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Business

What to do about the highest interest rate in 15 years

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Editor’s Note: This is an updated version of a story that originally ran on November 2, 2022.

In its last policymaking meeting of the year, the Federal Reserve on Wednesday raised its benchmark interest rate for the seventh time in a row, to a range of 4.25% to 4.5%. That is the highest it’s been in 15 years.

In a continued bid to tame decades-high inflation, the central bank may keep pushing rates higher next year, too, albeit at a more modest pace.

That, of course, means higher borrowing costs for consumers. But it also means your savings may actually start earning a little money after years of barely-there interest.

“Credit card rates are at a record high and still increasing. Auto loan rates are at an 11-year high. Home equity lines of credit are at a 15-year high. And online savings account and CD yields haven’t been this high since 2008,” said Greg McBride, chief financial analyst at Bankrate.

The good news: There are ways to situate your money so that you can benefit from rising rates and protect yourself from their costs.

If you’ve been stashing cash at big banks that have been paying next to nothing in interest for savings accounts and certificates of deposit, don’t expect that to change much, McBride said.

Thanks to the big players’ paltry rates, the national average savings rate is still just 0.19%, up from 0.06% in January, according to Bankrate’s December 7 weekly survey of large institutions.

But all those Fed rates hikes are starting to have a much more significant impact at online banks and credit unions, McBride said. They’re offering far higher rates — with some topping 3.75% currently — and have been increasing them as benchmark rates go higher.

As for certificates of deposit, there’s been a noticeable increase in return. The average rate on a one-year CD is 1.20% as of November 22, up from 0.14% at the start of the year. But top-yielding one-year CDs now offer as much as 4.5%.

So shop around. If you make a switch to an online bank or credit union, however, be sure to only choose those that are federally insured.

Given today’s high rates of inflation, Series I savings bonds may be attractive because they’re designed to preserve the buying power of your money. They’re currently paying 6.89%.

But that rate will only be in effect for six months and only if you buy an I Bond by the end of April 2023, after which the rate is scheduled to adjust. If inflation falls, the rate on the I Bond will fall, too.

There are some limitations: You can only invest $10,000 a year. You can’t redeem it in the first year. And if you cash out between years two and five, you will forfeit the previous three months of interest.

“In other words, I Bonds are not a replacement for your savings account,” McBride said.

Nevertheless, they preserve the buying power of your $10,000 if you don’t need to touch it for at least five years, and that’s not nothing. They also may be of particular benefit to people planning to retire in the next 5 to 10 years since they will serve as a safe annual investment they can tap if needed in their first few years of retirement.

When the overnight bank lending rate — also known as the fed funds rate — goes up, various lending rates that banks offer their customers tend to follow.

So you can expect to see a hike in your credit card rates within a few statements.

The average credit card rate hit a record high of 19.40% as of December 7, up from 16.3% at the start of the year, according to Bankrate. Some retail store credit cards are now carrying whopping rates of more than 30%.

“[Interest rate hikes] will most acutely impact those consumers who do not pay off their credit card balances in full through higher minimum monthly payments,” said Michele Raneri, vice president of US research and consulting at TransUnion.

Best advice: If you’re carrying balances on your credit cards — which typically have high variable interest rates — consider transferring them to a zero-rate balance transfer card that locks in a zero rate for between 12 and 21 months.

“That insulates you from [future] rate hikes, and it gives you a clear runway to pay off your debt once and for all,” McBride said. “Less debt and more savings will enable you to better weather rising interest rates, and is especially valuable if the economy sours.”

Just be sure to find out what, if any, fees you will have to pay (e.g., a balance transfer fee or annual fee), and what the penalties will be if you make a late payment or miss a payment during the zero-rate period. The best strategy is always to pay off as much of your existing balance as possible — on time every month — before the zero-rate period ends. Otherwise, any remaining balance will be subject to a new interest rate that could be higher than you had before if rates continue to rise.

If you don’t transfer to a zero-rate balance card, another option might be to get a relatively low fixed-rate personal loan. Average personal loan rates range from 10.3% to 12.5% for those with excellent credit scores, according to Bankrate. The best rate you can get would depend on your income, credit score and debt-to-income ratio. Bankrate’s advice: To get the best deal, ask a few lenders for quotes before filling out a loan application.

Mortgage rates have been rising over the past year, jumping more than three percentage points.

The 30-year fixed-rate mortgage averaged 6.33% in the week ending December 9, according to Freddie Mac. That is more than double where it stood a year ago.

“After cresting above 7%, mortgage rates have pulled back a bit but not enough to impact buyer affordability. The year-to-date rise in mortgage rates has still stripped would-be homebuyers of one-third of their buying power,” McBride said.

What’s more, mortgage rates may climb further.

So if you’re close to buying a home or refinancing one, lock in the lowest fixed rate available to you as soon as possible.

That said, “don’t jump into a large purchase that isn’t right for you just because interest rates might go up. Rushing into the purchase of a big-ticket item like a house or car that doesn’t fit in your budget is a recipe for trouble, regardless of what interest rates do in the future,” said Texas-based certified financial planner Lacy Rogers.

If you’re already a homeowner with a variable-rate home equity line of credit, and you used part of it to do a home improvement project, McBride recommends asking your lender if it’s possible to fix the rate on your outstanding balance, effectively creating a fixed-rate home equity loan.

If that’s not possible, consider paying off that balance by taking out a HELOC with another lender at a lower promotional rate, McBride suggested.

Given that inflation may have peaked, market returns may be better next year, said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. “The outlook for equity and fixed income returns has improved, and a balanced approach [in your portfolio] makes sense.”

That’s not to say markets won’t remain choppy in the near term. But, Ma noted, “A soft landing for the economy looks not only possible but likely.”

Any cash you have sitting on the sidelines might be put into the equity and fixed income markets in regular intervals over the next six to 12 months, he suggested.

Ma remains bullish on value stocks, especially small cap ones, which have outperformed this year. “We expect that outperformance to persist going forward on a multi-year basis,” he said.

Regarding real estate, Ma noted, “the sharply higher interest and mortgage rates are challenging…and that headwind could persist for a few more quarters or even longer.”

Commodities, meanwhile, have come down in price. “But they still are a good hedge given the uncertainty in energy markets,” he said.

Broadly speaking, however, Ma suggests making sure your overall portfolio is diversified across equities. The idea is to hedge your bets, since some of those areas will come out ahead, but not all of them will.

That said, if you’re planning to invest in a specific stock, consider the company’s pricing power and how consistent the demand is likely to be for their product, said certified financial planner Doug Flynn, co-founder of Flynn Zito Capital Management.

To the extent you already own bonds, the prices on your bonds will fall in a rising rate environment. But if you’re in the market to buy bonds you can benefit from that trend, especially if you purchase short-term bonds, meaning one to three years. That’s because their prices have fallen more, relative to long-term bonds, and their yields have risen more. Ordinarily, short- and long-term bonds move in tandem.

“There’s a pretty good opportunity in short-term bonds, which are severely dislocated,” Flynn said.

“For those in higher-income tax brackets, a similar opportunity exists in tax-free municipal bonds.”

Muni prices have dropped significantly and, while they have started to improve, yields have risen overall and many states are in better financial shape than they were pre-pandemic, Flynn noted.

Ma also recommends short-term corporate bonds or short-term Agency or Treasury securities.

Other assets that may do well are so-called floating rate instruments from companies that need to raise cash, Flynn said. The floating rate is tied to a short-term benchmark rate, such as the fed funds rate, so it will go up whenever the Fed hikes rates.

But if you’re not a bond expert, you’d be better off investing in a fund that specializes in making the most of a rising rate environment through floating rate instruments and other bond income strategies. Flynn recommends looking for a strategic income or flexible income mutual fund or ETF, which will hold an array of different types of bonds.

“I don’t see a lot of these choices in 401(k)s,” he said. But you can always ask your 401(k) provider to include the option in your employer’s plan.

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Business

Keystone Pipeline shuts down after oil leak, halting flow of 600,000 barrels a day

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New York
CNN Business
 — 

The Keystone Pipeline has been shut down following a leak discovered near the border of Kansas and Nebraska.

The shutdown of the major oil pipeline that carries crude from Canada triggered volatility in the energy market on Thursday, with oil prices briefly surging as much as 5% before retreating.

Federal safety regulators are investigating the leak and have deployed to the site, a spokesperson for the Pipeline and Hazardous Materials Safety Administration told CNN.

Canada’s TC Energy

(TRP) said it launched an emergency shutdown of the Keystone Pipeline System at 9 p.m. ET on Wednesday after alarms were triggered and pressure dropped in the system. The company said the system remains shut as “our crews actively respond and work to contain and recover the oil.”

Calgary-based TC Energy said there has been a “confirmed release of oil” into a creek located about 20 miles south of Steele City, Nebraska. An estimated 14,000 barrels of oil have been discharged as of late Thursday, the company said.

The PHMSA, an arm of the Transportation Department charged with enforcing safety regulations for pipelines, said the leak is located near Washington, Kansas, which is near the border with Nebraska.

The spokesperson said the agency continues to investigate the cause of the leak.

US oil prices climbed as high as $75.44 a barrel on the news, before easing. In recent trading, oil was up 0.8% to $72.57 a barrel. The gains follow a steep selloff in recent days that left crude at levels unseen since December 2021.

No timetable has been given for restarting the Keystone Pipeline, a 2,700-mile system that delivers mostly Canadian oil to major refineries across America. The pipeline can transport more than 600,000 barrels of oil per day.

Matt Smith, an analyst at commodity data provider Kpler, said Canadian oil normally transported by Keystone can’t be easily replaced.

“We’re seeing a pop in prices because this will impact refiners that take this crude,” Smith said.

“Our primary focus right now is the health and safety of onsite staff and personnel, the surrounding community, and mitigating risk to the environment through the deployment of booms downstream as we work to contain and prevent further migration of the release,” TC Energy said in a statement.

The leak happened on an existing Keystone pipeline that is separate from Keystone XL, a controversial pipeline project that was terminated last year after President Joe Biden revoked the pipeline’s permit on his first day in office.

The Keystone Pipeline has experienced leaks in the past, including one in South Dakota in 2016 and another one in 2019 in North Dakota that impacted nearly five acres.

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World

When China and Saudi Arabia meet, nothing matters more than oil

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Hong Kong
CNN
 — 

Chinese leader Xi Jinping is visiting Saudi Arabia this week for the first time in nearly seven years, during which he signed a comprehensive strategic partnership with the world’s largest oil exporter and met leaders from across the Middle East.

The visit is a sign that China and the Gulf region are deepening their economic relations at a time when US-Saudi ties have crumbled over OPEC’s decision to slash crude oil supply. As Xi wrote in an article published in Saudi media, the trip was intended to strengthen China’s relations with the Arab world.

The partnership agreement signed by the two sides includes a number of deals and memoranda of understanding, such as on hydrogen energy and enhancing coordination between the kingdom’s Vision 2030 and China’s Belt and Road Initiative, according to the official Saudi Press Agency (SPA). It did not provide specific details.

China is Saudi Arabia’s biggest trading partner and a source of growing investment. It’s also the world’s biggest buyer of oil. Saudi Arabia is China’s largest trading partner in the Middle East and the top global supplier of crude oil.

“Energy cooperation will be at the center of all discussions between the Saudi-Chinese leadership,” said Ayham Kamel, head of Eurasia Group’s Middle East and North Africa research team. “There is great recognition of the need to build a framework to ensure that this interdependence is accommodated politically, especially given the scope of energy transition in the West.”

Governments around the world have committed to drastically cutting carbon emissions over the coming decades. Countries such as Canada and Germany have doubled down on renewable energy investments to expedite their transition to net-zero economies.

The United States has significantly increased domestic oil and gas output since the 2000s, while accelerating its transition to clean energy.

The Russian invasion of Ukraine in February has triggered a global energy crisis that has left all countries racing to shore up supplies. And the West has further scrambled the oil markets by slapping an embargo and price cap on the world’s second biggest exporter of crude.

Energy security has also increasingly become a key priority for China, which is facing significant challenges of its own.

Last year, bilateral trade between Saudi Arabia and China hit $87.3 billion, up 30% from 2020, according to Chinese customs figures.

Much of the trade was focused on oil. China’s crude imports from Saudi Arabia stood at $43.9 billion in 2021, accounting for 77% of its total goods imports from the kingdom. That amount also makes up more than a quarter of Saudi Arabia’s total crude exports.

“Stability of energy supplies, in terms of both prices and quantities, is a key priority for Xi Jinping as the Chinese economy remains heavily reliant on oil and natural gas imports,” said Eswar Prasad, a professor of trade policy at Cornell University.

The world’s second largest economy is heavily reliant on foreign oil and gas. 72% of its oil consumption was imported last year, according to official figures. 44% of natural gas demand was also from overseas.

At the 20th Party Congress in October, Xi stressed that ensuring energy security was a key priority. The comments came after a spate of severe power shortages and soaring global energy prices following Russia’s invasion of Ukraine.

As the West shunned Russian crude in the months that followed the invasion, China took advantage of Moscow’s desperate search for new buyers. Between May and July, Russia was China’s No. 1 oil supplier, until Saudi Arabia regained the top spot in August.

“Diversity is a key ingredient for China’s long-term energy security because it cannot afford to put all of its eggs in one basket and turn itself into a captive of another power’s energy and geostrategic interests,” said Ahmed Aboudouh, a nonresident fellow with the Middle East Programs at the Atlantic Council, a research institute based in DC.

“Although Russia is a source of cheaper supply chains, nobody can guarantee, with utmost certainty, that the China and Russia relationship will continue to shore up 50 years from now,” Aboudouh said.

The Saudi Press Agency cited Saudi energy minister Prince Abdulaziz bin Salman as saying Wednesday that the kingdom would remain China’s “credible and reliable partner in this field.”

Saudi Arabia also has strong motivations to deepen energy ties with China, according to Gal Luft, co-director of the Institute for the Analysis of Global Security.

“The Saudis are concerned about losing market share in China in the face of a tsunami of heavily discounted Russian and Iranian crude,” he said. “Their goal is to ensure China remains a loyal customer even when the competitors offer [a] cheaper product.”

Oil prices have fallen back to where they were before the Ukraine war on fears of a sharp global economic slowdown. The extent to which the Chinese economy can pick up pace next year will have a huge bearing on how bad that slump will be.

Beyond security of supply, Saudi Arabia could offer Beijing another prize with bigger geopolitical ramifications.

Riyadh has been in talks with Beijing to price some of its oil sales to China in the Chinese currency, the yuan, rather than the US dollar, according to a Wall Street Journal report. Such a deal could be a boost to Beijing’s ambitions to expand the Chinese currency’s global influence.

It would also hurt the long-standing agreement between Saudi Arabia and the United States that requires Saudi Arabia to sell its oil only for US dollars and to hold its reserves partly in US Treasuries, all in return for US security guarantees. The “petrodollar system” has helped preserve the dollar’s status as the top global reserve currency and payment medium for oil and other commodities.

Although Beijing and Riyadh never confirmed the reported talks, analysts said it was logical that the two sides would be exploring the possibility.

“In the near future, Saudi Arabia could sell some of its oil and receive revenues in Chinese yuan, which makes economic sense as China is the kingdom’s top trading partner,” said Naser Al Tamimi, senior associate research fellow at ISPI, an Italian think tank on international affairs.

Some believe it’s already happening, but that neither China nor the Saudis want to highlight it publicly.

“They know too well how sensitive this issue [is] for the United States,” said Luft. “Both parties are overexposed to the US currency and there is no reason for them to continue to conduct their bilateral trade in a third party’s currency, especially when this third party is no longer a friend of either.”

Xi’s visit could mark another step “in the erosion of the dollar’s status” as reserve currency, he added.

Nonetheless, there are limits to the growing ties between Riyadh and Beijing.

“The Biden administration’s approach to the Middle East has concerned the Saudis, and they see a growing relationship with China as a hedge against potential US abandonment and a tool for leverage in negotiations with the United States,” said Jon B. Alterman, director of the Middle East Program at the Center for Strategic and International Studies, a Washington DC-based think tank.

The Biden administration has reoriented its policy priorities with a focus on countering China. At the same time, it has indicated its intention to downsize its own presence in the Middle East, sparking worries among allies there that the United States may not be as committed to the region as it used to be.

“All that being said, Chinese-Saudi ties pale in both depth and complexity to Saudi-US ties,” Alterman said. “The Chinese remain a novelty to most Saudis, and they are additive. The United States is foundational to how Saudis see the world, and how they have seen it for 75 years.”

Despite the possibility of shifting to yuan transactions, it’s too early to say Saudi Arabia would ditch the dollar in pricing its oil sales, analysts said.

Eurasia Group’s Kamal believes it’s “highly unlikely” that Saudi Arabia would take such a step, unless there is an implosion on the US-Saudi relationship.

“In essence there could be discussion on pricing of barrels to China in yuan, but this would be limited in size and probably only correspond to bilateral trade volumes,” he said.

Prasad from Cornell University said countries like China, Russia, and Saudi Arabia are all eager to reduce their dependence on the dollar for oil contracts and other cross-border transactions.

“However, in the absence of serious alternatives and with few international investors willing to place their trust in these countries’ financial markets and their governments, the dollar’s dominant role in global finance is hardly under serious threat,” he said.

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World

Oil tankers are getting stuck in the Black Sea. That could become a problem

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CNN
 — 

A bottleneck is building across an important trading route for oil, which if left unresolved could knock global supply and boost prices at a fragile moment for energy markets.

As of Thursday, 16 oil tankers traveling south from the Black Sea were waiting to cross the Bosphorus strait into the Sea of Marmara, an increase of five from Tuesday, according to a report from Istanbul-based Tribeca Shipping Agency. A further nine tankers were waiting to cross southbound from the Sea of Marmara through the Dardanelles strait into the Mediterranean.

The snarl-up in waterways controlled by Turkey, which Turkish officials said is mostly affecting crude oil shipments destined for Europe, has caught the attention of UK and US government officials who are now in talks with Ankara to resolve the growing impasse.

The snag is linked to a Western price cap on Russian oil that came into effect on Monday. The cap is supposed to limit the Kremlin’s revenues without adding to stress on the global economy by reducing supply. But Turkey is insisting that vessels prove they have insurance that will pay out in light of the new sanctions, before allowing them to pass through the straits linking the Black Sea and Mediterranean.

Although currently causing no disruption to global oil supply and thus prices, the hold-up could become a problem if left unresolved, said Jorge Leon, senior vice president for oil market analysis at Rystad Energy. “This is a very popular route around the world for global trade and specifically for crude,” he told CNN Business.

Countries including Russia, Kazakhstan and Azerbaijan use the Turkish straits to get their oil to world oil markets.

The traffic jam in the Turkish straits arose following the imposition this week of the price cap on Russian oil. The cap bars ship owners carrying Russian oil from accessing insurance and other services from European providers unless the oil is sold for $60 a barrel or less.

In light of the cap, Turkish maritime authorities are concerned about the risk of accidents or oil spills involving uninsured vessels, and are preventing ships from passing through Turkish waters unless they can provide additional guarantees that their transit is covered.

In a notice issued last month by Turkey’s government ahead of the price cap, maritime director general Ünal Baylan said that given “catastrophic consequences” for the country in the event of an accident involving a crude tanker, “it is absolutely required for us to confirm in some way that their [protection and indemnity] insurance cover is still valid and comprehensive.”

The International Group of P&I Clubs, which provides protection and indemnity insurance for 90% of the goods shipped by sea, has said it cannot comply with the Turkish policy.

The Turkish government’s requirements “go well beyond the general information that is contained in a normal confirmation of entry letter” and would require P&I Clubs to confirm coverage even in the event of a breach of sanctions under EU, UK and US law, the UK P&I Club said in a statement.

Turkish officials say this position is “unacceptable” and on Thursday reiterated demands for letters from insurers. “The majority of the crude oil tankers waiting to cross the strait are EU ships and a majority of the petrol is destined for EU ports,” the Turkish maritime authority said in a statement.

“It is difficult to understand why EU-based insurance companies are refusing to provide this letter… for ships that belong to the EU, carrying crude oil to [the] EU when the sanctions in question have been set forth by the EU,” it added.

Western officials, clearly worried about potential disruption to oil supply, say they are in talks with Turkey’s government to resolve the situation.

US Deputy Treasury Secretary Wally Adeyemo told Turkish Deputy Foreign Minister Sedat Onal on a call that the price cap only applies to Russian oil and “does not necessitate additional checks on ships” passing through Turkish waters.

“Both officials highlighted their shared interest in keeping global energy markets well supplied by creating a simple compliance regime that would permit oil to transit the Turkish straits,” the Treasury Department said in a statement.

“The UK, US and EU are working closely with the Turkish government and the shipping and insurance industries to clarify the implementation of the Oil Price Cap and reach a resolution,” according to a statement from the UK Treasury.

“There is no reason for ships to be denied access to the Bosporus Straits for environmental or health and safety concerns,” it added.

Despite the backlog of tankers, the average waiting time to cross the Bosphorus strait is still well below where it was this time last year, according to Leon of Rystad Energy. “Given the reaction from UK and US officials, my hunch is that this is going to be resolved very soon,” he said.

-— Gül Tüysüz in Istanbul contributed to this article.



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World

The West just scrambled the oil market. What happens next is up to Russia

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London
CNN Business
 — 

Most Russian crude oil exports to Europe are now banned, marking the boldest effort yet by the West to pile financial pressure on President Vladimir Putin as his brutal war in Ukraine enters its tenth month.

The oil embargo, which was agreed upon in late May, took effect in the European Union on Monday. It was accompanied by a new price cap on Russian crude set by G7 countries. That’s designed to limit the Kremlin’s revenues while allowing countries such as China and India to continue to buy Russian oil, provided they don’t pay more than $60 a barrel.

What happens next will likely hinge on the response from Moscow, which has vowed not to cooperate with the price cap and could slash its production, rattling global energy markets. Global crude prices were up 2.6% on Monday as investors watched nervously for the next move.

Here’s what you need to know about the oil embargo, the price cap and the potential impact.

The European Union now prohibits Russian crude oil imports by sea, setting up the bloc to have phased out 90% of oil imports from Russia. It’s a huge move given that Europe received roughly a third of its oil imports from Russia in 2021. More than half of Russia’s exports went to Europe 12 months ago.

There are a few exceptions. Bulgaria received a temporary carve-out. The embargo also doesn’t target imports via pipeline. That means the Druzhba pipeline can continue to supply Hungary, Slovakia and the Czech Republic. (Germany and Poland are working to end pipeline imports from Russia as soon as possible.)

But the embargo is significant. In 2021, the EU imported €48 billion ($50.7 billion) worth of crude oil and €23 billion ($24.3 billion) of refined oil products from Russia. Two-thirds of those imports arrived by sea.

A ban on Russian refined oil products, such as diesel fuel, imported by sea will launch in early February.

The European Union, plus the other members of the G7 — the United States, Canada, Japan and the United Kingdom — and Australia also agreed on Friday to cap the price of Russian crude oil at $60 a barrel, a policy aimed at Moscow’s other customers. This measure took effect Monday, too.

The price cap, which can be adjusted over time, is designed to be enforced by companies that provide shipping, insurance and other services for Russian oil. If a buyer pays more than the cap, they would withhold their services, in theory preventing the oil from being shipped. Most of these firms are based in Europe or the United Kingdom.

Despite unprecedented sanctions from the West, Russia’s economy and the government’s coffers have been padded by its lucrative position as the world’s second largest exporter of crude oil behind Saudi Arabia.

In October, Russia exported 7.7 million barrels of oil per day, just 400,000 barrels below pre-war levels, according to the International Energy Agency. Revenues from crude oil and refined products currently stand at $560 million per day.

By quickly phasing out imports, Europe hopes to limit inflows to Putin’s war chest, making it harder for him to continue his war in Ukraine.

But countries like China and India have stepped in buy surplus barrels. That’s where the price cap comes in.

G7 countries don’t want Russian oil taken off the market entirely, since that would push up global prices at a time when high inflation is hurting their economies. By enacting a price cap, they hope that can keep barrels flowing, but make the business less profitable for Moscow.

That’s far from certain. Countries like Poland and Estonia wanted a lower price cap, emphasizing that $60 is too close to the current market price for Russian oil. At the end of September, Russian Urals crude was trading just under $64 a barrel.

“Today’s oil price cap agreement is a step in right direction, but this is not enough,” Estonian foreign minister Urmas Reinsalu tweeted Friday. “Why are we still willing to finance Russia’s war machine?”

Enforcement could also prove difficult. Russia and its customers could start using more ships and insurance providers outside Europe and the United Kingdom to circumvent the rules, increasingly relying on what’s termed a “shadow fleet.”

“Capacity in that fleet has been growing, and it could probably handle Russian volumes for a while,” said Richard Bronze, head of geopolitics at Energy Aspects, a research firm.

Kremlin spokesperson Dmitry Peskov said Monday that Moscow will “not recognize any price caps.” Russian Deputy Prime Minister Alexander Novak said Sunday that Russia would not export oil to countries adhering to the cap, even if that will mean cutting production.

Oil prices have fallen sharply since the spring as fears about a global recession that may hit demand have come to the fore. Now, all eyes are on Russia’s response. Peskov said the price cap was a step towards “destabilizing the world energy markets.”

Moscow needs to find replacement customers for 1.1 million barrels per day of crude that had still been flowing to Europe, according to the IEA. That may not be easy, especially as coronavirus restrictions and a growth slowdown in China affect demand from the world’s second biggest economy.

The price cap adds to the uncertainty. Would-be customers may decide buying Russian cargoes has become too risky and complex, taking another batch of buyers off the market.

As the Kremlin has threatened, Russia may reduce its oil output as a result. The IEA has estimated Russia will slash output by an additional 1.4 million barrels per day by early 2023.

Other factors will dictate prices, too. Rare protests in China have raised questions about the country’s commitment to its “zero-Covid” policy, and demand could increase if its economy picks up pace.

The Organization of the Petroleum Exporting Countries, or OPEC, could also alter its output. The cartel on Sunday decided to stick with previously announced production cuts, giving it more time to assess the effects of the embargo and the price cap.

Europe’s embargo on refined oil products in February could also be a flash point for energy prices, since the region remains dependent on Russian diesel. Finding alternative sources in just two months may be tricky.

— Anna Chernova contributed reporting.



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World

Europe agrees to cap the price of Russian oil at $60 a barrel

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London
CNN Business
 — 

The European Union has reached a consensus on the price at which to cap Russian oil just days before its ban on most imports comes into force.

News of the deal, which had needed approval from holdout Poland, was confirmed on Twitter by the president of the European Commission, Ursula von der Leyen, marking a key milestone in the West’s efforts to punish President Vladimir Putin without adding to stress on the global economy.

“Today, the European Union, the G7 and other global partners have agreed to introduce a global price cap on seaborne oil from Russia,” von der Leyen said, adding that it would strengthen sanctions on Russia, diminish Moscow’s revenues and stabilize energy markets by allowing EU-based operators to ship the oil to third-party countries provided it is priced below the cap.

The bloc’s 27 member states agreed Friday to set the cap at $60 a barrel, an EU official with knowledge of the situation told CNN on Friday.

The West’s biggest economies agreed earlier this year to establish a price cap after lobbying by the United States, and vowed to hash out the details by early December. But setting a number had proved difficult.

Capping the price of Russian oil between $65 and $70 a barrel, a range previously under discussion, wouldn’t have caused much pain for the Kremlin. Urals crude, Russia’s benchmark, has already been trading within or close to that range. EU countries such as Poland and Estonia had pushed for the cap to be lower.

“Today’s oil price cap agreement is a step in right direction, but this is not enough,” Estonian foreign minister Urmas Reinsalu tweeted Friday. “Intent is right, delivery is weak.”

A price of $60 represents a discount of almost $27 to Brent crude, the global benchmark. Urals has been trading at discounts of around $23 in recent days. Reuters reported that the EU agreement included a mechanism to adjust the level of the cap to ensure it was always 5% below the market rate.

The risk of settling on a lower price is that Russia could retaliate by slashing its output, which would roil markets. Russia previously warned that it will stop supplying countries that adhere to the cap.

With EU countries in alignment, the last remaining obstacle to a wider G7 agreement was lifted. A top US Treasury department official said Thursday that $60 would be acceptable.

“We still believe that the price cap will help limit Mr. Putin’s ability to profiteer off the oil market so that he can continue to fund a war machine that continues to kill innocent Ukrainians,” National Security Council coordinator for strategic communications John Kirby told reporters.

“We think that the $60 per barrel is appropriate and we think it will have that effect,” Kirby added.

The price cap is designed to be enforced by companies that provide shipping, insurance and other services for Russian oil. If a buyer has agreed to pay more than the cap, they would withhold those services. Most of these firms are based in Europe or the United Kingdom.

Investors are already on edge, with the European Union’s embargo on Russian oil traveling by sea set to take effect on Monday. Confusion about the impact of that measure, along with lingering questions about the price cap, have unsettled traders.

“There’s so much uncertainty and doubt and lack of clarity about the policy that no one’s really confident about how to act,” said Richard Bronze, head of geopolitics at the research firm Energy Aspects.

Oil prices have dropped sharply since the summer, as China’s coronavirus lockdowns and global recession fears have dented demand. OPEC and Russia announced a big production cut in October, but that had little sustained impact on prices. The EU embargo and efforts to set a price cap could begin to push them higher again.

— Chris Liakos and Betsy Klein contributed to this article.



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Business

China markets tank as protests erupt over Covid lockdowns

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Hong Kong
CNN Business
 — 

China’s major stock indices and its currency have opened sharply lower Monday, as widespread protests against the country’s stringent Covid-19 restrictions over the weekend roiled investor sentiment.

Hong Kong’s Hang Seng

(HSI) Index fell as much as 4.2% in early trading. It has since pared some losses and last traded 2% lower. The Hang Seng

(HSI) China Enterprises Index, a key index that tracks the performance of mainland Chinese companies listed in Hong Kong, lost 2%.

In mainland China, the benchmark Shanghai Composite briefly fell 2.2%, before trimming losses to 0.9% lower than Friday’s close. The tech-heavy Shenzhen Component Index dropped 1.1%.

The Chinese yuan, also known as the renminbi, plunged against the US dollar on Monday morning. The onshore yuan, which trades in the tightly controlled domestic market, briefly weakened 0.9%. It was last down 0.6% at 7.206 per dollar. The offshore rate, which trades overseas, dropped 0.3% to 7.212 per dollar.

The plunging yuan suggests that “investors are running ice cold on China,” said Stephen Innes, managing partner of SPI Asset Management, adding that the currency market might be “the simplest barometer” to gauge what domestic and overseas investors think.

The markets tumble comes after protests erupted across China in an unprecedented show of defiance against the country’s stringent and increasingly costly zero-Covid policy.

In the country’s biggest cities, from the financial hub of Shanghai to the capital Beijing, residents gathered over the weekend to mourn the dead from a fire in Xinjiang, speak out against zero-Covid and call for freedom and democracy.

Such widespread scenes of anger and defiance, some of which stretched into the early hours of Monday morning, are exceptionally rare in China.

Asian markets were also broadly lower. South Korea’s Kospi lost 1%, Japan’s Nikkei 225

(N225) shed 0.6%, and Australia’s S&P/ASX 200 fell by 0.3%.

US stock futures — an indication of how markets are likely to open — fell, with Dow futures down 0.5%, or 171 points. Futures for the S&P 500 were down 0.7%, while futures for the Nasdaq dropped 0.8%.

Oil prices also dropped sharply, with investors concerned that surging Covid cases and protests in China may sap demand from one of the world’s largest oil consumers. US crude futures fell 2.7% to trade at $74.19 a barrel. Brent crude, the global oil benchmark, lost 2.6% to $81.5 per barrel.

On Friday, a day before the protests started, China’s central bank cut the amount of cash that lenders must hold in reserve for the second time this year. The reserve requirement ratio for most banks (RRR) was reduced by 25 percentage points.

The move was aimed at propping up an economy that had been crippled by strict Covid restrictions and an ailing property market. But analysts don’t think the move will have a significant impact.

“Cutting the RRR now is just like pushing on a string, as we believe the real hurdle for the economy is the pandemic rather than insufficient loanable funds,” said analysts from Nomura in a research report released Monday.

“In our view, ending the pandemic [measures] as soon as possible is the key to the recovery in credit demand and economic growth,” they said.

Innes from SPI Asset Management said China’s economy is currently caught in the midst of a tug-of-war between weakening economic fundamentals and increasing reopening hopes.

“For China’s official institutions, there are no easy paths. Accelerating reopening plans when new Covid cases are rising is unlikely, given the low vaccination coverage of the elderly,” he said. “Mass protests would deeply tilt the scales in favor of an even weaker economy and likely be accompanied by a massive surge in Covid cases, leaving policymakers with a considerable dilemma.”

In the near term, he said, Chinese equities and currency will likely price in “more significant uncertainty” around Beijing’s reaction to the ongoing protests. He expects social discontent could increase in China over the coming months, testing policymakers’ resolve to stick to its draconian zero-Covid mandates.

But in the longer term, the more pragmatic and likely outcome should be “a quicker loosening of [Covid] restrictions once the current wave subsides,” he said.

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Entertainment

Tosca Musk, Elon’s sister, has a business venture of her own — and it’s all about romance and female sexuality

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Atlanta, Georgia
CNN
 — 

Tosca Musk strides onto the red carpet at a Regal Cinemas, statuesque in a white pant suit and glistening burgundy silk top.

A hush comes over a group gathered outside the theater’s doors. Some whip out cell phones and start recording her every move.

It’s a chilly October night in Atlanta, and the fans are here for the premiere of “Torn,” the second in a trilogy of romantic fantasy movies based on books by author Jennifer Armentrout. The group of mostly female fans range in age from their twenties to their seventies, and some flew in from Boston, Detroit and other cities.

This is a big night for Musk and her five-year-old streaming service Passionflix, the backer of the movie. It’s their first public film premiere since the pandemic started.

She floats from one group to another, chatting effortlessly with Passionflix’s superfans, known as Passionistas. Her older brother, Elon Musk, may be the most famous sibling in the family, but he’s not the only one who’s founded a company.

Musk, 48, is the force behind Passionflix, which adapts romance novels into movies and streams them to a devoted niche audience. Romance novels are the most popular genre of books in the United States, and Musk is tapping into that market with stories about sultry, powerful female leads and handsome men with chiseled abs. She directs some of the films herself.

“Passionflix focuses on adapting romance novels exactly as the fan and the author envision it,” Musk says in a separate CNN interview. “We focus on connection, communication and compromise – and remove the shame from sexuality, specifically for women, because it empowers women to both acknowledge and ask for pleasure.”

Days earlier, on the set of a Passionflix movie, “The Secret Life of Amy Bensen,” Musk provides a few glimpses into life with her famous family.

Perched on a navy blue couch in a room tucked inside a warehouse in suburban Atlanta, she chooses her words carefully when asked about her older brother, who was on the verge of his Twitter acquisition.

The Musk children – Elon, Tosca and another brother, middle child Kimbal – were born in South Africa and spent time in Canada before coming to the United States. Their father, Errol, is an engineer and property developer, while their glamorous mother, Maye, is a model.

Tosca Musk attended film school at the University of British Columbia in Vancouver and moved to California after graduation. For three months, she worked for one of Elon Musk’s companies, Zip2.

“I realized every time I stepped out of the film world, I was just not happy,” she says. “It just wasn’t my thing.”

After a brief stint at the Los Angeles office of Canadian media company Alliance Atlantis, she began directing and producing films while still in her twenties.

Musk produced romance films for the Lifetime and Hallmark channels and in 2005 launched a comic web series, Tiki Bar TV, which was hailed by Apple CEO Steve Jobs as ahead of its time in the emerging field of vodcasts – or video podcasting.

Then came Passionflix. Its origin story is a classic tale of when one door closes, another one opens.

About five years ago, Musk got an email from a woman who wanted her to turn her script into a movie. Musk loved the script, but there wasn’t much interest from production companies.

“People weren’t really that interested because it was too risque … It was an adult movie with a little bit of reincarnation, things like that,” she says. “It just wasn’t one of those things that regular network television wanted to do.”

But Musk met the woman, Joany Kane, in Los Angeles, and they bonded over their shared passion for romance novels. During that conversation, Kane brought up the idea of turning romance novels into movies and creating a streaming platform for them.

And with that, Passionflix was born – with Musk at the helm and Kane as a co-founder.

“We had no investors. We had to go out and find every investor. So it was a matter of going out and pitching every single person,” Musk says. “We pitched every friend, every family member, everybody just for that small bit of angel investment. It was hard. The first money in is always the hardest money.”

Musk declines to say whether her brother Elon was one of her original investors. But she says she can always count on her two brothers, including restaurateur Kimbal Musk, to give her advice on her business ventures. She tries not to ask unless she really needs to.

“I get advice from them to a certain degree when I ask for it. But no unsolicited advice,” she says. “If I ask for advice, I have no doubt that he (Elon) will give it to me. And then I have to take it, because he’s going to be right. So you have to really want to know what you want to ask. But most of the time when I’m with my family, we talk about family things.”

So what does she think about her brother’s new role as CEO of Twitter – and the flurry of headlines surrounding it?

No comment.

Passionflix’s first film was “Hollywood Dirt,” based on a best-selling novel by Alessandra Torre about a Southern woman who finds romance with a Hollywood star when he comes to her small town to film a movie.

“During that shooting of that movie, we were struggling,” Musk says. “Are we going to get money? Are we going to be able to finish it? We were not really sure. We basically were just sort of piecing the dollars together.”

In May 2017, Musk played a trailer of the movie at a romance novel convention and asked attendees to prepay $100, as founding members, for a two-year Passionflix subscription. About 4,000 people signed up, Musk says, and she and Kane used that to show potential investors they were onto something.

“Trying to raise money for a female-driven platform on romance was just not high on anybody’s priority list at the time,” she says. “But as soon as we showed there was that many people that would come on board, the investors just started flying in.”

Passionflix has since produced more than two dozen feature-length and short films, according to the Internet Movie Database.

The company remains lean – it has a core team of seven people who each wear a lot of hats. In addition to producing its own content, Passionflix also licenses films for its platform.

“I think the biggest challenge for Passionflix is we can’t produce enough content to satiate the fans,” Musk says. “It’s a struggle with so many streaming platforms, when people want original content all the time.”

With more than 200 streaming services now competing for viewers, such niche markets face a myriad of challenges, says Dan Rayburn, a streaming media expert and consultant.

Creating, licensing and marketing content is very costly, he said. And while romance is the biggest-selling genre of books in the US, that doesn’t necessarily mean its popularity translates to movies.

“That’s comparing apples to oranges. Books are different,” Rayburn says. “This business is beyond tough. It’s highly competitive and requires an absolute large sum of money.”

Passionflix charges a subscription fee of $5.99 a month. The company does not disclose its subscriber numbers. Musk says subscribers are in the “six figures,” but declines to offer specifics.

Rayburn says it’s hard to determine the company’s profitability without knowing its expenses, including production and licensing costs.

“OK, if you don’t have subscriber numbers, what’s the usage? How many hours per month do people watch it? How much are you spending on content licensing?”

A deep dive into Passionflix’s online movie catalog reveals a mix of contemporary romance, fantasy romance, paranormal romance, erotic fan fiction and related sub-genres.

The films, which stream on the Passionflix site and on Amazon Prime Video, are rated on an escalating steaminess scale Musk calls a “barometer of naughtiness.”

The five categories: Oh So Vanilla, for wholesome romcoms; Mildly Titillating; Passion and Romance; Toe Curling Yumminess; and NSFW (Not Safe for Work). The latter category has risque plot lines and more sex – think “Fifty Shades of Grey.”

But Musk says that even the naughtiest Passionflix movies don’t reach the soft-core porn threshold.

“When we first started Passionflix, somebody asked us if we’re going to rate using MPAA,” she says, referring to the Motion Picture Association of America’s movie ratings such as PG-13, R, etc. “I don’t actually like any of those ratings. They’re not specific to women. I wanted something that could rate our shows and create more of a tongue-in-cheek conversation.”

Musk says she’s a romantic at heart and is a big fan of the genre.

“Love is amazing, it’s incredibly powerful. I love to tell stories of love, all kinds of love,” she says. “So parental love, friend love, family love, and love between any kind of couple.”

That broad range of romantic genres, and its sexy content, are what sets Passionflix apart from channels such as Hallmark and Lifetime Movie Network, says romance novelist Tamara Lush. She believes the romance genre has been especially popular during the pandemic because people seek comfort in stories with happy-ever-after endings.

“Hallmark is romance-centered but the stories are very, very sweet. Passionflix tells a wider range of stories, and the ones romance readers want to watch,” Lush says.

“The popularity of ‘Bridgerton,’ ‘After’ and ’365 Days’ on Netflix should tell streaming services all they need to know: that romance is a lucrative and sure bet for viewers.”

Passionflix’s original subscribers, known as founding members, get access to movie premieres and filming sets.

Last month in Atlanta, about four dozen of them piled into the Regal theater for the premiere of “Torn.” Following the movie, Musk hosted a question-and-answer session with the lead actors, followed by an after-party at a bar across the street. Fans and actors mingled over drinks.

Debbie Parziale, 67, says she flew in from Boston for the event. One of the founding members, she says she spent the pandemic years curled up on her couch, watching Passionflix movies.

“I love Tosca’s premise of empowering women and making sex not such a taboo subject,” she says. “She’s so true to the romance novels. When you read a book and watch one of her movies, it’s the book you read.”

Amanda Cromer, 32, says she signed up for Passionflix at a romance book convention. She loves the camaraderie that comes with being part of the Passionistas. The group has a virtual book club, called Passion Squad.

As one of the original members, Cromer can visit sets and interact with the actors. Cromer, who lives in a suburb of Atlanta, says that during a visit to the set of “Torn” she became an extra in a cafe scene.

“I love the empowerment the movies bring,” says Cromer, who attended last month’s “Torn” premiere with her mother.

“They choose books with strong female leads. They’ve done such a good job of portraying the female persona as a strong independent female, and not a timid person.”

Back on the set of her latest romance movie, Tosca Musk moves from one sparsely furnished room to another.

Musk lives in suburban Atlanta with her two children, 9-year-old twins who were conceived through in vitro fertilization using an anonymous sperm donor.

She’s getting ready to fly to Italy with the twins to film “Gabriel’s Redemption,” the third book in a series by Sylvain Reynard about a Dante scholar and his passionate affair with a younger graduate student. She says they plan to enjoy lots of gelato in Florence and visit Oxford, England, so the kids can see some of the locations where the Harry Potter movies were filmed.

As a single mother, Musk says she marvels at the path that led her to a job she loves.

She hopes Passionflix will help convince the film industry’s big names that adopting romance novels into movies is a worthy investment.

“The entertainment world is controlled mostly by men. At the end of the day, the decisions tend to sway toward the male audience as opposed to the female audience,” she says. “They also tend to be more about the victimization of women than they are about sexually free or sexually empowered stories about women.”

And for Musk, there’s also a simpler reason for her filmmaking ventures.

“I’m a storyteller at heart,” she says. “I just want to be able to tell stories.”

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Business

Elizabeth Holmes sentenced to more than 11 years in prison for fraud

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CNN
 — 

Elizabeth Holmes was sentenced to more than 11 years in prison on Friday following her conviction in January for defrauding investors while running the failed blood testing startup Theranos.

Judge Edward Davila imposed a sentence of 11 years and three months in prison, with another three years of supervision after Holmes is released. The sentence also includes a fine of $400, or $100 for each count of fraud. Restitution will be set at a later date. Holmes was ordered to turn herself into custody on April 27, 2023.

Holmes, who was found guilty in January on four charges of defrauding investors, faced up to 20 years in prison as well as a fine of $250,000 plus restitution for each count.

Lawyers for the government asked for a 15-year prison term, as well as probation and restitution, while Holmes’ probation officer pushed for a nine-year term. Holmes’ defense team asked Davila, who presided over her case, to sentence her to up to 18 months of incarceration followed by probation and community service.

Before the sentencing was announced, a tearful Holmes spoke to the court in San Jose, California. “I loved Theranos. It was my life’s work,” she said. “The people I tried to get involved with Theranos were the people I loved and respected the most. I am devastated by my failings.”

She also apologized to the employees, investors and patients of Theranos. “I’m so, so sorry. I gave everything I had to build our company and to save our company,” she said. “I regret my failings with every cell in my body.”

In arguments before the judge on Friday over her sentence, Kevin Downey, one of Holmes’ lawyers, said that unlike other defendants in corporate fraud cases, the Theranos founder did not express greed by cashing out shares or spending money on “yachts and planes.” Instead, the money was “used to build medical technology.”

Federal prosecutor Jeffrey Schenk pointed out that Holmes did gain fame, admiration, and a lifestyle from the fraud, even if she did not make financial gains. “These still are benefits she’s receiving,” he said.

Friday’s sentencing hearing caps off Holmes’ stunning downfall. Once hailed as a tech industry icon for her company’s promises to test for a range of conditions with just a few drops of blood, she is now the rare tech founder to be convicted and face prison time for her company’s missteps.

Holmes, now 38, started Theranos in 2003 at the age of 19 and soon thereafter dropped out of Stanford University to pursue the company full-time. After a decade under the radar, Holmes began courting the press with claims that Theranos had invented technology that could accurately and reliably test for a range of conditions using just a few drops of blood taken from a finger prick.

Theranos raised $945 million from an impressive list of investors, including media mogul Rupert Murdoch, Oracle founder Larry Ellison, Walmart’s Walton family and the billionaire family of former Secretary of Education Betsy DeVos. At its peak, Theranos was valued at $9 billion, making Holmes a billionaire on paper. She was lauded on magazine covers, frequently wearing a signature black turtleneck that invited comparisons to late Apple CEO Steve Jobs. (She has not worn that look in the courtroom.)

The company began to unravel after a Wall Street Journal investigation in 2015 found the company had only ever performed roughly a dozen of the hundreds of tests it offered using its proprietary blood testing device, and with questionable accuracy. Instead, Theranos was relying on third-party manufactured devices from traditional blood testing companies.

In 2016, Theranos voided two years of blood test results. In 2018, Holmes and Theranos settled “massive fraud” charges with the Securities and Exchange Commission, but did not admit to or deny any of the allegations as part of the deal. Theranos dissolved soon after.

In her trial, Holmes alleged she was in the midst of a decade-long abusive relationship with her then-boyfriend and Theranos COO Ramesh “Sunny” Balwani while running the company. Balwani, she alleged, tried to control nearly every aspect of her life, including disciplining her eating, her voice and her image, and isolating her from others. (Balwani’s attorneys denied her claims.)

In July, Balwani was found guilty on all 12 charges in a separate trial and faces the same potential maximum prison time as her. Balwani is scheduled to be sentenced on December 7.

“The effects of Holmes and Balwani’s fraudulent conduct were far-reaching and severe,” federal prosecutors wrote in a November court filing regarding Holmes’ sentencing. “Dozens of investors lost over $700 million and numerous patients received unreliable or wholly inaccurate medical information from Theranos’ flawed tests, placing those patients’ health at serious risk.”

More than 100 people wrote letters in support of Holmes to Davila, asking for leniency in her sentencing. The list includes Holmes’ partner, Billy Evans, many members of Holmes’ and Evans’ families, early Theranos investor Tim Draper, and Sen. Cory Booker. Booker described meeting her at a dinner years before she was charged and bonding over the fact that they were both vegans with nothing to eat but a bag of almonds, which they shared.

“I still believe that she holds onto the hope that she can make contributions to the lives of others, and that she can, despite mistakes, make the world a better place,” Booker wrote, noting that he continues to consider her a friend.

Ahead of the hearing, there were also questions over how Holmes’ sentencing could be complicated by developments in her life after stepping down from Theranos. Holmes and her partner, Evans, who met in 2017, have a young son. Holmes is also pregnant, as confirmed by recent court filings and her most recent court appearance in mid-October.

Mark MacDougall, a white-collar defense lawyer and former federal prosecutor, told CNN Business before the hearing that the fact that Holmes has a young child could impact how she is sentenced.

“I don’t know how it can’t, just because judges are human,” he said.

MacDougall also said he doesn’t see what a long prison sentence accomplishes. “Elizabeth Holmes is never going to run a big company again,” he said. “She’s never going to be in a position to have something like this happen again.”

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Business

Jeff Bezos’ top tips for managing the economic downturn

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Washington
CNN Business
 — 

Amazon founder Jeff Bezos recently warned consumers and businesses they should consider postponing large purchases in the coming months as the global economy contends with a downturn and faces a possible recession.

The business leader offered his starkest advice yet on a faltering economy in an exclusive sit-down interview with CNN’s Chloe Melas on Saturday at Bezos’ Washington, DC, home.

Bezos urged people to put off expenditures for big-ticket items such as new cars, televisions and appliances, noting that delaying big purchases is the surest way to keep some “dry powder” in the event of a prolonged economic downturn. Meanwhile, small businesses may want to avoid making large capital expenditures or acquisitions during this uncertain time, Bezos added.

If enough consumers follow through with Bezos’ advice, it could mean lower sales for Amazon, the e-commerce giant Bezos founded and that created the vast majority of the billionaire’s wealth.

The New York Times reported Monday that Amazon plans to slash its workforce, laying off 10,000 workers, the largest reduction in the company’s history. That’s in addition to a previously announced hiring freeze in its corporate workforce. The company is second only to Walmart in the number of people it employs in the United States.

Amazon

(AMZN) said in October it expects sales for the final three months of the year to be significantly below Wall Street’s expectations. The weaker forecast came as rising inflation and looming recession fears weigh on consumer purchasing decisions as Americans focus more on travel and dining out and less on buying discretionary goods.

The company’s stock has fallen more than 40% as surging prices and changing customer behavior weigh on Amazon and the broader tech sector.

Bezos said the probability of economic conditions worsening makes it prudent to save some cash if it’s an option.

“Take some risk off the table,” he said. “Just a little bit of risk reduction could make the difference.”

Last month, Bezos tweeted a warning to his followers on Twitter, recommending that they “batten down the hatches.” The advice was meant for business owners and consumers alike, Bezos said in the interview.

Many may be feeling the pinch now, he added, but argued that as an optimist he believes the American Dream “is and will be even more attainable in the future” — projecting that within his own lifetime, space travel could become broadly accessible to the public.

Although the US economy is not, technically, in a recession, nearly 75% of likely voters in a recent CNN poll said they feel as though it is. Wages are up, but not enough to take the sting off inflation, most notably high prices of necessities like food, fuel and shelter. For those invested in stocks, it’s not been a great year, either, and that’s especially hard on retirees who are living off their investments.

Other business leaders have issued similar messages about the economy in recent months. Tesla

(TSLA) and Twitter CEO Elon Musk last month admitted demand for Tesla

(TSLA)s was “a little harder” to come by, and noted that Europe and China are experiencing a “recession of sorts.” Musk also warned that Tesla

(TSLA) would fall short of its sales growth target.

JPMorgan Chase CEO Jamie Dimon in October spooked the stock market by saying a recession could hit the United States in as little as six to nine months.

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