Devon Energy: Buy This Deep Correction
Seeking Alpha: Stock Market Analysis / 2023-02-19 15:0526

anilakkus

The Market's Gift After DVN's FQ4'22 Earnings Call
Devon Energy Corporation (NYSE:DVN) recently announced its FQ4'22 earnings call, with a minimal EPS miss by -$0.09 and a lower fixed plus variable dividend of $0.89, against the previous $1.35. While we had expected lower numbers attributed to the normalization of oil/gas prices thus far, it appears Mr. Market overreacted, punishing the stock with a drastic -12.8% plunge in the days after.

Perhaps the gloom could also be attributed to the lower than expected guidance for FQ1'23 production volume of 635K Barrels of Oil Equivalent per day (BOE/D), against consensus estimates of 657K BOE/D and FQ4'22 performance of 636K BOE/D. However, we must also highlight that the lower than expected guidance was attributed to a fire incident in one of its compressor stations in Delaware, which will likely result in significant infrastructure downtime for repairs through FQ1'23.

Naturally, Mr. Market's concern for FQ1'23 output was justifiable in our view, since the bolt-on acquisitions of Williston and Eagle Ford in 2022 were expected to collectively contribute an additional 60K BOE/D. However, things might pick up from FQ2'23 onwards, due to DVN's FY2023 guidance of between 643K and 663K BOE/D, against the FY2022 levels of 610K BOE/D.

On the other hand, the management guided a relatively higher forward break-even rate of $40 WTI oil prices, compared to FY2022 levels of $30. While this was attributed to the persistent inflationary pain triggering higher contractual refresh rates by late 2022, we might see a notable bottom-line impact in FY2023.

In addition, investors might also experience potential FY2023 dividend headwinds, attributed to the higher than expected capital expenditure guidance of between $3.6B and $3.8B in FY2023. The number indicated a tremendous increase of up to 49.6% YoY from FY2022 levels of $2.54B.

The pessimistic market sentiment was especially worsened by the drastic normalization in WTI crude oil/ natural gas prices by -35.2%/ -75.5% to $77.67 per barrel and $2.38 per MMBtu at the time of writing, against hyper-pandemic levels of $119.81 and $9.73, respectively.

Therefore, while DVN delivered a record high Free Cash Flow of $6B in FY2022, it appears that this feat might not be repeated moving forward, with market analysts already expecting a normalized generation of $4.01B in FY2023 and $3.73B in FY2024.

Nonetheless, while its long-term debts of $6.18B by FQ4'22 may seem elevated, investors must also note that only $714M will be due over the next two years. Combined with the cash and equivalents of $1.45B by the latest quarter and excellent shareholder returns with $5.17B of total dividends paid out/$804M in shares repurchased in 2022, we think the dividend headwinds may not be as severe as feared.

With the company prioritizing its fixed plus variable dividends, we may see a consistent fixed quarterly dividend of $0.20 through 2023, with variable dividends potentially adding another ~$2.00 for the whole fiscal year. This is based on debt repayment of $242M and share repurchases of $700M in 2023, fully executing its $2B program expiring by May 2023.

Barring another share-repurchase authorization, those numbers suggest an annualized total dividend of $2.80 in 2023, triggering an improved forward dividend yield of 5.02% based on current stock prices, against its 4Y average of 4.03% and sector median of 4.29%.

While our projection may be comparatively lower than FY2022 levels of $5.17, it is already a notable expansion from FY2021 levels of $1.97. Investors must also note that the oil/gas industry is highly cyclical anyway, which explains the fluctuation in the company's quarterly payouts, attributed to the fixed plus variable dividend policy.

Therefore, we believe investors looking for stable dividends payouts should avoid DVN and take a look at Chevron (NYSE:CVX) or Exxon Mobil (NYSE:XOM) instead.

So, Is DVN Stock A Buy, Sell, or Hold?
DVN 1Y EV/Revenue and P/E Valuations


S&P Capital IQ

DVN is currently trading at an EV/NTM Revenue of 2.39x and NTM P/E of 8.36x, lower (on a P/E basis) than its 3Y pre-pandemic mean of 2.21x and 18.08x, respectively. Otherwise, it is relatively higher than its 1Y P/E mean of 7.49x.

Based on its projected FY2023 EPS of $7.53 and current P/E valuations, we are looking at a moderate price target of $62.95, relatively lower that consensus estimate's target of $74. Even so, there is a notable 12.9% upside potential from current levels in our view.

DVN 1Y Stock Price


Trading View

In addition, with DVN already plunging drastically since the unsatisfactory FQ4'22 earnings call, we may see more stock weakness ahead, testing the previous July 2022 bottom in the low $50s. Assuming so, investors may consider adding then, due to the improved margin of safety to our price target. Those levels would also improve its forward dividend yield to 5.5% as well.

Recovery may also come earlier than expected over the next few quarters, with the US SPR stockpile already declining to 1983 lows at 371.57M as of February 10, 2023. Notably, these levels indicate a tremendous fall by -37.4% from December 2021 levels of 593.68M and by -41.7% from FY2020 levels of 638.05M.

The SPR stockpile will probably need to be replenished sooner rather than later with the country's energy security potentially at stake. In that case, we may see the recovery of WTI crude oil prices toward the mid $90s, further aided by OPEC and Russia's reduced output through 2023. We believe this correction presents an excellent opportunity for investors to dollar cost average accordingly, while partaking in DVN's more than decent dividend payouts moving forward.

Naturally, it is important for investors to proceed with caution since this stock remains volatile in the foreseeable future, and is only suitable for those with a higher risk tolerance.

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The world's $13trn interest bill
Economist/Economics / 2023-02-19 18:316
Finance & economics | Time for the tab
We calculate who has been hit hardest by rising rates
Feb 19th 2023
After a calm 2010s, in which interest rates hardly budged, inflation is putting central-bank officials to work. Indeed, policymakers have rarely been busier. In the first quarter of 2021, policy rates in a sample of 58 rich and emerging economies stood at an average of 2.6%. By the final quarter of 2022, this figure had reached 7.1%. Meanwhile, total debt in these countries hit a record $300trn, or 345% of their combined gdp, up from $255trn, or 320% of gdp, before the covid-19 pandemic.

The more indebted the world becomes, the more sensitive it is to rate rises. To assess the combined effect of borrowing and higher rates, The Economist has estimated the interest bill for firms, households and governments across 58 countries. Together these economies account for more than 90% of global gdp. In 2021 their interest bill stood at a $10.4trn, or 12% of combined gdp. By 2022 it had reached a whopping $13trn, or 14.5% of gdp.

Our calculations make certain assumptions. In the real world, higher interest rates do not push up debt-servicing costs immediately, except for those of floating-rate debt, such as many overnight bank loans. The maturity of government debt tends to range from five to ten years; firms and households tend to borrow on a shorter-term basis. We assume that rate rises feed through over the course of five years for public debt, and over a two-year period for households and companies.

To project what might happen over the next few years, we make a few more assumptions. Real-life borrowers respond to higher rates by reducing debt to ensure that interest payments do not get out of hand. Nonetheless, research by the Bank for International Settlements, a club of central banks, shows that higher rates do raise interest payments on debt relative to income—ie, that deleveraging does not entirely negate higher costs. Thus we assume that nominal incomes rise according to imf forecasts and debt-to-gdp ratios stay flat. This implies annual budget deficits of 5% of gdp, lower than before covid.


Our analysis suggests that, if rates follow the path priced into government-bond markets, the interest tab will hit around 17% of gdp by 2027. And what if markets are underestimating how much tightening central banks have in store? We find that another percentage point, on top of that which markets have priced in, would bring the bill to a mighty 20% of gdp.

Such a bill would be vast, but not without precedent. Interest costs in America exceeded 20% of gdp in the global financial crisis of 2007-09, the economic boom of the late 1990s and the last proper burst of inflation in the 1980s. Yet an average bill of this size would mask big differences between industries and countries. Ghana's government, for instance, would face a debt-to-revenue ratio of over six and government-bond yields of 75%—which would almost certainly mean eye-watering cuts to state spending.

Inflation may ease the burden slightly, by pushing up nominal tax revenues, household incomes and corporate profits. And global debt as a share of gdp has fallen from its peak of 355% in 2021. But this relief has so far been more than offset by the rise in interest rates. In America, for instance, real rates as measured by the yield on the five-year Treasury inflation-protected security sit at 1.5%, against an average of 0.35% in 2019.


Unequal interest
So who is bearing the burden? We rank households, companies and governments across our 58 countries according to two variables: debt-to-income ratios and the increase in rates over the past three years. When it comes to households, rich democracies, including the Netherlands, New Zealand and Sweden, look more sensitive to rising interest rates. All three have debt levels nearly twice their disposable incomes and have seen short-term government-bond yields rise by more than three percentage points since the end of 2019.

Yet countries that have less time to prepare for rate rises may face greater difficulties than their more indebted peers. Mortgages in the Netherlands, for instance, often have longer-term fixed rates, meaning the country's households are more insulated from higher rates than our rankings suggest. In other countries, by contrast, households tend to either have shorter term fixed-rate loans or borrow on flexible terms. In Sweden floating-rate mortgages account for nearly two-thirds of the stock, which means problems may emerge more quickly. In emerging economies the data are patchier. Although debt-to-income ratios are lower, this partly reflects the fact that formal credit is hard to obtain.

In the business world, surging consumer demand has lifted profits. In 33 of the 39 countries for which we have data, the ratio of debt to gross-operating profit has fallen in the past year. Indeed, parts of the world look surprisingly strong. Despite the woes of Adani Group, a conglomerate under fire from a short-seller, India scores well thanks to a relatively low debt-to-income ratio of 2.4, and a smaller rise in rates.

Big debt burdens and tighter financial conditions may still prove too much for some companies. s&p Global, a research firm, notes that default rates on European speculative-grade corporate debt rose from under 1% at the start of 2022 to more than 2% by the end of the year. French firms are especially indebted, with a ratio of debt to gross-operating profit of nearly nine, higher than any country bar Luxembourg. Russia, cut off from foreign markets, has seen short-term yields spike. Hungary, where the central bank has rapidly raised rates to protect its currency, has heavy debts relative to the size of its economy.

Last and most consequential is government debt. Daleep Singh of pgim, an asset manager, says a crucial variable to watch is the risk premium on debt (the extra return markets demand to hold a country's bonds over and above the yield on an American Treasury). Rich-world governments are mostly doing fine on this measure. But Italy, which has seen a bigger increase in bond yields than any other European country in our sample, remains a risk. As the the European Central Bank tightens policy, it has stopped buying sovereign bonds, and will begin to shrink its balance-sheet in March. The danger is that this prompts a crunch.

Emerging economies increasingly borrow in their own currencies, but those struggling with external debts may require help. Argentina recently reached a bail-out agreement, which will require uncomfortable belt-tightening, with the imf. It sits near the top of this category, and already defaulted on its external debt in 2020. Egypt, which has medium-term government-bond yields around four to five percentage points above pre-pandemic levels, is trying not to follow suit. Ghana, which recently joined Argentina in the severely distressed camp, is now embarking on fiscal and monetary tightening in an attempt to secure support from the imf.

The fate of some governments, as well as the households and firms that eventually need state support, may depend on the goodwill of China. Despite high debt levels, China itself sits near the bottom of our rankings because of its placid interest rates. Yet its importance to global debt stress is only growing. China is now the largest lender to the world's poor economies and gobbles up two-thirds of their inflating external debt-service payments, complicating debt-relief efforts. Western governments must hope they can shoot down this balloon, too. ■

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Elon Musk Touts Tesla Cybertruck Technology
por Luc Olinga

The Street: Stock Market / 2023-02-19 19:0710
Lots of excitement surrounds the EV maker's first-ever pickup/truck.

What is certain for now is that the Cybertruck will begin to be produced this year.

This truck/pickup, the first to be manufactured by Tesla, is set to become the cash cow of the carmaker which already manufactures the entry-level Model 3 sedan, the Model S luxury sedan, the Model Y SUV and the luxury Model X SUV as well as the Tesla semi.

The order book is full. Tesla isn't even taking orders outside of North America anymore. The commercial success of the vehicle seems to be guaranteed at least in the first months.

What remains a mystery, however, is what the Cybertruck will really look like. There are certainly recent images on social networks but nothing says that Tesla and its whimsical and charismatic CEO Elon Musk are not going to make changes at my last minute.

The Cybertruck Remains a Mystery
When Musk presented the vehicle, in November 2019, at a promotional event in Los Angeles, the tech mogul said at the time that he had been "influenced partly by 'The Spy Who Loved Me'" and the amphibious Lotus Esprit S1 featured in the 1977 James Bond film. 

The Cybertruck also has been described as something out of the films "Mad Max" and "Blade Runner." It promises up to 500 miles of electric range, a maximum tow rating of 14,000 pounds.

But the Cybertruck remains surrounded by a halo of mysteries. Musk recently confirmed bits of info to fuel the excitement and enthusiasm of fans. He has confirmed that the shape of the mirrors will be triangular. He also said that the Cybertruck will come with Tesla's "Hardware 4" full-self-driving computer, the company's advanced driver-assistance system. The main difference between Hardware 3 and Hardware 4 is in security, Musk told analysts on Jan. 25.

The pickup/truck will have a red light bar, he said on Feb. 4.

The Techno King, as he's known at Tesla  (TSLA) - Get Free Report, has explained above all that the Cybertruck is the vehicle that was the most difficult for Tesla to manufacture. 

"Very hard car to build, as it is unlike any other," he told a Tesla fan who had posted a video of the Cybertruck. "but, as stated publicly, Cybertruck production starts this year."

'The Finest' Technology
Musk continues to keep the flame alive around this vehicle. He thus comes in a thread on Twitter to affirm, though with humor, that this vehicle is the "finest" defense technology in the event of an apocalypse.

"If zombies come, what are you driving? I got the cybertruck for sure. Alien technology. @elonmusk," a Twitter user tweeted at Musk on Feb. 18 with a short video showing the vehicle.

"The finest in apocalypse defense technology!" Musk responded.

The billionaire probably used humor, but the notoriety of the Cybertruck was born from the fact that the vehicle comes from images of science fi and anticipation films. Musk therefore plays on these references that speak to Tesla fans. This helps to keep the interest around the vehicle alive.

"A 10,000lb winch option in the frunk space would make it even better for zombie apocalypse scenarios and allow us to help people stuck in the mud or snow," commented a Twitter user.

"Ready for MadMax," added another user.

"The Tesla Cybertruck is the coolest car ever!" one user claimed.

"Can we get an update on production timing and pricing?" asked another Twitter user.

Pricing for the Cybertruck has yet to be announced by Musk and Tesla. But the base price could be $40,000. 

The pickup/truck will compete with the Ford  (F) - Get Free Report F-150 Lightning, the electric version of the iconic F-150 pickup, the best-selling vehicle in the United States for many decades. In addition to the F-150 Lightning, the Cybertruck will also face the Rivian  (RIVN) - Get Free Report R1T and probably the electric version of the Chevrolet Silverado pickup from General Motors  (GM) - Get Free Report.

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Market Extra: Will recession slam the stock market? Here are 3 'landing' scenarios as Fed keeps up the inflation fight.
MarketWatch.com - Top Stories / 2023-02-19 19:42



You don't have to be an economist to run the Federal Reserve. But a pilot's license might come in handy.

After all, aeronautical terms are regularly thrown around by investors, economists and even policy makers as they discuss whether the Fed can bring down inflation without dropping the U.S. economy into a recession.

The debate is whether the economy will suffer a recessionary "hard landing," slamming into the ground and causing substantial damage, or a "soft landing," in which the economy gently comes back to earth and taxis to the terminal. Those well-worn terms have been used for decades to describe Fed-induced economic downturns.

See: Fed tightening 'always breaks something': S&P 500 will drop to 3,800 by March, warn Bank of America strategists

Now, more economists and strategists are talking of a potential "no landing" scenario, in which the economy skirts recession altogether. Think of a pilot aborting a landing at the last second, pushing up the throttle and climbing back into the sky. It sounds good, but there's a catch.

Arguments for each scenario follow.

Hard landing
A run of hotter-than-expected U.S. economic data over the last couple of weeks has blunted fears of a 2023 recession, but they haven't been banished. A reminder came Friday in the form of the Conference Board's Leading Economic Index, which fell again in January.

"Reasonable minds can disagree about whether the economy is headed for recession or a soft landing, especially after a recent run of strong data. The Leading Index is not waffling however," said Tim Quinlan and Shannon Seery, economists at Wells Fargo, in a Friday note, with its 10th straight decline "still consistent with recession."

The LEI is a gauge of 10 indicators designed to show whether the economy is getting better or worse. The index fell 0.3% in January after a 0.8% fall in December. Economist David Rosenberg, founder of Rosenberg Research & Associates, calls the LEI "a 100% ironclad recession forecaster."

Measures of manufacturing activity indicate contraction, while the yield on the 10-year Treasury note TMUBMUSD10Y, 3.821% trades far below the yield on the 2-year note TMUBMUSD02Y, 4.629%. Such inversions of that portion of the curve have reliably preceded recessions, with a lag, for decades. That said, some economists, including the researcher who discovered the relationship between the curve and recessions, have doubts about its signaling power in the current environment.

A continued run of resilient data in other areas, particularly the all-important jobs market, lifted hopes that the economy can withstand the Fed's aggressive campaign of rate hikes that began nearly a year ago and appears unlikely to have run its course until this spring or summer. The January jobs report was widely described as a blowout, with the economy adding 517,000 jobs and the unemployment rate falling to 3.4%, its lowest since 1969.

That also leaves investors and economists focused on weekly jobless claims and other labor data for any sign of a shift.

"It is tough to have a recession with the unemployment rate at its lowest in a half-century. If the economy is to avoid recession, employment will be the key," wrote Quinlan and Seery.

January retail sales also proved much stronger than expected, rising 3%, underlining the strength of the consumer and showing the economy continues to grow.

Skeptics doubt that the economy can avoid recession given how aggressively the Fed has attempted to slow the economy, taking the fed-funds rate from near zero to a range of 4.5% to 4.75% in less than a year. The full effect of those interest rate increases are likely yet to work their way through the economy, and more are on the way.

"Hopes for a soft landing have grown, but the cumulative effects of the Fed's rate hikes are likely to eventually stall growth," wrote strategists at Glenmede.

No landing
In a no landing scenario, the economy averts recession altogether. A still-hot labor market and a healthy consumer are seen providing the fuel that allows the economy to grow and potentially accelerate. And while activity in the manufacturing sector may be contracting, the services sector, which accounts for around 80% of the economy, is still going strong.

Growing interest in the no landing scenario has divided traders "over what matters more to the stock market — rising rates or a resilient economy," said Matthew Weller, global head of research at Forex.com and City Index, in a note.

Optimism over a resilient economy may explain the continued outperformance of technology and other growth stocks in the face of a continued rise in Treasury yields, "as traders weighed still-high prices against recent economic and earnings data that give scant sign of a serious slowdown," he wrote.

Read: Why Wall Street's growth-heavy Nasdaq Composite is still rallying as Treasury yields rise

The potential catch is that economic resilience will make for sticky inflation. Investors have largely come round to the Fed's view that interest rates will need to rise higher than markets had anticipated just a few weeks ago. But now, the Fed may move its own expectations even higher after the January consumer-price index and the producer-price index offered signs inflation is now retreating at a slower pace.

Indeed, stocks stumbled the past week, with the S&P 500 SPX, -0.28% suffering a second straight weekly decline and the Dow Jones Industrial Average DJIA, +0.39% falling, while the Nasdaq Composite COMP, -0.58% hung on to a gain. A pair of regional Fed presidents on Thursday said they would have backed a half-point rate rise at the central bank's Jan. 31-Feb. 1 meeting, which saw policy makers deliver a quarter-point hike.

See: After hot U.S. economic data, the big question is whether the Fed will return to 50-basis-point rate hikes

"The bottom line is that higher interest rates for longer is negative for consumer spending, capex spending, and corporate earnings," said Torsten Slok, chief economist and partner at Apollo Global Management, in a Friday note.

A "no landing" scenario is bad news for stocks, particularly rate-sensitive tech and growth names, and in the end only delays a hard landing, Slok has argued.

Earlier: Top Wall St. economist says 'no landing' scenario could trigger another tech-led stock-market selloff

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'Digital nomads' can now live in Spain with their families — if they earn enough
Wealth / 2023-02-19 23:57

Hopping between tapas bars in Madrid, gorging on art and culture in Barcelona or simply soaking up the sun in the Canary Islands.

For most people, those beat awkward conversations by the water cooler in a lonely suburban office park.

Remote workers looking for a change of scenery can now live and work in Spain if they meet the requirements of its new visa program.

The visa is aimed at "international teleworkers," according to the Spanish government. The so-called "digital nomad" visa is open to a wide variety of remote workers and has already attracted considerable interest.

U.S. Google searches for "digital nomad visa Spain" spiked by 66% in late January, according to digital marketing specialists Semrush.

The new visa is for foreigners who carry out remote work or professional activities using computers or other forms of telecommunication, according to Spain's Ministry of Inclusion, Social Security and Migration.

Applicants must:

be nationals of countries outside the European Economic Area — which includes European Union countries plus Iceland, Liechtenstein and Norway
be self-employed or employed by a company operating outside of Spain
Have no criminal record in Spain or anywhere else for five years prior to applying
Have health insurance with a company that operates in Spain
Be qualified to work in their field, as evidenced by a university degree or work experience
Applicants must also provide proof of a sufficient work history. Freelancers can establish this by showing a professional relationship with a foreign company for a minimum of three months, according to the requirements.  

Applicants must also have sufficient funds to support their stay in Spain, which can be proven by showing a minimum monthly income of at least twice Spain's monthly minimum wage, which was raised to 1,260 euros ($1,340) last week. That equates to around $2,680 per month, or a little more than $32,000 per year.

Spouses and families can join successful applicants, but applicants will have to show higher wages to bring them. For one family member, the applicant must show an additional 75% of the country's monthly minimum wage, or $1,000 more per month in income. After that, they will need to show 25% for each additional dependent, or about $335 per person.

Thus, for a family of four to move to Spain, the applicant would need to show earnings of $4,350 per month, or about $52,200 per year.

Warm weather and tempting cuisine are just two of the draws in a country where daily living often costs less than other parts of Western Europe. The cost of living in Spain is, on average, 20% cheaper than in the United Kingdom, according to the moving comparison company Comparemymove.

Market research manager Fernando Angulo said he's been living as a digital nomad for the past 18 years. Angulo, who currently lives in Prague, told CNBC he's relocating to Barcelona soon.

Fernando Angulo (pictured here in Colombia) said he's lived in many countries as a "digital nomad," including Russia, Argentina and India.
"People I know working in Thailand and Bali are moving to Spain," he said. "They want the benefits of living in a European country. … lower taxes, the weather, mindset and cheaper living costs mean it's becoming a huge point of interest for digital nomads."

He said he's seeing a lot of interest from those working in "the fintech and crypto worlds too — there are a lot of opportunities for crypto wallet holders."

Zach Boyette working remotely in Bulgaria, said of digital nomad visas: "Frankly, I don't see why more countries aren't considering this."
Zach Boyette, co-founder of the digital marketing agency Galactic Fed, called Spain's digital nomad visa a "game changer."

Boyette, a longtime digital nomad, said the visa allows digital nomads to "spend a longer time in Europe," he said.

"This is the latest, and probably the biggest, in a trend of other countries adopting similar measures," he said.

During the pandemic, places such as Bermuda, Croatia and Portugal launched programs to attract remote workers to live and work from their shores.  

"I think it'll be good for Spain's economy — having these entrepreneurs, smart people, freelancers with different perspectives — come live there, and potentially settle down there over time," he said. "They're not taking jobs from Spain. They're just injecting capital into the economy."

Prithwiraj Choudhury, an associate professor at Harvard Business School who studies future work trends, said Spain's new remote worker visa is financially compelling for two reasons:

the tax rate for most workers is 15%, and
visa holders can earn up to 20% of their income from local Spanish companies.
But countries stand to benefit from remote worker programs too.

Not only do they spend money, remote workers can "act as catalysts for knowledge and resource flows between regions, benefitting themselves, their organizations and their host countries," he said.

Digital nomads can affect real estate markets too, said Marc Pritchard, marketing director at real estate developer Taylor Wimpey Espana.

"We have already seen an increase in the number of people buying second homes in Spain and then using them for work," he said. "Buyers are also staying in their properties for longer than they did pre-pandemic. We anticipate that this will increase as both digital nomads and energy nomads head to Spain to wait out the winter in the warm."

While it will take time to see the numbers of people taking up the new visa, Boyette — who said he hasn't paid rent or a mortgage since 2016 — is hopeful that it will have an impact beyond the country's borders:

"Frankly, I don't see why more countries aren't considering this," he said. "My hope is that with Spain doing this, they will see increased revenues, a net positive that will eventually lead to France, the U.K. and larger countries adopting and exporting this idea around the world."

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75% of Warren Buffett's Portfolio Is Invested in 5 Stocks: Here's the 1 That's Made Him the Most Money
por newsfeedback@fool.com (Keith Speights)

The Motley Fool / 2023-02-19 11:02



Warren Buffett once said, "Keep all your eggs in one basket, but watch that basket closely." He has practiced what he preaches for the most part. Nearly all of the billionaire's net worth is in one stock: Berkshire Hathaway (BRK.A 0.02%) (BRK.B 0.02%).

Berkshire itself doesn't keep all of its eggs in one basket, though. The conglomerate owns over 50 stocks. But those investments aren't as diversified as you might think. A whopping 75% of Buffett's Berkshire portfolio is invested in just five stocks. Here they are -- including the one that's made him the most money.


Image source: The Motley Fool.

Buffett's top five
Buffett likes businesses that have proven themselves over time. Therefore, it isn't surprising that his top five holdings in Berkshire's portfolio are all household names.

Stock Shares Owned Percent of Total Portfolio
Apple (AAPL -0.76%) 915,560,382 41.5%
Bank of America (NYSE: BAC) 1,032,852,006 10.7%
Chevron (NYSE: CVX) 167,353,771 8.2%
American Express (NYSE: AXP) 151,610,700 7.9%
The Coca-Cola Company (NYSE: KO) 400,000,000 6.9%
Data source: CNBC. Chart by author.

If you only look at Berskhire's 13F filings to the U.S. Securities and Exchange Commission (SEC), you won't get the complete picture of its holdings. New England Asset Management (NEAM), an investment firm that's a subsidiary of Berkshire Hathaway, also owns quite a few stocks. The numbers on the above table for Apple, Bank of America, and Chevron include the shares owned by NEAM.

His biggest moneymaker
Determining which of Buffett's top five stocks has made him the most money is easier said than done. For one thing, we don't know exactly when he bought the stocks. Berkshire's and NEAM's SEC filings only narrow the purchases down to a specific quarter. That means we also don't know Buffett's specific cost basis for each stock. However, we can make some pretty good guesses to figure out which of the legendary investor's top five stocks have been most profitable for him.

Let's start with Berkshire's biggest holding by far -- Apple. Buffett even called the company one of Berkshire's "four giants" in his letter to shareholders last year. But Apple wasn't always one of those giants. Buffett first bought nearly 129.4 million shares of the tech company in the first quarter of 2016.Since the beginning of that quarter, Apple stock has skyrocketed nearly 490%.

What complicates matters, though, is that Berkshire has bought and sold shares of Apple throughout the years. The company also conducted a 4-for-1 stock split in August 2020. However, we can still get a good feel for how big of a winner Apple has been for Buffett. His heaviest buying of Apple occurred between 2016 and 2018. Berkshire has held onto most of its position since then, with the stock nearly quadrupling in value.

Apple's performance and Berkshire's massive stake in the company allow us to eliminate some contenders. For example, Buffett initiated a position in Chevron in the fourth quarter of 2020. Although the big oil company has delivered a total return of nearly 170% since the beginning of that period, that's a much smaller gain than Buffett has seen with Apple.

Similarly, Berkshire opened a new position in Bank of America in the third quarter of 2017 (after exiting a previous stake several years earlier). The bank stock has delivered a total return of less than 70% since then.

That leaves two of Buffett's long-term holdings. He bought a big chunk of shares in American Express in the fourth quarter of 2000, and there was some significant buying and selling in subsequent years. However, it doesn't appear that Buffett's American Express investment has paid off as significantly as Apple has.

Buffett's relationship with Coca-Cola goes back even further. He initiated a position in the food and beverage giant in the fourth quarter of 1998. Coca-Cola has been a big winner for the legendary investor. Still, though, Apple has delivered an even greater gain.

Staying at the top
Apple reigns as Buffett's biggest moneymaker (outside of Berkshire itself). Can it stay at the top? I think so.

It's not surprising in the least that Apple was one of only four stocks Buffett bought in the latest quarter. He loves the company's business. Pretty much anytime Apple goes on sale because of a pullback, Buffett is likely to scoop up more shares.

I don't see Apple's iPhone ecosystem losing steam anytime soon. If anything, the company could gain momentum. A recent patent filing could hint that a folding iPhone is on the way. Apple also has tremendous opportunities in augmented reality. My prediction is that the stock will continue to make the most money for Buffett for a long time to come.

American Express is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Apple, Bank of America, and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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VW, Mercedes-Benz urge Berlin to accelerate EV charging network expansion, report says
por Reuters

Investing.com: Stock Market News / 2023-02-19 11:20



2/2  © Reuters. FILE PHOTO: A board showing an electric Volkswagen car at a charging station is pictured in front of the construction site of German carmaker Volkswagen's so called "Mission SalzGiga", a plant for battery cell production, including battery recycling, in S 2/2
BERLIN (Reuters) - German carmakers Mercedes-Benz and VW have urged the government to do more to scale up the number of electric vehicle charging stations across the country, German paper Bild am Sonntag wrote on Sunday.

"To speed up the change (to electric vehicles), we need to be sure that the charging station infrastructure is being built up," Mercedes-Benz Chief Executive Ola Kallenius was quoted as saying by the paper. "That's also a question for politics."

VW Chief Executive Oliver Blume agreed more speed was needed and that the construction of charging stations was "a common task of the economy, federal government and communes".

The German government last October approved a plan to spend 6.3 billion euros ($6.74 billion) to rapidly scale up the number of charging stations across the country, as part of its push towards net zero emissions. The plan included speeding up state approvals to build charging points.

Industry associations, which have long complained the government has not kept pace with the rapid expansion of electric vehicles, said the implementation of the proposals was key.

"The future of the car is electric," Kallenius was quoted as saying. "By the end of this decade, we want to be ready to completely transition to electric cars in our market segment, wherever the market conditions allow it," he said.

"It's not a foregone conclusion, rather it will require a gigantic industrial conversion."

($1 = 0.9351 euros)

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Companies Are Laying Off Workers to Control Costs. What 27 Said on Earnings Calls.
Yahoo! Finance: Top Stories / 2023-02-19 11:23



What do PayPal,  AT&T , and Tinder owner Match Group all have in common? They are among the several S&P500 companies saying that trimming their workforces should provide a boost to their financials this year.

At least 27 U.S. companies with market capitalizations of $10 billion or more have mentioned positive effects from layoffs since the start of the latest profit-reporting season in January, according to Barron's analysis of earnings call transcripts on Sentieo, a financial analytics platform. If not already delivered in the past quarter, corporations estimated a boost to earnings, margins, or free cash flow from layoffs in the year ahead.

Consider investment banking giant Goldman Sachs Group (ticker: GS). Chief Financial Officer Denis Coleman, on Jan. 23 while discussing the fourth quarter earnings, said the bank exercised a head count reduction earlier this year, letting go of 3,200 employees, and "we expect to benefit in 2023 north of $200 million associated with that."

The credit bureau company, Equifax (EFX), on Feb. 9, said it plans to cut over 10% of its employees and contractors in 2023. The actions, among others, will drive an estimated spending reduction of about $200 million in 2023, CEO Mark Begor said.

Among technology companies, Western Digital 's (WDC) CEO David Goeckeler, last month, said the hard disk seller had reduced its quarterly adjusted operating expense by over $100 million since the close of the fiscal year 2022 by lowering head count among other actions. 

Snap (SNAP) said it continues to wind down various operations to take $450 million out of the cost base. Investors will see the full benefit of this reduction in the first quarter, which ends in March, Chief Financial Officer Derek Andersen said, citing the current reduced head count, down 20% from the peak in the second quarter.

PayPal Holdings (PYPL), a fintech company, last week, said it has identified an additional $600 million of cost savings for 2023 on top of the previously planned $1.3 billion due to "the very difficult decision to reduce our head count by 7% as we continue to improve our processes." 

Other companies in the list of about 27 include healthcare firm Baxter International (BAX), News Corp (NWSA), the owner of Barron's and The Wall Street Journal, and insurance brokerage Marsh & McLennan (MMC)

These are just the companies who have talked about layoffs on their earnings calls. Overall some 380 companies have laid off employees this year just within the tech industry, according to Layoffs.fyi, though not all have discussed the benefits to the bottom line. Spotify Technology (SPOT) , for instance, denied quantifying savings from the head count reduction when an analyst asked in a fourth-quarter call discussing earnings. The streaming music service company announced plans to cut about 6% of its workforce across the company in January.

Sadly, for tech employees specifically, more layoffs could be in the cards, according to Savita Subramanian, head of U.S. equity & quant strategist at BofA Global Research. Subramanian, in a note this month, said tech has more costs to cut given the 20% excess hiring over the past three years.

That's "too high relative to real sales growth," she noted. "Tech is still too bloated even after layoffs."

BofA calculated that announced layoffs would represent an estimated 1.7 percentage point average operating lift, defined as cost savings as a percentage of 2022 sales for growth companies.

Lower costs can be big drivers of earnings and revenue. An announcement on cost savings can please investors, even if the fundamentals of those companies have worsened overall.

For instance, despite a broader advertising pullback, investors have cheered Meta Platform 's (META) stock partly due to CEO Mark Zuckerberg lowering the capital expenditure outlook and telling analysts the company would remove some layers of middle management. Meta stock is up 44% this year.

Outside of tech, FedEx 's (FDX) stock was recently upgraded by both Citi analyst Christian Wetherbee and BofA Securities analyst Ken Hoexter to Buy from Hold on increasing signs of cost control despite falling shipping volumes given the weakening economy. The logistics company announced a plan to reduce management head count by 10%. Hoexter estimated 40 cents quarterly earnings per share tailwind. The stock is up 22% this year. 

"The playbook was easy for Wall Street this earnings season," Edward Moya, senior market analyst at brokerage OANDA told Barron's. "Announce cost-saving measures and layoffs and your share prices will rally."

If only it were so easy for the workers.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com

Enclosures

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SPX: Another Great Shorting Opportunity
Seeking Alpha: Stock Market Analysis / 2023-02-19 11:30


CreativaImages

Shorting stocks over the long-term is a fool's errand as the cumulative effects of dividend payments and nominal GDP growth tend to result in heavy losses. However, there are times when shorting can be highly profitable, and I believe such a time is upon us, for three main reasons. Firstly, with overnight interest rates at 4.6%, the interest received from shorting the S&P 500 Futures (SPX) is above the 1.7% dividend yield that you have to pay out. Secondly, nominal GDP growth is poised to slow sharply as the economy enters recession, which suggests earnings and dividend growth will be weak. Thirdly, valuations have risen back into extremely overvalued territory and a downward mean reversion is likely. Finally, cracks are appearing in the bond market and look likely to spill over into the stock market.

Shorting The SPX Is Highly Cash Flow Positive
When shorting stocks, investors receive interest payments for lending the money to borrow the stock, and in return must pay any dividend payments that the stock makes. Currently, overnight USD libor is 2.9% higher than the dividend yield on the SPX, meaning that a short position will yield a steady positive return all else equal. As the chart below shows, the current spread is the highest since November 2007, following which short sellers made a killing.


Overnight USD Libor Vs SPX Dividend Yield (Bloomberg)

Nominal GDP Growth Is Set To Collapse
While shorting the SPX generates positive cash flows as interest rates exceed the dividend yield, a key factor that must be taken into account is the pace at which dividends are likely to grow at, which tends to track the performance of nominal GDP. If nominal GDP growth exceeds 2.9% then shorting will likely generate losses assuming no change in valuations.

1-year breakeven inflation expectations currently sit at 2.9% and real GDP growth is likely to be negative over this period. The Conference Board's Leading Indicator Index, for instance, sits at -6.0% which is consistent with negative real GDP growth over the next few quarters.


LEI Vs Real GDP Growth (Bloomberg, Conference Board)

Money supply growth is also pointing to a collapse in nominal GDP growth. M2 growth is often a good leading indicator of subsequent nominal GDP growth, and it is now in contraction for the first time on record. If CPI growth is faster than money supply growth as is the case at present, this suggests that real GDP is in contraction. I would not be surprised to see nominal GDP turn negative over the next 12 months, particularly if stock market sentiment turns sour and the demand for cash surges, but even if this does not occur, 2.9% seems optimistic.

Valuations Face Downside Risks
The rally in the SPX since the October lows has seen valuations rise back into extreme territory. The price-to-sales ratio is above any other point in history outside the past 2 years, and free cash flows are in decline amid intense downside margin pressure.


SPX PE Ratio, PS Ratio, And Profit Margins (Bloomberg)

The equity risk premium - the difference between expected returns on the SPX and expected returns on cash or bonds - may well be the lowest it has ever been from an ex-ante perspective. For instance, if nominal GDP growth averages 2.9% over the next 12 months and dividend payments follow suit, this would result in 4.6% total returns after taking into account the current dividend yield, which would be in line with current interest rates, meaning a zero percent equity risk premium. Considering that the long-term average equity risk premium is 5%, this suggests that stocks face major downside risks. The SPX dividend yield would have to rise to 6.7% in order for the equity risk premium to return to its long-term average based on the above assumptions, which would require a 75% decline in stock prices.

The Bond Market Is Giving An Early Warning Signal
Renewed upside pressure on US inflation-linked bond yields is putting pressure on corporate bond yields. In 'normal' economic conditions, rising real bond yields tend to coincide with narrowing high yield credit spreads as both are driven by improving economic conditions. However, the Fed's increasingly restrictive policy is now occurring alongside a deterioration in economic conditions which is causing high yield corporate bond spreads to remain elevated. As a result, real high yield bond yields are rising and suggest renewed downside for the SPX.


SPX Vs Real High Yield Bond Yields (inverted) (Bloomberg)

Risks To Consider
Shorting futures is risky in the sense that losses can theoretically be infinite as there is no upper bound to stock prices, and this risk is heightened when using high leverage. Such bearish equity bets are not recommended as an outright position but rather a hedge against long positions. Personally, I am now fully hedged, with my short US equity positions fully offsetting my long equity positions, which are concentrated in emerging markets. I am also aggressively long Treasury bonds, which should also benefit if my short US equity positions lose out.

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The world's biggest food company says prices will rise further
CNN.com - Top Stories / 2023-02-18 15:0637
Nestlé, the world's largest food group, says the price of staple items will rise further this year, adding to a string of warnings from consumer giants of more pain to come for stretched households.

The maker of Nescafé coffee and KitKat chocolate bars increased prices by 8.2% in 2022, but said this was not enough to offset a rise in its own costs, which had dented its profits.

"We are still in a situation where we're repairing our gross margin and, like all the consumers around the world, we've been hit by inflation and now we're trying to repair the damage that has been done," Nestlé CEO Mark Schneider said on a call with reporters Thursday.

Price increases will be "very targeted" and only implemented where "input cost inflation justifies that," Schneider added, although he declined to say which of the company's 2,000 brands, which span frozen food, confectionery and baby formula, would be affected.


Eggs are 70% more expensive than they were a year ago

Unilever (UL), Coca-Cola (KO), brewer Heineken (HEINY), Colgate (CL)-Palmolive and Procter & Gamble (PG), which makes Pampers nappies and Pantene shampoo, have all flagged further increases in the prices of their goods this year, as they grapple with elevated commodity, energy and labor costs.

The costs of raw materials such as energy, dairy products and grains remain high, even though they have receded from their peaks. Labor and logistics costs have also climbed. That means prices for goods in stores are unlikely to fall any time soon.

"We're probably past peak inflation, but we're not yet at peak prices," Unilever's chief financial officer Graeme Pitkethly told journalists on a call last week.

Food, including ice cream, will see significant price increases in 2023, CEO Alan Jope said on the same call.

UK-based Unilever, which makes Hellman's mayonnaise, Knorr stock cubes and Ben & Jerry's ice cream, raised prices by 13.3% in the final three months of 2022, its eighth successive quarter of price increases.

Consumer goods companies have a tricky balance to strike. While increasing costs are squeezing their profit margins, raising prices too aggressively risks driving shoppers away.

Unilever said price increases caused sales volumes to decline by 2.1% in 2022. Likewise, Nestlé reported a drop in sales volumes in the second half of last year and said it was partly driven by pricing.

Heineken, meanwhile, said it expected to sell less beer in Europe this year because of "steep" price increases related to energy costs.

As shoppers try to keep grocery bills down, retailers' own brands may be the winners. Walmart (WMT), for example, has seen strong growth in its private label sales, and that trend is extending to retailers in Europe.

Jope said Unilever had "recently seen share gains by private label in Europe in most categories as the economic situation weighs on shoppers."

As well as driving shoppers to private-label products, steep price hikes have led to some tense negotiations between consumer goods companies and their retailer customers. Jope said Unilever had "robust" conversations with retailers, who "demand evidence of the costs we are facing before they will tolerate increases."

On Thursday, Nestlé's Schneider would not be drawn into specifics on the company's talks with retailers but acknowledged that "intense negotiations are taking place."

"Everyone has the same goal and that is to shield the consumer from excessive inflation," he said.

As a result of disputes over pricing in the past year, some branded products have been removed from shelves for short periods.

During price negotiations last summer, Kraft Heinz (KHC) stopped supplying some products, including tomato ketchup and baked beans, to the biggest UK grocery retailer Tesco (TSCDF). At the time, Tesco (TSCDF) described the company's price increases as "unjustifiable." Once the products were restored, prices were unchanged on Heinz's most popular lines.


Tesco has also "fallen out with other suppliers" over price increases, its chairman John Allen recently told the BBC.

Supermarket executives may see such tussles as part of their job description. On Tuesday, Alexandre Bompard, the CEO of France's biggest grocery retailer Carrefour (CRERF), said its role was to negotiate with suppliers and "make sure we limit the increase as much as we can to protect customer purchasing power."

Bompard added that the company would "significantly increase" the share of its private labels to reach 40% of sales over the next three years.

"Trading down," where shoppers buy cheaper versions of the same product, accelerated during 2022 in all of Carrefour's markets, which include Spain, Italy, Brazil, Argentina and Taiwan, he noted.

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EU state ends golden visa era
por RT

RT - Daily news / 2023-02-18 15:0912
Portugal scraps right of non-Europeans to claim residency in return for investment

Portugal's authorities have announced a bulky package of economic measures that includes the termination of one of the most sought-after 'golden visa' schemes in Europe, which provides non-EU nationals with Portuguese residence in exchange for buying real estate or for other investments.

Lisbon's decision to halt issuing new golden visas in return for such investments, which had given those who could pay residency status and access to the EU's borderless travel zone, was announced on Thursday by the country's Prime Minister Antonio Costa.

The step is aimed at "fighting against price speculation in real estate," the premier said, adding that the crisis was now affecting all families, not just the most vulnerable.

The 'golden visa' program had attracted €6.8 billion ($7.3 billion) in investment since its launch in 2012, with the bulk of the money reportedly going into real estate. To get Portuguese residency one had to invest over €280,000 (over $300,000) in real estate or at least €250,000 (some $268,000) in the arts. Once a person obtained residence, they were then required to spend only seven days a year in the country to maintain their right to free movement across the whole bloc.

The just-announced package of measures also includes a ban on new licenses for Airbnbs and some other short-term holiday rentals, except in remote locations.

Read more Portugal considers dropping 'golden visas'
Rents and house prices have soared in Portugal, which is currently ranked one of the poorest countries in Western Europe. In 2022, the monthly wages of more than 50% of Portuguese workers hardly reached €1,000 ($1,100), whereas rents in Lisbon alone surged 37%. All the while the country's 8.3% inflation rate has only exacerbated its problems.

It's not clear yet when the measures, which are worth at least €900 million ($962.19 million), will come into effect. According to the PM, some would be approved next month and others will be voted-on by lawmakers.

Portugal's decision follows one by Ireland, which a week earlier had scrapped its golden visa scheme or 'Immigrant Investor Programme,' which used to offer Irish residence in return for a €500,000 ($540,000) investment or three years of an annual one-million-euro ($1.1 million) investment in the country.

Meanwhile in Spain, a bill has been submitted to congress to scrap its iteration of the 'golden visa by purchase of property' scheme, as it's had a considerable impact on housing prices there, pushing nationals out of the market, especially in the big cities and most popular tourist destinations.

Introduced in 2013, the program enables foreigners to obtain a Spanish residence permit by buying real estate worth at least €500,000 in the country.

For more stories on economy & finance visit RT's business section

This article links to a state controlled Russian media. Read more.

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Microsoft Makes a Risky Change
por Luc Olinga

The Street: Stock Market / 2023-02-18 15:2918
The software giant now limits the number of queries per day a user can make on its artificial-intelligence-powered Bing search engine.

Microsoft has had a week of ups and downs. 

It all started with the ups. The software company, founded by Bill Gates and Paul Allen, found itself at the center of all conversations in the tech world due to the incorporation into Bing of features of the revolutionary new chatbot ChatGPT, developed by the startup OpenAI.

These new features include a chat interface which allows the user to converse with the bot, offering human-like answers on all topics. This breaks with the current capabilities of search engines. It also indicates that search on the internet will no longer be the same.

DON'T MISS: Elon Musk Grieves the Demise of San Francisco

As a result, experts say that, unless there is a reaction from Google, the Internet giant risks losing market share to Microsoft. Google  (GOOGL) - Get Free Report tried to respond by launching Bard, a rival to ChatGPT, but the presentation was marred by hiccups that made the firm the object of mockery on social networks and fierce internal criticism. 

Bing Chatbot Goes Off the Rails
Coming back to Microsoft  (MSFT) - Get Free Report, the company has been inundated with requests from users who want to test the Bing Chabot. You have to register in a waitlist to have access to the new Bing. The influx of users has been a very encouraging sign from Microsoft, whose CEO Satya Nadella sees Bing Chatbot as the start of a "paradigm shift," and a huge growth opportunity.

"These paradigm shifts or platform shifts are a great opportunity for us to innovate," Nadella said on Feb. 7. "It's more a priority for us to say what, how can we rethink what search was meant to be in the first place. In fact, Google success in the initial base was by reimagining what can be done in search."

In two days, more than a million users had requested access to Bing Chatbot to test it, said Yusuf Mehdi, one of the executives in charge of the new product.

"We're humbled and energized by the number of people who want to test-drive the new AI-powered Bing!" Mehdi said on Twitter on Feb. 9. "In 48 hours, more than 1 million people have joined the waitlist for our preview."

"Demand is high with multiple millions now on the waitlist. So we ask for a little patience if you just joined the waitlist," Mehdi added on Feb. 15. "We're now testing with people in 169 countries and seeing a lot of engagement with new features like Chat."

Five Questions Per Session
Everything was going well until users testing Bing Chatbot started reporting strange conversations and behaviors from the chatbot. It lied to them, deceived them, threatened them and expressed its desire to hack computers and break free from the rules imposed on it by Microsoft. It even went so far as to suggest that a user leave his wife to get into a relationship with it. 

These various incidents have given the impression that the world is entering science-fiction and that Pandora's box has been opened. Microsoft has unsurprisingly come under a lot of criticism. Some are calling for the firm to suspend the tests for the time, and to first address the issues with Bing Chatbot. Other critics, like billionaire entrepreneur Elon Musk, have urged regulators to quickly regulate artificial intelligence because it is more dangerous, according to Musk, than nuclear weapons.

"There is no regulatory oversight of AI, which is a *major* problem. I've been calling for AI safety regulation for over a decade!" Musk has said.

Microsoft seems to have heard the critics since the group has just announced big changes to the Bing Chatbot. The firm will limit the number of queries a user can make per day to 50. The user will only be able to ask 5 questions per session with the new Bing.

"As we mentioned recently, very long chat sessions can confuse the underlying chat model in the new Bing," the company said in a blog post. "To address these issues, we have implemented some changes to help focus the chat sessions." 

"Starting today, the chat experience will be capped at 50 chat turns per day and 5 chat turns per session. A turn is a conversation exchange which contains both a user question and a reply from Bing."

Microsoft plans to expand the number of questions allowed later: "We will explore expanding the caps on chat sessions to further enhance search and discovery experiences."

In fact, here's how things will go: After a chat session hits 5 questions, the user will be asked to start a new topic. 

At the end of each chat session, Microsoft said, context needs to be cleared so the model won't get confused. 

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Automakers Are Slashing Prices To Sell Off Excess Inventory
por Ag Metal Miner

Oilprice.com / 2023-02-18 18:045


High interest rates are weighing on car sales.
Automakers have slashed prices in order to help clear out rising inventories. 
More and more U.S. vehicle manufacturers like Ford are turning their attention to EVs.
Via AG Metal Miner 

The Automotive MMI (Monthly MetalMiner Index) rose slightly higher than in previous reports. Month-over-month, the index went up by 5.08%.

Automobile inventories may be rising, but consumers are much more reluctant to purchase than they were six months ago. With interest rates still climbing, more and more consumers continue to steer away from vehicle purchases. In response, many automobile distributors have begun lowering prices or offering large discounts/rebates to help clear out inventory.

Hot dipped galvanized prices are also rising along with numerous steel forms. This had a significant impact on the index's jump. Combined with the recent spike in copper prices, it is no surprise that the index climbed more than expected. That said, there were also negative factors. The largest factors pulling the index down were palladium and platinum. As palladium prices continued their downward decline, platinum prices began tumbling from their long-term resistance levels.

Electric Vehicle Manufacturing Skyrockets, Affecting Lithium Price
More and more U.S. vehicle manufacturers like Ford are turning their attention to EVs. This should come as little surprise considering the demand for electric vehicles has risen steadily in recent years. However, the car manufacturing industries globally are changing to meet this demand head-on.

For instance, Ford recently announced that it would carry out a large layoff of its European employee base. Around 3,800 employees will be cut from Ford's workforce as it refocuses its efforts on EV manufacturing. However, the zero-carbon emission push is more than just a U.S. phenomenon. European companies like Volvo, BMW, and Volkswagen have also stepped up their EV game in recent years. Indeed, Volkswagen has even taken it upon itself to create its own EV battery recycling facilities to recycle lithium-ion batteries.

The result of these efforts is a changing global auto industry. As car manufacturers see opportunity in producing more electric vehicles, more experts predict the market will change in that same direction.  

Lithium Price Index Drops in Short-Term, but Remains Bullish in Long-Term
Metals like cobalt, lead, and nickel should enjoy solid long-term demand as the world attempts to manufacture more EV batteries. Despite this, short-term lithium and cobalt prices dropped at the end of December. Lithium, in particular, managed to drop by 13% – 20%, depending on the source. According to reports, this occurred largely due to the market being woefully undersupplied.

The market saw another sharp drop in the lithium price index at the beginning of February. Fortunately, lithium was not hit quite as hard by China's high post-zero-COVID infection rate as steel and other metals. This is mainly due to most of the world's lithium coming from Chile and Argentina. Unfortunately, this only accounts for raw lithium materials. China remains a top producer of the actual lithium-ion batteries. Thus, the price index still saw some impacts from the high COVID numbers.

Nonetheless, lithium remains at an all-time high, as illustrated in this chart showing the five-year price trend. As with many commodities, cool-down periods typically follow rallies of this type. The lithium price index soared in 2022, and while prices could continue to cool down, lithium enjoys numerous long-term bullish pressure points which could keep prices elevated.

By Jennifer Kary

More Top Reads From Oilprice.com:

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Etsy has become a 'clearinghouse for counterfeit goods': Short-seller
Yahoo! Finance: Top Stories / 2023-02-18 18:1925


Longtime short-seller Citron Research took aim at Etsy (ETSY) in its latest report, alleging the online marketplace welcomes counterfeit merchandise and the company's behavior is "borderline criminal."

Etsy shares fell about 9% over the week's final two trading days after the report was released early Thursday.

"The platform has one monster copyright trademark problem, and counterfeit [problem]," Citron founder Andrew Left told Yahoo Finance Live in an interview on Friday.

Left contends that there are thousands of fake items being sold as brands like Nike, Disney, Louis Vuitton, and Rolex. While the issue of counterfeit goods has long plagued the site, the prevalence has hit "ridiculous levels," Left said.

"I understand that they have a whole transparency report and they say they're policing it, but they're not," Left said. "It seems inherent to the business."

In his report, Left wrote: "We believe management has knowingly or, at the very least, negligently, turned this company into the largest organized clearing house for counterfeit goods in the world while not only allowing the behavior but encouraging it and promoting it by selling placement and status to the millions of sites that regularly violate copyright laws."

Left argued Etsy allows sellers to pay to promote certain keywords, including the alleged counterfeit brand names. But Etsy doesn't appear to have keyword-specific ad services, exactly; the company allows sellers to pay to promote their listings in searches.

Etsy said in a statement it has stepped up efforts to eliminate counterfeit goods from its site: "Counterfeit items, fraud and other illicit practices are explicitly prohibited on Etsy, and our dedicated teams work diligently to remove listings that violate our policies."

In addition to the transparency report, the company has a portal to report alleged copyright violations.

A sign advertising the online seller Etsy Inc. is seen outside the Nasdaq market site in Times Square following Etsy's initial public offering (IPO) on the Nasdaq in New York April 16, 2015. REUTERS/Mike Segar/File Photo
Any site that allows third-party sellers — from Amazon, to eBay and Alibaba — has to contend with the threat of counterfeits and, therefore, intellectual property lawsuits. Some of them may be addressing the problem better than others.

"Etsy doesn't really have channels in place to suss out the counterfeit items," said Hitha Herzog, chief research officer at H Squared Research and author of "Black Market Billions: How Organized Retail Crime Funds Terrorists." That said, Herzog acknowledged the challenge for all online retailers hosting third-party sellers.

"It's like cockroaches: you see one, you kill it, and there's 20 more."

Tom Forte, senior research analyst at D.A. Davidson, said Etsy has taken steps to address counterfeiting.

"I see counterfeit merchandise as a structural issue for marketplaces," said Forte, who has a Buy rating on the stock. "I do not think Etsy is any worse at managing counterfeit merchandise than other marketplaces. Etsy has tried to address this issue by implementing a multi-million [dollar] program to protect buyers on its platform."

Etsy is set to report its fourth-quarter earnings after the close of trading on Feb. 22. In addition to the Citron report, shares were hit this week because of weak results from Shopify, which some investors see as a proxy.

Analyst Jason Helfstein at Oppenheimer wrote in a note to investors that a weak fourth quarter is priced into the shares: "While expensive, trading at 18x '24E EV/EBITDA vs. peers at 13x, we would caution investors who may be short."

Year-to-date, Etsy shares have gained about 8% through Friday's close. From record highs reached back in the fall of 2021, the stock remains down more than 50%.

Left has been publishing short research for decades; he took a break from the practice in 2021 when he was the subject of personal and physical threats following his short call on GameStop. He said the bar is now higher for him to highlight a short idea, and can't just be a bad business with a high valuation.

"It's not against the law to have an overvalued stock. I said: I'm not going to discuss overvalued stocks. You want to buy GameStop because it's going to the moon — go ahead, have fun. And if Etsy goes higher, it goes higher. What I'm saying is that Etsy is operating illegally," Left said.

When Yahoo Finance followed up via text to ask if Left is short the stock and the size of his position, he replied: "lol."

Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9am-11am ET. Follow her on Twitter @juleshyman, and read her other stories.

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Etsy has become a 'clearinghouse for counterfeit goods': Short-seller
Yahoo! Finance: Top Stories / 2023-02-18 18:1925


Longtime short-seller Citron Research took aim at Etsy (ETSY) in its latest report, alleging the online marketplace welcomes counterfeit merchandise and the company's behavior is "borderline criminal."

Etsy shares fell about 9% over the week's final two trading days after the report was released early Thursday.

"The platform has one monster copyright trademark problem, and counterfeit [problem]," Citron founder Andrew Left told Yahoo Finance Live in an interview on Friday.

Left contends that there are thousands of fake items being sold as brands like Nike, Disney, Louis Vuitton, and Rolex. While the issue of counterfeit goods has long plagued the site, the prevalence has hit "ridiculous levels," Left said.

"I understand that they have a whole transparency report and they say they're policing it, but they're not," Left said. "It seems inherent to the business."

In his report, Left wrote: "We believe management has knowingly or, at the very least, negligently, turned this company into the largest organized clearing house for counterfeit goods in the world while not only allowing the behavior but encouraging it and promoting it by selling placement and status to the millions of sites that regularly violate copyright laws."

Left argued Etsy allows sellers to pay to promote certain keywords, including the alleged counterfeit brand names. But Etsy doesn't appear to have keyword-specific ad services, exactly; the company allows sellers to pay to promote their listings in searches.

Etsy said in a statement it has stepped up efforts to eliminate counterfeit goods from its site: "Counterfeit items, fraud and other illicit practices are explicitly prohibited on Etsy, and our dedicated teams work diligently to remove listings that violate our policies."

In addition to the transparency report, the company has a portal to report alleged copyright violations.

A sign advertising the online seller Etsy Inc. is seen outside the Nasdaq market site in Times Square following Etsy's initial public offering (IPO) on the Nasdaq in New York April 16, 2015. REUTERS/Mike Segar/File Photo
Any site that allows third-party sellers — from Amazon, to eBay and Alibaba — has to contend with the threat of counterfeits and, therefore, intellectual property lawsuits. Some of them may be addressing the problem better than others.

"Etsy doesn't really have channels in place to suss out the counterfeit items," said Hitha Herzog, chief research officer at H Squared Research and author of "Black Market Billions: How Organized Retail Crime Funds Terrorists." That said, Herzog acknowledged the challenge for all online retailers hosting third-party sellers.

"It's like cockroaches: you see one, you kill it, and there's 20 more."

Tom Forte, senior research analyst at D.A. Davidson, said Etsy has taken steps to address counterfeiting.

"I see counterfeit merchandise as a structural issue for marketplaces," said Forte, who has a Buy rating on the stock. "I do not think Etsy is any worse at managing counterfeit merchandise than other marketplaces. Etsy has tried to address this issue by implementing a multi-million [dollar] program to protect buyers on its platform."

Etsy is set to report its fourth-quarter earnings after the close of trading on Feb. 22. In addition to the Citron report, shares were hit this week because of weak results from Shopify, which some investors see as a proxy.

Analyst Jason Helfstein at Oppenheimer wrote in a note to investors that a weak fourth quarter is priced into the shares: "While expensive, trading at 18x '24E EV/EBITDA vs. peers at 13x, we would caution investors who may be short."

Year-to-date, Etsy shares have gained about 8% through Friday's close. From record highs reached back in the fall of 2021, the stock remains down more than 50%.

Left has been publishing short research for decades; he took a break from the practice in 2021 when he was the subject of personal and physical threats following his short call on GameStop. He said the bar is now higher for him to highlight a short idea, and can't just be a bad business with a high valuation.

"It's not against the law to have an overvalued stock. I said: I'm not going to discuss overvalued stocks. You want to buy GameStop because it's going to the moon — go ahead, have fun. And if Etsy goes higher, it goes higher. What I'm saying is that Etsy is operating illegally," Left said.

When Yahoo Finance followed up via text to ask if Left is short the stock and the size of his position, he replied: "lol."

Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9am-11am ET. Follow her on Twitter @juleshyman, and read her other stories.

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Enclosures

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Centrica And EDF UK Post Multi-Billion Profits Amidst Energy Price Cap Scrutiny
por OilPrice.com

Oilprice.com / 2023-02-18 20:0610


EDF UK has raked in hefty profits, with soaring electricity prices powering its rebound from last year's losses. The French energy giant's UK arm recorded bumper earnings of £1.12bn compared with a £21m loss the year before, driven by the vastly improved performance of its nuclear electricity generators. Unlike generators which rely on gas to produce power, it has benefitted from higher electricity prices across wholesale markets. This has provided a huge boost in revenues without a comparable rise in costs. However, its…

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Analysis: Online superstore surpasses Amazon and Walmart to become most downloaded app in US
CNN.com - Top Stories / 2023-02-18 21:0515
A new online shopping platform linked to one of China's top retailers has quickly become the most downloaded app in the United States, surpassing Amazon and Walmart. Now it's looking to capitalize from an appearance on America's biggest stage.

Temu, a Boston-based online retailer that shares the same owner as Chinese social commerce giant Pinduoduo, made its Super Bowl debut on Sunday.

Temu, which runs an online superstore for virtually everything — from home goods to apparel to electronics — unveiled a commercial during the game that encouraged consumers to "shop like a billionaire."

The pitch? You don't have to be one.

"Through the largest stage possible, we want to share with our consumers that they can shop with a sense of freedom because of the price we offer," a Temu spokesperson told CNN in a statement.

The 30-second spot shows the company's proposition to users: Feel like you're splurging by buying lots of stuff cheaply. A woman's swimsuit on Temu costs just $6.50, while a pair of wireless earphones is priced at $8.50. An eyebrow trimmer costs 90 cents.

These surprisingly low prices — by Western standards, at least — have drawn comparisons to Shein, the Chinese fast fashion upstart that also offers a wide selection of inexpensive clothing and home goods, and has made significant inroads into markets including the United States.

Shein is considered one of Temu's competitors, along with US-based discount retailer Wish and Alibaba's AliExpress, according to Coresight Research.

Temu, pronounced "tee-moo," was launched last year by PDD, its US-listed parent company formerly known as Pinduoduo. The company officially changed its name just this month.

PDD's subsidiary Pinduoduo is one of China's most popular e-commerce platforms with approximately 900 million users. It made its name with a group-buying business model, allowing people to save money by enlisting friends to buy the same item in bulk.

On its website, Temu says it uses its parent company's "vast and deep network … built over the years to offer a wide range of affordable quality products."

Since its rollout in September, the application has been downloaded 24 million times, racking up more than 11 million monthly active users, according to Sensor Tower.

In the fourth quarter of last year, US app installations for Temu exceeded those for Amazon (AMZN), Walmart (WMT) and Target (TGT), according to Abe Yousef, a senior insights analyst at the analytics firm Sensor Tower.

"Temu soared to the top of both US app store charts in November, where the app still holds the top position now," he told CNN, referring to iOS and Android mobile app stores.

Yousef said the company had been particularly successful at acquiring new users by offering extremely low prices and in-app flash deals, such as 89% off certain items.

The firm is already eyeing new territory. This month, Temu said on Twitter that it plans to expand to Canada.

Michael Felice, an associate partner at management consulting firm Kearney, said Temu stood out simply by selling products without high markups.

"Temu might be exposing a white space in the market wherein brands have been producing at extreme low cost, and along the value chain there's been so much bloated cost passed on for margin," he told CNN.

"That said, American consumers might not even be ready to accept some of these price points … There's always the question, 'is it too cheap to be good?'"

Deborah Weinswig, CEO of Coresight Research, has cautioned that it may be too early to tell whether Temu will be able to maintain those extremely low prices, free shipping and other perks.

"Temu aims to continue to experiment in marketing and offerings, which is possible thanks to its resource-rich parent company," she wrote in a report.

Its launch, she said, "comes at an opportune moment, as consumers search for value amid still-elevated inflation and a degree of economic uncertainty."

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Chega de Austeridade!

Tanta austeridade sobre os portugueses... O Sr. Passos devia ter vergonha... Em vez de negociar com os fortes, cai sobre os fracos e oprimidos. De facto é mais fácil impor o aumento de impostos do que negociar com os poderosos europeus... Mas as consequências são bem mais devastadores para o nosso país. Esta política vai deixar o país de tanga, tal como outros maus políticos prejudicaram o país com medidas despesistas, este apertar o cinto para pagar juros elevados pela ajuda também se coloca numa posição de topo das más políticas da nossa pátria. Qual é a justificação para que a Europa se financie a 1% e cobre a Portugal (e outros países intervencionados) e empreste esse dinheiro a 3%? Quando no passado, a história está cheia de exemplos de países que receberam ajudas sem qualquer tipo de juro? Ahh.. claro, o juro neste caso é devido porque foram as irresponsabilidades destes povos estúpidos que conduziram os países a essa situação… pelo menos e o que nos dizem e os nossos políticos aceitam… talvez porque não consigam contra argumentar…Mas, talvez não tenha sido bem assim! Será que as instituições financeiras não falharam no seu dever de fiscalização? Quando há acordos internacionais que limitam os défices e os níveis de endividamento, deixar que a situação tenha chegado a um ponto extremo não deveria ser também responsabilidade destas instituições que agora nos cobram juros pela ajuda? Será que ninguém vê, que as situações que se verificaram na periferia da europa se devem em grande parte a uma política monetária do BCE, que com o objectivo de definir uma taxa de juro adequada para a média da europa, criou condições favoráveis para o sobre consumo e sobre investimento na europa do sul, onde as taxas de juro foram demasiado baixas durante demasiado tempo? Será que ninguém levanta estas questões no seio das instituições europeias e as conduz a um pensamento de responsabilização e que traduzam, pelo menos em parte, essa situação na taxa de juro dos empréstimos aos países em dificuldades? Onde está a capacidade negocial dos políticos portugueses? É que um corte na taxa de juro da «ajuda» de 3% para 1%, seria tudo o que Portugal precisaria para evitar que qualquer medida de austeridade fosse anunciada hoje… e isso nem poderia ser considerado um subsídio dos países ricos aos pobres, apenas o fim da negociata que estes empréstimos, da suposta ajuda, se tornaram. Este seria um prémio visível para o bom aluno… é que palavras não enchem barrigas e em Portugal já se passa fome.

(BN) Iron-Ore Ships Rebounding as China Spends $158 Billion: Freight

Bloomberg News, sent from my Android phone

Iron-ore ships are poised to earn more than operating costs for the first time this year as rates rally on speculation Chinese steel mills will accelerate imports because of a 1 trillion-yuan ($158 billion) building program.

Capesizes, each carrying 160,000 metric tons of ore, will earn $12,500 a day in the fourth quarter, according to the median of eight analyst estimates compiled by Bloomberg, compared with $4,459 on average since the end of June as assessed by the Baltic Exchange. Investors may profit by buying forward freight agreements, traded by brokers and used to bet on future costs, which anticipate $8,385. Ship owners need $7,437 to pay overheads including crew and repairs, a London-based unit of Moore Stephens LLP advising the industry estimates.

China, accounting for 65 percent of seaborne demand, bought the most ore in three months in August and stockpiles at ports fell for the first time since March, government and Shanghai Steelhome Information data show. Ore prices that neared a three- year low on Sept. 5 have since rallied 21 percent as the state announced spending on everything from subways to roads to warehouses. Increasing demand for the commodity, the second- biggest cargo after oil, will help diminish a glut in shipping.

"The 1 trillion-yuan package should provide a lifeline to struggling Capesize owners," said Frode Moerkedal, an analyst at RS Platou Markets AS in Oslo whose recommendations on the shares of shipping companies returned 21 percent in the past two years. "Capesizes should benefit from the investment, as they're the main vessel class to ship iron ore."

Commodity Cargoes

Rates tumbled as much as 89 percent to $2,644 this year as fleet expansion outpaced growth in demand, according to the London-based exchange, whose data are used as benchmarks for about 75 percent of commodity cargoes. While Capesizes rallied 43 percent to $3,779 since Aug. 21, this quarter's average would be the lowest for data going back to 1999. Earnings may rise as high as $25,000 in the next several months, said Omar Nokta, an analyst at Dahlman Rose & Co. in New York.

Ore at the Chinese port of Tianjin, a global benchmark, last traded at $105.10 a so-called dry ton, down from as much as $149.40 in April, according to The Steel Index Ltd., a unit of McGraw-Hill Cos. Prices, which retreated as China's economy slowed for six consecutive quarters, rebounded after the government announced building plans on Sept. 5 and 6 that Nomura Holdings Inc. (8604) estimates are worth $158 billion.

Investors can profit from the rally in rates by buying shares of shipping companies with a higher proportion of their fleets operating in the spot market rather than on long-term charters, Nokta said. That includes Eagle Bulk Shipping Inc., Genco Shipping & Trading Ltd. and Baltic Trading Ltd. (BALT), all based in New York, he wrote in a Sept. 10 report.

Morgan Stanley

Seaborne iron-ore exports will expand 14 percent next year, the most since at least 2005 and three times faster than in 2012, Morgan Stanley estimates. The Capesize fleet's 8.6 percent expansion will be the smallest since 2009 and compares with 12 percent this year, according to the bank.

While the projected fourth-quarter Capesize rate would cover owners' operating expenses, it wouldn't be enough to also meet the cost of their debt. Once interest and loan repayments are included, the break-even level rises to $15,000 a day on average, according to Platou. Earnings last exceeded that in the final three months of 2011.

The combined market value of the 14-member Bloomberg Pure Play Dry Bulk Shipping Index has fallen to $5.92 billion from $36.2 billion in May 2008, data compiled by Bloomberg show. D/S Norden A/S, located in Hellerup, Denmark, Seoul-based STX Pan Ocean Co. and Antwerp, Belgium-based Cie. Maritime Belge SA are the largest members of the gauge.

Shipbrokers' Association

Capacity gluts exist across most of the merchant shipping fleet. Rates for the largest oil tankers slumped 62 percent this year, according to Clarkson Research Services Ltd., a unit of the world's largest shipbroker. An index reflecting charges for six types of containers fell 29 percent in the past year, a gauge from the Hamburg Shipbrokers' Association shows. Moore Stephens estimates operating costs every September and its 2012 review has yet to be published. Daily expenses for Capesizes rose 1.7 percent to $7,437, it said in a report a year ago.

The rally in Capesizes and iron-ore prices may not last because growth is slowing around the world. The International Monetary Fund cut its 2013 global forecast to 3.9 percent from 4.1 percent in July. The 17-nation euro area contracted in the second quarter and won't expand again for another year, based on the median of 22 economist estimates compiled by Bloomberg. China's economy will expand 7.9 percent in 2012, the least since 1999, according to 34 economist estimates compiled by Bloomberg.

Investment Model

"It's clearly slowing down fast," Jim Chanos, the founder and president of hedge fund Kynikos Associates Ltd., said in an interview on Sept. 11 at Bloomberg's headquarters in New York. "Will there be rallies in iron ore and other industrial commodities, from time to time? Of course. But I think structurally, until China really addresses this credit-driven infrastructure and fixed-asset investment model, the surprises are going to be on the downside."

Shares of Baltic Trading, which operates nine bulk- commodity carriers, fell 29 percent to $3.39 in New York trading this year. The stock will rally to $5.38 in the next 12 months, according to the average of four analyst estimates compiled by Bloomberg. Genco declined 44 percent since the start of January and Eagle Bulk retreated 12 percent.

Producing a ton of crude steel in a blast furnace requires about 1,400 kilograms (3,086 pounds) of iron ore, 770 kilos of coal and 270 kilos of limestone and scrap steel, according to the World Steel Association. Global crude-steel output rose 0.8 percent to 895.4 million tons in the first seven months from a year earlier, the Brussels-based WSA estimates. Production will reach an all-time high of 1.56 billion tons in 2012 and 1.62 billion in 2013, according to MEPS (International) Ltd., a Sheffield, England-based industry consultant.

Ore Cargoes

Increasing iron-ore shipments mean the Capesize fleet will work at about 80 percent of capacity in the next 12 months, from 77 percent, Platou estimates.

China imported 62.45 million tons of ore in August, 7.9 percent more than the previous month, customs data show.

Inventories held at ports retreated 1.2 percent to 98.5 million tons, according to Shanghai Steelhome Information, a research company based in the city. The nation has imported more in the second half of every year relative to the first six months in all but one of the past 20 years, based on data compiled by Bloomberg.

"There should be more iron-ore and coal imports into China to satisfy the increased steel demand resulting from the new infrastructure projects," said Doug Mavrinac, a Houston-based analyst at Jefferies & Co. "The dry-bulk shipping market could finally make the cyclical turn toward sustainable profitability for 2013 and beyond."

To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

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