How Wall Street wooed Sen. Kyrsten Sinema, preserved carried interest tax break

U.S. Senator Kyrsten Sinema (D-AZ) waits for an elevator to go to the Senate floor at the U.S. Capitol in Washington, U.S. August 2, 2022. 

Jonathan Ernst | Reuters

Long before Sen. Kyrsten Sinema, D-Ariz., held up a massive spending bill that promised to create jobs, invest in clean energy and tax the rich — delivering on some of President Joe Biden’s and the Democratic Party’s top campaign promises — those working at Wall Street investment firms had donated millions to the freshman senator’s campaign.

One of her main objections was the bill’s so-called carried interest tax provision — which would have closed an arcane loophole in tax law that allows hedge fund managers, law firm partners and private equity executives, among others, to pay significantly less taxes than ordinary workers.

Closing that loophole, which was estimated to raise $14 billion in tax revenue over the next decade, was supposed to help pay for $433 billion in spending on climate and health initiatives.

To get Sinema’s vote, and the bill passed, Senate Majority Leader Chuck Schumer said Democrats had “no choice” but to drop that provision from the broader Inflation Reduction Act. The bill instead imposes a 1% tax on all corporate share buybacks along with a minimum corporate tax rate of 15% on companies with more than $1 billion in revenues. The massive spending-and-tax package squeaked through the evenly divided Senate 51-50 on Sunday with Vice President Kamala Harris’ tiebreaking vote. It’s expected to pass the House later this week.

American Investment Council

Sinema has been fighting to help preserve the loophole since at least last year when she told Democratic leaders she opposed closing the carried interest tax break. It was subsequently stripped out of a House bill, according to NBC News.

Sinema’s opposition, along with several objections from Sen. Joe Manchin, D-W.V., helped sink a much more sprawling version of the bill, which was significantly pared back to win over the two moderate Democrats. 

‘What’s best for Arizona’

“Senator Sinema makes every decision based on one criteria: what’s best for Arizona,” Sinema’s spokeswoman Hannah Hurley told CNBC in an email. She said Sinema has been clear for over a year that she will only support tax reforms and revenue options that support Arizona’s economic growth and competitiveness. Sinema believes that “disincentivizing” investments in Arizona businesses would hurt the state’s economy and ability to create jobs, Hurley said.

In the weeks before Sunday’s vote, Sinema’s office was inundated with calls from lobbyists representing hedge funds, private equity firms and other money managers arguing against closing the carried interest tax loophole, according to people familiar with the matter. In the runup to last week’s deal, the senator and her staff fielded numerous in-person meetings with the industry, said some of the people familiar with these meetings, asking not to be identified in order to speak freely about private efforts to connect with Sinema.

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Private equity donors

Even before Sinema was elected to the Senate in 2018, she supported private equity investors as a member in the House of Representatives. In 2016, Sinema said the industry provided “billions of dollars each year to Main Street businesses,” according to The New York Times.

Sinema won a coveted seat on the powerful Senate banking committee and made quick work of networking with — and raising donations from — the industry she would oversee. Since the start of the 2018 election cycle, she’s raked in at least $2 million from the securities and investment industry — outraising Senate Banking Chairman Sherrod Brown’s $770,000 in industry donations over the same time, according to Federal Election Commission data analyzed by the nonpartisan campaign finance watchdog OpenSecrets. Both Sinema and Brown, D-Ohio, are up for reelection in 2024.

Sinema’s take includes $10,000 in campaign donations from the American Investment Council’s political action committee, half of which was donated to her campaign after Maloney’s op-ed ran last year.

Employees at private equity firms Kohlberg Kravis Roberts, the Carlyle Group and Apollo Global Management donated more than $95,000, combined, to Sinema from the 2018 election through the current 2022 election cycle, according to campaign finance data.

That includes $11,600 in combined donations from KKR co-founders Henry Kravis and George Roberts, according to Federal Election Commission filings. Records show that Carlyle’s and Apollo’s political action committees also donated a combined $15,000 to Sinema’s reelection campaign.

Representatives for KKR and Carlyle declined to comment. Representatives for Apollo and Blackstone did not respond to requests for comment.

‘Hats off to the P/E lobby!’

Biden signs China competition bill to boost U.S. chipmakers

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President Joe Biden on Tuesday signed a bipartisan bill that aims to strengthen U.S. competitiveness with China by investing billions of dollars in domestic semiconductor manufacturing and science research.

“Today is a day for builders. Today America is delivering,” Biden said at the signing ceremony outside the White House. He was joined by a crowd of hundreds, including tech executives, union presidents and political leaders from both parties.

The bill, dubbed the Chips and Science Act, includes more than $52 billion for U.S. companies producing computer chips, as well as billions more in tax credits to encourage investment in semiconductor manufacturing. It also provides tens of billions of dollars to fund scientific research and development and to spur the innovation and development of other U.S. tech.

The Biden administration also contended that the legislation will “unlock hundreds of billions more” in private spending in the industry. The White House said Tuesday that multiple companies, “spurred” by the chips bill, have announced more than $44 billion in new semiconductor manufacturing investments.

Of that sum, $40 billion is coming from Micron’s investment in memory chip manufacturing. The White House said the company’s initiative will yield 8,000 new jobs and boost the U.S. market share of memory chip production to 10% from 2%.

A newly announced partnership between Qualcomm and GlobalFoundries, meanwhile, includes $4.2 billion in chip production as part of an expansion of GlobalFoundries’ upstate New York facility, the White House said.

Advocates say the funding is needed to sharpen America’s technological edge and reinvigorate its lagging chip industry. The U.S. produces only about 10% of the world’s supply of semiconductors, whereas East Asia accounts for 75% of global production — including most of the top-tier chips, according to the White House.

US President Joe Biden (C) signs H.R. 4346, the CHIPS and Science Act of 2022, on the South Lawn of the White House in Washington, DC, on August 9, 2022.

Mandel Ngan | Afp | Getty Images

Semiconductors are critical pieces of an array of products including consumer electronics, automobiles, health-care equipment and weapons systems. The Covid-19 pandemic sparked a chip shortage and strained supply chains, highlighting America’s dependence on foreign-made chips and revealing a potential national security threat, officials say.

The signing comes as Biden and congressional Democrats cap a flurry of activity before lawmakers leave Washington for the rest of the month and turn their attention to midterm election campaigns.

Senate Democrats on Sunday passed a sweeping bill to fund ambitious climate, energy and health policies by raising taxes on rich corporations and reforming prescription drug pricing. The bill, a major piece of Biden’s agenda that Democrats had worked on for well over a year, squeaked through with no Republican support in the chamber, which is evenly split by party. Vice President Kamala Harris cast the tiebreaking vote.

In late June, Biden also signed a bipartisan bill to strengthen gun regulations, including by enhancing requirements for background checks. The legislation sped through Congress in the wake of a deadly mass shooting at an elementary school in Uvalde, Texas, in which a gunman killed 19 students and two teachers.

And last week, Biden revealed that a U.S. strike in Afghanistan killed top al-Qaeda leader Ayman Al-Zawahiri, who was considered a mastermind behind the 9/11 terrorist attacks.

Biden is also expected to sign another bill this week that bolsters health benefits for veterans who were exposed to chemicals that billowed from toxic burn pits.

That bill passed with overwhelming bipartisan support after Republicans temporarily blocked it. The move stoked outrage from some veterans’ groups, as well as comedian Jon Stewart, who emerged as a leading advocate.

Biden’s already-middling approval ratings have sunk in recent months, as global inflation and supply chain issues take a toll on Americans’ wallets at the grocery store and the gas station. His unpopularity, paired with a tough political map and other political headwinds, has fueled concerns among Democrats that they could suffer a rout in the November midterms that results in Republicans taking control of one or both chambers of Congress.

But the latest polls show Democrats’ chances of keeping the Senate have improved, and Biden on Monday predicted that the climate and tax bill’s passage will “immediately help” in the midterms.

Coinbase (COIN) earnings Q2 2022

Coinbase shares dropped in extended trading on Tuesday after the crypto exchange reported a loss of over $1 billion in the second quarter and missed analysts’ estimates for revenue.

Here’s how the company did:

  • Earnings: Loss of $4.98 per share, vs. loss of $2.65 per share as expected by analysts, according to Refinitiv.
  • Revenue: $808.3 million, vs. $832.2 million as expected by analysts, according to Refinitiv.

Coinbase’s revenue declined nearly 64% as investors exited the crypto market after last year’s dramatic run. Retail transaction revenue came in at $616.2 million, down 66% and below the $667.1 million consensus among analysts polled by StreetAccount.

Coinbase reported a $1.1 billion net loss, compared with $1.59 billion in net income in the same quarter last year, according to a letter to shareholders. One factor was a $377 million noncash cryptocurrency-related impairment charge. Coinbase’s own cryptocurrency assets at the end of June were worth $428 million, down from about $1 billion at the end of March. Over 40% of the cryptocurrency assets were in bitcoin.

“Q2 was a test of durability for crypto companies and a complex quarter overall,” the company said in the letter. “Dramatic market movements shifted user behavior and trading volume, which impacted transaction revenue, but also highlighted the strength of our risk management program.”

The company said it had 9 million monthly transacting users during the period, down from 9.2 million in the first quarter but more than the 8.7 million StreetAccount consensus. Macroeconomic and cryptocurrency credit resulted in lower trading volume during the quarter, the company said.

Coinbase is being forced to resize its business in response to market conditions.

Cryptocurrency controversies helped to push down prices in what some called a “crypto winter.” Coinbase’s stock tumbled 75% during the second quarter, while the price of bitcoin plunged by about 59%. Coinbase said it was extending its hiring freeze into the foreseeable future and cutting 18% of headcount. Assets on platform fell quarter over quarter to $96 billion from $256 billion, mostly because of pressure on cryptocurrency prices, Coinbase said.

“While we did see net outflows in Q2, we observed that the majority of this behavior was institutional clients de-risking and selling crypto for fiat as opposed to withdrawing their crypto to another platform,” Coinbase said in the shareholder letter. “As a result, our market share of the total crypto market capitalization declined to 9.9% from 11.2% in Q1.”

Bitcoin accounted for 31% of transaction revenue in the quarter, the highest level since the first quarter of 2021, while 22% of transaction revenue was associated with ethereum.

Coinbase updated its outlook for the full year. It now expects 7 million to 9 million monthly transacting users, down from a range of 5 million to 15 million three months ago. Management said it expects average transaction revenue per user in the low $20 range, rather than pre-2021 levels.

To reduce marketing spending, the company is doing less with paid media and incentives, while pursuing ways to attract nonpaid traffic. It also reduced its forecast for technology, development and general and administrative expenses to $4 billion to $4.25 billion from the $4.25 billion to $5.25 billion range a quarter ago. That includes optimizing infrastructure spending.

“Of course, we don’t control the macroeconomic factors or downturn,” CEO Brian Armstrong said on a conference call with analysts. “We don’t really even control the crypto market more broadly, right? So what do we control? Well, obviously we can focus on building great products for our customers. We can focus on staying on the forefront of crypto technology to make sure that we’re creating compelling use cases and making those available to our customers. We can focus on our expense management in down markets, and, frankly, we can ensure that we just don’t get distracted or disillusioned by short-term thinking.”

Armstrong added that he expects the company’s current efforts to result in “disproportionate share in the next up cycle.”

Coinbase shares declined almost 11% in Tuesday’s regular trading session.

WATCH: Much of bitcoin’s next rally depends on the Fed

Roblox (RBLX) earnings Q2 2022

The New York Stock Exchange welcomes executives and guests of Roblox (NYSE: RBLX), today, Wednesday, March 10, 2021, in celebration of its Direct Listing.


Roblox reported results on Tuesday that missed analyst estimates on the top and bottom lines.

Here’s how the company did:

  • Loss per share: 30 cents vs. 21 cents expected, according to a survey of analysts polled by Refinitiv.
  • Revenue: $639.9 million vs. $644.4 million expected, according to Refinitiv.

Shares fell more than 12% in after-hours trading.

The revenue figure is what Roblox calls bookings, which include sales recognized during the quarter and deferred revenue. Bookings declined by 4% year over year. The company generates revenue from sales of its virtual currency called Robux, which players use to dress up their avatars and buy other premium features in the games.

Roblox reported 52.2 million average daily active users, about a million shy of the StreetAccount consensus. That figure is up from 21% a year earlier, but down from the 54.1 million daily active users it reported in the first quarter. Users spent more than 11 billion hours engaged in Roblox during the second quarter.

Roblox said average bookings per daily active user was $12.25, down 21% year over year.

The company also offered a peek into the third quarter. It said July daily active users hit a record high of 58.5 million, up 26% year over year. And bookings for the month fell between $243 million and $247 million, up 8% to 10% from July 2021.

The company saw bookings swell more than 200% during the pandemic when kids were spending more time on their screens while stuck at home. The stock was blazing hot in 2021, after Roblox’s direct listing in March. Its market cap neared $80 billion before peaking in November 2021. Shares are down more than 60% since their highs.

Chief Business Officer Craig Donato told CNBC’s Steve Kovach that Roblox is bullish on the future because of its investments in its employees, server capacity and global data centers.

“We’re very much in investment mode,” Donato said, “and that’s going to put a little bit of drag on earnings, but these are investments that are the right investments for us to make that will pay off in the three-to-five-year timeframe.”

Executives will discuss the results with analysts on a conference call starting at 8:30 a.m. ET on Wednesday.

FDA expands monkeypox vaccine authorization to increase dose supply five-fold

A health worker administers a dose of the Bavarian Nordic A/S Jynneos monkeypox vaccine at a vaccination site in West Hollywood, California, on Wednesday, Aug. 3, 2022.

Jill Connelly | Bloomberg | Getty Images

The Food and Drug Administration on Tuesday expanded its authorization for the monkeypox vaccine in a way that would significantly boost the limited supply of shots.

The FDA will allow health-care providers to administer the shots through intradermal injection, or between the layers of the skin, which will increase the supply of doses by as much as fivefold. The vaccine is traditionally administered through subcutaneous injection, which goes into the fat layer beneath the skin. The intradermal injections are only for adults.

The emergency authorization also allows people under age 18 to receive the vaccine if they are at high risk of monkeypox infection. People under age 18 would receive the shot through subcutaneous injection.

Jynneos is the only FDA approved monkeypox vaccine in the U.S. The shots are administered in two doses 28 days apart. Jynneos is manufactured by Bavarian Nordic, a biotech company based in Denmark.

The U.S. has struggled to keep with up demand for the shots as the monkeypox outbreak grows, which has made it difficult for people to get appointments and lead to long lines outside clinics.

The U.S. is fighting the largest monkeypox outbreak in the world with nearly 9,000 cases across 49 states, Washington D.C. and Puerto Rico, according to the Centers for Disease Control and Prevention.

Health and Human Services Secretary Xavier Becerra declared the outbreak a public health emergency last week. The U.S. last declared a public health emergency in response to Covid-19 in 2020.

HHS has made more than 1 million doses available to state and local health departments since May. More than 620,000 doses have been shipped to jurisdictions so far, according to HHS.

Monkeypox is rarely fatal and no deaths have been reported in the U.S. so far. But the virus causes lesions that can be very painful. Some patients need hospitalization to manage the pain.

This is breaking news. Please check back for updates.

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Trump tax returns must be given to Congress, court says

Former President Donald Trump’s federal income tax returns and those of Trump business entities must be turned over to the House Ways and Means Committee, a federal appeals court panel said in a ruling Tuesday.

The 3-0 decision is the latest legal blow to Trump, who has repeatedly lost efforts in federal and state courts to shield his closely guarded tax returns and business-related documents from various investigations. Trump has argued that all of those probes are politically motivated.

The ruling by the U.S. Court of Appeals for the District of Columbia Circuit was announced a day after FBI agents searched Trump’s residence at his Mar-a-Lago Club in Palm Beach, Florida, as part of an investigation into the removal of sensitive documents from the White House when he left office in 2021.

The appeals panel said the House committee, which has sought Trump’s tax records for years as part of an inquiry into how the Internal Revenue Services audits presidential income tax returns, had the right under the law to obtain them from the U.S. Treasury Department.

The decision upholds a prior ruling dismissing Trump’s claims by Judge Trevor McFadden in federal court in Washington, which was issued in December.

Tuesday’s ruling applies to Trump’s returns for the tax years 2015 through 2020.

The appeals panel noted that while tax returns are generally confidential under federal law, one exception is when the chairman of the Ways and Means Committee requests such returns in writing from the secretary of the Treasury Department.

“The Chairman has identified a legitimate legislative purpose that it requires information to accomplish,” Judge David Sentelle wrote in the panel’s opinion. “At this stage, it is not our place to delve deeper than this.”

“The mere fact that individual members of Congress may have political motivations as well as legislative ones is of no moment,” wrote Sentelle, who was appointed to his seat by President Ronald Reagan.

“Indeed, it is likely rare that an individual member of Congress would work for a legislative purpose without considering the political implications.”

Trump is likely to ask the full lineup of judges on the D.C. Circuit Court of Appeals to re-hear the case, or to directly petition the U.S. Supreme Court to hear an appeal of Tuesday’s ruling.

As a candidate for the White House, and then as president, Trump broke decades of practice in refusing to publicly release his tax returns.

Ways and Means Committee Chairman Rep. Richard Neal, D-Mass., in a statement reacting to Tuesday’s ruling said, “With great patience, we followed the judicial process, and yet again, our position has been affirmed by the Courts. “

“‘I’m pleased that this long-anticipated opinion makes clear the law is on our side. When we receive the returns, we will begin our oversight of the IRS’s mandatory presidential audit program,” Neal said. 

Trump’s spokeswoman and William Consovoy, an attorney for Trump, did not immediately respond to requests for comment.

Neal in April 2019 first asked the Treasury Department for Trump’s federal income tax returns and those of the Donald J. Trump Revocable Trust and seven limited liability companies, one of which does business as Trump National Golf Club in Bedminster, New Jersey. Trump was president at the time of the request.

In a letter to Treasury, Neal wrote that his committee was “considering legislative proposals and conducting oversight related to our Federal tax laws, including, but not limited to, the extent to which the IRS audits and enforces the Federal tax laws against a President.”

The IRS is mandated by law to audit the annual tax returns of sitting presidents.

A month after Neal’s letter, the Treasury Department, at the time led by Trump appointee Steven Mnuchin, said it would not comply with Neal’s request, arguing that the committee did not have a legitimate legislative purpose.

The Ways and Means Committee then sued the IRS, Treasury, and Mnuchin, seeking to force them to turn over the tax returns.

As the case was pending, President Joe Biden defeated Trump in his bid for re-election. Neal in June 2021 renewed his request to Treasury for the tax returns, with additional detail about why the committee wanted them. Neal said that in addition to reviewing how tax laws are applies to a sitting president, the committee also was interested in reviewing possible conflicts of interest by a president.

In July 2021, Treasury’s Office of Counsel, which originally had supported the denial of the records’ release, issued an opinion saying Neal’s second request was valid, and that the department had no choice but to comply with it.

After Treasury said it would follow the opinion, Trump filed counterclaims against the department and the House committee, seeking to block the release of the returns.

Trump’s lawyers argued that the committee’s request lacked a legitimate purpose and violated the constitutional separation of powers between the executive and legislative branches of government.

In the ruling Tuesday, the appeals panel said that McFadden, the federal judge who heard those arguments, properly granted a motion to dismiss Trump’s lawsuit after finding that Neal’s 2021 request “was supported by the valid legislative purpose of the Committee’s study of the Presidential Audit Program.” The judge also found that the request did not violate the separation of powers, nor was it “facially unconstitutional.”

And McFadden properly ruled that Neal’s request was not a form of retaliation against Trump, the panel concluded.

“The 2021 Request seeks information that may inform the United States House of Representatives Committee on Ways and Means as to the efficacy of the Presidential Audit Program, and therefore, was made in furtherance of a subject upon which legislation could be had,” Sentelle wrote in the opinion.

“Further, the Request did not violate separation of powers principles under any of the potentially applicable tests primarily because the burden on the Executive Branch and the Trump Parties is relatively minor. Finally,§ 6103(f)(1) is not facially unconstitutional because there are many circumstances under which it can be validly applied, and Treasury’s decision to comply with the Request did not violate the Trump Parties’ First Amendment rights. We affirm.”

One of the three judges on the pane, Karen LeCraft Henderson, concurred with much of the opinion, but separately wrote, “I conclude that the burdens borne by the Executive Branch are more severe
and warrant much closer scrutiny than my colleagues have given them.”

And, Henderson wrote, “The Congress’s potential and incentive to threaten a sitting President with a post-Presidency … request [for tax returns] in order to influence the President while in office should not be dismissed so quickly.”

Apple Card growth, vendors blamed for mishaps in Goldman card business

Apple CEO Tim Cook introduces Apple Card during a launch event at Apple headquarters on Monday, March 25, 2019, in Cupertino, California.

Noah Berger | AFP | Getty Images

When it was unveiled in 2019, Apple touted its new credit card as a gamechanger with unheard-of levels of simplicity and transparency.

Behind the scenes, however, the card’s rapid growth and the new platform built by Goldman Sachs to service it created difficulties, resulting in failures more reminiscent of a traditional issuer than a customer-first disruptor, according to people with knowledge of the matter.

Goldman struggled to handle a bigger-than-expected influx of disputed transactions, known in the industry as chargebacks, according to the people. Chargebacks happen when a customer seeks a refund for a product or service billed on their card for any number of reasons. The disputes, which put banks in the middle of disagreements between customers and merchants, have surged during the pandemic, according to payments consultants.

When an Apple Card user disputes a transaction, Goldman has to seek a resolution within regulatory-mandated timelines, and it sometimes failed at that, said the people, who requested anonymity to speak candidly about the situation. Customers were sometimes given conflicting information or had long wait times, the people said.

Goldman got more disputes than it counted on, said one source. “You have these queues that you need to clear out within a certain amount of time. The business was getting so big, suddenly we had to create more automation to deal with it.”

Goldman Sachs declined to comment for this article, and an Apple representative didn’t immediately answer a request for comment.

‘A complete nightmare’

Problems at Goldman’s card business burst into public view August 4, when the New York-based investment bank disclosed a Consumer Financial Protection Bureau probe over a range of billing and service issues. (Goldman made no mention of Apple in the filing, but most of its $11.84 billion in card loans to date are from the Apple Card; the bank launched a GM-branded card in January.)

The regulator is looking into Goldman’s customer dealings, “including with respect to the application of refunds, crediting of nonconforming payments, billing error resolution, advertisements, and reporting to credit bureaus,” the bank said.

Regulators are focused on customer complaints from the past few years, and the biggest source of those came from attempted chargebacks, said the people.

The disputes can be thorny to resolve: Customers sometimes try to game the system by seeking refunds on legitimate purchases. In other cases, its merchants who aren’t always forthcoming. While refunds involving identify theft or items that were never received should be clear cut, there are also more nuanced cases where customers complain that an event like a music festival didn’t live up to its billing.

In online credit-card forums, several users complained that Goldman initially refused to side with them despite providing evidence of fraud.

“Goldman Sachs is holding me responsible for a $930 charge that was made at an Apple store with Apple Pay that I did not make,” according to one Reddit post. “Until now, I’ve never experienced less professional service from a major company, and this has been a complete nightmare.”

Edge cases

Growing pains

Ford increasing price of electric F-150 Lightning

Ford F-150 Lightning trucks manufactured at the Rouge Electric Vehicle Center in Dearborn Michigan.

Courtesy: Ford Motor Co.

DETROIT – Ford Motor on Tuesday said it is increasing the starting prices of its electric F-150 Lightning pickup due to “significant material cost increases and other factors.”

The Detroit automaker said the price increases – between $6,000 and $8,500, depending on the model – will not impact customers who have ordered a vehicle and are awaiting delivery. They will impact an undisclosed amount of reservation holders who have not yet ordered a truck.

The starting prices for the 2023 F-150 Lightning will now range from about $47,000 to $97,000, up from roughly $40,000 to $92,000 for the 2022 model-year. Prices exclude taxes and shipping/delivery costs.

Ford is the latest automaker to increase pricing of its newest electric vehicle amid rising inflation and commodity costs. General Motors previously raised the price of its Hummer EV pickup by $6,250, while EV startups Rivian Automotive and Lucid raised the costs of their vehicles substantially more than that. Tesla also has raised pricing this year on its vehicles.

Raw material costs for electric vehicles more than doubled during the coronavirus pandemic, according to a recent report by consulting and research firm AlixPartners.

Ford’s pricing increases come ahead of the automaker reopening ordering on Thursday for F-150 Lightning. The company late last year announced it had closed orders for the vehicle after receiving more than 200,000 nonbinding reservations for the truck.

It’s unclear how long customers will have to wait for a new truck after they place an order. Ford has only sold about 4,400 vehicles since beginning deliveries in May. A spokeswoman for the company said deliveries of new orders are scheduled to begin this fall.

Starting this fall, Ford on Tuesday also said the electric range of F-150 Lightning models with a standard battery is expected to increase by 10 miles to 240 miles. Trucks with a larger battery have a range of up to 320 miles.

Britain is becoming an ’emerging market country,’ analyst says

Pensioners protest over rising fuel prices at a demonstration outside Downing street called by The National Pensioners Convention and Fuel Poverty Action on February 7, 2022 in London, England.

Guy Smallman | Getty Images

Political instability, trade disruptions, an energy crisis and skyrocketing inflation are rendering the U.K. an “emerging market country,” according to Saxo Bank.

The Bank of England warned last week that the U.K. economy will enter its longest recession since the global financial crisis in the fourth quarter, leading GDP 2.1% lower. Meanwhile, inflation is projected to peak above 13% in October.

Importantly, the central bank is not anticipating a sharp rebound from the recession, and sees GDP remaining 1.75% below today’s levels in mid-2025. 

In a research note Monday, Saxo Bank’s head of macro analysis, Christopher Dembik, said the U.K. is “more and more looking like an emerging market country.”

A new prime minister will be announced Sept. 5 after Boris Johnson’s resignation, with Conservative candidates Liz Truss and Rishi Sunak vying for the keys to 10 Downing St. as the country faces a historic cost-of-living crisis and the sharpest fall in living standards on record.

The U.K.’s energy price cap is set to rise by another 70% in October, pushing energy bills above £3,400 ($4,118) per year and driving millions of households into poverty, with a further increase to the cap expected early next year.

The country has also been battling trade disruptions due to Brexit and Covid-related bottlenecks.

The only factor missing from a characterization as an emerging market country, Dembik said, is a currency crisis, with the British pound holding firm despite the litany of macroeconomic headwinds.

“It only dropped 0.70% against the euro and 1.50% against the U.S. dollar over the past week. Our bet: after surviving Brexit uncertainty, we don’t see what could push the sterling pound into a free fall.”

However, he suggested that all leading indicators point to more pain ahead for the British economy. For instance, new car registrations — often perceived as a leading indicator of the health of the British economy — fell from 1.835 million in July 2021 to 1.528 million last month.

“This is the lowest level since the end of the 1970s. The recession will be long and deep. There won’t be an easy escape. This is most worrying, in our view. The Bank of England assesses the slump will last with GDP still 1.75% below today’s levels in mid-2025,” Dembik said. 

“What Brexit has not done by itself, Brexit coupled with Covid and high inflation have succeeded in doing. The U.K. economy is crushed.”

The one solace, according to the Danish investment bank, is that the Bank of England’s expected interest rate hike in September — which would be its seventh in a row — could be the last.

“Outside of the jobs markets, there are signs that some of the key inflation drivers may be starting to ease,” Dembik said. 

“In addition, the prospect of a long recession (five negative quarters of GDP starting in Q4 2022 all the way through to Q4 2023) will certainly push the Bank of England into a wait-and-see position.”

The ‘social contract is broken’

However, the bank suggested that there are longer-term implications to the current crisis.

“Imagine the graduate entering the workforce in 2009/10, who will have been told this was a once-in-a-lifetime crash. They are now in their early 30s and having yet another once-in-a-lifetime economic crisis,” Dembik said. 

“They faced an economy of suppressed wages, no housing prospects, two years of socializing lost to lockdown, obscene energy bills and rent and now a lengthy recession. This will lead to more poverty and despair.”

The Bank of England has projected real household post-tax disposable income will fall 3.7% across 2022 and 2023, with low-income households the hardest hit, and Dembik highlighted the IMF’s recent findings that the U.K.’s poorest households are among the hardest hit in Europe by the cost-of-living spike.