Producer Price Index: Wholesale Inflation Rises to Highest Level in a Year

The producer price index for final demand increased 0.5% month-over-month (s.a.), more than the expected 0.3% growth. On a non-seasonally adjusted annual basis, this month’s headline PPI accelerated from 1.8% in March to 2.2% in April, as expected. This is the highest level since April 2023.

Core PPI (excluding food and energy) for final demand rose 0.5% from last month, more than the expected 0.2% growth. On a non-seasonally adjusted annual basis, core PPI accelerated from 2.1% year-over-year in March to 2.4% in April, as expected. This is the highest level since August 2023. (…)

Powell on the April PPI: “I wouldn’t call it hot. I would call it sort of mixed.”

Goldman Sachs:

The producer price index (PPI) increased more than expected in April. Core producer prices also increased more than expected, as the PPI excluding food and energy rose 0.5%, and the PPI excluding food, energy, and trade services increased 0.4%.

We estimate that the core PCE price index increased 0.25% in April, corresponding to a year-over-year rate of +2.76%.

The red line is the main problem area.

CONSUMER WATCH

The NY Fed released Q1 data on consumer indebtedness:

China Considers Government Buying of Unsold Homes to Save Property Market If authorities do proceed, it would mark a new phase in the Chinese government’s campaign to address the biggest drag on its economy.

(…) Local state-owned enterprises would be asked to help purchase unsold homes from distressed developers at steep discounts using loans provided by state banks, according to two of the people. Many of the properties would then be converted into affordable housing.

Officials are still debating details of the plan and its feasibility, the people said, adding that it could take months to be finalized if China’s leaders decide to go ahead. (…)

China’s home sales plummeted about 47% in the first fourth months and unsold housing inventory is hovering at an eight-year high, exacerbating a meltdown that threatens to put about 5 million people at risk of unemployment or reduced incomes.

The plan can “inject liquidity to developers directly and improve their financial situation, as well as immediately digesting excess inventory,” said Raymond Cheng, head of China property research at CGS International Securities HK. “This is all win situation. Of course, it needs a lot of funds – at least 1 trillion yuan to make the impact more meaningful.”

Shujin Chen, head of China financial and property research at Jefferies Financial Group, estimated at least 2 trillion yuan ($277 billion) of investments would be needed. (…)

Unsold housing inventory climbed to 3.6 billion square feet last year, the highest since 2016, official data showed. It will cost at least 7 trillion yuan, or 78% of China’s budget deficit this year, for the government to absorb the inventory in 18 months, Tianfeng Securities estimated.

The new plan to enlist local governments to reduce housing glut could further exacerbate their debt level, which has soared to 56% of gross domestic product as of last year. Banks would also be under pressure as their balance sheets have already been eroded by rising bad loans and narrowing margins.

With America Off-Limits, China EV Makers Aim to Conquer Rest of World Carmakers in China are accelerating a sales push in Europe and Southeast Asia and are looking to produce more abroad.

The 100% tariffs on Chinese EVs announced Tuesday in Washington are more of a symbolic blow than a practical one for Chinese carmakers. They have almost no business in the U.S. and already recognized that the political hurdles to entering the market were insurmountable.

The cold shoulder from Washington won’t change Chinese EV makers’ ambitions for global dominance, analysts said, but it will spur adjustments. The companies will emphasize emerging markets and localize production where possible, seeking to woo governments that are more open to Chinese EVs.

And some companies might focus on supplying EV technology, an approach that could lessen the political backlash and offer an indirect path to U.S. business. (…)

Thanks to America’s tariffs, U.S. carmakers will enjoy protection against low-cost Chinese competition. The flip side: “U.S. consumers will not have access to the world’s highest-quality and least-expensive electric vehicles,” said Cory Combs, associate director at the consulting firm Trivium China.

In China, the leading EV maker, BYD, offers a compact model with a range of about 200 miles on a single charge for the equivalent of less than $10,000. A version of its higher-end Seal sedan, with a range of around 340 miles, starts at around $25,000 in China. In the U.S., a version of Tesla’s Model 3 sedan with a similar range has a price tag of around $43,000, the carmaker’s website showed. (…)

China’s car exports have nearly quintupled over the past three years to about five million vehicles in 2023. While many are gasoline-powered cars shipped to Russia, others are EVs sent to Southeast Asia, Europe and elsewhere.

Another tactic is to open factories outside China in markets that are receptive to Chinese-branded EVs. BYD is opening new factories in Brazil, Hungary, Thailand and Uzbekistan and considering one in Mexico. The Chinese carmaker Chery Automobile plans to build cars in Spain with a local partner, Ebro-EV Motors. (…)

European policymakers, while weighing tariffs on China-made EVs, see the matter differently from the U.S. They want to induce Chinese companies to build factories in Europe rather than blocking Chinese-branded vehicles altogether, analysts said.

During Chinese leader Xi Jinping’s visit to Europe this month, French Finance Minister Bruno Le Maire said China’s auto industry, including BYD, was welcome to pursue industrial projects in France. (…)

Trump said at a March campaign rally in Ohio that he would welcome Chinese companies’ building car factories in the U.S. if they used American workers. (…)

Leapmotor, a Chinese EV startup, and Jeep’s parent, Stellantis, said Tuesday that they would start selling Leapmotor’s mass-market EVs in Europe in September. Other global markets—but not the U.S.—will follow soon after, the companies said.

Those EVs would be exported from China or made at Stellantis plants around the world. Last year Stellantis said it was investing €1.5 billion, the equivalent of $1.6 billion, in Leapmotor.

Stellantis Chief Executive Carlos Tavares described the strategy as a way to accommodate different duties scenarios.

Monday I wrote:

What will Chinese manufacturers do? Export their cheaper cars to untapped markets such as Central and South America, Africa and South-East Asia, effectively creating, and occupying new markets for cheaper cars, trucks and buses.

In the chart below, the top 3 regions (vehicle penetration averages 657) have total population of 905 million. The next 18 (vehicle penetration averages 147): 4.5 billion people.

Data: Visual Capitalist

S&P 500 Is Going Nowhere Through Year-End, Goldman’s Kostin Says

The firm’s chief US equity strategist reiterated his 2024 price target on the benchmark of 5,200 in an interview with Bloomberg Television on Tuesday, while noting he sees “roughly a flat return from now until the end of the year.”

That forecast is just below where the US stock benchmark is currently trading after a 10% advance since January. Kostin says the bank’s modeling — which incorporates the economy, earnings, valuation and money flow — implies no room for further upside. Goldman’s economists see real US gross domestic product growth this year of around 3% and the bank’s equity strategists project earnings growth of 8% in 2024, while highlighting that valuations are already historically high.

“The probability of a multiple expansion, while possible, is less probable,” Kostin said. (…)

One upside risk to Kostin’s outlook is if officials dial back interest rates more aggressively than markets currently anticipate, he said, while emphasizing that’s not in the cards at this point. (…)

• Cash levels among fund managers have fallen to even lower levels versus last month. In other words, complacency is approaching multi-year highs

How to survive while losing $7.5 billion

By Felix Salmon

Data: FactSet; Chart: Axios Visuals

No company has done a better job of taking advantage of its meme-stock status than movie theater chain AMC, a company that, improbably, is still worth billions even after losing $7.5 billion over the past five years.

By issuing enormous quantities of new stock, most recently on Monday, AMC has raised enough cash to keep itself afloat.

The sale of 72 million shares that AMC concluded on Monday brings the company’s total share count up to 296 million. Pre-pandemic, AMC’s total number of shares outstanding was just 11.8 million.

• That’s why AMC’s share price has fallen by 89% since the end of 2019, even as its market value — boosted by the last couple of days of meme-stock frenzy — has risen by 39%.

Where it stands: AMC stock, which closed at $2.91 on Friday, opened at $11.71 on Tuesday before falling back to close at $6.85. What’s going to happen today is anyone’s guess.

Follow the money: AMC raised $1.8 billion in 2021 by selling shares into the meme-stock frenzy — enough money to keep paying the bills and avoid bankruptcy.

• The same playbook seems to be working in 2024, too.

Being a meme stock is sometimes bad for companies. “It can tank acquisition plans and talks, and make it very hard to retain senior people,” says Dan Egan, director of behavioral finance at Betterment.

• In the case of AMC, however, the appetite for the stock from self-described degenerate apes has meant the difference between life and death.

Inflation Continues to Hinder Small Business Operations

NFIB’s Small Business Optimism Index rose by 1.2 points in April to 89.7, marking the first increase of this year but the 28^th consecutive month below the 50-year average of 98. Twenty-two percent of owners reported that inflation was their single most important problem in their business, down three points from March but still the number one problem for small business owners.

“Cost pressures remain the top issue for small business owners, including historically high levels of owners raising compensation to keep and attract employees,” said Bill Dunkelberg, NFIB Chief Economist. “Overall, small business owners remain historically very pessimistic as they continue to navigate these challenges. (…)”

Stubbornly High Rents Prevent Fed From Finishing Inflation Fight For more than a year, the central bank has expected slowing rent increases to show up in official housing measures. It’s still waiting.

This is from Nick Timiraos, possibly influenced by his FOMC/Fed contacts.

Stalled inflation this year hasn’t derailed the Federal Reserve’s plans to eventually cut interest rates. That’s because it expects a slowdown in housing costs to eventually drag inflation close to its 2% target.

The problem: It has been waiting for that slowdown for 1½ years now, and it still hasn’t arrived. The slowdown might simply be delayed. But some analysts worry it’s not going to happen because of changing dynamics in the housing market. If so, that would significantly weaken the case for lower rates. (…)

Because only a minority of leases turn over each year, changes in market rents are reflected in inflation with a lag. Accounting for that lag, Fed officials, Wall Street investors, and private-sector economists have expected housing inflation to slow since late 2022 based on what has already happened with market rents.

Housing inflation has indeed slowed from a peak of 8.2% one year ago—but only to 5.6% in March, “a much slower pace than pretty much anybody anticipated,” said Jay Parsons, head of residential strategy at Madera Residential, a Texas-based apartment owner. (…)

Housing “has not behaved the way we thought it would,” Chicago Fed President Austan Goolsbee said in an interview last month. “I still think it will, but if it doesn’t, we’re going to have a hard time” bringing inflation back to 2%.

To understand why, break core inflation into three different baskets: goods, housing and nonhousing services. To get all the way to 2% inflation, the Fed doesn’t need 2% for all those categories.

In the decade before the pandemic, core inflation was slightly below 2%, the result of inflation in goods running at about minus 1%, housing at 2.5% to 3.5%, and nonhousing services at slightly above 2%.

Much of last year’s slowdown in inflation was because goods prices returned to their prepandemic trend. For inflation to get back to 2%, nonhousing services inflation has to drop to less than 3% from 3.5% now, and housing to around 3.5% from 5.8%.

If inflation stays higher, Fed officials are likely to hold interest rates at their current levels, the highest in two decades, until they see more concrete evidence that the economy is slowing.

Many economists still think it’s only a matter of time before housing inflation reflects the slowdown in new leases that began two years ago. It might be taking longer than expected because more renters are renewing their leases instead of buying a home, deterred by high mortgage rates. That could lengthen the time it takes for lower rents from newly signed leases to show up in overall inflation. (…)

Some doubt whether housing will help as much as anticipated in bringing inflation down. Rents tend to be sensitive to wages and income, and as long as those expand solidly, rents might not slow as much.

A key reason market rents have moderated is that the industry is adding a record amount of new apartment supply. Some industry executives say, though, that that supply is being quickly absorbed because of increased immigration and solid job and wage growth.

“One of the surprises of the last six months, specific to multifamily, has been the reacceleration of demand,” Parsons said. (…)

“Most folks believed you would have had a massive falloff in rental growth throughout the Sunbelt,” said Ric Campo, chief executive of Camden. “But what’s happening is there’s been just a whole lot more demand than most people expected.”

Per the CPI, “nonhousing services inflation” is not 3.5% now, it was 4.8% YoY in March and 4.1% for Q1 as a whole, and rising.

Here’s a chart I found from our colleague Michael McDonough, the Chief Economist for Financial Products at Bloomberg. It shows so-called “super core” inflation — which strips out energy, core goods, and housing costs from CPI. It’s running at close to 4.8% year-on-year. (Joe Weisenthal)

Yesterday, the NY Fed released its Survey of Consumer Expectations: “Median one-year-ahead inflation expectations increased to 3.3 percent from 3.0 percent, according to the April Survey of Consumer Expectations. They also increased to 2.8 percent from 2.6 percent at the five-year-ahead horizon, while decreasing to 2.8 percent from 2.9 percent at the three-year horizon.”

This came right after the U. of Michigan released its own survey:

The university publishes both a mean and a median number, and the latter is more widely followed. Given that very few people ever expect prices to go down, outlying high inflation expectations will inevitably skew the mean upward. It’s also true that consumers have long been too negative, and the median has never dropped to the 2% target in the last three years.

All that said, it’s quite something that mean longer-term inflation expectations are now above 5% for the first time in three decades. (John Authers)

Euro Zone Wage Concerns Keep ECB Cautious on Rate Cuts Negotiated pay may not have slowed much — if at all — in 1Q

Data from the bloc’s largest economies suggest increases in negotiated pay failed to slow significantly in the first quarter. The danger is that companies pass rising costs on to consumers, keeping inflation above 2% for longer.

A key culprit is Germany, where past deals — some of which are embellished by one-off payments — have driven salaries sharply higher. Policymakers are unlikely to be sufficiently consoled by evidence of moderation elsewhere in the region. (…)

Pay gains probably slowed to 4.3% from a year ago in the first three months, compared with 4.5% for the final quarter of 2023, according to Bloomberg Economics. While not surpassing 3.5% in France, Italy and Spain, they reached 4.8% in Germany, it said.

For the ECB, part of the challenge is that negotiations work very differently across the continent. Whereas many contracts in Belgium are directly tied to inflation, German and Italian workers must often await new rounds of talks that determine compensation over multiple years.

In France, meanwhile, bargaining is more flexible and salaries in a host of sectors are agreed on once a year, Barclays economists said last week in a note.

Such complexities are reflected in the array of views on the first quarter. While ING’s Brzeski sees an acceleration to roughly 5%, Nomura analysts expect steady growth of 4.5% and the estimate over at Barclays is for a slowdown to about 4%. (…)

Macron Puts French Banks in Play With Plan to Transform Europe The French President signals he’d be open to cross-border bank M&A as he sets out the case for a transformative shift in the continent’s economic model

(…) “Dealing as Europeans means you need consolidation as Europeans,” Macron said in an interview with Bloomberg Editor-in-Chief John Micklethwait on the sidelines of the Choose France investment summit in Versailles near Paris. “We have now to open this box and to deliver a single-market approach which is much more efficient.”

As Europe comes to terms with Russia’s war in Ukraine and the steady deterioration of the global trading system, Macron has been trying to persuade his EU partners to embrace what he sees as a transformative program of reforms to turn the EU into a more united and powerful economic force. Only by getting smarter about protecting its interests, cutting back on regulation inside the single market and unlocking the bloc’s financial firepower, Macron argues, does the EU have a chance of going toe-to-toe with China and the US. (…)

But his proposals have run into stiff opposition nevertheless from Germany and its traditional allies, who are leery of pooling their financial liabilities with the rest of the EU and nervous about embracing the idea of capitalism à la française. (…)

“We do need a consolidation,” Macron said, so that BNP could buy smaller competitors. Asked if that could also include European rivals acquiring a French lender such as Societe Generale SA, he said, “Yes, for sure.” (…)

But the final piece of Europe’s so-called banking union — joint deposit insurance — is missing. Germany and like-minded countries have blocked efforts to move ahead, arguing that savers in their country shouldn’t be on the hook for losses at banks in other countries.

Bankers frequently say this hinders cross-border mergers in the bloc because funds in one country aren’t deemed to be as safe as those in another.

There’s also that fundamental European problem, that member states are reluctant to see their national champions bought up by bigger rivals, even if it helps to add muscle for the European economy as a whole. (…)

More Chinese Cities Move to Buy Up Housing Inventories The moves follow similar plans by a half dozen cities in recent weeks

Two more Chinese cities have unveiled plans to buy up unsold, unfinished or old housing, coming as Beijing shifts its focus to absorbing excess apartment supply as a way to resolve the country’s ongoing property crisis.

Nanjing, the capital of Jiangsu Province, on Saturday said it would help renovate or buy housing inventories and turn them into public housing.

Foshan, a midsize city in Guangdong Province, on Monday said it would encourage local state-owned enterprises to buy up and complete unfinished housing projects, and to participate in a trade-in program by buying old apartments and turning them into public housing. Foshan said it would make subsidies available for residents selling their apartments to move into new housing.

The moves, which follow similar plans by a half dozen cities in recent weeks, come after senior Chinese policymakers last month expressed concern about unsold and unfinished housing projects across the country, and flagged a desire to create more public housing.

Comments at the meeting raised speculation that central and local governments could allocate funding toward digesting a glut of unused and unfinished housing inventory across the country, the product of factors including tightened liquidity conditions for developers and lackluster consumption in the world’s second largest economy. (…)

We had the slow-moving accident, we are now having the slow-moving healing. First, stop prices from falling, deal with excess supply and builders’ debt, restore confidence, restart the cycle.

GameStop Shares Surge Again as Meme-Stock Phenomenon Returns Latest rally turbocharged by social media return of Keith Gill

Meme-stock traders again piled into GameStop Corp. and AMC Entertainment Holdings Inc., a day after shares of both firms soared in a revival of the retail frenzy.

The video-game retailer’s stock jumped 34% in premarket trading on Tuesday, while that of the beleaguered movie theater chain surged 41%.

The latest rally was turbocharged on Monday following the return to social media of Keith Gill, who drove the meme-stock mania of 2021 under the moniker “Roaring Kitty.” Gill, whose account had long been dormant, shot to fame that year by rallying day traders on Reddit in an effort to squeeze GameStop short sellers.

Both stocks — which remain far below their 2021 peaks — rallied more than 70% on Monday as option volume surged to the highest level since July 2022, with nearly 700,000 contracts traded. In contrast to the past few days, the surge was not solely driven by call trading, as put volume also surged. (…)

Monday’s rally also boosted other high-risk and heavily shorted names like included Rivian Automotive Inc., Lucid Group Inc., Nikola Corp., Vinfast Auto Ltd., Canoo Inc., EVgo Inc., ChargePoint Holdings Inc. and Blink Charging Co.

• AMC Set to Cash In on Meme-Stock Traders Driving Shares Higher Company’s fundraising deal could bring in another $125 million

Retail traders flocking to AMC Entertainment Holdings Inc. in hopes of burning short sellers may also be helping the company shore up its finances.

That’s because the beleaguered movie theater chain, which surged 78% on Monday amid the meme-stock frenzy, has a fundraising deal known as an at-the-market offering that lets it create new shares opportunistically to sell to buyers in the open market. The deal is part of AMC’s long-term effort to secure the capital needed to execute its turnaround, even if that means diluting investors seeking to cash in on short-term rallies. (…)

While the dilution would hit the very investors that have powered the shares higher, it’s nothing new for AMC or the meme-stock crowd. Over the past four years, the company has announced at least five equity offerings, data compiled by Bloomberg show, selling millions of shares in the process.

Navigating a massive debt load of $4.5 billion has been top of mind for AMC management, something the share sales are meant to address. The company had $624 million in cash and equivalents at the end of March, after losing nearly $165 million in the quarter, according to a filing last week. (…)

• “It is not so hard to see where GameStop goes from here. It has a $9.3 billion market cap and in the last year only reported $6.7 million in net income. With a price-to-earnings multiple of more than 1,000, the outlook for its share price is gloomy. And yet somehow, this isn’t a deterrent for retail traders. That’s unhealthy. It’s possible they’re still motivated more by anger than greed. But if there’s a single lesson from 2021, it’s that they’re dangerous to ignore. (John Authers)
• The Market’s Prion Disease Returns”

Prion diseases, of which “mad cow” is the best known, are thankfully quite rare in humans.  However, for better or worse, the market’s version – the meme stock trade — recurs periodically.

As I type this, GameStop (GME) is up about 70% today and several other speculative darlings are showing double-digit gains.  Why?  Because a popular meme account posted a cryptic message on X (fka Twitter) after three years of silence.  The crazy part is that within the cadre of traders who get involved in these names, this makes perfect sense. (…)

The stock was already up about 70% in the three weeks before today.  But that uptrend doesn’t fully explain why we saw such an explosion in open interest in options that would require another similar sized move during this week to pay off.

A suspicious person might wonder why “Roaring Kitty” chose to return to social media today. 

Given my past experience in analyzing the periodic bouts of meme stock activity, consider me suspicious.

In August 2022, there was a huge run-up in Bed, Bath & Beyond shares (the symbol was BBBY – it no longer exists).  The stock rallied sharply on a filing showing big purchases by then-insider Ryan Cohen – not coincidentally, the Chairman, President, and CEO of GME – and then fell sharply when it was revealed that he sold into the run-up.  We wrote two pieces explaining the activity, entitled “If You Can’t Spot the Sucker…” and “If You Can’t Spot the Sucker: Part 2”.  What occurred was legal, if unsavory.

I’m sorry, but I can’t shake the feeling that something similar is occurring today, except that a social media darling is under no obligation to file insider activity with the SEC – he is not an insider.  In both cases, nothing specific was said about the stocks.  The SEC filings in BBBY were boilerplate, and the social media post literally had no words.   So, it’s probably all legal, but someone played this beautifully.

Also in August 2022, we wrote the following:

“We noted during a previous meme stock bloom that the half-life of these flourishes seems to be shrinking.  If you participate in these period[ic] rallies and trade them profitably, congratulations.  If you notice the eruptions only after they are in full flourish, please be careful.”  This was a profitable play for many and treacherous for many more.  But it has returned once again, only with shorter opportunities for outsized profits.

Truthfully, I have no idea how long this flurry will last.  I’ll guess it will be in play longer than the two-day wonder in BBBY that we wrote about, since there will be no filings to tell us when those who catalyzed the move have sold.   If you caught the move early, congratulations.  If you’re jumping in now, when literally nothing has changed regarding the fundamentals of GME, AMC, KOSS and others, remember the adage, “if you can’t spot the sucker at the poker table, it’s probably you.”

How the ‘Harvard of Trading’ Ruined Thousands of Young People’s Lives IM Academy promises a Wall Street education. But instead of riches, many of its members have lost everything.

(…) During the pandemic, IM grew from a small New York operation into a global phenomenon by selling the promise that it could teach anyone, particularly teens and twentysomethings, how to become a savvy retail investor. For a one-time $275 fee and $250 a month, members had access to online courses and coaches providing trading strategies—the “Yale of forex, the Harvard of trading,” as a salesman described IM in a marketing video. When young people weren’t being invited by their friends to become budding stock market mavens, they might encounter Instagram videos showing how others had gotten rich with the IM method or hear about celebrity members, including fashion model Blac Chyna and professional boxer Floyd Mayweather Jr. (…)

The company, which had only 68,000 members in 2018, had grown to 225,000 by June 2021, with recruits spanning the globe, from the US to the Philippines. Membership exploded to half a million in 2022, and IM was bringing in at least a billion dollars in annual sales. (…)

IML students could learn foreign exchange trading or how to trade commodities or options. Lessons included a dozen or so prerecorded videos of Terry—at the time the company’s sole employee, along with freelance contractors—explaining market basics, like relying on price charts to predict pricing patterns. (…)

If students wanted to make money on trades but were less interested in mastering the contours of the markets, IML offered to automatically trade for people, mirroring moves from expert traders. In 2018, when officials at the US Commodity Futures Trading Commission found out that IML was trading directly for its customers and wasn’t a registered brokerage, they demanded the company to shut down and Terry to pay $150,000 in penalties. At the same time, the anti-MLM group Truth in Advertising published an exposé saying IML made false claims about how much members could make and promised returns that it never delivered. Terry pretended to adhere to the cease and desist by starting IM Academy as a new company—rebranding online and in his communications—while still filing most of his regulatory company documents under the original IML name.

Just as with IML, when a person joined IM, they would soon be encouraged to become an “independent business owner,” or IBO, a title that referred to customers who become salespeople. If a salesperson brought in two new members, they didn’t have to pay for their own subscription that month; if they brought in 12, they made $600 that month, and every month those new members remained active. Monthly commissions ranged from $150 to $750,000, but to reach the top level, a member needed 70,000 active recruits. While that was impossible for any individual to do, an IBO could exponentially increase their count by training recruits to also become IBOs and bring in new members—the hallmark of an MLM. [Multilevel marketing structure] (…)

Terry’s public persona took a religious turn. For years, he’d studied videos of megachurch leader Steven Furtick preaching to his congregants on how to channel God to be successful. Terry started peppering his speeches with references to the divine, crafting metaphors of himself as a Messiah and IM recruits as his God-given followers, who had a religious mission to sign people up. “I listen to messages that come from God. God’s trying to talk to you,” Terry often said in his thick Bronx accent during company rallies, which seemed like a cross between a rave and a revival. He also preached the “laws of attraction,” the new-age philosophy popularized in the 1980s by self-help author and friend Bob Proctor, in which people could attain wealth simply by visualizing it. (…)

Marco Moukhaiber, a former concert promoter turned YouTube vigilante, was in his condo in Edmonton, Alberta, in the summer of 2020 when he decided IM was his next target. He’d built a 93,000-person YouTube following with the release of video exposés of MLMs including health insurance company Primerica Inc. and telecom company ACN, and he’d already received cease-and-desist letters and threats of legal action from a few. Now his followers were directing him to IM. After weeks of research, Moukhaiber pretended to be interested in the platform and secretly recorded a recruiter telling him what IM had to offer.

Six months later, on Feb. 8, 2021, Moukhaiber released a 40-minute YouTube video, exposing Terry’s MLM history and the unsubstantiated claims IM consistently made about young adults getting rich from it. The video described the hundreds of thousands of young people who’d been left penniless and humiliated. Within a few days, it had clocked 590,000 views. (…)

Marco Moukhaiber, a former concert promoter turned YouTube vigilante, was in his condo in Edmonton, Alberta, in the summer of 2020 when he decided IM was his next target. He’d built a 93,000-person YouTube following with the release of video exposés of MLMs including health insurance company Primerica Inc. and telecom company ACN, and he’d already received cease-and-desist letters and threats of legal action from a few. Now his followers were directing him to IM. After weeks of research, Moukhaiber pretended to be interested in the platform and secretly recorded a recruiter telling him what IM had to offer.

Six months later, on Feb. 8, 2021, Moukhaiber released a 40-minute YouTube video, exposing Terry’s MLM history and the unsubstantiated claims IM consistently made about young adults getting rich from it. The video described the hundreds of thousands of young people who’d been left penniless and humiliated. Within a few days, it had clocked 590,000 views. (…)

Around the same time, the Federal Trade Commission began looking into IM. From the start of the pandemic, authorities around the world had received complaints that the company—along with other online trading MLMs, such as Kuvera, Melius and Pro Network Vision—was preying on young people. The Commodity Futures Trading Commission received 1,099 complaints about IM in 2020 alone, from people claiming that they’d lost their life savings and that the company had ruined their lives. According to IM’s own 2021 income disclosure, more than 94% of people who became IBOs made less in a year than what they spent on subscriptions. The top 0.05% of earners, including Rosa and Brown, averaged $1.4 million that year. (…)

Robert Fitzpatrick, founder of the website Pyramid Scheme Alert, says regulation in the US and globally is essentially nonexistent. “Bankrupt customers are in fact powerless to take on these giants,” he says. Financial education is one of the MLM industry’s fastest-growing categories, according to the Direct Selling Association, racking up close to $8 billion globally in sales in 2022. (…)

This February, at the Papp László Sportaréna on the outskirts of Budapest, some 3,500 people gathered for another IM rally. Attendance was less than a quarter of the Rotterdam event’s a year before, and Terry was nowhere to be seen. (…)

The company is promoting a three-day trip to Cancun at the end of May, along with a conference in Monterey, California, in November. But these days the young and hungry have been finding other day trading gurus on TikTok. Many people indoctrinated in IM’s ways have since moved on to build their own MLM offerings, despite Terry’s lawsuits. Morton, Rosa and Brown—none of whom have faced legal action for their work with IM—continue to broadcast their high-rolling lifestyles on Instagram and YouTube and promote IM, jetting between Dubai yachts and five-star hotels in Bali. Terry is still CEO but is keeping a lower profile, perhaps to avoid sanctions, perhaps to start other ventures. His personal website has been taken down, his last Instagram post is from August 2023 and his name isn’t mentioned on IM’s website.

At the Budapest arena, new recruits still saw nothing but possibility. Dino Mieviso, a 23-year-old assembly-line worker at a Volvo factory in Aals, Belgium, joined last October, persuaded by his brother, who’s part of a 170-member IM group in their hometown. While he says he initially just wanted to learn about the stock market to earn some extra income for his family, the rally made him see the value in bringing other young people along with him. “With the income I get from recruiting others, I’ll be able to trade using that residual income rather than my earnings from Volvo,” he says. “Soon we’ll be rich.”