And Exxon Mobil’s new bet on lithium gives it exposure, with all the potential upside in revenue and profits, to the red-hot market for electric vehicles and batteries.

Global demand for lithium is expected to surge in the coming years, far outstripping supply as the world shifts towards renewable energy systems. These require batteries to store electricity for later use, given the variable nature of wind and solar. By 2050, according to an estimate from the International Energy Agency, the world will need to mine 26 times more lithium than it did in 2021.

Lithium-ion batteries are currently the most widely used type of battery, the supply chain for which is dominated by China. Chinese battery giants are also investing heavily in developing sodium-ion batteries, which could potentially offer an alternative to lithium-based ones.

The lithium carbonate price peaked at the end of last year at CNY/tonne of 600,00. and hit a low at the end of April at around CNY177,000. A rebound is now underway which confirms a low in the region of the 2016 and 2018 peaks. It is reasonable to expect a great deal of volatility in lithium prices but the evidence of a higher plateau is now more convincing. 

Treasury-bill yields slated to mature early next month surged, driving them above 7% amid building concern that talks in Washington will fail to resolve the debt-ceiling crisis and the US might default.

The rate on the June 1 and June 6 maturities soared more than a percentage point on the day, while others for early June also climbed sharply. By comparison, the earliest June tenors yield around 4 percentage points above the May 30 issue. 

The Fed minutes reflected a split decision between hiking and holding rates. They are not talking about cutting rates but they seldom do until they are actually doing it. The next question is how quickly a deal on the debt ceiling will be made. 

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Some of the topics discussed include: Luxury puling back on weakening consumer demand. gold and oil steady, dollar firms, Wall Street and Treasuries weak, China breaking lower, India steady.

Aside from the capital, no state received more money than Nuevo Leon’s $2.3 billion. Jalisco received $1.2 billion, while Puebla and Mexico State followed with $0.9 billion each. The majority of the investment growth came from companies that expanded existing operations in Mexico.

“The greatest part of the foreign direct investment was reinvestment in utilities, which is related to the increase in the capacity of plants already installed by companies, and explained by the long-term perspective on export growth,” said Gabriela Siller, director of economic analysis at Banco Base.

The movement of companies from other parts of the world to just south of the US — a practice known as nearshoring — has generated buzz around Mexico’s production possibilities. Nearly $10 billion of the investment went to the manufacturing sector, while $6 billion went into financial services.

If the current pace continues, total investment for the year could reach $43 billion, Siller said. That would represent a 51% gain in total foreign direct investment from 2022 after $6.9 billion from the media merger and Aeromexico restructuring is excluded.

https://en.wikipedia.org/wiki/Isthmus_of_TehuantepecMexico’s GDP is around $1.27 trillion so inward investment approaching $100 billion in a year moves the needle for economic growth. At present Mexico is growing at around the pre-pandemic trend rate of 4%, and inflation (6.25%) continues to trend lower. Fiscal constraint has been a hallmark of AMLO’s presidency and that has helped to support the peso. In turn that has improved the perception of upside potential for foreign investors in the stock market.  

Confidence in that view has now been dented, however, with attendees at a luxury conference in Paris organized by Morgan Stanley flagging a “relatively more subdued” performance in the US, according to Edouard Aubin, an analyst at the investment bank. That reflects “weakness in the aspirational consumer in particular.”

That was counterbalanced by more buoyant demand elsewhere, according to Morgan Stanley. “Overall, we found corporate commentary resilient, pointing to an ongoing soft landing in the US largely offset by strength in other markets.”

Both Asia and the US are important markets for European luxury companies. Asia excluding Japan accounted for 30% of LVMH’s sales in 2022, while the US made up 27%, according to the company’s annual report. 

Deutsche Bank AG analysts have also said that a slowdown in the US is now a growing concern. While the rebound in Chinese demand has been among the key drivers of strong sales, investors are likely to be picky from here on, they added.

Hermes doubled in less than a year. For a “limited supply” champion that’s an impressive performance. The share’s trend has been supported by the low float and its status as a vehicle for playing China’s post pandemic consumer rebound, without in fact investing in China.  

At first, the insurance pricing process -- heavily reliant on algorithms and mathematical modeling -- seemed ripe for upending, thanks to advances in the sheer amount and variety of data digitally-native companies could suddenly collect on customers.

But the Silicon Valley axiom to move-fast-and-break-things hasn't been enough to transform an industry built on centuries of observed human behavior, massive marketing budgets and a savvy grasp of the regulatory environment.

Founded in 2015, Lemonade initially aimed to sell renters and homeowners insurance. It was worth $9.87 billion at its peak in 2021; it's now worth $1.23 billion. Root Insurance, also founded in 2015, began with the idea of using telematics -- or in-car data -- to offer personalized auto insurance based on how people drive. In 2020, it was worth roughly $6.8 billion, and has since swooned to about $67 million. Property and casualty insurance startup Hippo went public at a $5 billion valuation in 2021. It is now worth around $425 million.

So far, the insurtechs have been slow to gather and contextualize enough data to actually build better models. Regulations have restricted the use of some of their data and differentiated pricing. And it has been difficult to chip away market share from established industry giants.

I have been a beneficiary of the insurtech market, so perhaps I am more positively disposed towards the sector than others. As a user of MyFitnessPal, I was provided with a life insurance policy (at my peak pre-pandemic fitness point) at a rate that was far below anything available elsewhere. The home insurance premium I pay Lemonade is half what other companies have quoted. The big question is whether these companies can achieve profitability before they run out of money. 

One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: Japan breaking out, China quiet, speculation in the tech sector spreading beyond AI, gold eases, oil steady, bond yields continue to rebound. 

“Many cities will become like Hegang in a few years’ time,” said Houze Song, an economist at US think tank MacroPolo, noting that China’s aging and shrinking population means many cities don’t have the workforce to sustain faster economic growth and tax revenue.
 
“The central government may be able to keep things stable in the short term by asking banks to roll over local governments’ debt,” Song said. Without loan extensions, he added, “the reality is that over two thirds of the localities won’t be able to repay their debt on time.” 

In Heilongjiang province, where Hegang is located, bond investors are already wary of the risks. The province’s outstanding seven-year bond had an average yield of 3.53%, 18.8 basis points higher than the average nationwide, ranking it among the top four most expensive.

The big question for everyone is just how much pain is the Chinese government willing to tolerate? The modest official debt to gdp ratio posted by the government does not include the debt owed by states, counties, or cities; all of which have a quasi-guarantee from the central government. When those debts are included China has one of the highest debt burdens of any major economy. 

The Quantinuum group, meanwhile, made non-Abelian anyons in a different way. Using the Honeywell 32-qubit H2 quantum processor, which holds ytterbium ions in an electromagnetic trap and alters their quantum states using lasers, they created a quasi-one-dimensional chain of interacting trapped-ion qubits.

Here, the anyons correspond to natural excitations of the ground state of the qubit system – which technically means they are not quasiparticles, since quasiparticles must be excited states. “The Majorana zero modes at the end of superconducting wires in the Microsoft experiment and the lattice defects in the Google experiment are non-Abelian defects,” emphasizes Ashvin Vishwanath of Harvard University, who collaborated with the Quantinuum team. “Unlike our experiment, they are not realized on top of true non-Abelian topological order.”

There is no doubt excitement in the market around what are bleeding edge technologies is heating up. Commentary on quantum computing’s growth rate several years ago was the first time I heard the term exponential exponential growth. Conventional exponential growth is explained as a doubling; 2,4,8,16,32…. Growing by exponents implies 2,4,16,256,65536… I’m not sure reality has kept up with those lofty goals but the pace of innovation is certainly impressive.
 

There isn’t a single reason for EV charger failures. Some of the problems, particularly with older machines, can be chalked up to a new technology going through the usual learning curve of improvements, all while sitting outside, exposed to the weather. There have been cycles of needed upgrades, such as replacing modems to deal with 5G wireless internet service. The myriad networks, retail outlets and garage owners who own the machines don’t always stay on top of maintenance. And chargers must communicate with a rapidly expanding variety of cars. 

To that end, the precise scope of the problem isn’t known. EV drivers face a complex landscape of competing charging companies, each with its own stations and app, and there is no central repository of data on station performance. One widely cited 2022 study of fast-charging stations in the San Francisco Bay Area (excluding Tesla Inc.’s Superchargers), found that about 25% of the 657 plugs weren’t working. While J.D. Power doesn’t disclose reliability rankings, Gruber said the worst-performing charging company leaves drivers unable to plug in about 39% of the time. 

“With public charging, it’s a bit of the wild, wild West,” he said.

Tesla proved that reliable charging is possible. The all-electric automaker runs a global network of 45,000 Superchargers, which can add up to 200 miles of range in just 15 minutes. Tesla consistently gets the highest customer-satisfaction marks of any charging company in J.D. Power’s surveys, Gruber said. Its drivers report charger downtime of just 3%.

But Tesla has the advantage of keeping everything in-house. Until recently, Superchargers could only be used by Tesla cars, and didn’t need to work with the growing array of other EVs and batteries. Tesla also owns its Supercharger network, whereas many of the public chargers installed over the past decade are owned by whoever owns the parking lot where they’re located. Such property owners, Gruber said, don’t have as strong an incentive to maintain their machines.

The challenge with developing a profitable EV market is margins are thin and the market is highly competitive. That suggests not every business model is likely to be successful. Constructing a charging network is capital intensive and the pay back is uncertain until the total penetration of EVs is known.

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As Parks dug into the details of the loans, he found something alarming: Clauses mandating that borrowing countries deposit U.S. dollars or other foreign currency in secret escrow accounts that Beijing could raid if those countries stopped paying interest on their loans.

In effect, China had jumped to the front of the line to get paid without other lenders knowing.

In Uganda, Parks revealed a loan to expand the main airport included an escrow account that could hold more than $15 million. A legislative probe blasted the finance minister for agreeing to such terms, with the lead investigator saying he should be prosecuted and jailed.

Parks is not sure how many such accounts have been set up, but governments insisting on any kind of collateral, much less collateral in the form of hard cash, is rare in sovereign lending. And their very existence has rattled non-Chinese banks, bond investors and other lenders and made them unwilling to accept less than they’re owed.

“The other creditors are saying, ‘We’re not going to offer anything if China is, in effect, at the head of the repayment line,’” Parks said. “It leads to paralysis. Everyone is sizing each other up and saying, ‘Am I going to be a chump here?’”

Loans as ‘currency exchanges’
Meanwhile, Beijing has taken on a new kind of hidden lending that has added to the confusion and distrust. Parks and others found that China’s central bank has effectively been lending tens of billions of dollars through what appear as ordinary foreign currency exchanges.

Foreign currency exchanges, called swaps, allow countries to essentially borrow more widely used currencies like the U.S. dollar to plug temporary shortages in foreign reserves. They are intended for liquidity purposes, not to build things, and last for only a few months.

But China’s swaps mimic loans by lasting years and charging higher-than-normal interest rates. And importantly, they don’t show up on the books as loans that would add to a country’s debt total.

Mongolia has taken out $1.8 billion annually in such swaps for years, an amount equivalent to 14% of its annual economic output. Pakistan has taken out nearly $3.6 billion annually for years and Laos $300 million.

The swaps can help stave off default by replenishing currency reserves, but they pile more loans on top of old ones and can make a collapse much worse, akin to what happened in the runup to 2009 financial crisis when U.S. banks kept offering ever-bigger mortgages to homeowners who couldn’t afford the first one.

Some poor countries struggling to repay China now find themselves stuck in a kind of loan limbo: China won’t budge in taking losses, and the IMF won’t offer low-interest loans if the money is just going to pay interest on Chinese debt.

For Chad and Ethiopia, it’s been more than a year since IMF rescue packages were approved in so-called staff-level agreements, but nearly all the money has been withheld as negotiations among its creditors drag on.

The G-7 meeting starts today in Japan and the BRICS Summit will be in August in South Africa. On one side we have the major developed countries getting together to talk about cooperation and how to counter Russia and China. On the other, are the world’s major population centres, where growth will be concentrated over the coming decades. They are suspicious of G7 motives and not least since the confiscation of Russia’s sovereign reserves and are also seeking cooperation but with one another. A major PR exercise is now underway to win hearts and minds in the emerging markets as geopolitical battles lines are drawn. 

For the first, virtually all of the S&P 500’s gain for the year (barring this week’s surge) can be traced to the 7.5% rally from March 13 to April 13, which took it from 3,856 to 4,146. This coincided with the creation and growth of the BTFP as well as an expansion of the Fed’s balance sheet in response to the collapse of SVB and Signature Bank. Whatever the official interest rates, money was available. As money is also fungible, it had a way of finding where it could make the best return. The Fed’s balance sheet grew roughly $400 billion to $8.73 trillion between March 1 and March 22 as it tried to contain the crisis. It currently stands at around $8.50 trillion.

For the second, there was a slide in the expected federal funds rate on the anticipation that the Fed would pivot (since largely reversed). As the rally started, the projected rate after next month’s Federal Open Market Committee meeting had just dropped from about 5.5% to about 4.7%. Coinciding with this was a “defrosting of credit markets” that saw investment-grade corporate spreads compressing almost 30 basis points from this year’s peak of 163 on March 15 — again a phenomenon that was likely helped by the BTFP and increased liquidity.

Liquidity is both global and mobile. It flows to the most attractive assets and has been the driving force behind the bull market since the Global Financial Crisis 15 years ago. $87 billion has been drawn down in the Fed’s Bank Term Funding Program. That’s mostly been from regional banks requiring supplementary capital. They are still sitting on losses with long-dated bond portfolios and that situation is not improving as yields remain stubbornly high.

Companies including Chevron Corp., Paramount Resources Ltd. and Crescent Point Energy Corp. also have announced shutdowns, and consultant Rystad Energy estimates that the equivalent of about 240,000 barrels of daily production — and perhaps more than 300,000 barrels — has been shut due to the fires. 

So far, the blazes have mostly struck the gas-producing region of western Alberta. But ConocoPhillips said on Wednesday that it evacuated and then returned non-essential workers to the Surmont oil-sands site because of a wildfire nearby. Surmont produced about 143,000 barrels a day in March. 

Conditions are expected to worsen heading into the weekend, raising the possibility of even more blazes, Christie Tucker, a spokeswoman for Alberta Wildfire, said during a media briefing Wednesday. 

“It will get hotter and drier as we head to the weekend, and as we’ve seen, that can lead to more active wildfire behavior,” she said.
 

The breaking of California’s drought has overshadowed the very dry conditions in much of the centre of the North American continent. This is very early in the season for wildfires to be such a problem in Alberta, and hard winter wheat is withering in states like Kansas. 

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: NVidia accelerating and AI stocks breaking out, bonds yields surge on issuance fears, Dollar firm, gold weak, Ex-US valuations attractive. China quiet, Japan breaking higher. 

BT Group Plc said it plans to cut its workforce by as many as 55,000 people by the end of the decade, after the UK’s biggest network operator completes its nationwide fiber-optic rollout. 

The company’s workforce will drop to 75,000 to 90,000 people by the fiscal year ending in March 2030 from about 130,000 currently, counting employees and contractors, the company said in its full-year earnings statement on Thursday. That’s a decline of about 42%.

Chief Executive Officer Philip Jansen is slashing costs at BT, fighting an industrywide slump as telecom carriers spend heavily on networks to keep up with surging data demand without a corresponding rise in revenues. On Tuesday, British rival Vodafone Group Plc announced plans to reduce headcount by 11,000 over the next three years. Jansen has pledged to cut expenses by £3 billion ($3.7 billion) a year by 2025 against 2020 levels, and has been weighing more dramatic job cuts since at least 2019. 

The build out of the fibre network is a medium-term labour intensive project. The significant volatility in headcount begs the question why BT did not outsource the work to begin with. Nevertheless, almost halving the number of workers is a significant cost saving at the same time as income is likely to flow from the higher value network. 

Dynatrace shares are up 5.9% in premarket trading, after the infrastructure-software company reported fourth-quarter results that beat expectations and gave a full-year forecast that is ahead of the analyst consensus.

Barclays (equal weight, PT $41)
Profitability metrics were “all nicely above consensus,” while the outlook seems conservative
“The results and guide provide ammunition for the bulls, suggesting stronger product/[go-to-market] execution and/or improving macro conditions”

The market environment has changed from worrying about a recession to the fervent belief that AI will both solve all of humanity's problems and ultimately result in our annihilation. The reality is any model is only as good as the data it is trained on. That gives a clear advantage to the data repositories.  

A temporary slowdown in inflation may give Egypt’s MPC room to pause, especially after Governor Hassan Abdalla signaled higher interest rates are doing little to cool prices.

The central bank “is likely to remain data-led, and will see declining global commodity prices and a reduction in domestic inflation as supportive of their current monetary stance,” said Farouk Soussa, an economist at Goldman Sachs Group Inc. The monetary authority sees inflationary pressures stoked mainly by supply issues, “reducing the rationale for a further hike in the medium term,” he said.

Emerging markets have no choice but to aggressively hike rates when inflation surges. They don’t have deep domestic capital markets and rely on offering a real rate of return to attract inward investment. Egypt’s year over year inflation has probably peaked at around 30% but with overnight rates closer to 18%, there are still sharply negative real rates. That’s the primary reason for the downtrend in the Egyptian Pound. 

One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.

 

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: USA CDS peak, stocks firm, bonds decline, banks firm, Yen weakens which supports nominal Nikkei performance, gold eases but stable, oil steadies. 

President Joe Biden expressed confidence that negotiators would reach an agreement to avoid a catastrophic default, even as House Speaker Kevin McCarthy criticized his decision to travel to Japan for an international summit.

“I’m confident that we’ll get the agreement on the budget and that America will not default,” Biden said Wednesday at the White House, shortly before departing to Hiroshima, Japan for a Group of Seven leaders summit.

On Capitol Hill, McCarthy and other Republican lawmakers criticized Biden for his decision to travel, with the House speaker labeling the president “a big obstacle” to an agreement.

“Mr. President, stop hiding, stop traveling,” McCarthy said.

On Tuesday, Biden and congressional leaders agreed to a new narrower round of staff-level talks with hopes of reaching a bipartisan deal to avoid an unprecedented US default. The US president also announced he was canceling planned stops in Australia and Papua New Guinea, and would return to Washington by the beginning of next week for continued negotiations.

The decision to attend the G7 meeting is a clear signal there are more important issues at stake than the inward facing decision about how spending and taxing priorities are apportioned. Holding the sovereign debt market to ransom is not the most productive use of anyone’s time but at least it ensures there is a discussion about the trajectory and sustainability of the national debt and obligations. 

Automakers are accelerating the substitution of platinum for pricier palladium in catalytic converters,
putting the market for the metal on track for a deficit for the first time in two years, according to Johnson Matthey Plc.

Demand from automakers will exceed 3 million ounces for the first time since 2018 as platinum is increasingly preferred over palladium, which will continue to see its usage decline, the firm wrote in a report on Monday. Both precious metals are used to cut emissions from car exhausts.

The car industry’s switch has taken years, but is finally having a sizeable impact on the fundamentals of platinum group metals. While palladium has traded at a premium to platinum since 2017, the gap has narrowed to near the smallest in more than four years.

“Just as substitution benefits platinum, it disadvantages palladium,” said Rupen Raithatha, market research director at Johnson Matthey. “These are all incremental trends.”

Investors are increasingly eyeing risks to platinum supplies from South Africa, the world’s top miner, as power blackouts threaten to cripple its output. So far, the country’s miners have limited the impact by idling processing plants, allowing mining to continue, though more severe outages could hit overall production, according to Johnson Matthey.

The firm sees platinum in a small deficit of 128,000 ounces in 2023, following two years of large surpluses. That compares to the record shortfall forecast by the World Platinum Investment Council.
 

Platinum took a leg lower as the diesel cheating scandal broke. That destroyed a major demand driver for the metal. In a normal environment, the massive disparity between palladium and platinum would have encouraged automakers to retool years ago. The reason that did not happen is they are devoting all their energy to building electric vehicle production capacity and do not envisage using as many catalytic converters in future.  

 “An important influence over the last year has been the closing of the IPO market,” Burns said in the statement. “We had fourteen companies go public in 2021 but as the IPO market closed in 2022 companies postponed their plans with no private holdings going public.” 

During the year the fund invested £281 million into private companies for follow-on investments as well as two new investments in UPSIDE Foods and Climeworks, Burns said. Private holdings made up 28.6% of the portfolio at March 31.

“We will continue to closely monitor the proportion of the company invested in private companies throughout the year recognising that the proportion can be volatile,” he added.

Scottish Mortgage is not the only fund to have to write down investments in private assets. The low interest rate, low inflation and abundant credit of the last decade allowed long duration assets like high growth, zero profit companies to expand rapidly. The right investment decision was to bet big on the private assets sector. The big mistake was to think the trend was immune to tightening credit conditions. 

A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics discussed include: Megacaps continue to outperform, Chinese growth doubts, copper rolling over, dollar strengthens, gold eases back below $2000, Brazil new fiscal rule, high yield weak. 

Brazilian lawmakers introduced changes to President Luiz Inacio Lula da Silva’s proposed spending rules to include automatic penalties in case the administration is unable to meet fiscal goals set in the bill.

The government would be forced to reduce spending in case revenue comes in below its estimates, including delaying some payments, freezing the salary of public workers and halting the hiring of new ones, according to the text of the bill released on Tuesday by lawmaker Claudio Cajado, the bill’s rapporteur.

“Party leaders’ reaction to the new text is very positive,” Cajado told reporters, adding that the plan is to take the bill to a floor vote on May 24. “We made room for different opinions and I hope there will be no more changes to the bill.”

The new fiscal framework proposed by Finance Minister Fernando Haddad includes small but growing primary budget surpluses, which don’t take into account interest payments, in order to stabilize public debt. It’s part of government efforts to assuage investors worried about Brazil’s finances under Lula and to help the central bank lower interest rates, considered by the president as the main impediment to growth.

Brazil was among the first to aggressively raise rates to ensure a positive real rate would counter inflationary pressures by sucking liquidity out of the economy.  Today that positive real rate stands at 9.57%. 

Codelco’s production is down by about a fifth from only six years ago. After a double-digit-percentage drop in 2022, it’s expected to fall as much as 7% this year, to 1.35 million metric tons.

Ore quality is deteriorating around the world as existing deposits are depleted and new ones are more difficult and costly to develop. “There’s no easy mining left—not in Chile nor the rest of the world,” said Sougarret at a shareholders meeting on May 2.

Because Codelco is the world’s biggest copper supplier, its production wobbles have greater impact on a market where warehouse inventories are near their lowest levels in 18 years. The company’s travails also have tremendous impact on Chile’s economy: Copper accounts for more than half of the country’s exports and a significant share of the government’s income. President Gabriel Boric’s administration is budgeting a 40% drop in tax revenue from Codelco in 2023 at a time when it’s trying to boost social spending.

When the world is having difficulty sustaining production of a key commodity, it is reasonable to expect prices to rise. That’s generally the best way to attract the risk capital required to bring new supply online. It will not have escaped the notice of traders that copper prices are falling. That suggests one should be more concerned with demand than supply. 

“One could characterize many of them as companies that have long needed to address their capital structures,” Damian Schaible, co-head of restructuring at law firm Davis Polk, said referring to the firms that filed in the last couple of days. “And there’s a bunch more on the horizon.”

The longer interest rates stay high, the greater the pressure on borrowers. That is true of both the corporate and sovereign sector. Low interest rates and abundant credit allowed a large number of highly leveraged companies to survive much longer than would have been expected under normal credit conditions. The primary question is in how well they extended maturities during the pandemic. 

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: Japan firm, Thailand weak, China rebounds, India banks breaking out, UK banks firm, US breadth narrows, soft commodities continue to firm on weaker dollar and adverse weather conditions. 

Turkey will hold a runoff election, with President Recep Tayyip Erdogan just failing to secure enough votes for a first-round victory.

The 69-year-old, looking to extend his two decades in power, will face Kemal Kilicdaroglu, 74, in another vote on May 28 after doing better than polls predicted.

Turkish stocks and bonds dropped, while the cost of insuring the government’s debt against a default spiked, as the results wrong-footed investors betting on a quick end to Erodogan’s unconventional economic policies, which include keeping interest rates well below the level of inflation.

“This is a major disappointment to investors hoping for a win for opposition candidate Kilicdaroglu and the reversion to orthodox economic policy he promised,” said Hasnain Malik, a strategist at Tellimer in Dubai.

Erdogan won 49.5% of the votes, while Kilicdaroglu secured just under 45%, with nearly all the ballots counted, Turkey’s High Election Board said on Monday. Another contender, Sinan Ogan, received 5.2% and was eliminated from the race.

Turkey has a population of 85 million and a median age of 33. It’s no longer a very young country and is stuck squarely in the middle income trap. Erdogan’s domestic policy of promoting Islamic nationalism and international policy of boosting the country’s regional footprint have gained geopolitical points but has also been expensive. 

Under a constitution promulgated in 2017, the military-appointed senators get to vote alongside the 500 elected lower house members to decide on the next prime minister. 

Political parties affiliated with Thaksin, 73, have won the most seats in every national vote dating back to 2001, only to be unseated from power by dissolutions or coups. 

Whether Thaksin’s planned return to Thailand in July will exacerbate tensions with the military elite is another question. The telecoms magnate has been living in self-imposed exile after fleeing to avoid prison over a corruption conviction that followed a coup that toppled his own government in 2006.

Thaksin Shinawatra’s plan to return to the land of smiles in July is certainly going to represent a flash point in democrats’ relationship with the military. Quashing the corruption charge could easily be a precondition for successful negotiation of a coalition agreement to form a civilian government. The challenge will be in how a new administration will further their aims, without running headlong into opposition from the military/royalty-aligned status quo. 

Li’s shock treatment paid off. In March, Sea reported the first quarterly profit in its 14-year history, $427 million in GAAP-sanctioned net income. Its stock soared 22%. Last week, it said it would hand out 5% raises to most staff. Sea has now more than doubled its market value since November.

Like so many tech startups of its generation, Sea had bled red ink for years. In fact, it lost more than $8 billion since its founding to pay for growth in its e-commerce, games and finance operations. For now at least, Sea is setting a different kind of example: It’s demonstrating that if your underlying business is sound and substantial, you can pull back on subsidies and expansions to break even.

That’s proving a challenge for rivals. Among Sea’s regional competitors, Singapore’s Grab Holdings Ltd. is still losing more than $300 million a quarter, while Indonesia’s GoTo Group’s losses exceed $250 million. Sea may also cause trouble for global tech giants like Alibaba Group Holding Ltd. and Amazon.com Inc., which are both seeking growth in emerging markets. 

“What you’re seeing is a separation of proper, monetizable business models from something that is a work-in-progress,” said Amit Kunal, managing partner of Growtheum Capital, a private equity firm in Singapore, speaking broadly about the tech industry. “Sea read the market much earlier, took appropriate steps — and delivered.”

In the Big Picture video on Friday I spent a good deal of time talking about the winnowing process currently underway in the high growth markets that dominated performance during the pandemic. Higher rates and tight credit mean tough decisions have to be made. Only the companies capable of both rising to that challenge and simultaneously making money are likely to survive. 

A link to this week's Big Picture Long-Term video 

Relations between South Africa and the US — its second-biggest trading partner after China — have soured over Pretoria’s insistence that it is taking a non-aligned stance toward Russia’s war in Ukraine. Even so, South Africa participated in naval exercises with Russia recently, while officials of the ruling African National Congress have expressed support for Russia’s invasion of Ukraine.

State Department spokesman Vedant Patel wouldn’t be drawn on whether the US would consider sanctions against South Africa should the arms claim prove true, but added during a regular State Department briefing Thursday that the US had “serious concerns” about a sanctioned Russian vessel docking in a South African port.

“The political stakes are high, with trade deals and market access all now in question,” economists at Rand Merchant Bank wrote in a client note. “This will add an additional layer of risk until the debate around this has cleared, and the rand should reflect that risk premium.”

Eskom’s challenge in keeping the lights on pales into insignificance relative to the threat of forcing countries to pick sides in the new geopolitical landscape. Selling arms to Russia is not exactly remaining unaligned. Of course South Africa could argue they are equally willing to sell arms to Ukraine. Nevertheless, from NATO’s perspective, depriving Russia of resources is essential to the path to ending the conflict so South Africa’s nonconformity is likely to be viewed very negatively. 

But it's not unfair to say that Google, which in April, according to data from SimilarWeb, hosted roughly 91 percent of all search traffic, is somewhat synonymous with, well, the internet. And the internet isn't just some ethereal, predetermined thing, as natural water or air. The internet is a marketplace, and Google is its kingmaker.

As such, the demo raises an extremely important question for the future of the already-ravaged journalism industry: if Google's AI is going to mulch up original work and provide a distilled version of it to users at scale, without ever connecting them to the original work, how will publishers continue to monetize their work?

Google has unveiled its vision for how it will incorporate AI into search," tweeted The Verge's James Vincent. "The quick answer: it's going to gobble up the open web and then summarize/rewrite/regurgitate it (pick the adjective that reflects your level of disquiet) in a shiny Google UI."

Google announced it would pay the New York Times $100 million over three years this week. That results from years of litigation that Google was giving away content that should have been paid for.

The advent of advanced large language models means computer programs can scour Twitter for titbits and write journalistic synopses just like most journalists. Several services like Buzzfeed and CNET have tried and failed to use AI for unsupervised article writing. 

At Ueda’s first policy meeting last month, board members discussed “patiently” maintaining easing, according to a summary of opinions released by the central bank Thursday. 

“Patiently” implies waiting for a condition to be fulfilled and contrasts with the previous wording of “persistently” keeping up with easing, a word that was used up until the March meeting, when the BOJ was still led by Ueda’s predecessor Haruhiko Kuroda.

Given that the original Japanese word remained unchanged, the change in English doesn’t suggest a major shift. It does however hint at Ueda’s intention of signaling a gradual move away from the Kuroda era. Some economists suggest that the change acknowledges a shift in Japan’s economic reality. 

Now that Japan has successfully got the inflation pressures they have chased for so long, they are not about to squander the opportunity to break the deflationary culture. The only way to end the deflationary spiral will be to force people to accelerate purchases by instilling fear they will end up paying more later. That’s not a quick process. 

A link to today's video commentary is posted in the Subcsriber's Area. 

Some of the topics discussed include: regional banks still under pressure in the US, copper breaks lower on slowing Chinese economic activity, Wall Street steady, dollar firm, silver downward dyamic. bonds firm. 

PacWest Bancorp reported a drop in deposits and Western Alliance Bancorp said its deposits grew, with investors continuing to scrutinize the levels amid tumult in the regional-banking industry.

Beverly Hills-based PacWest said in a regulatory filing Thursday that deposits fell 9.5% last week after Bloomberg News reported that the lender was in talks with potential investors. The bank didn’t specify its total deposit levels after the decline, but said it had total deposits of $28.2 billion as of March 31, and that it had immediately available liquidity of $15 billion as of May 10, exceeding uninsured deposits of $5.2 billion. Hours after the Bloomberg report last week, PacWest confirmed it was in talks with several potential investors.

An inverted yield forces banks to offer higher deposit rates because of competition from money markets funds. The current situation is somewhat different because many banks are sitting on big losses on their bond portfolios and are technically insolvent. Hoarding deposits is the only way they can ensure they keep their leverage ratios in check. That’s an expensive source of funding for banks when long-term rates are so low. 

Separately, data from the People’s Bank of China showed credit and new loans were much worse than expected in April as consumers and businesses curbed their borrowing.

“China’s credit data came in well below estimates, reinforcing the concerns over the sustainability of post-Covid recovery,” said Zhou Hao, chief economist at Guotai Junan International Holdings Ltd. Overall growth momentum “has been slowing significantly,” he said. 

Expectations of policy easing has been growing, and a “policy rate cut looks imminent in the second quarter,” he added.

China’s economic growth accelerated to a one-year high in the first quarter after pandemic restrictions were dropped, led by stronger consumers spending on travel and shopping. Recent data has been more mixed though, with manufacturing activity contracting in April and imports plunging.

China did not engage in the same pandemic spending as many western governments. That ensures inflation was kept under control. Instead they decided to use the pandemic as a means to curtail speculation in the housing sector which was the exact opposite of what happened in other countries. That has helped to keep government bond yields contained and the trend is still lower. 

The US dollar is on pace for its biggest rise in nearly two months as concerns about a slowing US economy, hawkish policy messaging, a US debt-ceiling standoff and the solvency of regional banks supported havens. The pound fell after the Bank of England lifted its policy rate 25 basis points and indicated more hikes may be required to slow inflation.

The dollar firmed today as more of risk-off move than any other factor. When investors seek the haven of cash they end up holding dollars. Bond yields also compressed as some of that cash was redeployed in the expectation that during a recession, inflationary pressures are likely to go into reverse. 

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Some of the topics discussed include: Australia banks weak on fight monetary and fiscal policy, India, Mexico firm, Dollar eases, gold pauses, cloud computing bets strengthen amid narrow breadth. 

“Unfortunately, the negative sentiment is dragging down the real estate sector more broadly,” the firm’s president, Connor Teskey, told investors during an earnings call Wednesday. “We think that’s completely unfair.” 

The Brookfield group is one of the world’s largest owners of prime office properties, with a portfolio that includes New York’s Manhattan West and London’s Canary Wharf. Office landlords in major cities around the world are being squeezed by a combination of higher borrowing costs and lower occupancy, as many companies continue to allow employees to work from home at least part of the time. 

Brookfield Asset’s parent company has defaulted on mortgages covering more than a dozen office buildings, mostly in Los Angeles and around Washington.

The property market is “bifurcated” as high-quality assets perform well and lower-quality assets struggle, Teskey said on the call. 

 

The durability of the work from home phenomenon will be tested by the upcoming recession. I’ve been working from home since 2007 and I can attest the better description is you live at work. However, the experience of entrepreneurial people versus those simply marking time is very different.  Flexible time arrangements are not appropriate for every position. Efficiency metrics will quickly be developed to decide whether the cost of a large office building is outweighed by the productivity gain for happier more flexible workers. 

As countries compete for capital, investors and developers have said aggressive subsidies like the US Inflation Reduction Act — which provides $374 billion in funding for clean energy — will be needed to attract the vast investment required.

The new measures are a “great first step,” Fortescue Metals Group Ltd. said in a statement on Wednesday. The Australian iron ore miner has ambitions to become one of the world’s biggest green hydrogen producers and plans to reach final investment decisions on five projects around the world this year.  

The announcement of significant investment in the green hydrogen sector comes hot on the heels of opening the Northern Territory to natural gas development. Regardless of how the global energy sector evolves Australia looks likely to be significant beneficiary. That also applies to coal exports for both steel and electricity generation. 

Significance: The generative AI revolution will transform how work gets done, making it exponentially easier for everyone to tap into immense troves of trusted data to do their jobs more efficiently. Nearly 80% of senior IT leaders believe generative AI will help their organization make better use of data — which business leaders agree is critical for decision-making. However, 41% say they can’t understand their data because it is too complex or not accessible enough, and one-third cite inability to generate insights from data as an issue for their organizations. 

Tableau GPT can generate visualizations for sales leaders based on natural language prompts that display real-time progress against their quota, along with recommendations for helping them meet goals. If average order value is decreasing, Tableau GPT can generate visuals for commerce leaders that provide insights as to why, alongside suggested solutions to resolve the problem. Or Tableau GPT can automatically create visualizations for service leaders that display changes in their teams’ CSAT scores, identify potential causes — such as a high-level of active tickets and longer response time — and offer up solutions.

What’s new: By bringing the power of generative AI to analytics, and combining it with unified, real-time data from Data Cloud, Tableau is empowering everyone to make smarter, faster, data-driven decisions.

Tableau GPT is a reimagining of Tableau and makes it easier for everyone to tap into generative AI to better understand and interact with their data in a trusted and secure way. Users can surface insights in a conversational way by simply asking questions within the console, which helps power smarter data experiences for analysts, consumers, admins, developers, and more.  

The productivity app sector is sensitive to the evolution of generative AI and large language models because they are most liable to be competed with my evolving chatbot technology. That’s certainly the ambition of newer AI companies like Pi. 

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Some of the topics discussed include: AI related stocks continue rebound, precious metals firm, oil steadies, long lead time for EVs in planes and China controls supply chains,

Today, AMD (NASDAQ:AMD) announced the "AMD Data Center and AI Technology Premiere," an in-person and livestreamed event to showcase the company's growth strategy and expanding product portfolio and capabilities for data center and AI. AMD Chair and CEO Dr. Lisa Su will be joined by other AMD executives and key customers to detail new products, and momentum across data center, AI, adaptive and high-performance computing solutions.  

Since the GPT chatbot reveal a few months ago Nvidia has been the go-to investment destination for traders looking for an AI proxy. The company is the leader in developing the kind of graphics cards required to parse image data for the AI sector. That has fuelled both a rebound in the semiconductor sector and a rush by companies to compete. 

The huge commitment to Boeing’s largest 737 variant marks an important endorsement from one of the US manufacturer’s most loyal customers and highlights how carriers are willing to splurge on fleet upgrades again as air travel rebounds. Ryanair said the deal —  the largest order ever placed by an Irish company for US manufactured goods — was more expensive than its current crop of 737 deliveries. 

“We paid more per seat but we’re still incredibly happy with the deal we’ve done,” Chief Executive Officer Michael O’Leary said at a news conference. “We think the extra seats give us the revenue-earning potential.”

Deliveries will start in 2027 and run through 2033. Ryanair said discussions surrounding the purchase started in January, and half the order is earmarked for replacement of older 737NG models while the other half is reserved for growth.

From Boeing’s perspective this is a big vote of confidence in the 737 Max. Considering several of the aircraft have fallen out of the sky, there was understandable reticence among customers to buy them.  Boeing is obviously hoping this order will mark a recovery for commercial aircraft sales. 

During a press briefing in Malaysia, the Russian captain of the vessel described the situation saying that he had discovered a fire amidship early afternoon on Monday. The initial discovery of smoke was followed by one or more loud explosions which he said shook the vessel, broke the windows, and rendered most of the communications systems inoperable.

“The fire on the upper deck destroyed our aerial, none of the communication equipment was functioning,” the captain told NST TV in Malaysia. “I had to use the walkie talkie …I finally got in touch with our engineer via the walkie talkie but by then all our safety boats were destroyed.” 

The captain said the desperate crew had gone into the water in their life jackets and luckily two ships were in the immediate area to assist with the rescue. He said in the confusion with the crew going in all directions it had been impossible for him to get a head count. He said the fire was also being spread by windy conditions.

The tankers carrying Russia oil around the world can’t be insured. That means the only ships anyone is willing to send on those journeys are decrepit and old. Most are probably on the verge of being scrapped. It is only a matter of time before one of these vessels sinks, with a full cargo onboard. That will create an international incident where no one will take responsibility and there will be no insurance cover. 

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Soime of the topics discussed include: bitcion pulls back on Binance woes, gold and oil steady, robusta coffee breaks out, sugar pausing, cocoa pressuring the upper side of a long-term range, China banks surge, platinum firms on South Africa electricity fears. 

With China’s reopening trade stalled, Chinese investors are betting on a pledge by Beijing to let state-owned firms have access to more capital and play a bigger role. New guidelines on bond sales by SOEs is seen as another step in the reform as President Xi Jinping reshapes the economy. The frenzied trading has also been attributed to moves by three nationwide lenders to cut deposit rates to boost profit margins. 

It’s a “valuation system with Chinese characteristics” story, said Willer Chen, a senior analyst at Forsyth Barr Asia Ltd. Some investors are also “seeing value in bank stocks because their valuation is cheap and dividend yields are attractive, despite the shrinking net interest margins and weak
Q1 results.”

For now, much of the gains may be driven by sentiment, rather than fundamentals. Chinese lenders posted a tepid set of first-quarter earnings as they faced deeper margin woes despite being sheltered from the recent global banking jitters. Analysts say the pressure may persist through the year as lending rates are lowered to revive the economy.

 

This is very defensive action from Chinese investors. The primary rationale for overweighting banks is the assumption that the government, through the state-owned enterprises (SOEs), is going to take a much more dominant position in the economy. That’s positive short-term but raises important questions about the welcome private enterprise will receive in China over coming years. 

These Bitcoin-based tokens are queuing up along with regular Bitcoin transactions to be processed by miners. One of the most popular such coins, which are also known as BRC 20 tokens, is Ordi. Its market capitalization has reached more than $500 million since its recent introduction. 

“The high network fees have been caused by the en-masse minting of BRC-20 token,” said Jaime Baeza, founder and managing partner at digital asset hedge fund ANB Investments.  Until recently, memecoins and NFT collections such as Bored Apes and CryptoPunks were predominately based on Ethereum and served as a catalyst that helped to make that platform the world’s most commercially important blockchain.

The introduction of the Lightning network last year was supposed to speed up transactions. It was also the innovation that enabled the creation of bitcoin offshoots which has boosted traffic across the bitcoin network over the last six months.

The creators of the add-on network obviously did not rely on their experience of meme popularity to build sufficient capacity. One of the biggest challenges to the claim bitcoin will eventually be a major vehicle of exchange is the inadequacy of the network capacity. The Lightning network was hailed as a solution to that problem and it is obviously not working. 

Platinum ETFs saw heavy buying at the end of April from South Africa based funds. Year-to-date regional inflows into platinum funds in South Africa (+333 koz) are the standout when compared to the US (-107 koz), the UK (-18 koz) and Switzerland (-17 koz). Net flows have been positive every month this year so far, as South African investors are more acutely aware of the electricity supply issues being faced by PGM producers. Total global holdings stand at 3.3 moz, up from 3.0 moz at the beginning of the year, although that was down 1 moz from the peak level of holdings in July 2021.

These investors bought into the recent price rally and hope for more. The platinum price had risen more than 20% since late February before the recent correction. Supply issues in South Africa (~75% of mined supply) are well documented. The regularity and severity of load-shedding in 2022 was unparalleled, with the situation unlikely to improve significantly during 2023. Load-shedding resulted in the build-up of above-ground stocks of unrefined PGMs last year and could lead to an estimated loss of ~250 koz of platinum production this year as the Southern Hemisphere winter begins to bite. Available first-quarter results of major South African PGM miners all cite load-shedding as impacting refined output to some degree.

Platinum prices went vertical during the last South African power cuts. That acceleration also marked the peak of the decade-long bull market as the global economy headed into the financial crisis in 2008.

At the time there was a lot of talk about platinum miners investing in their own generating capacity. The subsequent crash meant very few completed that work. The big decline in platinum prices following the diesel cheating scandal drove several platinum miners into bankruptcy. The recent issues with Eskom have revitalized talk of building solar and wind farms so operations can be independent of the utility. 

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Take not just Chile, with its revisions to fiscal policies for miners, but Peru, a country long considered crucial to the next wave of copper production, where the mining sector has been battered during lengthy social unrest. Rio in late March agreed to sell a controlling stake in its Peruvian mine La Granja to First Quantum.

“What the market never predicted was how difficult South America would become,” said Radclyffe. “The uncertainty out of both Chile and now ongoing in Peru, that’s just added an extra level of complexity that the market never expected, and that hasn’t really been resolved.”

The classic basis for a big bull market in commodities is supply inelasticity meets rising demand.

The promise of a big bull market in copper is heavy on the supply inelasticity argument. I think everyone understands, there is limited supply and sufficient increases to meet the expected demand from renewables is not feasible. 

The country has burned most of its international reserves and recently faced difficulties to pay for fuel imports. The central bank stopped publishing reserves data in early February, when they stood at about $3.5 billion, out of which $2.6 billion was gold, suggesting only the precious metal is left.

While the Arce administration says the ability to operate with its gold in markets will halt the “low liquidity” Bolivia is going through, opposition lawmakers criticized the bill by saying it’s not a structural solution to the current economic crisis.

Senator Silvia Salame called it a “patch” to allow Arce’s administration to stabilize the country’s situation until the 2025 presidential elections.

Finance Minister Marcelo Montenegro said the gold reserves will be replenished by buying the commodity from local producers
in bolivianos.

Bolivia is not a big holder of gold so that is unlikely to be behind today’s weakness. Instead the prospect of continued rises in the Fed Funds Rate, in response to a stronger than expected jobs report, takes that mantle. 

Eli Lilly is at the forefront of two of the pharmaceutical industry’s hottest fields, and it’s paying off for the Indianapolis company’s investors.

Over the past year, Lilly’s valuation has climbed nearly 50% to exceed $400 billion, a few percentage points’ swing away from eclipsing Johnson & Johnson as the world’s largest drugmaker by market capitalization. It’s worth nearly as much as Pfizer, Bristol Myers Squibb and Moderna combined, despite earning less than one-third as much revenue as J&J or Pfizer in 2022.

Lilly’s skyrocketing stock price is largely due to two drugs: the diabetes and weight loss treatment Mounjaro, and the experimental Alzheimer’s treatment donanemab. Investors and Wall Street analysts expect both to become blockbusters in large markets with few established competitors.

On Wednesday, results from a large clinical trial of donanemab in people with mild Alzheimer’s showed treatment slowed cognitive and physical decline by 35% versus a placebo, sending Lilly shares higher by nearly 7%. 

The best markets for pharmaceuticals are in chronic conditions. Two of the fastest growing, with unmet need, are obesity and Alzheimer’s. Both are a product of modern living with longer lives and easier access to high calorie intake. 

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Some of the topics discussed include: regional bank pain continues but short-term oversold, dollar steadies on ECB downshift, silver firm, stocks ease. 

In such a stressful scenario, some lenders have been trying to assuage investors — with little to no avail.

PacWest Bancorp tumbled 43% even after saying core deposits have increased since March and confirming it’s in talks with several potential investors. Western Alliance also pared losses, but was down 31% despite its denial that the firm is exploring strategic options including a possible sale of all or part of its business.

“Obviously a rough day today — we’re having the latest flare-up in what is slowly becoming a crisis of confidence in the regional-banking sector here in the United States,” said Jim Smigiel, chief investment officer at SEI. “We have recommended additional cash allocations out of equities for our clients.”

That said, Smigiel and a myriad of market observers don’t see the parallels being made in what we’re going through today versus the 2008 financial crisis.

“Some of the differences are obvious — that was a credit crisis, this is not a credit crisis,” he noted. “This is more of an asset-ability-management issue and, of course, some of the ancillary effects of hiking interest rates 500 basis points in a very, very short period of time. But it doesn’t take away from the fact that this is the market testing the weakest hands in the sector and really continuing to do that as we’re seeing today.”

Jay Powell’s statement yesterday, that he sees a line being drawn under the banking crisis, sounds tone deaf today. The mismatches between the draw-down in “safe” assets versus the pressure from tightening credit conditions, and the future of higher loan loss provisions, continue to plague the banking sector. 

Finally, the Department of Defense should, as Julia van der Colff argued in these pages, consider rapidly fielding “second tier” precision munitions that take advantage of existing technologies to provide large quantities of minimum-capability weapons at reduced costs. Next-generation stealth, sensor, and precision capabilities are key to competing with China in the long run, but these simpler munitions could be more easily (and cheaply) produced in the volumes necessitated by great-power conflict. Combined with unmanned munitions carriers and teamed with manned strike platforms, second-tier weapons could be essential to providing the volume of effects required by these other concepts. As Russia’s use of Iranian drones in Ukraine has shown, not every target requires an exquisite precision munition. Unlike ventilators during the COVID-19 pandemic, the Department of Defense should not wait until a crisis to explore and test these designs.

The large-scale war in Ukraine has completely upended the procurement calculus for NATO. The “less is more” focus on high tech precision strikes is giving way to the acceptance that sometimes dumb weapons just need to hit in the vicinity of a target. 

Molson Coors cited marketing initiatives as one reason for its strong Q1 results in a company blog post. A strong premionization program is named as another highlight.

The alcohol company’s Q1 sales grew 5.9%, its eighth consecutive quarter of growth, for a total of $2.35 billion. On a call with analysts, executives said the company will increase marketing investments this year compared to 2022 to support further growth.

Core brands Coors Light and Miller Lite each saw double-digit revenue growth in the first quarter, with executives saying that the brands benefited from a Super Bowl ad campaign, the company’s first in 30 years. Independent research shows the positive sales trend for these brands is accelerating in Q2 while a major competitor, Bud Light, takes a big sales hit.

The controversy around Bud Light’s marketing campaign hit earnings by 1% in less than three weeks and the company is in full damage control mode. On my trip to London last week, I saw at least three different locations giving Bud Light away for free. The share posted an upside key reversal today to confirm near-term support, which suggests investors don’t see lasting damage from the negative reception of its ad campaign.  

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Some of the topics discussed include: Fed lifts rates and possibly paused but not cuts soon. Treasury yields decline, stocks and dollar weak, gold firm, oil extends decline, AI discussion on technological acceleration versus the interest rate cycle. 

Instead, the FOMC will take into account various factors “in determining the extent to which additional policy firming may be appropriate.”

“That’s a meaningful change that we’re no longer saying that we anticipate” further increases, Chair Jerome Powell said at a press conference after the decision, when asked whether the statement is a signal that officials are prepared to pause rate increases in June. “So we’ll be driven by incoming data, meeting by meeting, and we’ll approach that question at the June meeting.”

The increase lifted the Fed’s benchmark federal funds rate to a target range of 5% to 5.25%, the highest level since 2007, up from nearly zero early last year. The vote was unanimous, and Powell said support for the 25 basis-point rate increase was “very strong across the board.”

Whether that rate will prove to be high enough to bring inflation back to the Fed’s 2% target will be an “ongoing assessment” based on incoming data, Powell said, adding later that Fed officials’ outlook for inflation does not support rate cuts.

The Fed Funds Rate is now at the same level it was between 2006 and early 2008. The big takeaway from today’s press conference was they have no intention of cutting even if they are potentially pausing with the hiking program.

Powell appeared bemused that unemployment had not already jumped higher. That’s based on historical precedence when rates have gone up some quickly and other forms of credit have tightened. He continues to express hope a recession will be avoided but the reality is the longer high rates are sustained, the more likely a recession becomes. 

Researchers have long noted that artificial neural networks take much more time to absorb and apply new knowledge than people do, since training them requires tremendous amounts of both energy and data. That's no longer the case, Hinton argues, noting that systems like GPT-4 can learn new things very quickly once properly trained by researchers. That's not unlike the way a trained professional physicist can wrap her brain around new experimental findings much more quickly than a typical high school science student could.

That leads Hinton to the conclusion that AI systems might already be outsmarting us. Not only can AI systems learn things faster, he notes, they can also share copies of their knowledge with each other almost instantly.

“It’s a completely different form of intelligence,” he told the publication. “A new and better form of intelligence.”

I attended Hinton’s presentation at the EmTech Digital conference today. He expressed a great deal of caution about the evolution of AI while also saying that the reasoning capability necessary for outright competition with human thought is not yet in place. He is worried about the fact that when one model learns, every model can transfer the knowledge instantly and therefore the rate of improvement can only accelerate. Taken to a logical conclusion, the ability of AI models will eventually exceed the ability of the human mind. 

Scientists warned about the potential climate impact of shale gas production in Australia’s Northern Territory as the region — which had previously banned fracking — confirmed it will allow developers to seek approvals for projects.

The territory aims to exploit a sub-basin estimated to hold about 100 times Australia’s existing natural gas production after implementing a series of recommendations made when it lifted curbs on hydraulic fracturing in 2018.

“Our highly prospective onshore gas resources will support our energy security during the transition to renewables — and will improve living standards for all Territorians,” the region’s Chief Minister Natasha Fyles said in a statement. 

Development of onshore gas projects in the region — twice the size of Texas and with a population of less than 250,000 — has been a hugely contentious issue in Australia for years, pitting climate campaigners against resources companies that argue new local production is required to meet domestic energy demand. 

Prime Minister Anthony Albanese’s national government, which took office last year, has legislated more stringent emissions reduction targets, though also backs the role of gas in the nation’s energy mix, vowing to protect consumers from supply shortfalls.

Industry estimates suggest that the flagship Beetaloo Sub-basin alone could hold about 500 trillion cubic feet of gas, according to the Northern Territory government — more than three times annual global consumption and a quarter more than all proved US shale gas reserves. It’s part of an even larger basin called McArthur. 
 

Natural gas is a pollutant. There is no argument with that. However there is no point talking about emissions with blinkers on. The impact of natural gas emissions from combined cycle power plants is a fraction of what is being emitted by coal fired plants. The hard reality is if the developed world bends over backwards to achieve carbon neutrality, the growth in emissions from the developing world will mean it is all for nothing. 

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Some of the topics discussed include: AI winners and losers, techology versus interest rate cycles, oil and copper weak, Treasuries and gold firm, Wall Street pares losses in late trade but recession risks rising as banks break lower. 

Chegg Inc. tumbles as much as 48%, its biggest drop since November 2021, after the online educational services company warned that ChatGPT was threatening growth of its homework-help services, making it one of the first companies to highlight generative AI’s negative impact on business. Jefferies cut the recommendation on the stock to hold from buy, saying the AI overhang is starting to impact fundamentals. 

I’m attending the MIT Technology Review Emerging EMTech Digital conference at present. There have been some very interesting and educative presentations. The consensus is generative AI models are an innovation on the scale of the steam engine.

With that as a background, the law of jungle is clearly in effect. Microsoft is in full move “fast and break things” mode. Other companies are playing catch up and some are trying to be measured in how they consider ethics and bias. There is a widespread acceptance that the sector would not exist without Meta’s decision several years ago to open source its data. 

Vacancies at US employers fell in March by more than forecast and layoffs jumped, indicating softening demand for workers.

The number of available positions decreased for a third-straight month to 9.59 million from nearly 10 million a month earlier, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Tuesday. That was the lowest in nearly two years and fell short of the median estimate in a Bloomberg survey of economists.

The data point to a gradual moderation in labor demand, which should eventually bring the job market into better balance and alleviate upward pressure on wages. While some companies — notably in technology and finance — have cut employees, the labor market as a whole remains resilient and has been a stalwart between the US and recession.

We are a year into the hiking cycle, so it is reasonable to see some evidence of economic slowdown around now. The stress in the banking sector is mostly focused on the convexity of bond portfolios. Loan loss provisions have not been factored in yet but that is only going to make the situation worse. JPMorgan has a big balance sheet, but it can’t buy every bank. 

“The market is an investor desert,” said Scott Shelton, an energy specialist at ICAP. “The fundamental information that generates predictable price action doesn’t exist.”

Adding to the bearish sentiment, vacancies at US employers fell to an almost two-year low in March, a fresh sign of a softening labor market. Activity in China’s export-tilted manufacturing sector missed estimates in April, a possible sign of a recession among customers in the US and Europe. And Iranian Oil Minister Javad Owji said the country has increased output to more than 3 million barrels a day, providing additional supplies to the market.

“It’s going to take some evidence in the physical market on the tightening we see in our balances before we see any more positive or committed trading activity,” Emily Ashford, an energy analyst at Standard Chartered Bank, said by phone. 

OPEC+ have been proactive in attempting to curtail supply to meet declining demand. There are big outstanding questions about how sustainable that policy is against a background of competing priorities inside the cartel and economic weakness among the biggest customers. Keeping supply and demand in balance is only going to become more difficult. 

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The central bank also called for a long-term review of its policies and issued new price forecasts that show inflation below 2% again in the fiscal year ending March 2026. 

The decision to keep stimulus in place in pursuit of stronger inflation keeps the BOJ in a very different place to its price-fighting global peers for now. 

While the wave of policy tightening around the world to weaken inflation appears close to peaking, the Federal Reserve still looks set to push up borrowing costs further when it meets next week.

That possibility still seems a long way off for the BOJ, given a reiterated commitment in Friday’s statement to continue easing with yield curve control.  Still, Ueda later clarified that policy could be changed including a normalization during the review process.

“We’re not starting the review with the aim of normalizing,” Ueda said. “But it’s not zero chance we begin normalizing during the review period.”

For now, the risk of a premature tightening move stopping the BOJ from achieving its price target is greater than the cost of a delayed move, he said.

 

The message from the BoJ is clear. They are not going to begin normalising policy until they are certain deflationary forces have been banished. That could entail waiting until inflation returns to trend internationally so they have a benchmark to compare against. 

US officials are coordinating talks to rescue First Republic, with the Federal Deposit Insurance Corp., the Treasury Department and Federal Reserve orchestrating meetings about throwing a lifeline, Reuters reported, citing unidentified people. 

But some of the biggest US banks, which have already contributed $30 billion in deposits to prop up First Republic, have balked at getting more involved and potentially throwing good money after bad, Bloomberg News reported. 

The focus has shifted to a US takeover, according to CNBC. For its part, First Republic has acknowledged it’s engaged in discussions with multiple parties about strategic options.

It is very likely today is First Republic’s last day of active trading. Trading was halted on several occasions today as the stock plunged anew. By the end of the weekend a deal will have been completed for a large bank like JPMorgan to take it over. 

“This is a solid report, showing a resilient economy on the back of supportive remittances, rising exports, and improving labor conditions,” said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. “We expect economic activity to be more resilient than in previous cycles.”

The economy’s accelerating growth gives some pause to economists who’ve predicted that the country is headed for a contraction later in the year, due to the expected downturn in the US, Mexico’s biggest trading partner. Part of the surprise is the boost from the domestic market, which has contributed especially to the revival of the services sector, after it plunged earlier during the pandemic.

The Mexican peso erased earlier losses and strengthened as much as 0.3% after the first quarter release.

Mexico is likely to be one of the primary beneficiaries of the reorientation of supply chains as geopolitical tensions between the OECD and China intensify. The prospect of exporting LNG to Europe and the potential for domestic lithium to be used for battery manufacturing and exports is a key reason for optimism about the potential for economic growth. 

A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics discussed include: inflationary boom, lower growth, higher inflation and risk on. FANGMAN outperforming on narrowing breadth, gold stable, bitcoin surges, non-US markets breaking higher. 

The outlook depends largely on the resiliency of the job market. Low unemployment and persistent wage gains have so far allowed consumers to weather high inflation and keep spending.

The personal consumption expenditures price index grew at an 4.2% annualized pace in the January to March period. Excluding food and energy, the index rose 4.9%, faster than forecast and the most in a year. March data will be released Friday. Services inflation remained hot while prices of non-durable goods accelerated.

The inflation and consumer spending figures likely keep the Fed on track to raise interest rates by a quarter percentage point next week. First Republic Bank’s continuing struggles, however, do raise the possibility that the central bank could pause.

Consumer demand surged in the early part of the first quarter and eased back in the later part of the quarter. At the same time economic growth eased and inflation increased. 

During the call the chain's chief financial officer, Ian Borden, explained just how well that has worked.

"MyMcDonald's Rewards is yet another example of how we've tapped into our marketing engine to deploy our loyalty platform throughout the system," the executive said.

"Now in 50 markets, loyalty is building even stronger relationships with our customers, and the results continue to shine. In our top six markets, digital sales now represent almost 40% of systemwide sales, or nearly $7.5 billion, growth of more than 30% over the last year."

McDonald's' digital-membership numbers are particularly strong when you compare them with Starbucks, the company generally considered the pioneer of app-based loyalty rewards programs and mobile order and pay.

Starbucks, which reports only U.S. loyalty program members, ended its most-recent quarter with more than 30 million active rewards members.

Across its top six markets, McDonald's has an even bigger membership base.

Anything that gives consumers the impression they are saving money is going to be a benefit in an inflationary period. The reliability of fast-food revenue and the constancy of dividend growth is supporting their shares. 

Cboe Global Markets Inc., the Chicago-based exchange operator behind the VIX, has announced that a new one-day version of its flagship volatility index is poised to launch. The Cboe 1-Day Volatility Index (ticker VIX1D) is scheduled to start Monday, according to a notice on Cboe’s website. 

If it succeeds in capturing the sentiment embedded in in 0DTE options, it could mark a significant moment for investors and traders across the spectrum.

“This makes sense because so much of the volume has moved to shorter tenors,” said Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets. “I’ve been joking that the VIX is going through a mid-life crisis, being replaced by someone younger (shorter dates).”

There is already some evidence that nearer-term options have been flashing more stress than the VIX. Cboe offers a nine-day version of the gauge (VIX9D), which has regularly traded at higher levels than the VIX this year. 

The jump in demand for zero day options has been a major factor in the surge in intraday trading activity this year. That’s resulted in the 90-day VIX calculation not reflecting the volatility of where the majority of volume is traded. The new 1-day VIX and 9-day VIX measures are aimed at remedying that disparity. 

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: oil and copper extend drawdowns, gols stable, dollar weak, Wall Street weak as pressure mounts on the banking sector, HK steadies, ASX somewhat overbought, orange juice potentially peaking. 

As a HK subscriber to your excellent service, I like to give a few on the grounds observations. In my view, the reason why LVMH is making the shift is 1) China opened Hainan tax free shopping and Shenzhen also exploring the same makes shopping high end products less unfavorable in the mainland. 2) Chinese tourist since reopening find HK less attractive relatively for tourism than before.

On HK becoming just another Chinese city, on recent trip to UK, found some general public perception of HK over the last few years seriously incorrect, I suppose due to the sensational and misleading journalism on HK from the press in the west. While there are changes in HK in last few years, that it is becoming another Chinese city I think is very much misplaced.

On the HKD peg, from what I heard from current and prior HK central bank chiefs and top officials from PRC, there is no desire or rationale to change the peg for the foreseeable future. Also that HKD in circulation is back by about 5X USD reserve and that the peg is setup unilaterally by HK, risk of interference by US due to geopolitical concern is low.

Thank you for this generous and insightful email and your kind words. The efforts underway to boost the international credentials of Shenzhen, Guangzhou, Macau and Hong Kong to create a “Bay Area” innovation hub to rival Silicon Valley were the stated government policy ahead of the pandemic 

Will they be a conflagration risk?

Thank you for this question, which was in reference to the announcement CATL is prototyping a battery capable of powering airplanes. The fire risk from lithium batteries comes from the liquid catalyst. Since solid state batteries do not have a liquid electrolyte they are inherently safer. The new CATL battery is not exactly a solid state battery so it is impossible to know at this stage what the fire risk is. 

Dear Eoin, Why do you think the Uranium Miners ETF you have been holding has been disappointing of late? Is it all about "risk-off" and withdrawal of liquidity from the market? What makes you continue to hold? What would make you sell? Thanks! Kind regards, 

Thank you for this question. I don’t see how the promise of electrifying the economy is possible without a nuclear renaissance. The fact the sector is not performing better suggests the critical mass of support for the industry is not yet mature enough. Significant resources are being ploughed into the small modular reactor sector but the lead times are long and there is not enough urgency to ignite investor interest in the short term. That’s why I believe it is underperforming at present. 

Dear Eoin-Hope you are doing well. You often mention in your daily videos that you expect a recession within the next 18 months and that you also expect gold to move considerably higher in a not too distant future. If I am not mistaken in the previous recessions gold went down considerably. I know timing is always very difficult if not impossible, but do you expect gold to break upwards before the recession or after the recession. As always thanks very much for your wonderful service. Best rgds

Thank you for this important question. Gold began its bull market in 2000/01 when the Nasdaq was topping but it collapsed in 2008 during the credit crisis as contagion selling forced investors to sell anything they had a profit in. That suggests gold need not collapse during a recession but it will depend on how tight credit conditions become and how heavily positioned investors are in precious metals. 

When I see/read that Glaxo's shares have been ranging for 20 years, I can't help but be reminded by your service's maxim that, ranges are explosions waiting to happen." After 20 years, one must wonder when and in what direction will we see the explosion?

Thank you for this topical question. Glaxo has been a highly innovative company and yet the share has been locked in a lengthy and volatile range for decades. That suggests the innovations that drove the original bull market and funded the M&A activity that created GlaxoSmithKline are priced in.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: Regional banks break lower, Advance-Decline lower but tech stocks rally on strong Microsoft and Google earnings, China weak on removing stimulus

Aggregate hours worked in the private sector declined in February and declined again in March. Last week we walked through why we estimate the labor market has come back into alignment over the course of the last year. We also note that for all the talk of labor hoarding, filings of initial claims for unemployment insurance over the last four weeks have run higher than all of 2019 and most of 2018. Layoff announcements have been running above the post-GFC pace. Clearly some employers are laying off.

In our economic baseline, we assume the labor market carves out a peak this summer, and we pencilled in the July employment report as the time we expect the first negative payroll print. We'll see. However, our empirical models are moving that way. In the recent compendium (on page 17 at this link) , a leading indicator model developed by UBS's Pierre Lafourcade noted that a rising share were in contraction (defined as having passed a cyclical peak), and the same for a broader set of employment indicators that reflect labor market conditions.

"Historically, once roughly 50% of all series contract, payrolls go negative (which is intuitive), but it's the leading indicator bucket that tells you when that is likely to happen (it shoots up from 40% to 80% of series contracting in just a few months). The upshot is that while private non-farm employment is still growing, an increasing share of the underlying dynamics is turning sour," he wrote in the compendium in late March.

The big question for all investors is the rationale for raising rates. The answer to that question will inform the decision on how much they will cut rates during a downturn and how long rates will stay down before tightening resumes.

I see four scenarios: 

With China’s economic recovery well on track, top leaders will likely turn their policy focus now to boosting business confidence, increasing jobs and strengthening the property market without adding extra stimulus.

And

The People’s Bank of China has already signaled it will begin dialing back the pandemic stimulus used to funnel loans to small businesses in recent years. Local governments are also saddled with record amounts of debt, reducing their capacity to increase fiscal support.

“The People’s Bank of China could switch to a wait-and-see mode once the economy is back on track, and prepare for policy normalization,” said Yu Xiangrong, chief China economist of Citigroup Inc. 

The one thing investors are paying attention to is China’s willingness to inject liquidity into the economy. Capital is both global and mobile and China’s willingness to flood the market with liquidity after the credit crisis helped to re-float the global economy. This time around China is more interested in keeping inflationary pressures contained and avoiding reflating the housing bubble. That suggest much more targeting economic support.

Climate finance is likely to be a focus of December’s COP28 meeting in the United Arab Emirates, with the oil-exporting host saying it will address ways to fund the energy transition in poorer countries that simultaneously need to expand access to electricity. That adds pressure on industrialized nations and oil producers to step up. 

While Vietnam’s $15.5 billion and Indonesia’s $20 billion planned JETP agreements are at an earlier stage, they’re also much bigger and potentially more complex. A smaller deal envisaged with Senegal is complicated by its plan to start producing gas.

“We could have done an amazing, amazing model right here in South Africa,” said Tasneem Essop, executive director of Climate Action Network International, which represents over 1,900 climate-focused organizations in more than 130 countries. But “we got embroiled in the politics of it all.”

Coal might be dirty, but it is cheap, reliable, many countries have domestic supplies, plants can rapidly be constructed and last for decades. That’s hard to compete with. The unspoken drawback of forcing developing countries to abandon coal is higher electricity usage is a major contributor to higher standards of living.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: stocks ease, dollar and gold firm as dollar eases. China pulled back from 200-day MA. 10-yr Treasury contracts

Tech stocks in the S&P 500 are trading at almost 25 times prospective earnings. To justify such a multiple, the Fed would need to cut rates by at least 300 basis points, data compiled by Bloomberg Intelligence show. That’s more than five times what the swaps market is pricing in for rate cuts this year. 

“Traders are betting on a big about-face in the Fed’s interest-rate policy, but there is no certainty as to whether, and when, this will happen,” said Quincy Krosby, chief global strategist at LPL Financial. “Longer-term, the sector’s growth prospects are attractive, but not at the current valuations.” 

A bleak earnings outlook for tech companies supports the skepticism. Analysts expect a 15% slump in the sector’s first-quarter profits — the third-largest decline among the S&P 500’s 11 industry groups, data compiled by Bloomberg Intelligence show.

The most fervent hope of investors is we are going back to the good old days of permanently low interest rates, where the There Is No Alternative (TINA) market persists indefinitely. The challenge is that inflationary pressures are still conspicuously firm. If the Fed cuts rates by 300 basis points, which I believe is likely, that will be in response to a significant growth shock. Technology earnings are unlikely to be immune to that kind of development.

“Italy is stuck between a rock and a hard place, and what to do with the cooperation pact is a real diplomatic conundrum for Meloni,” Francesca Ghiretti, an analyst at the Mercator Institute for China Studies research firm, said in an interview.

“Renewing it would send a very difficult message to Washington, but not renewing it would put a strain in relations with China.”

With US-China relations deteriorating, Beijing is looking to prevent Europe from following Washington, particularly on measures like export controls of key technologies. The EU is struggling to balance a desire to engage with China on trade and investment with resisting economic coercion.

Memoranda of Understanding (MOUs) are not worth the paper they are written on. More often than not, they are an opportunity for politicians to stand around congratulating one another and make for good headlines. Concrete efforts to follow through on these photo opps is a lot more difficult. That’s exactly where Italy’s MoU on the Belt and Road Initiative sits. It is about to expire but nothing has been done to further it since it was signed. Nevertheless, refusing to re-sign is a PR mess.

Haleon was demerged last July in the largest London stock market listing in more than a decade. It is the first listed company to be focused purely on consumer health and its product portfolio spans oral and respiratory health, digestive health, pain relief and vitamins, minerals and supplements.

In an update, it said that sales within its respiratory health unit had jumped by 39 per cent to £510 million in the first quarter to March 31. Oral health sales rose by 9.4 per cent to £811 million, pain relief sales increased by 14 per cent to £724 million and sales of digestive health and other products climbed by 11.9 per cent to £536 million. Only its sales of vitamins, minerals and supplements were flat, at £405 million, leaving total revenue for the quarter up 13.7 per cent at £2.99 billion.

Haleon said the pressure on its vitamins, minerals and supplements unit was “largely” because of a strong quarter for its Emergen-C supplement brand during the coronavirus wave in early 2022. Sales had risen at a double-digit pace in Europe, the Middle East and Asia, Latin America and Asia Pacific, it said. Trading in the Asia Pacific region had been boosted “by strength in China, particularly in pain relief as lockdowns ended, combined with elevated Covid-19 and cold and flu incidence”.

Several years ago a delegate at The Chart Seminar recounted how his family had the rights to import and sell several large international brands in Peru. He said it was clear from the pattern of sales that the commodity boom was ending in 2011. He also said that during the years when the Dollar was weak, demand for premium imported brands surged.

A link to this week's Big Picture Long-Term video is posted in the Subscriber's Area. 

Mortgage industry specialists say homebuyers with credit scores of 680 or higher will pay, for example, about $40 per month more on a home loan of $400,000. Homebuyers who make down payments of 15% to 20% will get socked with the largest fees.

The new fees will apply only to Americans buying houses or refinancing after May 1.

Lenders and real estate agents say the changes will frustrate homebuyers with high credit scores and homeowners seeking to refinance because the rule punishes them for their relatively strong financial positions.

“The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well,” Ian Wright, a senior loan officer at Bay Equity Home Loans in the San Francisco Bay Area, told The Washington Times in an email message. “It overcomplicates things for consumers during a process that can already feel overwhelming with the amount of paperwork, jargon, etc. Confusing the borrower is never a good thing.”

When I first saw this news item, I thought it was a joke. However, it does appear to be true that people with better credit will be penalised for doing better in life.

There is a significant subset of the investment community that believes governments will engage in massive building programs to revitalise infrastructure. Forgive me for scepticism. The “vision thing” is sadly lacking in most countries. 

Psychiatric medications are a crucial part of treatment for many mental health conditions, helping to ease symptoms and boost mental well-being. But there are some more commonly prescribed.

Mental health conditions are complex. Just one medication will help in some cases. Other times, you might try a few different medications before finding the right one or even need more than one medication.

Psychiatric medications are an important part of many people’s treatment plans, including therapy and other strategies. While they can’t cure your mental health condition, they can help manage your symptoms.

The pharmaceutical industry thrives on chronic conditions. That’s why some of the most successful companies cater to diabetes or why Viagra was such a big hit. The pandemic has seen an explosion in the number of people seeking mental health solutions. It is now much more socially acceptable to talk about mental health and to a certain extent is faddish on social media. That suggests a growth market. I took the list of medications in the above article and traced down the parent companies. 

LVMH is shifting resources out of Hong Kong, reflecting waning interest in what used to be Asia’s premium shopping hub as mainland Chinese consumers switch to shopping at home.

The top global luxury conglomerate wants to focus more of its investment in burgeoning metropolises such as Shanghai, Chengdu, Guangzhou and Shenzhen as Hong Kong loses its relevance in the Greater China region, according to people familiar with the matter, who asked not to be identified discussing private deliberations. 

To that end, it’s already moved the regional headquarters of some brands, including the group’s local head office, to Shanghai, and relocated some senior executives to the mainland, the people said.

The question Hong Kong has to answer is why? The gateway to China rationale is wearing thin as the mainland deals easily with most of its counterparties and expertise is migrating to other cities. The fear of Hong Kong becoming “just” another Chinese city was at the centre of concern about the security law a couple of years ago and the reality is now coming to fruition. Greater geopolitical tension between China and the developed world is not good news for Hong Kong exceptionalism. 

A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics discussed include: CATL new battery, copper and oil weaker, Tesla breaking lower, Indian rupee remains weak, efforts to contain inflation have been all carrot and no stick so far. that could easily change. 

China’s Contemporary Amperex Technology Co. Ltd., known as CATL, unveiled its strongest battery to date Wednesday, saying that it could one day be used to power electric aircraft.  

The battery, which loads more power into a smaller package, has an energy density of 500 watt-hours per kilogram, CATL’s Chief Scientist Wu Kai said during a presentation at the Shanghai auto show. CATL’s most recent battery, called Qilin, has an energy density of 255 Wh/kg and can power an electric vehicle for 1,000 kilometers (620 miles) on one charge. 

The technology, which CATL calls a condensed state battery, is potentially a breakthrough that will help electrify sectors wed to fossil fuels because existing batteries are either too heavy or unsafe. Still, questions remain about the materials it will use, its cost and ultimate market impact.
 

CATL has a strong record of leading the way in both scale of manufacturing batteries and innovating on design. The Qilin battery sounded too good to be true when it was announced eighteen months ago but it is going into mass production this year. If China successfully puts a battery in the market with the promised characteristics of a solid state battery it would be a significant technological coup akin to the impact of the iPhone on legacy mobile phone manufacturers. 

Over the period to 2040, India will likely add 270 million people to its urban population, according to the International Energy Authority.

The shift is already on display in India’s megacities. Shiny new apartment buildings dot the capital Delhi as the newly wealthy ramp up realty investments. A top developer recently sold $1 billion of luxury homes in three days in Gurugram, one of Delhi’s satellite cities.

But public services are still poor — India’s Supreme Court has even warned that air traffic controllers might be forced to steer planes around the massive garbage dumps on Delhi’s outskirts if they get any bigger. 

Even small improvements in the quality of infrastructure can have a meaningful impact on productivity when the size of the Indian population is taken into account. One of the primary measures of success on that front will be the balance of trade. Since early 2021, the trade deficit has expanded from $100 to $283 billion. The only way that is going to change is if India begins to export finished products in serious volume.