Bloomberg

Stocks Mixed, Pound Gains as Dollar Rally Pauses: Markets Wrap

(Bloomberg) — Asian markets traded on a cautious note Tuesday following another selloff in US stocks, soaring bond yields and volatile currency markets as investors brace for a heightened risk of global recession.

A gauge of the region’s equities fluctuated as shares edged higher in Japan and Australia while Hong Kong stocks fell. US futures contracts rose after the S&P 500 closed at its lowest since 2020 and the Cboe Volatility Index spiked past 30, a level it hasn’t closed above since June. 

The pound rose more 1% following its drop to a record low Monday. Traders remained wary of the risk that the currency could drop to parity with the dollar after the Bank of England indicated it may not act before November to stem a rout.

Bonds were under pressure in Japan and Australia, while the benchmark 10-year Treasury yield held near 3.9% — a level last seen in 2010.

Read More: Everything-Selloff on Wall Street Deepens on 98% Recession Odds

The Bank of Japan announced an unscheduled bond buying operation across a wide range of maturities after the country’s 20-year bond yields rose to the highest level since 2015. The rate on the benchmark 10-year security touched the 0.25% upper limit of the BOJ’s tolerance band as global debt markets come under pressure from expectations for further monetary tightening.

Volatility across markets was also reflected by the risk of future price swings, which reached the highest since the beginning of the pandemic, as shown by a Bank of America index.

The dollar gauge inched back from a record high Monday, when Federal Reserve officials repeated hawkish comments on policy. Asian currencies including the yen and yuan strengthened slightly while staying around levels that have caused concern from authorities in Japan and China.

The turmoil in markets shows little sign of turning Fed officials away from hawkish rhetoric. Boston Fed President Susan Collins and her Cleveland counterpart Loretta Mester said additional tightening is needed to rein in stubbornly high inflation and Atlanta Fed President Raphael Bostic also said the central bank still has a ways to go to control inflation.

Read More: Fed Officials Say That Tackling Inflation Is Their No. 1 Job

“The market is pricing in some Fed increases, but we’re a bit worried that it might not be pricing in everything,” Laila Pence, president of Pence Wealth Management, said on Bloomberg Television. “We got whipsawed in August when inflation was up not down — everyone is nervous.”

Goldman Sachs downgraded equities to underweight in its global allocation over the next three months while remaining overweight cash, saying rising real yields and the prospect of a recession suggest the rout has further to run.

Negative sentiment is flowing into markets for energy and raw materials as well. West Texas Intermediate crude oil climbed but remained around $77 a barrel and close to levels seen in January. 

How much damage is a strong dollar causing? That’s the theme of this week’s MLIV Pulse survey. It’s brief and we don’t collect your name or any contact information. Please click here to share your views.

Key events this week:

  • US new home sales, Conference Board consumer confidence, durable goods, Tuesday
  • Fed Chair Jerome Powell and Charles Evans speak at events, Tuesday
  • Fed’s Mary Daly, Rafael Bostic, Charles Evans and ECB President Christine Lagarde speak at events, Wednesday
  • Euro zone economic confidence, consumer confidence, Germany CPI, Thursday
  • US initial jobless claims, GDP, Thursday
  • Fed’s Loretta Mester, Mary Daly speak at events, Thursday
  • China PMI, Friday
  • Euro zone CPI, unemployment, Friday
  • US consumer income , University of Michigan consumer sentiment, Friday
  • Fed’s Lael Brainard and John Williams speak, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.8% as of 7:08 a.m. in London. The S&P 500 fell 1% Monday
  • Nasdaq 100 futures gained 0.9%. The Nasdaq 100 dropped 0.5%
  • Japan’s Topix index increased 0.5%
  • South Korea’s Kospi index lost 0.5%
  • Hong Kong’s Hang Seng Index fell 0.6%
  • China’s Shanghai Composite Index added 0.8%
  • Australia’s S&P/ASX 200 Index rose 0.4%
  • Euro Stoxx 50 futures gained 0.8%

Currencies

  • The Bloomberg Dollar Spot Index slipped 0.4%
  • The Japanese yen rose 0.2% to 144.40 per dollar
  • The offshore yuan gained 0.2% to 7.1561 to the greenback
  • The euro climbed 0.4% to $0.9650
  • The British pound climbed 1.1% to $1.0806

Cryptocurrencies

  • Bitcoin was up 5.5% to $20,178
  • Ether rose 4.5% to $1,384

Bonds

  • The yield on 10-year Treasuries fell about seven basis points to 3.86%
  • Australia’s 10-year yield climbed eight basis points to 4.06%

Commodities

  • West Texas Intermediate crude rose 1% to $77.50 a barrel
  • Gold traded climbed 0.7% to $1,633.87 an ounce

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©2022 Bloomberg L.P.

Ethereum’s Merge Could Mean ‘Big Headache’ for UK Taxman

(Bloomberg) — An upgrade to the blockchain backing the world’s second-biggest cryptocurrency could trigger widespread tax confusion in the UK, potentially setting back the country’s efforts to establish itself as a crypto hub. 

After a shift known the Merge, holders of Ether can choose to lock up, or stake, their coins on the Ethereum blockchain to help validate transactions, earning yields as high as 5.2% by one estimate. That’s expected to push staking, until now the domain of more sophisticated crypto investors, into the mainstream. 

Unlike most other countries, the UK has already issued guidelines on how staking should be treated for tax purposes, which put increased onus on investors to figure out what they might have to pay. Further complicating matters, the vast majority of employed Britons aren’t currently required to file annual returns, potentially adding a big administrative burden on authorities should people who engage in staking be forced to do so.

U.K. Tax Regulator Toughens DeFi Stance And Crypto Isn’t Happy

Tax officials “are going to give themselves a quite a big headache if they suddenly require a lot of people to file tax returns just for their crypto,” said David Wren, a tax partner at EY. “So it’s not just that the tax position isn’t great, it’s also that the administration is not great on either side.”

The backlash against the UK’s staking tax guidelines, announced seven months before the Sept. 15 completion of the Merge, could threaten efforts by UK officials to gain an edge over jurisdictions like the EU in the midst of a leadership transition. 

Following Ethereum’s switch to a “proof of stake” model for validating and ordering transactions, more investors will be encouraged to lock up their Ether tokens in special staking wallets that can earn them passive returns. About 12% of all eligible Ether in circulation — worth approximately $25.2 billion at prevailing prices — was locked up in staking wallets as of Monday, according to Staking Rewards.

Ethereum is the most commercially important network in crypto because it underpins most decentralized-finance applications, and is also the most popular platform for minting nonfungible tokens. 

The UK’s HM Revenue and Customs updated its framework for cryptoassets earlier this year to include decentralized finance. Staking is considered a key part of DeFi, where investors can trade, lend or borrow digital tokens. The revamped guidelines said investors must consider the terms and conditions under which different platforms offer staking to determine if they must pay additional levies.

If a platform has use of a person’s tokens while holding them, HMRC said that could indicate beneficial ownership of those coins has passed and would be treated as a disposal, which incurs capital gains tax. 

That would be the likely scenario for people staking their Ether on crypto exchanges, according to Wren and Jonanthan Peall, a tax director at KPMG UK. This is because exchanges will group together staked tokens from multiple users to run their services, and they also typically don’t provide a time frame for returning the tokens to holders. 

Most people are expected to use exchanges for staking their assets because of the technical knowledge and capital required to be a validator on the Ethereum blockchain. Validators who run their own nodes on the blockchain are “not covered within the DeFi guidance,” HMRC said in a response to questions from Bloomberg News. 

US, India Treatment

Earnings from staking cannot be considered as interest, the guidance added, as cryptoassets aren’t considered currency or legal tender in the UK. That means returns from staking would be subject to income tax, which can rise to rates as high as 45%.

Unlike in the US, workers in the UK don’t have to file tax returns unless they have earnings from investments. That means there’s a lower awareness among people about the requirement to file returns in such cases, according to Wren and Peall. 

“One of the challenges for any tax authority is, are you are you causing a lot of people to suddenly file a tax return that weren’t previously?,” Wren said. 

Other major regions don’t have specific guidance for staking yet. Joseph Riley, a tax partner for law firm Dechert Llp, said staking rewards in the US could face a levy of up to 37% under federal income tax rules. Meanwhile in India, experts said the yield earned from staking at the moment of receipt would likely be considered as income, and then subject to its 30% blanket tax rate.

‘Full of Problems’

Ian Taylor, head of industry lobby group CryptoUK, called HMRC’s initial guidance “full of problems, overburdensome, and very difficult to value and enforce.” While the sector has expressed some optimism about a consultation that the authority has since held with industry participants about ways to improve the tax system, Taylor said it’s important for the UK to get it right as other jurisdictions will likely soon develop their own rules.  

“HMRC is currently analysing the responses to the DeFi call for evidence,” the department said in the response to Bloomberg. “A summary of responses will be published in due course together with details of the next steps.”

One possible solution initially presented by HMRC would require classifying digital assets as securities — something the crypto industry worldwide has vigorously resisted because of the added regulatory burden it would bring. 

“We don’t want that because tokens aren’t securities,” Taylor said in an interview, noting the extra work required if crypto tokens were to become regulated like equities or bonds. “Any way you look at it, it’s not perfect.”

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

Tycoon Li Ka-Shing’s UK Bets Sour as Sterling Slide Bites

(Bloomberg) — Hong Kong magnate Li Ka-shing lost $1.5 billion in a day, with the value of his sprawling business empire tumbling along with the historic decline in the pound.

CK Hutchison Holdings Ltd., the flagship conglomerate of Li’s group that earned 16% of its revenue from the UK in the first half, saw its shares slump 5.8% on Monday to the lowest since it restructured in 2015. Sister company CK Asset Holdings Ltd., a real estate developer that earned almost a third of its revenue from the UK, plunged 8.6%. Both recovered some ground on Tuesday, rising about 3%.

The share slump came amid a global rout as the pound fell to a record low and bets build the currency could slide even further. The $1.5 billion hit to Li’s personal fortune was the fifth-biggest decline among the world’s 500 richest people, according to the Bloomberg Billionaires Index. The 94-year-old is still worth about $26.7 billion, keeping him high in the ranks of Asia’s wealthiest people, with his stake in CK Asset accounting for most of his net worth.

Read more: Pound Under Siege With Mounting Bets It Will Drop Below $1

After decades of diversification, Li’s businesses now span property, telecommunications, ports, retail and utilities, with Europe, Hong Kong and mainland China contributing the bulk of its revenue. The CK group’s operations in the UK include mobile carrier Three UK, health and beauty chain Savers, the Harwich International port, and utilities firms including Northumbrian Water and Wales & West Gas Networks.

It’s one of the few Hong Kong groups with extensive overseas exposure, a strategy that has typically helped it weather risks ranging from protests in Hong Kong in 2019 to the ups and downs of the Covid pandemic. 

But currency fluctuations have always been a challenge, with the company reporting results in Hong Kong dollars, which are pegged to the strengthening greenback. 

That portends a big hit for the company. CK Hutchison has likely seen HK$15.7 billion ($2 billion), or 11.5%, of the net value of UK assets wiped out since June 30 due to the pound’s slump, according to Bloomberg News calculations.

A CK Hutchison representative declined to comment, while CK Asset didn’t immediately respond to a request for comment.

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©2022 Bloomberg L.P.

Korea EV Cell Makers Holding Up Well Against Weak Won

(Bloomberg) — South Korea’s electric car battery makers are shielded somewhat from a weak won, even though they import a lot of raw materials in US dollars, because demand is propping up earnings, according to Barings Asset Management Korea Ltd.

“In the short term, especially for the third quarter, their earnings seem to be fine,” Hyun Choi, the fund manager’s Seoul-based head of Korean equities, said. “But I’d add this — if this situation continues, it will become a burden for them.”

Concern that margins may come under pressure at companies like LG Energy Solution Ltd. and SK On Co. is growing as Korea’s won weakens, making it among the worst-performing currencies in the region. The country’s central bank chief has said South Korea should encourage repatriation of offshore capital to ride out the deepening crisis.

Compounding those worries are rising prices of precious metals like lithium, which has surged this year amid global supply chain disruptions. 

The average price of cathode-active materials, a core ingredient that accounts for around 40% of the cost of an EV battery, doubled to $42.37 per kilogram from $21.81 per kilogram at the end of 2021, LG Energy said in a filing last month.

Batteries are the most costly part of an electric car and LG Energy is Korea’s biggest battery maker.

Read more: Some Korean Firms Flag Dollar Needs in Meeting With Government

Automakers however are stomaching higher prices of batteries because consumer demand for cleaner cars is robust, Choi said. 

“The electric vehicle industry is small but consumers are accepting the price increases of EVs,” he said.

Shares in LG Energy dipped 1% on Tuesday while stock in Samsung SDI Co., another EV battery maker, dropped 2.7%.

 

(Updates with detail on other companies in text box.)

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©2022 Bloomberg L.P.

Philippines to Shut 175 Online Casinos, Deport 40,000 Chinese

(Bloomberg) — The Philippines will shut 175 online casinos that are operating illegally and deport 40,000 Chinese workers, a justice department official said.

Licenses of these online casinos, locally known as Philippine offshore gaming operators or POGO, have been cancelled by the gaming regulator, Department of Justice Spokesman Jose Dominic Clavano said in a briefing on Monday.

About 300 Chinese nationals working in illegal POGOs are now under the custody of the government. Using a rule of thumb of 200 workers for every POGO, the justice department estimates that about 40,000 Chinese workers will have to be deported, Clavano said.

Authorities expect to deport as many as 3,000 workers by the middle of October as arrests will start early next month, he said.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

Transcript ‘In Trust’ Episode Five: The Association

(Bloomberg) — This is the transcript for the fifth episode of 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 Five: The Association 

Rachel Adams-Heard I was starting to get a better idea of how the Drummond brothers made some of their money. They had the store, where they could charge a lot. They handled estates, approved their own claims. They were guardians, and could borrow Osage money from other guardians. They had so many different roles when it came to Osage finances.

I kept seeing this pattern. And, apparently, I wasn’t the only one. 

I mentioned that letter I found, from 1934, where the tribal attorney Louis Stivers said essentially the same thing. 

He called it an association. Men who were using their positions over Osage families to advance their own interests. He names names, too, in addition to the Drummond brothers. And these men he named either worked at the Drummond brothers’ store or the local bank where Jack Drummond worked and Fred Gentner sat on the board.

What Stivers seemed to say in this letter was that it wasn’t just a coincidence that all the same men kept coming up in the Osage guardianships and estates they handled — it was a whole strategy.

An association.

Elizabeth Lohah Homer That was a shocker, huh. That was a shocker of a letter. 

Rachel Adams-Heard I sent this to Elizabeth Lohah Homer — the lawyer in Washington D.C. who’s on the Osage Nation’s Supreme Court — because for everything I had heard about that time period, I hadn’t really seen any federal officials back then who seemed to catch that this was happening over and over again, among the same people in Hominy. 

Elizabeth Lohah Homer You don’t hear about that very often, where those bad behaviors actually get caught.

Rachel Adams-Heard The names Stivers mentioned have come up again and again in my reporting. There’s Fred L. Shedd, the guardian who lent out his wards’ money to the Drummond brothers. And Carl T. Matthews, who was the guardian of Rhoda Wheeler Ridge, the Osage woman who accused the Pope brothers of arranging a marriage with her to take her money. A man named Barlow. I recognized his name from Myron Bangs Jr.’s audit. Fred Gentner loaned him money from Myron’s account. Stivers lists a few others. He writes “et al” at the end, so I can only assume there were more. 

The archives have other letters and documents that offer a look inside how this all seemed to work. In one case, the Office of Indian Affairs sent a field agent to look into one of Fred L. Shedd’s guardianships. The superintendent had heard someone exerted “influence” over an Osage woman so she would sign a paper saying she wanted Shedd to remain her guardian. That agent reported back that Jack Drummond visited her and said if she told the Office of Indian Affairs that she wanted to keep Shedd as her guardian, he’d make sure she’d get more money each quarter and a new car.

From what I’ve read in the papers from this time period, these were prominent members of the White community in Hominy. This was a town of 3,000 or 4,000 people back then, with a young Rotary club that all but one of the men on this list were members of. The club came up in an article about a local game of donkeyball — a bunch of White businessmen riding donkeys, tossing the ball around. 

And Fred Gentner specifically seemed to have a lot of sway. He owned those shares in the store and the bank. He had been the head of his local Masonic temple in the early 1920s and led a committee to pave a road to Tulsa. Fred Gentner was also on the board of the company that published the Hominy newspaper. 

And while he was doing all that, according to Stivers, he was also using his connections with other White businessmen to access money from Osage guardianships and probates.

When I showed this letter to Gentner Drummond in his office he didn’t think it said these men were using Osage estates to enrich themselves, just that someone was objecting to having businessmen administer these estates.

There was one sentence in this letter from Louis Stivers that stood out to me. After he lists off examples where he’s seen the association play out, he writes, “All of these are sufficient to cause one to raise this question, to say nothing of Mr. Drummond’s conduct in the Wah-hu-sah-e estate in connection with certain disbursements due Josephine Lohah Kipp.” 

This was a new name to me, but Elizabeth, she actually knew Josephine well. 

Elizabeth Lohah Homer I always thought that Josephine was my grandma. But it turns out Josephine was not my grandma. Josephine was my grandpa’s first wife. 

Rachel Adams-Heard Elizabeth says she thought Josephine was her grandma, because she was at her house so much. They lived just outside of Hominy, in a big house. Hosted dinners, would have people over all the time. 

Elizabeth Lohah Homer She was like the, you know, kind of the center of the social scene for Osages in Hominy.  And so we were over there all the time, I mean it was like literally walking distance from our house.

Rachel Adams-Heard I wanted to know why Stivers singled out Josephine and her stepmother, a woman named Wah-hu-sah-e. What conduct he was talking about that warranted its own sentence in a letter that was already about a bunch of questionable stuff he seemed to think was going on.  

So I pulled Wah-hu-sah-e’s probate file. The one Stivers mentioned. She died in 1930. 

And what I saw in her probate was another letter from Stivers. He flags something — an almost $17,800 claim from the Hominy Trading Company. Debt the store said Wah-hu-sah-e’s estate owed. And that claim, it was approved by Wah-hu-sah-e’s executor: Fred Gentner Drummond. 

This is the strange part. According to Stivers, it wasn’t Wah-hu-sah-e’s debt at the store. It was money her husband’s estate owed, when he died seven years earlier in 1923. His name was Charles Wah-hre-she. 

At this point, I had seen some pretty enormous claims on Osage estates. But nearly $17,800? To a trading post? That’s more than a quarter million dollars today. And according to this letter, Fred Gentner was administrator of Wah-hre-she’s estate too.

I started looking around for any information I could find about Charles Wah-hre-she because he seemed like he might hold the key to figuring out what conduct Stivers was talking about in that letter — the example he seemed to find most questionable, that Fred Gentner Drummond was behind. 

And I learned that Charles Wah-hre-she was actually pretty famous at the time. He was a religious leader, influential in Hominy. I found a newspaper article calling him one of the most photographed Native Americans of the time. He took a trip to Mexico once, and made headlines across the country — I found mentions in newspapers from El Paso and Washington D.C. 

He was also a source for a well-known ethnologist named Francis La Flesche, who spent decades documenting Osage culture. His work comes up in a lot of books, and Wah-hre-she is mentioned by name. 

There was so much about him out there. But what stood out to me the most was a social media post, on Reddit of all places, from five years ago. 

The title said: “Osage Priest of Puma Clan Charles Wah-hre-she.” 

And the comment: “This is my great-great-grandfather. Born 1862. Murdered Dec. 10, 1923 during Osage Reign of Terror.”

This is “In Trust.” I’m Rachel Adams-Heard.

I didn’t set out to do a story about murder. Not that those stories don’t deserve to be told. There was just so much focus on the murders from the Reign of Terror — books, now a movie — and I wanted to understand the  financial schemes going on around them. The ones that don’t get as much attention, but still have these massive, generational impacts. 

But what I’ve learned from talking to Osage families is that it’s impossible to look at what happened during the 1920s and 1930s in Osage County without coming across murders that were never investigated or deaths that don’t make sense. 

There was Nah-me-tsa-he, who died while married to a man half her age, a man who sold her headrights just a few years later. Myron Bangs Jr.’s mother, who got sick just when a man who wanted her money married her. Suspicious circumstances definitely, but no one ever said they knew for sure what happened. 

But now I was looking at this Reddit post from someone who said definitively that their great-great-grandfather, Charles Wah-hre-she, was murdered. The same man whose debt at the Hominy Trading Company had come up in the Stivers letter. 

I sent a message to the account on the post — explained what I was working on, that I wanted to know more about Charles Wah-hre-she. 

For days, I refreshed the page over and over again, wondering if I’d hear back. 

While I waited, I went to someone else who might have heard about Charles Wah-hre-she. John Maker — who told me about the Osage price — his great-grandmother was Wah-hu-sah-e. 

And even though Wah-hre-she was her second husband, and not John’s direct ancestor, I thought maybe he would know how Wah-hre-she died. 

John Maker Well, I heard from that family — Angie Jake, who was his great-great-granddaughter — that he had been murdered on that road going out to their old place, called Cotton Gin Road. Of course, it was back in those days, it was a horse and buggy and the dirt road. And they had found him murdered, shot in his buggy, just leaned over. But it was a bullet wound to the head. And the horse was just standing there stopped and somebody was just coming or going and found him like that.Rachel Adams-Heard What was Angie like when she told you that? John Maker Well, I know she was hesitant to tell me. It’s like kind of an old skeleton closet story, you know. But she was real reverent about it when she was telling me, and I think we were just riding around in the car, yeah. I mean it was just kind of like, “By the way my old grandfather was murdered on this road.” And I was like, I had never heard that. Of course I had heard that name. Oh, Charlie Wah-hre-she was a well known name around Hominy, real respected religious leader.

Rachel Adams-Heard So John Maker had heard Charles Wah-hre-she was murdered during the Reign of Terror. And he had heard this story from a woman named Angie. John told me like a lot of deaths from the time this wasn’t something people talked a lot about. That people were scared the same thing could happen to them. 

The corruption of the time is well-documented now. But John said, for a long time, this was only ever something that was whispered about. 

John Maker And back in those days, it was common practice for these coroners or medical people: “Yup, he’s dead all right.” You know? No autopsy, none of that. I mean that corruption, what was the coroners, the medical examiner, the doctors, all the way to Oklahoma City on all these Osage deaths.

Rachel Adams-Heard I found out Angie had actually talked to someone else about it, an Osage woman she was distantly related to, who wrote her thesis paper on the Osage Native American church. In that paper, there’s a passage from a conversation with Angie where she says, “Wah-hre-she didn’t live very long. He was murdered.” 

But Angie says her parents never really sat her down and told her anything. Angie has since passed away, so I don’t know how she knew about Wah-hre-she’s death, or if she knew anymore than what she told John or this researcher.

At this point, I knew Louis Stivers suspected the Drummond brothers and other men around Hominy of being in an association. And that Stivers thought Fred Gentner Drummond took a bunch of money from Wah-hu-sah-e’s estate. Money Fred Gentner said the store was owed by her late husband, Wah-hre-she. And now I was learning that there was this whole other element, this belief by Wah-hre-she’s family that he was murdered. 

I was looking around for more information on Charles Wah-hre-she one day, when I went to check Reddit again. This time, I had a new message. From that account behind the post that said Wah-hre-she was murdered.

His name is John HorseChief. He’s an Osage citizen. An IT expert who works with a lot of old Osage records. We talked on the phone a few times. He said he was interested in seeing the documents I had found, so I sent him the letter from Louis Stivers, the reason I had come across his post to begin with. John invited me out to his family’s house in Hominy.    

Rachel Adams-Heard John?John HorseChief I’m John. Yeah. Rachel Adams-Heard Rachel — It’s nice to finally meet you in person.John HorseChief Glad you’re here. 

Rachel Adams-Heard John had two Crockpots on in the kitchen. There were jugs of tea on the table. His son had baked cookies.

John HorseChief Oh yeah, I was gonna tell you guys if you’re hungry. I made like traditional Indian corn with buffalo.Rachel Adams-Heard Oh, awesome. John HorseChief That’s real corn that we grow here. My uncle grows it and it’s been like tested. It’s got like 16% protein in this corn. Rachel Adams-Heard Oh, really? 

I sat down with John in the living room. His dad, Alfred, was also there. 

Alfred Horsechief Oh yeah, hi. 

Rachel Adams-Heard John said his sister Geneva and his cousin Mary Jo were going to come by later. The man they were going to tell me about, he was extraordinarily important — not just to their family, but to the Osage Nation’s history. He was a religious leader, at a time when Osage society was changing dramatically.

John HorseChief He had been educated but he chose to live an Osage life. He wore traditional clothing, he preferred to speak his language and, you know, he lived a traditional life as much as he could to that point. And so those are the things that we really value about the man of who he is and that’s really why I wanted my pops to be here, and my son, and all my family, is because we have this big large family and we, like, really take care of each other and our kids, but it’s all through this culture and it’s all through what our grandpa left us.

Rachel Adams-Heard Wah-hre-she died long before John or his dad were born. And even though Wah-hre-she was technically his great-great-grandfather John calls him grandpa. Says he’s always felt a strong connection to him.

When we sat down, John told me about a moment when he felt that connection — a moment that changed everything for him. 

At the time, John was working in the Osage Nation’s IT department. He says at first his job was mostly dealing with the typical IT stuff — messing with printers, network management, plugging in keyboards.

John HorseChief But one day there’s a big old box of dusty materials in the IT room. 

Rachel Adams-Heard A box of old audio recordings. Reel-to-reel tapes, waiting to be digitized. 

John HorseChief And they’re trying to pass it off to people. No one wanted to do it and I was a new guy in IT and so I needed to do something and then the first tape I digitized was one of our leaders named Bacon Rind. And he’s a very famous chief of ours and I heard his actual voice and from that moment, I knew that’s what I wanted to do. 

Rachel Adams-Heard John started digitizing and converting more and more of these recordings, cataloging them. Some were tapes, others were from files from old wax cylinders at the Library of Congress. 

John HorseChief Yeah so when I started doing those that’s when I started, you know, really getting into it. And it was opened up a new world for me, you know? Because I didn’t think we had recordings that old. 

Rachel Adams-Heard  John says these tapes were organized by catalog number, so he’d have to compare the numbers with field notes from the time to figure out who was talking. And as he’s doing that, one day, he notices something.

John HorseChief They had our grandpa’s name written down a whole different way. So Wah-hre-she can get written down a bunch of different ways, right? And so it was with a C-H I think. And then I looked and I was like, “Is that grandpa?” Sure enough, I started listening to it. And it was and I was like, “Man, this is really him. This is it.”Rachel Adams-Heard  And, what was his voice like when you heard that?John HorseChief It was beautiful, it was haunting, and it was just like he’s talking to me.

Rachel Adams-Heard John told me a lot of the recordings with Wah-hre-she were religious songs — powerful, important. Wah-hre-she lived at a time when the Native American Church was first forming. John told me, he was trying to hold on to parts of traditional Osage beliefs and culture, and these songs were part of that.

John HorseChief When you hear that, and then you think about it, and you go home, when you pray and you think about “Man, why was I the one who got to hear my grandpa’s voice?” And so, you know, I don’t want to say it’s about me or something like that, but you know we believe everything happens for a reason, and if it’s meant to be, it’s meant to be. And so I took that as a sign, a good sign. And so that’s what I got into, and then the more I learned about it, I just totally went into it.

Rachel Adams-Heard Wah-hre-she was born in the 1860s. He lived on the Osage Reservation before the land was divided up and parceled out to individuals. Before headrights. 

Then allotment came and everything changed. 

Mary Jo Pratt I imagine that would have been like taking you and dropping you in the middle of another country, where you don’t speak the language. 

Rachel Adams-Heard This is Mary Jo, John’s cousin. She said Wah-hre-she would have watched the impact of allotment first-hand, and seen the US government’s efforts to force the Osage Nation to assimilate. 

Mary Jo Pratt And so taking someone out of something that would have been a community type environment, where we don’t look after the survival of ourselves, we look after survival of the community, and then separating, purposely doing the separating, there you see the evolution — forced evolution. 

Rachel Adams-Heard John and his family told me, when oil money started pouring in and more and more White people moved to Osage County, Wah-hre-she knew things were going to get bad. He watched as traders, and bankers, and ranchers all sought to get rich off the Osage Nation — its land, its oil money. 

This whole time, Osage children were being forced to attend Native American boarding schools, a lot of it paid for with Native money — money held in trust by the United States. These boarding schools punished children for speaking their own language and forced them to wear certain clothes. They were also rife with abuse.

John HorseChief Wah-hre-she was wanting to save this culture. He knew that we were getting wiped out here. It’s the table stacked against us — the lawyers, the policemen, they were all against us. They’re taking away our religion, our culture. So he was like, “Let’s go somewhere else and start over, where we can get the religion going, as much as we can make it work in the times that we live in.” So they thought about Mexico and they went down there. 

Rachel Adams-Heard Mexico. I’ve seen references to this trip all over the newspaper archives. In one, from December 1921, it says Wah-hre-she is “proposing to remove the Indians from the Wright-Pawhuska jurisdiction,” a reference to the Osage Agency superintendent at the time. 

There’s also another newspaper clipping, from June of 1922. It says Wah-hre-she hosted a feast at his house outside of Hominy. At this feast, he reportedly said he had already met with President Obregon of Mexico, and he was supportive of the plan to make Mexico the Osage Nation’s new home. The paper says Wah-hre-she: “Has the idea that this is too much of a White man’s country.” 

John HorseChief We went down there with a sack of dollars and when we got to Mexico he turned it into a bag of pesos and he paid for everything. He talked to everything, he managed everything. He was never scared. You know, he was on a mission to do something. He was trying to preserve our culture, our people, you know what I mean? So, that’s how bad it was here. That’s how deadly and bad it was here. They were getting murdered. I mean, they could see the writing on the wall.

Rachel Adams-Heard But the Mexico plan didn’t work out. After he visited, Wah-hre-she determined the land was no good for farming. And by the time he came back home to Hominy, just as he had predicted, disaster had struck Osage County — the Reign of Terror was well underway. Just a year later, Wah-hre-she too was dead.

[ambient sound of a car]Rachel Adams-Heard Wow.John HorseChief So this is it, we have a…

Rachel Adams-Heard During our conversation, John offered to take me out to Wah-hre-she’s land. It’s still in the family. Only a couple buildings are still standing. There was a fire out here, the family says an accident, back in the ‘70s.  

John HorseChief Here is where Charles Wah-hre-she lived. And it was a big giant brick house that he built and after it burned down some of the bricks are over at my little house I have over there, I use it to kind of make my little driveway, but this is where he had his big — this is where Charles Wah-hre-she’s big house was at, and they called this “the farm” out here.

Rachel Adams-Heard It’s just a few miles away from where John lives now. The foundation’s still there. A couple other buildings too. One called the summer house, kind of like a big guest house. 

John HorseChief Different people come visit for like two weeks at a time. And that’s where they would live in the summer house, or relatives come over, we’d have our dances, and so it was like for guests and for big occasions.

Rachel Adams-Heard This is the same house Elizabeth Lohah Homer mentioned. Where she had all those memories from growing up — of big dinners and social gatherings. Being there with John, I could imagine kids running around, adults visiting. 

John HorseChief And so this is our family’s specific church house right here. 

Rachel Adams-Heard Wah-hre-she’s church is also on the property. It has eight sides, a pointed roof. 

John HorseChief And so you’ll see these around. At one point, there was 45 or so these churches active in the county, each family had one. There’s about four of them active left, and this was active ‘til about 10-15 years ago. And so that’s what me, and Mary Jo, and Geneva are here, we’re trying to get built back, right? Because the tribe is having a renaissance, you know, of our culture and who we are. We’ve been through the worst, worst times, you know what I mean? And the ones who are left are coming back stronger, and we want to get back the stuff that we lost: our family, our church, our culture, our language.  This is like, for me personally, now that I’m becoming an elder, you know, talking to Mary Jo and Geneva, this is something I want to fix up and get back together and, in 100 years, our boys and our grandsons are going to sit in here, and they’re going to know what to do. And this is going to be their place again. So that’s what we want.

Rachel Adams-Heard I’ve heard that Charles Wah-hre-she was murdered from a few different people at this point. Unfortunately, everyone who would have had first-hand knowledge of this — the people who were there, back then — they’ve all died.

But the story’s out there, and the details are remarkably consistent: Charles Wah-hre-she was on his way home, in a buggy, on Cotton Gin Road, when someone shot him in the head. 

But the official story was completely different.

Even though Wah-hre-she was the subject of a bunch of articles while he was alive, I could only find a couple newspapers that mentioned his death. 

It’s the same article, republished. One on Dec. 12 by a newspaper in Pawhuska and the other, on the next day in the Osage Journal. The headline was “Charles Wah-hre-she Dead at Hominy.” His name is spelled differently. Fifty-seven words that say he died at Rolater Hospital in Oklahoma City. That his wife and daughter were there. The service is at 10 a.m. 

Rolater Hospital, all the way in Oklahoma City. Oklahoma City is a two-hour drive from Hominy today, way longer in 1923. 

It’s the same location on his death certificate, which says he died on Dec. 10, 1923 from “Empyema of gallbladder with stones.” 

Basically, the doctor who filled out this death certificate was saying Wah-hre-she died of complications from gallbladder inflammation. Today, it’s pretty rare to die from that, but it can happen if left untreated. 

The undertaker was in Oklahoma City too. His name was Ed L. Hahn. And the funeral home he worked at, it still exists today. 

Cheryl Shick Hanh Cook Street and Draper, this is Cheryl how may I help you? Rachel Adams-Heard Hi Cheryl, my name’s Rachel…

Rachel Adams-Heard I told Cheryl I was looking for anything she could give me on Wah-hre-she. 

Cheryl Shick I would have to look and see if we actually have the record or not, that far back. I mean we do have some that far back but they’re a little sketchy sometimes, and I will need to go upstairs and look for that, so I will need to call you back. 

Rachel Adams-Heard Cheryl dug around in the records for a while. She called me back when she found something. 

Cheryl Shick I don’t have a lot of information. This is all handwritten so it’s kind of hard to read. It’s just a little card, is all it is. Back then that’s all we ever had.

Rachel Adams-Heard Cheryl told me some of the basic facts the funeral home had — his name, that he was married. That he was 68-years-old. 

Cheryl Shick There was an informant. I guess the gentleman that took care of him was Fred G. Drummond. And he died at Rolaters, or Rolaters Hospital. Rachel Adams-Heard So what would be the role of an informant? Cheryl Shick That would give us the information as to what — like mother and fathers names, date of birth, date of death, that sort of thing, things for the death certificate. Rachel Adams-Heard Is there any information about how he died? Cheryl Shick No, there’s nothing on here at all about how he died, just where he died and that’s it.  

Rachel Adams-Heard So Fred Gentner was the informant on this record at the funeral home. He was the one who called to give Wah-hre-she’s background information — his age, that he was married. Cheryl sent me a copy of the card and a separate itemized claim for Wah-hre-she’s undertaking services. 

It was $837.24. The most expensive part was the casket: $550. An account at the Hominy Trading Company paid for it. But there was no mention of how Wah-hre-she died. 

The funeral bill, the death certificate, the paper — they all put Charles Wah-hre-she in Oklahoma City when he died. Apparently from some sort of gallbladder inflammation. When I’d find something like this, I’d send it to John HorseChief. 

John HorseChief I’m just like, that doesn’t make any sense. That’s not what we heard. Rachel Adams-Heard So do you think, he was like, because — you said that you still believe that he was absolutely murdered?John HorseChief Yes, I believe that.

Rachel Adams-Heard John and I have talked a lot about this. Why the paperwork doesn’t match the story he’s heard — that a lot of people have heard — that Wah-hre-she was shot in the head. 

John told me, he hasn’t changed his mind. There are enough stories, and enough proof, that corruption was rampant back then.

I’ve tried to find out more about J.B. Rolater, the doctor the hospital was named after, who signed off on Wah-hre-she’s death certificate. There’s nothing I’ve seen that indicates he was ever suspected of being part of the Reign of Terror — of the criminal conspiracy that reached far beyond William Hale to lawyers, medical examiners, doctors.

There are some murders that have been solved from that time period, thanks to these archives and family stories. They come up in books like “Killers of the Flower Moon,” or “The Deaths of Sybil Bolton.” And I wish I could tell you this was one of those stories, and I figured out definitively whether Wah-hre-she was murdered, and if he was, who did it. 

But for every case that’s been solved, there are more like Wah-hre-she’s, where finding the answer seems almost impossible. The records say one thing, but knowing the corruption of the time, it’s hard to know whether you can trust them. The family story says something else, but it’s been a very long time, and no one who was there is still alive.

But there was still this whole other element to Wah-hre-she’s death that John still had questions about: the money. Why Wah-hre-she’s estate would have owed so much, and where it went? That’s after the break. 

John said, he was as sure as he ever was that Wah-hre-she was murdered. The official documents that placed him in Oklahoma City on Dec. 10 just didn’t seem right to him. Why would he have gone to a hospital so far away? If he wasn’t murdered, why had John heard this specific story — that Wah-hre-she was shot in the head on Cotton Gin Road — his entire life? 

John said, when he was reading all this paperwork — the death certificate, the card from the funeral home where Fred Gentner was the informant, the receipt paid for by an account at the Drummonds’ store — it was enough to make him want to know more: why Fred G. Drummond was all over Wah-hre-she’s and his wife Wah-hu-sah-e’s paperwork? He wanted to know how Fred Gentner ended up with so much of his family’s money. So John went to the courthouse and asked for the records on Wah-hre-she’s estate. 

John HorseChief Sure enough, I went up there yesterday to put those records and it’s a big manila envelope this thick. The very first name, Fred G. Drummond. Alright, oh, shit. So he became his executor after grandpa died, right? And in the very first day, Fred G. Drummond in there trying to correct the letter and get paid for this and get paid for that.

Rachel Adams-Heard When John went to the courthouse that day, I actually ran into him in the parking lot. He told me he put in an order to have Wah-hre-she’s entire probate copied and printed out so he could keep it. They told him it would take a couple days. He said I could come with him, when he picked it up. 

John HorseChief It’s a very intimidating courthouse in a way. Rachel Adams-Heard Yeah, how are you feeling? John HorseChief Well, it’s a different feeling. You know, like the first time we came up here I could really feel it, the first time we asked about it. These are the tomes. Rachel Adams-Heard Yeah, the old books with the gold and red spine. Yeah. I scanned every single one of that white one. John HorseChief Really?Clerk What can I do for you guys? John HorseChief Yes, ma’am. I’d like to pick up a probate I ordered on Friday. Clerk What’s your name? John HorseChief John HorseChief.Clerk On Charles? John HorseChief Wah-hre-she, yeah. Clerk: Wah-hre-she. $125.

Rachel Adams-Heard John handed over his card. The woman behind the counter walked over to her computer, only to return a few seconds later. She told us the machine couldn’t take a card with a pin. John needed to come back with cash.

John HorseChief Okay, well then we’re gone have to get some money and come back.Clerk Okay.John HorseChief Okay.

Rachel Adams-Heard John let me ride with him to an ATM nearby. We drove past Ree Drummond’s Mercantile, past her hotel, the Pioneer Woman Boarding House. Downtown Pawhuska was busy that day, a lot of tourists around. 

John’s told me before he doesn’t have anything against Ree Drummond; she never did anything to him or his family. And I’ve heard a version of this before from some other Osage citizens — that Ree’s brought jobs to the community and helped revitalize Pawhuska. But John also said he feels conflicted about eating at her restaurants, knowing the broader suspicions around the Drummond family’s history in Osage County. 

John HorseChief It’s no secret what they did. They took advantage of us through hook and crook. And, you know, they can say that we signed the paper and it was all legal but I mean, they’re sitting here holding all the money. I just want to know the truth. 

Rachel Adams-Heard John withdrew the cash and we drove back to the courthouse. He paid for Wah-hre-she’s probate. Left with a few hundred pages, double sided. We made a plan to meet up later, after he had a chance to read through it. 

Later that week one night, after John had gotten off work, I went back to his house. He had all the papers from the probate file on his kitchen table, with a magnifying glass. 

Rachel Adams-Heard Yeah, so what do you make of like, these dates?John HorseChief Oh, there’s even more. So like there’s this one and then there’s the $1,000 charge from the hospital, from the Rolaters Hospital to my grandpa’s bill, that’s further down here I think…

Rachel Adams-Heard In addition to the Rolaters Hospital charge there’s also a claim from the Hominy Trading Company. In the first week of December it shows Wah-hre-she bought some coffee and eggs. A couple boxes of Jell-O. 

And on Dec. 8, two days before he died, there’s another claim from the Drummond’s store: $200 cash – for “expense to Oklahoma City.” Fred Gentner approved that and all the other claims.

John HorseChief It’s even worse when you see all this guy’s name all over it. Right? He’s the one getting all the money out of it and directly benefiting from it. This dude’s name is all over my grandpa’s paperwork. Right? 

Rachel Adams-Heard Even seeing the probate, it still wasn’t clear how Wah-hre-she’s estate would have owed so much money to the Hominy Trading Company — about $17,800 by the time the store collected on it.

Rachel Adams-Heard Yeah, it’s so interesting, like, so we have the we have the congressional record, and we have that funeral card from the Oklahoma City funeral home with expenses that went into the funeral. But then, I’m not even like really seeing where those would be.John HorseChief Maybe those are — yeah, they’re not even in here are they? Maybe those are paid out of his own pocket. I don’t know. But I don’t even know what goes on. It’s just so confusing.

Rachel Adams-Heard It was confusing. You have to make a lot of assumptions to get the numbers to add up, because there aren’t many receipts showing how the debt could have piled up so much.  But I have been able to put together a rough idea of how that happened.

The congressional record I mentioned to John, it was the same hearing where one lawmaker called the extreme funeral bills fees than Teapot Dome. 

They cite an example, an Osage citizen whose funeral expenses were around $9,000. They call the person Wahrisha and later Waresi. But it’s clear from the other details they mention they’re just mis-saying Wah-hre-she. Because they’re talking about an Osage man who lived in Hominy, whose undertaker was in Oklahoma City — whose administrator was Fred Gentner Drummond. 

I’ve looked at all the other estates Fred Gentner handled, Wah-hre-she is the only one that makes sense here.

According to this hearing, the monument for Wah-hre-she’s grave cost $4,800 and the casket was $3,000. The funeral came out to more than $9,000. 

A couple years later, as the administrator of Wah-hre-she’s estate, Fred Gentner Drummond issued the Hominy Trading Company a promissory note, basically an IOU. It said Wah-hre-she’s estate owed the store a little over $11,000. 

And because Fred Gentner gave his store a promissory note from the estate it was collecting interest every year. Until one day, when Wah-hu-sah-e dies, and the store makes the claim, with interest, on her estate for roughly $17,800. More than $300,000 today.

So that’s where the $17,800 claim on Wah-hu-sah-e’s estate must have come from: Wah-hre-she’s funeral. The one that came up in a congressional hearing, that one lawmaker called worse than Teapot Dome. 

This is what Louis Stivers, the tribal attorney, was complaining about in that letter I found. The one that sent me looking for Charles Wah-hre-she’s family. That led me to John HorseChief. Stivers was objecting to how much that debt increased. And how the guy who issued the promissory note from Wah-hre-she’s estate was also the guy collecting on it: Fred Gentner. An IOU, to himself effectively, from the estate of an Osage man who couldn’t dispute it. 

But despite all the flags — from Stivers, from U.S. congressmen — Fred Gentner never had to pay the money back. A county judge overruled Stivers’ objections and said the Hominy Trading Company could keep the roughly $17,800. He also said Fred Gentner could keep the executor’s fee he paid himself, another $3,294.80. And Fred Gentner’s lawyer, a man named G.K. Sutherland, made $1,500 from Wah-hu-sah-e’s estate.

John HorseChief It’s like an open check. You can just start writing money against this guy. When you think about it, that this used to be yours and you actually see the paperwork and you know, I think you look at things a lot differently. You know what I mean? You look at people a lot differently. You think about yourself differently. 

Rachel Adams-Heard John told me he was going to keep looking through Wah-hre-she’s records — reading the probate — piecing together just what happened to his family in the ‘20s and ‘30s.  

John HorseChief You know, one of these days, we’re going to make sense of all this paperwork and, and it’ll be some more closure, but you know, I’m just barely kind of like putting together all that happened and the repercussions of what it did to us personally, you know what I mean? On a personal level, not just financially, right? But the bigger loss is just that he meant more to us, the person, right? But you know it’s bringing us together as a family and it’s just like, you know, just something we can kind of — I guess now we’re ready to talk about it. ‘Cause I have a feeling, they didn’t talk about it for a long time. You know what I mean? It was just so painful and just such a loss and, so. It was very, very hard on our family — and I think a lot of it, you know, it’s just so much stuff goes through my head, right. ‘Cause my grandpa was resistant to all this stuff like: let’s keep our culture. Let’s keep our language. Let’s keep what makes us, us. And then he was actively trying to move the tribe to where we could practice our culture and stuff. And it’s just, definitely it makes you think that this culture is that strong. It can withstand all this, all these millions of dollars, all that. And if we just lean into that, you know, we’ll be all right. 

Rachel Adams-Heard John and I went through more of the probate. We talked for a while. It was getting dark outside. 30-something degrees. A winter storm was rolling in. 

He told me about other things he was up to — projects he was working on with people around town. 

He showed me some beadwork he was doing for his son, a leather hat he made. John told me, before I left, there was something he wanted to show me. He had just gotten back from Nebraska, from a buffalo hunt. 

John HorseChief You know, I had a gun and I was about 70 yards away and I was in a 4×4 you know, I just kind of got out of the 4×4 and waited — I couldn’t shoot nothing else cause if you shoot another one you have to pay for that one too — so I got it, I got it, I got it. So I waited – you have to wait until there’s nothing behind him and nothing in front of him and then I did and I prayed and I was very thankful. And so, it was a good feeling, good experience, a blessing. So I’m very happy for that. And you know, that’s the kind of good things I want to spread around. 

Rachel Adams-Heard John pulled up a video on his phone. He had a brush in his hand, combing it through the hide.

John HorseChief But yeah, that’s a Buffalo robe. I’m making a Buffalo robe. I’m the first Osage to kill a buffalo in over a hundred years. That’s what I’m saying until someone pops up with a picture. But this is what I’m trying to take back. I’m trying to say “Hey, we need to start eating buffalo, growing our own corn, learn how to do this again.”Rachel Adams-Heard Does it make you feel close to Wah-hre-she?John HorseChief It does. Yeah. It makes me feel like his blessings are coming to me and he’s helping me out. Just got to follow this way.

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Europe Considers Making Big Tech Pay for Building the Internet

(Bloomberg) — When binge-watching TV became a universal pastime at the height of the pandemic, one of Europe’s top officials called the Chief Executive Officer and co-founder of Netflix Inc. and told him to make his product worse.  

Internal Market Commissioner Thierry Breton wanted Netflix to reduce the quality of its videos to free up bandwidth, fearing that Europe’s networks were under strain. Reed Hastings complied, cutting data output by about 25% for a month. So did YouTube.

It didn’t matter there was little evidence that networks were overloaded, or the fact Netflix already adapts video quality based on the capacity of the network it’s on. Politicians were alarmed at the prospect that millions of miles of cables and tens of thousands of antennas under their jurisdiction might be at the mercy of Silicon Valley, right when Europe became reliant on internet access to live and work through Covid-19 lockdowns.

So the European Union waded into an argument local broadband operators had been making for a decade: should Big Tech chip in for the telecom infrastructure they use? 

Broadband operators argued that the rewards from suddenly carrying 40% more downstream traffic and double the upstream traffic during the pandemic went to US tech platforms, while they were stuck footing the bill. The Stoxx 600 Europe Telecommunications Index has lost a quarter of its value in the last five years, while the NYSE FANG+ Index tracking the biggest tech stocks has more than doubled.

Now policymakers are beginning to share the carriers’ fears that if Europe continues to leave all the investment to telecom operators, its digital grid and the businesses built on top could fall behind those of the US and Asia.

“It’s time to see if our regulation and organization of the infrastructure supporting our digital space is relevant or not,” Breton said in an interview with Bloomberg this month. One of the questions, he said, includes “who should pay what.”

Tech companies are quick to rebut these arguments. They do invest in infrastructure: Meta and Alphabet have spent billions of dollars laying underwater cables between continents, adding tens of billions of dollars to Europe’s economy, according to research funded by Meta. Netflix has installed thousands of server boxes in more than 700 EU cities, to compress and store video locally so it doesn’t jam networks. In a push to get more people connected to the internet – and Facebook – Meta Chief Executive Officer Mark Zuckerberg has backed tools and initiatives to speed up telecom rollouts. 

“We partner with European internet service providers to make networks more efficient,” said a Netflix spokesperson. “We operate more than 700 caching locations in Europe, so when consumers use their internet connection to watch Netflix, the content doesn’t travel long distances. This reduces traffic on broadband networks, saves costs, and helps to offer consumers a high-quality experience.”

Matt Brittin, Google’s President of EMEA, said at an event in Brussels that it’ll be customers who pay “either with price or pay in worse services,” if Europe adds a streaming fee. 

For a few years, telecom companies and suppliers were themselves the hottest stocks, offering consumers the latest gadgets. Millions paid to send texts on Nokia phones branded with Orange SA and Vodafone logos.

But after the launch of the iPhone in 2007 and the rise of social media, the ground began to shift. The likes of BT Group Plc spent billions laying fiber optic cables and installing antennas so their customers could continue downloading apps and streaming videos from other companies. 

Large countries like France, Spain and Italy, as well as key European parliamentarians, back the push to make streaming sites like Netflix and YouTube pay their “fair share” to support infrastructure upgrades. But other influential countries like Germany, Denmark and the Netherlands are warier. Even some who back the general concept don’t know how to make it work. Some officials are asking whether the issue is Big Tech’s lack of investment, or rather the fragmentation of the telecom market itself.

In the US, there are now just three big mobile companies, while the EU contains nearly 40 large players, whose mergers have been blocked, making it nearly impossible to keep up, the telcos argue. That’s sparked concerns Europe might fall behind: just 2.5% of mobile connections were over 5G in Europe in 2021, versus 14.2% in the US and 28% across China, Japan and Korea, according to GSMA Intelligence, the research arm of the global mobile trade group. In time that could mean losing out on the next big 5G startup, or industrial investments, operators say.

“We have to consider that telco markets in Europe are much less attractive than in the US,” said Germany’s Andreas Schwab, who led the Digital Markets Act negotiations in the European Parliament. “This is a problem that we have to deal with as the 5G expansion is needed,” adding there is “no doubt that some non-telcos have a huge business” running on telecom operators’ networks. 

Europe’s biggest telecom operators like Vodafone constantly talk about the need for consolidation – and the EU’s appetite to allow it will now be tested anew with the planned merger of Orange and Masmovil in Spain. 

For now, the EU’s focus is on whether streaming sites should pay for how much traffic they use. Ideas include making companies pay for the precise amount of data they use; creating a fund – possibly overseen by governments – to invest in infrastructure; or – in a proposal supported by Spain’s Telefonica – requiring tech companies to negotiate deals directly with the carriers. 

“This is not a question of ‘you big American platforms, please be generous to us, because you are so huge,” Telefonica’s head of public policy Juan Montero Rodil said in an interview. “Not at all. What we are speaking about is paying a price for a service we deliver.”

Only a handful of firms are in the phone companies’ sights: Britain’s BT said that four-fifths of the data clogging their cables can at times be driven by just four companies, in a submission to digital regulator Ofcom, which is reviewing net neutrality rules aimed at ensuring internet service providers do not control what users can and cannot see on the internet. The review is also looking at investment incentives. 

A report commissioned by Europe’s telecom lobby group ETNO found that 56% of global traffic from 2021 was generated by Google, Meta, Netflix, Apple, Amazon and Microsoft.

Although experts question how accurately companies can determine where data comes from, it’s clear that usage is only likely to increase. And more fonts of data continue to flood in: TikTok traffic over BT’s network has grown twenty-fold in the last year, the company said. Representatives for TikTok didn’t immediately respond to a request for comment. 

For now, European carriers are avoiding lawsuits like SK Broadband Co, in South Korea, which sued Netflix claiming the rush to watch hit show Squid Game meant the streamer should be liable for millions of dollars in higher network costs. Korea also passed a so-called Netflix Law which holds online content providers accountable if they fail to maintain stable services, according to local news agency Yonhap.

BT executive Marc Allera likened a ‘fair use’ payment to how Netflix still pays to ship thousands of DVDs to old school subscribers.

“Net neutrality applies a set of regulation over what should be a free state to operate in the way you see fit,” he said in an interview. On the responsibility of big tech platforms, he asked: “Do they have any stake in the game, any contribution to make to these once-in-a-generation networks that are effectively creating all of the value and usage for them?” 

“I think there is a role greater than what it is today – which is close to zero.”

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©2022 Bloomberg L.P.

Dollar Rally Pauses, Stocks Mixed in Cautious Mood: Markets Wrap

(Bloomberg) — Asian markets traded on a cautious note Tuesday following another selloff in US stocks, soaring bond yields and volatile currency markets as investors brace for a heightened risk of global recession.

A gauge of the region’s equities fluctuated as shares edged higher in Japan and Australia while Hong Kong stocks fell 1%. US futures contracts rose after the S&P 500 closed at its lowest since 2020 and the Cboe Volatility Index spiked past 30, a level it hasn’t closed above since June. 

Bonds remained under pressure in Australia and Japan, while the benchmark 10-year Treasury yield held near 3.9% — a level last seen in 2010.

The Bank of Japan announced an unscheduled bond buying operation across a wide range of maturities after the country’s 20-year bond yields rose to the highest level since 2015. The rate on the benchmark 10-year security touched the 0.25% upper limit of the BOJ’s tolerance band as global debt markets come under pressure from expectations for further monetary tightening.

Read More: Everything-Selloff on Wall Street Deepens on 98% Recession Odds

The dollar gauge inched back from a record high Monday, when Federal Reserve officials repeated hawkish comments on policy. Asian currencies including the yen and yuan strengthened slightly while staying around levels that have caused concern from authorities in Japan and China.

BOJ Governor Haruhiko Kuroda said Monday that Japan’s intervention in the currency market was appropriate given recent volatility in the yen. Japan spent about 3 trillion yen ($21 billion) on its action, Nikkei reported. 

Traders are bracing for more pushback from China’s central bank as the yuan approaches the lowest level in 14 years.

“The yuan I think is getting close to its bottom,” Daniel Gerard, senior multi-asset strategist at State Street Global Markets, said on Bloomberg Television. “They’ve got to manage the trading basket.”

The pound advanced following its drop to a record low Monday. The Bank of England said it may not act before November to stem a rout, leaving traders wary of the risk that the currency could drop to parity with the dollar.  

The turmoil in markets shows little sign of turning Fed officials away from hawkish rhetoric. Boston Fed President Susan Collins and her Cleveland counterpart Loretta Mester said additional tightening is needed to rein in stubbornly high inflation and Atlanta Fed President Raphael Bostic also said the central bank still has a ways to go to control inflation.

Read More: Fed Officials Say That Tackling Inflation Is Their No. 1 Job

“The market is pricing in some Fed increases, but we’re a bit worried that it might not be pricing in everything,” Laila Pence, president of Pence Wealth Management, said on Bloomberg Television. “We got whipsawed in August when inflation was up not down — everyone is nervous.”

Negative sentiment is also flowing into markets for energy and raw materials. West Texas Intermediate crude oil traded around $77 a barrel near its January lows.

How much damage is a strong dollar causing? That’s the theme of this week’s MLIV Pulse survey. It’s brief and we don’t collect your name or any contact information. Please click here to share your views.

Key events this week:

  • China industrial profits, Tuesday
  • US new home sales, Conference Board consumer confidence, durable goods, Tuesday
  • Fed Chair Jerome Powell and Charles Evans speak at events, Tuesday
  • Fed’s Mary Daly, Rafael Bostic, Charles Evans and ECB President Christine Lagarde speak at events, Wednesday
  • Euro zone economic confidence, consumer confidence, Germany CPI, Thursday
  • US initial jobless claims, GDP, Thursday
  • Fed’s Loretta Mester, Mary Daly speak at events, Thursday
  • China PMI, Friday
  • Euro zone CPI, unemployment, Friday
  • US consumer income , University of Michigan consumer sentiment, Friday
  • Fed’s Lael Brainard and John Williams speak, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.6% as of 12:31 p.m. in Tokyo. The S&P 500 fell 1% Monday
  • Nasdaq 100 futures gained 0.6%. The Nasdaq 100 dropped 0.5%
  • Japan’s Topix index increased 0.7%
  • South Korea’s Kospi index lost 0.8%
  • Hong Kong’s Hang Seng Index fell 1%
  • China’s Shanghai Composite Index added 0.3%
  • Australia’s S&P/ASX 200 Index rose 0.1%
  • Euro Stoxx 50 futures gained 0.5%

Currencies

  • The Bloomberg Dollar Spot Index slipped 0.3%
  • The Japanese yen rose 0.2% to 144.45 per dollar
  • The offshore yuan gained 0.1% to 7.1668 to the greenback
  • The euro climbed 0.3% to $0.9637
  • The British pound climbed 0.8% to $1.0779

Cryptocurrencies

  • Bitcoin was up 5.4% at $20,162
  • Ether rose 4.5% to $1,385

Bonds

  • The yield on 10-year Treasuries fell four basis points to 3.88%
  • Australia’s 10-year yield climbed six basis points to 4.05%

Commodities

  • West Texas Intermediate crude rose 0.5% to $77.11 a barrel
  • Gold traded climbed 0.5% to $1,630.16 an ounce

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

Bitcoin Rally Past $20,000 Helps Crypto Scale $1 Trillion Mark

(Bloomberg) — Bitcoin jumped past the $20,000 level on Tuesday and cryptocurrencies as a whole climbed back above $1 trillion in market value, helped by a hiatus in the turmoil that gripped global markets this week.

The largest token added as much as 6.1% as of 12:30 p.m. in Tokyo, reaching the highest in more than a week. Ether, Solana and Avalanche also rose.

The gains came amid a bout of relative calm in global markets after bruising selloffs for stocks, bonds and commodities in the face of rapidly tightening monetary policy to fight inflation and concerns about a recession.

Over the past month digital tokens have proved more resilient than traditional assets, stirring speculation the worst may be over for crypto: the MVIS CryptoCompare Digital Assets 100 Index shed about 1% in that period versus losses of 6% for global bonds, over 10% for world stocks and 11% for commodities.

“Our short-term gauges support a rebound this week,” Katie Stockton, founder of Fairlead Strategies LLC, a research firm focused on technical analysis, wrote in a note Monday. “However, we only feel comfortable moving to a short-term neutral stance because we expect the bounce to fail quickly.”

Bitcoin at $20,000 is far off the record high of almost $69,000 hit in November last year. The overall market value of digital tokens is $2 trillion lower than 2021’s peak, according to CoinGecko data.

For James Butterfill, head of research at CoinShares, investor appetite for digital assets remains “tepid.” But he added that excitement about the upgrade of the Ethereum blockchain, the most commercially important network, has helped sentiment.

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©2022 Bloomberg L.P.

Grab Expects Growth to Slow While It Pursues 2024 Profitability

(Bloomberg) — Grab Holdings Ltd. expects slower revenue growth of 45% to 55% in 2023 as the Southeast Asian internet giant adjusts to a market downturn and speeds up efforts to reverse years of losses.

Chief Executive Officer Anthony Tan kicked off the company’s first investor day by trying to reassure shareholders Grab was on the rebound. The company backed by SoftBank Group Corp. anticipates breaking even in the second half of 2024 on a conditional basis, and excluding one-time items.

Grab, long considered one of the rising stars of Southeast Asia, has struggled since it went public through a merger with a special purpose acquisition company in December. Shares have tumbled more than 70% as the company wracked up losses in the post-Covid era and the stock market soured on unprofitable tech ventures. Grab, which went public by merging with Altimeter Capital Management’s SPAC in what was originally a $40 billion deal, is now worth about $10.8 billion.

“Looking ahead, we’re firing on all cylinders to improve our profitability trajectory,” Tan said at the company’s event in Singapore on Tuesday. “Grab is trying to achieve this by growing our top line in a sustainable manner.”

Grab, which counts Japan’s SoftBank and Uber Technologies Inc. as two biggest shareholders, expects losses to narrow to $380 million on an adjusted basis in 2022’s second half.

Executives said it now aims to break even by the latter half of 2024 on an adjusted earnings basis before interest, taxes, depreciation and amortization. That excludes as many as a dozen exceptional items, from fair value losses in investments to “restructuring costs.”

In the meantime, the company said it has about $6 billion of cash and liquid items on hand, giving it time to turn its on-demand and fintech services around.

Tan’s vision of creating a so-called superapp for Southeast Asia was aggressive, but led to extensive losses. Grab lost $3.4 billion in 2021 and has piled up almost $1 billion of losses in the first two quarters of this year. Revenue this year is set to roughly double to as much as $1.3 billion, Grab said last month.

The company started out focused on the ride-hailing business and competed effectively against Uber. The US company ended up selling Grab its business in Southeast Asia in return for a stake in its Singaporean rival. Grab then launched an ambitious — and expensive — campaign to expand into adjacent businesses, including food delivery and finance. It also added everything from hotel bookings and health services to gifts and entertainment experiences to its app.

Chief Operating Officer Alex Hungate said Grab will now have a more defined strategy, outlining an effort to make the company “Southeast Asia’s largest and most efficient on-demand platform that enables local commerce and mobility.”

“This is not just a bunch of words on a page,” Hungate said. “This defines our strategy in a more focused way than we’ve ever defined before.” 

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

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