Finance

Where are america’s greatest investors? Wall Street is the obvious place to look; after all, it is home to lots of hedge-fund managers who would claim the title. Other gurus reside in Greenwich, Connecticut; some have relocated to Palm Beach, Florida; and there is at least one contender in Omaha, Nebraska. Perhaps, though, the correct answer is Washington, dc.Americans hate politicians-cum-stockpickers. Famous examples include Paul Pelosi, husband of Nancy, the Democrat speaker of the House, and Richard Burr, a Republican senator. Some suspect their success is not solely attributable to their trading talents. An investigation by the New York Times, a newspaper, More

Summer is sleepy in Dubai, a time when locals and rich expats flee for cooler climes. For the emirate’s property brokers, though, this one was anything but languid. Viewings were a race: show up a few hours late and that sea-view apartment may already be spoken for. One spent whole afternoons camped out in the lobbies of fancy buildings, with showings every half-hour. The United Arab Emirates (uae), a seven-member federation that includes Dubai, is forecast to add 4,000 new millionaire residents this year, more than any other country. That is welcome news for a property market which contributes 8% of gdp—if not for brokers who want to be on a beach.These are heady times for the Middle East’s energy exporters. The Saudi economy is projected to grow by 7.6%, among the world’s fastest rates. Smaller Gulf states will have windfalls to pay down debt and top up sovereign-wealth funds. Even dysfunctional countries like Iraq should run surpluses. But the uae, and Dubai in particular, does not only benefit from high energy prices. It also gains from the sanctions and geopolitical disruptions that helped send those prices soaring. The city’s stockmarket has risen by 9% this year, compared with a 2% lift in Riyadh. Even before Russia invaded Ukraine, Dubai was in a stronger position to grow as a financial hub with giant, established rivals struggling. Hong Kong grows less attractive as it falls further into China’s orbit. It has also suffered from covid-19 restrictions. Meanwhile, London has lost some of its shine since Brexit—and no longer welcomes Russian capital. Dubai is the last financial hub where just about anyone can do business with just about anyone else.This is most obviously visible in the city’s property market. Russians bought more than twice as many homes in Dubai in the first half of 2022 as they did in the whole of last year. Betterhomes, a property firm, says they were the fourth-largest group of buyers, up from ninth place in 2021. Banking restrictions are no obstacle: one real-estate broker is said to have installed an atm in its office to facilitate cash transactions. Scores of Russian yachts are anchored in Emirati marinas, while oligarchs’ private jets loiter at a previously little-used airport south of Dubai.Firms, both local and multinational, are shifting their operations. Banks like Goldman Sachs and Bank of America have moved employees from Moscow to Dubai. Commodity firms are considering a move from Switzerland, which has joined eu sanctions on Russia. In Fujairah, on the east coast of the uae, local companies are piling into the arbitrage business. They can buy Russian oil at a steep discount, refine it, then sell the finished products at market-price. All of this is made possible by the uae’s neutral stance on the war. Although a longtime Western ally, it has declined to join Western-led sanctions on Russia.Dubai is not the only bolthole available. Some Russians have decamped to Turkey; the country’s attractiveness is limited, however, by a crashing currency and surging inflation. The uae offers no such worries. Its currency, the dirham, is pegged to the dollar and has not budged since 1997. Public debt is a manageable 32% of gdp; inflation is expected to peak at less than 4%. The banking system is trustworthy and well-capitalised. The income-tax rate is a hard-to-beat 0%. Scorching weather might be a shock, but Dubai offers all the amenities Russian émigrés would expect: designer brands in malls, renowned chefs in hotels, luxury homes with domestic help. Diners at a new restaurant in the financial district can order a baked potato stuffed with caviar for a mere 2,610 dirhams ($710).These attractions have already lured business from elsewhere. Dubai has made itself a financial hub that serves not just the Middle East but Asian and African markets. Indian businessmen, for example, find much to like. They enjoy tax breaks and better schools and hospitals. Lawyers can fly over in just three hours for international deals, a much shorter trip than to London or Singapore. Sovereign-wealth funds are a big source of cash for private-equity and venture-capital firms. One Indian bigwig says that half his friends in south Mumbai have bought flats in Dubai.Along with licit business there is the dodgier sort, too, from Irish mobsters to Iranian traders looking to circumvent sanctions. Establishments that cater to the rich, like a penthouse lounge on an artificial island in the Gulf, can have a bar-scene-from-Star-Wars vibe, albeit with $100 Wagyu steaks, $1,600 bottles of Cristal and less jaunty music. The illicit gold trade alone was once estimated to be worth around $4bn a year (though the government has taken some steps to clean it up).Double-edged swordDubai’s freewheeling political economy can cause tension. For much of the past decade it was Abu Dhabi, the uae’s less commercial capital, which set the tone on foreign policy. The Arab spring of 2010-11, and the chaos it unleashed, put the country on a war footing. The uae joined the Saudi-led invasion of Yemen in 2015, and sent arms to an aspiring dictator in Libya. It also pushed for the embargo of Qatar in 2017, which saw four Arab states cut trade and travel ties with the irksome emirate.Some of this was bad for business. Qataris used to buy lots of property in Dubai, either as an investment or as a second home in a more libertine city. The blockade cut them out of the property market. Earlier this year the Houthis in Yemen launched several rounds of missiles and drones at Abu Dhabi, a worrying event in a country that depends on a reputation for stability.Since 2019, though, the uae has swung back towards the Dubai model. It withdrew troops from Yemen that summer and has cut its role in Libya. The blockade ended last year. This was pragmatism: neither war nor the blockade brought the hoped-for benefits. Thus hard-nosed foreign policy is out and economic diplomacy is in.Take the sanctions-busting oil trade in Fujairah. Before they started importing Russian crude, firms there helped Iran sell its own oil. The commercial motive was straightforward: arbitrage is easy money. From the government’s perspective, the trade also served a political purpose. The uae was unnerved by an Iranian-sponsored attack in 2019 on Saudi oil facilities, which briefly shut down half the kingdom’s output. Acting as a middleman makes the uae useful to Iran, and perhaps reduces the risk of a similar attack.In March the Financial Action Task Force, the world’s main anti-money-laundering body, put the uae on its “grey list” of problem countries. The listing has no formal consequences, and bankers say it has not changed the uae’s reputation: anyone doing business there is already aware of the risks. But Emirati officials were upset by their inclusion (and hope to be removed from the list by the end of 2023).Financial institutions are investigating their newest clients. The government has told them not to deal with Russians who are under Western sanctions. “Banks want to future-proof their compliance,” says one Dubai-based financial analyst. But there are still choices to be made. A Russian with $1m in assets is probably not worth the headache. One with $10m? Maybe.A more serious worry is running afoul of American sanctions, which would be dreadful for a country with a big financial sector and dollar-linked currency. Yet America does not seem to want to look closely at the uae. Every few months a group from the Treasury department flies out to chide the Emiratis. In June Wally Adeyemo, the deputy secretary, told bankers to be careful with Russian customers. Aside from a few token sanctions on small firms—mostly for dealings with Iran—America has done little more than talk, however. The uae has convinced many Americans that it is an indispensable partner in the region. Forging diplomatic ties with Israel in 2020 was a masterstroke.This leaves Dubai in an enviable position. Whether or not America and Iran reach a nuclear deal, it can serve as an economic lifeline for Iran, as it has for years. However the war in Ukraine progresses, it can now play much the same role for Russia. Sitting on the sidelines is making Dubai the world’s resurgent entrepot. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

FTX is talking with potential investors about a funding round that would keep the company’s valuation in-line with a prior financing earlier this year.
The privately held company has been on a buying frenzy during the “crypto winter.”
Existing investors include Singapore’s Temasek, SoftBank’s Vision Fund 2 and Tiger Global.

Sam Bankman-Fried speaks onstage during the first annual Moonlight Gala benefitting CARE – Children With Special Needs at Casa Cipriani on June 23, 2022 in New York City.
Craig Barritt | Getty Images

Sam Bankman-Fried’s crypto conglomerate FTX is in talks with investors to raise up to $1 billion in new funding that would keep the company’s valuation at roughly $32 billion, according to people with knowledge of the discussions.
Negotiations are ongoing and the terms could change, said the sources, who asked not to be named because the talks are confidential. Coindesk previously reported on a coming investment at flat valuation, following FTX’s last capital raise in January. Existing investors include Singapore’s Temasek, SoftBank’s Vision Fund 2 and Tiger Global.

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Crypto’s bear market is unlike others before it. This time the Fed’s steering the ship

2 days ago

An FTX spokesperson declined to comment.
While its rivals and peers have been pummeled in this year’s “crypto winter,” FTX has tried to bill itself as the market consolidator, swooping in to buy distressed assets at a discount. The company, which is based in the Bahamas, is privately held so it hasn’t suffered the stock meltdown of Coinbase, which has lost three-quarters of its value in 2022.
Some of the fresh capital, on top of the $400 million round from January, would go to fuel more deal-making, the sources said. In July, FTX signed a deal that gives it the option to buy lender BlockFi, and the company was in discussions to acquire South Korean Bithumb. FTX also offered to buy bankrupt crypto brokerage Voyager Digital in August but was turned down for what was called a “low ball bid.”
Bloomberg reported in June that FTX was also trying to buy Robinhood, though Bankman-Fried, who owns a significant stake in the online broker, has denied any active discussions are underway.
FTX’s revenue soared more than 1,000% in 2021 to $1.02 billion from $89 million the prior year, CNBC reported last month, based on a leaked investor deck. FTX saw net income of $388 million last year, up from just $17 million a year earlier. Momentum continued in the first quarter, as the company reeled in $270 million in revenue, the financials showed.

But that’s when the market was soaring. Everything tied to crypto turned south in the second quarter, as rising interest rates and a four-decade high in inflation pushed investors out of the riskiest assets. Since the end of March, bitcoin and ether are both down by more than 60%, and numerous crypto-focused brokerages have been forced to liquidate.
Bankman-Fried, a former Wall Street quant trader, founded FTX three years ago. In continuing to raise money and snap up assets, Bankman-Fried is wagering that crypto will rebound and that he’ll be poised to capture a big chunk of profits when it does.
WATCH: 30-year-old crypto billionaire San Bankman Fried reveals how he made his billions

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U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the headquarters of the Federal Reserve, July 27, 2022 in Washington, DC.
Drew Angerer | Getty

The Federal Reserve will raise interest rates as high as 4.6% in 2023 before the central bank stops its fight against soaring inflation, according to its median forecast released on Wednesday.
The Fed on Wednesday raised benchmark interest rates by another three-quarters of a percentage point to a range of 3%-3.25%, the highest since early 2008.

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The median forecast also showed that central bank officials expect to hike rates to 4.4% by the end of 2022. With only two policy meetings left in the calendar year, chances are the central bank could conduct another 75-basis-point rate hike before the year-end.

The so-called dot-plot, which the Fed uses to signal its outlook for the path of interest rates, showed six of the 19 “dots” would take rates even higher, to a 4.75%-5% range next year.
Here are the Fed’s latest targets:

Arrows pointing outwards

Federal Reserve

The series of big rate hikes are expected to slow down the economy. The Summary of Economic Projections from the Fed showed the unemployment rate is estimated to rise to 4.4% by next year from its current 3.7%. Meanwhile, GDP growth is forecast to slump to just 0.2% for 2022.
With the aggressive tightening, headline inflation, measured by the Fed’s preferred personal consumption expenditures price index, is expected to decline to 5.4% this year. The gauge stood at 6.3% in August. Fed officials see inflation eventually fall back to the Fed’s 2% goal by 2025.

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Residential single family homes construction by KB Home Residential single family homes construction by KB Home are shown under construction in the community of Valley Center, California, U.S. June 3, 2021.
Mike Blake | Reuters

Check out the companies making headlines after hours.
KB Home — Shares dipped 2.1% in extended trading after the homebuilder disappointed on revenue expectations in its earnings results. KB Home reported earnings of $2.86 per share on revenue of $1.85 billion. Analysts surveyed by Refinitiv were expecting earnings of $2.67 per share on revenue of $1.87 billion.

Steelcase — The furniture stock declined 0.4% after Steelcase reported quarterly results that missed on revenue estimates. The company reported earnings of 21 cents per share on revenue of $863.3 million. Analysts were expecting earnings of 12 cents per share on revenue of $884.1 million, according to consensus estimates from FactSet.
H.B. Fuller Company — The adhesive manufacturing company jumped 4.9% after topping earnings expectations, though H.B. Fuller reported a slight miss on revenue estimates, according to FactSet.
Lennar — Lennar dipped 1% after the home construction company reported its latest quarterly results. The company reported earnings of $5.03 per share on revenue of $8.93 billion. Analysts surveyed by Refinitiv were forecasting earnings of $4.88 per share and revenue of $9 billion.
Correction: An earlier version of this story misstated a move in shares of KB Home.

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In recent weeks, as the Federal Reserve prepared to intensify its fight against inflation, a noose has tightened around the global economy. On September 21st the Fed delivered a 0.75 percentage-point interest-rate rise, its third in a row. The Fed’s benchmark rate now stands at 3-3.25%, up three percentage points since the start of the year. While the rise was anticipated, the central bank offered a surprise: new projections revealed that rates would probably rise to more than 4.5-4.75% at the end of 2023, higher than expected. The projections also suggested that unemployment would rise by at least 0.7 percentage points before the end of next year. Markets reeled on the announcement, piling new suffering on an already very painful month. Tighter American monetary policy squeezes economic activity everywhere else, by stifling risk appetites and pushing up the value of the dollar. Since the end of August, when Jerome Powell, the Fed chair, gave a speech at a central-banking conference in Wyoming spelling out his determination to whip inflation, financial markets have been battered. The value of the dollar has risen by about 2.5% over the past month alone, and by 16% since the start of the year. The flow of capital towards America’s fast-rising interest rates is proving increasingly difficult for other economies to handle. Falling currencies mean higher import prices, exacerbating inflation problems and forcing central banks to undertake their own whopping rate-rises. On September 20th the Swedish Riksbank lifted its benchmark rate by a full percentage point; the Bank of England is expected to mirror the Fed’s 0.75 percentage-point rise on September 22nd. The result of tighter financial conditions and hawkish monetary policy has been an epic rise in global bond yields. In recent days America’s ten-year yield has risen above 3.5%, back to levels last seen in the early 2010s. Over the past month alone, ten-year yields have risen by more than 0.6 percentage points in Germany and South Korea, and by nearly a full percentage point in Britain. After years in which interest rates plumbed historically low levels, falling currencies and soaring yields have come as a shock.They also pose a threat. South Korea, for instance, is furiously deploying reserves to prevent a chaotic fall in the won, and its government has expressed interest in reopening a dollar swap line with the Fed, through which the Bank of Korea could freely exchange its currency. In Britain, where the government has announced a big spending programme to shield people from energy-price rises, soaring gilt yields and sinking sterling have observers whispering that the economy may be at risk of losing the market’s confidence. Even if the worst outcomes can be avoided, the steady upward march in the cost of credit will chill private investment and tie the hands of governments which might have spent more to boost their economies. Unfortunately for policymakers elsewhere, the American economy continues to look hale, and its inflation figures are holding up. Mr Powell may thus decide that the Fed has more work to do, leaving the rest of the world to bear the pain. ■ More

The Federal Reserve raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level.
The central bank has been looking to bring down inflation, which is running near its highest levels since the early 1980s.
Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023. That implies a quarter-point rate rise next year but no decreases.

The Federal Reserve on Wednesday raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level.In its quest to bring down inflation running near its highest levels since the early 1980s, the central bank took its federal funds rate up to a range of 3%-3.25%, the highest it has been since early 2008, following the third consecutive 0.75 percentage point move.
Stocks seesawed following the announcement, with the Dow Jones Industrial Average most recently down slightly. The market swung as Fed Chairman Jerome Powell discussed the outlook for interest rates and the economy.

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Traders have been concerned that the Fed is remaining more hawkish for longer than some had anticipated. Projections from the meeting indicated that the Fed expects to raise rates by at least 1.25 percentage points in its two remaining meetings this year.

‘Main message has not changed’

“My main message has not changed since Jackson Hole,” Powell said in his post-meeting news conference, referring to his policy speech at the Fed’s annual symposium in August in Wyoming. “The FOMC is strongly resolved to bring inflation down to 2%, and we will keep at it until the job is done.”
The increases that started in March — and from a point of near-zero — mark the most aggressive Fed tightening since it started using the overnight funds rate as its principal policy tool in 1990. The only comparison was in 1994, when the Fed hiked a total of 2.25 percentage points; it would begin cutting rates by July of the following year.Along with the massive rate increases, Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023. That implies a quarter-point rate hike next year but no decreases.The “dot plot” of individual members’ expectations doesn’t point to rate cuts until 2024. Powell and his colleagues have emphasized in recent weeks that it is unlikely rate cuts will happen next year, as the market had been pricing.Federal Open Market Committee members indicate they expect the rate hikes to have consequences. The funds rate on its face addresses the rates that banks charge each other for overnight lending, but it bleeds through to many consumer adjustable-rate debt instruments, such as home equity loans, credit cards and auto financing.In their quarterly updates of estimates for rates and economic data, officials coalesced around expectations for the unemployment rate to rise to 4.4% by next year from its current 3.7%. Increases of that magnitude often are accompanied by recessions.Along with that, they see GDP growth slowing to 0.2% for 2022, rising slightly in the following years to a longer-term rate of just 1.8%. The revised forecast is a sharp cut from the 1.7% estimate in June and comes following two consecutive quarters of negative growth, a commonly accepted definition of recession.
Powell conceded a recession is possible, particularly if the Fed has to keep tightening aggressively.
“No one knows whether this process will lead to a recession or, if so, how significant that recession will be,” he said.The hikes also come with the hopes that headline inflation will drift down to 5.4% this year, as measured by the Fed’s preferred personal consumption expenditures price index, which showed inflation at 6.3% in July. The summary of economic projections then sees inflation falling back to the Fed’s 2% goal by 2025.Core inflation excluding food and energy is expected to decline to 4.5% this year, little changed from the current 4.6% level, before ultimately falling to 2.1% by 2025. (The PCE reading has been running well below the consumer price index.)The reduction in economic growth came even though the FOMC’s statement massaged language that in July had described spending and production as having “softened.” This meeting’s statement noted: “Recent indicators point to modest growth in spending and production.” Those were the only changes in a statement that received unanimous approval.Otherwise, the statement continued to describe job gains as “robust” and noted that “inflation remains elevated.” It also repeated that “ongoing increases in the target rate will be appropriate.”

’75 is the new 25′

The dot plot showed virtually all members on board with the higher rates in the near term, though there were some variations in subsequent years. Six of the 19 “dots” were in favor of taking rates to a 4.75%-5% range next year, but the central tendency was to 4.6%, which would put rates in the 4.5%-4.75% area. The Fed targets its fund rate in quarter-point ranges.The chart indicated as many as three rate cuts in 2024 and four more in 2025, to take the longer-run funds rate down to a median outlook of 2.9%.
Markets have been bracing for a more aggressive Fed.
“I believe 75 is the new 25 until something breaks, and nothing has broken yet,” said Bill Zox, portfolio manager at Brandywine Global, in reference to the size of the rate hikes. “The Fed is not anywhere close to a pause or a pivot. They are laser-focused on breaking inflation. A key question is what else might they break.”Traders had fully priced in the 0.75 percentage point move and even had assigned an 18% chance of a full percentage point hike, according to CME Group data. Futures contracts just before Wednesday’s meeting implied a 4.545% funds rate by April 2023.The moves come amid stubbornly high inflation that Powell and his colleagues spent much of last year dismissing as “transitory.” Officials relented in March of this year, with a quarter-point rise that was the first increase since taking rates to zero in the early days of the Covid pandemic.Along with the rate increases, the Fed has been reducing the amount of bond holdings it has accumulated over the years. September marked the beginning of full-speed “quantitative tightening,” as it is known in markets, with up to $95 billion a month in proceeds from maturing bonds being allowed to roll off the Fed’s $8.9 trillion balance sheet.

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General Mills’ Cheerios for sale on a store shelf.
Lisa Baertlein | Reuters

Check out the companies making headlines in midday trading Wednesday.
Freyr Battery — Shares of the electric vehicle battery maker shot up 17.1% after Morgan Stanley said the company’s price target was double where it is now. The bull estimate for the price was three times over its current price.

Stitch Fix — Stitch Fix was up 2.8%, even after the company posted downbeat quarterly numbers. The online styling company lost 89 cents per share in the previous quarter on a net revenue that was down 16% from the same quarter a year ago.
General Mills — Shares of the food producer jumped 5.7% after the company posted a better-than-expected quarterly profit. General Mills also raised its full-year sales forecast amid higher prices and strong demand for cereal, snacks and pet food.
Trupanion — The stock advanced 2.3% after Jefferies initiated coverage of Trupanion with a buy rating, saying the pet insurance company is well positioned for more gains ahead on the pet health trend.
Chemours — Chemours shares fell 8.4% after the chemicals company lowered its full-year guidance. The company now sees adjusted EBITDA between $1.4 billion and $1.45 billion, below prior guidance of $1.475 billion and $1.575 billion.
Sotera Health — Sotera Health shares dropped 10.7% after JPMorgan downgraded the company to underweight from overweight, citing risks from more than 700 outstanding trials.

Aurora Cannabis — Shares of the cannabis producer tumbled 7.1% after the company reported a breakeven quarter, on an adjusted basis. Analysts had predicted a quarterly loss. Aurora’s overall revenue came in slightly below expectations.
Beyond Meat — Shares of Beyond Meat declined 0.8% after the company announced it had suspended Chief Operating Officer Doug Ramsey after he was arrested Saturday on charges of terroristic threatening and third-degree battery after an incident at a college football game. The company announced Tuesday that Jonathan Nelson, senior vice president of manufacturing operations, will oversee Beyond’s operations activities on an interim basis.
Coty — The stock rose 3.2% after the beauty company said it has a strategy to double skincare product sales by fiscal year 2025. The announcement came ahead of Coty’s investor event Wednesday morning.
Arista Networks — Shares of the cloud services provider dipped 0.2% after Barclays upgraded the stock to buy, saying that Arista can sustain its revenue growth over the next few years.
Lockheed Martin, Raytheon Technologies, Northrop Grumman, L3Harris — Defense stocks moved higher on Wednesday after Russia president Vladimir Putin announced a partial military mobilization for the war in Ukraine, signaling that the conflict will continue in the months ahead. Shares of Lockheed Martin dipped 0.1%, Raytheon fell 1%, Northrop Grumman declined 0.2%, and L3Harris rose 0.1%.
PayPal — The stock fell 0.5% after Bank of America added PayPal to its US1 list of top ideas. The firm took out Visa, though that stock remains buy-rated.
— CNBC’s Alex Harring, Yun Li, Tanaya Macheel, Jesse Pound and Carmen Reinicke contributed reporting

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