Federal Reserve Chairman Jerome Powell testified during a House of Representatives Financial Services Committee hearing on Pandemic Response oversight of the Treasury Department and the Federal Reserve at the Rayburn Building on Wednesday, December 1, 2021.
Tom Williams CQ-Roll Call, Inc. | Getty Images
If you want to see how difficult it is to be Federal Reserve Chairman Jerome Powell, check out the contrasting comments from Cleveland Fed President Loretta Mester and former Dallas Federal Reserve President Richard Fisher.
Asked on our air today what the central bank should do in response to the crisis in Ukraine, Fisher said: “I would not respond to what is happening in Ukraine, mainly because we do not know how long it will last.”
At the same time, Mester spoke at a conference at her organization, where she said that the crisis in Ukraine “has consequences for the economic outlook, adding increased risk to inflation, even when it risks lowering the growth forecast.”
These contrasting comments underscore Powell’s dilemma.
Both mandates: Which one gets the advantage?
The Fed has two mandates: it must help the economy grow and it must fight inflation.
Matt Mali of Miller Tabak notes that “the crisis in Ukraine has the potential to slow growth, so the Fed probably has to go slow in raising interest rates. But the crisis is also fueling inflation, so the Fed can’t ignore that.”
Who has the advantage? How does Powell cut this needle?
Mailey believes that Powell will take the “middle way”: he acknowledges fears of growth, but will continue the course to raise interest rates.
“We have a situation where Powell and the Fed have mistaken that inflation is transient, so they have to raise interest rates, otherwise they will lose confidence.
However, “the market now believes that the Fed will not be as aggressive as they were even a month ago.” Mali believes an increase of 50 basis points in March is unlikely. He says the central bank will make 25 basis points in March, but they will leave at least four more table increases for the year.
Mali is particularly concerned about signals from the bond market and what it suggests for potentially lower growth.
“Yields are much lower than they were last Thursday when the war broke out, but the stock market is no lower. Someone is wrong, either the bond market or the stock market. growth. “
The problem for stocks: Lower growth means lower profits
Shares are driven by a combination of three factors: dividend growth, profit growth and market ratio (price-earnings ratio), which is a reflection of how much investors are willing to spend on future earnings.
Almost all of the stock’s decline this year is due to multiple compression: the S&P 500 is down nearly 10 percent, while the market multiplier has also fallen about 10 percent, from about 21.1 to about 19.1.
At the same time, the distribution of dividends has slightly increased, while earnings expectations remain roughly the same.
Analysts expect earnings growth of 7.8% for the S&P 500 in 2022, just below expectations of 8.4% at the beginning of the year, according to Refinitiv.
Others express the same concern as Mali: that the crisis in Ukraine and its subsequent inflation will take a second step down stocks.
Nick Reich of The Earnings Scout notes that this second step down may not be due to a downturn in the market, but to a real downturn in earnings forecasts because rising Fed interest rates will slow the economy.
“We don’t know how long the Fed will need to raise interest rates to curb inflation,” Reich told customers. “While some companies forecast eight interest rate hikes this year, our study shows that four hikes will stop inflation. This is good news. The bad news is that it will probably come at the expense of future growth. “
“In the next few months, there is likely to be a fear of growth,” he said.
You may even start hearing the “R word” [recession]which shares are not discounted. “Reich noted that if estimates in the second half remain stable in the coming months,” we could become less bearish or even bullish. “
Furthermore, we also do not know how long the war in Ukraine will last and what economic sanctions they will have on the economy.
“The question is, how does the Federal Reserve create a soft landing?” Mali asked me. “It’s not clear if they can.”
Traders worry about slowing growth as Fed chairman Powell faces interest rate dilemma Read More »
Austria’s operations with Sberbank, Russia’s largest lender, must go bankrupt as its Croatian and Slovenian stakes are transferred to new owners by the EU’s body responsible for restructuring bankrupt banks.
The move was announced by the EU’s Single Restructuring Council on Tuesday night, making Sberbank’s Austrian branch the first bank victim of large-scale sanctions imposed on Russia in response to its invasion of Ukraine.
SRB has already halted most of Russia’s state-owned bank’s activities this week after customers rushed to withdraw money in response to Western sanctions.
SRB said on Tuesday that it has decided to transfer all shares of the Croatian subsidiary of Sberbank to Hrvatska Poštanska Banka, while its Slovenian division will be transferred to Nova Ljubljanska Banka. It says the two banks will open on Wednesday.
“SRB also decided that no restructuring was needed for the Austrian parent of Sberbank Europe AG,” he added. “Insolvency proceedings will be conducted in accordance with national law. Eligible deposits of up to EUR 100,000 are protected by the Austrian Deposit Guarantee Scheme. ”
This is only the second time SRB has taken control of a troubled bank since it was established in 2015 as a pan-European body with powers to impose losses on shareholders and junior bondholders of bankrupt creditors in a bid to evade government bailouts in the sector. .
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The last time SRB took control of a bank through a formal restructuring process was when it organized the sale of Spanish Banco Popular to its rival Banco Santander for 1 euro in 2017.
Sberbank Europe has about 800,000 retail and corporate customers in Central and Eastern Europe, with almost 4,000 employees and total assets of € 13 billion. The Russian bank set up its European subsidiary when it acquired Austria’s Volksbank International in 2012.
Sberbank Direct, its online banking operation, has sought to expand its deposit base by offering German depositors 1.5% interest rates on their money – much higher than the near-zero interest rates offered by most local lenders.
Last year, however, the Russian bank agreed to sell its operations in Bosnia and Herzegovina, Croatia, Hungary, Serbia and Slovenia to a consortium of banks led by Slovenia’s AIK Banka. But the deal was not completed and was undermined by the collapse of Sberbank’s operations in the EU.
The first bank to go bankrupt over new sanctions against Russia is the Austrian branch of Sberbank Read More »
Today, Rivian announced several significant price increases for its R1T electric pickup and R1S electric SUV, which have raised the configuration price of many booking holders by more than $ 12,000. The increase in prices comes as Rivian seeks to increase production and make its electric vehicle profitable, while adding lower levels of components that will arrive as early as 2024.
When Rivian first introduced the R1T and R1S in 2018, it announced that vehicles would start at $ 69,000 before incentives, but after Tesla announced Cybertruck with similar specifications for much cheaper, the company said it would reduce the price you are.
In 2020, Rivian confirmed that the R1T would now start at $ 67,500 for the base version of Explore, which (at the time) the company said was coming in 2022. Launch had to start at $ 75,000.
The carmaker began production and deliveries last year, but had problems increasing production.
The announced prices are expected to be achieved through volume production, but the failures are now affecting the entire price list. Rivian announced price increases today and made them sound like they were about adding options rather than raising costs by emailing customers:
Base prices of vehicles and the price of certain options, upgrades and accessories have increased. With the R1T Adventure and Explore packages, the tonneau cover can now be selected. We are in the process of updating your Rivian account page to reflect these corrections and will send you an email notification when the update is complete. Until then, all product updates and prices can be seen in our configurator.
In fact, these changes in option prices have affected many different configurations of both R1T and R1S. Rivian has introduced a new two-engine option, but the four-engine option is still the only one currently in production and has become $ 6,000 more expensive.
In addition, the carmaker made the standard battery pack unavailable with the quad motor, so that’s another $ 6,000 for people who were fine with the 260-mile range and wanted the quad motor for either performance or faster delivery time. . Now they have to upgrade to the big package.
With these changes and a few smaller options and accessories that also see price increases, many Rivian booking owners report that the price of their configurations is increasing by more than $ 12,000.
Only people who are advanced in the delivery process have fixed prices. Everyone else will have to swallow the price increase or cancel. Rivian says the price increase is the result of “inflationary pressures on the price of components and raw materials from suppliers around the world.”
Jiten Bell, Rivian’s chief growth officer, said in a comment Electrek:
Like most manufacturers, Rivian is facing inflationary pressures, rising component costs and unprecedented shortages and delays in the parts supply chain (including semiconductor chips). This increase in costs and complexity due to these challenging circumstances necessitates an increase in the prices of the R1T and R1S models we offer today – prices that were originally set in 2018. This solution will allow us to continue to offer competitive products that maintain high standards. for the quality, productivity and capabilities that our customers expect and deserve from Rivian. Along with adjusted prices for our current offerings, we are also announcing options for twin-engine AWDs and standard batteries for the R1T and R1S, which will provide customers with a wider choice as part of our expanding portfolio of options, upgrades and accessories.
With today’s announcement, Rivian is technically sticking to its originally announced base price of $ 67,500 for the R1T, but is not expected to arrive until 2024.
Taking Electrek
I doubt that these price increases are only due to inflation and the price of materials. Rivian is likely to realize that its gross margin targets will be difficult to achieve without higher prices.
It is a pity for the people who have been supporting the company for a long time. I was the holder of a first day reservation and my configuration was indicated with an “estimated price” of $ 76,500:
Rivian hasn’t updated my order page yet, but it looks like my configuration will now cost $ 89,500:
This is starting to get really expensive. And with the added price changes on the lack of a clear delivery schedule in Canada, I’m thinking of canceling my order.
I guess many other Rivian reservation holders think the same.
On the other hand, we have seen car dealers raise prices with a similar amount above the price of the sticker and even more.
I’m not sure I agree with the approach to tearing off the band-aid. Rivian had to make moves like Tesla, raise the price by a few thousand dollars every few months – and lock up owners who have already thrown in $ 1,000.
What do you think about today’s price changes? How do they affect your order, if you had one? Let us know in the comments section below.
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Rivian announces 2 engine options and smaller batteries, configuration updates and a sharp increase in price of $ 12,000+ Read More »
Kim Jong Un, founder of Nexon, South Korea’s largest gaming company, died on February 28 in Hawaii at the age of 54.
NXC, Nexon’s holding company, announced Kim’s death and said he had been treated for depression as his physical symptoms worsened, according to The Korean newspaper.
He is survived by his two teenage daughters, Kim Jung-min and Kim Jung-yun, and his wife, Yu Jung-hyun.
Nexon CEO Owen Mahoney issued a statement saying: “It is difficult to express the tragedy of the loss of our friend and mentor Jay Kim, a man who has had an immense positive impact on the world. As a founder and visionary, Jay encouraged people around him to ignore skeptics and trust their creative instincts. He will be greatly missed by his family Nexon and many friends. “
Kim launched Nexon in 1994 and became the first Korean gaming company to earn over $ 830 million in annual sales in the first year of its debut. Nexon also developed one of the first multiplayer online role-playing games, The Kingdom of the Winds, in 1996, and launched one of the world’s most famous MapleStory games in 2003.
According to SeoulNexon is now the largest gaming company in South Korea with a market capitalization of $ 27 billion.
In 2007, the 54-year-old debuted on the Forbes list of the richest in Korea, where he ranked 28th with a net worth of $ 590 million. In June 2021, Kim officially became the third richest man in South Korea with a total net worth of $ 10.9 billion, reported Forbes.
After pleading not guilty to bribery charges in 2016, when Kim was accused of borrowing money from a close friend of the prosecutor, he focused on various philanthropic activities. According to Forbes, in 2017 Kim founded the Risk Philanthropy Fund C Program, and in 2018 promised to donate $ 93 million to children’s hospitals and startups. He also said his children would not inherit his fortune.
Between 2013 and 2015, the company donated approximately $ 16.6 million to help build the Purme Foundation Nexon Children’s Rehabilitation Hospital in Seoul. Nexon claims that the hospital is the first rehabilitation hospital built for children in South Korea.
Prior to his death, Kim continued to donate to children’s hospitals in South Korea and had donated a total of $ 3.1 million to Daejeon Chung-nam Public Children’s Rehabilitation Hospital and $ 2 million to the Nexon Palliative Care Center at National University Hospital. in Seoul, which is scheduled to open sometime this year.
Image presentation via Nexon
The story continues
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Kim Jong Un, a South Korean billionaire and founder of a gaming company behind MapleStory, has died at 54 Read More »
Houston – Exxon Mobil said on Tuesday it would end its involvement in a major oil and gas project in Russia, becoming the last Western oil company to announce its departure after Russia invaded Ukraine.
Exxon is developing three oil and gas fields near the eastern Russian island of Sakhalin in partnership with Rosneft, a state-controlled energy company, and one each from Japan and India. Exxon manages the fields and owns 30 percent of the project, which generates about 2 percent of the company’s global production.
The Texas-based company has been operating in Russia for a quarter of a century, but began shutting down after Russia invaded and annexed Crimea, part of Ukraine, in 2014, triggering Western sanctions.
BP and Shell have announced plans to sell their much larger Russian investments on Sunday and Monday. TotalEnergies of France said on Tuesday it would not invest more money in Russia, but intends to maintain its existing operations and investments in the country.
The decisions of Exxon, BP and Shell put an end to an era that began with the mass influx of Western companies into Russia at the end of the Cold War. Businesses once hope that the country, which has some of the world’s largest reserves of oil, natural gas and other raw materials, will become a promising emerging market. But President Vladimir Putin’s autocratic policies and invasion of Ukraine have turned Russia into a pariah of the international business community.
Among the major international oil companies, Equinor of Norway still produces a relatively modest 30,000 barrels of oil a day in Russia, and said Monday it also plans to leave. Several other companies have stakes in oil and gas pipelines.
“Exxon Mobil supports the people of Ukraine as they seek to defend their freedom and determine their own future,” the company said in a statement. “In response to recent events, we are beginning the process of terminating operations and developing steps to exit the Sakhalin-1 initiative.
The company said it would not make new investments in Russia, although it would not leave the country immediately.
“As an operator of Sakhalin-1, we have an obligation to ensure the safety of people, the environment and the integrity of operations,” the company said. “Our role as an operator goes beyond capital investment. The termination process will need to be carefully managed and closely coordinated with the partners to ensure that it is carried out safely. “
Exxon Mobil says it plans to leave its last remaining Russian project. Read More »
