Beijing is furious with the Biden administration mulling over a broader semiconductor chip export ban and, in response, decided last week to announce export restrictions on two metals, gallium and germanium, which are heavily imported by Western countries for semiconductor production. 

The timing of the announcement is one to ponder about. It came days before US Treasury Secretary Janet Yellen’s China visit on Thursday. It appears Chinese officials are playing a complex game of chess with the Biden administration as their dominance over rare earth mining and refining, and the lack of that in the West would open up talks with Yellen about future US bans on chips and semiconductor equipment that are critical for China’s economic growth. 

“China apparently does not like the news that the Biden administration is considering a wider semiconductor chip ban and decided to ban the export of gallium and germanium, which are used in semiconductors, 5G base stations, and solar panels,” Louis Navellier, founder of Navellier & Associates, wrote in a recent note to clients. 

“Although the US and its allies depend on China for these critical minerals, China needs Western technology such as lithography machines to produce high-performance chips,” Navellier said.

On Friday, The Wall Street Journal reported that Yellen met with Premier Li Qiang and discussed economic competition that would benefit both countries. 

Global gallium prices soared 27% on the news last week. Traders who spoke with Bloomberg said the gallium market is well-supplied, but export controls beginning next month have sent buyers scrambling to purchase the metal. 

On Friday, Fastmarkets data showed Gallium prices jumped $43 on the week to $326 a kilogram. 

Starting Aug. 1, exporters must apply for licenses with the commerce ministry to ship the metals abroad. And how the export controls will affect Chinese shipments still needs to be determined. 

Colin Hamilton, managing director for commodities research at BMO Capital Markets, said the restrictions would likely spur efforts by Western countries to seek supplies of both metals elsewhere.  

“This is a further example of how industrial raw materials are becoming increasingly strategic in global markets and brought to the center of policy action,” Hamilton wrote in a note early last week. 

Data from the US Geological Survey shows the US imported an estimated 14,000 kilograms of germanium in 2022 while consuming an estimated 30,000 kilograms. In the same year, imports of gallium were 14,000 kilograms, while consumption was around 18,000 kilograms.

In the meantime, the US will stockpile these metals as it will diversify sourcing away from Asia. There is a movement by the Biden administration to increase domestic mining and refining of rare earth metals. 

The move by China is “far from being the nuclear option that it could have chosen,” but it’s the “first warning shot,” Bernard Dahdah, an analyst at Natixis, wrote in a note. He pointed out, “China does control other metals through which it can inflict more severe consequences.”

Meanwhile, the US US Defense Department announced on Friday it is invoking the Defense Production Act to boost the domestic mining and processing capacity of the two metals. 

Authored by Catherine Yang via The Epoch Times (emphasis ours),

Indiana Attorney General Todd Rokita sent a letter to Target on Wednesday warning the corporation that its recent “Pride” campaign merchandise and donation efforts ran the risk of violating state child-protection laws. It also cited concerns about parental rights and neglect of fiduciary duties.

“State child-protection laws penalize the ‘sale or distribution … of obscene matter,’” the letter states (pdf), which includes items with sexual themes and material harmful to minors.

“Indiana, as well as other states, have passed laws to protect children from harmful content meant to sexualize them and prohibit gender transitions of children.”

The Epoch Times has not received a response from Target.

Attorneys general from six other states also signed on: Tim Griffin, Arkansas; Daniel Cameron, Kentucky; Andrew Bailey, Missouri; Raul Labrador, Idaho; Lynn Fitch, Mississippi; and Alan Wilson, South Carolina.

These are states that have this year passed laws, some now in the courts, that prohibit cross-sex hormone and surgery procedures for minors, and the chief legal officers are now sending a signal to corporations that do business in their states to take notice.

The letter does not cite legal action.

Contentious Merchandise

The letter drew attention to some of the products Target stocked in its “Pride” month campaign: LGBT-themed infant clothing, items specifically sourced from a Satanic brand, and the “tuck friendly” swimsuits that sparked media coverage and backlash.

The attorneys also stated Target’s support for Gay, Lesbian and Straight Education Network (GLSEN), which trains members to create LGBT-related associations in K-12 schools, runs the risk of violating parental-rights laws in these states. GLSEN training materials encourage members to make gender identity decisions with students without the knowledge of parents.

“The evidence suggests that Target’s directors and officers may be negligent in undertaking the ‘Pride’ campaign, which negatively affected Target’s stock price. Moreover, it may have improperly directed company resources for collateral political or social goals unrelated to the company’s and its shareholders’ best interests,” the letter states.

Target’s stock tumbled 17 percent in the week following backlash in the wake of its Pride campaign, leading to a three-year low and losses that exceeded $13 billion. Citi and JP Morgan Chase both downgraded Target’s shares.

“Target’s ‘Pride’ campaign was decidedly not an example of excellence in retail,” the letter continued. “It is likely more profitable to sell the type of Pride that enshrines the love of the United States. Target’s Pride Campaign alienates whereas Pride in our country unites.”

Target Flip-Flops Under Activist Pressure

Target issued a statement after the backlash, highlighting the fact that it has stocked products “celebrating Pride” for more than 10 years. It cited the reason for removing some items as “threats impacting our team members’ sense of safety and well-being while at work.” The company reiterated its “commitment to the LGBTQIA+ community” moving forward.

In response, seven activist groups called on Target to return any removed items to its stores and online, and release a statement to “in the next 24 hours reaffirming their commitment to the LGBTQ+ community.”

Read more here…

Below is a significant admission by the President of the United States, which was said in passing to a reporter after he was grilled over the controversial White House decision to send internationally-banned cluster bombs to Ukraine.

Biden had also told CNN’s Fareed Zakaria on Friday that the transfer is necessary because Kyiv is “running out of ammunition” after 500 days of war, a grim milestone reached Saturday.

“It was a very difficult decision on my part. And by the way, I discussed this with our allies, I discussed this with our friends up on the Hill,” he explained. He then added: “The Ukrainians are running out of ammunition.” Watch Biden again make the admission below:

🚨Ukraine out of Ammunition🚨

Biden with a pretty damning admission when responding to reporters asking about cluster munitions to Ukraine:

“They’ve run out of ammunition”

This confirms that Western media have been lying about the status of the war.

Ukraine are in bad shape. pic.twitter.com/wozmIRArMP

— Clandestine (@WarClandestine) July 8, 2023

A prominent geopolitical observer has noted the following, however…

“For those saying this means the US military are depleted of our stockpiles, this is not true. We have been giving Ukraine all our old shit and stockpiles from the late 80’s and 90’s.”

The war analyst continued: “Now we are giving them old cluster munitions, with high dud-rates. We have been giving them the shit we don’t want. They’ve been fighting Russia without air support and with old and faulty equipment. No wonder they are losing.”

Indeed news of Ukraine’s big counteroffensive, which kicked off after much anticipation last month, has largely retreated from the headlines as more and more negative developments for the Ukrainian effort has become evident.

Even Zelensky recently admitted a much “slower than expected” offensive, and things along the frontlines have largely remained stalemated, with the recent Wagner mutiny events inside Russia also not making any kind of positive difference in terms of Ukrainian positions on the battlefield. Ukraine is putting its hopes on eventually receiving F-16s from the West, but by the time this actually happens, and the long and difficult task of training Ukrainian pilots is complete, the battlefield momentum is unlikely to be in their favor.

Authored by Alice Ivey via CoinTelegraph.com,

Explore the concept of prompt engineering, its significance, and how it works in fine-tuning language models…

Prompt engineering has become a powerful method for optimizing language models in natural language processing (NLP). It entails creating efficient prompts, often referred to as instructions or questions, to direct the behavior and output of AI models.

Due to prompt engineering’s capacity to enhance the functionality and management of language models, it has attracted a lot of attention. This article will delve into the concept of prompt engineering, its significance and how it works.

Understanding prompt engineering

Prompt engineering involves creating precise and informative questions or instructions that allow users to acquire desired outputs from AI models.

These prompts serve as precise inputs that direct language modeling behavior and text generation.

Users can modify and control the output of AI models by carefully structuring prompts, which increases their usefulness and dependability.

History of prompt engineering

In response to the complexity and expanding capabilities of language models, prompt engineering has changed over time. Although quick engineering may not have a long history, its foundations can be seen in early NLP research and the creation of AI language models. Here’s a brief overview of the history of prompt engineering:

Pre-transformer era (Before 2017)

Prompt engineering was less common before the development of transformer-based models like OpenAI’s  generative pre-trained transformer (GPT). Contextual knowledge and adaptability are lacking in earlier language models like recurrent neural networks (RNNs) and convolutional neural networks (CNNs), which restricts the potential for prompt engineering.

Pre-training and the emergence of transformers (2017)

The introduction of transformers, specifically with the “Attention Is All You Need” paper by Vaswani et al. in 2017, revolutionized the field of NLP. Transformers made it possible to pre-train language models on a broad scale and teach them how to represent words and sentences in context. However, throughout this time, prompt engineering was still a relatively unexplored technique.

Fine-tuning and the rise of GPT (2018)

A major turning point for rapid engineering occurred with the introduction of OpenAI’s GPT models. GPT models demonstrated the effectiveness of pre-training and fine-tuning on particular downstream tasks. For a variety of purposes, researchers and practitioners have started using quick engineering techniques to direct the behavior and output of GPT models.

Advancements in prompt engineering techniques (2018–present)

As the understanding of prompt engineering grew, researchers began experimenting with different approaches and strategies. This included designing context-rich prompts, using rule-based templates, incorporating system or user instructions, and exploring techniques like prefix tuning. The goal was to enhance control, mitigate biases and improve the overall performance of language models.

Community contributions and exploration (2018–present)

As prompt engineering gained popularity among NLP experts, academics and programmers started to exchange ideas, lessons learned and best practices. Online discussion boards, academic publications, and open-source libraries significantly contributed to developing prompt engineering methods.

Ongoing research and future directions (present and beyond)

Prompt engineering continues to be an active area of research and development. Researchers are exploring ways to make prompt engineering more effective, interpretable and user-friendly. Techniques like rule-based rewards, reward models and human-in-the-loop approaches are being investigated to refine prompt engineering strategies.

Significance of prompt engineering

Prompt engineering is essential for improving the usability and interpretability of AI systems. It has a number of benefits, including:

Improved control

Users can direct the language model to generate desired responses by giving clear instructions through prompts. This degree of oversight can aid in ensuring that AI models provide results that comply with predetermined standards or requirements.

Reducing bias in AI systems

Prompt engineering can be used as a tool to reduce bias in AI systems. Biases in generated text can be found and reduced by carefully designing the prompts, leading to more just and equal results.

Modifying model behavior

Language models can be modified to display desired behaviors using prompt engineering. As a result, AI systems can become experts in particular tasks or domains, which enhances their accuracy and dependability in particular use cases.

How prompt engineering Works

Prompt engineering uses a methodical process to create powerful prompts. Here are some crucial actions:

Specify the task

Establish the precise aim or objective you want the language model to achieve. Any NLP task, including text completion, translation and summarization, may be involved.

Identify the inputs and outputs

Clearly define the inputs required by the language model and the desired outputs you expect from the system.

Create informative prompts

Create prompts that clearly communicate the expected behavior to the model. These questions should be clear, brief and appropriate for the given purpose. Finding the best prompts may require trial and error and revision.

Iterate and evaluate

Put the created prompts to the test by feeding them into the language model and evaluating the results. Review the outcomes, look for flaws and tweak the instructions to boost performance.

Calibration and fine-tuning

Take into account the evaluation’s findings when calibrating and fine-tuning the prompts. This procedure entails making minor adjustments to obtain the required model behavior, ensuring that it aligns with the intended job and requirements.

The Pentagon has again complained that Russian fighter jets have dangerously interfered with US drone operations over Syria, in what marks the third such incident in as many days.

“Three MQ-9 Reaper drones the U.S. military said had been ‘harassed’ by Russian fighter jets over Syria on Friday were the same drones that later carried out an airstrike that killed a top Islamic State group leader,” US Central Command said Sunday.

The incident reportedly happened Friday, the same day that CENTCOM says it killed ISIS leader Usama-al-Muhajir.

The Pentagon had in the two days prior, on Wednesday and Friday, also alleged Russian jets ‘harassed’ US drones which were actively engaged in counter-ISIS operations. 

“The strike on Friday was conducted by the same MQ-9s that had, earlier in the day, been harassed by Russian aircraft in an encounter that had lasted almost two hours,” the Sunday CENTCOM statement said.

The US has once again blasted the “unsafe and unprofessional” behavior of the Russian pilots. ABC News noted the following after the latest incident: 

There was a third straight day of interactions between Russian fighters and U.S. drones on Friday when U.S. Air Forces Central said “Russian aircraft flew 18 unprofessional close passes that caused the MQ-9s to react to avoid unsafe situations.”

The Pentagon has at this point declassified two videos which it says supports its assessment of Russian aerial aggression aimed at disrupting American drone flights over Syria. 

Russian jet dropping flares in vicinity of a US drone in Syria. pic.twitter.com/Sr53fajBqx

— Spriter Team (@SpriterTeam) July 6, 2023

These ‘harassment’ episodes over Syria appear very similar to the March 14, 2023 event which resulted in an American MQ-9 Reaper drone crashing into the Black Sea. A Russian Su-27 fighter jet had intercepted and damaged the drone, at one point dumping fuel on it in mid-air flight.

In Syria, the US administration has justified any and all US military actions as based on “countering ISIS” – even though the Islamic State has long been driven underground and was defeated. Russia and Syria have charged that the US really just wants to steal Syria’s oil and gas resources, as part of the continued economic war against Damascus. The Pentagon has also lately been reemphasizing this counter-ISIS mission: “We urge Russian forces in Syria to cease this reckless behavior and adhere to the standards of behavior expected of a professional air force so we can resume our focus on the enduring defeat of ISIS,” it said.

US confirms target killed in Syria drone strike two days ago was an ISIS leader.

Release notes that Russian aircraft “harassed” the US drone used in the strike; fails to mention that target had been living comfortably in Bza’a, which is controlled by NATO ally Turkey. pic.twitter.com/U5bn6UaYNm

— Lindsey Snell (@LindseySnell) July 9, 2023

But Damascus, Moscow, and Tehran have pointed out that ISIS grew out of the NATO-Gulf regime change efforts to oust Assad, which started in 2011 and 2012, destroying much of Syria and resulting in mass killings.

Authored by Alice Giordano via The Epoch Times (emphasis ours),

As Robert F. Kennedy Jr. draws unusual bipartisan support in the race for the White House, there is a swell of sentiment that he should be former President Donald Trump’s running mate.

“They would be an unstoppable duo,” Carla Gericke, both a Republican and Libertarian out of New Hampshire, told The Epoch Times, “I think it’s literally the ticket to reunite this fractured country of ours.” 

Texas realtor Trisha Psencik Hope told The Epoch Times that while she is “Trump all the way” regardless of who his running mate will be, her top pick is RFK Jr., mostly because of the strong stance he took against COVID vaccine mandates. 

Mrs. Psenick Hope, of Houston, said she wished Trump had taken a strong position against mandating the experimental jab and believes other GOPers feel the same way. 

“I think bringing RFK to the ticket will soothe some of the lingering feelings about that and any future concerns about the government doing something like that again,” she said. 

On July 6, Mr. Kennedy told NewsMax he wouldn’t consider being a running mate for either Trump or [Joe] Biden, but the prospect of a Kennedy/Trump ticket remains a hot topic on social media and also among high-profile politicians and could reveal how America will vote next November.

Former Trump adviser Steve Bannon suggested a Trump/Kennedy ticket back in April. 

Early in July, on the Christian Broadcasting Network (CBN), former Arizona gubernatorial candidate Kari Lake, who considered herself a vice-presidential prospect for Trump, was asked about what she thought of the idea.

While she didn’t directly answer the question, Mrs. Lake called Mr. Kennedy a good man who has done amazing and criticized people who have been referring to Mr. Kennedy as a “MAGA Democrat.”

“They just don’t want outsiders in the political machine, they don’t want outsiders coming into the swamp draining the swamp,” said Mrs. Lake, “They just want just the pre-approved, controllably, easily blackmailed and easily bribed people like Biden and the whole swamp system down there.”

Mr. Bannon said Mrs. Lake is his favored choice for Trump’s vice president, but said on his War Room show that if she wasn’t available “Kennedy would be an excellent choice.”

Others like Connecticut resident Libby DePiero, who has attended 41 Trump rallies since his first run for president in 2016, told The Epoch Times it would be a “dream come true” if Kennedy and Trump ran together. 

“Between Kennedy’s fight for medical freedom against the COVID tyrannists [sic], and Trump’s proven record to make Americans first in their own country, it would be an even better presidency than Trump’s first time in office,” she said. 

Several who like the idea have run polls on social media posing the question.

According to a Twitter poll of 1,629 users, 73.8 percent said they would support a Trump/Kennedy Ticket. The poll was based on 1,629 voters.

Participants like New York Times bestselling author and founder of ACT for America Brigitte Gabriel said a “Trump-Kennedy 2024 unity ticket would end Biden’s chances of re-election!”

Ms. Gericke said that while Kennedy does come from a political dynasty, she sees him as an outsider like Trump who knows that this world is such dire straits that the presidency is beyond party loyalty.

Mrs. Psenick Hope said while she and her husband were vacationing in Colorado, they broached the idea of a Kennedy/Trump ticket with locals in the left-leaning state. 

“They said they would support Trump if Kennedy was on the ticket with him, she said, “just like Republicans say they would support Kennedy if he was on the ticket with Trump.”

Mrs. Lake told CBN anchor Gary Lane that the swell of support for a Kennedy/Trump ticket shows “we are almost beyond Democrat versus Republican. We are now Communism and Globalism versus Americanism,” she said. 

U.S. corporate profits hit record levels in 2022, even as stocks fell into a bear market and inflation reached 40-year highs.

Given these headwinds, investors are watching corporate fundamentals very closely. Corporate profit margins provide a buffer against higher borrowing costs and price pressures and for many reasons, they are a key measure of financial health.

In the following infographic, Visual Capitalist’s Dorothy Neufeld shows America’s most profitable companies by sector, using data from Fortune.

America’s Most Profitable Companies

Here are the U.S. firms with the highest annual profits in their sector. Data is based on the fiscal year ending on or before January 31, 2023 across companies in the Fortune 500.

Both public and private companies that are incorporated and operate in the U.S. are included.

Apple is the most profitable company in America. Reaching almost $100 billion in profits in 2022, it outpaces the profit leaders in both the energy and financials sectors combined. Furthermore, at the end of 2022, its net profit margin stood at nearly 25%.

Amid a maturing smartphone market, the company is focusing more on service-based revenue. iPhones make up roughly half of its total net sales, yet growth is plateauing. Last year, iPhone sales growth was 7%, compared to 39% the year before. Meanwhile, services sales—including cloud, AppleCare, and advertising—increased 14% annually.

Within the energy sector, Exxon Mobil took the top spot with record profits of over $55 billion. Profits jumped almost 142% last year as oil prices spiked with Russia’s invasion of Ukraine. Steep cuts in costs through the pandemic also helped to bolster the company’s returns.

JPMorgan Chase saw the highest profits in the financial sector. As the nation’s largest bank by assets, it saw a sharp decline in its investment banking division as higher interest rates made financing mergers and acquisitions less lucrative. Overall, profits sank more than 22% annually.

Corporate Profits in Perspective

Low taxes and interest rates contributed to about one-third of profit growth across nonfinancial companies in the S&P 500 over the last 20 years, a paper from the Federal Reserve shows.

Now, as interest rates climb higher, steeper costs could cut into bottom lines. The good news is so far, corporations have shown resilience to a shifting interest rate regime.

In the first quarter of 2023, U.S. corporate profits fell moderately by just over 5%.

Profitability and Competitive Advantage

What does this mean for investors?

For investors looking for companies that can weather higher rates, profitability is one factor to consider. Companies with strong profitability can reinvest in their business, pay dividends, and better withstand road bumps from rising costs.

Going further, companies with high profitability often have a strong market share thanks to economies of scale lowering costs, brand loyalty driving demand, and economic moats. We can see this with Apple and Visa, for example.

Over time, this builds a sustainable competitive advantage. As companies preserve profitability, it adds value to shareholders, often supporting share prices over the longer-term.

In another significant escalation, Russia says it shot down a cruise missile launched by Ukraine over Crimea, according to Crimean Governor Sergei Aksyonov.

“The incident inflicted no damage or casualties, he added, without specifying where the missile had been launched from,” according to international reports. The intercept reportedly happened near the city of Kerch on the Crimean peninsula.

Drones inside Russia’s territory or over Russian-controlled Crimea have been a regular feature of this war, but cruise missiles or other long-range heavy missiles much less so. 

Regional reports say the attack temporarily halted traffic over the immense Crimean Bridge:

Krym Realii media outlet reported that several explosions were heard in occupied Crimea at around 12 p.m. on July 9.

Following Aksyonov’s claim, local Telegram channels also reported that the traffic was temporarily stopped at the Crimean Bridge that connects the Russian-occupied peninsula and mainland Russia over the Kerch Strait. There have been no further details.

Elsewhere, the Rostov regional government reported that a Ukrainian missile was intercepted over its territory in the south of Russia. “There were no casualties. The debris partially damaged the roofs of several buildings,” Governor Vasily Golubev wrote. 

As these kinds of attacks have increased and become more frequent over the last several months, Kremlin accusations of the US directly assisting in cross-border attacks have increased. Russia has warned in response it could begin taking out “decision-making centers” in Ukraine in response, and in some cases it has acted on these warnings.

Various governments and institutions around the world observed the grim milestone of the 500th day of the war on Saturday, with Western governments condemning Moscow and calling on it to halt its operations…

Tomorrow, the world will mark 500 days since Russia started its brutal, full-scale invasion of #Ukraine. Russia’s invasion needs to stop. Not in 500 days, not in 50 days, but today.#StandWithUkraine pic.twitter.com/zew7L4m30j

— Foreign Policy CAN (@CanadaFP) July 7, 2023

This weekend marked the 500th day since the Russian military invasion on Feb. 24, 2022. Ukraine’s much-touted counteroffensive, launched last month, has largely retreated from the headlines, strongly suggesting its failure. 

A deranged 25-year-old Hispanic male indiscriminately shot four people, killing one, while casually motoring around New York City on a scooter. Police say the suspect was experiencing a mental health crisis. 

The shooting spree in Brooklyn and Queens started around 1110 ET Saturday and ended two hours later, police said. The 25yo gunman was in possession of a 9 mm semi-automatic handgun with a high capacity magazine and an “illegal” scooter, New York Police First Deputy Commissioner Edward Caban said at a news conference.  

Police sources told NBC News that the suspect “appears to suffer from emotional or mental issues.” NYPD Assistant Chief Joseph Kenny noted that the suspect was a “male Hispanic.” 

The rampage started when the suspect shot a 21yo man in the shoulder in Cypress Hills. About 20 minutes later, the suspect fatally shot an 87yo man once in the back on Jamaica Avenue near 108th Street. A 44yo man was reportedly shot in the face near 126th Street and remains in critical condition. And a 63yo man was shot in the shoulder on 134th Street. 

“We don’t know the motive…If you look at the demographics and pedigree of the victims, they’re all different,” Kenny said.

The assistant NYPD chief continued, “At this time, the video shows that he’s not targeting anybody. He’s not following anybody as he’s driving on his scooter, he’s randomly shooting people.”

MAN WENT ON SHOOTING SPREE IN NYC TODAY AT RANDOM STRANGERS ***
pic.twitter.com/0byJnLVQpe

— The_Real_Fly (@The_Real_Fly) July 9, 2023

NYC, Queens: man on scooter went on shooting spree killing 1 and injuring 3 today. pic.twitter.com/J7l6bcFA4G

— AlphaFox (@Alphafox78) July 9, 2023

The suspect was arrested two hours later on the corner of Sutphin Boulevard and 94th Avenue in Queens. 

This is just another day in crime-ridden NYC as Democrats fail to enforce law and order. Remember, progressives in City Hall were the ones that pushed disastrous defunding the police measures a few years ago. 

Authored by Andrew Moran via The Epoch Times,

New data show that a growing number of U.S. firms are collapsing under the weight of higher interest rates as corporate bankruptcies reached their highest first-half levels since 2010.

In the first six months of 2023, there were 340 corporate bankruptcies, topping every other comparable span in 13 years, according to S&P Global Market Intelligence. This is up 93 percent from the same time a year ago and higher than in 2020, when there was a spike during the early days of the coronavirus pandemic.

There were 54 recorded corporate bankruptcy filings in June, unchanged from the 54 bankruptcies in May. Last month, some of the most notable companies to submit filings were Lordstown Motors, Rockport Co., Instant Brands Acquisition Holdings, and iMedia Brands.

“Lordstown Motors Corp. filed for bankruptcy June 27, with plans to restructure its business and seek a buyer, according to a company release. The electric vehicle manufacturer’s assets include its Endurance pickup truck and related resources,” S&P noted in the July 6 report.

“Instant Brands Acquisition Holdings Inc. also sought bankruptcy protection June 12. The tightening of credit terms and higher interest rates had impacted the company’s liquidity levels, according to an official release. The company has also already secured $132.5 million from existing lenders and plans to continue discussions with its financial stakeholders.”

Year-to-date through June, 15 companies with more than $1 billion in liabilities filed for bankruptcy, such as Cyxtera Technologies, Diebold Holding, Bed Bath & Beyond, Diamond Sports Group., and Party City.

Epiq Bankruptcy, a U.S. bankruptcy filing data provider, confirmed that 2,973 total commercial Chapter 11 bankruptcies were filed in the first half of 2023, up 68 percent from the same period in 2022.

Higher Interest Rates Impacting Businesses

Banking experts purport that higher interest rates are the leading cause of the increase in corporate bankruptcies. Many businesses either maintain vast debt loans that will require refinancing or need more liquidity to stay afloat.

“The increase in commercial and individual bankruptcy filings during the first half of 2023 underscores the economic challenges faced by businesses and individuals,” said Mr. Gregg Morin, Vice President of Business Development and Revenue at Epiq Bankruptcy, in the report.

“Our objective is to provide bankruptcy professionals with timely and accurate data necessary for analyzing stakeholder volumes and trends for making informed business decisions.”

The situation could be exacerbated should the Federal Reserve pull the trigger on two more rate hikes this year. The futures market is penciling in a quarter-point boost to the benchmark fed funds rate at this month’s Federal Open Market Committee (FOMC) policy meeting.

Meanwhile, according to a recent Fitch Ratings report, the corporate default rate is projected to climb to as high as 4.5 percent in 2023, up from the previous forecast low of 2.5 percent. The updated projections reflected “the tighter lending conditions and capital access resulting from stress in the banking sector and inflation uncertainty.”

However, some argue that corporate bond market indicators are “less ominous.”

“The interest rate differentials, or spreads, between the 10-year U.S. Treasury note and investment grade (IG) and high yield (HY) corporate bonds continue to hover within their average width over the past 25 years, a bond market signal indicating the likelihood of a less severe recession, with traders pricing in fewer corporate defaults,” wrote John Lynch, the CIO at Comerica Wealth Management, in a research note.

Economists contend that the worst corporate bankruptcies typically occur one or two years into a recession. Today, they are happening before the official start of an economic downturn as the U.S. economy is still expanding.

What’s happening?

“Simple,” says Mr. Pete St. Onge, a Heritage Foundation economist, “banks aren’t lending.”

“Banks are battening down the hatches, hogging their bailout money instead of lending it out,” he said in a recent podcast.

“That credit crunch means not only do we get bankruptcies like in any recession, on top of that, we get a lending wall that cuts off even the healthy businesses. Of course, their jobs go down with them.”

Since the Federal Reserve launched the Bank Term Funding Program (BTFP) following the Silicon Valley Bank collapse in March, financial institutions have kept tapping into these emergency lending facilities. After hitting a record high at above $103 billion at the end of June, the latest central bank H.4.1 data show that the BTFP dropped for the first time since the beginning of May.

Despite financial entities receiving these funds, companies say it is getting more challenging to apply for credit, resulting in what many perceive to be a credit crunch.

A recent Goldman Sachs survey found that three-quarters of small business owners say they are worried about accessing capital as banking stress has forced the sector to tighten lending.

Moreover, a National Federation of Independent Business (NFIB) Small Business Survey found that more small business owners have found it harder to access credit than in the last survey.