Finance

It is safe to say that neither Kamala Harris nor Donald Trump will win November’s presidential election by pledging fiscal prudence. The deficit and debt are afterthoughts for most Americans these days. And proposals from both candidates for cleaning up the country’s finances are fundamentally unserious. Mr Trump has talked about using cryptocurrency or drilling for oil in order to pay off the national debt—ideas that amount to utter nonsense. Although Ms Harris has vowed to reduce the deficit, she has declined to offer any substantive plan for doing so. More

The hotly anticipated comeback of a 1990s British legend sold out fast. Fans took to social media to complain. “Poor effort and a load of hype,” wrote one. “What a shitshow,” added another. “Anyone else loving the chaos?” asked an amused onlooker. To celebrate its 30th birthday, St. John, a restaurant that pioneered modern British cooking, brought back its menu from 1994, along with prices from 1994. As punters rushed to take advantage, tables were booked up in seconds—leaving most empty-handed. More

Microsoft’s generative artificial intelligence prospects are impressive. But the stock has more to offer investors than just the new tech. Jim Cramer said Microsoft shares could bottom Wednesday — and out of all the megacap tech stocks, this Club name is the one to buy. Microsoft closed at a record high of $467 on July 5. But then, almost immediately, it began to slide. It got no help from its July 30 earnings report and made a recent bottom in the Aug. 5 market plunge. The stock’s subsequent recovery stalled out late last month and turned lower once again. Exacerbated by Tuesday’s tech wreck, shares on Wednesday were back to where they were around on Aug. 2 at $408 each. MSFT YTD mountain Microsoft YTD Wells Fargo is more aligned with Jim, pointing out three “underappreciated levers” — search, cybersecurity, and enterprise software — that could add to Microsoft’s overall revenue growth. The analysts added the stock to their “Signature Picks” list — keeping a buy-equivalent overweight rating and a price target of $515. The Club has a price target of $500 on the stock. Microsoft’s search engine Bing could grab more share in the search market from Alphabet , Wells Fargo said in a research note Wednesday, citing last month’s antitrust case loss regarding exclusivity deals with device makers like Apple. If Google Search is no longer the iPhone’s default search engine, then more business could come to Microsoft. To be sure, search is small at Microsoft compared to Alphabet. Google Search has about 88% market share in the U.S., versus just over 7% for Bing, according to web data provider StatCounter. The numbers worldwide are even more lopsided in Google’s favor. Wells Fargo also highlighted Microsoft’s cybersecurity business. “Microsoft has quietly become the largest cybersecurity vendor on the planet, continuing to take share in adjacent areas,” the analysts wrote. Similar to others in the sector, Microsoft’s cybersecurity business can continue to rake in major corporations as clients as the threat of hacks and breaches remains elevated. Microsoft did take some heat when July’s CrowdStrike upgrade caused a major global IT outage . In 2023, Microsoft CEO Satya Nadella said the company’s cybersecurity business had surpassed $20 billion in revenue over a 12-month period. Microsoft’s customer relationship software suite, dubbed Dynamics, could see more upside as well, Wells Fargo said. The analysts see “significant cross-sell potential.” That’s because the company already has a massive customer base from its cloud computing business Azure and productivity apps included in Office. Bottom line These three underappreciated areas are encouraging, even though Microsoft’s generative AI efforts are still crucial to the Club’s investment thesis. While Azure revenue missed expectations last quarter, we still expect a pick-up in the back half of the year, given management’s bullish commentary around its outlook. Wall Street firms seem to agree with us. In addition to Wells Fargo’s bullishness, Piper Sandler added Microsoft to its high-conviction buy list on Wednesday due to these AI tailwinds. (Jim Cramer’s Charitable Trust is long MSFT, GOOGL, AAPL, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Executive Chairman and CEO of Microsoft Corporation Satya Nadella speaks during the “Microsoft Build: AI Day” event in Bangkok, Thailand, May 1, 2024. 
Chalinee Thirasupa | Reuters

Microsoft’s generative artificial intelligence prospects are impressive. But the stock has more to offer investors than just the new tech. More

Ken Griffin, founder and CEO of Citadel, speaks at the Milken Global Conference 2024 at The Beverly Hilton in Beverly Hills, California, on May 6, 2024.
David Swanson | Reuters

Billionaire investor Ken Griffin’s suite of hedge funds at Citadel eked out small gains in what proved a volatile month in August as markets grappled with an emerging growth scare.
Citadel’s multistrategy Wellington fund gained about 1% in August, bringing its year-to-date return to 9.9%, according to a person familiar with the returns, who spoke anonymously because the performance numbers are private. All five strategies used in the flagship fund — commodities, equities, fixed income, credit and quantitative — were positive for the month, the person said.

The Miami-based firm’s tactical trading fund rose 1.5% last month and is up 14.5% on the year. Its equities fund, which uses a long/short strategy, edged up 0.8%, pushing its 2024 returns to 9.3%.
Citadel declined to comment. The hedge fund complex had about $63 billion in assets under management as of Aug. 1.
Volatility made a strong comeback in August as fears of a recession were rekindled by a weak July jobs report. On Aug. 5, the S&P 500 dropped 3%, its worst day since September 2022. Still, the market quickly bounced back, with the equity benchmark ending August up 2.3%. The S&P 500 is now ahead more than 15% in 2024.
Overall, the hedge fund community recently moved into a defensive mode as macroeconomic uncertainty mounted. Hedge funds on net sold global equities for a seventh straight week recently, driven by sales of communication services plus financial and consumer staples stocks, according to Goldman Sachs’ prime brokerage data. More

Investors returning from summer holidays might feel dispirited upon checking their portfolios. Stocks have had a poor start to September. America’s benchmark S&P 500 index dropped by 2% on its first day of trading. European shares followed suit on September 4th; those in Japan have fallen by even more. It is a striking change from the calm that had settled over markets before Labor Day. American share prices ended August less than a hundredth of a percentage point below an all-time high reached in July, European ones fared similarly and Japanese stocks were just a few percentage points below their peak. Adding to the good vibes, rich-world inflation had continued to cool, setting the scene for the Federal Reserve to begin cutting interest rates when its policymakers next meet on September 17th and 18th. More

Global semiconductor and associated stocks fell on Wednesday, following a steep plunge in Nvidia’s share price in the U.S. overnight.
On Tuesday, around $279 billion of value was wiped off of Nvidia. That was the biggest one-day market capitalization drop for a U.S. stock in history.
Nvidia shares continued sliding in post-market trading Tuesday, falling 2%, after Bloomberg reported that the company received a subpoena from the Department of Justice as part of an antitrust investigation.

People walk past the logo of Samsung Electronics in Seoul on July 7, 2022. South Korea’s Samsung Electronics Co Ltd turned in its best April-June profit since 2018 on Thursday, underpinned by strong sales of memory chips to server customers even as demand from inflation-hit smartphone makers cools.
Jung Yeon-je | Afp | Getty Images

Global semiconductor and associated stocks fell on Wednesday, following a steep plunge in Nvidia’s share price in the U.S. overnight.
In the U.S., chipmaker Nvidia plunged more than 9% in regular trading, leading semiconductor stocks lower amid a sell-off on Wall Street. Economic data published Tuesday resurfaced jitters about the health of the U.S. economy. Nvidia shares continued sliding in post-market trading Tuesday, falling 2%, after Bloomberg reported that the company received a subpoena from the Department of Justice as part of an antitrust investigation.

Around $279 billion of value was wiped off of Nvidia on Tuesday, in the biggest one-day market capitalization drop for a U.S. stock in history. The previous record was held by Facebook-parent Meta, which suffered a $232 billion fall in value in a day in February 2022.
Nvidia’s value chain extends to South Korea, namely, memory chip maker SK Hynix and conglomerate Samsung Electronics.

Samsung shares closed 3.45% lower, while SK Hynix, which provides high bandwidth memory chips to Nvidia, slid 8%.
Tokyo Electron dropped 8.5%, while semiconductor testing equipment supplier Advantest shed nearly 8%.
Japanese investment holding company SoftBank Group, which owns a stake in chip designer Arm, fell 7.7%.

Contract chip manufacturer Taiwan Semiconductor Manufacturing Company declined more than 5%. TSMC manufactures Nvidia’s high-performance graphics processing units which power large language models — machine learning programs that can recognize and generate text.
Taiwan’s Hon Hai Precision Industry — known internationally as Foxconn — lost nearly 3%. It has a strategic partnership with Nvidia.
The selling in Asia filtered through to European semiconductor stocks. Shares of ASML, which makes critical equipment to manufacture advanced chips, fell 5% in early trade. Other European names such as ASMI, Be Semiconductor and Infineon, were all lower.
—CNBC’s Lim Hui Jie contributed to this report. More

Stock trading app Robinhood on Wednesday launched a new feature in the U.K. allowing retail traders to lend out any stocks they own outright in their portfolio to interested borrowers.
Shares lent out via the Robinhood app will be treated as collateral, with Robinhood receiving interest from borrowers and paying it out monthly to lenders.
Share lending is risky — not least due to the prospect that a borrower may end up defaulting on their obligation and be unable to return the value of the share to the lender.

In this photo illustration, the Robinhood Markets Inc. website is shown on a computer on June 06, 2024 in Chicago, Illinois. 
Scott Olson | Getty Images

Online brokerage platform Robinhood on Wednesday launched a share lending program in the U.K. that would allow consumers there to earn passive income on stocks they own, in the company’s latest bid to grow market share abroad.
The stock trading app, which launched in the U.K. last November after two previous attempts to enter the market, said that its new feature would enable retail investors in the U.K. to lend out any stocks they own outright in their portfolio to interested borrowers.

You can think of stock lending like “renting” out your stocks for extra cash. It’s when you allow another party — typically a financial institution — to temporarily borrow stocks that you already own. In return, you get paid a monthly fee.
Institutions typically borrow stocks for trading activities, like settlements, short selling and hedging risks. The lender still retains ownership over their shares and can sell them anytime they want. And, when they do sell, they still realize any gains or losses on the stock.
In Robinhood’s case, shares lent out via the app are treated as collateral, with Robinhood receiving interest from borrowers and paying it out monthly to lenders. Customers can also earn cash owed on company dividend payments — typically from the person borrowing the stock, rather than the company issuing a dividend.
Customers are able to sell lent stock at any time and withdraw proceeds from sales once the trades settle, Robinhood said. It is not guaranteed stocks lent out via its lending program will always be matched to an individual borrower, however.
“Stock Lending is another innovative way for our customers in the UK to put their investments to work and earn passive income,” Jordan Sinclair,  president of Robinhood U.K., said in a statement Wednesday.

“We’re excited to continue to give retail customers greater access to the financial system, with the product now available in our intuitive mobile app.”

Niche product

Share lending isn’t unheard of in the U.K. — but it is rare.
Several firms offer securities lending programs, including BlackRock, Interactive Brokers, Trading 212, and Freetrade, which debuted its stock lending program just last week.
Most companies that offer such programs in the U.K. pass on 50% of the interest to clients. That is higher than the 15% Robinhood is offering to lenders on its platform.
Share lending is risky — not least due to the prospect that a borrower may end up defaulting on their obligation and be unable to return the value of the share to the lender.
But Robinhood says on its lander page for stock lending that it aims to hold cash “equal to a minimum of 100% of the value of your loaned stocks at a third-party bank,” meaning that customers should be covered if either Robinhood or the institution borrowing the shares suddenly couldn’t return them.
Robinhood keeps cash collateral in a trust account with Wilmington Trust, National Association, through JP Morgan Chase & Co acting as custodian, a spokesperson for the firm told CNBC.
Simon Taylor, head of strategy at fintech firm Sardine.ai, said that the risk to users of Robinhood’s share lending program will be “quite low” given the U.S. firm is behind the risk management and selecting which individuals and institutions get to borrow customer shares.

“I doubt the consumer understands the product but then they don’t have to,” Taylor told CNBC via email.
“It’s a case of, push this button to also make an additional 5% from the stock that was sitting there anyway. Feels like a no brainer.”
“It’s also the kind of thing that’s common in big finance but just not available to the mainstream,” he added.
The new product offering might be a test for Robinhood when it comes to gauging how open local regulators are to accepting new product innovations.
Financial regulators in the U.K. are strict when it comes to investment products, requiring firms to provide ample information to clients to ensure they’re properly informed about the risk attached to the products they’re buying and trading activities they’re practicing.
Under Britain’s Financial Conduct Authority’s consumer duty rules, firms must be open and honest, avoid causing foreseeable harm, and support investors’ ability to pursue their financial goals, according to guidance published on the FCA website in July last year.
Still, the move is also a chance for Robinhood to try to build out its presence in the U.K. market, which —apart from a select number of European Union countries — is its only major international market outside of the U.S.
It comes as domestic U.K. trading firms have faced difficulties over the years. Hargreaves Lansdown, for example, last month agreed a £5.4 billion ($7.1 billion) acquisition by a group of investors including CVC Group.
The company has been battling issues including regulatory changes, new entrants into the market, including Revolut, and the expectation of falling interest rates.
Unlike Robinhood, which doesn’t charge commission fees, Hargreaves Lansdown charges a variety of different fees for consumers buying and selling shares on its platform. More

Zilch said Tuesday that it made an operating profit in July 2024, hitting profitability faster than other major consumer fintechs that have also managed to break even.
The company also said it topped £100 million ($130 million) in annual revenue run rate, doubling from the run rate it reported last year.
Philip Belamant, Zilch’s CEO, told CNBC the firm was able to hit profitability by growing rather than cutting back like other fintechs have done.

Zilch CEO Phil Belamant.

British financial technology firm Zilch on Tuesday reported its first-ever month of profit, marking a key milestone for the company as it looks toward an eventual initial public offering.
In a trading update, Zilch, which competes with the likes of Klarna and Block in the buy now, pay later space, said that it made an operating profit in July 2024, hitting profitability within four years of its founding date — faster than other major consumer fintechs that have also managed to break even.

Competitors Starling and Monzo, meanwhile, took more than three and four years to make their first profit, respectively. Others have managed to hit profitability faster. Digital banking startup Revolut, for example, broke even for the first time just two years after its launch.
Zilch also said it topped £100 million ($130 million) in annual revenue run rate, doubling from the run rate it reported last year.
Philip Belamant, Zilch’s CEO and co-founder, told CNBC Tuesday that, despite the current high-interest rate environment, the firm was able to hit profitability by growing its business rather than cutting back like other fintechs have done.

“If you think of the last two and a half, three years, a lot of VC-backed companies, especially high growth fintech businesses have had to cut their way to get to profitability. And some of those have actually cut so far they went bust along the way,” Belamant told CNBC’s “Squawk Box Europe.”
“It’s not been easy. And, for Zilch, we took a different approach. We looked at this and said let’s grow our way to profitability,” Belamant added.

Separately Tuesday, Zilch announced the appointment of former Aviva CEO Mark Wilson to its board. Wilson, who was made a non-executive director, said he was “excited” to join the firm at a critical juncture and “further help Zilch steer its path toward sustainable success as a category leader.”
Zilch’s CEO Belamant told CNBC in June that he wants to list the business publicly in the next 12 to 24 months. That same month, the company announced that it had raised $125 million of initial debt financing from Deutsche Bank.
That deal, which gives Zilch the option to draw down up to $315 million of credit from both Deutsche Bank and other banks, is expected to help the company triple its overall sales volumes in the next couple of years, according to the firm.
Klarna, which Zilch competes with in the U.K., is also planning a stock market flotation in the medium term, with its CEO Sebastian Siemiatkowski having previously told CNBC it wouldn’t be “impossible” for the firm to list as soon as this year. More