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In China, escalating cost of business sends some companies to the exits

A new data protection law adds to challenges faced by foreign firms operating in the massive Chinese consumer market......»»

Category: topSource: washpostNov 25th, 2021

Covid Woes And Supply Chain Issues Among The Drivers In FTSE Reshuffle

The FTSE All Share Index Quarterly Review is based on closing prices today and is due to be announced on Wednesday 1 December, with the changes effective after the close on Friday 17 December. Q3 2021 hedge fund letters, conferences and more A sparky performance by Electrocomponents pushes it into a prime position to move into […] The FTSE All Share Index Quarterly Review is based on closing prices today and is due to be announced on Wednesday 1 December, with the changes effective after the close on Friday 17 December. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more A sparky performance by Electrocomponents pushes it into a prime position to move into the FTSE 100. Dechra pharma, another FTSE 100 contender has clawed opportunity from the soaring popularity for pets. Cyber Security firm DarkTrace set to slip out of the FTSE 100 following a share slide as the lock-in IPO period ended. Johnson Matthey’s position in the FTSE 100 looks shaky after it abandoned its battery plans. Supply chain issues plague electrical retailer AO World as it looks set to slide from FTSE 250. Petershill Partners eyes up a FTSE 250 position and fresh acquisitions of private equity assets. Fresh Covid woes hit The Restaurant Group as it looks set to slide out of the FTSE 250. Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown summarises the runners and riders: Electrocomponents – Contender To Enter The FTSE 100 "The sparky performance by Electrocomponents plc (LON:ECM), with adjusted pre-tax profits up 91% for the first half of the year, has led to a surge in its share price, pushing it into a prime position to move into FTSE 100 territory. The vast range of industrial and electronics products held by the distributor is partly behind its success, as well as its smooth online operations fulfilling the lucrative business-to-business segment. It’s not been immune from higher transport and labour costs, and global supply chain issues, but it appears to have deftly managed its inventory and kept margins intact. Although there are likely to be further cost pressures ahead, Electrocomponents appears in a robust position, particularly given that demand for electrical parts shows little sign of waning." Dechra Pharma - Contender To Enter The FTSE 100 "Dechra Pharmaceuticals plc (LON:DPH) has clawed opportunity from the soaring popularity for pets during the pandemic. Its share price has bounded upwards and it is a prime contender to take a walk into the FTSE 100. With so many more people working from home, it’s been an ideal opportunity to settle in a new furry friend and Dechra is in the business of keeping them healthy throughout their lifetimes. Demand for the pharmaceutical company’s veterinary products has been strong, with full year results showing pre-tax profits almost doubling. There is a risk that with incomes facing a squeeze from rising inflation, spending per head could decline, so there could be headwinds to navigate. But other results from pet orientated companies indicate that demand for pets doesn’t seem to be falling away, which bodes well for future revenues streams." Darktrace – Likely To Be Demoted From The FTSE 100 "Cyber security firm Darktrace PLC (LON:DARK) made a stealthy entry into the top-flight at the last reshuffle, but it’s a leading contender to leave the blue chip index given that shares have fallen by 52% since reaching a record high in September. This appears to be down to the end of the lock-up period following its IPO, with big chunks of new shares flooding the market prompting the falls. Darktrace is not alone in being a former IPO darling, now experiencing the pain of a rapid deceleration in its share price. Its successful launch in the spring was seen as a coup for the London market, and if it exits the top-flight it will leave a big tech gap in the FTSE 100. However, given ongoing growth reported by the company and some pretty upbeat trading updates, it may not stay outside the top-flight for long.  There is growing demand for sophisticated technology to counter the growing armies of cyber criminals and Darktrace uses AI to scan regular business operations and detect tiny irregularities, providing an early warning system of cyber-attacks. The ongoing shift to digital is likely to keep opening up new opportunities and markets for Darktrace as firms scale up their operations to meet demand, whilst trying to ensure their systems stay secure." Johnson Matthey – Likely To Be Demoted From The FTSE 100 "Investors are clearly worried about Johnson Matthey PLC (LON:JMAT)’s strategy for the future and amid this uncertainty, the company risks sliding out of the FTSE 100. The engineering company’s decision to abandon plans to become a battery supplier by selling off its eLNO business saw shares slide, because this appeared to be JMAT’s answer to the shift towards electric vehicles and away from combustion engines, for which it makes catalytic converters. Management says it will focus on other potential growth avenues, but ultimately the group will be starting from scratch as it looks for new opportunities alongside the new greener auto industry. Although catalytic converters won’t be rendered obsolete immediately, the clock is ticking and as the transition to electric vehicles speeds up, Johnson Matthey will need to quickly find a new sense of direction." AO World – Likely To Be Demoted From The FTSE 250 "Online electrical retailer AO World PLC (LON:AO) was well set up to capitalise on the accelerated shift to e-commerce during the first stages of the pandemic, with profits soaring as demand for white goods and IT equipment bounded higher. But the company has come down to earth with a bump, falling to a £10 million half year loss, sending shares plummeting, and this dramatic reversal of fortunes is likely to see it kicked out of the FTSE 250. Its rapid growth seems to have been part of the problem, given that it hasn’t had as much time to build up deep relationships with suppliers, so when the supply crunch hit for electrical goods, it was lower down on the list of priorities. Higher labour and transport costs exacerbated by the shortage of drivers have also dented margins, given that it’s so reliant on its delivery network to make sales and provide after care. A quick turnaround is unlikely given that the company has warned that the crucial Christmas trading period will be tough, with supply chain issues lingering, so AO World may find it hard to climb back up the ladder into FTSE 250 territory for some time." The Restaurant Group – Likely To Be Demoted From The FTSE 250 "As fears about the Omicron variant swirl, there are fresh concerns that restrictions could be tightened on hospitality firms and The Restaurant Group PLC (LON:RTN) hasn’t escaped this fresh round of volatility. Although shares are up marginally today, they have fallen by 35% over the past month as investors worry that despite a big round of cost cutting and the slimming down of its restaurant footprint, a big bounce back in fortunes remains elusive.  Although its star brand Wagamama is dishing out fast food as fast as it can make it to crowds queuing outside restaurants or ordering in from home, its airport concessions arm has struggled with a 53% fall in like-for-like sales at the last quarterly reading, as tourism has been slow to recover. Like many other firms in the sector the company is also facing the challenges of higher costs and wage pressures, amid a shortage of staff and those problems look set to linger." Provident Financial - Contender For The FTSE 250 "Provident Financial plc (LON:PFG), the sub-prime firm known for specialising in credit cards, online loans and consumer car finance is likely to gain a foothold in the FTSE 250 after its valuation recovered as it’s pivoted the business. The company called time on its doorstep lending business earlier this year as part of its attempt to climb out of a financial black hole, after being forced to pay compensation for mis-selling its products. Shifting its business model away from riskier high interest loans towards a mid-cost credit model is now more of a focus for the company and it’s a direction of travel investors have embraced. Although the shine has come off the share price in recent days, which may be partly due to fears that if the new variant leads to another downturn, the potential for bad loans could increase, shares are still up by 41% over the past six months." Petershill Partners – Contender For The FTSE 250 "Petershill Partners PLC (LON:PHLL) only started trading on the London Stock Exchange in September but already it’s a leading contender to step into the FTSE 250. Petershill owns minority stakes in a range of alternative asset managers such as venture capital firms and private equity companies, many of which had been managed by Goldman Sachs for a decade or more.  Assets under management at the investment firm increased by 8% in the third quarter, and it has its eye on fresh prizes with new acquisitions being sized up. Petershill has capitalised on the hunger for private equity investments in an era of ultra-low rates, enabling firms to borrow cheaply to finance takeovers.  With an increase in interest rates looming there is a risk that appetite for such assets may wane, and that might partly account for a slight nudging downwards in the share price over the past month." About Hargreaves Lansdown Over 1.67 million clients trust us with £138.0 billion (as at 30 September 2021), making us the UK’s number one platform for private investors. More than 98% of client activity is done through our digital channels and over 600,000 access our mobile app each month. Updated on Nov 30, 2021, 12:19 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 30th, 2021

Generation PMCA 3Q21 Commentary: Right Place Wrong Time

Generation PMCA commentary for the third quarter ended September 2021, titled, “Right Place Wrong Time.” Q3 2021 hedge fund letters, conferences and more Right Place Wrong Time Being in the wrong place at the right time is usually just an inconvenience or in market parlance a missed opportunity. In the wrong place at the wrong […] Generation PMCA commentary for the third quarter ended September 2021, titled, “Right Place Wrong Time.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Right Place Wrong Time Being in the wrong place at the right time is usually just an inconvenience or in market parlance a missed opportunity. In the wrong place at the wrong time, you're likely a victim of poor circumstances. For an investor, a poor selection coupled with an unforeseen shock. The opposite—right place at the right time—implies luck. Right place at the wrong time, according to a certain someone’s significant other, means she’s always waiting for someone who’s invariably late. More than a mere inconvenience. While some of our equity selections have recently been operating on their own schedules, and our timing appears off, we still feel we’re in the right places. The adage ‘better late than never’ comes to mind. Fund manager Bruce Berkowitz once quipped that he suffered from premature accumulation. We have felt similarly over the last few months because many of our positions have either lagged or declined outright despite fundamentals that we believe remain intact. Of course, when our positions are zigging while the markets are zagging, we reexamine our assumptions to ensure we are correctly positioned. We believe that only one of our securities suffered permanent impairment relative to our initial appraisal and we realized a loss because we saw better opportunities for the proceeds. We remain confident in our assessments of our other holdings. They trade well below our estimated FMVs (Fair Market Values) implying substantial upside potential. Though we don’t know when the market will come to its senses and see what we see. Regarding the market in general, we feel like the little boy that cried correction. Though he kept calling for it, and was eventually correct, his too frequent calls were ignored. The S&P 500 is at a ceiling in our TRACTM work. From this level, it’s either moving on to the next ceiling, about 30% higher, or returning to its recent floor, over 20% lower. Neither event must take place all at once. However, with the market’s FMV currently lower, the likelihood of a material rise from today’s levels is low. We expect sideways or downward price action for an extended period until underlying values catch up. And, with the absence of the typical wall of worry, any exogenous shock could lead to a rapid decline. Global Traffic Jam Speaking of poor timing, the concept of Just-in-Time inventories, designed to promote efficiencies, contributed to inefficiencies over the last year. Everyone encountered an IKEA (‘Swedish for out of stock’) problem. Demand has simply overwhelmed supply. With the economy essentially closed in the spring of last year, production was scaled back (i.e., a supply squeeze) only to require a substantial ramp-up over the last year as demand surged from massive government stimulus and vaccines which allowed for widespread reopening and a leap in consumer confidence. But this about-face created a logjam. Delivery times have been near record highs which has fueled higher costs and, in turn, increased prices. In the meantime, companies are adapting, finding other sources of supplies, different means of transportation, and implementing productivity enhancing measures. While this does not occur overnight, the congestion will dissipate. The market must believe this is all transitory too because it hasn’t impacted the overall indexes. This, despite staffing shortages which, for example, has caused FedEx to reroute packages and airlines to cancel flights. Companies have had to boost pay for overtime and raise wages to attract new employees. There has been a record backlog of ships at ports because of staffing constraints and calls for the U.S. National Guard to loan terminals which would assist in moving goods. Rolling blackouts due to power shortages in China led to production slowdowns. For diversification purposes, some companies moved a portion of their manufacturing to Vietnam, only to have to cope with Covid related shutdowns. Despite these cost pressures, demand has been overpowering because profit margins remain at all-time highs. The usual semiconductor deficit is a result of excess demand, spurred by work-from-home and advances in digitalization which increased the need for electronic components at a time when supply hasn’t been sufficient to fulfill needs. Since the length of time between ordering a semiconductor chip and taking delivery rose to a record high, nearly double the norm, new plants are being built, many in the U.S. being subsidized by the government. Nearly 30 new fabs will be under construction shortly in various jurisdictions, which is more than opened in the last 5 years combined. Looks like an eventual overshoot. Time Heals All The pendulum will swing in the other direction. The scarcity issues facing us now will beget surpluses. Look no further than the PPE shortages at the outset of the pandemic which were quickly met by increased production ultimately creating surpluses, even with demand still high. A capital goods spending cycle is clearly upon us as companies expand production which also bodes well for continued economic growth. Some of the issues will immediately halt. How about the crazy story of Tapestry (maker of Coach purses and other brands) announcing it’ll stop destroying returned product? Apparently, employees were hacking up merchandise and tossing it. That’s one way of creating a supply constraint, and a PR nightmare. Used car prices hit another record high—the normal ebb and flow gone. Prices have been leaping higher. But with production of new cars expected to be back to near normal over the next several months, used car prices should moderate. Commodity prices have surged too as inventories haven’t been sufficient to keep up with demand. However, nothing cures scarcity better than higher prices which encourages production. These constraints have pushed U.S. inflation to the highest since the mid '90s. While some argue it’s a monetary phenomenon, as central banks have poured money into the system, it appears to us more related to the overall supply/demand imbalances. A step-up in demand for raw materials and labour, when ports became congested, simultaneously increased shipping costs, and led to other logistical bottlenecks, all of which combined to ignite prices. Housing prices have also lifted materially. Single-family home prices in the U.S. have risen by a record 19.7% in the last year because of ever-growing demand (spurred by demographics, the shift to work-from-home, and low rates) and, perhaps more importantly, a dearth of listings. While construction costs are up, house prices have outpaced so new builds will in due course help level off prices. That’ll be the Economics 101 feedback loop between prices/costs and supply/demand at work. Core PCE, the broadest inflation measure, was 3.6% for September, moderating since the April highs, a positive sign. Since supply disruptions are beginning to alleviate, it bodes well for a further diminution of inflationary pressures especially since most of the rise in inflation is attributable to durable goods which have suffered the brunt of the bottlenecks. As consumer spending moves from goods back towards services, this should help too. Though growth rates should slow, we are still experiencing an economic boom. Look no further than global air traffic which, astonishingly, is running virtually at 2019 levels. The March of Time Watching inflation is important because it directly impacts our pocketbooks in the short term and our real-spending power over time. Not only because inflation erodes purchasing power but because it also influences the level of interest rates which affects the valuations of financial assets. Longer-term interest rates are likely heading higher, not just because they’re coming off a really low base or inflation is rising. Serious supply and demand dynamics in the bond market are in-play. Fewer bonds will be bought (tapering) by the Fed, who’s been buying, a previously inconceivable, 60% of all U.S. 10-year Treasury issuances. Yet extremely elevated deficit spending still requires massive government bond offerings, at a time when foreigners and individuals have been disinterested in bonds at such low yields. Increasing rates will be necessary to attract buyers (i.e., create demand). Interest rates should remain relatively low though. Primarily because inflation should remain low as a result of poor demographics (nearly every developed country’s birth rate isn’t sufficient to generate population growth), the strength of the U.S. dollar which is disinflationary, and high government debt. These factors should temper economic growth rates. Q3 U.S. GDP grew by only 2% over last year. Aggregate demand may be weakening just when supply constraints are diminishing. On a good note, lesser growth may bode well for an extended economic cycle with low interest rates and relatively high market valuations as the Fed may not need to quell growth. On the other hand, debt laden Japan’s growth rate was so slow since 2008 that it slipped into recession 5 times while the U.S. suffered only once. For a Bad Time Call… Speculators have been winning big, but it almost never ends well. Right now, speculation is still running hot—too hot. Call option purchases (the right to buy shares at a set price for a fixed period) have leaped. Investment dealers, making markets as counterparties on the other side of the call option trades, buy sufficient shares in the open market to offset (i.e., hedge) their positions. As stocks run higher, and call option prices increase, higher amounts of shares are bought. Tesla’s run-up to recent highs is a good example as call-option buying was extreme and a disproportionate amount of buying was attributable to dealer hedging. On a related side note, Tesla ran to about 43x book value recently. In our TRACTM work that’s one break point, or about 20% below, the 55x book value level that only a small number of mature companies have ever achieved because it is mathematically unsustainable since a company cannot produce a return on equity capital sufficient to maintain that valuation level. Historically, share prices invariably have materially suffered thereafter until underlying fundamentals catch up. This is probably not lost on Elon Musk who has tweeted about the overvaluation of Tesla and just sold billions of dollars of shares. Insiders at other companies have been concerned about their share prices too which has led to an uptick in overall insider selling. Meanwhile, use of margin debt as a percent of GDP is at an all-time high of 4%, about 25% higher than at the market peaks in 2000 and 2007. Purchases of leveraged ETFs are at highs too. U.S. equity issuances (IPOs/SPACs) are also at all-time highs as a percent of GDP. The record addition of supply of shares should cause problems for the stock market, especially if demand for shares suddenly wanes if interest rates spike, profit margins shrink, or an unforeseen negative event occurs. Stock ownership generally has reached a high (50% of household assets) which doesn’t bode well for stock market returns when other asset classes shine again. The NASDAQ is extremely overbought. Similar levels in the recent past have led to double-digit declines. The fact that so much of the major indexes are now concentrated in so few companies could hurt too. Worrisome, Apple Inc (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL), and Meta Platforms Inc (NASDAQ:FB) (Facebook) are all at ceilings or have given “sell signals” in our TRACTM work. Buyout valuations paid by private equity firms has doubled over the last 10 years to levels that don’t make economic sense. Cryptocurrencies may have found a permanent role in the financial system; however, demand is too frothy. Just talk to teenagers or Uber drivers. Since it’s in weak hands, demand already running rampant, prices well above cost of producing coins, and supply virtually unlimited as new cryptos keep cropping up, prices could collapse. The overall hype should soon wither. While markets have already ignored the rise in 10-year Treasury yields, further increases could be harmful. Headline risk from inflation worsening in the short term, and rates rising further in reaction, could spoil the party. Valuations of growth companies are the most vulnerable to rising rates given their higher multiples and the more pronounced impact on cash flows which are further out in time. The forward-12-month S&P 500 earnings multiple is just about 30% above its 10-year average. The earnings yield less the inflation rate is at all-time lows. Earnings estimates themselves are likely too high, which is typically the case. Growth expectations are way above trend as analysts extrapolate the recent spectacular growth. But growth must moderate, if only because the comparison over time becomes much more challenging than last year’s trough. The added boost we’ve experienced from lowered tax rates and share repurchases should disappear too. Profit margins should eventually be negatively impacted. Not just from less sales growth but also from escalating costs, particularly on the labour front. Wage pressures are likely, and productivity may drop for a period, if companies cannot hire qualified workers. Job openings have skyrocketed, and job cuts haven’t been this low since 1997. Teens who’ve just graduated high school in California are training to drive trucks. This may be positive for teen employment but yikes! And global oil inventories have been plummeting. The inventory situation is expected to worsen which could lead to $100, or higher, oil prices, a level that would not be favourable for the economy. Investors generally are still expecting above-average returns for U.S. stocks over the next several years. Meanwhile, since valuations are so high, models that have been historically accurate predicting 10-year returns point to negligible returns. Our Strategy We continue to hedge (by shorting U.S. stock market ETFs in Growth accounts or holding inverse ETFs in registered or long-only accounts) principally because valuations have only been this high on 4 occasions in the last 50 years. Since we are not concerned about a recession, and the bear market that usually accompanies one, we’d like nothing better than to cover our hedges after a meaningful market correction. We sleep well at night knowing that we are partially hedged and that our holdings are growing, high-quality companies that, unlike the overall market, trade at substantial discounts to our estimates of FMV. The track record of most of our holdings shows steadily rising earnings over the last several years. And we foresee further growth ahead. Securities that are already detached from FMV can fall even further away if sentiment worsens. However, it doesn’t mean the companies are worse off, only that they’re temporarily losing the popularity contest. While the prices of our Chinese holdings have not gotten materially worse since last quarter, these holdings are still a drag on the portfolios. Since the ones we own are dominant high-quality companies, now trading at less than 40 cents-on-the-dollar in our view—a 60% off sale, we continue to wait for the end of the bear market in these shares. The entire KWEB, a Chinese Internet/technology ETF, is down 54% since February. Meanwhile, economic growth in China is expected to be 5% annually for the next several years, outpacing the U.S. which is expected to grow by less than 2% per year. By 2030, China should have the largest consuming middle class globally. The Chinese growth engine remains attractive. And the companies we hold continue to grow. With valuations so attractive and the stocks nearly universally shunned, we believe a new uptrend should be close. Our Portfolios The following descriptions of the holdings in our managed accounts are intended only to explain the reasons that we have made, and continue to hold, these investments in the accounts we manage for you and are not intended as advice or recommendations with respect to purchasing, selling or holding the securities described. Below, we discuss each of our new holdings and updates on key holdings if there have been material developments. All Cap Portfolios - Recent Developments for Key Holdings Our All Cap portfolios combine selections from our large cap strategy (Global Insight) with our best small and medium cap ideas. We generally prefer large cap companies for their superior liquidity and lower volatility. Importantly, they tend to recover back to their fair values much faster than smaller stocks, so they can be traded more frequently for enhanced returns. The smaller cap positions are less liquid holdings which are potentially more volatile; however, we hold these positions because they are cheaper, trading far below our FMV estimates making their risk/reward profiles favourable. There were no material changes in our smaller cap holdings recently. All Cap Portfolios - Changes In the last few months, we made several changes within our large cap positions all summarized in the Global Insight section below. Global Insight (Large Cap) Portfolios - Recent Developments for Key Holdings Global Insight represents our large cap model (typically with market caps over $5 billion at the time of purchase but may include those in the $2-5 billion range) where portfolios are managed Long/Short or Long only. A complete description of the Global Insight Model is available on our website. Our target for our large cap positions is more than a 20% return per year over a 2-year period, though some may rise toward our FMV estimates sooner should the market react to more quickly reduce their undervaluations. Or, some may be eliminated if they decline and breach TRAC floors. At an average of about 60 cents-on-the-dollar versus our FMV estimates, our Global Insight holdings appear much cheaper, in aggregate, than the overall market. Global Insight (Large Cap) Portfolios - Changes In the last few months, we made several changes within our large cap positions. We bought Altice USA Inc (NYSE:ATUS) and American Eagle Outfitters Inc (NYSE:AEO). We sold Wells Fargo & Co (NYSE:WFC) as it achieved or FMV estimate and TAL Education Group (NYSE:TAL) as it became clear we erred in our assessment once the Chinese government essentially eliminated for-profit education and other opportunities provide better reward vs. risk. Altice USA provides broadband, telephone, and television services to nearly 5 million customers across 21 states. Altice saw a surge in subscribers and plan upgrades with the increase in work from home. As people have returned to work, subscriber growth has slowed and become tougher to predict. At the same time, Altice is upgrading its network, leading to higher capital expenditures, lower free cash flow, and a moderation in share repurchases. Trading at over $35 at the end of last year, shares now trade near $17. We believe investors have become too focused on near-term subscriber trends and not the attractive long-term metrics of the business. Altice should generate close to $1.5 billion in free cash flow and see solid subscriber growth as network upgrades and fresh marketing initiatives bear fruit. Not unlike its peers, Altice carries a large debt-load. Though, management expects debt to decline even as spending accelerates and there are no material debt maturities before 2025. Our FMV estimate is $40. We believe there are numerous avenues for Altice to close the gap between its current share price and its intrinsic value. With large insider ownership already, a management-led buyout would not surprise us. American Eagle Outfitters is a vastly different company than it was just a few years ago. Gone are the days of chasing sales and market share. Management is now laser-focused on cash flow generation, return on investment, and total shareholder return (i.e., stock appreciation, dividends, and share buybacks). Its intimate apparel Aerie brand has metrics that top the retail field and is now close to 50% of revenue, on track to exceed $2 billion in revenue. Meanwhile, American Eagle continues to dominate denim. Years of investments in logistics and its supply chain are paying off. With disruptions everywhere, Eagle’s in-house logistics operations are now a major competitive advantage, enabling the company to achieve higher sales and margins on far less inventory. Our FMV estimate is $35. Income Holdings High-yield corporate bond yields have climbed slightly but at 4.4% remain near all-time lows. Our income holdings have an average current annual yield (income we receive as a percent of current market value of income securities held) of about 5%. Though most of our income holdings - bonds, preferred shares, REITs, and income funds—trade below our FMV estimates, attractive new income opportunities are still not easily found. We have our sights on several securities; however, we believe more attractive entry price points should avail themselves in the months ahead, either as rates rise and bond yields decline or as share prices correct, whether on a case-by-case basis or because of an overall market setback. We recently purchased, VICI Properties, one of the largest U.S. REITs, whose properties include 60 leading casinos (e.g., Caesar’s Palace, MGM, Mirage). Leases are long term with built-in escalators, provide high margins, required capital expenditures are low, and lease renewals are all but guaranteed as the behemoth tenants can’t simply relocate. It yields 5.1% and our FMV estimate is $39, well above the price. We also bought FS KKR Capital, one of the largest U.S. BDCs (business development corp.). The company utilizes its own investment-grade balance sheet (it borrowed $1.25 billion recently at 2.5%) to lend, mostly on a senior-secured basis, mainly to private middle-market U.S. companies. Despite delivering several good quarters recently, it trades at just over a 20% discount to its net asset value and sports an 11.6% dividend yield. All in Good Time We remain concerned about several factors, primarily high market valuations, which could trigger a market decline and reestablish a wall of worry. The average S&P 500 high-to-low annual decline since 1980 has been about 14%. In the last year, it’s only suffered just shy of a 6% correction. Prices have risen too far above underlying values and should revert. Many of our holdings, in contrast, have gone in the other direction, already enduring their own bear markets. We don’t expect to be right all the time. Nor do we need to be, to have respectable performance. But we’ve suffered unduly recently. We can’t turn back time and alter our selections. And we certainly don’t wish to rush time. Time is precious. But we do believe that good things happen to those who wait. And we will continue to wait patiently, biding our time, because our process is designed to select out-of-favour securities, the ones that are underappreciated but whose quality businesses we expect to advance, causing the disconnect between prices and values to alleviate, all in good time. We look forward to recovering from our recent lull and notes from clients stating, “It’s about time!” Randall Abramson, CFA Herb Abramson Generation PMCA Corp. Updated on Nov 26, 2021, 2:09 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 26th, 2021

It"s Begun – Get Ready To Pay Much Higher Prices For Meat From Now On

It's Begun – Get Ready To Pay Much Higher Prices For Meat From Now On Authored by Michael Snyder via TheMostImportantNews.com, The era of cheap meat is over.  For those that are carnivores, that is really bad news.  For decades, Americans have been able to count on the fact that there would always be mountains of very inexpensive meat at the local grocery store, but now those days are gone and they aren’t coming back.  As I was writing this introductory paragraph, it struck me that what is happening to meat prices actually parallels what I wrote about yesterday.  Just as the left doesn’t want us to use traditional forms of energy because they believe that doing so is “bad” for the climate, so they also detest that a lot of us like to eat a lot of meat because the production of meat causes levels of certain greenhouse gases to rise.  Sometimes we joke about the methane that comes from “cow farts”, but radicals on the left take this stuff deadly seriously.  And at the same time that gasoline prices are soaring into the stratosphere, the exact same thing is happening to meat prices.  In fact, we just learned that the price of beef in the U.S. has risen more than 20 percent since last October… Behind unleaded gasoline, beef prices have risen the most on the Consumer Price Index (CPI) since October 2020, rising 20.1% in the past year, according to the Bureau of Labor Statistics. An increase of over 20 percent in one year is deeply alarming. Unfortunately, it isn’t just the price of beef that is soaring.  Tyson Foods just released some new numbers which show that beef, pork and chicken prices are all rising dramatically… The biggest meat company by sales in the United States has announced significant price rises for the fourth quarter, as the impact of the highest inflation for 30 years continues to be felt. Tyson Foods, based in Springdale, Arkansas, announced on Monday that chicken prices rose 19 percent during its fiscal fourth quarter, while beef and pork prices jumped 33 percent and 38 percent, respectively. During the early portion of this crisis, Tyson Foods was reluctant to pass increasing costs along to consumers, but now we are being informed that they don’t intend to make the same mistake again… Stewart Glendinning, the chief financial officer of Tyson Foods, said that they have been slow to increase their prices, in line with inflation, but are now making up for the delay. ‘We expect to take continued pricing actions to ensure that any inflationary cost increases that our business incurs are passed along,’ he said, on the company’s quarterly earnings call. Sadly, this is just the beginning.  The price of meat is only going to go higher from here, and eventually it will get to a point where meat prices become exceedingly painful. Of course there are many that would argue that we are already there. As food prices continue to climb, those that help the needy are going to have a much more difficult time trying to do so. For example, the Salvation Army is projecting that it will need 50 percent more funding than last year as it feeds more Americans than ever before… The Salvation Army is planning to serve more meals than in 2020’s record year, and will need around 50% more funding to meet the buoyed demand, Hodder said. He expects rental and utilities assistance to lead the pack of requested aid. “We’re fearful of what we’re calling ‘pandemic poverty,’” Hodder said. The price of gasoline continues to shoot up as well. On Tuesday, the average price of gasoline in California set a new record high for the third day in a row… Gas prices in California have broken a new record with an average price tag of $4.687 for a regular gallon as of Tuesday morning, according to the American Automobile Association. It was the third day in a row the state has recorded record breaking prices as Monday’s average gas price was $4.682 and Sunday’s was $4.676 which broke the previous state record of $4.671 in October 2012. Needless to say, the price of gasoline is quite a bit higher than that in certain urban areas. In downtown Los Angeles, one unfortunate motorist ended up paying more than six dollars a gallon on Monday… Brian Sproule squinted against the sun on Monday as he examined the price board at a Chevron station in downtown Los Angeles, where a regular gallon of gas was $6.05. Sproule, 37, is a mobile notary who spends much of his time in his car. He said he’s used to spending about $40 to fill his tank, but by the time he capped off his Hyundai Elantra, the meter displayed a whopping $71.59. Can you imagine paying that much for gasoline? Don’t think that it can’t happen where you live.  Eventually, everyone in the entire country will be seeing such prices. As “Bidenflation” makes headlines day after day, U.S. consumers are becoming increasingly pessimistic.  Just check out the latest consumer confidence number released by the University of Michigan… The University of Michigan’s consumer sentiment index fell to 66.8 in November – down sharply from the October reading of 71.7 and well below economists’ forecast for a reading of 72.4. “Consumer sentiment fell in early November to its lowest level in a decade due to an escalating inflation rate and the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation,” Richard Curtin, the survey’s chief economist, said in a statement. Americans haven’t been this negative about the economy in a really long time. And it is becoming increasingly clear that things are going to get even worse in the months ahead.  Our leaders continue to promise that they will make progress on the problems that we are facing, but those problems just keep on escalating.  In fact, the number of giant container ships waiting off the coast of southern California just hit another new record high… On Friday and Monday, yet another record was set for the number of container ships stuck at anchor or in holding patterns off the ports: 83. The average wait time at anchor for ships arriving in Los Angeles hit yet another fresh peak on Tuesday: 16.9 days. That really surprises me. Despite all of the national attention, and despite the fact that the Biden administration has gotten directly involved, the nightmare at the ports in southern California just continues to intensify. If we can’t even figure out how to get stuff unloaded and moved across the country in a timely manner, what hope do we have of properly addressing our more complex economic problems? As our economy is shaken by crisis after crisis, millions upon millions of families all over the nation are deeply suffering. But of course not everyone is doing badly these days.  It turns out that the vaccine manufacturers are laughing all the way to the bank… The People’s Vaccine Alliance (PVA), an international non-profit working to close the global vaccine disparity, analyzed the earnings reports of Pfizer, BioNTech and Moderna and found that the companies will make a combined $34 billion in profit this year. When broken down, that is $93.5 million a day, $65,000 a minute and more than $1,000 every second of profit. When I look at those numbers, they literally make me want to vomit. The greed that we are witnessing has reached a level that is absolutely breathtaking. But this is what happens when the moral foundation of a society completely collapses. In about a month and a half, 2021 will be over and 2022 will be here. 2021 has been bad, but I believe that 2022 will be even worse. So I would encourage you to make preparations for a very rough year, because the days ahead are not going to be pretty. *  *  * It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon. Tyler Durden Wed, 11/17/2021 - 17:40.....»»

Category: personnelSource: nytNov 17th, 2021

Berry Global (BERY) Exhibits Strong Prospects, Risks Persist

Berry Global (BERY) is poised to gain from solid end markets, investments in latest equipment technologies, and focus on operational productivity. High operating costs and debt levels pose concerns. Berry Global Group, Inc. BERY stands to benefit from strength in its consumer businesses across food and beverage end markets. Solid momentum across the company’s healthcare end market along with recovery in construction, food service, and industrial products end markets is also likely to drive its performance in the quarters ahead. For fiscal 2021 (ended September 2021, results are awaited), it anticipates overall organic sales to grow 5% year over year.The company’s acquired business of RPC Group (July 2019) has enriched its growth opportunities in the plastic and recycled packaging industry. Its investments in the latest equipment technologies, advantaged film development, and design for circularity are likely to enhance its competency. Its focus on improving operational productivity and partnerships across the value chain is also likely to be beneficial.Reduction of debt also remains one of its priorities. In the first three quarters of fiscal 2021 (ended Jul 3, 2021), the company repaid long-term debt of $3,287 million.However, BERY has been experiencing escalating costs and expenses over time. Its cost of sales jumped 28.1% and 34.2% in fiscal 2020 (ended September 2020) and third-quarter fiscal 2021 (ended Jul 3, 2021), respectively. Also, in fiscal 2020 and third-quarter fiscal 2021, its selling, general and administrative expenses increased 45.8% and 4.5%, respectively.Berry Global’s high-debt profile poses a concern. In the last five fiscal years (2016-2020), its long-term debt rose 12.2% (CAGR). Its long-term debt balance (including the current portion) remained high at $9,694 million exiting the third-quarter fiscal 2021. Any further increase in debt levels can raise the company’s financial obligations.Image Source: Zacks Investment ResearchIn the past three months, this Zacks Rank #3 (Hold) stock has returned 5.9% compared with the industry’s growth of 2.8%.Key PicksSome better-ranked companies from the Zacks Industrial Products sector are discussed below.SPX FLOW, Inc. FLOW presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise in the last four quarters was 40.42%, on average.In the past 30 days, SPX FLOW’s earnings estimates have increased 8% for 2021 and 17.9% for 2022. Its shares have gained 2.6% in the past three months.AZZ Inc. AZZ presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 25.47%, on average.AZZ’s earnings estimates have increased 2% for fiscal 2022 (ending February 2022) and 5.1% for fiscal 2023 (ending February 2023) in the past 30 days. Its shares have gained 7.5% in the past three months.Franklin Electric Co., Inc. FELE presently carries a Zacks Rank #2. Its average earnings surprise in the last four quarters was 16.27%.Franklin Electric’s earnings estimates have increased 1% for 2021 and 1.5% for 2022 in the past 30 days. Its shares have gained 13.3% in the past three months. Zacks' Top Picks to Cash in on Artificial Intelligence In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AZZ Inc. (AZZ): Free Stock Analysis Report SPX FLOW, Inc. (FLOW): Free Stock Analysis Report Berry Global Group, Inc. (BERY): Free Stock Analysis Report Franklin Electric Co., Inc. (FELE): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 16th, 2021

Uniroyal Global Engineered Products, Inc. Reports Financial Results for the Third Quarter Ended October 3, 2021

SARASOTA, Fla., Nov. 16, 2021 (GLOBE NEWSWIRE) -- Uniroyal Global Engineered Products, Inc. (OTCQB:UNIR) today reported financial results for the third quarter of 2021 ended October 3, 2021. Financial Summary Net Sales of $16,385,914 increased 8.0% versus prior year Net Loss of $823,974 versus prior year loss of $1,013,995 Net Income (Loss) Allocable to Common Shareholders of $4,794,471 income versus loss of ($1,822,633); 2021 includes non-recurring adjustment for extinguishment of preferred stock dividend Net Income (Loss) Per Common Share $1.28 versus loss of ($0.49) per common share Overview In addition to bolstering our manufacturing efficiencies in a very difficult operational environment, we have been diligently working on ways to improve the liquidity of the Company as we push through the various headwinds impacting most industrial companies globally, particularly unprecedented escalating inflation in raw material prices and supply shortages due to the lingering effects of the Covid-19 pandemic. To bolster liquidity, we have recently restructured our financing arrangement in our U.K. operations to ease onerous constraints and give us more borrowing capacity if needed; sought and received funding from various public and private entities; and in the third quarter of 2021, the owners of our Preferred Units and Stock (collectively "preferred shares") agreed to forgive all previously accrued dividends payable on these preferred shares. In addition, the owners of these preferred shares will not be entitled to receive a quarterly dividend until such time as the Company declares a dividend payable. Since the fourth quarter of fiscal 2019, the Company has accrued but not paid a quarterly dividend on the preferred shares. Because of the forgiveness, the previously accrued dividends were reversed which reduced payables and increased our equity. Since the previously accrued dividends were recorded as a deduction to arrive at Net Income (Loss) Allocable to Common Shareholders, the reversal of the accumulated accrual ($6,158,311), net of preferred stock dividends accrued ($539,866) added $5,618,445 to the Net Loss in arriving at Net Income Allocable to Common Shareholders for the third quarter of 2021. Until a Preferred dividend is declared, this will eliminate the need for cash dividend payments of approximately $800,000 each quarter. As previously mentioned, there were a number of significant factors which negatively influenced the operational results of the third quarter of 2021. The most important of these was the global supply shortages which had a major negative impact on the cost of our raw materials, as well as the production levels of our automotive customers which certainly lessened our overall sales performance. To be sure, costs for major raw materials have increased substantially particularly for resins and plasticizers which are major components of our vinyl products. From a supply standpoint, our procurement team was able to source materials so that production was never curbed, but the overall costs were very high, both for materials and transportation. We have been increasing our selling prices but for the short-term it is difficult to recoup margins due to the timing of the increases. This led to a decline in Gross Profit Margin this quarter versus the prior year. Relative to our sales performance, as much as 65% of our overall sales in the past has been to the Automotive Sector which has seen dramatic production delays due to supply shortages. This has been a global issue but has particularly impacted our U.K. operations where the majority of its sales is to the automotive industry. On the plus side, sales within our Industrial Sector increased 25.7% for the third quarter of 2021 versus last year as customers continued to rebound from the effects of the Covid-19 pandemic. The diversification of the Company was evident this quarter as we recorded an 8.0% increase in overall sales despite a decline in our major Automotive Sector. Net Sales Net Sales for the third quarter of 2021 were $16,385,914 versus $15,171,898 for the third quarter of 2020, representing an increase of 8.0%. Within the Automotive Sector, which contributed 53.2% of our overall sales for the quarter, we declined 3.9% versus last year. Sales in this sector increased 10.2% in our U.S. operations but declined 8.8% in our U.K. operations versus the prior year. Our U.K. operations contributed 70.7% of our total Automotive Sector sales this quarter versus 74.5% in the prior year. Slower production levels from major automotive OEM's primarily due to their supply shortages were the principal reason for the overall decline in automotive sales this quarter. The Industrial Sector, which contributed 46.8% of our overall sales this quarter, increased 25.7% versus last year as customers continued to recover from the Covid-19 pandemic. Sales for our U.S. and U.K. operations were both up sharply but we are particularly pleased with the growth for the U.S. operations where we recorded strong gains to customers within the restaurant industry as well as health and fitness industries. The U.S. operations represented 86.2% of sales within the Industrial Sector for the third quarter of 2021. As previously stated, the diversification of the Company led us to increased sales this quarter despite a slow-down in sales to the automotive industry due to its supply shortages impacting production levels. For perspective, our historical sales composition is approximately 65% Automotive and 35% Industrial. For the third quarter of 2021, the Automotive Sector represented 53.2% of overall sales and the Industrial Sector contributed 46.8% of overall sales. Net Loss Net Loss for the third quarter of 2021 was $823,974, an improvement versus the net loss of $1,013,995 for the third quarter of last year. Net Sales increased 8.0% but Gross Profit Margin declined to 11.9% for the third quarter of 2021 versus 13.6% last year as raw material cost increases weighed heavily on our results. We have been able to increase our selling prices for most customers but, at this point, not to the full extent of the cost increases. Some of this is timing but we will have to absorb a certain amount of the increases through operational efficiencies. We expect that this balance will continue into the fourth quarter. Offsetting some of the raw material cost increases was a decline in Operating Expenses for the third quarter of 2021 compared to the third quarter of last year, primarily in General and Administrative expenses. Partially offsetting the decline in these expenses was an increase in Research and Development costs as technological products and providing the resources to develop them continue to be a strength of the Company. Net Income/ (Loss) Allocable to Common Shareholders Net Income Allocable to Common Shareholders was $4,794,471 or $1.28 per common share versus a net loss of ($1,822,633) or ($0.49) per common share in the third quarter of last year. As described in the Overview, accrued dividends on our Preferred Units and Stock were forgiven. Since the fourth quarter of 2019, these quarterly dividends were accrued and deducted on the Income Statement but were not paid to preserve cash. Because of the forgiveness, we reversed the previously accrued dividends of $6,158,311, net of preferred stock dividends accrued of $539,866, which added a total of $5,618,445 to the Net Loss of $823,974 in arriving at Net Income Allocable to Common Shareholders of $4,794,471 for the third quarter of 2021. The forgiveness of the accrued dividends reduced a substantial liability, enhanced stockholders' equity and increased liquidity. In addition, future dividends will be subject to approval by the Company. Weighted average shares outstanding were 3,736,006 for both fiscal third quarters. For further details, see the Company's Form 10-Q filed on November 16, 2021. About Uniroyal Global Engineered Products, Inc. Uniroyal Global Engineered Products, Inc. (UNIR) is a leading manufacturer of vinyl-coated fabrics that are durable, stain resistant, cost-effective alternatives to leather, cloth and other synthetic fabric coverings. Uniroyal Global Engineered Products, Inc.'s revenue in 2020 was derived 59.6% from the automotive industry and approximately 40.4% from the recreational, industrial, indoor and outdoor furnishings, hospitality and healthcare markets. Our primary brand names include Naugahyde®, BeautyGard®, Flame Blocker™, Spirit Millennium®, Ambla®, Amblon®, Velbex®, Cirroflex®, Plastolene® and Vynide®. Forward-Looking Statements: Except for statements of historical fact, certain information contained in this press release constitutes forward-looking statements, including, without limitation, statements containing the words "believe," "expect," "anticipate," "intend," "should," "planned," "estimated" and "potential" and words of similar import, as well as all references to the future. These forward-looking statements are based on Uniroyal Global Engineered Products, Inc.'s current expectations. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance and that a variety of factors could cause the Company´s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company´s forward-looking statements. The risks and uncertainties which may affect the operations, performance, development and results of the Company´s business include, but are not limited to, the following: uncertainties relating to economic conditions, uncertainties relating to customer plans and commitments, the pricing and availability of equipment, materials and inventories, currency fluctuations, technological developments, performance issues with suppliers, economic growth, delays in testing of new products, the Company's ability to successfully integrate acquired operations, the Company's dependence on key personnel, the Company's ability to protect its intellectual property rights, the effectiveness of cost-reduction plans, rapid technology changes and the highly competitive environment in which the Company operates. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. Uniroyal Global Engineered Products, Inc. Public Relations: Elizabeth Henson, (941) 906-8580lhenson@uniroyalglobal.com Uniroyal Global Engineered Products, Inc.   Consolidated Balance Sheets                   (Unaudited)       ASSETS   October 3, 2021   January 3, 2021   CURRENT ASSETS           Cash and cash equivalents   $ 633,833     $ 1,656,882     Accounts receivable, net     10,102,981       10,114,819     Inventories, net     20,257,905       17,952,850     Other current assets     2,359,596       1,841,153     Related party receivable     41,263       907     Total Current Assets     33,395,578       31,566,611     PROPERTY AND EQUIPMENT, NET     17,191,409       18,491,122     OPERATING LEASE RIGHT-OF-USE ASSETS, NET     5,781,541       6,242,736     OTHER ASSETS           Intangible assets     3,352,407       3,388,357     Goodwill     1,079,175       1,079,175     Other long-term assets     5,394,829       4,679,990     Total Other Assets     9,826,411       9,147,522     TOTAL ASSETS   $ 66,194,939     $ 65,447,991     LIABILITIES AND STOCKHOLDERS' EQUITY           CURRENT LIABILITIES           Checks issued in excess of bank balance   $ 96,921     $ 275,297     Lines of credit     17,807,174       17,760,583     Current maturities of long-term debt     2,915,352       1,432,301     Current maturities of finance lease liabilities     240,257  .....»»

Category: earningsSource: benzingaNov 16th, 2021

Citigroup (C) to Incur $1.2-$1.5B Charges on South Korea Exit

Citigroup's (C) planned exit from South Korea's consumer banking business will result in cash charges in the range of $1.2-$1.5 billion. The exit is expected to have a favorable effect on its financials over time. Citigroup C Chief Financial Officer Mark Mason has provided updates on the company’s impending exit from South Korea’s consumer banking business. In this connection, the company expects to incur cash charges of nearly $1.2-$1.5 billion. These charges, pertaining to voluntary termination benefits and other related expenses, will be recognized in the fourth quarter of 2021 and in 2022.Mason, further, said, “In terms of Korea, however, the economics of winding down the consumer business are much more attractive than continuing to run the business -- even including the cost of the voluntary retirement program -- given the reduced future operating costs and the release of roughly $2 billion of allocated tangible common equity over time.”Following this announcement, shares of Citigroup gained 2.2% during the last day’s trading on investor optimism over the favorable impact of the planned exit on its financials over the long term.It must be noted that, in April, Citigroup had announced a major strategic action, whereby, it will exit consumer banking operations in 13 markets across Asia and EMEA, including Australia, Bahrain, China, India, Indonesia, and Korea. Making progress on this strategy, in August, the company announced the sale of its Australian consumer business to National Australia Bank NABZY for $882 million.In total, Citigroup anticipates the release of roughly $7 billion of allocated tangible common equity over time. This includes the above-mentioned $2 billion related to the winding down of the Korean consumer business.Citigroup continues to pursue all options including the sale of these businesses, with primary focus on best “results for its people, clients and shareholders.” Mason noted that management continues to have “good conversations with potential buyers of our consumer businesses” in the Asia and EMEA regions.With these exits, Citigroup seeks to focus on investments in several areas like wealth division operations in Singapore, Hong Kong, the UAE, and London to stoke growth. Further, these initiatives are expected to boost the company’s capital position, reduce expenses, and drive operational efficiencies.Similar to other major banks like JPMorgan JPM and PNC Financial PNC, Citigroup’s long-term strategy to increase the fee-based business mix and shrink its non-core assets bodes well for long-term growth.Shares of Citigroup have gained 43.7% over the past year, underperforming the industry’s rally of 55.6% Image Source: Zacks Investment ResearchCurrently, Citigroup carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Citigroup Inc. (C): Free Stock Analysis Report The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report National Australia Bank Ltd. (NABZY): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 9th, 2021

TreeHouse Foods (THS) Q3 Earnings Miss Estimates, Sales Up

TreeHouse Foods' (THS) third-quarter performance reflects gains from organic sales growth. However, supply-chain headwinds are a drag. TreeHouse Foods, Inc. THS posted third-quarter 2021 results, with the top line surpassing the Zacks Consensus Estimate and increasing year over year. However, the bottom line declined and missed the consensus mark.The company’s top line gained from organic sales growth as well as benefits from acquisition of the pasta business. However, commodity and freight cost inflation as well as supply-chain disruptions were a drag. Nevertheless, prudent pricing actions enabled the company to offset inflationary headwinds.For 2021, management lowered the upper limit of its sales view and curtailed adjusted earnings expectations. It also provided the guidance for the fourth quarter. Management expects supply chain and inflation-related headwinds to persist. Despite challenges, the company will continue to boost customer fulfillment capabilities, formulate alternative sourcing strategies and undertake efforts to retain labor. It will also continue to focus on pricing actions to offset inflation. Shares of the company were up 4.1% during the trading session on Nov 8, following the quarterly results.In a separate release, the company announced that the board has approved plans to explore strategic alternatives for the business. This includes a potential sale of the company or divesting the Meal Preparation business to focus more on the Snacking and Beverages business. The move follows the company’s strategic review process, which began earlier this year. Management highlighted that these are likely to boost shareholders’ returns.  Quarter in DetailAdjusted earnings from continuing operations amounted to 46 cents per share, missing the Zacks Consensus Estimate of 49 cents. The bottom line declined 35.2% from 71 cents reported in the year-ago quarter.Net sales of $1,101.2 million surpassed the consensus mark of $1,072 million. The top line increased 5.3% year over year, driven by 1.7% growth in underlying organic sales, a 3.2% gain from the pasta business acquisition and a favorable exchange rate impact of 0.4%.Organic sales gained from favorable pricing, offset by unfavorable volume/mix (excluding buyouts). Favorable pricing impacts stemmed from the company’s prudent pricing actions to offset commodity and freight cost inflation. Volume/mix (excluding acquisitions) was unfavorable due to supply chain disruption caused by shortages and lower service levels, offset by higher demand in food-away-from-home and co-manufacturing sales channels as well as new product sales.Gross margin came in at 16.3%, contracting 170 basis points from the year-ago quarter’s figure. The decline was caused by commodity inflation. Gross margin was also adversely impacted by supply chain disruptions leading to higher labor costs, supply shortages and unfavorable channel mix from increased food-away-from-home demand. The downsides were partly mitigated by favorable pricing actions to recover commodity and freight cost inflation, lower costs related to the COVID-19 pandemic and favorable volume/mix stemming from the inclusion of the high-margin pasta business acquisition.Total operating expenses, as a percentage of sales, dropped 0.2 percentage points to 14% due to higher freight costs, somewhat offset by reduced employee incentive compensation expenses.Adjusted EBITDA from continuing operations slumped 20.5% to $108.6 million due to commodity and freight cost inflation. The metric was also affected by supply chain disruption leading to higher labor costs and supply shortages as well as unfavorable channel mix from higher food-away-from-home demand. The downsides were offset by favorable pricing actions, lower employee incentive compensation expenses and a favorable volume/mix from the inclusion of the high-margin pasta business acquisition.TreeHouse Foods, Inc. Price, Consensus and EPS Surprise  TreeHouse Foods, Inc. price-consensus-eps-surprise-chart | TreeHouse Foods, Inc. Quote Segment DetailsMeal Preparation: Sales in the segment rose 7.4% year over year to $690.2 million. The upside was driven by the favorable impacts from the inclusion of the pasta business acquisition and an increase in underlying organic net sales of 1.8%. Organic net sales were supported by improved pricing, partially offset by unfavorable volume/mix excluding acquisitions. Pricing was driven by prudent pricing actions, which partly offset commodity and freight cost inflation. Volume/mix (excluding acquisitions) was unfavorable due to supply chain disruption, which led to supply shortages and declines in service levels. This was offset by higher demand in the food-away-from-home and co-manufacturing sales channels. Direct operating income (DOI) margin in the segment contracted 3.2 percentage points, year on year.Snacking & Beverages: Net sales increased 2% to $411 million, driven by growth in organic net sales of 1.6%. Organic net sales were supported by favorable volume/mix excluding acquisitions and higher pricing. Volume/mix excluding acquisitions was driven by new product sales, particularly in the Liquid Beverages category. Pricing gains were driven by an increase of $8.2 million in pricing actions that led to a recovery in commodity and freight cost inflation. DOI margin fell 6.1 percentage points.Image Source: Zacks Investment ResearchOther Financial Updates & GuidanceThe company concluded the third quarter with cash and cash equivalents of $67.4 million, long-term debt (excluding operating lease liabilities) of $1,893.8 million and total shareholders’ equity of $1,857.8 million. During the first nine months of 2021, cash provided by operating activities of continuing operations amounted to $60.7 million.Management updated its 2021 guidance and provided fourth-quarter view. For the year, net sales are anticipated to be $4.20-$4.325 billion compared with $4.20-$4.45 billion expected earlier. The company posted net sales of $4.35 billion in 2020. Management expects the current operating constraints to limit the company’s ability to meet high demand conditions. Adjusted earnings from continuing operations are expected to be $1.08 to $1.28 per share down from the previous guidance of $2.00-$2.50 per share. The bottom line is likely to be affected by escalating inflationary trends as well as higher costs related to labor and supply chain disruption. The Zacks Consensus Estimate for sales and earnings in 2021 is currently pegged at $4.33 billion and $2.11 per share, respectively.Fourth-quarter net sales are expected in the range of $1.04-$1.16 billion. Adjusted earnings are expected in the bracket of break-even to 20 cents per share. The Zacks Consensus Estimate for sales and earnings in the fourth quarter is currently pegged at $1.20 billion and 98 cents per share, respectively.Shares of this Zacks Rank #4 (Sell) company have declined 4.6% in the past three months against the industry’s rise of 2.6%.Consumer Staples Picks You Can’t MissMGP Ingredients, Inc. MGPI, flaunting a Zacks Rank #1 (Strong Buy), delivered an earnings surprise of 117.6% in the last four quarters, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.United Natural Foods, Inc. UNFI, also with a Zacks Rank #1, has a trailing four-quarter earnings surprise of 13.1%, on average.The Chefs' Warehouse, Inc. CHEF, with a Zacks Rank #2 (Buy), delivered an earnings surprise of 279% in the last four quarters, on average. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report United Natural Foods, Inc. (UNFI): Free Stock Analysis Report TreeHouse Foods, Inc. (THS): Free Stock Analysis Report The Chefs' Warehouse, Inc. (CHEF): Free Stock Analysis Report MGP Ingredients, Inc. (MGPI): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 9th, 2021

Magellan (MGLN) Q3 Earnings Decline Y/Y on Elevated Costs

Magellan Health's (MGLN) third-quarter results reflect impact of rising expenses, partly offset by top-line growth and net new business growth in the Healthcare segment. Magellan Health, Inc. MGLN delivered third-quarter 2021 adjusted earnings per share of 3 cents per share, which declined 62.5% year over year due to escalating expenses.The company’s revenues of $1.3 billion climbed 7.2% year over year in the quarter under review on the back of net new business growth in the Healthcare segment. However, the upside was partly offset due to the non-renewal of Magellan Rx’s Individual Part D Prescription Drug Plan (PDP) on Jan 1, 2021 resulting in a slight decline in the company’s Pharmacy Management segment.Segment profit improved 11.4% year over year to $38 million in the third quarter.Magellan Health, Inc. Price, Consensus and EPS Surprise Magellan Health, Inc. price-consensus-eps-surprise-chart | Magellan Health, Inc. QuoteHealthcare segment profit of $20.6 million dipped 3% from the prior-year quarter’s figure. The segment’s performance was hurt due to elevated corporate investments, partly offset by favorable net business growth.Pharmacy Management segment profit amounted to $29 million, which declined 7.8% year over year in the quarter under review. The downside was due to higher corporate investments and new contract implementation expenses, partly offset by strength in specialty and government businesses.Total costs, expenses and other income of $1.3 billion increased 5.3% year over year due to rise in cost of care, and direct service costs and other operating expenses.Capital Position (as of Sep 30, 2021)Magellan Health exited the third quarter with cash and cash equivalents of $1 billion, which declined 9.3% from the figure at 2020 end.Total assets dipped 0.2% from the figure as of Dec 31, 2020 to $3.4 billion.Total stockholder's equity amounted to $1.9 billion, which increased 3.4% from the 2020-end level.During the nine months ended Sep 30, 2021, net cash used in operating activities was $60.1 million compared with $54.2 million in the prior-year comparable period.Business UpdateDeclared on Jan 4, 2021, the merger agreement of Magellan Health with Centene Corporation CNC is anticipated to conclude in the fourth quarter of 2021.Zacks RankMagellan Health carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Other Medical Sector ReleasesOf the medical sector players that have reported third-quarter results so far, HCA Healthcare, Inc. HCA and Tenet Healthcare Corporation THC beat the Zacks Consensus Estimate for earnings. Bitcoin, Like the Internet Itself, Could Change Everything Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Tenet Healthcare Corporation (THC): Free Stock Analysis Report HCA Healthcare, Inc. (HCA): Free Stock Analysis Report Magellan Health, Inc. (MGLN): Free Stock Analysis Report Centene Corporation (CNC): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 8th, 2021

Parker-Hannifin (PH) Exhibits Strong Prospects, Risks Persist

Parker-Hannifin (PH) is poised to benefit from strength in its end markets, acquired assets, and shareholder-friendly policies. However, escalating costs and high debt level pose concerns. Parker-Hannifin Corporation PH stands to benefit from strength across its industrial end market and recovery in the commercial aerospace end market. In the quarters ahead, improving orders for products and its unique Win Strategy (version 3.0) are also likely to be beneficial. For fiscal 2022 (ending June 2022), the company anticipates sales to grow 6-9% on a year-over-year basis, higher than 4.8% rise recorded in fiscal 2021 (ended June 2021).The company believes in strengthening its businesses through the addition of assets. The acquisition of Exotic Metals Forming Company and LORD Corporation in fiscal 2020 (ended June 2020) enabled Parker-Hannifin to strengthen its business portfolio. Also, it agreed to acquire Meggitt plc in August 2021. The buyout is likely to strengthen its motion & control technologies offerings in aerospace and defense end markets. Acquisitions boosted Parker-Hannifin’s sales by $394.1 million in fiscal 2021.It focuses on rewarding shareholders through dividend payments and share repurchases. In the first three months of fiscal 2022, Parker-Hannifin used $132.9 million for paying out dividends. The quarterly dividend rate was hiked by 17% in April 2021. Also, it reinstated its share-buyback program in third-quarter fiscal 2021 (ended March 2021), which it expects to continue in fiscal 2022.However, escalating costs and expenses has been a major concern for the company over time. In first-quarter fiscal 2022 (ended September 2022), its cost of sales increased 13.7% on a year-over-year basis. Its selling, general and administrative expenses rose 10.2%. For fiscal 2022, it expects corporate general & administrative, interest, and other expenses (on an adjusted basis) of $461 million.Its high-debt profile poses a concern. Exiting first-quarter fiscal 2022, its long-term debt balance remained high at $6,263.9 million. Any further increase in debt levels can raise the company’s financial obligations.Image Source: Zacks Investment ResearchIn the past six months, this Zacks Rank #3 (Hold) stock has gained 3% against the industry’s decline of 5.2%.Key PicksSome better-ranked stocks from the Zacks Industrial Products sector are Applied Industrial Technologies AIT, AZZ Inc. AZZ and Welbilt, Inc. WBT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Applied Industrial delivered an earnings surprise of 26.71% in the last reported quarter.AZZ delivered an earnings surprise of 25.47% in the last reported quarter.Welbilt delivered an earnings surprise of 172.50% in the last reported quarter. Bitcoin, Like the Internet Itself, Could Change Everything Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities. Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. See 3 crypto-related stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report ParkerHannifin Corporation (PH): Free Stock Analysis Report Applied Industrial Technologies, Inc. (AIT): Free Stock Analysis Report AZZ Inc. (AZZ): Free Stock Analysis Report Welbilt, Inc. (WBT): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksNov 8th, 2021

The 5 best places to buy holiday cards online in 2021

Holiday cards are a great way to spread love to your family and friends this season. Here are the best places to buy Christmas cards online. Table of Contents: Masthead Sticky Holiday cards are a great way to stay in touch with loved ones by sending a physical card or e-card. Now is a good time to start thinking about holiday cards, in case of shortages or shipping delays. Our top pick is cards from Simply to Impress, which makes it easy to create your own designs. When you buy through our links, Insider may earn an affiliate commission. Learn more. Artifact Uprising Snail mail holiday cards are a popular annual tradition in the winter. There's no better way to express your family's warmest wishes during the holidays than to send a thoughtful card.Whether you and your loved ones are celebrating Christmas, Hanukkah, Winter Solstice, Kwanza, or a combination of several different holidays, everybody loves to receive a greeting card. The holidays are approaching, and with shortages and stock issues on the rise, it's not too early to think about ordering cards.We've made sure every pick in our guide has great options for Christmas, Hanukkah, and general wintry holiday tidings. We also looked at criteria like designs, customization options, print quality, paper quality, cost, ease of ordering, speed, and extra services. All the cards we picked can be ordered online and sent through the post.Here are the best holiday cards you can buy in 2021Best holiday cards overall: Simply to ImpressBest full-service holiday cards: MintedBest budget holiday cards: Amazon PrintsBest unique holiday cards: EtsyBest photo-quality custom holiday cards: Artifact Uprising Best holiday cards overall Simply to Impress Simply to Impress has card options galore, with high-quality printing on sturdy paper for a reasonable price.So far, we have not seen any shipping issues with Simply to Impress, but now is a good time to start shopping for holiday cards to avoid future delays that could arise. Simply to Impress boasts a huge variety of categories in the holiday section. Right away, you choose to focus your search according to what you're looking for.You can select sub-headings like "photo" or "non-photo cards," "religious Christmas cards," "Hanukkah cards," "baby's first Christmas," and, my personal favorite, "from the pet." It's also one of the few mainstream stationery companies to have a Kwanza card section.You can also narrow down options easily by checking boxes like how many (if any) photos you'd like to display on your cards, what color cardstock you'd like to use, and even what fancy shape or extra detailing you would like.There are add-ons to cards, such as metallic foil detailing options for a pop of something special in your cards. These extra details will add to the final cost somewhat, but overall, Simply to Impress keeps prices reasonable, especially for the quality of the cards. It's definitely not the cheapest option on this list, but the bang-for-buck ratio is high.Worth a look:Modern Pine Holiday Card (small)Sparkling Love Holiday Card (small)Canvas & Twine Holiday Card (small) Best full-service holiday cards Minted Minted takes care of every part of the card creation and delivery process.Minted is not reporting any shortages or out-of-stock issues, but some customers on Twitter have complained of recent shipping delays. We recommend ordering earlier than you usually would this year.Minted offers highly customizable cards with plenty of photo and non-photo options. It's not the absolute best photo printing in the business, but all the images are clear, paper options are high-quality, and the designs are lovely.Minted sources its designs from a wide-ranging team of artists and sometimes highlights their bios alongside their card designs. This way, you can support a unique artist's work while still getting all the benefits of ordering from an easy online company.Minted also offers a few full-service benefits you can't get everywhere else. If you're like most people, you don't have a lot of extra time for licking 50 envelopes and hand-addressing each one, in addition to adding a personal message.Minted provides optional envelope-addressing and return-addressing in an attractive, script-like font. All you have to do is upload your address book. You can even order customized postage for your full-service cards. Want a stamp of your cute little kid in elf ears? Done. Or maybe a traditional Christmas tree or snowy scene? No problem.Minted is one of the only sites on our list that offers three-dimensional letterpress printing. It sends the prices way up, but this traditional lux mode of printing might be worth it if you're a fan of the finer things in life.Worth a look:Way Over Here Holiday Card (small)Classic Christmas Card (small)A Wonderful Life Holiday Card (small) Best budget holiday cards Amazon Amazon Prints offers plenty of Christmas, Hanukkah, and holiday cards for those on a budget.Amazon Prints does not currently have any reported issues of out-of-stock cards or delayed shipping. Years ago, you might not have thought of a giant retailer like Amazon as a great place to get something as personal as a set of holiday cards. Nowadays, Amazon has a share in pretty much every market, including that of lower-cost custom cards.Amazon Prints has cards from a handful of companies available, including Aperion, Kramer Drive, A Fresh Bunch, Tumbalina, and Vanilla Print. Starting at about 75 cents per photo card without any extras, you can choose from dozens of template designs.Amazon does have a smaller selection of designs, shapes, and paper types than most of the other top picks. But if your holiday card goals are fairly simple, the quality of the prints is perfectly good and goes for a great price.Merry Card (small)New Years Card (small)Happy Holidays Card (small) Best unique holiday cards HansAtelier/Etsy With Etsy, your friends and family can receive a unique piece of art from you in the mail.Shipping times vary throughout Etsy since all sellers operate individually. It's important to check the expected shipping dates for each product before ordering. You likely already know about Etsy, the popular online marketplace for handmade and vintage goods. But if you haven't taken a look at some of the personalized stationery offerings lately, you'll be amazed by the creative options for cards.Tons of incredible artists and craftspeople offer custom holiday card packages, including everything from an illustrated family portrait to letterpress cards showing your cat on Santa Claus's body.You can order personalized photo card packages that will be similar in style and quality to some of the other major retailers on this list. Etsy gives you the opportunity to hire your own artist to create something special for your family.The cost to have your own art created and printed in small batches is often more expensive than the template cards from other stores, but you're directly supporting an artist when you order from Etsy.Note that if you're getting custom art created, printing and physical cards may not be included. You may have to make your own arrangements for printing. Also, the process may take longer than buying a more generic set of cards.Also, the quality between craftspeople and their individual Etsy shops definitely varies, meaning you should shop around and read reviews by other customers before making your choice.Worth a look:Custom Christmas Card Printable Illustration (small)Custom Christmas Card with Family Portrait Illustration (10 ct) (small)Personalized Dog Holiday Card with Snow globe (small) Best photo-quality holiday cards Artifact Uprising Artifact Uprising makes gorgeous custom cards with high-quality photos printed on them.Artifact Uprising is not experiencing delays or shortages as of now. It's a good time to get your holiday card shopping done early to avoid possible issues in the future.Artifact Uprising, a specialized online photo and stationery service, has made a name for itself as an especially high-quality maker of photography books and prints.Artifact Uprising's holiday card selection includes more than 100 designs and five foil colors, including some hand-lettered options, all printed on 100% recycled paper. Cards come in sets of 10 with envelopes included.Many of the designs are simple and understated, making for a very elegant base that will allow your family photo to be the star of the show.You can add return address and recipient address printing for a fee to make things easier on your writing hand this year. The company also makes personalized envelope seal stickers for that extra touch. All the extras do add to the cost, however.With Artifact Uprising, you're also supporting a women-owned family company — this top holiday card pick was founded by two photographer sisters. And while you're there, AU's store sells lovely personalized photo gifts to help you shorten your shopping list.Worth a look:Inner Circle Holiday Card (small)Abstract Holly Card (small)Wavy Holiday Card (small) Check out our other holiday guides Target The best places to buy wrapping paper onlineThe best Christmas tree ornamentsThe best places to buy Christmas decorationsThe best holiday lightsWhere to buy live Christmas trees onlineThe best artificial Christmas trees Read the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 27th, 2021

Green Energy: A Bubble In Unrealistic Expectations

Green Energy: A Bubble In Unrealistic Expectations Authored by David Hay via Everegreen Gavekal blog, “You see what is happening in Europe. There is hysteria and some confusion in the markets. Why?…Some people are speculating on climate change issues, some people are underestimating some things, some are starting to cut back on investments in the extractive industries. There needs to be a smooth transition.” - Vladimir Putin (someone with whom this author rarely agrees) “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of its citizens.” – John Maynard Keynes (an interesting observation for all the modern day Keynesians to consider given their support of current inflationary US policies, including energy-related) Introduction This week’s EVA provides another sneak preview into David Hay’s book-in-process, “Bubble 3.0” discussing what he thinks is the crucial topic of “greenflation.”  This is a term he coined referring to the rising price for metals and minerals that are essential for solar and wind power, electric cars, and other renewable technologies. It also centers on the reality that as global policymakers have turned against the fossil fuel industry, energy producers are for the first time in history not responding to dramatically higher prices by increasing production.  Consequently, there is a difficult tradeoff that arises as the world pushes harder to combat climate change, driving up energy costs to painful levels, especially for lower income individuals.  What we are currently seeing in Europe is a vivid example of this dilemma.  While it may be the case that governments welcome higher oil and natural gas prices to discourage their use, energy consumers are likely to have a much different reaction. Summary BlackRock’s CEO recently admitted that, despite what many are opining, the green energy transition is nearly certain to be inflationary. Even though it’s early in the year, energy prices are already experiencing unprecedented spikes in Europe and Asia, but most Americans are unaware of the severity. To that point, many British residents being faced with the fact that they may need to ration heat and could be faced with the chilling reality that lives could be lost if this winter is as cold as forecasters are predicting. Because of the huge increase in energy prices, inflation in the eurozone recently hit a 13-year high, heavily driven by natural gas prices on the Continent that are the equivalent of $200 oil. It used to be that the cure for extreme prices was extreme prices, but these days I’m not so sure.  Oil and gas producers are very wary of making long-term investments to develop new resources given the hostility to their industry and shareholder pressure to minimize outlays. I expect global supply to peak sometime next year and a major supply deficit looks inevitable as global demand returns to normal. In Norway, almost 2/3 of all new vehicle sales are of the electric variety (EVs) – a huge increase in just over a decade. Meanwhile, in the US, it’s only about 2%. Still, given Norway’s penchant for the plug-in auto, the demand for oil has not declined. China, despite being the largest market by far for electric vehicles, is still projected to consume an enormous and rising amount of oil in the future. About 70% of China’s electricity is generated by coal, which has major environmental ramifications in regards to electric vehicles. Because of enormous energy demand in China this year, coal prices have experienced a massive boom. Its usage was up 15% in the first half of this year, and the Chinese government has instructed power providers to obtain all baseload energy sources, regardless of cost.  The massive migration to electric vehicles – and the fact that they use six times the amount of critical minerals as their gasoline-powered counterparts –means demand for these precious resources is expected to skyrocket. This extreme need for rare minerals, combined with rapid demand growth, is a recipe for a major spike in prices. Massively expanding the US electrical grid has several daunting challenges– chief among them the fact that the American public is extremely reluctant to have new transmission lines installed in their area. The state of California continues to blaze the trail for green energy in terms of both scope and speed. How the rest of the country responds to their aggressive take on renewables remains to be seen. It appears we are entering a very odd reality: governments are expending resources they do not have on weakly concentrated energy. And the result may be very detrimental for today’s modern economy. If the trend in energy continues, what looks nearly certain to be the Third Energy crisis of the last half-century may linger for years.  Green energy: A bubble in unrealistic expectations? As I have written in past EVAs, it amazes me how little of the intense inflation debate in 2021 centered on the inflationary implications of the Green Energy transition.  Perhaps it is because there is a built-in assumption that using more renewables should lower energy costs since the sun and the wind provide “free power”.  However, we will soon see that’s not the case, at least not anytime soon; in fact, it’s my contention that it will likely be the opposite for years to come and I’ve got some powerful company.  Larry Fink, CEO of BlackRock, a very pro-ESG* organization, is one of the few members of Wall Street’s elite who admitted this in the summer of 2021.  The story, however, received minimal press coverage and was quickly forgotten (though, obviously, not be me!).  This EVA will outline myriad reasons why I think Mr. Fink was telling it like it is…despite the political heat that could bring down upon him.  First, though, I will avoid any discussion of whether humanity is the leading cause of global warming.  For purposes of this analysis, let’s make the high-odds assumption that for now a high-speed green energy transition will continue to occur.  (For those who would like a well-researched and clearly articulated overview of the climate debate, I highly recommend the book “Unsettled”; it’s by a former top energy expert and scientist from the Obama administration, Dr. Steven Koonin.) The reason I italicized “for now” is that in my view it’s extremely probable that voters in many Western countries are going to become highly retaliatory toward energy policies that are already creating extreme hardship.  Even though it’s only early autumn as I write these words, energy prices are experiencing unprecedented increases in Europe.  Because it’s “over there”, most Americans are only vaguely aware of the severity of the situation.  But the facts are shocking…  Presently, natural gas is going for $29 per million British Thermal Units (BTUs) in Europe, a quadruple compared to the same time in 2020, versus “just” $5 in the US, which is a mere doubling.  As a consequence, wholesale energy cost in Great Britain rose an unheard of 60% even before summer ended.  Reportedly, nine UK energy companies are on the brink of failure at this time due to their inability to fully pass on the enormous cost increases.  As a result, the British government is reportedly on the verge of nationalizing some of these entities—supposedly, temporarily—to prevent them from collapsing.  (CNBC reported on Wednesday that UK natural gas prices are now up 800% this year; in the US, nat gas rose 20% on Tuesday alone, before giving back a bit more than half of that the next day.) Serious food shortages are expected after exorbitant natural gas costs forced most of England’s commercial production of CO2 to shut down.  (CO2 is used both for stunning animals prior to slaughter and also in food packaging.)  Additionally, ballistic natural gas prices have forced the closure of two big US fertilizer plants due to a potential shortfall of ammonium nitrate of which “nat gas” is a key feedstock.  *ESG stands for Environmental, Social, Governance; in 2021, Blackrock’s assets under management approximated $9 ½ trillion, about one-third of the total US federal debt. With the winter of 2021 approaching, British households are being told they may need to ration heat.  There are even growing concerns about the widespread loss of life if this winter turns out to be a cold one, as 2020 was in Europe.  Weather forecasters are indicating that’s a distinct possibility.   In Spain, consumers are paying 40% more for electricity compared to the prior year.  The Spanish government has begun resorting to price controls to soften the impact of these rapidly escalating costs. (The history of price controls is that they often exacerbate shortages.) Naturally, spiking power prices hit the poorest hardest, which is typical of inflation whether it is of the energy variety or of generalized price increases.  Due to these massive energy price increases, eurozone inflation recently hit a 13-year high, heavily driven by natural gas prices that are the equivalent of $200 per barrel oil.  This is consistent with what I warned about in several EVAs earlier this year and I think there is much more of this looming in the years to come. In Asia, which also had a brutally cold winter in 2020 – 2021, there are severe energy shortages being disclosed, as well.  China has instructed its power providers to secure all the coal they can in preparation for a repeat of frigid conditions and acute deficits even before winter arrives.  The government has also instructed its energy distributors to acquire all the liquified natural gas (LNG) they can, regardless of cost.  LNG recently hit $35 per million British Thermal Units in Asia, up sevenfold in the past year.  China is also rationing power to its heavy industries, further exacerbating the worldwide shortages of almost everything, with notable inflationary implications. In India, where burning coal provides about 70% of electricity generation (as it does in China), utilities are being urged to import coal even though that country has the world’s fourth largest coal reserves.  Several Indian power plants are close to exhausting their coal supplies as power usage rips higher. Normally, I’d say that the cure for such extreme prices, was extreme prices—to slightly paraphrase the old axiom.  But these days, I’m not so sure; in fact, I’m downright dubious.  After all, the enormously influential International Energy Agency has recommended no new fossil fuel development after 2021—“no new”, as in zero.  It’s because of pressure such as this that, even though US natural gas prices have done a Virgin Galactic to $5 this year, the natural gas drilling rig count has stayed flat.  The last time prices were this high there were three times as many working rigs.  It is the same story with oil production.  Most Americans don’t seem to realize it but the US has provided 90% of the planet’s petroleum output growth over the past decade.  In other words, without America’s extraordinary shale oil production boom—which raised total oil output from around 5 million barrels per day in 2008 to 13 million barrels per day in 2019—the world long ago would have had an acute shortage.  (Excluding the Covid-wracked year of 2020, oil demand grows every year—strictly as a function of the developing world, including China, by the way.) Unquestionably, US oil companies could substantially increase output, particularly in the Permian Basin, arguably (but not much) the most prolific oil-producing region in the world.  However, with the Fed being pressured by Congress to punish banks that lend to any fossil fuel operator, and the overall extreme hostility toward domestic energy producers, why would they?  There is also tremendous pressure from Wall Street on these companies to be ESG compliant.  This means reducing their carbon footprint.  That’s tough to do while expanding their volume of oil and gas.  Further, investors, whether on Wall Street or on London’s equivalent, Lombard Street, or in pretty much any Western financial center, are against US energy companies increasing production.  They would much rather see them buy back stock and pay out lush dividends.  The companies are embracing that message.  One leading oil and gas company CEO publicly mused to the effect that buying back his own shares at the prevailing extremely depressed valuations was a much better use of capital than drilling for oil—even at $75 a barrel. As reported by Morgan Stanley, in the summer of 2021, an US institutional broker conceded that of his 400 clients, only one would consider investing in an energy company!  Consequently, the fact that the industry is so detested means that its shares are stunningly undervalued.  How stunningly?  A myriad of US oil and gas producers are trading at free cash flow* yields of 10% to 15% and, in some cases, as high as 25%. In Europe, where the same pressures apply, one of its biggest energy companies is generating a 16% free cash flow yield.  Moreover, that is based up an estimate of $60 per barrel oil, not the prevailing price of $80 on the Continent. *Free cash flow is the excess of gross cash flow over and above the capital spending needed to sustain a business.  Many market professionals consider it more meaningful than earnings.  Therefore, due to the intense antipathy toward Western energy producers they aren’t very inclined to explore for new resources.  Another much overlooked fact about the ultra-critical US shale industry that, as noted, has been nearly the only source of worldwide output growth for the past 13 years, is its rapid decline nature.  Most oil wells see their production taper off at just 4% or 5% per year.  But with shale, that decline rate is 80% after only two years.  (Because of the collapse in exploration activities in 2020 due to Covid, there are far fewer new wells coming on-line; thus, the production base is made up of older wells with slower decline rates but it is still a much steeper cliff than with traditional wells.)  As a result, the US, the world’s most important swing producer, has to come up with about 1.5 million barrels per day (bpd) of new output just to stay even.  (This was formerly about a 3 million bpd number due to both the factor mentioned above and the 2 million bpd drop in total US oil production, from 13 million bpd to around 11 million bpd since 2019).  Please recall that total US oil production in 2008 was only around 5 million bpd.  Thus, 1.5 million barrels per day is a lot of oil and requires considerable drilling and exploration activities.  Again, this is merely to stay steady-state, much less grow.  The foregoing is why I wrote on multiple occasions in EVAs during 2020, when the futures price for oil went below zero*, that crude would have a spectacular price recovery later that year and, especially, in 2021.  In my view, to go out on my familiar creaky limb, you ain’t seen nothin’ yet!  With supply extremely challenged for the above reasons and demand marching back, I believe 2022 could see $100 crude, possibly even higher.  *Physical oil, or real vs paper traded, bottomed in the upper teens when the futures contract for delivery in April, 2020, went deeply negative.  Mike Rothman of Cornerstone Analytics has one of the best oil price forecasting records on Wall Street.  Like me, he was vehemently bullish on oil after the Covid crash in the spring of 2020 (admittedly, his well-reasoned optimism was a key factor in my up-beat outlook).  Here’s what he wrote late this summer:  “Our forecast for ’22 looks to see global oil production capacity exhausted late in the year and our balance suggests OPEC (and OPEC + participants) will face pressures to completely remove any quotas.”  My expectation is that global supply will likely max out sometime next year, barring a powerful negative growth shock (like a Covid variant even more vaccine resistant than Delta).  A significant supply deficit looks inevitable as global demand recovers and exceeds its pre-Covid level.  This is a view also shared by Goldman Sachs and Raymond James, among others; hence, my forecast of triple-digit prices next year.  Raymond James pointed out that in June the oil market was undersupplied by 2.5 mill bpd.  Meanwhile, global petroleum demand was rapidly rising with expectations of nearly pre-Covid consumption by year-end.  Mike Rothman ran this chart in a webcast on 9/10/2021 revealing how far below the seven-year average oil inventories had fallen.  This supply deficit is very likely to become more acute as the calendar flips to 2022. In fact, despite oil prices pushing toward $80, total US crude output now projected to actually decline this year.  This is an unprecedented development.  However, as the very pro-renewables Financial Times (the UK’s equivalent of the Wall Street Journal) explained in an August 11th, 2021, article:  “Energy companies are in a bind.  The old solution would be to invest more in raising gas production.  But with most developed countries adopting plans to be ‘net zero’ on carbon emissions by 2050 or earlier, the appetite for throwing billions at long-term gas projects is diminished.” The author, David Sheppard, went on to opine: “In the oil industry there are those who think a period of plus $100-a-barrel oil is on the horizon, as companies scale back investments in future supplies, while demand is expected to keep rising for most of this decade at a minimum.”  (Emphasis mine)  To which I say, precisely!  Thus, if he’s right about rising demand, as I believe he is, there is quite a collision looming between that reality and the high probability of long-term constrained supplies.  One of the most relevant and fascinating Wall Street research reports I read as I was researching the topic of what I have been referring to as “Greenflation” is from Morgan Stanley.  Its title asked the provocative question:  “With 64% of New Cars Now Electric, Why is Norway Still Using so Much Oil?”  While almost two-thirds of Norway’s new vehicle sales are EVs, a remarkable market share gain in just over a decade, the number in the US is an ultra-modest 2%.   Yet, per the Morgan Stanley piece, despite this extraordinary push into EVs, oil consumption in Norway has been stubbornly stable.  Coincidentally, that’s been the experience of the overall developed world over the past 10 years, as well; petroleum consumption has largely flatlined.  Where demand hasn’t gone horizontal is in the developing world which includes China.  As you can see from the following Cornerstone Analytics chart, China’s oil demand has vaulted by about 6 million barrels per day (bpd) since 2010 while its domestic crude output has, if anything, slightly contracted. Another coincidence is that this 6 million bpd surge in China’s appetite for oil, almost exactly matched the increase in US oil production.  Once again, think where oil prices would be today without America’s shale oil boom. This is unlikely to change over the next decade.  By 2031, there are an estimated one billion Asian consumers moving up into the middle class.  History is clear that more income means more energy consumption.  Unquestionably, renewables will provide much of that power but oil and natural gas are just as unquestionably going to play a critical role.  Underscoring that point, despite the exponential growth of renewables over the last 10 years, every fossil fuel category has seen increased usage.  Thus, even if China gets up to Norway’s 64% EV market share of new car sales over the next decade, its oil usage is likely to continue to swell.  Please be aware that China has become the world’s largest market for EVs—by far.  Despite that, the above chart vividly displays an immense increase in oil demand.  Here’s a similar factoid that I ran in our December 4th EVA, “Totally Toxic”, in which I made a strong bullish case for energy stocks (the main energy ETF is up 35% from then, by the way):  “(There was) a study by the UN and the US government based on the Model for the Assessment of Greenhouse Gasses Induced Climate Change (MAGICC).  The model predicted that ‘the complete elimination of all fossil fuels in the US immediately would only restrict any increase in world temperature by less than one tenth of one degree Celsius by 2050, and by less than one fifth of one degree Celsius by 2100.’  Say again?  If the world’s biggest carbon emitter on a per capita basis causes minimal improvement by going cold turkey on fossil fuels, are we making the right moves by allocating tens of trillions of dollars that we don’t have toward the currently in-vogue green energy solutions?” China's voracious power appetite increase has been true with all of its energy sources.  On the environmentally-friendly front, that includes renewables; on the environmentally-unfriendly side, it also includes coal.  In 2020, China added three times more coal-based power generation than all other countries combined.  This was the equivalent of an additional coal planet each week.  Globally, there was a reduction last year of 17 gigawatts in coal-fired power output; in China, the increase was 29.8 gigawatts, far more than offsetting the rest of the world’s progress in reducing the dirtiest energy source.  (A gigawatt can power a city with a population of roughly 700,000.) Overall, 70% of China’s electricity is coal-generated. This has significant environmental implications as far as electric vehicles (EVs) are concerned.  Because EVs are charged off a grid that is primarily coal- powered, carbon emissions actually rise as the number of such vehicles proliferate. As you can see in the following charts from Reuters’ energy expert John Kemp, Asia’s coal-fired generation has risen drastically in the last 20 years, even as it has receded in the rest of the world.  (The flattening recently is almost certainly due to Covid, with a sharp upward resumption nearly a given.) The worst part is that burning coal not only emits CO2—which is not a pollutant and is essential for life—it also releases vast quantities of nitrous oxide (N20), especially on the scale of coal usage seen in Asia today. N20 is unquestionably a pollutant and a greenhouse gas that is hundreds of times more potent than CO2.  (An interesting footnote is that over the last 550 million years, there have been very few times when the CO2 level has been as low, or lower, than it is today.)  Some scientists believe that one reason for the shrinkage of Arctic sea ice in recent decades is due to the prevailing winds blowing black carbon soot over from Asia.  This is a separate issue from N20 which is a colorless gas.  As the black soot covers the snow and ice fields in Northern Canada, they become more absorbent of the sun’s radiation, thus causing increased melting.  (Source:  “Weathering Climate Change” by Hugh Ross) Due to exploding energy needs in China this year, coal prices have experienced an unprecedented surge.  Despite this stunning rise, Chinese authorities have instructed its power providers to obtain coal, and other baseload energy sources, such as liquified natural gas (LNG), regardless of cost.  Notwithstanding how pricey coal has become, its usage in China was up 15% in the first half of this year vs the first half of 2019 (which was obviously not Covid impacted). Despite the polluting impact of heavy coal utilization, China is unlikely to turn away from it due to its high energy density (unlike renewables), its low cost (usually) and its abundance within its own borders (though its demand is so great that it still needs to import vast amounts).  Regarding oil, as we saw in last week’s final image, it is currently importing roughly 11 million barrels per day (bpd) to satisfy its 15 million bpd consumption (about 15% of total global demand).  In other words, crude imports amount to almost three-quarter of its needs.  At $80 oil, this totals $880 million per day or approximately $320 billion per year.  Imagine what China’s trade surplus would look like without its oil import bill! Ironically, given the current hostility between the world’s superpowers, China has an affinity for US oil because of its light and easy-to-refine nature.  China’s refineries tend to be low-grade and unable to efficiently process heavier grades of crude, unlike the US refining complex which is highly sophisticated and prefers heavy oil such as from Canada and Venezuela—back when the latter actually produced oil. Thus, China favors EVs because they can be de facto coal-powered, lessening its dangerous reliance on imported oil.  It also likes them due to the fact it controls 80% of the lithium ion battery supply and 60% of the planet’s rare earth minerals, both of which are essential to power EVs.     However, even for China, mining enough lithium, cobalt, nickel, copper, aluminum and the other essential minerals/metals to meet the ambitious goals of largely electrifying new vehicle volumes is going to be extremely daunting.  This is in addition to mass construction of wind farms and enormously expanded solar panel manufacturing. As one of the planet’s leading energy authorities Daniel Yergin writes: “With the move to electric cars, demand for critical minerals will skyrocket (lithium up 4300%, cobalt and nickel up 2500%), with an electric vehicle using 6 times more minerals than a conventional car and a wind turbine using 9 times more minerals than a gas-fueled power plant.  The resources needed for the ‘mineral-intensive energy system’ of the future are also highly concentrated in relatively few countries. Whereas the top 3 oil producers in the world are responsible for about 30 percent of total liquids production, the top 3 lithium producers control more than 80% of supply. China controls 60% of rare earths output needed for wind towers; the Democratic Republic of the Congo, 70% of the cobalt required for EV batteries.” As many have noted, the environmental impact of immensely ramping up the mining of these materials is undoubtedly going to be severe.  Michael Shellenberger, a life-long environmental activist, has been particularly vociferous in his condemnation of the dominant view that only renewables can solve the global energy needs.  He’s especially critical of how his fellow environmentalists resorted to repetitive deception, in his view, to undercut nuclear power in past decades.  By leaving nuke energy out of the solution set, he foresees a disastrous impact on the planet due to the massive scale (he’d opine, impossibly massive) of resource mining that needs to occur.  (His book, “Apocalypse Never”, is also one I highly recommend; like Dr. Koonin, he hails from the left end of the political spectrum.) Putting aside the environmental ravages of developing rare earth minerals, when you have such high and rapidly rising demand colliding with limited supply, prices are likely to go vertical.  This will be another inflationary “forcing”, a favorite term of climate scientists, caused by the Great Green Energy Transition. Moreover, EVs are very semiconductor intensive.  With semis already in seriously short supply, this is going to make a gnarly situation even gnarlier.  It’s logical to expect that there will be recurring shortages of chips over the next decade for this reason alone (not to mention the acute need for semis as the “internet of things” moves into primetime).  In several of the newsletters I’ve written in recent years, I’ve pointed out the present vulnerability of the US electric grid.  Yet, it will be essential not just to keep it from breaking down under its current load; it must be drastically enhanced, a Herculean task. For one thing, it is excruciatingly hard to install new power lines. As J.P. Morgan’s Michael Cembalest has written: “Grid expansion can be a hornet’s nest of cost, complexity and NIMBYism*, particularly in the US.”  The grid’s frailty, even under today’s demands (i.e., much less than what lies ahead as millions of EVs plug into it) is particularly obvious in California.  However, severe winter weather in 2021 exposed the grid weakness even in energy-rich Texas, which also has a generally welcoming attitude toward infrastructure upgrading and expansion. Yet it’s the Golden State, home to 40 million Americans and the fifth largest economy in the world, if it was its own country (which it occasionally acts like it wants to be), that is leading the charge to EVs and seeking to eliminate internal combustion engines (ICEs) as quickly as possible.  Even now, blackouts and brownouts are becoming increasingly common.  Seemingly convinced it must be a role model for the planet, it’s trying desperately to reduce its emissions, which are less than 1%, of the global total, at the expense of rendering its energy system more similar to a developing country.  In addition to very high electricity costs per kilowatt hour (its mild climate helps offset those), it also has gasoline prices that are 77% above the national average.  *NIMBY stands for Not In My Back Yard. While California has been a magnet for millions seeking a better life for 150 years, the cost of living is turning the tide the other way.  Unreliable and increasingly expensive energy is likely to intensify that trend.  Combined with home prices that are more than double the US median–$800,000!–California is no longer the land of milk and honey, unless, to slightly paraphrase Woody Guthrie about LA, even back in the 1940s, you’ve got a whole lot of scratch.  More and more people, seem to be scratching California off their list of livable venues.  Voters in the reliably blue state of California may become extremely restive, particularly as they look to Asia and see new coal plants being built at a fever pitch.  The data will become clear that as America keeps decarbonizing–as it has done for 30 years mostly due to the displacement of coal by gas in the US electrical system—Asia will continue to go the other way.  (By the way, electricity represents the largest share of CO2 emission at roughly 25%.)  California has always seemed to lead social trends in this country, as it is doing again with its green energy transition.  The objective is noble though, extremely ambitious, especially the timeline.  As it brings its power paradigm to the rest of America, especially its frail grid, it will be interesting to see how voters react in other states as the cost of power leaps higher and its dependability heads lower.  It’s reasonable to speculate we may be on the verge of witnessing the Californication of the US energy system.  Lest you think I’m being hyperbolic, please be aware the IEA (International Energy Agency) has estimated it will cost the planet $5 trillion per year to achieve Net Zero emissions.  This is compared to global GDP of roughly $85 trillion. According to BloombergNEF, the price tag over 30 years, could be as high as $173 trillion.  Frankly, based on the history of gigantic cost overruns on most government-sponsored major infrastructure projects, I’m inclined to take the over—way over—on these estimates. Moreover, energy consulting firm T2 and Associates, has guesstimated electrifying just the US to the extent necessary to eliminate the direct consumption of fuel (i.e., gasoline, natural gas, coal, etc.) would cost between $18 trillion and $29 trillion.  Again, taking into account how these ambitious efforts have played out in the past, I suspect $29 trillion is light.  Regardless, even $18 trillion is a stunner, despite the reality we have all gotten numb to numbers with trillions attached to them.  For perspective, the total, already terrifying, level of US federal debt is $28 trillion. Regardless, as noted last week, the probabilities of the Great Green Energy Transition happening are extremely high.  Relatedly, I believe the likelihood of the Great Greenflation is right up there with them.  As Gavekal’s Didier Darcet wrote in mid-August:  ““Nowadays, and this is a great first in history, governments will commit considerable financial resources they do not have in the extraction of very weakly concentrated energy.” ( i.e., less efficient)  “The bet is very risky, and if it fails, what next?  The modern economy would not withstand expensive energy, or worse, lack of energy.”  While I agree this an historical first, it’s definitely not great (with apologies for all the “greats”).  This is particularly not great for keeping inflation subdued, as well as for attempting to break out of the growth quagmire the Western world has been in for the last two decades.  What we are seeing in Europe right now is an extremely cautionary case study in just how disastrous the war on fossil fuels can be (shortly we will see who or what has been a behind-the-scenes participant in this conflict). Essentially, I believe, as I’ve written in past EVAs, we are entering the third energy crisis of the last 50 years.  If I’m right, it will be characterized by recurring bouts of triple-digit oil prices in the years to come.  Along with Richard Nixon taking the US off the gold standard in 1971, the high inflation of the 1970s was caused by the first two energy crises (the 1973 Arab Oil Embargo and the 1979 Iranian Revolution).  If I’m correct about this being the third, it’s coming at a most inopportune time with the US in hyper-MMT* mode. Frankly, I believe many in the corridors of power would like to see oil trade into the $100s, and natural gas into the teens, as it will help catalyze the shift to renewable energy.  But consumers are likely to have a much different reaction—potentially, a violently different reaction, as I noted last week.  The experience of the Yellow Vest protests in France (referring to the color of the vest protestors wore), are instructive in this regard.  France is a generally left-leaning country.  Despite that, a proposed fuel surtax in November 2018 to fund a renewable energy transition triggered such widespread civil unrest that French president Emmanuel Macron rescinded it the following month. *MMT stands for Modern Monetary Theory.  It holds that a government, like the US, which issues debt in its own currency can spend without concern about budgetary constraints.  If there are not enough buyers of its bonds at acceptable interest rates, that nation’s central bank (the Fed, in our case) simply acquires them with money it creates from its digital printing press.  This is what is happening today in the US.  Many economists consider this highly inflationary. The sharp and politically uncomfortable rise in US gas pump prices this summer caused the Biden administration to plead with OPEC to lift its volume quotas.  The ironic implication of that exhortation was glaringly obvious, as was the inefficiency and pollution consequences of shipping oil thousands of miles across the Atlantic.  (Oil tankers are a significant source of emissions.)  This is as opposed to utilizing domestic oil output, as well as crude from Canada (which is actually generally better suited to the US refining complex).  Beyond the pollution aspect, imported oil obviously worsens America’s massive trade deficit (which would be far more massive without the six million barrels per day of domestic oil volumes that the shale revolution has provided) and costs our nation high-paying jobs. Further, one of my other big fears is that the West is engaging in unilateral energy disarmament.  Russia and China are likely the major beneficiaries of this dangerous scenario.  Per my earlier comment about a stealth combatant in the war on fossil fuels, it may surprise you that a past NATO Secretary General* has accused Russian intelligence of avidly supporting the anti-fracking movements in Western Europe.  Russian TV has railed against fracking for years, even comparing it to pedophilia (certainly, a most bizarre analogy!).  The success of the anti-fracking movement on the Continent has essentially prevented a European version of America’s shale miracles (the UK has the potential to be a major shale gas producer).  Consequently, the European Union’s domestic natural gas production has been in a rapid decline phase for years.  Banning fracking has, of course, made Europe heavily reliant on Russian gas shipments with more than 40% of its supplies coming from Russia. This is in graphic contrast to the shale output boom in the US that has not only made us natural gas self-sufficient but also an export powerhouse of liquified natural gas (LNG).  In 2011, the Nord Stream system of pipelines running under the Baltic Sea from northern Russia began delivering gas west from northern Russia to the German coastal city of Greifswald.  For years, the Russians sought to build a parallel system with the inventive name of Nord Stream 2.  The US government opposed its approval on security grounds but the Biden administration has dropped its opposition.  It now appears Nord Stream 2 will happen, leaving Europe even more exposed to Russian coercion.  Is it possible the Russian government and the Chinese Communist Party have been secretly and aggressively supporting the anti-fossil fuel movements in America?  In my mind, it seems not only possible but probable.  In fact, I believe it is naïve not to come that conclusion.  After all, wouldn’t it be in both of their geopolitical interests to see the US once again caught in a cycle of debilitating inflation, ensnared by the twin traps of MMT and the third energy crisis? *Per former NATO Secretary General, Anders Fogh Rasumssen:  Russia has “engaged actively with so-called non-governmental organizations—environmental organizations working against shale gas—to maintain Europe’s dependence on imported Russian gas”. Along these lines, I was shocked to listen to a recent podcast by the New Yorker magazine on the topic of “intelligent sabotage”.  This segment was an interview between the magazine’s David Remnick and a Swedish professor, Adreas Malm.  Mr. Malm is the author of a new book with the literally explosive title “How To Blow Up A Pipeline”.   Just as it sounds, he advocates detonating pipelines to inhibit fossil fuel distribution.  Mr. Remnick was clearly sympathetic to his guest but he did ask him about the impact on the poor of driving energy prices up drastically which would be the obvious ramification if his sabotage recommendations were widely followed.  Mr. Malm’s reaction was a verbal shrug of the shoulders and words to the effect that this was the price to pay to save the planet. Frankly, I am appalled that the venerable New Yorker would provide a platform for such a radical and unlawful suggestion.  In an era when people are de-platformed for often innocuous comments, it’s incredible to me this was posted and has not been pulled down.  In my mind, this reflects just how tolerant the media is of attacks on the fossil fuel industry, regardless of the deleterious impact on consumers and the global economy. Surely, there is a far better way of coping with the harmful aspects of fossil fuel-based energy than this scorched earth (literally, in the case of Mr. Malm) approach, which includes efforts to block new pipelines, shut existing ones, and severely restrict US energy production.  In America’s case, the result will be forcing us to unnecessarily and increasingly rely on overseas imports.  (For example, per the Wall Street Journal, drilling permits on federal land have crashed to 171 in August from 671 in April.  Further, the contentious $3.5 trillion “infrastructure” plan would raise royalties and fees high enough on US energy producers that it would render them globally uncompetitive.) Such actions would only aggravate what is already a severe energy shock, one that may be worse than the 1970s twin energy crises.  America has it easy compared to Europe, though, given current US policy trends, we might be in their same heavily listing energy boat soon. Solutions include fast-tracking small modular nuclear plants; encouraging the further switch from burning coal to natural gas (a trend that is, unfortunately, going the other way now, as noted above); utilizing and enhancing carbon and methane capture at the point of emission (including improving tail pipe effluent-reduction technology); enhancing pipeline integrity to inhibit methane leaks; among many other mitigation techniques that recognize the reality the global economy will be reliant on fossil fuels for many years, if not decades, to come.  If the climate change movement fails to recognize the essential nature of fossil fuels, it will almost certainly trigger a backlash that will undermine the positive change it is trying to bring about.  This is similar to what it did via its relentless assault on nuclear power which produced a frenzy of coal plant construction in the 1980s and 1990s.  On this point, it’s interesting to see how quickly Europe is re-embracing coal power to alleviate the energy poverty and rationing occurring over there right now - even before winter sets in.  When the choice is between supporting climate change initiatives on one hand and being able to heat your home and provide for your family on the other, is there really any doubt about which option the majority of voters will select? Tyler Durden Tue, 10/26/2021 - 19:30.....»»

Category: worldSource: nytOct 26th, 2021

Kimberly-Clark (KMB) Q3 Earnings Miss Estimates, Sales Up Y/Y

Kimberly-Clark's (KMB) third-quarter 2021 results reflect lower earnings due to higher input costs. Management cuts 2021 view for sales, earnings and adjusted operating profit. Kimberly-Clark Corporation KMB reported third-quarter 2021 results, with the top line increasing year over year and beating the Zacks Consensus Estimate. The bottom line declined from the year-ago quarter’s reported figure and lagged the consensus mark. The company is encountering significant input cost inflation, which hurt earnings. Management also slashed its sales, adjusted operating profit and earnings per share guidance for 2021.Quarter in DetailAdjusted earnings came in at $1.62 per share, which fell short of the Zacks Consensus Estimate of $1.66. The bottom line declined from $1.72 per share in the year-ago quarter. Quarterly earnings were hurt by escalated inflation and supply chain disruptions leading to higher-than-anticipated increase in costs.Kimberly-Clark’s sales came in at $5,010 million, which surpassed the Zacks Consensus Estimate of $5,002.8 million. The metric advanced 7% year over year. Favorable currency movements lifted sales by 1%. The net effect of the Softex Indonesia buyout and business exits related to the company’s 2018 Global Restructuring Program boosted the top line by 2%. Organic sales rose 4%, with net selling prices rising 3% and product mix increasing sales 1%.In North America, organic sales in consumer products increased 3%, while it jumped 16% in the K-C Professional segment. Outside North America, organic sales went up 6% in developing and emerging (D&E) markets. The metric was in line with the year-ago quarter’s levels across the developed markets.KimberlyClark Corporation Price, Consensus and EPS Surprise  KimberlyClark Corporation price-consensus-eps-surprise-chart | KimberlyClark Corporation Quote Adjusted operating profit came in at $745 million, down from $806 million in the year-ago quarter, thanks to a rise in input costs to the tune of $480 million. Increase in pulp and polymer-based materials, distribution as well as energy costs led to a rise in input costs. These were somewhat offset by organic sales growth, reduced marketing, research and general expense as well as cost savings of $115 million and $35 million from the FORCE (Focused On Reducing Costs Everywhere) program and the 2018 Global Restructuring Program, respectively.Segment DetailsPersonal Care: Sales of $2,656 million increased 14% year over year. Net selling prices improved 4%, volumes grew 3% while product mix increased 2 points. The net effect of the Softex Indonesia buyout and business exits related to the company’s 2018 Global Restructuring Program aided sales by nearly 3%. Also, favorable currency rates fueled sales by 1%. Sales advanced 11% in North America and 18% in D&E markets. The metric grew 11% across developed markets outside North America, including Australia, South Korea and Western/Central Europe.Consumer Tissue: Segment sales of $1,541 million fell 5% year over year, including a 1% positive impact from currency rates. Volumes fell 7% reflecting tough comparison stemming from escalated shipments in North America and developed markets in the year-ago quarter owing to spike in demand amid the pandemic. Nevertheless, net selling prices inched up 1%. Sales fell 8% in North America, while it increased 5% in D&E markets. The metric fell 6% in developed markets outside North America.K-C Professional (KCP): Segment sales gained 13% to $797 million. Volumes were up 6%. Net selling prices rose 5%, while product mix rose slightly. Also, favorable currency rates contributed 1% to sales. Sales jumped 16% in North America, while it grew 14% in D&E markets. The metric increased 3% in developed markets outside North America.Other Financial UpdatesThe company ended the quarter with cash and cash equivalents of $286 million, long-term debt of $7,555 million and total stockholders’ equity of $707 million. Kimberly-Clark generated cash from operating activities of $782 million during three months ended Sep 30, 2021. Management incurred capital expenditures of $235 million. In 2021, the company now expects capital spending of $1,000-$1,100 million compared with $1,100-$1,200 million expected earlier.Kimberly-Clark repurchased 0.4 million shares for $58 million in the third quarter. In 2021, the company plans to buy back shares worth nearly $400 million at the lower end of the previously-provided guidance of $400-$450 million.The company is on track with the 2018 Global Restructuring Program, which is focused on lowering its structural costs and improving financial flexibility. As part of this initiative, the company plans to sell or exit some low-margin businesses that deliver about 1% of net sales. Notably, Kimberly-Clark generated cumulative savings of $525 million from this program, until the third quarter of 2021. Management anticipates annual pre-tax cost savings of $550-$560 million from this program by 2021-end.Image Source: Zacks Investment Research2021 OutlookNet sales in 2021 are now expected to grow 1-2% year over year. Earlier, management had anticipated the metric to increase 1-4%. Organic sales are now expected to decline 1-2% compared with flat to 2% down forecasted before. Combined gains from foreign currency translations and the Softex Indonesia buyout net of exited businesses related to the 2018 Global Restructuring Program is likely to improve sales by 3%.Management now expects adjusted operating profit to decrease 20-22% compared with a 11-14% decline anticipated earlier. Key input costs are now estimated to escalate $1,400-$1,500 million compared with $1,200-$1,300 million projected before. The updated input cost guidance is accountable to higher polymer-based materials, distribution costs and energy rates. On the savings front, management now expects total cost savings of $520-$540 million in 2021, including $390-$400 million from the FORCE program and $130-$140 million from the 2018 Global Restructuring Program. Earlier, Kimberly-Clark expected total savings of $520-$560 million.Finally, the company now envisions 2021 adjusted earnings per share of $6.05-$6.25, down from the previous expectation of $6.65-$6.90. The updated earnings view reflects significant escalated input cost inflation. The metric came in at $7.74 in 2020.This Zacks Rank #3 (Hold) stock has lost 1.3% so far this year compared with the industry’s decline of 5.9%.Top 3 PicksAlbertsons Companies, Inc. ACI, currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 37.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.Edgewell Personal Care Company EPC, currently carrying a Zacks Rank of 2 (Buy), has a trailing four-quarter earnings surprise of 31.2%, on average.General Mills, Inc. GIS, currently carrying a Zacks Rank of 2, has a trailing four-quarter earnings surprise of 7.3%, on average. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report General Mills, Inc. (GIS): Free Stock Analysis Report KimberlyClark Corporation (KMB): Free Stock Analysis Report Albertsons Companies, Inc. (ACI): Free Stock Analysis Report Edgewell Personal Care Company (EPC): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksOct 25th, 2021

ETF Strategies to Beat Likely "Hyperinflation" in the World

Rising inflation has been emerging as a great cause for concern globally. Supply chain disruptions due to COVID-19 and prolonged ultra-easy monetary policy have led to such a scenario. Inflation has been on an uphill ride this year thanks to the low-base effects from 2020. Also, because economic recovery has picked up on widespread vaccination and fiscal stimulus, business restrictions have been relaxed and demand has jumped.The annual inflation rate in the United States rose to a 13-year high of 5.4% in September 2021 from 5.3% in August and above market expectations of 5.3%. Faster price increases were recorded in cost of shelter (3.2% vs. 2.8% in August); food (4.6% vs. 3.7%, the highest since December of 2011), namely food at home (4.5% vs. 3%); new vehicles (8.7% vs. 7.6%); and energy (24.8% vs. 25%), per trading economics.Twitter co-founder Jack Dorsey recently put stress on escalating U.S. inflation, saying things are going to get considerably worse. “Hyperinflation is going to change everything,” Dorsey tweeted lately, as quoted on CNBC. HSBC Asset Management has also recognized that rising inflation is one of the factors forming the current “wall of worry” faced by global markets, as quoted on CNBC.The consensus forecasts for U.S. 2021 GDP have been reduced by 0.7 percentage points to 5.9%, according to HSBC’s aggregate. On the other hand, supply chain issues have boosted U.S. 2021 inflation expectations by a full percentage point to 4.3%.Against this backdrop, we suggest a few ETF strategies that can be worth investing at the time of rising inflation. Below we highlight those.Bet on Value ETFsHigher inflation may goad the Fed to raise rates. Rising rates are good for value stocks than the growth ones as the latter’s cash flows come way out in the future, as indicated by New York University finance professor Aswath Damodaran, as quoted on CNBC. Vanguard Value ETF VTV is thus a good bet.Energy Sector a Likely Winner?The energy sector tends to perform well in an inflationary environment. The revenues of energy stocks are dependent on energy prices, a key factor of the inflation indices. Such firms surpassed inflation 71% of the time within a time span of 1973-2020 and delivered an annual real return of 9.0% per year on average.The operating backdrop of the sector too is bullish. Oil price has been on a tear with Brent hitting the highest level not seen since 2014. The rally has been driven by supply disruptions and storage drawdowns as well as growing demand with the easing of pandemic restrictions. VanEck Vectors Unconventional Oil & Gas ETF FRAK could be good play out here.Own Real EstateWarren Buffett also suggests owning real estate during periods of inflation because the purchase is a “one-time outlay” for the investor, does not incur recurring costs and involves resale value. In a rising-inflation environment, real estate stocks act as good bets. Both, resale value of the property and rental income, rise with price inflation (read: Follow Buffett With These Inflation-Friendly ETF Strategies).Thanks to rising home prices, affordability is falling. Demand for renting has been increasing, which in turn is giving a push to shelter costs. This means exposure to real estate could be inflation-beating. Notably, equity REITs outperformed inflation 67% of the time and offered an average real return of 4.7%.Some of the decent real estate ETF plays right now are Real Estate Select Sector SPDR ETF XLRE and U.S. Diversified Real Estate ETF PPTY.Play Inflation-Protected ETFsThanks to the growing reach of the ETF industry, we now have several ETFs that offer exposure to tackle inflationary pressure. These ETFs are ProShares Inflation Expectations ETF RINF, Horizon Kinetics Inflation Beneficiaries ETF INFL and Quadratic Interest Rate Volatility and Inflation ETF IVOL.TIPS ETFs like iShares TIPS Bond ETF TIP also look to be great bets. These offer exposure to U.S. TIPS, which are government bonds whose face value rises with inflation. TIPS ETFs offer robust real returns during inflationary periods unlike their unprotected peers in the fixed-income world.Time for Asian Fixed Income?HSBC Asset Management Global Chief Global Strategist Joe indicated that Asian fixed income assets are “reasonably priced inflation hedges,” as quoted on CNBC. VanEck J.P. Morgan EM Local Currency Bond ETF EMLC is one of the emerging market bond ETFs that yields more than 5% at present. China (10.36%), Indonesia (9.61%), Thailand (6.41%) and Malaysia (6.15%) take about one-third assets of the fund. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report iShares TIPS Bond ETF (TIP): ETF Research Reports Vanguard Value ETF (VTV): ETF Research Reports VanEck J.P. Morgan EM Local Currency Bond ETF (EMLC): ETF Research Reports Real Estate Select Sector SPDR ETF (XLRE): ETF Research Reports ProShares Inflation Expectations ETF (RINF): ETF Research Reports U.S. Diversified Real Estate ETF (PPTY): ETF Research Reports Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL): ETF Research Reports Horizon Kinetics Inflation Beneficiaries ETF (INFL): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 25th, 2021

Futures At All Time High On Evergrande Reprieve Despite Intel, Snapchat Collapse

Futures At All Time High On Evergrande Reprieve Despite Intel, Snapchat Collapse S&P 500 futures traded to within 2 points of their September all time high, rising 0.12% to 4547, just shy of their 4549.5 record after China's Evergrande unexpectedly made a last minute coupon payment, averting an imminent weekend default and boosting risk sentiment. But while spoos were up, Nasdaq futures edged -0.18% lower after Intel warned of lower profit margins, while Snap crashed 22%, leading declines among social media firms after flagging a hit to digital advertising from privacy changes by Apple. Intel plunged 10% in premarket trading as it missed third-quarter sales expectations, while its Chief Executive pointed to shortage of other chips holding back sales of the company's flagship processors. 10Y yields dropped 2bps, the dollar slumped and bitcoin traded above $63,000. Fed Chair Powell is scheduled to speak at 11am ET.  The Chinese property giant’s bond-coupon payment has boosted sentiment because it reduces risks to the broader financial system, according to Pierre Veyret, technical analyst at ActivTrades. “However, this optimistic trading mood may be short-lived as investors’ biggest concern remains inflation,” he said. “Traders will listen intently to Jerome Powell today as the Fed chairman is expected to give more clues about monetary policy.” Not everything was roses, however, and Facebook fell 3.7%, while Twitter lost 4.1% after Snap said privacy changes by Apple on iOS devices hurt the company's ability to target and measure its digital advertising Snap plunged 20.9% on the news and cast doubts over quarterly reports next week from Facebook and Twitter, social media firms that rely heavily on advertising revenue. Meanwhile supply chain worries, inflationary pressures and labor shortages have been at the center of third-quarter earnings season, with analysts expecting S&P 500 earnings to rise 33.7% year-on-year, according to Refinitiv data. Some analysts, however, said such worries will only have a temporary impact on earnings from mega-cap technology and communications companies this reporting season. "Intel also produced less than stellar results. Shorting big-tech has been a good way to lose money in the past two years, and I expect only a temporary aberration," wrote Jeffrey Halley, senior market analyst, Asia Pacific at OANDA in a client note. Elsewhere, Apple rose 0.2%. Other giga tech stocks including Tesla, Microsoft and Netflix also rose, limiting declines on Nasdaq 100 e-minis. Here are some more premarket movers: Mattel (MAT US) rose 6.7% after the firm known for its Barbie and Fisher-Price toys lifted its full-year guidance amid a sales rebound, even as it grapples with a global logistics crunch ahead of Christmas. Digital World Acquisition (DWAC US) jumped 67% after more than quadrupling on Thursday after news that the blank-check company would merge with former President Donald Trump’s media firm. Phunware (PHUN US) soared 288% as the company, which runs a mobile enterprise cloud platform, is plugged by retail traders on Reddit. Whirlpool (WHR US) fell 2% as the maker of refrigerators reported sales that fell short of Wall Street’s estimates, citing supply chain woes. Investors were more upbeat about Europe, where consumer and tech companies led a 0.6% gain for the Stoxx 600 Index which headed for a third week of gains with cosmetics maker L’Oreal SA jumping more than 6% after reporting sales that were significantly higher than analysts expected. Euro Stoxx 50 and CAC gain over 1%, FTSE 100 and IBEX lag but hold in the green. Tech, household & personal goods and auto names are the strongest sectors. On the downside, French carmaker Renault SA and London Stock Exchange Group Plc were the latest companies to report supply-chain challenges. Here are some of the biggest European movers today: L’Oreal shares rise as much as 6.8% after its 3Q sales beat impresses analysts, with Citi praising the French beauty-product maker’s capacity to re-balance growth between different geographies at a time of worry over China. The stock posted its biggest gain in almost a year. Essity shares are the biggest gainers in the OMX Stockholm 30 large cap index after 3Q EPS beat consensus by 10%, with Jefferies citing lower financing costs as among reasons for the improved earnings. Thule shares rise as much as 6.7%, most since July 21, after the company reported earnings for the third quarter. Klepierre shares gain as much as 4.8%, hitting the highest since Sept. 30, after the French mall owner boosted its net current cash flow per share view amid an ongoing recovery in its markets and stronger-than- expected rent collection. Wise shares fell as much as 5.4% after co-founder Taavet Hinrikus sold a stake worth GBP81.5m in the digital-payments provider to invest in early-stage businesses. Boliden shares declined as much as 6.1%, most since May 2020, after 3Q earnings missed estimates. London Stock Exchange declines as much as 4.2% following third-quarter earnings, with Citi (neutral) describing the revenue mix as “marginally disappointing” amid underperformance in the data and analytics division. Shares in holding company Lifco fell as much as 8% after reporting disappointing sales numbers in its dental business, missing Kepler Cheuvreux’s revenue estimates by 18%. European stocks ignored the latest warning print from the continent's PMIs, where the composite flash PMI declined by 1.9pt to 54.3 in October—well below consensus expectations—continuing the moderation from its July high. The area-wide softening was primarily led by Germany, although sequential momentum slowed elsewhere too. In the UK, on the heels of a succession of downside surprises, the composite PMI surprised significantly to the upside for the first time since May. Supply-side constraints continue to exert upward price pressures, with both input and output prices rising further and reaching new all-time highs across most of Europe. Euro Area Composite PMI (October, Flash): 54.3, GS 54.9, consensus 55.2, last 56.2. Euro Area Manufacturing PMI (October, Flash): 58.5, GS 57.1, consensus 57.1, last 58.6. Euro Area Services PMI (October, Flash): 54.7, GS 54.8, consensus 55.4, last 56.4. Germany Composite PMI (October, Flash): 52.0, GS 54.5, consensus 54.3, last 55.5. France Composite PMI (October, Flash): 54.7, GS 54.3, consensus 54.7, last 55.3. UK Composite PMI (October, Flash): 56.8, GS 53.6, consensus 54.0, last 54.9. Earlier in the session, Asian equities climbed, led by China, as signs that Beijing may be easing its property policies and a bond interest payment by Evergrande boosted sentiment. The MSCI Asia Pacific Index rose 0.2%, on track to take its weekly advance to almost 1%. Chinese real estate stocks, including Seazen Group and Sunac China, were among the top gainers Friday, after Beijing called for support for first-home purchases, adding to recent official rhetoric on property market stability. China Evergrande Group pulled back from the brink of default by paying a bond coupon before this weekend’s deadline. The payment “brings some near-term reprieve ahead of its official default deadline and presents a more positive scenario than what many will have expect,” said Jun Rong Yeap, a market strategist at IG Asia Pte. The Asian measure was also bolstered by tech shares, including Japan’s Tokyo Electron and Tencent, while the Hang Seng Tech Index capped a 6.9% rise for the week in its biggest climb since August. The gains in the sector offset declines for mining shares as coal futures in China extended a price collapse to more than 20% in three days. Unlike in the U.S., where stocks are trading at a record high, Asian shares have been mixed in recent weeks as traders try to assess the impact on earnings of inflation, supply chain constraints and China’s growth slowdown. Falling earnings growth forecasts, combined with rising inflation expectations, are continuing to cast “a stagnation shadow over markets,” Kerry Craig, a global markets strategist at JPMorgan Asset Management, said in a note. In rates, Treasuries resumed flattening with long-end yields richer by more than 2bp on the day, while 2-year yield breached 0.46% for the first time since March 2020, extending its third straight weekly increase. 2-year yields topped at 0.464% while 10-year retreated from Thursday’s five-month high 1.70% to ~1.685%, remaining higher on the week; 2s10s is flatter by 2.5bp, 5s30s by ~1bp. In 10-year sector bunds cheapen by 3.5bp vs Treasuries as German yield climbs to highest since May; EUR 5y5y inflation swap exceeds 2% for the first time since 2014. In Europe, yield curves were mixed: Germany bear-flattened with 10-year yields ~2bps cheaper near -0.07%. Meanwhile, measures of inflation expectations continue to print new highs with EUR 5y5y inflation swaps hitting 2%, the highest since 2014, and U.K. 10y breakevens printing at a 25-year high. In FX, AUD and NZD top the G-10 scoreboard. The Bloomberg dollar index Index fell and the greenback traded weaker against all its Group-of-10 peers apart from the pound; risk-sensitive Scandinavian and Antipodean currencies led gains. The pound inched lower after U.K retail sales fell unexpectedly for a fifth month as consumer confidence plunged, adding to evidence that the economic recovery is losing momentum. The cost of hedging against inflation in the U.K. over the next decade rose to the highest level in 25 years amid mounting concern over price pressures building in the economy. The Aussie dollar climbed as positive sentiment was boosted by the news about Evergrande Group’s bond payment; it had earlier fallen to a session low after the central bank announced an unscheduled bond-purchase operation to defend its yield target. The yen held steady following two days of gains as a rally in Treasuries narrows yield differentials between Japan and the U.S. In commodities, crude futures recover off Asia’s worst levels, settling around the middle of this week’s trading range. WTI is 0.5% higher near $82.90, Brent regains a $85-handle. Spot gold adds ~$10 to trade near $1,792/oz. Most base metals trade well with LME nickel and zinc outperforming. Looking at the day ahead, the main data highlight will be the aforementioned flash PMIs from around the world, on top of UK retail sales for September. From central banks, Fed Chair Powell will be speaking, in addition to the Fed’s Daly and the ECB’s Villeroy. Earnings releases will include Honeywell and American Express. Market Snapshot S&P 500 futures little changed at 4,538.75 STOXX Europe 600 up 0.4% to 471.82 MXAP up 0.2% to 200.16 MXAPJ up 0.2% to 661.40 Nikkei up 0.3% to 28,804.85 Topix little changed at 2,002.23 Hang Seng Index up 0.4% to 26,126.93 Shanghai Composite down 0.3% to 3,582.60 Sensex down 0.2% to 60,775.00 Australia S&P/ASX 200 little changed at 7,415.48 Kospi little changed at 3,006.16 Brent Futures up 0.2% to $84.81/bbl Gold spot up 0.5% to $1,792.58 U.S. Dollar Index down 0.18% to 93.60 Euro up 0.2% to $1.1645 Top Overnight News from Bloomberg The Bank of England will likely defy investors’ expectations of a sudden interest-rate increase next month because it rarely shifts policy in such dramatic fashion, according to three former senior officials. The ECB will supercharge its regular bond-buying program before pandemic purchases run out in March, according to economists surveyed by Bloomberg. Euro-area businesses are reporting a sharp slowdown in activity caused by an aggravating global supply squeeze that’s also producing record inflation. French manufacturing output declined at the steepest pace since coronavirus lockdowns were in place last year, while growth momentum deteriorated sharply in Germany, purchasing managers report. Private-sector activity in the euro area slowed to the weakest since April, though it remained above a pre-pandemic average. China continued to pull back on government spending in the third quarter even as the economy slowed, with the cautious fiscal policy reflecting the desire to deleverage and improve public finances. President Joe Biden said the U.S. was committed to defending Taiwan from a Chinese attack, in some of his strongest comments yet as the administration faces calls to clarify its stance on the democratically ruled island. A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded with a positive bias but with gains capped following the temperamental mood on Wall St amid mixed earnings results and although a late tailwind heading into the close lifted the S&P 500 to a record high and contributed to the outperformance of the NDX, futures were then pressured after hours as shares in Intel and Snap slumped post-earnings with the latter down as much as 25% on soft guidance which subsequently weighed on tech heavyweights including social media stocks such as Facebook and Twitter. ASX 200 (Unch.) was subdued amid weakness in mining names and financials but with downside cushioned after the recent reopening in Melbourne and with the RBA also conducting unscheduled purchases to defend the yield target for the first time since February. Nikkei 225 (+0.3%) recovered from opening losses with risk appetite at the whim of a choppy currency and with some encouragement heading into the easing of restrictions in Tokyo and Osaka from Monday. News headlines also provided a catalyst for individual stocks including Nissan which was subdued after it cut planned output by 30% through to November and with Toshiba pressured as merger talks between affiliate Kioxia and Western Digital stalled, while SoftBank enjoyed mild gains after a 13.5% increase in WeWork shares on its debut following a SPAC merger. Hang Seng (+0.4%) and Shanghai Comp. (-0.3%) traded, initially, with tentative gains after another respectable liquidity injection by the PBoC and news of Evergrande making the USD-bond interest payment to avert a default ahead of tomorrow’s grace period deadline. This lifted shares in Evergrande with attention now turning to another grace period deadline for next Friday, although regulatory concerns lingered after the PBoC stated that China will continue separating operations of banking, securities and insurance businesses, as well as signed an MOU with the HKMA on fintech supervision and cooperation in the Greater Bay area. Finally, 10yr JGBs were lower on spillover selling following a resumption a resumption of the curve flattening stateside where T-note futures tested the 130.00 level to the downside amid inflationary concerns and large supply from AerCap which launched the second largest IG dollar bond issuance so far this year. In addition, the gains in Japanese stocks and absence of BoJ purchases in the market today added to the lacklustre demand for JGBs, while today also saw the RBA announce unscheduled purchases valued at AUD 1bln to defend the yield target for the first time since February, although the impact on yields was only brief. Top Asian News Tencent Blames WeChat Access for Search Engines on Loophole JPM’s Yang Joins Primas Asset Management’s Credit Trading Team Gold Rises on Weaker Dollar to Head for Second Weekly Gain Interest Payment Made; Junk Bonds Rally: Evergrande Update A choppy start to the session has seen European equities extend on opening gains (Stoxx 600 +0.8%) with the Stoxx 600 on course to see the week out relatively unchanged. After a marginally positive lead from Asia, European stocks picked up after the cash open with little in the way of clear catalysts for the surge. Macro focus for the region has fallen on flash PMI readings for October which painted a mixed picture for the Eurozone economy as the EZ-wide services metric fell short of expectations whilst manufacturing exceeded forecasts. Despite printing north of the 50-mark, commentary from IHS Markit was relatively downbeat, noting that "After strong second and third quarter expansions, GDP growth is looking much weaker by comparison in the fourth quarter.” Stateside, futures are mixed with the ES relatively flat whilst the NQ (-0.3%) lags after shares in Intel and Snap slumped post-earnings with the latter down as much as 25% on soft guidance which subsequently weighed on tech heavyweights including social media stocks such as Facebook (-4% pre-market) and Twitter (-4.5% pre-market). Elsewhere in the US, traders are awaiting further updates in Capitol Hill, however, moderate Democrat Senator Manchin has already tempered expectations for a deal being reached by today’s goal set by Senate Majority Leader Schumer. Back to Europe, sectors are mostly firmer with outperformance in Personal & Household Goods following earnings from L’Oreal (+6.2%) who sit at the stop of the Stoxx 600 after Q3 earnings saw revenues exceed expectations. To the downside, Telecom names are lagging amid losses in Ericsson (-3.1%) after the DoJ stated that the Co. breached obligations under a Deferred Prosecution Agreement. Elsewhere, Vivendi (+3.1%) is another notable gainer in the region as Q3 earnings exceeded analyst estimates. LSE (-3.3%) sits at the foot of the FTSE 100 post-Q3 results, whilst IHG (-3.5%) is another laggard in the index post-earnings as the Co.’s fragile recovery continues. Top European News U.K.-France Power Cable Has Unplanned Halt: National Grid Banks Prepare to Fight Basel Over Carbon Derivatives Rule Wise Slumps After Founder Hinrikus Offloads $112 Million Stake London Stock Exchange Says Supply Chains to Delay Tech Spend In FX, the Greenback has topped out yet again, and partly in tandem with US Treasury yields following their latest ramp up, but also against the backdrop of improved risk appetite that emerged during APAC hours when reports that China’s Evergrande made an overdue interest payment helped to lift sentiment after a late tech-led downturn on Wall Street. The index may also have lost momentum on technical grounds following a minor extension to 93.792, but still not enough impetus to reach 94.000 or test a couple of resistance levels standing in the way of the nearest round number (Fib resistance at 93.884 and 21 DMA that comes in at 93.948 today compared to 93.917 on Thursday), and a fade just shy of yesterday’s best before the aforementioned drift back down to meander between a narrow 93.789-598 corridor. Ahead, Markit’s flash PMIs and a trio of Fed speakers including Williams, Daly and chair Powell feature on Friday’s agenda alongside today’s batch of earnings. AUD/NZD/CAD - Honours remain pretty even down under as the Aussie and Kiwi both take advantage of the constructive market tone that is weighing on their US counterpart, while assessing specifics such as RBA Governor Lowe reiterating no target rate for Aud/Usd, but the Bank having to intervene in defence of the 0.1% 3 year yield target for the first time in 8 months overnight in wake of upbeat preliminary PMIs. Meanwhile, NZ suffered another record number of new COVID-19 cases to justify PM Adern’s resolve to keep restrictions tight until 90% of the population have been vaccinated and keep Nzd/Usd capped under 0.7200 in mild contrast to Aud/Usd hovering just above 0.7500. Elsewhere, some traction for the Loonie in the run up to Canadian retail sales from a rebound in WTI to retest Usd 83/brl from recent sub-Usd 81 lows, as Usd/Cad retreats towards the bottom of a 1.2375-30 range. EUR/CHF/GBP/JPY - All marginally firmer or flat against the Dollar, but the Euro easing back into a lower band beneath 1.1650 and not really helped by conflicting flash PMIs or decent option expiry interest from 1.1610-00 (1.4 bn) that could exert a gravitational pull into the NY cut. The Franc is keeping afloat of 0.9300, but under 0.9250, the Pound has bounced to probe 1.3800 on the back of considerably stronger than expected UK prelim PMIs that have offset poor retail sales data and could persuade more of the BoE’s MPC to tilt hawkishly in November, especially after the new chief economist said the upcoming meeting is live and policy verdict finely balanced. Conversely, the BoJ is widely tipped to maintain accommodation next week and as forecast Japanese inflation readings will do little to change perceptions, putting greater emphasis on the Outlook Report for updated growth and core CPI projections and leaving the Yen tethered around 114.00 in the meantime. SCANDI/EM - The Sek and Nok are on a firm footing circa 9.9800 and 9.7000 against the Eur respectively, and the former may be acknowledging an upbeat Riksbank business survey, while the latter piggy-backs Brent’s recovery that is also underpinning the Rub in the run up to the CBR and anticipated 25 bp hike. The Cnh and Cny are back in the ascendency with extra PBoC liquidity and Evergrande evading a grace period deadline by one day to compensate for ongoing default risk at its main Hengda unit, but the Try is still trying in vain to stop the rot following Thursday’s shock 200 bp CBRT blanket rate cuts and has been down to almost 9.6600 vs the Usd. In commodities, WTI and Brent are marginally firmer this morning though reside within overnight ranges and have been grinding higher for the duration of the European session in-spite of the lack of newsflow generally and for the complex. Currently, the benchmarks are firmer by circa USD 0.40/bbl respectively and reside just off best levels which saw a brief recapture of the USD 83/bbl and USD 85/bbl handles. Given the lack of updates, the complex remains attentive to COVID-19 concerns where officials out of China reiterated language issues yesterday about curbing unnecessary travel around Beijing following cases being reported in the region. Elsewhere, yesterday’s remarks from Putin continue to draw focus around OPEC+ increasing output more than agreed and once again reiterating that Russia can lift gas supplies to Europe; but, as of yet, there is no update on the situation. Finally, the morning’s European earnings were devoid of energy names, but updated Renault guidance is noteworthy on the fuel-demand front as the Co. cut its market forecast to Europe and anticipates a FY21 global vehicle loss of circa 500k units due to component shortages. Moving to metals, spot gold and silver are firmer but have been fairly steady throughout the session perhaps aided by the softer dollar while elevated yields are perhaps capping any upside. Base metals remain buoyed though LME copper continues to wane off the closely watched 10k mark. US Event Calendar 9:45am: Oct. Markit US Composite PMI, prior 55.0 9:45am: Oct. Markit US Services PMI, est. 55.2, prior 54.9 9:45am: Oct. Markit US Manufacturing PMI, est. 60.5, prior 60.7 10am: Fed’s Daly Discusses the Fed and Climate Change Risk 11am: Powell Takes Part in a Policy Panel Discussion DB's Jim Reid concludes the overnight wrap Hopefully today is my last Friday ever on crutches but with two likely knee replacements to come in the next few years I suspect not! 6 days to go until the 6 weeks of no weight bearing is over. I’m counting down the hours. Tomorrow I’ll be hobbling to London to see “Frozen: The Musical”. I’ve almost had to remortgage the house for 5 tickets. There is no discount for children which is a great business model if you can get away with it. Actually given the target audience there should be a discount for adults as I can think of better ways of spending a Saturday afternoon. The weekends have recently been the place where the Bank of England shocks the market into pricing in imminent rate hikes. Well to give us all a break they’ve gone a couple of days early this week with new chief economist Huw Pill last night telling the FT that the November meeting was “live” and that with inflation was likely to rise “close to or even slightly above 5 per cent” early next year, which for a central bank with a 2% inflation target, is “a very uncomfortable place to be”. Having said that, he did add that "maybe there’s a bit too much excitement in the focus on rates right now" and also talked about how the transitory nature of inflation meant there was no need to go into a restrictive stance. So the market will probably firm up November hike probabilities today but may think 1-2 year pricing is a little aggressive for the moment. However, it’s been a volatile ride in short sterling contracts of late so we will see. Ultimately the BoE will be a hostage to events. If inflation remains stubbornly high they may have to become more hawkish as 2022 progresses. This interview capped the end of a day with another selloff in sovereign bond markets as investors continued to ratchet up their expectations of future price growth. In fact by the close of trade, the 5yr US inflation breakeven had risen +10.0bps to 2.91%, and this morning they’re up another +3.5bps to 2.95%, which takes them to their highest level in the 20 years that TIPS have traded. 10y breakevens closed up +4.7bps at 2.65%, their highest level since 2011. Bear in mind that at the depths of the initial Covid crisis back in 2020, the 5yr measure fell to an intraday low of just 0.11%, so in the space of just over 18 months investors have gone from expecting borderline deflation over the next 5 years to a rate some way above the Fed’s target. Those moves weren’t just confined to the US however, as longer-term inflation expectations moved higher in Europe too. The 10yr German breakeven rose +5.4bps to a post-2013 high of 1.87%, and its Italian counterpart hit a post-2011 high of 1.78%. And what’s noticeable as well is that these higher inflation expectations aren’t simply concentrated for the next few years of the time horizon, since the 5y5y inflation swaps that look at expectations for the five year period starting in five years’ time have also seen substantial increases. Most strikingly of all, the Euro Area 5y5y inflation swap is now at 1.95%, which puts it almost at the ECB’s 2% inflation target for the first time since 2014. The global increase in inflation compensation drove nominal yields higher, with the yield on 10yr US Treasuries up +4.4bps yesterday to a 6-month high of 1.70%, as investors are now pricing in an initial hike from the Fed by the time of their July 2022 meeting. And in Europe there was a similar selloff, with yields on 10yr bunds (+2.4bps), OATs (+2.1bps) and BTPs (+2.7bps) all moving higher too. Interestingly though, the slide in sovereign bonds thanks to higher inflation compensation came in spite of the fact that commodity prices slid across the board, with energy, metal and agricultural prices all shifting lower, albeit in many cases from multi-year highs. Both Brent Crude (-1.41%) and WTI (-1.63%) oil prices fell by more than -1% for the first time in over two weeks, whilst the industrial bellwether of copper (-3.72%) had its worst daily performance since June. Even with high inflation remaining on the agenda, US equities proved resilient with the S&P 500 (+0.30%) posting a 7th consecutive advance to hit an all-time high for the first time in 7 weeks. Consumer discretionary and retail stocks were the clear outperformer, in line with the broader reflationary sentiment. Other indices forged ahead too, with the NASDAQ (+0.62%) moving to just -1.04% beneath its own all-time record, whilst the FANG+ index (+1.11%) of megacap tech stocks climbed to a fresh record as well. In Europe the major indices were weaker with the STOXX 600 retreating ever so slightly, by -0.08%, but it still remains only -1.29% beneath its August record. Looking ahead, the main theme today will be the release of the flash PMIs from around the world, which will give us an initial indication of how various economies have fared through the start of Q4. Obviously one of the biggest themes has been supply-chain disruptions throughout the world, so it’ll be interesting to see how these surface, but the composite PMIs over recent months had already been indicating slowing growth momentum across the major economies. Our European economists are expecting there’ll be a further decline in the Euro Area composite PMI to 55.1. Overnight we've already had some of those numbers out of Asia, which have showed a recovery from their September levels. Indeed, the Japanese service PMI rose to 50.7 (vs. 47.8 in Sep), which is the first 50+ reading since January 2020 before the pandemic began, whilst the composite PMI also moved back into expansionary territory at 50.7 for the first time since April. In Australia there was also a move back into expansion, with their composite PMI rising to 52.2 (vs. 46.0 in Sep), the first 50+ reading since June. Elsewhere in Asia, equity markets have followed the US higher, with the Hang Seng (+0.92%), CSI (+0.87%), Hang Seng (+0.42%), KOSPI (+0.27%) and Shanghai Composite (+0.09%) all in the green. That also comes as Japan’s nationwide CPI reading moved up to +0.2% on a year-on-year basis, in line with expectations, which is the first time so far this year that annual price growth has been positive. In other news, we learnt from the state-backed Securities Times newspaper that Evergrande has avoided a default by making an $83.5m interest payment on a bond whose 30-day grace period was going to end this weekend. Separately, the state TV network CCTV said that 4 Covid cases had been reported in Beijing and an official said that they would be testing 34,700 people in a neighbourhood linked to those cases. Looking forward, equity futures are pointing to a somewhat slower start in the US, with those on the S&P 500 down -0.08%. Turning to the pandemic, global cases have continued to shift higher in recent days, and here in the UK we had over 50k new cases reported yesterday for the first time since mid-July. New areas are moving to toughen up restrictions, with Moscow moving beyond the nationwide measures in Russia to close most shops and businesses from October 28 to November 7. In better news however, we got confirmation from Pfizer and BioNTech that their booster shot was 95.6% effective against symptomatic Covid in a trial of over 10,000 people. Finally, there was some decent economic data on the US labour market, with the number of initial jobless claims in the week through October 16 coming in at 290k (vs. 297k expected). That’s the lowest they’ve been since the pandemic began and also sends the 4-week average down to a post-pandemic low of 319.75k. Alongside that, the continuing claims for the week through October 9 came down to 2.481m (vs. 2.548m expected). Otherwise, September’s existing home sales rose to an annualised rate of 6.29m (vs. 6.10m expected), and the Philadelphia Fed’s business outlook survey fell to 23.8 (vs. 25.0 expected). To the day ahead now, and the main data highlight will be the aforementioned flash PMIs from around the world, on top of UK retail sales for September. From central banks, Fed Chair Powell will be speaking, in addition to the Fed’s Daly and the ECB’s Villeroy. Earnings releases will include Honeywell and American Express. Tyler Durden Fri, 10/22/2021 - 08:07.....»»

Category: dealsSource: nytOct 22nd, 2021

Kimberly-Clark (KMB) Queued for Q3 Earnings: Things to Note

Kimberly-Clark's (KMB) third-quarter results are likely to reflect input cost inflation, though the company's focus on saving efforts, pricing and strategic growth pillars bode well. Kimberly-Clark Corporation KMB is likely to display year-over-year growth in the top line, when it reports third-quarter 2021 numbers on Oct 25. The Zacks Consensus Estimate for revenues is pegged at $5,003 million, suggesting a rise of 6.8% from the prior-year quarter’s reported figure.The Zacks Consensus Estimate for earnings has moved down by a penny over the past seven days to $1.66 per share, which indicates a decline of 3.5% from the figure reported in the prior-year period. In the last reported quarter, the company delivered a negative earnings surprise of nearly 15%. The company has a trailing four-quarter negative earnings surprise of 4.4%, on average.KimberlyClark Corporation Price, Consensus and EPS Surprise KimberlyClark Corporation price-consensus-eps-surprise-chart | KimberlyClark Corporation QuoteKey Factors to NoteThe company has been encountering high input costs and elevated other manufacturing expenses for the past few quarters. On its last earnings call, management stated that key input costs for 2021 are now estimated to flare up $1,200-$1,300 million compared with the $900-$1,050 million projected before. The updated input cost guidance is accountable to the higher polymer-based materials and pulp costs. This also raises concerns over the quarter under review. Apart from this, consumer tissue volumes in North America are seeing tough comparisons with the record jump in the year-ago period, as retailers and consumers in the region have been curtailing inventory and at-home stocking.Nonetheless, Kimberly-Clark has been taking robust steps to lower costs. This is highlighted by the 2018 Global Restructuring Program as well as the Focus on Reducing Costs Everywhere or FORCE Program. While input costs are expected to flare up in 2021, management on its second-quarter earnings call stated that it is focused on undertaking relevant pricing actions to counter the inflation and efficiently manage costs. Also, management expects total cost savings of $520-$560 million in 2021, including $400-$420 million from the FORCE program and $120-$140 million from the 2018 Global Restructuring Program. These factors, along with the company’s focus on strategic growth pillars, bode well for the quarter under review.The company’s strategic growth pillars include focus on improving core business in the developed markets; speed up growth of the Personal Care segment in the developing and emerging markets, and enhance the digital and e-commerce capacities. The company has been progressing well with these objectives, which have been aiding its portfolio and expanding the global business. Notably, Kimberly-Clark recently completed the acquisition of Softex Indonesia — a leading player in the Indonesian personal care market. The net impact of the Softex Indonesia buyout and business exits related to the company’s 2018 Global Restructuring Program boosted Kimberly-Clark’s top line by 2% in the second quarter. Management expects the Softex Indonesia acquisition to increase the overall sales by 2% in 2021, which will likely impact the third-quarter performance as well.What the Zacks Model UnveilsOur proven model doesn’t conclusively predict an earnings beat for Kimberly-Clark this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Kimberly-Clark currently carries a Zacks Rank #3 and has an Earnings ESP of -0.15%.Stocks With Favorable CombinationsHere are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.Hershey HSY has an Earnings ESP of +1.02% and carries a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The Coca-Cola Company KO has an Earnings ESP of +0.75% and carries a Zacks Rank #2, currently.The Estee Lauder Companies EL has an Earnings ESP of +0.24% and currently holds a Zacks Rank #3. Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CocaCola Company The (KO): Free Stock Analysis Report Hershey Company The (HSY): Free Stock Analysis Report KimberlyClark Corporation (KMB): Free Stock Analysis Report The Estee Lauder Companies Inc. (EL): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 20th, 2021

Just How Big Is China"s Property Sector, And Two Key Questions On Policy And Tail Risks

Just How Big Is China's Property Sector, And Two Key Questions On Policy And Tail Risks While the broader US stock market was giddily melting up in the past week, things in China were going from bad to worse with Evergrande set to officially be in default on Oct 23 when the grace period on its first nonpayment ends, and with contagion rocking the local property market - which as we explained last week just saw the most "catastrophic" property sales numbers since the global financial crisis - sending dollar-denominated Chinese junk bonds to all time high yields. So even though it is now conventional wisdom that China's property crisis is contained (just as its concurrent energy crisis is also somehow contained), we beg to differ, and suggest that the crisis hitting the world's largest asset class is only just starting and is about to drag China into a "hard landing", with the world set to follow. And yes, with a total asset value of $62 trillion representing 62% of household wealth, the Chinese real estate sector is not only 30 times bigger than the market cap of all cryptos and also bigger than both the US bond and stock market, but is the key "asset" that backstops China's entire financial system whose deposits at last check were more than double those of the US. In other words, if China's property sector wobbles, the world is facing a guaranteed depression. So given the escalating weakness in China’s property sector, which has been in focus given intense regulatory pressure on developers’ leverage and banks’ mortgage exposure, and consequent contraction in sales and construction activity, it is natural to ask how significant a hit this could pose to both China's and the global economy. To help people get a sense of scale, below we excerpts some of the key findings from a recent note from Goldman showing just how big China's property sector is. A wide range of estimates for the scale of China’s property sector — up to about 30% of GDP — have been reported in the media and by other analysts. Different definitions of the scope of the sector largely account for the disparity. The most important distinctions are what types of building are included (residential, nonresidential, or all construction including infrastructure), what economic activity is included (only the construction itself, or all the value-added embedded in the finished residence e.g. domestically produced materials), and whether related real estate services are also included. A narrow definition of “residential construction activity as a share of GDP” could be as low as 3.6% of GDP. Expanding this to include all related domestic activities - e.g. materials like metals, wood, and stone produced domestically and used in housing construction, as well as services like financial activities and business services used directly or indirectly by the housing sector - would account for 12.4% of GDP. Adding nonresidential building construction and its associated activity would take it to 17.7%. Finally, including real estate services—which show a high correlation with broader property trends—would take the number to 23.3%. (All these numbers are based on detailed 2018 data, and exclude infrastructure spending not directly related to residential and nonresidential buildings.) The property sector’s share of the Chinese economy has grown fairly steadily over the past decade, after surging in the stimulus-fueled recovery just after the 2008 financial crisis. Digging into the definition of the “property sector”, there are three main questions that need to be kept in mind: 1. What types of construction? One important difference is in what types of construction activities are included. Construction broadly consists of three categories: residential housing, nonresidential buildings, and infrastructure-related construction. In China, residential construction appears to be about half of total construction—the rest is either non-residential building construction or civil engineering works, plus a small amount of installation/decoration activity. Specifically, residential and nonresidential buildings represent around 70% of total construction, and residential floor space under construction is typically about 70% of total floor space under construction. Note that this ~50% share for residential share of total construction is not unusual in international perspective. For example, the residential share is similar in the United States—though it reached into the 60-70% range during the peak years of the housing bubble—and has been about 40-50% in South Korea for some time. 2. What types of economic activity (only construction, or everything necessary to complete the finished building)? An even more important distinction is what types of activities one counts. Strictly speaking, the construction industry itself represents about 7% of China’s GDP. This represents wages, profits, and taxes from the construction sector (regardless of what type of construction or what end users). This is the value added of the construction sector itself, or the narrowly defined activity of building things. However, the construction industry uses a lot of output from other sectors – both materials (cement, wood, steel, etc.) and services (transportation of materials, financial services) to create finished buildings. Put another way, there are a lot of “backward linkages” from the construction sector: a home purchase requires not just the value added from construction industry, but also the value added from the “upstream” industries that provided the materials and were otherwise involved in the completion of the finished product. To gain some intuition for this, in the chart below, Goldman shows how much of each industry’s domestic value added ultimately goes into “final demand” of the construction industry (purchases of property by consumers or investment in property by businesses). For example, about one-third of value added in “wood products” goes into construction, about one-half of basic metals value added goes into construction, and essentially all of construction’s value added goes into construction final demand. (Note that this includes direct and indirect requirements—for example, basic metal output that is sold to firms in the metal fabrication industry that then sell to the construction sector would be counted as part of final demand for construction.) The next chart shows what fraction of the final demand for construction is provided by each sector. Roughly speaking, if we think about this as “the total domestic value added embedded in an apartment”, almost 30% of this is provided by construction activity, 8% from nonmetallic mineral products, etc. From the perspective of total domestic value added from all industries embedded in the final demand of the construction industry, the overall construction industry’s final demand accounts for roughly one-quarter of China’s GDP. This estimate is based on China’s most recent (2018) “input-output” table—which indicates the final output of each industry, as well as how much input is used from every other. 3. Should real estate services be included. Some analysts focus on property construction only, while others add the “real estate services” sector e.g. the leasing and maintenance of buildings when estimating the impact of the housing sector of the economy. These activities contribute roughly 6-7% of GDP in China. In many countries, real estate services are somewhat less volatile than housing construction. The likely reason is that real estate services relate in part to the stock of existing buildings than the flow of new building construction. Even if there were a housing crash and building construction stopped, most real estate services could theoretically continue.  As evidence of this, in the US housing crash, construction sector GDP fell by ~30% peak to trough but real estate services never declined. That said, in China the “real estate services” sector has been significantly more volatile, almost as volatile as the construction sector itself. Contributions by type of demand and activity Taking these three factors into consideration, Goldman next shows estimated shares of China’s activity in the next chart, and breaks down construction into its main components while showing the share attributable to real estate services. The “sector activity” column shows the share of GDP accounted for directly by activities of that sector. In other words, companies and workers engaged in all types of construction activity accounted for 7.1% of China’s GDP in 2018. The “final demand” column shows the share of GDP accounted for by all the domestic economic activities embodied in final demand for that sector. In other words, the demand for buildings and other construction also generates demand for materials and other types of services — and adding the value added in construction and all of these “upstream” sectors together gives the numbers in the right column Putting the above together, the size of China’s property sector therefore depends on the question we want to answer: What share of Chinese economic activity do workers/companies involved in residential construction represent? Here, one should look at domestic value-added (the left column). This is 7.1% for overall construction and just 3.6% for residential construction only. How much economic activity is driven by demand for residential property construction? Residential property demand drives 12.4% of GDP (right column, second row in table), because in addition to the construction activity it creates demand for all the materials and other services involved in building construction. What about the impact of total demand for property construction? Including non-residental buildings as well as residential, and the total upstream requirements of both, we want to look at the “domestic value added in final demand” of construction of residential + nonresidential buildings. This is 17.7% of GDP (12.4%+5.3%). How much of the economy is at risk from a property downturn? Here, we could potentially add end demand for real estate services to the above calculation. This would be another 5.6% of GDP, suggesting 23.3% of the economy—nearly a quarter—would be affected. Finally, if one adds all construction and all real estate and all their associated activities, we get just over 30% of the economy (24.5%+5.6%), although it is worth caveating that this may be an overly broad definition for the property sector, as it includes infrastructure-related activity, which if anything is likely to be ramped up by policymakers in the event of severe property sector weakness. * * * Yet even a nice big, round 30% estimate for how much China's property sector contributes to GDP, does not encompass all the potential spillovers from a construction sector downturn. There are at least three others: Second-round effects. A shock to construction (or any other sector) implies a drop in wages and company profits in that sector. This in turn implies lower income for the household and business sectors — and incrementally lower consumption and investment respectively. Such “second-round” or “multiplier” effects aren’t included in the estimates above. Fiscal spillovers. Land sales represent an important part of local government revenues in China (roughly 1/3 in gross revenue terms). Governments acquire land usage rights from rural occupants and sell them at a premium via auctions to developers. If land sales revenues fall because of a housing downturn (through some combination of fewer successful auctions and/or lower land prices), budgets will be squeezed, which could limit local governments’ spending and investment. Spillovers abroad via imports. As the world’s largest trading nation, China does not get all of its construction materials and other intermediate inputs domestically. In addition to the estimates above, which focus on domestic value-added, about 11% of the total value added embedded in China’s construction final demand is from foreign sources. (This is about 3% of China’s GDP, although it makes more sense to look at each trading partner’s exposure relative to the size of its own economy.) So, if we wanted to look at the total size of China’s construction sector in terms of driving economic activity, regardless of where that economic activity occurs (perhaps to compare China’s construction sector to other countries with different levels of import intensity) the figure in the top right cell in Exhibit 3 would be 3% larger. Putting it all together, and China's property sector emerges as the mother of all ticking financial time bombs. * * * Which brings us to what is Beijing's latest policy action (if any) to prevent this potential financial nuke from going off, and what are any additional tail risks to be considered. Well, as noted above, China's property sector began the week with sharp price falls across the board, with China's junk bonds cratering to near all time lows and with signs that the concerns are spilling over to the broader China credit market with spreads widening across the board. Some key updates: Recent news suggest China property stresses are building up. A number of China property HY developers have made announcements over recent weeks regarding their upcoming bond maturities. On 11 Oct, Modern Land launched a consent solicitation to extend the maturity on its USD 250mn bond due on 25 Oct by 3 months Xinyuan Real Estate announced on 14 Oct that the majority of holders of its USD 229mn bond due on 15 Oct have agreed to an exchange offer. Note that Fitch considers both transactions to be distressed exchanges. Furthermore, Sinic announced on 11 Oct that they are not expecting to make the principal and interest payments on its USD 250mn bond due on 18 Oct. These indicate that stresses amongst developers are building. Meanwhile, the grace period on Evergrande's missed coupon payments is ending soon. Evergrande missed coupon payments of USD 148MM on 11 Oct. This came after missing an earlier coupon payment on 23 Sep. The earlier missed coupon has a 30-day grace period, which ends on 23 Oct, and should that not be remedied in the coming week, the company will be in default on this bond. With Evergrande USD bonds priced at around 20, a potential default is unlikely to have large market impact, though if the company is able to remedy the earlier default, this could provide a positive surprise for the market. Despite these mounting risks, the market staged a sharp rebound at the end of the week, with news emerging that policymakers are seeking to speed up mortgage approvals (if not followed by much more aggressive easing, this step will do nothing but delay the inevitable by a few days). And while Goldman's China credit strateigst Kenneth Ho writes overnight that valuation is cheap across the lower rated segments within China property HY, market direction hinges on whether they will be able to refinance and avoid defaults. In particular, he notes that with $6.2bn of China property HY bonds maturing in Jan 2022, policy direction in the coming two months will be key. And since Goldman remains in the dark as to what Beijing will do next, as it remains "difficult to foresee how policy developments will play out in the coming weeks", Goldman prefers to wait for clearer signs of policy turn before shifting lower down the credit spectrum. * * * This brings us to what Goldman calls two key questions on China property - policy and tail risks, which will dictate the direction of the China property HY market. As discussed in depth in recent days, Beijing's tight regulatory stance is increasingly affecting a broader set of developers, as slowing activity levels are adding to worries across China property HY. For the period from early August to the first week of October, the volume of land transactions cratered by 42.5% compared with the same period last year, and for property transaction volume, this fell by 27.0%. Difficult credit conditions and weak presales add pressure to developers’ cash flows, and these factors are what led to the pick up in defaults and stresses in China property HY. Therefore, unless there are clear signs of an easing in policy direction, Goldman warns that tail risks concerns are unlikely to subside, and these will dictate the direction of China property HY market. As noted by Goldman's China economics team, credit supply holds the key to China’s housing outlook in the near term, emphasizing the need for policy adjustments in order to stabilize the housing market. Incidentally, the latest monthly Chinese credit creation numbers showed a modest miss to expectations, as total TSF flows came in at 2.928TN, just below the 3.050TN consensus, and up 10.1% Y/Y, lower than the 10.3% in August (the silver lining is that M2 rose 8.3%, up from 8.2% in August and above the 8.2% consensus). That said, given the sharp slowdown in residential property activity levels over the past two months, policy stance appears to have relaxed over the past two weeks if somewhat more slowly than most had expected. The table below summarizes a number of policy announcements and news reports that suggest some easing of policies are taking place. That said, the announcements and policymakers’ statements do not signal a large shift in overall policy direction yet. For example, the more concrete measures such as home buyer subsidies and the reduction in home loan interest rates are conducted at a city, and not national, level. And whilst Bloomberg reported that the financial regulators have informed a number of major banks to accelerate mortgage approvals, the precise details are lacking. The recent actions are therefore mostly in line with the overall policy stance. On one hand, policymakers remain focused on the medium term goal of deleveraging, and will want to avoid over-stimulating and reflating the property sector; on the other hand, policymakers have stated that they want a stable property market and to avoid systemic risks from emerging, suggesting that they would seek to avoid over-tightening. The problem is that they can't have both, and one will eventually have to crack. Goldman is somewhat more optimistic and writes that finding a balance will take time, adding that "given the need to balance the competing policy objectives, further measures could continue to emerge piecemeal, and visibility on the timing and the type of policy actions are limited." Furthermore, there may need to be further downside risk towards the property sector before we see a more decisive change in direction in the policy stance. This means that tail risks concerns are unlikely to subside, despite signs that policy direction is gradually shifting. * * * Assuming help does not come on time, the next key question is how fat is the tail as large amounts of bonds trading at stressed levels. Currently, the China property market is pricing in elevated levels of stress. Their price distribution is shown below indicating that 38% of bonds (by notional outstanding and excluding defaulted bonds) are trading at a price below 70, and 49% of bonds are below a price of 80. Are market prices overly bearish on tail risk, or are they accurately reflecting the stresses amongst property developers? With policymakers likely to maintain their medium term goal to delever the property sector, it is unlikely that tail risk concerns for higher levered developers will not subside. However, how “fat” the tail is will depend on the policy stance over the next two months. A big challenge going forward is that there are sizeable bond maturities in the next year, which will heavily influence tail risk. As noted above, a number of developers have conducted or are seeking to complete distressed buybacks, and defaults rates amongst China property HY companies are soaring. As such, the policy stance in the next two months will be critical. As shown in Exhibit 2, China property HY bond maturities are relatively light for the remainder of 2021, but pick up substantially in 2022, with USD 6.3bn of bonds maturing in January alone! A full list of bond maturities from now to February 2022, is shown below. It goes without saying, that should policy easing over the next two months be insufficient to ease the financial conditions amongst developers, there could potentially be a meaningful pick up in credit stresses at the start of 2022 just as the Fed launches its taper and just as a cold winter sends energy costs to unprecedented levels. Finally, for any investors seeking some exposure to China's HY market assuming that the worst is now over, Goldman agrees that while valuation is cheap across the lower rated segments within China property HY, the key determinant on market direction won't be valuation, but rather hinges on whether developers will be able to refinance and avoid defaults - i.e., can the Ponzi scheme continue. Tyler Durden Sat, 10/16/2021 - 18:00.....»»

Category: blogSource: zerohedgeOct 16th, 2021

The 20 best books of 2021, according to Book of the Month readers

Every year, Book of the Month crowns the best book of the year in November. Here are all the 2021 nominees, based on readers' favorites. When you buy through our links, Insider may earn an affiliate commission. Learn more. Every year, Book of the Month crowns the best book of the year in November. Here are all the 2021 nominees, based on readers' favorites. Amazon; Bookshop; Alyssa Powell/Insider Book of the Month sends great books from emerging authors directly to subscribers. At the end of each year, readers vote for their favorite books they read through the service. Here are the 20 most loved BOTM selections of 2021. The winner will be announced on November 11. Book of the Month sends new and noteworthy books - often before they become popular - to subscribers each month. In the past, the company has picked hits such as "The Great Alone" by Kristin Hannah, "Pachinko" by Min Jin Lee, and "The Girl With the Louding Voice" by Abi Daré to bring to its readers.Membership (small)At the end of the year, the club's thousands of subscribers vote on the best books they read through the service, making it a more curated version of Goodreads' best books of the year. For example, the 2020 winner was "The Vanishing Half" by Brit Bennett, which also won the 2020 Goodreads award for Best Historical Fiction.Below, you'll find a reading list of the top 20 books of 2021 according to Book of the Month readers. Book of the Month will announce the best book of 2021 on November 11, awarding the winning author a $10,000 prize. The 20 best books picked by Book of the Month in 2021, according to its readers:Descriptions are provided by Amazon and edited lightly for length and clarity. "Things We Lost To The Water" by Eric Nguyen Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $13.99When Huong arrives in New Orleans with her two young sons, she is jobless, homeless, and worried about her husband, Cong, who remains in Vietnam. As she and her boys begin to settle into life in America, she sends letters and tapes back to Cong, hopeful that they will be reunited and her children will grow up with a father.But with time, Huong realizes she will never see her husband again. While she attempts to come to terms with this loss, her sons, Tuan and Binh, grow up in their absent father's shadow, haunted by a man and a country trapped in their memories and imaginations. As they push forward, the three adapt to life in America in different ways: Huong gets involved with a Vietnamese car salesman who is also new in town; Tuan tries to connect with his heritage by joining a local Vietnamese gang; and Binh, now going by Ben, embraces his adopted homeland and his burgeoning sexuality. Their search for identity — as individuals and as a family — threatens to tear them apart, un­til disaster strikes the city they now call home, and they are suddenly forced to find a new way to come together and honor the ties that bind them. "Imposter Syndrome" by Kathy Wang Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $16.59Julia Lerner, a recent university graduate in computer science, is living in Moscow when she's recruited by Russia's largest intelligence agency in 2006. By 2018, she's in Silicon Valley as COO of Tangerine, one of America's most famous technology companies. In between her executive management (make offers to promising startups, crush them and copy their features if they refuse); self-promotion (check out her latest op-ed in the WSJ, on Work/Life Balance 2.0); and work in gender equality (transfer the most annoying females from her team), she funnels intelligence back to the motherland. But now Russia's asking for more, and Julia's getting nervous.Alice Lu is a first-generation Chinese-American whose parents are delighted she's working at Tangerine (such a successful company!). Too bad she's slogging away in the lower echelons, recently dumped, and now sharing her expensive two-bedroom apartment with her cousin Cheri, a perennial "founder's girlfriend." One afternoon, while performing a server check, Alice discovers some unusual activity, and now she's burdened with two powerful but distressing suspicions: Tangerine's privacy settings aren't as rigorous as the company claims they are, and the person abusing this loophole might be Julia Lerner herself. The closer Alice gets to Julia, the more Julia questions her own loyalties. Russia may have placed her in the Valley, but she's the one who built her career; isn't she entitled to protect the lifestyle she's earned? Part page-turning cat-and-mouse chase, part sharp and hilarious satire, "Impostor Syndrome" is a shrewdly-observed examination of women in tech, Silicon Valley hubris, and the rarely fulfilled but ever-attractive promise of the American Dream. "The Lost Apothecary" by Susan Penner Amazon; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $13.99Hidden in the depths of 18th-century London, a secret apothecary shop caters to an unusual kind of clientele. Women across the city whisper of a mysterious figure named Nella who sells well-disguised poisons to use against the oppressive men in their lives. But the apothecary's fate is jeopardized when her newest patron, a precocious 12-year-old, makes a fatal mistake, sparking a string of consequences that echo through the centuries.Meanwhile, aspiring historian Caroline Parcewell spends her 10th wedding anniversary alone in present-day London, running from her own demons. When she stumbles upon a clue to the unsolved apothecary murders that haunted London 200 years ago, her life collides with the apothecary's in a stunning twist of fate — and not everyone will survive. "This Close To Okay" by Leese Cross-Smith Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $15.62On a rainy October night in Kentucky, recently divorced therapist Tallie Clark is on her way home from work when she spots a man precariously standing at the edge of a bridge. Without a second thought, Tallie pulls over and jumps out of the car into the pouring rain. She convinces the man to join her for a cup of coffee, and he eventually agrees to come back to her house, where he finally shares his name: Emmett. Over the course of the emotionally charged weekend that follows, Tallie makes it her mission to provide a safe space for Emmett, though she hesitates to confess that this is also her day job. What she doesn't realize is that Emmett isn't the only one who needs healing — and they both are harboring secrets.Alternating between Tallie and Emmett's perspectives as they inch closer to the truth of what brought Emmett to the bridge's edge — as well as the hard truths Tallie has been grappling with since her marriage ended — "This Close to Okay" is an uplifting, cathartic story about chance encounters, hope found in unlikely moments, and the subtle magic of human connection. "We Are the Brennans" by Tracey Lange Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $19.49When 29-year-old Sunday Brennan wakes up in a Los Angeles hospital, bruised and battered after a drunk driving accident she caused, she swallows her pride and goes home to her family in New York. But it's not easy. She deserted them all — and her high school sweetheart — five years before with little explanation, and they've got questions.Sunday is determined to rebuild her life back on the east coast, even if it does mean tiptoeing around resentful brothers and an ex-fiancé. The longer she stays, however, the more she realizes they need her just as much as she needs them. When a dangerous man from her past brings her family's pub business to the brink of financial ruin, the only way to protect them is to upend all their secrets — secrets that have damaged the family for generations and will threaten everything they know about their lives. In the aftermath, the Brennan family is forced to confront painful mistakes — and ultimately find a way forward together. "The Maidens" by Alex Michaelides Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $16.78Edward Fosca is a murderer. Of this, Mariana is confident. But Fosca is untouchable. A handsome and charismatic Greek tragedy professor at Cambridge University, Fosca is adored by staff and students alike ― particularly by the members of a secret society of female students known as The Maidens.Mariana Andros is a brilliant but troubled group therapist who becomes fixated on The Maidens when one member, a friend of Mariana's niece Zoe, is found murdered in Cambridge.Mariana, who was once herself a student at the university, quickly suspects that behind the idyllic beauty of the spires and turrets, and beneath the ancient traditions, lies something sinister. And she becomes convinced that, despite his alibi, Edward Fosca is guilty of the murder. But why would the professor target one of his students? And why does he keep returning to the rites of Persephone, the maiden, and her journey to the underworld?When another body is found, Mariana's obsession with proving Fosca's guilt spirals out of control, threatening to destroy her credibility as well as her closest relationships. But Mariana is determined to stop this killer, even if it costs her everything ― including her own life. "Razorblade Tears" by S.A. Cosby Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $20.10Ike Randolph has been out of jail for 15 years, with not so much as a speeding ticket in all that time. But a Black man with cops at the door knows to be afraid.The last thing he expects to hear is that his son Isiah has been murdered, along with Isiah's white husband, Derek. Ike had never fully accepted his son but is devastated by his loss.Derek's father, Buddy Lee, was almost as ashamed of Derek for being gay as Derek was ashamed of his father's criminal record. Buddy Lee still has contacts in the underworld, though, and he wants to know who killed his boy.Ike and Buddy Lee, two ex-cons with little else in common other than a criminal past and a love for their dead sons, band together in their desperate desire for revenge. In their quest to do better for their sons in death than they did in life, hardened men Ike and Buddy Lee will confront their prejudices about their sons and each other as they rain down vengeance upon those who hurt their boys. "Malibu Rising" by Taylor Jenkins Reid Amazon; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $16.80Malibu: August 1983. It's the day of Nina Riva's annual end-of-summer party, and anticipation is at a fever pitch. Everyone wants to be around the famous Rivas: Nina, the talented surfer and supermodel; brothers Jay and Hud, one a championship surfer, the other a renowned photographer; and their adored baby sister, Kit. Together, the siblings are a source of fascination in Malibu and the world over — especially as the offspring of the legendary singer Mick Riva.The only person not looking forward to the party of the year is Nina herself, who never wanted to be the center of attention, and who has also just been very publicly abandoned by her pro tennis player husband. Oh, and maybe Hud — because it is long past time for him to confess something to the brother from whom he's been inseparable since birth.Jay, on the other hand, is counting the minutes until nightfall, when the girl he can't stop thinking about has promised she'll be there.And Kit has a couple of secrets of her own — including a guest she invited without consulting anyone.By midnight the party will be entirely out of control. By morning, the Riva mansion will have gone up in flames. But before that first spark in the early hours before dawn, the alcohol will flow, the music will play, and the loves and secrets that shaped this family's generations will all come rising to the surface. "Four Winds" by Kristin Hannah Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $14.49Texas, 1921. A time of abundance. The Great War is over, the land's bounty is plentiful, and America is on the brink of a new and optimistic era. But for Elsa Wolcott, deemed too old to marry in a time when marriage is a woman's only option, the future seems bleak. Until the night she meets Rafe Martinelli and decides to change the direction of her life. With her reputation in ruin, there is only one respectable choice: Marriage to a man she barely knows.By 1934, the world has changed; millions are out of work, and drought has devastated the Great Plains. Farmers are fighting to keep their land and their livelihoods as crops fail and water dries up and the earth cracks open. Dust storms roll relentlessly across the plains. Everything on the Martinelli farm is dying, including Elsa's tenuous marriage; each day is a desperate battle against nature and a fight to keep her children alive.In this uncertain and perilous time, Elsa ― like so many of her neighbors ― must make an agonizing choice: Fight for the land she loves or leave it behind and go west, to California, in search of a better life for her family. "The People We Keep" by Alison Larkin Amazon; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $22.99Little River, New York, 1994: April Sawicki is living in a motorless motorhome that her father won in a poker game. Failing out of school, picking up shifts at Margo's diner, she's left fending for herself in a town where she's never quite felt at home. When she "borrows" her neighbor's car to perform at an open mic night, she realizes her life could be much bigger than where she came from. After a fight with her dad, April packs her stuff and leaves for good — setting off on a journey to find her own life.Driving without a chosen destination, she stops to rest in Ithaca. Her only plan is to survive, but as she looks for work, she finds a kindred sense of belonging at Cafe Decadence, the local coffee shop. Still, somehow, it doesn't make sense to her that life could be this easy. The more she falls in love with her friends in Ithaca, the more she can't shake the feeling that she'll hurt them the way she's been hurt.As April moves through the world, meeting people who feel like home, she chronicles her life in the songs she writes and discovers that where she came from doesn't dictate who she has to be. "The Heart Principle" by Helen Hoang Amazon; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $13.99When violinist Anna Sun accidentally achieves career success with a viral YouTube video, she finds herself incapacitated and burned out from her attempts to replicate that moment. And when her longtime boyfriend announces he wants an open relationship before making a final commitment, a hurt and angry Anna decides that if he wants an open relationship, then she does, too. Translation: She's going to embark on a string of one-night stands — the more unacceptable the men, the better.That's where tattooed, motorcycle-riding Quan Diep comes in. Their first attempt at a one-night stand fails, as does their second and their third, because being with Quan is more than sex — he accepts Anna on an unconditional level that she has just started to understand. However, when tragedy strikes Anna's family, she takes on a role that she is ill-suited for until the burden of expectations threatens to destroy her. Anna and Quan have to fight for their chance at love — but to do that, they also have to fight for themselves. "Instructions for Dancing" by Nicola Yoon Amazon; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $14.40Evie Thomas doesn't believe in love anymore. Especially after the strangest thing occurs one otherwise ordinary afternoon: She witnesses a couple kiss and is overcome with a vision of how their romance began… and how it will end. After all, even the greatest love stories end with a broken heart, eventually.As Evie tries to understand why this is happening, she finds herself at La Brea Dance Studio, learning to waltz, fox-trot, and tango with a boy named X. X is everything that Evie is not: Adventurous, passionate, daring. His philosophy is to say yes to everything — including entering a ballroom dance competition with a girl he's only just met.Falling for X is definitely not what Evie had in mind. If her visions of heartbreak have taught her anything, it's that no one escapes love unscathed. But as she and X dance around and toward each other, Evie is forced to question all she thought she knew about life and love. In the end, is love worth the risk? "Once There Were Wolves" by Charlotte McConaghy Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $20.99Inti Flynn arrives in Scotland with her twin sister, Aggie, to lead a team of biologists tasked with reintroducing 14 gray wolves into the remote Highlands. She hopes to heal not only the dying landscape but Aggie, too — unmade by the terrible secrets that drove the sisters out of Alaska.Inti is not the woman she once was, either, changed by the harm she's witnessed ― inflicted by humans on both the wild and each other. Yet, as the wolves surprise everyone by thriving, Inti begins to let her guard down, even opening herself up to the possibility of love. But when a farmer is found dead, Inti knows where the town will lay blame. Unable to accept that her wolves could be responsible, Inti makes a reckless decision to protect them. But if the wolves didn't make the kill, then who did? And what will Inti do when the man she is falling for seems to be the prime suspect? "People We Meet On Vacation" by Emily Henry Amazon; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $9.98Poppy and Alex. Alex and Poppy. They have nothing in common. She's a wild child; he wears khakis. She has insatiable wanderlust; he prefers to stay home with a book. And somehow, ever since a fateful car share home from college many years ago, they are the very best of friends. For most of the year, they live far apart — she's in New York City, and he's in their small hometown — but every summer, for a decade, they have taken one glorious week of vacation together.Until two years ago, when they ruined everything. They haven't spoken since.Poppy has everything she should want, but she's stuck in a rut. When someone asks when she was last truly happy, she knows, without a doubt, it was on that ill-fated, final trip with Alex. And so, she decides to convince her best friend to take one more vacation together — lay everything on the table, make it all right. Miraculously, he agrees.Now she has a week to fix everything. If only she can get around the one big truth that has always stood quietly in the middle of their seemingly perfect relationship. What could possibly go wrong? "The Inheritance of Orquídea Divina" by Zoraida Cordove Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $21.49The Montoyas are used to a life without explanations. They know better than to ask why the pantry never seems to run low or empty or why their matriarch won't ever leave their home in Four Rivers — even for graduations, weddings, or baptisms. But when Orquídea Divina invites them to her funeral and to collect their inheritance, they hope to learn the secrets that she has held onto so tightly their whole lives. Instead, Orquídea is transformed, leaving them with more questions than answers.Seven years later, her gifts have manifested differently for Marimar, Rey, and Tatinelly's daughter, Rhiannon, granting them unexpected blessings. But soon, a hidden figure begins to tear through their family tree, picking them off one by one as it seeks to destroy Orquídea's line. Determined to save what's left of their family and uncover the truth behind their inheritance, the four descendants travel to Ecuador — to the place where Orquídea buried her secrets and broken promises and never looked back. "Damnation Spring" by Ash Davidson Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $19.81Colleen and Rich Gundersen are raising their young son, Chub, on the rugged California coast. It's 1977, and life in this Pacific Northwest logging town isn't what it used to be. For generations, the community has lived and breathed timber; now, that way of life is threatened. Colleen is an amateur midwife. Rich is a tree-topper. It's a dangerous job that requires him to scale trees hundreds of feet tall — a job that both his father and grandfather died doing. Colleen and Rich want a better life for their son — and they take steps to assure their future. Rich secretly spends their savings on a swath of ancient Redwoods. Colleen, desperate to have a second baby, challenges the logging company's use of herbicides that she believes are responsible for the many miscarriages in the community — including her own. The pair find themselves on opposite sides of a budding conflict that threatens the very thing they are trying to protect: Their family. "The Star-Crossed Sisters of Tuscany" by Lori Nelson Spielman Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $10.95Since the day Filomena Fontana cast a curse upon her sister more than 200 years ago, not one second-born Fontana daughter has found lasting love. Some, like second-born Emilia, the happily single baker at her grandfather's Brooklyn deli, claim it's an odd coincidence. Others, like her sexy, desperate-for-love cousin Lucy, insist it's an actual hex. But both are bewildered when their great-aunt calls with an astounding proposition: If they accompany her to her homeland of Italy, Aunt Poppy vows she'll meet the love of her life on the steps of the Ravello Cathedral on her 80th birthday — and break the Fontana Second-Daughter Curse once and for all.Against the backdrop of wandering Venetian canals, rolling Tuscan fields, and enchanting Amalfi Coast villages, romance blooms, destinies are found, and family secrets are unearthed — secrets that could threaten the family far more than a centuries-old curse. "The Last Thing He Told Me" by Laura Dave Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $12.92Before Owen Michaels disappears, he smuggles a note to his beloved wife of one year: Protect her.Despite her confusion and fear, Hannah Hall knows exactly to whom the note refers — Owen's 16-year-old daughter, Bailey. Bailey, who lost her mother tragically as a child. Bailey, who wants absolutely nothing to do with her new stepmother. As Hannah's increasingly desperate calls to Owen go unanswered, as the FBI arrests Owen's boss, as a US marshal and federal agents arrive at her Sausalito home unannounced, Hannah quickly realizes her husband isn't who he said he was. And that Bailey just may hold the key to figuring out Owen's true identity — and why he disappeared.Hannah and Bailey set out to discover the truth. But as they start putting together the pieces of Owen's past, they soon realize they're also building a new future — one neither of them could have anticipated.You can read our interview with author Laura Dave here. "The Office of Historical Corrections" by Danielle Evans Bookshop; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $17.49Danielle Evans is known for her blisteringly smart voice and X-ray insights into complex human relationships. With "The Office of Historical Corrections," Evans zooms in on particular moments and relationships in her characters' lives in a way that allows them to speak to larger issues of race, culture, and history. She introduces us to Black and multiracial characters experiencing the universal confusions of lust and love and getting walloped by grief — all while exploring how history haunts us, personally and collectively. Ultimately, she provokes us to think about the truths of American history — about who gets to tell them and the cost of setting the record straight. "Infinite Country" by Patricia Engel Amazon; Lauren Arzbaecher/Insider Available at Amazon and Bookshop from $14.80I often wonder if we are living the wrong life in the wrong country.Talia is being held at a correctional facility for adolescent girls in the forested mountains of Colombia after committing an impulsive act of violence that may or may not have been warranted. She urgently needs to get out and get back home to Bogotá, where her father and a plane ticket to the United States are waiting for her. If she misses her flight, she might also miss her chance to finally reunite with her family.How this family came to occupy two different countries — two different worlds — comes into focus like twists of a kaleidoscope. We see Talia's parents, Mauro and Elena, fall in love in a market stall as teenagers against a backdrop of civil war and social unrest. We see them leave Bogotá with their firstborn, Karina, in pursuit of safety and opportunity in the United States on a temporary visa, and we see the births of two more children, Nando and Talia, on American soil. We witness the decisions and indecisions that lead to Mauro's deportation and the family's splintering — the costs they've all been living with ever since. Read the original article on Business Insider.....»»

Category: worldSource: nytOct 15th, 2021

Fortune Brands (FBHS) Exhibits Solid Prospects, Risks Remain

Fortune Brands (FBHS) is likely to gain from strength in its businesses, acquired assets, and shareholder-friendly policies. Escalating costs and operating expenses and a high debt level weigh on it. Fortune Brands Home & Security, Inc. FBHS stands to benefit from strength in the U.S. housing market, supported by expected new construction growth and product launches. The company has been witnessing strong momentum in its plumbing business, backed by the growing popularity of its brands. Robust demand for the company’s doors and decking products and strength in its security business are also likely to drive its performance in the coming quarters. For 2021, it expects sales growth of 23-25% on a year-over-year basis, higher than the previously mentioned 20-22%.The company intends to solidify its product portfolio and leverage business opportunities through the addition of assets. In the first half of 2021, it used $5.2 million (net of cash acquired). In December 2020, Fortune Brands acquired LARSON Manufacturing, which has enhanced its outdoor living product offering in the doors and decking market. In the first and second quarters of 2021, the LARSON buyout expanded the Outdoors & Security segment’s sales by 32% and 35%, respectively.Fortune Brands believes in rewarding shareholders handsomely through dividend payments and share buybacks. In the first half of 2021, it paid out dividends of $72 million and bought back shares worth $156 million. In December 2020, it also raised the quarterly dividend rate by 8%. The company’s focus on operational efficiency and cost-control measures might also help it in maintaining a solid margin performance in the quarters ahead.However, escalating costs and expenses pose a major concern. In 2020 and second-quarter 2021, the company’s cost of sales increased 38% and 24%, respectively, on a year-over-year basis. Its selling, general and administrative expenses recorded a year-over-year increase of 43% and 18% in 2020 and second-quarter 2021, respectively.Its high-debt profile is also a major issue. Exiting the second quarter, Fortune Brands’ long-term debt balance was $2,608.3 million, reflecting a 1.4% increase from 2020-end. Any further increase in debt levels can raise the company’s financial obligations and hurt profitability.The company faces stiff competition from several of its peers in the industry like Allegion plc ALLE, American Woodmark Corporation AMWD, and InSinkErator business of Emerson Electric Co. EMR. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Emerson Electric Co. (EMR): Free Stock Analysis Report American Woodmark Corporation (AMWD): Free Stock Analysis Report Fortune Brands Home & Security, Inc. (FBHS): Free Stock Analysis Report Allegion PLC (ALLE): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksOct 15th, 2021

Rowan Street 3Q21 Commentary: Sells Alibaba And Tencent

Rowan Street commentary for the third quarter ended September 2021. Q3 2021 hedge fund letters, conferences and more Dear Partners and Friends, Rowan Street Performance Update Rowan Street was down -13% in Q3, causing our fund to decline -9.2% (net) year-to-date as of September 30. This decline is normal and is to be expected, especially […] Rowan Street commentary for the third quarter ended September 2021. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Dear Partners and Friends, Rowan Street Performance Update Rowan Street was down -13% in Q3, causing our fund to decline -9.2% (net) year-to-date as of September 30. This decline is normal and is to be expected, especially after a solid performance year we had in 2020, where our fund outperformed the market by 30% net of fees. We would like to remind all our partners, especially the ones who have recently joined our partnership, that the sole focus of the fund is to compound our partners’ capital at double-digit rates of return over a long-term holding period. Since December 2017 (start of our fully invested period), the fund has delivered 68.8% return (net of fees) or 15% per annum. Although 3 ¾ years is still a relatively short period of time to judge whether we are successful in achieving our long-term double digit return goal (anything longer than 5 years would be a more desirable barometer), thus far we have been on target. Looking at a longer time period of 6 ½ years since we founded Rowan Street, which includes the initial period of 2 ¾ years when we held 75% of our portfolio in cash while we carefully developed and tested our investment strategy and internal processes and invested only our personal capital as well as friends and family, we have delivered 93.4% cumulative net return or 11% per annum. When we report our 7, 8, 9 & 10 year performance numbers, the benchmark of our success will always be — are we compounding our investors’ capital at double-digit returns over the long run? If the answer is yes, then we are doing our job and that is the only thing that truly matters. In contrast to the majority of Wall Street funds out there, our focus will NEVER be on beating or keeping up with the market in any given quarter or a year, or on minimizing short-term volatility in the fund. We believe volatility is not the real risk. Volatility is part of the course of investing. In fact, there is NO wealth creation without volatility! It is simply the “price of admission” that the market demands us to pay, yet there is so much effort on Wall Street that is dedicated towards minimizing volatility. These efforts are catered towards nurturing clients’ emotional well-being while creating an illusion of safety, but almost always come at a huge cost of reducing clients’ long-term returns. We are very fortunate to have limited partners in the fund that allow us to focus on the long-term compounding of their family’s capital instead of being distracted from our main goal in order to nurture their emotional well-being. This is a huge advantage for us! At Rowan Street, the #1 fundamental principle of everything we do is we have a mindset of a business owner — this is how we approach all our investments. When you start looking at the world through the lens of a business owner, you start paying less and less attention to the stock tickers that bounce up and down every day and realize that most of the time these daily stock price gyrations have very little to do with the long term intrinsic value of the business. Over the long run, however, stock prices accurately reflect the fundamentals of businesses. For example, when you purchase a house or a commercial property or buy into a small business, you do not get a quote on it every single moment or every single day. You are in it for the long run, and you make your investment decision based on the earnings that your property or business can generate over the next 5-10 years in relation to the capital that you have to put up up-front. This is exactly how we structure the portfolio of our fund and how we judge the performance of our businesses, in which we are minority owners. Spotify Let’s look at one of our investments, Spotify Technology SA (NYSE:SPOT), as an example. We encourage you to review our investment thesis on Spotify that we published in our Q2 2020 Letter and in H1 2021 Letter. The company went public in April of 2018 and since the stock has delivered the following calendar year returns: 2018: -24% (since IPO date) 2019: +32% 2020: +110% 2021: -26% (as of this writing) As you can see, performance of an individual stock can be very lumpy from year to year. Spotify was the biggest contributor to our funds’ performance in 2020 and it's the second biggest detractor thus far in 2021. Do these short-term stock price gyrations matter to us? Absolutely not! Focusing on this and judging our investment based on how it performs in any given year would be akin to attempting to win a football game while keeping our eyes on the scoreboard. This is why at Rowan Street, our eyes will always be focused on the “playing field”. If we continue to do that, the score will take care of itself over time! What does it look like on the “playing field” for Spotify? As you can see from the tables below, Spotify’s intrinsic value has increased quite a bit since its IPO date. Revenues have increased by 75% (or ~20% p.a.), gross profits have increased 64% (~18% p.a.). We believe that management has done a terrific job thus far in reinvesting these gross profits into building the world’s leading audio platform and constantly innovating ( and out-innovating its competitors) to deliver for both artists and fans. The result of their investments could be seen in the growth of Monthly Active Users (MAU) as well as their Premium Subscribers. The former has grown at 2.3x and the latter at 2.1x over the past 3 years, and we estimate that it’s feasible for Spotify to grow to ~1 billion users over the next 5 years. If the management continues executing the way they have been in the past, we have a pretty good chance of attaining our double-digit return from owning Spotify’s stock over the next 5 years. Exit From Our Chinese Positions As you know, we have owned stock in Alibaba Group Holding Ltd (NYSE:BABA) and Tencent Holdings ADR (OTCMKTS:TCEHY) since 2018. We know both companies very well and have spent countless hours studying their operations over the past 3 years. We have published our detailed write-up on Alibaba in our Q3 letter last year. At one point, in the first half of 2020, we were sitting on substantial gains in both positions (2x on Tencent), and our China exposure had grown to around 25% at the time. We started actively trimming these in Q1 and completely exited both positions in Q2 (please see our rationale below). All-in-all, we ended up netting a small gain in dollar terms. However, both Alibaba and Tencent detracted ~5% from our performance in 2021. We believe the number one mistake that we as investors can make is to be unwilling to admit that we are wrong. Sometimes being willing to change our mind in the face of new evidence, selling when necessary, is one of the most important skills that we as investors can have. So what new evidence changed our mind? As you know, capital allocation and reinvestment of capital is one of the most important foundational pillars that we spend a lot of time on and watch very closely. Recent Chinese government crackdown and CCP’s ”common prosperity“ policies, which you are all well aware of as they have been widely covered this year, have a direct impact on the future capital allocation policies of both Alibaba and Tencent. When management of the companies that we are owners of do NOT have full control of the capital allocation, that goes against all our foundational principles as investors and stewards of your capital. At that point, we place a lot less importance on the size of revenues and cash flows that the company generates and how attractive their valuations may be (it's very apparent to just about everyone how statistically cheap the stock of Alibaba and Tencent currently are). The only logical decision here, once one of our foundational principles is violated, is to sell and to reinvest the proceeds into our high conviction ideas that fit our investment criteria and that have a high probability of compounding our fund’s capital at double-digits (p.a.) in the next 5-10 years, which is exactly what we have done over the past several months. General Thoughts on China Fred Liu, a fellow fund manager, recently gave a very good overview of China's latest crack-down and provided a basic framework through which to analyze the latest developments: “The difference in Chinese policies vs. many western governments, is that China prioritizes the labor and tech components of the equation more so than capital… While labor is made up of the domestic population itself and technology is used to amplify this output, capital is face-less (or at least belonging most to those who have benefited from the country’s rise and accumulated the capital in the process, and thus have a “national duty” to help & repay their fellow citizens / country who helped them achieve success).” “Capital is meant as a tool to enhance & accelerate society’s goals, not as an end-goal itself. Versus many Western markets, where it seems that the betterment of shareholders (and putting more money into their pockets) is often then the end goal itself. If the well-being of capital must be sacrificed to ensure a better long-term direction of society then in the Chinese government’s eyes, it's a worthy trade-off.” “In this case, the Capital wasn’t being productive anyways, so there’s no loss if the government impairs it (and sends a message to discourage future investment in these fields). Capital (and investors) will be rewarded when capital is needed to fuel to achieve the broader goals of societal and economic advancement in a harmonious and equitable manner. But when capital investment in certain sectors is at odds with these goals, don’t be surprised when it's impaired.” Fred makes some very good points and we would completely agree with this view. However, the entire ideology of a command economy with its 5-year plans is at odds with our own ideology in the Western world where free markets (or Adam Smith’s invisible hand) determines whether Capital is productive or not and how it should be allocated. In his very famous book The Wealth of Nations, Adam Smith wrote: “But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value, every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectively than when he really intends to promote it. I have never known much good done by those who were affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.” Using the invisible hand metaphor, Smith was trying to present how an individual exchanging money in his own self-interest unintentionally impacts the economy as a whole. In other words, there is something that binds self-interest, along with public interest, so that individuals who pursue their own interests will inevitably benefit society as a whole. This very ideology is the foundation of our capitalistic system that has worked so incredibly well for America over the past 245 years. Fishing In Our Own Pond The real question to ask ourselves as investors: Is this our game to play? We would not invest in an individual company whose set of values, principles and ideologies is at odds with our own. The company‘s future prospects may prove to be very bright (as Alibaba’s and Tencent’s are very likely to be), but it would be extremely difficult-to-impossible for us to maintain a strong conviction in companies (and sleep well at night) that operate on a soil of a system, which at the very core, is contradictory to our own values. Simply put, we came to the conclusion that this is NOT our game to play! Continuing to invest in Chinese companies that are “outside of our circle of competence” makes little sense for Rowan Street considering we have an amazing “pond to fish” here in the United States. Some of the best innovators, entrepreneurs and some of the best companies in the world are still being founded and built here. When it comes to breaking down the top 100 companies of the world, according to this interesting chart below by Visual Capitalist, the United States still commands the largest slice of the pie. And even though China has the second largest and rapidly growing slice of the pie, at the risk of sounding redundant, we have concluded that we have ZERO edge in that part of the world no matter how attractive their future may appear with their high GDP growth, huge size of the population, rise of the middle class and incredible pace of innovation (arguably even higher than in the USA). We believe that domestically we have much better odds of winning, and that’s where we will focus on from now on. We want to thank you for your partnership. Joe and I have our entire net worths invested alongside you — we strongly believe in eating our own cooking. We look forward to reporting to you again at the end of 2021. Best regards, Alex and Joe Updated on Oct 13, 2021, 4:58 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 14th, 2021

Inside the gargantuan civilian effort to get remaining Americans out of Taliban-controlled Afghanistan

Project Dynamo is still evacuating Americans and US visa holders out of Afghanistan even after Western militaries have all withdrawn from the country. Bryan Stern, founder of Project Dynamo, in the group's mission control room. Bryan Stern Civilian-run groups are still evacuating Americans and visa holders out of Afghanistan. One of these groups is Project Dynamo, run by American civilians. The group is processing around 30,000 applications from people desperate to flee Afghanistan. See more stories on Insider's business page. The moment the wheels of the Kam Air charter plane left the tarmac in Kabul, Afghanistan, people were crying tears of joy.That flight to the United States, which took place September 28, was carrying more than 100 US citizens, green card holders, and Special Immigration Visa (SIV) holders who remained trapped in Kabul when it fell to the Taliban on August 15.Also there were two men working for Project Dynamo, an American civilian-run organization that has continued evacuation efforts from Afghanistan even after foreign forces withdrew at the end of August."It was just pure emotion," Bryan Stern, who was on the plane, told Insider. "I was just so relieved and happy with what we had accomplished." Stern at the Hamid Karzai International Airport in Kabul, Afghanistan. Bryan Stern. That was the first private rescue mission from Afghanistan organized by a non-governmental organization, Stern said.Stern, a former 9/11 responder and US Army veteran from Florida, said he felt "angry" seeing the chaos unfold in Kabul after the Taliban takeover because it reminded him of what happened in New York City 20 years ago."I just couldn't get it out of my mind. I saw people jump from the towers and now they were doing the same but from airplanes," he said, referring to the photos that showed desperate Afghans falling out of planes as they tried to flee Kabul.It was this anger, paired with a "feeling of helplessness," that prompted him to set up Project Dynamo with a few friends, he said.A 'massive undertaking'Several weeks later, Stern is still traveling across the world, coordinating efforts to get people out of Kabul, be it by foot, bus, or plane. US evacuees at the Abu Dhabi International Airport. Bryan Stern But with little help from the US government and funded mostly from donations, Project Dynamo is facing a "massive undertaking," said Jen Wilson, one of the organization's volunteers."When evacuations first started, it was obviously very frantic … but at least we had options because the State Department and the embassies were all at the airport, processing visas," Wilson, who is based in the US, told Insider."But now, it's obviously gotten much slower. We're also hindered because there is no diplomatic presence from any country that we can utilize. So it's just us."How it worksHere's how the process works, according to Stern:Anyone wishing to leave Afghanistan can register on Project Dynamo's website and upload their passport and visa information for their destination countries.Project Dynamo then vets and approves the documents with help from the relevant governments, and notifies them that an evacuation flight is being organized.Once there are enough people for a flight, the group sends them to a safe house.Everyone is then given a measles shot and a COVID-19 test before boarding the flight."A safe house is not as spooky it sounds," Stern said. "Everything is controlled ... you're not smuggled, you're not under a carpet. This is all legal.""We also have to remember these are not refugees, they're Americans who are going home." A passenger receiving a measles, mumps, and rubella shot. Bryan Stern Meanwhile, Project Dynamo works with fixers on the ground, arranging buses and provisions for the passengers.The team also has connections to different private charter companies from around the world, Stern said, adding that Kam Air - the largest private Afghan airline - offered to help with last month's evacuation.Stern declined to say how much that flight cost. None of the passengers on board have to pay a ticket fee, he added.It's usually the charter companies that work with the Taliban to get clearance to fly, Stern said.He said the idea that getting out of Afghanistan is an impossible mission was a "huge misconception": "If you understand the rules and the process and the procedures, and you follow all this, you can get out," he said.Wilson, meanwhile, said the Taliban had posed "no problems at all" with Project Dynamo's passengers because they "don't want Americans in their country anyway." Still, the process is tedious, and things could go awry. Last week's evacuation flight was delayed for 33 hours after the Department of Homeland Security briefly denied it entry into the US, leaving the evacuees stranded at the Abu Dhabi airport with little food and having to sleep on floors."There's a lot of waiting around, but this is part of the process," Stern said.Project Dynamo has received around 30,000 applications to fleeIt is unclear exactly how many Americans and visa holders are still in Afghanistan.In an address to the nation on August 31, the day of the military-withdrawal deadline, President Joe Biden said that around "100 to 200 Americans" who wanted to leave Afghanistan were still there. Defense Secretary Lloyd Austin told a Senate hearing last month that the number of remaining Americans "fluctuates daily."A State Department official also told reporters on September 1 that "the majority" of SIV applicants were left behind after the military withdrawal. Project Dynamo has received around 30,000 applications from Afghans desperate to leave the country since August 15, Stern said.But the majority of them don't have the necessary paperwork to do so, and Project Dynamo can't help them acquire these documents, meaning they can't leave, Stern said.Many have already fled through other means, Stern said, adding that Project Dynamo had already helped some families cross the Afghanistan-Pakistan border by foot. He did not give a specific number. A post shared by PROJECT DYNAMO (@projectdynamo) While the work moves slowly, Wilson said it still feels urgent."For the Afghans on the ground ... they're running out of food, they're running out of money," she said. "They don't have enough water, the prices of goods and services in countries have skyrocketed. So they are really trapped there. And the winter season is coming."But the team has no plans of slowing down any time soon, Wilson said, adding they will do "whatever it takes" to get everyone out.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 13th, 2021