Shaking seats and piped-in fog: How 4DX is carving out a niche moviegoing market

Chris Hemsworth stars as the villainous Dementus in Warner Bros.’ “Furiosa: A Mad Max Saga.”

Warner Bros. Discovery

In George Miller’s new Mad Max film “Furiosa,” a red paint flare explodes and casts the theater screen in a saturated crimson cloud.

Feet away, among the rows of gyroscopic 4DX chairs, plumes of fog roll in, catching the red hue from the screen as if the flare somehow transcended the fourth wall and infiltrated the cinema. The fog parts, Chris Hemsworth as Dementus comes into focus and grins at the audience.

This is the 4DX viewing experience. It’s one of many multi-sensory moments programmed for “Furiosa: A Mad Max Saga,” which opened in theaters Friday, in order to immerse audiences in Miller’s latest visit to the vast Wasteland. And it amounts to a key value proposition at a time when cinemas are desperate to lure back moviegoers, particularly those in the younger demographics.

“We make movies different,” said Duncan Macdonald, head of worldwide marketing and theatre development for CJ 4DPlex Americas. “We are so different out there, with our motion capabilities and our environmental effects.”

In the wake of the pandemic, audiences grew used to shorter theatrical windows and having access to more content at home. At the same time, pandemic-related shutdowns and production stalls from two Hollywood strikes greatly limited the amount of content hitting theaters. As a result, consumers fell out of the habit of going to cinemas.

Moviegoers who have returned are seeking premium experiences — higher-quality picture and sound — and are willing to pay more for those tickets. 4DX is one option in the premium large format market alongside the likes of IMAX and Dolby Cinema. CJ 4DPlex also owns the ScreenX format.

“Premium movie theatre experiences are key to the health of the industry and with fewer films in the marketplace on average than in past years, the importance and essential nature of a company like 4DX comes into sharp focus,” said Paul Dergarabedian, senior media analyst at Comscore.

4DX utilizes motion seats, practical effects and sensory elements to immerse viewers in a movie. For Warner Bros.’ “Wonka,” the company piped in the smell of chocolate during screenings.

CJ 4DPlex Americas CEO Don Savant says the experience is “complementary” to routine moviegoing experiences, noting that 4DX cinemas attract younger consumers, predominantly in the 10-to-30 age range, who are seeking more experiential viewing.

4DX is a 4D film presentation system developed by CJ 4DPlex, a subsidiary of South Korean cinema chain CJ CGV. It allows films to be augmented with various practical effects, including motion-seats, wind, strobe lights, simulated-snow, and scents.

CJ 4DPlex

For consumers, the 4DX experience costs an average of $8 more than traditional ticket prices, meaning a ticket can range from $20 to $30 each. But the extra cost doesn’t seem to be detering audiences.

Last year, 4DX’s domestic locations tallied $53.4 million in ticket sales.

“Notably, the higher price for premium movie tickets is not a barrier to their success but rather seen as representing a solid value proposition for fans in pursuit of the best possible big screen experience,” Dergarabedian said. “This is good news for theater owners who, facing fewer wide release films in the marketplace, can boost revenues on a per-ticket basis while giving their patrons a great experience that will have them returning to the multiplex more often.” 

And, for major blockbuster titles, 4DX is proving to be even more popular. Ticket sales for Disney’s “Avatar: The Way of Water” topped $83.6 million from 4DX screens, or about 3.6% of the film’s total box office haul. It is currently the highest-grossing film for the screen format, Savant said.

“We want to give customers an easy excuse to leave their homes and visit a local Regal theater,” said CEO Eduardo Acuna of Regal Cinemas. “Premium formats like 4DX offer a movie-watching experience that cannot be replicated by any home theater setup. Each premium format serves a different purpose for storytelling, and each increases the enjoyment of watching a movie in a different and immersive way.”

Acuna noted that 4DX auditoriums are “a strong box office performer” for Regal.

Regal is the largest operator of 4DX screens domestically, with 50 of the 62 locations found in the U.S. and Canada. Globally, there are nearly 750 4DX screens with numerous theatrical partners. The highest volume is in Asia and Europe.

Savant said 4DX is adding around 25 to 30 screens per year worldwide, but is looking to push that figure up to 50 to 60 screens a year. The company is seeking to have around 1,200 4DX locations in the next five years. On average, each theater has around 140 seats.

Moviegoers who venture away from their couches and into a 4DX theater to see Warner Bros.’ “Furiosa” will feel from their seat the rev of motorcycles racing through the desert, smell gunpowder in the air during epic gun battles and even get hit with a soft spray of water as it’s flicked in the face of a character on the screen.

Last year, 4DX programmed more than 100 films for the souped-up viewing experience. Around 40 to 45 of those were major Hollywood titles, Savant said. Others included concert content, musical singalongs, anniversary titles and local language films.

Typically, the 4DX programmers, who are based in Seoul, have two to three weeks to craft the motion and special effects, although Savant said they can turn around a film in a week if the need arises. 4DX can program three titles at a time.

Both Macdonald and Savant referred to 4DX’s programmers as “artists,” describing the process — from the subwoofers in the seats to the fog machines — as different brushstrokes in a work of art.

“Every film is different,” said Macdonald. “So we look at the nuances of the different films that we have and how those are programmed.”

In some cases filmmakers will get involved, offering suggestions for when certain effects should be used and how subtle or bombastic they should feel or look.

“It’s the most dynamic way to see [a film],” Savant said.

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The 10 books the rich will be reading this summer

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high net worth investor and consumer. Sign up to receive future editions, straight to your inbox.

Today’s workaholic wealthy rarely have time to sit back and read a good book — except maybe for a few weeks in August. That’s why J.P. Morgan Private Bank, every May, releases its summer reading list, often serving as a book club for billionaires.

This year marks the 25th anniversary of the list, now called the J.P. Morgan Summer Reading List. The 10 books are carefully curated to match the tastes and preoccupations of J.P. Morgan’s wealthy clients. This year’s list includes books on effective communication, artificial intelligence, Formula One, whiskey, hidden vacation spots and the art collection of Alicia Keys and Swizz Beatz.

J.P. Morgan creates the list by surveying its more than 35,000 client advisors and employees globally and asking about the topics clients are talking and thinking about the most. This year, the advisors sent in more than 700 recommended book titles, which a committee whittled down based on timeliness and appeal.

“Our clients run the gamut from business owners and entrepreneurs to philanthropists and art collectors,” said Darin Oduyoye, chief communications officer of J.P. Morgan Asset and Wealth Management, who has spearheaded the list since its founding. “There are books to match up to each of those groups.”

Clients get an elegant J.P. Morgan-branded box with a book or two from the list, recommended specifically by their client advisor. The advisor also includes a handwritten note and a commemorative bookmark.

The list helps advisors connect with clients during the slow summer months. It also helps with client events, since authors on the list often agree to do special dinners or speaking events for J.P. Morgan clients.

Authors love being on the list as well since J.P. Morgan buys thousands of books to hand out and since clients often refer the books to others.

“The list is something that both clients and colleagues, and our communities, look forward to,” Oduyoye said.

This year’s 25th anniversary edition features a special “Anniversary Spotlight” highlighting Water.org, the charity founded by Gary White and Matt Damon, and their book “The Worth of Water.”

Here is J.P. Morgan’s 25th Annual Summer Reading List, along with summaries of the books, provided by the bank:

“Supercommunicators: How to Unlock the Secret Language of Connection” by Charles Duhigg

Sharing the latest research on what makes conversations effective, Charles Duhigg reveals how we can level up our communications and make stronger connections. Whether it’s a divided jury room or the way a CIA officer recruits a foreign agent, Duhigg uses examples to illustrate how we can deliver effective messages by recognizing and tapping into the three layers of every conversation—practical, emotional and social. Taking us from the writers’ room of one of television’s most successful sitcoms to the couches of in-demand marriage counselors, Duhigg shows us that we all have supercommunicators inside of us.

“The Anxious Generation: How the Great Rewiring of Childhood Is Causing an Epidemic of Mental Illness” by Jonathan Haidt

Social psychologist Jonathan Haidt lays out urgent facts—and issues a clear call to action—to focus attention on the global epidemic of teen mental illness. Haidt identifies the pervasive use of smartphones and over a dozen other mechanisms as having contributed to the “great rewiring of childhood.” Arguing that these technologies have had a profound negative effect on children’s social and neurological development, he explores what can be done to reverse the significant rise in sleep deprivation, fragmented attention, loneliness, addiction and social comparison. Importantly, Haidt calls for collective action and outlines steps that we all must take to end this epidemic.

Giants: Art from the Dean Collection of Swizz Beatz and Alicia Keys” published by Phaidon

Celebrating selections from the world-class art collection of musical and cultural icons Alicia Keys and Swizz Beatz (Kasseem Dean), “Giants” highlights 100 works by nearly 40 multigenerational Black American, African and African diasporic artists. Curated by the Brooklyn Museum for its first-ever major exhibition, the Dean Collection features works by legendary—as well as emerging—artists including Gordon Parks, Jean-Michel Basquiat, Lorna Simpson, Odili Donald Odita and Kennedy Yanko. “Giants” also includes exclusive conversations between Swizz Beatz, Alicia Keys and curator Kimberli Gant, in addition to interviews with 10 of the renowned artists featured.

“Brave New Words: How AI Will Revolutionize Education (and Why That’s a Good Thing)” by Salman Khan

Salman Khan, the visionary behind the nonprofit Khan Academy, explores how artificial intelligence (AI) is set to transform learning both in education and the workplace. Demonstrating how AI will not replace human interaction but rather enhance it with tools to encourage creativity and problem solving, he shows how AI can adapt to each student’s individual pace while identifying strengths and areas of improvement. Outlining how emerging technologies can create a more accessible education system, Khan offers practical implications for administrators, counselors and hiring managers, as well as thoughtful insights on how we all can use AI in an increasingly digital world.

“Love & Whiskey: The Remarkable True Story of Jack Daniel, His Master Distiller Nearest Green, and the Improbable Rise of Uncle Nearest” by Fawn Weaver

Entrepreneur Fawn Weaver reveals the untold story of one of America’s most iconic whiskey brands. Set in Lynchburg, Tennessee, “Love & Whiskey” follows Weaver’s quest to discover the life of Nearest Green, a 19th-century African American distiller who played a pivotal role in developing Jack Daniel’s whiskey. Navigating through layers of history to unlock the truth about Green’s contributions to the spirits industry and his friendship with Daniels, Weaver uncovers a story that connects generations. Her findings inspire a new path forward, with Weaver spearheading the creation of Uncle Nearest Premium Whiskey as a way to honor and celebrate Green’s legacy for generations to come.

“The Formula: How Rogues, Geniuses, and Speed Freaks Reengineered F1 into the World’s Fastest-Growing Sport” by Joshua Robinson and Jonathan Clegg

In “The Formula,” Joshua Robinson and Jonathan Clegg from The Wall Street Journal tell the riveting story of how Formula 1’s fearless reinvention led to its breakthrough in America. With fast cars, engineering geniuses, driver rivalries and glamorous settings, “The Formula” details how F1’s “sudden” arrival in the United States was actually decades in the making. With unfettered access to F1’s most legendary teams and icons from Ferrari to Mercedes, Robinson and Clegg give readers a thrilling look inside the drivers, corporations, cars and risks that have defined the world’s fastest-growing sport.

“Secret Stays: Pioneering Hosts of the New Chic” by Melinda Stevens, Issy von Simson and Tabitha Joyce

A fascinating exploration curated by Melinda Stevens, Issy von Simson and Tabitha Joyce, “Secret Stays” introduces 22 hidden gems that reflect the dynamic evolution of modern travel. Highlighting captivating properties and the people who own them—from a secluded Croatian monastery to a Japanese machiya townhome—this coffee table book from Assouline, the luxury brand on culture, reveals one-of-a-kind experiences that stem from a revived belief in genuine, bespoke hospitality. Through stunning photographs and compelling narratives, “Secret Stays” takes a fresh look at the diverse and ever-evolving face of travel today.

Finding Fortunato: How a Peruvian Adventure Inspired the Sweet Success of a Family Chocolate Business” by Adam Pearson

In “Finding Fortunato,” Adam Pearson takes us on a journey into the northern Peruvian jungle with the inspirational story of the entrepreneurial family who struck gold and discovered the legendary Nacional white cacao bean—previously thought to be extinct. Realizing their success was predicated on disrupting a traditional, unethical supply chain to instead trade directly with local Peruvian farmers, the family pioneered Fortunato Chocolate, a company that would come to be described as “the Rolex of chocolate.”

“Uptime: A Practical Guide to Personal Productivity and Wellbeing” by Laura Mae Martin

Every day, tens of thousands of Google employees, from interns to C-suite executives, rely on an executive productivity advisor—Laura Mae Martin—to make the most of their time. In “Uptime,” Martin provides easy-to-follow steps to boost productivity, prevent burnout and achieve a better work-life balance. Whether you face an avalanche of emails, an overloaded calendar or a difficult meeting to lead, Martin’s strategic approach lays out concrete steps to help you manage time efficiently, focus on priorities, and maintain effective systems and routines.

“The Secret Society of Aunts & Uncles” by Jake Gyllenhaal and Greta Caruso

A whimsical and heartwarming picture book by Academy Award and Tony Award nominee Jake Gyllenhaal and his childhood best friend Greta Caruso, “The Secret Society of Aunts & Uncles” celebrates the unique, fun-filled role aunts and uncles play in children’s lives. Humorously exploring the call to adventure that being an aunt or uncle can bring—from flexible bedtimes to activities with a “healthy dose of danger”—this book paints a loving portrait of these special relationships.

Anniversary Spotlight: “The Worth of Water: Our Story of Chasing Solutions to the World’s Greatest Challenge” by Gary White and Matt Damon

In celebration of the 225th anniversary of JPMorgan Chase’s earliest predecessor—the Manhattan Company, which was founded as a water works company—we are proud to spotlight “The Worth of Water” by Gary White and Matt Damon. These two unlikely allies, with a shared mission to end the global water crisis, take readers on a journey to empower communities and families with tools to address their potable water shortages. Outlining their trial-and-error approach to finding a workable solution, White and Damon demonstrate how the water crisis is solvable through collective action.

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GM all-electric Chevy Equinox goes on sale as the latest test for EV production and demand

GM’s 2024 Chevrolet Equinox EV during a media launch event for the vehicle on May 16, 2024 in Detroit.

Michael Wayland / CNBC

DETROIT — The Chevrolet Equinox has been a crucial part of General Motors’ lineup for two decades. The vehicle is a quintessential family hauler and a go-to car for people seeking an economical compact crossover for everyday driving.

GM is hoping the 2024 Chevrolet Equinox EV can do the same for its growing all-electric vehicle portfolio as it begins shipping the crossover to dealers amid slower-than-expected demand for EVs. The rollout marks the latest test for mass-market adoption as well as the company’s production of new “Ultium” EV technologies.

“It’s very important to us but, more importantly, it’s very important to customers and people who want affordability and electric vehicles,” GM President Mark Reuss told CNBC last week. “This is about $27,500 [including up to $7,500 in federal incentives] for an over 300-mile range car, which is right in the heart of everything.”

Offering a new EV for around $25,000 has long been a target for automakers such as GM, Tesla and others. The importance of such a vehicle has grown more apparent as Chinese automakers like BYD and Nio grow their sales of less expensive EVs outside of China.

The Equinox EV is launching with higher-priced models that start at roughly $43,000 to $51,100 (without any incentives). The entry-level Equinox LT model, starting at about $35,000, is expected later this year.

“The Equinox EV is the vehicle that’s really going to make a difference for a lot of customers that maybe previously haven’t been interested or looked at EVs,” Kathleen Murawski, marketing and advertising manager for gas-powered and Equinox EVs and Chevy Blazer EVs, told CNBC.

GM sells hundreds of thousands of gas-powered Equinox crossovers annually, including 212,701 last year. The crossover is typically one of GM’s bestselling vehicles and top five in sales for its segment, according to Autopacific.

Testing GM

The Equinox EV is GM’s new entry point for all-electric vehicles in the U.S. after the automaker discontinued the Chevy Bolt last year. It’s expected to be GM’s top-selling EV.

With such lofty sales expectations, it also will test the legacy automaker’s ability to successfully mass produce an Ultium-based EV following pricier vehicles such as the $110,000 GMC Hummer EV, $60,000 Cadillac Lyriq and a botched launch of the Blazer EV, starting at roughly $55,000, due to software issues.

“We’ve got the launch on this vehicle right. We’ve got the quality of this vehicle right. We’ve got the software of this vehicle right. We’re just super excited to see now where it goes,” GM President of Global Markets Rory Harvey told CNBC. “We think we’ve got a product that’s out there to win.”

The Equinox EV is arriving to market following the Blazer EV and alongside GM’s more than $96,000 Silverado EV RST. The company has already launched a work truck version of the Silverado EV.

The production ramp-up of GM’s new EV vehicles — using what the automaker calls its “Ultium” platform, batteries and other technologies — has been slower than the company and investors had expected. The Equinox will change that, according to GM North America President Marissa West.

“We’ve eliminated the production constraints, and now it’s about meeting the customer demand with the most affordable, longest-range vehicle on the market in the heart of our Chevrolet lineup, which is … the heart and soul of General Motors,” West said during an interview Monday.

Paul Waatti, director of industry analysis at AutoPacific, agrees. He called the Equinox a critical product for GM’s EV plans as well as a potential redemption opportunity for the company following its disappointing ramp-up of current Ultium-based products.

“GM is going to start to see real volume in their EV portfolio,” Waatti said. “It was a slow start, but now they’re going to have the big volume players in the mix. It’s really a turning point for GM.”

“[The Equinox is] undoubtedly the most significant Ultium launch for GM yet,” he added. “It might just be the most compelling EV on the market right now.”

Equinox EV

All of that being said, the Equinox EV is an Equinox in name only. It shares little to nothing with the traditional gas-powered vehicle, which the company redesigned to look more rugged for the 2025 model year.

The Equinox EV is wider and lower than the traditional crossover. It’s a result of GM’s Ultium EV platform, aerodynamics and other targeted features for the vehicle, including an up to EPA-estimated 319 miles of range on a single charge.

A standard front-wheel-drive Equinox EV has a 213 horsepower and 236 foot-pounds of torque, according to company estimates. GM says optional all-wheel-drive models have an estimated 288-horsepower and 333 foot-pounds of torque.

Outside of the U.S., the Equinox EV will be sold in Canada, Mexico, the Middle East and some South American markets such as Brazil.

GM’s 2024 Chevrolet Equinox EV (right) next to a gas-powered Chevy Equinox on May 16, 2024 in Detroit.

Michael Wayland / CNBC

Brad Franz, director of Chevy car and crossover marketing, said retaining the familiar names for the EVs was a “strategic decision” to leverage names people know and trust.

“The Chevy proposition here is these can make your life easier. Not only easier, but better,” he said Thursday during a media event. “How are we going to tackle that? We’ll start with just leveraging our brand reputation.”

Keeping the same names also aligns with the company’s target to exclusively offer EVs to consumers by 2035. While the automaker hasn’t shifted that goalpost in light of slower-than-expected sales of EVs, it has recently shifted its messaging to note the transition will be based on customer demand.

GM ranked fourth in U.S. market share of all-electric vehicles during the first quarter, representing 6.1% of new EVs sold, according to data provided by Motor Intelligence. Tesla, at 52.3%, is by far the leader in estimated U.S. EV sales, followed by Hyundai, including Kia, at 9.3% and Ford Motor at 7.5%.

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‘Quiet wealth’ takes on new meaning with super-private deals for mansions, art and classic cars

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

The rich have taken “quiet wealth” to a new level, turning to private purchases of mansions, art and classic cars designed to avoid attention, according to experts.

Auction companies and luxury real estate brokers say wealthy buyers and sellers are increasingly turning to private sales and off-market listings to avoid social media and prying eyes. While public auction sales are declining in the art world, private sales — done behind closed doors between discreet buyers and sellers — are growing.

Last year, while combined public auction sales for Sotheby’s, Christie’s and Phillips fell by 19%, private sales increased by 4% at Sotheby’s and 5% at Christie’s, totaling $2.4 billion across the two auction houses. CNBC reported in February that Christie’s had sold a Mark Rothko painting for over $100 million to hedge-fund billionaire Ken Griffin, even as public auctions continued to decline.

Classic cars are also seeing a shift to private sales, especially with the most expensive and rare models. RM Sotheby’s, the classic-car auction company, has sold trophy Ferraris, Porsches and other trophy cars by public auction for more than 30 years. But its newly formed RM Sotheby’s private sales division has seen its sales more than quadruple over the past four years, according to Shelby Myers, global head of private sales for RM Sotheby’s.

Private sales, where cars are discreetly brokered between buyer and seller without an auction or public price, now account for nearly a third of revenue, he said.

“We’ve definitely seen a trend where people want to transact privately,” Myers said. “Discretion today is key. People can buy without the whole world staring at them.”

The rise in private sales for classic cars, art, real estate and other markets is being driven by social media, technology and cooling prices for collectibles. When a work of art or classic car comes up for auction, the results, and sometimes the seller, are highly public, spread over social media and blogs.

Collectibles experts say sellers don’t want to risk putting a treasured item up for auction only to have it stumble publicly on the auction block.

“It’s very public now when someone loses money on a sale, and no one wants that,” Myers said. “Up until a few years ago, you could buy a car at auction and the prices wouldn’t be splattered all over social media.”

Collectors who like to show their cars at events and award shows are also shying away from auctions since viewers are more likely to be able to figure out how much the owner paid.

“The car enthusiasts used to be a relatively small, tight-knit group,” Myers said. “Now when a major collector shows their car, it spreads like wildfire over blogs and the internet. And everyone can see who the owner is and what they paid.”

In real estate, many of the biggest deals in Manhattan, Malibu, Aspen, the Hamptons and Palm Beach are now in private or “off-market” sales. Also known as “whisper” or “pocket” listings, off-market properties are not listed on multiple listing services or public websites but are shopped around quietly among a select group of brokers and buyers.

A townhouse in Manhattan’s Greenwich Village sold this year in an off-market deal for $72.5 million, making it the most expensive townhouse ever sold downtown. A 13,000-square-foot mansion in Palm Beach sold off-market for $60 million, making it one the most expensive non-waterfront homes ever sold on the island. And Aspen’s first sale of over $100 million — Patrick Dovigi’s mansion on Red Mountain to billionaires Steve Wynn and Thomas Peterffy — was off-market, with the broker representing both the buyer and seller.  

Los Angeles is considered the birthplace of off-market deals, starting in the 1980s and 1990s when celebrities and movie stars wanted to avoid overzealous fans visiting their listed homes.

Over time, according to Douglas Elliman real estate agent Ernie Carswell in Los Angeles, wealthy, not but famous, sellers have joined in on the off-market craze.

“Even the average multi-millionaire or billionaire likes the idea of selling without the media and privacy invasion,” Carswell said.

Carswell said he currently has a billionaire client in New York who wants a special property in Los Angeles, so Carswell is looking at a mega-mansion owned by a Middle Eastern billionaire who is offering it only to select buyers. He’s also working on a deal in Palm Springs with a celebrity selling a home he didn’t want to be publicly shown to a billionaire buyer who doesn’t want any photos of his new home on the web.

“They don’t want burglars to know how to get to the bedroom, or how much land there is or how to get through the hedges,” Carswell said. “I blame technology.”

Carswell said off-market listings don’t make sense for properties under $5 million since they have a larger possible buying pool and benefit from broader marketing. But for special mega-homes in Malibu, Bel Air or Beverly Hills priced over $20 million, the list of potential buyers is smaller, and most are already known to the brokers, which makes an off-market agreement more appealing. 

That makes broker relationships even more important — especially to the wealthy, Carswell said.

“Never before has the need for a skilled, connected real estate professional been more valuable, especially at the high end,” he said.

Still, some brokers say even for pricey properties, sellers who go private don’t get the highest price since they’re limiting their pool of potential buyers.

“They’re leaving money on the table,” said real estate broker Noble Black of Douglas Elliman. “There is a valid reason for not listing, you want privacy and discretion. But you’re paying a premium for that.”

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An art market full of cracks is about to face a $1 billion test

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

The key May art sales at major auction houses are expected to be down from last year, as wealthy buyers and sellers take a breather from the frenzied prices of 2021 and 2022.

Art auction sales at Christie’s, Sotheby’s and Phillips over the next two weeks are expected to total $1.2 billion, down 18% from a year ago and nearly half the total for the May 2022 sales, according to ArtTactic.

It extends a recent decline for the art market from its post-Covid peak, when cheap money, a booming stock market and fiscal stimulus saw record sales. Last year, global auctions of fine art fell 27% from 2022 — the art market’s first contraction since the start of the pandemic in 2020 — and the average price dropped 32%, marking the biggest decline in seven years, according to ArtTactic.

During the first quarter of this year, sales in the contemporary and postwar category — the big money maker and growth driver for the art market in recent years — plunged 48%, according to ArtTactic.

The auction houses say demand from buyers remains strong. The problem, they say, is supply, as collectors hold back on selling their trophies for a better market environment. This spring, there are also no big single-owner collections up for sale, like the Macklowe Collection or Paul Allen Collections that helped power sales in previous years.

“We’re seeing what people perceive as a smaller offering this season,” said Brooke Lampley, global chairman and head of global fine art at Sotheby’s. “The proof is in the pudding. It’s the buyers showing up and what the work will sell for that will define our perception of the art market right now. And I expect the results to be strong.”

Price pressures

Dealers and art experts say the auction art market is stalled over price, with sellers not willing to get a lower price than they might have gotten at the peak of the market in 2021-2022. Buyers, meanwhile, are demanding discounts due to rising interest rates, an uncertain election year and geopolitical uncertainty.

“Sellers want 20% more, and buyers want 20% less,” said Philip Hoffman, CEO of the Fine Art Group, an advisory and art finance firm. “There is a stalemate.”

CNBC’s Robert Frank before an Andy Warhol and Jean-Michel Basquiat collaboration at Sotheby’s.

Crystal Lau | CNBC

Dealers say today’s buyers don’t have the confidence they had two or three years ago: Persistent inflation, higher interest rates, fears of a slowing economy, the upcoming elections and geopolitical crises are all causing many collectors to pause their buying.

“People feel hesitant,” said Andrew Fabricant, chief operating office at Gagosian, the mega-gallery and dealership. “It’s an election year, there is the situation with the Fed, are they going to cut or not. The cost of money is relatively high compared to a few years ago.”

Even buyers who have the cash and are willing to pay aren’t buying, because there is a dearth of top-level art coming up for auction, according to experts.

“Our clients have have a ton of cash,” Hoffman said. “The question they’re asking is, ‘Should we buy in to the art market right now?'”

Fewer pieces

While the spring sales typically have more than a dozen works offered for more than $30 million each, this year there are just a few.

The most expensive works this auction season include Francis Bacon’s 1966 “Portrait of George Dyer Crouching,”— part of a series of 10 famous and monumental portraits Bacon did of Dyer between 1966 and 1968. It’s selling at Sotheby’s for an estimated $30 million to $50 million.

(L-R) Jean-Michel Basquiat’s “The Italian Version of Popeye has no Pork in his Diet,” 1982, and Francis Bacon’s “Portrait of George Dyer Crouching,” 1966.

Crystal Lau | CNBC

Sotheby’s also has a collection of four paintings by Joan Mitchell, with two expected to fetch over $15 million.

Christie’s is featuring a large work by Brice Marden, who died last year, called “Event,” estimated at $30 million to $50 million. It also has an iconic 1982 work by Jean-Michel Basquiat, called “The Italian Version of Popeye Has No Pork In His Diet,” estimated at $30 million.

Yet collectors and art advisors say there are few if any “masterpiece” works to create excitement this season.

“They just don’t have the marquis material this season,” Fabricant said. “Unless you have something truly singular and special, I don’t think you’re going to have the same enthusiasm you had in past sales.”

At the same time, art experts say now is a good time to hunt for bargains given the long-term prospects for the art market.

“I do think if you can get deals with pre-2022 prices and if there is something of good quality, now is the time to buy,” Hoffman said. “My outlook for the art market for next 10 years is that it will be a fabulous investment. It’s a great time to buy, not the best time to sell.”

While auction sales are weak, sales in the private markets and galleries remains strong, advisors say. Sales of new works in galleries are less dependent on investment returns, and are therefore less susceptible to economic and stock-market volatility. The auction houses are also seeing strong growth in their private sales, where they broker a deal directly between buyer and seller without a public auction.

Christie’s sold a Mark Rothko painting to hedge fund billionaire Ken Griffin earlier this year for more than $100 million, CNBC previously reported. Collectors say selling a trophy work privately carries less risk of a failed auction, which can damage a work’s value.

“With private markets, you can be very targeted in terms of who you’re approaching, what type of buyer you’re approaching,” said Drew Watston, head of art services at Bank of America. “You can be very targeted about the price that you’re going out and asking for in the market. There’s great discretion so you can kind of go out into the market and test a price and adjust depending on the feedback that you get.”

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Inflation fears among America’s small businesses are rising again and their faith in the Fed is falling

The fight against inflation was going well for the Federal Reserve and economy for much of last year and into 2024, but one important demographic remained unconvinced about the progress being made in lowering pricing: small business owners.

Now, more influential parties are coming around to a view that small businesses have been stubborn in saying is closer to the on-the-ground truth: inflation isn’t coming down fast enough. On Wednesday, Federal Reserve Chair Jerome Powell conceded that after three months of disappointing data on inflation, there has been a “lack of further progress” this year. Market traders, who not long ago were in interest rate cut euphoria mode and forecasting up to six rate cuts by the Fed this year, are now more likely to see one or two cuts at most.

Disappointment over inflation is nothing new for small business owners, and their frustration over high prices is increasing again, according to the CNBC|SurveyMonkey Small Business Survey for Q2 2024.

One in four (24%) small business owners tell CNBC that they think inflation has reached a peak, down from 29% in the previous quarter, and back to where the economic sentiment reading was a year ago. The percentage of small business owners who expect inflation to rise from here is trending up as well — 75% this quarter, up from 69% in Q1.

“Small business owners are the engine of our economy, and the data shows they are still pessimistic about overcoming inflation,” Lara Belonogoff, senior director of brand management and research at SurveyMonkey, said in a statement upon the Q2 survey’s release.

This CNBC|SurveyMonkey online poll was conducted April 8-12, 2024 among a national sample of 2,130 self-identified small business owners ages 18 and up.

Despite a positive market reaction to Fed Chair Powell’s comments after the FOMC meeting on Wednesday — in the least, Powell all but ruled out another rate hike this year — small business confidence in the Fed has declined. Last quarter, a little over one-third (35%) of business owners said they had confidence in the Fed. That’s not fallen back to 31%, where it was in Q2 of last year.

“Inflation remains a top concern, clearly, for small businesses,” said U.S. Small Business Administration head Isabel Casillas Guzman in an interview with CNBC’s Kate Rogers at the virtual Small Business Playbook event on Thursday. “We’ve tried to make sure the SBA is more readily available to credit worthy borrowers out there. Half of businesses don’t get the capital they need fully, or at all.”

She suggested small business owners start with local SBA resource partners, local district offices, which can connect them with lenders on the ground, as well as starting with the SBA’s online Lender Match tool.

One finding over which small businesses are in line with a broader macro view is the overall state of the economy. Over one-quarter (27%) describe the economy as “excellent or good,” which has not trended lower even as inflation fears have picked back up. It’s also notably up from 21% in the year-ago quarterly survey. The economy’s performance helps explain why nearly three times as many business owners cite inflation as the biggest risk they face (37%) compared to the No. 2 threat, consumer demand, at 13%.

SBA Administrator Guzman cited the 17.2 million new business applications filed during the Biden administration as a sign of the economic optimism despite inflation. She pointed to the Biden legislation that is spurring government spending on infrastructure and clean energy, which are economic growth drivers. “These are all small business trades across those opportunities,” she said. “That’s the economic growth the president has been focused on.”

Increasingly, though, it’s also a fiscal policy-linked spending plan and rise in federal debt that economists are tying to sticky inflation.

The CNBC|SurveyMonkey Small Business Confidence Index was unmoved quarter-over-quarter, at 47 out of 100, and up one point from Q2 of last year.

Fed's Jerome Powell: Inflation remains too high and path forward is uncertain

The CNBC|SurveyMonkey data is consistent with other recent small business survey findings. Goldman Sachs’ 10,000 Small Businesses Voices survey released this week cited 71% of small business owners saying inflationary pressures have increased on their businesses over the past three months and 49% saying they’ve had to raise the prices. In the CNBC survey, 48% said they are raising prices.

Inflation will loom large in how America’s small business owners tilt in the presidential election.

Inflation is the No. 1 issue over which small business owners say they will vote, with 63% of survey respondents citing it, followed by economic growth at 61%.

Confidence in President Biden’s handling of the presidency — which is typically low in a small business demographic that skews conservative — remains underwater in the new survey, at 31%, down by two percentage points quarter over quarter. Among Republican small business owners taking the survey, 5% approve of the job Biden is doing. Among Democrats, 82% of small businesses approve of Biden, though pollsters say that approval ratings under 90% within one’s own party are a signal of dissatisfaction.

Biden has made some gains with his supporters, with the overall Small Business Confidence Index reading among this survey subset unchanged quarter over quarter at 61, and up from 55 in Q3 of 2023.

The CNBC survey found that in one area, small business owners who identify as either Republicans or Democrats do reach a rare point of consensus: both say that when it comes to government policy, they are getting slighted compared to large corporations.

The Goldman Sachs survey found that 55% of business owners are unhappy with the amount of focus small business issues get from candidates. Inflation, at 73%, was the issue cited most frequently.

Guzman said that the SBA has doubled the number of small-dollar loans, including to startups, as well as to women and people of color, who she noted are starting businesses at the highest rates. She also said more of the government loan volume is going into “rural banking deserts.”

And the total amount of government contracts going to small businesses has reached 28%, Guzman said, roughly $178 billion, according to the recent government scorecard. “We want more people to do business with the largest buyer in the world,” she said. 



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Walgreens tops quarterly revenue estimates, but narrows profit outlook in ‘challenging’ economy

A person rides past a Walgreens truck, owned by the Walgreens Boots Alliance, Inc., in Manhattan, New York City, U.S., November 26, 2021. 

Andrew Kelly | Reuters

Walgreens on Thursday reported fiscal second-quarter sales that beat Wall Street’s expectations, but lowered the high end of its full-year adjusted earnings outlook in part due to a “challenging” retail environment in the U.S.

The company also posted a steep net loss for the quarter as it recorded a hefty nearly $6 billion charge related to the decline in value of its investment in primary-care provider VillageMD. Walgreens has closed 140 VillageMD clinics amid financial woes for the business, which it sees as critical to its ongoing push to transform from a major drugstore chain into a large health-care company.

But Walgreens does not believe the VillageMD charge “will have a significant impact on our financial position, or our ability to invest across businesses going forward,” Walgreens global CFO Manmohan Mahajan said during an earnings call Thursday.

The results come as Walgreens’ new CEO, Tim Wentworth, works to slash costs and steer the company out of a rough spot with a slate of new executives. Shares of Walgreens fell 30% last year as the company faced weakening demand for Covid products, low pharmacy reimbursement rates, an unsteady push into health care and a challenging macroeconomic environment. 

In a release Thursday, the company said it is confident it will meet its goal of saving $1 billion during fiscal 2024 through its ongoing cost-cutting program. Walgreens has laid off employees, closed unprofitable stores and used artificial intelligence to make its supply chain more efficient, among other efforts.

Here’s what Walgreens reported for the quarter, compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: $1.20 adjusted vs. 82 cents expected
  • Revenue: $37.05 billion vs. $35.86 billion expected

Walgreens narrowed its fiscal 2024 adjusted earnings guidance to between $3.20 and $3.35 per share. That compares with the company’s previous outlook of $3.20 to $3.50 per share. Analysts surveyed by LSEG expect full-year adjusted earnings of $3.24 per share.

Walgreens said the new guidance reflects the hurdles facing retailers in the U.S. and an early wind-down of its sales-leaseback program. It also takes into account lower earnings due to Walgreens’ forward sale of shares of drug distributor Cencora, formerly known as AmerisourceBergen.

The company said a stronger performance in its pharmacy services segment and a lower adjusted effective tax rate helped to offset the factors dragging on its earnings. 

But Mahajan said Walgreens expects the current economic backdrop will “continue to negatively impact our U.S. retail sales in the short term.”

Wentworth noted on the call that the company is “exploring innovative ways to boost profitability and growth” in its retail pharmacy division, such as through new pharmacy reimbursement models.

The company did not give a new revenue forecast for the fiscal year. Walgreens has not provided that guidance since October, when it said it sees $141 billion to $145 billion in sales. 

The company reported a net loss of $5.91 billion, or $6.85 per share, for the quarter. That compares with a net income of $703 million, or 81 cents per share, for the same period a year ago. a

Excluding certain items, including the $5.8 billion non-cash charge related VillageMD, adjusted earnings per share were $1.20 for the quarter.

The company booked sales of $37.05 billion in the quarter, a roughly 6% jump from the same period a year ago. 

Walgreens sees growth across all divisions

The company said that increase reflects sales growth across its three business segments. But Walgreens’ U.S. health-care division stood out as sales jumped about 33% in the fiscal second quarter compared with the same period a year ago. 

Revenue for the segment came in at $2.18 billion.

The company said the higher sales reflect VillageMD’s acquisition of multispecialty care provider Summit Health and growth across all businesses in the segment on a pro-forma basis.

VillageMD sales grew 20% due to same-clinic growth, among other factors. Sales from the segment’s specialty pharmacy company, Shields Health Solutions, grew 13%, due to new contracts and expansions of current partnerships.

Specialty pharmacies are designed to deliver medications with unique handling, storage and distribution requirements, often for patients with complex conditions such as cancer and rheumatoid arthritis.

Walgreens and VillageMD

Source: Walgreens

Meanwhile, Walgreens’ U.S. retail pharmacy segment generated $28.86 billion in sales in the fiscal second quarter, an increase of almost 5% from the same period last year.

That segment operates more than 8,000 drugstores across the U.S., which sell prescription and nonprescription drugs as well as health and wellness, beauty, personal care, and food products. 

Walgreens said pharmacy sales for the quarter rose 8.2% compared with the year-ago quarter. Comparable sales climbed 8.7% due to price inflation in brand medications and “strong execution” in pharmacy services, largely driven by the company’s vaccine portfolio.

Total prescriptions filled in the quarter including immunizations totaled 305.7 million, a more than 2% increase from the same period a year ago. 

Retail sales for the quarter fell 4.5% from the prior-year quarter, and comparable retail sales declined 4.3%. The company pointed to a challenging retail environment and a weaker respiratory season, among other factors. 

Walgreens’ international segment, which operates more than 3,000 retail stores abroad, posted $6.02 billion in sales in the fiscal second quarter. That’s an increase of more than 6% from the year-ago period. 

The company said sales from its U.K. subsidiary, Boots, grew 3%.

When asked on the call about Eli Lilly‘s new direct-to-consumer website aimed at expanding access to its weight loss drug Zepbound, Wentworth did not comment on the program specifically.

But he noted that the company is a “natural partner” for pharmaceutical companies that may “want to go directly to patients for a particular product, where the normal supply chain, reimbursement model, et cetera isn’t working effectively.”

As an example, Wenworth pointed to GLP-1s, a new class of weight loss and diabetes drugs that includes Zepbound. Those drugs must be taken chronically but carry hefty price tags, which can be a hurdle for both patients and insurance plans and other payers.

Walgreens is “uniquely positioned” to distribute drugs and serve as a “clinically aligned partner” that can help patients navigate their treatment safely, according to Wentworth.

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What is Nowruz? Persian New Year traditions and food explained | CNN

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CNN
 — 

Just as spring is a time for rebirth, the Persian New Year is a time to celebrate new life. Nowruz is celebrated on the spring equinox, which Tuesday, March 19.

This celebration of spring is filled with symbolism around rebirth and renewal, because spring is a time when life is coming back after a long, cold winter, said Yasmin Khan, the London-based human rights campaigner turned author of “The Saffron Tales: Recipes from the Persian Kitchen,” “Zaitoun: Recipes and Stories from the Palestinian Kitchen,” and “Ripe Figs: Recipes and Stories from the Eastern Mediterranean.”

These three cookbooks from Khan inspire and provide a window into the cultures and stories of people from the Middle East through food.

The conversation has been edited and condensed for clarity.

CNN: What are some of Persian New Year’s traditions and rituals?

Yasmin Khan: On the last Tuesday before the New Year, there is a tradition to make small bonfires in your garden. Traditionally people jump over the bonfires, and it’s supposed to be a symbol of purification, challenges of the year gone by, and energetically cleansing you and preparing you for the year ahead.

A key tradition is to set up an altar in your house called a Haft-seen, which means seven S’s in Farsi. You place seven things on your altar that begin with the letter S in Farsi, which are symbols or qualities you’d like to invite in for the year ahead. You can have apples for good health, candles for light, eggs for fertility, wheatgrass for rebirth and renewal, vinegar for wisdom, and a gold coin for abundance and prosperity. Each person chooses items that have meaning for them.

The festival lasts two weeks. At the end of the festival, you take the wheatgrass you’ve been growing on your altar and you take it down to some running water somewhere. You tie knots in the wheatgrass then throw it into the running water. It would float off along with all your hopes and dreams for the year ahead.

CNN: What food is important for the holiday?

Khan: Like all cultural celebrations, food is a really integral part. Because it’s a festival celebrating spring, we eat lots of green and fresh herbs. For example, there’s this dish called Kuku Sabzi (see recipe below), which is a gorgeous herb and spinach frittata that we always eat on the first day of the year in our house. The frittata is fragrant and aromatic and is served with flatbreads, sliced tomatoes and pickles.

The first meal of the Persian New Year is always fish served with herb-flecked rice filled with dill, parsley and chives in it. The two-week festival is a time of celebration with people you know … traditionally you go to people’s houses and eat lots of delicious sweets and pastries.

CNN: What are some easy ways people can join in the celebrations?

Khan: Cooking is probably the easiest and most fun way to celebrate the new year. I really recommend that people give some Persian recipes a go. As well as being delicious, they’re healthy and vibrant with all the herbs that are packed in them.

In the weeks before the new year, we do a big deep spring cleaning called “shaking down the house” in Farsi. It’s really lovely to have a focus and have something that is about bringing in new life, renewal and rebirth during this difficult time.

And no one regrets a spring clean, so I think that’s also a really great idea. I think this is a beautiful kind of nonreligious festival that everyone can join into and that we can all relate to. It’s a time where we really try and let go of any difficulties that we’ve had in the past year and try to start the new year with a clean slate.

This Iranian frittata is a sensational deep green color and tastes like spring on a plate, bursting with fresh herby flavor. It is incredibly quick to throw together, will keep for a few days in the fridge, and can be enjoyed hot or cold.

Serve as an appetizer or as part of a mezze spread, wrapped up in a flatbread with some slices of tomato and a few salty and sour fermented cucumber pickles, or add some crumbled feta and lightly toasted walnuts for a more substantial main.

Makes 4 servings as a main or 8 servings as a starter

Prep time: 15 minutes | Total time: 35 minutes

Ingredients

7 ounces|200 grams spinach

1 3/4 ounces|50 grams fresh parsley

1 3/4 ounces|50 grams fresh dill

2 2/3 ounces|75 grams fresh cilantro

5 medium eggs

1/2 teaspoon turmeric

2 tablespoons all-purpose flour

1 teaspoon sea salt

1 teaspoon freshly ground black pepper

1 teaspoon dried fenugreek leaf

2 teaspoons sunflower oil

2 garlic cloves, crushed

Instructions

1. Wash spinach, parsley, dill and cilantro, then dry well on paper towels or in a salad spinner. Squeeze out as much moisture as possible; if the greens are wet when they are cooked, they will make the kuku go spongy. Chop finely or blitz in a food processor, in a couple of batches.

2. Heat broiler to high. Crack eggs into a large mixing bowl. Add turmeric, flour, salt, pepper and fenugreek leaf. Stir in the chopped spinach and herbs.

3. Heat oil in a large ovenproof skillet. Add garlic and gently fry over low heat to soften, about 2 minutes.

4. Make sure garlic is evenly distributed around the skillet, then pour in the egg mixture. Cook over low heat until kuku is almost cooked through, 5-8 minutes. Finish off in hot broiler.

5. Let kuku cool slightly, then cut into triangular slices to serve.

This is typically the first meal served during Nowruz, according to cookbook author Yasmin Khan.

Makes 4 servings

Ingredients

Marinade

2 garlic cloves, minced

1/2 cup dark soy sauce

Juice of 1 medium lemon

3 tablespoons extra-virgin olive oil

Pinch of cayenne pepper (optional)

4 salmon fillets

Mixed herb rice

1 3/4 cups white basmati rice

Sea salt

Pinch of saffron strands

Pinch of granulated sugar

2 tablespoons freshly boiled water

1 small bunch fresh parsley, finely chopped

1 small bunch fresh coriander, finely chopped

2 tablespoons fresh dill, finely chopped

2 tablespoons bunch fresh chives, finely chopped

1 garlic clove, crushed

Sunflower oil

2 tablespoons unsalted butter, divided

Instructions

1. To make the marinade, combine garlic, soy sauce, lemon juice, olive oil and cayenne pepper, if using, in a deep bowl. Add salmon, turn to coat well, cover with plastic wrap and let marinate in the fridge for at least 30 minutes.

2. Rinse and parboil rice and prepare the saffron liquid. Place saffron in a pestle and mortar with sugar and grind until you have a fine powder. Add just-boiled water and let steep for 10 minutes.

3. Very carefully, fold rice, chopped herbs, garlic clove and 1 tablespoon oil together, being careful not to break the rice grains.

4. Preheat oven to 400°F/Gas 6. Place an 8”-wide nonstick saucepan with snug-fitting lid over a medium heat. Melt 1 tablespoon butter with 2 tablespoons oil. Add 1 tablespoon saffron liquid and season with a pinch of salt. Once the fat is hot, sprinkle a thin layer of rice over the bottom and firmly press down to line the base of the pan. Using a large spoon, gently layer the rest of the rice on top, building it up into a pyramid shape. Using the handle of a wooden spoon, make 4 holes in the rice. Dot remaining 1 tablespoon butter into holes and then pour over the rest of the saffron liquid.

5. Place a clean tea towel or 4 paper towels on top of the pan and fit the lid on tightly. Tuck in the edges of the tea towel, or trim paper towels to fit, so they won’t catch the flame. Cook over medium heat for 5 minutes, then reduce heat to very low and cook 15 minutes more. Take rice off heat and let sit. Do not be tempted to sneak a peek while it is cooking as this will disturb the steaming process. When rice has been cooking for 10 minutes, place salmon on a baking tray and bake skin side up until cooked to your liking, 10-15 minutes.

6. Once rice has cooked, fill sink with 2” cold water and place saucepan – with lid still tightly on – in the water. This will produce a rush of steam that should loosen the base of the rice. Remove lid, place a large plate on top of pan and quickly turn rice over. Present the herbed rice with the fish and serve immediately.

This recipes are adapted from Yasmin Khan’s book “The Saffron Tales: Recipes from the Persian Kitchen.”

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Banks are in limbo without a crucial lifeline. Here’s where cracks may appear next

The forces that consumed three regional lenders in March 2023 have left hundreds of smaller banks wounded, as merger activity — a key potential lifeline — has slowed to a trickle.

As the memory of last year’s regional banking crisis begins to fade, it’s easy to believe the industry is in the clear. But the high interest rates that caused the collapse of Silicon Valley Bank and its peers in 2023 are still at play.

After hiking rates 11 times through July, the Federal Reserve has yet to start cutting its benchmark. As a result, hundreds of billions of dollars of unrealized losses on low-interest bonds and loans remain buried on banks’ balance sheets. That, combined with potential losses on commercial real estate, leaves swaths of the industry vulnerable.

Of about 4,000 U.S. banks analyzed by consulting firm Klaros Group, 282 institutions have both high levels of commercial real estate exposure and large unrealized losses from the rate surge — a potentially toxic combo that may force these lenders to raise fresh capital or engage in mergers.  

The study, based on regulatory filings known as call reports, screened for two factors: Banks where commercial real estate loans made up over 300% of capital, and firms where unrealized losses on bonds and loans pushed capital levels below 4%.

Klaros declined to name the institutions in its analysis out of fear of inciting deposit runs.

But there’s only one company with more than $100 billion in assets found in this analysis, and, given the factors of the study, it’s not hard to determine: New York Community Bank, the real estate lender that avoided disaster earlier this month with a $1.1 billion capital injection from private equity investors led by ex-Treasury Secretary Steven Mnuchin.

Most of the banks deemed to be potentially challenged are community lenders with less than $10 billion in assets. Just 16 companies are in the next size bracket that includes regional banks — between $10 billion and $100 billion in assets — though they collectively hold more assets than the 265 community banks combined.

Behind the scenes, regulators have been prodding banks with confidential orders to improve capital levels and staffing, according to Klaros co-founder Brian Graham.

“If there were just 10 banks that were in trouble, they would have all been taken down and dealt with,” Graham said. “When you’ve got hundreds of banks facing these challenges, the regulators have to walk a bit of a tightrope.”

These banks need to either raise capital, likely from private equity sources as NYCB did, or merge with stronger banks, Graham said. That’s what PacWest resorted to last year; the California lender was acquired by a smaller rival after it lost deposits in the March tumult.

Banks can also choose to wait as bonds mature and roll off their balance sheets, but doing so means years of underearning rivals, essentially operating as “zombie banks” that don’t support economic growth in their communities, Graham said. That strategy also puts them at risk of being swamped by rising loan losses.

Powell’s warning

Federal Reserve Chair Jerome Powell acknowledged this month that commercial real estate losses are likely to capsize some small and medium-sized banks.

“This is a problem we’ll be working on for years more, I’m sure. There will be bank failures,” Powell told lawmakers. “We’re working with them … I think it’s manageable, is the word I would use.”

There are other signs of mounting stress among smaller banks. In 2023, 67 lenders had low levels of liquidity — meaning the cash or securities that can be quickly sold when needed — up from nine institutions in 2021, Fitch analysts said in a recent report. They ranged in size from $90 billion in assets to under $1 billion, according to Fitch.

And regulators have added more companies to their “Problem Bank List” of companies with the worst financial or operational ratings in the past year. There are 52 lenders with a combined $66.3 billion in assets on that list, 13 more than a year earlier, according to the Federal Deposit Insurance Corporation.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 7, 2024.

Brendan Mcdermid | Reuters

“The bad news is, the problems faced by the banking system haven’t magically gone away,” Graham said. “The good news is that, compared to other banking crises I’ve worked through, this isn’t a scenario where hundreds of banks are insolvent.”

‘Pressure cooker’

After the implosion of SVB last March, the second-largest U.S. bank failure at the time, followed by Signature’s failure days later and that of First Republic in May, many in the industry predicted a wave of consolidation that could help banks deal with higher funding and compliance costs.

But deals have been few and far between. There were fewer than 100 bank acquisitions announced last year, according to advisory firm Mercer Capital. The total deal value of $4.6 billion was the lowest since 1990, it found.

One big hang-up: Bank executives are uncertain that their deals will pass regulatory muster. Timelines for approval have lengthened, especially for larger banks, and regulators have killed recent deals, such as the $13.4 billion acquisition of First Horizon by Toronto-Dominion Bank.

A planned merger between Capital One and Discovery, announced in February, was promptly met with calls from some lawmakers to block the transaction.

“Banks are in this pressure cooker,” said Chris Caulfield, senior partner at consulting firm West Monroe. “Regulators are playing a bigger role in what M&A can occur, but at the same time, they’re making it much harder for banks, especially smaller ones, to be able to turn a profit.”

Despite the slow environment for deals, leaders of banks all along the size spectrum recognize the need to consider mergers, according to an investment banker at a top-three global advisory firm.

Discussion levels with bank CEOs are now the highest in his 23-year career, said the banker, who requested anonymity to speak about clients.

“Everyone’s talking, and there’s acknowledgment consolidation has to happen,” said the banker. “The industry has structurally changed from a profitability standpoint, because of regulation and with deposits now being something that won’t ever cost zero again.”

Aging CEOs

One deterrent to mergers is that bond and loan markdowns have been too deep, which would erode capital for the combined entity in a deal because losses on some portfolios have to be realized in a transaction. That has eased since late last year as bond yields dipped from 16-year highs.

That, along with recovering bank stocks, will lead to more activity this year, Sorrentino said. Other bankers said that larger deals are more likely to be announced after the U.S. presidential election, which could usher in a new set of leaders in key regulatory roles.

Easing the path for a wave of U.S. bank mergers would strengthen the system and create challengers to the megabanks, according to Mike Mayo, the veteran bank analyst and former Fed employee.

“It should be game-on for bank mergers, especially the strong buying the weak,” Mayo said. “The merger restrictions on the industry have been the equivalent of the Jamie Dimon Protection Act.”

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Ulta CEO says e-commerce sites can do more to stop the sale of stolen goods

Read CNBC’s full investigation into the alleged organized theft groups that police say are stealing and reselling items from retailers including Ulta Beauty, T.J. Maxx and Walgreens.

Faced with sophisticated organized retail crime rings that investigators say have targeted his company, Ulta Beauty CEO Dave Kimbell is laying some blame on e-commerce sites.

In the first in-depth interview given by a retail CEO about organized theft, Kimbell responded to a monthslong CNBC investigation that showed how police broke up what they say is a professional network of thieves who used Amazon to resell millions in cosmetics stolen from Ulta stores and other retailers across the U.S.

While Kimbell wouldn’t comment directly about Amazon, he said online marketplaces are “part of the problem.”

“[Online marketplaces] give more scale and more opportunity for people to liquidate this product,” Kimbell told CNBC in an on-camera interview. “You used to have to sell stolen goods at flea markets or out of the trunk of your car, or maybe just locally. Now, you have more sophisticated tools to have a broader reach across the country or even internationally.”

As part of an investigation into retail crime rings and the actions companies and law enforcement are taking to crack down on the problem, CNBC followed a case that involved Michelle Mack, a San Diego woman whom prosecutors accuse of using her Amazon digital storefront to resell goods stolen from stores.

The 53-year-old mother of three and her husband, Kenneth Mack, were charged with conspiracy to commit organized retail theft, grand theft and receipt of stolen property in connection with the alleged crime ring. During a raid at her California mansion in December, California Highway Patrol and Homeland Security agents say they found $387,000 in suspected stolen goods, most of which had come from Ulta. Investigators say her crime ring brought in millions of dollars over more than a decade. Both Michelle Mack and Kenneth Mack have pleaded not guilty. 

For Kimbell, the scale of such an operation wasn’t surprising.

“Unfortunately, I’m not that shocked because we’ve seen it in other parts of the country,” said Kimbell. “The magnitude of this one is significant. But this is what’s happening, and this is the environment in which we’re operating.”

Ulta Beauty CEO Dave Kimbell said online marketplaces need to do more to prevent the sale of stolen goods.

CNBC

Kimbell said he doesn’t think the onus is on consumers to evaluate whether a product they are buying from an online marketplace is stolen. Many shoppers may not even consider that the products could be stolen from one retailer and sold by another, he said, adding it’s a largely online phenomenon.

“That doesn’t happen in brick-and-mortar [stores]. You wouldn’t come into a retailer and see somebody [at] a table in front [selling] stolen goods,” Kimbell said. “We shouldn’t have an environment where it’s possible to steal from one retailer and [have it] end up on any other platform, any other large-scale, mainstream platform.”

Anyone who sells products online “should be committed to ensuring that nothing that they sell is stolen goods,” Kimbell said.

“I can tell you with 100% certainty, nothing that we sell at Ulta.com or any online platform is product that’s been stolen from another retailer,” he said. “There are tools, there’s data, there’s analytics, there’s capabilities that we collectively have that we could try to take even more action.”

Amazon declined CNBC’s request for an interview but said in a statement the e-commerce giant has “zero tolerance for the sale of stolen goods.” An Amazon spokesperson said the company invests $1 billion annually and employs “thousands of people” to combat fraud, including detection and prevention tools.

The spokesperson said Amazon works with law enforcement and other retailers to “stop bad actors and hold them accountable.”

In the Mack case, Amazon said it did not receive signals that would have indicated the seller was offloading stolen goods. Mack’s page was taken down after her arrest.

How bad is organized retail crime?

It’s unclear exactly how big of a problem organized retail crime is. The National Retail Federation and the Retail Industry Leaders Association say not every instance is reported, tracked or tallied.

According to the most recent NRF survey on shrink — the industry term for lost inventory from damage, theft or other sources — the total value of goods stolen in external theft instances totaled $40.5 billion in 2022, representing 36.15% of total shrink, compared with 37% in 2021.

Ulta Beauty is one of a number of retailers that have started to discuss retail crime as a problem but haven’t quantified how it is affecting their businesses. Ulta Beauty Chief Financial Officer Scott Settersten and Chief Operating Officer Kecia Steelman have discussed theft or organized retail crime specifically on earnings calls or at investor conferences. 

Ulta Beauty said it aims to have all of its fragrances locked up in stores in the first few months of this year. Fragrance has been one of the hardest-hit categories for the retailer because of its high value and the relative ease of reselling it, Kimbell said.

The CEO didn’t quantify the rise of organized retail crime his company has seen, but he said “it has definitely gotten worse.”

“Retail crime has been part of the retail industry forever … but what we’ve seen over the last few years, really the last couple of years, is a significant elevation,” he said.

Retail executives are increasingly worried about a rise in violence associated with theft, according to the NRF survey, with 81% reporting an increase in violence and 28% reporting that their company has closed a specific location because of crime. Ulta said it has not yet closed a store because of crime.

Kimbell said he is particularly concerned about how the rise in crime affects Ulta’s 50,000 employees across 1,400 stores around the country.

“These situations … they’re not fun … they’re threatening; they’re intimidating,” Kimbell said. “They can be traumatic.”

– Additional reporting by Ali McCadden.

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