Bloomberg

Energy ‘Pain Point’ Erodes European Phone Stocks’ Haven Appeal

(Bloomberg) — European phone carriers are under threat from rising energy prices and climbing wages, offsetting the rich dividends, stable revenue streams and tempting price tags that typically make them one of the safest places to sit out bouts of stock-market turmoil.

Vodafone Group Plc to Telenor ASA have warned that energy bills could eat into earnings, workers at BT went on strike to demand higher wages, while inflation-hit customers shop for more discounts at Liberty Global Plc.

That’s compounding the sector’s flip from second-best performer in the Stoxx 600 index in the first half of the year to the second-worst laggard since June. The Stoxx Telecom Index is down 15% in the second half, with BT Group plc and Telefonica SA stumbling by more than 30%.

“Energy costs are definitely a pain point,” said Bloomberg Intelligence analyst Erhan Gurses. Interest in telecom stocks has waned as some investors predict a slowdown in earnings growth, while others trim positions to lock in profits, he said.

The 2% to 3% energy-crisis hit to European telcos’ earnings before interest, taxes, depreciation, and amortization that Berenberg analysts predict next year may not sound too harsh. But it’s still a major blow for an industry with low growth rates. Meanwhile, Citigroup Inc. analysts estimate wage inflation could carve an additional 2% from carriers’ Ebitda.

Central-bank moves to tackle quickening inflation are adding to the headwinds, spurring the cost of refinancing and piling pressure on indebted carriers like Telecom Italia SpA and tower companies like Cellnex Telecom SA.

The climbing rates are weighing on the valuations and financing costs for potential deals, prompting activist investor Cevian Capital AB to sell most of its stake in Vodafone earlier this year, according to a Bloomberg report.

Ranged against other asset classes, even the higher-income telecom stocks have seen their luster increasingly dimmed by the upward march of government yields. 

“Bonds have become more attractive,” said EdenTree fund manager Christopher Hiorns. “When you see yields explode to where they are now, I’m probably still in the equity camp, but the margin is a lot lower.”

The current crises haven’t entirely quashed the industry’s allure.

Deals are coming at a faster pace: Vodafone sealed a pact for a fiber joint venture with Altice Europe NV in Germany. It’s also planning to sell a stake in its towers unit, Vantage Towers AG.

And valuations are on telcos’ side. Priced at 11 times forward earnings, the industry is the cheapest it’s been since March 2020 and boasts the highest dividend yield in two years.

Even with the earnings revisions, the sector still appeals to Mandana Hormozi, a portfolio manager at Franklin Mutual European Fund, which is overweight the sector. 

“If you are looking at earnings revisions in the 1% to 5% range for the next year, that’s not a bad place to be,” she said. “That’s pretty defensive.” 

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©2022 Bloomberg L.P.

Foxconn Unveils Pickup, Crossover Models to Expand EV Lineup

(Bloomberg) — Foxconn Technology Group took the wraps off two new electric vehicles on Tuesday, prototypes that embody the iPhone maker’s ambitions of carving out a slice of a market led by the likes of Tesla Inc.

The company, whose main listed arm is Hon Hai Precision Industry Co., unveiled the Model B crossover SUV and Model V pickup truck at its event in Taipei. Foxconn founder Terry Gou, 72, introduced the Model B by driving it onto the stage. The pickup will be produced in Taiwan, Thailand and the US, Hon Hai Chairman Young Liu said.

Foxconn is hoping to replicate the way it muscled into electronics assembly to become the biggest manufacturing partner for Apple Inc. and other global brands. It’s aiming to build clients’ electric vehicles from the chassis up, with no plans to sell vehicles under its own brand.

“After we announced our plans to build EVs in 2020, many people questioned whether Foxconn can build cars,” Liu said. “Then when we unveiled three models a year later, everyone thought, ‘wow, how did they manage to develop three models in just a year?’ That’s the speed we’re operating at.”

None of the cars Foxconn has unveiled so far are destined to go on sale to consumers but are reference designs, intended to show off the company’s capabilities to potential big-brand clients. The Model C prototype introduced previously is now a production vehicle that is branded as the Luxgen n7 by Taiwanese automaker Yulon Group.

Liu said Foxconn’s expertise in managing supply chains gives it an advantage in developing new models faster than rivals. Asked when Foxconn’s production volumes will surpass those of Tesla, Liu said he hoped Foxconn would one day manufacture cars for the US giant.

The Model B, which uses the same platform as the Model C, was designed with Italian house Pininfarina SpA. The crossover SUV has a full-length glass roof and a range of 450 kilometers (280 miles) on one charge.

Foxconn also said it is developing its own solid-state batteries.

The Taiwanese company created Foxtron Vehicle Technologies in 2020 as a venture with Yulon. It then embarked on a flurry of activity, buying Lordstown Motors Corp.’s Ohio plant to create a US base, launching an open EV platform and inking a manufacturing deal with startup Fisker Inc.

Demand for EVs is soaring as consumers and governments embrace the technology, spurring a worldwide shift for the tech and automotive industries. But Foxconn’s trying to get into a field already crowded by aggressive rivals from Tesla to China’s Nio Inc. and BYD Co. to Xpeng Inc. It’s also attracting new entrants including Xiaomi Corp.

One major point of uncertainty is how the Biden administration’s recently unfurled raft of restrictions on chip exports to China will shake up the global EV industry. Xpeng has warned that the curbs on chips could potentially hammer Chinese EV makers.

(Updates with comment from chairman in sixth paragraph)

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©2022 Bloomberg L.P.

Stocks Rally, Dollar Falls as Investor Angst Eases: Markets Wrap

(Bloomberg) — Stocks extended a rebound and major currencies rallied versus the dollar amid the UK’s efforts to foster greater stability in its volatile bond market. 

A gauge of Asian equities advanced Tuesday, led by technology stocks in Hong Kong. US equity futures jumped as much as 2% after the S&P 500 closed above a key technical support level on Monday. 

A Bloomberg gauge of the greenback declined for a second day as the New Zealand dollar surged on rate-hike bets and the pound fluctuated following a Financial Times report that the Bank of England was likely to delay the sale of government bonds.

The yen paused in its run toward the closely watched 150 per dollar level, which has investors on high alert for possible intervention. Japanese Finance Minister Shunichi Suzuki said he was watching market moves with a sense of urgency.

Chinese junk dollar bonds dropped to a record low, as a property crisis sparked by a crackdown on excessive borrowing and a slide in home sales show few signs of turning around without more policy steps.

China’s decision to delay the publication of key economic data including third-quarter gross domestic product added a touch of caution to trading in the region. The Communist Party congress has provided few signs of a let up in China’s Covid-zero and property-market policies that are weighing on the economy. 

Treasury yields declined during Asian trading, as did rates on Australia’s benchmark bonds. Government bond yields in New Zealand bucked the trend, rising with the country’s currency after inflation data remained stronger than expected. The figures underscored risks to markets from persistently high consumer prices even in countries at the vanguard in tightening monetary policy. 

The latest US recession probability models by Bloomberg economists Anna Wong and Eliza Winger forecast a higher probability of such an event across all time frames — with the 12-month estimate of a downturn by October 2023 hitting 100%. That’s up from 65% for the comparable period in the previous update.

Amid debate about when stocks might find a bottom, Morgan Stanley’s Mike Wilson wrote that the rout which took the S&P 500 to test a “serious floor of support” could lead to a technical recovery. The strategist, who’s one of Wall Street’s most-prominent bearish voices, said he “would not rule out” the measure rising to about 4,150. That’s 13% above current levels.

By contrast, JPMorgan Chase & Co.’s Marko Kolanovic was trimming risk allocations in the bank’s model portfolio as he grew more cautious about economic and market recoveries.

Despite the turmoil seen in UK markets, institutions like the Treasury are still strong and credible, according to Philipp Hildebrand, vice chairman of BlackRock, Inc. 

“Hopefully the new chancellor can bring stability back into the marketplace and then the government can focus on a growth strategy that is focused on the supply side as opposed to simply stimulating demand,” he said on Bloomberg Television.

Elsewhere in markets, oil rose as investors weighed signs of a tight market against concerns over a global economic slowdown. Gold edged higher and Bitcoin continued to trade below $20,000.

Key events this week:

  • US industrial production, NAHB housing market index, Tuesday
  • Fed’s Neel Kashkari speaks, Tuesday
  • Euro area CPI, Wednesday
  • EIA crude oil inventory report, Wednesday
  • US MBA mortgage applications, building permits, housing starts, Fed Beige Book, Wednesday
  • Fed’s Neel Kashkari, Charles Evans, James Bullard speak, Wednesday
  • US existing home sales, initial jobless claims, Conference Board leading index, Thursday
  • Euro area consumer confidence, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 futures rose 1.5% as of 6:59 a.m. London time. The S&P 500 rose 2.7% Monday
  • The Nasdaq 100 futures added 1.7%. The Nasdaq 100 rose 3.5%
  • Euro Stoxx 50 futures were up 1%
  • Japan’s Topix index gained 1.1%
  • Hong Kong’s Hang Seng Index was up 1.2%
  • China’s Shanghai Composite Index fell 0.1%
  • The S&P/ASX 200 Index climbed 1.7%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%
  • The euro rose 0.1% to $0.9854
  • The Japanese yen rose 0.1% to 148.89 per dollar
  • The offshore yuan rose 0.1% to 7.1992 per dollar
  • The British pound was little changed at $1.1356

Cryptocurrencies

  • Bitcoin rose 0.1% to $19,552.96
  • Ether rose 0.2% to $1,332.06

Bonds

  • The yield on 10-year Treasuries fell four basis points to 3.98%
  • Australia’s 10-year bond yield dropped 10 basis points to 3.92%

Commodities

  • West Texas Intermediate crude rose 0.8% to $86.11 a barrel
  • Spot gold rose 0.4% to $1,656.34 an ounce

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©2022 Bloomberg L.P.

Singapore PM Warns US Chip Curbs Can Have ‘Wide Ramifications’

(Bloomberg) — Singapore’s Prime Minister Lee Hsien Loong warned the US decision to curb supply of microchips to Chinese companies could have widespread consequences and greater decoupling between the top two economies may create a “less stable world.”

“The Biden administration’s latest move is a very serious one, I’m sure they have considered it carefully,” Lee said at a press conference in Canberra where he is meeting with his Australian counterpart. “It can have very wide ramifications.”

Last week, the US Commerce Department placed sweeping restrictions on technology exports to China, including semi-conductors and chip-making equipment — a move which will hamper Beijing’s domestic research and technology industry. The Chinese government slammed the move, describing the curbs as political and arbitrary and warning they would “further weaken” the global economy.

Lee said in Australia that restrictive trade decisions based on valid national security concerns could result in “less economic cooperation, less interdependency, less trust and possibly ultimately a less stable world.”

The Singapore government has for a long time worked to balance its relationship between the US and China as tensions have risen between the two superpowers in the Asia-Pacific region. The city-state’s deputy prime minister Lawrence Wong told Bloomberg News in August he was worried the US and China could “sleepwalk into conflict” over the democratically run island of Taiwan.

At the press conference in Canberra with Lee, Australian Prime Minister Anthony Albanese said the Covid-19 pandemic had shown the importance of securing supply chains and prioritizing “national resilience.”

“National security is not just about our defense systems. It’s also about our capacity to make things here in Australia, to be less vulnerable to shocks of whatever form, be it a future pandemic, trade, cybersecurity shocks or whether it be international conflict,” he said.

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©2022 Bloomberg L.P.

Crypto’s Foot Race Heats Up as Ex-Meta Workers Unfurl Blockchain

(Bloomberg) — Aptos Labs, a startup with its roots in Meta Platforms Inc.’s failed crypto ambitions, went live with a blockchain that seeks to make transactions quicker and more secure.

“This is step one in a long journey to create universal and fair access to decentralized applications” via “a safe, scalable, and upgradeable blockchain,” Aptos said in a statement on Tuesday.

Aptos’s blockchain uses a programming language called Move that’s supposed to make transactions faster and cheaper. Move also powered the network of Meta’s cryptocurrency project Diem, which faced strong resistance from regulators and eventually sold its assets.

Aptos has won investment from the likes of Binance Labs, the venture capital arm of the world’s biggest cryptocurrency exchange. Other supporters include Andreessen Horowitz and the venture units of FTX and Coinbase Global Inc.

Projects like Aptos and rival blockchain Solana are pursuing faster transaction speeds, which are seen as key to the wider adoption of digital ledgers. 

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©2022 Bloomberg L.P.

Korea to Consider Increasing Scrutiny Over Kakao After Outages

(Bloomberg) — South Korean lawmakers plan to discuss stepping up government oversight of Kakao Corp. after hours-long service outages over the weekend prompted criticism over the internet giant’s reliability. 

The ruling People Power Party said its lawmakers and government officials will meet Wednesday to discuss possible revisions to the broadcasting communications law so that private data centers, such as those housing Kakao and Naver Corp. servers, come under the same regulations as other national disaster management facilities during emergencies.

Changes could include requiring private businesses to report to the government in the event of any service disruption, and implementing fines of up to 3% of revenues if they fail to do so, according to Yonhap News. Lawmakers also plan to summon and question Kakao and Naver founders as well as SK Inc. chairman during a parliamentary hearing on Monday, according to the office of main opposition lawmaker Jo Seounglae.

Public criticism of Kakao and its affiliates has increased following the blaze at an SK C&C data center in the south of Seoul on Saturday. The internet giant struggled for hours to recover operations of its popular messaging service, widely used by government officials and businesses. Its services including payment, banking and gaming were halted during that time. As of Tuesday, major services including KakaoTalk, Korea’s No. 1 messenger app, were mostly restored while some mail services were still limited.

The disruptions highlighted the nation’s dependence on the group, which has been the target of regulatory crackdowns due to its market dominance. Kakao has faced public complaints, including that Kakaopay Corp. executives sold the stocks shortly after going public.

“Although the network is run by a private company, it’s practically national communications infrastructure,” South Korean President Yoon Suk Yeol told reporters on Monday. “If a monopoly or an oligopoly causes market distortions and acts like national infrastructure, I think the government should take action.” 

Shares of Kakao and its affiliates Kakaopay and KakaoBank Corp. bounced back early Tuesday following an earlier slump. Kakaopay is still down nearly 80% so far this year, making it the biggest loser on the benchmark Kospi. 

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©2022 Bloomberg L.P.

Transcript ‘In Trust’ Episode 8: The Pivot

(Bloomberg) — This is the transcript for the eighth episode of the Bloomberg and iHeart investigative podcast “In Trust.” Learn more and subscribe to “In Trust” on iHeart, Apple or Spotify. 

Our transcripts are generated by a combination of software and human editors, and may contain slight differences between the text and audio. Please confirm in audio before quoting in print. 

Episode 8: The Pivot

Louise Red Corn  It was on the second page. The tagline was: “If it stinks, we’ll find it eventually.”

Rachel Adams-Heard This is Louise Red Corn. She’s a journalist. She used to run the Bigheart Times — the newspaper that published that list of all the non-Osage headright holders back in 2009. The paper’s had a lot of taglines over the years. 

Louise Red Corn  The former owner of the paper had it just being, “The only newspaper in the Barnsdall area that gives a diddley.” And I thought, “No, that’s just not good enough.” So I changed it to “The only newspaper in the world…” and they came over and they were like, “Louise, that’s just a really gross exaggeration.”

Rachel Adams-Heard Louise works for the Osage News now. She’s married to Raymond Red Corn, the former assistant principal chief who delivered the bid for the Bluestem acquisition. These days, Louise mostly covers the Osage Nation, but she’s spent a lot of her career writing county news, and you can’t cover Osage County without covering the Drummonds.

Louise Red Corn   I mean, I’ve written a lot of stories about them from speeding tickets to assaults to exaggerated statistics at the Mercantile in terms of how busy they are.

Rachel Adams-Heard These stories date back a while. Speeding tickets that were dismissed. The time a Drummond punched a police officer. Gentner Drummond represented him in court, and the man pleaded guilty to a misdemeanor assault of an officer. A story about Ree Drummond’s Mercantile in Pawhuska, and whether it was actually seeing the thousands of visitors a day she said it was. 

Louise Red Corn  I think sometimes there is the aforementioned chutzpah that they don’t always follow the rules the way everybody else does. A lot of people kowtow to them — kowtow to the Drummonds and just sort of give them a green light. And I think the reason in Pawhuska is that the Drummonds have done a hell a lot of good for Pawhuska. You know, sales-tax collections are up between 30 and 50% over pre-Mercantile times. They built a new football field at the high school. They’re in the process of building an animal shelter that — and they’ve never sought, I mean, they’ve kept those things secret almost. I mean, they just have not even ever claimed credit for those two items. So, I mean, there’s a certain amount of gratitude that is natural.

Rachel Adams-Heard I’ve heard this from other people too — that there are Drummonds today who have helped revitalize Pawhuska. They’ve brought jobs, tourists, money to a place that needed it. That they’ve given back to the community. And not everyone feels that way, of course. But what Louise is talking about here gets at the complexity of it all. 

The complexity of a place shaped by a hundred years of history, with shifting rules and fortunes and power dynamics. A place where tremendous wealth was lost — and gained — by families who are still neighbors. Who run into each other at the store, or dinner, or Friday night football games.

And that complexity, it doesn’t just describe the relationship between the Drummonds and the Osage Nation. Because there’s another character in this story, that’s been here all along: the United States government. 

Jean Dennison [Introduces herself in Osage…] My name is Jean Dennison. I’m a citizen of the Osage Nation from Oklahoma and an associate professor of American Indian studies at the University of Washington.

Rachel Adams-Heard Jean was one of the first people I interviewed for this story. I was nervous. I was an oil reporter from Houston. A lot of this history I was learning about for the first time. I couldn’t figure out if the trust relationship with the US government was a good thing or a bad thing. If Osage citizens liked it. 

And Jean told me, I wasn’t going to find one answer. She said over and over again that this story — the Osage Nation’s story — is really complicated. 

When Jean and I talked this last time, it was about that trust relationship with the US government. Something Osage leaders have fought tirelessly for — for over a century. Something they want to use today to protect the land they bought from Ted Turner, by putting it back into trust with the US.  

I wanted to ask Jean why — why pursue the trust relationship if it’s been so flawed in the past, and, occasionally, even today. I guess I wanted to know: Why bother? 

Jean Dennison There was a lot of failures to honor the kinds of promises that were made in these treaties by the United States government. But ultimately these treaties really did offer the United States access to our lands, but they also offered Osages the ability to have some kind of protection against other kinds of threats.

And that’s really what this trust relationship was about — was this ability to have increased protection against the threats that were rising in our territories. 

Rachel Adams-Heard In order words, the federal government was a tool. A tool to keep the state out of the Osage Nation. Jean says, it was a flawed one. But it was the best tool the Osage Nation had at the time.

Jean Dennison And so what we see again and again is these kinds of looking at the world around us and trying to figure out, what are the tools, what are the things that we can do to make this pivot again and again. Looking at the situation around us and saying, “Okay, the structures that we have in place right now are not working for us, they’re creating more chaos than they are creating order. And so we’re going to pivot.”

Rachel Adams-Heard The Osage Nation is in the middle of a pivot. One that involves land, oil, and sovereignty. That will determine the future of who controls these nearly 1.5 million acres — and how. 

This is In Trust. I’m Rachel Adams-Heard, and in this episode, you’re also going to be hearing from someone else, Allison Herrera. She’s a contributing reporter on this series and she’s here to help me explain this pivot. 

Elizabeth Lohah Homer I did a presentation for the Osage Nation employees back, I believe it was in 2009 or 2010.

Rachel Adams-Heard This is Elizabeth Lohah Homer, the lawyer in DC who sits on the Osage Nation’s Supreme Court. 

Elizabeth Lohah Homer  I had told people — I had said this before the Irby decision came down — if there’s any justice left in America, the Osages win the Irby case.

Rachel Adams-Heard The Irby case. This is just one in a whole bunch of reservation cases in recent years that are incredibly important for understanding where everything stands today. Where the state’s jurisdiction ends, and tribal nations’ jurisdiction begins.

No one’s covered these cases more closely than Allison Herrera, the Indigenous Affairs reporter for KOSU, a public radio station in Oklahoma. She’s going to help me out on this one. 

Allison Herrera Allison here. So, Irby. It was a case about taxation. Whether the state could collect income taxes from Osage citizens who live and work in Osage County. But just like all of these cases, the Irby case was about something much bigger than that. Because at the center of it was a question: Was there still an Osage Reservation? Or had it been disestablished when the US divided up all the surface land into parcels under the 1906 Allotment Act? 

I talk to a lot of federal Indian law experts. And they all pretty much said no; the Osage Reservation was never disestablished. The 1906 Act did a lot of things, but it didn’t get rid of the reservation. 

That’s what Elizabeth was saying in that presentation, back in 2010. She thought the Osage Nation had an even better case than a lot of other tribal nations because of the Osage Mineral Estate and all the underground land that the Osage Nation fought to hold onto.

Rachel Adams-Heard  Then, the decision hit.

Elizabeth Lohah Homer I was sitting in front of my computer at my desk, and I got an electronic copy of Irby and started reading it. And the next thing I know, I’m having a hard time breathing. I was just, Oh, my God, this is the worst, the worst opinion. 

Allison Herrera The US Court of Appeals for the 10th Circuit ruled the Osage Nation Reservation had been disestablished. That it was no longer Indian country. 

Elizabeth Lohah Homer  And so to me, the Irby decision truly struck me as — there is no justice left in the United States. And as an officer of the court and a lawyer for my entire life, my entire career, that just was emotionally wrenching. Devastating to me because it was so wrong. So wrong. 

Rachel Adams-Heard In the decade after the Irby decision, the Osage Nation tried to find a path forward. Another way to get its reservation recognized by the court. 

Allison Herrera But they were kind of stuck. You can’t bring the same case twice. The court had ruled. And, it ruled that the Osage Reservation was disestablished.  

Rachel Adams-Heard But then— 

(Audio from US Supreme Court, Chief Justice John Roberts: “We’ll hear argument first this morning in Case 18-9526, McGirt versus Oklahoma…”)

Rachel Adams-Heard In 2020…

(Audio from US Supreme Court, Ian H. Gershengorn:  “Mr. Chief Justice, and may it please the Court…”)

Rachel Adams-Heard  …something big happened. Another case: McGirt v. Oklahoma. 

(Audio from US Supreme Court, Ian H. Gershengorn: “This case is resolved by the fundamental proposition that decisions about sovereign rights are for Congress to make, and Congress makes those decisions by speaking clearly in the text. The decision below must be reversed because the text makes clear that Congress never terminated the Creek Reservation and never transferred federal criminal jurisdiction to Oklahoma.”)

Allison Herrera McGirt was another case involving a reservation in Oklahoma. But this time, it was the Muscogee Nation Reservation, also known as the Muscogee Creek Nation. This case was about a felony crime and whether it should be prosecuted in federal or state court. But just like the Irby case, it was also about something much bigger — whether the Muscogee Nation’s Reservation still existed.

The McGirt case went all the way up to the Supreme Court. It was decided on July 9, 2020 — the last day before the court said it would recess. And as someone who’s covered Indigenous affairs for a while, I’ll just never forget it. This was one of the biggest wins for tribal sovereignty in decades. The highest court in the land ruled that the Muscogee Nation Reservation still existed. The Allotment Era — when the US government divided up Native land — didn’t change that.

In the months after the McGirt decision, other tribal nations in Oklahoma asked state courts to apply the ruling to their own reservations. The Chickasaw, Cherokee, Choctaw Nation, Seminole and Quapaw. They had their reservation statuses affirmed, too. But it hadn’t been applied to the Osage Nation. At least not yet. 

Wilson Pipestem  McGirt is a case, in my mind, of one of great hope. But also great pain.

Rachel Adams-Heard This is Wilson Pipestem, the attorney who’s represented the Osage Nation and the Osage Minerals Council. You heard from him a couple episodes ago. Allison and I went to his office in Tulsa over the summer to talk to him about these cases. How they affect the Osage Nation. What Osage leaders want to do moving forward. 

Allison Herrera And Wilson said one of the biggest things McGirt highlighted to him was what could have happened during the 1920s — if the Osage Reservation had been recognized.

 Wilson Pipestem That would have been federal jurisdiction over all of those murders, but they treated the Osage Reservation like it didn’t exist anymore. So you had to bring a case against somebody in Osage County Court where justice was not to be found, right. So it wasn’t until somebody was murdered on trust land — Henry Roan was murdered on trust land — that they decided it’s federal jurisdiction now. To me, that shows you the protection that reservation status can bring, because those cases would have been federal jurisdiction to start with. And we may have been able to avoid the loss of many lives if the federal government would have respected the homelands of the Osage people and treated as a reservation, as it should have been for over 100 years now. 

Allison Herrera What Wilson is talking about here gets at the importance of having these reservations in the first place. It affects who gets to tax you, protect you and punish you.

Wilson Pipestem You know, there’s just no doubt in my mind as a legal matter, the Osage Reservation was never disestablished. It just never was. The language is not in any of those laws. And even when the 10th Circuit Court of Appeals in Irby said, “Well, we looked at all the statutes, we don’t find any language of disestablishment, so we’ll go to these other things that now McGirt in the Supreme Court has decided…” — no, you can’t get past that first question. So the Osage Reservation was never disestablished. 

Rachel Adams-Heard Elizabeth and Wilson are not the only ones who feel this way. The Osage leaders I’ve talked to are adamant: Their reservation still exists. And eventually, they’ll get the court to recognize that. 

Wilson Pipestem  And the sooner we can get to that ruling, the easier the transition will be. 

Allison Herrera This past year, the Osage Nation piggybacked on a criminal case to try to get the McGirt decision applied to them. They lost with a state district judge for Osage County. But we’ve reached out to the tribe. They said they’re still weighing their options — deciding the best way to move forward. A pivot. 

Rachel Adams-Heard But that’s not the only pivot the Osage Nation is planning. When we come back, we talk to the man leading another big pivot. 

Geoffrey Standing Bear I’m the kind of person that likes to understand things, even though the older I get, I realize how limited we all are in trying to understand everything. It’s been on my mind, day and night. 

(Audio from Geoffrey Standing Bear’s inauguration — introduction: And now ladies and gentlemen, our Kihekah has some words to say to us. His inaugural address.)

Geoffrey Standing Bear There was no written speech.

(Audio from Geoffrey Standing Bear inauguration. Geoffrey Standing Bear: “On June 28 — it was less than two weeks ago — an election in the state of Oklahoma was held. And in that election, several officials of the state who have pledged opposition to the Native American self-governance won their primaries. That was illustrated the next day, June 29, when the Supreme Court of the United States of America ruled in the case of Castro-Huerta.”)

Rachel Adams-Heard This is Geoffrey Standing Bear, the principal chief of the Osage Nation. He’s leading the tribe through all this — how to respond to the McGirt case, and the current state of Oklahoma politics. 

Standing Bear is the chief who decided to bid the max amount the Osage Congress would allow, back when the tribe bought the land from Ted Turner. And over the summer, he won another term as chief. He gave his inauguration speech at the Osage Casino in Tulsa. And during it, he kind of dropped a bomb. 

Geoffrey Standing Bear I looked to my left and I saw our Minerals Council…

(Audio from inauguration, Geoffrey Standing Bear: “Minerals Council, it’s time for you to fully manage our mineral estate for our people.”)

Geoffrey Standing Bear And I looked over to my right where the Osage Congress, where our legislature was sitting, and said…

(Audio from inauguration, Geoffrey Standing Bear: “Congress, we need you to enact the laws of the Osage Nation to do this.”)

Allison Herrera What Chief Standing Bear is proposing is a big deal. After more than a century of the Bureau of Indian Affairs managing the Osage Mineral Estate, the Osage Nation would be taking it over. All the duties that fell to the BIA would now be the Osage Nation’s responsibility: overseeing leases, making sure oil sites get cleaned up.

This hasn’t happened yet, and it still has a long way to go. Part of the reason Standing Bear wants to do this is pretty practical. He thinks the Osage Nation can do a better job than the US government. The BIA is, after all, a federal bureaucracy. Stuff takes a long time. There’s internal office politics. Outdated software. Staffing issues. 

But Standing Bear says this is also about something much bigger.

Geoffrey Standing Bear All of our areas that are engaged in sovereignty, in my view, the one area that is most exposed is our Osage Mineral Estate. So we need to get in there, preempt that with self-governance and use that mineral estate as our, our people who … We purchased this mineral estate in 1872, with our own money. Let us use it the way our elders intended it for us to use it. 

Rachel Adams-Heard Allison and I wanted to talk to Standing Bear after he gave this speech. We wanted to know why now. Why, after so many decades, would the Osage Nation want to take it over. 

Allison Herrera So we called him just a few days after that speech to ask him about it. 

Geoffrey Standing Bear This is a threat that’s unique from the others. It is a threat of control by the state on a regulatory basis, taxation basis, criminal basis. Those are powerful forces. 

Allison Herrera In other words, this is about keeping the state — Oklahoma — out of the Osage Nation. And Standing Bear said it’s more important than ever, because of how Oklahoma responded to McGirt. By bringing another case he mentioned: Castro-Huerta. 

(Audio clip from broadcast news program.

Anchor One: The US Supreme Court ruling on criminal jurisdiction on tribal land in Oklahoma.Anchor Two: So this ruling today means the state of Oklahoma can exercise criminal jurisdiction over non-Native Americans on tribal land. This comes after the case Oklahoma v. Castro-Huerta, which questioned who could prosecute non-tribal members who committed crimes against Native Americans.Anchor One: And of course this ruling narrows the 2020 decision McGirt v Oklahoma, which said that Native Americans.)

Rachel Adams-Heard Another court case—I know. But this is important. Because when the Supreme Court ruled in favor of the Muscogee Nation, Oklahoma wasn’t happy. 

On the other side of all this is Kevin Stitt. He’s the governor of Oklahoma. And his office has been at the forefront of trying to undo McGirt, that decision that meant so much for tribal sovereignty. Stitt says by taking away the state’s control, Oklahoma risks becoming some sort of lawless land, with thousands of criminals released from jail. 

But Allison’s done some reporting on this. 

Allison Herrera My reporting partner Rebecca Nagle and I pulled data from all the tribes over three years to see how many cases would actually be affected by the McGirt decision. And what we found was fewer than 1,000 cases in Oklahoma were affected. But Oklahoma stands by their number, and that argument — that thousands of criminals would be released — has been a pretty key part of the state’s response to McGirt. And over the summer, Oklahoma was successful in limiting the impact of McGirt. The Supreme Court ruled in the state’s favor in the Castro-Huerta case.

Stitt is running for re-election this year. It would be his second term as Governor. He easily won the primary in June, and his next stop is the general election in November.

Rachel Adams-Heard And that election is also where over 100 years of Osage Nation history and Drummond history collide in the present day.

Because as we’ve told you, the Republican candidate to become the next attorney general of the state — the chief law enforcement officer for all of Oklahoma — is the lawyer and big landowner whose family has deep roots in Osage County: Gentner Drummond.

This is a pretty important role at an even more important time, especially when it comes to who gets to prosecute whom. The AG, after all, is the one who guides the state’s response on matters like this. During that first interview in his office, Gentner said one of the things he was running on was a promise — a promise to work more with tribal nations in Oklahoma than Stitt has. 

Gentner Drummond  With the cacophony surrounding the McGirt decision, our governor, for some reason, just can’t see it in himself to act rationally. And so he’s driven a wedge between the Native American tribes and the state of Oklahoma. And I think that I can undo that.

Allison Herrera Tribal leaders in Oklahoma supported Gentner — and their support means a lot. When the final votes were rolling in during the June primary, Choctaw Nation Chief Gary Batton put out a statement saying this was a win for tribal sovereignty. 

So here we have a Drummond, about to be the next attorney general of the state, vowing to work for tribal sovereignty — at a time when the chief of the Osage Nation sees an existential threat from the state. A threat he’s worried would affect the Osage Mineral Estate — the same one that members of Gentner’s family had fought to get a piece of a century ago.

Rachel Adams-Heard If your head is spinning, so were ours. We asked Standing Bear about what he thinks all this means. How this history impacts the state of play today. And his answer was, basically, it’s complicated. And not just because of the Drummonds’ history in Osage County.

Geoffrey Standing Bear During the election, we met and I said — I know Gentner pretty good. He’s a good guy, in my mind, except his views on protecting his ranch and surface owners have come into conflict with us and our mineral estate. I said, “Gentner, if you would pledge not to sue Osage Nation again on these issues between the surface land and the mineral estate, I will ask our Minerals Council to support you, and I would support you for attorney general.” He would not do that. 

Rachel Adams-Heard   What Standing Bear is saying here is something we haven’t told you about yet but comes up a lot in Osage County. Gentner’s lawsuits. Gentner’s firm brought a lot of lawsuits against oil companies in the area on behalf of other landowners. He considers himself a steward of the land. He has a lot of it, after all — land that he says has been damaged by oil and gas production. That whole time, all the royalties from that oil and gas are going to headright holders. 

Gentner Drummond  If you injure the land, you fix it. That’s all. That’s all I asked. I was litigating on a case-by-case basis on my land. If you dumped thousands of gallons of saltwater, I would require you to clean it up. And if you wouldn’t clean it up, then I’d sue you. 

Allison Herrera But in 2014, Gentner and his law firm did something more drastic. They brought a lawsuit on behalf of an Osage rancher and another landowner in Osage County.

Gentner Drummond When we stepped back, and one of my very intelligent attorneys in this law firm realized, “Well, there’s a NEPA — National Environmental Protection Act — and let’s go use NEPA to make the BIA do its job.” And that’s what we did. 

Allison Herrera Basically, they didn’t just go after one oil company. They went after the whole system. The way the BIA was permitting wells in Osage County.

This was one of the biggest lawsuits to affect the Osage Mineral Estate — ever. After Gentner and his law firm brought the case, the BIA  said it would revamp its process for permitting wells in Osage County. But those permits started to take a long time. All the while, oil prices were super low. Headright payments were taking a huge hit. A lot of Osage headright holders saw it as an attack — not just by the BIA, but by Gentner Drummond himself. 

Gentner says he was a convenient scapegoat. But Standing Bear says that case has him and other Osage leaders on guard.

Geoffrey Standing Bear  We have to be cognizant that the new attorney general of Oklahoma, or we believe he’ll be the new attorney general, has displayed interest adverse to our legal interest and our policy interests. We hope Gentner Drummond will work with us, but we are very aware of his views and his history.

Rachel Adams-Heard There’s something else I want to mention, that involves Gentner Drummond’s law firm and Standing Bear’s office. 

Just last year, an attorney at Gentner’s law firm represented a woman who worked for the Osage Nation and said she was sexually harassed by two men who served in the chief’s office. According to a letter Gentner’s firm sent to a lawyer for the chief’s office, the woman raised complaints with the tribe’s HR department and was later fired. Drummond Law called it a retaliatory termination and requested a $125,000 settlement.

When the Osage News reported on the proposed settlement earlier this year, they quoted an Osage congressman who said Standing Bear was using the Osage peoples’ money to buy the woman’s silence. One of the accused men still works in his office. Standing Bear says personnel matters are confidential and that he signed a law earlier this year to prohibit sexual harassment. 

From the beginning I was told this story was complicated. What I didn’t realize was just how intertwined the Drummond story and the Osage story were — not just in the 1920s, but today. 

And after more than a hundred years of history — of decades living side by side on this land — there’s a big question hanging over Osage County: Can the Osage Nation reclaim more of what was lost? Land, headrights, sovereignty. And as they try, will they find an ally in Gentner Drummond? 

I started this story with a question: Did the Drummonds have headrights? And if so, how did they get them? But I ended with a totally different understanding of how three brothers built an empire, on the Osage Reservation. 

I learned about a store, where they could charge huge markups. A store that dozens of Osage families became indebted to. A lot of times, those debts were repaid when an Osage person died, and one of the Drummond brothers became the administrator of their estate, a position that allowed them to approve claims from their family’s own store. Sometimes, it was the funeral itself that brought the store huge business. A $9,000 funeral. An $18,000 promissory note. The Osage price. 

I learned how all of this was done while the Drummond brothers were guardians, meant to protect their Osage wards’ money above all else. 

I learned about secrets tucked deep in family stories, and others hidden away in land abstracts and court archives. Secrets that shape this place today. A place where neighbors were given totally different rulebooks. One that allowed some people to have tremendous power, and another that took that control away. 

A place where many of the descendants of those people — Osage and Drummond — live side by side. Where the great-grandchildren of an Osage allottee can run into the great-grandchildren of a Drummond guardian while picking up a sandwich at Subway. Or filling up their tank at the gas station. 

In November, Oklahoma voters will elect a new attorney general. It’s almost certain to be Gentner Drummond, the descendant of a man who came to this land almost 150 years ago to trade with the Osages. A descendant who will have a leading voice in what the future looks like for tribal nations and the state of Oklahoma. 

Meanwhile, the Osage Minerals Council will keep meeting to figure out if they’re going to take over the management of their mineral estate. And if so, what that’ll look like.

Then there’s the ranch. The 43,000 acres the Osage Nation bought from Ted Turner. Standing Bear says the tribe is still working to put it in trust. To make this land inalienable. Osage forever.  

Geoffrey Standing Bear In the meantime, my job is to keep the peace with our neighbors and among ourselves until we can think this through. This is a critical time. It’s not letting up. It keeps coming. And I also thought after McGirt, well, it’ll get to us eventually, but it keeps coming.

(Audio from inauguration, Geoffrey Standing Bear:  “And this brings me immediately to the day that we all must work together to follow our constitution and protect our mineral estate and all our lands. And how do we do that?

History has shown that where federal law clearly preempts state law, tribal governance — self-governance — preempts state law. Preempts means we need to get there first. Governing ourselves on our lands, with our territory and our people.

I’ll do everything, and assistant chief will do everything we can to claim this territory — to preempt this territory — as Osage law managed by our minerals council.”)

Geoffrey Standing Bear Then at the end I looked at my Uncle Mogri Lookout, he’s my relative. And I said, I want to quote your father Henry, uncle Henry Lookout. And he was you might say a holy man. And he told us, among many things, he said — 

(Audio from inauguration, Geoffrey Standing Bear:  “Life is short. Be quick about it. Thank you.”)

Rachel Adams-Heard That concludes this part of In Trust. We’re taking a break so we can work on more stories. 

Allison Herrera We’ll be back soon. See you then.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

Alan Howard-Backed Crypto VC Firm Hires Diana Biggs as Partner

(Bloomberg) — 1k(x), a $1 billion crypto venture capital firm that counts British hedge fund tycoon Alan Howard among its backers, hired former Valour Inc. executive Diana Biggs as a partner. 

Biggs will provide support to new and existing portfolio companies, driving partnerships with institutions and non-crypto applications for British Virgin Islands-based 1k(x), it said in a statement. She was previously chief strategy officer at Valour, the Swiss provider of crypto exchange-traded products. 

Founded by European crypto investors Lasse Clausen and Christopher Heymann four years ago, 1k(x) focuses on early-stage investing in blockchain ecosystems and developers such as Arweave, Gnosis and Matter Labs.

Biggs left Valour this summer after spending two years there, holding positions such as chief executive officer of its ETP business. Before that, she was global head of innovation at HSBC Holdings Plc’s private bank. 

The broader crypto market has been in stuck in a downturn since late 2021, and venture capital investment in digital asset businesses plunged to its lowest level in over a year in the third quarter. Despite the so-called crypto winter, traditional financial firms have continued to launch products and services related to digital assets. 

“We are entering a new phase of adoption of these emerging technologies, as they gain market share and converge with the established platforms,” Biggs said in an email. 

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

UK Police Probe China Consulate Attack of Hong Kong Protester

(Bloomberg) — British police are investigating the attack of a Hong Kong protester inside the grounds of a Chinese consulate, which took place as President Xi Jinping opened a key Communist Party’s congress in Beijing.    

Greater Manchester Police said in a statement that a man was dragged inside the gates of the Chinese consulate in Manchester on Sunday, after some 30 to 40 people had gathered outside the building to stage a peaceful protest. Shortly before 4 p.m., one man was dragged inside the consulate grounds and assaulted, before being removed by a police officer, it added.

Assistant chief constable Rob Potts said what had begun as a “peaceful protest” had escalated into a “hostile situation.” 

“I can assure the public that all viable avenues will be explored to bring to justice anyone we believe is culpable,” he added. The city’s police force is now liaising with national policing and diplomatic partners.

Videos posted to Twitter of the exchange showed protesters gathered in front of signs criticizing the ruling Chinese Communist Party and Xi, who is expected to clinch a precedent-busting third term in office this weekend. One man is then dragged into the consulate, where four men stand over and beat him, as a bystander wearing a beret and black jacket observes at close range. Police said the victim was in his 30s, had several physical injuries and stayed overnight in hospital for treatment. 

The Hong Kong Indigenous Defence Force, a political group that had called for protesters to join the demonstration in the days leading up to the event, decried the attack in an online post. It also quoted the Hong Konger who was beaten as saying: “This attack in broad daylight is beyond reason.”

READ: Hong Kong Migrants Find UK Is a World Turned Upside-Down

Chinese Foreign Ministry spokesman Wang Wenbin said he wasn’t aware of the incident at a regular news briefing in Beijing on Monday. “The Chinese embassy and consulates in the UK always abide by the law of their host country,” he added. 

Questions on the incident were omitted from the foreign ministry’s briefing transcript and appeared to have been scrubbed from China’s heavily censored internet, with searches for Wang’s response returning no results on Monday. 

In Britain, there were growing calls on Monday to identify and hold to account the attackers. Conservative lawmaker Iain Duncan Smith demanded on Twitter that “those responsible are sent home to China,” while British politician Andrew Gwynne said the British government “needs to urgently call the Chinese Ambassador in to answer for this act of violence.”

A spokesperson for British Prime Minister Liz Truss described the incident as “deeply concerning.”  

Nathan Law, a Hong Kong pro-democracy activist living in self-imposed exiled in the UK, wrote on Twitter: “If the consulate staff responsible are not held accountable, Hongkongers would live in fear of being kidnapped and persecuted.”

The UK has seen an influx of Hong Kongers since opening a pathway to citizenship in January 2021, after Beijing imposed a sweeping national security law on the former British colony. Some 140,500 Hong Kongers have applied for the program. 

On Sunday, Xi declared Beijing had successfully restored order to Hong Kong, saying it was now ruled solely by patriots. Scores of the city’s former opposition leaders have been jailed under the security law.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

Stocks Push Higher After UK Reversal, S&P Rally: Markets Wrap

(Bloomberg) — Stocks in Asia rebounded after the S&P 500 closed above a key technical level and the UK reversed more of its unfunded tax cuts, bolstering global market sentiment.

A gauge of the region’s equities rose, led by technology stocks in Hong Kong. Shares of Chinese electric-vehicle maker BYD Co. jumped more than 6% on an expected surge in third-quarter profit, putting other vehicle makers in the country in focus.

The Japanese yen paused in its run toward the closely watched 150 per dollar level, which has investors on high alert for possible intervention. Finance Minister Shunichi Suzuki said he was watching market moves with a sense of urgency.

A Bloomberg gauge of the dollar declined for a second day as most major currencies clawed back some of their recent losses. Treasury yields edged lower.

Chinese junk dollar bonds dropped to a record low, as a property crisis sparked by a crackdown on excessive borrowing and a slide in home sales show few signs of turning around without more policy steps.

China’s decision to delay the publication of key economic data including third-quarter gross domestic product may inject a note of caution to trading in the region. The Communist Party congress provided few signs of a let up in China’s Covid-zero and property-market policies that are weighing on the economy. 

Government bond yields in New Zealand jumped after inflation remained stronger than expected, underscoring risks to markets from persistently high consumer prices even in countries at the vanguard in tightening monetary policy. 

The latest US recession probability models by Bloomberg economists Anna Wong and Eliza Winger forecast a higher probability of such an event across all time frames — with the 12-month estimate of a downturn by October 2023 hitting 100%. That’s up from 65% for the comparable period in the previous update.

Amid debate about when stocks might find a bottom, Morgan Stanley’s Mike Wilson wrote that the rout which took the S&P 500 to test a “serious floor of support” could lead to a technical recovery. The strategist, who’s one of Wall Street’s most-prominent bearish voices, said he “would not rule out” the measure rising to about 4,150. That’s 13% above current levels.

Still, Wells Fargo Investment Institute expects to see further challenges to company profits. “Our earnings estimates have been below the consensus for quite some time,” global strategist Gary Schlossberg said on Bloomberg Television. “We think that there’s still some further downward revisions to come.”

Elsewhere in markets, oil rose after Monday’s choppy session as investors weighed signs of a tight market against concerns over a global economic slowdown. Gold was steady and Bitcoin continued to traded below $20,000.

Key events this week:

  • US industrial production, NAHB housing market index, Tuesday
  • Fed’s Neel Kashkari speaks, Tuesday
  • Euro area CPI, Wednesday
  • EIA crude oil inventory report, Wednesday
  • US MBA mortgage applications, building permits, housing starts, Fed Beige Book, Wednesday
  • Fed’s Neel Kashkari, Charles Evans, James Bullard speak, Wednesday
  • US existing home sales, initial jobless claims, Conference Board leading index, Thursday
  • Euro area consumer confidence, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 futures rose 0.7% as of 10:51 a.m. Tokyo time. The S&P 500 rose 2.7% Monday
  • The Nasdaq 100 futures added 0.7%. The Nasdaq 100 rose 3.5%
  • Japan’s Topix index gained 0.6%
  • South Korea’s Kospi index surged 0.5%
  • Hong Kong’s Hang Seng Index was up 1.1%
  • China’s Shanghai Composite Index increased 0.2%
  • The S&P/ASX 200 Index climbed 1.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at $0.9833
  • The Japanese yen rose 0.2% to 148.80 per dollar
  • The offshore yuan was little changed at 7.2054 per dollar
  • The British pound fell 0.2% to $1.1340

Cryptocurrencies

  • Bitcoin was little changed at $19,529.58
  • Ether rose 0.2% to $1,332.17

Bonds

  • The yield on 10-year Treasuries fell two basis points to 3.99%
  • Australia’s 10-year bond yield dropped five basis points to 3.97%

Commodities

  • West Texas Intermediate crude rose 0.3% to $85.70 a barrel
  • Spot gold was little changed

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

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