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FSOC meets today.

(Jun 16) — Treasury Secretary Janet Yellen will preside over a meeting of the Financial Stability Oversight Council at the Treasury Department today. The meeting will consist only of an executive session. The preliminary agenda for the executive session includes an update on financial stability vulnerabilities, an update on developments in the commercial real estate market, and an update on developments in the banking sector. Readouts for past Council meetings are available here.

A view of Lac Leman in Geneva. Switzerland is close to a dangerous threshold with a credit-to-GDP ratio of 315.1%. Photo: Jose Cendon | Bloomberg

High rates might soon prove to be an aberration

After suffering devastating double-digit losses in 2022, the fixed income market remains more fragile than at any point since the subprime mortgage crisis. The Move index — a closely tracked gauge of bonds’ price volatility — recently hit its highest levels in almost 15 years. More worrying still is that the instability has been especially pronounced in US Treasuries, the barometer for world debt markets. (Financial Times | Jun 15) see also Powell says nearly all officials expect 'some' further Fed hikes (Bloomberg Economics - opinion | Jun 14)

Crypto gets its moment of clarity, but not the one it wanted

The crypto industry is running out of ground to stand on, particularly in the US. In quick succession, crypto has seen financial contagions, multiple cases of alleged fraud and outright theft, the collapse of several trading and lending platforms, and the evaporation of about $1.8 trillion in market value across all coins. Through it all, regulators including the US Securities and Exchange Commission have steadily ramped up enforcement actions, with hints of more to come. (Bloomberg | Jun 15)

Normalization, not recession

The economy is particularly hard to read right now, and has been so for a while. We have mostly been offering a “strong at the core, weak at the margins” read of it recently. Most other views out there fall into opposing camps. Some observers note the surprising strength of the economy, say recession is nowhere in sight, see inflation as sticky, and bang on about higher rates for longer. Others think we are practically in a recession already and that deflation and rate cuts are right around the corner. (Financial Times - opinion | Jun 13)

'The oracle of Wall Street returns: ‘There will be many fewer banks’

Meredith Whitney, credited with predicting the Great Financial Crisis, is relaunching her firm at a time when she predicts that, once again, a large number of banks may disappear. Whitney said a combination of headwinds, including the US housing market and new bank regulation, will make it increasingly hard for many regional banks to survive on their own. This will weigh on their stock prices and make them attractive acquisition targets. (Financial Times | Jun 12)

Companies, big investors sell shares at fastest rate in years

Companies and their largest investors are selling shares at a pace not seen in years as stock prices rebound. Since the end of April, companies and private-equity firms have sold more than $24 billion worth of stock in so-called follow-on sales. The S&P 500 entered a new bull market last week, closing 20% above its October low as a handful of big technology stocks rallied, after the index took a beating since last year on inflation and other worries. (The Wall Street Journal | Jun 11)

US & allied cyber agencies warn about LockBit ransomware

The Cybersecurity & Infrastructure Security Agency and cybersecurity agencies from the UK, Canada, Germany, Australia, France, and New Zealand published an advisory warning about LockBit ransomware. LockBit was the most deployed ransomware variant worldwide last year and is still prolific in 2023, the document said. Approximately $91 million in ransom from the US has been paid to the LockBit cybercrime group since January 2020. Around 1,700 attacks using the ransomware in the US have been reported to the Federal Bureau of Investigation since 2020.

— Cybersecurity and Infrastructure Security Agency (and others)

AI regulation is here. Almost.

The European Parliament voted to approve draft AI regulations, set to be the West’s first comprehensive set of rules in the area. Lawmakers and officials from the European Union and EU member countries still need to negotiate details of the bill before it can be approved. The draft legislation regulates how companies train AI models, and requires companies disclose when content is made using AI in some cases. For high-risk applications, the bill requires safeguards and transparency measures. 

— The Wall Street Journal

Hacker gang Clop deploys extortion tactics against global companies

The Russian-speaking gang of hackers that compromised UK groups such as British Airways and the BBC has claimed it has siphoned off sensitive data from more institutions including US-based investment firms, European manufacturers, and US universities. The group that calls itself Clop, after the Russian word for bedbugs, added German industrial group Heidelberg; Kansas-based Putnam Investments, with $168bn under management; and Leggett & Platt, a $4bn manufacturer in Missouri, to a list of companies it claims to have hacked.

— Financial Times

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Illustration by Time Peacock | WSJ

The rush for hotel suites and connecting rooms is on

The most in-demand hotel room for travelers right now is the room right next to theirs. Hotel and resort managers say requests for connecting rooms and suites have increased recently as multigenerational families and large groups of friends gather. Continued flexibility from hybrid work and travelers bringing family members along on business trips have also contributed, hotel managers say. 

— The Wall Street Journal

Is eating out a luxury again?

Are restaurant prices going through the roof? Hell yes. Should they? Maybe we all need to remember that food is something we buy as raw material and prepare for ourselves, and that paying someone to cook for us or bring it to us should never be anything other than a luxury. Put most simply, all of us — restaurants and customers — are re-evaluating eating out, recognizing it as the luxury it’s always been.

— Financial Times

Brain waves synchronize when people interact

Much about the phenomenon of synchrony remains mysterious — even scientists occasionally use the word “magic” when talking about it. It could be that coherence between brains is a result of shared experience. But the newest research suggests that synchrony is more than that — or can be.

— Scientific American