David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Musk's Last Laugh With Impossible Electric Truck

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The first working models of the Semi were delivered last week to PepsiCo Inc., part of an order of 100 vehicles. That’s three years behind schedule, but it still happened. More sober carmakers are getting in on the act, too. Alongside Volvo, Daimler Truck Holding AG has had orders for 1,280 zero-emission trucks and buses in the first half of this year, and unveiled a prototype long-haul model in September.

    What’s changed? If Tesla had made dramatic breakthroughs in battery density, Musk would be boasting about it, so that's not the answer. There’s one huge difference in 2022 compared to 2017, however: the cost of diesel.

    The decline of domestic oil refining and 2022’s squeeze in energy prices have conspired to drive US truck fuel costs up to almost double what they were five years ago. Plug the current prices of Californian diesel and commercial electricity into the trucking expenditure calculator made by logistics-data company ACT Research Co., and even an electric rig that’s twice as pricey to buy as a conventional vehicle is getting 12% cost savings every mile, equivalent to nearly $17,000 a year at typical usage levels.1

    That might not last as diesel prices fall back to earth, but it’s close enough to put electric trucking firmly in the game.

    The other factor supporting the Semi right now is that it’s not trying to offer full-spectrum competition to long-haul trucks. Its range is only half what a Class 8 can do between refueling stops. It’s telling, too, that one of its first customers will be a Frito-Lays plant. If you’re worried about the challenges of hauling heavy loads as well as your massive batteries, few types of cargo will be more forgiving than feather-light pallets of potato chips.

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    Amazon's Biggest Revenue Driver AWS Falls Prey To Macro Slowdown

    This article from Benzinga may be of interest. Here is a section:

    Amazon is aware of the macro challenges, and hence AWS employees are reaching out to clients to see how it can help optimize spending, said David Brown, AWS' vice president.

    "If you're looking to tighten your belt, the cloud is the place to do it," AWS CEO Adam Selipsky said during his keynote presentation.

    However, an investment firm Andreessen Horowitz analysis last year, painted a different picture. It showed that a company could trim its computing costs by half or more by bringing workloads from the cloud back to on-premises data centers.

    Amazon is also offering a cheaper alternative, Graviton computing instances based on energy-efficient Arm-based chips alternative to standard Advanced Micro Devices, Inc (NASDAQ:AMD) and Intel Corp (NASDAQ: INTC) processors.

    "We do see some customers who are doing some belt-tightening now," Selipsky told CNBC. Expedia Group, Inc (NASDAQ: EXPE) CEO Peter Kern sees the cloud as an area where his company can reduce its fixed costs.

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    Cash as an asset

    I posted this piece on Friday discussing the merits of shorter-term bonds versus long-term bonds. The calculations I posted are incorrect because the stated yield is annualised. Therefore the compounding chart I posted is completely erroneous. I really should remember that anything which seems too good to be true usually is. I don’t know what I was thinking and can only apologise. Nevertheless, my conclusions about gold, the dollar and the outlook for stocks remains unchanged. I’ve amended the copy below to make more sense.

    Housing Tumbles Down Under as Soaring Borrowing Costs Take Toll

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    In Australia, where the pace of housing declines has eased, the outlook for mortgagees is similarly tough: borrowing capacity has fallen and monthly repayments have surged. In addition, a large chunk of loans that were fixed at record-low rates during the pandemic are due to roll over in 2023 at a much higher rate. 

    With the full impact of past hikes yet to be felt, rates still rising and the economy set to weaken, there’s likely still some way to go before prices bottom, said Shane Oliver, chief economist at AMP Capital Markets in Sydney. 

    Given expectations that rates will rise higher in both countries, some economists see home values dropping more than 20% from their peaks. 

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    Cannabis banking bill and retirement package both could actually pass Congress by year's end, analysts say

    This article from MarketWatch may be of interest to subscribers. Here is a section:

    Lame-duck session might result in OKs for 'SAFE Banking Plus' and 'Secure Act 2.0'

    It has been a long road for Washington's cannabis banking bill and an unrelated measure targeting the U.S retirement system.

    Now both legislative packages have decent or even strong chances of becoming reality by year's end, according to analysts.

    The bill that aims to protect financial institutions that work with the marijuana industry (MSOS)(MJ) is known as "SAFE Banking Plus," with the "Plus" referring to its expected inclusion of some criminal-justice reform provisions.

    The cannabis banking bill has a roughly 70% chance of passing by the end of December, reckons Ben Koltun, director of research at Beacon Policy Advisors.

    "There's a lot of positive momentum. It's just can they come to agreement over some of the details that are outstanding?" Kolton told MarketWatch.

    Cowen Washington Research Group is also bullish on the measure, putting its chances at 75% -- up from 60% in October.

    "We are increasingly optimistic that Congress will enact the SAFE Act on cannabis banking by the year-end. We now set a 75% probability for passage based on the election outcome, the passage of a cannabis research bill, and the broader progress the Senate made over the last 2 weeks on other bills," said Cowen analyst Jaret Seiberg in a note on Monday.

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    Gold Climbs to Highest Since August as Inflation Misses Estimate

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The Personal Consumption Expenditure Deflator, a measure of inflation based on changes in personal consumption, rose 0.3% in October from the month before, below economists’ median forecast. It follows two other inflation gauges that indicated price pressures were easing, boosting bets on a slowdown in monetary tightening. 

    Rate hikes to curb inflation have weighed on non-interest bearing gold throughout the year by pushing up bond yields and the dollar. Bets on a slowdown and China’s Covid loosening saw bullion rise 8% in November as the greenback retreated the most since 2009.

    Other data showed the jobs market gradually cooling, a welcome sign for the Fed as it tries to tame inflation. Wage gains driven by labor tightness have been a major driver of price increases.

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    Credit Suisse Slump Takes Shares Near Rights Offer Price

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The threshold of 2.52 francs is “the ‘hard underwriting’ price for the consortium of 19 banks,” JPMorgan & Co. analysts said in a research note. If Credit Suisse’s shares keep trading above that level until “the last day of rights trading on Dec. 6, 2022, we can assume at that point the capital raise was most likely a success.”

    Having a large number of underwriters makes it easier to find buyers and reduces the risk for the investment banks to get stuck holding a large amount of the shares. As part of the lender’s capital raise plans, Saudi National Bank to invest up to 1.5 billion francs in the lender, becoming a top shareholder. 

    Credit Suisse Chairman Axel Lehmann, speaking at a conference in London on Thursday, said that the stock would stabilize after the rights issue is completed and that investors should expect volatility until then. The new shares are due to start trading on Dec. 9. 

    “I cannot predict where the share price is going,” Lehmann said. Until the end of the capital raise process, “we will have a little bit of volatility, but then I think it will start to somewhat stabilize and bottom out, and then we go from there.”

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