Failure of investors to ask enough questions, Europe's energy price cap struggles, China’s covid dilemma.
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Summary:
- A broad failure of investors asking questions before investing in start-ups has been exposed this past month.
- The EU has worked to quickly reduce its reliance on Russian fossil fuels.
- This week, rallies against Beijing's "zero-Covid" policy took place.
Investors failure to ask questions weighing on the investment industry’s reputation
The professional investment industry's reputation has had a terrible month. The demise of FTX exposed the fact that a cryptocurrency exchange with fewer financial controls than Enron had been receiving investments from everyone, from edgy hedge funds to conservative pension and sovereign wealth funds. For Theranos, a fraudulent blood-testing business that duped media magnate Rupert Murdoch and Oracle founder Larry Ellison, Elizabeth Holmes was given an 11-year prison term.
Shares of IT companies that went public in the 2020–21 Spac craze are down significantly, and many crypto firms are in peril. Despite claiming to be "supported by the greatest," including SoFi, Tiger Global, and Peter Thiel, BlockFi filed for bankruptcy on Monday. Veteran Silicon Valley dealmakers claim that when venture investors stopped attempting to identify and support the most intelligent entrepreneurs and instead began doling out cash, standards have slowly eroded. The VC model has always assumed that the majority of start-up businesses fail, but that investors are made up for their losses by investing in advance of a few significant winners.
However, this strategy has evolved from early investment rounds involving a few million dollars to massive agreements involving billions due to decades of easy money and a lack of respectable yields from safer alternatives.
Doesn’t anyone do due diligence any more? https://t.co/hIiUn78Qbn
— Financial Times (@FT) November 30, 2022
Europe’s energy price cap struggles
Since the start of the crisis in Ukraine, the EU has worked to quickly reduce its reliance on Russian fossil fuels while keeping costs under control, but the outcomes of these efforts have been rather uneven. More swiftly than many officials and analysts had anticipated, the bloc has been able to reduce its reliance on Russian oil and gas, but efforts to address the region's skyrocketing energy costs have resulted in bitter disagreements in the EU's capitals. Critics who claimed that a cap on month-ahead wholesale gas of €275 per megawatt hour, as proposed by Brussels last week, would not have addressed this summer's price increase called the idea a "laugh."
RePowerEU, a €210 billion plan presented by the EU in May, aims to boost domestic fossil fuel production while accelerating the deployment of renewable energy sources. After energy ministers agreed to a voluntary goal to cut consumption by 15% across the bloc in July, there has also been success in reducing gas demand.
Previously, about 40% of the EU's supply came from Russian pipelines; today, that percentage is less than 8%. EU members have started to replace the 155 bcm of Russian pipeline gas each year.
Price cap problems: Europe struggles to form a wartime energy policy https://t.co/3oGhcZTgwH
— Financial Times (@FT) November 30, 2022
China’s covid predicament
China is in a situation that is essentially hopeless. This week, rallies against Beijing's "zero-Covid" policy took place in numerous places around the nation, revealing a level of public rage not seen since the 1989 Tiananmen Square protests. However, relaxing China's Covid regulations and possibly igniting a "exit wave" of infections might result in the wintertime deaths of hundreds of thousands, if not millions, of senior individuals.
The harm that this situation is doing to China's reputation as a whole as well as its president, Xi Jinping, is real. Despite the skilled efforts of Chinese censors to artistically remove crowd scenes from World Cup coverage, TV images of maskless crowds watching the World Cup in Qatar only serve to reinforce the perception that Beijing has been slow to end the pandemic.
The danger to many of China's elderly citizens' lives is only one aspect of the emergency that the country is facing. The recent Covid infection wave could spiral out of control, overwhelming an already overburdened public health system with its sheer number of cases. If this occurs, public resentment of Xi's regime may increase even more. Beijing must understand that the protesters on the streets are expressing justifiable complaints.
China’s dire Covid predicament https://t.co/42QIWiWS97 | opinion
— Financial Times (@FT) November 29, 2022
Sources: ft.com, twitter.com
