting the ranking of the player’s province.
“Many people have never [had] such game experience before,” Wang said. “From very, very easy to very, very difficult, they heard different people on social media talking about that, that generated a lot of curiosity, ‘Why is this so hard?’ That’s why it’s so unique.”

Anecdotally, the number of this reporter’s WeChat contacts who’d tried the mini-program game roughly tripled over one September weekend to nearly 300. The following weekend, two of six people on a bench in a Beijing subway car were seen playing the game.
“Sheep a Sheep just went viral these past few days. Very fresh to everyone, especially regulators,” Brian Tycangco, analyst at Stansberry Research, said in email last week.
“So the impact isn’t that clear yet,” he said. “People might lose interest in it just as fast as they were attracted.”

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Andrew Kelly | Reuters

Check out the companies making the biggest moves midday:
Hertz — Shares of the rental car company jumped 4.42% after the company announced a partnership with BP’s electric vehicle charging unit that will put thousands of charging stations at Hertz locations. Many of the stations will be used to charge Hertz’s growing fleet of electric vehicles, but some will be available for public use.

Keurig Dr Pepper — The beverage company shed 3.51% after being downgraded by Goldman Sachs to a neutral rating from a buy. The firm sees increased risk to Keurig’s margins as commodity inflation remains elevated.
Lucid — The electric vehicle stock climbed 2.49% on Tuesday after Cantor Fitzgerald initiated coverage of Lucid with an overweight rating. The investment firm said in a note to clients that Lucid’s cars have a competitive advantage to peers in longer battery range and faster charging.
Tesla — Tesla shares gained nearly 2.51% following a report from Electrek that the electric vehicle maker is expecting a “very high volume” of vehicle deliveries during the end of the quarter. Ark Invest’s Cathie Wood also told CNBC Tuesday she is sticking by her bullish call on Tesla, saying “our confidence couldn’t be higher as we see the movement towards electric vehicles accelerates.”
Ford Motor — Ford stock slid just under 1% after the automaker announced it is directing $700 million toward new investment and creating 500 additional hourly manufacturing jobs in Kentucky. The investment will support an all-new F-Series Super Duty pickup truck, the company said in a news release.
FLEETCOR Technologies — Shares of the global business payments company shed 3.4% on Tuesday. On Monday, Fleetcor announced its chief financial officer was leaving the company after 22 years.

Moderna — Moderna shares rose 2.12% on Tuesday, a day after the Food and Drug Administration authorized five additional batches of the drug company’s updated Covid booster shot made at a Catalent facility in Indiana. On Friday, Moderna asked the FDA to authorize its omicron shots for kids ages 6 through 17.
Cruise lines — Cruise line stocks were the leading outperformers on the S&P 500 following news that Canada would drop Covid-19 travel restrictions starting next month. Royal Caribbean rose 3.91% and Norwegian Cruise Line Holdings rallied 4.26%. Carnival added 3.6%
Energy stocks — Oil prices rose from a nine-month low on Tuesday, propelling energy names higher. Valero Energy, gained 3.35%, Marathon Petroleum rose 3.7% and Phillips 66 added 2.78%. Exxon Mobil increased 2.1% and Baker Hughes gained 1.52%.
—CNBC’s Sarah Min, Jesse Pound and Alex Harring contributed reporting.

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Visit cnbcevents.com/delivering-alpha to register for this year’s conference on September 28, 2022.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, September 26, 2022.
Brendan McDermid | Reuters

(Click here to subscribe to the new Delivering Alpha newsletter.)
The Federal Reserve’s most aggressive pace of tightening since the 1980s is making the majority of Wall Street investors believe stocks will be underwater for longer, according to the new CNBC Delivering Alpha investor survey.

We polled about 400 chief investment officers, equity strategists, portfolio managers and CNBC contributors who manage money, asking where they stood on the markets for the rest of 2022 and beyond. The survey was conducted this week.
Fifty-eight percent of respondents said their biggest concern for the markets right now is the Fed being too aggressive. The central bank last week raised rates by three-quarters of a percentage point for a third straight time and pledged more hikes to beat inflation, triggering a big sell-off in risk assets.

Arrows pointing outwards

“While this aggressive pace of hiking should bring inflation closer to the 2% target, it will also likely bring economic hardship,” said Seema Shah, chief global strategist at Principal Global Investors. “The Fed’s tolerance for economic pain doesn’t bode well for risk assets. … Get defensive, times are getting tougher.”
More than 60% of the investors believe the S&P 500 will end the year below 4,000, which would translate into a 16% loss for the year. Still, the 4,000 level is about 8% higher than where the benchmark traded Tuesday.

Arrows pointing outwards

Rising rates and volatility in currency markets caused the S&P 500 to drop 1% on Monday, taking out its June low. The Dow Jones Industrial Average slipped into a bear market, down about 20% from its Jan. 4 closing high.

“The market reaction to early earnings releases suggests that slowing economic activity is nowhere near priced in,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. “Earning estimates are likely to continue their decline until we see a bottoming in leading economic indicators. We are not there yet, suggesting volatility ahead for risk assets.”
While investors expect more wild moves in the markets, they still think the U.S. remains the best place for their money, the survey showed. More

Cryptocurrency lender Nexo said it has agreed to buy an undisclosed stake in Hulett Bancorp, which owns a little-known bank called Summit National Bank.
Through Summit National Bank, Nexo plans to offer a range of products including checking accounts and crypto-backed loans.
Nexo’s bank license will bring users enhanced legal safeguards and help it expand its footprint in the U.S., the company said.

The crypto market has been battered this year, with nearly $2 trillion wiped off its value since its peak.
Jonathan Raa | Nurphoto | Getty Images

Cryptocurrency lender Nexo on Tuesday announced it has taken a stake in a federally-regulated U.S. bank, paving the way for the company to offer banking services to Americans as a licensed institution.
Nexo, based in Zug, Switzerland, said it has agreed to buy an undisclosed stake in Hulett Bancorp, which owns a little-known bank called Summit National Bank. Through Summit National Bank, which holds a federal bank charter with the Office Comptroller of the Currency, Nexo plans to offer a range of products including checking accounts and crypto-backed loans.

The move is a significant development for the nascent crypto industry, which is seeking to win favor with politicians and regulators as investment and adoption of digital assets grows. The market has been licking its wounds following the collapse of controversial token terraUSD, which sparked a wave of liquidations and failures of companies like Celsius and Three Arrows Capital.
Nexo declined to disclose the size of its stake in Summit National Bank. The firm called the deal an “industry-changing transaction.” On top of the ability to launch new products, Nexo said its bank license would bring users enhanced legal safeguards. The deal will also help Nexo expand its footprint in the U.S., the company said.
“We already have a robust offering with regard to our crypto-backed loans but we always like to have more than one option for providing a particular service,” Antoni Trenchev, co-founder of Nexo, told CNBC.

“The acquisition of a stake in a full-fledged bank enables us to offer our complete range of services to U.S. retail and institutional clients, including bank accounts, asset-backed loans, card programs, as well as escrow and custodial solutions, and many other future plans for Nexo’s U.S. expansion that will be uncovered in the months to come.”
Summit National Bank traces its origins to 1984 in Wyoming, where the firm was originally chartered as Hulett National Bank. The firm later opened locations in Idaho and Montana. According to its website, Summit National Bank’s primary lending is in “commercial, agriculture, real estate, mortgages, and construction.”

The news arrives only a day after Nexo was hit with lawsuits from eight U.S. states alleging the company offered users interest-earning accounts without first registering them as securities and providing necessary disclosures. Nexo allegedly misled investors to believe it was a licensed and registered platform, according to the filings.
In response to the legal action, Nexo said it had been working with U.S. federal and state regulators. The company sought to differentiate itself from other players that have run into financial difficulty, saying it “did not engage in uncollateralized loans, had no exposure to LUNA/UST, did not have to be bailed out, or needed to resort to any withdrawal restrictions.”
Nexo, which has over $4 billion in assets under management, isn’t the first crypto firm to have obtained a banking license, though it’s a rare phenomenon in the industry. Other fintech companies have previously obtained federal banking charters through mergers and acquisitions, including SoFi, which offers crypto trading on its platform, and LendingClub.

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FTX, the bitcoin exchange founded by billionaire Sam Bankman-Fried, is set to buy Voyager Digital’s assets after winning a bankruptcy auction.
FTX’s bid was valued at roughly $1.4 billion, the companies said in a statement late Monday.
Voyager has hinted at a possible transition of its customers over to FTX U.S.

Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, speaks during an interview on an episode of Bloomberg Wealth with David Rubenstein in New York, US, on Wednesday, Aug 17, 2022.
Jeenah Moon | Bloomberg | Getty Images

Customers of beleaguered cryptocurrency lender Voyager Digital may find some solace in the news that FTX, the bitcoin exchange founded by billionaire Sam Bankman-Fried, is set to take on the company’s assets after winning a bankruptcy auction.
After several rounds of bidding, FTX’s U.S. subsidiary was selected as the highest bidder for Voyager’s assets, the companies said in a statement late Monday. The bid was valued at roughly $1.4 billion, a figure that includes $1.3 billion for the fair market value of Voyager’s digital assets, plus a $111 million “additional consideration” in anticipated incremental value.

Voyager declared Chapter 11 bankruptcy in July after a tumultuous drop in digital currency prices left it unable to redeem withdrawals from its customers. The firm’s demise stemmed in part from the collapse of Three Arrows Capital, a so-called hedge fund that took loans from other institutions, like Voyager, to make risky gambles on tokens — including the collapsed stablecoin terraUSD. In June, 3AC defaulted on borrowings from Voyager worth $670 million.
Voyager hinted at a possible transition of its customers over to FTX U.S., saying the exchange “will enable customers to trade and store cryptocurrency after the conclusion of the Company’s chapter 11 cases.” The asset purchase deal will be presented to the U.S. Bankruptcy Court for the Southern District of New York for approval on Oct. 19. The sale of Voyager’s assets to FTX U.S. is dependent on a vote by creditors, as well as “other customary closing conditions,” according to the statement.

The move marks a potential step toward compensating users of Voyager, who have few legal avenues in getting paid the crypto they stored on the platform before it froze customer withdrawals. In bankruptcy proceedings, customers of crypto platforms are treated as unsecured creditors, meaning they’re not actually entitled to the crypto they purchased, and like other creditors would need to go through the courts to try to get their money back. Creditors of Mt. Gox, which went under in 2014, are still waiting to get repaid.
Previously, Voyager claimed on its website and in marketing materials that users’ funds were protected by the Federal Deposit Insurance Corporation, but this technically wasn’t true — Voyager’s cash deposits are kept with Metropolitan Commercial Bank, a New York-based lender. FDIC insurance only covers the event of failure of the bank, not Voyager. In July, the FDIC and the Federal Reserve sent Voyager a cease and desist letter ordering it to stop claiming it was FDIC-insured.

Read more about tech and crypto from CNBC Pro

In the crypto winter of 2022, Bankman-Fried has emerged as a savior to numerous firms that fell victim to the plunging value of digital tokens and resulting liquidity issues at their platforms. The 30-year-old quant trader-turned-crypto extraordinaire has been shopping for bargains amid the industry’s recent carnage.

In July, FTX signed a deal that gives it the option to buy lender BlockFi after providing a $250 million line of credit. Bankman-Fried says he still has plenty cash to spend on further deals. And he may soon receive even more, with sources telling CNBC FTX is raising another $1 billion from investors in an upcoming financing round.
 — CNBC’s Kate Rooney contributed to this report.

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Cathie Wood, chief executive officer and chief investment officer, Ark Invest, speaks during the Milken Institute Global Conference on May 2, 2022 in Beverly Hills, California.
Patrick T. Fallon | AFP | Getty Images

Cathie Wood’s Ark Invest launched a new venture capital fund, targeting individual investors with a minimum investment of just $500.
The actively managed ARK Venture Fund invests in 70% private companies and 30% public firms focused on technologically enabled innovation, and selectively in other venture capital funds, the company said Tuesday. The fund is available to individual investors initially through investing app Titan, a startup backed by Andreessen Horowitz.

“We are doubling down on innovation,” Wood said in an interview on CNBC’s “Squawk Box” Tuesday. “Ark is moving from social media and social marketing into social distribution, direct to consumer. Pretty exciting. We are offering investors something they’ve not been able to access before.”
The ARK Venture Fund charges a flat management fee of 2.75%, and does not charge any carried interest or load fees. The total expense ratio of the fund is estimated to be 4.22%, Ark said.
Ark’s flagship Innovation Fund (ARKK) has been under water all year as Wood’s disruptive darlings have been some of the biggest victims of rising interest rates. ARKK is down 60% this year and off 70% of its 52-week high in November.

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