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Federal Reserve Anticipates Maintaining ‘Restrictive’ Policy Until Inflation Subsides, Meeting Minutes Reveal

By Philanthropy Grants

The minutes from the September Federal Reserve meeting revealed a divergence in opinions regarding the necessity of additional interest rate hikes but a consensus that rates should remain elevated until inflation heads back to 2%. Most participants suggested that one more increase in the federal funds rate would likely be appropriate at a future meeting, while some felt that no further hikes would be warranted. The meeting ended with the decision not to raise rates. However, in the dot plot of individual members’ expectations, about two-thirds of the committee indicated that one more increase would be needed before the end of the year. Since March 2022, the FOMC has raised its key interest rate 11 times, taking it to a targeted range of 5.25%-5.5%, the highest level in 22 years. Several central bank officials have indicated that the tightening in financial conditions might negate the need for further hikes. Markets wavered following the minutes’ release, with traders in the fed funds futures market reducing bets on additional rate hikes for November and December.

Members in favour of further hikes at the meeting expressed concern about inflation. Most FOMC members saw upside risks to prices, along with the potential for slower growth and higher unemployment. Despite concerns, the economy has proven more resilient than expected this year. However, the minutes noted that consumers have continued to spend, and officials worried about the impact of tighter credit conditions, less fiscal stimulus, and the resumption of student loan payments. inflation data has generally indicated progress toward the central bank’s 2% target, though there have been some fluctuations. The recent producer price index (PPI) report showed a rise of 0.5% in September, taking the 12-month PPI rate to 2.2%, its highest since April and above the Fed’s coveted 2% annual inflation target. This sets the stage for releasing the consumer price index, expected to show headline inflation at 3.6% in September.

Bank of America Exceeds Expectations in Q3 with Strong Interest Income

By Philanthropy Grants

Bank of America outperformed expectations in its third-quarter earnings report, fueled by stronger-than-anticipated interest income. The bank’s profit increased by 10% to $7.8 billion, equivalent to 90 cents per share, compared to the previous year’s $7.1 billion, or 81 cents per share. The revenue also showed a 2.9% growth, reaching $25.32 billion, slightly exceeding LSEG’s estimate. Bank of America attributed its success to a 4% rise in interest income, totaling $14.4 billion, approximately $300 million more than what analysts had predicted. This increase was driven by higher interest rates and growth in loans. Furthermore, the bank’s provision for credit losses came in better than expected, at $1.2 billion, which was below the estimated $1.3 billion.

Following the release of these results, Bank of America’s shares closed more than 2% higher. Analyst Mike Mayo of Wells Fargo commented that the bank had successfully navigated potential pitfalls associated with loan losses and rising interest rates. He described the quarter as “okay” but noted that it fell short of the results achieved by JPMorgan and Citigroup. Bank of America’s CEO, Brian Moynihan, highlighted the bank’s continued growth despite signs of an economic slowdown. He emphasized that they had acquired new clients and accounts across all lines of business, even in a healthy yet decelerating economy, where U.S. consumer spending still outpaced the previous year but continued to slow down.

Deutsche Bank’s Quarterly Profits Exceed Expectations, Shares Rise

By Philanthropy Grants

Deutsche Bank’s shares saw a 7% boost in early London trading after it reported its thirteenth consecutive profitable quarter, slightly exceeding market expectations. In the third quarter, the bank reported a net profit of €1.031 billion ($1.06 billion), surpassing the analyst consensus, which had projected quarterly net profit of €997 million. Although the bank’s quarterly net profit was 8% lower than the previous year, it marked a 35% increase over the previous quarter. Deutsche Bank’s corporate banking business delivered a strong performance, with revenues rising 21% year-on-year to €1.89 billion, benefiting from the current higher interest rate environment. However, the bank’s investment unit experienced a slowdown, with net revenues declining by 4% year-on-year to €2.27 billion and a 12% drop in the first nine months to €7.3 billion.

The bank expected full-year revenues of around €29 billion, at the higher end of previous estimates. Additionally, it revealed its intention to increase and expedite shareholder pay-outs and release up to an extra €3 billion in capital. Deutsche Bank’s CFO, James von Moltke, explained that the investment banking unit’s performance is “pretty much in line with the market” on an underlying basis. He attributed the normalisation of fixed income and currency revenues and a shift toward other products, such as credit and financing, as factors influencing the unit’s performance. Despite the bank’s improved financial results, challenges persist, including a weakening European business environment, macroeconomic uncertainty, and IT problems affecting two retail units.

Bernstein Predicts Bitcoin to Reach $150,000 by 2025 on ETF Hopes

By Philanthropy Grants

Bernstein, the global asset management firm, expressed optimism about the potential approval of a bitcoin exchange-traded fund (ETF), foreseeing a bullish scenario. In a recent note, Bernstein analyst Gautam Chhugani predicted that Bitcoin’s price could surge to $150,000 by 2025. The optimistic projection hinges on the anticipation of the U.S. Securities and Exchange Commission (SEC) approving a bitcoin ETF by the first quarter of 2024. This estimate is substantially higher than Bitcoin’s current price of around $34,000 and more than double its previous all-time high of over $67,000, achieved in November 2021. Moreover, Bernstein anticipates that approving a Bitcoin ETF would redirect up to 10% of Bitcoin’s circulating supply into ETFs. Such approval would enable traditional investors to gain direct exposure to Bitcoin through their investment portfolios. Currently, the only similar product available is Grayscale’s Bitcoin Trust (GBTC), which holds approximately 3% of the total outstanding Bitcoin.

Chhugani explained, “You may not like Bitcoin as much as we do, but a dispassionate view of Bitcoin as a commodity suggests a turn of the cycle.” He also stated that “SEC approved ETFs by the world’s top asset managers (BlackRock, Fidelity et al) seems imminent.” In addition to the Bitcoin price prediction, Chhugani initiated coverage of various Bitcoin mining companies, highlighting the “halving” event expected in April 2024. During the halving, Bitcoin rewards are halved, leading to reduced supply. Chhugani suggested that this event could result in “losing miners” exiting the market, creating opportunities for the survivors. While Bitcoin has recently surged to $35,000, its highest level since May 2022, investors remain hopeful for an ETF approval by the end of the year. However, the SEC’s historical stance, as articulated by Chair Gary Gensler, who has raised concerns about the crypto industry’s risks, means the outcome remains uncertain. The industry has faced regulatory challenges, including the SEC’s lawsuit against Binance for securities violations and the bankruptcy filing by crypto exchange FTX last year, with its former CEO, Sam Bankman-Fried, currently on trial for fraud.

Bill Gross Forecasts Potential 5% Test for Surging 10-Year Treasury Yield in the Near Term

By Philanthropy Grants

Respected investor Bill Gross anticipates a potential surge in Treasury yields soon. During an appearance on CNBC’s “Last Call,” Gross believed the 10-year Treasury yield could reach 5%. He emphasized that the market is presently oversold, influenced by the anticipation of higher Treasury supplies and the Federal Reserve’s commitment to maintaining elevated interest rates for an extended period. On a challenging Tuesday, the stock market experienced a sharp downturn due to the rapidly rising bond yields, causing the S&P 500 to fall by 1.4%. This decline pushed the index to its lowest since June, coinciding with the 10-year Treasury yield hitting its highest point in 16 years. Over the past month, the benchmark yield has surged, touching 4.8%, as the Federal Reserve announced its intention to sustain higher interest rates. Additionally, the 30-year Treasury yield reached 4.9% that Tuesday, marking the highest since 2007.

Gross believes that in the near term, 5% might be the cap for the Treasury yield, contingent upon factors like inflation and economic growth. Fellow billionaire investor Ray Dalio echoed this sentiment, asserting that the surging 10-year rate might test 5% due to prolonged high inflation. Gross, renowned as the “bond king” in the past, pointed out the substantial impact the Federal Reserve’s aggressive rate hikes since March 2022 have had on the yield curve. The central bank has elevated interest rates to levels not seen since early 2001. He also highlighted the concern among investors regarding the adverse effects of a deepening Treasury deficit. The recognition of a Treasury deficit exceeding $2 trillion is affecting the long end of the market. Gross also noted the recent selling of ETFs, which primarily hold long rather than short bonds, as another contributing factor.

How Do Car Insurance Companies Determine Settlement?

By Philanthropy Grants

Getting involved in an auto accident can be frightening. Even if everyone is unharmed, your vehicle might need to be repaired. In some cases, it could be totaled. If your insurance company deems your car a total loss, you must get a total loss settlement. Here’s a breakdown of when a vehicle is considered totaled and how settlement is determined.

When Does Insurance Company Declare A Car A Total Loss?

A vehicle is said to be a total loss if the insurance company decides that the cost of repairing or fixing a car is more than replacing it or if the damages are extensive to make the car safe to drive.

How Do Insurance Companies Determine A Total Loss Settlement?

The amount an insurer is ready to pay for your car if it’s totaled in an accident is called a total loss car insurance settlement. Several factors will affect the amount you will get paid for your totaled vehicle. These include:

The value of comparable vehicles: The insurance company will look at similar cars for sale to assess your vehicle for a total loss claim. They’ll try to find cars of the same model and make to determine the fair market value.

Coverage in your policy: Your policy can also determine your total loss compensation, especially if you’re forced to file an insurance claim against your policy due to a hit-and-run or uninsured motorist.

The vehicle value: How much your car was worth before the crash helps determine the amount an insurer will pay you. Most insurers work with a third-party vendor to get vehicle data to determine the value.

Remember that calculating the settlement for your totaled vehicle differs from calculating costs for medical payments, bodily injuries, or other property damage.

Two Prominent Fed Figures Affirm Support for Maintaining Elevated Interest Rates

By Philanthropy Grants

Two Federal Reserve officials, Governor Michelle Bowman, and Boston Fed President Susan Collins, voiced their support on Friday for maintaining elevated interest rates in the ongoing battle against persistently high inflation. In separate speeches, both policymakers acknowledged the possibility of further rate hikes if economic data does not align with their goals. Governor Bowman emphasized that progress has not effectively curbed inflation to meet the Fed’s 2% target. She stated, “I continue to expect that further rate hikes will likely be needed to return inflation to 2% in a timely way,” during her prepared remarks in Vail, Colorado. Echoing similar sentiments, President Collins expressed optimism regarding recent inflation data but highlighted that it’s premature to claim victory, particularly due to the elevated core inflation excluding shelter costs. She emphasized that rates may need to remain higher for an extended duration, acknowledging that further tightening remains possible.

Their comments come shortly after the Federal Open Market Committee (FOMC) decided not to raise rates in its recent meeting. However, they hinted at the likelihood of one more increase later this year, followed by potential cuts in 2024. The federal funds rate currently lies within a range of 5.25% to 5.5%. President Collins noted that while there are signs of moderating inflation and a rebalancing economy, progress has been uneven across various sectors. She highlighted the delayed impact of monetary policy moves due to the strong financial positions of consumers and businesses. In conclusion, both officials emphasized the importance of closely monitoring economic indicators and being prepared to take further measures to achieve the Fed’s mandate while navigating the complexities of the current economic landscape.

Citigroup CEO Jane Fraser Observes ‘Cracks’ Among Consumers as Savings Diminish

By Philanthropy Grants

Citigroup CEO Jane Fraser has noted a change in purchasing behavior among lower-income consumers as their bank balances shrink. The third-largest U.S. bank has closely monitored its credit card customers for signs of financial strain. Fraser mentioned in an interview that the bank is paying particular attention to consumers with lower FICO scores, where signs of financial stress are evident. She highlighted that the excess savings accumulated during the Covid pandemic are dwindling for these consumers. During the pandemic, the U.S. government injected trillions of dollars into households and businesses to prevent an economic catastrophe. However, the Federal Reserve’s aggressive interest rate hikes have increased the cost of credit cards, mortgages, and auto debt, leading to a rise in late payments and defaults. This financial strain is being felt by lower-end consumers.

Besides concerns about artificial intelligence and labor market tightness, Fraser mentioned that corporate leaders share their observations of softening demand, especially among lower-income consumers. This group is noticeably shifting its spending patterns towards lower categories in an effort to save money. She emphasized that while the consumer base is resilient, there is a softening trend. The softening demand may assist the Federal Reserve in its efforts to combat inflation. Fraser indicated that while employment and gross domestic product figures suggest a potential “soft landing” for the economy, any recession that does occur is likely to be manageable. In the interview, Fraser discussed the recent restructuring of Citigroup, highlighting a move from the traditional “financial supermarket” model towards a more streamlined operation. The upcoming fourth-quarter earnings report will reveal details regarding job cuts and cost savings resulting from the reorganization.

OCBC Bank in Singapore Faces Temporary Outage, Shares Rise by 1%

By Philanthropy Grants

On Monday, OCBC, Southeast Asia’s fourth-largest bank, experienced a brief outage affecting its digital and card banking services. At 9:43 a.m. Singapore time, the bank acknowledged the issue via a Facebook post, citing “technical problems impacting our banking channels.” Approximately an hour later, at 10:37 a.m., OCBC reported that card and branch services had been restored, followed by ATM services. As a result, shares of the Singapore-headquartered bank rose by 1.05% in afternoon trading. OCBC moved quickly to reassure its customers that there had been no security breach and that their funds and customer data remained secure throughout the technical problem. An OCBC spokesperson stated, “We are investigating the cause of the technical problem and will provide an update as soon as we can,” in response to inquiries from CNBC.

This incident comes in the wake of similar disruptions at other Singaporean banks. In May, Singapore’s largest bank, DBS, faced additional capital requirements imposed by the Monetary Authority of Singapore (MAS) due to service disruptions in February and March. MAS deemed the March outage “unacceptable” and stated that DBS had “fallen short of expectations.” Consequently, DBS was required to apply a multiplier of 1.8 times its risk-weighted assets for operational risk, resulting in an additional regulatory capital of approximately 1.6 billion Singapore dollars, equivalent to $1.2 billion.

AMC Shares Plunge as Investors Prepare for Stock Conversion

By Philanthropy Grants

AMC Entertainment witnessed a sharp drop of over 20% in its share price, reaching a new 52-week low of $2.46 per share. This decline is in anticipation of a stock conversion scheduled for later in the week. On Friday, the company’s preferred equity units, APE shares, are set to be transformed into common stock, a year after their introduction on the New York Stock Exchange. The APE shares were designed to enable AMC to issue more stock while appeasing investors concerned about dilution, who rejected the company’s attempts to issue additional shares last year. During the COVID-19 pandemic, AMC raised significant funds by selling new stock, aiding in debt repayment, and preventing bankruptcy while theaters faced closures or limited screenings. In addition to the stock conversion, AMC plans a reverse stock split of 10-to-1 on Thursday. This maneuver increases the company’s authorized share count from 52.5 million to 550 million, permitting AMC to issue more than 390 million shares.

This complex share reconfiguration follows a lawsuit in February that accused AMC of manipulating a shareholder vote related to the conversion of preferred stock to common stock and the issuance of new shares. The revised stockholder settlement was recently approved by a Delaware judge. The downward trajectory of AMC’s shares can be attributed to concerns about the company potentially issuing a substantial amount of equity to address its debt balance. Analysts, including Eric Wold of B. Riley Securities, recognize the necessity of additional liquidity for AMC’s immediate future, especially considering projections that the company won’t achieve positive free cash flow until 2025. While Eric Wold believes that AMC’s stock conversion is a strategy to navigate the film exhibition industry’s post-pandemic recovery and ongoing issues in Hollywood, Roth MKM’s Eric Handler holds a more pessimistic view. Handler’s valuation assessment suggests AMC’s shares are trading at an irrational level, considering the need for significant adjusted EBITDA figures to justify the current market capitalization. Despite the differing perspectives, the imminent stock conversion will impact AMC’s financial landscape, offering a potential solution to immediate liquidity concerns and drawing attention to the complexities and challenges the company faces in its recovery.

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