Ukraine is burning through artillery shells. Now the US is increasing production by 500%.

The US currently manufactures just over 14,000 rounds of 155mm ammunition every month. Ukrainian forces have fired that many in just 48 hours. US soldiers train with M777 howitzers at Schofield Barracks, Hawaii, June 3, 2021US Army/Spc. Jessica Scott The US is aiming to increase production of a key artillery shell used by Ukraine. The hope is to manufacture 90,000 rounds of 155mm ammunition by 2025. The US currently makes just over 14,000 rounds per month. The United States is planning to dramatically ramp up production of a key artillery round that Ukraine has used to beat back Russia's full-scale invasion of the country, The New York Times reported Tuesday.Under the latest proposal, the US aims to within two years produce up to 90,000 rounds 155mm of ammunition every month, The Times reported, citing a US Army report.That's more than double the goal detailed just last month by Army Secretary Christine Wormuth, who told reporters the goal was to manufacture "20,000 rounds a month" by this spring and 40,000 by 2025.The increase comes after some US officials have expressed concern that US aid to Ukraine has depleted the country's stockpile of the ammunition. Last summer, one defense official told The Wall Street Journal that the country's supply of 155mm rounds was "uncomfortably low" and "not at the level we would like to go into combat."As of January 18, the US had already committed to providing Ukraine with at least 160 M777 Howitzers and just under 1.1 million of the 155mm artillery rounds they use. But it is burning through them fast.Currently, the US produces just over 14,000 rounds of 155mm ammunition every month. As The Washington Post reported last month, Ukrainian forces have previously fired that many rounds in the span of 48 hours.Have a news tip? Email this reporter: cdavis@insider.comRead the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 24th, 2023

Russia is running out of new rockets and artillery shells and may need to rely on "unpredictable" decades-old ammo instead, US military official says

A senior US military official said that Russia likely won't be able to keep up its current rate of rocket and artillery fire past early next year. A Ukrainian soldier of an artillery unit fires towards Russian positions outside Bakhmut on November 8, 2022, amid the Russian invasion of Ukraine.BULENT KILIC/AFP via Getty Images Russian forces are quickly using up their arsenal of fresh ammunition, a US military official said. Because of this, Moscow's troops may have to fire questionable, decades-old munitions instead.   Russia likely won't be able to keep up its current rate of artillery and rocket fire past early next year. Russian forces are quickly burning through their stockpiles of fresh ammunition, and they may soon be forced to use older, unreliable munitions instead, a senior US military official said. Stocks of fully serviceable — or new — ammunition are "rapidly dwindling" and putting pressure on Russia to use explosives that are in "degraded conditions," the official told reporters during a Tuesday briefing, adding that Moscow likely won't be able to sustain its current rate of artillery and rocket fire past early 2023.  For this reason, the official said, Russian forces have to assess their tolerance for "increased failure rates, unpredictable performance" and if the "degraded munitions" need to be restored. But since Russia has already shown over the course of the war that it will draw from an "aging" stockpile of weapons, armor, and munitions, there are indications that the country is willing to risk using ammunition that was manufactured more than 40 years ago, the official said. Western intelligence previously assessed that Russia has pulled obsolete tanks out of storage and outfitted its soldiers with Soviet-era rifles that were rendered barely usable due to poor storage over the years.  If rockets and artillery shells are kept in storage for a long period of time without proper care and maintenance, they have the potential to degrade, putting them at risk to explode when they're not supposed to or simply not explode at all."In other words," the senior military official said, "you load the ammunition, and you cross your fingers and hope it's going to fire. Or, when it lands that it's going to explode."The official added that the "Russian military will very likely struggle to replenish its reserve of fully-serviceable artillery and rocket ammunition through foreign suppliers, increased domestic production and refurbishment."Director of National Intelligence Avril Haines, the top US intelligence official, delivered similar remarks earlier in December and said that Russia is burning through its munitions stockpiles faster than the country's arms makers can replace them.And as Russia expends its stockpiles of artillery and precision-guided munitions in Ukraine, it continues to face sweeping and hard-hitting international sanctions. US officials have said this pressure on Russia is why Moscow is turning to countries like Iran and North Korea for help. "This is why it's not surprising that they're reaching out to countries like Iran and North Korea to try to obtain some more dependable ammunition," the senior military official said Tuesday of Russia's struggle to restock its arsenal of munitions.A top UK envoy said Friday at the United Nations that Russia is looking to secure "hundreds" of ballistic missiles from Iran, and in return, it is offering the country "unprecedented" military and technical support.Iran previously provided Russia with a variety of combat drones, including the Shahed-136 — a suicide drone which for weeks this past fall became a go-to weapon for Moscow as it carried out attacks against Ukraine's civilian infrastructure, specifically in the energy sector.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 13th, 2022

US Futures Drop As Chinese Stocks Soar On Reopening Optimism

US Futures Drop As Chinese Stocks Soar On Reopening Optimism US stock futures fell on Monday as investors weighed the outlook for economic growth against the possibility of a softening in the Federal Reserve’s policy, or in other words, whether bad news is again bad news. At the same time, and just one week after China was swept by violent anti-covid zero protests, Chinese stocks in listed in the US rose sharply after Hong Kong-listed peers rallied and the offshore yuan strengthened past the key 7.00 level after Chinese authorities eased Covid testing requirements across major cities over the weekend. The financial hub of Shanghai scrapped PCR testing requirements to enter outdoor public venues such as parks or use public transportation starting Monday. Hangzhou, home to tech giant Alibaba dropped obligations to enter most public venues including offices and supermarkets, while Shanghai also eased rules.  As a result, Hong Kong’s Hang Seng Tech Index closed at session highs, soaring some 9.2%, the biggest jump since Nov. 11, after China eased Covid testing requirements across major cities over the weekend. Meanwhile in the US, Nasdaq 100 futures were down 0.4% by 7:30 a.m. in New York, while S&P 500 futures dipped 0.5%. The indexes shrugged off a hotter-than-expected jobs report on Friday as investors and erased almost all early losses as they remained optimistic that the Fed would slow the pace of interest rate hikes at its meeting this month. The dollar remained near session lows, boosting most Group-of-10 currencies. Treasury yields climbed across the curve. Oil advanced after OPEC+ kept its 2 million production cut and amid growing signs China is reopening, while gold was little changed. Bitcoin rose more than 1%, gaining for a second day. The S&P 500 is on course for its biggest fourth-quarter gain since 1999 as signs of a cooling in US inflation have led to a pullback in bond yields, but market participants warn the outlook for next year remains uncertain amid the risk to corporate earnings from the specter of a recession. Among notable moves in premarket trading, US-listed Chinese stocks extended their torrid rally as easing Covid curbs in major Chinese cities fueled optimism that Beijing is hastening the shift away from its Covid Zero strategy; Alibaba rose 5.2%, Baidu +5.6%, Pinduoduo +5%, +5.6%, Bilibili +16%, Nio +6.3%, XPeng +11%. Cryptocurrency-exposed stocks rose as Bitcoin extended gains for a second day. Tesla slipped as much as 4.8% after a Bloomberg News report said that the electric vehicle maker planned to lower production at its Shanghai factory. Here are the other notable premarket movers: Activision Blizzard rises 2.3% after Bloomberg News reported that Microsoft is ready to fight for its $69 billion acquisition of the video gaming company if the US Federal Trade Commission files a lawsuit seeking to block the deal. Marathon Digital and Riot Blockchain lead cryptocurrency-exposed stocks higher as Bitcoin extends gains for a second day. Marathon Digital +4.9%, Riot Blockchain (RIOT US) +2.8% and Coinbase  +2.3% Keep an eye on airlines’ shares as Morgan Stanley says 2023 could be a “Goldilocks” year for air travel, boosting earnings beyond current expectations, as the broker upgrades United Airlines to overweight and cuts Allegiant Travel to equal-weight. Alaska Air is initiated with a buy recommendation at Citi, saying the carrier has attributes to offset headwinds facing domestic airlines in 2023. Additionally, the broker begins coverage on JetBlue with a neutral rating. Watch Terex as Deutsche Bank cut its rating to hold from buy on recent outperformance, saying that it’s best to stay defensively-positioned on US industrial stocks into 2023. Keep an eye on Ameris Bancorp and Atlantic Union (AUB US) as Piper Sandler resumed coverage on US mid-Atlantic and southeast banks, saying the two lenders are its preferred larger-cap names with both at attractive entry points. “Despite an increasingly optimistic end to the year, the main indexes seem unlikely to recover their lost ground and the current rally may be too little, too late,” said Richard Hunter, head of markets at Interactive Investor. Moreover, “doubts still linger” on how much more the Fed will still need to raise interest rates and the impact of higher-for-longer inflation, he said. Morgan Stanley strategist Michael Wilson said the year-end rally he had predicted had now run its course and investors are better off booking profits from here on. He sees an “absolute upside” for the S&P 500 at 4,150 points -- about 2% above current levels -- which could be achieved “over the next week or so.” Notable other US headlines: WSJ's Timiraos writes that Fed officials have signalled plans to hike by 50bp at the December gathering, though elevated wage pressures could lead them to continue increasing rates to levels higher than investors currently expect. Delta Air Lines (DAL) confirmed it reached an agreement in principle for a new pilot contract after it offered a 34% pay increase to pilots over 3 years, according to Reuters. Apple (AAPL) supplier Foxconn (2317 TT) expects full production at its COVID-hit plant in China to resume from late December to early January, while the Co. and the local government are pushing hard on the plant's recruitment drive but many uncertainties remain, according to sources cited by Reuters. Moldova’s central bank is to conduct an extraordinary meeting on Monday to assess its main policy indicators including the policy rate, according to Reuters. Iran’s Attorney General announced that Iran abolished its morality police and is considering changing hijab laws following the protests, according to WSJ. Euro Stoxx 50 falls 0.2%. FTSE 100 outperforms peers, adding 0.3%. Here are some of the biggest European movers today: Tech investors Naspers and Prosus both gain more than 5% in Johannesburg trading Monday after Chinese authorities accelerate a shift toward reopening the economy. European mining stocks in focus as metals advance after Chinese authorities eased Covid testing requirements across major cities over the weekend. Rio Tinto and Glencore shares rise as much as 3.7% and 2.4% respectively. Credit Suisse shares climb as much as 3.7% in early trading after the Wall Street Journal reported that Saudi Arabia’s Crown Prince Mohammed bin Salman is preparing to invest in the Swiss lender’s investment-bank unit. Grifols shares rise as much as 6.5% in early trading after Morgan Stanley raised to overweight from equal-weight on the expectation that 2023 will be a “strong growth year” supported by accelerating plasma collections and early signs of declining donor fees. Bayer shares slide as much as 2.8%, the most in about a month, after Bank of America cut its recommendation for the German agropharmaceutical giant to neutral on the company’s lack of catalysts after a 2022 outperformance. FlatexDEGIRO shares fall as much as 38%, the biggest intraday drop since its 2009 listing, after the online brokerage firm cut its revenue forecast and said it was working on measures to address shortcomings in some business practices and governance identified by a BaFin audit. German catering equipment company Rational sinks as much as 9%, making them the worst performer in the Stoxx 600, after Bank of America initiated coverage on the stock with an underperform recommendation, citing a “demand crunch” in 2023. Swedish Orphan Biovitrum shares drop as much as 2.2% after Morgan Stanley downgrades the stock to equal-weight from overweight. Asian stocks rebounded, inching closer to bull market territory, as Chinese equities resumed their rally on further relaxation of Covid rules in Asia’s biggest economy. The MSCI Asia Pacific Index climbed as much as 1.4%, led by communication services and consumer discretionary shares. Benchmarks in Hong Kong led gains in the region with the Hang Seng Tech Index soaring more than 9% and the Hang Seng China Enterprises Index up roughly 5%. Morgan Stanley upgraded China to overweight. Investors cheered latest signs of China pivoting from its strict virus rules as authorities eased Covid testing requirements across major cities over the weekend, including the financial hub of Shanghai. The move fueled gains in reopening stocks in China and its neighboring countries such as South Korea. Markets were closed in Thailand for a holiday. The moves coincided with growing bullish calls from Wall Street banks on Chinese equities, with more market watchers calling a bottom in the nation’s shares. Morgan Stanley upgraded China stocks to overweight from an equal-weight position held since January 2021, while abrdn’s Asia Pacific chief executive Rene Buehlmann urged investors to “go back” into Chinese markets. Elsewhere, stock benchmarks were mixed with gauges in Japan and South Korea trading lower while those in Australia, Singapore and Vietnam rose.  After falling for much of the year, Asian stocks staged a dramatic rally in the past few weeks with a surge in foreign inflows into emerging Asian shares, supported by the dollar’s weakness and expectations for a slowdown in the Fed’s hikes.  The key Asian stock benchmark still remains about 17% lower so far this year, on course for its worst annual performance in more than a decade. A closer look at Japanese stocks reveals that they ended mixed as investors gauged the impact of China’s shift toward reopening and US employment data. The Topix fell 0.3% to close at 1,947.90, while the Nikkei advanced 0.2% to 27,820.40. Toyota Motor Corp. contributed the most to the Topix decline, decreasing 1%. Out of 2,164 stocks in the index, 741 rose and 1,304 fell, while 119 were unchanged. “Japanese stocks are a bit weak at the moment as economic indicators are becoming a little more globally skewed,” said Mamoru Shimode, a chief strategist at Resona Asset Management.  Australian stocks rose: the S&P/ASX 200 index rose 0.3% to close at 7,325.60, led by gains in mining and real estate shares, as traders bet on further reopening of the Chinese economy from Covid restrictions.  Shares of iron ore miners and steel companies were among top performers advancing as commodity prices rallied on China reopening bets.  In New Zealand, the S&P/NZX 50 index rose 0.3% to 11,677.75. Stocks in India ended flat on Monday as investors likely took profits in recent outperformers, while the focus shifts to the central bank’s monetary policy announcement later this week. The S&P BSE Sensex ended flat at 62,834.60 in Mumbai, while the NSE Nifty 50 Index was also little changed, as both indexes overcame declines of as much as 0.6% each. The key gauges rose for eight consecutive sessions before declining on Friday. The Reserve Bank of India’s rate-setting panel will commenced its three-day meet Monday for the monetary policy to be announced on Wednesday. All of the economists surveyed by Bloomberg expect the benchmark lending rate to be increased, with the median estimate for a 35 basis points hike. Polls in India’s Gujarat, also the home state to Prime Minister Narendra Modi, end today and results will be announced on Dec. 8. Investors will be watchful of the outcome as the results will indicate Modi’s popularity for national elections next in 2024.  In rates, treasuries are mixed as the curve bear flattens with 2s10s narrowing 1.6bps as US trading day begins, extending the flattening move unleashed Friday by stronger-than-estimated November employment data. All Treasuries apart from the very long end fell, with the largest decline seen in the belly of the curve, as traders added to Fed hike wagers ahead of US ISM services numbers for November. Yields remain inside Friday’s ranges, though inverted 2s10s reached -81.4bp, new low for the cycle. 2- to 7-year yields higher by 3bp-4bp on the day, 30-year lower by ~1bp; 10-year higher by ~2bp at 3.50% Most European 10-year yields are lower, led by UK as expectations for BOE rate hikes are pared. IG credit issuance slate blank so far, however dealers expect $10b-$15b this week and $20b for December. Three-month dollar Libor fell for a third straight day, longest streak since February, to 4.72343%. The Bloomberg Dollar Spot Index snapped a four-day drop as the greenback rose 0.1%. CAD and AUD are the strongest performers in G-10 FX, JPY and GBP underperform. ZAR (1.7%) leads gains in EMFX. The yen underperformed all its Group-of-10 peers while the Australian and Canadian dollar were the top gainers as commodities got a boost on hopes that China is engineering a gradual shift away from its strict Covid Zero policy. Chinese stocks and the yuan also rallied. The yuan strengthened past the key 7 per dollar level after Shanghai and Hangzou relaxed Covid testing rules. Hong Kong dollar surged to the strongest level since June 2021. Te onshore yuan extended gain to 1.5% to 6.9450 per dollar, the most since Nov. 11 as reopening optimism continues to boost the currency.  The euro steadied after rising to a fresh five-month high of $1.0585. Euro options bets suggest a run above $1.06 before FOMC meeting. Bunds, Italian bonds swung between modest gains and losses amid a slew of ECB speeches. The pound slipped after posting four consecutive weeks of gains. Money markets eased BOE rate-hike wagers after policy-maker Swati Dhingra said in a newspaper interview that interest rates should peak below 4.5%. The central bank will conduct bond sales later on Monday In commoidties, Crude benchmarks have been choppy, but are ultimately firmer post-OPEC+ and as the Russian oil cap comes into effect at USD 60/bbl. Brent rises 1.8% near $87.15 while WTI Jan was at 81.50/bbl, with the latest easing of China's COVID controls also factoring. OPEC+ ministers formally endorsed the output policy rollover and will hold the next JMMC meeting on February 1st, while it vowed to stand ready to adjust oil output to stabilize markets. Russian Deputy PM Novak said they will not operate under the oil price cap even if they have to cut production and the price cap may affect other countries as well, while he added that they are working on mechanisms to ban supplies which are capped. Russia is analysing the price cap imposed by G7 and allies on its oil and made preparations for this, while it will not accept the oil price cap, according to state news agencies citing the Kremlin. Russia's Kremlin, on price cap, said Russia is preparing a decision and will not recognise the price cap; price cap will destabilise global energy market but will not affect Russia's ability to sustain the military operation in Ukraine. US economic data include November final S&P Global US services and composite PMIs (9:45am), October factory orders and November ISM services (10am) Market Snapshot S&P 500 futures down 0.3% to 4,062.75 STOXX Europe 600 little changed at 442.85 MXAP up 1.1% to 159.66 MXAPJ up 1.7% to 521.41 Nikkei up 0.2% to 27,820.40 Topix down 0.3% to 1,947.90 Hang Seng Index up 4.5% to 19,518.29 Shanghai Composite up 1.8% to 3,211.81 Sensex down 0.1% to 62,798.89 Australia S&P/ASX 200 up 0.3% to 7,325.60 Kospi down 0.6% to 2,419.32 German 10Y yield little changed at 1.85% Euro up 0.2% to $1.0555 Brent Futures up 1.9% to $87.16/bbl Gold spot down 0.0% to $1,797.23 US Dollar Index little changed at 104.47 Top US News From Bloomberg ECB Governing Council member Francois Villeroy de Galhau said it’s too early to discuss where interest rates will peak, saying the monetary-tightening process should be carried out at the appropriate pace The ECB should raise borrowing costs by at least a half-point this month to curb surging consumer prices, according to Governing Council member Gabriel Makhlouf ECB Governing Council Member Mario Centeno said “everything indicates” that the peak of inflation may be reached in the fourth quarter “Decisive monetary tightening must continue” as inflation persists above target, Croatian Central Bank Governor Boris Vujcic told the newspaper Jutarnji List, weeks before the Balkan nation joins the euro zone The US dollar has erased more than half of this year’s gains amid growing expectations the Federal Reserve will temper its aggressive rate hikes, and as optimism grows over China’s reopening plans Swedish central bankers are divided on the prospects for bringing inflation back to its target after a string of interest-rate increases, minutes from the bank’s latest policy meeting show Emerging-market central banks face a Catch-22 where plunging economic growth means they can’t keep monetary conditions tight, but elevated inflation doesn’t allow them to halt rate hikes either OPEC+ responded to surging volatility and growing market uncertainty by keeping its oil production unchanged The world’s worst- performing major currency looks poised for an impressive turnaround in 2023 as its two key drivers -- a hawkish Federal Reserve and dovish Bank of Japan -- swap places in the eyes of some investors The BOJ may achieve its inflation target in 2023 as the cost of living has consistently exceeded market expectations this year, according to Takatoshi Ito, a contender to replace Governor Haruhiko Kuroda in April The PBOC injected a record monthly amount into state policy banks in November to help spur infrastructure spending and boost a struggling economy Turkish inflation slowed for the first time in over a year-and-a-half, though measures to revive the economy ahead of elections in 2023 may keep it elevated for some time A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks traded mostly positive as Chinese markets led the advances on reopening optimism after several large cities further loosened COVID-19 restrictions, although the gains for the rest of the region were limited after Friday’s mixed post-NFP performance on Wall St and a further deterioration in Chinese Caixin Services and Composite PMI data. ASX 200 was higher with the index supported by strength in mining and energy as underlying commodity prices benefitted from the China reopening play. Nikkei 225 was indecisive and just about kept afloat throughout the session with price action contained by a lack of pertinent drivers to propel the index closer to the 28,000 level. Hang Seng and Shanghai Comp shrugged off the weak Chinese PMI data with risk appetite supported by reopening hopes and as the PBoC’s previously announced RRR cut took effect, while developers were boosted after reports last week that China's top four banks intend to issue loans for domestic developers’ overseas debt repayments. Top Asian News Chinese Caixin Services PMI (Nov) 46.7 vs. Exp. 48.0 (Prev. 48.4); Composite PMI (Nov) 47.0 (Prev. 48.3) Several Chinese cities accelerated the loosening of COVID-19 restrictions over the weekend including Shanghai and Shenzhen which scrapped requirements for commuters to present PCR tests for travelling on public transport, while apartment complexes in Beijing indicated that those that tested positive could quarantine at home, according to FT. China could announce 10 supplementary COVID measures as soon as Wednesday, via Reuters citing sources; could downgrade COVID to category B management as early as January. Subsequently, Shanghai scraps COVID testing requirement at more public venues from Tuesday, according to Bloomberg. PBoC is reportedly expected to reduce the amount of open market operations towards the end of the year to avoid excess liquidity, according to China Securities Journal. Morgan Stanley upgraded MSCI China to overweight from equal weight and said the ROE is likely to rise to 11.1% by end-2023, according to Reuters. European bourses are under modest pressure, Euro Stoxx 50 -0.2%, following on from fairly contained action in futures overnight. In APAC hours, Chinese stocks were the marked outpeformers given the loosening of COVID restrictions, though the region's PMIs slipped. Stateside, futures are are in-fitting with European peers and are under slight pressure, ES -0.3%, with specific developments light during the Fed blackout window. Tesla (TSLA) reduced Shanghai output by up to 20% due to sluggish demand, according to Bloomberg; output cuts set to take effect as soon as this week, sources state. Foxconn (2317 TT) November sales -11.4% YY. Q4 outlook expected in-line with consensus. November was the month most affected by COVID; due to off-peak seasonality and COVID November revenue declined MM. Top European News BoE’s Dhingra said higher interest rates could lead to a deeper and longer recession which is what she thinks they should all be worried about, while she sees few signs that demands for higher wages are raising the risk of a wage-price spiral, according to the Observer. Confederation of British Industry warned the UK will fall into a year-long recession next year as a combination of rising inflation, negative growth and declining business investment weigh on the economy, according to FT. UK Conservative Party Chairman and Minister without Portfolio in the Cabinet Office Zahawi said the government is looking at bringing in the military if strikes go ahead in various sectors including the health sector, according to Reuters and Sky News. UK RMT union rejected the Rail Delivery Group offer and demanded a meeting on Monday to resolve the dispute, while UK Transport Secretary Harper said the situation is disappointing and unfair to the public, according to Reuters. ECB’s Villeroy said that inflation should peak in H1 next year and that he favours a 50bps rate hike at the December 15th meeting, while he added that rate hikes will continue after that but cannot say when they will stop and he expects to beat inflation by 2024-2025, according to Reuters. ECB's Makhlouf sees a 50bps increase at a minimum at the December (15th) meeting, expects the eventual magntude to be 50bp; have to be open to policy rates moving into restrictive territory for a period in 2023; pre-mature to be talking about the endpoint for rates EU Commission President von der Leyen said the US Inflation Reduction Act is raising concerns in Europe and there is a risk it could lead to unfair competition, close markets and fragment supply chains that have already been tested by the pandemic, while she added that competition is good but it must be a level playing field and that they must take action to rebalance the playing field where the IRA or other measures conduct distortions, according to Reuters. FX DXY bid despite an earlier move to 104.10 lows, with the index recovering to 104.75+ parameters amid favourable technical levels US yields. Action which has been felt most keenly against the JPY, USD/JPY testing 135.50 at best from an initial 134.10 low, action which has offset the Yuan's impact on the USD. Yuan outperforms given the latest easing of COVID restrictions and source reports pointing to additional measures being forthcoming. AUD the next-best ahead of the RBA policy announcement with a 25bp hike expected. Both EUR and GBP were unreactive to the latest PMIs, with hefty OpEx in EUR/USD of note for the NY Cut; though, GBP has felt the USD's bid more keenly, sub-1.2250 at worst. PBoC set USD/CNY mid-point at 7.0384 vs exp. 7.0368 (prev. 7.0542) Fixed Income Core benchmarks are experiencing choppy trade, but retain an underlying bid with Bunds surpassing touted 142.17 resistance and Gilts briefly breaching 106.00. A move which leaves USTs lagging slightly with corresponding yields bid, though the curve is mixed and action is once again most pronounced at the short-end ahead of ISM & Factory Orders. Commodities Crude benchmarks have been choppy, but are ultimately firmer post-OPEC+ and as the Russian oil cap comes into effect at USD 60/bbl. Currently, WTI Jan & Brent Fed are pivoting USD 81.50/bbl and USD 87/bbl respectively, with the latest easing of China's COVID controls also factoring. OPEC+ ministers formally endorsed the output policy rollover and will hold the next JMMC meeting on February 1st, while it vowed to stand ready to adjust oil output to stabilise markets, according to Reuters and FT. Iraqi Oil Minister said OPEC members are committed to the agreed production rates until the end of 2023 and the Algerian Energy Minister said the decision to keep output unchanged is appropriate to market fluctuations. Kuwaiti Oil Minister said OPEC+ decisions are based on market data and ensure its stability, while he added the impact of slow global economic growth on oil demand is a cause for continuous caution, according to Reuters. G7 and Australia announced on Friday that a consensus was reached on a price cap for Russian seaborne oil at USD 60/bbl which will enter into force on December 5th or very soon thereafter and they will ‘grandfather’ any revision of the price cap to allow compliant transactions concluded beforehand. Furthermore, US Treasury Secretary Yellen said that the price cap will immediately cut into Russia’s most important source of revenue and preserve stable global energy supplies, while a senior Treasury official stated that the price cap will create an anchor for Russian oil and has already driven prices lower, according to Reuters. Ukrainian President Zelensky’s chief of staff commented that the price cap on Russian oil should be capped to USD 30/bbl, according to Reuters. Russian Deputy PM Novak said they will not operate under the oil price cap even if they have to cut production and the price cap may affect other countries as well, while he added that they are working on mechanisms to ban supplies which are capped. Russia is analysing the price cap imposed by G7 and allies on its oil and made preparations for this, while it will not accept the oil price cap, according to state news agencies citing the Kremlin. Russia's Kremlin, on price cap, said Russia is preparing a decision and will not recognise the price cap; price cap will destabilise global energy market but will not affect Russia's ability to sustain the military operation in Ukraine. EU countries cut their gas demand by a quarter last month despite a fall in temperature which shows an effort in reducing the reliance on Russian energy, according to FT. Moldova’s Deputy PM Spinu said they will not pay a 50% advance to Gasprom by December 20th for its December gas supplies, according to Reuters. Spot gold has pulled back below USD 1800/oz and now resides in proximity to its 200-DMA at USD 1795/oz while base metals remain bid, but have eased from initial best levels. Geopolitics US Defense Secretary Austin accused Russia of deliberate cruelty in its war in Ukraine and that it was intentionally targeting civilians, according to Reuters. US Director of National Intelligence Haines said they expect a reduced tempo in Ukraine fighting to continue in the coming months, while she added that Russia is not capable of indigenously producing munitions they are expending, according to Reuters. US Indo-Pacific Commander Aquilino said it is in China’s strategy to encourage nations like North Korea to create problems for the US and he is not optimistic about China doing anything helpful to stabilise the Indo-Pacific region, according to Reuters. N.Korea has fired around 130 artillery shots off its East & West Coast, via Yonhap; Subsequently, N. Korean military says the firing of artillery shells was a warning to S. Korean military action, via KCNA. US Event Calendar 09:45: Nov. S&P Global US Composite PMI, est. 46.3, prior 46.3 09:45: Nov. S&P Global US Services PMI, est. 46.1, prior 46.1 10:00: Oct. Durable Goods Orders, est. 1.0%, prior 1.0% Durables-Less Transportation, est. 0.5%, prior 0.5% Cap Goods Ship Nondef Ex Air, prior 1.3% Cap Goods Orders Nondef Ex Air, prior 0.7% 10:00: Oct. Factory Orders, est. 0.7%, prior 0.3% Factory Orders Ex Trans, prior -0.1% 10:00: Nov. ISM Services Index, est. 53.3, prior 54.4 DB's Jim Reid concludes the overnight wrap Although there is little question that I feel fully aware that someone has cut my back open with a knife within the last few days and sawed off some bone inside, I feel remarkably mobile and spritely. However, I'm trying not to appear too mobile as I've been signed off housework for a few weeks as I'm not supposed to bend, twist or lift. Don't waste a crisis as they say. I also resisted any urge to celebrate England waltzing into the last 8 of World Cup last night. Still plenty of time for it to go spectacularly wrong. No need to stress the back needlessly at this stage! As the World Cup builds to the business end of the tournament, we welcome in a week with limited US data and one with the Fed now on their blackout period ahead of next week's FOMC. In fact, could it actually be quite a quiet week ahead? Famous last words in a year like this, but next week should be much more interesting than this week given that we also have US CPI and the ECB meeting to go alongside the Fed. The data we do see in the US starts today with the ISM services index (DB forecast 53.9 vs 54.4 in October) and ends with PPI and the UoM consumer confidence number on Friday with the latest inflation expectations numbers included. Elsewhere we’ll also get CPI and PPI from China (Friday), industrial production from Germany (Wednesday) and trade data from key economies. While central bank speak will be sparse, Lagarde speaks today and for this week some attention will shift to Canada and Australia. The former meet on Wednesday and as a reminder, their last meeting's dovish tilt spurred a pivot trade in the US on the back of expectations the Fed would mimic the message. So this meeting may be a driver of sentiment more broadly. The consensus is split on Bloomberg between 25bps and 50bps which makes it interesting. The Reserve Bank of Australia will also decide on policy tomorrow, and consensus expects a 25bp rate hike that takes the cash rate to 3.1%. Wednesday will also likely see the Reserve Bank of India downshift to 25bps after three 50bps hikes. So by midweek we’ll have a better feel for whether these central banks are trying to downshift. The full day-by-day week ahead is at the end as usual on a Monday. Staying on the topic of where central bank rates are going, payrolls from last Friday merit some closer attention. The headline (263k vs 284k last and 200k consensus) and private (221k vs. 248k last and 185k consensus) payrolls numbers beat with unemployment steady at 3.7%. However, market focus was squarely on the upside surprise to average hourly earnings (+0.6% vs. +0.5% last and +0.3% consensus) which boosted the year-over-year growth rate by a couple of tenths to 5.1% vs consensus at only 4.6%. This big upside miss got our economists digging into the data and they found that the response rate for the establishment survey, which measures nonfarm payrolls, hours and earnings, was just 49.4%, well below the normal 65-70% range and the lowest since 2002. So it feels like you could see decent sized revisions. In addition, our economists found that most of the upside surprise to AHEs was due to the transportation and warehouse sector, which showed a +2.5% monthly gain - over five standard deviations above the average and by far a record increase. Information services AHEs (+1.6% vs. Unch.) also showed an unusually large gain that was about 2.5 standard deviations outside of the average. Combined, the unusually large increases in these two sectors likely boosted overall AHEs by around one to two tenths in their view. Nevertheless, income growth from our economists’ payroll proxy was still up 7.6% compared to a year ago and inflation is not going to be coming down to trend with labour markets like this. There is more and more evidence that the supply side is normalising on the inflation front but it's seems inconceivable that inflation can normalise overall when we see the type of employment numbers we saw last week, not just from the employment report but also from the JOLTS data which still pointed towards a tight labour market. Indeed, in Powell's mid-week speech which caused a major bond/rates rally, he did cite the latest JOLTS data as still showing a large imbalance between supply and demand for labour, referencing the roughly 1.7 job openings for every unemployed worker. Powell also noted that for "the principal wage measures that we look at, I would say that you're one and half or two percent above that (which is consistent with two percent inflation over time)". So it's fascinating that at the moment the market is focusing squarely on the very strong likelihood that we'll ratchet down to 'only' a 50bps hike next week and extrapolating that level of dovishness rather than focus on any risks that the terminal rate could end up being nearer say 6% than 5%. Indeed Larry Summers was doing the rounds over the weekend suggesting that markets were likely under-pricing terminal and seemingly being more comfortable suggesting a peak nearer 6 than 5%, even if he wasn't specific over a particular number. In terms of weekend news OPEC+ decided to keep production at current levels as expected. This follows the EU decision on Friday, after months of negotiations, to cap the price of Russian crude at $60 per barrel, starting today. This morning in Asia trading hours, oil prices are trading higher with Brent crude futures (+0.82%) trading at $86.27/bbl and WTI futures (+0.83%) at $80.64/bbl following China’s further easing of its Covid Curbs. Elsewhere, Shanghai and Hangzhou have followed other Chinese cities in easing some Covid restrictions over the weekend. They announced that from tomorrow, they will remove the requirement to have a PCR test to enter outdoor public venues and to use public transport. Chinese equities surged on the news with the Hang Seng rising +3.3% in early trading to its highest since mid-September, leading gains across the region with the CSI (+1.60%) and the Shanghai Composite (+1.55%) also rallying. Outside of China, the Nikkei (+0.01%) is struggling to gain traction this morning whilst the KOSPI (-0.51%) is slipping back slightly. In overnight trading, US stock futures are indicating a negative start with contracts tied to S&P 500 (-0.14%) and the NASDAQ 100 (-0.17%) edging lower. Meanwhile, yields on 10yr USTs (+4.55 bps) have climbed higher, trading at 3.53% with the 2s10s curve at -79.15 bps as we go to press. Data out from China today showed that services activity contracted further in November as Covid restrictions continued to restrain growth, with the Caixin China services PMI falling to a six-month low of 46.7 from 48.4 in October. Elsewhere, the final estimate of Japan’s services PMI fell to 50.3 from October's 53.2, hitting the lowest since August as cost pressures remained acute. The composite PMI contracted to 48.9 in November from 51.8 a month earlier. In FX, the Chinese currency strengthened to 6.96 against the US dollar, moving below 7 for the first time since mid-September on hopes of reopening. Recapping last week now and for the second week running major sovereign bond markets and equity indices rallied, after perceived dovishness from Fed Chair Powell in his last remarks before the December FOMC communications blackout period, troubling global growth data, and further confirmation of China moving on from the strictest form zero Covid policies that have plagued global supply chains. Treasury and Bund yields fell over the week, a largely parallel shock to the already inverted US yield curve while Bund yields flattened slightly. All told, 2yr Treasuries fell -18.1bps (+4.4bps Friday) while 10yr yields were -19.1bps lower (-1.9bps Friday). 2yr Bunds fell -8.7bps, though climbed +8.0bps Friday, while 10yr yields were -11.8bps lower after climbing +4.2bps Friday following the US jobs report. But note that 10yr US yields fell c.7bps after the European close and c.15bps lower than their highs for the day just after payrolls were released. Terminal Fed Funds fell c.8bps on the week but were first c.6bps higher pre-Powell's speech and then c.22bps lower into payrolls, before climbing 8bps after and into the close for the week. A second straight week of falling discount rates led to a second straight week of decent equity performance. The S&P 500 climbed +1.13% (-0.12% Friday) with the more rate-sensitive NASDAQ outperforming, up +2.09% (-0.18% Friday). One area of weakness was bank stocks, where the S&P 500 banks sector fell -2.03% (-1.04% Friday) as slower growth and flatter curves weighed. Performance was more mixed in Europe, but the STOXX 600 still managed to post a +0.58% weekly gain (-0.15% Friday), while the regional indices took their cues from the World Cup: the DAX fell -0.08% (+0.27% Friday) with Germany failing to reach the knockout round again while the CAC and FTSE 100 increased +0.44% (-0.17% Friday) and +0.93% (-0.03% Friday), respectively. Tyler Durden Mon, 12/05/2022 - 08:03.....»»

Category: blogSource: zerohedgeDec 5th, 2022

Futures Fumble 1% Gain, Turn Sharply Lower As Yields, Dollar Soar

Futures Fumble 1% Gain, Turn Sharply Lower As Yields, Dollar Soar US stock futures erased overnight gains  of over 1% as worries about the impact of scorching inflation and a looming recession took the shine off a strong start to the corporate earnings season. Contracts on the S&P 500 dropped 0.4% in an extremely illiquid session at 7:15 a.m. in New York after earlier rising as much as 1.1%. Nasdaq 100 futures were also down 0.4%, despite a boost from a better-than-expected report from Netflix which sent the stock soaring 13% in premarket trading. Behind the sudden, violent slump is today's renewed surge in interest rates which pushed the 10Y Yield to 4.10%, the highest level since October 2008, potentially driven by news that the BOE would launch gilt sales on Nov 1. A surge in the dollar sparked by a plunge in sterling, which tumbled after soaring food prices drove UK inflation back into double digits in September, matching a 40-year high of 10.1% and intensifying pressure on the central bank and Liz Truss’s government to act. Gilts were broadly lower weighing on rates sensitive sectors like banks, property and construction and retail. The result is that UK equities dropped following four days of gains. In premarket trading, Netflix soared as much as 14% in premarket trading, set for its biggest jump since January 2021, after the video streaming company handily beat estimates for paid subscribers, signaling the worst of the slowdown is likely over. Shares of other video-streaming companies are rising after Netflix’s quarterly results reassured investors that its business was back on track. Walt Disney +2.8%, Roku +3.7%, Warner Bros Discovery +1.7%, fuboTV +3.4%.  Bank stocks are lower in thin premarket trading Wednesday, putting them on track to snap a two-day winning streak. In corporate news, Mitsubishi UFJ Financial Group is evaluating an acquisition of some loan portfolios from Credit Suisse to expand its business in the US. HSBC has been reprimanded by a UK watchdog for violating environmental advertising rules, after it sought to depict itself as a green bank in a set of posters. Here are other notable premarket movers: United Airlines shares jump 7.1% in US premarket trading Wednesday following earnings that beat estimates, with analysts saying results and outlook are impressive on strong demand, better costs. Here’s what they are saying: Lam Research leads fellow chip-tool makers higher in premarket trading after ASML said its fourth-quarter sales would likely be better than estimates, driven by strong demand for its advanced chip-making machines. Lam Research (LRCX US) +3.1%, Applied Materials (AMAT US) +1.7% and KLA (KLAC US) +2% Olaplex shares plummet 42% in premarket trading after the hair-care products company slashed full-year forecasts due to slowing sales and announced the departure of its COO Tiffany Walden. Evercore ISI cuts Best Buy, Lowe’s, Advance Auto and Petco Health & Wellness to in-line from outperform in note on Wednesday. All the stocks drop in premarket trading. Best Buy (BBY US) falls 1.6%, Lowe’s (LOW US) -1.1%, Advance Auto (AAP US) -1.1%, Petco (WOOF US) -3.2% Keep an eye on Polaris as the stock was cut to neutral from buy at Citi as the broker flags retail environment being “substantially worse than previously anticipated” after it made checks with the company’s off-road vehicle dealers. Intuitive Surgical shares jumped 7.4% in postmarket trading on Tuesday after the company posted revenues and adjusted earnings per share for the third quarter that were higher than consensus analyst estimates. Upbeat company results, cheaper valuations and UK policy reversals have helped buoy risk appetite in recent sessions. At the same time, investors are having to keep track of weakness in the global economy and the impact of persistent inflation on decisions by policymakers at the Federal Reserve and other central banks. Indeed, US stocks have had a roller-coaster October so far as investors swing between fears about a hawkish Federal Reserve and optimism over early third-quarter reports that have showed signs of resilience to higher prices. While a Bank of America survey showed full capitulation among stock investors, strategists have warned that the uncertain macroeconomic outlook could fuel further declines, according to Bloomberg. “While it looks like capitulation, we probably have not seen a bottom yet,” said Randeep Somel, a portfolio manager at M&G Investments. “Companies’ earnings are not reflecting wider macro economic expectations yet, and that isn’t likely to dissipate until around early next year once we got through what is likely to be a rough winter,” he said on Bloomberg TV. Quantitative strategists at Citigroup Inc. said US stocks were pricing in the highest odds of a recession than any other asset class, but still could be poised for more losses. “US equities have priced the most (but not enough) recession risk, and earnings estimates have further to adjust,” strategists including Alex Saunders wrote in a note dated Oct. 18 (he must be ignoring commodities, which are pricing in a global depression). “US equities have priced the most (but not enough) recession risk, and earnings estimates have further to adjust,” strategists including Alex Saunders wrote in a note. “US bonds have priced the least risk, but it will take some time before bonds react to recession risks given the hawkish Fed.” European stocks struggled to eke out a fifth day of gains as most sectors decline; real estate, retail and utilities drop, while tech and insurance outperform. Euro Stoxx 50 rises 0.2%, paring earlier gains; Stoxx 600 is down 0.2%. IBEX lags, dropping 1%. Utilities stocks fell, led by German names, after Handelsblatt reported that the German Economy Ministry is planning to cap electricity prices along the lines of the proposals made to cap gas prices. The sector is among the worst-performing groups on the broader gauge, down 1.1%, with Encavis, RWE and BKW all down at least 4.5%. In Germany’s plan, utilities will have to offer relief for consumers on a base contingent designed to encourage energy saving, according to the report   Earlier in the session, Asia stocks fell, with shares in Hong Kong dropping the most in the region as the maiden policy speech by the territory’s leader failed to ease concerns about China’s earnings outlook and rising mainland Covid cases. The MSCI Asia Pacific lost as much as 0.8%, erasing an earlier gain, as shares of technology companies such as Alibaba, Tencent and TSMC weighed.  A selloff in consumer stocks dragged down Hong Kong and China gauges as a plan unveiled by Chief Executive John Lee to woo back foreign talent and ease housing woes failed to offset concerns about earnings and Covid. Benchmarks in Japan and Australia rose in tandem with gains in Wall Street. Read: HK Developers Drop as Stamp Duty Rule Disappoints: Street Wrap Most Asia fund managers in a survey by Bank of America expect weaker corporate profits in the region during the next 12 months, with net 72% of the view that consensus estimates for earnings per share growth are too high.  It’s been almost a year since Bitcoin hit a record. Where do you see it going from here? Fill out our survey. “Global growth expectations are shrouded in pessimism but improving on the margin for China,” the survey report said. “However, investors are wary that the continued pursuit of a zero-Covid strategy could pour cold water on their fledgling hope for a China recovery.” China’s intermittent lockdowns continue to weigh on sentiment, with the ongoing party congress in China offering little hope to investors and traders assessing the impact on corporate profits in the latest results season. The MSCI Asia gauge is trading near April 2020 levels after dropping more than 28% this year Japanese stocks extended their advance to second day, driven by gains in information companies and machinery makers. The Topix rose 0.2% to 1,905.06 as of 3 p.m. close in Tokyo, while the Nikkei 225 advanced 0.4% to 27,257.38. SoftBank Group contributed the most to the Topix’s gain, increasing 3.7%. Out of 2,166 stocks in the index, 1,376 rose and 674 fell, while 116 were unchanged. Australian stocks edged higher, with the S&P/ASX 200 index rising 0.3% to close at 6,800.10 as investors digested quarterly output reports from commodity producers. All sectors gained except for energy and technology. Banks and industrials contributed the most to the gauge’s advance. In New Zealand, the S&P/NZX 50 index rose 0.6% to 10,916.65. Indian stocks indexes rose for the fourth straight session before giving away the majority of gains, dragged by the rupee’s slide against the dollar. The S&P BSE Sensex rose 0.3% to 59,107.19 in Mumbai, while the NSE Nifty 50 Index advanced 0.1%. The gauges rose as much as 0.7% before paring the advance in the last hour of trading. For the week, they are up about 2% each. The Indian rupee tumbled to a record, declining to 82.98 against the greenback in late trading, as the central bank was seen moving away from supplying dollars. The looming expiry of weekly derivative contracts also weighed on local shares. Ten of the 19 sector sub-gauges compiled by BSE Ltd. advanced today, led by energy companies, while utilities and power firms were the worst performers. “Domestic institutions have been strong buyers in the market over the last week, as 2QFY23 results have come in line or stronger than expected,” S Hariharan, head of institutional equity at Emkay Global Financial, said. In FX, the Bloomberg dollar spot index spiked 0.3% as the greenback rose against all of its Group-of-10 peers apart from the New Zealand dollar; the yen tumbled to a fresh 32 year low of 149.70 against the dollar while the pound slumped below $1.13. The euro slumped to almost $0.98. The shift in the euro’s volatility term structure shows that traders are following central banks into being more data dependent than before. Australian and New Zealand dollars trim intraday gains alongside similar moves in US futures. In Japan, authorities continued their jawboning of the yen, with Finance Minister Shunichi Suzuki saying he is increasing the frequency of monitoring foreign-exchange markets. The currency hovered above 149 per dollar. The 10-year government bond yield rose above the 0.25% upper limit of the central bank’s target range, a breach that’s likely to prompt the Bank of Japan to step up bond purchases to limit the advance. “The outlook for the UK is very, very difficult and certainly when focusing on our asset allocation it’s predominantly in the US where we have much higher conviction and certainty of outcome,” Grace Peters, JPMorgan Private Bank’s head of investment strategy, said on Bloomberg Television. In rates, Treasuries were cheaper across the curve with losses led by belly, cheapening 2s5s30s spread by 3bp into early US session. US yields cheaper by nearly 7bp across belly of the curve, flattening 5s30s spread by almost 3bp following three successive steepening sessions; 10-year around 4.09%, cheaper by ~8bp on the day. US coupon issuance resumes with $12b 20-year bond reopening; WI yield near 4.34% is above all auction stops since the May 2020 reintroduction of the tenor and ~52bp cheaper than September auction, which stopped through by 1.3bp Front-end bund yields rose by 12bps as the curve bear- flattened after Germany’s Finance Agency said it will increase the amount of securities it can lend to traders in the repo market by €54b, a move strategists say will help ease a collateral squeeze that has plagued the debt market in recent months. Bunds underperform gilts and USTs. German 10-year yield is up 7 bps to 2.35%, while gilts 10-year yield is up 3bps to below 4% and Treasuries 10-year yield climbs ~5bps to above 4%. Most UK bonds fell, while the pound dropped as much as 0.6% after data showed UK CPI rose 10.1% last month from 9.9% in August, exceeding economists expectations of 10% and adding to pressure on policy makers to lift the key rate significantly next month. The bank of England also confirmed that it will start selling down its portfolio of gilts. In commodities, oil rose amid concerns that the European Union’s latest sanctions on Russian fuel could exacerbate the market tightness that the US is trying to alleviate with additional sales. The Biden administration will announce Wednesday a plan to release 15 million barrels from US emergency oil reserves in an effort to ease high gasoline prices. WTI and Brent Dec futures are firmer intraday after yesterday’s decline, which saw Brent dip under USD 90/bbl but settle at the figure. LME metals are mostly softer amid the firmer Dollar and risk aversion, with 3M copper extending its losses under USD 7,500/t. US President Biden will lay out plans on Wednesday to continue using the SPR to gain more stability in gas prices and will reiterate that gasoline company profits are too high and should be returned to consumers, according to a senior administration official. Furthermore, the Biden administration agreed to make future oil purchases to refill reserves at prices at or below USD 67.00-72.00/bbl, while President Biden will announce 15mln additional barrels for delivery from SPR in December, extending the initial timeline and completing the 180mln commitment. Spot gold trades lower intraday and back under the USD 1,650/oz mark as the Dollar picks up in pace. Japan plans to further loosen crypto rules as soon as December "by making it easier to list virtual coins, potentially boosting the country’s allure for Binance and rival exchanges", according to Bloomberg. Looking to the day ahead now, data releases include the UK and Canadian CPI readings for September, along with US housing starts and building permits for September. From central banks, the Fed will release their Beige book, and we’ll also hear from the Fed’s Kashkari, Evans and Bullard, the ECB’s Centeno and Visco, and the BoE’s Cunliffe and Mann. Finally, earnings releases include Tesla, Procter & Gamble and Abbott Laboratories. Market Snapshot S&P 500 futures down 0.2% to 3,726.50 STOXX Europe 600 down 0.4% to 398.38 MXAP down 0.8% to 137.80 MXAPJ down 1.1% to 445.81 Nikkei up 0.4% to 27,257.38 Topix up 0.2% to 1,905.06 Hang Seng Index down 2.4% to 16,511.28 Shanghai Composite down 1.2% to 3,044.38 Sensex up 0.2% to 59,077.34 Australia S&P/ASX 200 up 0.3% to 6,800.06 Kospi down 0.6% to 2,237.44 German 10Y yield up 3% to 2.354 Euro down 0.3% to $0.9826 Brent Futures up 0.6% to 90.59 Gold spot down 0.7% to $1,640.03 U.S. Dollar Index up 0.25% to 112.42 Top Overnight News from Bloomberg Embattled UK Prime Minister Liz Truss faces a brewing parliamentary rebellion if she is forced to abandon a key Conservative manifesto commitment on pensions as part of a frantic austerity drive Record-low demand for German bonds at a government auction suggests investors are getting picky as countries ready a wall of sales and speculation mounts that the ECB will start reducing the bonds it’s amassed on its balance sheet over the years Bank of Japan Board Member Seiji Adachi reinforced the central bank’s message that it won’t adjust policy in response to the rapid weakening of the yen, pushing back against persistent market speculation The value of US Treasuries owned by Japanese investors slid by almost 3% in August to the lowest level in three years as a slump in global debt markets hammered down prices A number of hedge funds are starting to come around to the idea that it may be time to buy the beaten-up pound and gilts. Others say investors should remain cautious. Great Hill Capital in New York sees opportunities to go long sterling after the currency’s recent wild ride. Blue Edge Advisors Pte sees positives in longer- maturity gilts as global growth slows A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mixed following the choppy performance stateside where the major indices wobbled on news that Apple cut iPhone 14 Plus production less than two weeks after its debut, but then recovered heading into the close and with futures underpinned after-hours after strong earnings and subscriber additions from Netflix. ASX 200 gained with outperformance in defensive sectors although the upside was contained by a lacklustre mood in miners after BHP’s quarterly output update which included higher iron output but also a severe drop in coal production. Nikkei 225 was led higher by notable strength in blue-chip names including SoftBank and Fast Retailing and with firm gains also in utilities and power stocks, while the latest commentary from BoJ board member Adachi echoed the central bank’s dovish message as he warned against a shift towards tightening and pushed back on responding to short-term FX moves with monetary policy. Hang Seng and Shanghai Comp. remained pressured amid COVID concerns and data uncertainty, while Hong Kong Chief Executive John Lee’s first annual Policy Address failed to inspire a turnaround despite the announcement of measures to support property, tech start-ups and attract foreign talent. Top Asian News Hong Kong Chief Executive John Lee said in his first annual Policy Address that national sovereignty and security are top priorities, while he also noted Hong Kong faces a “new chapter” of development and warned Hong Kong faces risks from global turmoil and Covid. Lee added that they will allow overseas talent to refund extra stamp duty on home purchases and will introduce a bill this year to exempt the stamp duty payable for transactions conducted by dual-counter market makers. Lee also stated the HKEX will revise main board listing rules next year to facilitate fundraising of advanced tech enterprises that have yet to meet the profit and trading record requirements, according to Reuters. BoJ's Adachi said monetary policy does not directly control FX and there are times FX moves rapidly short-term, while he added that responding to short-term FX moves with monetary policy would heighten uncertainty over BoJ's guidance which is not good for the economy. Adachi also stated that inflation is starting to increase but he is not convinced yet that the BoJ's target will be achieved in a stable and sustained manner. Furthermore, he said they must be cautious about shifting toward monetary tightening as downside risks to the economy are increasing and a shift to monetary tightening would weaken demand and heighten the risk Japan will revert to deflation, while the best approach now is to maintain easy monetary policy. Coal Miner Left With Retiring Plants in Indonesia Green Push Taiwan Central Bank Sees Severe Economic Challenges Next Year Billionaire Ambani Splurges $163 Million on Priciest Dubai Villa Singapore’s COE Category B Bidding Rises to S$110,000 Equities in Europe trade mostly lower after initially opening modestly firmer across the board. Sectors overall are now mostly lower (vs a mixed open) with no overarching theme, with Tech, Banks, Media, and Insurance towards the top of the bunch whilst Real Estate, Utilities, Retail, and Basic Resources sit as the laggards. US equity futures are off best levels with the RTY lagging peers and the NQ slightly more cushioned following Netflix earnings. Click here and here for the Daily European Equity and Additional Opening News, which includes earnings from ASML & Nestle among others. Netflix Inc (NFLX) - Q3 2022 (USD): EPS 3.10 (exp. 2.13), Revenue 7.93bln (exp. 7.84bln). Q3 Net subscriber additions 2.41mln (exp. 1.07mln). Sees Q4 EPS USD 0.36 (exp. 1.20). Sees Q4 revenue USD 7.78bln (exp. 7.98bln). Sees Q4 streaming paid net change +4.5mln (exp. +3.9mln). Won't provide paid membership forecasts from Q4. (PR Newswire) Shares rose 14.3% after-market, +13.8% in the pre-market Top European News Daily Mail's Hodges understands UK PM Truss has been informed by Graham Brady the traditional threshold of letters for a leadership challenge has been breached. But he is insisting on a threshold of half the parliamentary party before acting. UK Tory rebels were reported to have asked opposition Labour Party MPs to help them oust UK PM Truss as Tory backbenchers grow increasingly frustrated with the PMs leadership, according to The Telegraph. Pensions could increase in line with earnings instead of inflation next year after UK PM Truss went back on her commitment to the pension triple lock, according to The Telegraph. UK Chancellor Hunt met with Chairman of the 1922 Committee Brady on Tuesday afternoon which prompted further questions about the future of UK PM Truss, according to Sky News. UK Chancellor is lining up taxes on energy companies and banks to fill a GBP 40bln UK fiscal hole, according to FT. Germany is planning an electricity price cap along the lines of a gas cap, according to Handelsblatt; German Economy Ministry Draft: cabinet should discuss power and gas price breaks on November 18th, via Reuters. FX Franc flounders as Dollar rebounds alongside bear-steepening in US Treasuries, USD/CHF probes parity as DXY tops 112.500. Sterling deflated irrespective of firmer than forecast UK inflation data on broader economic, fiscal and political concerns; Cable tests support around 1.1250 from a 1.1350+ peak. Euro fades against Greenback and edges closer to 0.9800, Yen slips further through 149.00 in the ongoing absence of actual Japanese intervention and the Loonie treads cautiously between 1.3700-1.3800 parameters into Canadian CPI. Antipodes fare better vs their US peer post-NZ inflation and pre-Aussie jobs as NZD/USD hovers near 0.5700 and AUD/USD just above 0.6300. Japanese PM Kishida says no comment on FX; need to take appropriate action against excess FX volatility. Japan's Finance Minister Suzuki says there is no change to the thinking on FX, in frequent communication with the MOF. Fixed Income Gilts dented post-CPI which topped 10%, though clawed back losses to mid-97.00; before further pressure on political updates and ahead of a later DMO outing. Bunds and USTs under pressure in sympathy, with Bunds tacking the laggard mantel in wake the German FinMin increasing the size of outstanding bonds; yield above 2.30% Stateside, USTs are moving in tandem with peers though magnitudes a touch more contained ahead of 20yr supply and Fed speak; curve mixed, overall. German Finance Ministry says increased the size of 18 outstanding bonds by EUR 3bln each (total of EUR 54bln), via Reuters; increase will provide flexibility to cover financing needs during the energy crisis. Commodities WTI and Brent Dec futures are firmer intraday after yesterday’s decline, which saw Brent dip under USD 90/bbl but settle at the figure. Spot gold trades lower intraday and back under the USD 1,650/oz mark as the Dollar picks up in pace. LME metals are mostly softer amid the firmer Dollar and risk aversion, with 3M copper extending its losses under USD 7,500/t. US Private Energy Inventory (bbls): Crude -1.3mln (exp. +1.4mln), Gasoline -2.2mln (exp. -1.1mln), Distillates -1.1mln (exp. -2.2mln), Cushing +0.9mln. US President Biden will lay out plans on Wednesday to continue using the SPR to gain more stability in gas prices and will reiterate that gasoline company profits are too high and should be returned to consumers, according to a senior administration official. Furthermore, the Biden administration agreed to make future oil purchases to refill reserves at prices at or below USD 67.00-72.00/bbl, while President Biden will announce 15mln additional barrels for delivery from SPR in December, extending the initial timeline and completing the 180mln commitment. Geopolitics Russia says it is preparing to evacuate civilians from Kherson which comes as Ukrainian troops push closer to the city as part of a successful counter-offensive, according to AFP News Agency Europe is planning to sanction a number of Iranian individuals and entities regarding arms sales to Russia, according to Politico citing diplomats/officials; adding, a list of sanctions has been prepared, aim is to be in agreement before Thursday/Friday US, Britain and France plan to raise Iran's arms transfers to Russia during closed-door UN security council meeting Wednesday, according to Reuters citing diplomats. North Korea said it fired artillery shells on Tuesday to send a warning against South Korea's military drills and it called on its 'enemies' to immediately stop causing military tensions, according to KCNA. US Event Calendar 07:00: Oct. MBA Mortgage Applications -4.5%, prior -2.0% 08:30: Sept. Building Permits, est. 1.53m, prior 1.52m, revised 1.54m Building Permits MoM, est. -0.8%, prior -10.0%, revised -8.5% 08:30: Sept. Housing Starts, est. 1.46m, prior 1.58m Housing Starts MoM, est. -7.2%, prior 12.2% 14:00: U.S. Federal Reserve Releases Beige Book DB's Jim Reid concludes the overnight wrap Our wayward but lovely dog Brontë doesn't get so much of a mention these days but I have to say that she was taken to the Vet yesterday and although she got a clean bill of health the report back from my wife shocked me. She's 8 in a couple of months and the Vet said we will soon have to move her to geriatric food portions. When my wife told me it actually made me quite upset. Firstly because it seems like only yesterday she was a puppy (maybe because she still acts like one), and secondly in dog years she's not much older than me. If anyone tries to put me on geriatric food portions soon they'll be trouble! There's been a bit of feast and famine in markets over the last 24 hours, with both equities and bond yields seeing sizeable intra-day swings without obvious catalysts. The S&P 500 fell from an intraday high of +2.31% just after the open to close “only” close +1.15% higher but was then buoyed after the bell by Netflix who reported that subscriber growth topped estimates, leading to $3.10 EPS versus $2.12 expectations. Their equity jumped in after-hours trading, ultimately settling around +14% higher, reversing the -1.73% decline in normal trading. This has helped S&P 500 and the Nasdaq 100 futures be +0.79% and +1.19% higher this morning as we go to print. Prior to this, equities generally had a positive day yesterday in spite of the volatility, with the S&P 500 posting a broad-based advance that saw more than 89% of the index move higher on the day, whilst Europe’s STOXX 600 (+0.34%) advanced for a 4th day running. Megacap tech stocks had lagged behind ahead of the Netflix report, with the FANG+ index just (+0.24%) after dipping into the red late in the New York afternoon. Netflix itself was one of the biggest decliners in the S&P and the biggest decliner in the FANG+ at -1.73% before their earnings. The after-hours Netflix news followed a number of other releases, including Goldman Sachs (+2.33%) where trading revenue of $6.2bn beat estimates, alongside Johnson & Johnson (-0.35%) who cut their sales forecast for the year. Today’s highlights include Tesla who’ll be reporting after the close. In fixed income the ranges were large even if closing levels weren't much different. 10yr Treasury yields saw an intraday surge of more than +10bps around the time of the US open, before closing essentially unchanged. In Asia, US 10yr yields are +1.5bps higher, trading just above 4%. Meanwhile in Europe, yields on 10yr bunds (+1.4bps), OATs (+0.8bps) and BTPs (+3.2bps) moved slightly higher but bunds traded it a 13.5bps range. One thing possibly helping risk was the fact that global energy prices moved decisively lower yesterday, which also saw inflation breakevens decline across the big economies. Brent crude (-1.74%) fell back beneath $90/bbl intraday for the first time in a couple of weeks before closing at $90.03, which followed a Bloomberg report that there’d be another 10-15m barrels of oil released from the Strategic Petroleum Reserve. Even more strikingly, European natural gas futures (-12.37%) fell to a 4-month low of €113 per megawatt-hour, which comes as the long-range forecasts have suggested that we won’t be seeing the worst-case scenario of a cold winter in Europe, which in turn will reduce demand for heating. That’s a big boost to Europe on multiple levels, as lower prices mean that any measures to subsidise gas prices wouldn’t be as expensive as feared, whilst lower demand would reduce the risk of energy rationing or blackouts. In terms of data, this is a big week for US housing and we got another glimpse yesterday of the continuing impact of rate hikes as mortgage rates have hit their highest level in over two decades. The US National Association of Home Builders’ market index fell to 38 in October (vs. 43 expected). That’s its lowest level in a decade with the exception of the pandemic months of April and May 2020, and continues its run of having fallen in every single month this year. Here in the UK, the political situation remained incredibly volatile following the mini-budget U-turn, with constant press briefings about when Prime Minister Truss might be removed from office. The opinion polling remains dire for the government, with a YouGov poll yesterday showing that Truss had a net favourability rating of -70, which for reference is well beneath the -53 score for Prime Minister Johnson at the time of his resignation in early July. Strikingly, even if you just looked at those who voted Conservative at the last election, her net favourability was still at -51, with ratings that are deeply negative among every category of voters. We should hear from Truss in the House of Commons later for Prime Minister’s Question Time, so one that plenty of observers will be watching. When it came to markets, the biggest story was an explicit pushback from the Bank of England on the FT’s report that the BoE were set to postpone the start of QT on October 31. We’d mentioned the report in yesterday’s edition, which saw equity futures move higher when it came out, but a BoE spokesperson said in the European morning that it was “inaccurate”. Gilt yields moved higher immediately afterwards, but by the close they’d moved lower, with the 10yr gilt yield down -2.2bps on the day. After Europe went home the BoE announced that QT/Gilt sales will commence from November 1st. So the earlier FT story proved to be inaccurate. In the meantime however, sterling returned to being the worst-performing G10 currency again, closing down -0.33% against the US Dollar. This morning, sterling (+0.11%) is rebounding a little, trading at $1.1331 as I type. Keep an eye out for the latest UK CPI print shortly after we go to press as well, which is the last one ahead of the BoE’s next meeting a fortnight tomorrow. Our UK economist sees that returning to double-digits with a +10.0% reading, and he doesn’t expect it to fall out of double-digits until March 2023. Asian equity markets are a little more mixed overnight. As I type, the Nikkei (+0.73%) and the Kospi (+0.18%) are trading in positive territory while the Hang Seng (-1.08%) is trading lower in early trade. Mainland Chinese stocks are also down with the CSI (-0.86%) and the Shanghai Composite (-0.51%) both in the red amid a lack of positive surprises from the 20th party congress. Early this morning, the Bank of Japan (BOJ) Governor Haruhiko Kuroda in his speech to the parliamentary committee stated that the recent depreciation in the Japanese yen was sharp and one-sided and doesn’t bode well for the nation’s economy as it makes difficult for businesses to plan ahead. In terms of yesterday’s other data, US industrial production came in on the upside with a +0.4% advance in September (vs. +0.1% expected), whilst the previous month’s contraction was also revised to a shallower -0.1% (vs. -0.2% previously). Separately in Germany, the ZEW survey’s current situation reading fell more than expected to -72.2 in October (vs. -68.5 expected), which is its lowest level since August 2020. However, the expectations component unexpectedly rose to -59.2 (vs. -66.5 expected), ending a run of 3 consecutive monthly declines. To the day ahead now, and data releases include the UK and Canadian CPI readings for September, along with US housing starts and building permits for September. From central banks, the Fed will release their Beige book, and we’ll also hear from the Fed’s Kashkari, Evans and Bullard, the ECB’s Centeno and Visco, and the BoE’s Cunliffe and Mann. Finally, earnings releases include Tesla, Procter & Gamble and Abbott Laboratories. Tyler Durden Wed, 10/19/2022 - 08:08.....»»

Category: dealsSource: nytOct 19th, 2022

The War Has Just Begun

The War Has Just Begun Via 'Big Serge' Thoughts Substack, The Winter of Yuri I have been attempting for several days to collect my thoughts on the Russo-Ukrainian War and condense them into another analysis piece, but my efforts were consistently frustrated by the war’s stubborn refusal to sit still. After a slow, attrititional grind for much of the summer, events have begun to accelerate, calling to mind a famous quip from Vladimir Lenin: “There are decades where nothing happens; and there are weeks where decades happen.” “You should know, by and large, we haven’t even started anything yet in earnest.” This has been one of those weeks. It began with the commencement of referenda in four former Ukrainian oblasts to determine whether or not to join the Russian Federation, accompanied by Putin’s announcement that reservists would be called up to augment the force deployment in Ukraine. Further excitement bubbled up from the Baltic seabed with the mysterious destruction of the Nordstream pipelines. Nuclear rumors circulate, and all the while the war on the ground continues. In all, it is clear that we are currently in the transitional period towards a new phase of the war, with higher Russian force deployment, expanded rules of engagement, and greater intensity looming. Season 2 of the Special Military Operation looms, and with it the Winter of Yuri: Let’s try to process all the developments of the past few weeks and get a handle on the trajectory in Ukraine. Annexation The keystone event at the heart of recent escalation was the announcement of referenda in four regions (Donetsk, Lugansk, Zaporizhia, and Kherson) to determine the question of entry into the Russian Federation. The implication of course was that if the referenda succeeded (a question that was never in doubt), these regions would be annexed to Russia. While there were some rumors circulating that Russia would delay the annexation, this was never really plausible. To allow these regions to vote in favor of joining Russia only to leave them out in the cold would be monumentally unpopular and raise serious doubts about Russia’s commitment to its people in Ukraine. Formal annexation is a certainty, if not on September 30th as rumored, then within the next week. All of this is rather predictable, and completes the first layer of annexations which I noted in previous analysis. The reasoning is not particularly complex: clearing the Donbas and securing Crimea were the absolute minimum Russian objectives for the war, and securing Crimea requires both a land bridge with road and rail connections (Zaporizhia oblast) and controlling Crimea’s water sources (Kherson). These minimum objectives have now been formally designated, though of course Ukraine maintains some military activity on these territories and will have to be dislodged. The Big Serge Annexation Map: Phase 1 Complete I think, however, that people lost focus as to what the referenda and the ensuing annexation means. Western talking points focused on the illegitimacy of the votes and the illegality of any annexation, but this is really not very interesting or important. The legitimacy of annexation is derived from whether or not Russian administration can succeed in these regions. Legitimacy, as such, is merely a question of efficacy of state power. Can the state protect, extract, and adjudicate? In any case, what is far more interesting than the technicalities of the referenda is what the decision to annex these regions says about Russian intentions. Once these regions become formally annexed, they will be viewed by the Russian state as sovereign Russian territory, subject to protection with the full range of Russian capabilities, including (in the most dire and unlikely scenario) nuclear weapons. When Medvedev pointed this out, it was bizarrely spun as a “nuclear threat”, but what he was actually trying to communicate is that these four oblasts will become part of Russia’s minimum definition of state integrity - non-negotiables, in other words. I think the best way to formulate it is as such: Annexation confers a formal designation that a territory has been deemed existentially important to the Russian state, and will be contested as if the integrity of the nation and state is at risk. Those fixating on the “legality” of the referenda (as if such a thing exists) and Medvedev’s supposed nuclear blackmail are missing this point. Russia is telling us where it currently draws the line for its absolute minimum peace conditions. It’s not walking away without at least these four oblasts, and it considers the full range of state capabilities to be in play to achieve that goal. Force Generation The move to hold referenda and eventually annex the southeastern rim was accompanied with Putin’s long-awaited announcement of a “partial mobilization”. Ostensibly, the initial order calls up just 300,000 men with previous military experience, but the door is left upon for further surges at the discretion of the president’s office. Implicitly, Putin can now ramp up the mobilization as he sees fit without needing to make further announcements or sign more paperwork. This is similar to American Lend-Lease or the “Authorization for Use of Military Force” in America, where the door is opened once and the President is then free to move at will without even informing the public. It was increasingly clear that Russia needed to raise its force deployment. Ukraine’s successful drive to the Oskil River was made possible by Russian economy of force. The Russian army had completely hollowed out Kharkiv Oblast, leaving only a thin screening force of national guardsmen and LNR militia. In places where the Russian Army has chosen to deploy sizeable regular formations, the results have been disastrous for Ukraine - the infamous Kherson Counteroffensive turned into a shooting gallery for Russian artillery, with the Ukrainian Army haplessly funneling men into a hopeless bridgehead at Andriivka. A Shooting Gallery So far in this war, Ukraine has achieved two big successes retaking territory: first in the spring, around Kiev, and now the late summer recapture of Kharkov Oblast. In both cases, the Russians had preemptively hollowed out the sector. We have yet to see a successful Ukrainian offensive against the Russian Army in a defensive posture. The obvious solution, therefore, is to raise the force deployment so that it is no longer necessary to hollow out sections of the front. The initial surge of 300,000 men is being a bit muddled. Not all of the men being called up will be sent to Ukraine. Many will remain in Russia on garrison duty so that existing ready formations can be rotated to Ukraine. Therefore, it is likely that we will see more Russian units arriving in theater much sooner than expected. Additionally, many of the units originally committed to Ukraine have been off the front for refitting and resting. The scale and pace of Russia’s new force generation is likely to shock people. On the whole, the timing of Russia’s manpower surge coincides with the depletion of Ukrainian capabilities. Ukraine spent the summer sending its 2nd tier conscripts to the front in the Donbas as it lovingly collected NATO-donated weapons and trained units in the rear. With generous NATO help, Ukraine was able to accumulate forces for two full scale offensives - one in Kherson (which failed spectacularly) and one in Kharkov (which succeeded in pushing past the Russian screening force and reaching the Oskil). Much of that carefully accumulated fighting power is now gone or degraded. Rumors circulated of a third offensive towards Melitipol, but Ukraine does not seem to have the combat power to achieve this, and strong Russian forces are in the region behind prepared defensive lines. On the whole, therefore, Ukraine’s window for offensive operations has closed, and what remains is closing quickly. The last zone of intense Ukrainian operations is around Lyman, where aggressive Ukrainian attacks have so far failed to either storm or encircle the town. It is still possible that they take Lyman and consolidate control of Kupyansk, but this would likely represent the culmination of Ukrainian offensive capability. For now, the area around Lyman is a killing zone that exposes attacking Ukrainian troops to Russian air and ground fires. The large scale view of force ratios is as follows: Ukraine has spent much of the combat power that they accumulated with NATO help during the summer, and will have an urgent need to reduce combat intensity for refitting and rearming at precisely the same time that Russian combat power in the theater begins to surge. Simultaneously, NATO’s ability to arm Ukraine is on the verge of exhaustion. Let’s look at this more closely. Depleting NATO One of the more fascinating aspects of the war in Ukraine is the extent to which Russia has contrived to attrit NATO military hardware without fighting a direct war with NATO forces. In a previous analysis I referred to Ukraine as a vampiric force which has reversed the logic of the proxy war; it’s a black hole sucking in NATO gear for destruction. There are now very limited stockpiles to draw from to continue to arm Ukraine. Military Watch Magazine noted that NATO has drained the old Warsaw Pact tank park, leaving them bereft of Soviet tanks to donate to Ukraine. Once these reservoirs are fully tapped, the only option will be giving Ukraine western tank models. This, however, is much harder than it sounds, because it would require not only extensive training of tank crews, but also an entirely different selection of ammunition, spare parts, and repair facilities. Tanks are not the only problem, however. Ukraine is now staring down the barrel (heh heh) of a serious shortage of conventional tube artillery. Earlier in the summer, the United States donated 155mm howitzers, but with stockpiles of both guns and shells dwindling, they’ve recently been forced to turn to lower caliber towed trash. After the announcement of yet another aid tranche on September 28th, the USA has now put together five consecutive packages which do not contain any conventional 155mm shells. Shells for Ukraine’s Soviet vintage artillery were running low as early as June. In effect, the effort to keep Ukraine’s artillery arm functioning has gone through a few phases. In the first phase, Warsaw Pact stockpiles of Soviet shells were drained to supply Ukraine’s existing guns. In the second phase, Ukraine was given mid-level western capabilities, especially the 155mm howitzer. Now that 155mm shells are running low, Ukraine has to make do with 105mm guns which are badly outranged by Russian howitzers and will be, in a word, doomed in any kind of counterbattery action. As a substitute for adequate tube artillery, the latest aid package does include 18 more of the internet’s favorite meme weapon - the HIMARS Multiple Launch Rocket System. What is not explicitly mentioned in the press release is that the HIMARS systems don’t exist in current US inventories and will have to be built, and are thus unlikely to arrive in Ukraine for several years. The increasing difficulties in arming Ukraine coincide with the rapid closing of Ukraine’s window of operational opportunity. The forces accumulated over the summer are degraded and fought out, and every subsequent rebuild of the Ukrainian first tier forces will become harder as manpower is destroyed and NATO arsenals are depleted. This depletion comes precisely as Russian force generation is surging, foretelling the Winter of Yuri. The Winter War Anyone who expects the war to slow down during the winter is in for a surprise. Russia is going to launch a late autumn/winter offensive and achieve significant gains. The arc of force generation (both Russia’s increasing force accumulation and Ukraine’s degradation) coincide with the approach of cold weather. Let’s make a brief note about combat in the cold. Russia is perfectly capable of waging effective operations in the snow. Going back to World War Two, the Red Army was more than capable of offensive success during the winter, starting in 1941 with the general counteroffensive at Moscow, again in 1942 with the destruction of the German 6th Army at Stalingrad, and in 1943-44 with two successful large scale offensives beginning in the winter. Now, of course World War Two is not directly applicable in all ways, but we can establish that from a technical standpoint there is a clearly established capability to wage operations in cold weather. We also have more recent examples. In 2015, during the first Donbas War, LNR and DNR forces launched a pincer operation which successfully encircled a Ukrainian battalion at the Battle of Debaltseve. And, of course, the Russo-Ukrainian War begin in February, when much of northern Ukraine was below freezing temperatures. Nice Move Winter weather actually favors a Russian offensive for multiple reasons. One of the paradoxes of military operations is that freezing weather actually enhances mobility - vehicles can get stuck in mud, but not on frozen ground. From 1941-43, German troops celebrated the arrival of spring, because the thaw promised to bog the Red Army down in mud and slow their momentum. The winter death of foliage also reduces the cover available to troops in a defensive posture. And, of course, cold weather favors the side with more reliable access to energy. As for where Russia will choose to commit its newly generated forces, there are four realistic possibilities, which I will enumerate in no particular order: Reopening the Northern Front with an operation around Kharkov. The attractiveness of this option is clear. A Russian move in force towards Kharkov would immediately collapse all of Ukraine’s gains towards the Oskil by compromising their rear areas. An offensive on Nikolayev out of the Kherson region. This would move further towards the goal of a landlocked Ukraine, and would take advantage of the fact that Ukrainian forces in this region are badly chewed up after their own failed offensive. Massive commitment to the Donbas to finish the liberation of DNR territory by capturing Slovyansk and Kramatorsk. This is less likely, as Russia has demonstrated comfort with the slow tempo of operations on this front. A push north from the Melitopol area towards Zaparozhia. This would safeguard the nuclear powerplant and end any credible threats to the land bridge to Crimea. Other possibilities I regard as unlikely. A second advance on Kiev would make little operational sense, as it would not support any of the existing fronts. I would expect action around Kiev only if the new force generation is significantly larger than the headline number of 300,000. Otherwise, Russia’s winter offensives are likely to be concentrated on mutually supporting fronts. I think some movement to reopen the northern is likely, as it would completely compromise Ukraine’s gains in the Izyum-Kupyansk direction. There are rumors that forces are being moved into Belarus, but I actually think the Chernigov-Sumy axis would be more likely than a new Kiev operation, as it could be supportive of an offensive on Kharkov. Potential Axes of Winter Advance (Base Map Credit: @War_Mapper) On the broadest level, it is clear that Ukraine’s window to conduct offensive operations is nearing its close, and the force generation ratios on the ground are going to swing decisively in Russia’s favor through the winter. Nordstream and Escalation As we were pondering these developments on the ground, yet another plotline emerged underwater. The first hint that something was amiss was the news that pressure in the Nordstream 1 pipeline was dropping mysteriously. It was then revealed that the pipeline - along with the non-operational Nordstream 2 - had suffered serious damage. Swedish seismologists recorded explosions on the floor of the Baltic Sea, and it was revealed that the pipelines are heavily damaged. Let’s be frank about this. Russia did not blow up its own pipelines, and it is ludicrous to suggest that they did. The importance of the pipeline to Russia lay in the fact that it could be switched on and off, providing a mechanism for leverage and negotiation vis a vis Germany. In the classic carrot and stick formulation, one cannot move the donkey if the carrot is blown up. The *only* feasible scenario in which Russia might be responsible for the sabotage would be if some hardliner faction within the Russian government felt that Putin was moving too slowly, and wanted to force an escalation. This would imply, however, that Putin is losing internal control, and there is no evidence whatsoever for such a theory. And so, we return to elementary analysis, and ask: Cui bono? Who benefits? Well, considering Poland celebrated the opening of a new pipeline to Norway only a few days ago, and a certain former Polish MP cryptically thanked the United States on Twitter, it is fair to make a few guesses. The first lesson of doing crimes is not to brag about it on twitter Let us briefly meditate on the actual implications of Nordstream’s demise. Germany loses what little autonomy and flexibility it had, making it even more dependent on the United States. Russia loses a point of leverage over Europe, reducing the inducements to negotiation. Poland and Ukraine become even more critical transit hubs for gas. Russia clearly perceives this as a bridge burning move of sabotage by NATO, designed to back them into a corner. The Russian government has decried it as an act of “international terrorism” and argued that the explosions occurred in areas “controlled by NATO” - the concatenation of these statements is that they blame NATO for an act of terrorism, without explicitly saying that. This precipitated another meeting of the Russian National Security Council. Many western nations have advised their citizens to leave Russia immediately, suggesting they are worried about escalation (this coincides with Ukraine’s unhinged claim that Russia may be about to use nuclear weapons). For the time being, I expect Russian escalation to remain confined to Ukraine itself, likely coinciding with the deployment of additional Russian ground forces. If Russia feels compelled to undertake an out of theater escalation, targeting American satellites, digital infrastructure, or forces in Syria remain the most likely option. On the Precipice I am fully cognizant that my views will be spun as “coping” after Ukraine’s gains in Kharkov oblast, but time will tell out. Ukraine is on its last legs - they drained everything usable out of NATO stockpiles to build up a first tier force over the summer, and that force has been mauled and degraded beyond repair just as Russia’s force generation is set to massively increase. Winter will bring not only the eclipse of the Ukrainian army, the destruction of vital infrastructure, and the loss of new territory and population centers, but also a severe economic crisis in Europe. In the end, the United States will be left to rule over a deindustrialized and degraded Europe, and a rump Ukrainian trashcanistan sequestered west of the Dnieper. For now, though, we are in the interregnum as the last flames of Ukraine’s fighting power flickers out. Then there will be an operational pause, and then a Russian winter offensive. There will be several weeks where nothing happens, and then everything will happen. During that operational pause, you may be tempted to ask - “is it done, Yuri?” No, Comrade Premiere. It has only begun. Tyler Durden Sun, 10/02/2022 - 07:00.....»»

Category: blogSource: zerohedgeOct 2nd, 2022

The secrets of Russia"s artillery war in Ukraine

The "generally mediocre performance" of Russian troops is being offset by massed artillery to support a slow, methodical advance, a new report says. Russian President Vladimir Putin shoots a fortress cannon at the Peter and Paul Fortress in St. Petersburg, January 7, 2019.(Alexei Druzhinin, Sputnik, Kremlin Pool Photo via AP) A new report provides details about Russian artillery tactics gleaned from interviews with Ukrainian soldiers. Here are some key findings regarding Russia's grinding artillery-based way of war in Ukraine. A report published by the UK-based Royal United Services Institute (RUSI) think tank reveals fascinating new details on Russian artillery tactics gleaned from in-person interviews of Ukrainian soldiers by military analysts Jack Watling and Nick Reynolds.While the report deserves reading in full here, the article highlights key findings regarding Russia's artillery-based way of war.It's no secret that after Russia's ambitious early attacks met with disaster in February-March, starting in April Russia pivoted to an artillery-oriented style of attrition warfare in Eastern Ukraine, battering Ukrainian units with overwhelming shelling.Watling observes: "The generally mediocre performance of Russia's ground forces has been increasingly offset by their leveraging of massed artillery fires to facilitate a slow and methodical advance. Sustained bombardment has progressively displaced the local population and levelled the settlements and infrastructure that were being defended, forcing the Ukrainian military to abandon territory after it is devastated."Massive bombardments gradually dislodged Ukrainian troops from the symbolically important cities of Severodonetsk and Lyschansk by the end of June, while making it impossible for Ukrainian forces to concentrate with adequate speed and numbers to effectively counterattack. Even more ominously, Watling estimates Ukrainian personnel losses may now be approaching parity with Russia's.The silver lining is that Ukrainian units have repeatedly avoided encirclement and annihilation — part of Moscow's original objectives in Donbas — through timely and relatively orderly withdrawals, and actually gained ground around Kherson in southern Ukraine.Russian artillery has an over 3:1 firepower advantageUkrainian soldiers man a howitzer during artillery drills in the Kharkiv Region, June 14, 2021.Vyacheslav Madiyevskyy/ Ukrinform/Future Publishing via Getty ImagesRussia doesn't actually have a huge quantitative advantage in combat troops compared to Ukraine (because it's not fully mobilized) — but it does have much more artillery, and is generating a lot more artillery fires.According to the report, Russian howitzers are expending 20,000 shells daily on average, compared to 6,000 fired by Ukraine. The ratio for rocket artillery and ballistic-missile launches is even worse. And Ukraine still risks exhausting its supply of Soviet-standard 152-mm shells even faster than Russia does.Russian artillery remains more centralized than expectedArtillery craters and burning fields in southern Chernihiv, Ukraine.Satellite image ©2022 Maxar TechnologiesRussia's military was thought to have decentralized much artillery into its key tactical unit, the tank or infantry battalion tactical group (BTG), thought to integrate a powerful (and theoretically more responsive) complement of 1-3 artillery batteries.But according to the study, BTGs in practice often have only a modest number of mortars and older howitzers. Instead, brigade- and divisional command echelons jealously retain control of more modern artillery assets in centralized "artillery tactical groups."Furthermore, artillery in BTGs has been saddled with shockingly poor communications architecture, compelling units to verify fire missions via un-encrypted civilian cell phones, resulting in a ponderous "kill-chain."The result, per the report: "… Russian artillery has largely operated independently from — rather than in close support of — its maneuver elements [ie. tanks and infantry], with supportive fire missions having long delays."Russian artillery becomes much more effective when linked to dronesUkrainian police inspect a downed Russian drone after a strike in northwestern Kyiv, March 22, 2022.FADEL SENNA/AFP via Getty ImagesPrior to 2022, Russia's military was perceived to have developed a Western-style "reconnaissance-fires complex" where forward drone surveillance assets (especially Orlan-10 surveillance drones) could cue in precise and timely strikes, aided by digital fire direction/battle management systems.This was not in evidence in the war's early days due to rushed war preparations, but since then it's clear Russia sometimes can implement this doctrine and deliver deadly precision attacks — it's just not a widespread capability, due to shortages of adequately trained personnel and hardware, particularly communications systems and drones.For example, when supported by drones, Russian artillery can adjust fires in real time to hit moving targets. Drone spotters also enable the deployment of small sub-units of just one or two guns to deliver effective strikes, rather than fully batteries of six guns.But a lack of proficient personnel and hardware (particularly the larger Orlan-30 drone, which has a laser designator) has resulted in Russian units wasting supplies of laser-guided Krasnopol rounds in unguided barrages.Russia assigns different roles to different types of artilleryThe first upgraded 203-mm 2S7M Malka self-propelled artillery vehicle delivered to Russia's military, April 15, 2020.Rostec Press OfficebackslashTASS via Getty ImagesAccording to Watling, while Russia employs howitzers for attacking discrete point targets, multiple-rocket launcher systems are often used to bar the movement of Ukrainian forces by laying down a curtain of destruction in between them and their desired objective.Counter-battery attacks targeting Ukrainian artillery, as well as Ukrainian drone operators, are the preserve of Tochka-U ballistic missiles and Russia's longest-range guns controlled at the divisional level: the 2A65 Msta and 2A36 Giatsint towed-howitzers, their 2S19 and 2S5 self-propelled variants, and the 2S7M Malka 203-mm self-propelled howitzer.Here's how Russian artillery deploysA battery of towed artillery in firing position in Talakivka, northeast of Mariupol, Ukraine.Satellite image ©2022 Maxar Technologies.Ukrainian sources claim Russian artillery units typically deploy roughly one-third of their maximum firing range back from the frontline to insulate against enemy attacks.Watling writes that "… mortars are largely positioned 1.5 km [1 mile] back from the forward line of own troops, artillery tactical groups subordinated to brigades 8 km [5 miles] back, and artillery tactical groups armed with longer-ranged systems dedicated to deep fires at 10–15 km [6-9 miles] back."Howitzer units usually deploy in a 100×300 meter area, with 20-40 meters between guns. Rocket-launcher units instead use a linear formation, with up to 150 meters separating each launcher truck.The report also describes Russian units deploying "dummy" artillery batteries of mostly damaged/destroyed guns to divert and absorb Ukrainian strikes.Russia's counter-battery game is slow — except when aided by dronesA fragment of a Tochka-U missile after an attack at the railway station in Kramatorsk, Ukraine, April 8, 2022.Andriy Andriyenko/APCounter-battery artillery seeks to take out an opponent's artillery, leveraging radars and acoustic sensors to trace incoming shellfire back to its point of origin. The faster that can be accomplished, the more likely counter-battery fire will catch the attacking battery before it can relocate.But according to Watling and Reynolds, Russian counter-battery is slow, usually averaging 30 minutes to launch a counter-battery strike. That's more than enough time for even towed artillery to fire, hitch up to trucks and get the hell out of dodge.But when networked with a drone spotter, Russian guns can execute accurate counter-battery strikes in just three to five minutes. Only Ukraine's most modern, Western-supplied mobile artillery systems can shoot-and-scoot fast enough to avoid that.As a result, Ukrainian artillery batteries regularly deploy portable air-defense missiles — preferably optically-guided Starstreak/Marlet missiles — to shoot down drones.Watling notes Russia has made surprisingly extensive, even wasteful, use of Tochka-U ballistic missiles for counter-battery strikes, noting an incident when three of these powerful but imprecise weapons were fired at a single Ukrainian M109 Paladin self-propelled howitzer — causing only light damage.Russian artillery doesn't shoot-and-scootAn Uragan-M truck-mounted artillery unit in a Victory Day military parade in Minsk, May 9, 2020.Natalia FedosenkobackslashTASS via Getty ImagesWhile the report notes Ukrainian units report can "consistently evade" Russian counter-battery fire (at least when drones aren't around), Russian artillery crews mostly didn't move after firing — displacing only after having come under attack, ie. "take fire and then scoot."Ukrainian sources also claim Russian howitzers crews, when coming under shellfire, typically abandon their guns to seek cover — even when vehicle-mounted.Ammunition supply is Russia's Achilles heelA still image of HIMARS in use, from footage shared by the Ukrainian Defense Ministry.Ukraine Ministry of DefenseRussia's employment of artillery may lack finesse by Western standards, but it still has had a dominant role in facilitating the capture of key objectives and inflicted unsupportable casualties.How to tackle such a broadly destructive, if clumsy, behemoth? Watling argues the key is to starve the beast, ie. "… the logistics burden posed by the transportation and stockpiling of the vast quantity of shells that allows Russia to continue to maneuver by fire."That's because Moscow's ground forces are infamously dependent on rail logistics to supply forces compared to Western armies, lacking adequate trucks and modern palletized load-lifting equipment.Watling writes: "… ammunitions dumps at the divisional and brigade level are large, distinct, hard to conceal or defend, and slow to relocate … given the disparity in guns and the shortage of Russian precision fires, the fastest way to level the playing field is to enable Ukraine to strike Russian artillery logistics."While the report argues Ukraine has failed to systematically exploit this weakness, this arguably has changed, given a stunning succession of precision attacks on Russian ammunition depots deep behind the frontline in July.These are made possible by Ukraine's use of Western-supplied HIMARS and M270 rocket artillery systems, which can precisely attack targets nearly 50 miles away using GPS-guided rockets.Such strikes could hamstring Russia's artillery war, but only so long as Ukraine receives enough HIMARS/M270s and long-range Western howitzers quickly enough, and if NATO states adequately increase production of 155-mm shells so as to sustain deliveries to Ukraine. He also advocates the West streamlining the number of artillery types delivered to Ukraine to simplify the resulting "logistical nightmare" for Ukraine's military but that seems unlikely to happen given the distributed nature of Western aid to Ukraine.Sébastien Roblin writes on the technical, historical, and political aspects of international security and conflict for publications including The National Interest, NBC News,, War is Boring and 19FortyFive, where he is defense-in-depth editor. He holds a master's degree from Georgetown University and served with the Peace Corps in China. You can follow his articles on Twitter.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJul 12th, 2022

US To Increase Artillery Ammunition Production By 500% For Ukraine

US To Increase Artillery Ammunition Production By 500% For Ukraine Authored by Dave DeCamp via, The Pentagon is planning to boost its production of artillery ammunition by 500% over the next two years as the US is depleting its military stockpiles by sending millions of shells to Ukraine, The New York Times reported Tuesday. Since Russia launched its invasion of Ukraine, the US has pledged to send Ukraine over one million 155mm artillery shells. Before the US Army began efforts to increase production, it produced 14,400 155mm shells a month, but under the new plans, the number could reach over 90,000 each month. Projectiles production line. Image: BAE Systems According to the Times, an Army report said the plan will involve expanding factories and bringing in new producers in an effort described as "the most aggressive modernization effort in nearly 40 years" of the US military-industrial complex. The unguided 155mm shells that are fired out of Howitzers include parts produced by several arms manufacturers, including steel bodies made by General Dynamics and explosives mixed by BAE Systems. American Ordnance pours the explosives into the bodies, and several other contractors produce the fuzes that are screwed into the shells. The US plans to dramatically ramp up ammunition production over the next two years show that the US is expecting to support Ukraine against Russia for years to come, and there is no sign that the fighting will end anytime soon. What’s not clear is if the policy is sustainable, as US military officials have warned it may be hard to continue arming both the US and Ukraine as the war drags on. Ukrainian forces are estimated to be using about 90,000 rounds of artillery each month, which is more than double what the US and Europe can currently produce. The US has had to dip into a little-known stockpile of weapons that it keeps in Israel to keep up with Ukraine’s artillery demand. The Pentagon also requested that US forces stationed in South Korea send equipment to Ukraine. Tyler Durden Thu, 01/26/2023 - 06:30.....»»

Category: worldSource: nytJan 26th, 2023

Study Finds US Would Run Out Of Long-Range Munitions In 1 Week In China Hot War

Study Finds US Would Run Out Of Long-Range Munitions In 1 Week In China Hot War A new study released this week by the D.C.-based Center for Strategic and International Studies (CSIS) has concluded that America's defense industry is "not adequately prepared" for "a protracted conventional war" with an enemy with a large military like China. The findings were the result of a war games simulation which also relied heavily on observations and statistics being gained from the Ukraine-Russia war, and Washington's ongoing military support role to Kiev. Information from the Ukraine war led CSIS to find that the US would rapidly deplete its munitions, particularly long-range, precision-guided ones - in merely less than a week of a hot war with China in the Taiwan Strait. Chinese PLA naval soldiers on the march in a file photo. Image: Asia Times/Facebook “The main problem is that the U.S. defense industrial base — including the munitions industrial base — is not currently equipped to support a protracted conventional war," the study emphasized. "The bottom line is the defense industrial base, in my judgment, is not prepared for the security environment that now exists," CSIS’s Seth Jones concluded in a statement to The Wall Street Journal. As the study's main author, Jones posed the question: "How do you effectively deter if you don’t have sufficient stockpiles of the kinds of munitions you’re going to need for a China-Taiwan Strait kind of scenario?" According to more from the study: "As the war in Ukraine illustrates, a war between major powers is likely to be a protracted, industrial-style conflict that needs a robust defense industry able to produce enough munitions and other weapons systems for a protracted war if deterrence fails..." "Given the lead time for industrial production, it would likely be too late for the defense industry to ramp up production if a war were to occur without major changes." The report additionally pointed out that the slow-moving nature of US bureaucracy and oversight is also a fundamental aspect to the problem: The study also said that the U.S.’s foreign military sales (FMS) take too long because they need to be initiated by the Department of State and then executed by the Department of Defense and ultimately approved by Congress. Foreign sales have benefits, including supporting the U.S. defense industry, strengthening ally relations and preventing the sale of adversary systems to other countries, the study said. "The U.S. FMS system is not optimal for today’s competitive environment — an environment where such countries as China are building significant military capabilities and increasingly looking to sell them overseas," the study stated. It does seem the Pentagon is taking note, and is aware that events in Ukraine have exposed US defense shortcomings, as the Biden administration chooses to get more and more involved. The New York Times reported Tuesday that the US plans to boost production of artillery ammunition by 500% over the next two years. Whereas the US Army previously produced 14,400 155mm shells a month, the new plans could see those numbers hit over 90,000 each month. Tyler Durden Wed, 01/25/2023 - 20:40.....»»

Category: personnelSource: nytJan 25th, 2023

11 Most Undervalued Foreign Stocks To Buy According To Hedge Funds

In this article, we discuss 11 most undervalued foreign stocks to buy according to hedge funds. If you want to see more stocks in this selection, check out 5 Most Undervalued Foreign Stocks To Buy According To Hedge Funds.  According to JPMorgan’s projections, the global economy is expected to grow at a meagre rate of […] In this article, we discuss 11 most undervalued foreign stocks to buy according to hedge funds. If you want to see more stocks in this selection, check out 5 Most Undervalued Foreign Stocks To Buy According To Hedge Funds.  According to JPMorgan’s projections, the global economy is expected to grow at a meagre rate of approximately 1.6% in 2023. Factors that are expected to contribute to this slower growth include an overall tightening of financial conditions, the ongoing impact of the COVID-19 pandemic, particularly in China during the winter, and persistent natural gas issues in Europe. It is possible that in 2023, stock markets outside of the United States may face challenges due to a combination of factors such as high inflation, increasing interest rates, and a slowdown in economic growth.  The conflict in Ukraine, the increase of nationalist movements, and the ongoing effects of the COVID-19 pandemic are all contributing to a slowdown in globalization. This trend may have a negative impact on non-US stock markets, which have benefited from globalization over the past 30 years. However, Fidelity research suggests that even though there may be short-term difficulties, international stocks may perform better than US stocks in the long run, over the next 20 years.  Mislav Matejka, Head of European and Global Equity Strategy at J.P. Morgan, told investors on January 5:  “Within developed markets, the U.K. is still our top pick. As for EM, its recovery is mostly linked to China. Tactically, the Asia reopening trade led by China is overdue and the activity hurdle rate is very easy, with further policy support likely. We expect around 17% upside for China by the end of 2023.”  Some of the most undervalued foreign stocks to buy according to hedge funds include Canadian Natural Resources Limited (NYSE:CNQ), Nutrien Ltd. (NYSE:NTR), and Shell plc (NYSE:SHEL). To check out more foreign stocks, see 10 Best Foreign Stocks To Buy and 10 Best International Dividend Stocks To Buy.  Our Methodology  We scanned Insider Monkey’s database of holdings of 920 elite hedge funds tracked as of the end of the third quarter of 2022 and picked the top 11 foreign stocks — companies headquartered outside of the US — that have P/E ratios of less than 10 as of January 23. The list is arranged in ascending order of the number of hedge fund holders in each firm.  Source:Pixabay Most Undervalued Foreign Stocks To Buy According To Hedge Funds 11. TotalEnergies SE (NYSE:TTE) Number of Hedge Fund Holders: 22 P/E Ratio as of January 23: 7.33 TotalEnergies SE (NYSE:TTE) is a European multinational integrated energy and petroleum company that operates through four segments – Integrated Gas, Renewables & Power, Exploration & Production, Refining & Chemicals, and Marketing & Services. On January 12, TotalEnergies SE (NYSE:TTE) announced that it has commissioned its 18th biogas production unit in France. The site will convert 220,000 metric tons of organic waste into 200,000 metric tons per year of digestate and 160 GWh of biomethane, equivalent to the average annual consumption of 32,000 people. In 2023, it will produce 69 GWh and scale up eventually in line with demand.  On January 19, JPMorgan analyst Christyan Malek raised the firm’s price target on TotalEnergies SE (NYSE:TTE) to EUR 73 from EUR 68 and kept an Overweight rating on the shares. According to Insider Monkey’s third quarter database, 22 hedge funds were bullish on TotalEnergies SE (NYSE:TTE), compared to 20 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with over 23 million shares worth $1.07 billion.  In addition to Canadian Natural Resources Limited (NYSE:CNQ), Nutrien Ltd. (NYSE:NTR), and Shell plc (NYSE:SHEL), TotalEnergies SE (NYSE:TTE) is one of the most undervalued foreign stocks to invest in.  Here is what Artisan Partners specifically said about TotalEnergies SE (NYSE:TTE) in its Q3 2022 investor letter: “We added one new position this quarter, TotalEnergies SE (NYSE:TTE). TTE is one of the world’s largest energy companies. It develops and produces oil and gas, produces and sells refined products, is one of the largest producers and traders of LNG, and owns a large portfolio of renewable power generating assets. TTE has one of the lowest cost portfolios of oil and gas assets and therefore one of the lowest breakeven points in the industry. It also has one of the best balance sheets in the industry. We estimate it will reach a net cash position sometime in 2023. The valuation of TTE—and that of Shell—is fascinating. TTE sells at approximately 4X earnings and has a 5% dividend yield. With its current buyback program and a recently announced special dividend, the owners yield is more than 10%. The valuation and owners yield are not dissimilar to those of Shell, which we also own and which trades at just under 5X earnings. To say that a discount is attached to European oil companies relative to US peers is an understatement. ExxonMobil sells at 8X earnings, Chevron 9X and Conoco 8X. If TTE and Shell redomiciled to the US, their share prices would probably double. We have a few theories for the valuation anomaly. First, as mentioned above, Europe generally trades at a big discount to the US. In the case of TTE and Shell, this makes no economic sense. The oil and gas business is a global one, and TTE and Shell have attractive assets. The main explanation, we believe, is that large sections of the European asset management industry will not invest in oil and gas because of ESG restrictions. Yet if the recent war in Ukraine and the current energy crisis have shown us nothing else, the supply of energy is an enormous social good. Indeed, it is an existential good. Moreover, it is companies such as TTE that will invest billions to supply the LNG that Europe desperately needs to restore its economy and reduce the crushing cost burden on families who must now choose between heating their homes and eating. Finally, TTE is also investing billions per year in renewable power generating assets such as wind and solar. Such assets will likely never replace clean burning natural gas and nuclear as base power suppliers, but they are a valuable and clean adjunct to modern grids. We believe TTE’s renewable portfolio is worth between $25 billion and $35 billion and is moving from almost no profit contribution toward meaningful levels of profit over the next few years. We wonder how it makes sense for investors to disinvest from these kinds of assets on ethical grounds.” 10. Stellantis N.V. (NYSE:STLA) Number of Hedge Fund Holders: 25 P/E Ratio as of January 23: 2.91 Stellantis N.V. (NYSE:STLA) is a Netherlands-based company engaged in the design, engineering, manufacturing, distribution, and sale of automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, and production systems worldwide. On January 9, Stellantis N.V. (NYSE:STLA) signed an agreement with Element 25 to secure substantial supplies of raw materials for battery electric vehicle production. Shipments for a total volume of 45 kilotons will begin in 2026, with options to extend the supply term and volumes. On October 20, Nomura analyst Anindya Das upgraded Stellantis N.V. (NYSE:STLA) to Buy from Neutral with a price target of EUR 19.80, up from EUR 15.70, citing better-than-anticipated year-to-date net pricing strength in Stellantis N.V. (NYSE:STLA)’s major markets of North America and Europe, lower risk of margin pressure from EV battery material prices in 2023 in light of the company’s “appropriately paced rollout of EVs in North America” compared to the “aggressive EV ramp-up plans of its Detroit peers”, and benefits from post-merger platform consolidation in Europe beginning in 2023.  According to Insider Monkey’s data, Stellantis N.V. (NYSE:STLA) was part of 25 hedge fund portfolios at the end of Q3 2022, and Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the largest stakeholder of the company, with 29 million shares worth $349.35 million.  9. Novartis AG (NYSE:NVS) Number of Hedge Fund Holders: 26 P/E Ratio as of January 23: 9.50 Novartis AG (NYSE:NVS) is a Swiss company that researches, develops, manufactures, and markets healthcare products worldwide. The company operates through two segments – Innovative Medicines and Sandoz. On December 14, Harrow Health, Inc. (NASDAQ:HROW), an eye care pharmaceutical company, announced an agreement to acquire the exclusive U.S. commercial rights to several FDA-approved ophthalmic products from Novartis AG (NYSE:NVS). Per the agreement, Harrow Health, Inc. (NASDAQ:HROW) is expected to make a $130 million payment at the end of an additional $45 million subject to the commercial launch of Triesence injection, which is anticipated in the second half of 2023. On January 3, JPMorgan analyst Richard Vosser upgraded Novartis AG (NYSE:NVS) from Underweight to Neutral with a price target of CHF 85, up from CHF 78. He sees a divide in the outlooks for European pharmaceutical companies in 2023, with some facing challenges from genericization and downside to consensus estimates. He advised avoiding companies like GSK and Roche, and instead favors firms with sustainable growth and more pipeline data points. According to Insider Monkey’s data, 26 hedge funds were long Novartis AG (NYSE:NVS) at the end of September 2022, compared to 22 funds in the last quarter. Jim Simons’ Renaissance Technologies is the largest stakeholder of the company, with 3.18 million shares worth $241.85 million.  Here is what Madison Investors Fund has to say about Novartis AG (NYSE:NVS) in its Q3 2022 investor letter: “We sold our position in Novartis. We like the company’s track record of innovation, and its diversified portfolio of drugs. However, we’ve become increasingly concerned about the outlook for some of its recently launched therapeutics, as well as some generic competition in a few of its mature drugs. If pressed, we still like the odds that Novartis will do well, but the outlook is a little cloudier than it’s been in a while. As noted above, we’ve been big fans of its Alcon unit for many years, and now that Alcon is independent, we decided to concentrate our investment there.” 8. Vale S.A. (NYSE:VALE) Number of Hedge Fund Holders: 27 P/E Ratio as of January 23: 4.67 Vale S.A. (NYSE:VALE) is headquartered in Rio de Janeiro, Brazil, and the company produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking worldwide. On January 10, the company announced that it has received multiple bids for a stake of up to 10% in its base metals business, following talks with sovereign wealth funds, automakers, and industrial groups.  On December 9, Morgan Stanley analyst Carlos De Alba upgraded Vale S.A. (NYSE:VALE) to Overweight from Equal Weight with a price target of $20, up from $14.50. The analyst believes China’s reopening will continue to benefit miners, but the path forward will be bumpy. He sees iron ore price momentum heading into the first half of 2023, due to reduced supply and China exiting its COVID Zero policy. He also believes that possible transactions that would “unlock value” from Vale S.A. (NYSE:VALE)’s base metals unit could be catalysts for a re-rating. According to Insider Monkey’s data, 27 hedge funds were bullish on Vale S.A. (NYSE:VALE) as of the end of September 2022, and Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 21.40 million shares worth $285 million.  Here is what GMO LLC had to say about Vale S.A. (NYSE:VALE) in its Q1 2022 investor letter: “Let’s look at Vale (NYSE:VALE), the world’s largest iron ore producer, as a case study for how shareholders can be rewarded. Vale’s stock price is about where it was at the beginning of last year. Despite the market’s lack of enthusiasm, the company generated about $20 billion of free cash flow last year. Not bad for a company with a market cap of a little over $100 billion and no substantive debt as of the end of March. 4 What did the company do with all that cash? Last year, Vale paid out about $9 billion in regularly scheduled dividends and distributed another $10 billion between extra dividends and share repurchases. Combined with dividends distributed in the first quarter of this year and a recently announced share repurchase, Vale has returned or announced the return of over $33 billion since the beginning of last year, almost a 32% yield relative to the market cap of the company. Not a bad way to win.” 7. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) Number of Hedge Fund Holders: 33 P/E Ratio as of January 23: 2.29 Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) explores for, produces, and sells oil and gas in Brazil and internationally. The company operates through Exploration and Production, Refining, Transportation and Marketing, Gas and Power, and Corporate and Other Businesses segments. On January 18, Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) announced that its total oil and gas production for FY 2022 was 2.68 million boe/day, surpassing its full-year target of 2.6 million boe/day. Italian steel pipe maker Tenaris S.A. (NYSE:TS) also disclosed that it signed a three-year deal to supply tubing with corrosion resistant alloys to Petrobras for work offshore Brazil. According to Insider Monkey’s data, 33 hedge funds were bullish on Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) at the end of Q3 2022, compared to 30 funds in the last quarter. It is one of the most undervalued foreign stocks to buy according to hedge funds. Rajiv Jain’s GQG Partners is the leading position holder in the company, with over 214 million shares worth $2.6 billion.  Like Canadian Natural Resources Limited (NYSE:CNQ), Nutrien Ltd. (NYSE:NTR), and Shell plc (NYSE:SHEL), Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) is one of the most popular foreign stocks among elite hedge funds.  6. Shell plc (NYSE:SHEL) Number of Hedge Fund Holders: 39 P/E Ratio as of January 23: 5.13 Shell plc (NYSE:SHEL) is a London-based energy and petrochemical company that operates through Integrated Gas, Upstream, Marketing, Chemicals and Products, and Renewables and Energy Solutions segments. On January 18, Shell plc (NYSE:SHEL) announced that it is purchasing Volta in a deal valuing the electric vehicle charging company at approximately $169 million. On January 23, Morgan Stanley Martijn Rats downgraded Shell plc (NYSE:SHEL) from Overweight to Equal Weight and decreased the price target from 2,922 GBp to 2,767 GBp. This change is due to a more neutral outlook for the energy industry and a shift in the analyst’s overall industry view to “In-Line.” Additionally, the analyst noted that consensus estimates for the energy sector are already high, leaving little potential for further growth. According to Insider Monkey’s data, 39 hedge funds were bullish on Shell plc (NYSE:SHEL) at the end of the third quarter of 2022, and Ken Fisher’s Fisher Asset Management held the leading stake in the company, comprising 20.7 million shares worth $1.03 billion.  Here is what Harding Loevner International Equity Fund has to say about Shell plc (NYSE:SHEL) in its Q1 2022 investor letter: “While risks of unforeseen consequences arising from the Ukraine conflict are high, on this front we are cautiously optimistic that China will work hard to maintain its neutrality in a credible way, as it is a huge beneficiary of trade with the rest of the world, especially the rich developed nations. We think it likely that China, along with India, will continue to buy oil and gas from Russia (just as Europe, at least for now, plans to keep its gas pipelines open), and do not expect that fact to alter China’s trade relations with the West much. Nevertheless, we must contemplate that our optimism is misplaced on the importance of membership in the global network of exchange. If our central and optimistic case—admittedly an educated guess—is wrong, then we’d need to greatly modify our views of which companies in our opportunity set will face new barriers to profitable growth, and which might stand to benefit, relatively, from a further receding of globalization. (Global trade, after all, has never matched the peak share of GDP it reached in 2008, before the Global Financial Crisis.) We’d expect such a world to be less efficient, as the cold logic of comparative advantage is demoted as a determinant of which goods or services are produced and where. That would lead to a less prosperous world, since exploiting comparative advantage is a cornerstone of wealth creation. If regional blocs began to raise limits on the movement of capital as well as goods, we’d need to parse which of our multinational companies were at risk of declining sales from increasingly hostile, siloed countries. Royal Dutch Shell (NYSE:SHEL) has found its Siberian oil and gas joint venture assets stranded by the combination of sanctions and the public opprobrium of Russia’s actions.”     Click to continue reading and see 5 Most Undervalued Foreign Stocks To Buy According To Hedge Funds.    Suggested articles: 10 Dirt Cheap Stocks To Buy 11 Tech Stocks with Low PE Ratio 10 Best Healthcare Stocks for the Long Term   Disclosure: None. 11 Most Undervalued Foreign Stocks To Buy According To Hedge Funds is originally published on Insider Monkey......»»

Category: topSource: insidermonkeyJan 24th, 2023

The US is scrambling to find what experts say may be the "most important" hardware Ukraine needs to hold off Russia in 2023

The US has estimated that Ukraine was firing thousands of artillery shells a day, and now it's searching around the world for more ammo. Ukrainian troops prepare to fire an L119 howitzer at Russian positions in the Luhansk region on January 16.ANATOLII STEPANOV/AFP via Getty Images Ukraine and Russia have relied heavily on artillery to batter each other's forces. Whether they can find more ammunition for that artillery will affect the course of the war in 2023. To support Ukraine, the US and its allies are searching all over the world for the right shells. Amid indications that Russia is planning to resume offensive operations in spring 2023, Ukraine's allies are scrambling to provide Ukraine with sufficient artillery ammunition.But this requires scouring the globe for munitions to feed Ukraine's polyglot collection of Soviet-designed guns and the dizzying array of howitzers and rocket launchers supplied by various Western countries."Ammunition availability might be the single most important factor that determines the course of the war in 2023, and that will depend on foreign stockpiles and production," US defense experts Michael Kofman and Rob Lee wrote in December for the Foreign Policy Research Institute.The US has vowed to ramp its munitions production. The US Army recently began searching for companies that can help assemble XM1128 155 mm extended-range howitzer ammunition.A Ukrainian artillery unit fires at Russian positions near Bakhmut in December.SAMEER AL-DOUMY/AFP via Getty ImagesThis month, the Army is conducting an Industry Day to "inform the industrial base of the potential U.S. Army requirements to accelerate the production and delivery of 155-mm Projectiles and ancillary equipment and the need to expand the industrial base capability." This includes not just the shell itself but all necessary components such as propellant, fuses, and packing materials.Even the US's non-European allies are being asked to contribute. The US is buying 100,000 155 mm shells from South Korea that will be sent to Ukraine.The problem is that expanding production lines for munitions may take years, a process not helped by Pentagon bureaucracy. The challenges are even harder for Europe, with a large but fragmented arms industry spread across many nations. Years after post-Cold War defense cutbacks, Europe is striving to supply Ukraine despite limited stockpiles and production capability.The US has also pledged to provide Ukraine with "non-standard ammunition," which means shells for Ukraine's Russian-designed guns that use a design and caliber not produced by US factories. Ukraine's shopping list includes 152 mm and 122 mm howitzers, 122 mm rockets, and ammunition for tank cannons. This has resulted in US officials buying munitions from Eastern European factories equipped to produce Russian-style munitions.The town of Kupiansk near Kharkiv, seen here on January 6, has experienced regular Russian shelling.Spencer Platt/Getty ImagesThe US has had to do this before in order to support clients such as Iraq and Afghanistan, which used Soviet- and Russian-made weapons. But the high-intensity combat in Ukraine is generating far higher demand than those smaller conflicts.Artillery — Stalin's famous "god of war" — has been the backbone of both the Russian and Ukrainian armies. Russia has relied on massive saturation barrages to support its sluggish infantry and armor, while Ukraine has scored tremendous successes using precision-guided shells and rockets such as the HIMARS multiple rocket launcher.But the god of war has a voracious appetite: In November, the Pentagon estimated that Russia was firing 20,000 shells a day, while Ukraine fired 4,000 to 7,000.There is a good reason Ukraine has targeted Russian ammunition depots with GPS-guided HIMARS rockets. Russia may already be experiencing a shell shortage so bad that Moscow is buying munitions from North Korea. Ukrainian forces have reported that Russian barrages are now less intense.Ukrainian artillery troops handle rounds while firing on Russian positions near Bakhmut in December.SAMEER AL-DOUMY/AFP via Getty ImagesIn World War I and II, artillery ammunition wouldn't have been such a problem. The US, Germany, Britain, and Russia eventually developed enough manufacturing capacity to keep their big guns in action. During the Soviet offensive against the Seelow Heights in April 1945, Red Army gunners fired 500,000 shells in 30 minutes.But things changed after the Cold War. For two decades, the US focused on supporting small-scale counterinsurgency operations rather than the ammo-guzzling "big war" being waged in Ukraine. European armies and defense industries withered, while the post-Soviet military suffered under extensive budget cuts.Meanwhile, defense procurement increasingly shifted to buying small numbers of expensive, high-tech guided shells and rockets.But the Russo-Ukraine war has demonstrated the continued need for large quantities of shells. The god of war is still a big eater.Michael Peck is a defense writer whose work has appeared in Forbes, Defense News, Foreign Policy magazine, and other publications. He holds a master's in political science. Follow him on Twitter and LinkedIn.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 19th, 2023

Russia"s defense manufacturing sector is using convict labor to meet war-time demands: UK intel

The UK MOD said Russia's defense industry is likely under intense pressure to hasten production — and convict labor is its latest gambit. A file image of President Vladimir Putin visiting Uralvagonzavod tank factory in Nizhny Tagil in 2015.Alexei Nikolskyi/Sputnik/Kremlin via Reuters Russia announced it's using the forced labor of convicts to manufacture weaponry. Russia has burned through much of its initial supply of tanks and ammunition, per Western estimates. The UK MOD said that manufacturers are likely under intense pressure to keep the army supplied. A British defense intelligence assessment says that Russia is "highly likely" using prison labor in its defense manufacturing as it struggles to keep up with the demands of the war. "The prison population provides a unique human resource to Russian leaders to utilize in support of the 'special military operation' while willing volunteers remain in short supply," the UK's Ministry of Defence wrote in an intelligence update on Friday, using Russia's euphemism for its invasion of Ukraine.  The UK MOD pointed to reports from late November in which Uralvagonzavod, Russia's sole tank manufacturer, announced it would use the forced labor of 250 convicts from Nizhny Tagil, a remote town 75 miles north of Yekaterinburg.  Russia, which reintroduced forced prison labor in 2017, has a prison population of around 400,000, as well as a system accused of perpetuating "extreme brutality and corruption," the UK MOD said. Despite its vast initial supply of tanks — the International Institute for Strategic Studies estimated it had 12,800 as of April last year — Russia appears to have suffered losses faster than it can replace them.In November, US officials estimated that Russia had lost half of its main battle tanks since the start of the war. Open-source documentation project Oryx has counted 1621 tanks destroyed, damaged, abandoned or captured.Meanwhile, the Uralvagonzavod factory is capable of manufacturing or upgrading around 20-30 tanks a month, according to the Kyiv Post. It is likely under "intense pressure" to produce more, the UK MOD said. The UK MOD report follows several signals that Russia, like Ukraine, is grappling with difficulties in keeping its front line supplied with a wide range of munitions.In September, as international sanctions bit, US intelligence officials said that Russia had turned to North Korea for the supply of millions of artillery shells and rockets, The New York Times reported. Estonia's intelligence chief Colonel Margo Grosberg told a press conference in November last year that Russia had used up almost two thirds of its ammunition, according to Estonian state broadcaster ERR. And by December, a senior US military official said that Russia had resorted to firing 40-year-old artillery shells from its dwindling stockpile, CNN reported. While Ukrainian and US estimates differ, both countries have said that the daily rate of artillery fire from Russia has dropped dramatically in recent months — suggesting that Russia is rationing its ammo, CNN reported. Ukraine is also finding spent Russian missiles that were clearly manufactured in 2022, Ukrainian Ministry of Defense representative Vadym Skibitskyi told Ukrainian broadcaster RBC earlier this month.This suggests that Russian missiles are going straight from the production line to the front lines, he said. Read the original article on Business Insider.....»»

Category: dealsSource: nytJan 13th, 2023

Niall Ferguson: "Kissinger Is Right To Worry" About Possibility Of World War 3

Niall Ferguson: "Kissinger Is Right To Worry" About Possibility Of World War 3 Authored by Niall Ferguson, op-ed via, 2022 was the year in which war made a comeback. But Cold War II could become World War III in 2023... with China as the arsenal of autocracy. War is hell on earth - and if you doubt it, visit Ukraine or watch Edward Berger’s All Quiet on the Western Front, Netflix’s gut-wrenching new adaptation of Erich Maria Remarque’s classic antiwar novel of 1929. Even a small war is hellish for those caught up in it, of course. But a world war is the worst thing we humans have ever done to one another. In a memorable essay published last month, Henry Kissinger reflected on “How to Avoid Another World War.” In 1914, “The nations of Europe, insufficiently familiar with how technology had enhanced their respective military forces, proceeded to inflict unprecedented devastation on one another.” Then, after two years of industrialized slaughter, “the principal combatants in the West (Britain, France and Germany) began to explore prospects for ending the carnage.” Even with US intermediation, the effort failed. Kissinger posed an important question: “Does the world today find itself at a comparable turning point [like the opportunity for peace in 1916] in Ukraine as winter imposes a pause on large-scale military operations there?” This time last year, I predicted that Russia would invade Ukraine. The question one year later is whether there is a way to end this war, or whether it is destined to grow into something much larger. As Kissinger rightly points out, two nuclear-armed powers are currently contesting the fate of Ukraine. One side, Russia, is directly engaged in conventional warfare. However, the US and its allies are fighting indirectly by providing Ukraine with what Alex Karp, chief executive of Palantir Technologies Inc., calls “the power of advanced algorithmic warfare systems.” These are now so potent, he recently told the Washington Post’s David Ignatius, that they “equate to having tactical nuclear weapons against an adversary with only conventional ones.” Take a moment to ponder the implications of that. War is back. Could world war also make a comeback? If so, it will affect all of our lives. In the second interwar era (1991-2019), we lost sight of the role of war in the global economy. Because the wars of that time were small (Bosnia, Afghanistan, Iraq), we forgot that war is history’s favorite driver of inflation, debt defaults — even famines. That is because large-scale war is simultaneously destructive of productive capacity, disruptive of trade, and destabilizing of fiscal and monetary policies. But war is as much about the mobilization of real resources as it is about finance and money: Every great power needs to be able to feed its population and power its industry. In times of high interdependence (globalization), a great power needs to retain the option to revert to self-sufficiency in time of war. And self-sufficiency makes things more expensive than relying on free trade and comparative advantage. Throughout history, the principal source of power is technological superiority in armaments, including intelligence and communications. A critical question is therefore: What are the key inputs without which a state-of-the-art military is unattainable? In 1914, they were coal, iron and the manufacturing capacity to mass-produce artillery and shells, as well as steamships. In 1939, they were oil, steel, aluminum and the manufacturing capacity to mass-produce artillery, ships, submarines, planes and tanks. After 1945 it was all of the above, plus the scientific and technical capacity to produce nuclear weapons. Today, the vital inputs are the capacity to mass-produce high-performance semiconductors, satellites, and the algorithmic warfare systems that depend on them. What were the principal lessons of the 20th-century world wars? First, the American combination of technological and financial leadership, plus abundant natural resources, was impossible to beat. Secondly, however, the dominant Anglophone empires were poor at deterrence. The UK failed twice to dissuade Germany and its allies from gambling on world war. This was mainly because Liberal and Conservative governments alike were unwilling to ask voters for peacetime sacrifices, and they failed at statecraft. The result was two very expensive conflicts that cost much more in life and treasure than effective deterrence would have — and left the UK exhausted and unable to sustain its empire. The US has been the dominant Anglophone empire since the Suez Crisis of 1956. With the threat of nuclear Armageddon, the US successfully deterred the Soviet Union from advancing its Marxist-Leninist empire in Europe much beyond the rivers Elbe and Danube. But America was relatively unsuccessful at preventing the spread of communism by Soviet-backed organizations and regimes in what was then known as the Third World. The US is still bad at deterrence. Last year, it failed to deter President Vladimir Putin from invading Ukraine, mainly because it had low confidence in the Ukrainian defense forces it had trained and the Kyiv government that controlled them. The latest objective of American deterrence is Taiwan, a functionally autonomous democracy that China claims as its own.  In October, President Joe Biden’s administration belatedly published its National Security Strategy. Such documents are always the work of a committee, but internal dissonance shouldn’t be this obvious. “The post-Cold War era is definitively over,” the authors declare, “and a competition is underway between the major powers to shape what comes next.” However, “we do not seek conflict or a new Cold War.” For the major powers have “shared challenges” such as climate change and Covid and other pandemic diseases. On the other hand, “Russia poses an immediate threat to the free and open international system, recklessly flouting the basic laws of the international order today, as its brutal war of aggression against Ukraine has shown.” China, meanwhile, is “the only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power to advance that objective.” So what will the US do to check these rivals? The answer sounds remarkably similar to what it did in Cold War I: “We will assemble the strongest possible coalitions to advance and defend a world that is free, open, prosperous and secure.” “We will prioritize maintaining an enduring competitive edge over the PRC while constraining a still profoundly dangerous Russia.” “We must ensure strategic competitors cannot exploit foundational American and allied technologies, know-how, or data to undermine American and allied security.” In other words: form and maintain alliances and try to prevent the other side from catching up technologically. This is a cold war strategy in all but name. US support for Ukraine since the Feb. 24 invasion has undoubtedly succeeded in weakening Putin’s regime. The Russian military has suffered disastrous losses of trained manpower and equipment. The Russian economy may not have contracted by as much as Washington hoped (a mere 3.4% last year, according to the International Monetary Fund), but Russian imports have crashed due to Western export controls. As Russia’s stock of imported component parts and machinery runs down, Russian industry will face deep disruptions, including in the defense and energy sectors. Last year, Russia cut off gas exports to Europe that it cannot reroute, as there are no alternative pipelines. Putin thought the gas weapon would allow him to divide the West. So far, it has not worked. Russia also tried choking Black Sea grain exports. But that lever had little strategic value as the biggest losers of the blockade were poor African and Middle Eastern countries. The net result of Putin’s war thus far has been to reduce Russia to something like an economic appendage of China, its biggest trading partner. And Western sanctions mean that what Russia exports to China is sold at a discount. There are two obvious problems with US strategy, however. The first is that if algorithmic weapons systems are the equivalent of tactical nuclear weapons, Putin may eventually be driven to using the latter, as he clearly lacks the former. The second is that the Biden administration appears to have delegated to Kyiv the timing of any peace negotiations — and the preconditions the Ukrainians demand are manifestly unacceptable in Moscow. The war therefore seems destined, like the Korean War in Cold War I, to drag on until a stalemate is reached, Putin dies and an armistice is agreed that draws a new border between Ukraine and Russia. The problem with protracted wars is that the US and European publics tend to get sick of them well before the enemy does. China is a much tougher nut to crack than Russia. Whereas a proxy war is driving Russia’s economy and military back into the 1990s, the preferred approach to China is to stunt its technological growth, particularly with respect to — in the words of National Security Adviser Jake Sullivan — “computing-related technologies, including microelectronics, quantum information systems and artificial intelligence” and “biotechnologies and biomanufacturing.” “On export controls,” Sullivan went on, “we have to revisit the longstanding premise of maintaining ‘relative’ advantages over competitors in certain key technologies.  We previously maintained a ‘sliding scale’ approach that said we need to stay only a couple of generations ahead. That is not the strategic environment we are in today.  Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.” Sanctions on Russia, argued Sullivan, had “demonstrated that technology export controls can be more than just a preventative tool.” They can be “a new strategic asset in the US and allied toolkit.” Meanwhile, the US is going to ramp up its investment in home-produced semiconductors and related hardware. The experience of Cold War I confirms that such methods can work. Export controls were part of the reason the Soviet economy could not keep pace with the US in information technology. The question is whether this approach can work against China, which is as much the workshop of the world today as America was in the 20th century, with a far broader and deeper industrial economy than the Soviet Union ever achieved. Readers of the science-fiction novel The Three-Body Problem by Liu Cixin will recall that the aliens from the planet Trisolaris use intergalactic surveillance to halt technological advance on Earth while their invasion force makes its way through deep space. Can arresting China’s development really be how the US prevails in Cold War II? True, recent Commerce Department restrictions — on the transfer of advanced graphics processing units to China, the use of American chips and expertise in Chinese supercomputers, and the export to China of chipmaking technology — pose major problems for Beijing. They essentially cut the People’s Republic off from all high-end semiconductor chips, including those made in Taiwan and Korea, as well as all chip experts who are “US persons,” which includes green-card holders as well as citizens. It’s also true that there are no quick fixes for Chinese President Xi Jinping. Most of China’s fabrication capacity is at low-tech nodes (larger in size than 16 nanometers). He cannot conjure up overnight a mainland clone of Taiwan Semiconductor Manufacturing Co.,  which leads the world in the sophistication of its chips. Nor can Xi expect that TSMC would conduct business as usual if China launched a successful invasion of Taiwan. The company’s chip fabs would almost certainly be destroyed in a war. Even if they survived, they could not function without TSMC personnel, who might flee, and equipment from the US, Japan and Europe, which would cease to be available. Yet China has other cards it can play. It is dominant in the processing of minerals that are vital to the modern economy, including copper, nickel, cobalt and lithium. In particular, China controls over 70% of rare earth production both in terms of extraction and processing. These are 17 minerals used to make components in devices such as smartphones, electric vehicles, solar panels and semiconductors. An embargo on their export to the US might not be a lethal blow, but it would force the US and its allies to develop other sources in a hurry. America’s Achilles heel is often seen as its unsustainable fiscal path. At some point in the coming decade, according to the Congressional Budget Office, interest payments on the federal debt are likely to exceed defense spending. Meanwhile, it is not immediately obvious who buys all the additional Treasuries issued each year if the Federal Reserve is engaged in quantitative tightening. Might this give China an opportunity to exert financial pressure on the US? In July, it held $970 billion worth of Treasuries, making it the second-largest foreign holder of US debt. As has often been pointed out, if China chose to dump its Treasuries, it would drive up US bond yields and bring down the dollar, though not without causing considerable pain to itself. Yet the bigger American vulnerability may be in the realm of resources rather than finance. The US long ago ceased to be a manufacturing economy. It has become a great importer from the rest of the world. As Matthew Suarez, a lieutenant in the US Marine Corps, points out in an insightful essay at American Purpose, that makes the nation heavily reliant on the world’s merchant marine. “Setting aside the movement of oil and bulk commodities,” Suarez writes, “most internationally traded goods travel in one of six million containers transported in approximately 61,000 ships. This flow of goods depends on an equally robust parallel flow of digital information.” The growing dominance of China in both these areas should not be underestimated. Beijing’s Belt and Road Initiative has created infrastructure that reduces Chinese reliance on seaborne trade. Meanwhile, Shanghai Westwell Lab Information Technology Co. is rapidly becoming the leading vendor of the most advanced port-operating systems. The war in Ukraine has provided a reminder that the disruption of trade is a vital weapon of war. It has also reminded us that a great power must be in a position to mass-produce modern weaponry, with or without access to imports. Both sides in the war have consumed staggering quantities of shells and missiles as well as armored vehicles and drones. The big question raised by any Chinese-American conflict is how long the US could sustain it. As my Hoover Institution colleague Jackie Schneider has pointed out, just “four months of support to Ukraine … depleted much of the stockpile of such weapons, including a third of the US Javelin arsenal and a quarter of US Stingers.” According to the Royal United Services Institute, the artillery ammunition that the US currently produces in a year would have sufficed for only 10 days to two weeks of combat in Ukraine in the early phase of the war. A February 2022 Department of Defense report on industrial capacity warned that the US companies producing tactical missiles, fixed-wing aircraft and satellites had reduced their output by more than half. As I have pointed out elsewhere, the US today is in some ways in the situation of the British Empire in the 1930s. If it repeats the mistakes successive UK governments made in that decade, a fiscally overstretched America will fail to deter a nascent Axis-like combination of Russia, Iran and China from risking simultaneous conflict in three theaters: Eastern Europe, the Middle East and the Far East. The difference is that there will be no sympathetic industrial power to serve as the “arsenal of democracy” — a phrase used by President Franklin D. Roosevelt in a radio broadcast on Dec. 29, 1940. This time it is the autocracies that have the arsenal. The Biden administration must be exceedingly careful not to pursue economic warfare against China so aggressively that Beijing finds itself in the position of Japan in 1941, with no better option than to strike early and hope for military success. This would be very dangerous indeed, as China’s position today is much stronger than Japan’s was then. Kissinger is right to worry about the perils of a world war. The first and second world wars were each preceded by smaller conflicts: the Balkan Wars of 1912 and 1913, the Italian invasion of Abyssinia (1936), the Spanish Civil War (1936-39), the Sino-Japanese War (1937). The Russian invasion of Ukraine may seem to be going well for the West right now. But in a worst-case scenario, it could be a similar harbinger of a much wider war. Tyler Durden Tue, 01/03/2023 - 22:20.....»»

Category: dealsSource: nytJan 3rd, 2023

Oil Will "Crush" All Other Investments In 2023

Oil Will "Crush" All Other Investments In 2023 Submitted by QTR's Fringe Finance While I work to put the finishing touches on my “23 Stocks I’m Watching for 2023”, which should be out this week, one of my favorite investors that I love reading and following, Harris Kupperman, has offered up his own position review for 2022 heading into 2023. Harris is the founder of Praetorian Capital, a hedge fund focused on using macro trends to guide stock selection. Mr. Kupperman is also the chief adventurer at Adventures in Capitalism, a website that details his investments and travels. Harris is one of my favorite Twitter follows and I find his opinions - especially on macro and commodities - to be extremely resourceful. I’m certain my readers will find the same. I was excited when he offered up his latest thoughts to Fringe Finance, published below - bold emphasis is QTR’s. Harris Kupperman’s 2022 Position Review It seems that everyone has a blog these days. Once a year, we must stop everything, tally up the scores and see who got it right. Besides, what’s the point of going through all this effort, if you cannot point to your record of continuously nailing major trends and investment themes. Even when I get one wrong, there’s a learning process involved in admitting the mistake and avoiding future ones. With that preamble out of the way, let’s dive into the 2022 Position Review. (Prior Position Reviews 2021, 2020, 2019, 2018) *Normally I publish the review a bit closer to the last day of the trading year, but I’m headed out to Sicily and then Malta for a well-deserved vacation. Don’t worry, I’ll post plenty of vacation pics… Historically, the year-end review has focused on individual stock tickers, but over the past year and change, I’ve been migrating this blog to focus more on the big picture trends, while Kuppy’s Event Driven Monitor (KEDM) picks up the tickers themselves (or at least the ones that aren’t small caps). With that in mind, let’s dig into the trends, before doing a recap on some legacy positions held over from prior years. From a performance standpoint, 2022 was something of a listless year after two big years (2020 & 2021) for the home team. For whatever reason, the themes on my books simply didn’t trend; meanwhile I failed to properly capitalize on the trends that dominated the year. That said, 2022 was a painful year for many and a slight positive return certainly feels like a win—especially as I frequently run my book well over 100% net long. In my mind, there are times like 2020 and 2021 when they literally give the money away, and then there are times when it becomes harder. The pros know the difference between the two and when it gets difficult, they pull back on exposure, score small wins, and wait for the easy times to return. Meanwhile, the amateurs get chewed up during the hard years and have no capital left for when it gets easy again. As the Fed became increasingly dominant in 2022, I continued pulling back on the exposure and risk side. Those who’ve followed this blog for some time know that I’m fast to ramp up market exposure if the narrative changes. Until then, my goal has been to avoid doing anything stupid, slowly stack my chips, and make it through to the other side for when things get easy again. Fortunately, my roadmap for 2022 saved me from a whole lot of trouble. Admittedly, it was an incredibly contrarian and ballsy call (precisely the type of call that you’ve come to expect from this blog). I challenged orthodoxy by pointing out that after a decade of out-performance, Ponzi Schemes would have a rough year. That undertow would eventually drag down the Tiger-40 list of slightly more “real” businesses, and finally the rot would creep up into the “compounders” that a generation of investors had learned to buy without any regard for valuation metrics. I’m proud to say that I positively nailed this call. Looking back on that call, I cannot believe how incredibly contrarian it was to say that investing in frauds would be a bad idea. In retrospect, this should have been obvious to everyone, but a decade of outperformance made everyone forget this simple fact. Unfortunately, the other side of my pair trade (value stocks) didn’t perform as well as I had expected. Many of them are up on the year, just not up as much as I had hoped. This is likely caused by an anticipated economic slowdown, due to rapidly increasing interest rates. One could say that the market is looking through a period of over-earning and penalizing their share prices—despite many of these companies trading at low single-digit earnings multiples on full-cycle earnings. While my exposure remains subdued, I have an amazing shopping list of near-monopoly value names to purchase when The Pause comes, if it becomes obvious that the long end doesn’t completely panic. I’ve spent much of the year building on this list, but have done little besides continue to learn the names better. Turning to other themes, my strongest held view is that 2023 is the year of oil crushing all other CUSIPs. I know I made the case in early 2022 for a similar outcome, but sometimes things just don’t play out on my schedule. In the months since then, there has been minimal spending growth on exploration, while global demand has continued to rebound and grow. The postponement of my theme was mainly caused by the unexpected purge of SPR inventory, along with China going offline due to germs. If you enjoy this content, I would love to have you as a subscriber and can offer Zero Hedge readers 50% off by using this link. These two trends seem destined to reverse during 2023. Meanwhile, Russian oil production is permanently impaired and likely in free-fall. When I tally these three components, I come to a mind-numbing swing of nearly 5 million bbl/d. Now, I know the swing cannot actually be this large—mainly because demand will suffer given the magnitude of the swing. However, demand will only suffer at triple digit oil prices. While I was off on the price of oil, my energy investments mostly appreciated. I haven’t spoken about offshore oilfield services on these pages, but a pretty good chunk of my exposure is through Valaris (VAL – USA) and Tidewater (TDW – USA) and they’ve both been stalwarts in my portfolio during 2022. Given their valuations, I suspect that they’ll continue to lead the energy markets higher. Of course, I also had an overweighted position in oil futures and futures options, and these did not appreciate as much as hoped, but maybe they’re just deferring my gratification until oil murders every other CUSIP. Once again, I think it’s important to repeat that if you haven’t stress-tested your portfolio for oil prices north of $200, you’re going to suffer dearly when that should come to pass. My other core theme was a continuation of the housing strength witnessed during 2020 and 2021. On this score, I was wrong. Housing is now starting to roll over as interest rates take a bite out of affordability. I’ve since tossed my housing supply names, though they trade north of where I mentioned them. While I remain bullish, I’m going to wait for construction activity to bottom and begin its recovery. The demand is there, but not with current interest rates. As an inflection investor, I like to joke that the best inflections are the ones where I get the thesis horribly wrong, yet make some small money anyway, as I was disciplined on valuation. I know I won’t win them all, but not losing when the thesis is wrong, is a different sort of victory that isn’t spoken enough about. With that waltz through the big picture completed, let’s go through all the positions I’ve publicly carried over from 2022. Positions mentioned in alphabetical order and % change is from the closing price on 12/31/2021 and the closing price on the last trading day before mentioned or closed. All data is accurate as of the close on December 23, 2022. Cornerstone Brands (CNR – USA) +38% until closed in 2022 and 232% since the original post Cornerstone was the scene of a bold robbery as Private Equity lifted it from my hands, right as the demand for building components peaked. Sometimes, I just get lucky as I would have likely held through the pullback. In any case, I caught the recovery in housing components well, played it large, rode through a lot of volatility and exited with a really great return. Don’t cry too hard for the Private Equity boys, they’re going to absolutely bank on this one too, as they bought it simply too cheaply. Lee Enterprises (LEE – USA) -49% in 2022 and -37% since the original post During 2022, LEE continued to put up strong performance on the digital front with digital revenue increasing by 27% over the prior year and digital now represents a third of total revenue. Even more impressively, in the fourth quarter, digital represented 55% of total advertising revenue. Meanwhile, digital subscribers grew by 32% over the year. LEE is increasingly a digitally native business, especially when one looks at the adjusted EBITA number. Meanwhile, it trades at roughly one times adjusted EBITDA on an equity basis—which seems ludicrous for a rapidly growing digital business. Of course, there’s a reason that it trades cheaply; the debt level is high, debt paydown was minimal and EBITDA didn’t convert to cash flow due to one-time charges. My expectation is that these one-time charges continue as the business pivots into the digital world and cash flow will suffer for the next year or two. As an investor, I’m content to look past this muddled performance, with the hope that things normalize at an attractive cash flow number at some future date. Given current growth on the digital side, this should end up as a much more profitable business in the digital format, when compared to the prior print format and we know that the market loves to put high multiples on cash-generative subscription businesses with rapid growth. While the share price at LEE has not been rewarding during 2022, I’m content with how it’s all panning out. Oil Futures, Futures Options and Futures Call Spreads  There was surprisingly little movement in these positions during the year—primarily as the ’23 and ’25 curves stayed rather inert. Near year-end, I did use the decline in the spread between front-month and ’25 futures to swap my ‘25 futures for the Brent Oil ETF (BNO – USO) as I wanted to diversify from WTI, gain some roll yield (which has since become a contango) and get more exposure to the front of the curve as that’s likely to be where the action is going forward. I also picked up some shorter-dated futures positions near the lows in December as I sought to max out my energy exposure. As a consequence of these adjustments, the size of my oil position grew rather dramatically. Russian Positions (RSX – USA and others)  (original post) As a contrarian, I often run into a burning building as others flee. Usually this works, sometimes it doesn’t. In terms of my Russian positions, it’s still unclear how they will play out. On one hand, I have massive unrealized gains based on the current marks on the MOEX. On the other hand, I cannot realize these gains and it isn’t clear when or if I ever will be allowed to realize these gains. I’ve marked these positions to zero and like many other investors, I’m going to wait and see how they play out. While this isn’t my proudest investment, I have a sneaking suspicion that my overall IRR will be quite attractive over time—with plenty of risk along the way. Sandridge Energy (SD – USA) -7% until closed since the original post Sandridge is a good example of why my best advantage as an investor is my ability to average down as something gets cheaper. I had to average down on Sandridge, multiple times, but eventually I ended up with a large position at a great price and on the recovery in energy equities, I had a nice big gain on my SD position. Admittedly, it was a long road to get to that big win and I unfortunately show a small loss from when I first wrote about SD. St. Joe (JOE – USA) -26% in 2022 and 82% since original post My JOE position was one of my largest disappointments during 2022. While the company continues to execute and create value for shareholders, investors ignored this fact and sold the shares off anyway. I’m baffled by this performance, especially given the growth in population and home values in their core Bay and Walton Counties. In any case, I used the recent weakness to increase my position rather dramatically below $40. While investors are likely to continue shunning anything exposed to the housing sector, I’m perfectly content to wait things out, knowing the inherent value of what I own. There’s a whole lot of torque in JOE. It’s just a question of when this one finally gets noticed. Sprott Physical Uranium Trust (U-U – Canada) +8% in 2022 and 25% (both in Canadian Dollars) from original post SPUT remains my largest single ticker position. The uranium macro continues to improve, and stockpiles continue to drain. I believe that 2023 is the year when all of this finally matters, and the uranium price begins to levitate. As far as I’m concerned, SPUT is the reincarnation of GBTC, and will become a highly reflexive situation as traders begin to chase the price higher, especially as the liquidity in the spot market continues to dissipate. I’ll have more to say about SPUT in January, but let’s just say I think that 2023 is the year when I get paid on this one. While uranium should not be correlated with oil, I have a suspicion that as oil recovers, ESG-focused investors will rediscover uranium as a substitute. Could uranium become oddly correlated with oil during 2023? In summary, 2022 was a year where I avoided landmines, and survived to fight another day. I’m excited for the time when I can flex up my exposure, but I’m not going to rush things. For now, I want to stay conservative, stick to low-risk setups and stay highly liquid. I think that 2023 will be difficult for longs, especially as oil crushes everything else. There will be a time to take advantage of that pain, maybe even swapping some barrels for beaten down non-oil names, but this is all into the future… For now, I want to wish everyone a Happy New Year and the best of luck in 2023. Sincerely, Kuppy QTR’s Disclaimer: These are all the opinions of Harris Kupperman and not solicitations to buy or sell any securities. I am not a financial advisor. I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.   Tyler Durden Thu, 12/29/2022 - 05:00.....»»

Category: smallbizSource: nytDec 29th, 2022

The Middle East Oil And Gas Nations Pouring Billions Into Clean Energy

The Middle East Oil And Gas Nations Pouring Billions Into Clean Energy By Alex Kimani of To say that the six countries that make up the Gulf Cooperative Council (GCC) live and breathe hydrocarbons is hardly an exaggeration. About 60years ago, the average city in Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Qatar, Bahrain, and Oman was home to maybe a few thousand people; fast forward to the present and many cities have transformed into world-class metropolises thanks to the region’s vast oil and gas riches. Saudi Arabia alone owns 16% of the world's proven oil reserves and is also the world's second-largest oil producer, responsible for 15% of global output. In the current year, Saudi Arabia and several other Middle East nations have reported rare budget surpluses thanks to high oil and gas prices. According to the kingdom’s finance ministry, releasing what it said were preliminary estimates, the country’s 2022 surplus clocked in at 102 billion riyals ($27 billion), good for 2.6% of its gross domestic product (GDP). For 2022, total revenue will have hit around 1.234 trillion riyals, against spending of around 1.132 trillion riyals. But it has not always been this way. For years, most GCC nations have languished under heavy budget deficits amid low energy prices. Indeed, just last year, S&P Global Ratings estimated that GCC central government deficits would reach about $490 billion cumulatively between 2020 and 2023 while government debt would surge by a record-high $100 billion in 2021.  Of course, things have turned out much better than feared for these nations, but they remain acutely aware of just how dependent on oil and gas their economies have become. It’s for this reason that Saudi Arabia and its GCC peers have embraced the energy transition and are now investing heavily in renewable energy. According to BCG’s annual M&A report, 10.3 % of all M&A transactions are green energy deals, with green M&A activity having quadrupled since 2001. BCG says that the Middle East recorded 283 green deals in the first three quarters of 2022, marking an increase of 16% from the same period last year with a total value of $23.8 billion. The report foresees environmental considerations continuing to drive an increasing number of deals, despite unfavorable macroeconomic conditions. “Green deals are very hot in the region. Soaring sustainability transactions in the Middle East are a clear outcome of established national transformation programs seeking out diverse economic outputs for countries on their path to net zero. As the region continues grounding itself as a hub where collaboration and diversification can bear fruit, so will green mergers and acquisitions,” Ihab Khalil, Managing Director, and Senior Partner, BCG, has declared. BCG’s analysis has revealed that despite the substantial premium they often command, green deals globally actually create more value than non-green deals upon announcement and over the ensuing two years. According to the report, the median two-year relative total shareholder return (rTSR) of non-green deals (-0.55%) exceeds that of green deals (-2.38%). Further, by analyzing cumulative abnormal return (CAR) for three-day periods before and after a deal announcement, BCG found that the median CAR of environmental-related transactions (1.0%) is significantly marginally higher than that of non-green deals (0.0%).  Of all the Gulf nations, it is Saudi Arabia and the UAE that are leading the way when it comes to clean energy investments. Let’s delve into exactly how these two countries are restrategizing and diversifying their economies away from oil. Saudi Arabia: Solar, Wind, and Hydrogen Although Saudi Energy Minister Prince Abdulaziz bin Salman last year made waves in the oil community after telling Bloomberg News that Saudi Arabia intends to pump every last drop of oil and intends to be the last man standing, Saudi Arabia has crafted one of the most ambitious clean energy blueprints: Crown Prince Mohammed bin Salman’s Vision 2030 economic plan. In the economic plan, Saudi Arabia has set a target to develop ~60 GW of renewable energy capacity by the end of the decade, which compares with an installed capacity of roughly 80 GW of power plants burning gas or oil.  So far, Saudi Arabia has only made limited progress deploying renewables with just 300 MW of utility-scale solar in operation while 400 MW of wind power is under construction.  With its sun-scorched expanses and steady Red Sea breezes, Saudi Arabia is prime real estate for renewable energy generation. Last year, Saudi Arabia’s national oil company Saudi Aramco sent shockwaves through the natural gas markets after it announced that it was kicking off the biggest shale gas development outside of the United States. Saudi Aramco said it plans to spend $110 billion over the next couple of years to develop the Jafurah gas field, which is estimated to hold 200 trillion cubic feet of gas. The state-owned company hopes to start natural gas production from Jafurah in 2024 and reach 2.2 Bcf/d of sales gas by 2036 with an associated 425 million cubic feet per day of ethane.  Two years ago, Aramco announced that instead of chilling all that gas and exporting it as LNG, it will convert it into a much cleaner fuel: Blue hydrogen.  Saudi Aramco told investors that Aramco has abandoned immediate plans to develop its LNG sector in favor of hydrogen. Nasser said that the kingdom’s immediate plan is to produce enough natural gas for domestic use to stop burning oil in its power plants and convert the remainder into hydrogen. Blue hydrogen is made from natural gas either by Steam Methane Reforming (SMR) or Auto Thermal Reforming (ATR) with the CO2 generated captured and then stored. As the greenhouse gasses are captured, this mitigates the environmental impacts on the planet. In 2020, Aramco made the world’s first blue ammonia shipment--from Saudi Arabia to Japan. Japan--a country whose mountainous terrain and extreme seismic activity render it unsuitable for the development of sustainable renewable energy--is looking for dependable suppliers of hydrogen fuel with Saudi Arabia and Australia on its shortlist. The Saudi government is also building a $5 billion green hydrogen plant that will power the planned megacity of Neom when it opens in 2025. Dubbed Helios Green Fuels, the hydrogen plant will use solar and wind energy to generate 4GW of clean energy that will be used to produce green hydrogen. But here’s the main kicker: Helios could soon produce green hydrogen that’s cheaper than oil. Bloomberg New Energy Finance (BNEF) estimates that Helios’ costs could reach $1.50 per kilogram by 2030, way cheaper than the average cost of green hydrogen at $5 per kilogram and even cheaper than gray hydrogen made from cracking natural gas. Saudi Arabia enjoys a serious competitive advantage in the green hydrogen business thanks to its perpetual sunshine, wind, and vast tracts of unused land. Germany has said it needs “enormous” volumes of green hydrogen, and hopes Saudi Arabia will become a key supplier. Two years ago, Germany’s cabinet committed to invest €9B (about $10.2B) in hydrogen technology in a  bid to decarbonize the economy and cut CO2 emissions. The government has proposed to build an electrolysis capacity of 5,000 MW by 2030 and another  5,000 MW by 2040 over the following decade to produce fuel hydrogen. The European economic powerhouse has realized it cannot do this alone and will require low-cost suppliers like Saudi Arabia especially as it doubles down on its green energy commitments following a series of devastating floods in the country. UAE: Nuclear, Wind, and Waste-to-Energy  Last year, the Emirates Nuclear Energy Corporation (ENEC) announced the commissioning of the country’s first-ever nuclear power plant--the Barakah unit 1. The 1,400-megawatt nuclear plant has become the single largest electricity generator in the UAE since reaching 100% power in early December, and is now providing "constant, reliable and sustainable electricity around the clock."ENEC says Barakah unit 1 is "now leading the largest decarbonization effort of any industry in the UAE to date." Following in the footsteps of Saudi Arabia, the UAE is also laying a strong foundation for the energy transition. Masdar, the clean energy arm of Abu Dhabi sovereign wealth fund Mubadala, is building renewable capacity in central Asia after signing a deal in April 2021 to develop a solar project in Azerbaijan. Since its inception in 2006, Masdar has built a portfolio of renewable energy assets in 30 different countries, having invested about $20 bn to develop 11 GW of solar, wind, and waste-to-energy power generation capacity. And now Masdar says it intends to apply the lessons gleaned abroad to develop clean energy capacity back at home.  “Solutions we have developed in our international operations will definitely have applications here in the UAE”, says Masdar’s El-Ramahi. For instance, Masdar plans to bolster the UAE’s comparatively weak wind resources by developing domestic wind farms using the latest class three turbines that are able to harness electricity even from low wind speeds.  Further, the company is also constructing a $1.1 bn facility that will burn garbage to generate power in one of the world’s largest waste-to-energy plants. Once complete, the plants will incinerate almost two-thirds of the household waste the country generates every year. Though not typically considered a clean energy source, modern waste-to-energy plants are much cleaner as per the United Nations Environmental Program (UNEP). By using advanced technologies, these plants are able to burn waste at extremely high temperatures thus ensuring complete combustion while missions are specially treated, leaving minimal amounts of toxic byproducts like flue ash. In fact, tests have shown that the air emitted by certain waste-to-energy chimneys can be cleaner than the air flowing in. Tyler Durden Tue, 12/27/2022 - 04:15.....»»

Category: personnelSource: nytDec 27th, 2022

5 of Russia"s biggest blunders throughout Putin"s war in Ukraine

Russia has lost thousands of troops and massive amounts of hardware in a campaign that is widely regarded as a failure. Russian President Vladimir Putin in Astana on October 14.Contributor/Getty Images Russia's military has little to show for itself after 10 months of fighting in Ukraine. US and Western officials have widely denounced Putin's campaign as a "failure." Here are some of Moscow's biggest blunders and mistakes throughout the war.  After 300 days of fighting in Ukraine, Russian President Vladimir Putin's military has little to show for its efforts. Putin expected his forces to capture Kyiv in a matter of days after launching a full-scale invasion on February 24. In recent months, Ukrainian forces have liberated thousands of square miles of territory — including the only regional capital that Russian forces managed to capture.Russia's campaign has been widely denounced by US and Western officials as a "failure," and it now faces estimates of more than 100,000 casualties — a toll that continues to rise.From Russia's botched invasion to Putin's miscalculation of the Western response, here are some of the biggest mistakes Moscow has made during its unprovoked war in Ukraine.Screwing up the invasionA destroyed Russian tank on the side of a road in Luhansk region on February 26.ANATOLII STEPANOV/AFP via Getty ImagesOnce Putin announced the assault, it didn't take long for his military to make mistakes.Military analysts have told Insider that Russia completely botched its initial invasion for a variety of reasons and that its campaign has been riddled with miscalculations, poor communication, and widespread confusion."We would have thought that they would have done a much more deliberate, well-thought-through operation. That is not what they did," Jeffrey Edmonds, a Russia expert at the Center for Naval Analyses and former CIA military analyst, told Insider in a recent interview.During the early days of the war, Russian forces were expected to combine air support with a ground assault and advance with large groups of artillery, armor, and troops.Instead of leading with a substantial air campaign and gaining superiority over Ukraine, Russian commanders just instructed their troops to drive to Kyiv. They quickly faced logistical headaches, isolation, and ambushes."The Kremlin simply miscalculated and expected the Ukrainian military to collapse far quicker than it has," Mason Clark, the lead Russia analyst at the Institute for the Study of War, told Insider in February, adding that it "led to a lot of dumb Russian mistakes."Overlooking the strength of Ukraine's defenseUkrainian troops in liberated territory in the Kharkiv region on September 12.AP Photo/Kostiantyn LiberovPutin assumed victory would be quick and easy and that his forces would capture Kyiv in a matter of days. But the city of nearly 3 million people never fell, as the Russian leader greatly underestimated Ukraine's will to fight and defend its homeland.Ukraine's fierce resistance was on display very early in the war. A senior US defense official said on February 28 that Ukraine was putting up a "very stiff and very effective defense" around Kyiv, which helped slow Russian advances.Clark told Insider that Russia's lack of success was caused by a mix of poor execution and the Ukrainian military performing better and with "much higher morale than anyone, most importantly the Russians, anticipated."US and Western intelligence agencies had assessed that Kyiv would not be able to withstand Russia's assault for very long, but Ukrainian forces fended it off and, in recent months, stunned Moscow by liberating thousands of square miles of territory in two counteroffensives in northeastern and southern Ukraine.Abandoning lots of weaponsRussian ammunition left behind after Russia's from Izium on September 14.Photo by Metin Aktas/Anadolu Agency via Getty ImagesUkraine's surprise counteroffensive in the northeastern Kharkiv region in late summer surprised Russia and marked the start of a massive push that liberated thousands of square miles of captured territory.The speed of the offensive sent Russian forces scrambling from their positions, leaving mountains of weaponry and ammunition.The abandoned hardware even helped restore Ukraine's dwindling firepower, though so much was left behind that Ukrainian forces struggled to handle it all.The British Ministry of Defense said at the time that some Russian troops "fled in apparent panic" and left lots of "high-value equipment" behind.Expending its stockpiles of precision munitionsREUTERS/Gleb GaranichCars burn after Russian military strike, as Russia's invasion of Ukraine continues, in central Kyiv, Ukraine October 10, 2022.In recent months, Russia has launched waves of missile and drone attacks targeting Ukraine's civil infrastructure, but doing so has depleted Moscow's stockpiles of long-range precision munitions.Military experts and officials have said the terror campaign was not a sustainable use of Russia's limited capabilities and was unlikely to affect Ukraine's will to fight.More recently, senior US intelligence officials have said Russia is burning through its munitions faster than it can replace them. Officials also say the use of massive amounts of artillery and precision-guided munitions has forced Moscow to turn to Iran and North Korea for supplies.The UK's permanent representative to the UN said on December 9 that Russia was looking to obtain "hundreds" of ballistic missiles from Iran in exchange for "unprecedented" military support. Days later, a senior US military official said Russia was running out of new artillery shells and rockets and may have to use older, less reliable ammunition.Underestimating Western unityUkrainian President Volodymyr Zelenskyy and House Speaker Nancy Pelosi in Kyiv on April 30.Getty ImagesOne of Putin's most significant blunders was underestimating Western unity behind Ukraine.NATO and the European Union have remained relatively united in providing military aid and humanitarian assistance to Ukraine and in applying sweeping sanctions against Russia.The invasion also created an opportunity for NATO to expand — which Putin has vehemently opposed for decades — by adding Sweden and Finland, which like other European countries are now more concerned about their security.Some countries have even reversed longstanding foreign, domestic, financial, and military policies as a result of the war.Read the original article on Business Insider.....»»

Category: smallbizSource: nytDec 23rd, 2022

4 Gas Distribution Stocks to Watch in a Challenging Industry

The near-term prospects of the Zacks Gas Distribution industry look challenging. Yet, systematic investment to strengthen infrastructure and efficiently supply natural gas to customers should drive the performance of SRE, ATO NJR and NWN. The production of natural gas in the United States is likely to increase year over year in 2023 per the latest report by the U.S. Energy Information Administration (“EIA”) and continue driving stocks in the Zacks Utility Gas Distribution industry. The distribution companies offer services to transport natural gas from the region of production to millions of consumers across the United States.Sempra Energy SRE, with its widespread natural gas infrastructure and systematic investments in infrastructure development projects, is poised to benefit as natural gas production volumes are expected to increase in the 2022-2023 time period. Steady investments and expanding infrastructure in key production regions should drive the performance of Atmos Energy Corporation ATO NewJersey Resources Corporation NJR  and Northwest Natural Holding CompanyNWN.About the IndustryThe shale revolution has substantially increased natural gas production. Its clean-burning nature is steadily boosting demand for natural gas from all customer groups. Natural Gas distribution pipelines play a vital role in delivering natural gas from intrastate and interstate transmission pipelines to consumers through small-diameter pipelines. The natural gas network in the United States has nearly 3 million miles of pipelines. Major concerns for the industry are aging infrastructure and increasing investment costs required to upgrade and maintain the vast network of pipelines due to the hike in interest rates. Competition from other clean sources of energy can lower demand for natural gas, and consequently for pipelines. The expected contraction in U.S economic activity in fourth-quarter 2022 and first-quarter 2023 is a concern.Factors Shaping the Future of the Gas Distribution IndustryAging Distribution Infrastructure: The existing U.S. natural gas distribution pipelines are aging. Leakage or breakage in these old cast iron and bare steel pipelines may result in the disruption of services. At present, natural gas distribution utilities provide services to over 80 million customers in the United States. Per a report from Business Roundtable, replacing the old pipelines will cost around $270 billion. To lower the possibility of interruption in services, the Department of Energy announced $33 million in funding for 10 projects involved in natural gas pipeline retrofitting to rehabilitate existing old cast iron and bare steel pipes.  The Rapid Encapsulation of Pipelines Avoiding Intensive Replacement or the REPAIR program will ensure the minimum extension of the service life of distribution pipelines by 50 years and lower the replacement cost of old pipelines by nearly 10 to 20 times per mile. At present, pipe excavation and replacement costs can go up to $10 million per mile. The rising interest rates will increase the overall project financing cost for the utilities compared with what these companies have enjoyed in the past two years. Despite the efforts of utilities to upgrade pipelines, aging natural gas pipelines also resulted in a few accidents in 2022.Production and Export Volumes of Gas to Increase: The short-term energy outlook released by the EIA indicates that domestic dry natural gas production will grow 3.7% year over year to 98.13 billion cubic feet per day (Bcf/d) in 2022 and 2.3% year over year to 100.38 Bcf/d in 2023. EIA also expects U.S. natural gas consumption to increase 5.38% in 2022 to 88.42 Bcf/d due to higher consumption from all customer groups, while 2023 consumption is expected to drop by 3.4% to 85.40 Bcf/d due to the expectation of milder winter temperature and lower usage from the residential and commercial customer group. EIA expects U.S. liquefied natural gas (LNG) export volumes to increase 8.6% year over year to 10.6 Bcf/d in 2022. The export volume was lower than expected due to an accident in Freeport LNG Export Terminal. With the Freeport terminal resuming operation, EIA expects LNG export volumes to increase 15.6% to 12.25 Bcf/d in 2023.Fresh Investments Create Demand: The clean-burning nature and wide availability across the United States is driving demand for natural gas. The distribution network will continue to play a major role in transporting natural gas to nearly 75 million customers in all parts of the United States. The demand from the rising natural gas customer volume and usage of natural gas to produce electricity will play a pivotal role in the utilities’ gradual transition toward clean energy. Three new LNG export terminals being developed in the United States, there should be increased demand for natural gas pipeline services to transfer the gas from production areas to these terminals. Per EIA, once completed, the three new LNG projects will increase the combined export capacity by 5.7 Bcf/d by 2025. As production and demand for natural gas are increasing, more pipelines will be required to safely transfer the natural gas to end-users.Zacks Industry Rank Indicates Dull ProspectsThe group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects.The Zacks Utility Gas Distribution industry — a 15-stock group within the broader Zacks Utilities sector — currently carries a Zacks Industry Rank #196, which places it in the bottom 21% of the 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms 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 a negative earnings outlook for the constituent companies in aggregate. Since 2021-end, earnings estimates have gone down by 1.5% to $3.89 per share.Before we present a few Gas Distribution stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.  Industry Beats S&P 500 and SectorThe Gas Distribution industry has outperformed the Zacks S&P 500 composite and its sector over the past year. The stocks in this industry have collectively returned 7.8% in the same time frame, while the Utility sector and Zacks S&P 500 composite have declined 4% and 19.4%, respectively.One-Year Price PerformanceGas Distribution Industry's Current ValuationSince utility companies have a lot of debt on their balance sheets, the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio is commonly used to value them.The industry is currently trading at a trailing 12-month EV/EBITDA of 9.56X compared with the S&P 500’s 11.54X and the sector’s 21.17X. Over the past five years, the industry has traded as high as 13.7X, a low of 9.08X, and at the median of 10.35X.Utility Gas Industry vs  S&P  500 ( Past 5 yrs)Utility Gas Industry vs  Sector( Past 5 yrs) 4 Gas Distribution Stocks to Keep a Close Watch OnBelow are four stocks that have been witnessing positive earnings estimate revisions. Only one out the four natural gas distribution stocks mentioned below presently carries a Zacks Rank #2 (Buy). The rest carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Sempra Energy: This San Diego, CA-based energy services holding company is involved in the sale, distribution, storage and transportation of electricity and natural gas. Sempra Energy has plans to invest $36 billion in the 2022-2026 time frame to strengthen its operation and transmission and distribution infrastructure.  Worldwide demand growth for LNG continues to rise, Sempra Energy is well positioned with strategically located opportunities in North America. The stock currently carries a Zacks Rank #3.The Zacks Consensus Estimate for SRE’s 2022 earnings has moved up 1.4% to $8.76 per share over the past 60 days. The current dividend yield of SRE is 2.91%. In the past year, the stock has gained 21.8% compared with the industry’s rally of 7.3%.  Its long-term earnings growth (three to five years) rate is pegged at 5.7%.Price and Consensus: SREAtmos Energy: This Dallas, TX-based company is engaged in the regulated natural gas distribution and storage business. Atmos Energy is planning to invest $15 billion from fiscal 2023 through 2027, out of which more than 85% will be allocated to enhance the safety of the existing operations. The stock currently carries a Zacks Rank #3. The Zacks Consensus Estimate for ATO’s fiscal 2023 earnings has moved 0.2% higher to $5.97 per share over the past 60 days. The current dividend yield of ATO is 2.61%. In the past year, the stock has gained 10.7%. The long-term earnings growth rate is pegged at 7.5%.Price and Consensus: ATONew Jersey Resources: This Wall, NJ-based company provides regulated gas distribution, and retail and wholesale energy services to its customers. New Jersey Resources has plans to invest $1.1-$1.4 billion in the fiscal 2023-2024 time period to strengthen its infrastructure. NJR’s strategic investments to expand natural gas transmission and distribution pipelines will allow it to cater to increasing demand from its expanding customer base. The stock currently carries a Zacks Rank #3.The Zacks Consensus Estimate for NJR’s fiscal 2023 earnings has moved 0.4% higher to $2.47 per share over the past 60 days. The current dividend yield of NJR is 3.2%. In the past year, the stock has gained 20.3%. Its long-term earnings growth rate is pegged at 6%.Price and Consensus: NJRNorthwest Natural Holding Company: This Portland, OR-based, energy company supplies natural gas and water to customers in the United States. Northwest Natural Holding aims to invest nearly $1.4 billion in the 2022-2026 time frame to further strengthen its operations. The income of this utility is highly regulated and enjoys the benefit of an expanding customer base. The stock currently carries a Zacks Rank #2.The Zacks Consensus Estimate for NWN’s 2022 earnings has moved 1.2% higher to $2.55 per share over the past 60 days. The current dividend yield of NWN is 4.14%. The long-term earnings growth rate is pegged at 4.3%.Price and Consensus: NWN  Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock And 4 Runners UpWant 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 Sempra Energy (SRE): Free Stock Analysis Report Atmos Energy Corporation (ATO): Free Stock Analysis Report Northwest Natural Gas Company (NWN): Free Stock Analysis Report NewJersey Resources Corporation (NJR): Free Stock Analysis ReportTo read this article on click here.Zacks Investment Research.....»»

Category: topSource: zacksDec 21st, 2022

Futures Rise On China Growth Hopes

Futures Rise On China Growth Hopes After US stocks were set to start week with modest gains as optimism around an economic recovery in China offset fears that the Fed is pushing the US economy off a recessionary cliff. S&P and Nasdaq futures were both up 0.4% as of 7:45 a.m. ET led by energy and tech shares, after China’s leaders said they will focus on boosting the economy next year, hinting at business-friendly policies, and further support for the property market. In premarket trading, Tesla gained after Chief Executive Officer Elon Musk polled users on Twitter over whether he should step down as head of the social-media company, with the result so far leaning toward yes. At the same time, Ardelyx slumped after the biotech said that the FDA may need “up to a few more weeks” to finalize its response to the company’s appeal over the complete response letter for its new drug application for its kidney disease therapy XPHOZAH (tenapanor). Here are some other notable premarket movers: Tesla shares gain 5.1% in US premarket trading after CEO Elon Musk polled users on Twitter over whether he should step down as head of the social-media company, with the result so far leaning toward yes. Moderna gains 4% as Jefferies upgraded the stock to buy from hold, saying it can rebound in 2023 on a return of pipeline opportunities. Ardelyx shares drop 13% after the biotech said that the FDA may need “up to a few more weeks” to finalize its response to the company’s appeal over the complete response letter for its new drug application for its kidney disease therapy XPHOZAH. Aerojet shares rise 3% after L3Harris Technologies (LHX US) agreed to buy the rocket engine maker in a deal valued at about $4.7 billion. The purchase makes strategic sense, although analysts at Truist said the offer price looks expensive. Watch Netflix stock as its price target was raised at Morgan Stanley on the back of currency “swings,” though broker flagged risk that expectations and valuation have run “too far too fast.” Vertex Pharmaceuticals stock is downgraded to hold at Jefferies, which says that the company continues to offer a good pipeline, but risk/reward and valuation seem “balanced” following strong gains this year. KeyBanc adds to recent upgrades for PerkinElmer moving to overweight from sector weight based on transformational sale of analytical instruments business. A fourth-quarter rally in the S&P 500 fizzled out as investors grew worried the Fed would keep interest rates higher for longer despite signs of cooling in inflation. Unexpectedly hawkish comments from the European Central Bank added to the pessimism last week, keeping the benchmark index on course for its biggest annual slump since 2008. Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said although stock-index futures were climbing today, sentiment is still expected to be subdued into the year-end. “Concerns that the US will be dragged into recession as the Fed tries to tame the wild horse of inflation are still front and center,” she said. Morgan Stanley strategist Michael Wilson warned US corporate earnings next year are facing their biggest drop since the global financial crisis as the economy weakens. That could spark a new stock-market low that’s “much worse than what most investors are expecting,” he wrote in a note. Yet while underlying stock indexes remain on track to end the month lower, some investors are starting to look past fears of an economic recession triggered by higher interest rates, and betting that inflation has peaked allowing the Federal Reserve and other central banks some leeway in tightening policy.   “Markets have begun to price in that inflation will decline, in part due to the action by central banks,” Jacob Vijverberg, multi-asset investment manager at Aegon Asset Management, told clients, pointing to recent below-forecast US inflation figures. This would help riskier assets such as higher yielding fixed income and equities to outperform, he added. European stocks also gained after a downbeat close to the past week, the Stoxx 600 rising 0.5% led by energy shares which outperformed on Monday as oil advanced following a pledge from China to revive consumption and a plan from the Biden administration to begin refilling US strategic crude reserves. The Stoxx 600 Energy sub-index rose 2.2% as of 8:30 a.m. in London, outpacing all other groups in the regional equity benchmark, which gained 0.5%. Here are the biggest Eureopean movers: BP shares rise as much as 3.3%, Shell 3.2% and TotalEnergies 3.4%. European energy shares outperform on Monday as oil advances following a pledge from China to revive consumption and a plan from the Biden administration to begin refilling US strategic crude reserves. Suedzucker shares rise as much as 6.4%, adding to last week’s strong gains following the German sugar producer’s guidance increase, with Warburg today upgrading the stock to buy from hold. Innate Pharma surged as much as 19% at the open after the French biotech company announced it had expanded its collaboration with Sanofi for natural killer cell therapeutics in oncology. Freenet shares rise as much as 4.8% after Deutsche Bank raises the stock to buy from hold, saying the telecom and media firm could be a defensive addition to portfolios in 2023. TietoEVRY shares gain as much as 3.5% after Nordea raised its recommendation to buy from hold, saying the break-up case for the firm is “becoming partly de-risked” following the announced disposals of Banking, Connect and Transform businesses. Nexi shares advance as much as 5% to lead gains on the FTSE MIB index after the government dropped a proposed measure on a minimum threshold to accept digital payments. Fugro shares dropped as much as 30%, the most since 1995, after report on involvement with 2019 dam breach in Brazil that killed 270 people. Tokmanni shares fall as much as 6.8%, extending losses into a fourth session, after Nordea cut its recommendation for the shares to hold from buy, noting the company’s “unwillingness to increase prices” hurts its investment case “at least temporarily.” Asia stocks headed lower for a third day as traders assessed rising infection numbers in China and risks of a regional economic slowdown. The MSCI Asia Pacific Index erased initial gains to fall as much as 0.4%, as health care and industrials dragged on the gauge. Initial optimism for stocks in China and Hong Kong faded amid concerns that Asia’s biggest economy will suffer from a spike in virus cases in Beijing, Shanghai and other major cities. Beijing Covid Death Reports Fuel Concern China Hiding Data Benchmarks also slumped in Japan as the yen strengthened, joining the Philippines and South Korea lower, while India and Singapore advanced.   Asian shares could climb more than 9% through 2023, according to strategists surveyed by Bloomberg. But the road may be bumpy as uncertainty remains over the pace of China’s reopening and the outlook for Federal Reserve policy. Moreover, the world’s biggest money managers are set to unload up to $100 billion of stocks in the final few weeks of the year. Still, “modest valuations, light investor positioning and good fundamentals are buffers that should help Asian stocks withstand near-term volatility,” said Zhikai Chen, head of Asian and global emerging market equities at BNP Paribas Asset Management. The yen strengthens and JGB futures fall on report PM Kishida may add flexibility to BOJ’s 2% inflation goal. Japan’s 5-year yield climbs to 0.145%, highest since 2015. The moves are later pared after Japan’s Matsuno denies plans to revise BOJ accord. Most currency majors grind higher against the dollar; yuan marginally softer. Asian stocks fall for third day, with Japan and China leading the retreat. Hang Seng erases a gain of as much as 1.7%, Shanghai Composite falls 1.5%. S&P futures nudge 0.1% higher, Nasdaq contracts also slightly firmer. Treasury 10-year yield adds three basis points to 3.51%; Australian curve bear steepens after 10-year yield jumps six basis points. WTI crude rises to around $75.20; gold muted near $1,792. Australia stocks edged lower: the S&P/ASX 200 index fell 0.2% to close at 7,133.90, with real-estate shares leading declines on the gauge. Shares of Star Entertainment slid 18% to become the worst performer on the gauge after the government issued new proposed tax changes that may impact its business. In New Zealand, the S&P/NZX 50 index fell 0.7% to 11,518.14 Indian stocks rose the most in nearly a month, in contrast to the broader Asian market that traded lower.  The S&P BSE Sensex gained 0.8% to 61,806.19, while the NSE Nifty 50 Index also advanced by a similar measure. Benchmark indexes in most other regional economies, including China, Hong Kong and Japan, fell. Broad-based buying in the market lifted overall sentiments, said Osho Krishan, senior analyst, technical and derivative research, Angel One. “Technically, there has been no substantial change in the market outlook as the bulls made a comeback from their support zone and showcased their resilience,” Krishan said.  The gains come as demand in India’s large domestic market cushions it from the impact of a slowing global economy. High-frequency indicators show the economic activity has stayed steady in recent months but may slow going forward as resilience wanes.  Reliance Industries gave the biggest boost to the index, adding 1.4%. In FX, the Bloomberg Dollar Spot Index fell 0.5% as the greenback weakened against all of its Group-of-10 peers. Here is how other key pairs did: The euro rose by 0.6% to 1.0653, erasing Friday’s loss after ECB Vice President Luis de Guindos said half-point increases in borrowing costs will continue as officials try to tame soaring prices. In Germany, the IFO business confidence index rose to 88.6 (estimate 87.5) in December from revised 86.4 in November, according to the IFO Institute The pound rose while gilts plunged across the curve with the belly outperforming slightly as money markets added to BOE tightening wagers and traders looked ahead to QE sales starting January The yen whipsawed after reports on a potential change to a key agreement between the government and central bank fueled speculation policy makers are moving closer to a hawkish pivot. The BOJ is expected to keep monetary stimulus unchanged Tuesday, yet elevated overnight volatility in the yen reflects risk of a shift in tone when it comes to forward guidance Australian dollar climbed amid broad greenback weakness spurred by speculation of a hawkish pivot in Japan. Gains were refreshed on news that Australia’s Foreign Minister Penny Wong will travel to Beijing on Tuesday In rates, the Treasury curve twist-steepened; the 2-year yield fell 1bp and the 10-year yield rose by around 4bps. US 10-year yields around 3.54%, cheaper by 6bps vs. Friday close with bunds and gilts lagging by additional 1.5bp and 10bp in the sector; long-end led losses widens 2s10s, 5s30s spreads by 3.5bp and 3bp on the day. Dollar issuance slate remains light, with issuance likely concluded now for the year. Treasuries follow more aggressive bear steepening move across gilts, where long-end yield are cheaper by 13bp as traders look ahead to QE sales starting January. This week’s US auctions include $12b 20-year bond reopening Wednesday and $19b 5-year TIPS Thursday. In Europe, Bunds and Italian bonds extend the streak of declines to four, the longest in 6 weeks and money markets added to ECB tightening bets as markets continued to digest last week’s hawkish policy messaging. In commodities, oil futures rose boosted by Beijing’s pro-growth pledge and a US move to refill strategic crude reserves boosted oil futures, though economic growth fears kept prices on track for a second monthly loss.   Bitcoin is softer on the session, but resides towards the mid-point of relative narrow parameters. It's a quiet economic calendar, with just the NAHB Housing Market Index on deck (est. 34, prior 33). Market Snapshot S&P 500 futures up 0.4% to 3,894.00 STOXX Europe 600 up 0.5% to 426.88 MXAP down 0.2% to 156.07 MXAPJ little changed at 507.98 Nikkei down 1.1% to 27,237.64 Topix down 0.8% to 1,935.41 Hang Seng Index down 0.5% to 19,352.81 Shanghai Composite down 1.9% to 3,107.12 Sensex up 0.7% to 61,781.21 Australia S&P/ASX 200 down 0.2% to 7,133.87 Kospi down 0.3% to 2,352.17 German 10Y yield little changed at 2.19% Euro up 0.6% to $1.0647 Brent Futures up 1.1% to $79.90/bbl Gold spot up 0.2% to $1,796.99 U.S. Dollar Index down 0.46% to 104.22 Top Overnight News from Bloomberg EU member states will on Monday discuss a gas-price cap that’s almost one-third lower than an original proposal as they attempt to break a deadlock over the controversial proposal to contain the impact of a historic energy crisis After this winter, the EU will have to refill gas reserves with little to no deliveries from Russia, intensifying competition for tankers of the fuel. Even with more facilities to import liquefied natural gas coming online, the market is expected to remain tight until 2026, when additional production capacity from the US to Qatar becomes available. That means no respite from high prices China’s swift abandonment of Covid Zero has seen infections explode, especially in Beijing, which has seen shortages of medicine, overwhelmed hospital staff and deserted streets as residents stay home sick or to avoid the virus. That aligns with what other places experienced as they shifted from eliminating Covid to living with it — except for the lack of officially reported deaths China’s top leaders said they will focus on boosting the economy next year, hinting at business-friendly policies, further support for the property market while likely scaling back fiscal stimulus A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks eventually traded lower across the board following the downbeat performance on Wall Street on Friday. ASX 200 was weighed on by its heavyweight Financials and Healthcare sectors but losses were cushioned by gains in the metals-related names. Nikkei 225 was pressured following weekend reports that Japan's government is set to revise a 10-year-old joint statement with  the BoJ that commits the central bank to achieve its 2% inflation "at the earliest date possible," while Toshiba Corp shares slid over 5% amid Nikkei reports that its preferred bidder JIP reportedly appears to be mulling a lower valuation for a buyout. Hang Seng and Shanghai Comp were initially mixed but the former failed to hold onto opening gains whilst the latter overlooked the PBoC injecting fresh funds via 14-day reverse repo for the first time in nearly two months, with sentiment dampened by reports of two COVID-related deaths in mainland China. US equity futures traded flat within tight ranges - the ES March contract remained under 3,900. Top Asian News China reported two new COVID-related deaths in the mainland on December 18th vs zero a day earlier, according to Reuters. China's Shanghai Education Bureau said it is to shut down all in-person classes in kindergartens and childcare centres in the city from December 19th due to COVID-19 infections, according to Reuters. Chip maker Renesas Electronics (6723 JT) suspended work at its Beijing plant from Friday for several days due to the spread of COVID-19 in the city, according to Reuters. Beijing has removed or adjusted 126 COVID-19 prevention measures, and all factories and construction sites above designated size and commercial buildings in the city have fully resumed work, officials cited by Global Times said Sunday. Macau's government is to cancel COVID risk regulations for mainland China from Tuesday; arrivals from China must have a negative COVID test in the last 72 hours, according to Reuters. Hong Kong leader Lee to begin a four-day trip to Beijing on Wednesday, at which he is expected to discuss the reopening of the border with mainland China, via SCMP citing sources. Beijing, China is to buy imported COVID medicines to relive pressure on domestic shortages, via Reuters citing an official; customs will speed up the clearance for imported COVID medicines. USTR Office has announced a nine-month extension of tariff exclusion on 352 Chinese import product categories, according to Reuters. China is to maintain ample liquidity in 2023 to implement proactive fiscal policy, according to state media citing the PBoC Vice Governor. China’s Central Economic Work Conference suggested China will focus on stabilising its economy in 2023 and step up policy to ensure key targets are met, according to a statement cited by Reuters. PBoC injected CNY 9bln via 7-day reverse repos with the rate maintained at 2.00%; injects CNY 76bln via 14-day reverse repos with the rate maintained at 2.15% - for a daily net injection CNY 83bln. according to Reuters. Toshiba Corp's (6502 JT) preferred bidder JIP reportedly appears to be mulling a lower valuation for a buyout, according to Nikkei. Japan is reportedly eyeing an initial budget at a record JPY 114tln for FY23, according to Kyodo. Australia’s sovereign wealth fund is positioning for inflationary pressures to persist globally and believes that gold and other commodities will offset hindered returns across asset classes, according to Bloomberg. South Korean Finance Minister said the economy is slowing more rapidly than expected; economic slowdown is to be at its worst pace in H1 2023, via Reuters. European bourses have commenced the week on a firmer footing, Euro Stoxx 50 +0.7%, shaking off the softer APAC handover in minimal newsflow. Sectors are firmer ex-Media/Real Estate, featuring outperformance in Energy after Friday's pressure. Stateside, futures are similarly supported, ES +0.5%, in-tandem with the European tone ahead of a sparse US docket. Top European News UK Chancellor Hunt has commissioned the OBR to prepare an economic & fiscal forecast, to be presented alongside the Spring Budget due 15th March, 2023. UK PM Sunak scrapped Liz Truss' plan to purchase energy from foreign producers, according to Sky News. Elsewhere, Sunak is set to sign off an extension to the government's energy support package for businesses for up to 12 months. Bank of France cut France's 2023 growth forecast to 0.3% (prev. 0.5%) and cut the 2024 forecast to 1.2% (prev. 1.8%), according to Reuters. ECB's de Guindos says the ECB will keep hiking rates and does not know when they will stop, not planning on altering the 2% mid-term price stability goal. ECB's Simkus is in no doubt that there will be a 50bps hike in February. ECB's Kazimir says rates will not only need to go to restrictive territory but stay there much longer. FX USD has faded despite hawkish weekend Fed rhetoric, with the DXY nearer the lower-end of 10412-83 parameters. Action which benefits peers across the board, with marked outperformance in the JPY as USD/JPY gapped lower from the 136.69 close to either side of the figure. Antipodeans are the current best performers, with the Kiwi through 0.64 vs USD at best and AUD holding above 0.67. EUR is bid but to a slightly lesser extent despite hawkish (as expected) ECB rhetoric and strong German Ifo release while Cable has reclaimed 1.22 convincingly. ZAR is the marked outperformer after Ramaphosa secures re-election as ANC leader for the 2024 presidential campaign. PBoC sets USD/CNY mid-point at 6.9746 vs exp. 6.9753 (prev. 6.9791) South African President Ramaphosa has been re-elected as leader of the governing ANC party. Fixed Income Bunds are facing modest pressure, though are off worst levels which occurred in wake of ECB's Kazimir which prompted the 10yr German yield to test 2.20%, action which is being felt more keenly in the periphery. Gilts are the marked underperformers after last week's relative resilience, with the UK yield around 3.45%. USTs are softer, but comparably more contained and haven't really threatened a breach of initial early-European parameters. Commodities A choppy but ultimately fairly contained start to the week for the crude benchmarks. Price action throughout the European morning has been two-way in nature and at times without an overt catalyst or driver. Currently, WTI & Brent Fed’23 are firmer by around USD 1.00/bbl on the session but are shy of their overnight peaks by around another USD 1.00/bbl, and as such are someway from last week’s respective USD 77.77/bbl and USD 75.26/bbl best levels. EU countries are reportedly mulling a gas price cap at levels lower than suggested to date, with the bloc set to meet on Monday in a bid to come to an agreement, according to a document cited by Reuters. Czech Republic proposed a EUR 188/MWh cap on Dutch TTF front-month contract vs the EUR 275/MWh cap originally suggested, according to Reuters. Saudi Aramco, Sinopec and SABIC have expanded refining and petrochemical cooperation and expect to start operations by the end of 2025, according to Reuters. Algeria is considering exporting its spare power capacity to Europe, according to the Algerian Energy Minister cited by Reuters. Uniper (UN01 GY) said the first German LNG terminal is to open in Wilhelmshaven; an annual volume of at least 5bcm of natural gas is expected to be imported, according to Reuters. El Paso Natural Gas Co. has lifted the force majeure at its Amarillo compressor station, according to Reuters. North Dakota Pipeline Authority said an estimated 200-250k BPD of oil was curtailed on Friday as a result of an extended storm system but anticipated a relatively quick return of production over the next several days, according to Reuters. USDA and USTR chiefs said Mexican officials have presented potential amendments to restrictions on genetically modified corn and other biotech products, according to Reuters. Indian antitrust agency raided some steel firms for alleged price collusion, according to Reuters sources. Peruvian President has urged congress to pass a bill to bring forward general elections amid protests, according to Reuters. Spot gold and silver are benefitting from the dented dollar while base metals derive support from the generally positive risk tone and the aforementioned unwinding of restrictions in China, with LME Copper firmer by over 1.0%. Geopolitics Blasts were heard across Ukrainian capital Kyiv early Monday morning, according to a Reuters witness. Russian military stationed in Belarus are to conduct tactical exercises, according to Interfax citing the Russian Defence Ministry Ukrainian advisor Podolyak says, to European partners, Ukraine will not surrender to or fulfil the demands of Russia; adds, "War ending can only be accelerated by increasing artillery/tanks supply. Even unilaterally…" Qatari diplomat said Qatar has been "exclusively criticised and attacked" in the investigation into the European parliament, according to a statement cited by Reuters. Qatari diplomat added that "limiting dialogue and cooperation" on Qatar before the legal process has ended will negatively affect discussions on global energy security and security cooperation. North Korea fired two ballistic missiles towards the Korean Peninsula's east coast on Sunday, according to the South Korean military cited by Reuters. The missiles appeared to have landed outside of Japan's Exclusive Economic Zone (EEZ), according to NHK. US State Department said the US is gravely concerned that Iranian authorities are reportedly continuing to kill protesters, according to Reuters. Italian Economy Minister urged the EU to give a strong and strategic response to the US Inflation Reduction Act (IRA), and suggested some Italian companies are considering moving production to the US, according to Reuters. Australian PM said Foreign Minister Wong is to travel to Beijing on Tuesday at the invitation of China, according to Reuters. US Event Calendar 10:00: Dec. NAHB Housing Market Index, est. 34, prior 33 DB's Jim Reid concludes the overnight wrap Well, I had Argentina in the research World Cup sweepstake. After hours of studying form, player fatigue, different systems, the climate etc., I skillfully closed my eyes and put my hand in a jar and pulled the winners out. I will try to not let my success change me. As everyone recovers from a breathtaking final, it'll be interesting to see whether market activity drops off a cliff this week as we approach Christmas even if there was lots of unfinished business after last week. The market doesn't believe the Fed, with a pricing disconnect now opening up, and the market is now worried the ECB has upped its level of hawkishness. Outside of the ECB's Guindos and Simkus speaking today we won't hear much from these two central banks before Xmas so there is unlikely to be much official follow-through to last week's meetings. It will therefore be left to quite a full slate of data to move markets in what is likely to be a week low on liquidity. The US consumer will be a big focus with consumer confidence (Wednesday) and personal income data, along with PCE inflation (both Friday). We'll also see various housing market and business activity indicators from the US, as well as Japan's CPI report and PPI numbers from Europe. Elsewhere, the BoJ will be the last major central bank to make a monetary policy decision this year tomorrow. It could be a bit more interesting than usual as we'll see below. In terms of some of the highlights now, we start with US housing. This is obviously a big focus at the moment and today's NAHB housing index (33 DB forecast vs 33 previously), tomorrow's housing starts (1.400mn vs. 1.425mn) and building permits (1.500mn vs. 1.512mn), Wednesday's existing home sales (4.25mn vs. 4.43mn) and Friday's new home sales (600k vs. 632k) will all be important. The hard data is all expected to slow further from last month. Probably more important is Friday's income and consumption report which contains the latest reading on core PCE. Our economists think it should come in at 0.2% mom (vs. 0.2% previously), taking the YoY rate down three-tenths to 4.7%. Normally core PCE is above core CPI but over the next 12 months our economists think that anomalies in healthcare components between the two means that the former will edge above the latter at 3.2% for 2023 Q4/Q4 against 3.1%. Friday also see the final revisions to the University of Michigan consumer sentiment, including the important consumer expectations of inflation. Other business activity gauges for the US include durable goods orders on Friday, with both headline (DB forecast -3.5% vs +1.1% in October) and core (DB forecast unch vs +0.6%) seen showing signs of weakening by our US economists. Indicators of manufacturing activity from regional Feds are also due throughout the week. These releases will follow an array of downside surprises in activity-related gauges recently, including the fall in industrial production last Thursday. Over in Europe, we will get PPIs from several countries starting with Germany tomorrow. As a reminder, the latest YoY reading stands at 34.5%, some way off the 45.8% peak reached in August. October's report also showed the first MoM decrease in producer prices since May 2020 amid falling energy costs. From central banks, all eyes will be on the BoJ tomorrow and we will also get minutes from their October meeting on Thursday. Our Chief Japan economist previews the meeting and addresses the potential for YCC revision or a policy assessment here. The yen initially rallied as much as +0.61% this morning after Kyodo News reported on Saturday that Japan’s Prime Minister Fumio Kishida was looking to add flexibility around the 2% inflation goal and would discuss it with the next governor after Kuroda's term ends in April. This follows Bloomberg last week reporting that a policy review is being considered for next year. However, some of the Japanese currency’s early gains today were reversed after a government spokesman denied the report and the Yen (+0.28%) is currently trading at $136.22. Following the BoJ's decision, the CPI report for Japan will be released on Thursday. Our Chief Japan economist (full preview here) expects the overall index to reach 3.9% YoY (vs +3.7% in October), the core index excluding fresh food to be up 3.8% (+3.6%), and core-core index excluding fresh food and energy to rise to 2.8% (+2.5%) as food and durable goods continue to be the key drivers of inflation. Speaking of energy prices, EU energy ministers will meet today to resume talks regarding a natural gas price cap as well as other measures to cope with the energy crisis as winter looms. Similar to the US, a number of sentiment indicators will be released in Europe. For Germany, they will include the Ifo survey today and the GfK's consumer confidence reading on Wednesday. Manufacturing and consumer confidence will also be released for Italy on Friday. Asian stock markets had a negative start to the final full trading week of 2022, tracking Friday’s losses on Wall Street as synchronised interest rate hikes and a hawkish tone from global central banks weigh on sentiment. Rising Covid-19 cases in China, particularly in Beijing, following the abandonment of Covid Zero are also adding to the bearish mood. Chinese equities are retreating with the Shanghai Composite (-1.31%) and the CSI (-1.03%) both in the red. The Nikkei (-1.15%), the KOSPI (-0.60%) and the Hang Seng (-0.45%) are also weak in early trading. In overnight trading, US stock futures are little changed with contracts on the S&P 500 (-0.06%) and the NASDAQ 100 (-0.07%) slightly down after posting two consecutive weekly losses. In energy markets, oil futures have moved higher in Asian trading hours with Brent oil (+0.94%) trading at $79.81/bbl and WTI futures (+1.00%) at $75.03/bbl after China indicated its intention to revive consumption heading into 2023. Meanwhile, yields on 10Yr USTs are up +2.92 bps, trading at 3.51%. Looking back at last week, it was a familiar 2022 story in markets since hawkish central bank announcements from the Fed and the ECB sparked a fresh selloff. The decisions themselves were actually in line with expectations, with both hiking by 50bps. But what struck investors was the much more aggressive tone on future rate hikes than the consensus had expected. For instance, the FOMC’s dot plot signalled that rates would be at 5.1% even by end-2023, which was up from 4.6% in the September dot plot. Meanwhile, the ECB said that rates would “still have to rise significantly”, with President Lagarde explicitly pointing to further 50bp moves ahead. Given those developments, risk assets sold off across the board, with the S&P 500 ending the week -2.08% lower (-1.11% Friday). That was a massive turnaround from earlier in the week, when the index had surged on the back of the US CPI print on Tuesday that surprised to the downside. Indeed, by the close on Friday the S&P 500 was down -6.06% from its intraday peak for the week just after the release. It was a similar story elsewhere too, with the STOXX 600 down -3.28% over the week (-1.20% Friday), and the Nikkei down -1.34% (-1.87% Friday). In Europe, sovereign bonds saw significant losses in light of the ECB’s rhetoric, and yields on 10yr German bunds rose by +21.9bps (+7.0bps Friday) to 2.14%. The moves at the front-end of the curve were even larger, with the 2yr German yield up +26.5bps (+3.7bps Friday) to a post-2008 high, which came as investors increased their expectations for the ECB terminal rate. For Treasuries there was a rather different reaction however, with 10yr yields ending the week down -9.6bps (+3.6bps Friday). That occurred as investors grew increasingly confident that the Fed would be able to keep long-term inflation in check, with the 10yr breakeven down to a nearly two-year low of 2.13%. Tyler Durden Mon, 12/19/2022 - 08:06.....»»

Category: blogSource: zerohedgeDec 19th, 2022

The Clarifying Moment Elon Musk Has Given Us

Elon Musk's chaotic reign at Twitter is giving us a masterclass in how to think about leadership and burnout Elon Musk’s chaotic leadership of Twitter has brought us to a clarifying moment in how we think about work, leadership, and peak performance. On the one hand, his burnout-fueled decision-making seems like a regression—a step, or many steps, backwards, given what we know about the connection between human energy and decision-making. But on the other hand, he’s showing us the vivid results of that backward-looking model: total chaos. Musk’s second month at Twitter has been an extension of his master class in how not to make decisions. And the lesson is clear: we only have so much cognitive energy—and what we choose to spend it on, and how we renew it, really matters. [time-brightcove not-tgx=”true”] Last week began with Musk installing mattresses at Twitter’s offices in San Francisco, which spurred an investigation by city officials, since the move could violate safety codes. Musk’s move to “go to the mattresses” wasn’t surprising, given his earlier proclamation that Twitter would be “extremely hardcore.” In response to the investigation, Musk angrily tweeted at San Francisco Mayor London Breed that he was just “providing beds for tired employees.” By week’s end, Musk was posting a tweet calling for the prosecution of Anthony Fauci. And on Thursday night, without warning he banned several journalists, including reporters from The New York Times, The Washington Post and CNN. Meanwhile, as Musk was consumed with Twitter, the stock price of Tesla declined 14% in just the past five days. What’s most surprising is that this is the same man who so brilliantly transformed the automotive industry by shifting from a less efficient and nonrenewable energy source with a lot of downstream negative costs—like burning up the planet—to a more efficient and renewable one. So how does this science–and data-driven genius adopt such an incredibly backward idea of how human energy works? It’s the equivalent of Musk announcing that the next Tesla model will be running on coal—which would be fitting, because the Industrial Revolution is the model he’s using for human energy. That’s when our collective approach to work was defined by the idea that humans are machines, and more time up and operating meant a higher rate of production. Now we know that this is actually not how humans achieve peak performance. In fact, many super successful CEOs (including Satya Nadella and Jeff Bezos) seem to know about the connection between sleep, recovery, and peak performance. High performance athletes like LeBron James, Mikaela Shiffrin and Tom Brady know. The military knows. In October 2020, the Army released its first updated field and fitness manual in eight years with sections on sleep. “To achieve optimal readiness, soldiers must have sleep and the more sleep obtained the better,” the manual reads. “Sleep is necessary to sustain not only alertness, but also higher-order cognitive abilities such as judgment, decision making and situational awareness.” In a 2017 piece on Thrive entitled “Sleep Is a Weapon,” Admiral Jim Stavridis, former NATO Supreme Allied Commander, contrasted this with the burnout-fueled model. “That sort of cultural approach in the military—of the leader as super-human and not in need of rest—is a mistake, and our military leaders must recognize that to make the right decisions—ethical, moral and tactical — they must regard sleep as a weapon that strengthens and enhances their performance as surely as the latest technology,” he wrote. “Rested commanders are the best commanders.” Last week, The New York Times ran a piece about the increasing presence of high-achieving executives and CEOs in Ironman triathlons. And here’s Matt Dixon, who has coached several of them: “A lack of sleep used to be a badge of toughness amongst high-performing people. Now it’s a badge of stupidity. Every single high-performing CEO that I work with prioritizes sleep. Every single one. I don’t work with a CEO who doesn’t sleep at least seven hours every night.” Of course, Musk is hardly the only one ignoring the science, especially in the tech world, which has long been the boiler rooms of burnout. The newly arrested FTX founder Sam Bankman-Fried is another recent cautionary tale, described by Insider as “famously sleeping four hours a night on a beanbag chair next to his desk and taking calls from clients and investors at 3 a.m.” But even in tech, the culture is shifting. The Information reported on tech’s “overnight shift”—how, instead of moving mattresses into their offices, Silicon Valley leaders are now optimizing their smart mattresses for sleep: “The biggest flex in the tech world used to be bragging about how little you slept—now it’s a high sleep score.” Every day Musk has been proving the high costs of this unscientific way of using his energy—monetary costs, brand costs, opportunity costs. And that’s all in addition to the undeniable health costs. They may not be obvious right away but we have tons of data that show us how dangerously real the health costs of burnout are. This is a man running multiple major companies—and he’s wasting time, day and night, trolling the world on Twitter? With results that are not exactly an advertisement for burnout as a badge for high performance. Advertisers are taking note, with half of Twitter’s top 100 advertisers pausing their ads, while investors shorting Tesla have made $11.5 billion so far this year. And there have been multiple reports on Tesla investors increasingly frustrated with “Musk’s erratic behavior.” As one investor put it, sounding like the exasperated parent of a toddler, “You’ve got a great car company — just stop it.” On Wednesday, Tesla’s third-largest individual shareholder, Leo KoGuan, called on Musk to step down as Tesla CEO, tweeting, “Elon abandoned Tesla and Tesla has no working CEO. Tesla needs and deserves to have working full time CEO.” Mario Nataralli, of MBLM, an agency that researches the connection between brands and consumers, recently spoke about what Musk is doing to his great car company. “This is creating real damage for the Tesla brand,” he told Automotive News. “When I see people commenting that they are no longer considering a Tesla car or are embarrassed to drive it, I think that’s reaching the point of significant equity damage for the brand.” According to the U.K.-based research firm YouGov, Tesla’s approval rating fell into negative territory for the first time last month. Tesla’s not just any great car company, but a revolutionary car company whose founder is now spending way too much of his valuable energy on stunts like auctioning Twitter’s espresso machines. It’s not about how much money this will or won’t bring in—it’s about the cognitive opportunity costs of even thinking it up. As Steve Jobs once said, “Focus is about saying no. And the result of that focus is going to be some really great products.” And great companies. So yes, Musk’s Twitter working model is a regression. But so many business leaders in every industry are going the other way (the future-looking way)—and following the science. They know the costs of trying to power through burnout for themselves and for their employees. And for the few who don’t, Musk is hopefully doing us the service of providing an overdue kiss of death for the backward-looking, anti-science, bad-for-humans and bad-for-business idea that burnout, performance, and great business results are somehow a match made in heaven. If Burnout Inc. were a company, the short sellers would be making a fortune......»»

Category: topSource: timeDec 17th, 2022

Russia Reaching Out To North Korea, Iran As It Burns Through 40-Year-Old Ammo: Pentagon

Russia Reaching Out To North Korea, Iran As It Burns Through 40-Year-Old Ammo: Pentagon The Pentagon this week is suggesting that Russia is growing increasingly desperate in maintaining steady ammo supplies, with senior officials describing 40-year old Soviet-era ammo being used, claiming Moscow is turning to countries like North Korea, and relying increasingly on Iran.  "They [Moscow] have drawn from ageing ammunition stockpiles, which does indicate that they are willing to use older ammunition, some of which was originally produced more than 40 years ago," a senior Pentagon official told a press briefing. This makes it potentially faulty, unreliable, and even dangerous for the Russian troops operating the heavy guns, the official described: "In other words, you load the ammunition and you cross your fingers and hope it's going to fire or when it lands that it's going to explode." AFP/Getty Images The official went on the predict that Russia could deplete its up-to-date ammunition stocks by early 2023 if it didn't seek to tap both foreign suppliers and older ammo. Further the official alleged the chief foreign suppliers are likely to be Iran and the North Koreans. "Russia, has been seeking to get additional capabilities from Iran," the official said. "And you know, the [National Security Council] put out a fair amount of information on this last week. You know, in a lot of ways, given this current state of Russia's munitions stockpile, it's not surprising that they continue to look at opportunities to work with countries like Iran and with – and North Korea to try to gain additional capability." When pressed for evidence of the assertions, the Pentagon official cited that the Ukrainian army is increasingly finding duds and unexploded Russian ordinance littering the battlefield, which is a sign of reliance on older, undependable munitions:  "And so, ultimately, broadly speaking, our assessment is that Russia -- the Russian military will very likely struggle to replenish its reserve of fully-serviceable artillery and rocket ammunition through foreign suppliers, increased domestic production and refurbishment. So, again, this is why it's not surprising that they're reaching out to countries like Iran and North Korea to try to obtain some more dependable ammunition." The US spokesman continued, "we do assess that they have used quite a bit of their stockpile and that their numbers - the numbers available to them have really diminished their ability to sustain their current rate of fire when it comes to PGMs [precision-guided munitions]." This latest assessment also echoed the prior words of Director of National Intelligence Avril Haines, who said in early December as the war entered its tenth month that Russia is "quite quickly" burning through its military stockpiles. "It's really pretty extraordinary," Haines said. "Our own sense is that they are not capable of indigenously producing what they are expending at this stage. That's why you see them going to other countries effectively to try to get ammunition." Tyler Durden Wed, 12/14/2022 - 18:40.....»»

Category: blogSource: zerohedgeDec 14th, 2022

20 NATO States "Pretty Tapped Out" After Weapons Transfers To Ukraine

20 NATO States "Pretty Tapped Out" After Weapons Transfers To Ukraine Authored by Kyle Anzalone via The Libertarian Institute,  Two-thirds of the North Atlantic Treaty Organization (NATO) have depleted their stockpiles by sending weapons to Kiev, according to an alliance official. Even larger NATO states are struggling to meet the demands of Ukraine’s war effort.  The New York Times reported on Sunday the North Atlantic alliance is struggling to meet Kiev’s battlefield needs. According to one NATO official, 20 out of 30 members are "pretty tapped out" regarding their ability to supply Ukraine with additional weapons. While larger states like the US, France, Germany, and Italy have the ability to arm Ukraine, those governments have also resisted sending specific weapons systems requested by Kiev.  ATACMS missile, via Yahoo News Ukraine has sought long-range surface-to-surface missiles known as ATACMS from Washington. However, the White House has rebuffed the request out of concerns the munitions could be used to hit Russian territory.  Part of the cause of the dwindling arms supply is the massive demand for artillery. Currently, Ukrainian forces are firing thousands of rounds daily, but the US can only produce 15,000 rounds per month. Camille Grand, a defense expert at the European Council on Foreign Relations, told NYT, "[a] day in Ukraine is a month or more in Afghanistan." The increased demand for weapons has been a significant boon for the Western arms industry. "Taking into account the realities of the ongoing war in Ukraine and the visible attitude of many countries aimed at increased spending in the field of defense budgets, there is a real chance to enter new markets and increase export revenues in the coming years," said Sebastian Chwalek, CEO of Poland’s PGZ, an entity that owns multiple arms manufacturers.  US arms makers are also profiting off the war. In May, during a visit to a Lockheed Martin plant, President Joe Biden said Washington would increase the number of weapons the US would produce. The President said his plan to ramp up production would not come cheap.  The American arms profiteering has upset some Europeans. According to POLITICO, one European official said, "the fact is, if you look at it soberly, the country that is most profiting from this war is the US because they are selling more gas and at higher prices, and because they are selling more weapons." Mark F. Cancian, a former White House weapons strategist and current senior adviser at the Center for Strategic and International Studies, agreed it would take a multi-year effort to ramp up the production of key weapons. "If you want to increase the production capability of 155mm shells. It’s going to be probably four to five years before you start seeing them come out the other end," he said.  Multiple US and NATO officials have said the alliance is committed to Kiev for the long term, as they are preparing to fight a multi-year proxy war against Moscow. In October, Secretary of Defense Lloyd Austin said the US and its allies would "boost Ukraine’s defensive capabilities for pressing urgent needs and for the long term." Tyler Durden Mon, 11/28/2022 - 12:01.....»»

Category: blogSource: zerohedgeNov 28th, 2022

Pentagon weighs sending Ukraine a strike weapon system that can hit targets almost 100 miles away: report

The US is considering a proposal to send Ukraine a weapon combining cheap precision bombs with a rocket capable of hitting almost 100 miles away. A Ukrainian flag in the village of Dolyna in Donetsk Oblast, Ukraine, after the withdrawal of Russian troops on September 24, 2022.Metin Aktas/Getty Images The US is weighing a proposal to send a cheap, 94-mile strike weapon to Ukraine, per Reuters. The proposal, from Boeing, would combine a small, inexpensive bomb with an existing rocket system. It comes as the US contemplates its own military supplies and production backlog. The US is considering a proposal to send Ukraine a small, cheap weapons system that would allow President Volodymyr Zelenskyy's military to strike Russian forces up to 94 miles away, according to Reuters. The weapon, proposed by Boeing, has been called the Ground-Launched Small Diameter Bomb (GLSDB), and combines small, inexpensive precision GBU-39 bombs fitted to a M26 rocket motor, the outlet reported. Both components are in abundant supply in the US, with the plan appearing to address growing pressure on the US' military stockpile, given the quantity of arms it has sent to Ukraine this year.The proposal is one of around six being developed to aid military production in US, to support Ukraine and allies in Eastern Europe, Reuters reported.A Pentagon spokesperson did not immediately respond to Insider's request for comment, but told Reuters that the department works to "identify and consider the most appropriate systems."In May, the US refused to send its long-range ATACMS weapons to Ukraine, out of concerns that the weapons — which can travel up to around 190 miles — could hit targets in Russia.The 94-mile range of the GLSDB system would nonetheless put previously unreachable targets in Ukraine's crosshairs.As of November 23, the US has sent Ukraine $19 billion in military aid since the war's outbreak, including 38 HIMARS and 8,500 Javelin anti-armor missile systems.However, in August reports began to emerge of low supplies of several munitions in the US — particularly 155mm artillery shells. Efforts to ramp up production are hampered by existing bureaucracy, as Insider's Michael Peck reported.The Pentagon insisted in a recent statement to Insider that it "will not go below our readiness requirements" when it comes to supplying weapons to Ukraine.Meanwhile, proposals to send powerful Gray Eagle drones, much desired by Ukraine, have remained stuck in political limbo.Read the original article on Business Insider.....»»

Category: smallbizSource: nytNov 28th, 2022