TOKYO—The Bank of Japan made a surprise decision to let a benchmark interest rate rise to 0.5% from 0.25%, pushing the yen higher and ending a long period in which it was the only major central bank not to increase rates.
The
BOJ
said the yield on the 10-year Japanese government bond could rise as high as 0.5% from a previous cap of 0.25%. The central bank has set a target range around zero for the benchmark government bond yield since 2016 and used that as a tool to keep overall market interest rates low.
The 10-year yield, which had been stuck around 0.25% for months because of the central bank cap, quickly moved up to 0.46% in afternoon trading.
The yen rose in tandem. In Tuesday afternoon trading in Tokyo, one dollar bought between 133 and 134 yen, compared with more than 137 yen before the BOJ’s decision.
The Nikkei Stock Average, which had been slightly higher in the morning, was down more than 2% as investors digested the possibility that companies would have to pay higher interest on their debt. Also, the weak yen has pushed up profits for many exporters, so a stronger yen could be negative for stocks.
Gov.
Haruhiko Kuroda,
who is nearing the end of 10 years in office, is known for making moves that surprise the market, although he had made fewer of them in recent years.
Market players had anticipated that time might be running out on the Bank of Japan’s low-rate policy, but they generally didn’t expect Mr. Kuroda to move at the year’s final policy meeting.
The Bank of Japan’s statement on its decision Tuesday didn’t mention inflation as a reason to let the yield on government bonds rise as high as 0.5%. Instead, it cited the deteriorating functioning of the government bond market and discrepancies between the 10-year government bond yield and the yield on bonds with other maturities.
The bank said Tuesday’s move would “facilitate the transmission of monetary-easing effects,” suggesting it didn’t want the decision to be interpreted as monetary tightening.
The move is “a small step toward an exit” from monetary easing, said
Mitsubishi UFJ Morgan Stanley Securities
strategist Naomi Muguruma.
Ms. Muguruma said the BOJ needed to narrow the gap between its cap on the 10-year yield and where the yield would stand if market forces were given full rein.
“Otherwise magma for higher yields could build up, causing the yield to rise sharply when the BOJ actually unwinds easing,” she said.
Japan’s interest rates are still low compared with the U.S. and Europe, largely because its inflation rate hasn’t risen as fast. The Federal Reserve last week raised its benchmark federal-funds rate to a range between 4.25% and 4.5%—a 15-year high—while the European Central Bank said it would raise its key rate to 2% from 1.5%.
In the U.S., inflation has started to slow down recently but is still running above 7%. In Japan, consumer prices in October were 3.7% higher than they were a year earlier.
Japan has seen prices rise like other countries, owing to the impact of the war in Ukraine as well as the yen’s weakness. However, the pace of inflation is milder in Japan, where consumers tend to be highly price sensitive.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
oversaw one of the biggest financial frauds in American history, a top federal prosecutor said in charging that the former chief executive stole billions of dollars from the crypto exchange’s customers while misleading investors and lenders.
An indictment by the U.S. attorney’s office for the Southern District of New York, unsealed Tuesday, charges Mr. Bankman-Fried with eight counts of fraud. Prosecutors allege that he took FTX.com customers’ money to pay the expenses and debts of Alameda Research, an affiliated trading firm. Mr. Bankman-Fried is charged as well with conspiring to defraud the U.S. and violate campaign-finance rules by making illegal political contributions.
Damian Williams,
the U.S. attorney for the Southern District of New York, said he authorized the charges against Mr. Bankman-Fried last Wednesday and a grand jury voted on the indictment Friday.
“This investigation is very much ongoing, and it is moving very quickly,” Mr. Williams said at a press conference in Manhattan on Tuesday. “While this is our first public announcement, it will not be our last.”
John J. Ray III, the new chief executive of FTX, testified in front of a House committee Tuesday on the collapse of the crypto exchange. Photo: Nathan Howard/Getty Images
Separately, John J. Ray III, the new chief executive of FTX, said at a congressional hearing Tuesday that FTX incurred losses in excess of $7 billion. Mr. Ray, who oversaw the Enron Corp. bankruptcy early in the 2000s decade, said funds were taken from FTX and Alameda, an affiliated trading firm that incurred trading losses.
Mr. Ray described Enron as having been brought down by sophisticated people whose machinations aimed to keep transactions secret. FTX presents as “old-fashioned embezzlement,” Mr. Ray said. “It’s taking money from customers and using it for your own purpose.”
Also Tuesday, the Securities and Exchange Commission alleged in a civil lawsuit that Mr. Bankman-Fried diverted customer funds from the start of FTX to support Alameda and to make venture investments, real-estate purchases and political donations. The Commodity Futures Trading Commission filed a lawsuit Tuesday linking his allegedly fraudulent conduct at Alameda and FTX to markets that the CFTC regulates.
“
Sam Bankman-Fried
built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto,” SEC Chair
Gary Gensler
said.
The charges are the latest twist in a saga that has rattled the world of cryptocurrencies, a largely unregulated market that boomed during the pandemic but has been hammered this year by rising interest rates and the failure of several significant industry players.
FTX, one of the largest crypto exchanges in the world, filed for bankruptcy last month after the firm ran out of cash and a merger with rival Binance collapsed. The firm’s failure marked a sudden fall from grace for Mr. Bankman-Fried, who portrayed FTX as a safer crypto exchange to use and cast himself as an ally of regulation.
In interviews since the filing, Mr. Bankman-Fried said he bore responsibility for FTX’s collapse but denied he committed any fraud.
Mark Cohen,
a lawyer for Mr. Bankman-Fried, said Tuesday that his client “is reviewing the charges with his legal team and considering all of his legal options.”
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Mr. Bankman-Fried, 30 years old, was arrested Monday in the Bahamas. He appeared in court Tuesday in Nassau. He was denied bail and has been remanded to jail until Feb. 8, according to a person familiar with the matter.
A U.S. court official said that while the case had been assigned to a federal judge in Manhattan, there was no timing yet for Mr. Bankman-Fried’s extradition.
The tales of Mr. Bankman-Fried’s alleged misdeeds resonated with crypto customers around the world, even those who haven’t suffered significant losses as various firms by turns suspended withdrawals and collapsed.
Vasco Tagachi, a 42-year-old Portuguese-Sri Lankan trader based in China, said he felt a sigh of relief after learning of Mr. Bankman-Fried’s arrest. He said he had $57,423 in an FTX account this fall but was able to withdraw almost all of it just before the firm stopped honoring withdrawal requests.
“I had a little bit of tears in my eyes hearing that,” he said.
Prosecutors allege that from 2019 through November 2022, Mr. Bankman-Fried conspired with unnamed individuals to defraud customers and lenders. He provided false and misleading information to lenders on the financial condition of Alameda, according to the indictment.
Sam Bankman-Fried was arrested in the Bahamas on Monday, a day before he was expected to testify on the sudden collapse of FTX before the House Committee on Financial Services. Illustration: Jacob Reynolds
While the 14-page indictment was light on detailed allegations, it says that on Sept. 18, 2022, Mr. Bankman-Fried caused an email to be sent to an FTX investor in New York that contained false information about FTX’s financial condition. In June 2022, the indictment says, Mr. Bankman-Fried and others misappropriated FTX.com customer deposits to satisfy the loan obligations of Alameda.
Mr. Bankman-Fried is also accused of defrauding the Federal Election Commission starting in 2020 by conspiring with others to make illegal contributions to candidates and political committees in the names of other people.
He and his associates contributed more than $70 million to election campaigns in recent years, The Wall Street Journal previously reported. He personally made $40 million in donations ahead of the 2022 midterm elections, most of which went to Democrats and liberal-leaning groups.
Mr. Ray, the FTX CEO, said FTX is investigating whether any loans taken by FTX executives were improperly used for campaign contributions.
Mr. Ray added that tracing fund flows from FTX to executives and third parties was difficult because of the lack of a paper trail for many corporate transactions at FTX.
“We’re dealing with a paperless bankruptcy,” he said. “It makes it very difficult to trace and track assets.”
The CFTC’s complaint contains a detailed discussion of events at Alameda and FTX and argues that the agency, generally less visible to the public than the SEC, also has jurisdiction over the case. While the CFTC regulates U.S. derivatives markets, it can go after fraud that affects some commodity markets.
Besides giving Alameda access to its customer deposits, FTX granted the crypto hedge fund controlled by Mr. Bankman-Fried a series of trading-execution privileges that provided it an edge against other traders on the platform, the CFTC lawsuit alleges.
The CFTC said that while institutional customers had their orders routed through the FTX system, Alameda was able “to bypass certain portions of the system and gain faster access.” It resulted in Alameda’s orders being received by FTX several milliseconds faster than those of other institutional clients.
The lawsuit also alleges that Alameda wasn’t subject to certain automated verification processes, including on whether it had available funds before executing a transaction, giving it further advantage on the speed of its trades.
The edge wasn’t enough to keep Mr. Bankman-Fried from thinking about shutting down Alameda in September, according to the CFTC complaint.
In a document titled “We came, we saw, we researched,” Mr. Bankman-Fried laid out reasons for shutting down Alameda, according to the CFTC lawsuit. Chief among them: Alameda wasn’t making enough money to justify its existence, he wrote.
The CFTC said the statements contradicted what Mr. Bankman-Fried and Alameda were saying publicly at the time.
Tuesday’s congressional hearing was the first public appearance for Mr. Ray on FTX’s bankruptcy. Mr. Bankman-Fried had been scheduled to appear virtually at the same hearing, before he was arrested in the Bahamas at the request of the U.S. government. Bahamian police have said that they would keep him in custody and that they are awaiting an extradition order from U.S. authorities.
“The operation of Alameda really depended, based on the way it was operated, on the use of customer funds,” Mr. Ray said, responding to questions from members of Congress at the hearing. “There were virtually no internal controls…whatsoever.”
He described numerous loans totaling billions of dollars taken out by Mr. Bankman-Fried from Alameda.
“We have no information at this time as to what purpose or use of those funds were,” Mr. Ray added. He said Mr. Bankman-Fried had signed as the issuer and recipient for some of the loans.
Mr. Ray pushed back against recent statements made by Mr. Bankman-Fried that he had little to no involvement in the management of Alameda after passing control of the company to
Caroline Ellison
and
Sam Trabucco,
as well as Mr. Bankman-Fried’s statements that customer funds were passed to Alameda because of an accounting error.
“I don’t find those statements to be credible,” Mr. Ray said.
The Justice Department’s indictment of Mr. Bankman-Fried includes an array of charges with few supporting details, a tactic that could give federal prosecutors flexibility in navigating the rules involving extradition.
The charges against Mr. Bankman-Fried run the gamut from wire fraud to securities fraud conspiracy to conspiring to launder money and conspiring to break campaign-finance laws.
The statutes charged, with the exception of the campaign-finance offense, are enormously broad, said Rebecca Mermelstein, a former federal prosecutor who is now at O’Melveny & Myers LLP.
“By not being superspecific, you protect yourself later against an argument that charges relating to different criminal conduct are being added,” she said.
The arrest of Mr. Bankman-Fried is the latest case to highlight prosecutors’ push to bring white-collar cases to justice faster.
Deputy U.S. Attorney General Lisa Monaco said in a September speech that making prosecutors and companies feel that they were “on the clock” in these cases was a key priority for the department.
FTX founder Sam Bankman-Fried sat down with The Wall Street Journal to discuss what happened to the billions of dollars deposited by the exchange’s customers. Photo: Kenny Wassus/The Wall Street Journal
“We need to do more and move faster,” she said. “In individual prosecutions, speed is of the essence.”
Former federal prosecutors say that high-profile financial cases with lots of victims can increase the pressure on authorities to bring cases more quickly.
“Appearances matter when it comes to criminal justice,” said Mark Chutkow, a former federal prosecutor who is currently head of government investigations and corporate compliance at Dykema Gossett PLLC.
If Mr. Bankman-Fried remains in the Bahamas while the details of his potential extradition to the U.S. are worked out, there is only one prison there: the Bahamas Department of Correctional Services, commonly known as Fox Hill Prison.
Prison inmates reported removing human waste by buckets and developing bed sores from lying on the bare ground, according to a 2021 human-rights report on the Bahamas by the U.S. State Department. Cells were infested with rats, maggots and insects, the report said.
Inmates are supposed to get an hour every day outside for exercise. Because of staff shortages and overcrowding, there are times when inmates will only get 30 minutes a week, said Romona Farquharson, an attorney in the Bahamas.
The prison has different sections that separate those serving terms for violent crimes, for instance, from those who aren’t. Because of overcrowding, there have been instances in which inmates awaiting trial for minor crimes have been sent to the maximum-security facility, said Ms. Farquharson.
“I think they’ve got to be careful not to have him in really rough areas in the prison,” she said.
—Angel Au-Yeung, Ben Foldy and Hannah Miaocontributed to this article.
Write to Corinne Ramey at corinne.ramey@wsj.com, James Fanelli at james.fanelli@wsj.com, Dave Michaels at dave.michaels@wsj.com, Alexander Saeedy at alexander.saeedy@wsj.com and Vicky Ge Huang at vicky.huang@wsj.com
Income-seeking investors are looking at an opportunity to scoop up shares of real estate investment trusts. Stocks in that asset class have become more attractive as prices have fallen and cash flow is improving.
Below is a broad screen of REITs that have high dividend yields and are also expected to generate enough excess cash in 2023 to enable increases in dividend payouts.
REIT prices may turn a corner in 2023
REITs distribute most of their income to shareholders to maintain their tax-advantaged status. But the group is cyclical, with pressure on share prices when interest rates rise, as they have this year at an unprecedented scale. A slowing growth rate for the group may have also placed a drag on the stocks.
And now, with talk that the Federal Reserve may begin to temper its cycle of interest-rate increases, we may be nearing the time when REIT prices rise in anticipation of an eventual decline in interest rates. The market always looks ahead, which means long-term investors who have been waiting on the sidelines to buy higher-yielding income-oriented investments may have to make a move soon.
During an interview on Nov 28, James Bullard, president of the Federal Reserve Bank of St. Louis and a member of the Federal Open Market Committee, discussed the central bank’s cycle of interest-rate increases meant to reduce inflation.
When asked about the potential timing of the Fed’s “terminal rate” (the peak federal funds rate for this cycle), Bullard said: “Generally speaking, I have advocated that sooner is better, that you do want to get to the right level of the policy rate for the current data and the current situation.”
Fed’s Bullard says in MarketWatch interview that markets are underpricing the chance of still-higher rates
In August we published this guide to investing in REITs for income. Since the data for that article was pulled on Aug. 24, the S&P 500
SPX,
-0.50%
has declined 4% (despite a 10% rally from its 2022 closing low on Oct. 12), but the benchmark index’s real estate sector has declined 13%.
REITs can be placed broadly into two categories. Mortgage REITs lend money to commercial or residential borrowers and/or invest in mortgage-backed securities, while equity REITs own property and lease it out.
The pressure on share prices can be greater for mortgage REITs, because the mortgage-lending business slows as interest rates rise. In this article we are focusing on equity REITs.
Industry numbers
The National Association of Real Estate Investment Trusts (Nareit) reported that third-quarter funds from operations (FFO) for U.S.-listed equity REITs were up 14% from a year earlier. To put that number in context, the year-over-year growth rate of quarterly FFO has been slowing — it was 35% a year ago. And the third-quarter FFO increase compares to a 23% increase in earnings per share for the S&P 500 from a year earlier, according to FactSet.
The NAREIT report breaks out numbers for 12 categories of equity REITs, and there is great variance in the growth numbers, as you can see here.
FFO is a non-GAAP measure that is commonly used to gauge REITs’ capacity for paying dividends. It adds amortization and depreciation (noncash items) back to earnings, while excluding gains on the sale of property. Adjusted funds from operations (AFFO) goes further, netting out expected capital expenditures to maintain the quality of property investments.
The slowing FFO growth numbers point to the importance of looking at REITs individually, to see if expected cash flow is sufficient to cover dividend payments.
Screen of high-yielding equity REITs
For 2022 through Nov. 28, the S&P 500 has declined 17%, while the real estate sector has fallen 27%, excluding dividends.
Over the very long term, through interest-rate cycles and the liquidity-driven bull market that ended this year, equity REITs have fared well, with an average annual return of 9.3% for 20 years, compared to an average return of 9.6% for the S&P 500, both with dividends reinvested, according to FactSet.
This performance might surprise some investors, when considering the REITs’ income focus and the S&P 500’s heavy weighting for rapidly growing technology companies.
For a broad screen of equity REITs, we began with the Russell 3000 Index
RUA,
-0.18%,
which represents 98% of U.S. companies by market capitalization.
We then narrowed the list to 119 equity REITs that are followed by at least five analysts covered by FactSet for which AFFO estimates are available.
If we divide the expected 2023 AFFO by the current share price, we have an estimated AFFO yield, which can be compared with the current dividend yield to see if there is expected “headroom” for dividend increases.
For example, if we look at Vornado Realty Trust
VNO,
+1.01%,
the current dividend yield is 8.56%. Based on the consensus 2023 AFFO estimate among analysts polled by FactSet, the expected AFFO yield is only 7.25%. This doesn’t mean that Vornado will cut its dividend and it doesn’t even mean the company won’t raise its payout next year. But it might make it less likely to do so.
Among the 119 equity REITs, 104 have expected 2023 AFFO headroom of at least 1.00%.
Here are the 20 equity REITs from our screen with the highest current dividend yields that have at least 1% expected AFFO headroom:
Company
Ticker
Dividend yield
Estimated 2023 AFFO yield
Estimated “headroom”
Market cap. ($mil)
Main concentration
Brandywine Realty Trust
BDN,
+1.82%
11.52%
12.82%
1.30%
$1,132
Offices
Sabra Health Care REIT Inc.
SBRA,
+2.02%
9.70%
12.04%
2.34%
$2,857
Health care
Medical Properties Trust Inc.
MPW,
+1.90%
9.18%
11.46%
2.29%
$7,559
Health care
SL Green Realty Corp.
SLG,
+2.18%
9.16%
10.43%
1.28%
$2,619
Offices
Hudson Pacific Properties Inc.
HPP,
+1.55%
9.12%
12.69%
3.57%
$1,546
Offices
Omega Healthcare Investors Inc.
OHI,
+1.30%
9.05%
10.13%
1.08%
$6,936
Health care
Global Medical REIT Inc.
GMRE,
+2.03%
8.75%
10.59%
1.84%
$629
Health care
Uniti Group Inc.
UNIT,
+0.28%
8.30%
25.00%
16.70%
$1,715
Communications infrastructure
EPR Properties
EPR,
+0.62%
8.19%
12.24%
4.05%
$3,023
Leisure properties
CTO Realty Growth Inc.
CTO,
+1.58%
7.51%
9.34%
1.83%
$381
Retail
Highwoods Properties Inc.
HIW,
+0.76%
6.95%
8.82%
1.86%
$3,025
Offices
National Health Investors Inc.
NHI,
+1.90%
6.75%
8.32%
1.57%
$2,313
Senior housing
Douglas Emmett Inc.
DEI,
+0.33%
6.74%
10.30%
3.55%
$2,920
Offices
Outfront Media Inc.
OUT,
+0.70%
6.68%
11.74%
5.06%
$2,950
Billboards
Spirit Realty Capital Inc.
SRC,
+0.72%
6.62%
9.07%
2.45%
$5,595
Retail
Broadstone Net Lease Inc.
BNL,
-0.93%
6.61%
8.70%
2.08%
$2,879
Industial
Armada Hoffler Properties Inc.
AHH,
-0.08%
6.38%
7.78%
1.41%
$807
Offices
Innovative Industrial Properties Inc.
IIPR,
+1.09%
6.24%
7.53%
1.29%
$3,226
Health care
Simon Property Group Inc.
SPG,
+0.95%
6.22%
9.55%
3.33%
$37,847
Retail
LTC Properties Inc.
LTC,
+1.09%
5.99%
7.60%
1.60%
$1,541
Senior housing
Source: FactSet
Click on the tickers for more about each company. You should read Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.
The list includes each REIT’s main property investment type. However, many REITs are highly diversified. The simplified categories on the table may not cover all of their investment properties.
Knowing what a REIT invests in is part of the research you should do on your own before buying any individual stock. For arbitrary examples, some investors may wish to steer clear of exposure to certain areas of retail or hotels, or they may favor health-care properties.
Largest REITs
Several of the REITs that passed the screen have relatively small market capitalizations. You might be curious to see how the most widely held REITs fared in the screen. So here’s another list of the 20 largest U.S. REITs among the 119 that passed the first cut, sorted by market cap as of Nov. 28:
Company
Ticker
Dividend yield
Estimated 2023 AFFO yield
Estimated “headroom”
Market cap. ($mil)
Main concentration
Prologis Inc.
PLD,
+1.29%
2.84%
4.36%
1.52%
$102,886
Warehouses and logistics
American Tower Corp.
AMT,
+0.68%
2.66%
4.82%
2.16%
$99,593
Communications infrastructure
Equinix Inc.
EQIX,
+0.62%
1.87%
4.79%
2.91%
$61,317
Data centers
Crown Castle Inc.
CCI,
+1.03%
4.55%
5.42%
0.86%
$59,553
Wireless Infrastructure
Public Storage
PSA,
+0.11%
2.77%
5.35%
2.57%
$50,680
Self-storage
Realty Income Corp.
O,
+0.26%
4.82%
6.46%
1.64%
$38,720
Retail
Simon Property Group Inc.
SPG,
+0.95%
6.22%
9.55%
3.33%
$37,847
Retail
VICI Properties Inc.
VICI,
+0.41%
4.69%
6.21%
1.52%
$32,013
Leisure properties
SBA Communications Corp. Class A
SBAC,
+0.59%
0.97%
4.33%
3.36%
$31,662
Communications infrastructure
Welltower Inc.
WELL,
+2.37%
3.66%
4.76%
1.10%
$31,489
Health care
Digital Realty Trust Inc.
DLR,
+0.69%
4.54%
6.18%
1.64%
$30,903
Data centers
Alexandria Real Estate Equities Inc.
ARE,
+1.38%
3.17%
4.87%
1.70%
$24,451
Offices
AvalonBay Communities Inc.
AVB,
+0.89%
3.78%
5.69%
1.90%
$23,513
Multifamily residential
Equity Residential
EQR,
+1.10%
4.02%
5.36%
1.34%
$23,503
Multifamily residential
Extra Space Storage Inc.
EXR,
+0.29%
3.93%
5.83%
1.90%
$20,430
Self-storage
Invitation Homes Inc.
INVH,
+1.58%
2.84%
5.12%
2.28%
$18,948
Single-family residental
Mid-America Apartment Communities Inc.
MAA,
+1.46%
3.16%
5.18%
2.02%
$18,260
Multifamily residential
Ventas Inc.
VTR,
+1.63%
4.07%
5.95%
1.88%
$17,660
Senior housing
Sun Communities Inc.
SUI,
+2.09%
2.51%
4.81%
2.30%
$17,346
Multifamily residential
Source: FactSet
Simon Property Group Inc.
SPG,
+0.95%
is the only REIT to make both lists.
AUSTIN, Texas—Even as a cold night started to settle outside
Tesla
‘s headquarters here on Saturday, a group of cryptocurrency entrepreneurs had no plans to leave until
Elon Musk,
the man they named their currency after, accepted a 12,000-pound sculpture of a Mr. Musk-headed goat riding a rocket.
It is the latest stunt in the cryptocurrency space, where jokes and memes about digital currencies regularly flood social media. But a 6-ton sculpture as a marketing gimmick isn’t so common.
The creators of Elon GOAT say the name of their cryptocurrency was inspired by their respect for Mr. Musk. They and his other fans think he is the “greatest of all time,” or a “GOAT.” They took the admiration literally, spending $600,000 to create a sculpture of Mr. Musk’s head, wearing a gold-plated dogecoin necklace on a goat’s body. The rocket can move, pointing to the sky as if it is taking off. Gas lines run through it so that flames can shoot out of the back.
They trucked it to
Tesla Inc.’s
headquarters, in hopes Mr. Musk would accept the gift. The creators are calling called the event “GOATSgiving.”
Elon Musk has warned of dire financial challenges facing Twitter, the social-media company he took over for $44 billion in October. WSJ’s Mark Maurer explains how the company is trying to fix its finances and avoid a potential bankruptcy. Photo Illustration: Laura Kammermann
But about two hours after the co-founders of Elon GOAT parked the sculpture right outside the Tesla building, there was no sign of Mr. Musk.
Dustin Dailey, a security officer at Tesla, walked over to a group of about 15 people and said they couldn’t accept the sculpture on Mr. Musk’s behalf, but would find a spot for it on their property if Mr. Musk gave the thumbs-up.
But so far Mr. Musk hasn’t given any indication he would accept it or whether he knew the sculpture was there. Tesla didn’t respond to a request for comment
“I am fairly certain he does know about it,” said Mr. Dailey of the sculpture. “It’s all over Twitter.”
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Alec Wolvert, an Elon GOAT co-founder and chief marketing officer, said they were planning on camping out on a piece of public land off a toll road that overlooks the headquarters until Mr. Musk accepted the sculpture.
“We’re gonna stay here as long as possible,” Mr. Wolvert said. “I even heard some people say they were going to strap themselves to it.”
The idea of the sculpture came together last year. “It was an evening joke that kind of just came to fruition,” said
Ashley Sansalone,
an Elon GOAT co-founder.
Metal sculptor Kevin Stone spent nearly six months working on the sculpture of Elon Musk.
Photo:
Kevin Stone
The cryptocurrency entrepreneurs asked Kevin Stone, a metal sculptor in British Columbia, Canada, to make the giant sculpture with Mr. Musk’s head. The goal: to get Mr. Musk to tweet about the sculpture to his more than 118 million followers and draw attention to their cryptocurrency, the Elon GOAT.
“Elon tweeting us would legitimize the token,” said Mr. Sansalone, 40 years old.
Mr. Sansalone said he works on the token full time and previously ran a construction company and traded energy. Unlike bitcoin, ether or dogecoin, the Elon GOAT token is far from a household cryptocurrency name. It is ranked well outside the largest cryptocurrencies by market value, according to CoinMarketCap.
Mr. Musk’s head, which took nearly six months to complete was made by Mr. Stone. The goat body and rocket were made by others in Phoenix to speed up the project, Mr. Sansalone said. Then all the pieces were put together and attached to the back of a 70-foot long semi-truck trailer.
“When I first saw the statue my jaw dropped,” said DeMarco Hill, 51, who spotted it in September in Goodyear, Ariz., where he lives. He grabbed his 12-year-old son and they followed it. “It was something you’ve never seen before in your life.”
Mr. Hill, a trucker who owns his own company, Stay Ready Trucking, thought the stunt was so entertaining that he found Mr. Sansalone and asked if he could participate. Mr. Sansalone said Mr. Hill was needed because only someone with a special license could drive around the heaping pile of metal.
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He has since driven the sculpture through California, Arizona and Washington, before bringing it to Texas. People who drive by honk their horns or give a thumbs-up, Mr. Hill said.
“If I pull up to the side of the road it’s like people crowding around,” he said. “It gets crazy.”
Mr. Sansalone said the sculpture has mostly gotten a positive response. He hasn’t heard anyone mistaken Mr. Musk’s face for someone else. “I would say he is probably the most relevant person on the planet right now,” Mr. Sansalone said about Mr. Musk, the world’s richest person who recently bought Twitter Inc. for $44 billion.
In September, the sculpture sat in front of Tesla’s office in Palo Alto, Calif., during the company’s artificial-intelligence conference. Tesla employees crossed the street to take pictures with the sculpture, Mr. Sansalone said. Mr. Musk was at the conference, according to Twitter posts he made, and Mr. Sansalone assumes the billionaire saw the sculpture.
“All there was to look at was a lit-up rocket erected in the middle of the street,” he said.
On Saturday night, the group remained hopeful.
At one point in the evening, a group of about 20 people who were waiting outside started to chant “Elon claim your goat” in the hopes that the god of crypto, as one co-founder put it, would hear them.
“I’m a huge fan of Elon and I want to give this man his flowers while he’s alive,” said Aamir Manzoor, a 36-year-old from Toronto who is a holder of Elon GOAT. “He’s done a lot for the world.”
Write to Joseph Pisani at joseph.pisani@wsj.com, Alyssa Lukpat at alyssa.lukpat@wsj.com and Adolfo Flores at adolfo.flores@wsj.com
A research paper published at Harvard University is advocating that central banks should buy bitcoin
BTCUSD,
+2.41%
as a hedge against sanctions by other countries.
The paper, titled “Hedging Sanctions Risk: Cryptocurrency in Central Bank Reserves,” was authored by Ph.D. candidate Matthew Ferranti from Harvard’s economics department, and likens central banks’ gold reserves to potential bitcoin holdings.
Ferranti points out that central banks in countries across the globe should look into holding bitcoin as a hedge against possible financial sanctions. He gives the example of the unprecedented financial sanctions levied against Russia by the U.S. and many western nations following its invasion of Ukraine — billions in Russian assets were frozen after the Ukraine war began.
“Sanctions risk may diminish the appeal of U.S. Treasuries, propel broader diversification in central bank reserves, and bolster the long-run fundamental value of both cryptocurrency and gold,” Ferranti writes.
In the paper, Ferranti says El Salvador is a model for central banks owning bitcoin. The country, headed by bitcoin bull Nayib Bukele, has purchased millions of dollars worth of the crypto and has even made bitcoin an official national currency.
See also: ‘We just bought the dip’: El Salvador expands bitcoin holdings
Since the inception of popular cryptos like bitcoin and ether
ETHUSD,
+3.74%,
part of its appeal has been the lack of involvement from central banks, in favor of the decentralized nature of the digital asset.
In the wake of the recent crypto winter and collapse of popular crypto exchange FTX, as well as financial issues for crypto companies Voyager and Celsius, some crypto bulls have called for increased regulation and transparency for the industry.
The paper comes after FTX struggled with liquidity issues in November, eventually leading to a bankruptcy filing. Sam Bankman-Fried resigned as CEO and later apologized for the collapse of his former company.
See: Why do people invest in crypto? ‘It’s partly fraud and partly delusion,’ says Charlie Munger.
Also see: Tom Brady, Steph Curry and Kevin O’Leary set to lose big from FTX bankruptcy filing
Bitcoin’s price is down over 70% over the past year, and the price for ether is also down over 70% over the same period. The total market cap for all crypto nearly hit $3 trillion during parts of 2021, but is now around $800 billion.
Group AG warned it would lose around $1.6 billion in the fourth quarter after customers pulled their investments and deposits over concerns about the bank’s financial health.
The warning of a big pretax loss pushed Credit Suisse’s shares to a new closing low, below a previous nadir hit in late September as concerns swirled about the bank’s financial health.
Switzerland’s No. 2 bank by assets said outflows were around 6% of its total $1.47 trillion assets, or around $88.3 billion, between Sept. 30 and Nov. 11. Customers in its wealth-management arm—its main business serving the world’s rich—removed $66.7 billion from the bank. Credit Suisse in late October said that a social-media frenzy around its finances was causing large outflows. The bank typically attracts at least $30 billion in net new assets in a year and hasn’t posted an annual net outflow since 2008, according to its filings.
Analysts at JPMorgan said the outflows and the anticipated loss were much worse than they expected. The bank “is not out of the woods yet in terms of stabilizing the franchise,” they said.
The fast pace of withdrawals meant the bank’s liquidity fell below some local-level requirements, the bank said. It said it maintained its required group-level liquidity and funding ratios at all times. Banks must keep enough liquid assets on hand to meet expected cash outflows in a 30-day period, under post-financial-crisis-era rules.
Credit Suisse’s stock fell 6.1% Wednesday to end at 3.62 Swiss francs, a record closing low. The shares are down 59% this year, according to FactSet.
The cost to insure the bank’s debt against default rose Wednesday.
The warning comes at a precarious time for the bank, which weeks ago launched a sweeping overhaul of its operations. Credit Suisse received shareholder approval Wednesday on a plan to raise more than $4 billion in new stock. It is in the process of selling a large group within its investment bank to free up capital, as part of its recovery effort.
The new stock is being sold to new and existing investors, with terms due to be finalized Thursday. Saudi National Bank said it would take a stake of up to 9.9% as a new shareholder. Some analysts are concerned the new capital raising may not be enough if Credit Suisse’s revamp doesn’t go to plan. The bank’s capital needs depend on selling and exiting some businesses, and on how its continuing businesses perform.
Chairman
Axel Lehmann
said shareholders showed their confidence in the bank by approving the stock increase.
The reduction of customer assets means Credit Suisse has less money to manage and earns less in fees. A broader slowdown in activity in its wealth-management division and investment bank contributed to the warning of a pretax loss of around $1.6 billion for the quarter, it said.
In all, more than $100 billion has left the bank since June, according to Credit Suisse’s filings. It said client balances have stabilized in its Swiss bank and that the outflows have slowed in wealth management, but haven’t reversed.
Wealth management, the business of managing rich people’s money, is Credit Suisse’s largest and most important business. The bank’s overhaul is meant to reduce its reliance on risky Wall Street trades and double down on the steady fee-collecting business of working with the world’s ultra wealthy.
Large outflows indicate that some of those well-heeled clients have grown wary of Credit Suisse’s troubles despite its more than 160-year history. The bank was hit hard when a client, family office Archegos Capital Management, defaulted in March 2021, triggering a loss of more than $5 billion.
Uncertain markets have meant clients aren’t transacting as much across wealth managers. However, crosstown rival UBS Group AG reported around $35 billion in net new fee generating assets from wealth- and asset-management clients in the third quarter.
Concerns about the bank reached a fever pitch in October when commentators on social-media platforms Twitter and Reddit called into question the bank’s health.
Credit Suisse warned last month it would make a net loss in the fourth quarter, in part because of costs from the overhaul. It posted consecutive quarterly losses this year after starting to restructure its operations late last year. In last year’s fourth quarter, it lost around $2.2 billion.
The bank said it is still targeting a capital ratio of at least 13% between 2023 and 2025 as it restructures.
Write to Margot Patrick at margot.patrick@wsj.com
Corrections & Amplifications Credit Suisse reported about a $2.2 billion net loss in the fourth quarter of 2021. An earlier version of this article incorrectly said it lost around $1.7 billion in the quarter. (Corrected on Nov. 23)
said it fired three of the founder’s top deputies.
Gary Wang, an FTX co-founder and its chief technology officer; FTX engineering director Nishad Singh; and Caroline Ellison, who ran Mr. Bankman-Fried’s trading arm, Alameda Research, were terminated from those roles after FTX tapped
John J. Ray
to oversee the companies’ bankruptcy, an FTX spokeswoman said late Friday.
Mr. Bankman-Fried resigned on Nov. 11, when FTX filed for bankruptcy. He was replaced by Mr. Ray, a veteran restructuring executive who once oversaw the liquidation of Enron Corp.
FTX and Alameda sought protection from creditors after executives at both businesses revealed that FTX had lent billions of dollars worth of customer assets to Alameda to plug a funding gap, The Wall Street Journal previously reported. In a Thursday court filing, Mr. Ray highlighted numerous failings, including “the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals.”
On a Nov. 9 video call with Alameda employees, Ms. Ellison said that she, along with Messrs. Bankman-Fried, Wang and Singh, were aware of the decision to send customer money to the trading firm, the Journal previously reported.
The four executives also comprised the board of what they called the Future Fund, a philanthropic arm charged with making grants to nonprofits and investments in “socially-impactful companies.”
Messrs. Bankman-Fried, Wang and Singh all owned stakes in at least some of the FTX companies, according to Mr. Ray’s court filing.
“Mr. Bankman-Fried ultimately agreed to resign, resulting in my appointment as the debtors’ CEO,” Mr. Ray wrote in the filing. “I was delegated all corporate powers and authority under applicable law, including the power to appoint independent directors and commence these Chapter 11 cases on an emergency basis.”
Write to Justin Baer at justin.baer@wsj.com and Hannah Miao at hannah.miao@wsj.com
Federal Reserve Gov. Christopher Waller said Sunday that financial markets seem to have overreacted to the softer-than-expected October consumer price inflation data last week.
“It was just one data point,” Waller said, in a conversation in Sydney, Australia, sponsored by UBS.
“The market seems to have gotten way out in front over this one CPI report. Everybody should just take a deep breath, calm down. We’ve got a ways to go ” Waller said.
Investors cheered the soft CPI print, released Thursday, driving stocks up to their best week since June. The S&P 500 index
SPX,
+0.92%
closed 5.9% higher for the week.
The data showed that the yearly rate of consumer inflation fell to 7.7% from 8.2%, marking the lowest level since January. Inflation had peaked at a nearly 41-year high of 9.1% in June.
Waller said it was good there was some evidence that inflation was coming down, but noted that there were other times over the past year where it looked like inflation was turning lower.
“We’re going to see a continued run of this kind of behavior and inflation slowly starting to come down, before we really start thinking about taking our foot off the brakes here,” Waller said.
“We’ve got a long, long way to go to get inflation down. Rates are going keep going up and they are going to stay high for awhile until we see this inflation get down closer to our target,” he added.
The Fed is focused on how high rates need to get to bring inflation down, and that will depend solely on inflation, he said.
Waller said “the worst thing” the Fed could do was stop raising rates only to have inflation explode.
The 7.7% inflation rate seen in October “is enormous,” he added.
The Fed signaled at its last meeting earlier this month that it might slow down the pace of its rate hikes in coming meetings.
The central bank has boosted rates by almost 400 basis points since March, including four straight 0.75-percentage-point hikes that had been almost unheard of prior to this year.
“We’re looking at moving in paces of potentially 50 [basis points] at the next meeting or the next meeting after that,” Waller said.
The Fed will hold its next meeting on Dec. 13-14, and then again on Jan. 31-Feb. 1.
At the same time, Powell said the Fed was likely to raise rates above the 4.5%-4.75% terminal rate that they had previously expected.
“The signal was ‘quit paying attention to the pace and start paying attention to where the endpoint is going to be,’” Waller said.
In the wake of the CPI report, investors who trade fed funds futures contracts see the Fed’s terminal rate at 5%-5.25% next spring and then quickly falling back to 4.25%-4.5% by November. That’s well below the levels prior to the CPI data.
Customers pulled funds from Crypto.com over the weekend after the company’s chief executive said the cryptocurrency exchange mishandled a roughly $400 million transaction.
Crypto.com Chief Executive
Kris Marszalek
said on Twitter that the transfer was sent to the wrong type of account on another exchange. The transfer of a large chunk of ether, a popular cryptocurrency, took place on Oct. 21, but came to light after Twitter users flagged the transfer as unusual, based on publicly available blockchain transaction records.
Concerns about Singapore-based Crypto.com spread across the internet over the weekend, with prominent digital-currency figures taking aim at the company. Cryptocurrency traders are on edge following the quick collapse of FTX, which went from one of the most trusted exchanges to bankrupt in the course of a week.
Changpeng Zhao,
chief executive at Crypto.com’s larger peer Binance, appeared to question the nature of the transfers without naming the company, which may have fueled Sunday’s withdrawals, according to crypto industry players. “If an exchange [has] to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems,” Mr. Zhao tweeted Sunday.
The value of Crypto.com’s own cryptocurrency sank roughly 20% Sunday from the prior 24 hours. It traded near 6 cents apiece.
Mr. Marszalek dismissed the concerns about Crypto.com, tweeting later on Sunday that the October transfers had “generated so much [fear, uncertainty and doubt] & speculation on Twitter” weeks later.
A spokesman for Crypto.com said that the platform was seeing higher levels of activity, noting that it had assets fully matching customer deposits. “Fluctuations in deposit and withdrawal activity does not affect our levels of service,” he added.
An outside analysis of Crypto.com’s public blockchain from Argus Inc., a blockchain analysis firm, showed that between 7 p.m. EST Saturday and 5:30 a.m. EST Sunday, users withdrew a net $14 million worth of the cryptocurrency ether and $39 million worth of other tokens tied to the Ethereum network from Crypto.com. Over that same time, Crypto.com moved $33 million from other wallets to meet customer demands, according to Argus.
It appeared that Crypto.com had enough funds to meet user withdrawals, said Owen Rapaport, co-founder of Argus.
Crypto.com is a midsize exchange. It has tried to raise its profile over the past year among retail investors. In late 2021, it sponsored the arena that is home to LeBron James and the Los Angeles Lakers, renaming it the Crypto.com Arena from the Staples Center. It also ran its first Super Bowl ad this year and is a global partner of Formula One.
The transaction that sparked concerns about Crypto.com involved the transfer of 320,000 ether—or roughly $400 million worth of the token at the time—to a wallet linked to crypto exchange Gate.io on Oct. 21.
Over the weekend, Mr. Marszalek said on Twitter that the transfer was supposed to be a “move to a new cold storage address,” but was sent to an external exchange address.
“We have since strengthened our process and systems to better manage these internal transfers,” he said on Twitter.
A cold storage address is a type of wallet that is unplugged from the internet. It is considered the safest way to prevent digital currencies from being stolen or hacked.
Mr. Marszalek said the company had worked with Gate.io to return the funds back to its cold storage.
“It’s not looking good for these guys in general,” tweeted Adam Cochran, founder of venture-capital firm Cinneamhain Ventures, which invests in blockchain-related companies.
After FTX’s troubles began last week, a number of cryptocurrency exchanges, including Crypto.com, promised to publish proof of their reserves in the spirit of transparency. The audited proofs allow users to check that their own assets are covered by an exchange’s reserves.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Elaine Yu at elaine.yu@wsj.com
Billionaire Dallas Maverick’s owner Mark Cuban recently offered his perspective on the implosion of crypto platform FTX late this week.
“‘That’s somebody running a company that’s just dumb-as-fucking greedy.’”
— Mark Cuban
Cuban, speaking on Friday at a conference in Washington, D.C. hosted by Sports Business Journal, shared the view that avarice was at the root of the downfall of one-time crypto darling Sam Bankman-Fried, whose firm FTX Group just filed for chapter 11 bankruptcy.
“So what does Sam Bankman [Fried] do, he’s just–‘gimme more, gimme more, gimme more.’ So I’m gonna borrow money, loan it to an affiliated company and hope and pretend to myself that the FTT tokens that are in there on my balance sheet are gonna to sustain their value.”
Check out: Mark Cuban says buying metaverse real estate is ‘the dumbest shit ever
FTX’s collapse marks a stunning turnabout for a company, which was once valued at $26 billion, and whose founder, Bankman-Fried was viewed by many in the crypto industry as a venerable actor in the Wild West of digital exchanges.
On Thursday, the 30-year-old entrepreneur tweeted: “I f—ked up, and should have done better,” referencing the collapse of his exchange.
Embattled FTX, short billions of dollars, sought bankruptcy protection after the exchange experienced the crypto equivalent of a bank run. FTX, an affiliated hedge fund Alameda Research, and dozens of other related companies also filed a bankruptcy petition in Delaware on Friday morning. Boasting a nearly $16 billion fortune recently, Sam Bankman Fried’s net worth had all but evaporated in the wake of the FTX implosion, according to the Bloomberg Billionaires Index.
The price of FTX’s native token FTT went down about 88.8% over the past seven days to around $2.74, according to CoinMarketCap data.
The U.S. Justice Department and the Securities and Exchange Commission are looking into the crypto exchange to determine whether any criminal activity or securities offenses were committed.
Regulators and are examining whether FTX used customer deposits to fund bets at Alameda Research, a no-no in traditional markets, according to reports.
Cuban, who is one of the stars of the investing show “Shark Tank” and owns the NBA’s Dallas Mavericks, is a big investor in crypto and blockchain-related platforms. According to a CNBC report, he has said that 80% of his investments that aren’t on Shark Tank are crypto-centric.
See: Tom Brady, Steph Curry and Kevin O’Leary set to lose big from FTX bankruptcy filing
For his part, Cuban is part of a class-action lawsuit accused of misleading investors into signing up for accounts with crypto platform Voyager Digital, which filed for bankruptcy in July. The suit alleges that Cuban touted his support for Voyager and referred to it “as close to risk-free as you’re gonna get in the crypto universe.”
Cuban mentioned Voyager in his Friday interview. Representatives for the billionaire investor didn’t immediately respond to a request for comment.
The Mavericks owner took to Twitter on Saturday to say that the crypto implosions “have been banking blowups. Lending to the wrong entity, misvaluations of collateral, arrogant arbs, followed by depositor runs.”
Cuban’s net worth is $4.6 billion, according to Forbes.