How homeowners can make sense of the climate finance

How homeowners can make sense of the climate finance

Solar panels create electricity on the roof of a house in Rockport, Massachusetts, U.S., June 6, 2022. Picture taken with a drone. 

Brian Snyder | Reuters

When Josh Hurwitz decided to put solar power on his Connecticut house, he had three big reasons: To cut his carbon footprint, to eventually store electricity in a solar-powered battery in case of blackouts, and – crucially – to save money.

Now he’s on track to pay for his system in six years, then save tens of thousands of dollars in the 15 years after that, while giving himself a hedge against utility-rate inflation. It’s working so well, he’s preparing to add a Tesla-made battery to let him store the power he makes. Central to the deal: Tax credits and other benefits from both the state of Connecticut and from Washington, D.C., he says.

“You have to make the money work,” Hurwitz said. “You can have the best of intentions, but if the numbers don’t work it doesn’t make sense to do it.” 

Hurwitz’s experience points up one benefit of the Inflation Reduction Act that passed in August: Its extension and expansion of tax credits to promote the spread of home-based solar power systems. Adoption is expected to grow 26 percent faster because of the law, which extends tax credits that had been set to expire by 2024 through 2035, says a report by Wood Mackenzie and the Solar Energy Industry Association. 

Those credits will cover 30 percent of the cost of the system – and, for the first time, there’s a 30 percent credit for batteries that can store newly-produced power for use when it’s needed.

“The main thing the law does is give the industry, and consumers, assurance that the tax credits will be there today, tomorrow and for the next 10 years,” said Warren Leon, executive director of the Clean Energy States Alliance, a bipartisan coalition of state government energy agencies. “Rooftop solar is still expensive enough to require some subsidies.”

California’s solar energy net metering decision

Certainty has been the thing that’s hard to come by in solar, where frequent policy changes make the market a “solar coaster,” as one industry executive put it. Just as the expanded federal tax credits were taking effect, California on Dec. 15 slashed another big incentive allowing homeowners to sell excess solar energy generated by their systems back to the grid at attractive rates, scrambling the math anew in the largest U.S. state and its biggest solar-power market — though the changes do not take effect until next April.

Put the state and federal changes together, and Wood Mackenzie thinks the California solar market will actually shrink sharply in 2024, down by as much as 39{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. Before the Inflation Reduction Act incentives were factored in, the consulting firm forecast a 50{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} drop with the California policy shift. Residential solar is coming off a historic quarter, with 1.57 GW installed, a 43{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} increase year over year, and California a little over one-third of the total, according to Wood Mackenzie.

This roofing company says it's figured out how to make solar shingles affordable

For potential switchers, tax credits can quickly recover part of the up-front cost of going green. Hurwitz took the federal tax credit for his system when he installed it in 2020, and is preparing to add a battery now that it, too, comes with tax credits. Some contractors offer deals where they absorb the upfront cost – and claim the credit – in exchange for agreements to lease back the system. 

Combined with savings on power homeowners don’t  buy from utilities, the tax credits can make rooftop solar systems pay for themselves within as little as five years – and save $25,000 or more, after recovering the initial investment, within two decades.  

“Will this growth have legs? Absolutely,” said Veronica Zhang, portfolio manager of the Van Eck Environmental Sustainability Fund, a green fund not exclusively focused on solar. “With utility rates going up, it’s a good time to move if you were thinking about it in the first place.”

How to calculate installation costs and benefits

Here is how the numbers work.

Nationally, the cost for solar in 2022 ranges from $16,870 to $23,170, after the tax credit, for a 10-kilowatt system, the size for which quotes are sought most often on EnergySage, a Boston-based quote-comparison site for solar panels and batteries. Most households can use a system of six or seven kilowatts, EnergySage spokesman Nick Liberati said. A 10-12 kilowatt battery costs about $13,000 more, he added.

There’s a significant variation in those numbers by region, and by the size and other factors specific to the house, EnergySage CEO Vikram Aggarwal said. In New Jersey, for example, a 7-kilowatt system costs on average $20,510 before the credit and $15,177 after it. In Houston, it’s about $1,000 less. In Chicago, that system is close to $2,000 more than in New Jersey. A more robust 10-kilowatt system costs more than $31,000 before the credit around Chicago, but $26,500 in Tampa, Fla. All of these average prices are as quoted by EnergySage. 

The effectiveness of the system may also vary because of things specific to the house, including the placement of trees on or near the property, as we found out when we asked EnergySage’s online bid-solicitation system to look at specific homes.

The bids for one suburban Chicago house ranged as low as $19,096 after the federal credit and as high as $30,676.

Offsetting those costs are electricity savings and state tax breaks that recover the cost of the system in as little as 4.5 years, according to the bids. Contractors claimed that power savings and state incentives could save as much as another $27,625 over 20 years, on top of the capital cost.

Alternatively, consumers can finance the system but still own it themselves – we were quoted interest rates of 2.99 to 8.99 percent. That eliminates consumers’ up-front cost, but cuts into the savings as some of the avoided utility costs go to pay off interest, Aggarwal said. 

The key to maximizing savings is to know the specific regulations in your state – and get help understanding often-complex contracts, said Hurwitz, who is a physician.

Energy storage and excess power

Some states have more generous subsidies than others, and more pro-consumer rules mandating that utilities pay higher prices for excess power that home solar systems create during peak production hours, or even extract from homeowners’ batteries.

California had among the most generous rules of all until this week. But state utility regulators agreed to let utilities pay much less for excess power they are required to buy, after power companies argued that the rates were too high, and raised power prices for other customers.

Wood Mackenzie said the details of California’s decision made it look less onerous than the firm had expected. EnergySage says the payback period for California systems without a battery will be 10 years instead of six after the new rules take effect in April. Savings in the years afterward will be about 60 percent less, the company estimates. Systems with a battery, which pay for themselves after 10 years, will be little affected because their owners keep most of their excess power instead of selling it to the utility, according to EnergySage. 

“The new [California rules] certainly elongate current payback periods for solar and solar-plus-storage, but not by as much as the previous proposal,” Wood Mackenzie said in the Dec. 16 report. “By 2024, the real impacts of the IRA will begin to come to fruition.”

The more expensive power is from a local utility, the more sense home solar will make. And some contractors will back claims about power savings with agreements to pay part of your utility bill if the systems don’t produce as much energy as promised. 

“You have to do your homework before you sign,” Hurwitz said. “But energy costs always go up. That’s another hidden incentive.”

Elon Musk polls Twitter on whether he should step down, most vote yes

Elon Musk polls Twitter on whether he should step down, most vote yes

Elon Musk polls Twitter users over whether he should remain as CEO

Twitter’s new owner and CEO, Elon Musk, posted an casual poll of the social media platform’s consumers Sunday asking if he must phase down as head of the organization.

At 6:20 a.m. ET on Monday, the poll ended with a majority of respondents (57.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) calling for the billionaire to leave his put up. More than 17 million people had voted by the time the poll closed.

linked investing information

Oppenheimer downgrades Tesla, says Elon Musk's handling of Twitter could hurt electric vehicle maker

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Musk claimed he would abide by the benefits of the poll. It is unclear no matter whether or not he will really do so. Shares of Tesla — a different one of Musk’s organizations — closed down less than 1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} Monday.

In courtroom in November, Musk said, “I hope to lower my time at Twitter and obtain anyone else to operate Twitter in excess of time.” Nevertheless, on Sunday, he wrote in a tweet that there is no achievable successor for him at the social media business.

“The question is not finding a CEO, the dilemma is getting a CEO who can continue to keep Twitter alive,” he wrote.

In reaction to a further consumer speculating that Musk has previously selected a successor, the billionaire mentioned: “No one particular wants the occupation who can basically hold Twitter alive. There is no successor.”

This photo illustration taken on December 18, 2022 in Los Angeles displays a mobile phone displaying Elon Musk’s Twitter webpage the place he is conducting a survey about his long run as the head of the corporation.

Chris Delmas | AFP | Getty Pictures

Twitter polls are straw polls, that means they are informal and not similar to expert public impression investigation. Destructive bots or inauthentic accounts may well also be equipped to sign up a reaction to a Twitter poll.

Musk’s Sunday poll followed online backlash after the “Chief Twit” (as he has termed himself) designed unexpected improvements to procedures impacting consumers of Twitter in the past 7 days.

For instance, the organization launched a new social media platform marketing coverage on Sunday, which prohibited buyers from sharing back links to some of their other social media accounts. Longtime Musk close friends and proponents, which includes Y Combinator founder Paul Graham, expressed their dismay at the coverage resulting in Musk to afterwards apologize and roll it back.

Investors want Musk to be more involved with Tesla, says Loup’s Gene Munster

Times before, Twitter created alterations to its policy on “doxxing,” which the company now defines as “sharing someone’s non-public facts on-line with no their authorization.” The new policy prohibits people from sharing other people’s live site info, household addresses, get in touch with facts or actual physical location info but has remaining a lot of bewildered above what facts crosses Twitter’s line. 

Musk’s policy variations ended up applied as a justification to suspend the Twitter accounts of a quantity of U.S.-dependent journalists, commentators and others who have been essential of the CEO or his companies in the earlier. Some of the accounts were fully or partly restored a number of days later on, but not all.

The suspensions marked the latest chapter of Musk’s rocky takeover of Twitter. He led the acquisition of the corporation for all-around $44 billion in October, and his leadership has resulted in massive personnel cuts, a spike in racist detest speech, advertisers fleeing or slashing their spending on the system, as nicely as the reinstatement of earlier banned accounts.

Musk statements that Twitter use has achieved an all-time superior since he took about, and that loathe speech impressions have fallen.

The billionaire’s administration of Twitter is bleeding into, and elevating problems about, his other ventures.

For case in point, Musk has bought billions of bucks well worth of Tesla shares this calendar year to finance the Twitter takeover. He has also pulled in expertise from both equally Tesla and SpaceX, which includes executives, engineers and lawyers, to guide him at Twitter.

A CEO expending time and cash on Twitter isn’t Tesla’s only challenge — the company is at present presenting discounts on autos in China, an indication of weaker need for its cars and trucks there, according to Tesla bear Toni Sacconaghi of Bernstein on CNBC’s “Squawk on the Street” very last week.

Before this month, NASA Administrator Bill Nelson asked SpaceX President and COO Gwynne Shotwell whether or not Musk’s “distraction” at Twitter may well have an impact on SpaceX’s operate with the room agency, NBC Information noted. Nelson said she reassured him it would not.

Musk can not run Twitter the same as an engineering company, says TCU's Mary Uhl-Bien

But Musk’s behavior at Twitter is getting a unfavorable impact on his car or truck firm’s public graphic and inventory rate. Shares in Tesla experienced dropped about 60{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} year to date as of Friday’s near. It will come amid a broad decrease in expansion shares which has seen the tech-large Nasdaq Composite tumble much more than 30{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} year to date.

In a note late Sunday, Dan Ives, handling director of equities at Wedbush Securities, wrote that the second-most significant ask for on his Christmas “wish listing” was for Musk to find a successor to run the social media organization.

“With the Twitter chaos entrance and middle and ensuing in a important headache and overhang for the Tesla story, we believe Musk wants to name a long-lasting CEO of Twitter (and not Musk himself) to conclude the ache,” Ives claimed.

Tesla’s biggest retail shareholder, Leo Koguan, wrote in a tweet on Dec. 14, that “Elon abandoned Tesla and Tesla has no doing the job CEO.” He referred to as on the company’s board of directors to acquire motion. “Tesla demands and warrants to have [a] operating total time CEO,” he wrote, criticizing the board for obvious inaction.

Musk tweeted very last 7 days that he will “make guaranteed” Tesla shareholders reward from Twitter in the extensive time period.

A study in Germany’s Der Spiegel very last week uncovered that 63{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of respondents really feel that Musk’s general public efficiency as CEO of Twitter has had a mainly destructive or clearly adverse affect on their watch of Tesla.

And only 9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of respondents to that study explained they uncover Tesla very or typically likable as a brand — the business rated considerably driving VW, BMW, Opel and other individuals in Germany. Which is even with the fact that Tesla is investing seriously in the German marketplace. It opened a major car or truck assembly plant in Grünheide, outdoors of Berlin, in March o this 12 months.

Correction: This article has been current to replicate that at 3.30 a.m. ET the the vast majority of poll respondents had voted for Musk to go away his put up.

— CNBC’s Ryan Browne contributed to this report.

Fractured markets: the big threats to the financial system

Fractured markets: the big threats to the financial system

You can enable subtitles (captions) in the video player

[MUSIC PLAYING]

TOMMY STUBBINGTON: This is a story of a world that became addicted to low interest rates.

HARRIET AGNEW: It’s a tale of what can happen when the era of cheap money comes to an end.

KATIE MARTIN: Investors have just been spoiled for like two decades by super low interest rates, and it’s over. The game is up. Inflation is here for the first time in most investors’ living memories. And this changes everything.

JIM LEAVISS: 30 years of falling bond yields perhaps coming to an end. Suddenly we’re at an inflexion point. We’re seeing some cracks in the financial system.

TOMMY STUBBINGTON: What a decade of easy monetary policy did was encourage people to take greater risks.

DAVID OLDER: When you see rates rise as quickly as they have, often there are things that break.

COLBY SMITH: At no time have we seen such a complicated constellation of risks.

KATIE MARTIN: It’s only when the tide goes out that you see who’s been swimming naked.

TOMMY STUBBINGTON: So let’s rewind to 2008. You have this huge global financial crisis.

JIM LEAVISS: And that was due to leverage, too much borrowing, particularly in the US mortgage market.

DAVID OLDER: The result of that was the need for incredible liquidity injections into the financial system.

COLBY SMITH: In the immediate aftermath of the global financial crisis, central banks really had to sit on their hands. Economies globally were so lacklustre, and the recovery was so slow. And central banks weren’t grappling with high inflation. They were grappling with what to do with incredibly low inflation.

TOMMY STUBBINGTON: And central banks around the world respond to the recession that follows by slashing interest rates, by buying up vast quantities of government debt under their quantitative easing programmes.

JIM LEAVISS: This was a new thing, really. We saw central banks buying back huge amounts of government bond markets. Trillions and trillions of dollars’ worth of government IOUs ended up being owned by central banks instead of by traditional investors.

DAVID OLDER: And that did set forth a paradigm, if you will, of inexpensive money and a feeling that there was a Fed put below the markets. The Federal Reserve and central banks globally were able to achieve this because there was no inflation.

TOMMY STUBBINGTON: Financial markets in particular get conditioned to this world where every time something goes wrong, a central bank comes riding to the rescue.

JIM LEAVISS: Ever since that point, we’ve had loose monetary policy with interest rates heading all the way down to zero. If you went back to a couple of years ago, most of the government bond markets of the world had negative yielding government bonds, which is just extraordinary.

MEGAN GREENE: Now that existed up until the pandemic hit. And then you had central banks and governments step in pretty aggressively to support the economy while we put the economy into a deep freeze.

JIM LEAVISS: The global financial crisis followed by a eurozone crisis followed by COVID– three big things coming in rapid succession. In a way, we’ve almost forgotten what normal looks like.

KATIE MARTIN: There is everything that leads up to COVID and the invasion of Ukraine, and there is everything after.

TOMMY STUBBINGTON: What’s changed? In one word, inflation.

DAVID OLDER: There was a belief that inflation was transitory, that this was caused by supply chain issues during COVID, by a tight labour market because of COVID, and that would recede, and you’d see inflation coming down. The realisation by central banks that this was not the case, that inflation was stickier earlier this year, led to this very steep rise in interest rates.

COLBY SMITH: The Federal Reserve officially changed its monetary policy framework to tolerate higher periods of inflation. What the Fed did not envision– that this framework would become operational just as inflation was starting to become a much more persistent issue.

JIM LEAVISS: Post COVID, everybody wanted to get out there again and start flying, start eating out in restaurants at the same time that we had people who had left the labour force and a lot of supply bottlenecks, the perfect breeding ground for some inflation, sustained by the war in Ukraine. So suddenly you had energy prices going through the roof.

[EXPLOSION]

KATIE MARTIN: The world has changed. The world is different. Inflation is here for the first time in most investors’ living memories.

TOMMY STUBBINGTON: We’ve ended up in a world where inflation’s at 10{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. Now what we have is central banks around the world scrambling to stop inflation running away.

MEGAN GREENE: In every major economy, except for in China and in Japan, we have central banks that are aggressively tightening rates and also withdrawing liquidity from the markets. The Fed is shrinking its balance sheet. The Bank of England has started quantitative tightening. The ECB is starting to talk about quantitative tightening.

COLBY SMITH: Financial markets definitely got used to this notion that interest rates would be low for quite a long time. People really did not grapple with the fact that interest rates were going to have to be significantly higher. What we hear from officials is that it’s not going back to the way it was any time soon.

DAVID OLDER: You have inflation for the first time in 40 years limiting their ability to use monetary policy and inject liquidity in the same way. So as a result, we’re seeing a drainage of liquidity globally, higher rates, and a new paradigm.

TOMMY STUBBINGTON: You can no longer buy up government debt every time there’s a wobble in the markets because you need to concentrate on your main mission, which is fighting inflation.

MEGAN GREENE: There’s so much uncertainty that investors are pulling their money out of the markets into cash as well. So that’s further withdrawing liquidity.

KATIE MARTIN: The first really big rake that has been stepped on here is in the UK pension sector.

KWASI KWARTENG: The Bank of England are taking further steps to control inflation, acting–

TOMMY STUBBINGTON: Let’s rewind to September the 23rd. We have the gilt market, which is expecting this new government to come out with a package of energy subsidies. What they didn’t expect is that the government would pile a load of unfunded tax cuts on top of this, borrowing even more money than the market realised. It was going to be the supply of gilts, the supply of new debt that the UK government has to raise has suddenly gone up.

KATIE MARTIN: The UK government bond market, generally on the boring side– it’s a rinky-dink little market compared to the US Treasuries market. It got fried.

HARRIET AGNEW: The market freaked out because essentially the government was saying, we need to borrow much more money at a time where it’s going to get even more expensive to borrow money. This drove a sharp sell-off in the UK government bond market. The speed and scale of the move in the gilts market was unprecedented, and this is what caused a shock.

TOMMY STUBBINGTON: The supply of something goes up. Investors respond by selling it. You see UK borrowing costs leap higher on the day of the budget.

JIM LEAVISS: That it was going to result in the biggest amount of gilt issuance that we’ve ever seen. The more bonds that are issued, the more that the market has to buy, the lower price the government will have to sell those at.

TOMMY STUBBINGTON: Pound crashes to its all-time low against the dollar. Usually higher interest rates would be good for your currency. But we have this sense that the international investment community has lost confidence in UK economic policymaking.

MEGAN GREENE: And that caused a whole bunch of forced selling in the LDI market.

TOMMY STUBBINGTON: Liability-driven investing or LDI has been at the centre of this. This is a strategy used by certain pension schemes to protect them against big swings in interest rates. The reason that they need to do that is because moves in long-term interest rates mean that their liabilities, the money that they have to pay out to pensioners for decades in the future, swings up and down wildly.

Now one way that they can protect themselves against that is by owning lots of gilts– gilts, long-term government bonds, that will also see wild swings in their prices as long-term interest rates move. That works if you are able to fill your pension portfolio with 100{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} gilts. In practise, it doesn’t work that way. There are shortfalls in the funding of these schemes, so they need to buy riskier assets as well.

KATIE MARTIN: The returns that you can get out of bonds have been falling for years. So they think, well, we need to enhance returns. They need to hedge themselves against the risk that bond yields could fall further.

JIM LEAVISS: And that’s where derivatives come in that effectively synthetically create the same effect of holding long-term gilts, but using leverage, using borrowed money.

KATIE MARTIN: The problem is that if bond yields rise, pension funds have to pay out that money. That can mean that they have to sell assets really quickly.

JIM LEAVISS: As gilt yields climbed rapidly in the wake of the budget, that meant that those swapped positions, moved against the pension funds. The type of moves that are supposed to be only seen once in a generation in the gilt market– we had that happening three days in a row.

HARRIET AGNEW: So when the gilt price fell, the yields rose. And this meant that pension funds faced collateral calls.

TOMMY STUBBINGTON: They had to raise new cash, and they had to raise it fast.

KATIE MARTIN: Selling of UK government bonds meant more selling of government bonds. And it spiralled incredibly quickly. And it very quickly became a threat to financial stability in the UK.

TOMMY STUBBINGTON: This is a slow-moving industry. These guys are not used to responding to market conditions on a day-by-day basis. LDI was a strategy that was sold to companies as something that you can lock away in the drawer and not think about. It wasn’t supposed to be something where pensions trustees and where companies had to think fast about which assets they can liquidate in order to meet margin calls on their collateral positions.

HARRIET AGNEW: If the Bank of England hadn’t stepped in, there would have been this doom loop of asset sales, where it becomes a sort of self-fulfilling prophecy. And you sell prices into a falling market, and prices keep on falling. And then you risk contagion across other parts of the market.

JIM LEAVISS: The Bank of England announces that it’s prepared to buy up to 65 billion pounds’ worth of gilts, of long-term gilts, over the next 13 days, which effectively looks like a return to the days of quantitative easing precisely at the time when they’re trying to back away from policies like that.

KATIE MARTIN: The Bank of England had to step in. Something had to give. Ordinary people who pay mortgages could see that the rates on those mortgages were shooting through the roof. Mortgage lenders were pulling out of the market.

TOMMY STUBBINGTON: It could have developed into a financial crisis.

DAVID OLDER: The LDI dynamic exposed the stresses that can happen in the system when you have a very sharp rise in interest rates. Loose fiscal policy combined with an inflationary backdrop– very dangerous. And I think the financial markets really forced a coherence in fiscal policy. The Bank of England’s response to that was a tactical response– inject liquidity for a moment in time to reverse the quantitative tightening policy they had.

MEGAN GREENE: If the Bank of England hadn’t stepped in as the market-maker of last resort, I think we would have had a Lehman-type event where you had a bunch of UK pensions go bust. Pension funds knew that the Bank of England wasn’t going to let them go bankrupt. There was some reticence to unwind their positions, which is why the governor, Andrew Bailey, created this deadline and really stuck to it so that pension funds would have to unwind it rather than just handing it over to the Bank of England and allowing the Bank of England to take the losses.

KATIE MARTIN: It was very, very tightly targeted. It wasn’t a monetary policy move. They were at pains to point out that this isn’t more easing. This is just us making sure that the system can hold.

TOMMY STUBBINGTON: Central banks like the Bank of England wear two different hats. One of them is to set monetary policy and control inflation, and the other one is to protect financial stability. Now for most of the last decade, those two things have worked pretty well hand in hand. When you had no inflation and low interest rates, it was easy to ride to the rescue on financial stability grounds without compromising your monetary policy. With high inflation, you can’t do that anymore. Your financial stability function no longer pushes in the same direction as monetary policy.

KATIE MARTIN: The question is very much whether this is a very British problem or whether the UK is a taste of things to come.

HARRIET AGNEW: The crisis that we’ve seen in the UK pension fund market could be a harbinger of what’s to come elsewhere.

DAVID OLDER: When you see rates rise as quickly as they have, often there are things that break.

MEGAN GREENE: There are going to be a bunch of market dislocations, and it’s going to be central banks that are going to have to step in to paper them over, even as they’re trying really hard to fight inflation.

KATIE MARTIN: One of the most famous and oft-repeated phrases that you ever hear of financial markets is the famous quote from Warren Buffett. “It’s only when the tide goes out that you see who’s been swimming naked.”

MEGAN GREENE: It’s a great metaphor for where we are now, because as the liquidity is withdrawn, we can see where all the vulnerabilities are because they’re going to blow up.

TOMMY STUBBINGTON: Which investment strategies, which business models no longer work in a world of rising interest rates?

KATIE MARTIN: Once all of that lovely liquidity is gone, then you find out what’s really at risk.

HARRIET AGNEW: In a bull market, almost everything goes up, and you can’t see the problems in the portfolio. It’s only when the tide goes out and the markets turn that you see where the issues are or who’s got their trunks down.

KATIE MARTIN: If you’re looking for who’s been swimming naked, there’s a lot of skinny-dippers out there.

TOMMY STUBBINGTON: The places to look are wherever there’s leverage in the system, wherever there’s borrowed money. When markets move a long way quickly, people lose money on their leveraged positions. And they’re forced to sell assets in a disorderly way, which exacerbates the moves and creates even wider problems.

HARRIET AGNEW: After the financial crisis, global regulators did a lot of work to make the banks safer, as a lot of the risk got pushed away from the banking sector into what we call the shadow banking sector– non-bank players such as hedge funds, private equity, pension funds, and asset managers, the unregulated parts of the financial sector. Before the financial crisis, regulators knew that most of the leverage was in the banks. The problem is now, we don’t really know exactly where the leverage is.

KATIE MARTIN: If this can happen to the gilt market, it could happen to the Japanese government bond market. It could happen to the US Treasuries market. We have to be ready for the possibility that bonds just don’t work like they used to anymore.

MEGAN GREENE: The market dislocations and price moves that we see in global markets over the next year will be as swift and severe as what we saw in the UK with the LDI blow-up. Markets broadly globally are very stressed already.

JIM LEAVISS: Partly it’s driven by a disagreement between governments that want to boost the economy and central banks, like the Bank of England, who want to slow the economy. And that story is going to replay in other parts of the world, including probably this winter in Europe.

TOMMY STUBBINGTON: The European Central Bank has to set policy for lots of countries. That means one of the things that they’re really worried about is the gaps opening up in bond markets between what it costs different countries to borrow. And this is particularly for countries with weaker economies like Italy or Greece. So far, they’ve been able to get away with the threat of buying more Italian bonds to stop this happening.

But again, they face a similar dilemma to the Bank of England. How do you convince people that you’re still committed to fighting inflation and at the same time commit to buy billions of euros of assets in order to stop these cracks opening up in the financial system? The Bank of England certainly sets a precedent for the Fed here.

You can imagine a situation where the Fed is forced to intervene to protect market functioning, while at the same time, they’re moving in the opposite direction in order to reach their monetary policy objectives. It’s a very difficult tightrope to walk when your financial stability and your monetary policy functions are pulling in different directions. And one of the big worries in the US is the smooth functioning of the market for US Treasuries, which is the world’s largest bond market. It’s a fundamental part of the world’s financial plumbing.

KATIE MARTIN: Everything depends on the fate of the US Treasuries market, but there are some real cracks there.

TOMMY STUBBINGTON: Lots of participants in that market have been complaining that liquidity is getting worse, that it’s harder to trade bonds without moving the price, that sometimes it’s simply impossible. That’s a worrying sign when you’re talking about a market that’s so fundamental to the global financial system.

JIM LEAVISS: The US bond market is the interest rate that sets the global interest rate. Everything that happens to US Treasuries has implications for equity markets, property markets, your mortgage rate. Everything is based on US Treasury bond markets.

TOMMY STUBBINGTON: As the Federal Reserve moves to tighten monetary policy by raising interest rates and also by winding down its portfolio of Treasuries, people are worried that those problems may get worse and that you may end up in a place where the Treasury market simply isn’t functioning.

COLBY SMITH: The Treasury market is hands down the world’s most important bond market. So dysfunction in that market is just not going to be tolerated from the Federal Reserve. That being said, there have been cracks. In March 2020, and there was this big, broad dash for cash as investors panicked in the face of the pandemic.

KATIE MARTIN: The nightmare scenario honestly, is that we get anything like the sort of volatility that we’ve seen in gilts happen in US Treasuries.

TOMMY STUBBINGTON: Something similar in the Treasury market is probably a disaster for the global economy.

KATIE MARTIN: Bank of America has done a lot of research into these fragilities that it can see occurring in the US Treasuries market. “If the Treasuries market fails to trade for a period of time, various credit channels, including corporate, household, and government borrowing and securities and loans would cease. This could lead to events such as US government debt default”– not good– “inability to convert Treasuries to cash or meet corporate, household, or government obligations globally, the inability to produce benchmarks that form the backbone of the derivatives market, the inability to issue, trade, or hedge debt of corporates, municipalities, insurance companies, banks.” I could go on– potentially one of the biggest risks to financial stability that there has been anywhere since the housing bubble of 2006, 2007.

MEGAN GREENE: We’re facing into a recession across developed markets, a slowdown in China, unbelievable geopolitical risk, a war in Europe. I think the flight to safety might be a trend that we’ll see over the next year. That should support the US Treasury market.

KATIE MARTIN: The logical conclusion is that there’s simply no way that US authorities would stand back and let that happen. But yields can rise because prices are falling in bond markets much more quickly than we have become used to. So if you have modelling for any kind of hedging contract, anything that’s predicated on rates moving slowly, I would suggest you check the fine print on that pretty quickly.

JIM LEAVISS: Coming from a world where central banks were the number-one buyer of government bond issuance to them being the biggest seller of government bonds, for me and other bond investors, we don’t quite know how well the global markets will be able to digest this additional supply at the same time that government borrowing is already quite high.

COLBY SMITH: No Fed official has officially said we need a recession in order to tame inflation, but all signs point to that having to be the case.

JEROME POWELL: The economy and the country have been through a lot over the past 2 and 1/2 years and have proved resilient.

COLBY SMITH: Chair Jay Powell acknowledged the fact that a recession is a real possibility. And he said something that I think really shocked investors. Everyone wants there to be a painless way to bring inflation down, and there just isn’t. And we constantly hear them reference this 1970s period when inflation got out of control because policymakers prematurely eased policy. And that’s just not a mistake that they’re willing to make this time around.

DAVID OLDER: Jerome Powell has been very clear that he’s willing to accept a weaker stock market in pursuit of lower inflation. But if the credit market seized up and ceased to function, I think the Federal Reserve, just like the Bank of England, would be very quick to intervene and manage that issue.

COLBY SMITH: Big concern is how severe of a crisis we could have going forward. And we often find out when it’s too late.

KATIE MARTIN: The Japanese government bond market is an outlier. Inflation is incredibly low in Japan. Interest rates are held at more or less zero, and bond yields are held incredibly low. The Bank of Japan will probably have to unravel this policy if inflation does start to get sticky.

The big question that investors are asking is, can Japan do this? Can it pull this off without lighting a fuse under the massive Japanese government bond market? Lots of people have spent years looking for some sort of disaster in the Japanese government bond market, and they’ve been disappointed. But what is to say that that market can’t do this? And what is to say what the reaction of Japanese asset managers would be to that? Nobody knows the answer to these questions.

COLBY SMITH: One flash point is what’s going on with emerging and developing economies. These are highly indebted countries intimately affected by rising borrowing costs globally, by a strong dollar. They also do not have the kind of fiscal robustness that would allow them to perhaps weather through various crises. There’s this amazing stat from the IMF. 60{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of low income countries are either near or at debt distress already. We could perhaps see a wave of defaults going forward.

DAVID OLDER: Ultra low rates certainly fueled speculative excess. So we saw that in unprofitable growth companies. We saw that in private venture capital-backed companies. We’ve seen it in the crypto world, where there’s a lot of opacity.

HARRIET AGNEW: One area that we might see potential winds next year is the US market for unlisted tech companies. We’ve seen a big sell-off in listed tech companies this year. We’re expecting trouble to fall over into the private markets at some point next year. Companies raise money at sky-high valuations during the good times. And as interest rates rise, they may be forced to do what’s called a down round, which is when they raise money at a big discounted valuation.

MEGAN GREENE: UK specifically I think the mortgage market is a bit of a risk as well, just because the Bank of England will have to hike rates aggressively. And most mortgages are pretty short-term in the UK relative to the US. You could end up having these fixed-term mortgages turn variable with much higher rates. That could blow back on the banks.

JIM LEAVISS: Your mortgage rates are set related to the gilt market yields. So we saw UK mortgage rates start to hit 6, 6 and 1/2. I even saw 7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} mortgage rates.

HARRIET AGNEW: When central banks are pouring money into the financial markets, and they’re rising, it’s an incredibly easy environment in which to invest. A rising tide carries all boats.

COLBY SMITH: Low interest rates and ultra-accommodative monetary policy has definitely allowed for more risk taking than I think would have been possible.

TOMMY STUBBINGTON: When you can’t earn a decent yield, a decent interest rate, from buying the safest assets, it pushes you into more dangerous areas, encourages you to take on leverage. You use borrowed money to juice up your returns.

DAVID OLDER: You’ve had a generation of investors, more than a decade, that have gotten used to these tailwinds from low rates, low interest rates, and the ability to fuel the speculative excess.

COLBY SMITH: Investors should absolutely be braced for more surprises. There are pockets of hidden leverage in this economy and financial system that policymakers have not yet identified. The big concern is how quickly those get exposed.

KATIE MARTIN: Nobody thought that inflation could jump to 10{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. What if we’ve got double-digit inflation in major economies, and actually we’re going to 15{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}?

COLBY SMITH: The situation is going to get much dicier. We heard this from the IMF. The worst is yet to come for the global economy and the global financial system. That’s pretty strong language.

INTERVIEWER: Are there any reasons to be cheerful?

[UNCOMFORTABLE GIGGLE]

TOMMY STUBBINGTON: We saw with the UK pensions crisis that the central banks still are able to step in and stop the worst problems without compromising their commitment to fighting inflation.

KWASI KWARTENG: The Bank of England are taking further steps–

KATIE MARTIN: Maybe the mess that happened in the UK around the time of the mini budget is enough of a wake-up call to the rest of the system. If it’s not, then we’re going to get accidents like this happening over and over again for the next few years.

JIM LEAVISS: For inflation rates to stay this high, you’re going to need the oil price to keep going up and up and up. If we ended up with some sort of peace in Ukraine and stability, then we forget about all the extra billions and trillions that governments and consumers are going to have to be spending on energy bills.

KATIE MARTIN: There has been a bit of a pullback in US inflation in the data for October. And the Fed is indicating that maybe it won’t have to raise interest rates quite as quickly as it had previously told the market it would. So that takes the pressure off a bit, but it’s still well above target. And the pressure is still very much on.

JIM LEAVISS: China has been in a zero COVID policy for a very long time. If China opens up in 2023, then that could produce a significant boost to economic activity around the world.

DAVID OLDER: A lot of the pain has been felt in 2022. We’ve seen rates rise very sharply. We’ve seen valuations contract very sharply. Markets are all down. And there’s been a process of understanding that we’re in a different type of paradigm– higher rates, higher inflation for longer.

MEGAN GREENE: It’s hard to imagine that we can tighten monetary policy so aggressively, have a downturn in the economy, and not see a bunch of defaults.

TOMMY STUBBINGTON: This crisis has perhaps less potential to spiral through the financial system.

MEGAN GREENE: We’ve got the plumbing set up much better than we did in 2008 for central banks to go ahead and step in.

TOMMY STUBBINGTON: But at the same time, until inflation can be brought back down and until central banks are in a position where they can reassure the markets rather than scaring them, this is going to continue.

KATIE MARTIN: This is the point where policymakers, regulators, central banks, governments, even, start to think, OK, we have to take this seriously. We cannot take the risk that people’s savings are at risk unduly, that people’s pensions are at risk, that house prices could come under pressure, or, more importantly, that people’s mortgage rates could absolutely shoot through the roof.

JIM LEAVISS: We could see trade unions on the rise again, having been extinct effectively since the 1980s and 1970s. And we could see wages start to increase.

KATIE MARTIN: The system was absolutely addicted to cheap money. One investor was putting it to me the other day. It’s absolutely naive to think that we can get out of this low interest rate environment without some sort of blow-up.

[MUSIC PLAYING]

HSBC launches wealth management center

HSBC launches wealth management center
  • By Kao Shih-ching / Staff reporter

HSBC Financial institution Taiwan Ltd (滙豐台灣商銀) on Friday introduced a prosperity administration centre in Taipei, and options to open up facilities in Taichung and Taoyuan next year, as the financial institution aims to increase its prosperity management company, regardless of interest charge boosts.&#13

The institution of the new wealth management centers is believed to price the bank about NT$100 million (US$3.3 million), HSBC Taiwan explained, including that it would continue investing in staff, service platforms and monetary know-how.&#13

“We are absolutely dedicated to Taiwan, as it is an vital current market in Asia and we intention to be the primary wealth administration financial institution,” HSBC Holdings PLC prosperity and own banking main government Nuno Matos instructed a information conference in Taipei on Friday. &#13

HSBC launches wealth management center

Image: CNA

“Taiwan’s higher-web-value customers make up about 10 {21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of Taiwan population,” he claimed. &#13

The wealth administration consumer base in Asia showed twofold progress year-on-year very last year, and the variety of HSBC Taiwan’s higher-internet-really worth customers grew 40 percent, when its property underneath management rose 22 p.c from a calendar year previously, Matos mentioned.&#13

While many local banks’ prosperity management organizations have documented lowering net price incomes in mild of volatile economical markets amid worldwide central banks’ rate hikes, HSBC Taiwan saw its pre-tax earnings from prosperity administration and particular banking maximize by 70 percent on a yearly basis for the very first 50 percent of this yr, company data confirmed.&#13

HSBC managed to sustain favourable growth, as it has acquired a bigger market place share by furnishing in depth merchandise and personalized providers, Matos stated.&#13

As the desire rate hikes adopted by Taiwan’s central financial institution are softer than all those of its world peers, the financial tightening has experienced a milder impact on the marketplaces, he extra.&#13

The central financial institution on Thursday lifted its essential interest costs by 12.5 foundation points, marking the fourth consecutive quarter of price hikes. Since March, the financial institution has lifted fees by 62.5 basis points, even though the US Federal Reserve has boosted fees by 425 foundation points.&#13

HSBC Taiwan is anticipated to show powerful growth in business enterprise effectiveness via subsequent yr, Matos explained.

Reviews will be moderated. Retain feedback suitable to the post. Remarks made up of abusive and obscene language, individual assaults of any form or marketing will be eradicated and the person banned. Remaining determination will be at the discretion of the Taipei Instances.

Why finance and accounting students should consider the US CMA certification

Why finance and accounting students should consider the US CMA certification
The US CMA opens up wide range of career opportunities

The US CMA opens up huge vary of career options
| Picture Credit history: Freepik

As accounting and finance leaders leverage new-age systems to change monetary information into slicing-edge insights to fuel achievements, the country has witnessed a swift increase of worldwide accounting certifications these types of as the Certified Administration Accountant (US CMA). Built and endorsed by the Institute of Administration Accountants (IMA), a worldwide association of accountants and money gurus in small business, this has been a world-wide benchmark for management accountants and fiscal experts, as it presents both equally upskilling chances and specialist relevance at the national and worldwide concentrations. 

The system can be done in 11 months and eligibility specifications are graduation or accounting or finance graduation degree from a recognised college or an government accounting certification with two years of relevant qualified practical experience. In India, you can consider the US CMA Review to distinct Part Two in 3 a long time. The exam window is readily available thrice a calendar year and the check can be taken either as in human being at a centre or as a distant proctored alternative. To keep up with the evolving economic landscape the IMA delivers the Continuing Qualified Education and learning (CPE) Certificate unfold about 30 hours annually. 

This certification will allow accounting pros to detect significant gaps in creating financial statements, budgeting, analysing costs, checking hazards, communicating strategies, qualitative reporting and final decision-making and building imaginative and sustainable options. It opens up a extensive selection of career opportunities in spots such as Inside Handle, Finance Arranging and Budgeting, Analytics, Economical Reporting, Effectiveness and Risk Management. Some job solutions include things like

Company Controller: Precision in accounting features and fiscal statements needs qualitative reporting, tax compliance, working with exterior auditors and analysing tendencies. All this can be managed by a company controller.

Financial Analyst Enterprise overall performance and results rely on how nicely monetary info is analysed, traits are forecasted, and profits and expenses are managed. Monetary analysts make styles, analyse facts, carry out market investigation and implement guidelines to assistance strategic fiscal setting up and educate stakeholders and traders.

Charge Accountant: Making worth within an firm is outlined by value administration and budgeting methods. Expense accountants assistance corporations oversee and analyse cost expenses and purchases, document money info, report and assess elements impacting price tag and profitability and make recommendations to improve price efficiency. 

Chance Manager: Strategic enterprise choices are pushed by sharp risk management techniques. In a electronic-native enterprise environment, economic operations and business enterprise pursuits are vulnerable to fraud. But a danger supervisor can interpret and assess threat-related data, quantify exterior unfavorable things to do, establish organisational methods and report hazard-linked conversation to leaders and stakeholders to permit educated business decisions.

Main Finance Officer: Corporations require new path and capabilities, and this is achievable as a result of a shift in attitude and conduct. This variance is produced by CFOs who not only accelerate capacity creating but also achieve full opportunity by raising the bar of talent in companies. A CFO manages the all round finance functionality in an organisation.

The writer is the CEO and Direct Instructor, Miles Education and learning

Retail stocks including Macy’s, Target get smoked as markets tank after retail sales miss

Retail stocks including Macy’s, Target get smoked as markets tank after retail sales miss

The Grinch might be a short-seller this Christmas season.

Retail stocks were tanking across the board on Thursday, as a much worse-than-expected November retail sales report early Thursday, combined with Wednesday’s latest announcement from the Federal Reserve, had markets under heavy selling pressure.

In early afternoon trading, shares of Macy’s (M) were off 3.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, while shares of Target (TGT) and Abercrombie & Fitch (ANF) were down more than 4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, among other notable names underperforming in the retail space.

The VanEck Retail ETF (RTH) — which counts Amazon, Home Depot and Walmart as its top three holdings — was off 2.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in afternoon trade. The SPDR S&P Retail ETF, XRT, was down 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.

These moves also come amid a washout across equity markets, with the Nasdaq down as much as 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in early afternoon trade.

But this investor caution on retail in particular does appear misplaced after this morning’s latest retail sales data.

The government’s retail sales report showed out Thursday morning showed spending fell sharply in November as the key holiday shopping season kicked into high gear.

Retail sales showed a decline of 0.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} over the prior month.

Shoppers queue outside Target during Black Friday sales in Chicago, Illinois, U.S., November 25, 2022. REUTERS/Jim Vondruska

Shoppers queue outside Target during Black Friday sales in Chicago, Illinois, U.S., November 25, 2022. REUTERS/Jim Vondruska

Sales declines were notched in most retail sales categories, notably discretionary items shoppers have pulled back on amid higher prices and a slowing economy. Online retailers, general merchandise, and clothing stores all reported sales declines.

This poor read on retail sales has raised investor angst retailers may end the important holiday season with excess inventories, pressuring profit margins and leading to lackluster fourth quarters.

“The headwinds of the past year are catching up to consumers and forcing them to be more conservative in their holiday shopping this winter,” warned Morgan Stanley economist Ellen Zentner in a client note.

“While last year consumers rushed to buy gifts early due to low inventories, this year 70{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} of consumers are waiting for discounts before starting their holiday shopping. As such, holiday spending will likely be softer this November/December with more shopping back-loaded.”

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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