- One Step Ahead of Sanctions
- How the World Is Paying for Putin’s War in Ukraine
- Russian Yachts and Money
- Seizing Russian Assets
- A History of Russian Defaults
- Inflation at Its Highest in 40 Years
- Fed Starts Experiment
- 25% of Americans Are Delaying Retirement
- Sizzling U.S. Energy Stocks
- Americans Start Summer Travel Season
- EV Sales Will Triple by 2025
- Missed Payments, Rising Interest Rates
- Forbes, Chronicler of Wealthy and Powerful
- Movie Theaters Experiencing Popcorn, Candy Shortages Over Inflation
Energy traders aren't sleeping much these days as headline after headline keeps the industry on its toes. A report from the Financial Times overnight suggested that Saudi Arabia told the West it was prepared to raise oil production if Russia's output fall substantially under the weight of sanctions. It's an interesting turn for the Kingdom, which has resisted calls to increase production despite oil trading at decade highs, though crude futures (CL1:COM) still fell nearly 3% to $112/bbl in response.
Snapshot: Earlier this week, EU leaders agreed to ban 90% of Russian crude by the end of the year as part of the bloc's sixth sanctions package on Moscow. Another report from the Wall Street Journal on Tuesday outlined that OPEC+ could suspend Russia from a supply deal due to economic fallout from the invasion of Ukraine and its ability to pump more crude. The oil group is set to meet today for its June meeting, and while it's expected to maintain production, leader Saudi Arabia may announce an immediate supply boost or bring forward production increases (previously set for September) if the climate is right.
Before coming into office, President Biden vowed to make a "pariah" out of Saudi Arabia's ruling family, blaming Saudi Crown Prince Mohammed Bin Salman for the 2018 murder of U.S.-based columnist Jamal Khashoggi. Relations between the two nations haven't improved since, with the Kingdom rebuffing every U.S. call to pump more crude or dip into its spare capacity. Things have changed in recent weeks, however, as gas prices reached record highs and several high-level U.S. delegations were dispatched to Saudi Arabia to arrange a potential visit by Biden later this month.
Latest statement: "There's a lot going on right now, but the idea we're going to be able to, you know, click a switch, bring down the cost of gasoline, is not likely in the near term, nor is it with regard to food," President Biden told reporters at the White House. "We can't take immediate action that I'm aware of yet to figure out how we're going to bring down the price of gasoline back to $3 a gallon, but we can compensate by providing for other necessary costs for families by bringing those down." In an op-ed on Memorial Day, Biden wrote that the Fed has the "primary responsibility to control inflation" and called the current high-priced environment America's "top economic challenge right now." (9 comments)
Sheryl Sandberg, one of the most powerful women in the business world, is leaving her COO role at Meta Platforms (FB), closing out a career at a company that helped transform social media. In the position, she was the longtime lieutenant to Mark Zuckerberg, with the two often appearing together at industry conferences and high-profile events. Meta veteran Javier Olivan will replace her as operating chief, after spending 15 years with the company and most recently serving as chief growth officer.
Quote: "When I took this job in 2008, I hoped I would be in this role for five years. Fourteen years later, it is time for me to write the next chapter of my life," Sandberg wrote in a statement. "I am not entirely sure what the future will bring - I have learned no one ever is. But I know it will include focusing more on my foundation and philanthropic work, which is more important to me than ever given how critical this moment is for women."
Sandberg has an impressive resume, building out Facebook's advertising model that is now the bulk of the company's revenue (it generated $115B in 2021). Her involvement also spanned functions that related to Instagram, WhatsApp and Messenger, and was often described as the "adult in the room" especially when Facebook was in its early stages. However, she did face some heat over the last few years, especially over the Cambridge Analytica scandal, Russian disinformation and Facebook's influence on mental health.
Get out while the good is going? Meta's share price has fallen by over 50% from its peak last year due to struggles in advertising, slowing growth, rising costs and a broader selloff in tech stocks. In the meantime, it's trying to transform its business model into the metaverse, a collection of virtual worlds that could be a decade away. Sandberg will still serve on Meta's board of directors, but her direct reports will transition over the next few months and she'll depart in the fall. (116 comments)
Financials dropped the most out of any S&P 500 sector on Wednesday following a stark warning from JPMorgan (JPM) CEO Jamie Dimon. "You know, I said [last month] there's storm clouds but I'm going to change it... it's a hurricane," he declared at the Bernstein Strategic Decisions Conference, referencing a U.S. economy that is struggling with "fiscally induced growth, QT and the war in Ukraine." Just about every S&P 500 Financial sub-sector also ended the session in the red, including insurance, mortgage REITs, fintech and asset managers.
More from the conference: "Right now it's kind of sunny, things are doing fine, everyone thinks the Fed can handle this," he told the room full of analysts and investors. "[But] that hurricane is right out there down the road coming our way. We just don't know if it's a minor one or Superstorm Sandy or - yes, Sandy or Andrew, or something like that. And it's - see, you better brace yourself. So, JPMorgan is bracing ourselves, and we're going to be very conservative in our balance sheet."
Dimon still predicts that U.S. consumers have some six to nine months of spending power left in their bank accounts as the government's pandemic stimulus runs out. That may help things in the near-term, but the Fed already "has" to embark on quantitative tightening because of too much liquidity in the system. "We've never had QT like this," he added, saying history books will be written about the new chapter of monetary policy as markets head into uncharted territory.
Outlook: "If you - look, if you go back to 2010 and say, 'Who are all the major buyers of Treasuries?' All that time it was central banks, foreign exchange managers, banks who were topping up their liquidity profiles, because we had to for regulations. All three, it's - it won't happen, this go-around. Banks are topped up, foreign exchange managers are topped up, the central bank would be selling, not buying, and governments have much for fiscal deficit to finance. That's a huge change in the flow of funds around the world. I don't know what the effect of that is. I'm prepared for - and you're talking about minimum huge volatility." (96 comments)
Sweeping restrictions on outdoor water use have gone into effect for Southern Californians as the state attempts to conserve the precious life resource. Declining reservoir levels and reduced snowpack have led to a severe three-year drought and officials fear that some communities won't even have enough water to get through the summer. "Some would consider this a wake-up call. I disagree," said California's Natural Resources Secretary Wade Crowfoot. "The alarm's already gone off."
Snapshot: The new limits will depend on locality, but the hardest hit will be the 6M residents across Ventura and northwestern L.A. counties and parts of the San Gabriel Valley and Inland Empire. Households will be forbidden from irrigating their lawns more than once a week to preserve enough supplies for people to cover their basic needs. Outdoor and landscape watering accounts for roughly half of all urban water use, according to California estimates.
Not all counties will be sharing the pain (for now) in a strategy that has divided the experts. The Metropolitan Water District of Southern California has targeted regions that rely heavily or entirely on the State Water Project, while areas that receive water from the Colorado River and other sources will be spared. However, similar restrictions could soon be implemented for those localities as well given that the Colorado River is also suffering from its first-ever shortage.
Go deeper: California authorities have urged people to recycle water, take shorter showers, and only run dishwashers and washing machines when full, but the messaging has fallen on deaf ears. According to State Water Resources Control Board, average urban water use even rose nearly 19% in March, compared to the same month in 2020. If the drought continues, state and local water officials will have to make big investments in infrastructure, like expensive recycling and desalination technology, or risk a longer list of expanding restrictions. (4 comments)
In Asia, Japan -0.2%. Hong Kong -1%. China +0.4%. India +0.8%.
In Europe, at midday, London closed. Paris +1%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.4%. S&P +0.5%. Nasdaq +0.7%. Crude -2.7% to $112.13. Gold +0.5% to $1857.10. Bitcoin -5.5% to $29,911.
Ten-year Treasury Yield unchanged at 2.93%
Today's Economic Calendar
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
8:30 Initial Jobless Claims
8:30 Productivity and Costs
10:00 Factory Orders
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
12:00 PM Fed's Logan Speech
1:00 PM Fed's Mester: “What’s ahead for U.S. Monetary Policy?”
4:30 PM Fed Balance Sheet