Finance

Howard Buffett, son of billionaire investor Warren Buffett, is donating millions of dollars from his foundation in support of Ukraine after meeting with President Volodymyr Zelenskyy.
The Howard G. Buffett Foundation donated $2.7 million to the citizen-funded nonprofit Spirit of America, which is delivering nine 50-passenger buses to the Ukrainian Territory Defense Forces. The Buffett Foundation’s donation also funded 375 advanced trauma kits for Ukrainians on the front lines.

“I’ve never quite seen anything like this in my lifetime,” Buffett said on CNBC’s “Squawk Box” Monday. “It’s millions of refugees trying to leave the country and it’s just an overwhelming situation for the country… I believe we’ve got to support Ukraine in this fight. It’s a difficult fight for them.”
Buffett, the chairman and CEO of Howard G. Buffett Foundation as well as a director at Berkshire Hathaway, met with Zelenskyy on Wednesday in Ukraine capital Kyiv.
“We appreciate this signal of solidarity,” Zelenskyy said in a tweet Wednesday. “Expressed gratitude for the humanitarian support. Invited him to join projects on restoring irrigation systems in the Odesa region, demining and school nutrition reform.”

Warren Buffett, left, and his eldest son, Howard G. Buffett
Peter Kramer | NBC | Getty Images

Russia’s forces invaded Ukraine in February, with the conflict now turning into a town-by-town fight as Russia tries to consolidate territory in the east. The U.S. has been sending Ukraine military assistance, including advanced rocket-launcher systems and missiles.
The Howard G. Buffett Foundation was established in 1999 and has been fighting conflicts, food insecurity and human trafficking among the world’s most impoverished and marginalized populations. It had $529 million in assets at the end of 2020.

Warren Buffett has pledged to give away all of his Berkshire shares through annual gifts to the Bill & Melinda Gates Foundation, Howard G. Buffett Foundation and others.
Howard Buffett is expected to eventually succeed his father as Berkshire chairman to preserve its unique culture.

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Charles Schwab agreed to pay $187 million to settle an SEC investigation into the firm’s robo-advisor, Schwab Intelligent Portfolios.
The agency alleged Schwab didn’t disclose a “cash drag” on client portfolios, which enriched the firm but caused investors to make less money for the same amount of risk in most market conditions.
Schwab neither admitted nor denied the claims. The alleged behavior occurred from 2015 to 2018.

The U.S. Securities and Exchange Commission headquarters in Washington on Feb. 23, 2022.
Al Drago/Bloomberg via Getty Images

Charles Schwab agreed to pay $187 million to settle an SEC investigation into alleged hidden fees charged by the firm’s robo-advisor, Schwab Intelligent Portfolios, according to an agency announcement on Monday.
“Robo-advisor” is shorthand for a digital investment service that uses algorithms to judge how to allocate individuals’ money among asset classes such as stocks, bonds and cash.  

From March 2015 through November 2018, Schwab didn’t disclose to clients that its robo-advisor allocated funds “in a manner that their own internal analyses showed would be less profitable for their clients under most market conditions,” the SEC claimed.
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As part of the settlement, three Schwab subsidiaries — Charles Schwab & Co., Charles Schwab Investment Advisory and Schwab Wealth Investment Advisory — agreed to pay a $135 million civil penalty and an additional $52 million in disgorgement and interest to affected clients.
In a statement issued Monday, Schwab neither admitted nor denied the allegations and said the firm is “pleased to put this behind us.”
“We believe resolving the matter in this way is in the best interests of our clients, company and stockholders as it allows us to remain focused on helping our clients invest for the future,” according to the statement. “As always, we are committed to earning our clients’ trust every day and work diligently to maintain the highest standards for professional conduct throughout our organization.”

Cash drag

Robo-advisors are getting more popular. They began appearing around 2008, during the advent of the iPhone and an ascendant digital culture. They may soon hold more than $1 trillion of Americans’ wealth.
The dynamic outlined by the SEC was due to an undisclosed “cash drag” on Schwab client portfolios, the agency said.
Cash generally yields lower returns than stocks, for example, during periods of low interest rates and a rising stock market, as was the directional trend over 2015-2018.
Schwab advertised that clients’ cash allocations were determined by strict portfolio methodology that sought optimal returns, according to the SEC. But the firm’s data showed that the cash allocations would lead clients to make less money for the same amount of risk in most circumstances, the SEC said.

The firm profited by sweeping cash to an affiliate bank, loaning the money and pocketing the difference between the loan interest it received and the cash interest it paid to robo-adviser clients, according to the SEC.
“Schwab’s conduct was egregious, and today’s action sends a clear message to advisers that they need to be transparent with clients about hidden fees and how such fees affect clients’ returns,” Gurbir S. Grewal, director of the SEC’s enforcement division, said Monday.
However, Schwab highlighted that its Schwab Intelligent Portfolios Service lets investors elect not to pay an advisory fee in exchange for allowing the firm to hold some proceeds in cash.
The firm said it “[does] not hide the fact that our firm generates revenue for the services we provide” and thinks cash is a “key component of any sound investment strategy through different market cycles.”

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“It’s possible we go into recession, obviously, probably 50-50 odds now,” Gorman said Monday at a financial conference held by his New York-based bank. That’s up from his earlier 30% recession-risk estimate, said Gorman.
“I don’t think we’re falling into some massive hole over the next few years, I think eventually the Fed will get hold of inflation,” he added. “You know that it’s going to be bumpy; people’s 401(k) plans are going to be down this year.”
Still, the Fed waited too long to raise rates, which gives them less room to maneuver should a recession begin, Gorman said. The CEO began discussing the risk of a recession with his internal committees last August or September when it was clear that inflation was going to be more persistent than hoped, he said.

Morgan Stanley Chairman and Chief Executive James Gorman speaks during the Institute of International Finance Annual Meeting in Washington, October 10, 2014.
Joshua Roberts | Reuters

The odds of a recession may be climbing as the Federal Reserve wrangles with inflation, but it’s unlikely to be a deep one, according to Morgan Stanley CEO James Gorman.
“It’s possible we go into recession, obviously, probably 50-50 odds now,” Gorman said Monday at a financial conference held by his New York-based bank. That’s up from his earlier 30% recession-risk estimate, said Gorman, who added that “we’re unlikely at this stage to go into a deep or long recession.”

Gorman was speaking as markets were in freefall amid expectations that central banks need to aggressively combat inflation. Bank executives have raised alarms about the economy recently as the Fed raises rates and reverses quantitative easing programs. Rival CEO Jamie Dimon said he predicted a “hurricane” ahead due to central banks and the Ukraine conflict.
But Gorman expressed confidence that the Fed would eventually be able to bring inflation down from its multi-decade highs.
“I don’t think we’re falling into some massive hole over the next few years, I think eventually the Fed will get hold of inflation,” he said. “You know that it’s going to be bumpy; people’s 401(k) plans are going to be down this year.”
While markets have been crashing, the fundamentals of the economy, including consumer and corporate balance sheets, are in better shape than markets suggest, which gives Gorman comfort, he said.
Still, the Fed waited too long to raise rates, which gives them less room to maneuver should a recession begin, Gorman said. The CEO began discussing the risk of a recession with his internal committees last August or September when it was clear that inflation was going to be more persistent than hoped, he said.
“We’re in sort of a ‘Brave New World’ right now, and I don’t think there’s anybody in this room who could accurately predict where inflation is going to be a year from now,” Gorman said.

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The logo of cryptocurrency exchange Binance displayed on a smartphone with the word “cancelled” on a computer screen in the background.
Budrul Chukrut | SOPA Images | LightRocket via Getty Images

Binance said Monday that it is temporarily pausing bitcoin withdrawals “due to a stuck transaction causing a backlog.”
At first, Binance founder and CEO Changpeng Zhao said in a tweet that the issue would be fixed within 30 minutes. But he later amended that to say, “Likely this is going to take a bit longer to fix than my initial estimate.” He added that, “[t]his is only impacting the Bitcoin network,” and that holders “can still withdraw Bitcoin on other networks like BEP-20.”

“Funds are SAFU,” he added. The acronym stands for “secure asset fund for users,” which is a fund the company established in 2018 to help safeguard users.
The news comes as bitcoin tumbled more than 10% on Monday, breaking below $24,000 and sinking to the lowest level since December 2020.
The largest cryptocurrency has been hit by macroeconomic concerns, including rampant inflation.
Binance is the world’s largest crypto exchange. The company handles spot trading volumes of more than $14 billion and nearly $50 billion in derivatives volume in a single day, according to data from CoinGecko.
– CNBC’s Ryan Browne contributed reporting.

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Crypto lender Celsius said it is pausing all account withdrawals and transfers, citing “extreme market conditions.”
The firm had more than $8 billion lent out to clients and almost $12 billion in assets under management as of May.
Bitcoin and other tokens plunged, with the world’s biggest digital coin falling to lows not seen since December 2020.

Celsius CEO Alex Mashinsky.
Piaras Ó Mídheach | Sportsfile for Web Summit | Getty Images

Celsius, a controversial cryptocurrency lending platform, said Monday it was pausing all withdrawals, causing more pain in the fragile crypto market.
Celsius is one of the largest players in the nascent crypto lending space, with more than $8 billion lent out to clients and almost $12 billion in assets under management as of May. The group, which offers users higher-than-average interest rates on their deposits, is essentially the crypto equivalent of a bank — but without the strict insurance requirements faced by traditional lenders.

“Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts,” the company said in a memo to clients on Monday.
The move has raised concerns about Celsius’ solvency. The firm has seen the value of its assets more than halve since October, when it handled $26 billion in client funds. Celsius’ cel token has also erased 97% of its value in the same timeframe. Celsius is the biggest holder of cel, a token it encourages people to buy to earn rewards and get discounts on lending rates.
“Acting in the interest of our community is our top priority,” Celsius said in the memo. “In service of that commitment and to adhere to our risk management framework, we have activated a clause in our Terms of Use that will allow for this process to take place. Celsius has valuable assets and we are working diligently to meet our obligations.”
Celsius was not immediately available for additional comment on the situation when contacted by CNBC.
Bitcoin and other cryptocurrencies took a beating on the news. The world’s biggest digital asset tumbled 8% to $25,287, according to Coin Metrics data, falling to lows not seen since December 2020. Ether dropped 8% to $1,329, while Celsius’ cel token plunged more than 50%.

It comes hot on the heels of the $60 billion meltdown of hyped stablecoin terraUSD. The collapse heightened regulators’ fears over crypto products offering investors unusually high returns. Anchor, a lending service, once promised users interest rates of up to 20% on their holdings of terraUSD, a coin that was always meant to be worth $1.
Market participants have suggested that Celsius had exposure to the now-collapsed terraUSD stablecoin. Celsius has denied this.
Just last week, the company said it had not had any issues meeting withdrawal requests. Celsius said it had the reserves and “more than enough” of the cryptocurrency ether, to meet obligations.
In April, Celsius boss Alex Mashinsky told CNBC his company holds on average 300% collateral for each loan it offers to retail investors, while for institutional investors it issues undercollateralized loans.
“We’ve been doing this for five years now, longer than anybody else,” he said at the time. “The business is doing very well.”
Hours before announcing a freeze on account withdrawals, Mashinsky lashed out at a crypto investor raising concerns with Celsius.
“Do you know even one person who has a problem withdrawing from Celsius?” Mashinsky asked, before accusing the investor of spreading “misinformation.”

Crypto lending is still very much a regulatory gray area. U.S. market regulators believe many of the products should be treated as securities subject to strict rules to ensure investors are protected.
In February, BlockFi, a competitor to Celsius, was hit with a $100 million penalty from the Securities and Exchange Commission and 32 states, which charged it with violating securities laws. Celsius itself was sent cease-and-desist letters from four U.S. states.
Vijay Ayyar, head of international at crypto exchange Luno, said Celsius’ decision to pause withdrawals had exacerbated the sell-off in cryptocurrencies, which have already come under pressure due to concerns around rising inflation and higher interest rates.
“The Luna/Terra debacle potentially has a lot of hidden skeletons in the closet, which we’re now potentially seeing come out,” Ayyar told CNBC.
“The trust in these yield products is definitely impacted and we’re probably going to see widespread regulation on such products in the near term.”
Nexo, another crypto lending firm, said it sent Celsius a letter Sunday offering to acquire its collateralized loan portfolio, but the company declined.
“As a sign of goodwill and in an attempt to support the digital asset ecosystem in these difficult times, yesterday we reached out to the Celsius team to offer our support, but our help was refused” Antoni Trenchev, Nexo’s CEO, told CNBC.
“We firmly believe that much can be done to help Celsius’ clients in various different ways.”
Celsius’ troubles have reignited worries over the risk of a broader market contagion from cryptocurrencies. Tether, the world’s biggest stablecoin, hovered below its $1 peg Monday on several major exchanges as investors fled the token. Celsius borrowed $500 million in tether tokens, posting bitcoin as collateral.
Tether, which made an equity investment in Celsius, said it wouldn’t face any fallout from its involvement on the stablecoin’s reserves.
“Tether lending activity with Celsius (as with any other borrower) has always been overcollateralized and has no impact on our reserves,” the company said in a statement.
The manager of Canada’s second-largest pension fund, the Caisse de dépôt et placement du Québec, also made an investment in Celsius. The CDPQ was not immediately available for comment when contacted by CNBC.

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U.S. President Joe Biden has repeatedly indicated the U.S. would defend Taiwan militarily upon attack, only to have the White House deny a shift in a decades-long “one China policy.”
“We believe he is actually paying lip service to this one China policy,” said Zhou Bo, a senior fellow at Tsinghua University’s Center for International Strategy and Security Studies.
Taiwan is a democratically self-ruled island the 72-year-old government in Beijing considers part of its territory. Beijing has maintained its seeks peaceful reunification with Taiwan.

BEIJING — There is an increasing wariness of U.S. claims to recognize Beijing as the sole legal government of China, a retired officer of the People’s Liberation Army told CNBC on Monday.
His comments came after U.S. President Joe Biden repeatedly indicated the U.S. would defend Taiwan militarily if the island is attacked, only to have the White House deny a shift in a decades-long “one China policy.”

“We believe he is actually paying lip service to this one China policy,” said Zhou Bo, now a senior fellow at Tsinghua University’s Center for International Strategy and Security Studies.
Zhou did not specify who “we” referred to in his response to a question on CNBC’s ”Street Signs Asia” about how Beijing viewed the back-and-forth over Biden’s comments.

U.S. Vice President Joe Biden delivers remarks at the Strategic and Economic Dialogue (S&ED) at the State Department in Washington, U.S. June 23, 2015.
Yuri Gripas | Reuters

Taiwan is a democratically self-ruled island that Beijing considers part of its territory. Beijing has maintained it seeks peaceful reunification with Taiwan.
During the Shangri-La Dialogue in Singapore over the weekend, China’s Defense Minister Wei Fenghe maintained that Beijing would achieve reunification and warned those pursuing Taiwan independence would “come to no good end.”
A day earlier, U.S. Secretary of Defense Lloyd Austin accused China of “provocative, destabilizing” military activity close to Taiwan.

For more than 40 years, the U.S. “one China policy” has recognized Beijing as the sole legal government of China. Meanwhile, the U.S. maintains unofficial relations with Taiwan, with a policy of making sure the island has the resources to defend itself.
Given recent media reports about U.S. assistance to Taiwan, Zhou said, “How could we have trust in the one China policy?”
— CNBC’s Ravi Buddhavarapu contributed to this report.

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China sold nearly 21.5 million passenger cars last year. That’s roughly the equivalent of sales in the United States, Europe and Japan combined, according to industry data accessed through the Wind database.
Chinese tech giant Baidu’s tie-up with automaker Geely is one of those rushing to make a bet on assisted driving a reality.
Just 15 months since the companies’ Jidu electric car project launched, the brand revealed Wednesday a concept car it says is 90% of what customers will get next year for about $30,000.

Jidu, Baidu’s electric car venture alongside Geely, revealed its first concept car on June 8, 2022.

BEIJING — As Chinese companies race for a slice of the world’s largest car market, they’re betting heavily on assisted driving technology.
China sold nearly 21.5 million passenger cars last year. That’s roughly the equivalent of sales in the United States, Europe and Japan combined, according to industry data accessed through the Wind database.

Electric cars have grabbed a growing share of that Chinese market. Tesla, start-ups like Nio and traditional automakers have jumped in. After initially competing on battery driving range and in-car online entertainment, companies increasingly emphasize assisted driving capability.
Chinese tech giant Baidu and automaker Geely are among those rushing to make a bet on making assisted driving a reality.
Just 15 months since the companies’ Jidu electric car project launched as part of a tie-up, the brand revealed Wednesday a concept car it says is 90% of what customers will get next year for about $30,000. Tesla’s Model Y runs closer to $50,000 in China.

Evolution of ‘smart cars’

“It’s a car, and, even more so, a robot,” Jidu CEO Joe Xia said during the livestreamed event in Mandarin, translated by CNBC. “We use a concept car to quickly prove our early stage design and idea.”

The four-seat vehicle, called Robo-01, has replaced the dashboard with a long screen extending across the front of the car and removed cockpit buttons — since the driver can use voice control instead, Xia said.

Theoretically, the half-moon of a steering wheel can fold up, paving the way for a cockpit seat with no window obstructions, once full self-driving is allowed on China’s roads. Two large external sensors for assisted driving can retract, for aesthetics and for protection in the event of an emergency.
Xia claimed Jidu “can become the standard for self-driving cars.” But the company declined to share what level of assisted driving software would come with the car.

Consumers are considering two important factors in intelligent vehicles. First of all, the most important one is autonomous driving.

vice president, DeepRoute.ai

Many electric cars, including Tesla, Nio and Xpeng, offer some form of tech-enabled driving assistance. In late May, Chinese self-driving tech start-up WeRide said it received a strategic investment from German engineering company Bosch to produce an assisted driving software system for mass production and delivery next year.
“I think the definition of smart cars has evolved a lot,” said Xuan Liu, vice president at autonomous driving software start-up DeepRoute.ai, said in a phone interview Wednesday.
“Consumers are considering two important factors in intelligent vehicles,” he said. “First of all, the most important one is autonomous driving. I think they are also interested in this so-called intelligent cabinet, so they want the interaction with the vehicle system.”
Jidu plans to launch a limited version of its first production model in the fall. Deliveries are set to begin next year, with a target market of family passenger vehicles priced above 200,000 yuan ($29,985), Baidu CEO Robin Li said on an earnings call in late May.

Baidu has majority ownership of Jidu, and the search giant has rolled out commercial robotaxis in parts of China using its Apollo autonomous driving system. That’s the same system, along with other tech from Baidu, that will be used in Jidu’s concept car (above).

Baidu has majority ownership of Jidu, and the search giant has rolled out commercial robotaxis in parts of China using its Apollo autonomous driving system. That’s the same system, along with other tech from Baidu, that will be used in Jidu’s concept car.
Co-investor Geely did not have an official release about Jidu’s concept car, after increasing its capital support earlier this year.
Geely has pushed into the electric car industry with its own vehicles, and announced in November a multi-year plan to build up the software component of the cars. The automaker said it aimed to commercialize full self-driving under specific conditions, called “Level Four” autonomous driving in a classification system, by 2025.
Earlier this month, Geely announced its subsidiary has launched the first nine of 72 satellites to support mapping and autonomous driving.

Competing for customers

Though electric car sales have surged, interest in Jidu’s first concept car appeared modest.
About 50,000 people viewed one of the main streams on the WeChat messaging app Wednesday night.
In contrast, Nio’s annual car release event in December drew about 200,000 views, though it included a musical performance. That event introduced a new sedan and custom augmented reality glasses that can impose digital images over the real, physical world.
For companies focused on self-driving technology, they’re looking at a market at least a year or two into the future.
For Chinese consumers, the main draw of self-driving cars is getting assistance during the commute home after a long day at work, Liu said. As for the business side, it’s the possibility that lower software costs will speed up widespread use, he said.

Read more about electric vehicles from CNBC Pro

DeepRoute.ai in April announced it cut the price of autonomous driving software from $10,000 per car to $3,000. Liu said the company was able to slash the price by using cheaper sensors but better software, and he expected the price could fall further once the start-up is able to work with automakers for mass production and deployment from 2024 onward.
While regulators have yet to allow full self-driving cars on most roads en masse, companies like DeepRoute.ai, Baidu and others are building data records through their robotaxi operations.
Liu said such data can help improve algorithms for self-driving technology, and build a track record to support potential changes in regulation.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, June 3, 2022.
Brendan McDermid | Reuters

U.S. stock futures fell Sunday night as Wall Street tries to recover from one of its worst weeks of 2022.
Futures tied to the Dow Jones Industrial Average dropped 176 points, or 0.6%, while S&P 500 futures slid 0.95%. Nasdaq 100 futures pulled back by 1.5%.

The major averages last week posted their biggest weekly declines since late January. The Dow and S&P 500 fell 4.6% and 5.1%, respectively, while the Nasdaq Composite lost 5.6%.
A chunk of those losses came Friday, when hotter-than-expected U.S. inflation data spooked investors. The Dow dropped 880 points, or 2.7%. The S&P 500 and Nasdaq lost 2.9% and 3.5%, respectively.
The Bureau of Labor Statistics reported Friday that the U.S. consumer price index rose last month by 8.6% from a year ago, its fastest increase since December 1981. That gain topped economists’ expectations. The so-called core CPI, which strips out food and energy prices, also came in above estimates at 6%.
On top of that, the preliminary June reading for the University of Michigan’s consumer sentiment index registered at a record low of 50.2.

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That data comes ahead of a highly anticipated Federal Reserve meeting this week, with the central bank expected to announce at least a half-point rate hike on Wednesday. The Fed has already raised rates twice this year, including a 50-basis-point (0.5 percentage point) increase in May in an effort to stave off the recent inflation surge.

“May’s CPI report showed scant signs of inflation peaking, though we still expect peaking soon. The report also suggests a more hawkish Fed and higher recession risk,” wrote Ed Yardeni, president of Yardeni Research.
“Investor and consumer sentiment both have soured. But this time, pervasive bearishness may not be as useful a contrarian bullish signal as in the past,” he said, adding that the firm now sees a 45% chance of a “mild recession;” that’s up from the previous forecast of 40%.
Stocks have had a tough year as recession fears rise along with consumer prices. The S&P 500 is down 18.2% year to date through Friday’s close. It’s also 19.1% below an intraday record set in January. The Dow has fallen 13.6% in 2022, and the Nasdaq Composite is deep in bear market territory, down 27.5% this year and trading 30% below an all-time high set in November.
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