High Gas Prices Could Be The New Normal For Europe
por Irina Slav

Oilprice.com / 2023-02-26 20:0551


Last summer, in August, gas prices on the European market topped 340 euros per megawatt-hour.
China's demand for LNG is expected to rebound this year, intensifying competition for limited supply.
Despite relatively high storage levels, Europe is increasingly reliant on LNG spot markets.
In the winter of late 2022 and early 2023, Europe got lucky. It got very lucky. Gas storage sites were fuller than usual because of the massive LNG-buying effort the EU put into securing gas for the winter, and the winter itself turned out to be warmer than usual.

Yet luck, while a big part of Europe's success in making it through winter relatively unscathed despite decimated Russian gas supply, was not all of it. Europe made it because it had the money to pay such prices for LNG on the spot market, which made the fuel impossible to afford for many other countries, notably Pakistan and Bangladesh. And now it has to do it all over again.

"We do not expect filling storage to be as costly next summer as it was this past year," Aurora Energy Research senior analyst Jacob Mandel told Reuters this week. "That said, firms that rely on spot supply to fill storage, rather than hedge against future price jumps, will risk paying similar costs to last summer," he added.

Last summer, in August, gas prices on the European market topped 340 euros per megawatt-hour, which is more than $360. To prevent a repeat of this, the European Union approved a price cap mechanism that is triggered when the price of gas tops 180 euros per MWh, or $190.

The bloc also plans to buy gas jointly on the global market in a bid to ensure member states do not become competitors and that richer ones do not fill their storage sites at the expense of poorer ones.

But none of this would be enough in the face of fundamental factors. China's demand for LNG is expected to rebound this year, intensifying competition for limited supply. According to Energy Intelligence analysts, China's LNG demand will rise by 3 million tons in 2023, yet Europe will remain the prime destination for LNG globally. Because it has no choice.

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"For this winter it is right to say that we are off the hook. If there are no last minute surprises, we should get through...maybe with some bruises here and there. But the question is...what happens next winter?"

The question comes from the head of the International Energy Agency, Fatih Birol, who talked to Reuters on the sidelines of the Munich Security Conference earlier this month. And that's not the first time Birol has warned again of premature calm in Europe.

"Even though we have enough LNG import terminals, there may not be enough gas to import and therefore it will not be easy this coming winter for Europe," Birol said, echoing earlier comments that Europe faces a deep supply gap with the disappearance of Russian pipeline flows via the now defunct Nord Stream infrastructure.

That gap was estimated at 30 billion cubic meters by the International Energy Agency. According to its head, this year will see 23 billion cu m in additional supply. China is returning to business as usual, which means higher gas demand, while in the United States, gas drillers are reducing output because U.S. gas prices are near record lows.

The European political leaders could take solace in the fact that there is plenty of gas in storage left from last winter, but that can't be much of a consolation because the governments that paid for that gas made a loss on it. They made a loss because they didn't hedge future sales, and they didn't hedge probably because they expected the gas to be used during the winter.

On top of all this, as several market analysts, notably Reuters' John Kemp, have observed, the EU's gas storage does not cover 100 percent of consumption. In fact, taken together, the total storage capacity in the bloc covers about a quarter of total gas demand.

Besides, gas storage capacity is distributed unevenly among member states, so while some countries could satisfy close to 100 percent of their demand for gas from storage, Germany, for instance, cannot. So it's building LNG import terminals.

Argus reported this week that Germany plans to become the world's fourth-largest LNG importer by 2030, with a capacity of close to 71 million tons. That's the same Germany that refused to sign long-term LNG supply deals with Qatar because of its energy transition plans. Yet it may soon become the largest LNG importer after China, Japan, and South Korea. 

Those 70.7 million tons of liquefied gas would need to come from somewhere, and it will, from Qatar and the United States but mostly from the latter, whose producers are more flexible than QatarEnergy and gladly sell their LNG on the spot market—at respectively higher prices.

What all the latest developments in Europe's natural gas space suggest is that the EU will continue paying much higher prices for the gas it consumes than it used to before 2022. Governments will probably continue to shield the most vulnerable groups with state funds. That's a lot of additional expenses that weren't necessary just two years ago—and a persistent inflation driver for European economies.

By Irina Slav for Oilprice.com

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How the titans of tech investing are staying warm over the VC winter
Economist/Business & Finance / 2023-02-26 22:00

Business | VCetacean evolution
Venture capital's bruised whales are rethinking their strategies
Feb 26th 2023 | SAN FRANCISCO
Venture capitalists are not known for their humility. But the world's biggest investors in innovation have been striking a more humble tone of late. In a recent letter to investors Tiger Global, a hedge fund turned venture-capital (VC) investor, reportedly admitted that it had "underestimated" inflation and "overestimated" the boost the pandemic would give to the tech startups in its portfolio. In November Sequoia, a Silicon Valley VC blue blood, apologised to investors in its funds after the spectacular blow-up of FTX, a now defunct crypto-trading platform that it had backed. Speaking in January, Jeffrey Pichet Jaensubhakij, the chief investment officer of GIC, one of Singapore's sovereign-wealth funds, said that he was "thinking much more soberly" about startup investing.


The VC giants' newfound contrition comes on the back of a gigantic tech crash. The tech-heavy NASDAQ index fell by a third in 2022, making it one of the worst years on record and drawing comparisons with the dotcom bust of 2000-01. According to the Silicon Valley Bank, a tech-focused lender, between the fourth quarters of 2021 and 2022, the average value of recently listed tech stocks in America dropped by 63%. And the plunging public valuations dragged down private ones (see chart 1). The value of older, larger private firms ("late-stage" in the lingo) fell by 56% after funds marked down their assets or the firms raised new capital at lower valuations.


This has, predictably, had a chilling effect on the business of investing in startups. Soaring inflation and rising interest rates made companies whose promised profits lie primarily in the distant future look less attractive today. Scandals like FTX did not help. After a decade-long bull run, the amount of money flowing into startups globally declined by a third in 2022, calculates CB Insights, a data provider (see chart 2). In the final three months of 2022 it fell to $66bn, two-thirds lower than a year earlier; the number of mega-rounds, in which startups raise more than $100m, fell by 71%. Unicorns, the supposedly uncommon private firms valued at more than $1bn, became rarer again: the number of new ones contracted by 86%.

This turmoil is forcing the biggest venture investors—call them the VC whales—to shift their strategies. For Silicon Valley, it signals a reversion to a forgotten style of venture capitalism, with fewer deep-pocketed tourists splashing the cash and more bets on young companies by Silicon Valley stalwarts.

Misadventure capital
To understand the scale of VC's reversal of fortune, consider its earlier bonanza. Between 2012 and 2021 annual global investments grew roughly ten-fold, to $638bn. Conventional VC firms faced competition from a new breed of investor from beyond Silicon Valley. These included hedge funds, the venture arms of multinational companies, from Shell to Samsung, and the world's sovereign-wealth funds, some of which began investing in startups directly. Dealmaking turned frenetic. In 2021 Tiger Global inked almost one new deal a day. Across VC-dom activity "was a bit unhinged", says Roelof Botha, boss of Sequoia Capital, "but rational", given that low interest rates meant that money was virtually free. And "if you weren't doing it, your competitor was."

What passed for rationality in the boom times now looks somewhat insane. The downturn has spooked the VC funds' main sources of capital—their limited partners (LPs). This group, which includes everyone from family offices and university endowments to industrial firms and pension funds, is growing more nervous. And stingier: lower returns from their current investments leaves LPs with less capital to redeploy, and collapsing stockmarkets have left many of them overallocated to private firms, whose valuations take longer to adjust and whose share of some LPs' portfolios thus suddenly exceeds their quotas. Preqin, a data firm, finds that in the last quarter of 2022 new money flowing into VC funds fell to $21bn, its lowest level since 2015.

What new VC funding there is increasingly flows into mega-funds. Data from PitchBook, a research firm, show that in America in 2022 funds worth more than $1bn accounted for 57% of all capital, up from 20% in 2018. How the VC whales behind these outsize pools of capital adapt to the VC winter will determine the shape of the industry in the years to come.

The venture cetaceans can be divided into three big subspecies, each typified by big-name investors. The startups they finance range from the newly founded in need of "seed" funding, to the somewhat older, later stage firms that are looking to rapidly grow. First there is the conventional Silicon Valley royalty, such as Sequoia and Andreessen Horowitz. The second group comprises the private tourists, such as Tiger and its New York hedge-fund rival, Coatue, as well as SoftBank, a gung-ho Japanese investment house. Then there are the sovereign-wealth funds, such as Singapore's GIC and Temasek, Saudi Arabia's Public Investment Fund (PIF) and Mubadala of the United Arab Emirates. As well as investing directly, these entities are LPs in other VC funds; PIF, for example, is a large backer of SoftBank's Vision Fund.

Together these nine institutions ploughed more than $200bn into startups in 2021 alone, or roughly a third of the global total (not counting the state funds' indirect investments as LPs). All nine have been badly damaged by last year's crash. Sequoia's crossover fund, which invested in both public and private firms, reportedly lost two-fifths of its value in 2022. Temasek's listed holdings on American exchanges shrank by about the same. SoftBank's mammoth Vision Funds, which together raised around $150bn, lost more than $60bn, wiping out their previous gains. In a sign that things were terrible, its typically garrulous boss, Son Masayoshi, sat out its latest earnings call on February 7th. Tiger reportedly lost over half of the value of its flagship hedge fund and marked down its private investments by about a quarter, torching $42bn in value and leading one VC grandee to speculate that the hedge fund might turn itself into a family office.

All three groups have reined in their investments. But each has responded to the downturn in distinct ways. That is in part because it has affected them to different degrees.

The private outsiders have been hardest hit. The combined number of startup investments by the three firms in our sample fell by 76% between the second half of 2021 and the same period in 2022. Tiger has lowered the target for its latest fund from $6bn to $5bn; its previous one raised $13bn. In October Phillipe Laffont, Coatue's boss, said that the hedge fund was holding 70-80% of its assets in cash. The firm has also raised $2bn for its "tactical solutions fund", designed to give mature startups access to debt and other resources, as an alternative to raising equity at diminished valuations during a market downturn. SoftBank has all but stopped investing in new startups. Instead, in the second half of 2022 most of its capital went to well-performing portfolio firms, says Lydia Jett, a partner at the Vision Fund.

The other two groups are also retrenching, but not as drastically. According to data from PitchBook, in the second half of 2022 the number of deals struck by Sequoia and Andreessen Horowitz fell by a combined 47%. Direct investments by the four sovereign funds in our sample slowed by a more modest 31% in the same period, no doubt thanks to their governments' deep pockets and longer time horizons.

Taken together, venture capitalists' slowing pace of investment has left them with a record amount of capital that LPs had already pledged to stump up but that has yet to be put to use. Last year the amount of this "dry powder" was just shy of $300bn in America alone (see chart 3). According to data from PitchBook, our five private whales are sitting on a combined $50bn or so; the sovereign investors hold their numbers close to their chest but are likely to be of a similar order of magnitude, all told. Some of it may wait a long while to be deployed, if it ever is. But some will find grateful recipients. Who those recipients are also depends on which group of whales you look at.


Conventional VCs and the hedge funds are focusing on younger "early-stage" firms. in part because volatility in the public markets makes it harder to value more mature companies that hope to list in the near future. Mr Botha says that Sequoia has doubled the number of "seed" deals with the youngest companies in 2022, compared with 2021. In January the firm launched its fifth seed fund, worth $195m. Last April Andreessen Horowitz launched an "accelerator" programme to nurture startups. About half the startups Tiger backed in 2022 were worth $50m or less, compared with just a fifth in 2021, according to PitchBook.

Early-stage firms are unlikely to be the only recipient of VC cash. David DiPietro, head of private equity at T. Rowe Price, a fund-management group, thinks that startups selling "must-have" products, such as cyber-security services, or cost-cutting tools, such as budgeting software, should fare well. Money will also keep flowing to well-managed businesses with strong balance-sheets., expects Kelly Rodriques, chief executive of Forge, a marketplace for private securities. Firms with buzzy new technologies, such as artificial-intelligence chatbots and other forms of whizzy "generative AI", are also likely to attract investments—especially if those technologies already work in practice and underpin a viable business model.

Another category of startups likely to gain favour comprises those involved in industries that governments deem strategic. In America, that means climate-friendly technology and advanced manufacturing, on which Uncle Sam is showering subsidies and government contracts. Some 8% of the deals all our whales made in the second half of 2022 involved firms working on technologies to combat climate change, for example, up from 2% in the same period of 2021. Last year Andreessen Horowitz launched an "American Dynamism" fund, which partly invests in firms that rely on government procurement, such as Anduril, a defence-tech startup.

Sovereign-wealth funds are likely to be looking elsewhere. Seed deals are simply too small for them: whereas the typical early-stage American company is worth about $50m, in 2021 the median value of startups backed by the sovereign funds was a whopping $650m. And to them, what counts as "must-have" startups is somewhat different, determined less by the market or other states' strategic imperatives, and more by their own governments' nation-building plans.

On February 16th PIF said it would take a stake in VSPO, a Chinese platform for video-game tournaments. This is part of a plan dreamed up by Muhammad bin Salman, the Saudi crown prince, to invest $38bn in "e-sports" by 2030 and make Saudi Arabia a gamer's mecca. Temasek invests heavily in firms that develop technology to boost food production. In the past year it backed Upside Foods, a startup selling lab-grown meat, and InnovaFeed, a maker of insect-based protein. This is motivated by Singapore's goal of locally producing 30% of the city-state's nutritional needs by 2030, up from about 10% in 2020. Rohit Sipahimalani, chief investment officer of Temasek, thinks that over the next few years his focus will shift towards "breakthrough innovation rather than incremental innovation", on the back of government support of strategic tech.

One group of firms is likely to see less investment from our whales, however: those in China. The Communist Party's harsh two-year crackdown on consumer technology may be easing but the VC titans remain wary of what was until recently one of the world's hottest startup scenes. An executive at a big venture fund says that in the past, foreign investors in China knew that the government would be respectful of their capital. Now, he sighs, it feels like the government "has pulled the rug out from underneath us".

Tiger has said that there is a "high bar" for new investments in China. GIC has reportedly scaled back its investments in China-focused private funds. Mr Sipahimalani of Temasek says diplomatically that he is trying to avoid investing in "areas caught in the cross-hairs of US-China tension". Sequoia is reportedly asking external experts to screen new investments made by its Chinese arm into quantum computing and semiconductors, two such contentious areas. All told, the number of our whales' deals with Chinese startups fell from 22% of the total in 2021 to 16% in 2022.

After the dotcom crunch VC investments needed nearly two decades to return to their previous peak. Today's tech industry is more mature, startups' balance-sheets are stronger and, according to the Silicon Valley Bank, their peak valuations relative to sales are lower than in 2000-01. This time the whales of VC are unlikely to need 20 years to nurse their wounds. But the experience will have lasting effects on the sort of businesses they back. ■

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Global firms are eyeing Asian alternatives to Chinese manufacturing
Economist/Business & Finance / 2023-02-20 20:47

Business | The Altasian option
Can "Altasia" steal China's thunder?
Feb 20th 2023 | Singapore
IN 1987 PANASONIC made an adventurous bet on China. At the time the electronics giant's home country, Japan, was a global manufacturing powerhouse and the Chinese economy was no larger than Canada's. So when the company entered a Chinese joint venture to make cathode-ray tubes for its televisions in Beijing, eyebrows were raised. Before long other titans of consumer electronics, from Japan and elsewhere, were also piling into China to take advantage of its abundant and cheap labour. Three-and-a-half decades on, China is the linchpin of the multitrillion-dollar consumer-electronics industry. Its exports of electronic goods and components amounted to $1trn in 2021, out of a global total of $3.3trn. These days, it takes a brave firm to avoid China.

Increasingly, however, under a weighty combination of commercial and political pressure, foreign companies are beginning to pluck up the courage if not to leave China entirely, then at least to look beyond it for growth. Chinese labour is no longer that cheap: between 2013 and 2022 manufacturing wages doubled, to an average of $8.27 per hour. More important, the deepening techno-decoupling between Beijing and Washington is forcing manufacturers of high-tech products, especially those involving advanced semiconductors, to reconsider their reliance on China.

Between 2020 and 2022 the number of Japanese companies operating in China fell from around 13,600 to 12,700, according to Teikoku Databank, a research firm. On January 29th it was reported that Sony plans to move production of cameras sold in Japan and the West from China to Thailand. Samsung, a South Korean firm, has slashed its Chinese workforce by more than two-thirds since a peak in 2013. Dell, an American computer-maker, is reportedly aiming to stop using Chinese-made chips by 2024.

The question for Dell, Samsung, Sony and their peers is: where to make stuff instead? No single country offers China's vast manufacturing base. Yet taken together, a patchwork of economies across Asia presents a formidable alternative. It stretches in a crescent from Hokkaido, in northern Japan, through South Korea, Taiwan, the Philippines, Indonesia, Singapore, Malaysia, Thailand, Vietnam, Cambodia and Bangladesh, all the way to Gujarat, in north-western India. Its members have distinct strengths, from Japan's high skills and deep pockets to India's low wages. On paper, this is an opportunity for a useful division of labour, with some countries making sophisticated components and others assembling them into finished gadgets. Whether it can work in practice is a big test of the nascent geopolitical order.


This alternative Asian supply chain—call it Altasia—looks evenly matched with China in heft, or better (see chart). Its collective working-age population of 1.4bn dwarfs even China's 980m. Altasia is home to 154m people aged between 25 and 54 with a tertiary education, compared with 145m in China—and, in contrast to ageing China, their ranks look poised to expand. In many parts of Altasia wages are considerably lower than in China: hourly manufacturing wages in India, Malaysia, the Philippines, Thailand and Vietnam are below $3, around one-third of what Chinese workers now demand. And the region is already an exporting power: its members sold $634bn-worth of merchandise to America in the 12 months to September 2022, edging out China's $614bn.


Altasia has also become more economically integrated. All of it bar India, Bangladesh and Taiwan has, helpfully, signed on to the Regional Comprehensive Economic Partnership (RCEP, which also includes China). By harmonising the rules of origin across the region's sundry existing trade deals, the pact has created a single market in intermediate products. That in turn has eased regulatory barriers to complex supply chains that run through multiple countries. Most Altasian countries are members of the Indo-Pacific Economic Framework, a newish American initiative. Brunei, Japan, Malaysia, Singapore and Vietnam belong to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which also includes Canada, Mexico and several South American countries.

A model for the Altasian economy already exists, courtesy of Japanese companies, which have been building supply chains in South-East Asia for decades. More recently Japan's rich Altasian neighbour, South Korea, has followed its example. In 2020 South Korean firms' total stock of direct investments in Brunei, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam—which together with unstable Myanmar make up the Association of South-East-Asian Nations (ASEAN)—and Bangladesh reached $96bn, narrowly outstripping Korean investments in China. As recently as a decade ago the stock of Korean companies' investments in China was nearly twice as large as in Altasia. Samsung is the biggest foreign investor in Vietnam. Last year Hyundai, a South Korean carmaker, opened its first ASEAN factory, making electric vehicles in Indonesia.

Now more non-Altasian firms are eyeing the region, often via their Taiwanese contract manufacturers. Taiwan's Foxconn, Pegatron and Wistron, which assemble gadgets for Apple, among others, are investing heavily in Indian factories. The share of iPhones made in India is expected to rise from around one in 20 last year to perhaps one in four by 2025. Two Taiwanese universities have teamed up with Tata, an Indian conglomerate with ambitious plans in high-tech manufacturing, to offer courses in electronics to Indian workers. Google is shifting the outsourced production of its newest Pixel smartphones from China to Vietnam.

More sophisticated manufacturing, especially of geopolitically fraught semiconductors, is also moving to Altasia. Malaysia already exports around 10% of the world's chips by value, more than America. ASEAN countries account for more than a quarter of global exports of integrated circuits, easily surpassing China's 18%. And that gap is growing. Qualcomm, an American "fabless" chipmaker, which sells microprocessor designs for others to manufacture, opened its first research-and-development centre in Vietnam in 2020. Qualcomm's revenues from Vietnamese chip factories, many of which belong to global giants like Samsung, tripled between 2020 and 2022. Earlier this month the local government of Ho Chi Minh City announced that it was courting a $3.3bn investment from Intel (though it later struck the American chip giant's name from the statement online).

China's huge advantage has historically been its vast single market, knit together with decent infrastructure, where value could be added without suppliers, workers and capital crossing national borders. For Altasia to truly rival China, therefore, its supply chain will need to become far more integrated and efficient. Although RCEP has greased the wheels of intra-Altasian commerce somewhat, the flow of goods faces more obstacles than it does within China. Its member countries will need to play to their comparative advantage.

For now the infrastructure that connects them is shabby, at best. Finicky regulations and national ambitions can easily gum up the alternative supply chain. Altasia's poorer countries are also not necessarily keen on the logical division of labour, which would see them with a bigger role in the more menial parts of the electronics supply chain. And forgoing all Chinese-made parts is next to impossible. Thamlev, an American electric-bike startup, moved production from China to Malaysia in 2022 in order to avoid a 25% American tariff, but still needed to import Chinese components. As a result, it took a month longer for its e-bikes to reach American riders.

Prospects for deeper integration are hazy, both within Altasia and with big consumer markets in the rich world. India, on whose 1.4bn people Altasia's future may depend, seems in no rush to become part of RCEP. Although the country has, with other Altasian neighbours, signed up to America's Indo-Pacific framework, it has opted out of the initiative's trade provisions. And these anyway lack bite: America is in a protectionist mood and has offered no tariff cuts or better access to its vast market. One ASEAN policymaker likens it to a doughnut, lacking substance in the middle.

Altasia will certainly not replace China soon, let alone overnight. In January, for example, Panasonic announced a big expansion of its Chinese operations. But in time China is likely to become less attractive to foreign manufacturers. Chinese labour is not getting any cheaper and its graduates are not getting much more numerous. America may yet realise that reducing its reliance on China in practice requires closer ties with friendly countries, including membership of the CPTPP, the precursor of which collapsed after America pulled out in 2017. And as a budding alternative to China, Altasia has no equal. ■

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76% of Warren Buffett's Berkshire Hathaway Portfolio Value Is in These 5 Stocks
por newsfeedback@fool.com (Keith Noonan)

The Motley Fool / 2023-02-19 12:588


Berkshire Hathaway's (BRK.A 0.02%) (BRK.B 0.02%) Warren Buffett has said: "Diversification is protection against ignorance. It makes little sense if you know what you are doing." While having a meaningful degree of portfolio diversification is likely a smart move for most investors, it's clear Buffett is enormously confident in the Berkshire managers' and analyst teams' abilities to pick winners.

Given that Berkshire has absolutely crushed the market since Buffett became the company's leader in 1965, it would be nearly impossible to argue that his confidence is misplaced. Read on for a look at Berkshire Hathaway's five largest stock holdings (based on the company's recent 13F filing), which accounted for roughly 76% of its direct equity ownership positions.


Image source: The Motley Fool.

1. Apple 
Apple (AAPL -0.76%) stands as, by far, the largest holding in the Berkshire Hathaway stock portfolio. At current prices, the tech giant's stock accounts for roughly 38.9% of the investment conglomerate's equity holdings. Buffett's company began investing in the iPhone maker back in 2016, and the combination of capital appreciation for existing shares in the portfolio and additional stock purchases elevated it to Berkshire's top equity position.

Apple's dominance in the mobile market has made it one of the world's most profitable businesses. According to analysis from Counterpoint Research, the iPhone company generated 85% of global profits on smartphone sales in last year's fourth quarter. If you think about how many device manufacturers are out there and how competition and commodification trends, Apple's dominance in mobile is nothing short of incredible -- and it doesn't look like the tech leader will be ceding dominance in the space any time soon.

2. Bank of America
Early in 2011, it looked like Buffett might have been done with Bank of America (BAC 0.20%) stock for good. The publication of Berkshire's 13F filing for 2010's fourth quarter revealed that Berkshire had sold off the entirety of its position in the bank stock and taken a substantial loss exiting the position. But the investment conglomerate was back to buying BoA shares before 2011 was over.

With BoA facing pressures from the 2011 debt-ceiling crisis and lingering pressures from the recent financial crash and recession, Buffett proposed a deal to BoA that would provide the struggling financial giant with an injection of new capital. Berkshire bought $5 billion worth of preferred stock and received stock warrants allowing the holding company to purchase 700 million shares of the banking giant's common stock at $7.14 per share.



BAC data by YCharts.

Roughly six years later, BoA stock was trading above $24 per share, and Buffett moved to exercise the warrants. The purchase immediately made Berkshire Hathaway Bank of America's largest shareholder, and it remains so to this day. BoA stock accounts for approximately 11.2% of Berkshire's stock portfolio as of this writing, and Berkshire owns roughly 12.6% of the banking company's outstanding shares.

3. Chevron
Berkshire Hathaway initiated a position in Chevron (CVX -2.23%) stock in 2020 and poured billions of dollars in additional investment into the stock in 2022. That proved to be a great move.

Berkshire's large position in Chevron played a huge role in the investment conglomerate's market-beating performance over the last year. Spurred by high oil prices, the energy giant wound up the best-performing component of the Dow Jones Industrial Average index in 2022.



CVX data by YCharts.

While falling gas prices caused Chevron's share price to dip around 5% year to date in 2023 and lag the Dow's roughly 3% gain across the stretch, the energy company has still been crushing the index since the beginning of last year. Even with the valuation dip in 2023, Chevron stands as Berkshire's third-largest holding and accounts for roughly 9.8% of the company's equity portfolio.

4. Coca-Cola
Warren Buffett has never been an official spokesperson for Coca-Cola's (KO 1.52%) soft drinks. However, he's made enough public appearances sipping on Cokes and Diet Cokes through the years that the beverage giant has certainly gotten some promotional mileage from it. The Oracle of Omaha also likes the company so much that he's said he would never sell a share of its stock, and it currently makes up 8.5% of Berkshire Hathaway's stock portfolio.

Coca-Cola also has one of the best dividend growth streaks of any publicly traded company. At 60 years of consecutive annual payout growth, the company is a decade past the 50-year marker needed to join the illustrious ranks of the Dividend Kings. Only nine public companies have longer dividend growth track records, and Buffett and other shareholders will very likely be treated to another dividend increase when the company publishes its upcoming fourth-quarter report.

5. American Express
Berkshire currently owns roughly 20% of American Express's (AXP -0.36%) stock, and that ownership stake will likely increase even if the investment conglomerate never buys another share. American Express has been on a substantial buyback spree in recent years, buying back and retiring nearly a third of its outstanding shares over the last decade.



AXP EPS Diluted (TTM) data by YCharts. EPS = earnings per share. TTM = trailing 12 months.

In addition to growth in its number of active members and total transaction volume conducted across its network, retiring shares has been a substantial positive catalyst for earnings-per-share growth. The company has also returned value to Buffett and other shareholders in the form of dividends and raised its payout by 160% over the last decade.

Based on its stock price as of this writing, AmEx accounts for 7.5% of Berkshire's equity holdings.

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 Noonan has no position in any of the stocks mentioned. 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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Investments
Five Clues This Isn't Just a Bear Market Rally
Ryan Detrick
Posted on February 7, 2023
"When the facts change, I change my mind. What do you do, sir?" John Maynard Keynes

Stocks are off to a roaring start to 2023, which has many claiming this is just a bear market rally and one that will likely end with new lows. Carson Investment Research has quietly been taking the other side to these vocal bears, saying many times that October was likely the end of the bear market and that better times were potentially in the cards. In fact, we upgraded our view on equities to overweight from neutral in late December and added equity risk to the models we run for our Partners as a result.

Two big reasons for our optimism are that we don't see a recession this year, and everyone is bearish. Regarding the macro outlook, last week's 517k jobs number does little to change our stance. Additionally, I've done this for a long time, and I've never quite seen everyone as bearish as they were late last year. Remember, the crowd is rarely right, as we discussed in Is Anyone Bullish?

The S&P 500 is up 17% from the October lows, the same magnitude as the 17% rally we saw last summer. Back then, stocks rolled back over and made new lows, something most strategists on tv are saying will happen again.

Well, the facts are changing for us, and as Keynes told us in the quote above, we had better change our minds as well. So here are five clues that this rally is on firmer footing and will likely continue.

The Trendline
The S&P 500 finally broke above the bearish trendline from 2022. As you can see below, each time this trendline was touched, stocks sold off, usually hard. However, this time, stocks broke above the trendline and accelerated higher, a clear change in trend. Not to mention, the S&P 500 also moved significantly above the 200-day moving average, which clues that the trend has changed.



More stocks are going up.
Even though the S&P 500 is still more than 10% away from a new all-time high, we are seeing more and more stocks making new 52-week highs, yet another sign that this rally, indeed, is different. As you can see below, the first part of last year saw less and less stocks making new highs, a potential warning sign under the surface. Well, today is near 180, with more and more stocks breaking out to the upside. With more stocks strong, the likelihood that the overall indexes follow is potentially quite high.



Wider breadth and participation
Another clue that more and more stocks are trending higher is that more than 70% of the stocks in the S&P 500 are above their 200-day moving average. This is the most since  2021; in other words, more participation than any time we saw last year. As the chart below shows, when this gets above 65%, it signals a potential shift to a stronger trending market. For example, we saw this above 65% for much of the bull market of 2021. Once this broke beneath 65% in late 2021, it was a warning sign of potential trouble brewing.



High beta is doing better.
We saw leadership from things like utilities, healthcare, and staples this time a year ago. In other words, the defensive part of the market. Today we are seeing those groups underperform, with high-beta names doing well, another clue that this rally is on better footing. So let's sum it up like this, you don't want the defensive stuff leading to a proper healthy bull market.



The Golden Cross
Lastly, a rare technical development took place last week on the S&P 500, as the 50-day moving average moved above the slower-trending 200-day moving average. This development is known as a "Golden Cross," which has tended to resolve bullishly for stocks.

Since 1950, there have been 36 other Golden Crosses on the S&P 500 and the future returns have been strong, with the S&P 500 higher a year later nearly 78% of the time and up 10.7% on average, with a median return of close to 13%. The bottom line is that this is another sign that things appear to be improving more than anytime we saw last year.



Taking it a step further, historically, this Golden Cross took place nearly 13% away from all-time highs. We looked, and when Golden Crosses happened more than 10% or more away from new highs, the future returns got better. Higher a year later, 15 out of 16 times (93.8%) and up a very solid 15.7% on average is something most bulls would likely take, I'm sure.



Let's be clear, after this huge start to the year, and we wouldn't be surprised at all if we saw some type of weakness or consolidation in February. That would be perfectly normal action after the run we've seen, but the bigger picture, we see many clues that this looks like more than a bear market rally, and continued strength in stocks in 2023 is potentially likely.

AUTHOR
Ryan Detrick
Chief Market Strategist
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Enviado do meu Galaxy

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.

Enviado do meu Galaxy

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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Enviado do meu Galaxy

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.

Enviado do meu Galaxy

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

Enviado do meu Galaxy

'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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