Lifted in toto from Mining Technology, February 26:
Zijin gets approval for Julong copper project expansion in Tibet The expansion is set to increase the mine's capacity from 200,000 tonnes (t) per day to approximately 350,000t.
Chinese company Zijin Mining has received approval for the second-phase expansion of the Julong copper project in Tibet.
The approval for expansion was given by the Tibet Autonomous Region Development and Reform Commission.
This expansion is set to increase the mine’s capacity from 200,000t
per day to nearly 350,000t, positioning it as the largest single copper
mine in China by mining and processing scale.
For this expansion, Zijin has announced an investment of 17.46bn yuan ($2.42bn), which will be self-financed by Julong Copper.
Upon completion of the construction, the mine is expected to commence production by the end of 2025.
The mine is expected to adopt an open-pit method and have a service life of 36 years.
The company said in a statement: “Upon completion of the construction
completion and production commencement of the Julong Phase 2 Project,
Julong Copper Mine will become the largest stand-alone copper mine in
China.
“It will play an important role in further enhancing the production
output of mine-produced copper in China, promoting the transformation of
Tibet’s resource advantages into economic development advantages, and
driving the economic and social development of Tibet.”
Going forward, Zijin has plans for a third phase of expansion for the Julong Copper Mine.
If approved by relevant authorities, the mine could potentially reach
an ore mining and processing volume of around 200 million tonnes
annually.
The move is expected to make Julong the largest stand-alone copper mine globally in terms of mining and processing scale.
In August 2023, Zijin reportedly planned an investment of 27.71bn yuan for the expansion of the Cukaru Peki copper and gold mine in eastern Serbia.
The global nickel mining industry is under stress, and the primary
reason is an oversupply of low-cost nickel from Indonesia. Moreover,
this constant supply continues to support a major global surplus,
placing downward pressure on the nickel price. At this point, the
Southeast Asian nation has already cornered more than half of the
world’s supply of this critical metal.
Indonesia’s ascent as the leading player in the global nickel
industry, leveraging Chinese capital and innovation, proved remarkable.
In fact, according to this report, the country’s dominance comes despite concerted resistance from the European Union via the World Trade Organization.
In just over a decade or so, Indonesia managed to completely
transform its nickel export business while surging its mine output
nine-fold. Together, China and Indonesia now produce about 70% of the
world’s total nickel supply. Unable to compete with the formidable
capital and low operating costs of Indonesian operations, competitor
nickel miners in Australia and elsewhere could potentially go out of
business.
The current nickel price could
change rapidly. MetalMiner can help your organization navigate volatile
nickel markets using AI technology. Read more here.
Mining Companies, Experts Warn of Shutdowns
French miner Eramet
recently warned that the day is not far off when Indonesia will cement
its position as the world’s number one supplier, wiping out its rivals.
Indeed, the Financial Times quoted CEO Christel Bories as saying
Indonesia could end up supplying over three-quarters of the world’s
highest class of pure nickel in another five years. Hidden somewhere
between the lines was the message – “competitors beware.”
Andrew Forrest, Founder and Chairman of Fortescue Metals Group and
one of the richest people in Australia, recently asked the London Metal
Exchange to understand the difference between “dirty” and “clean”
nickel. Fearing the closure of mines, he told reporters that the
Exchange must learn to segregate nickel based on its associated carbon
emissions, allowing purchasers to choose the sustainability of their
products. Andrew was perhaps referring to companies using batteries from
cheap nickel mined in Indonesia, which many accuse of having a higher
emissions footprint....
Well yeah. You've got homeboys heading north to wreak a bit of havoc*
From Mothership.sg, February 29:
MINDEF's budget for the upcoming financial year is projected to be S$20.2 billion.
Singapore will keep military spending at about 3 per cent of gross domestic product (GDP) over the next decade as the risk of regional and global conflicts has gone from being unlikely to being "non-zero", said Defence Minister Ng Eng Hen during the Committee of Supply debate on Feb. 28, 2024.
Dreams of global peace have been decimated: Ng Eng Hen
He said that in 2014, he attended the 50th Munich Security Conference, a forum he described as "special" where Henry Kissinger (former US Secretary of State), Helmut Schmidt (former German Chancellor), and former French President Valéry d'Estaing appeared together.
"It was 50 years of peace, and the mood was one of celebration," he said. " I remember President Valéry d'Estaing saying that 'Europe had eliminated the concept of war'."
"It was just one decade ago. All those dreams have been decimated."
Ng said he can "assure" people that "surprises" and "unintended consequences" are in store, with some of them linked, while others could appear "completely out of the blue".
"When the ambient temperature of geopolitics rises, sparks and fires will arise from multiple sources.
So, I have reversed my assessment for today's generation in Singapore and elsewhere.
The risk of regional and even global conflict even in the next decade has become non-zero.
I've already had the Kyiv - Kiev débâcle that ended up with a guy asking "you some kind of commie?" because I used the latter spelling and my pathetic bleating "No, no, Mussorgsky, you know? Great Gate of...?":
From the old commies at RT, February 24, 2024:
Germany renames Kiev
Berlin will now abandon the established rendering of the city in its official documents
The German authorities have decided to switch from the traditional
spelling of Ukraine’s capital, Kiev, to a new variant requested by the
Ukrainian government, the Foreign Ministry said on Saturday. The city
previously known in German as ‘Kiew’ will now be written as ‘Kyjiw’, the
ministry said in a series of statements on X (formerly Twitter).
The
change has been entered in the register for official use, which sets
out guidelines for government documents. The Foreign Ministry said it
would gradually introduce the change.
The statement did not
elaborate on the reasons for the change, only saying the spelling had
been common practice for many entities.
The Japanese Defense
Ministry made a similar decision in March 2022, about a month into the
conflict between Moscow and Kiev. The move was made following a review
of major media coverage, it said at the time.
The Ukrainian authorities have been campaigning for the spelling change
since at least 2018. The US Board on Geographic Names (BGN) – which
maintains uniform geographic name usage throughout the US government –
introduced similar changes in June 2019 when it adopted ‘Kyiv’.....
Now I'm flashing on that whole Lemberg>Lwów>Lvov>Lviv thing, depending on who was running the show, where I was always two decades behind the times. Change is hard.
Insurance sector 'suffered' amid inflation: Lemonade CEO
Shares of Lemonade (LMND)
are dropping sharply [down 27.7% yesterday; up 4.9% today] as the company, in a letter to shareholders,
outlined a potential drop in profits after “extraordinary challenges” in
2023. The company plans to double its growth budget, which amounted to
$55 million in the previous year.
Daniel Schreiber, Lemonade CEO,
joins Yahoo Finance to discuss the challenges that lie ahead for
Lemonade, including rising consumer costs.
Schreiber elaborates on
how the business has operated so far, focusing particularly on the
impact of AI on operations: "We're really seeing everything getting
better. Our loss ratio collapsed by 12% year on year. Our operating
expense shrunk year on year. The efficiencies that our AIs are driving,
we've been automated through AIs from the get-go, so we're growing
revenue 31% and actually shrinking R&D costs, marketing costs, and
operating costs because we're using generative AI and other AIs to do a
lot of our work for us. All of that emboldens us to continue to invest
because every dollar that we invest returns itself about threefold over,
and if you're long-term oriented, and we absolutely are, that just
makes so much sense."
Video Transcript
BRAD SMITH:
Shares of Lemonade plunging this morning after saying 2023 was a year of
extraordinary challenges. The insurance company says it's going to
focus on growth in the coming year, planning to roughly double its
budget, which it warns will hurt profits in the near term. Daniel
Schreiber, who is the Lemonade CEO joins us now in studio to discuss
more. Thanks so much for taking some of the time here today.
DANIEL SCHREIBER: Good to be with you.
BRAD SMITH:
Absolutely. So let's discuss this because the Street sending shares
lower, and perhaps just on the announcements that you made around some
of the spending plans here to really grow out the business. So what are
you going to track up against? What's the barometer to say whether or
not some of that spending is working for the company?
DANIEL SCHREIBER:
Absolutely. So we're coming off of perhaps our best quarter ever, you
know, revenue up by a third, gross profit up three-fold, EBITDA losses
halving. So we're really seeing dramatic progress. In terms of our
guidance, we did say because of that, we're going to spend more on
growth. This is a great opportunity to start growing. We've been growing
at an increasing rate.
So we've had 18% a couple of quarters ago,
20, we'll be 21 now, and continuously grow because we do see
opportunities for increasing the long term profitability of the
business. And insurance is such a huge, vast market that spending now at
a roughly CAC to LTV ratio of 3 to 1, every dollar you spend comes back
three-fold.
But it does mean that we're going to slightly depress
earnings. We're going to continue to improve earnings. Don't get me
wrong. EBITDA will increase and get better this year relative to last
year, but perhaps at a rate that signals that we're investing in our
future rather than just taking the profit now.
SEANA SMITH:
I guess in terms of moving the needle, how big of an impact do you see
this having on your bottom line in the longer term? And what's more
specifically your message to the street? Clearly, there a little bit
worried about the spending that's going to be happening here in the
coming quarters. But why do you think that this is a strategy that's
going to pay off in the long run?
DANIEL SCHREIBER:
At a fundamental level, all lights are green. We're really seeing
everything getting better. Our loss ratio collapsed by 12% year-on-year.
Operating expense shrunk year-on-year. The efficiencies that our AIs
are driving. We've been automated through AIs from the get go. So we're
growing revenue 31% and actually shrinking R&D costs, marketing
costs, and operating costs because we're using generative AI and other
AIs to do a lot of our work for us.
So all of that emboldens us to
continue to invest because every dollar that we invest returns itself
about three-fold over. And if you're long-term-oriented, and we
absolutely are, that just makes so much sense. So we're going to
continue to do that. We have said that next year, we'll be cash
flow-positive. We have said that the following year, we will be
EBITDA-positive. We reiterated those. But we have to get through the
extra growth before we turn those corners entirely.
BRAD SMITH:
As we continue to get more and more reads on inflation and where
inflation continues to show up, insurance is one of those areas here.
And a lot of consumers perhaps asking why premiums are getting higher,
why we're continuing to see that be one of the stickier elements of the
services inflation.
From your seat at the helm of Lemonade and all
of the services that come forward, why is it getting more expensive?
And ultimately, how are you going to look across some of those costs
that consumers are still having to pay right now and perhaps bring that
down eventually over some time?
DANIEL SCHREIBER:
So notwithstanding the great results that we just announced, insurance
as a sector has suffered terribly in the last couple of years, largely
because of inflation. And most businesses can adjust prices when their
costs go up. Insurance companies may not. We're heavily regulated....
When property casualty insurers were pulling out of California and Florida every non-insurance-literate commentator was talking global warming while the insurance company bigwigs were talking the extreme inflation in the cost to repair homes and vehicles.
And though the insurance/reinsurance folks can be right bastards (especially the herverzeckring crowd in Amsterdam) I pay attention to them—and more importantly, their filings with state insurance commissioners—more than I do the peeps who are unregulated.
Chile's SQM the
world's second-largest lithium producer, on Wednesday posted an 82%
fall in its fourth-quarter net profit from a year earlier, below
forecasts as prices for the key battery metal continued to slide from
earlier peaks.
The
miner, which also produces fertilizers and industrial chemicals,
reported a quarterly net profit of $205.9 million, below the $317
million expected by analysts polled by LSEG, after a gradual slide in
earnings over 2023....
Lithium carbonate prices eased to CNY 95,500, matching the over-two-year low from mid January and holding the 80% plunge in 2023 as the market continued to struggle with a considerable surplus. New estimates showed that NEV sales in China plunged by nearly 40% from the previous month in January, stretching the pessimism following the slowdown from the previous year. The slowdown in electric vehicle sales in China limited lithium demand for battery manufacturers, driving factories to skip their typical restocking season. Instead, firms took advantage of high inventories following the supply glut caused by extensive subsidies from Beijing throughout 2022. The developments drove key market players to forecast the next lithium deficit to return only in 2028, an aggressive twist from speculations of persistent shortfalls that lifted lithium prices to CNY 600,000 in November 2022.
If interested here are our posts mentioning lithium over that time period, we were pretty bearish. Probably the most interesting event was the attempt by the Chinese to form a cartel to support the price at 250,000. Didn't work.
And why would the Chinese want to support the price?
Fed's preferred inflation gauge logs lowest annual rise since March 2021
The Fed's preferred inflation gauge logged its lowest annual increase
since March 2021 in January, matching Wall Street forecasts, while
monthly prices rose at the fastest rate in a year.
The core
Personal Consumption Expenditures (PCE) index, which strips out the cost
of food and energy and is closely watched by the Federal Reserve, rose
2.8% over the prior year in January, the slowest annual increase since a
2.2% increase in March 2021.
Compared to the prior month, core
PCE rose 0.4%, the most since January 2023 and an increase from the 0.1%
increase seen in December. The monthly increase marked a stark shift in
the inflation data.
Prior to Thursday's release, the six-month
annualized rate of price increases had been below the Fed's 2% goal for
two consecutive months. After the January data, the six-month annualized
PCE price increase is 2.5%.
"Fed officials have signaled they do
not need better news on inflation to cut rates, just continued good
news," Oxford Economics deputy chief US economist Michael Pearce wrote
in a note to clients. "With the trend in inflation still downward,
gradual rate cuts this year are still on the table."....
SuperCore Inflation Soars In January, Services Costs Re-Accelerate As Govt Handouts Spike
GOOD NEWS... One of The Fed's favorite inflation indicators - Core PCE Deflator - dropped to +2.8% YoY in January (as expected) - the lowest since March 2021.
Headline PCE Deflator rose 0.3% MoM as expected, down at +2.4% YoY in January ...
Source: Bloomberg
BAD NEWS... Services soared on a MoM basis...
However, shorter-term signals are less encouraging:
Core PCE 3M annualized rate 2.8% from 2.0%
Core PCE 6M annualized rate 2.6% from 2.2%
On a core basis, services costs jumped even more and Durable Goods costs flipped from deflation...
UGLY NEWS... Even more focused, from The Fed's perspective, is Services inflation ex-Shelter, and the PCE-equivalent actually ticked up on a YoY basis to 3.45%, thanks to a large 0.6% MoM jump - the biggest MoM rise since Dec 2021.
Source: Bloomberg
Under the hood, the SuperCore, every sub-element rose MoM...
Source: Bloomberg
Income and Spending both increased with the former soaring 1.0% MoM (+0.4% exp) but the latter up only 0.2% (in line)...
They aren't asking enough. A smart paralegal would be able to find damages five times larger than the $2.3 billion.
From Reuters, February 28:
Alphabet's Google was hit with a 2.1-billion-euro ($2.3 billion) lawsuit by 32 media groups including Axel Springer and Schibsted on Wednesday, alleging that they had suffered losses due to the company's practices in digital advertising.
Shares of the Mountain View, California-based company fell more than 2%.
The
move by the group - which include publishers in Austria, Belgium,
Bulgaria, the Czech Republic, Denmark, Finland, Hungary, Luxembourg, the
Netherlands, Norway, Poland, Spain and Sweden - comes as antitrust
regulators also crack down on Google's ad tech business.
"The
media companies involved have incurred losses due to a less competitive
market, which is a direct result of Google's misconduct," a statement
issued by their lawyers Geradin Partners and Stek said.
"Without
Google's abuse of its dominant position, the media companies would have
received significantly higher revenues from advertising and paid lower
fees for ad tech services. Crucially, these funds could have been
reinvested into strengthening the European media landscape," the lawyers
said....
From the University of Chicago's Booth School of Business, Chicago Booth Review, Capitalisn't, February 16:
The Wall Street Journal wrote that “Wall Street's best-known
bear is going into hibernation” after short seller Jim Chanos announced
he would close his main hedge funds late last year, in part due to
diminishing interest in stock picking. Short selling, which bets on
drops in asset prices, wins when companies and governments fail and has
gained a predatory reputation over the years. Just last week, the China
Securities Regulatory Commission announced new measures to limit short selling.
On this episode of the Capitalisn’t podcast, hosts Luigi Zingales and Bethany McLean sit
down with Chanos to discuss the relationship between short sellers and
our information environment, the fallout from the “meme stock” craze,
the effects of the Federal Reserve’s interest rate policies, and how
short selling can contribute to market efficiency and resilience. Do
short sellers play a positive role by uncovering corporate fraud,
mismanagement, and systemic risks? What safeguards are necessary to
prevent short-selling abuse and ensure fair and transparent markets?
Audio Transcript
....Bethany: There is no question that the last decade
has been a very tough time for short sellers. The Federal Reserve’s
low-interest-rate policy helped make investors very, very bullish, which
meant that even questionable stocks only went up, and so, short sellers
could short something that seemed overvalued, and the stock would just
continue to go up.
Stocks obviously crashed in the pandemic, but that was really
short-lived. The continuation of the Fed’s policy meant that, at least
for a few years, even post-pandemic, literally, stocks only went up, and
we seem to be back in that world a little bit today.
Last fall, Jim Chanos abruptly closed his hedge fund. As one person
wrote, “Wall Street’s best-known bear is going into hibernation.” That’s
what the Wall Street Journal wrote, and they noted that his firm managed less than $200 million today, down from $6 billion in 2008.
Data tracker HFR noted that, overall, hedge funds that focus on
bearish bets manage $5.3 billion, down from $6.2 billion in 2012. The
business has shrunk. And so, the question is, is short selling dead? We
thought the best guest we could have on to answer this question is, of
course, Jim Chanos.
Jim, the idea for this episode came from one of our listeners,
someone you know, actually, who wrote in an email to me: “What does it
say about capitalism if Jim Chanos can’t find enough investors willing
to profit from its frauds, fads, and failures, not to mention the
competitive forces that are necessary for a functioning market? Is short
selling dead?”
I wanted to start by asking you that question. Do you think your
decision to close your fund says something more broadly about the state
of short selling and even capitalism?
Jim Chanos: Well, I don’t know about that.
Increasingly, our clientele, we realized, has the ability to do a lot of
what we were doing for them through their own back office, their own
risk-management protocols.
Having said that, a lot of exhaustion has set in among investors. To
your questioner’s point, when is this ever going to matter? If markets
are ruled by liquidity and positioning, will fundamentals ever count on
the short side? The traditionalist in me says, “Yes, of course it will.”
It may take time; it may take a cycle. But if that doesn’t happen, then
we can ask much broader questions about markets as a whole, in all
aspects. If you just say one side of the market isn’t working, I think
by definition, then you have to worry about many sides of the market not
working.....
Overview: The dollar is mixed as the market awaits the US personal consumption expenditure deflator, which is the measure of inflation the Fed targets. While there is headline risk, we argue that the signal has already been generated by the CPI and PPI releases. The yen is the strongest of the G10 currencies, up nearly 0.5%. The market shrugged off weak data that spurs speculation of a third quarterly contraction and focused on the comments from a BOJ board member that were consistent with the exit from negative interest rates in the coming months. Meanwhile, the Australian and New Zealand dollars remain fragile after yesterday's drubbing. Most emerging market currencies are firmer today, led by the Malaysian ringgit, where officials are threatening to intervene.
Asia Pacific equities were mixed, including in Japan where the Topix edged higher, but the Nikkei slipped. Mainland Chinese stocks rose with the CSI 300 up almost 2%. However, Chinese companies that trade in Hong Kong fell by about 0.2%. South Korea and Taiwan went in opposite directions as did Australia and New Zealand. Europe's Stoxx 600 is slightly firmer after falling by 0.35% yesterday. US index futures are trading softer. Bonds are selling off. European benchmark 10-year yields are 4-6 bp higher. The 10-year US Treasury yield is up four basis points to nearly 4.31%. Gold is a little softer but within yesterday's range (~$2024-$2038). April WTI is flattish near $78.50....
Germany could be eyeing a return of nuclear power just two years after it was phased out should early polling for the next general election prove correct, with one leading politician saying current energy policy is crumbling.
Polls indicate the centre-right Christian Democrats (CDU), which now
supports a revival of the country’s nuclear power assets after signing a
declaration in January, could garner around 30% of the votes in next
year’s election, meaning the current opposition would likely spearhead
any coalition.
After the 2011 Fukushima nuclear accident, a CDU-led government
championed the push to phase out the generation source, which accounted
for nearly a third of Germany’s power at its height, in 1997.
Look again “I am very aware that it gets harder
every day to reverse our exit [from nuclear],” said party member and MEP
Peter Liese at a recent energy conference.
“We need to seriously re-examine what is possible.”
His comments came in the light of the country’s looming exit from
coal-fired generation in 2030 and recent warnings the lights could go
out unless an additional 11 GW of gas-fired capacity was built to bridge the transition to renewables.
“A key aspect of our strategy crumbled,” CDU lawmaker Mark Helfrich
told Montel, adding it was important to admit the party’s “basic
assumptions” on nuclear had “fundamentally changed”.....
....MUCH MORE, including (specious) arguments against.
But for all the futuristic problems AI promises to solve, there’s a
distinctly practical one that’s threatening to hold it back from scaling
up en masse. AI data centers rely on specialized electrical
transformers—refrigerator-size units that convert current to a safe
voltage—to integrate with the grid, the network of power plants and
wires that carry electricity across the country. But those transformers
are in extremely short supply right now—so much so that wait times for
new units are as high as four years. Demand has also sent prices up some 70% since January 2020. The supply-chain pressures and historical trends that have caused the shortage aren’t showing signs of easing.
“Unless we do see considerable investment—both at the commodity level
and in manufacturing of transformers—I think the shortage that we’re
currently in is only going to continue to get worse,” Benjamin Boucher,
energy analyst at consultancy Wood Mackenzie, tells Fortune. “It’s going to take several years to actually get a lot of that [AI] capacity online.”
Years of underinvestment and consolidation in this niche
manufacturing sector have caused a transformer bottleneck that’s
colliding with a boom in demand from the AI and renewable energy
sectors. Analysts’ only hope is that innovation—or maybe even
engineering help from AI itself—will yield another way to power data
centers without having to wait years for new transformer capacity.....
....Los Angeles-based Sauce Pricing — a startup backed by founding members
of Sweetgreen, Uber, Airbnb and several private equity firms — said
restaurants “have the opportunity to increase item prices by 10% to 20%
during the lunch rush so customers might pay an extra $1 to $2 for a $10
item,” according to a blog post on its website.....
First Solar Jumps On Strong Outlook For 2024, Overcoming Solar Sector Struggles
First Solar stock jumped Wednesday, shaking off the gloom hanging over
stocks in the broader solar energy sector. The solar panel manufacturer
reported fourth quarter results and an outlook for 2024 that impressed
Wall Street.
First Solar (FSLR)
reported Tuesday said that it earned $3.25 per share on sales of $1.2
billion for the December quarter. On average, analysts projected the
Arizona-based company would post earnings of $3.14per share on sales of $1.31 billion, according to FactSet. For the same period a year earlier, First Solar lost 7 centsper share on sales of $1 billion.
The company highlighted for investors that it was expanding capacity
to meet a growing backlog of solar projects, despite a broader slowdown
for the industry.
"Over the past year, we expanded manufacturing capacity, mobilized at
our latest announced facility in Louisiana, produced and shipped a
record volume of modules, expanded our contracted backlog to historic
levels and increased R&D investment," First Solar Chief Executive
Mark Widmar told analysts Tuesday night.
On the stock market today, First Solar stock rose more than 5% to 153.09 in early trading.
First Solar's Outlook For 2024
For the 2024 fiscal year ending with December, First Solar guided for
sales between $4.4 billion and $4.6 billion. Coming into the report,
analysts were projecting First Solar would tally $4.56 million in sales
for all of 2024, according to FactSet.
Further, First Solar projects that its earnings per share for 2024
will fall between $13 and $14. That would nearly double its 2023
earnings per share of $7.74. Analysts were projecting a 2024 EPS of
$13.26 for First Solar heading into the report, according to FactSet.
"FSLR has been executing consistently the last few quarters, not only
scaling manufacturing capacity ... but also producing and shipping
record volumes," wrote Evercore ISI analyst James West in a client note
following the report....
...As for our opinion? We have the Go-Go's "We got the beat" cued up.
As long-time readers know, we have some history with this one, including pretty much from the IPO to the all-time-high eighteen months later, a period known as "The happy time."
First Solar IPO:......$20.00 Nov. 17, 2006.
Top tick..............$317.00 May 14, 2008.
I stole "The happy time" from the Nazis who used it ("Die Glückliche Zeit") to describe their murder and destruction in the service of the attempt to starve Britain in the North Atlantic in 1940.
The most interesting thing about what is going on in Transnistria is that both Russia and NATO+Ukraine seem to want conflict.
Moldova is not a NATO mamber.
From Bloomberg, February 28, 8:12 AM EST:
Moldova’s
breakaway region of Transnistria has called on Russia to step in and
stop what it described as attempts by the government in Chisinau to
bring the enclave back into its fold through economic pressure.
The
self-proclaimed administration in Tiraspol adopted a declaration
directed at Moscow, the United Nations and other international
organizations, at a congress convened on Wednesday, denouncing recently
introduced trade taxes by Moldova’s pro-European Union government....
It's not some cutesy management* fad or pop insight like "Business secrets of Genghis Khan."
To
the rich go the profits and internalizing that fact makes the rest of
this portfolio construction/fund management/investing stuff easier to
conceptualize and execute.
And AI is accelerating the already extant dynamic.
From ZeroHedge's The Market Ear, February 28:
1 or 0. Tech vs the rest
Earnings decouple
EPS outlooks for Big Tech and the rest of the S&P 500 continue to decouple...
Source: Barclays
Earnings recession ex Tech
Excluding the Nasdaq -100 EPS cycle, US and global equities’ EPS would be flat to down over the past two years.
Source: Soc Gen
"Other" earnings being revised down
Downward EPS revisions for SPX over the last 3 months.
Source: Barclays
You cannot spell margin without A & I
Morgan Stanley sees AI-driven productivity adding 30bps to 2025 net margin for the S&P 500 (13.0% net margin in base case). MS's new framework highlights that services-oriented pockets of the market possess a more significant opportunity with respect to AI-driven efficiency gains; these groups include Software & Services, Consumer Services, Health Care Equipment & Services, Financial Services, and Media & Entertainment. Just these groups alone represent over 30% of expected 2025 net income for the S&P 500, which speaks to the potential margin opportunity. (Morgan Stanley) What if AI is as good as the consultants say...?
UBS highlights that a possible upside surprise for equities this year would be that Generative AI does actually increase productivity growth to 2.5%, fueling a 20% return from equities in 2024.
Source: UBS
Keep it in the happy tech family
Large US Tech stocks account for 40% of Nvidia revenue.
Source: Soc Gen
....MUCH MORE *Although people had been observing and discussing "rich get richer" and "winner-take-all" dynamics for over a century, one of our favorite pointers toward the current situation did come out of a business school. We've been hammering on this for so long that I start to bore myself. Here's a recapitulation from last year, linking to an article that was published seven years ago today:
HBR—From Pareto To Hyper-Pareto: "AI Is Going to Change the 80/20 Rule"
A prescient article from the Harvard Business Review, February 28, 2017:
Many high-performance organizations remain passionate about Vilfredo
Pareto, the incisive Italian engineer and economist. They continue to be
inspired by his 80/20 principle, the
idea that 80% of effects (sales, revenue, etc.) come from 20% of causes
(products, employees, etc). As machine learning and AI algorithmic
innovation transform analytics, I’m betting that next-generation
algorithms will supercharge Pareto’s empirically provocative paradigm.
Here are three important ways that AI and machine learning will redefine
how organizations use the Pareto principle to digitally drive
profitable innovation to levels beyond conventional analytics.
Smart Paretos First, greater volumes and variety of data guarantee that algorithms get the training they need to get smarter. Digital networks consequently become Pareto platforms that transform vital vectors of variables into new value.
Novel workplace analytics, for example, mean more organizations can
more readily identify the 20% of employees contributing 80% of value to a
product, process, or user experience. Ongoing digitalization of
business processes, platforms, and customer experiences similarly
invites creative Pareto perspectives: What 20% of the platform upgrade
creates 80% of its impact? What 20% of customer experience evokes 80% of
delight or distaste? Serious C-suites want those data-driven questions algorithmically addressed.
Super-Paretos Second, traditional distributions have disruptively changed. The dirty little productivity secret of big data is that Pareto’s 80/20 insight has decayed into empirical anachronism. Analytically aggressive firms increasingly see Pareto proportions closer to 10/90, 5/50, 2/30, and 1/25. Depending on how rigorously the data is digitally sliced, diced, and defined, 1/50, 5/75, and, yes, 10/150 Paretos emerge. Pareto’s “vital few” becomes a “vital fewer.”
Extreme distributions transcend and dominate industry. Fewer than 10%
of drinkers, for example, account for over half the hard liquor sold.
Even more extreme, less than 0.25% of mobile gamers are responsible for half of all in-game revenue.
Clearly identifying and cosseting the “super-Paretos,” however,
doesn’t go analytically far enough; market and market growth demand that
those descriptive statistics lead to predictive and prescriptive
statistics. In other words, turn those data sets into “training sets”
for smart algorithms.
Organizations need to identify Pareto propensities, as well — they
need to algorithmically crack the code on the tiny adjustments that
promote order-of-magnitude business impacts. Managers and their data
science teams must reorganize themselves around extreme Pareto
potentials and possibilities, not just more and better data.
For instance, one multibillion-euro industrial equipment company with
over 2,000 SKUs determined that less than 4% of its offers were
responsible for one-third of sales and roughly half of profitability.
But extending the analysis to include service and maintenance revealed
that roughly 100 products were responsible for over two-thirds
of profitability. That pushed the firm to fundamentally rethink pricing
and bundling strategies....
This
type of information advantage is more and more accruing to the biggest
and richest of corporations. It is a type of rich-get-richer advantage
akin to the flywheel effect:
...Much more important than the direct monetization of big data is the strategic advantage it can bestow over time.
In a winner-take-all economy, as in a horse race, small differences in
superiority are rewarded all out of proportion to the actual advantage. A
top thoroughbred may only be a couple fifths of a second faster than
the field but those two lengths over the course of a season can mean
triple the earnings for #1 vs. #2.
In commerce the results can be even more dramatic because rather than
the 60%/20%/10% purse structure of the racetrack the winning vendor will
often get 100% of a customer's business.....
Just to reiterate, every incremental advantage that a company can afford does not affect income production in isolation. They accrete in sometimes unforeseeable combinations:
A very handy conceptual framework first posted after the start of the U.S. lockdowns, April 2020. Schools were closed so it seemed natural to link to a superb mini-MBA module.
Overview: A less hawkish Reserve Bank of New Zealand and a slightly softer than expected January CPI from Australia appears to have sparked a broad US dollar rally. The Dollar Index is up almost 0.25%, which, if sustained, would be its best day since the US CPI was reported on February 13. Most of the greenback's strength was seen in the Asia Pacific region, and it has steadied in the European morning. The dollar approached JPY150.80 and there are large options at JPY151 that expire today. The yen is the strongest of the G10 currencies, off less than 0.15%. The Antipodeans have been hit the hardest. The Australian dollar is off around 0.75% and the New Zealand dollar has been tagged for 1.2%. The euro briefly traded below $1.08 for the first time in a week. Emerging market currencies are also weaker, with the South African rand, Thai baht leading the drop with 0.65%-0.85% declines. With herculean efforts the dollar continues to hold slightly below CNY7.20.
Equities are under pressure. All the large markets in the Asia Pacific region but South Korea, sold off. That included a 2% slide in the Chinese shares that trade in Hong Kong and a 3.8% slump in the Shenzhen Composite. Europe's Stoxx 600 is giving back yesterday's nearly 0.2% gain. US index futures are modestly softer after a mixed performance yesterday. European 10-year yields are mostly softer, but UK Gilts are flat. The 10-year US Treasury yield is a basis point lower near 4.29%. The stronger dollar has weighed on gold. It had poked above $2039 yesterday but settled lower on the day and follow-through selling today has seen in slip below $2025 before finding support. April WTI rallied more than $3 a barrel from Monday's low to $79 yesterday. An 8 mln-barrel build in US stocks according to API estimates seemed to blunt the speculation that OPEC+ will extend its output cuts. April WTI is trading softer, around $78, but within yesterday's range....
As we observed in the earlier posts, "if Nigeria's economy can't deliver for the people right now, what is going to happen when it becomes the second most populous country on earth?"
From the Associated Press, February 27/28:
Nigeria’s government employees and other union workers began a new
nationwide strike Tuesday that threatened to shut down key services
while people are angry about soaring inflation and growing economic
pain.
Since assuming office in Africa’s most populous country last
year, President Bola Tinubu has enacted policies that include doing
away with fuel subsidies and unifying the country’s multiple exchange
rates, leading to a devaluation of the naira against the dollar.
Gasoline
prices have more than doubled and inflation has shot up as a result,
reaching close to 30% last month, the highest in nearly three decades,
according to the National Bureau of Statistics....
This exposes a huge quandary for European businesses and regulators.
From EuroNews, February 27:
Some critics in the European Parliament are mad about the deal
but there are also questions about what happened and the EU plans to
look into it
Microsoft’s new “strategic partnership”
with French artificial intelligence company Mistral AI faces scrutiny
in Europe, with some critics in the parliament saying they are “furious”
about it as the EU AI Act was changed to meet the demands of companies
such as Mistral.
The French AI champion unveiled its
new large language model (LLM) on Monday, with it set to become
available to Microsoft’s Azure cloud customers in a dramatic shake-up
for the start-up.
“On a technical level and a political level in
the [European] Parliament, we are extremely furious because the French
government for months was making this argument of European leadership,
meaning that those companies should be able to scale up without help
from Chinese or US companies,” said Kai Zenner, head of office and
digital policy adviser for Axel Voss, an MEP from the European People’s
Party (EPP).
“They were always blaming the Parliament that we are making it kind
of impossible, for those national champions, unicorns to try to compete
with their global competitors,” he told Euronews Next.
EU countries recently agreed on the technical details
of the EU’s AI Act, but only after mammoth negotiations during which
France in particular pushed for concessions for open source companies
like Mistral.
Zenner also said Mistral AI was making the argument
that if their wishes were not fulfilled they would be forced to
cooperate with companies like Microsoft.
“Now they got all their wishes, and they do it anyway and I find this is just ridiculous”.
He claims that the EU AI Act’s final version was rushed and the rules
will be “attacked in front of courts” due to the concessions.
The partnership is also set to be looked into by the European Union’s
competition watchdog, which also last month began looking into
Microsoft’s multibillion-dollar deal with OpenAI....
The Swedish fintech, which was criticized for its handling of a dramatic staff reduction in 2022, is touting new efficiencies powered by OpenAI.
Klarna is bullish on bots.
One
month after taking its OpenAI-powered virtual assistant global, the
Swedish buy-now, pay-later company has released new data touting its
ability to handle customer communications, make shoppers happier, and
even drive better financial results.
The app-based AI chatbot
already handles two-thirds of all customer service chats, the company
said Tuesday—some 2.3 million conversations so far—with the virtual
assistant earning customer satisfaction ratings at the same level as
human agents. Klarna, which is expected to go public
this year and will need all the hype it can get at a time when
investors have been generally frosty toward IPOs, estimates that the
chatbot could help improve its profits by $40 million in 2024.
Announcing a partnership
with OpenAI early last year, Klarna said it was one of the first
companies to integrate the firm’s groundbreaking ChatGPT technology into
a plug-in for shopping. The natural-language interface initially helped
customers choose items and make other shopping-related decisions based
on personalized queries, a feature Klarna described as “smooth
shopping.”
The company has continued to
build out its AI offerings since then. Its app-based assistants are now
available to customers worldwide and handle a variety of tasks including
refunds, cancellations, and even disputes.
Klarna boasted in its announcement on Tuesday that the AI assistant “is doing the equivalent work of 700 full-time agents."....
I don't think we are going to see "real" liquidations. Combined with Evergrande there would be so much property coming on the market that the clearing price would end up being 10% of previous valuations.Besides locking in 90% losses for the debt-holders the effect on apartment owners would lead to protests and maybe riots as the realization of the realizations sink in.
So, more extend-and-pretend but now with a bit of judicial oversight. I say a bit because a judge in Hong Kong probably doesn't have a lot of power on the mainland.
From The BBC, February 27/28:
China's
biggest private property developer Country Garden is facing a
liquidation petition, which has been filed in Hong Kong by a creditor.
A firm called Ever Credit Ltd filed the case for non-payment of a loan worth HK$1.6bn ($204.5m; £161.2m).
Maersk has
warned of disruptions to container shipping via the Red Sea dragging
into the second half of the year and of heavy congestion and delays for
U.S.-bound goods.
Major container shipping companies have switched
away from the Red Sea and Suez Canal to the longer route around
Africa's Cape of Good Hope following attacks on shipping by Houthi
militants.
"Be
prepared for the Red Sea situation to last into the second half of the
year and build longer transit times into your supply chain planning,"
Maersk's head of North America, Charles van der Steene, said in a
statement on Tuesday....
...The Zacks Consensus Estimate for FSLR’s fourth-quarter revenues is
pegged at $1.31 billion, indicating growth of 30.8% from the year-ago
reported figure....
*****
...The Zacks Consensus Estimate for First Solar’s fourth-quarter earnings
is pegged at $3.19 per share, implying a massive improvement from the
prior-year reported loss of 7 cents per share....
Which were higher than the street (by a nickel in the case of EPS) but still got beat:
Net sales of $3.3 billion for 2023 and $1.2 billion for the fourth quarter
Net income per diluted share of $7.74 for 2023 and $3.25 for the fourth quarter
2023 year-end net cash balance of $1.6 billion
2023 net bookings of 28.3 GW; 2.3 GW since third quarter earnings call at a base ASP of 31.8 c/w
2024 net sales guidance of $4.4 billion to $4.6 billion
2024 EPS guidance of $13.00 to $14.00 per diluted share
2024 year-end net cash balance guidance of $0.9 billion to $1.2 billion
TEMPE, Ariz.--(BUSINESS WIRE)--
First Solar, Inc. (Nasdaq: FSLR) (the “Company”) today announced
financial results for the fourth quarter and year ended December 31,
2023.
Net sales for the fourth quarter were $1.2 billion, an increase of $0.4
billion from the prior quarter. The increase was primarily a result of
increased module sales in the fourth quarter. Net sales for the full
year 2023 were $3.3 billion compared to $2.6 billion in the prior year.
This increase was driven by higher module volumes sold and average
selling prices (“ASPs”).
The Company reported fourth quarter net income per diluted share of $3.25 and full year net income per diluted share of $7.74.
Cash, cash equivalents, restricted cash, restricted cash equivalents,
and marketable securities, less debt at the end of the fourth quarter
increased to $1.6 billion from $1.3 billion at the end of the prior
quarter. The increase was primarily a result of operating cash flows,
offset by capital expenditures related to manufacturing capacity
expansions in Alabama, Ohio, Louisiana, and India.
“Few years have been as consequential to our long-term growth strategy
as 2023,” said Mark Widmar, CEO of First Solar. “Over the past year, we
scaled manufacturing capacity, mobilized at our latest announced
facility in Louisiana, produced and shipped a record volume of modules,
expanded our contracted backlog to historic levels, increased R&D
investment, and continued to evolve our technology and product roadmap.”
Forecasted net sales for 2024 are $4.4 billion to $4.6 billion.
Operating income is forecasted to be $1.5 billion to $1.6 billion, which
includes production start-up expense of $85 million to $95 million,
underutilization costs associated with factory ramp of $40 million to
$60 million, and Section 45X tax credits of $1.0 billion to $1.05
billion. Forecasted net income per diluted share is $13.00 to $14.00.
The year-end 2024 net cash balance is projected to be in the range of
$0.9 billion to $1.2 billion. The complete 2024 guidance is as follows:
JPMorgan CEO Jamie Dimon warns no one will be able to escape the claws of AI—and that sets it apart from the dotcom bubble: ‘This is not hype’
When it comes to artificial intelligence there are two camps: those
who are skeptical about how much AI will impact our future and those who
believe it will change the world forever. JPMorgan Chase’s CEO Jamie
Dimon falls firmly in the latter group.
Whether or not you
currently work with technology, the billionaire boss of the New
York–based bank has even insisted that nearly all professions will get
an AI makeover.
"This is not hype,” the Wall Street titan told CNBC. "This is real.”
Dimon
revealed that he’s got 200 workers at JPMorgan dedicated to researching
the wave of large language models, from Bing and Bard to
ChatGPT—including how they could be used internally.
AI will eventually "be used in almost every job," he concluded.
Dimon, who has previously called AI “critical to our company’s future success,” has in the past said that the technology can be used to help Chase develop new products, drive customer engagement, improve productivity, and enhance risk management.
And
he’s putting his money where his mouth is: The banking behemoth
advertised more than 3,500 AI-related roles between February and April
last year, according to data from consultancy Evident....
He goes on to say that this isn't a bubble but there he could be wrong. So much of the valuations we are seeing are based on coming attractions that any hint of, say, the market for GPUs not growing to $400 billion per year (Huang on NVDA's earnings call) would whack the multiples that the hardware companies are fetching. I think we might be in a valuation bubble.
There's an interesting dichotomy developing in the markets, one that we've seen before.
The old pros are cautious, befuddled and a bit scared. Folks with less than a decade at the market are making money.
Adam Smith noted it in the 'sixties bull market in The Money Game. Our comments alternating with 'Adam Smith':
There is one wonderful chapter where the consummate pragmatic
speculator, the Great Winfield, is lamenting his performance problems in
a wildly speculative bull market.
“My boy,” said the Great Winfield over the phone. “Our trouble is
that we are too old for this market. The best players in this kind of a
market have not passed their twenty-ninth birthdays. Come on over and I
will show you my solution.”
So Adam Smith goes over and finds three new faces in the Great Winfield’s office.
My solution to the current market,” the Great Winfield said. “Kids.
This is a kids’ market. This is Billy the Kid, Johnny the Kid, and
Sheldon the Kid.” The three Kids stood up without taking their eyes from
the moving tape, shook hands, and called me “sir” respectfully.
“Aren’t they cute?” the Great Winfield asked. “Aren’t they fuzzy?
Look at them, like teddy bears. It’s their market. I have taken them on
for the duration.”
Winfield then describes how much money Billy the Kid is making in
computer leasing stocks like Leasco Data Processing and Randolph
Computer that he has heavily leveraged with bank borrowing....
And the really spooky bit, for me anyway, SHALE:
...Sheldon the Kid waved his hand for recognition. “This one will really take you back,” said the Great Winfield. “Sheldon’s Western Oil Shale has gone from three to thirty.” “Sir!” said Sheldon. “The Western United States is sitting on a
pool of oil five times as big as all the known reserves in the world –
shale oil. Technology is coming along fast. When it comes, Equity Oil
can earn seven hundred and fifty dollars a share. It’s selling at twenty-four dollars. The first commercial
underground nuclear test is coming up. The possibilities are so big no
one can comprehend them.” “Shale oil! Shale oil!” said the Great Winfield. “Takes you way back, doesn’t it. I bet you can barely remember it.” “The shale oil play,” I said dreaming. “My old MG TC. A blond
girl, tan from the summer sun, in the Hamptons, beer on the beach,
‘Unchained Melody,’ the little bar in the Village.” “See? See?” said the Great Winfield. “The flow of the seasons.
Life begins again. It’s marvelous. It’s like having a son! My boys! My
Kids!”
The Great Winfield had made his point. Memory can get in the way of
such a jolly market, that malaise that comes with the instantly gone,
flickering feeling of déjà vu. We have all been here before. “The strength of my kids is that they are too young to
remember anything bad, and they are making so much money they feel
invincible,” said the Great Winfield. “Now you know and I know that one day the orchestra will stop
playing and the wind will rattle through the broken window panes, and
the anticipation of this freezes us. All of these kids but one will be
broke, and that one will be the multi-millionaire, the Arthur Rock of
the new generation. There is always one, and maybe we will find him.”
In late 2006 both Bloomberg and Raymond James' Jeff Saut were reminded of the above:
I realize that probably does not cut it for our readers. So when I make a statement like "Depending on who is doing the forecasting, with Nigeria's population continuing to boom and China's population shrinking fast (How Serious Is China's Demographic Doom? Almost Beyond Comprehension), there is the very real possibility that Nigeria will be the second most populous nation on earth." in an earlier post, long-suffering reader has every right to query "WTF Climateer dude, cites and sources please."
First up,The World Economic Forum in collaboration with Visual Capitalist:
