Bloomberg

(Bloomberg) — There’s a new way to cope with the guilt of firing your employees — a LinkedIn post letting your network know you feel miserable about it.

Braden Wallake, the chief executive officer of a Columbus, Ohio-based marketing agency called HyperSocial, wrote a guilt-filled post Tuesday about laying off employees that concluded with a teary-eyed selfie. After the post went viral, he declared himself “the crying CEO.”

Wallake’s original post has more than 30,000 likes and 5,300 comments. In it, he said he loves all of his employees, acknowledged how his own decisions led to the dismissals and said it was the “hardest thing” he has ever had to do.

“Days like today, I wish I was a business owner that was only money driven and didn’t care about who he hurt along the way” wrote Wallake, 32. “But I’m not.”

Comments criticized Wallake’s post, calling it a PR stunt and saying he was fishing for sympathy. Some expressed support for the move and suggested he shouldn’t be a victim of “cancel culture.”

“There’s been a lot of backlash, but there’s also been a lot of support,” Wallake said in a phone interview. “What no one sees is all the direct messages this has started, of CEOs reaching out saying they are in a similar place. And that to me is what matters.”

Wallake’s company, HyperSocial, focuses heavily on LinkedIn marketing and outreach strategies for its clients. The company is small; it has 15 employees, two fewer than before the layoffs. Wallake is an influencer of sorts, with over 30,000 followers on the Microsoft Corp.-owned social network for professionals.

In an attempt to quell the debate, Wallake wrote a follow-up post Wednesday seeking to help people in need of a job. “What I want to do now is try to make better of this situation and start a thread for people looking for work,” he wrote. “I’m not sorry for the post. But I’d at least like to use that post for the benefit of others that may need it.”

(Updates with comment from the CEO in the sixth paragraph.)

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(Bloomberg) — Ja Rule has joined the ranks of  celebrities embracing nonfungible tokens, or NFTs, with a collection called “Black is Beautiful.” Rule, along with his business partner Herb Rice, said they would donate $25,000 from initial sales of the collection to historically Black universities including Jackson State University, Morgan State University, Hampton University, Spelman College and Morehouse College.

The rapper’s entertainment company, ICONN Media, will match an additional $25,000. 

Each of the selected schools has a personal tie to Rule and his collaborators, who operate under an entity know as The Painted House. Rule’s daughter is a Hampton alumna, and Rice’s wife graduated from Morgan Sate. Other members include Deion Sanders, the head football coach at Jackson State and TV personality Tanya Sam, who attended Spelman. Sam’s husband graduated from Morehouse.

“Those were the schools that were on our radar for [those] reasons,” Rule told Bloomberg in an interview. “This is just the spark—we’re starting it. I pray that others will get onboard with this movement.” 

That movement, according to The Painted House, involves helping “communities of color with access, education, and insights to empower the next generations of creative minds.”

In addition to the initial donation of $50,000, Rule is considering investing in these universities’ art programs. 

“It’s important that our Black children are proud to go to HBCUs,” said Rule. 

The collection, which features 1,000 different illustrations by Florida artist Nick Davis, is intended to depict the complexities of being Black in America,

“It’s basically telling the story of Black America,” Rule said. “From our joy to our pain.”

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(Bloomberg) — Bank of America Corp. has hired Joe Valenti as co-head of media and telecom investment banking, according to a memo seen by Bloomberg News.

New York-based Valenti, who most recently led technology, media and telecommunications at Solomon Partners, will lead the business alongside Dan Kelly, according to the memo from the firm’s global TMT investment-banking head Sam Powers. 

“With a primary focus on digital infrastructure, Joe will also work closely with Alex Wan to help drive our origination and coverage efforts in this rapidly growing sector,” Powers wrote. A Bank of America spokesman confirmed the memo’s contents and declined to comment further. 

Prior to joining Solomon Partners in 2019, Valenti worked at Barclays Plc and its predecessor Lehman Brothers for almost two decades. Under his leadership, Solomon Partners advised clients including data-center operator Digital Realty Trust Inc. on its acquisition of a majority stake in Teraco. 

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(Bloomberg) — Stocks surged as softer-than-expected inflation data fueled bets the Federal Reserve could pivot to a smaller pace of hikes — a view taken with a grain of salt by market watchers saying officials may still be a long ways from achieving their goal.

Traders went risk-on Wednesday, with the S&P 500 hitting a three-month high. A rally in tech shares sent the Nasdaq 100 more than 20% above its June bottom, leaving it in a bull market going by a commonly held definition. The gauge still sits 19% below its November record. The Cboe Volatility Index slid to a level last seen in April. 

The dollar sank the most since the onset of the pandemic. Treasury two-year yields were lower by about five basis points in late trading after plummeting nearly 20 basis points immediately after the data. West Texas Intermediate crude topped $91 a barrel.

For a market plagued by fears about the Fed’s struggles to tame the inflation beast, the July consumer price index brought a sigh of relief — with both core and overall measures coming in below forecasts. Swaps are now suggesting a move of 50 basis points as more likely in September than a repeat of the 75-basis-point increases that officials have opted to implement at their past two meetings.

“This is overall good news for risky assets,” wrote Florian Ielpo, head of macro at Lombard Odier Asset Management, adding that “a lower growth rate of prices does not mean the end of inflation, and naturally the end of hawkish central banking. Inflation remains a situation that requires the Fed’s attention and more importantly the Fed’s measures.”

One danger of the stock-market bullishness right now is it could cause a relaxation of financial conditions that would go against the Fed’s goals. It’s also worth looking back to the early 1980s, when then Fed Chair Paul Volcker eased policy as inflation peaked and the economy tipped into a recession. But the moderation of price pressures proved to be much slower than officials wanted — and they had to tighten again months later.

In fact, the CPI surprise is just one piece of the intricate puzzle officials are playing with at the moment — and possibly over the next several months — with the central bank still miles away from reaching its inflation target. Food prices in the US soared the most since 1979 in July, keeping the cost of living painfully high even as lower gasoline costs offered some relief to consumers.

Two Fed officials responded to softening inflation data by saying it doesn’t change the US central bank’s path toward even higher rates this year and next.

Alluding to market pricing of the policy trajectory, Fed Bank of Minneapolis President Neel Kashkari said it was not realistic to conclude the central bank will start cutting rates in early 2023. His Chicago counterpart Charles Evans said officials will probably continue hiking into next year to bring down “unacceptably high” inflation.

“The easing of financial conditions likely annoys the Fed, and we should not be surprised to see Fed speakers continue to try to talk down the market and risk assets,” said Christian Hoffmann, portfolio manager at Thornburg Investment Management.

More comments on CPI:

• “The Fed still has significantly further to tighten and the US economy ultimately cannot avoid its fate. Enjoy today and the next few weeks, it won’t last for too long,” said Seema Shah, chief global strategist at Principal Global Investors.
• “This data point will fuel talk of a policy pivot. But, for me, the issue really does boil down to the labor market. Wage growth is running red hot and absent a turn around in productivity, this will ultimately fuel higher prices,” wrote Neil Dutta, head of economics at Renaissance Macro Research.
• “This is a step in the right direction, but keep in mind we have many miles ahead of us before inflation normalizes. One month’s data point does not make a trend, however, so cautious optimism is likely the name of the game,” said Mike Loewengart, managing director of investment strategy at E*Trade from Morgan Stanley.
• “Wow, finally the anecdotal evidence that inflation was easing has finally showed up in a mainstream inflation report. The Fed is rapidly losing its case for further tightening and this report reinforces for investors that either a new easing cycle has already begun or we are getting very close to one,” said Jim Paulsen, chief investment strategist at the Leuthold Group.

In corporate news, Tesla Inc. climbed after Elon Musk offloaded $6.9 billion of stock in the electric-vehicle maker to accumulate cash ahead of a trial that could force the billionaire to follow through on an agreement to acquire Twitter Inc. Wendy’s Co. became the latest restaurant chain to show signs of strain thanks to rising inflation as sales and restaurant margin fell short of Wall Street projections.

After the close of regular trading, Walt Disney Co. said it will raise the price of its flagship Disney+ streaming service by 38%. That’s part of a plan to generate more revenue for its money-losing online businesses and build on third-quarter results that beat estimates for sales, profit and subscriber growth. The shares jumped.

Respected for decades for combining decent returns and relatively low volatility, the 60/40 portfolio has generated a 11.5% loss so far this year. Is it time to put the strategy to rest entirely or does it just need a tweak? Have your say in the anonymous MLIV Pulse survey.

What to watch this week:

• US PPI, initial jobless claims, Thursday
• San Francisco Fed President Mary Daly is interviewed on Bloomberg Television, Thursday
• Euro-area industrial production, Friday
• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 2.1% as of 4 p.m. New York time
• The Nasdaq 100 rose 2.8%
• The Dow Jones Industrial Average rose 1.6%
• The MSCI World index rose 1.8%

Currencies

• The Bloomberg Dollar Spot Index fell 1%
• The euro rose 0.9% to $1.0302
• The British pound rose 1.2% to $1.2220
• The Japanese yen rose 1.6% to 132.93 per dollar

Bonds

• The yield on 10-year Treasuries advanced one basis point to 2.79%
• Germany’s 10-year yield declined three basis points to 0.89%
• Britain’s 10-year yield declined two basis points to 1.95%

Commodities

• West Texas Intermediate crude rose 1.1% to $91.49 a barrel
• Gold futures fell 0.4% to $1,805.90 an ounce

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(Bloomberg) — Elon Musk is accusing Twitter Inc. of hiding key witnesses in their legal battle over whether he must consummate a $44 billion buyout of the company, according to people familiar with the allegations. 

Musk contends the social media company isn’t producing the names of employees specifically responsible for evaluating how much of Twitter’s customer base is made up of spam and robot accounts, said the people, who asked not to be identified because they weren’t authorized to speak publicly about the matter. 

Musk’s lawyers have asked the judge in the case to force Twitter to identify the workers so the defense can get their records and question them, the people said. 

A letter asking Delaware Chancery Court Judge Kathaleen St. J. McCormick to compel Twitter to hand over the names was filed Tuesday under seal. Under the court’s rules, Twitter’s attorneys have five business days to decide what should be redacted from the filing as proprietary information. 

A Twitter spokesman declined to comment on the filing. 

Tesla Share Sale

The letter comes as the Tesla Inc. co-founder said Tuesday he is selling $6.9 billion of Tesla shares to avoid a sudden sale in the event he is forced to go ahead with the deal to acquire Twitter. That has prompted some analysts to predict the billionaire may settle the case.

Read More: Musk Shares Sale Adds to Twitter Settlement Odds, Arbs Say 

So far Twitter has handed over the names of “records custodians,” who aren’t as familiar with the data at issue, the people said. Musk wants McCormick to force Twitter to come up with the names of the employees charged with monitoring those accounts, they said. 

Both sides have issued a torrent of subpoenas to banks, investors and lawyers involved in the teetering transaction as they seek ammunition for an Oct. 17 trial.  

“It’s another salvo in the discovery wars that are common in this kind of litigation,” said Carl Tobias, a University of Richmond law professor who specializes in securities and merger and acquisition law. “Both sides are jockeying for position by targeting different information.”

War of the Bots

Twitter’s lawyers say they’ll need only four days in court to prove Musk is using questions about spam and bot accounts as a pretext to walk away from the deal. The company said it has turned over all its information about those accounts and that it intends to make Musk pay the $54.20 per share he originally agreed to.

Musk counters in court filings that Twitter’s handover of the that material hasn’t been robust and that the company has failed to produce evidence that spam bots account for fewer than 5% of its active users, as it has said in regulatory filings. He argues this gives him a legitimate basis for canceling the buyout.

He alleges Twitter’s disclosures show that the actual number of monetizable daily active users, or mDAU as the industry calls it, is 65 million less than the 238 million Twitter has claimed. He says Twitter also misrepresents how many of those users view advertising, the company’s main source of revenue. By his estimate, fewer than 16 million users see the majority of ads and should be counted as monetizable. 

The case is Twitter v. Musk, 22-0613, Delaware Chancery Court (Wilmington). 

(Adds details and context starting in second section.)

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(Bloomberg) — The Internal Revenue Service is seeking to identify customers of cryptocurrency prime dealer SFOX Inc. as part of its efforts to force crypto investors to pay taxes on their holdings.

In court filings in New York and Los Angeles, the tax authority asked federal judges to let it serve summonses on SFOX and M.Y. Safra Bank, which partnered with SFOX in 2019 to offer its customers cash deposit accounts backed by the Federal Deposit Insurance Corporation. The IRS is seeking account and transaction records for users with cryptocurrency transactions over $20,000 in any year from 2016 to 2021.

“Transactions in cryptocurrency have grown substantially in recent years, and the IRS is concerned that taxpayers are not properly reporting these transactions on their tax returns,” a lawyer for the government said in court papers filed Monday in Los Angeles.

SFOX and M.Y. Safra Bank didn’t immediately respond to messages seeking comment.

According to a May analysis by Barclays Plc, cryptocurrency investors are paying less than half the taxes they owe. SFOX has more than 175,000 users who have made $12 billion in transactions since 2015, according to the government.

The IRS push to collect taxes on cryptocurrency is part of a broader effort by US lawmakers and regulators, including the Securities and Exchange Commission and the Commodity Futures Trading Commission, to extend their oversight to crypto trading.

The US has served similar information demands, called “John Doe” summonses, seeking user information from Kraken, Circle Internet Financial and Coinbase. 

The cases are In the Matter of the Tax Liabilities of John Does, 22-mc-00150, U.S. District Court, Central District of California (Los Angeles); and In the Matter of the Tax Liabilities of John Does, 22-mc-00213, U.S. District Court, Southern District of New York (Manhattan).

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(Bloomberg) — The US Supreme Court refused to immediately consider if user suits against Coinbase Global Inc. can proceed at the same time the company seeks to send the disputes to arbitration.  

The court denied the cryptocurrency exchange platform’s requests for the justices to intervene in the cases and put proceedings on hold while it fights to settle the litigation out of court.

Two federal trial court judges rejected Coinbase’s requests to send the disputes to arbitration. 

At issue for the justices was whether those trial proceedings could continue while Coinbase appeals the rulings, or whether they must await a ruling from the San Francisco-based 9th US Circuit Court of Appeals on the arbitration question before moving forward.

“Allowing district court proceedings to march onward –through discovery, potential class proceedings, and even a trial — while the arbitrability question is on appeal” would harm Coinbase in ways that can’t be undone, even if the case is eventually sent to arbitration, the company told the justices in their Aug. 3 request for intervention.

The question has split the appellate courts. According to Coinbase, six circuits require the proceedings to stop while the appeal is ongoing, while three — including the 9th Circuit — do not.

One case seeks compensation after a user said he lost $31,000 after turning over access to his account to a scammer. The other case before the court challenged a $1.2 million Dogecoin sweepstakes that failed to disclose the entrants didn’t need to buy or sell cryptocurrency, which the user says violates California law.

In that dispute, the challengers told the court they don’t oppose the request for the court to intervene or put the proceedings on hold, they only oppose Coinbase’s proposed resolution.

The cases are Coinbase v. Bielski, 22A91, and Coinbase v. Suski, 22A92.

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(Bloomberg) — Apple Inc., stepping up its spending on original podcasts, signed an agreement with a Pulitzer Prize-winning studio and is holding talks with other companies about additional deals.

The iPhone maker is looking to add original content to its Podcasts app that it hopes could eventually turn into shows on its Apple TV+ service. The deal — an agreement with Futuro Studios, the maker of the criminal-justice series “Suave” — will fund development and production of podcasts, according to people familiar with the situation. In exchange, Apple will have the first chance to turn any podcast into a film or TV show.

The company has discussed similar arrangements with other studios and spent up to $10 million on the push so far, said the people, who asked not to be identified because the talks are private. Apple has already announced podcasts with At Will Media, Campside Media, Jigsaw Productions and Pineapple Street Studios.

Apple and Futuro declined to comment.

The investments have been led by Apple’s TV studio, rather than its podcast division. Despite being one of the biggest distributors of audio in the world, the company’s podcasting unit has avoided funding individual shows or buying networks because it wants to be seen as a neutral platform.Apple has already financed Jigsaw’s “The Line,” an award-winning podcast about Navy SEAL Eddie Gallagher, as well as Campside’s “Hooked,” a nine-part series about an engineer who turns into a bank robber. Most of Apple’s in-house podcasts have been tied in one way or another to its TV shows. That includes companion podcasts for series like “For All Mankind” and “The Problem With Jon Stewart.”None of the audio shows feature advertising yet, and they’ve primarily served as marketing tools for a video series — or to gauge interest in the material. 

Apple TV+, which launched in 2019, also has adapted shows from existing podcasts. It turned “The Shrink Next Door” into a series with Paul Rudd and Will Ferrell. “WeCrashed,” based on the WeWork Inc. saga, starred Jared Leto and Anne Hathaway. Both podcasts were originally produced by Wondery, now part of Amazon.com Inc. 

Apple hasn’t pumped nearly as much money into original podcasts as Amazon and Spotify Technology SA, which have each spent more than $1 billion acquiring companies and programming. Spotify, Apple’s rival in music streaming, has made some of the most popular podcasts in the world exclusive to its service and thus unavailable to the competition.

Apple isn’t taking that approach, but its foray into the industry is a welcome sign for podcast producers seeking funding. With other companies tightening their budgets, investments in audio shows have begun to slow in recent months.  Radio networks such as IHeartMedia Inc. and Audacy Inc., which have been major financiers of original audio, have pulled back as their ad growth softens and stock prices slip. 

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(Bloomberg) — The Federal Trade Commission is investigating the operators of the BitMart cryptocurrency exchange over a December 2021 hack that led to consumer losses between $150 million and $200 million — marking the agency’s first known probe into crypto markets.

The investigation was disclosed Wednesday in an FTC order denying a bid by BitMart operators Bachi.Tech Corporation and Spread Technologies LLC to block the agency’s efforts to compel them to turn over information. The companies had argued that the FTC’s document request was overly broad and that some of the information was located overseas.

The FTC had sent civil subpoenas in May to the BitMart operators, seeking details on what the companies told consumers about the security of their crypto assets and how they have handled customer complaints. The consumer-protection agency — which has penalized dozens of companies from Wyndham Hotels & Resorts Inc. to Uber Technologies Inc. over lax cyber practices — expects these details to help it determine whether the firms engaged in unfair or deceptive business practices. 

The FTC also said it was investigating whether the BitMart operators were complying with another federal law that requires financial institutions to safeguard sensitive customer data. 

If the agency finds that the companies misled users about its cybersecurity protections or didn’t comply with financial-services laws, it can impose fines and put them under a consent decree ordering them to change their practices. 

An FTC spokesperson declined to comment on the probe Wednesday. Lawyers representing BitMart’s two operating companies didn’t respond to requests for comment.

President Joe Biden’s March 9 executive order directed the FTC and its sister agency the Consumer Financial Protection Bureau to study how to police crypto transactions for fraud and abuse. The FTC — which focuses a large portion of its consumer-protection work on scams and identity theft — reported a tenfold increase in crypto scams from 2020 to 2021. These included a number of get-rich quick schemes and fake celebrity endorsements involving lesser-known currencies.

In December, BitMart confirmed a cybersecurity breach where it said hackers withdrew about $150 million of cryptocurrencies from BitMart wallets. The company’s chief executive officer later pledged to compensate users who were impacted by the breach. Blockchain security firm PeckShield Inc., which first identified the hack, estimated the losses at $200 million.

BitMart’s crypto exchange was valued at more than $300 million during a funding round last year. It says it has offices in New York, Hong Kong, Singapore and Seoul.

(Corrects the name of the exchange in the second paragraph.)

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(Bloomberg) — Apple Inc. is close to erasing its losses for the year as softer-than-expected inflation data fueled a risk-on rally in the stock market Wednesday. 

The iPhone-maker edged 2.6% higher to $169.24 as investors piled back into stocks on bets the Federal Reserve could dial back the size of future interest-rate hikes, after the July consumer price index showed a deceleration in growth from the prior month. Megacap tech stocks all rallied with Meta Platforms Inc. and Netflix Inc. leading the pack on a more than 5.8% gain each, while the Nasdaq 100 Index advanced 2.9%. The tech-heavy benchmark closed 20% higher from its June low.

Since bottoming in mid-June, Apple’s shares have surged about 30%, outpacing the S&P 500 Index and the Nasdaq 100. That’s put the tech giant back on top as the world’s most valuable company and within reach of turning positive for the year. It is now down just 4.7% in 2022, compared with a drop of 18% for the Nasdaq 100. 

The furious rally comes after the company posted quarterly earnings that were better-than-feared, and also reflects Wall Street’s confidence in its ability to continue churning out big profits. Individual investors, who recently helped ignite rallies in speculative corners of the market, have also flocked to the stock. 

Apple, which has a market value of about $2.7 trillion, surpassed oil giant Saudi Aramco again in July to become the world’s largest company. 

The recent surge puts its shares back in the expensive camp, trading at 26.4 times profits projected over the next 12 months, well above its 10-year average at 16.7 times. That compares with the Nasdaq 100 which is priced at 23 times earnings and the S&P 500 at 17.8.

About 96% of analysts covering the stock recommend investors buy or hold on to their positions, according to data compiled by Bloomberg, with an average forecast of a 6.9% gain in its shares over the next 12 months.

(Updates share price moves.)

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