Trucks and Tariffs Are a Disastrous Combination for Big Auto
When BYD Co. Ltd. announced its newest electric vehicles could recharge in just five minutes, it represented a big problem for Tesla Inc. Rival Contemporary Amperex Technology Co. Ltd., or CATL, then unveiling an even-faster-charging battery is a big problem for US automakers in general. Here is a game-changing technology being defined by two Chinese powerhouses while the US, spiritual home of autos for much of the past century, merely looks on.
America's auto industry faces three simultaneous disruptions. First, even as EVs struggle to grow their share of the US market, they continue to take market share from internal combustion engines globally. Second, advanced driver-assistance systems, or ADAS, and other IT increasingly define the design, experience and value of vehicles. Third, China has emerged as a leader in both. President Donald Trump's rhetoric about the US wresting back leadership of global autos is rooted in these real challenges. His actions, though, threaten to consign Detroit to outright irrelevance.
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Chicago Tribune
20 minutes ago
- Chicago Tribune
Trump gets ‘golden share' power in US Steel buyout. US agencies will get it under future presidents
HARRISBURG, Pa. — President Donald Trump will control the so-called 'golden share' that's part of the national security agreement under which he allowed Japan-based Nippon Steel to buy out iconic American steelmaker U.S. Steel, according to disclosures with the U.S. Securities and Exchange Commission. The provision gives the president the power to appoint a board member and have a say in company decisions that affect domestic steel production and competition with overseas producers. Under the provision, Trump — or someone he designates — controls that decision-making power while he is president. However, control over those powers reverts to the Treasury Department and the Commerce Department when anyone else is president, according to the filings. The White House didn't immediately respond to questions Wednesday about why Trump will directly control the decision-making and why it goes to the Treasury and Commerce departments under future presidents. Nippon Steel's nearly $15 billion buyout of Pittsburgh-based U.S. Steel became final last week, making U.S. Steel a wholly owned subsidiary. Trump has sought to characterize the acquisition as a 'partnership' between the two companies after he at first vowed to block the deal — as former President Joe Biden did on his way out of the White House — before changing his mind after he became president. The national security agreement became effective June 13 and is between Nippon Steel, as well as its American subsidiary, and the federal government, represented by the departments of Commerce and Treasury, according to the disclosures. The complete national security agreement hasn't been published publicly, although aspects of it have been outlined in statements and securities filings made by the companies, U.S. Steel said Wednesday. The pursuit by Nippon Steel dragged on for a year and-a-half, weighed down by national security concerns, opposition by the United Steelworkers and presidential politics in the premier battleground state of Pennsylvania, where U.S. Steel is headquartered. The combined company will become the world's fourth-largest steelmaker in an industry dominated by Chinese companies, and bring what analysts say is Nippon Steel's top-notch technology to U.S. Steel's antiquated steelmaking processes, plus a commitment to invest $11 billion to upgrade U.S. Steel facilities. The potential that the deal could be permanently blocked forced Nippon Steel to sweeten the deal. That included upping its capital commitments in U.S. Steel facilities and adding the golden share provision, giving Trump the right to appoint an independent director and veto power on specific matters. Those matters include reductions in Nippon Steel's capital commitments in the national security agreement; changing U.S. Steel's name and headquarters; closing or idling U.S. Steel's plants; transferring production or jobs outside of the U.S.; buying competing businesses in the U.S.; and certain decisions on trade, labor and sourcing outside the U.S.
Yahoo
20 minutes ago
- Yahoo
Higher Market Volatility Shines a Light on Buffer ETFs
You can find original article here Wealthmanagement. Subscribe to our free daily Wealthmanagement newsletter. Markets are facing a fresh round of uncertainty with the United States striking Iranian targets over the weekend and Iran retaliating by firing missiles at a U.S. base in Qatar. Questions loom about the potential for spiking oil prices as observers wait to see if tensions escalate or simmer down. It's just the latest shock to markets this year. President Donald Trump's 'Liberation Day' tariffs and subsequent announcements have sent stocks and bonds whipsawing amid on-again, off-again developments. The Chicago Board Options Exchange's CBOE Volatility Index (VIX) currently sits at about 20 and at one point in April reached 50—the highest level since the height of the COVID-19 pandemic. Easily and efficiently maximizing returns while mitigating risk is the promise driving one of the biggest recent success stories in exchange-traded funds: Defined outcome ETFs. By buying and selling options on the underlying portfolio, like a structured product, these ETFs promise to let investors realize market gains while still getting protection when they fall. The tradeoff: Sacrificing some portion of those gains should the market climb higher than the pre-determined limit. The funds have grown from $5 billion in assets at the end of 2020 to $50 billion by 2025, according to Morningstar. In a recent report, BlackRock projected the space will reach $650 billion by 2030. Even institutional investors are buffing up their portfolios. In December, Bloomberg reported that the University of Connecticut's endowment sold almost all of its hedge fund exposure in favor of the funds. 'What's really resonating is the certainty in the downside protection,' said Graham Day, executive vice president and CIO, with Innovator, the firm that launched the first buffer ETF in 2018. 'The ability of bonds to protect is now a huge question mark. And so that's starting to stir the pot more in terms of what advisors are using to manage risk.' Overall, more than 300 buffer ETFs are on the market. Two managers—Innovator and First Trust—still dominate the space, though others are competing by launching variations on the theme (i.e., Calamos has debuted Buffer crypto ETFs) or with lower fees (BlackRock's funds cost slightly less than the average). Other managers jumping on the buffer ETF train include Goldman Sachs Asset Management, PGIM, Alliance Bernstein and Allianz. [[scm-embed type="everviz" src=" 'For something that started as a niche product, now the largest asset managers are hopping into the game, which we would expect to drive down costs,' said Patrick Nerney, vice president, investments, with St. Petersburg, Fla.-based Dynasty Financial Partners. 'But at the end of day, this is a complex product that requires a nuanced understanding.' Providers offer a range of buffers, so advisors can choose what percentage of losses they are willing to tolerate and how much upside they are willing to forego. Downside protection can be as low as single-digit percentages or go all the way to 100%. The upside caps vary accordingly. More downside protection, less upside gains and vice versa. As ETFs, they easily fit into most advisor trading platforms and performance reporting tools. They require more handholding than plain-vanilla ETFs. They have fixed time spans—typically a year. Buffer ETFs tied to major stock indices tend to come in monthly flavors, while some newer ETFs offering protection on Bitcoin and other assets are issued quarterly. Investors can roll over into a new version at the end of the defined outcome period. Some try their hand at tactical plays—trading in or out may reduce the protections or, conversely, lock in early gains, but only if timed correctly. In addition, some providers now offer laddered products with blended exposures to provide time-based diversification and automatically roll over into new issuances annually. 'The beauty of those is that you can hold them for the long term,' said Rob Kane, director of alternative investments with $285 billion AUM Commonwealth Financial Network. 'We continue to see the evolution of trying to make these more of a strategic allocation in a portfolio … something that will be in a portfolio for the next 20 years.' More adventurous advisors use the funds as tactical investments, opportunistically moving in and out of the funds regardless of the time frame in the prospectus. For example, if an investor buys a defined outcome ETF with a 15% upside cap in one month for $100 and the market goes up 5%, they can opt to sell, enter a new buffer ETF, lock in their gains and reset their protection levels. 'We do see tactical use where an investor sells if the cap is running out or they want to reset the protection level,' said Lan Anh Tran, a manager research analyst for Morningstar who tracks the sector. 'There are people buying in after the buffer periods have started. So, there is some opportunistic investment. But the more common use case is to use these as a hedge. And they make more sense as laddered products.' Because of the options strategies, investors in these ETFs do not receive dividends. 'The conversation we often have is, 'Are you willing to forego dividends and returns in excess of a certain percentage in exchange for downside protection?'' said Curtis Congdon, president of XML Financial Group in Bethesda, Md. 'And for many clients who are approaching retirement or wanting to be more conservative, buffer ETFs give them a way to retain equity exposure while having less tail risk.' In addition, buffer ETFs carry higher fees than passive ETFs. Average expense ratios are in the 70 to 80 basis point range. 'This category of buffers has not seen the fee compression that other categories of ETFs have,' said Mike Venuto, chief investment officer at Tidal, which advises asset managers on launching ETFs. 'Our internal research says that it has an average expense ratio of 72 basis points. If you weigh by assets, it's 65 basis points. That's light years away from traditional ETFs. I can see why new issuers are drawn to them.' While recent volatility may have triggered some advisors to give the funds a fresh look, interest has been steadily building over time. In fact, in the year-to-date through the end of April, $5.6 billion flowed into the category, according to data from Morningstar Direct. During the first quarter, 'we got about $368 million in inflows,' said Matt Kaufman, senior vice president and head of ETFs at Calamos Investments, which has a variety of defined outcome products, some offering 100% downside protection on the major stock indices as well as Bitcoin. 'We see people who are buying new. We also see people selling out of old series, capturing gains and moving into other series to reset their starting points. People are using these exactly as we anticipated and expect them to.' Not everyone is a fan. In March, asset manager AQR Capital Management analyzed 99 ETFs using Morningstar data and found that the ETFs performed worse than passive funds tracking market indices coupled with investments in three-month Treasuries. The researchers argued that there are better ways for investors to hedge risk. That triggered a pair of responses from Vest, the subadvisor that builds First Trust's buffer products. Vest President Jeff Chang questioned the dataset that AQR chose, which included both buffer and non-buffer ETFs. Chang also pointed out that evaluating buffer ETFs on returns misses the point since the products are not intended to beat the market, but to provide protection. Morningstar's Jeffrey Ptak joined the debate on his Substack, posted shortly after another article he wrote on Morningstar's site. Ptak said buffer ETFs, by and large, had delivered on their promises and found 'the average dollar invested in buffer ETFs has exceeded the ETFs' total returns, meaning investors have been able to achieve the potential outcomes advertised.' The buffer funds have weathered the initial COVID-19 market disruptions in 2020 and the wave of supply chain disruption and inflation that hammered 60/40 portfolios in 2022. 'They did what they were supposed to do,' Innovator's Day said. 'Sometimes we are asked if these have been tested. In 2020, the VIX was at 70, and they did what they were supposed to do.' However, Jack Zhang, chief investment strategist, alternative investments, with Sequoia Financial, cautioned about how surrendering the upside, at the wrong time, is also a risk of the ETFs. 'In the case of the COVID recovery, we essentially got many years of returns crammed into a short time period,' Zhang said. With a capped upside, investors can miss out on those kinds of substantial gains. 'In times of crisis, they can provide benefits, but perhaps not as much as other asset classes. Over cycles, being diversified in stocks, bonds and alternatives gives you more of an all-weather approach. I think over the long-term horizon, that just works better than buffer ETFs.' 'Our team moved a considerable portion of our client's domestic and international equity exposure—almost 40%—into these products in February and late March,' said Phillip Knight, a managing director and partner with Americana Partners, a Houston-based wealth management firm with over $8.5 billion in assets under management. 'We're beyond glad that we made this move, but we've also found that using these types of tools in a portfolio model adds an element of optionality, and to maximize benefits for our clients, you need to closely monitor the P&Ls of each position.' 'We tend to recommend them as a complement to a traditional stock and bond portfolio,' said Gary Quinzel, vice president, portfolio consulting with Minneapolis-based Wealth Enhancement, an RIA with about $100 billion in client assets. 'Our dynamically-hedged equity building block portfolio aims to provide exposure to U.S. equities with less beta risk relative to the overall market. Investors can expect a smoother experience.' Wealth Enhancement uses a variety of buffer ETFs diversified by buffer ranges and time periods. Depending on the client, it recommends allocating 10% to 25% of portfolios to the products. 'We like to combine the different strategies so we're hedged against time periods as well as potential downfalls. The end result, if done optimally, is that it can lower beta in a portfolio by 30% to 50%.' Brent Coggins, chief investment officer with Triad Wealth Partners, a Lawrence, Kan.-based RIA with $460 billion in AUM, outlined a similar philosophy. 'If you look at our investment platform, you will see a bit of everything,' Coggins said. 'We have strategies that use the full principal protection outcomes, all the way up to more conservate, high-single digit protection levels that may have a levered upside. It's very much case-by-case and all anchored back to identifying the strategy that's going to maximize the success for the client's financial plan.' They can be particularly good fits for clients who are more concerned about principal protection than about increasing their wealth—such as investors in or near retirement. 'There's a massive chunk of wealth transitioning from the accumulation phase to the decumulation phase. For them, it's no longer about, 'Did I beat the S&P or did I miss it by a couple hundred basis points.' It's about, 'Am I harnessing growth potential,' said Mike Loukas, principal and CEO of TrueMark Investments, which operates a suite of active ETFs, including buffers, under the TrueShares banner. 'Investors, to a large degree, are far more comfortable with that tradeoff and the world of hedging than they used to be.' Loukas still sees the benefit of uncapped funds. 'There are moments where I'm OK in a normal market, trailing the S&P by a little bit, but in these massive up markets, you can't afford to trail by 2000 basis points,' Loukas said. 'Something that is uncapped has the ability to track the S&P up the ladder without being capped out. It comes down to what individual investors or modelers are looking for, and matching expectations and intents with the right defined outcome for the needs of the portfolio.' While it is always important to see what makes any fund perform the way it does, that's particularly true with buffers. 'The largest education hurdle we've had with advisors is that some of these products own underlying large cap stocks. And while those held up awesome at the end of the year, in the recent slide the Mag 7 got hit hard,' said Dynasty's Nerney. 'The index wasn't down as much as those names, so how were these products lower than the S&P? It was because you're long large cap tech.' Still, Nerney said the ETFs do have a role to play. 'I hope our teams that were using them continue their allocations even though the payoff prolife wasn't as exciting as it typically is,' Nerney said. 'You need to remain systematic in your allocation in any product set you use. [When] portfolios are shedding 5% to 6% a day, there's nothing like actual protection.' Generally, advisors using buffer ETFs are allocating anywhere from 10% to 25% of a client's assets to the funds. Buffer ETFs are more common in the RIA space, as broker/dealers more often restrict the investments allowed on the platform, and some have limited the use of buffer ETFs because of the underlying options. 'One of the things that still surprises me is that some home offices … say that sounds risky. So, they limit how much an advisor can use them,' Day said. 'It's backwards. If you are an aggressive investor, you can allocate more to these buffers, but if you're conservative, you can allocate less, which is counterintuitive.' One of the biggest benefits advisors see for the products is mitigating investor behavior, such as panic selling, when markets fall. 'Most folks, just by human nature, don't want to lose money,' Kane said. 'So, when you come out and say, 'We have an option to protect you,' that's absolutely great. It's an easier sell than 'I would like to put option overlay strategy over your portfolio', which requires much more nuance to describe. Buffer ETFs are a great way to package it together.' Vest's Chang also points to behavioral factors as a key selling point. 'One of the biggest risks is not volatility. It's staying invested,' he said. Studies show that investors experience losses 2.5 times more than they experience gains, which often leads them to sell and then miss out when markets turn. 'The average equity investor underperforms by 3.5% every year. They would have doubled their returns if they had something that kept them invested.' That makes sense to clients concerned about the heightened volatility roiling markets. 'This is when pricing can be extremely attractive,' Chang said. 'We are always one tweet away from a 10% move up or down. That's going to persist for a bit. ... When Henry Ford created the seat belt, less than 10% of consumers paid for that option. But if you're going to be out there in a Lamborghini, you want to put a seat belt on.' Sign in to access your portfolio
Yahoo
23 minutes ago
- Yahoo
Trump-backed crypto firm is planning stablecoin audit, new app
By Michelle Conlin (Reuters) -Zak Folkman, the co-founder of U.S. President Donald Trump's cryptocurrency platform World Liberty Financial, said on Wednesday that the company will issue an audit of its stablecoin "within days" and that it planned a new app. Folkman also hinted that WLF's governance token, known as WLFI, could soon become tradable in an interview at the Permissionless conference on Wednesday, organized by crypto media company Blockworks in Brooklyn, New York. WLFI, which was launched two months before the U.S. presidential election in November by Trump and his business partners, has yielded hundreds of millions of dollars in revenue for the Republican president's family business. The business, along with other forays into crypto, has drawn a barrage of criticism from Democratic lawmakers, as well as government ethics watchdogs. Critics say it creates conflicts of interest as it is happening at the same time as the president is pulling back enforcement and easing regulations on the industry. The Trump Organization said in January that the president's investments, assets and business interests would be held in a trust managed by his children. The White House and the Trump Organization did not immediately respond to requests for comment. World Liberty has raised the money by selling so-called governance tokens, which give holders the right to vote on changes to the project's underlying code and to signal their opinion on its direction and plans. They cannot be traded. During the interview on Wednesday, when Blockworks co-founder Jason Yanowitz asked whether the token would become tradable, Folkman said, "I don't want to give away too much, but if you pay attention over the next couple of weeks, I think everyone ... is going to be very, very happy." Folkman said WLF would also be launching an app that would make crypto seamless for everyday investors to use. He said the company's stablecoin recently just got its first attestation report from an accounting firm and that it would be posted on its website "within the next few days." "We're going to have very transparent auditing from a financial level," he said. (Michelle Conlin in New YorkEditing by Marguerita Choy)
