Friday, January 31, 2020

Investors' money locked up as firms get property jitters

Investors have been blocked from withdrawing their money from two funds run by pensions and investment giant Aviva – sparking fears that property markets have peaked.

The last time funds stopped investors withdrawing their money was at the height of the property crash.

The Aviva Irish Property Fund and the Friends First Irish Commercial Property Fund have a value of almost €1bn. Now Aviva has blocked investors exiting the funds for up to six months.

The move has been interpreted by some as a sign that investors think commercial property valuations have peaked. Experts said the residential market was also close to peak.

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Goodbody’s Colm Lauder wrote in a note to investors: “This update from two significant property funds further highlights a perception that the Irish property market is late cycle, especially following the Green Reit sale.”

The phrase ‘late cycle’ means a slowdown in growth as the top of the market is reached.

It is understood that the €1.3bn sale of commercial property company Green Reit last year by founder Stephen Vernon has spooked smaller investors. Mr Vernon has a reputation for calling the top of property market, and his actions are closely monitored.

Smaller investors have reacted to Mr Vernon’s move by pulling money out of property funds, but withdrawals have accelerated in the past few days.

It is understand that there was a deluge of people contacting Aviva yesterday to pull out of commercial property funds, prompted by reports that the funds had been devalued.

Last night, a fourth property fund also said it had sharply written down the value of its Irish property after investors withdrew cash.

A fund run by Zurich Insurance said the withdrawals prompted it to move to disposal-based pricing of its Irish property, an accounting change that led to it cutting its value by 7.7pc, in response to “an increase in net outflows”.

John McCartney, director of research at property agency Savills, said the residential property market was also rapidly reaching a point where supply was meeting demand.

He said the latest figures showed prices had fallen almost 1pc in Dublin in the previous year. This compares with an annual rise of 13pc in April 2018.

Equilibrium

“We are rapidly moving towards equilibrium in the residential property market. It is astounding that people are prepared to ignore the pricing signals,” he added.

He said smaller investors had become spooked by commercial property values, but there was still demand for offices especially as Facebook, LinkedIn and Amazon were expanding in Dublin.

“Demand for office space is strong, and the vacancy rate is low. Institutional investors are still investing,” he said.

Aviva said in a statement: “Due to recent net outflows from the Aviva Irish Property Fund and the Friends First Irish Commercial Property Fund, we have taken the decision to close both funds to all outgoing transactions, including surrenders, and switches.”

It insisted that both funds are open to new business from investors. Friends First is part of Aviva.

Suzie Nolan, senior property fund manager at Aviva Life and Pensions Ireland DAC, said: “Our view is that the fundamentals of the Irish commercial property market remain strong.

“The properties in the fund are actively managed by an in-house team, the Irish economy continues to perform well, unemployment is at a 13-year low of 4.8pc and the demand for good-quality commercial property remains strong from both occupiers and investors,” she added.

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European shares climb in early trading on Brexit day

(For a live blog on European stocks, type LIVE/ in an Eikon news window)

Jan 31 (Reuters) – Gains in airlines and mining stocks helped European shares rise in early trading on Friday, on a day the United Kingdom officially ends its 40-year membership of the EU.

The pan-European STOXX 600, which was up 0.3% by 0811 GMT, was still looking at its second straight weekly decline on concerns about the coronavirus outbreak in China which has now taken more than 200 lives.

Investors also took heart that the World Health Organization (WHO) stopped short of travel and trade restrictions with China, even as it declared the virus outbreak a global emergency.

Travel and leisure as well as the mining subsector, which are among the worst hit European subindexes this week, outperformed.

Spain’s Banco Sabadell tumbled 7.3% after the lender swung to a loss in the fourth quarter from a profit a year earlier due to higher-than-expected bad loan provisions and losses at its British unit TSB.

Brexit day, which comes three and a half years after the United Kingdom first voted to leave the bloc, is not expected to move markets, analysts said. (Reporting by Medha Singh in Bengaluru; Editing by Shounak Dasgupta)

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Thursday, January 30, 2020

Breastfeeding to be allowed in House of Commons chamber

Decades of parliamentary tradition are to be swept away after the new Commons Speaker Sir Lindsay Hoyle lifted a ban on women MPs breastfeeding in the chamber.

“I’m of the view there isn’t a policy,” said Sir Lindsay, responding to questions from parliamentary journalists at Westminster. “My view is, it is up to the woman.”

“I think it would be wrong for me as a man to dictate on that policy. If it happens, it happens. I wouldn’t be upset by it, let’s put it that way.”

His landmark ruling overturns an edict issued in 2000 by the first woman Speaker of the Commons, Betty Boothroyd, which was upheld by her successors Michael Martin and John Bercow.

Sir Lindsay’s move follows a campaign, led by women MPs, for scrapping the rule and also implements a recommendation by the Commons’ powerful administration committee.

The first woman to breastfeed in the Commons chamber was Labour’s Helene Hayman, then the youngest MP, back in the late 1970s. She was later Lord Speaker from 2006-2011.

Harriet Harman, now the self-styled “Mother of the House” and a leading campaigner for women’s rights in Parliament, breastfed her child shortly after becoming an MP in a by-election in 1982.

But in 2000 Speaker Boothroyd ruled: “I do not believe that the feeding of babies in either the Chamber or Committee is conducive to the efficient conduct of public business.

“Nor do I think that the necessary calm environment in which to feed babies can be provided in such circumstances.”

Her successor, Mr Martin, suggested women should use a feeding room near where committee meetings took place.

More recently, the administration committee of MPs recommended allowing breastfeeding “wherever it is appropriate in the Palace of Westminster”.

And a report commissioned by Mr Bercow in 2016 recommended that mothers should be able to bring babies into the chamber and voting lobbies.

Since then a number of women MPs, including former Liberal Democrat leader Jo Swinson, Labour MPs Stella Creasy and Ellie Reeves and Conservative Kemi Badenoch, have brought their babies into the chamber during Commons votes and for the swearing in after last month’s election.

During his Q&A with political reporters, Sir Lindsay was also quizzed on the bullying allegations against Mr Bercow and whether his predecessor should receive a peerage, which is so far being withheld by Boris Johnson.

He said that in his nine years as Mr Bercow’s deputy he was “personally” not bullied by him. “Personally I can honestly say I didn’t witness it,” he added. “But I do speak to people who may or may not have been subjected.”

On whether Mr Bercow should receive a peerage, Sir Lindsay said he should be nominated but then vetted.

“When somebody’s name goes forward to the Lords, people are checked and issues are reviewed about whether they are a fit person,” he said. “Part of that vetting will be looking into people’s conduct.”

And on a so-called “bullying culture” in Westminster, the Speaker said: “MPs haven’t always been the best employers of their staff.

“I think people reflected on the way the chamber carried out, the way we were speaking to each other, the threats, the intimidation, it was not a nice place.”

But he claimed: “The bullying culture is over, we are not going to tolerate it. And I’m certainly not going to tolerate people who abuse security staff who are carrying out their duties to make us safe.”

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There’s been a jump in the number of millennials with $100,000 saved — here’s how they did it

The most fortunate young Americans are ahead of their older peers when they were their age.

A sizeable number have seen a savings bump in recent years. One quarter of millenmials have $100,000 or more in savings, up from 16% two years ago, according to Bank of America’s BAC, -0.69% “Better Money Habits” report, which surveyed nearly 2,000 millennials aged 24 to 41. The bank asked about the total amount of savings, including bank savings/checking accounts, IRA, 401(k) and other retirement or investment accounts. A 10-year bull market has helped.

Many millennials also arrived onto the jobs market during or in the immediate aftermath of the Great Recession. The good news: the jobs environment is getting rosier, at least judging by the latest jobs figures. The unemployment rate was unchanged at 3.5% in December and remained near a 50-year low. The labor force participation rate was 63.2% in December, unchanged from the previous month, helped by an increase in women aged 25 to 34 looking for work and/or getting jobs.

That’s an encouraging improvement for this struggling generation, according to the survey, which was first reported by USA Today. Millennials are saddled with record student-loan debt of $1.5 trillion and many have a hard time affording a first house. In 2015, only 8% of millennials said they had $100,000 or more stashed away for a rainy day. Millennials are also just as likely to budget than both Generation X-ers and baby boomers, the study also found.

This age group has competition from younger cohorts, however. A separate study from credit bureau TransUnion TRU, +0.59% looked at the credit profile of Generation Z, those born in or after 1995. Among those Gen Zers who have already reached adulthood in the U.S., 66% have some sort of loan product. There’s evidence that members of Generation Z, who came of age after the Great Recession, are also having an easier time paying off their debt than millennials did at their age.

Millennials, previous studies suggest, have fewer responsibilities than their older counterparts. They are more likely to rent than own property and, unlike their parents and older siblings, are less likely to have kids. They spend more than an average of $2,300 per year than older generations on five key items: groceries, gas, restaurants, coffee and cell phone bills, according to personal-finance site Bankrate. And they spend $233 per month on meals versus $182 for older generations.

They also have bigger problems. They shoulder more student-loan debt than any other generation and face house prices that are far higher than their parents did at their age in a post-recession environment of stagnant wages. Student-loan debt has reached $1.3 trillion as the cost of college has soared. And spending no more than 30% of their income on rent or a mortgage, a golden rule for decades, is now almost impossible for many young Americans.

(Jacob Passy contributed to this report.)

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Tuesday, January 28, 2020

Posh grave of Iron Age 'warrior' buried 2,000 years ago in Roman Britain uncovered

A FANCY grave belonging to an Iron Age "warrior" buried 2,000 years ago has been uncovered in the UK.

The battle-hardened individual's burial dates back to the time when the Roman Empire ruled Britain.


Inside the grave were iron weapons, including a spear and a sword with a decorated scabbard.

The burial was found during an excavation on a site in Walberton near Chichester, where 175 new homes are to be built.

Archaeologists were astonished by the discovery, as late Iron Age / early Roman graves are extremely rare in the south of England.

X-ray scans of the sword and scabbard revealed a "beautiful copper-alloy decoration".


Experts say this would've been very visible when the sword was worn in life.

"There has been much discussion generally as to who the people buried in the 'warrior' tradition may have been in life," said Jim Stevenson, of Archaeology South East.

"Were they really warriors, or just buried with the trappings of one?

"Although the soil conditions destroyed the skeleton, the items discovered within the grave suggest that the occupant had been an important individual."

Dotted lines that appeared on the X-ray are also suspected to be the remains of a studded garment worn by the buried individual.

It's another exciting discovery because evidence of clothing rarely survives after such a long time.

The Romans in Britain

Here's everything you need to know…

  • The Roman Empire conquered vast swathes of Europe, West Asia and North Africa.
  • A Roman force of 40,000 led by Aulus Plautius landed in Kent and took the south east in 43 AD.
  • Key tribal leaders surrendered, and within three years Britain was declared part of the Roman Empire.
  • Londinium (London) was founded in 47 AD and became the country's capital. Networks of roads were built across the country.
  • Over time, the Britons began to adopt Roman customs, such as towns, animals, a new religion and ways of reading and counting. The Romans even gave us the word "Britain".
  • The Romans largely remained in the south of Britain, famously never managing to take Scotland from the country's violent Barbarian forces.
  • By 410 AD, the Empire was falling apart, and Roman rule ended in Britain when soldiers were recalled to Rome to protect other parts of it.


The grave also contained remains of a wooden container, which was preserved as a dark stain.

Experts think that was likely used to lower the body into the grave.

Four ceramic pots were placed outside of the container but still within the grave.

The jars were made from local clays and would typically have been used for preparing, cooking and storing food.

But they were likely placed in the grave as containers for "funerary offerings" – possibly as supplies for the dead individual in the afterlife.

Archaeologists took such detailed recordings of the grave that they were able to create an exact 3D model, which can be seen here.

They now hope to examine local warrior burials to find out more about the identity and social status of the deceased.

In other news, the graves of 50 slaves who were forced to build an elite Roman villa in the UK were recently unearthed.

Bronze Age poo from "Britain's Pompeii" reveals how locals were riddled with parasites.

Ancient Chinese people gave their babies coneheads by ‘moulding their skulls’ to show off how rich they were.

And, from headless vikings to ‘screaming’ mummies, here are some of the most gruesome ancient corpses ever found.

What do you make of this discovery? Would you like to have lived in Roman Britain? Let us know in the comments!

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Monday, January 27, 2020

Startup braves Theranos stain with dreams of low-cost blood tests

San Diego life sciences executive Jeff Hawkins is trying to bring credibility back to a field rocked by scandal.

A former Illumina vice president, Hawkins heads startup Truvian Sciences. The five-year-old company is developing a compact blood testing machine that promises to deliver 40 standard health and wellness screening results in about 20 minutes, compared with up to a week turnaround time for similar tests processed at centralised labs.

Theranos founder Elizabeth Holmes. Credit:AP

The desktop device, which targets retail health clinics such as those popping up in shopping centres, medical offices and corporate wellness centres, also requires less blood than is commonly drawn for tests sent to large labs. And Truvian expects prices to be significantly lower as well.

The company's technology is still in development. While experts say Truvian is well prepared to meet accuracy and precision targets on its machines, it hasn't proven its devices work yet.

And there is plenty of scepticism around desktop blood testing. Truvian's business model is similar to that of Theranos, the notorious Silicon Valley firm that promised more than 200 tests with just a finger prick of blood.

Theranos raised $US400 million ($590 million) from investors and was valued at more than $US9 billion. But its technology claims were fiction. Theranos collapsed in 2018 after three years of scandal. Founder Elizabeth Holmes was charged with criminal fraud for misleading investors. A book, podcast and HBO documentary chronicled its epic downfall.



In the wake of Theranos, venture capital investors questioned whether desktop blood diagnostics presented an impossible engineering challenge.

In addition, cautious retailers now demand US Food and Drug Administration approval before even considering bringing compact blood testing equipment into their stores, said Hawkins. Theranos rolled out popular direct-to-consumer blood testing centres in some pharmacy outlets in the US state of Arizona without regulatory approval. There were several reports of inaccurate results.

Truvian is attempting to break through the scepticism by being as transparent as possible about its technology, pursuing regulatory approval, teaming with top medical laboratory leaders to validate the science, and setting a high bar for test accuracy.

"We want to make sure our instrument gives you a result that is of the same quality as the result you would get if your blood is sent off to a central lab," said Hawkins. "The core tenant of what we did was say how do we deliver the speed, convenience and lower blood volume but also offer that really high-quality result."

The message is getting through. Last month, Truvian moved into a new 11,000 square metre headquarters in San Diego on the heels of raising $US27.1 million in a second round of venture capital funding.

Investors include GreatPoint Ventures, Tao Capital Partners, DNS Capital and Domain Associates. The recent funding brings the total raised by Truvian to $US46.3 million.

Truvian aims to tap into two trends: consumers demanding more direct access and control of their health and retailers, pharmacies and corporations offering outpatient health/wellness services for customers and employees.

In theory, these retail and workplace clinics provide convenience and lower-cost health care, particularly for people with minor illnesses. They can get checked without going to a hospital. Having fast, relatively easy blood diagnostics at stores or workplaces help outpatient health providers determine if a couple of Tylenol and rest is enough, or if something more serious requires a visit to a doctor.

"One thing Theranos did, which is probably why there are even investors around, is open up a lot of people's eyes to this market opportunity," said Hawkins. "If you could build a platform like this and deliver it, these large retailers and corporate clinics would engage in diagnostics."

Truvian was co-founded by seven life science entrepreneurs. Two of the most active co-founders are Dena Marrinucci, formerly of genetic testing startup Epic Sciences and currently Truvian's senior vice president of corporate development and Kim Kamdar, a PhD and partner with health care venture capital firm Domain Associates, is another co-founder. Hawkins joined in January 2018.

The company employs 50 workers and expects to hire approximately 30 more this year. It plans to deliver beta test machines to independent labs later this year ahead of seeking US regulatory approval by year-end. The company also will seek approvals in Europe.

"They reached out to me and a number of other people who are in the regulatory pathway and are deep believers in it," said Kelly Bethel, a staff physician at Scripps Clinical Medicine Group and a Truvian adviser.

"They asked what kind of study do we need? What kind of accuracy do we need? How do we do this right? That gave me a great deal of confidence."

Truvian's device resembles a squat desktop computer. It uses optical sensing systems to deliver clinical chemistries, immunoassays and hematology all in one instrument. As part of its platform, Truvian can deliver blood test results to mobile phones.

Its initial panel would target standard wellness markers such as cholesterol and glucose levels, complete blood cell count, as well as thyroid, kidney and liver functions.

Today, most blood samples are processed at centralised labs such as Quest Diagnostics or LabCorp. using large, expensive machines, said Hawkins. The esoteric results typically come back no sooner than four hours, often the next day, and sometimes take a week.

Getting blood test readouts in less than an hour enables "a lot more coherent discussion" between health providers and patients, said Bethel.

"It is just much better if the physician or provider and the patient can have those numbers in front of them," she said. "They can say, this one is completely fine and normal, but this other one is a little high. I want you to do something to address that."

Pathology Professor Jerry Yeo, a clinical chemist for 32 years who is currently at the University of Chicago, knew Hawkins from his time at Illumina. Yeo was an early skeptic of Theranos. So Hawkins invited him to San Diego to look at Truvian's work and become an adviser.

"I told Jeff, after the Theranos fiasco, anybody like me is going to say show me the data," said Yeo. "I need to see how the technology works. I need to smell the box and touch the box."

Yeo said he found Truvian's efforts to date credible for the market niche the company is pursuing. He said Truvian scientists were willing to show preliminary data from a prototype. Yeo expects to be one of the first labs to test the Truvian's beta machines.

"Everyone is more septical now," he said. "Everybody's antenna is up. So you better be able to show it, publish it and test it by a third party independent lab, not just you. I think they are trying to do all those things."

The global market for blood diagnostics tops $US60 billion annually. According to Hawkins, nobody today is doing immunoassays, blood chemistries and hematology on one desktop machine – though some startups have compact machines that focus on a particular category, such as chemistries to measure blood glucose.

"It's a big market," said Hawkins. "I have been around diagnostics enough to know that if we succeed, that will give confidence to others that they could succeed. But I think multiple companies can survive in this market."

The San Diego Union-Tribune

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Sunday, January 26, 2020

Musk Takes On German Ecology Critics of Tesla Plant Near Berlin

Elon Musk said concern that a Tesla assembly site in a rural area near Berlin would cause water shortages is exaggerated, pushing back against critics of the plant.

“Sounds like we need to clear up a few things!” the carmaker’s chief executive officertweeted. “Tesla won’t use this much net water on a daily basis. It’s possibly a rare peak usage case, but not an everyday event.”

Tesla still has to jump through local hoops for the proposed plant, located in a water conservation zone in a forest bordering a nature preserve. Company planning documents saying the so-called Gigafactory 4 would need about 98,000 gallons of water per hour set off protests by residents this month.

Over the weekend, Musk cleared a different environmental obstacle: unexploded World War IIordnance, a result of the Berlin area’s legacy as an industrial target for Allied bombers.

Bomb disposal officers carried out controlled detonations of seven wartime bombs on Sunday at the future Tesla site, German news agency DPA reported.

Once the area is free of old explosives, harvesters and trucks will roll in to clear thousands of trees in the first stage of development. The work needs to be done by the end of February to meet Tesla’s timetable for starting production in July 2021.

Musk said “this is not a natural forest — it was planted for use as cardboard.” In a subsequent tweet, he said the “net environmental impact will be extremely positive!”

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WeWork inks office space deal with SoftBank-backed Gympass: sources

NEW YORK (Reuters) – WeWork has signed a deal to provide space to 250 employees of gym membership app company Compass in New York, the latest example of the U.S. office-sharing start-up’s majority owner, SoftBank Group Corp, using its connections to buoy its business, people familiar with the matter said on Sunday.

SoftBank is also a minority investor in Gympass. While it does not have absolute control over it, it encourages its portfolio companies to collaborate, one of the sources said.

Around 25,000 employees at SoftBank-backed companies, including U.S. ride-hailing start-up Uber Technologies, Brazilian online housing broker QuintoAndar, and online real estate marketplace Compass, are in WeWork offices.

SoftBank is hoping this network of portfolio companies will help its attempted turnaround of WeWork, which it rescued from bankruptcy last year by acquiring majority control. This followed a failed attempt by WeWork to launch an initial public offering in September, which left it starved for cash.

Last year, in the third quarter alone, WeWork parent The We Company saw its net losses more than double to $1.25 billion year-on-year.

WeWork has around 650,000 subscribers worldwide, and hopes to hit 1 million by early 2021, one of the sources said.

The company has agreed a three year-deal with Gympass, which was founded in Brazil but is now headquartered in New York, for office space in Manhattan’s SoHo area, potentially tripling Gympass’ presence in the city, according to the sources.

The sources did not disclose the value of the contract and requested anonymity because the agreement is private.

Gympass, which was not previously a WeWork client, is a marketplace for corporate clients to offer gym access to employees through a network of over 50,000 gyms and studios around the world.

It was last valued in 2019 at $1 billion in a $300 million fundraising led by SoftBank, according to data provider PitchBook.

After taking control of WeWork, SoftBank installed its chief operating officer Marcelo Claure as executive chairman. WeWork’s co-founder and ex-CEO Adam Neumann agreed to leave the company in October after securing an exit package from SoftBank worth up to $1.7 billion.

Neumann sought to branch out WeWork’s concept to areas such as education and made a flurry of acquisitions, many of which the company is now looking to divest.

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Saturday, January 25, 2020

Bernie Sanders’ blatant blunder against JPMorgan’s Jamie Dimon

In a bid to stir up trouble at the World Economic Forum in Davos, Switzerland, last week, Democratic presidential candidate Sen. Bernie Sanders took a misguided swipe at JPMorgan CEO Jamie Dimon on Twitter.

Dimon, a responsible, moderate Democrat, has been on a mission to educate the far left that socialism is not quite what its supporters would have you believe.

The banker wrote a thoughtful piece for Time magazine’s Davos 2020 issue in which he stated, “I believe [socialism] would be a disaster for our country. True freedom is inexorably linked with the free enterprise that capitalism guarantees, and we mustn’t forget that.”

Later, during a CNBC interview at Davos, Dimon went on to reiterate socialism’s shortcomings.

Socialist Sanders snidely tweeted in response, “That’s funny. Jamie Dimon seemed fine with corporate socialism when his bank got a $416 billion bailout from American taxpayers.”

But Bernie had his facts wrong. The amount was $25 billion, and JPMorgan was forced by the government (as were all the other banks) to take Troubled Asset Relief Program (TARP) capital — even though JPMorgan’s balance sheet was so strong that Dimon didn’t want it.

Further, to assist the Federal Reserve and the FDIC, JPMorgan agreed to acquire Bear Stearns and Washington Mutual in order to protect customer assets, in a deal financed by the government. All funds were paid back at a profit to the US.

I agree with Dimon. Socialism breeds corruption and politicization of commerce and capital, and in virtually every case morphs into a weak and depleted economy, with non-rewarding jobs, few career paths and very rich leaders.

Today there is no ceiling on success in the US. Let’s keep it that way.

And keep our facts straight.

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Elizabeth Warren wins Des Moines Register endorsement in Democrats 2020 U.S. presidential nomination race

(Reuters) – The Des Moines Register newspaper endorsed Massachusetts Senator Elizabeth Warren in the crowded race for the Democratic Party’s presidential nomination late Saturday, a coveted show of support that could boost her campaign in the state’s first-in-the-nation caucus Feb. 3.

Top finishers in Iowa’s nominating contests frequently go on to lead their parties in the final election matchup.

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Oil set for longest run of weekly losses since last May

Oil is heading for the longest run of weekly losses since last May on fears that China’s coronavirus outbreak may dent demand amid plentiful global supplies, even as United States crude inventories unexpectedly declined.

Futures in New York are down 5.1 per cent this week as officials widened their travel ban beyond the epicentre of the outbreak.

S&P Global Ratings warned that the virus could hit Chinese consumption. Broader market sentiment was mixed, with mainland China shut for Chinese New Year holidays.

The fast-spreading virus is the latest challenge for a market that has been buffeted this year by geopolitical turmoil in the Middle East and North Africa, as well as the phase one trade deal between Beijing and Washington.

While the International Energy Agency said the world is “awash with oil”, a surprise 405,000-barrel decrease in US crude stockpiles offered some relief.

“The coronavirus has clearly taken many of the more fundamental issues off the market and is impacting sentiment,” said senior commodity strategist Daniel Hynes at Australia and New Zealand Banking Group in Sydney.

West Texas Intermediate futures is poised for a third weekly drop after closing at the lowest level since Nov 29 on Thursday.

Brent crude fell four cents to US$62, and is also set for a third weekly decline.

Goldman predicts that the virus may crimp global demand by 260,000 barrels a day this year.

BLOOMBERG

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Friday, January 24, 2020

‘Kids that don’t fail are normally frugal.' Wealth advisers say Meghan and Harry’s lifestyle already raises red flags

Meghan and Harry Windsor aren’t the first people to try to quit the safety of a rich family and try to go it alone, and they won’t be the last.

But financial experts who have counseled wealthy families say the reports about the couple’s first financial moves as an independent royals raise classic warning signs. Chief among them: Reports that the couple is looking to buy a mansion in Vancouver on the market for $36 million Canadian dollars ($27 million in U.S. dollars), already dubbed a “Megha-Mansion” by the British press.

That might account for the bulk of the couple’s rumored entire net worth.

Or it might account for all of it.

“That is a red flag,” writes Elizabeth Windisch, a financial planner at Aspen Wealth Management in Centennial, Colo., in an email, “they really couldn’t find a nice, secure home for, say, $15 million.” Others agree. “If it’s true, that would be a red flag,” says Mike Alves, managing director of Vida Private Wealth in Pasadena, Calif.

This sort of move is a common mistake among offspring who leave the safety of their wealthy families, and it rarely bodes well, says Peter Creedon, an adviser at Crystal Brook Advisors in Mt. Sinair, N.Y. They often leave the family, but carry on trying to maintain a similar lifestyle, he says.

The royal family’s media relations office did not immediately respond to queries.

Meanwhile, reports that Prince Charles will be bankrolling the couple for their first year are also raising groans among financial experts who advise high-net-worth families. The first year of parental support often turns into “indefinitely,” says Windisch. Such support at the beginning usually indicates “that neither party is at all ready to face what it takes to be independent, and is only delaying the inevitable time to face the music. These types of parents have a difficult time saying ‘no.’”

The Sussexes have some things in their favor that could boost their earning power considerably: They have 11 million followers on Instagram FB, +0.29%, they’re now known by their first names around the world, and they have a network of boldface names, including Oprah Winfrey, George Clooney and the Obamas.

Assuming their celebrity/royal wattage doesn’t fade anytime soon, some marketing experts have said they have the potential to make tens of millions of dollars a year or more from their SussexRoyal trademark, if they manage to balance public exposure with their status as members of the British royal family. Netflix NFLX, +1.89% has already expressed interest in working with the couple.

While the couple’s move to North America received considerable backlash in the U.K. media and even from members of the public on their own Instagram account, the U.S. appears to welcome ex-royals with open arms. Sarah, Duchess of York has made a living in the U.S., but it has involved being a pitch woman for WW International, WW, +0.60% the company formerly known as Weight Watchers, and confessional appearances on “Dr Phil.”

Their royal status also presents challenges: They require around-the-clock security. What’s more, they can’t say “yes” to every multi-million-dollar offer that comes their way. Unlike the Kardashians, a family that has made hundreds of millions of dollars from their fame, the Sussexes brand relies on their revered status as members of Britain’s royal family. Branding socks and ties with their royal insignia might be too much even for Harry’s grandmother, Britain’s Queen Elizabeth, to stomach.

Meghan and Harry may be planning to live on their investments while they get lucrative new careers, but some analysts question whether the numbers add up. They are reported to have anywhere between $30 million and $45 million, although even those estimates may be high. A down payment on a house in Canada would immediately $5 million or $6 million as a down payment on a house, equal to around 20% of the price.

If they were to invest part of their remaining fortune? Realistic investment returns today are unlikely to be higher than “6% to 7%,” and even that will involve plenty of risk, says Mebane Faber, chief executive of Cambria Investments and a leading analyst of global asset allocation strategies.

Then there’s taxes. The top rates in Vancouver, Canada: 25% for capital gains, and 50% for interest and ordinary income, notes global accounting firm PricewaterhouseCoopers.

Based on common metrics in the investment world, they’ll be subject to investment management fees which are likely to exceed $100,000 a year and could run at several times that. By that math, they can expect to earn somewhere between $1.1 million and $1.9 million year. Mortgage costs on the new home? About $1.4 million a year, based on current Canadian mortgage rates of about 3%. The property taxes, around 0.265% of the value, will run to another $75,000 a year.

That would leave the Sussexes somewhere between an income of $400,000 and a deficit of $500,000. From this they will have to finance their living expenses, at least until they get “Sussex Royal” or Meghan’s voice-over career up and running. Although some are skeptical that the Sussexes have been spending $3 million a year, on top of renovation costs and the expenses of official duties, even more cautious observers say the couple lives very large indeed.

Financial advisers say that rich kids who successfully quit their families and go it alone usually share a few key characteristics. They typically have a realistic plan to become self-supporting. “Before breaking from a family enterprise or business, have a plan,” says Peter Creedon. “The more detailed the better.”

They’re quick to slash their living expenses, at least until they are earning big money themselves. “The kids that don’t fail are normally frugal,” says Mike Alves. “They live within their means. They’re savers.”

The offspring who make it usually have parents who don’t continue to support them, financial advisers say. They know they can’t go back — or won’t. “I’d have walked on hot coals rather than going back to them to ask for more money,” says Creedon of his own experience leaving home.

Maybe most importantly, say advisers, people who break away from their rich families and succeed on their own have usually had core money values drummed into them by their parents. Many of them are born to parents who made their money, knew the value of every dollar, and made sure their kids did too. Conceivably that could apply to Markle’s family. Harry’s family? Probably not so much.

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New York City To Require Businesses To Accept Cash Payments

New York City stores and restaurants will soon be legally required to accept cash or face a stiff fine.

The city council is expected to pass a bill on Thursday that would prohibit brick-and-mortar food and retail establishments from refusing payments of $20 or less in cash or imposing a fine or tax on cash payments.

Councilman Ritchie Torres, who sponsored the bill, said the motive is to protect New Yorkers from discrimination.

“We in the city council have real concerns that an increasingly cashless marketplace could have a real-world discriminatory effect on low-income communities, especially communities of color that lack access to credit or debit,” Torres said Thursday.

According to a report by the Urban Institute, members of 360,000 households in New York City do not have a bank account, equaling roughly 11.7% of the city’s population. That figure is higher than the national average of 7.7% and higher than the state’s average of 8.5%.

Individuals who use cash, as opposed to debit or credit, may do so because they lack documentation, a permanent address, are living in poverty or don’t have brick-and-mortar banking services in their neighborhood, Torres said.

Of the city’s five boroughs, the Bronx, which Torres represents, has the highest percentage of unbanked and underbanked households. The Bronx and Brooklyn have rates of unbanked and underbanked households well above the national, state and city averages, according to the bill.

An exception to the cash rule will be if the business provides a machine that converts cash into a prepaid card that can be used to make purchases without any additional cost to the customer. Business transactions that take place entirely online, by phone or by mail are also excluded from the new rule.

The bill is expected to go into effect later this year. Once imposed, businesses that refuse to accept cash would face a fine of up to $1,000 for the first offense and up to $1,500 for any subsequent offenses.

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Thursday, January 23, 2020

Tucker Carlson: Schiff takes his star turn at Trump's impeachment trial -and CNN and MSNBC are deep in bliss

Tucker: Schiff relishes his turn in the spotlight

CNN, MSNBC praise Rep. Adam Schiff during impeachment trial.

Imagine a movie written and directed by children whose ending you already know. And by the way, it's 20 hours long, in Hungarian, with misspelled subtitles.

That's what watching President Trump's Senate impeachment trial is like. We've been monitoring it anyway all day because that's what we do. The star of the proceedings Wednesday was Congressman Adam Schiff, fittingly of Burbank, Calif.

Schiff, who, sources say, had not a single friend in high school, has been relishing his recent turn in the spotlight. He seems to have taken a break from his Joe McCarthy impression, in which he repeatedly denounced his political opponents as agents of the Russian government.

And he is now trying a new role, as a tough, but lovable, dean of students. Schiff spent the entire day delivering a lecture about the perils of cheating, like America was suddenly the world's largest middle school.

Rep. Adam Schiff, D-Calif., lead Trump impeachment manager: By inviting foreign interference and cheating an election…

To cheat in an election for precisely this reason.

Helping him cheat in the next election.

To cheat in our election – should we just get over it?

It's kind of cheating, really, if we're going to be honest about it and blatant about it, it's cheating.

In other words, to cheat.

"Keep your eyes on your own paper, class."

But Schiff didn't stay in character for long. At one point, he seemed to switch abruptly from Mr. Chips to Dr. Strangelove.

The United States, Schiff explained to the 19 viewers who were still watching, confused, " aids Ukraine and her people so that we can fight Russia over there, and we don't have to fight Russia here."

Huh? Wait a second, whoever said anything about fighting Russia, much less "over here"? Is Putin planning to invade the homeland? Is Milwaukee safe? Do unseen Slavic saboteurs move among us? What does Adam Schiff know about World War III that the rest of us don't know?

Well, unfortunately, no one on CNN or MSNBC thought to ask him that. They were too deep in bliss.

To the mouth breathers on cable television, Adam Schiff's speech is like a brainstem massage. Surging waves of ecstasy flood the central nervous system; linear thought ceases. All that's left are satisfied grunts of pleasure.

Is Putin planning to invade the homeland? Is Milwaukee safe? Do unseen Slavic saboteurs move among us? What does Adam Schiff know about World War III that the rest of us don’t know?

Wolf Blitzer, CNN anchor: A very, very powerful and forceful speech, almost two and a half hours by Adam Schiff.

A very, very strong case from Adam Schiff.

George Conway, attorney and husband of Kellyanne Conway, counselor to President Trump: It was a very coherent, cohesive narrative, something that the White House doesn't have.

Andrew Weissmann, MSNBC legal analyst: This was a speech really aimed at the better angels, and I think Adam Schiff did a really great job.

Blitzer: What did you think of the presentation by the lead House Manager, Adam Schiff?

Jeffrey Toobin, CNN legal analyst: I thought it was dazzling.

We want to apologize to any viewers under 18 who may have just watched that. It was obviously pornographic and not suitable for children.

And while we're at it, another apology of sorts. Viewers of the show Tuesday night had to endure an exceedingly long speech by Congressman Hakeem Jeffries of New York, who is a so-called "impeachment manager."

Now, judging by his title, you might imagine Mr. Jeffries is some sort of statesman, an august figure in the political realm. Not so. In fact, he's a joke. And not only that but a race-baiter.

Rep. Hakeem Jeffries, D-N.Y.: The president of the United States chose to pull the sheets off and reveal himself in terms of his tendency to be a racial arsonist, fanned the flames of hatred.

Accepting assistance from a hostile foreign power like Russia is treasonous behavior.

The president of the United States is a dangerous con artist.

It seems that the Trump campaign conspired with Russian spies to sell out our democracy.

We do know that every racist in America voted for Donald Trump.

We have a hater in the White House.

The Grand Wizard of 1600 Pennsylvania Avenue.

Now, wait a second. So the president is not only a Klansman but also an active Russian spy. That's quite a combination.

Under normal circumstances, a claim like that by a sitting member of Congress would be headline news. But as it was, nobody seemed to notice. It's normal now. They're all inflamed extremists. They will say absolutely anything.

Here's Mazie Hirono, for example, who's an actual sitting U.S. senator from Hawaii, telling you it's ludicrous — maybe even a sign of mental illness — to believe that impeachment has been in the works since 2016.

Sen. Mazie Hirono, D-Hawaii: They're still saying that we were out to get the president from day one — some kind of a weird conspiracy theory that I have to say. Even [Supreme Court Justice Brett ] Kavanaugh brought out this. Do you really believe this stuff? I find it incredible.

Yes, it's incredible. It's just a weird conspiracy theory, just like when people said the federal food pyramid was backward and carbs didn't really make you thin. Or those wackos who claimed that Iraq had no weapons of mass destruction. Or for that matter, that UFOs were real.

Just pure insanity like that. Impeachment in the works for years? You'd have to be a nut to believe that.

Well, unfortunately, nobody passed those talking points to Democrat Al Green, soo he just went ahead and admitted it in an interview.

Rep. Al Green, D-Texas: Well, the genesis of impeachment, to be very candid with you, was when the president was running for office.

Oops, somebody accidentally told the truth. Don't worry, it won't happen again. But you've got to love a man who talks with his eyes closed.

Adapted from Tucker Carlson's monologue from "Tucker Carlson Tonight" on Jan. 22, 2020.

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Volkswagen CEO: Seat's de Meo probably in talks with Renault - CNBC

FRANKFURT/PARIS (Reuters) – The chief executive of Volkswagen (VOWG_p.DE) said Luca de Meo, who stepped down as chief executive of the German carmaker’s Spanish Seat brand this month, was probably in talks with French carmaker Renault (RENA.PA).

The Italian-born de Meo has served as chairman of Seat’s executive committee for four years, overseeing a resurgence in the Barcelona-based company’s sales and boosting its prominence within the Volkswagen group.

“We are very, very sad that Luca is leaving us because he played a very important role in the group,” Volkswagen CEO Herbert Diess told CNBC on the sidelines of the World Economic Forum (WEF) annual meeting in Davos.

“He did a great job with us but we accepted that he’s going to leave and he’s probably in talks with Renault, that’s what he told us,” Diess said.

Renault declined to comment on the matter on Thursday.

Renault Chairman Jean-Dominique Senard said this week that a new CEO would be named shortly.

De Meo has been in talks with Renault but faced a potential hurdle over a stringent non-compete clause in the contract, sources told Reuters previously.

The French state, which has a stake in Renault, has given its tacit backing to de Meo’s possible appointment.

“There’s no reason the state would oppose de Meo’s nomination,” a source at the economy ministry said.

In December, Spanish newspaper La Vanguardia cited anonymous sources as saying Renault – in the wake of the high-profile arrest of former boss Carlos Ghosn – had offered de Meo the job of chief executive.

Renault and its Japanese partner, Nissan Motor (7201.T), last week rejected media reports that their 20-year-old alliance was in danger of being dissolved.

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Wednesday, January 22, 2020

Wall Street treads water as China virus fears ease

NEW YORK (AFP) – Wall Street had a mostly flat day on Wednesday (Jan 22), with markets little moved either by strong earnings or a rising death toll blamed on a virus from China.

The benchmark Dow Jones Industrial Average and the broader S&P 500 were both about flat at 29,186.27 and 3,321.81, respectively.

The tech-heavy Nasdaq managed to eke out a 0.1 per cent gain to finish at 9,383.77, however.

Markets pulled back from records on Tuesday as investors grew worried about the new coronavirus in China, which has so far killed more than a dozen and infected hundreds.

But those fears eased in Wednesday’s session.

“Today, we found out how much time it would take to contain this and more details and people feel a little bit less nervous about that story,” Art Hogan, chief market strategist at National Holdings, told AFP.

“This story as a market mover dissipated a bit,” he added, saying attention would be more on individual stocks.

IBM rose 3.4 per cent after topping fourth-quarter earnings expectations.

But Dow member Boeing fell another 1.4 per cent as newly-installed chief executive officer David Calhoun said the company would stand by its globally-grounded 737 Max jet.

The company expects to resume production even before authorities allow it to fly again later this year, Calhoun said.

Among other companies reporting earnings, Johnson & Johnson fell 0.7 per cent, Netflix dove 3.6 per cent and United Airlines sank 2.9 per cent.

Meanwhile, electric automaker Tesla topped US$100 billion (S$135 billion) in market value for the first time, triggering a payout plan that could deliver billions to founder Elon Musk.

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Kirstie Allsopp and Phil Spencer reveal simple tip to boost property value by £63,000

Phil Spencer and Kirstie Allsopp are property experts who share their renovation tips on the small screen. Tonight, they will appear on Kirstie and Phil’s Love It or List It to help unhappy homeowners. In previous episodes, the pair have revealed how to boost property value by up to £63,000.

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  • Property: Expert reveals ‘crucial’ way to boost value by £45,000

On the show, Kirstie and Phil go head to head as Phil tries to help unhappy homeowners find their dream property.

Kirstie will focus on coming up with a plan to renovate the house instead.

Analysing data from season one to four, experts at Insulation Express revealed the most profitable renovations the show had seen.

The data revealed refurbishments boosted the value of one property by a whopping £63,000.

The experts said: “Whilst not every house featured on the show stated the value added post-refurbishment, from the homeowners that did, the average renovation increased the value of their home by £63,000.

“Taking into account refurbishment costs, the average profit totalled £13,444.”

Those who made the most profit managed to do this by looking by using space in the property more effectively.

“The two properties that had the highest return on their investment received a hefty profit of £35,000,” the expert said.

“However, to make such a high profit, they both invested a lot of money – £60,000 and £95,000.

“But what unhappy homeowners can take from this is that their main profit came from altering the layout of their homes and moving rooms, in order to fully utilise the space.”

By following Kirstie and Phil’s advice, the data showed homeowners can also boost how much their home is worth by looking at the needs of potential buyers.

They added: “If you consider doing this yourself, take note of how much time you spend in each room and consider what other homeowners may want.

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  • Property for sale: This cheap trick can boost home value by £60,000

“A large kitchen is usually a desirable aspect in any home. Can you swap around the kitchen and living room?

“Or perhaps knock down a wall between the dining room and kitchen to create a larger space?

“Sometimes you can craftily add a new bedroom to a home by dividing one bedroom into two, as long as they’re still good-sized rooms.”

Homeowners do not need to splash the cash to get a good return and Kirstie has previously helped increase property value with smaller improvements.

Experts at Insulation Express said: “It’s worth mentioning that you don’t have to spend a lot on home improvements to get a big profit.

“One couple only spent £7,000, and focused on renovating their kitchen, as well as repainting.

“From this they added £20,000 to the value of their home, making a £13,000 profit. This proves you don’t have to completely change your home if you’re planning on selling.

“A fresh update like a new kitchen, or a lick of paint can add great value.”

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Sunday, January 19, 2020

Former MP Brendan Nelson to head up Boeing in Australia

Former defence minister and Australian War Memorial director Brendan Nelson has been appointed to run aerospace and defence giant Boeing's operations in Australia.

The Chicago-headquartered Boeing said on Monday Dr Nelson would commence as president of Boeing Australia, New Zealand and South Pacific on February 11. He will oversee 3800 employees working across commercial plane manufacturing, military systems, services, and research and development.

Former Liberal opposition leader Brendan Nelson will lead Boeing’s operations in Australia. Credit:Rohan Thomson

Dr Nelson stood down as the head of the Australian War Memorial at the end of last year, after planing a controversial $500 million, nine-year redevelopment of the site, which a former memorial director likened to turning the site into a "theme park” for military hardware enthusiasts.

Dr Nelson was also subject to criticism led by the Greens for actively seeking donations from military and weapons companies while running the memorial. That included Boeing, which gave $500,000 to support an exhibition about the Afghanistan war.

The appointment comes as Boeing faces one of the biggest crises in its history due to the grounding of its best-selling 737 MAX.

Boeing's Australian presence is its largest in any country outside its native US and includes a major manufacturing plant in Melbourne's Fisherman's Bend which makes jet parts including for the 737 MAX and 787 Dreamliners.

Boeing's local defence arm operates across 14 sites, covering military aircraft design and maintenance; communication and control systems and surveillance solutions.

“It is an honour to join a global company like Boeing whose proud legacy here in Australia dates back more than 90 years to the earliest days of Australian aircraft manufacturing,” Dr Nelson said in a statement.

“Today, Boeing Australia employees are working across the country in high-tech jobs that help define and deliver the future of aviation and defence – not just for Australian customers but for the world.”

Dr Nelson was elected to federal parliament in 1996 and was a Howard government education and defence minister, as well as the Liberal opposition leader from 2007 to 2008.

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Friday, January 17, 2020

UFC signs Facebook video deal to drive pay-per-view buys: Report

Cain Velasquez explains challenges of moving from UFC to WWE

Former UFC champion Cain Velasquez explains the differences between MMA and the WWE. Velasquez is joined by Rey Mysterio to give his thoughts on his upcoming WWE match with Brock Lesnar at Crown Jewel.

UFC has signed a deal with Facebook to produce three original shows for the social media platform’s Facebook Watch vertical this year, Variety reported.

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The mixed martial arts fight promoter is hoping the shows will drive more viewers to become customers for its pay-per-view events, according to the report.

“Our primary objective is to push viewership and transactions on Saturday nights,” Dave Shaw, senior VP of content and international for UFC, told Variety.

UFC IS IN CHINA LOOKING TO DOUBLE ITS MONEY: REPORT

UFC’s pay-per-view fights appear on ESPN+. A subscription to the streaming service costs $4.99 per month or $49.99 per year. Pay-per-view UFC events cost $64.99 on top of the subscription cost, and ESPN is bundling Saturday’s UFC 246 with an annual subscription for $84.98.

The new Facebook Watch shows include live interview shows “Quick Hits” with host Laura Sanko, a show highlighting fighters answering fan questions called “The Check-In Show” and “Fighter Commentary,” which features fighters discussing their past and upcoming fights, Variety reported.

The first episodes of “The Check-In Show” and “Fighter Commentary” went live this week ahead of Saturday’s fights, highlighting the two main events on the card — Conor McGregor vs. Donald “Cowboy” Cerrone in welterweight and Holly Holm vs. Raquel Pennington in bantamweight.

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UFC FIGHTER PAIGE VANZANT EARNS MORE MONEY ON SOCIAL MEDIA THAN SHE DOES IN THE RING

FACEBOOK CANCELS ‘SORRY FOR YOUR LOSS’ AS IT SCALES BACK SCRIPTED EFFORTS

The shows will tie in to 20 UFC events this year, including 12 pay-per-view shows and eight “Fright Night” events, according to the report.

UFC will also continue uploading its other videos to Facebook. The company generated more than $1 million in ad revenue from its Facebook content in 2019, according to the report.

Facebook is pulling back on scripted original series for Watch. Deadline reported this week that the social media company opted to not renew the Jessica Biel-starring “Limetown” or “Sorry For Your Loss” starring Elizabeth Olsen. The company is reportedly planning to focus more on unscripted content, apparently like UFC’s live shows.

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Thursday, January 16, 2020

Exclusive: Volkswagen to buy 20% of Chinese battery maker Guoxuan amid electric push - sources

HONG KONG/BEIJING (Reuters) – Volkswagen AG (VOWG_p.DE) is set to take a 20% stake in Chinese electric vehicle battery maker Guoxuan High-tech Co Ltd (002074.SZ), two sources told Reuters, as the German firm accelerates its electric push into the world’s largest auto market.

The deal would mark Volkswagen’s first direct ownership in a Chinese battery maker and comes as the Wolfsburg-based automaker strives to meet a goal of selling 1.5 million new energy vehicles (NEVs) a year in China by 2025, including plug-in hybrid cars.

The top foreign automaker in China plans to acquire the stake in Shenzhen-listed Guoxuan via a discounted private share placement in the coming weeks, the two sources with knowledge of the matter said. Based on Guoxuan’s market capitalization of $2.8 billion, a 20% stake in the company at present is worth about $560 million.

The deal’s details have been mostly finalized and the two firms are waiting for new Chinese regulatory rules on private share placements that will provide a more flexible pricing mechanism and shorter lock-up periods for majority shareholders, said one of the people, speaking on condition of anonymity.

After the stake purchase, Volkswagen will become the battery maker’s second-largest shareholder with a 20% stake, behind Zhuhai Guoxuan Trading Ltd, a firm controlled by Guoxuan’s founder Li Zhen, which currently holds 25%.

Guoxuan is among a swathe of mid-tier Chinese battery makers behind CATL (300750.SZ) and BYD (002594.SZ). It is based in China’s eastern city of Hefei, where Volkswagen is also building electric vehicles with JAC Motor (600418.SS), one of a number of its Chinese joint venture partners.

A third source, who declined to be named due to the sensitivity of the matter, said Volkswagen has long wanted to control a battery maker to better manage its supply chain.

Volkswagen declined to comment. Guoxuan and the China Securities Regulatory Commission did not immediately respond to requests for comment.

To achieve its NEV sales goal in China, Volkswagen has built a new $2.5 billion electric vehicle plant with partner SAIC Motor (600104.SS) that will have annual output capacity of 300,000 cars and is also revamping manufacturing facilities in China’s southeastern city of Foshan to build electric cars with partner FAW Group.

Volkswagen has also identified CATL as a strategic supplier and Volkswagen board member Stefan Sommer told Reuters in July last year that it could even build its own battery cell manufacturing plants in China.

“By holding a stake in the top Chinese battery makers, carmakers can gain more bargaining power on battery prices,” said Yale Zhang, managing director of Shanghai-based consultancy AutoForesight. “Foreign carmakers are now catching up with their Chinese counterparts on securing battery supplies in China.”

Volkswagen’s rivals in China include Tesla (TSLA.O), which earlier this month began delivering cars from its $2 billion factory in China. The U.S. electric car maker eventually plans to manufacture 250,000 vehicles a year in the plant’s first phase.

China has been a keen supporter of NEV – pure battery electric, hybrid and plug-in hybrids – and has started implementing NEV sales quota requirements for automakers.

However, cuts to subsidies have dealt the market a blow, with NEV sales contracting for the first time last year. Sales this year are likely to be flat or rise only slightly, according to China’s top auto industry association.

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Chicago bond refunding produces budget savings, lower market penalty

CHICAGO, Jan 16 (Reuters) – Chicago wrapped up a $1.47 billion bond refunding on Thursday that produced enough savings to help plug a budget hole through deals that benefited from low supply in the U.S. municipal market and yield-hungry investors.

A big yield penalty the nation’s third-largest city has been paying in the market due to its chronic budget deficits and large unfunded pension liability eased substantially with the pricing of $466.5 million of general obligation (GO) refunding bonds and $1 billion of Sales Tax Securitization Corporation tax-exempt and taxable bonds.

Dan Solender, who heads tax-free fixed-income investments at Lord Abbett, said the city got a boost from high demand for bonds “especially those with extra yield such as Chicago.”

“Even though Chicago clearly still has issues they have made some financial progress to stabilize from their previous downward trend,” he added.

The bond refunding, which was the biggest component of Mayor Lori Lightfoot’s plan to eliminate an $838 million deficit in the city’s fiscal 2020 budget, produced an upfront savings that exceeded a target of $210 million, a city spokeswoman said. The spread over Municipal Market Data’s (MMD) benchmark triple-A yield for 10-year tax-exempt GO refunding bonds eased to 105 basis points from 170 basis points for comparable bonds the city sold last year, according to MMD.

For tax-exempt second lien Sales Tax Securitization Corporation bonds maturing in 10 years, the spread over MMD’s scale was just 62 basis points, 21 basis points lower than the spread for senior lien bonds priced in 2018.

The corporation was created under former Mayor Rahm Emanuel as a way to refund outstanding debt with higher ratings and lower yields by giving investors a statutory lien on the city’s share of state sales taxes. (Reporting By Karen Pierog; Editing by Cynthia Osterman)

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