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➚ BUY: Abodes. In what counts for good news in the U.S. housing market, The Wall Street Journal reports that mortgage applications have risen for six straight weeks as mortgage rates eased.

➘ SELL: Adobe. It owes $1 billion to Figma after calling off a planned acquisition of the software company in the face of stiff resistence from European regulators. Adobe shareholders hated the deal from the jump and cheered its collapse.

Nikola founder gets four years in prison for lying to investors… Novo Nordisk’s farm-boy hero… Google will pay $700M in states’ antitrust case… Tennessee sues BlackRock over ESG investing… Fed official “confused” by stock rally: “It’s not what you say, it’s what did they hear?” … Consultants should have consulted themselves… Apple watch arbitrage…

The Gulf’s golden ticket

THE SCOOP

The hottest piece of paper for global power players right now isn’t an AI stock or a bond with a juicy yield. It’s an Emirati passport.

The UAE has been handing out travel credentials to select foreign billionaires, businessmen, and celebrities, hoping to spur investments and burnish the region’s financial and cultural credibility. The list, which spans business, sports, and arts, is a cross-section of a new global elite that tilts to the south and east, united by their ability to bring money, fame, or industry to the Gulf state, and the passports have gone mostly to friends of its ruling family, the al-Nahyans.

Hedge fund boss Ray Dalio has one. So do star deejay David Guetta; Rajeev Misra, the former boss of SoftBank’s Vision Fund; Russian UFC fighter Khabib Nurmagomedov; and Syed Basar Shueb, the Pakistani chief executive of industrial colossus IHC, according to people familiar with the arrangements. (U.S. prosecutors said Changpeng Zhao, the indicted founder of crypto trading firm Binance, holds one, too.)

The passports don’t confer citizenship or certain benefits enjoyed by locals, like gold-plated healthcare and a government stipend — not that these recipients need them. Instead, they act as a backstage pass of sorts to the emirate’s economic modernization, a ticket to the club of well-connected men who are steering its vast oil wealth into global sports, media, and finance deals.

Representatives for the UAE Embassy in the U.S., Dalio, Guetta, Misra, and others mentioned in the story didn’t respond to requests for comment.

LIZ’S VIEW

It’s the latest sign of a growing and occasionally strange two-way courtship between Middle Eastern states and international bigwigs. Gulf officials in the UAE, Saudi Arabia, and Qatar have trillions of dollars in oil money and mandates to diversify their economies. Foreign investors and industrialists, suddenly living in a world where capital is scarce and expensive, are lining up to help them spend it.

But as I’ve written before, Gulf states are hardly pure economic actors. “Whether splashy investments in European soccer teams or electric-car startups earn big returns for Saudi Arabia’s Public Investment Fund is a bit beside the point, which is to tilt the kingdom’s economy away from oil and project its influence abroad,” I wrote last month.

That’s how U.S. media banker Aryeh Bourkoff ended up investing in the IPO of Abu Dhabi’s national oil company at the request of a powerful Emirati sheik. The money (which was the government’s to begin with) was irrelevant; the imprimatur of a Hollywood mogul was invaluable.

Dalio moving his family office to Dubai or flashing an Emirati passport at customs when he visits his beachside penthouse in Abu Dhabi brings that same validation. So does Indian industrial giant Essar (whose founder, I’m told, was offered a passport but hasn’t accepted it) bidding on construction contracts. The Gulf state reportedly paid huge sums to bring UFC fights; having Dana White declare “I love it here” is as valuable as fight-night revenue.

The confluence of money and power in the Middle East is the story in global finance right now, the thread that runs through so many other stories. It’s straining the scruples of some international players and beckoning others, and testing whether a sheer mountain of money can buy acceptance on the global stage.

Two things to watch for as attacks by Houthi rebels on Red Sea vessels rattle global shippers. (Surprisingly, oil prices aren’t one of them. They are little changed as shippers reroute tankers.)

Freight costs are soaring for routes through the Mediterranean, which could hit profits of shipping giants like Maersk — or else be passed on to importers and consumers.

Suez Canal traffic is a key source of hard currency for Egypt, which is already running dangerously short of dollars and euros since the pandemic crushed tourism. Cairo has devalued the Egyptian pound three times since 2022, with little to show for it. Imports are more expensive, and banks are turning off credit-card transactions in dollars.

These squeezes can be vicious cycles as shortages in key goods sap the economy and drive foreign capital away, said Hung Tran, nonresident senior fellow at the Atlantic Council.

Egypt has “always been very dependent on this one thing [the Suez Canal],” Tran said. “It’s a big plus when things go well, but right now it’s a risk.”

Hold your bourses: We wrote last week that the Bank of Japan looked ready to finally join the rest of the world and start raising interest rates. (“Sayonara, NIRP!”) Instead it left its easy-money policies in place at today’s meeting, sending the Nikkei index up 2%.

As previously discussed, one of my favorite genres of story is “dealmakers expect more deals.” Wall Street has been trying to will itself out of a dry spell, but I see few signs that M&A is coming back. Debt is expensive. The stocks rally is deceptive; the S&P 500’s 25% rise would be 4% without the seven big tech companies.

And for all the talk about private equity firms’ dry powder, they can’t get their hands on much of it until they start returning profits to their investors, which they cannot do while the IPO market stays shut. Recent big mergers, mostly in the energy sector, have the feel of the last two at the dance.

And this week brought three cautionary tales. Illumina finally gave up on Grail, which it bought for $7 billion over the objections of regulators who later sued to block it. The deal cost Illumina’s CEO his job and chummed the water for activist Carl Icahn, who won a board seat in a fight last spring and just this morning announced he’s taking another run.

Yesterday, a jury ordered Bayer to pay $857 million to former high-school students who said they were sickened by a weed-killer that was part of its $63 billion acquisition of Monsanto in 2018. Bayer previously set aside a $10.9 billion settlement pot but still faces some 40,000 cases, which it’s committed to litigating one at a time. The entire company is now worth less than half of what Bayer paid for Monsanto.

And Adobe rounds out a very bad week of M&A hindsight with its $1 billion surrender on Figma.

• Tim Scott emerges as a 2024 kingmaker as Republican candidates court his endorsement, Semafor’s Shelby Talcott scooped.
• U.S. prosecutors are targeting Hamas’ financial network. Dozens of lawyers and FBI agents are on the case as the U.S. government seeks to press the Palestinian group on all fronts.