This Is What Whales Are Betting On General Motors

Someone with a lot of money to spend has taken a bullish stance on General Motors (NYSE:GM). And retail traders should know. We noticed this today when the big position showed up on publicly available options history that we track here at Benzinga. read more.....»»

Category: blogSource: benzingaSep 22nd, 2022

Families in over 20 states are scrambling to place a bet on what their energy bills will be in the future. A wrong decision could cost them hundreds of dollars.

It's like playing the stock market, a Tulane professor says. Some families must bet on a complicated energy market at their financial risk. The Fed study reflects growing pessimism among aspiring homebuyers — especially young homebuyers — as prices have ballooned over the course of the pandemic.skynesher/Getty Images In over 20 states, families have some choice over where their home's energy comes from. In today's volatile energy market, a wrong decision could cost them hundreds of dollars. Increasing in prevalence in the 1990's, deregulated energy markets have pros and cons, experts say. Faced with rising costs, Americans are shopping for the best deals on not just food, housing, and flights — but the energy powering their homes. In over 20 states that include New York, Illinois, and California, energy markets have been deregulated or restructured to varying degrees. It means consumers aren't simply stuck with a single local energy company. Some can shop around for the best offer before deciding on their electricity and gas providers.  Many are even faced with the decision of whether to lock in a fixed energy rate for a period of time or roll the dice with a variable rate — which can be subject to demand, production, weather, and other factors. In today's volatile energy market, a wrong decision could cost them hundreds of dollars. While more consumer choice is typically regarded as good thing, the recent volatility in the energy market — and households' lack of knowledge about how to navigate this — are making these choices much more difficult."It's almost analogous to the stock market," Joshua Basseches, an assistant professor of public policy and environmental studies at Tulane University, told Insider. "It's putting a lot of these decisions into the hands of consumers, sort of betting on what's going to happen to these different prices of these different fuels."In August, electricity bills rose at their fastest rate in 41 years, with natural gas prices rising 33% vs. the year prior. These increases have been driven by the reopening of the US economy, the energy crisis in Europe, and heatwaves across the country. With prices at the gas pump easing in recent months, Americans are turning their attention to their energy bills as prices spike. And things could get even worse this winter.Whether they like it or not, consumers in deregulated states deciding which provider to use and what kind of plan to sign up for are effectively betting on the future of energy prices. That would be a tall task even for energy experts."You are being asked to play the market out a year to three years, and that is not a comfortable decision," Floyd Stanley, a 66-year old in Texas, told Bloomberg. "If you're low income, then every dollar counts"When it comes to consumer choice in energy markets, Basseches says "none of this was possible" 20 years ago: "The utilities made all the decisions for you. They sent you your bill."But in the 1990s, some states with high electricity costs began opening up their energy markets to new companies, with the goal being to make them more competitive and reduce costs. It allowed some Americans to choose not who owned the electricity wires connected to their homes, but where this electricity was being generated. Today, there are as many as 28 states offering some choice, although choice is very limited in some states — making a precise number difficult to determine. In theory, consumers were in a position to benefit, but stakes, particularly as inflation grips the economy."If you're low income, then every dollar counts," said Basseches. "But if you're middle or upper class, these are probably going to be relatively minor differences in costs, depending on whether you take advantage of these different packages."And stakes were even higher for large industrial companies that consume huge amounts of electricity. They lobbied for deregulation in the hopes it would lead to lower operating costs. For these companies, the choices they make in today's volatile energy market can have "hugely consequential" financial implications due their significant energy usage, says Basseches.  Pros and cons of deregulationIn general, Basseches says he thinks deregulation can help lower a state's energy costs. In Texas for instance, among the "most deregulated" states, he says energy costs are generally "very low." It's also opened up the market to new sources of energy, making it easier for states to take steps towards renewables.That said, Basseches hasn't seen conclusive evidence that deregulation has produced lower costs more broadly — some have even argued it's produced higher energy bills in some states. Additionally, there can be "issues of reliability and of system maintenance" in these markets that can contribute to blackouts and spiking costs during extreme weather events. For instance, while several factors led to the Texas blackouts in February of 2021, deregulation likely played a role. In the past, a monopoly utility would have been responsible for the maintenance of the state's electric grid in the event of a weather crisis like the one that hit the Lone Star State that winter. But in today's competitive market, a collective shirking of responsibility may have contributed to the crisis, though experts disagree on just how much. In the early 2000's, California blackouts — which were partially tied to the state's recently deregulated energy market — set the stage for the 2003 recall that made Arnold Schwarzenegger governor. The state took steps to mitigate these problems in the future, however. And it's unclear to what degree deregulation was to blame for California's power grid being pushed to the limit during the recent heat wave.In the United Kingdom, the government could spend as much as $150 billion over the next year and a half to freeze household energy bills. But if energy bills continue to rise in the US, American households might not be so lucky as every dollar of government spending faces scrutiny. If anything, state governments might be asking citizens for help with the energy crisis. During the California heatwaves, residents received alerts on their phones asking them to cut down on their power usage, which reportedly helped the state avoid any blackouts. Perhaps they'll even be asked to shut off their Christmas lights this holiday season, as Germans are currently being urged to do.In deregulated states, consumers eager to save money on energy bills may have no choice but to scour the options available to them and embrace their inner Nostradamus as they forecast future prices.  Read the original article on Business Insider.....»»

Category: dealsSource: nytSep 27th, 2022

Tchir: Braking, Breaking, Broken, Broke

Tchir: Braking, Breaking, Broken, Broke Authored by Peter Tchir via Academy Securities, I’m incredibly worried about the state of the economy, markets, and geopolitics (please see Putin’s Speech SITREP). With football season in full swing, maybe we will get a “bend but doesn’t break” type of market. Sentiment survey’s like AAII are sending some contrarian signals. That survey (which was published on Wednesday and presumably did not fully include the impact of the FOMC meeting) had bulls at a measly 17.7% and hit a yearly high of 60.9% of respondents being bearish. The CNN Fear & Greed index nudged back to extreme fear, but at a rating of 24, there is room for more fear (coincidentally, the index had the same reading this time last year before the S&P 500 rallied 10% into year-end). But enough of looking at the “bright” side of things. Let’s move on to things that are braking, breaking, or even broken (hopefully not driving us broke). Where To Start? There are so many places to start and it is difficult to pick just one. We should probably start with FX since the moves there are starting to pit country against country, but we’ll start with rates because it is almost as important, just as broken, and more natural for us. Rates Once markets had time to digest Powell’s speech, there was a moment where rates reacted logically. The front-end shot higher (with one ugly looking gap up and down), while the long-end rebounded. We’ve seen this reaction before. The Fed is going to hike more, so the front-end is forced to move higher, but the back-end gets nervous (rightfully so) that the hikes will put the brakes on the economy and ultimately we will have lower growth in the future. On Wednesday, mortgage bonds outperformed as markets liked the Fed’s commitment not to sell MBS as part of quantitative tightening (How & Why The Fed Should Tweak QT). But by Thursday, all hell had started to break loose in the bond markets. Every bond yield (across the globe) was shooting higher. One theory was that Japan was selling Treasuries to fund their intervention. Maybe we should have even started with FX because interventions could become a common occurrence in the coming weeks. Whether Japan was selling bonds or not, it captured the market’s attention. It also served as a reminder that China has been reducing their holdings of U.S. Treasuries according to the latest TIC data (from $1.07 trillion at the start of the year, down to $0.97 trillion as of the end of July). Investors are forced to wait until the middle of October to figure out what China did in August (nothing like real-time data). With tensions between the U.S. and China remaining elevated and obvious problems in the Chinese economy, it seems reasonable to expect this trend to continue. The real problem, though, for global bond markets was the UK and their Gilts! The 10-year Gilt finished the week up almost 70 bps! (3.14% to 3.83%). The 2-day move, on Thursday and Friday, was 51 bps! To put that in perspective, the only time the 10-year Gilt had a bigger 2-day move was in March of 2009 when yields dropped by 58 bps. The recent move was bigger than moves that occurred during the bust, almost the entire Great Financial Crisis, the European Debt Crisis, Brexit, and Covid! Just a shockingly large move that dragged global bond markets with it. This little statement from the September 2021 FOMC Statement is worth re-visiting. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses. At the time, the U.S. was still buying $80 billion a month of Treasuries and $40 billion of MBS. Apparently, we no longer need to worry about “smooth market functioning” which I guess is good, because we don’t have smoothly functioning bond markets. Central bankers should re-visit quantitative easing and treat it like a nuclear weapon (rather than a pea shooter). But we digress. Volatility One outlier in recent moves is the VIX. The MOVE index, a measure of Treasury market volatility, is high and is climbing again towards Covid levels. The implied volatility on DXY (a dollar index) is rising and is the highest it has been since Covid. Yet, for all that, the VIX remains subdued at just under 30. Is that a sign of health in equities, that investors are behaving calmly, or a sign that we haven’t seen capitulation yet? Train Wreck Waiting to Happen? With the VIX not at levels that reflect extreme fear, the behavior of “risky” ETFs continues to be intriguing. TQQQ had over $250 million of in-flows on Friday and probably around $1 billion since September 13th. Not “bad” for a fund that is down 34% for the past month and 74% for the year. The fact that investors are still piling into triple leveraged ETFs as so many individual stock charts seem to be breaking down is either courageous or a recipe for disaster. ARKK had more muted inflows, while SQQQ saw profit taking. Bitcoin keeps managing to claw back to about $19,000. Given what is going on with stocks, commodities, and bond yields, that is impressive. Though, with FX markets experiencing volatility and considering the interventions, the case to own something other than “fiat currency” does seem more credible. I’m still betting that we break $10,000 before the year is done in crypto. FX The Chinese Yuan is well above 7 and continues to weaken reflecting their economic problems. The Euro is well below 1 (closing at 96.9) as the populace braces for power rationing. The Pound is collapsing and was 1.35 at the start of the year and was 1.09 on Friday. Hearing lots of chatter about possible intervention, which is par for the course when it is easier to play with markets than question potential policy mistakes (like massive tax breaks). The Yen is no longer a “safe haven”. The intervention may have slowed down the decline, but so long as the Bank of Japan remains on easy street while other central banks are hiking, those attempts are likely to be futile (at least until positioning against the Yen becomes too one-sided). I think that the relative strength of the Mexican peso (compared to so many other currencies versus the dollar) is interesting and is indicative of a shift away from China (and Asia Pacific) to Mexico and Latin America for investors and companies. Central bankers who seemed to “get the joke” this time around also helped on a relative basis. This plays into our longer-term theme on how businesses and the global economy will develop, but that theme will take years in a market that for the moment seems to be thinking in terms of days and even hours. Historically, companies (and markets) struggle with such large shifts in FX rates. Policies that make countries more or less competitive often take years to succeed (or fail). With FX moves occurring at this speed, we will likely see some cracks and exposures. It doesn’t bode well for earnings in dollars. Commodities WTI is up 8.8% from November 2021 and is lower than at any time since January 2022. Gasoline prices continue to decline and the futures contracts out the curve are even lower. Remember when lumber prices were daily news? Where “clever” social media users would send around pictures of 2x4s as a symbol of wealth? Well, the front contract at 435 is back to where it was in early 2020 (down 74% from its 2021 high and down 70% from its 2022 high). It’s an illiquid and thinly traded market, but it felt like an appropriate time to mention it. Gold continues to decline and is 20% off its high of the year and is back to early 2020 levels. Given that crypto seems to be hanging in there and is slightly off its lows, it is curious that gold keeps leaking. Geopolitical tensions are high which should help gold, but with central bankers giving investors “real yields”, maybe the “barbarous relic” is in trouble? Gold could be an interesting way to play the possible rise of India, which has been another main theme here at Academy, but that is a story for another day. DBC, a commodity ETF, is down 10% on the month and off 12.5% in the past 3 months (while still up 16% year to date). The market seems to be shifting rapidly from viewing lower commodity prices as a sign that inflation is waning to a sign that the recession may already be here! Bottom Line There is limited evidence that the Fed has “slammed” the brakes on the economy. We can go back to debating jobs – Establishment versus Household or the fact that in the last report the data from 2 months ago was ratcheted down significantly. We can also point out that consumer spending saw the prior month’s data revised lower and try to forget that with high inflation, spending the same isn’t that much of an achievement. We can ignore the roll over in home prices, the increase in auto loan delinquencies, and the difficulties in commercial real estate where higher yields create a greater urgency in ending the WFH trend. Heck, we can even pretend that sub-50 PMI prints are “good” as they did beat expectations (the Citi Economic Surprise Index is slightly positive indicating that data has been beating expectations, but I think that the trend of downward revisions offsets that). Finally, the wealth effect must be a concern! This year in general (and the past few weeks) have given us nowhere to hide. So called 60/40 funds, a bellwether strategy for individuals, are down 17% to 23% depending on the mix/index. They’ve been trounced, down 10% or so in the past month. More sophisticated risk parity strategies have also struggled of late. Crypto has not been good for investors this year. The Nasdaq 100 is still above the lows, but I’m told that the charts for many individual stocks are precarious. ARKK, as representative of disruptive stocks, is near its lows. Wealth destruction has been immense and is ongoing. A very good chartist, who has caught many of the large moves this year, is looking at 3,200 on the S&P on this down leg. That would be problematic. Rates (particularly U.S. rates) seem far too high. I don’t see the economic data being good enough to support the current assumptions on Fed hikes. Yes, there are some nice union contracts being signed and wage gains are being made, but overall, company after company seem to be leaning towards belt tightening rather than spending and the Fed’s message this past week will only accelerate that trend. Apparently, that is what the Fed wants, but this feels like a case of “be careful of what you wish for”. Markets are plagued by the lack of liquidity, potential selling by foreigners and sovereigns, and the mixed policy signals (talking tough on inflation but handing out money to “fight” inflation seems to be the norm, which is confusing). Equities seem too complacent. Yields are at the highs of the year. FX volatility is real and problematic. VIX and some aggressive fund flows don’t signal capitulation. Yes, stocks are cheap compared to where they were a year ago, but are they cheap to where they were in 2019? Are they cheap given the global uncertainty and restrictive monetary policy? In a world where central banks are shrinking their balance sheets (QT), we will face headwinds as markets are forced to absorb what the central banks once owned. Is the market pricing in QT or Stagflation? With commodity prices declining, we may be at risk of underestimating the impact of QT. Finally, what about private equity? That was a major source of cash raising for companies who in turn spent that money. There must be some cracks there that will weigh on the economy and markets! There is a lot of fear in the market. Sentiment is awful. Is the Fed put truly dead? Will every Fed speaker stay on point, or will some deliver the hope of a pivot especially if the data is weak? Credit is about right. Riskier credit (high yield and leveraged loans) is weak and testing or breaking to new lows. Investment Grade, while wider, is holding in reasonably well (if you watch the CDS indices, don’t forget that the 20th was a roll day to a new index, which added about 10 bps, making last week’s performance misleading). The market remains open for new issue as well. Be very small on risk, utilize options, and watch credit markets! Liquidity is awful. Narratives and correlations are shifting rapidly! Tyler Durden Mon, 09/26/2022 - 09:05.....»»

Category: blogSource: zerohedgeSep 26th, 2022

3 Top Industrial Manufacturing Stocks to Beat Industry Woes

Despite supply chain constraints and raw material cost inflation weighing on the Zacks Manufacturing - General Industrial industry's near--term outlook, ROLL, AIT and GHM are poised for growth on the back of end-market strength. The Zacks Manufacturing – General Industrial industry is grappling with supply chain challenges. Inflation in raw material and freight costs is squeezing margins. The persistent shortage of skilled labor is an added concern for the industry. Stepped-up investments in product innovation pose a threat to the bottom line. These headwinds dull the near-term prospects of the industry.However, a strong demand environment, thanks to continued expansion in manufacturing activities, is expected to drive growth of RBC Bearings Incorporated ROLL, Applied Industrial Technologies, Inc. AIT and Graham Corporation GHM.About the IndustryThe Zacks Manufacturing – General Industrial industry comprises companies engaged in the production of a wide range of industrial equipment. Some industry players offer power transmission products, bearings, engineered fluid power components and systems, industrial rubber products, vapor-abrasive blasting equipment, vehicle-powered truck refrigeration systems, adhesive, gel coat equipment, flow-control components and linear motion components. In addition, industrial manufacturing companies reconstruct and assemble pumps, valves, speed reducers and hydraulic motors. The companies provide services to original equipment manufacturing, and maintenance, repair and overhaul customers. These end users belong to the mining, oil and gas, forest products, agriculture and food processing, fabricated metals, chemicals and petrochemicals, transportation, and utilities industries.3 Trends Shaping the Future of the Manufacturing General Industrial IndustryStrong Demand Environment: With the continued expansion of manufacturing activities, strong demand across end-markets such as technology, metals, refining, chemicals, automation, utilities, mining, oil & gas, power and general industries bodes well. The Institute for Supply Management’s manufacturing index touched 52.8% in August, indicating expansion in U.S. manufacturing activities for the 27th consecutive month. It is supported by an increase in new order rates and a backlog of orders. As companies ramp up production to recover from the pandemic-induced slump, manufacturing output is expected to continue to increase. This should foster growth of the industry participants. Digitization amid the pandemic has been enabling several manufacturers to boost their competitiveness with enhanced operational productivity, product quality and lower costs.Supply Chain & Cost Woes: Persisting supply chain constraints are weighing on volumes and also increasing lead times for industrial manufacturing companies. Inflation in raw material and freight costs and logistics problems are hurting the margins of these companies. The shortage of skilled workers in the United States has been a perennial problem for industry participants. Although supply chain constraints will continue through 2022, there are signs that the situation is gradually improving, which will provide some relief to the players.Investments in Product Innovation: Industry players are continually making investments in automation, product development and innovation, capacity expansion, new technologies and manufacturing processes to stay competitive in the market. These frequent investments often dent the bottom line and hurt profitability. However, they are beneficial for long-term growth. Focus on an acquisition-based growth strategy to expand network and product offerings should contribute to the top-line growth of industrial manufacturing companies.Zacks Industry Rank Indicates Bleak ProspectsThe Zacks Manufacturing – General Industrial industry housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #148. This rank places it in the bottom 41% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of negative earnings outlook for the constituent companies in aggregate. The Zacks Consensus Estimate for the group’s 2022 earnings per share has decreased 1.5% since the end of June.Despite the industry’s drab near-term prospects, we will present a few stocks, worth considering for your portfolio. But before that, it’s worth taking a look at the industry’s stock market performance and current valuation.Industry Lags Sector & S&P 500The Zacks Manufacturing – General Industrial industry has underperformed both the sector and the Zacks S&P 500 composite index in the past year.Over this period, the industry has declined 18.5% compared with the sector and the S&P 500 Index’s decrease of 17.9% and 12.6%, respectively.One-Year Price PerformanceIndustry's Current ValuationOn the basis of forward 12-month Price-to-Earnings (P/E), which is a commonly used multiple for valuing manufacturing stocks, the industry is currently trading at 16.87X compared with the S&P 500’s 16.78X. It is also above the sector’s P/E ratio of 14.67X.Over the past five years, the industry has traded as high as 26.76X, as low as 14.89X and at the median of 19.36X as the chart below shows.Price-to-Earnings RatioPrice-to-Earnings Ratio 3 Manufacturing-General Industrial Stocks Leading the PackHere we have discussed three stocks from the industry that have solid growth opportunities despite the prevalent headwinds. Each of the stocks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. RBC Bearings: The company is poised to benefit from its product development initiatives and improving demand for commercial aircraft components. Recovery in its OEM and aftermarket defense businesses is also a boon. The buyout of ABB Ltd’s DODGE mechanical power transmission division (in November 2021) for $2.9 billion expanded ROLL’s exposure in the industrial, aerospace and defense markets. The acquisition is expected to significantly contribute to bottom-line growth. Backed by these tailwinds, shares of the company have gained 15.5% in the past six months.Headquartered in Oxford, CT, the company manufactures and distributes engineered bearings and precision components. The Zacks Consensus Estimate for RBC Bearings’ fiscal 2023 (ended March 2023) earnings has been revised northward by 32.7% in the past 60 days.Price and Consensus: ROLL Applied Industrial: Strengthening demand in the technology, metals, refining, chemicals, automation, utilities, aggregates, rubber & plastics, lumber & wood, pulp & paper, plus utilities and mining end-markets are likely to drive the company’s growth. Pricing actions and cost-control measures should fuel AIT’s bottom line. Shares of the company have increased 4.5% in the past six months. Based in Cleveland, OH, AIT is a distributor of value-added industrial products, including engineered fluid power components, bearings, specialty flow control solutions and power transmission products. The Zacks Consensus Estimate for Applied Industrial’s fiscal 2023 (ended June 2023) earnings has been revised upward by 6.7% in the past 60 days. Price and Consensus: AIT Graham: Strong orders and backlog levels support growth of the company. The Barber-Nichols acquisition (June 2021) is strengthening GHM’s top line. Strength across the space and commercial aftermarket places the company well for future growth. Cost-control measures to tackle supply chain woes should drive the bottom line. Shares of GHM have rallied more than 21% in the past six months.Headquartered in Batavia, NY, Graham designs and manufactures mission-critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy and process industries. The Zacks Consensus Estimate for Graham’s fiscal 2023 (ended March 2023) earnings has doubled in the past 60 days.Price and Consensus: GHM This Little-Known Semiconductor Stock Could Be Your Portfolio’s Hedge Against Inflation Everyone uses semiconductors. But only a small number of people know what they are and what they do. If you use a smartphone, computer, microwave, digital camera or refrigerator (and that’s just the tip of the iceberg), you have a need for semiconductors. That’s why their importance can’t be overstated and their disruption in the supply chain has such a global effect. But every cloud has a silver lining. Shockwaves to the international supply chain from the global pandemic have unearthed a tremendous opportunity for investors. And today, Zacks' leading stock strategist is revealing the one semiconductor stock that stands to gain the most in a new FREE report. It's yours at no cost and with no obligation.>>Yes, I Want to Help Protect My Portfolio During the RecessionWant 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 RBC Bearings Incorporated (ROLL): Free Stock Analysis Report Applied Industrial Technologies, Inc. (AIT): Free Stock Analysis Report Graham Corporation (GHM): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 21st, 2022

Tail Risk And Persistent Inflation

Tail Risk And Persistent Inflation Authored by Michael Lebowitz via, Tail risk is the danger that asset prices move significantly more than what is considered normal. Given the lasting financial toll often caused by severe and unexpected adverse price movements, investors must appreciate potential causes of tail risk. Today, the leading tail risk potential is increasing odds that high inflation remains stubborn, and the Fed continues to fight those odds aggressively. The Fed is trying to clarify that fighting inflation is job number one. They aggressively “whack” down dovish market narratives to get investors to believe them as part of their hawkish campaign. Based on implied market expectations, investors are betting that inflation will quickly normalize and the Fed will promptly lower rates. The tail risk is that inflation proves sticky, and the Fed maintains a heavy foot on the financial brakes and continues to “whack” markets lower. Volcker To better appreciate today’s tail risk, it’s worth reviewing the monumental burden put upon Fed Chair Paul Volcker to tackle inflation in the 1970s and early 80s. Paul Volcker was not always a revered Fed Chair. During his watch, first as the President of the New York Fed and later as the Fed Chairman, he was tasked with crushing double-digit inflation, the likes of which hadn’t been seen in 25 years. Doing so required inflicting financial pain upon Americans. Not surprisingly, few appreciated his efforts at the time. Everyone was really after him. There are famous stories of people even sending him their car keys because their car loans were so expensive – Volcker: The Triumph of Persistence- by William Silber Based on comments from Volcker and others, it appears the Fed was able to limit inflation temporarily but struggled to put an end to persistent levels of high inflation. Success didn’t ultimately occur until they realized they had to change how people and companies thought about inflation.   The situation forty years ago and today are different. That said, we are growing increasingly concerned Jerome Powell and his colleagues are dealing with persistent inflation, not the brief bouts of transitory inflation seen over the last forty years. This Time is Different While inflation rates may be similar today to those of Volcker’s era, it is worth providing context for how today’s financial and economic environments are vastly different from Volcker’s experience and why it matters. There is anxiety among Fed members that the low inflation era may be ending. If so, a new, high inflation regime and behaviors that accompany it will likely spell more restrictive Fed monetary policy. Restrictive policy, including double-digit interest rates, quelled Volcker’s high inflation regime. This time that anecdote is not feasible. Unlike the 70s and early 80s, when debt levels were low and equity valuations cheap, today’s economic and financial environments are the opposite. Today’s economy relies heavily on debt for consumption and to roll over maturing debt and avoid bankruptcy. High-interest rates will be exponentially more damaging than they were forty years ago. As the graph below from Brett Freeze shows, an increasing amount of debt has been misallocated. The only way to pay interest and principal on such unproductive debt is to issue new debt to replace it. The following graph shows the CAPE valuation hit a ‘dirt cheap’ level of 6.64 in the early 80s. Today, CAPE stands at 28.90, about 50% above the historical average. The risk to investors of just a normalization of valuations is palpable. As we share, there is significantly more financial market and economic risk today than in the 70s and early 80s if high inflation becomes entrenched. Crushing high inflation immediately before it becomes persistent will take harsh measures, but it may be the best action given the nation’s financial vulnerability. If they fail at the task and let high inflation persist, there will be much bigger problems.  Persistent Inflation- The Fed’s Nightmare Scenario In Persistent Inflation Scares the Fed, we discussed one of the Fed’s greatest fears, a price-wage spiral. To wit: The BIS argues that inflation drives consumer and corporate spending decisions in a high inflation regime. This results in behavioral changes, which cause individual prices of goods and services to become more correlated. Inflation begets inflation and therefore becomes persistent. Further: Once the general price level becomes a focus of attention, workers and firms will initially try to make up for the erosion of purchasing power or profit margins they have already incurred. Essentially once people think that high inflation is permanent, their behaviors change. As prices rise, workers demand higher wages, companies raise prices to compensate, and on and on in a circular motion. Wages are already rising as employees and unions have new-found leverage. Thus far, companies are raising prices to offset higher wages. The graphs below point to a very tight labor market. Based on corporate margin data, companies are thus far able to raise prices to help offset higher wages. The first revolution of a potential price-wage spiral has already begun.   The Fed must be forceful in changing the inflation expectations of employees and employers. They must be willing to take action to increase the unemployment rate, thereby reducing employees’ leverage over employers. Doing so involves weakening the economy and punishing asset prices. Their ability to eliminate the odds of a new inflation regime rests on their ability to convince employees, corporations, and the markets that high inflation will not be lasting. Unlike prior monetary policy, the goal is not just about changing our consumption habits but, more importantly, changing our inflation outlook. Is The Fed Up For The Task? In his unexpectedly hawkish Jackson Hole speech, Jerome Powell made it clear that fighting inflation is vital to longer-term economic health. He also seems very aware of the dangers of changing attitudes about high inflation. To wit: If the public expects that inflation will remain low and stable over time, then absent major shocks, it likely will. Unfortunately, the same is true of expectations of high and volatile inflation. During the 1970s, as inflation climbed, the anticipation of high inflation became entrenched in the economic decision-making of households and businesses. The more inflation rose, the more people came to expect it to remain high, and they built that belief into wage and pricing decisions. As former Chairman Paul Volcker put it at the height of the Great Inflation in 1979, “Inflation feeds in part on itself, so part of the job of returning to a more stable and more productive economy must be to break the grip of inflationary expectations.” On the heels of Powell’s speech Neel Kashkari, President of the Minneapolis Fed, stated, “I was actually happy to see how Chair Powell’s Jackson hole speech was received. People now understand the seriousness of our commitment to getting inflation back down to 2%.” The market’s reception of the Chairman’s speech was a 3%+ decline in the S&P 500. Yes, the Fed seems to get it. But will the Fed have the nerve to do whatever it takes to crush inflation? Will Investors Get Caught Offsides? Even after Powell’s speech, investors continued to underestimate what the Fed may have to do. If inflation drops quickly back to 2% and a price-wage spiral fails to materialize, investors will be correct. Might they be wrong? The graph below shows economists have grossly underestimated the persistence and amount of inflation for almost two years. The market is now aligned with recent Fed speak of a 4.00-4.50% Fed Funds rate. However, as shown below, it starts leaning toward a Fed easing by the spring of 2023. Most recent Fed members have been clear that Fed Funds will likely stay above 4.00% for 2023. To wit: We’re going to have to get interest rates up probably a little above 4% by sometime early next year, and hold them there.  – Cleveland Fed President Mester We’re going to stick at this until the job is done, until the job is done. I don’t think markets are pricing in the fact that not only could rates get up to 4-4.5%, they could stay there for all of 2023.  -Jerome Powell Summary Persistently high inflation is the tail risk that few investors seem to appreciate. Dovish market narratives and investors betting on them are like the moles in the arcade classic Whac-A-Mole. Any bit of dovish inflation news and the market narrative shifts to a less aggressive Fed and soon-to-be lower interest rates. Once such sentiment gains momentum, Fed members pull out the mallet and whack the dovish narrative down. If inflation remains persistent, even in the 4-6% range, investors will appreciate that the Fed’s job is not easy. In this case, the tail risk is the market’s realization that the Fed needs to take a page from Volcker’s book and raise rates beyond 4.50% and possibly keep them there well beyond 2023. Tyler Durden Wed, 09/21/2022 - 10:15.....»»

Category: smallbizSource: nytSep 21st, 2022

Lucid is Looking Like A Clear EV Winner

Lucid is in a better financial position than most upstart EV players The near-term headwinds should matter little in the long haul Lucid noted that its liquidity position will keep it running well into 2023 Like most electric vehicle plays, Lucid Group, Inc. (NASDAQ:LCID) has had its share of ups and downs. The luxury EV […] Lucid is in a better financial position than most upstart EV players The near-term headwinds should matter little in the long haul Lucid noted that its liquidity position will keep it running well into 2023 Like most electric vehicle plays, Lucid Group, Inc. (NASDAQ:LCID) has had its share of ups and downs. The luxury EV maker’s stock has made two trips to the $60 level only to reverse towards its early pre-SPAC days. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2022 hedge fund letters, conferences and more   Yet there’s a bigger picture here—that being the long road ahead for EV manufacturers. As government carbon emission initiatives shift into high gear in the second half of the decade, electric-powered cars and trucks are expected to play a powerful role. The International Energy Agency’s (IEA) current Global EV Outlook highlights a growing list of subsidies and incentives that has consumers gravitating towards EVs in record numbers. At the same time, the list of EV models available for purchase at dealerships or online has swelled to around 450 compared to less than 100 in 2015. So with demand and supply trends looking favorable, the EV industry is bound to produce multiple winners not named Tesla or NIO in the years ahead. But what has Lucid in the driver’s seat to emerge victorious? Lucid Group Has Solid & Transparent Financials For starters, Lucid is in a better financial position than most upstart EV players. It exited the second quarter with $4.6 billion in cash & cash equivalents. Compare this to the company’s $27.5 billion market cap, and you’ll see that cash represents 17% of its valuation. That’s some pretty cheap cash available for sale given the growth prospects. Production of the flagship Lucid Air is off to a slow start relative to demand. Approximately 1,400 vehicles rolled off the assembly line in the first half of 2022 and less than 700 were delivered to customers in Q2. Stack that up against Lucid’s 37,000-plus reservations and the impact of recent supply chain and logistic issues is clear. Management has reduced its full year production guidance to 6,500 units at the midpoint—a big reason why the stock has been stuck in neutral all summer. The near-term headwinds should matter little in the long haul though because both the demand and financial strength are there. Lucid noted that its liquidity position will keep it running well into 2023. This is a healthy situation to be in, especially at a time when some competitors are fending off bankruptcy. Lucid Group Vertical Integration A Big Plus The good news with regards to the demand-supply imbalance is that Lucid’s core EV technology is developed and manufactured in-house at its EV powertrain factory in Arizona. This is also where Lucid motors, transmissions, power inverters, and auto racing-inspired battery packs get made—not to mention its fast-charging Wunderbox system. These components get shipped off to the company’s car factory in neighboring Casa Grande, AZ. Better yet, help is on the way. The Casa Grande facility is undergoing a Phase 2 expansion that will nearly triple its installed capacity to 90,000 Lucid Air and Lucid Gravity EVs. When you’re sitting on a backlog of 37,000 vehicles worth an estimated $3.5 billion in sales, a ramp in production can’t come soon enough. Looking further ahead, increased capacity will also come from a brand new production facility in Saudi Arabia. Lucid just broke ground on the project so it’ll be a while, but once completed the Saudi Arabia facility is slated to boost annual capacity by some 155,000 vehicles. The leadership is essentially betting that if you build it, they will (continue to) come. Bottom line: expanding in-house parts production and vehicle assembly should 1) make securing key materials and parts less of a problem and 2) improve Lucid’s ability to meet demand over time. Lucid Group Industry-Leading Efficiency The efficiency of Lucid’s EV technology is a differentiator that may be undervalued by the market. In the EV space, efficiency can be defined in a number of ways, including battery cost minimization, environmental impact, and reducing the customer’s total cost of ownership. Lucid’s technology sets out to accomplish all of the above. At 4.6 miles per kWh, a measure of travel distance relative to energy consumption, the 4-door Lucid Air sedan has what the company calls “unprecedented efficiency”. While much of this relates to a low battery cost component of cost of goods sold (COGS), with Lucid, it's also about efficient vehicle design. Translation: the use of fewer battery cells per vehicle gives Lucid an industry leading range. Granted, even the base model is expensive at $87,400, but the luxury features and 13-hour battery charge time make it well worth the sticker price to some affluent car buyers. As expansion projects ramp production, Lucid will roll out its second offering, the Gravity SUV, which is targeted for the first half of 2024. If consumer interest in the Lucid Air is any indication, the waitlist for Gravity is likely to get heavy in a hurry. Should you invest $1,000 in Lucid Group right now? Before you consider Lucid Group, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Lucid Group wasn't on the list. While Lucid Group currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys. View The Five Stocks Here Article by MarketBeat.....»»

Category: blogSource: valuewalkSep 20th, 2022

Scoop Up These 5 Stocks as August Retail Sales Bounce Back

Retailers, be it Ulta Beauty (ULTA), Arhaus (ARHS), Designer Brands (DBI), Chico's and Kroger (KR), need to channelize their strength to tap any surge in consumer demand. Consumer spending activity, which is one of the pivotal factors driving the economy, held up last month, as Americans spent more on motor vehicle & parts dealers, stores, and restaurants. This was evident from the retail sales data for the month of August that bounced back after a decline in July. The Commerce Department stated that U.S. retail and food services sales in August rose 0.3% sequentially to $683.6 billion, following a downwardly revised reading of 0.4% decline registered in July.A robust job market and decent household finances, thanks to federal relief checks received in the peak pandemic period, have allowed consumers to shield themselves from inflationary pressure to an extent. Additionally, savings from falling gasoline prices allowed consumers to redirect some bucks to other categories.Retailers like Ulta Beauty, Inc. ULTA, Arhaus, Inc. ARHS, Designer Brands Inc. DBI, Chico's FAS, Inc. CHS and The Kroger Co. (KR) need to channelize their strength to tap any surge in consumer demand.But the question industry experts are asking is how long this will last as soaring commodity prices as well as rising interest rates have already started pinching consumers’ pockets. The consumer price index rose 0.1% month on month in August. On a year-over-year basis, the metric rose 8.3%. With the desperate need to tame inflation, the Federal Reserve may announce a steep hike in the benchmark interest rate in the upcoming meet.Category-Wise SalesThe Commerce Department’s report suggests that sales at motor vehicle & parts dealers and building material & supplies dealers increased 2.8% and 1.1%, respectively, on a sequential basis.Sales at food & beverage stores increased 0.5%, while at food services & drinking places, sales grew 1.1%. At sporting goods, hobby, musical instrument, & book stores, sales advanced 0.5%. Sales at clothing & clothing accessories outlets grew 0.4%, while the same at general merchandise stores increased 0.5%. Sales at miscellaneous store retailers increased 1.6%.The report also indicates that sales at furniture & home furnishings stores and health & personal care stores fell 1.3% and 0.6%, respectively. Sales at electronics & appliance stores declined 0.1%, while the same at non-store retailers decreased 0.7%. Meanwhile, receipts at gasoline stations dropped 4.2%.Past Year Price Performance Image Source: Zacks Investment Research5 Prominent PicksUlta Beauty is worth betting on. The company has been strengthening its omni-channel business and exploring the potential of both physical and digital facets. It has been implementing various tools to enhance guests' experience, like offering a virtual try-on tool and in-store education, and reimagining fixtures, among others. Ulta Beauty focuses on offering customers a curated and exclusive range of beauty products through innovation.This beauty retailer and the premier beauty destination for cosmetics, fragrance, skincare products, hair care products and salon services has a trailing four-quarter earnings surprise of 32.8%, on average. We note that this Zacks Rank #1 (Strong Buy) company has an estimated long-term earnings growth rate of 11.9%. The Zacks Consensus Estimate for Ulta Beauty’s current financial year sales suggests growth of 13.7% from the year-ago period. You can see the complete list of today’s Zacks #1 Rank stocks here.Arhaus is another potential pick. Strong consumer demand, new collections, brand awareness and ramp-up of new showrooms have been driving Arhaus’ top-line performance. The company plans to have 165 total traditional showrooms over the period from the current count of 80 showrooms, with plans to add five to seven new traditional showrooms per year. Arhaus estimates fiscal 2022 net revenues in the band of $1,173 million to $1,193 million and foresees comparable growth in the bracket of 43% to 48%.This lifestyle brand and premium retailer has a trailing four-quarter earnings surprise of 92%, on average, and an estimated long-term earnings growth rate of 14.3%. The Zacks Consensus Estimate for Arhaus’ current financial year sales and EPS suggests growth of 49.2% and 5.8%, respectively, from the year-ago period. The stock carries a Zacks Rank #2 (Buy).Investors can count on Designer Brands. The company’s flexible business model, best-in-class omnichannel capabilities and Owned Brands portfolio have been the key drivers of growth. The company’s efforts to expand sourcing and supply chain capabilities have been leading to speed to market with new designs and faster delivery times.This designer, producer and retailer of footwear and accessories has a trailing four-quarter earnings surprise of 55.1%, on average. The Zacks Consensus Estimate for Designer Brands’ current financial year sales and EPS suggests growth of 6.9% and 23.5%, respectively, from the year-ago period. The stock carries a Zacks Rank #2.You may invest in Chico's FAS. This Florida-based fashion retailer’s efforts to become a “digital-first, customer-led” company coupled with a strong portfolio of three unique brands, namely, Chico's, WHBM and Soma, position it well to expand its customer base and market share. Product enhancement, planned inventories, operating discipline and marketing strategies have been helping to drive full-price selling, lower markdowns and produce higher gross margin.Chico's has a trailing four-quarter earnings surprise of 249%, on average. The Zacks Consensus Estimate for Chico's current financial year sales and EPS suggests growth of 19.6% and 112.5%, respectively, from the year-ago period. The stock carries a Zacks Rank #2.Kroger is another lucrative option. The company, which operates in the thin-margin grocery industry, has been undergoing a complete makeover not only with respect to products but also in terms of the way consumers prefer shopping grocery. The company has been adding new products as well as eyeing technological expansion to enhance its omnichannel reach. Kroger has been making significant investments to enhance product freshness and quality, and expand digital capabilities. The company has been introducing items under its “Our Brands” portfolio.Kroger has a trailing four-quarter earnings surprise of 15.7%, on average. The company has an estimated long-term earnings growth rate of 11.7%. The Zacks Consensus Estimate for Kroger’s current financial year sales and EPS suggests growth of 7.8% and 9.8%, respectively, from the year-ago period. The stock carries a Zacks Rank #2. FREE Report: The Metaverse is Exploding! Don’t You Want to Cash In? Rising gas prices. The war in Ukraine. America's recession. Inflation. It's no wonder why the metaverse is so popular and growing every day. Becoming Spider Man and fighting Darth Vader is infinitely more appealing than spending over $5 per gallon at the pump. And that appeal is why the metaverse can provide such massive gains for investors. But do you know where to look? Do you know which metaverse stocks to buy and which to avoid? In a new FREE report from Zacks' leading stock specialist, we reveal how you could profit from the internet’s next evolution. Even though the popularity of the metaverse is spreading like wildfire, investors like you can still get in on the ground floor and cash in. Don't miss your chance to get your piece of this innovative $30 trillion opportunity - FREE.>>Yes, I want to know the top metaverse stocks for 2022>>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 Ulta Beauty Inc. (ULTA): Free Stock Analysis Report Chico's FAS, Inc. (CHS): Free Stock Analysis Report Designer Brands Inc. (DBI): Free Stock Analysis Report Arhaus, Inc. (ARHS): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 20th, 2022

Transcript: Albert Wenger

     The transcript from this week’s, MiB: Albert Wenger, Union Square Ventures, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in… Read More The post Transcript: Albert Wenger appeared first on The Big Picture.      The transcript from this week’s, MiB: Albert Wenger, Union Square Ventures, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, what can I say, I have yet another extra special guest, Albert Wenger, managing partner at Union Square Ventures. He has a fascinating background in technology and software, and is interested in all sorts of interesting things, ranging from climate change to humanism, to the huge transitions that humans have gone through as a species and what it means to society, investing, scarcity and just the quality of life that we will enjoy as a species. I found this conversation to be really intriguing. If you’re interested in venture capital, in technology, in how to think about early stage investing, well, strap yourself in, this is a great one. With no further ado, my conversation with Union Square Ventures’ Albert Wenger. You have quite a fascinating history. Let’s delve into that, starting with your background. You won a national German competition in computer science in high school. Tell us about that and where that led you. ALBERT WENGER, MANAGING DIRECTOR, UNION SQUARE VENTURES: Well, I fell in love with computers very early on when I was a young teenager. And my parents were super indulgent of this at a time when that was very unusual, and they bought me an early Apple II computer, one of the earliest Apple IIs to be sold in Europe, actually. And I’ve stuck with that, my entire life. I’ve studied computer science as an undergrad and as a graduate student. And I’ve been investing in a lot of computer companies over the years. So it’s been a central to what I do and who I am. RITHOLTZ: So let’s talk about the timing of school. You graduate Harvard in 1990, with an Economics and Computer Science degree, perfect for the explosion of the Internet; a PhD from MIT and Information Technology in ‘96. So when you were leaving school, were you interested in the Internet, or was it more hardware and software? WENGER: No. The web was really exploding while I was at MIT. And I actually finished my PhD in ’99, but I started a company in late ‘96, early ‘97. And I was kind of doing the company and the thesis at the same time, which wasn’t great for either, and also wasn’t great for our marriage. We kind of managed to get through that. But I was really fascinated with the web from when I first discovered it, which was in a computer lab at MIT where I’m trying to do my stats homework. So — RITHOLTZ: So let’s talk a little bit about some of the other companies you either founded or run, the most famous is probably, which ended up getting picked up by Yahoo. Tell us a little bit about — WENGER: It was an early Web 2.0 darling, Joshua Schachter had started. He was working at Morgan Stanley actually full time. He had started this as a side project. And it was kind of this idea that you would share your bookmarks with others, because bookmarks were kind of an indication of something that was actually interesting on the Internet. And Joshua added tags to that, and so you could browse things by tags. And at that time, Union Square Ventures’ Fred and Brad had started the firm, they had just raised the first fund. I had just finished another project I was been working on. And they were like, “Hey, we’re talking to this guy, Joshua, what do you think?” So I met up with Joshua, and they wound up investing, and I wound up to become the president. RITHOLTZ: So you’re president of, you see it through in order to be acquired by Yahoo in the early 2000s. Tell us a little bit about that experience. WENGER: The team was tiny. It was sub 10 people, basically. RITHOLTZ: Wow. WENGER: And it was a very rapidly growing service. I made myself sufficiently unpopular during the acquisition because I insisted on certain things, I’m like, “We’re not doing this. We’re not doing this. We’re not doing this.” At they at the end, they were like, “We want all of you except for this Wenger guy. We don’t want him,” which was perfect for me, mind you, because I didn’t want to relocate out to the West Coast. So I got to just take my marbles and start making angel investments. RITHOLTZ: So is that what led you to Etsy and Tumblr was the acquisition? WENGER: Yeah, exactly. I had a little bit of money and I met Rob Kalin, the founder of Etsy. He had just come back from the West Coast. He had tried to raise money on the West Coast, was unsuccessful with that. And so I wrote an angel check here, and then I brought Union Square Ventures in as the first Series A investor. RITHOLTZ: Is that what led to your transition from entrepreneur to venture capital? WENGER: Well, I was basically hanging out at the USV offices after the sale of and — RITHOLTZ: Just because you had no place else to go. WENGER: Because I knew both Brad and Fred really well, and so it was kind of a natural thing to do. I did these angel investments. I led the Union Square Ventures investment in Etsy, I became a venture partner for that, and then became a GP in the 2008 fund. RITHOLTZ: So Etsy, also Tumblr was another one. And if memory serves, were they acquired by Yahoo? WENGER: They were also acquired by Yahoo. Yes. RITHOLTZ: Okay. So you’re working at a contact list. What was that experience like now not as a president, but as an outside investor? WENGER: It was a very, very lucky landing for Tumblr, because Yahoo really was the only bidder and they were bidding against themselves, but they didn’t really know that. RITHOLTZ: So what eventually led you to say, “You know, I think I could do this venture stuff full time. Let me hang my hat at Union Square Ventures and focus solely on something else.” WENGER: Yeah, that had really been my goal since my own first startup in ’96, ‘97, which was a company called W3Health that ultimately failed. From that experience, I realized that I really loved startups, but then I was never going to be good operator, but I thought I could maybe be a decent investor. RITHOLTZ: Let me make a digression here, and since you’re in front of me, I have to ask this question. So I deal with traders, investors, fund managers, economists down the list, there is no group of people that seem to be prouder of their failures than venture capitalists. Why is that? WENGER: Because it’s an integral part of the business. And if you can’t deal with failure, you can’t be a VOICE, because many of the startups you invest in fail. RITHOLTZ: Statistically, that’s your expectation? WENGER: Yes, absolutely. RITHOLTZ: So it just seems like the healthiest way to think about what is unavoidable, yet so many people within the world of finance, kind of dance around it, try not to deal with it. There’s a little bit of denial. It’s almost like an object of pride, “Look, here are all the companies we invested in that didn’t make it. Look, here are all the great companies we passed on.” It’s almost like a point of pride, this sort of self-awareness. WENGER: Well, it’s also important too, how the venture capital model works overall, right? So the most you can ever lose in venture capital is the amount of equity you’ve put in. RITHOLTZ: Right. WENGER: But the upside is nearly limitless. I mean, it’s what Nassim Taleb calls convex tinkering, right? It’s the perfect example of that. You take many small, relatively small positions, and any one of them can become very, very large. But you also learn a lot from the things that don’t work. You know, sometimes you learn a lot more from that than you learn from the ones that do succeed. RITHOLTZ: Sure. You tend to learn more from losers than winners usually. And then I have to ask the same question, so Union Square Ventures, by definition Union Square is here in New York City. What’s it like being a venture investor on this side of the country, as opposed to what seems to be, you know, the gravitational black hole of venture out in Silicon Valley in California? WENGER: Well, first of all, it’s no longer that. So you know, Sequoia just opened a New York City office. Andreessen Horowitz has people on the ground here. So New York City is now, today, one of the epicenters. When we started, that wasn’t the case. When we started, people were like, “Oh, there’s been no tech company in New York City. There’s been no IPO.” Of course, you know, we were involved with two of the major IPOs. We led the Series A in Etsy. I also led the Series A — we — Union Square Ventures led the Series A in MongoDB, the big New York City-based success story. So it was incredibly healthy, though, because we were never caught up in the “Oh my God FOMO” of we have to have one of these and one of those, and everybody else is investing in the sector. It was always a “Let’s form our own thesis. Let’s figure out what we believe, and then let’s find companies that fit with that.” And we’ve always been extremely competitive in winning deals in the West Coast. In Twilio, I led the Series A, for Union Square Ventures, and there was a, you know, San Francisco-based company. So — RITHOLTZ: Last question on this topic, how different is venture in New York versus California, or is there really no big difference? WENGER: There used to be a noticeable difference between East Coast and West Coast. Today, I think that’s completely erased. RITHOLTZ: Quite interesting. So let’s talk about the thesis-driven venture capital firm, which is how USV describes itself. Tell us what these theses are and how do they drive your investment? WENGER: Yeah. So there’s been an evolution over time. I would say, you know, what we call Thesis 1.0 was that we invest in large networks of engaged users, differentiated by user experience, and those were investments like Twitter and Tumblr. And then we started to focus on companies that had less obvious network effects, so more data behind the scenes, companies like Sift, for example. And then we added to our thesis sort of infrastructure, and infrastructure investments included Twilio and MongoDB, Cloudflare. Stripe. There’s a whole bunch of infrastructure investments, infrastructures for building digital businesses. Our current iteration, what we call Thesis 3.0 is about broadening access to knowledge, capital and well-being by leveraging existing networks and protocols, and building trusted brands. And each part of that thesis actually means something very concrete. So let me just pick one of them, building trusted brands. For us, a lot today is about is your business model fundamentally aligned with your customer or not? The advertising model, as we have learned is not aligned with customers’ interests, right? If you’re YouTube, you want to serve the most engaging video so that you can show more ads. You don’t want to serve the most appropriate video, right? But if you have a subscription model, let’s say like Netflix, you want to show something that somebody actually really truly deeply is going to relate to, so that they stay as subscriber long term. So each part of this thesis means something and we use the sort of high level thesis to then look for very concrete things. So for example, I said broadening access to capital, so we’ve done a lot in lending, like, how can we do better underwriting, better, cheaper, faster loans, for instance, to small businesses, investment, like a company like Funding Circle, or to individuals, like a company like Upgrade, in a way that actually helps people, so where you’re not dragging them into like a debt hole, but you’re actually helping them build up their credit score while you’re giving them — extending their credit. RITHOLTZ: So 3.0 sounds a lot like World After Capital, I’m hearing some very similar themes. WENGER: Absolutely. There’s a strong relationship between some of the ideas in the book and some of the ideas that inform our investing. RITHOLTZ: We’ll circle back to the book in a little bit. Let’s talk about a couple of companies you invested in because I’m picking up a theme there, Meatable, Terra, Living Carbon, Marvel Fusion, Legendary Food, climate sustainability impact investing. WENGER: Yeah. So those are all personal investments, not Union Square Ventures investments. But I made those investments in the run up to us forming a climate thesis, and now a Climate Fund. So those are all investments that go back a few years, when I sort of became really interested in what kind of opportunities come out of the climate crisis. The climate crisis, if we don’t get on top of it, none of the other stuff will matter. None of the money we’ve made will matter. It’s so big. It’s so much bigger than COVID, for example, in ways that I think people still don’t appreciate. And so I made some personal investments first, and then we started talking to our LPs about it. And then during COVID, we raised the first Climate Fund, $160 million Climate Fund. We’re almost done investing that. And so the climate thesis is very simple. We want to invest in companies that either reduce emissions, draw down existing emissions, or help with adaptation. So I’ll give an example of an adaptation investment. We invested in a company out of Australia called FloodMapp. And what they do is they predict where things are going to flood. They also measure the actual flooding. Floods are one of the biggest problems coming out of the climate crisis, and they’re here today. This is not some future problem. And mega floods in Pakistan, a third of Pakistan is underwater as we speak. I don’t think people understand how horrific the devastation there is. RITHOLTZ: It’s the other side of the droughts that are everywhere. It’s what’s dry gets drier, what’s wet gets wetter. WENGER: Absolutely. Talking about emissions reductions, we’ve made investments, for example, in our first ever investment in Africa, in a company called Shift EV. What Shift EV does is it takes existing delivery vans and retrofits them in a space of a couple of hours, from internal combustion engine to electric. RITHOLTZ: A couple of hours? WENGER: A couple of hours. Yes. RITHOLTZ: Because if you want to take an old 911 and convert it to EV, it will take you about a year, assuming if you can get on the list. It’s that backed up for that shift itself. WENGER: So they have completely industrialized this process. RITHOLTZ: That’s amazing. WENGER: You drive a minivan in and a couple of hours later, drives out as an EV. RITHOLTZ: Wow. What do they do with the internal combustion engine and — WENGER: That’s a great question. I need to ask Ellie what they do with that. I don’t know. RITHOLTZ: I mean, it seems like that’s a lot of hardware to just throw away. WENGER: I don’t know. Great question. RITHOLTZ: Really interesting. WENGER: And then I’ll talk about one of the drawdown investments. We’ve invested in a company called Brilliant Planet out of the U.K. What they do is they build ponds in the desert and they pump seawater in, and then they grow algae very, very rapidly, continues algae bloom, and it takes a huge amount of carbon out of the atmosphere. RITHOLTZ: Algae in ponds — WENGER: In the desert. RITHOLTZ: — can move the needle? WENGER: Yes. Absolutely. RITHOLTZ: That’s quite fascinating. Two questions come out of this, one is structural and one is fund based. Let’s do the fund one first. So John Doerr had a climate fund started about 10 years ago at Kleiner Perkins. Some people have said it kind of lagged other similar era venture funds. Was he just early? How do you look at this in terms of not just having a positive impact on the planet but generating a return on investment? WENGER: Yeah. The early green tech funds, they were too early in one sense. But in another sense, they were actually crucial to our having a shot at overcoming the climate crisis. Because if it hadn’t been for the investments, we wouldn’t have gotten on the cost curve, for instance, for solar PV, right? So the reason we have really cheap PV today, the reason we have really relatively cheap batteries today is because of some of the investments that were made back there. And there’s this pattern in the world where every big technological shift starts with a bubble, right? RITHOLTZ: Right. WENGER: So when we had ships, we had the South Sea bubble, right? And when we had railroads, we had the railroad bubble. There was an automotive bubble. There was dot-com bubble, multiple bubbles in crypto. There was a green tech bubble. But, now, it’s a decade-plus later and all the things that they were rightly concerned about are all coming true. And we are now reaping some of the benefit, but we’re also now building on — we’re sort of standing on the shoulders of giants, as it were. RITHOLTZ: And to clarify, I believe that fund doubled over 7 or 10 years, not like it was a sinkhole, but compared to what it could have done, had that money been invested elsewhere, it might have seen better returns. But it wasn’t — I don’t want to make it sound like it was total loss. So the second question is, you’re making seed investments, how does that work if you want to bring one of those seeds to your firm, to Union Square Ventures? And from a public market, that sounds like it’s a compliance and conflict nightmare. You guys approach it differently. WENGER: In our LPA, we can write checks up to $100,000. So we can’t make massive investments in startups. So all of the companies you mentioned have a sub $100,000 investment. And then the only one where I’ve invested more is Marvel Fusion. We can invest more once the fund has passed on something. So if the fund says we’re not doing this, then we can invest. RITHOLTZ: Got it. Interesting. So along those lines, there are some venture firms that don’t really seem to care a lot about valuations and others seem to focus on a little bit. How do you fall in that spectrum? Is valuation significant, or is it, hey, we’re going to make 100 investments and if two or three workout, the valuations are irrelevant? WENGER: No, we’ve definitely always been disciplined on valuation, and we’ve let a number of things go. Sometimes we let them go and they do great, like, “Well, we could have made money if we had invested.” And sometimes you’re very happy at that. Our approach is we’ve always kept our fund sizes small, so we don’t need to be in everything that’s out there. Our latest funds are — our core fund is $250 million. So these aren’t big funds in the scheme of things when you have other firms that raised $3 billion. $8 billion, $15 billion per fund. And as a result, if we think the price is too high, we can just find something else. RITHOLTZ: So let’s talk a little bit about some of those bigger funds, and I guess we’ll hold Softbank off to the side because that was really aberrational. But do you end up when you have lots of $10 billion and $20 billion venture funds, with too much capital chasing to a few good deals? How does this impact the whole ecosystem that’s out there? WENGER: Largely, it’s great for us because we’re early stage investors. So it means there’s lots of money to come in and fund later rounds of the companies we’ve invested in. So we haven’t really spent much of our time worrying about it. And then every once in a while, these firms go. We’re going to go really early and some of them do spread money early. But we find, because we’re thesis-driven and because we are opinionated, on deals that we’re really interested in, we can win those deals. Sometimes they’ll take a small check from somebody else along for the ride, but they know that we work with early stage companies that we roll our sleeves up, that we’re involved, and that we have a thesis. And you know, we take the approach we’d rather disagree with the founder and then not invest than sort of like — be like, “Oh, well, whatever it is you want to do.” Like, we have a thesis as to why we think this is interesting. Let’s talk about this. If it’s aligned, great. And obviously things may change after we’ve invested. We’re not like stubborn, you know. But let’s talk about why we are excited. And if that aligns with you, that’s great. If it doesn’t, let’s go separate ways, right? So we take a kind of — I call it a high alpha approach investing. We’d rather have really upfront conversations about what we like and don’t like than sort of get married as it were. And actually, it’s harder to get rid of VC than it is to get a divorce. So like we think it’s good to have these conversations up front, right? RITHOLTZ: What about follow-up rounds, or some firms that will do a seed round, and then participate in an A or B round? Is that something that Union Square does? WENGER: Well, we reserve a lot of funds for follow-on, and we have a very sort of, I think, sophisticated reserves methodology that we’ve honed over many funds cycles now, where we actually built kind of a Monte Carlo analysis of the portfolio to see how much money we think we need to keep in reserve. But eventually, when the valuations get too high, the rounds get too large, we don’t follow on. We have a separate vehicle called the Opportunity Fund, where we sometimes write bigger checks into late-stage rounds in some of our portfolio companies, but not always. RITHOLTZ: So let’s talk a little bit about this book, “The World After Capital,” starting with what is technological nonlinearity? I liked that phrase. WENGER: The basic idea is that every once in a while in humanity’s history, we invent things that radically change what we, as society, have as a binding constraint on us. So let me make that very concrete. For hundreds of thousands of years, our ancestors were foragers. They were hunter-gatherers. They would go out and find things, and eat berries and kill little squirrels. And then roughly 10,000 years ago, we had a bunch of inventions. We figured out that you could plant seeds, that you could irrigate them, that you could domesticate animals, that you could use the dung from the animals too as a fertilizer. We figured all those things out and we got agriculture. And the constraint shifted from how much food can you find to how much land — arable land do you have. And when that constraint shifted, we changed just about everything, about how humanity lives. Like, we went from being migratory to being sedentary. We went from very flat tribal societies to very hierarchical agrarian societies. We went from being, clearly, like polygamous, polyamorous, whatever you want to call it, to being monogamous-ish. We went from having religions where, you know, everything was a spirit, a tree, a rock, everything had a spirit, and then we went from that to theistic religions where there was some different number of gods. Then fast forward to a couple 100 years ago, we had sort of the enlightenment. With the enlightenment, we had sort of big scientific breakthroughs and we figured out how to dig up stuff out of the ground and burn it and create energy, and make heat and electricity and all those things. And the constraint of it again shifted from, you know, how much land do you have to how much physical capital can you create? How many machines can you build? How many buildings, roads, railroads, et cetera? RITHOLTZ: That’s really interesting. WENGER: And we changed everything yet again. And so now the point of the book is, guess what? We have to change everything yet again, because capitalism, this is why the book is called “The World After Capital,” capital is no longer the binding constraint. Instead, it’s human attention. RITHOLTZ: Human attention, so that’s the third great shift is. So we went from agricultural scarcity to having enough food. WENGER: We went from forager to agrarian, so from food scarcity to land scarcity, then we went from land scarcity to capital scarcity. And now, we’re going from capital scarcity to attentional scarcity. RITHOLTZ: Capital is no longer scarce. So now attention is the new scarcity, which there’s a line in the book that really caught my eye, attention is time plus intentionality. Explain that. WENGER: Yeah. So speed just tells you how fast you’re going. Velocity tells you how fast you’re going towards something, towards some destination. RITHOLTZ: Speed plus direction. WENGER: Speed plus direction is velocity. And the same is true for attention. Time just tells you how much time has elapsed, you know, two hours. Attention is what was your mind and your body doing during those two hours. Were you, you know, just scrolling Twitter, or were you like working on a solution to the climate crisis? RITHOLTZ: So you say something about these transitions that really jarred me. Previous transitions like agriculture emerged over thousands of years and was incredibly violent. Industrial Age lasted over hundreds of years, and also involved lots of violence and bloody revolutions, and two World Wars, which raises the obvious question, what sort of violence is the next transition based on attention scarcity potentially going to involve? WENGER: Well, at the moment, the leading candidate is the climate crisis. We have known about it for literally hundreds of years, actually, and we have refused to do enough about it. And so now, we have entered the state where we’re getting extreme heat events. We’re getting extreme drought events. The food supply is definitely in question. Something that we have taken for granted for many years now. We’ve taken for granted that you can go to the store and buy food. Unless we really course correct very hard, very dramatically, and by dramatically, I mean, the level of government activation that we had in World War II. In World War II, we spend roughly 50% of GDP on the war effort. We need to spend roughly 50% of GDP on the climate crisis for several years sustained in order to actually avert it. RITHOLTZ: So that suggests that you don’t think there’s going to be some technological magic bullet going to appear out of nowhere? WENGER: Well, if you look at World War II, the government went to Ford and said, “We need you to build airplanes, not cars.” And actually, there’s a chart in my book that shows that output of cars dropped. We need to get to a similar point where we’ll say there’s certain things we’re just not going to do for a while because we need to do these other things. There are great technologies. We don’t need to invent some magic bullet that doesn’t exist. We just need to build a lot of what we already know how to build. Like, we need to build a lot of nuclear power plants. We need to build a lot of these ponds in the desert that can draw down carbon. There’s 1001 different things that we need to build. We just need to take our physical capital and point it at that. And when you do that at that scale, incredible things become possible. So, during World War II, Ford Motor Company built a plant, it was called the Willow Run facility. And in Willow Run, they built the B-17 Liberator bomber. Now, that’s a four-engine bomber, with lots of gun turrets to defend against fires. At peak production, they finished — they finished one of these every hour. RITHOLTZ: Amazing. WENGER: They finished a complete airplane every hour. And my point is once we decide to take our attention, and allocate our attention to what the real problem is, we can redirect our physical capital. We have plenty of physical capital. People say, “Oh, you can’t build nuclear power plants fast enough.” That’s if you built them in peacetime mode. If you built them in wartime mode, you could build them very rapidly. RITHOLTZ: So when you say this requires a substantial commitment of capital, let’s put a dollar amount on that. Are you talking — WENGER: Half of GDP. I’m saying half of GDP. RITHOLTZ: So you’re saying $10 trillion? WENGER: Yeah. RITHOLTZ: Just in the U.S. alone? WENGER: Yeah. RITHOLTZ: Now, we just passed a climate bill, arguably, that was a couple of billion dollars, $100 billion maybe over 10 years. And it was like pulling teeth, it was a miracle it just managed to skate through. And that’s a fraction of a trillion dollars. How you’re going to get 10x or 100x? Do things have to get much worse before they get much better? WENGER: Yeah. I mean, there’s a book about the climate crisis called “Ministry for the Future,” by Kim Stanley Robinson. And the book starts with a devastating heat event in India, where tens of millions of people die. I don’t know what it takes. But I can tell you, it’s only going to get worse, it’s going to get a lot worse. And at some point, hopefully, people — enough people will wake up and say, “No, no, we really actually have to get into a wartime footing. RITHOLTZ: So up till now, a huge swath of the population has been asked my grandkids problems, what wakes them up? Is that sort of events? I mean, you see what’s happening in California. You see what’s going on in lots of the United States with droughts. It seems like people are starting to pay attention. WENGER: Oh, absolutely. Yale does an incredible survey of climate attitudes. And it is very clear that even in the U.S., which has been lagging on this, a significant majority of people believe that the climate crisis is real, that is caused by humans, and the government should do something about it. So I actually believe this is going from a kind of a losing proposition for politicians to a winning proposition. And I think politicians need to be much more into it. Most of them still aren’t willing to acknowledge the full extent of this crisis. And the physics of this crisis are extraordinary. So because of all the CO2 we’ve put in the atmosphere, the amount of heat that we’re now trapping that used to radiate out into space, do you know how much heat it is? It is four Hiroshima-sized nuclear bombs every second. RITHOLTZ: It’s insane. I read that in your book and I was like, no, no, he must mean every week. Every second? WENGER: Every second. Now, imagine for a moment you had alien spaceships above Earth, throwing four Hiroshima-sized nuclear bombs into our atmosphere every second. RITHOLTZ: That would put us on a wartime footing? WENGER: And what will we do? Yeah. We would drop everything, right? We would be like, “They’re trying to kill us. We have to get rid of them.” I mean, we made a movie about it called Independence Day. RITHOLTZ: Four nuclear bombs every second? WENGER: Yeah. RITHOLTZ: And it’s just — WENGER: Of every minute of every hour of every day, it’s a mind-boggling amount of heat. RITHOLTZ: So there’s a couple of other things in the book I wanted to touch on. You mentioned alien visitors. We’ll hold off on the Fermi paradox discussion because nobody wants to hear me babble about that. But one of the things I thought was kind of interesting is the transition of the nature of scarcity. You’re right, it changes the way we measure human effort. It makes it more difficult, and we need increasingly more sophisticated ways of providing incentives to sustain unnecessary level of effort. Flash that out a little more. WENGER: So if you think of hunter-gatherers, right, I mean, you can see the results of effort immediately. RITHOLTZ: Right. WENGER: Like, you go to the forest, you either come back with something or not. RITHOLTZ: Right. WENGER: So it’s very easy to create incentives. Like, if you don’t find something, go back hunting and come back with something. RITHOLTZ: Or you’ll go hungry. Right. WENGER: When you go to agriculture, you have these, you need to see, you need to take care of it, and you don’t know how big a harvest you’re going to get. So you need a little more sophisticated incentive, and a lot of those incentives were often provided by a religion. Religion is sort of saying you have to apply yourself to this backbreaking work. This is the work of the Lord, et cetera. And then when we went over to capital, now it gets even more complicated because you might not see results of some effort for many, many years. I actually think when I say more sophisticated incentives, in the book, I talked a lot about just freeing up humans to pursue their interests, to make it so that you can freely allocate attention. And I’m always very inspired by mathematics. Like, you can’t get rich as a working mathematician, basically. I mean, yes, if you wind up going to Wall Street, you can. But if you actually keep working as a mathematician, that’s not a — you know, there’s also no patents. And you know, the only thing math works on recognition by peers, and there’s some prizes. There’s like the famous Fields Medal, and there’s some other prizes. And yet, the amount of math that’s been produced over the last, you know, few decades is just mind-blowing extraordinary. And I believe we need to bring that type of model to many, many more parts of the economy and parts of activity. So in a way, what all of “The World After Capital” is about is how can we shrink all the explicitly incentivized economic activity, where there’s an explicit, okay, you go to work and you get paid a wage kind of thing. And here’s a market transaction, how can we shrink that and make room for things that are super, super important, but cannot have prices, cannot be economically incentivized? Let me give concrete examples of that. Obviously, we’ve talked about the climate crisis. But let’s talk about death from above. Like, every million years or so, the earth gets hit by something very large out of space. That’s very, very bad when it happens. But there’s no market for allocating resources to that. There’s no supply and demand for it. So we, as humanity, need to decide that this is a real problem and we ought to be working on it. RITHOLTZ: Now, aren’t we tracking various large observed asteroids and doing some stuff? WENGER: We are, but the amount of effort we’re putting into this relative to the size of the problem is minuscule. The number of people who sort of truly globally work full time on this is a tiny fraction of the people we actually should have. And we’re also not working sufficiently on like what will we do if we detected one that’s clearly headed for us, right? RITHOLTZ: Well, you send Bruce Willis up and — WENGER: Exactly. Yes. RITHOLTZ: — he takes it, right? WENGER: Yeah, he does. RITHOLTZ: I mean, it’s not unknown. We know the regular major extinction events. There’s a real interesting theory that as the sun goes around the galaxy and passes over and above the galactic plane, that affects the asteroid belt and — WENGER: The famous Oort cloud is where a lot of these objects — yeah. RITHOLTZ: Right, which is full 360 around the — WENGER: Yes. So we know all of this. And here’s the interesting thing. When we went from the agrarian age to the industrial age, we didn’t get rid of agriculture. This agriculture today, right, we all eat food that’s grown in agriculture. But what we did is we shrunk how much human attention is required to do agriculture, and we took it from being like 80% of human attention to like sub 10%. RITHOLTZ: It’s less than 2% in United States. It’s tiny. WENGER: So what I want to do is, let’s do the same with the rest of the economic sphere. I’m not an anti-capitalist. I’m not a degrowth. Person. I’m not suggesting we should get rid of markets. I’m just saying we should compress market-based activity from absorbing much of human attention to absorbing maybe 30% of human attention, and we should free the rest up to work on these incredibly important thing. Some of them are threats, and some of them are opportunities, right, opportunity to cure cancer, opportunity to create incredible wildlife habitats, restore those wildlife habitats, opportunity to travel to space. I mean, all these opportunities that we’re not paying attention to because they’re not — again, they’re not really market price based and can’t be market price based. There’s just no prices for them. RITHOLTZ: So the conclusion of the book had a list of action goals, which was not what I was expecting in a book on venture capital and “The World After Capital;” mindfulness, climate crisis, democracy, decentralization, improving learning, and humanism. Address whichever those you feel like. WENGER: Well, these are all core components of how to have a — hopefully, a transition that’s not a violent transition, right? These are all about how could we get out of the industrial age into the knowledge age without some cataclysmic event, without a world war, without killing billions of people through the climate crisis, right? They’re also all components of what a knowledge age society might look like. Right? So let’s talk about mindfulness for a second. We’re constantly assaulted with new information now. You know, our brains evolved in an environment where when you saw a cat, there was an actual cat. Now, there’s an infinity of cat pictures. So if you don’t work on how you — how much you are in control of your mind, external sources will control your mind. So mindfulness, which is a much abused word, but it has become much more important in a world where we’re constantly assaulted by information flows, right? Let’s talk about humanism for a moment. Humanism is about recognizing that humans are the prime movers on this planet. We are the ones who have brought about the climate crisis. We are the ones who put a theory to solve it, or wind up getting wiped out by it. And it’s about this idea that, you know, with great power comes great responsibility. And so, we are responsible for the whales, not the whales for us. There is — at the moment, because we’re in this transition period already, and because things are going so poorly for so many people in this transition, there’s no a flight back to religion, there’s a flight to populism. And a big part of the book is about, no, there is a secular alternative way of thinking about society that embraces science, that embraces progress, that embraces humans and all types of humans, and that recognizes that we are first and foremost human, and only secondarily are we American, or Russian, or male or female or something else. You know, these are all secondarily. But primarily, we’re humans, and humans are fundamentally different from all the other species on the planet. RITHOLTZ: Quite fascinating. So let’s talk about the current state of the world for venture capitalists. We’ve seen valuations come way down for public companies. They’re pretty reasonably priced these days, about 16 times for the S&P 500. That’s historically, more or less, average. Where do you see the state of the world in early stage valuations? How are they holding up? A year ago, late stage valuations had gone just bonkers. Tell us a little bit about what’s going on today. WENGER: The correction always, basically, is a trickle-down type of correction. It happens very rapidly in the public markets. Then you still get some high-priced private rounds that either were in the works, or they have a lot of structure. In the later stage markets, you know, there’s a headline number. But then nobody talks about all the war in coverage that’s behind the scenes. And then the early stage valuations tend to sort of lag behind all of that. But we’re seeing early stage valuations come down. And as a firm, we’ve always been disciplined on valuations. So we just let a lot of things go where we just thought it was — RITHOLTZ: Are they down off the peak, or are they cheap and attractive? WENGER: The down of the peak, whether they’re cheap or attractive, I think, you know, time will tell. But we are back in a situation where, you know, there are seed deals getting done that’s below $10 million, certainly below $20 million, and you know, seed rounds that have a reasonable size. So you know, for a while we were seeing these $10 million, $20 million, $30 million seed rounds. RITHOLTZ: It sounds pricey. WENGER: Yeah. And that’s not happening anymore. But at Union Square Ventures, we’ve also always tried to basically be at the next era, at the next thesis and evolve our thesis before everybody else gets there. And once everybody else gets there, try and evolve our thesis. And so, for example, in the Climate Fund, we’ve made any number of reasonably priced investments, very reasonably priced. RITHOLTZ: So I always assumed it was tied to the public markets. But sometimes you just don’t realize, when you have a good couple of years in a row in the public markets, like we saw in the 2010, pretty much straight up through 2021, you see that impact and what people are looking for, what sort of deals get done, and valuations generally. WENGER: I always find it relatively surprising how much private early stage valuations are tied to public markets because our holding — RITHOLTZ: That’s the exit, right? WENGER: But our holding periods are 5, 8, 10 years. And so, like, what’s the current public — RITHOLTZ: Right. WENGER: And so there’s a couple of different explanations. One, obviously, is just investor sentiment, right? RITHOLTZ: Right. WENGER: You know, when investors are like bearish because of what they’re seeing in the public markets, they take a bearish attitude towards their own investing. We try — at Union Square Ventures, we try to have a pretty steady pace as one way of contracting our own sort of — you know, whatever our own emotions may be about the public markets. There is, however, another effect that sometimes is underestimated, which is that the people who give money into venture funds, so these are pension funds and endowments, and so forth, they have a certain whip from the public markets, because when they’re feeling flashed on the public markets then their private allocation, you know, as a percentage of their overall portfolio, they have a certain target in mind. Then when the public markets come down a lot, all of a sudden, they’re overallocated, so they want to pull back. So there is a mechanism by which the current public markets transmit into the private markets. There’s a real financial mechanism. There’s a psychological mechanism and a real financial mechanism by which some transmission, some contagion basically happens from the public market into private market. But it doesn’t make very much sense. Like, if people were sort of more cognizant of both that emotional reaction and this mechanism, they’d be like, “Well, yeah, but innovation is happening at some pace. In some area, there’s some innovation and we should be funding that innovation.” RITHOLTZ: So I’m just making notes, investors are irrational. WENGER: Deep and profound insight right here. RITHOLTZ: Right. There you go. WENGER: You’ve never heard this one before. RITHOLTZ: So to put that into a little context, 2020, 2021, very founder-friendly deals. Now, it seems like a little more investor-friendly, a fair assessment or not quite there yet? WENGER: Well, when it comes to founder-friendly versus investor-friendly, there’s a lot more to deal than valuation. There’s all the other terms. And while I believe we will see a correction on valuation that’s pretty significant, I don’t think we’re going to go back to where venture capital was 20 or 30 years ago, that had all these super draconian terms. Certainly, even at the early stage, even at the early stage, there were all these like — there were redemption provisions in the early stage deals. I don’t think that’s going to come back. We are not fans of structure in latest stage deals. Like, just to give a good example, when I was still on the board of Twilio, Twilio had the option of doing a totally clean, no structure round and call it $1,000,000,001. In a highly structured round with like — you know, we’re going to have a full ratchet into an IPO at a $1,000,000,005. And I was — you know, some of the other investors at the table really wanted the $1,000,000,005 number because it’s a big headline number. And I talked to Jeff and I said, “It doesn’t make any sense.” RITHOLTZ: Right. WENGER: You don’t actually know what your deal is until many years. Like, just take the deal where you know what the deal is today and you know what the deal is a year from now, and two years from now, because it’s not going to change based on circumstances. RITHOLTZ: Right. WENGER: And so Jeff took the clean deal, and that enabled Twilio to go public when the IPO window reopened. Whereas at the $1,000,000,005 deal, they wouldn’t have been able to go public. And that worked incredibly well for Twilio to become a public company. RITHOLTZ: Really interesting. So since we’re comparing early stage investments to the public world, lately, everybody has been looking at different sectors the past year. Energy has done well, technology not so much. Within venture, do you see that same sort of segmentation, different sectors have different — WENGER: Well, we were basically the first sort of venture firm to have a dedicated climate fund. And now, many of the venture firms are following suit, either adding a climate pocket to their existing funds, or a climate thesis or, you know, some people call it sustainability fund. Ours is very focused on climate. So for instance, we don’t deal with water waste. It’s strictly about atmospheric carbon. So there’s a lot money rotating into that sector. There’s still healthy sort of activity around Web3. So you know, Web3, there’s still — RITHOLTZ: Crypto, blockchain, all that? WENGER: Yeah. There’s still healthy sort of activity. I do think that certain kind of software companies that had found it very easy to raise money, I think they’re finding it a lot harder, just because people have looked at it and said, “Wow, I think we’ve reached some stage of normalization in this market.” You know, like, not everything in this market is going to be a $50 billion outcome. There’s going to be many, much smaller outcomes, and so we need to adjust accordingly. And also, many of these markets had just too many companies raised venture capital doing basically more or less the same thing. RITHOLTZ: So it was easy to raise money for a fund today, a little more challenging, even if you’re a pretty decent sized VC with a 10, 20-year history. Are they having difficulty going back to their clients saying, “Hey, we’re doing another billion dollars?” WENGER: You know, I think that we will only see a year from now, or two years from now. There were a lot of funds that have put out a lot of money very, very rapidly, and we’ll see just how big the hangover is. But we won’t know that for some time. RITHOLTZ: So some of the folks who give advice to founders like Chamath and Jason, and the crew with the All-In Podcast, they’ve been talking about — preaching really about cutting costs and reducing your burn rate, and get ready for a tough year or two. How do you see this environment? Is that good advice, or do you really have to, you know, go all out and get more funding as opposed to trying to make a more modest burn rate last longer? WENGER: There’s very little one size fits all advice that makes sense. RITHOLTZ: Fair. WENGER: Nonetheless, we held a call early this year for all of our portfolio companies. And we said this really is a big adjustment and it’s not a one or two months’ blip. This is a long-term adjustment. And it was great because we had some CEOs in our portfolio who had managed through the implosion of dot-com bubble, and they spoke about just how difficult the funding environment can get. So generally speaking, we did a lot in ’21 because we saw this coming. To me, the biggest sign of the bubble really was — that we really were reaching the tail end, was all these incubation efforts that were being raised. And I knew this because I had raised money into an incubator in ‘99, towards the end of the dot-com bubble. And I think when investors think, “Oh, I don’t even need the entrepreneur, I can just start the company myself,” that’s kind of when you know that it’s gotten too easy, right? And that’s not going to lie. So in ‘21, we took a lot of liquidity. We sold a lot of things that we were able to sell. And we told all of our portfolio companies to raise money. And so — RITHOLTZ: Last year, this is — WENGER: ‘21. Yeah. Well, it’s best to do things before. RITHOLTZ: Sure. Sure. WENGER: Right? So as a result, we have very few companies in our portfolio that need to raise. We have some, but we have very few. And then, you know, at the beginning of this year, we told everybody who had raised successfully, “You got to make this money lasts much longer than you thought when you raised it.” And so, yes, absolutely. You know, companies were operating with very inefficient growth. Because it was easy to fund inefficient growth, you could be burning $1 million, $2 million, $3 million, $4 million a month. And you know, if you were growing 405%, 50%, 60%, that was good enough. That’s not going to be the case. So you’re either growing very fast, or you have something very compelling, in which case you can raise money, or you are growing, you know, 20%, 30%, but you are growing very, very efficiently, right? So being in the sort of 50% growth, but you’re super inefficient, that’s going to be a really tough place to be. RITHOLTZ: All right, so before I get to my favorite questions, I have two questions I’ve been sitting on sort of from the book and some from your blog continuations that I want to hear where you go with this. And the first one is a quote from the book, “Malthus could not foresee the scientific breakthrough that enabled the Industrial Revolution.” I think you let him off the hook a little too easy. It’s just an abject failure of imagination. And you are in the imagination business. The Malthusians, weren’t these folks just unable to imagine any sort of progress or technological development? WENGER: Well, we have had more progress and more technological development than people were able to imagine. I think, conversely, we’re now in the opposite trap. We can’t imagine that things could get really, really bad. We can’t imagine that the climate crisis could disrupt our food supply to the point where billion people starved. We simply can’t wrap our head around this idea. So I think we’re in the opposite trap at the moment. We’ve been so used to the success of progress, and we’ve so neglected the engines that produce progress, that I think we’re in the opposite trap at the moment. RITHOLTZ: What are the other engines? Is it early stage investing from governments when the project has a 10 and 20-year ROI that the private sector won’t do it? WENGER: It’s foundational research. We’ve not had a true breakthrough in science since quantum mechanics. It’s a hundred years ago. So general relativity and quantum mechanics are hundred years ago. Now, we’ve made some progress in biology. Biology, we’ve had some really good progress. But you know — RITHOLTZ: You’re talking fundamental science not technology. WENGER: Fundamental science. RITHOLTZ: Like, I immediately think of semiconductors was a giant — WENGER: Oh, no, incredible progress. But fundamental science, we’ve not had a true big unlock in a hundred years. Now, I think when we talk about engine of progress, this is also how hard is it to start a business? How many regulations do you have to comply with? How expensive is it to comply with those regulations? We’re also talking about — we’re still subsidizing oil and gas globally, to the tune of trillions of dollars. RITHOLTZ: Yes. Yes. WENGER: Subsidizing oil and gas, it’s crazy. RITHOLTZ: Which by the way, helps to explain why so many people have an incentive to either question the impact, the source or the reality of climate change. WENGER: Yes. RITHOLTZ: There’s forces that work there. WENGER: And so, I believe we’re in this sort of opposite trap today. And you know, people like to make fun of Greta Thunberg. But young kids, young activists understand the severity of the climate crisis in a way — RITHOLTZ: Right. WENGER: — in a way that most adults don’t seem to be willing to accept. RITHOLTZ: Right. I don’t think climate change is going to impact my life. You know, I’m 60. I’m going to run out the clock. WENGER: You’re not. RITHOLTZ: Someone your age — WENGER: The reality is you’re not. You’re not going to escape. You and I are not going to escape this. It’s here, it’s now and it’s only going to get worse. RITHOLTZ: I don’t doubt that for a second, but — WENGER: And here’s the thing, I think — RITHOLTZ: I challenge — WENGER: We could live in this amazing, incredible future. Like, wouldn’t you rather live in a city that has mostly electric or all electric cars in it? Like, the air would be so much better. Wouldn’t you rather live in a world that has huge — like, think of all the Midwest, instead of growing corn to feed cows — RITHOLTZ: Right. WENGER: — super inefficient. If we can grow the meat of the cows in the vast instead, we could have like incredible forests. We could have incredible wildlife areas. Like, we could have this amazing, incredible future. We could have energy reserve. If we build more nuclear power, electricity could basically be almost free. So we have this amazing thing we can go. Instead, we’re headed for this complete disaster and we’re mostly like, “eh.” RITHOLTZ: I think that’s a fair assessment. I think you definitely have that. And I certainly see people my generation, absolutely think it’s not going to impact them or minimum impact, it’s really the grandkids’ problem. WENGER: Yeah. And it’s just — that’s totally, utterly wrong. RITHOLTZ: All right, one other curveball I have to ask you about, which involves Yuval Noah Harari, who says in Sapiens, “All value systems are based on equally valid, subjective narratives, and humans have no privileged position as a species.” You say he’s wrong. Explain. WENGER: Not just wrong, it’s completely dangerous because it opens the door to absolute moral relativism. It’s sort of like, well, if you believe that, then, you know, the ISIS narrative is just as valid, you know, and I just think that’s wrong. And I do think there’s an objective thing, which is humans have knowledge. And by knowledge, I mean, I can read a book today that somebody else wrote in some other part of the world a thousand years ago, right? No other species on the planet has this. I mean, other species have amazing things about them, but none of them has knowledge. And that puts us in a privileged position. By the way, privilege comes with obligation. That’s usually what it used to mean. Today, we think of privilege just it lets you do whatever you want. But it used to mean that you had real obligations, right? And I believe because we have the power of knowledge, we have real obligations to other species. Other species don’t have much of an obligation to us, but we have an obligation to them. RITHOLTZ: And the interesting thing about what you said is not only does no other species have the ability to access anything, anybody has written, anytime in history, pretty much this is the first generation that had access in that way, across — pretty much across the whole board. WENGER: Well, this is the amazing thing about digital technology, right? We could use it to make all the world’s knowledge accessible to everybody in the world. And great things could come from that, right? So there’s some people like Elon Musk and others who are like, “Oh, my God, the population is going to, you know, decrease a lot and that will be bad.” I’m like, no, we have 8 billion people at the moment, peak population. The present trajectory might be 11 billion, although if we don’t get on top of the climate crisis, it will decrease actually rapidly. But we’re making such poor use of it. Why? Because so many people don’t have access to knowledge, don’t have a shot. I always love the story of Ramanujan, the famous mathematician, who used to send a letter to Hardy. And Hardy was like, “We should bring this guy over to England and he would have been a very productive mathematician.” There are Einsteins, and Ramanujans, and Elinor Ostrom, and Marie Curies all around the world today, and we’re not giving them — so we’re vastly undertapping human potential. And we can use digital technology to change that and to give everybody access. And that’s one of the things, one of the great opportunities that we have in this transition to the knowledge age. RITHOLTZ: Quite, quite fascinating. So let me jump to my favorite questions that I ask all of my guests, starting with, tell us what kept you entertained over the past couple of years. What have you been watching or listening to? WENGER: I really don’t watch much. At the moment, the only thing I watch with any kind of regularity Sabine Hossenfelder’s YouTube series called Science Without the Gobbledygook. RITHOLTZ: I’ll take a look at that. I’m a giant fan of YouTube Premium, and I’m always astonished that people I know who are YouTube junkies won’t spring for the 8 bucks a month to pull out commercials and distractions. But YouTube is just an endless rabbit hole. WENGER: Well, YouTube is an example of the best and the worst of the Internet all in one place, right? There’s so much amazing knowledge like Sabine’s videos, Veritasium. I mean, you could learn almost anything from how to fix your dishwasher to how — you know, the theory of general relativity works. At the same time, YouTube is also this place where tons of people, you know, become radicalized or redpilled, or whatever it is, because the algorithm — the algorithm has the wrong objective function, right? Its objective function is engagement. It’s not lifting people up. RITHOLTZ: Tell us about some of your mentors who helped shape your career. WENGER: I was super, super fortunate when I was an early teenager. We talked about this, when I first fell in love with computers. I lived in a relatively small village in Germany. And there was one computer science student there who was maybe 10 years older than I was. And he just spent time with me, and he gave me his books, and he gave me his floppy disks with software, and he helped me sort of understand all this. And I’m forever grateful to (Anstur Guenther), wherever you are in the world. RITHOLTZ: That’s really interesting. Have you spoken to him anytime recently? WENGER: No, because I haven’t been able to find him. Basically, he seems to have disappeared. RITHOLTZ: Well, if you’re listening, reach out to Albert. Tell us — we mentioned a number of books. Tell us about some of your favorite and what you’re reading right now. WENGER: Favorites, I would say David Deutsch, “The Beginning of Infinity” is definitely one of my favorites. RITHOLTZ: I just ordered that because of you. WENGER: I’m reading at the moment, a book by Ada Palmer called “Perhaps the Stars.” It’s the fourth book in a series called the Terra Ignota Series. She’s a professor at the University of Chicago. RITHOLTZ: What sort of advice would you give to a recent college grad who is interested in a career in either entrepreneurship or venture capital? WENGER: Develop a mindfulness practice, you know, whatever works for you, whether that’s yoga, running, for me, it’s conscious breathing. I just think it’s such a superpower not to get hijacked by your emotions. It’s a true superpower. And the more humans can cultivate it, the more we can achieve. RITHOLTZ: That’s really, really intriguing. And our final question, what do you know about the world of venture today that you wish you knew 30 or so years ago when you were first getting started? WENGER: There will always be another bubble. RITHOLTZ: There will always be another bubble. That’s amazing. Just human nature can’t be avoided. WENGER: It can’t be avoided. RITHOLTZ: And what should we do in anticipation of during and after bubbles? WENGER: We should acknowledge that they will come, that they’re part of how we operate, that you can make money before, during and after. RITHOLTZ: There you go. Really, really fascinating stuff. We have been speaking with Albert Wenger. He is managing partner at Union Square Ventures. If you enjoy this conversation, well, be sure to check out any of our previous 400 or so discussions we’ve had over the past eight years. You can find those at iTunes, Spotify, or wherever you get your favorite podcasts from. We love your comments, feedback and suggestions. Write to us at Sign up for my daily reading list at Follow me on Twitter @ritholtz. I would be remiss if I did not thank the crack staff that helps put these conversations together each week. Sarah Livesey is my audio engineer. Sean Russo is my head of Research. Paris Wald is my producer. Atika Valbrun is our project manager. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio. END   ~~~   The post Transcript: Albert Wenger appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureSep 20th, 2022

Trumpworld theorizes that Mar-a-Lago special master"s involvement in previously botched FBI case makes him the best bet to help out the embattled former president

Mar-a-Lago special master Raymond Dearie's work on the bungled Carter Page surveillance case may have soured him on the FBI, Trump advisors hope. Former President Donald Trump speaks at a Save America Rally to support Republican candidates running for state and federal offices in the state at the Covelli Centre on September 17, 2022 in Youngstown, Ohio.Jeff Swensen/Getty Images Trumpworld suspects Raymond Dearie may be skeptical of FBI operations after experiencing a bad one. Dearie was one of the judges who signed off on surveillance of Trump campaign aide Carter Page. Dearie's role as special master in the Mar-a-Lago case doesn't involve reviewing the FBI's conduct.  Trump advisors are betting that special master Raymond Dearie's negative experience with the FBI during its controversial investigation into Trump campaign aide Carter Page may mean he's as skeptical of federal investigators as they are. Two anonymous sources floated the theory to Axios that Dearie's possible skepticism of the FBI made him former President Donald Trump's top choice, citing his nearly decade-long run on the Foreign Intelligence Surveillance Court as a key selling point. Dearie, a former chief judge of the US District Court for the Eastern District of New York, has been tasked with sorting through the 11,000-plus documents law enforcement agents recovered from Mar-a-Lago and separating out anything he believes may be protected by attorney-client privilege or executive privilege. The third-party review, which is to be completed by November 30 and must be paid for by Trump, doesn't involve passing any kind of judgment on the FBI. Still, Trumpworld operatives are banking on Dearie harboring some disdain for the law enforcement agency following mistakes made several years ago. Dearie was one of five Republican-appointed judges who signed off on FISA warrants to surveil a former Trump advisor, Carter Page as part of an investigation into his ties to the Russian government. Two of the four approved warrants were later declared invalid after the Justice Department inspector general found a series of misstatements and omissions in the applications by the FBI to get the court warrants to eavesdrop on Page.Trump and his allies will soon learn whether Dearie is on the same page as they are. —Kyle Cheney (@kyledcheney) September 16, 2022 Dearie asked Trump's lawyers to submit a proposed agenda for their first special master meeting by close of business on Monday, and scheduled a preliminary conference for 2 pm on Tuesday in Brooklyn, New York. Read the original article on Business Insider.....»»

Category: smallbizSource: nytSep 19th, 2022

Escobar: Asia"s Future Takes Shape In Vladivostok, The Russian Pacific

Escobar: Asia's Future Takes Shape In Vladivostok, The Russian Pacific Authored by Pepe Escobar, Sixty-eight countries gathered on Russia’s far eastern coast to listen to Moscow’s economic and political vision for the Asia-Pacific... The Eastern Economic Forum (EEF) in Vladivostok is one of the indispensable annual milestones for keeping up not only with the complex development process of the Russian Far East but major plays for Eurasia integration. Mirroring an immensely turbulent 2022, the current theme in Vladivostok is ‘On the Path to a Multipolar World.’ Russian President Vladimir Putin himself, in a short message to business and government participants from 68 nations, set the stage: “The obsolete unipolar model is being replaced by a new world order based on the fundamental principles of justice and equality, as well as the recognition of the right of each state and people to their own sovereign path of development. Powerful political and economic centers are taking shape right here in the Asia-Pacific region, acting as a driving force in this irreversible process.” In his speech to the EEF plenary session, Ukraine was barely mentioned. Putin’s response when asked about it: “Is this country part of Asia-Pacific?” The speech was largely structured as a serious message to the collective west, as well as to what top analyst Sergey Karaganov calls the “global majority.” Among several takeaways, these may be the most relevant: Russia as a sovereign state will defend its interests. Western sanctions ‘fever’ is threatening the world – and economic crises are not going away after the pandemic. The entire system of international relations has changed. There is an attempt to maintain world order by changing the rules. Sanctions on Russia are closing down businesses in Europe. Russia is coping with economic and tech aggression from the west. Inflation is breaking records in developed countries. Russia is looking at around 12 percent. Russia has played its part in grain exports leaving Ukraine, but most shipments went to EU nations and not developing countries. The “welfare of the ‘Golden Billion’ is being ignored.” The west is in no position to dictate energy prices to Russia. Ruble and yuan will be used for gas payments. The role of Asia-Pacific has significantly increased. In a nutshell: Asia is the new epicenter of technological progress and productivity. No more an ‘object of colonization’  Taking place only two weeks before another essential annual gathering – the Shanghai Cooperation Organization (SCO) summit in Samarkand – it is no wonder some of the top discussions at the EEF revolve around the increasing economic interpolation between the SCO and the Association of Southeast Asian Nations (ASEAN). This theme is as crucial as the development of the Russian Arctic: at 41 percent of total territory, that’s the largest resource base in the federation, spread out over nine regions, and encompassing the largest Special Economic Zone (SEZ) on the planet, linked to the free port of Vladivostok. The Arctic is being developed via several strategically important projects processing mineral, energy, water and biological natural resources. So it’s perfectly fitting that Austria’s former foreign minister Karin Kneissel, self-described as “a passionate historian,” quipped about her fascination at how Russia and its Asian partners are tackling the development of the Northern Sea Route: “One of my favorite expressions is that airlines and pipelines are moving east. And I keep saying this for twenty years.” Amidst a wealth of roundtables exploring everything from the power of territory, supply chains and global education to “the three whales” (science, nature, human), arguably the top discussion this Tuesday at the forum was centered on the role of the SCO. Apart from the current full members – Russia, China, India, Pakistan, four Central Asians (Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan), plus the recent accession of Iran – no less than 11 further nations want to join, from observer Afghanistan to dialogue partner Turkey. Grigory Logvinov, the SCO’s deputy secretary general, stressed how the economic, political and scientific potential of players comprising “the center of gravity” for Asia – over a quarter of the world’s GDP, 50 percent of the world’s population – has not been fully harvested yet. Kirill Barsky, from the Moscow State Institute of International Relations, explained how the SCO is actually the model of multipolarity, according to its charter, compared to the backdrop of “destructive processes” launched by the west. And that leads to the economic agenda in the Eurasian integration progress, with the Russian-led Eurasia Economic Union (EAEU) configured as the SCO’s most important partner. Barsky identifies the SCO as “the core Eurasian structure, forming the agenda of Greater Eurasia within a network of partnership organizations.” That’s where the importance of the cooperation with ASEAN comes in. Barsky could not but evoke Mackinder, Spykman and Brzezinski – who regarded Eurasia “as an object to be acted upon the wishes of western states, confined within the continent, away from the ocean shores, so the western world could dominate in a global confrontation of land and sea. The SCO as it developed can triumph over these negative concepts.” And here we hit a notion widely shared from Tehran to Vladivostok: Eurasia no longer as “an object of colonization by ‘civilized Europe’ but again an agent of global policy.” ‘India wants a 21st Asian century’ Sun Zuangnzhi from the Chinese Academy of Social Sciences (CASS) elaborated on China’s interest in the SCO. He focused on achievements: In the 21 years since its founding, a mechanism to establish security between China, Russia and Central Asian states evolved into “multi-tiered, multi-sector cooperation mechanisms.” Instead of “turning into a political instrument,” the SCO should capitalize on its role of dialogue forum for states with a difficult history of conflicts – “interactions are sometimes difficult” – and focus on economic cooperation “on health, energy, food security, reduction of poverty.” Rashid Alimov, a former SCO secretary general, now a professor at the Taihe Institute, stressed the “high expectations” from Central Asian nations, the core of the organization. The original idea remains – based on the indivisibility of security on a trans-regional level in Eurasia. Well, we all know how the US and NATO reacted when Russia late last year proposed a serious dialogue on “indivisibility of security.” As Central Asia does not have an outlet to the sea, it is inevitable, as Alimov stressed, that Uzbekistan’s foreign policy privileges involvement in accelerated intra-SCO trade. Russia and China may be the leading investors, and now “Iran also plays an important role. Over 1,200 Iranian companies are working in Central Asia.” Connectivity, once again, must increase: “The World Bank rates Central Asia as one of the least connected economies in the world.” Sergey Storchak of Russian bank VEB explained the workings of the “SCO interbank consortium.” Partners have used “a credit line from the Bank of China” and want to sign a deal with Uzbekistan. The SCO interbank consortium will be led by the Indians on a rotation basis – and they want to step up its game. At the upcoming summit in Samarkand, Storchak expects a road map for the transition towards the use of national currencies in regional trade. Kumar Rajan from the School of International Studies of the Jawaharlal Nehru University articulated the Indian position. He went straight to the point: “India wants a 21st Asian century. Close cooperation between India and China is necessary. They can make the Asian century happen.” Rajan remarked how India does not see the SCO as an alliance, but committed to the development and political stability of Eurasia. He made the crucial point about connectivity revolving around India “working with Russia and Central Asia with the INSTC” – the International North South Transportation Corridor, and one of its key hubs, the Chabahar port in Iran: “India does not have direct physical connectivity with Central Asia. The INSTC has the participation of an Iranian shipping line with 300 vessels, connecting to Mumbai. President Putin, in the [recent] Caspian meeting, referred directly to the INSTC.” Crucially, India not only supports the Russian concept of Greater Eurasia Partnership but is engaged in setting up a free trade agreement with the EAEU: Prime Minister Narendra Modi, incidentally, came to the Vladivostok forum last year. In all of the above nuanced interventions, some themes are constant. After the Afghanistan disaster and the end of the US occupation there, the stabilizing role of the SCO cannot be overstated enough. An ambitious road map for cooperation is a must – probably to be approved at the Samarkand summit. All players will be gradually changing to trade in bilateral currencies. And creation of transit corridors is leading to the progressive integration of national transit systems. Let there be light A key roundtable on the ‘Gateway to a Multipolar World’ expanded on the SCO role, outlining how most Asian nations are “friendly” or “benevolently neutral” when it comes to Russia after the start of the Special Military Operation (SMO) in Ukraine. So the possibilities for expanding cooperation across Eurasia remain practically unlimited. Complementarity of economies is the main factor. That would lead, among other developments, to the Russian Far East, as a multipolar hub, turning into “Russia’s gateway to Asia” by the 2030s. Wang Wen from the Chongyang Institute for Financial Studies stressed the need for Russia to rediscover China – finding “mutual trust in the middle level and elites level”. At the same time, there’s a sort of global rush to join BRICS, from Saudi Arabia and Iran to Afghanistan and Argentina: “That means a new civilization model for emerging economies like China and Argentina because they want to rise up peacefully (…) I think we are in the new civilization age.” B. K. Sharma from the United Service Institution of India got back to Spykman pigeonholing the nation as a rimland state. Not anymore: India now has multiple strategies, from connecting to Central Asia to the ‘Act East’ policy. Overall, it’s an outreach to Eurasia, as India “is not competitive and needs to diversify to get better access to Eurasia, with logistical help from Russia.“ Sharma stresses how India takes SCO, BRICS and RICs very seriously while seeing Russia playing “an important role in the Indian Ocean.” He nuances the Indo-Pacific outlook: India does not want Quad as a military alliance, privileging instead “interdependence and complementarity between India, Russia and China.” All of these discussions interconnect with the two overarching themes in several Vladivostok roundtables: energy and the development of the Arctic’s natural resources. Pavel Sorokin, Russian First Deputy Minister of Energy, dismissed the notion of a storm or typhoon in the energy markets: “It’s a far cry from a natural process. It’s a man-made situation.” The Russian economy, in contrast, is seen by most analysts as slowly but surely designing its Arctic/Asian cooperation future – including, for instance, the creation of a sophisticated trans-shipment infrastructure for Liquified Natural Gas (LNG). Energy Minister Nikolay Shulginov made sure that Russia will actually increase its gas production, considering the rise of LNG deliveries and the construction of Power of Siberia-2 to China: “We will not merely scale up the pipeline capacity but we will also expand LNG production: it has mobility and excellent purchases on the global market.” On the Northern Sea Route, the emphasis is on building a powerful, modern icebreaker fleet – including nuclear. Gadzhimagomed Guseynov, First Deputy Minister for the Development of the Far East and the Arctic, is adamant: “What Russia has to do is to make the Northern Sea Route a sustainable and important transit route.” There is a long-term plan up to 2035 to create infrastructure for safe shipping navigation, following an ‘Arctic best practices’ of learning step by step. NOVATEK, according to its deputy chairman Evgeniy Ambrosov, has been conducting no less than a revolution in terms of Arctic navigation and shipbuilding in the last few years. Kniessel, the former Austrian minister, recalled that she always missed the larger geopolitical picture in her discussions when she was active in European politics (she now lives in Lebanon): “I wrote about the passing of the torch from Atlanticism to the Pacific. Airlines, pipelines and waterways are moving East. The Far East is actually Pacific Russia.” Whatever Atlanticists may think of it, the last word for the moment might belong to Vitaly Markelov, from the board of directors of Gazprom: Russia is ready for winter. There will be warmth and light everywhere.” Tyler Durden Tue, 09/13/2022 - 23:30.....»»

Category: dealsSource: nytSep 14th, 2022

DraftKings (DKNG) to Launch Its Online Sportsbook in Kansas

DraftKings Inc. (DKNG) announces the launch of its top-rated mobile sportsbook in Kansas on Sep 1, 2022, as the contracting counterparty of BHCMC, LLC, manager of Boot Hill Casino & Resort. DraftKings Inc. DKNG recently announced the launch its online sportsbook in Kansas on Sep 1, 2022. The launch has been planned at the busiest time of the year, prior to the beginning of the 2022 National Football League and college football seasons.This will allow eligible sports fans in Kansas to access the latest variety of legal and regulated bets including player props, special odds boost selections and more by downloading the DraftKings Sportsbook app available via iOS and Android.Furthermore, prospective players will also be able to experience the first-ever blockchain-based gaming franchise, Reignmakers Football, which recently revealed Player Card NFTs for fans to collect and play within new fantasy contests all NFL season long.Kansas would be the 18th U.S state to have DraftKings sports betting activities along with Ontario and Canada. Prior to this, DraftKings launched the online sportsbook (OSB) in Maryland, Ohio and Puerto Rico, making the sportsbook app available to 44% of the U.S. population.DraftKings Inc. Price and Consensus DraftKings Inc. price-consensus-chart | DraftKings Inc. QuoteGrowing Efforts to Boost Player GrowthComplementing sportsbook is DraftKings' recently launched Same Game Parlay (SGP), which allows users to combine multiple betting outcomes from the same game into one parlay bet.Besides in-app parlay merchandising, the company also rolled out Parlay Insurance, which will allow customers to avoid an outright loss of one of the legs in their parlay.DraftKings recently increased its focus on innovation or feature enhancements like the Web3 strategy, which implements use cases for blockchain and NFT technology that form a vital part of their core business and disrupt the sports fan experience.DraftKings is also focusing on its iGaming product as it captures the marketing, gross margin, and general and administrative synergies from Golden Nugget Online Gaming (GNOG) that it recently acquired. It is also working on migrating the GNOG guest to the DraftKings platform.After introducing markets for Major League Baseball, and being the first to release look-ahead lines for all 272 NFL games, DraftKings prepares to have more markets for the NFL that it plans to roll out when the season starts.What's Next for DraftKings?DraftKings will face a clash in Kansas as FanDuel is also launching its online sportsbook in the same state and on the same day. DraftKings will lose players to its rivals if it fails to provide differentiation in its activities.This could result in a further drop in the company’s shares, which have declined 41.5% year to date in comparison with MGM Resorts International’s MGM decline of 27.3%. The Zacks Gaming industry fell 37.6% in the same period.Zacks Rank & Stocks to ConsiderDraftKings has a Zacks Rank #3 (Hold), currently.Some better-ranked stocks in the Consumer Discretionary sector are BJ's Wholesale Club BJ and Intercontinental Hotels Group IHG, both sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.BJ’s Wholesale Club’s shares are up by 13.40% while Intercontinental Hotels Group’s shares are down 9.11% on a year-to-date basis. Zacks' Top Picks to Cash in on Electric Vehicles Big money has already been made in the Electric Vehicle (EV) industry. But, the EV revolution has not hit full throttle yet. There is a lot of money to be made as the next push for future technologies ramps up. Zacks’ Special Report reveals 5 picks investorsSee 5 EV 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 Intercontinental Hotels Group (IHG): Free Stock Analysis Report MGM Resorts International (MGM): Free Stock Analysis Report BJ's Wholesale Club Holdings, Inc. (BJ): Free Stock Analysis Report DraftKings Inc. (DKNG): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 1st, 2022

"End Of Abundance": Macron Warns Of "Major Tipping Point" And "Great Upheaval" As Difficult Winter Approaches

"End Of Abundance": Macron Warns Of "Major Tipping Point" And "Great Upheaval" As Difficult Winter Approaches With much of Europe facing a cold winter thanks to the war in Ukraine, various leaders have been sounding the alarm over the 'sacrifices' people are going to have to make in order to maintain opposition to Vladimir Putin - who's betting on fracturing the EU due to Russia's immense leverage over energy. The equestrian statue of Frederick the Great on Unter den Linden Avenue in Berlin after the illumination was switched off on July 27. (Omer Messinger/Getty Images) On Wednesday we reported that that both EU policy Chief Josep Borrell warned that "wary" EU populations would have to endure deep economic pain and a severe energy crunch - while calling on the citizenry to "bear the consequences" with continued resolve. MAP OF THE DAY: Day-ahead electricity prices in Europe are eye-watering, with lots of countries setting record highs for today. Notable to see the Nordics close to €400 per MWh, and Germany at €600. Before 2020, anything above €75-100 was considered expensive| #EnergyCrisis — Javier Blas (@JavierBlas) August 23, 2022 The same day, Belgian Prime Minister Alexander De Croo went much further - suggesting that "the next 5 to 10 winters will be difficult." "The development of the situation is very difficult throughout Europe," De Croo told Belgium broadcaster VRT.  "In a number of sectors, it is really difficult to deal with those high energy prices. We are monitoring this closely, but we must be transparent: the coming months will be difficult, the coming winters will be difficult," he said.  The prime minister's comments suggest replacing Russian natural gas imports could take years, exerting further economic doom on the region's economy in the form of energy hyperinflation. And in yet another ominous warning in what must have been coordinated messaging, French President Emmanuel Macron on Wednesday went even further  - warning at his first cabinet meeting after the summer holidays that the French should expect to make deep sacrifices in what he called the "end of abundance." Speaking before ministers at the Élysée, Macron said that the country was at a "tipping point" as it faced a difficult winter and a new era of instability due to climate change and Russia's invasion of Ukraine, according to The Guardian. "What we are currently living through is a kind of major tipping point or a great upheaval … we are living the end of what could have seemed an era of abundance … the end of the abundance of products of technologies that seemed always available … the end of the abundance of land and materials including water," he said, adding that France and the French felt that they've been living under a series of crises, "each worse than the last." NEW - French President Macron proclaims the "end of abundance," cites sacrifices to "defend freedom." — (@disclosetv) August 24, 2022 "This overview that I’m giving, the end of abundance, the end of insouciance, the end of assumptions – it’s ultimately a tipping point that we are going through that can lead our citizens to feel a lot of anxiety. Faced with this, we have a duty, duties, the first of which is to speak frankly and clearly without doom-mongering," Macron continued, adding that France, Europe and the world had possibly been too "insouciant" about threats to democracy and human rights - while warning of the "rise of illiberal regimes and strengthening of authoritarian regimes." Tone deaf? According to the report, Philippe Martinez, the secretary general of the powerful CGT union criticized Macron's comments as being "misplaced" - adding that many French citizens have never known abundance. Philippe Martinez, pictured here in June 2022. Photograph: Luc Nobout/Zuma Press/Rex/Shutterstock "When we talk about the end of abundance, I think of the millions of unemployed, the millions of those in a precarious situation. For many French people, times are already hard, sacrifices have already been made," he said. The president’s warnings came as it was revealed that the dividends paid out by major French companies reached a record €44bn in the second quarter of 2022, as a result of what were described as exceptional profits in 2021. The economic newspaper Les Echos said the dividend payout was almost 33% up on the previous year and was the result of a post-Covid economic catchup. Macron, who was re-elected for a second five-year term in April but lost his parliamentary majority in the subsequent general election, and his government are facing a rocky rentrée, the traditional September return to work and school after the long summer break in France. After months of successive election campaigns, his newly appointed government had little time to establish itself before the holidays, putting this year’s return to parliamentary business under particular scrutiny. -The Guardian During a commemoration ceremony for the allied invasion of Provence in 1944, Macron warned that this autumn and winter would be a difficult one - with the risk of energy shortages and high prices due to Russia's war on Ukraine - which he referred to as "the price to pay for freedom." Tyler Durden Thu, 08/25/2022 - 06:55.....»»

Category: blogSource: zerohedgeAug 25th, 2022

Von Greyerz: An Autumn Of Epic Asset Collapses & Higher Inflation... Means Poverty & Social Unrest

Von Greyerz: An Autumn Of Epic Asset Collapses & Higher Inflation... Means Poverty & Social Unrest Authored by Egon Von Greyerz via, The world economy and especially the political and economic situation today consists of a potpourri of lethal ingredients which will have dire consequences... Let’s look at what this deadly potion consists of: Debts at levels that can never be repaid – sovereign, corporate & private Epic global bubbles in stocks, bonds & property – all about to collapse Major geopolitical conflicts with no desire for peace – major wars likely Energy imbalances and shortages, most self-inflicted Food shortages leading to major famine and civil unrest Inflation, leading to hyperinflation & global poverty Political and economic corruption in US, Europe and most countries No country will afford social security, medical or pension payments So what are governments around the world doing to solve these problems? Nothing of course. The only thing they know is to print more money. They have never understood that a debt problem cannot be solved with more debt. All they can try to achieve is to pass the baton to the next leader so it will be his problem. This means that all the political, economic and financial mismanagement of the past 50 years will result in a global collapse never seen before in history. The consequences will be both dire and unpredictable since the world has no experience of this magnitude and complexity of problems. So what are global leaders doing?  What is clear is that Western leaders will not assume any responsibility for the coming calamities. Covid will obviously be blamed although there is a lot of evidence that it was manmade and could have been controlled with simple and cheap existing medicines. And all the lockdowns and restrictions have certainly had a bigger impact than the disease itself. Sweden for example virtually had no lockdowns or mask requirements and did not suffer more deaths than countries in total lockdown. Special interests like Big Pharma clearly had the politicians in their hands. They had trillions of dollars to gain and nothing to lose since they are immune against any prosecution. Anyway, it has happened and we can’t go back. The future will tell us if, as many scientists  believe, the people’s immune system will have been severely weakened by the vaccines. Secondly, the Russians will be blamed for the current global economic problems of inflation, energy shortages and decline of global trade. The fact that these problems started well before the Russian invasion of Ukraine is quickly forgotten. WILL THE WAR DRUMS BECOME LOUDER? Since 3600BC, governments have fought 14,000 wars against each other. As far as I am aware, there is no period in history without an important war. At the end of the 30-year war, European nations tried to put a stop to unprovoked wars with the 1648 Treaty of Westphalia. The peace conference in Muenster involved 194 states. The start of the war in 1618 was the Protestant Bohemians rising against the Catholic Holy Roman Empire. The major opponents to the Roman Catholics were the Habsburgs supported by Sweden and the Netherlands. Spain and France were also involved in the war together with many other nations. Interestingly, my two home countries benefitted from the peace. Sweden by virtue of being a major military power at that time gained substantial territories around the Baltic and Switzerland gained formal independence from Austria. But the major result of the Westphalian peace treaty in 1648 was: National self-determination Precedent for ending wars through diplomatic congresses Peaceful coexistence among sovereign nations Acceptance of the principle of non-interference in the affairs of other nations if there was not a clear present danger to the aggressor. Almost all wars in history have been between neighbouring countries. But in the 20th century the US changed that. Without provocation and far from its borders, the US invaded Vietnam, Serbia, Iraq, Libya and Syria. So the 300 year old Westphalian principle of non-interference was properly buried by the US on multiple occasions. But not only did the US break this principle but also failed in each single one of the aforementioned conflicts. One could of course argue that Japan broke the treaty first with the Pearl Harbour attack. But like all aggressors they claimed self defence against potential US interference in Japan’s ambitions in the Pacific. The Russians will of course argue that they haven’t broken the Westphalian treaty since Ukraine historically has been part of Russia. In the Maidan revolution in 2014, a US inspired coup ousted the Soviet friendly Ukrainian leader and replaced him by a Western friendly leader. Since then Russia has always warned the West that it cannot accept being surrounded by an increasing number of NATO countries just like the Russian missiles on Cuba in 1962 directed against the US. What we do know is that sadly wars are an integral part of history and as long as there are people on earth, there will be wars The risk is that what now seems a local conflict in eastern Ukraine will become a major international conflict. This is not a war between a small innocent country and a superpower. No this is a major conflict between the US and Russia. And since China has declared it is supporting Russia, this is a conflict between the three major super powers in the world. And since the US has coerced the EU to join against Russia with weapons, money and sanctions, this is a conflict of major proportions. GERMANY BITING OFF THE HAND THAT FEEDS THEM The lack of statesmen and strong leadership in the US and EU has created an absurd situation with the EU not just biting the hand that feeds them but actually biting it off totally. With many European countries being dependent on Russian gas, oil, cereal and fertilisers, EU’s left hand doesn’t know what the right one is doing. Not only is this a human and economic catastrophe of major proportions but one which will have major implications for Europe for a long time. Germany used to be the economic and financial engine of Europe but is now on the way to becoming a basket case. But sadly they haven’t discovered it yet. Scholz inherited ludicrous Marxist policies from Merkel. For example to close down both nuclear energy and coal was always a recipe for disaster with no medium term viable alternatives. And her immigration policy will not only be economically ruinous for Germany but also lead to major social unrest. The demographics of Germany is also another irreparable problem. With the lowest fertility rate in Europe combined with the highest life expectancy, Germany is entering a long term cycle of economic contraction. Add to this that Germany has financed a major part of the Mediterranean EU countries’ woes through the Target2 transfer payment system. As the Target2 graph shows below, the transfer payments to Italy of €596 billion, Spain €526b, to the ECB €358b, Greece €107b and Portugal €69b have been mainly financed by Germany to the extent of €1.2 trillion. Add to that the balance sheet of the ECB which has grown more than 8X since 2004 to €8.7 trillion GRAPH and we can confidently state that the whole European Economic Community -ECB- has now become -EDC- or the Economic Debt Community. It is clear that the old basket cases of Greece, Italy and Spain which were forced by Brussels to change leadership and to take on more debt are the immediate danger to the EU and the Eurozone. If we just take Italy, their debt has doubled since 2000 to €2.7 trillion which at 150% of GDP means that the country is on the verge of bankruptcy. But it is not only Italy’s debt that has surged, but even worse, the cost of financing it. Since September 2021, 10 year Italian bond yields have gone up 6X from 0.5% to 3.4%. This is obviously more than Italy can afford! GREECE AND ITALY SHOULD LEAVE THE EU NOW The head of the Bundesbank Joachim Nagel has made it clear that it would be fatal for the ECB to hold borrowing costs down for ill-disciplined Eurozone states. He declared that such action would be “treacherous waters”. So Italy and Greece can no longer expect subsidised rates from the EU. Italy needs to roll over €300 billion of debt annually plus finance its annual deficit of €100 billion, a real Sisyphean task. When Germany was the rich uncle of the EU, these debt levels were tolerated just to keep this dinosaur from falling apart. But with the coming severe German economic downturn combined with insoluble debt and structural problems in all EU countries, the inevitable collapse of the European dream is now reality as I have predicted for over 20 years. Politicians always learn too late that political dreams and economic reality are as far apart as heaven and hell. If these politicians ever studied history, they would have learnt that all these illusions of grandeur always end not just in tears but in total collapse. If I were in charge of Greece and Italy I would quickly default on the debt and create new Drachmas and Liras. That would give these countries a short term  relative advantage rather than to sink in the general quagmire of the EU at a later stage. If they stay in the EU, Brussels will force Greece and Italy to take on more debt and impose unacceptable conditions. No country will ever repay their debt anyway or be in a position to finance it so better to run for the exit now rather than to wait for the EU’s total collapse. So with Germany, Greece, Italy and Spain all having their problems, so does Macron in France. Having lost a working majority, he can no longer afford to be arrogant and will find it hard to reduce the French budget deficits, a condition to get German agreement for joint debt issuance. So the EU and the Euro is now entering a final chapter. Like all political monstrosities,  the fall will take a number of years. Brussels and government leaders in especially Germany and France will remain on the barricades for a long time although everything around them will fall apart. The only thing that could precipitate the fall is a debt default by the ECB when investors instead of buying the worthless debt paper will use it for fuel as they have run out of energy sources. The only problem is of course that the debt is electronic and therefore unsuitable for burning- Hmmm. US & GLOBAL INFLATION Going across the pond, the US elite has never hated someone more than Trump. They tried all they could during his reign and now he is the first ex-president who is being raided by the FBI. The US regime shot themselves in the foot with the sanctions against Russia. The Russians are still selling their energy to Germany, China, India etc and instead the suffering parties are the US, Europe and the rest of the world with high inflation and energy shortages. With already high support for the Republicans and Trump, this raid is likely to have the opposite effect of the one desired by the regime. How many times can you shoot yourself in the foot before it really hurts? UN AGENDA 2030 – THE (UN-)SUSTAINABLE DEVELOPMENT GOALS This UN programme, supported by Schwab and the WEF (World Economic Forum) was always going to fail. Starting in 2016, bureaucrats with no understanding of the real economy created this programme signed by 194 nations. There are 17 admirable but unrealistic goals like No Poverty, Zero Hunger, Good Health, Clean Energy, Climate Action etc. Today almost half way into the programme, every single goal is hopelessly behind schedule with no chance of achieving the target. How could anyone believe that 194 nations could jointly achieve these 17 goals when not  even one single country can do it? More about Agenda 2030 and Schwab’s attempt to take over the UN in a later article. MARKETS As generally is the case before major turns in markets, optimism is still high. But this autumn is likely to change all that as the realities outlined at the beginning of this article finally hit the world. Stock markets are now extremely near finishing the correction and to resume the downtrend in earnest. It is possible that the real falls in markets will wait until September but the risk is here now and very dangerous. What we know with certainty is that the world is facing a wealth destruction and wealth transfer of major proportions. Most paper assets will die a relatively quick death and that includes paper money. This will obviously include stocks, bonds, property and all derivatives. Falls of 75-95% in the next few years will not be uncommon. As currencies finish their journey to ZERO (they are already down 97-99% since 1971) no use betting on the horse that comes last to the bottom whether it is the Dollar or the Euro. They will all get there! Instead, the only money which has survived in history is gold and silver and these metals will continue to maintain their purchasing power or even enhance it as all fiat money is killed off by governments and central banks by the creation of an unlimited supply. It is so simple really but still only 0.5% of financial assets are in physical gold in spite of the metal’s golden 5,000 year record. That percentage is about to change drastically. Tyler Durden Mon, 08/22/2022 - 06:30.....»»

Category: blogSource: zerohedgeAug 22nd, 2022

Saturday links: a tribute to teamwork

On Saturdays we catch up with the non-finance related items that we didn’t get to earlier in the week. You can check... AutosU.S. traffic deaths in 2022 are at a 20-year high. ( Ford ($F) F-150 Lightning is a great truck with a subpar tablet. ( buyers need to be careful when it comes to tax credits. ( would help if EV chargers were actually working. ( ($UPS) driver are struggling with the heat in their vehicles. ( golf carts are the future of low-carbon transportation. ( some cities are incentivizing e-bikes. ( transportAirbus is betting on AI to make flying safer and cheaper. ( Air ($AAL) has put deposits down on 20 Boom Supersonic jets. ( the hype, supersonic commercial travel is a ways off. ( 'premium economy' gets you on various airlines. ( role Florida airspace is playing in nationwide flight delays. ( ships have returned to Alaska. ( is Europe doing weaning itself off Russian natural gas? ( role crypto mining plays in the Texas energy market. ( drought increases the risk of flash floods. ( farmers are using technology to save on water. ( the ongoing drought, more Los Angelenos are getting rid of their yards. ( wide swath of the U.S. is at-risk of extremely high temperatures a couple of decades out. ( cities are going to have to re-think heat adaptation. ( in Brazil is not just an issue in the Amazon. ( does the term 'widely recyclable' really mean when it comes to plastic? ( only work if you change them as needed. ( change is changing how fisheries work. ( insights from James Bridle's "Ways of Being: Animals, Plants, Machines: The Search for a Planetary Intelligence." ( Walk, "Burn Rate is an honest, vulnerable account of a life." ( Q&A with Nedra Glover Tawwab author of "Set Boundaries, Find Peace." ( Fall vaccination campaign is going to be complicated. ( the CDC following or leading when it comes to Covid guidance? ( data on how long people are infectious with Covid. ( respiratory infections can increase the likelihood of bacterial infections and lead to worse disease. ( college vaccine mandates helped bring down Covid case counts. ( look at the kind of brain issues Covid patients are having a year (or so) later. ( majority of people who had Omicron didn't even know it. ( testing is gaining momentum. ( seems to be general effects to the Bacillus-Calmette-Guerin vaccine. ( CDC is taking back control over hospital data. ( FDA has cleared a path to OTC hearing aids. ( organs could potentially replace animal testing. ( it matters when you take your medication. ( minoxidil is the hot, new hair loss treatment. ( fitness plan doesn't have to be complicated. ( vs. duration when it comes to physical exercise. ( health means better brain health. ( Inflation Reduction Act has provisions to help farmers with conservation efforts. ( Covid pandemic took a toll on London's restaurant scene. ( farmland is valued more highly. ( wing prices are finally falling. ('s grape growers in Spain and Italy are dealing with heat and drought. ( are dealing with CO2 shortages. ( Japanese are drinking less, generating less tax revenue. ( betting firms are rightsizing their marketing plans going into the NFL season. ( college athletes are uniquely at-risk of mental health issues. ( districts are pulling out all the stops to get warm bodies in classrooms. ( your arms around the national teacher shortage. ( messaging is broken. ( on Abnormal ReturnsWhat you missed in our Friday linkfest. ( links: the history of interest rates. ( ETFs are here. ( you a financial adviser looking for some out-of-the-box thinking? Then check out our weekly e-mail newsletter. ( mediaHarvard Business School is going to be tuition-free for its lowest-income students. ( rules for public speaking including 'Remember that the audience always wants you to succeed.' ( a pharmacist these days is tough. (»»

Category: blogSource: abnormalreturnsAug 20th, 2022

Capitalize on a Surging Nasdaq With These 3 Stocks

With a better-than-expected CPI print and a strong earnings season, stocks have found many buyers as of late. Following a brutal stretch to start the year, the tech-heavy Nasdaq has surged as of late, putting it in bull market territory. Needless to say, investors have welcomed the rally with open arms.The rally was boosted by last week’s better-than-expected CPI print, with a strong earnings season further helping to lift stocks. Following the print, some market participants are betting on the Fed to slow down its pace of rate hikes.Much of the Nasdaq’s struggles year-to-date can be attributed to a hawkish Fed, soaring costs, and geopolitical issues.Now that buyers have returned, several stocks within the Index could see significant interest, including Adobe ADBE, Microsoft MSFT, and Dollar Tree DLTR. Below is a year-to-date chart of all three companies with the S&P 500 blended in as a benchmark.Image Source: Zacks Investment ResearchLet’s take a look at each company a little closer.AdobeAdobe ADBE is one of the biggest software companies in the world, generating the bulk of its revenue via licensing fees from its customers. The company is currently a Zacks Rank #3 (Hold) with an overall VGM Score of a B.Adobe’s growth prospects are rock-solid – for the company’s current fiscal year (FY22), the Zacks Consensus EPS Estimate of $13.51 reflects a strong 8.3% year-over-year uptick. And in FY23, earnings are forecasted to grow an additional 16%.Image Source: Zacks Investment ResearchThe company’s 41.1X forward earnings multiple is undoubtedly on the high side, but this is typical of stocks with high-growth natures. Still, the value is nicely beneath its five-year median of 45.6X.Image Source: Zacks Investment ResearchIn addition, the company has been the definition of consistency within its bottom-line results, exceeding the Zacks Consensus EPS Estimate in 14 consecutive quarters. Just in its latest quarterly print, ADBE recorded a 1.5% bottom-line beat.MicrosoftMicrosoft MSFT is one of the largest broad-based technology providers in the world, dominating the PC software market with more than 80% of the market share for operating systems. The company currently carries a Zacks Rank #3 (Hold) with an overall VGM Score of a C.Microsoft’s bottom-line projections allude to notable growth – the Zacks Consensus EPS Estimate of $10.14 for the company’s current fiscal year (FY23) pencils in a double-digit 10% uptick in earnings year-over-year. Looking ahead a bit, the $11.67 per share estimate for FY24 reflects a further 15% expansion of the bottom-line.Image Source: Zacks Investment ResearchMicrosoft’s forward earnings multiple resides at 28.9X, undoubtedly on the higher side but just above its five-year median of 28.4X and nowhere near highs of 37.5X in 2021. Shares trade at a 14% premium relative to their Zacks Sector.Image Source: Zacks Investment ResearchThe company has been on a blazing-hot earnings streak, exceeding the Zacks Consensus EPS Estimate in nine of its previous ten quarters. Over its last four, the average surprise has been a respectable 4.5%.Dollar TreeDollar Tree DLTR is an operator of discount variety stores, offering a wide range of quality everyday general merchandise in many categories. The company sports a Zacks Rank #2 (Buy) with an overall VGM Score of an A.Dollar Tree’s growth prospects are fantastic, further bolstered by its Style Score of an A for Growth. For the company’s current fiscal year (FY23), earnings are forecasted to soar by a remarkable 41%. And in FY24, the company’s bottom-line is forecasted to tack on an additional 15% of growth.Image Source: Zacks Investment ResearchIn addition, the company sports solid valuation levels – DLTR’s 20.4X forward earnings multiple is nowhere near highs of 26.5X in 2021 and represents a steep 24% discount relative to its Zacks Sector.Dollar Tree carries a Style Score of a B for Value.Image Source: Zacks Investment ResearchDollar Tree has repeatedly reported bottom-line results above expectations, exceeding the Zacks Consensus EPS Estimate in 10 consecutive quarters. Just in its latest quarterly release, the discount retailer penciled in a robust 20% bottom-line beat.Bottom LineWith a better-than-expected CPI print and a strong earnings season, stocks have found many buyers as of late. After a brutal first half, it looks like it could be time for the bears to finally go back into hibernation.However, there’s still a challenging macroeconomic backdrop, of course. But, we’re still well above 2022 lows, a significant positive.If the buying remains at this level, Microsoft MSFT, Adobe ADBE, and Dollar Tree DLTR shares stand to benefit massively.All three companies have stellar growth prospects paired with a well-established nature, perks that any investor would seek in a stock. 7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.8% per year. So be sure to give these hand-picked 7 your immediate attention. See them 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 Microsoft Corporation (MSFT): Free Stock Analysis Report Dollar Tree, Inc. (DLTR): Free Stock Analysis Report Adobe Inc. (ADBE): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksAug 17th, 2022

Futures Reverse Early Losses As Walmart Beat Sparks Relief Buying

Futures Reverse Early Losses As Walmart Beat Sparks Relief Buying US stock futures drifted modestly lower after hitting a 4-month high just above 4,300 during Monday's session, boosted by solid earnings and a guidance boost from Walmart, as attention turned back to lingering worries about the path of economic growth, how long until the NBER admits the US is in a recession and how Fed policy ties the room together. Contracts on the Nasdaq 100 and the S&P 500 were down less than 0.1% by 7:45 a.m. ET.  Gains in technology stocks on Monday spurred the broader benchmark equity index to its highest since May, with investors shrugging off terrible Chinese economic data. Crude oil reversed some of its recent sharp losses amid economic headwinds that clouded the demand outlook and prospects for an increase in supply. The greenback settled higher after fluctuating between gains and losses, while bitcoin traded above $24K. Chinese stocks listed in the US declined in premarket trading after a Reuters report that Tencent would liquidate its $24BN stake in Meituan to appease Beijing, sparking concerns it would do the same to its other investments. Among notable movers in premarket trading, Snowflake fell 3.5% after Tiger Global Management cut its position in the software firm for the first time in eight quarters, according to latest 13F filings. Chinese stocks listed in New York fell in premarket trading following the Tencent report. Pinduoduo Inc. lost 4%, while Inc. declined 2.2%. Zoom Video Communications slid 3% after Citigroup Inc. downgraded its recommendation on the stock to sell from neutral, seeing “new hurdles to sustaining growth.”  Here are some other notable premarket movers: Big-box retailers gain in premarket trading after Walmart said it sees a full-year adjusted EPS decline of 9% to 11% -- less steep than its previous projection for a decline of 11% to 13% -- following a stronger-than-expected earnings report for the second quarter. Zoom VideoCommunications (ZM US) down 3% in pre-market trading as Citi cuts its recommendation on the stock to sell from neutral, saying it sees “new hurdles to sustaining growth,” including growing competition from services like Microsoft Teams and macro-related pressures hitting customers. Bird Global (BRDS US) shares drop 6.4% in premarket trading after the electric vehicle company on Aug. 15 posted second-quarter results that showed a wider net loss than the same period a year earlier. Chinese stocks in US fall in premarket trading following a report that Tencent plans to sell all or much of its stake in food delivery company Meituan, in an effort to appease Beijing and lock in profits. Alibaba (BABA US) -2.2%, Nio (NIO US) -1%, Baidu (BIDU US) -1.8% Compass (COMP US) analysts at Barclays and Morgan Stanley cut their price targets on the real estate brokerage after it reduced its full-year guidance and announced plans to cut costs. The shares plunged 12% in US postmarket trading on Monday. Ginkgo Bioworks (DNA US) shares jump as much as 23% in US premarket trading after the cell programming platform operator’s revenue for the second quarter beat estimates. Snowflake (SNOW US) drops 3.5% in premarket trading after Tiger Global Management cut its position in the software firm for the first time in eight quarters, according to latest 13F filings. “The lack of clear direction is driving the markets up and down,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note. “Yesterday’s data softens the case for the continuation of the steep recovery, and throws the foundation of a period of consolidation, and perhaps a downside correction.” A sharp drop in New York state manufacturing, the second-worst reading since 2001, along with the longest streak of declines since 2007 in homebuilder sentiment, sparked another round of "bad news is good news" and boosted hopes that the Fed may slow interest-rate hikes. However, it was soon outweighed by fears of a recession and belief among some traders the Fed could still press ahead with its tightening irrespective of a slowdown.  US stocks have been rallying since mid-June on optimism that corporate earnings are holding up even with higher prices and weakening consumer sentiment. The market also has gotten a boost from speculation that the Fed will slow the pace of interest rate increases after cooler-than-expected inflation data. While some strategists, especially those at JPMorgan, suggest the rebound could extend until the end of the year as investors turn less bearish, others including Michael Wilson at Morgan Stanley have said disappointing earnings are likely to spark another selloff in stocks. As a result of the recent frenzied positional rally, four weeks of gains have pushed more than 90% of S&P 500 members above their 50-day moving averages. That’s been a good omen in the past, with stocks showing gains of 5.7% on average in the following three months and rising 18% in the 12 months after the signal. Negative returns have been a rare exception, with stocks falling only twice. “While this is not a necessary condition for the end of the bear market, it would increase our confidence that a rally back to the old highs will come before a return to the June lows,” Jeff Buchbinder, a strategist at LPL Financial, wrote in a note on Monday. On the other hand, Skylar Montgomery Koning, senior global macro strategist at TS Lombard, said the bar for the Fed to stop its hiking cycle was high. “The market is betting not only that inflation comes down to a level that the Fed is comfortable with, but that the Fed reaction is timely,” she said on Bloomberg Television. “It may take until we get a 75-basis point hike in September or the new set of dot projections, and that may have to be what makes the market narrative shift.” European bourses are firmer across the board after a relatively constructive APAC handover, the Euro Stoxx 50 rising +0.4%, though off best levels post-ZEW. IBEX outperforms, adding 1.1%. Miners, telecoms and utilities are the strongest performing sectors. Here are some of the biggest European movers today: Delivery Hero shares jump as much as 14% after the firm projected 7% q/q growth in gross merchandise value in 3Q, in- line with expectations and putting the firm on track to meet its FY targets Glencore and other European miners outperform the broader market after BHP posted its highest ever FY profit and said it will push ahead with growth options Philips rises as much as 3.6% after its CEO Frans van Houten said he would step down in October, with the current head of the company’s Connected Care division, Roy Jakobs, taking over Watches of Switzerland jumps as much as 7.1%, reaching the highest since June 7, after the watchmaker published a first-quarter trading update. Analysts found the update to be solid Jyske Bank gains as much as 9.1% after the Danish lender reported 2Q pretax profit that topped Citigroup’s estimate by more than 20%, with Citi noting provisions came in well above expectations DFDS climbs as much as 8.7% after the Danish logistics company published 2Q results that beat consensus estimates and boosted its FY22 revenue forecast, RBC writes in a note Pandora drops as much as 8%, the most in more than three months, after the jewelery maker reported Ebit before significant items that missed the average analyst estimate Sonova and other European hearing aid makers lead losses on the Stoxx 600 after the firm and Danish peer Demant cut their guidance, with analysts flagging negative consensus revisions Straumann plunges as much as 14%, the most intraday since May 2020, after the oral care company announced 1H results and reaffirmed its guidance for the year Hemnet falls as much as 16% after the Swedish property ad company offered 8 million shares at SEK147 a share in a secondary offering announced on Monday after markets closed Hargreaves Lansdown declines as much as 1.8% after Credit Suisse downgraded its recommendation to neutral from outperform due to the personal investment firm’s valuation Earlier in the session, Asian equities fell as investors weighed growth risks in the region against the probability of a slower pace of US interest-rate increases. The MSCI Asia Pacific Index declined as much as 0.4%, and is poised to snap a four-day winning streak. Hong Kong shares fell the most, with Meituan among the biggest drags on the regional gauge after Reuters reported that Tencent intends to sell all or much of its $24 billion stake in the food-delivery giant to appease Beijing. Across Asia, energy shares slid as oil prices fell on rapidly cooling US manufacturing that followed weaker-than-expected Chinese data Monday -- offsetting gains in materials and utilities shares. After improving sentiment pushed up the region’s stocks for four straight weeks, markets are looking ahead to minutes of the Federal Reserve’s latest policy meeting due Wednesday for hints on its rate-hike trajectory. Closer to home, China’s surprise interest-rate cut on Monday did little to allay concerns over the property sector and the broader slowdown from Covid restrictions. Economists and state media are calling for additional stimulus, which could aid a rally in Chinese stocks and Asian peers. “While the downside surprises across the economic calendar suggested that growth conditions have clearly worsened, market participants seem willing to ride on optimism” that the Fed may shift to a looser policy stance sooner with easing inflation, Jun Rong Yeap, market strategist at IG Asia said in a note. Japan’s benchmarks dropped while gauges in the Philippines, Malaysia and India rose. Indonesian shares were higher after President Joko Widodo said in his annual budget speech that he aims to narrow next year’s deficit to below 3% of gross domestic product for the first time since 2019. Japanese stocks edged lower as investors remained on the lookout for signs of an economic slowdown in the US and China. The Topix Index fell 0.2% to 1,981.96 at the market close in Tokyo, while the Nikkei 225 was virtually unchanged at 28,868.91. SoftBank Group Corp. contributed the most to the Topix’s decline, decreasing 2.6% after Elliot Management sold off almost all of its position in the company. Out of 2,170 stocks in the index, 908 rose and 1,138 fell, while 124 were unchanged.  Australia's S&P/ASX 200 index rose 0.6% to close at 7,105.40, its highest level since June 8. BHP, the largest-weighted stock in the benchmark, was among the top performers Tuesday after its full-year profit exceeded analysts’ expectations. Challenger slumped after announcing a strategic review of Challenger Bank. In New Zealand, the S&P/NZX 50 index rose 0.5% to 11,847.15. In FX, the Bloomberg Dollar Spot Index advanced a third day as the greenback was steady to higher against all of its Group-of-10 peers. The euro touched an almost two-week low of $1.0125 after German ZEW expecations index came in lower than forecast. Aussie recovered a loss after the Reserve Bank’s August minutes failed to bolster bearish views, only to resume its slide in the European session. Australia’s central bank signaled further interest-rate increases would come in the period ahead, while restating it will be guided by incoming economic data and the inflation outlook. The yen was steady in the Asian session only to slip in the European session. China’s onshore yuan fell to the lowest since May, tracking Monday’s losses in the offshore unit. The nation’s central bank didn’t push back strongly against the currency weakness through its daily reference rate on Tuesday but traders are watching if its stance would change in case the yuan selloff deepens. USD/CNY rose as much as 0.3% to 6.7978, the highest since May 16; USD/CNH falls 0.1% to 6.8113 after surging 1.2% on Monday In rates, Treasuries were mixed, pivoting around a near unchanged 10-year sector with the curve flatter as long-end outperforms. Bunds and gilts underperform with the latter following stronger-than-forecast UK wage figures for June. US yields cheaper by up to 2bp across front-end and richer by 1.5bp in long-end of the curve -- 2s10s, 5s30s spreads subsequently flatter by 1.7bp and 2.7bp on the day; 10-year yields around 2.79% and near unchanged, outperforming both bunds and gilts by over 1bp.  European bonds fall, with the yield on German 10-year up about 2bps, while gilts 10-year yield rises ~3bps following stronger-than-forecast UK wage figures for June. . Both are trading within Monday’s range. Peripheral spreads are mixed to Germany; Italy and Spain widen, Portugal tightens. Italian 10-year yield rises ~7bps to 3.04%. Australian and New Zealand bonds extended opening gains amid concerns over economic growth. Japanese government bonds rallied as a smooth five-year auction and concerns over global economic slowdown encouraged buying. In commodities, WTI traded within Monday’s range when crude futures fell around 5% over the previous two sessions. Besides economic worries, investors are also facing the prospect of rising supply as demand moderates. Libya is pumping more and Iran is edging closer to reviving a nuclear deal that will likely see higher crude flows. On Tuesday, oil reversed recent losses however, and rose more than 1% to over $90 as the prospect of an "imminent" Iranian deal once again faded; Iran responded to the EU's draft nuclear deal and expects a response in the next two days, according to a source cited by ISNA. It was also reported that an adviser to the Iranian negotiating delegation told Al-Jazeera they are not far from an agreement and chances of reaching a nuclear deal are very high. Iran's response to the draft EU JCPOA text will probably fail to satisfy Western parties, particularly the US, according to Iran International; Iran wants further provisions around economic guarantees above the one-year exemption reportedly being offered. Elsewhere, spot gold falls roughly $4 to around $1,775/oz. Base metals are mixed; LME tin falls 1% while LME zinc gains 1.9%. Looking to the day ahead, data releases from the US include July’s industrial production, capacity utilization, housing starts and building permits. In the UK, there’s unemployment for June, Germany has the ZEW survey for August and Canada has July’s CPI. Elsewhere, we’ll get earnings releases from Walmart and Home Depot. Market Snapshot S&P 500 futures little changed at 4,295.50 STOXX Europe 600 up 0.4% to 443.91 MXAP down 0.3% to 163.03 MXAPJ little changed at 529.75 Nikkei little changed at 28,868.91 Topix down 0.2% to 1,981.96 Hang Seng Index down 1.0% to 19,830.52 Shanghai Composite little changed at 3,277.89 Sensex up 0.5% to 59,751.63 Australia S&P/ASX 200 up 0.6% to 7,105.39 Kospi up 0.2% to 2,533.52 German 10Y yield little changed at 0.91% Euro down 0.2% to $1.0140 Gold spot down 0.3% to $1,774.93 U.S. Dollar Index up 0.18% to 106.74 Top Overnight News from Bloomberg Tencent-Backed Giants Dive on Report of $24 Billion Meituan Sale Oil Extends Losses on Global Slowdown and Chance of More Supply Babylon Said to Mull Take-Private Not Long After SPAC Deal Chipmakers’ Pandemic Boom Turns to Bust as Recession Looms Apple Lays Off Recruiters as Part of Its Slowdown in Hiring FAA Warns of Monday Evening Delays at NYC Area Airports Wong Says Singapore Must Compromise Over Law on Sex Between Men ‘Broken’ Barclays ETN Soars to 33% Premium With Issuance Halted Trump Executive Weisselberg in Plea Talks to Resolve Tax Case US Congress Pushes Biden Toward Risky Confrontation With China Twitter Must Give Musk Data, Documents From Ex-Product Head Next Singapore PM Warns US, China May ‘Sleepwalk Into Conflict’ Apple Sets Return-to-Office Deadline of Sept. 5 After Delays Tiger Global, Yale Cut Stocks Last Quarter as Markets Tumbled Druckenmiller Sold Big Tech in Bear Market as Soros Dove Back In A Century of Fed Crises Holds Secrets to Fight Future Recession Compass Stock Slumps as CEO Reffkin Plots Out More Cost Cuts A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly positive as the region followed suit to the gains on Wall Street but with upside limited as economic slowdown concerns lingered. ASX 200 traded higher amid a deluge of earnings and with the index led by the mining sector including BHP shares after the industry giant reported a record FY underlying net and dividend. Nikkei 225 lacked direction amid the absence of any major fresh macro drivers and alongside a choppy currency. Hang Seng and Shanghai Comp were initially kept afloat by support-related optimism with developers encouraged after reports that China is considering issuing government-guaranteed bonds to provide liquidity to certain developers, while PBoC-backed press noted that China needs additional policy stimulus to increase economic growth. However, the Hang Seng later pulled back ahead of the European open to slip below 20k. Top Asian News China's NDRC said macro policies should be strong, reasonable and moderate in expanding demand actively, while it will roll out practical measures to support starting up businesses and job employment, according to Reuters. PBoC-backed Financial News front page report stated that China needs additional policy stimulus to increase economic growth, while Securities Times suggested the recent surprise PBoC rate cut could be the first in a series of measures to stabilise growth. China is to consider issuing government-guaranteed bonds to provide liquidity to certain developers. RBA Minutes from the August 2nd meeting stated the board expects to take further steps in the process of normalising monetary conditions in the months ahead, but is not on a pre-set path and seeks to do this in a way that keeps the economy on an even keel. The minutes also reiterated that members agreed it was appropriate to continue the process of normalising monetary conditions and that inflation was expected to peak later in 2022 and then decline back to the top of the 2%-3% range by the end of 2024. Australian Bureau of Statistics will begin publishing a monthly CPI indicator with the first publication on October 26th to coincide with the release of the quarterly CPI data, while it added that quarterly CPI will continue to be the key measure of inflation. China is reportedly to enhance policy to increase new births, will boost housing support for those with additional children, via Bloomberg. European bourses are firmer across the board after a relatively constructive APAC handover, Euro Stoxx 50 +0.4%, though off best levels post-ZEW. US futures are in contained ranges and pivoting the unchanged mark at this point in time, ES -0.2%; HD and WMT in focus. Home Depot Inc (HD) Q1 2023 (USD): EPS 5.05 (exp. 4.94), Revenue 43.79 (exp. 43.36bln); confirms FY22 guidance. Top European News Delivery Hero Sees Path to 2023 Profit Powered by Asia Unit Pandora Sells Lab-Grown Diamonds in US as Mined Ones Dropped UK Real Wages are Falling at Their Fastest Pace on Record: Chart Hearing Aid Makers Plunge After Sonova, Demant Cut Guidance DFDS Gains on Guidance Upgrade; RBC Sees Future Growth Potential Turkey Limits Resales of Newly Bought Cars by Dealers FX DXY breaches last week’s peak as Treasury yields rebound and Yuan weakens further amidst Chinese growth concerns, index up to 106.860 vs 106.810 on August 8, USD/CNY and USD/CNH approach 6.8000 and 6.8200 respectively. Euro stumbles after unexpected deterioration in German ZEW economic sentiment and Pound slips following mixed UK jobs and wage data, EUR/USD down to 1.0125 and Cable low 1.2000 area. Yen and Franc retreat as risk sentiment improves and bonds back off, USD/JPY tops 134.00 and USD/CHF above 0.9500. Kiwi cautious ahead of RBNZ, but Aussie holds up better post-RBA minutes flagging more hikes, NZD/USD eyes bids into 0.6300 and AUD/USD hovers just under 0.7000. Loonie underpinned awaiting Canadian CPI as crude prices stabilise to a degree, USD/CAD straddles 1.2900. Fixed Income Debt futures retreat further from Monday's lofty levels in corrective price action and as broad risk sentiment improves. Bunds down to 156.07 having been closer to 157.00, Gilts to 116.52 vs 116.99 earlier and 117+ yesterday, T-notes to 119-19 from almost 120-00. UK 2029 and German 2027 supply snapped up amidst given some yield concession. Commodities Crude benchmarks pressure, but off worst levels and well within yesterday's ranges, as the EU receives Iran's response to the JCPOA draft. Initial indications are that a deal is in reach, though, caveats/unknowns remain in focus - particularly the US' response. EIA said US oil output from top shale regions in September is due to increase to the highest since March 2020, according to Reuters. Iran sets September Iranian light crude OSP to Asia at Oman/Dubai + USD 9.50/bbl, via Reuters. Major European zinc smelter (Nyrstar Budel) reportedly to shut due to elevated energy costs, via Bloomberg; will shut as of September 1st. Spot gold under modest pressure as the USD lifts, but still near the 50-DMA while base metals recoup from Monday's data-driven pressure. US Event Calendar 08:30: July Housing Starts, est. 1.53m, prior 1.56m July Housing Starts MoM, est. -2.0%, prior -2.0% July Building Permits, est. 1.64m, prior 1.69m, revised 1.7m July Building Permits MoM, est. -3.3%, prior -0.6%, revised 0.1% 09:15: July Industrial Production MoM, est. 0.3%, prior -0.2% July Capacity Utilization, est. 80.2%, prior 80.0% July Manufacturing (SIC) Production, est. 0.3%, prior -0.5% DB's Henry Allen concludes the overnight wrap Here in the UK we’ve had quite a historic weather spell recently. Last month was the driest July in England since 1935, and a new record temperature just above 40°C was also recorded. But as this dry spell finally comes to an end, there are now weather warnings about thunderstorms over the coming days. My wife and I discovered this to our cost on our evening walk yesterday, when we hadn’t packed an umbrella and got soaked. One thing I hadn’t realised until watching the news the other day was that healthy grass actually absorbs water much quicker than parched grass – I had assumed like humans that the grass that’s been without water for days would drink it up rapidly. So while I’m not paid to give you my bad hunches on how weather works, the risk now is that the water just runs off the hard ground and leads to flooding. Let’s hope we can catch a break from this in the days ahead. Markets were also struggling to catch a break yesterday thanks to a succession of disappointing data releases that brought the risks of a recession back into focus. That marks a shift in the dominant narrative over the last couple of weeks, when there had actually been a small but growing hope that central banks might be able to execute a soft landing, not least after the much stronger-than-expected US jobs report for July. But ultimately, a number of leading indicators are still moving in the wrong direction, and yesterday’s releases served as a reminder that hard landings have historically been the norm when starting from a position as unfavourable as the present one. In terms of the specifics of those data releases, the more negative tone was set from the outset by the Chinese data we mentioned in yesterday’s edition, which showed that retail sales and industrial production for July had been weaker than expected by the consensus. But we then also got the Empire State manufacturing survey for August, which plunged to -31.3 (vs. 5.0 expected), thus also marking its worst performance since the GFC apart from April and May 2020 during the Covid lockdowns. Lastly, we then had the NAHB’s housing market index for August, which similarly fell to its lowest level since May 2020 at 49 (vs. 54 expected). That marked its 8th consecutive move lower, which comes against the backdrop of one of the most aggressive Fed tightening cycles in decades, with housing one of the most sensitive sectors to rate hikes. Growing fears of a slowdown led to a decent risk-off move across multiple asset classes, but one of the places that was most evident was in oil prices, where both Brent crude (-3.11%) and WTI (-2.91%) underwent sizeable declines on the day. In fact on an intraday basis, Brent crude traded at $92.78 per barrel at its lows, which exactly matches its previous intraday low on August 5, and prior to that you’ve got to go back before Russia’s invasion of Ukraine in late February for the last time that oil prices were trading lower. That decline in oil prices was offered further support by the latest developments on the Iran nuclear deal, where Iran sent its response to the European Union’s proposed text to revive the deal. While the specific contents of the response are unknown, it’s been reported by the semi-official Iranian Students’ News Agency that Iran expects a response back from the EU within the next two days, so there could be tangible progress this week. Furthermore, Iran’s foreign minister said that an agreement with the US could be reached in the coming days. That trend towards weaker oil prices has continued this morning as well, with Brent crude down a further -0.87% at $94.27/bbl, and WTI down -0.62% at $88.86/bbl. Whilst oil prices fell back yesterday, the seemingly inexorable move higher in European natural gas continued, with futures up +6.79% on the day to €220 per megawatt-hour, which is just shy of their March peak at €227. Prices have been bolstered by the latest European heatwave, which has seen rivers dry up and caused issues with fuel transportation, further compounding the continent’s existing woes on the energy side. That gloomy backdrop saw Germany’s government announce a levy of an extra 2.419 euro cents per kilowatt hour for natural gas, which comes as policymakers are hoping that measures to reduce demand will help the continent get through the winter. Meanwhile, German and French power prices for next year rose to fresh records yesterday, rising +3.67% and +3.24% respectively. In light of the decline in oil prices and the more general risk-off tone, sovereign bonds rallied on both sides of the Atlantic yesterday, and yields on 10yr Treasuries came down -4.3bps to 2.79%. Inflation breakevens led the bulk of that decline amidst the moves lower in commodity prices, with the 10yr breakeven down by -2.9bps, whilst the 2s10s curve (+2.1bps) remained firmly in inversion territory at -40.0bps, even as it underwent a modest steepening. For Europe there were even larger declines in yields yesterday, with those on 10yr bunds (-8.8bps), OATs (-8.1bps) and BTPs (-6.5bps) all moving lower on the day, which came as investors moved to price in a less aggressive ECB hiking cycle over the coming months, with the June 2023 implied rate down by -9.9bps on the day. In overnight trading, yields on 10yr USTs (-0.9bps) have posted a further decline to 2.78% as we write. One asset class that didn’t fit this pattern so well were equities yesterday, as they pared back their earlier losses to move higher on the day, building on a run of 4 consecutive weekly moves higher. In the US, the S&P had opened -0.54% lower, but reversed course to end the session up +0.40%, which brings its advances from its recent low in mid-June to more than +17% now. It was a fairly broad-based advance across sectors, and the NASDAQ posted a similar +0.62% gain as well, whilst in Europe, the STOXX 600 (+0.34%) also strengthened in the afternoon to post a 4th consecutive daily advance. Those moves in US and European equities have been echoed in Asia this morning, with the Hang Seng (+0.12%), Shanghai Composite (+0.24%), CSI (+0.13%) and the Kospi (+0.31%) all edging higher in early trade. The main exception is the Nikkei (-0.08%), which has lost ground modestly after reaching a 7-month high in the previous session. That said, there are signs that equities may be losing momentum as well this morning, with futures on the S&P 500 (-0.12%) and the NASDAQ 100 (-0.12%) both pointing lower following their strong run of gains recently. To the day ahead now, and data releases from the US include July’s industrial production, capacity utilisation, housing starts and building permits. In the UK, there’s unemployment for June, Germany has the ZEW survey for August and Canada has July’s CPI. Elsewhere, we’ll get earnings releases from Walmart and Home Depot. Tyler Durden Tue, 08/16/2022 - 08:20.....»»

Category: worldSource: nytAug 16th, 2022

10 Dividend Stocks to Buy According to Billionaire Louis Bacon

In this article, we discuss 10 dividend stocks to buy according to billionaire Louis Bacon. You can skip our detailed analysis of Moore Global Investments’ performance, and go directly to read 5 Dividend Stocks to Buy According to Billionaire Louis Bacon.  Louis Bacon founded Moore Global Investments in 1989 and is currently serving as the […] In this article, we discuss 10 dividend stocks to buy according to billionaire Louis Bacon. You can skip our detailed analysis of Moore Global Investments’ performance, and go directly to read 5 Dividend Stocks to Buy According to Billionaire Louis Bacon.  Louis Bacon founded Moore Global Investments in 1989 and is currently serving as the chairman and principal investment manager of the firm. The investment management firm mainly invests in private equity markets and global financial markets. As of August 2022, Bacon has a net worth of over $1.6 billion. Bacon is one of the most prominent traders on Wall Street and specializes in macro trading. His investment strategy involves betting on currencies, bonds, and commodities while analyzing global political and economic conditions. He made large profits during the crash in Japanese stocks in 1990 and Black Wednesday in 1992 when the UK Government was forced to withdraw the pound sterling from the European Exchange Rate Mechanism. In 2019, Bacon privatized three of his multi-manager flagship funds, returning assets to outside investors. The step was taken due to intense competition for trading talent and the negative results of these funds over the years. However, these funds returned a total of over $19 billion in profits to its shareholders. Returning external money lifted the returns of the fund, which ended 2020 with a 70% return, according to a report by the Financial Times. As of the end of Q1 2022, Moore Global Investments’ 13F portfolio was valued at nearly $4 billion, down from $5 billion in the previous quarter. The hedge fund invested in a wide range of sectors during the quarter, with technology making up the major portion of the portfolio. Some of the fund’s major holdings are Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and, Inc. (NASDAQ:AMZN). In this article, we will discuss dividend stocks in Louis Bacon’s portfolio. Louis Bacon Moore of Moore Capital Our Methodology: These stocks are picked from the Q1 portfolio of billionaire Louis Bacon’s hedge fund. Dividend Stocks to Buy According to Billionaire Louis Bacon 10. Comcast Corporation (NASDAQ:CMCSA) Dividend Yield as of August 8: 2.82%   Moore Global Investments’ Stake Value: $9,216,000 Comcast Corporation (NASDAQ:CMCSA) is an American telecommunications company that provides internet and home phone services. In Q2 2022, the company reported $6.3 billion in operating cash flow, up from $6.1 billion during the same period last year. The company generated $3.1 billion in free cash flow and paid $1.2 billion in dividends during the quarter, which shows that its FCF is enough for dividend payments. It ended the quarter with $6.8 billion available in cash and cash equivalents. Comcast Corporation (NASDAQ:CMCSA) holds a 14-year track record of consistent dividend growth. The company pays a quarterly dividend of $0.27 per share, with a yield of 2.82%, as of August 8. At the end of Q1 2022, Moore Global Investments owned 196,836 shares in Comcast Corporation (NASDAQ:CMCSA), reducing its position in the company by 15%. The hedge fund’s total stake in the company amounted to over $9.2 million, which represented 0.23% of Louis Bacon’s portfolio. At the end of Q1 2022, 78 hedge funds in Insider Monkey’s database owned stakes in Comcast Corporation (NASDAQ:CMCSA), down from 80 a quarter earlier. These stakes are collectively valued at over $7 billion. Among these hedge funds, First Eagle Investment Management owned the largest stake in the company in Q1. Comcast Corporation (NASDAQ:CMCSA) is down 24.5% year-to-date, just like major tech stocks, such as Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and, Inc. (NASDAQ:AMZN), which have also lost their value in 2022 so far. ClearBridge Investments mentioned Comcast Corporation (NASDAQ:CMCSA) in its Q4 2021 investor letter. Here is what the firm had to say: “Weakness among our holdings in the communication services sector was the other detractor to performance. Comcast was hurt by tepid subscriber growth in its broadband business but demonstrated strong growth in free cash flow, positioning the company for accelerated capital return going forward.” 9. Lockheed Martin Corporation (NYSE:LMT) Dividend Yield as of August 8: 2.63%   Moore Global Investments’ Stake Value: $10,911,000 Lockheed Martin Corporation (NYSE:LMT) is an American aerospace company that specializes in defense and information security. Moore Global Investments started building its position in the company during the third quarter of 2012, with shares worth over $1 million. In Q1 2022, the hedge fund bought an additional stake worth over $6.6 million, boosting its position in the company by 108%. The company accounted for 0.27% of Louis Bacon’s portfolio. Lockheed Martin Corporation (NYSE:LMT) has been paying dividends to shareholders consistently since 1996 while maintaining a 19-year track record of dividend growth. The company pays a quarterly dividend of $2.80 per share, with a yield of 2.63%, as of August 8. In July, Susquehanna lifted its price target on Lockheed Martin Corporation (NYSE:LMT) to $539 with a Positive rating on the shares, expecting the company to maintain growth in domestic and international defense spending. The number of hedge funds tracked by Insider Monkey owning stakes in Lockheed Martin Corporation (NYSE:LMT) grew to 56 in Q1 2022, from 42 in the previous quarter. The collective value of these stakes is over $2.44 billion. Ariel Investments mentioned Lockheed Martin Corporation (NYSE:LMT) in its Q3 2021 investor letter. Here is what the firm has to say: “Conversely, leading global defense contractor Lockheed Martin Corporation (LMT) was the greatest detractor over the trailing one-year period due to pared back F-35 delivery plans and weaker than expected 2022 sales guidance. Nonetheless, we remain confident in LMT’s positioning as they continue to secure a steady stream of lucrative contracts and benefit from a sizeable backlog. Looking ahead, management is focused on driving innovation, underscored by the pending acquisition of Aerojet Rocketdyne enabling vertical integration in propulsion systems for space and missile defense. At today’s valuation, LMT is currently trading at a 32% discount to our estimate of private market value.” 8. The Mosaic Company (NYSE:MOS) Dividend Yield as of August 8: 1.15%   Moore Global Investments’ Stake Value: $14,963,000 An American agricultural corporation, The Mosaic Company (NYSE:MOS) announced a quarterly dividend of $0.15 per share in May, raising it by 33%. This was the company’s third consecutive year of dividend growth. As of August 8, the stock’s dividend yield came in at 1.15%. The Mosaic Company (NYSE:MOS) is one of the latest acquisitions of Moore Global Investments. The hedge fund initiated its position in the company with 225,000 shares, worth nearly $15 million. The company represented 0.38% of Louis Bacon’s portfolio. In August, Citigroup upgraded The Mosaic Company (NYSE:MOS) to Buy while lifting its price target to $61. The firm expects the agricultural stocks to perform well in a slowing economic environment. The Mosaic Company (NYSE:MOS) was a popular buy among elite funds in Q1 2022, as 66 hedge funds tracked by Insider Monkey owned stakes in the company, up from 46 in the previous quarter. These stakes hold a value of over $1.5 billion. Soroban Capital Partners was the company’s leading stakeholder in Q1. Carillon Tower Advisers mentioned The Mosaic Company (NYSE:MOS) in its Q1 2022 investor letter. Here is what the firm has to say: “Despite a rally near the end of the quarter, major equity indexes closed lower as fear of U.S. Federal Reserve (FED) balance sheet tapering, interest rate hikes, and war in Ukraine sent the bulls into retreat. Supply chains eased for some goods, but remained challenged for many commodities including energy, agriculture, and fertilizer due to war and general scarcity, and also in many consumer products as semiconductors remained in short supply. Potash and phosphate fertilizer producer Mosaic (NYSE:MOS) performed strongly as war exacerbated already short supplies of key oil and gas exploration.” 7. Northrop Grumman Corporation (NYSE:NOC) Dividend Yield as of August 8: 1.45%   Moore Global Investments’ Stake Value: $15,299,000 Northrop Grumman Corporation (NYSE:NOC) is a Virginia-based aerospace company that specializes in defense technology. In Q1 2022, Moore Global Investments increased its stake in the company by 389%, purchasing additional 27,208 shares. The hedge fund’s total stake in the company amounted to nearly $15.3 million, which represented 0.38% of Louis Bacon’s portfolio. On May 18, Northrop Grumman Corporation (NYSE:NOC) declared a quarterly dividend of $1.73 per share, up 10% from its previous dividend. The company has been growing its dividend consistently for the past 18 years, bringing its annual dividend to $6.92 per share in 2022, from $1.60 per share in 2003. As of August 8, the stock’s dividend yield was recorded at 1.45%. In July, Susquehanna lifted its price target on Northrop Grumman Corporation (NYSE:NOC) to $530 while maintaining a Positive rating on the shares. At the end of Q1 2022, 39 hedge funds in Insider Monkey’s database owned stakes in Northrop Grumman Corporation (NYSE:NOC), up from 33 in the previous quarter. The total value of these stakes came in at $940.3 million. LRT Capital Management mentioned Northrop Grumman Corporation (NYSE:NOC) in its Q2 2022 investor letter. Here is what the firm has to say: “Based in Virginia, Northrop Grumman is one of the world’s largest defense contractors with annual revenue of more than $30 billion. The company operates in a cozy oligopoly, that after decades of consolidation the US defense market is now controlled by five large companies: The Boeing Company, General Dynamics Corporation, Lockheed Martin Corporation, Northrop Grumman Corporation, and Raytheon Technologies Corporation. (Click here to see the full text) 6. FedEx Corporation (NYSE:FDX) Dividend Yield as of August 8: 1.96%   Moore Global Investments’ Stake Value: $15,340,000 FedEx Corporation (NYSE:FDX), an American transport company, raised its quarterly dividend by 53% in June to $1.15 per share. This was the company’s 21st consecutive year of dividend growth. In the last five years, the company has raised its dividend at a CAGR of 13.4%. Its dividends are safe for the future as well, as its free cash flow generation has remained stable over the years. As of August 8, the stock’s dividend yield came in at 1.96%. In Q1 2022, Moore Global Investment owned 66,296 FDX shares, with a total value of over $15.3 million. The hedge fund trimmed its position in the company by 7% during the quarter and has been investing in the company since 2011. FedEx Corporation (NYSE:FDX) represented 0.38% of Louis Bacon’s portfolio in Q1. In June, BofA raised its price target on FedEx Corporation (NYSE:FDX) to $287 with a Buy rating on the shares, presenting a positive outlook on the stock. As per Insider Monkey’s Q1 2022, 52 hedge funds owned stakes in FedEx Corporation (NYSE:FDX) worth over $1.78 billion. In the previous quarter, 64 hedge funds held positions in the Tennessee-based company, with stakes valued at over $2.4 billion. Ken Griffin, Steve Cohen, and Israel Englander were some of the prominent stakeholders of the company in Q1. In addition to major tech stocks like Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and, Inc. (NASDAQ:AMZN), FedEx Corporation (NYSE:FDX) is also one of Louis Bacon’s prominent holdings in Q1.   Click to continue reading and see 5 Dividend Stocks to Buy According to Billionaire Louis Bacon.    Suggested articles: Billionaire Louis Bacon’s Top 10 Stock Picks 10 Best Aristocrat Dividend Stocks to Buy 10 Best Plastics Stocks to Buy Now Disclosure. None. 10 Dividend Stocks to Buy According to Billionaire Louis Bacon is originally published on Insider Monkey......»»

Category: topSource: insidermonkeyAug 9th, 2022

Scaling Ethereum: The Role Of Rollups

Scaling Ethereum: The Role Of Rollups Authored by Conor Ryder via, The growth of Decentralized Finance and more recently NFTs exposed Ethereum’s lack of scaling solutions for all to see. During the Bored Ape Yacht Club land sale only a few months ago, buyers paid over $10,000 in transaction fees per NFT, which surpassed the $6,000 or so price tag of the NFT itself. These transaction costs rear their ugly head every time the Ethereum network becomes congested - think times of extreme volatility like the Terra collapse or the Celsius crisis recently. Whatever your thoughts on Ether as an investment, the fact that the cost of using the network can exceed the price of the item being bought is a clear sign that the Ethereum blockchain isn’t fit for purpose in its current state. This Deep Dive will take a look at the data behind Layer 2 rollups, Ethereum’s quickest solution for scaling the network in the short term. There are two main ways to scale Ethereum: Improve the transaction capacity of the blockchain itself. The most effective way to upgrade the blockchain but also the most complicated. Sharding and other upgrades may not be seen for another year or more. Move to Layer 2. Instead of doing all the computational work on Layer 1 (Ethereum blockchain), a solution is to move the bulk of the work to Layer 2 - an off-chain network that reduces the computational strain on the Ethereum mainchain. The Layer 2 protocols responsible for achieving this scalability solution are called rollups. Layer 2 rollups are the fastest way to help Ethereum scale in the short term. Blockchain Improvements Improvements are being planned to the Ethereum network, most notably the Merge in September, which should see the energy consumption of the Ethereum blockchain reduced by about 99%. However, contrary to what some may think, the Merge itself won’t be a big factor in helping Ethereum solve its scalability issues. These fixes are due to come later in 2023 when the network begins the process of sharding. Sharding is beyond the scope of this deep dive but it essentially entails splitting the network into shards or seperate pieces in order to reduce congestion and improve transaction throughput. Transaction throughput is where Ethereum struggles compared to its ambitions to be the backbone of a new financial system. Currently, Ethereum can only handle about 15 transactions per second, compared to Visa’s 24,000 and Solana’s 50,000. Only when Ethereum completes its roadmap of sharding and other updates to the blockchain will it reach the elusive 100,000 transactions per second. We can see that optimistic and zK rollups offer respectable throughput improvements and when we factor in that there are, and will be, multiple protocols offering capacity for transactions, that throughput number starts to approach Visa’s level. In the absence of widespread upgrades to the blockchain, rollups definitely serve a purpose for the Ethereum network in the near term - with lower fees comes more adoption. Ethereum Fees Transaction fees on the Ethereum network are currently at their lowest levels since December 2020. A falling transaction fee is exactly what Ethereum needs, however in this instance it's related to a lack of demand. TVL of DeFi projects has plummeted while NFTs are in their first ever bear market, all combining to bring blockspace demand to recent lows. However, the low fees do offer us a glimpse into how Ethereum users might interact with protocols in the future if the fees weren’t so prohibitive. As decentralized exchange volume decreases year to date, one would assume that this paints a sufficient picture of the activity on these platforms. However, an interesting trend to examine is trade count, which arguably shows the actual usage on an exchange. Trade size is also a useful barometer for whale vs. retail activity and for the purposes of this article, a smaller trade size is indicative of more retail usage. Take Uniswap and Curve for example, Ethereum’s two largest decentralized exchanges by volume. Have users adjusted their behaviors in light of the lower fees? The answer is yes. The lowest transaction fees in nearly two years have seen trade sizes on the decentralized exchanges, such as Uniswap above, plummet while trade count actually rises. More trades are being placed by Uniswap users as transaction costs are low. Lower fees make DeFi more accessible to the average user and less geared towards whales, a nuance that is most definitely pivotal for the adoption of DeFi.  One decentralized exchange that is geared towards whales is Curve, an exchange specializing in stablecoin trading. We’ve observed a similar trend there where average trade size has fallen by over 80% while trade count rises. In contrast, Coinbase volumes are hovering around yearly lows as average trade size and trade count are both moving lower. In bear markets, volumes plummet on centralized exchanges as general interest among the public wanes. DeFi, however, still has plenty of use cases during a bear market (look at Curve’s role in the Terra collapse) and we can see that one factor of on-chain activity is Ethereum transaction fees, rather than general interest.  Reducing fees is priority number one for the Ethereum community in order to drive underlying adoption of the network. The quickest way to do that is via rollups. State of Rollups There are two main types of rollups, Optimistic and zK rollups, and their cost saving benefits have been clear to see already. Below are the fee comparisons between various Layer 2’s and Ethereum, according to Optimistic and zK rollups mainly differ on their treatment of transaction veracity - how do we know the block being sent back to the Ethereum network does not contain fake transactions? Optimistic Rollups Optimistic rollups (ORs) presume transactions are valid when sending rolled up transactions back to the Ethereum blockchain, hence the name Optimistic. This assumption can be tested with a process called fraud proofs, where an onlooker can claim a transaction is fraudulent. The period for this usually spans 7 days, which is widely accepted as the biggest drawback of optimistic rollups. An exchange might logistically struggle to support immediate withdrawals if it was subject to a 7 day waiting period on transactions.  The two largest ORs are Arbitrum, which has yet to release a token, and Optimism, which launched a token on June 1st this year. There are other Layer 2 protocols with tokens that investors can get exposure to, such as Boba, a governance token for the Boba network, another optimistic rollup. Dydx is also a governance token, this time for the operation of the Layer 2 version of the decentralized exchange, which depends on zK rollups. IMX is a Layer 2 scaling solution for NFTs on Ethereum and differs slightly from the other governance tokens as it also can be used to pay transaction fees on the platform. The market seemed to start arriving at the conclusion that optimistic rollups were just a band aid over a bigger issue as since the Optimism (OP) token launch, it underperformed not only ETH but also other Layer 2 protocols.  However, with the announcement of a final date for the Merge, the market became more bullish on the Ethereum blockchain as a whole and Optimism started to outperform. This bullish sentiment is also evident in the futures market for OP which has seen a large buildup of open interest while the funding rate has moved positive in the last week. zK Rollups While Optimistic rollups presume all transactions are valid and allow onlookers to submit fraud proofs, “Zero knowledge” (zK) rollups do the work of validating each transaction themselves by submitting a validity proof along with each bundle of transactions. This is why they are more computationally intensive and up until recently, not EVM compatible, but it is also why they are far faster at settlements and withdrawals - there is no need for a window for fraud proof. This near-instant settlement is extremely appealing to exchanges who need to be able to satisfy user withdrawals in a timely manner; exactly why dydx has already adopted a zK rollup on Layer 2. Due to the computational intensity of zK rollups, OR’s were initially rolled out quickest while developers worked on what was deemed the ‘holy grail’ of rollups, a zK rollup that was EVM compatible. In the last couple of weeks we may have witnessed the beginning of the zK rollup era, as three teams, Polygon, Matter Labs and Scroll, all announced breakthroughs with EVM compatible zK rollups.  Layer 2s and DEXs Looking specifically at Uniswap and Curve’s breakdown of TVL, we can see that only a small portion of their value sit on Layer 2 optimistic rollups (Optimism and Arbitrum): 1.9% on Uniswap and 1.8% on Curve. Uniswap currently has 97% of TVL sitting on the Ethereum mainchain, while Curve has 92%. It’s reasonable to expect that once a zK EVM compatible rollup is rolled out that this number will decrease and move towards Layer 2, allowing more DEX users to avail of the cheaper fees on offer. Conclusion Layer 2 rollups are an essential part of Ethereum’s short/mid-term scaling strategy and possibly even in the long term as the rollups will sit on top of the improved Ethereum network.  It looks as if zK rollups are beginning to arbitrage away the competitive advantages of optimistic rollups, and if the teams working on an EVM compatible zK rollup can successfully launch their products, I expect them to gain a large amount of market share, potentially with traffic directed from decentralized exchanges.   Vitalik Buterin: “my advice to teams like Optimism and Arbitrum is that I think they should start zK-ifying themselves fairly soon.” Tyler Durden Thu, 08/04/2022 - 22:20.....»»

Category: smallbizSource: nytAug 5th, 2022

Bally"s Corporation Announces Second Quarter 2022 Results

PROVIDENCE, R.I., Aug. 4, 2022 /PRNewswire/ -- Bally's Corporation (NYSE:BALY) today reported financial results for the second quarter ended June 30, 2022. Second Quarter 2022 Financial Highlights Revenue of $552.5 million Net income of $59.5 million Adjusted EBITDA of $141.2 million Lee Fenton, Chief Executive Officer said, "Our second quarter results reflect continued strength in our Casinos & Resorts segment, record margins in our International Interactive segment and continued growth in our North America Interactive segment particularly in in New Jersey, despite headwinds from significant FX volatility and challenges in Atlantic City. We are pleased with the Company's record cash flow from operations in the quarter and are focused on continued incremental cash flow generation initiatives." Summary of Financial Results Three Months Ended June 30, (in thousands, except percentages) 2022 2021 Revenue $            552,496 $            267,733 Net income $              59,501 $              68,942 Net income margin 10.8 % 25.8 % Adjusted EBITDA(1) $            141,224 $              82,825 Adjusted EBITDA margin(1) 25.6 % 30.9 % (1) Refer to tables in this press release for a reconciliation of these non-GAAP financial measures to the most directly comparable measure calculated in accordance with GAAP. 2022 Guidance Bally's is updating its previous guidance provided on February 24, 2022 for the year ending December 31, 2022 with revenue in the range of $2.2 billion to $2.3 billion and Adjusted EBITDA in the range of $535 million to $550 million reflecting six months of results, adverse foreign exchange movements and lower expectations for our Atlantic City property. The guidance is subject to a number of known and unknown uncertainties and risks, including those set forth under Bally's safe-harbor statement under the federal securities laws set forth below. Capital Return Program On July 27, 2022, the Company completed its tender offer and repurchased 4.7 million shares of its common stock for cash at a price of $22.00 per share for an aggregate purchase price of $103.3 million. Bally's currently has $334.6 million available for use under its previously announced capital return program. Reconciliation of GAAP Measures to Non-GAAP Measures To supplement the financial information presented on a generally accepted accounting principles ("GAAP") basis, the Company has included in this earnings release non-GAAP financial measures for Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDAR and Adjusted EBITDAR margin, which exclude certain items described below. The reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures are presented in the tables appearing below. "Adjusted EBITDA" is earnings, or loss, for the Company, or where noted the Company's reportable segments, before, in each case, interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, acquisition, integration and restructuring expenses, share-based compensation, and certain other gains or losses as well as, when presented for the Company's reporting segments, an adjustment related to the allocation of corporate costs among segments. Adjusted EBITDA margin is measured as Adjusted EBITDA as a percentage of revenue. "Adjusted EBITDAR" is Adjusted EBITDA (as defined above) for the Company's Casinos & Resorts segment plus rent expense associated with triple net operating leases. Adjusted EBITDAR margin is measured as Adjusted EBITDAR as a percentage of revenue. Management has historically used Adjusted EBITDA and Adjusted EBITDA margin when evaluating operating performance because the Company believes that these metrics are necessary to provide a full understanding of the Company's core operating results and as a means to evaluate period-to-period performance. Management also believes that Adjusted EBITDA is a measure that is widely used for evaluating operating performance of companies in the Company's industry and a principal basis for valuing such companies as well. Adjusted EBITDAR and Adjusted EBITDAR margin are used outside of our financial statements solely as valuation metrics. Management believes Adjusted EBITDAR and Adjusted EBITDAR margin are additional metrics traditionally used by analysts in valuing gaming companies subject to triple net leases since it eliminates the effects of variability in leasing methods and capital structures. Neither Adjusted EBITDA or Adjusted EBITDAR should be construed as an alternative to GAAP net income as an indicator of the Company's performance. In addition, Adjusted EBITDA or Adjusted EBITDAR as used by the Company may not be defined in the same manner as other companies in the Company's industry, and, as a result, may not be comparable to similarly titled non-GAAP financial measures of other companies. Bally's does not provide reconciliations of Adjusted EBITDA to net income on a forward-looking basis to its most comparable GAAP financial measure because Bally's is unable to forecast the amount or significance of certain items required to develop meaningful comparable GAAP financial measures without unreasonable efforts. These items include depreciation, impairment charges, gains or losses on retirement of debt, acquisition, integration and restructuring expenses, interest expense, share-based compensation expense, professional and advisory fees associated with Bally's capital return program and variations in effective tax rate, which are difficult to predict and estimate and are primarily dependent on future events, but which are excluded from Bally's calculations of Adjusted EBITDA. Bally's believes that the probable significance of providing these forward-looking non-GAAP financial measures without a reconciliation to the most directly comparable GAAP financial measure, is that investors and analysts will have certain information that Bally's believes is useful and meaningful regarding its operations, including its completed and proposed acquisitions and the estimated impact on those businesses' results from the anticipated changes Bally's is likely to make, or has made, to their operations, but will not have that information on a GAAP basis. Investors are cautioned that Bally's cannot predict the occurrence, timing or amount of all non-GAAP items that may be excluded from Adjusted EBITDA in the future. Accordingly, the actual effect of these items, when determined could potentially be significant to the calculation of Adjusted EBITDA.   Second Quarter Conference Call Bally's second quarter 2022 earnings conference call and audio webcast will be held today, Thursday, August 4, 2022 at 8:00 a.m. EDT. To access the conference call, please dial (800) 343-4849 (U.S. toll-free) and reference conference ID BALYQ22022. The webcast of the call will be available to the public, on a listen-only basis, via the Internet at the Investors section of the Company's website at An online archive of the webcast will be available on the Company's website for 120 days. Supplemental materials have also been posted to the Investors section of the website, under Events & Presentations. About Bally's Corporation Bally's Corporation is a global casino-entertainment company with a growing omni-channel presence of Online Sports Betting and iGaming offerings. It currently owns and manages 14 casinos across 10 states, a horse racetrack in Colorado and has access to OSB licenses in 18 states. It also owns Gamesys Group, a leading, global, online gaming operator, Bally's Interactive, a first-in-class sports betting platform, Monkey Knife Fight, a daily fantasy sports site in North America, SportCaller, a leading, global B2B free-to-play game provider, and Telescope Inc., a leading provider of real-time fan engagement solutions. With approximately 10,000 employees, Bally's casino operations include more than 15,800 slot machines, 500 table games and 5,300 hotel rooms. Upon closing the previously announced Tropicana Las Vegas (NV) transaction, as well as completing the construction of a land-based casino near the Nittany Mall in State College, PA, Bally's will own and manage 16 casinos across 11 states. Its shares trade on the New York Stock Exchange under the ticker symbol "BALY". Cautionary Note Regarding Forward-Looking Statements This press release contains forward-looking statements within the meaning of the federal securities laws.  Forward-looking statements may generally be identified by the use of words such as "anticipate," "believe," "expect," "intend," "plan" and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.  As a result, these statements are not guarantees of future performance and actual events may differ materially from those expressed in or suggested by the forward-looking statements. Any forward-looking statement made by Bally's in this press release, its reports filed with the Securities and Exchange Commission (the "SEC") and other public statements made from time-to-time speak only as of the date made. New risks and uncertainties come up from time to time, and it is impossible for Bally's to predict or identify all such events or how they may affect it. Bally's has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws. Factors that could cause these differences include, but are not limited to those included it the Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other reports filed by Bally's with the SEC. These statements constitute Bally's cautionary statements under the Private Securities Litigation Reform Act of 1995. Investor Contact Media Contact Robert Lavan Richard Goldman Chief Financial Officer Kekst CNC 401-475-8564 646-847-6102   BALLY'S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenue: Gaming $          455,088 $          207,490 $          918,790 $          362,768 Hotel 33,929 22,315 60,864 35,374 Food and beverage 27,435 23,382 51,423 38,882 Retail, entertainment and other 36,044 14,546 69,690 22,975 Total revenue 552,496 267,733 1,100,767 459,999 Operating (income) costs and expenses: Gaming 204,051 63,350 423,263 110,604 Hotel 9,731 7,506 18,313 12,655 Food and beverage 21,898 17,004 40,854 29,213 Retail, entertainment and other 14,755 2,021 27,854 3,818 Advertising, general and administrative 181,707 101,211 363,323 181,710 Goodwill and asset impairment — 4,675 — 4,675 Expansion and pre-opening 717 937 717 1,540 Acquisition, integration and restructuring 10,112 18,402 15,392 30,660 Gain from insurance recoveries, net of losses 14 (579) (150) (11,255) Rebranding 185 382 474 1,295 Gain on sale-leaseback (50,766) (53,425) (50,766) (53,425) Depreciation and amortization 74,773 25,717 153,654 38,503 Total operating costs and expenses 467,177 187,201 992,928 349,993 Income from operations 85,319 80,532 107,839 110,006 Other income (expense): Interest income 148 530 310 1,054 Interest expense, net of amounts capitalized (45,976) (21,829) (91,823) (42,627) Change in value of naming rights liabilities 20,032 19,070 33,411 (8,336) Gain (adjustment) on bargain purchases — 24,114 (107) 24,114 Other, net 5,412 (6,494) 11,619 (3,823) Total other income (expense), net (20,384) 15,391 (46,590) (29,618) Income before income taxes 64,935 95,923 61,249 80,388 Provision (benefit) for income taxes 5,434 26,981 (141) 22,151.....»»

Category: earningsSource: benzingaAug 4th, 2022

Pay Attention; This Is Not The "70s

Pay Attention; This Is Not The '70s Authored by Michael Lebowitz via, The markets are now betting that inflation will soon subside, allowing the Fed to pivot. But, if inflation proves persistent and not transitory, the Fed may have much more work to do, to the detriment of asset prices. There are two schools of thought on the issue of transitory versus persistent inflation. One school thinks high inflation will arrest the current inflation surge, thus proving inflation transitory this time. On the other side of the argument, the BIS warns that inflation can remain persistent in high inflation regimes as they fear we are entering. Both views may be correct. The current surge in inflation may be transitory, but we may be entering a long period where inflation remains moderately above that of the last 20 years. This article compares the two viewpoints to help appreciate how inflation might behave in the coming months and years. Given the Fed’s enormous impact on markets and its extremely hawkish stance due to inflation, a well-reasoned inflation forecast is imperative for investors. Transitory Inflation Many economists believe higher prices result in demand destruction, which normalizes supply/demand price curves and arrests sharp increases in prices over the coming months. Walmart and other retailers help support this idea. Per Walmart’s press release on 7/25/2022: “The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars.“ The graph below shows that prior spikes of high inflation were transitory. In those instances, high inflation rates lasted for up to two and half years but fell just as quickly as they rose. Persistent Inflation The Bank for International Settlements (BIS) recently published Inflation: a look under the hood. In the article, they argue that high inflation regimes, as we may be entering, can be persistent, not transitory. It is worth distinguishing that in a high inflation regime, inflation can be volatile and not persistently very high. Essentially the average inflation rate over the regime is elevated from that of a low inflation regime. If the BIS is correct, inflation may fall sharply in the next three to six months, but average inflation rates over the next decade or more may linger well above the Fed’s preferred 2% objective. Today’s Bout of Inflation Economist Milton Friedman once stated, “inflation is always and everywhere a monetary phenomenon.” Basically, the more money, the more inflation and vice versa. While we largely subscribe to his theory, the current bout of inflation is due to monetary machinations, as he posits, but also the result of supply problems. Understanding how money is created is vital to understanding inflation. Contrary to popular opinion, the Fed does not print money. All money is lent into existence. The Fed simply adds or subtracts reserves at banks. Excess reserves allow banks to lend money and thus print money.  In 2020 and 2021, the Federal government borrowed over $6 trillion. By doing so, they significantly increased the money supply. However, new money is inflationary only if the money is spent. Printing a zillion dollars and burying it in a hole should not affect prices. Unlike the traditional spending habits of the government, during the pandemic, they borrowed and wrote checks to individuals and companies. The economy was essentially mainlining money versus a slower drip that often accompanies government borrowing and spending. The graph below shows the monetary base rose by over $3 trillion in less than two years. That compares to a similar $3 trillion growth over seven years after the financial crisis. At the same time money was coursing through the economy, the supply of goods and services came to a halt. Global supply lines around the world were hampered. The basic laws of supply and demand took hold, and prices surged higher. The Transitory View As the graph above shows, the monetary base is starting to decline. In fact, it has declined 8.6% over the last year. Fiscal deficits have normalized, albeit at high levels. More importantly, the direct flow of money from the government to the economy has concluded. Lastly, consider the supply lines here and abroad are healing, allowing the supply of goods and services to normalize. Assuming the current political stalemate prevents large doses of fiscal stimulus and supply line problems continue to ease, prices should fall.   Further supporting the view, wages are not keeping up with inflation which puts consumers in a financial bind. Many people struggle with no choice but to reduce their spending or rely on credit and savings to prop it up. Personal savings have fallen to 12-year lows, and credit card use is expanding rapidly. The means to consume are dwindling. The Fed is reducing system liquidity to fight inflation. By doing so, new money creation (bank loans) declines. Ergo, given price supply/demand curves are normalizing quickly, we believe the current bout of inflation is the cure for this bout of inflation. Like prior high inflation, it seems likely the recent outbreak of transitory inflation is also coming to an end. BIS Self-Feeding Dynamics The BIS has a different opinion. They believe that as prices rise above 5%, “self-feeding dynamics kick in.” The BIS explains two inflation regimes, which they call low and high. Low is what we were accustomed to over the last 30+ years. In a low regime, the primary driver of temporary inflation is when the prices of specific goods and services rise or fall out of step with most other prices. Such changes tend to last for short periods and do not affect consumption choices. The BIS argues that inflation drives consumer and corporate spending decisions in a high inflation regime. This results in behavioral changes, which cause individual prices of goods and services to become more correlated. Inflation begets inflation and therefore becomes persistent. To their point, the graph below shows that prices become more correlated with each other as inflation rates rise above 5%. Price-Wage Spiral When inflation becomes recognized and is no longer perceived as transitory, personal and business economic decisions change. Per the BIS: Once the general price level becomes a focus of attention, workers and firms will initially try to make up for the erosion of purchasing power or profit margins that they have already incurred. This circular dynamic is known as a price-wage spiral. Employees and unions demand higher wages to combat inflation. To meet their demands and maintain profit margins, companies raise prices. Higher prices call for renewed demands for higher wages, and on and on. The graphs below show little correlation between wages and inflation in low inflation environments. However, the correlation picks up markedly in the 1964-1985 high inflationary regime. Can We Compare The 70s to 2022? While the BIS report provides food for thought, we must consider the only recent experience with persistent inflation (>5%) was over 40+ years ago. At the time, there was little debt and much less economic reliance on debt and interest rates. Today’s economy is heavily reliant on low-interest rates. A two to three percent increase in interest rates will have a much more significant negative effect on the economy than forty years ago. Because of this dynamic, Fed policy is a much bigger determinant of inflation and economic activity than it ever has been. If true, the Fed should be able to manage inflation better this time around. Unlike in the 70s and 80s, wages are not keeping up with inflation. De-unionization and outsourcing jobs over the last forty years are partially responsible. Until very recently, workers had little leverage. If that is changing in today’s tight labor market, the odds of a price-wage spiral will increase. Summary Stay humble on your inflation stance. No one has a crystal ball on whether inflation will be transitory or persistent. While we think transitory, we understand there are many forces driving prices, and the relationship between many of them is not fully understood or appreciated. If a price-wage spiral develops, the likelihood of persistent inflation is real. This scenario must scare the Fed. It will force them to reduce employment and kick the legs out of a wage-price spiral. In the late 70s, P/Es on stocks were in the single digits, and debt levels were negligible. Today, valuations are nearly four times those levels, and debt as a percentage of GDP is at levels considered unthinkable not that long ago. As we wrote earlier, Fed monetary policy is much more influential on economic activity because of the enormous reliance on debt and interest rates. Accordingly, their policy actions and direct and indirect effects on liquidity greatly influence asset prices. The Fed is in the driver’s seat, and its reaction to inflation will dictate market returns. Pay attention; this is not the 1970s! Tyler Durden Wed, 08/03/2022 - 08:20.....»»

Category: blogSource: zerohedgeAug 3rd, 2022

DraftKings Q2 Preview: Should Investors Bet on an EPS Beat?

Online gambling has exploded over the last several years. Simply put, everybody wants to roll the dice. Online gambling has exploded over the last several years. We see the advertisements everywhere, and as more states legalize it, it looks like it’s here to stay. Simply put, everybody wants to roll the dice.The industry also offers a unique investment opportunity. One of the titans in the space, DraftKings DKNG, is slated to release quarterly results on Friday, August 5th, before the market opens.DraftKings is a multi-channel provider of sports betting and gaming technologies, powering sports and gaming entertainment for 50 operators across more than 15 regulated U.S. and global markets. It’s the only U.S.-based vertically integrated sports betting operator.In addition, the company boasts a Zacks Rank #2 (Buy). How does the gambling titan shape up heading into the print? Let’s find out.Share Performance & ValuationOver the last year, DraftKings shares have plunged, losing more than two-thirds of their value and being stuck on a nasty downtrend throughout the period.Image Source: Zacks Investment ResearchHowever, take a look at the chart below.Image Source: Zacks Investment ResearchDKNG shares have been on a parabolic run over the last month, tacking on an impressive 32% in value and crushing the S&P 500’s performance. After hiding all year long, buyers have finally launched their counterattack.DraftKings valuation levels appear slightly elevated, further bolstered by its Style Score of an F for Value. The company’s forward price-to-sales ratio resides at 5.4X, well below its median of 18.6X since IPO in 2020 but representing a steep 27% premium relative to the general market.Image Source: Zacks Investment ResearchQuarterly EstimatesOne analyst has upped their earnings outlook for the quarter, with the Consensus Estimate Trend inching up 1.1%. The -$0.87 Zacks Consensus EPS Estimate reflects a 15% decrease in quarterly earnings year-over-year.Image Source: Zacks Investment ResearchHowever, the company’s top-line is in much better condition – the quarterly revenue estimate of $438 million pencils in a sizable 47% double-digit uptick in quarterly sales year-over-year.Quarterly Performance & Market ReactionsDraftKings has struggled to report bottom-line results above expectations, recording seven EPS misses over its nine quarterly reports. However, the narrative is changing – DKNG has recorded back-to-back bottom-line beats over its last two prints.Additionally, top-line results have been rock-solid, with the company recording seven revenue beats over its nine quarterly prints. The chart below illustrates DraftKings’ revenue on a quarterly basis.Image Source: Zacks Investment ResearchIt’s worth noting that the market has reacted poorly as of late to the company’s quarterly results, with shares moving downwards following each of its previous two earnings releases.Putting Everything TogetherDraftKings shares have lost immense value over the last year, but buyers have stepped up significantly over the previous month, driving shares upwards.The company’s valuation levels appear slightly elevated relative to the general market but are low relative to where shares have traded historically.Earnings are forecasted to take a sizable hit, but the top-line is projected to register serious growth. In addition, the company has repeatedly recorded revenue beats, and the bottom-line has found consistency as of late.Heading into the print, DraftKings DKNG boasts a Zacks Rank #2 (Buy) with an Earnings ESP Score of 1.3%. Zacks' Top Picks to Cash in on Electric Vehicles Big money has already been made in the Electric Vehicle (EV) industry. But, the EV revolution has not hit full throttle yet. There is a lot of money to be made as the next push for future technologies ramps up. Zacks’ Special Report reveals 5 picks investorsSee 5 EV 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 DraftKings Inc. (DKNG): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksAug 2nd, 2022