The Columbia Journalism Review (CJR) has issued a scathing indictment of the New York Times for yellow journalism during the Trump-Russia saga.
In short, the hyper-partisan 'paper of record' was operating in bad faith.
It's wasn't just the Times either. CJR's findings accurately reflect what most objective thinkers have known this whole time - they were all operating in bad faith.
The @CJR review of post-2016 reporting is long, but important.
The TL;DR conclusion:
corpo media knowingly suppressed facts that cut against popular narratives,
ignored denials,
eagerly laundered partisan attacks via "anonymous sources,"
That said, CJR aimed the majority of criticism towards the NYT.
"No narrative did more to shape Trump’s relations with the press than Russiagate. The story, which included the Steele dossier and the Mueller report among other totemic moments, resulted in Pulitzer Prizes as well as embarrassing retractions and damaged careers," wrote CJR executive editor Kype Pope in an editor's note.
The findings were published in a lengthy, four-part series. The first section begins with a story about then-New York Times executive editor Dean Baquet’s reaction when he found out Special Counsel Robert Mueller didn’t plan to pursue Trump’s ousting, telling his staff "Holy s---, Bob Mueller is not going to do it." -Fox News
"Baquet, speaking to his colleagues in a town hall meeting soon after the testimony concluded, acknowledged the Times had been caught ‘a little tiny bit flat-footed’ by the outcome of Mueller’s investigation," according to Jeff Gerth - the author of CJR's lengthy retrospective.
"That would prove to be more than an understatement," he continued. "But neither Baquet nor his successor, nor any of the paper’s reporters, would offer anything like a postmortem of the paper’s Trump-Russia saga, unlike the examination the Times did of its coverage before the Iraq War."
According to Gerth, the Times destroyed its credibility outside of its "own bubble."
I highlighted a few parts last night from this series - the only real attempt by corporate media, apart from a few @ErikWemple columns, to grapple with their serial Russiagate misconduct and lying. They'll ignore it even though it's from @CJR and by Gerthhttps://t.co/TxLItPJrkh
What's more, the Times appeared to legitimize former British spy, Christopher Steele, who was indirectly paid by the Clinton campaign to fabricate the infamous 'dossier' that so much of the Russiagate coverage - and the DOJ's sham investigation, was based on.
The Times appeared to legitimize Christopher Steele, the ex-British spy who authored the infamous dossier, claiming he had "a credible track record" while Steele's so-called "primary" source was telling the FBI that Steele "misstated or exaggerated" in his report and that information stemming from Russia was "rumor and speculation."
Part three offered examples of the Times' slight-of-hand coverage against Trump in comparison to other hostile outlets. For example, Trump explained his decision to fire FBI Director James Comey, mentioning the "Russia thing" as being a "made-up story" to NBC's Lester Holt but acknowledged the firing would likely "lengthen out the investigation."
"The media focused on the ‘Russia thing’ quote; the New York Times did five stories over the next week citing the 'Russia thing' remarks but leaving out the fuller context. The Post and CNN, by comparison, included additional language in their first-day story," Gerth wrote.
In another instance, the Times avoided covering some of the more damning texts from Peter Strzok, who wrote "there’s no big there, there" shortly after the appointment of Special Counsel Robert Mueller, something Gerth noted was covered by the Wall Street Journal and the Washington Post. -Fox News
In closing, Gerth concluded that "the erosion of journalistic norms and the media’s own lack of transparency about its work" is responsible for the broad distrust in the media.
No kidding.
"In January 2018, for example, the New York Times ignored a publicly available document showing that the FBI’s lead investigator didn’t think, after ten months of inquiry into possible Trump-Russia ties, that there was much there. This omission disserved Times readers. The paper says its reporting was thorough and ‘in line with our editorial standards," wrote Gerth. "Another axiom of journalism that was sometimes neglected in the Trump-Russia coverage was the failure to seek and reflect comment from people who are the subject of serious criticism. The Times guidelines call it a 'special obligation.' Yet in stories by the Times involving such disparate figures as Joseph Mifsud (the Maltese academic who supposedly started the whole FBI inquiry), Christopher Steele (the former British spy who authored the dossier), and Konstantin Kilimnik (the consultant cited by some as the best evidence of collusion between Russia and Trump), the paper’s reporters failed to include comment from the person being criticized."
Demand and output for cardboard boxes and other packaging material fell sharply in the fourth quarter of 2022, according to data released by the American Forest & Paper Association and Fibre Box Association on Friday.
It’s the latest indicator that consumer demand is eroding following the pandemic. Dwindling savings, inflation, rising interest rates and fears of a recession may all be swaying consumers to spend less.
Such pressures would show up in the humble box industry, which serves as an excellent barometer for the larger economy. Practically everything we consume and use spends some time in a box, ranging from online orders to food sent to grocery stores.
U.S. box shipments fell by 8.4% in the fourth quarter, according to the Fibre Box Association. KeyBanc’s Adam Josephson, who leads the bank’s analysis of the packaging industry, wrote in a Sunday note that this was “the most severe quarterly decline since the Great Financial Crisis (2Q09).”
U.S. box operating rates fell to 80.9%, the Fibre Box Association said, which was also a low last seen in the first quarter of 2009. This means nearly 20% of the U.S. capacity to produce boxes was stagnant last quarter. Supply of containerboard, which is used to make corrugated boxes, stood at 4.3 weeks, according to the American Forest & Paper Association. That’s down from last quarter, but still historically high.
The American Forest & Paper Association reported that another type of packaging material called boxboard had its lowest operating rate in its five-year record during 2022’s final quarter. Boxboard is typically thinner than cardboard and lacks air pockets.
Box bloodbath? Cardboard crisis?
Box demand normally sees modest upticks of 1% to 2% each year. But government stimulus and the shift from service to goods demand through 2020 and 2021 shocked box demand into some of its fastest growth in history. Prices rose as much as 55% through this time, Josephson said.
A hangover after a yearslong cardboard carnival would be in order and this one looks nasty.
To Josephson, the end of 2022 in the packaging world had “echoes of the Great Financial Crisis everywhere one looks,” he wrote in the Sunday note. What’s more, significant capacity that is, more facilities that produce packaging materials is set to enter the market through the next several years. It’s a tricky time for more packaging production to open up, given the shaky outlook for demand and falling consumer spending.
"Inflationary pressures on the consumers have also added to the problem by reducing the consumers’ discretionary spending capabilities,” said Thomas Hassfurther, executive vice president of corrugated products at WestRock, in a Thursday call to investors. WestRock is the No. 2 largest packaging company in the U.S.
“In addition, consumer behavior changed very quickly as we exited the extreme COVID period, resulting in more of a preference towards travel, entertainment and experience versus that of tangible goods,” Hassfurther said. “Containerboard and box demand continues to be negatively impacted from the deterioration in U.S. and global economic conditions, rising interest rates and a cooler housing market.”
However, WestRock executives maintained that demand in 2023 still appeared “healthy” compared to pre-COVID times. On the Thursday call, they forecast shipments to be 6% higher in first-quarter 2023 compared to the same period in 2019, on a per-day basis.
A downturn after a wild upswing isn’t particularly shocking. What’s troublesome is that executives grew or made plans to grow in response to this unprecedented demand. An increase in supply will further drive down already-plummeting prices.
In the cardboard world, for example, more than 2 million tons per year of additional containerboard output is coming to the North American market. Ocean carriers expect to add a record-breaking number of new container ships through the next two years. And nearly 60 real estate firms, most of which expanded payrolls during the pandemic, have already had to lay off more than 13,000 workers through 2022 and 2023, according to Insider.
The crime rate in Chicago has spiked by 61 percent in the first three weeks of 2023, with almost all crime segments registering an increase, with data coming at a time when the state’s governor insists that crime in the city is decreasing.
In the first 22 days of this year, the Chicago Police Department received 4,844 complaints related to crime, up 61 percent compared to the 3,013 complaints received in 2022, reveals data (pdf) from the department. This is also 97 percent higher than from the same period in 2021 and 81 percent higher than in 2020.
The biggest increase in crime in the past year was in motor vehicle theft, which rose by 165 percent year to date until Jan. 22, 2023, when compared to the year-ago period.
Aggravated battery jumped 31 percent, robbery 26 percent, theft, 24 percent, criminal sexual assault 12 percent, and burglary 11 percent. Murder fell by 9 percent, while shooting incidents declined 1 percent.
The data come as Illinois governor J.B. Pritzker has been trying to paint a positive picture of Chicago’s crime incidents.
“Crime is coming down gradually in the city and across the state. It’s going to take a little while. These things don’t come down immediately. But it’s getting better,” he said in an interview with CNBC this month.
Chicago Mayor Lori Lightfoot recently attracted criticism after a mayoral debate on Jan. 9 during which she suggested that street vendors “not use money, if at all possible, using other forms of transactions to take care of themselves” so as to ensure that their money is safe.
“To combat crime in Chicago, Mayor @LoriLightfoot says ‘not use money, if at all possible, (use) other forms of transactions to carry…’ What’s next? Laws demanding ‘cash control’?" conservative talk radio host Larry Elder said in a tweet on Jan. 23.
Businesses and Citizens Looking to Exit City
The high crime rate in Chicago is affecting businesses operating in the city, with some of them choosing to leave. In October 2022, Tyson Foods, for example, announced plans to relocate staffers from the Chicago area and South Dakota to Arkansas. In May, Boeing had announced plans to shift its headquarters out of Chicago.
In a speech to the Economic Club of Chicago in September, McDonald’s CEO Chris Kempczinski revealed that he has received multiple offers from governors and mayors from other states who want him to shift the company’s headquarters from Chicago.
“While it may wound our civic pride to hear it, there is a general sense out there that our city is in crisis,” Kempczinski said.
“We have violent crime that’s happening in our restaurants … We’re seeing homelessness issues in our restaurants. We’re having drug overdoses that are happening in our restaurants.”
A survey published this month by nonprofit AARP found that 88 percent of Chicago voters over 50 years of age have considered leaving the city in the past year. They wanted to move to a community with a lower crime rate.
Among respondents, 89 percent said that a candidate’s position on violence and crime is “very important” when it comes to deciding the next mayor.
Cashless Bail
One of the main reasons contributing to ongoing crime is a lax approach to enforcing the law while approving measures that cut down severity of punishments related to lawlessness.
A controversial law, the SAFE-T Act, was set to go into effect on Jan. 1, 2023, in Illinois. But on Dec. 31, the state supreme court placed on hold a portion of the bill that would have eliminated cash bail for certain crimes.
Last month, a Kankakee County judge had ruled that cashless bail violated Illinois’ constitution and couldn’t be applied in counties where lawsuits have been filed to block it.
Republican leaders had earlier raised alarm bells about the SAFE-T act, warning that it would result in a rapid rise in crime in Illinois, including Chicago. The city frequently registers over 700 homicides annually.
State Senator John Curran, a Republican, pointed out that SAFE-T’s cashless bail raises the risk of releasing dangerous criminals back into the streets. Multiple law enforcement officials had also warned about the cashless bail provision.
According to real estate platform Property Club, Chicago is ranked number six on the list of most dangerous cities in the United States.
For the fifth quarter in a row, SNAP stock craters after the company reports devastating earnings. But this one really hurts, because by now even the bears expected that all the bad news had been flushed out. Boy, were they wrong.
Having plunged six months ago after projecting its worst revenue growth on record, a shock revelation which took the stock some 25% lower, and tumbling again three months ago ago when the company reported another ugly quarter, SNAP is down double digits once again, tumbling from the mid-$11s to just below $10 after the former "growth" company forecast its first ever revenue decline.
Which is not to say that its historical data was any good. Here is how the company did in yet another catastrophic quarter:
Revenue $1.30 billion, +0.1% y/y, missing the estimate $1.31 billion
North America revenue $880.3 million, -5.6% y/y, estimate $923.5 million
Europe revenue $218.6 million, +4.6% y/y, estimate $201.4 million
Rest of the world revenue $200.9 million, +28% y/y, estimate $180 million
Adjusted EPS 14c vs. 22c y/y, beating the estimate 11c
Adjusted EBITDA $233.3 million, -29% y/y, beating the estimate $207 million
There was some good news in the daily active users, which at 375 million, or up +18% y/y, actually beat estimate 374.7 million, but not thanks to North America:
North America daily active users 100 million, +3.1% y/y, missing estimate 100.9 million
Europe daily active users 92 million, +12% y/y, estimate 89.7 million
Rest of world daily active users 183 million, +31% y/y, estimate 184.7 million
Tragically, in a time when tech companies are firing everyone, SNAP still uses the same colorblind graphic designer.
Of course, with (just barely) more users than expected yet missing on revenue, it meant just one thing: the monetization disappointed and sure enough, ARPU of $3.47, was not only 15% lower vs 2021, but missed estimates of $3.49
North America average revenue per user $8.77, -8.5% y/y, estimate $9.16
Europe average revenue per user $2.38, -6.3% y/y, estimate $2.25
Rest of world average revenue per user $1.10, -1.8% y/y, estimate 99c
But while historical data was bad, it's what the company disclosed about the present and, worse, the future that shocked markets: specifically, while the company disappointed quarter-to-date revenue is already down about 7% Y/Y, the final straw before everyone hit the sell button is that the company's forecast assumes revenue will decline between -10% to -2% in the first quarter.
Not only is that below the average analyst estimate for growth of 1.48%, but it is Snapchat's first every quarterly negative revenue guidance.
Knowing that its stock would soon be in the single digits, it barely tried to put lipstick on a pig and instead just gave token lip service to Q1 guidance, saying that "given the work we have completed to reprioritize our cash cost structure, we believe we have a path to adjusted EBITDA breakeven in Q1."
Whatever. Meanwhile, the company is now a melting ice cube, and the stock reflects it with SNAP plunging back into the single digits after hours.
Oil prices rallied on the day, with WTI rebounding back above $79 as factors ranging from the end of the Fed’s (dovish) rate increases to swelling demand in China give bulls more ammunition.
"The main driver for oil lately has been the potential for a resurgence of oil demand out of China, which may continue into February considering how Chinese economic momentum picked up in the overnight PMI reports," said Colin Cieszynski, chief market strategist at SIA Wealth Management.
The nationwide 'deep freeze' has clearly been impacting the inventory data over the last few weeks. We suspect today could be the first 'clean' indication...
API
Crude +6.33mm (-1mm exp)
Cushing +2.72mm
Gasoline +2.73mm
Distillates +1.53mm
Crude inventories built for a 5th straight week (despite expectations for a small draw) with Cushing stocks soaring once again. On the product side, we also saw notable builds (with Distillates biggest rise since the first week of December)...
Source: Bloomberg
Additionally, AlphaBBL data suggests that crude inventories at Cushing climbed 2.1 million barrels in the last week.
WTI was trading around $79 ahead of the API print and managed to hold those gains despite the builds...
The OPEC-plus group including Russia meets tomorrow and while most analysts don't expect major policy shifts, energy investors are always slightly on edge ahead of OPEC gatherings.
Relative to Intel's epic-fail, AMD stepped up to the plate after the bell and hit the ball out of the park.
AMD's headline Q4 revenue figure beat expectations at $5.6 billion (vs $5.52 billion consensus) and EPS beat at 69c (vs 67c consensus).
But, growth across its embedded and data center segments was partially offset by lower client and gaming segment revenue.
And notably, the company's operating expenses jumped to $2.56 billion from $1.22 billion a year earlier.
But crucially, unlike Intel's big guide lower, AMD's guide was only very marginally lower than consensus:
Revenue will be as much as $5.6 billion in the period, AMD said in a statement Tuesday, compared with an average analyst prediction of $5.56 billion.
Though a less severe drop than expected, the outlook represents the company’s first year-over-year quarterly sales decline since 2019, ending a growth streak that elevated AMD into the upper ranks of the chip industry.
“2022 was a strong year for AMD as we delivered best-in-class growth and record revenue despite the weak PC environment in the second half of the year," said AMD Chair and CEO Dr. Lisa Su.
"We accelerated our data center momentum and closed our strategic acquisition of Xilinx, significantly diversifying our business and strengthening our financial model. Although the demand environment is mixed, we are confident in our ability to gain market share in 2023 and deliver long-term growth based on our differentiated product portfolio.”
AMD's share prices are surging after-hours, back near December highs...
Economic conditions are much worse than you are being told. Throughout the past year, prices have been rising much faster than most of our incomes have. As a result, our standard of living has been rapidly declining. It has become increasingly difficult for U.S. households to make it from month to month, and as you will see below, more than a third of all U.S. adults are actually relying on their parents to pay at least some of their bills at this point.
But even more alarming is what has been happening to real disposable income. According to Fox Business, the most recent GDP report revealed that the decline in real disposable income that we witnessed in 2022 was the largest that has been measured since 1932…
The most troubling information in the GDP report is the precipitous drop in real disposable income, which fell over $1 trillion in 2022.
For context, this is the second-largest percentage drop in real disposable income ever, behind only 1932, the worst year of the Great Depression.
Just think about that for a moment.
The last time real disposable income declined this quickly was literally during the peak of the Great Depression.
And as our incomes get squeezed tighter and tighter, more Americans are starting to fall behind on their bills.
For example, the proportion of subprime auto borrowers that are at least 60 days behind on their payments has just surged to the highest level that we have seen since 2008…
In December, the percentage of subprime auto borrowers who were at least 60 days late on their bills climbed to 5.67% a major increase from a seven-year low of 2.58% in April 2021, according to Fitch Ratings. It marks the steepest rate of Americans struggling to make their car payments since the 2008 financial crisis.
We are already beginning to witness the largest tsunami of repossessions that we have seen since the “Great Recession”, and it is only going to get worse in the months ahead.
One woman in San Antonio that knows that her vehicle could be repossessed at any time has decided that hiding it is the best strategy for now…
For some, however, the only lesson is to try and outsmart the repo man: hardly the best long-term strategy. Take San Antonio native Zhea Zarecor who is currently trying to negotiate with her lender so her 2013 Honda Fit won’t get repossessed. In the meantime, she’s hiding it.
The 53-year-old, who is currently in school for her bachelor’s in information technology (and raking up massive student loans for an education she should have had some 35 years ago) splits the monthly bill for the car about $178 with her roommate. But then the roommate lost his job, and with prices for groceries and everyday items increasing, there just wasn’t enough for the car payments.
Zarecor is trying to make extra money with odd jobs like contract secretarial work and participation in medical studies, but it often feels hopeless, she said. “Our money doesn’t go as far as it used to,” she said. “I don’t see prices going down, so the only relief I see is when I get my degree.”
Sadly, most of the country is just barely scraping by at this juncture.
As I discussed in a previous article, one recent survey discovered that 57 percent of Americans cannot even afford to pay a $1,000 emergency expense right now.
And a different survey has found that a whopping 35 percent of all U.S. adults are still relying on Mom and Dad to pay at least some of the bills…
More than one third of adults (35%) admit they still have at least one bill on their parents’ tab. According to a new poll of 2,000 Americans, the top three expenses their parents still pay for are rent (19%), groceries (19%), and utilities (16%). In fact, almost one-quarter (24%) of millennials say their parents cover their rent.
Are things really this bad?
Unfortunately, economic conditions are only going to get even worse in the months ahead as countless more Americans lose their jobs.
On Monday, I was quite saddened to learn that electronics giant Philips will be giving the axe to another 6,000 workers…
Philips announced Monday that it’s cutting another 6,000 jobs worldwide as it works to boost profitability.
The workforce reduction will occur over the next two years with the first 3,000 cuts taking place this year, the Dutch consumer electronics and medical equipment maker said on Monday. In its earnings report, the company revealed it suffered a net loss of 1.6 billion euros in 2022, which is down from a net profit of 3.3 billion euros last year.
In fact, every day I could fill up my articles with nothing but job loss announcements.
We have entered a very painful economic downturn, and one prominent Wall Street economist is warning that the full impact of this crisis will not be felt until the second half of 2023…
According to one Wall Street economist, a looming recession this year will feel more like the 1970s than a 2008-07 slump.
“People are too focused on ‘08 and 2020. This is more like 1973, 74 and 2021,” Piper Sandler chief global economist Nancy Lazar said on “Mornings with Maria” Monday.
Lazar predicted feeling the full impact of a recession in the second half of 2023 as lag effects from the Federal Reserve’s rate hikes take hold.
Actually, it would be quite wonderful if her seemingly gloomy forecast is accurate.
Because I don’t believe that we are heading into a slowdown like we experienced during the early 1970s.
Rather, I see all sorts of evidence that indicates that we are in the very early stages of the economic equivalent of “the Big One”.
I believe that things will be very rough this year, and I believe that the long-term outlook is even worse.
Our leaders assured us that everything would be okay even as they were flooding the system with money and engaging in the greatest debt binge in all of human history.
Now a day of reckoning has arrived, and we will get to suffer the consequences of their very foolish decisions.
* * *
It is finally here! Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.
January saw the return of the "QE trade"... or more appropriately, a de-hawking of The Fed as the narrative rapidly shifted from hyped-inflation and growth scares to 'soft landing' and Fed-Pause/Pivot... and everything's awesome.
Overall January saw macro surprise data flat in January as 'soft' survey data tumbled (along with weaker 'hard' industrial data) but offset by a number of questionably strong labor market indications...
Source: Bloomberg
However, despite the narrative shift, January saw rate expectations barely budge... terminal rate dropped around 4bps while rate-cut exp fell 3bps...
Source: Bloomberg
The market is locked-and-loaded for a 25bps hike tomorrow by The Fed, it also prices an 83% chance of a 25bps hike in March and 42% odds of a 25bps hike in April...
Source: Bloomberg
But that never stopped stocks from fully embracing the dovish hope, with Nasdaq soaring over 10% in January. The Dow lagged with a meager 2.4% return...
Source: Bloomberg
Stocks melted up into today's month-end close (on a massive MOC buy), erasing all of yesterday's selling pressure from the open...
Nasdaq soared to its best January since 2001...
Source: Bloomberg
Who could have seen that coming!!??
NASDAQ'S PERCENTAGE GAIN FOR JANUARY IS ITS BIGGEST JANUARY ADVANCE SINCE 2001, ITS BIGGEST MONTHLY ADVANCE SINCE JULY 2022
From Jan 9 "We Are Setting Up For A Tech-led Squeeze Higher As Shorting Gets Extreme"https://t.co/cfs4fYCasa
The January shift in the growth and inflation outlooks have helped support a laggards-to-leaders (dash for trash) trade within the S&P 500...
At the stock level, 9 of the 10 best performing stocks in January also underperformed the S&P 500 over the last 12 months - also highlighting a laggard-to-leaders trade.
And if you needed more evidence of the 'quality' of the rally, "most shorted" stocks soared 19% in January - the biggest monthly short squeeze since January 2021 - which marked the record high in stocks...
Source: Bloomberg
And all that exuberance pushed financial conditions to their loosest since June (when Fed Funds were 350bps lower)...
Source: Bloomberg
That is the 3rd month of 'easing' financial conditions in the last four, after financial conditions reached their tightest since 2016...
Source: Bloomberg
Is that the "unwarranted easing" that The Fed warned about in its latest Minutes?
Treasury yields ended the month of January significantly lower with the short-end lagging (2Y -22bps) and the belly outperforming (5Y -37bps)...
Source: Bloomberg
That is the second biggest monthly drop in the 5Y yield since March 2020 (the peak of Fed intervention amid the COVID lockdowns)...
Source: Bloomberg
The yield curve collapsed further in January with Fed Chair Powell's favorite signals (3m spot - 18m fwd 3m bill yield spread) crashing to its most inverted ever right as the dot-com boom busted...
Source: Bloomberg
The dollar fell for the 4th straight month in January, with the greenback sparking a 'death cross'...
Source: Bloomberg
...with one of the largest 3mo declines in the world's reserve currency in history...
Source: Bloomberg
Gold surged for the 3rd straight month in a row, back above $1900 (to its highest since April 2022 and notably above the 2011 highs)...
Source: Bloomberg
...up 18%, its best such move since August 2011...
Source: Bloomberg
Bear in mind that gold has dramatically decoupled from the resurgence in real yields...
Source: Bloomberg
Bitcoin saw its best start to a year since 2013, up almost 40% in January...
Source: Bloomberg
Bitcoin is back above $23,000, erasing all the losses from the FTX FUD, now testing back to the Terra-LUNA / 3AC / Voyager collapse chaos...
Source: Bloomberg
Solana (hammered hard during the FTX debacle) was the massive outperformer though in crypto and we note that Bitcoin outperformed Ethereum (which still had a stellar 33% gain on the month)...
Source: Bloomberg
Oil prices had a quiet January ending marginally lower (WTI rangebound between $78 and $82), which followed a quiet December (which ended practically unchanged in a narrow range)...
January saw the biggest drop in NatGas prices since January 2001, with Henry Hub crashing to its lowest since April 2021, back below $3.00
Source: Bloomberg
Finally, circling back to the start, the last time the Nasdaq soared as much as this in January, it didn't end well...
Source: Bloomberg
This time is obviously different though... because inflation remains extremely high, govt debt is exponentially higher, and The Fed balance sheet remains ridiculously high.
When it comes to labor market data (or rather "data"), Biden's labor department is a study in contrasts (and pats on shoulders). One day we get a contraction in PMI employment (both manufacturing and services), the other we get a major beat in employment. Then, one day the Household survey shows a plunge in employment (in fact, there has almost been no employment gain in the past 9 months) and a record in multiple jobholders and part-time workers, and the same day the Establishment Survey signals a spike in payrolls (mostly among waiters and bartenders). Or the day the JOLTS report shows an unexpected jump in job openings even as actual hiring slides to a two year low. Or the straw the breaks the latest trend in the labor market's back, is when the jobs report finally cracks and shows the fewest jobs added in over a year, and yet initial jobless claims tumble and reverse all recent increases despite daily news of mass layoffs across all tech companies, as the relentless barrage of conflicting data out of the Bureau of Labor Statistics (which is the principal "fact-finding" agency for the Biden Administration and a core pillar of the Dept of Labor) just won't stop, almost as if to make a very political point.
But while one can certainly appreciate Biden's desire to paint the glass of US jobs as always half full, reality is starting to make a mockery of the president's gaslighting ambitions, as one by one core pillars of the administration's "strong jobs" fabulation collapse. First it was the Philadelphia Fed shockingly stating that contrary to the BLS "goalseeking" of 1.1 million jobs in Q2 2022, the US actually only added a paltry 10,000 jobs (just as the Fed unleashed an unprecedented spree of 75bps rate hikes).
Then, it was Goldman's turn to make a mockery of the "curiously" low initial jobless claims, by comparing them to directly reported state-level WARN notices (mandatory under the Worker Adjustment and Retraining Notification (WARN) Act) which no low-level bureaucrat and Biden lackey can "seasonally adjust" because there they are: cold, hard, fact, immutable and truly representative of the underlying economic truth, and what they show is that - as the Goldman chart below confirms - layoffs are rising far faster than what the DOL's Initial Claims indicates.
More importantly, Goldman also found that WARN notices also track the JOLTS layoff rate: WARN notice counts remained elevated in late 2020 even as the layoff rate declined, but this likely reflects unusual reporting delays during the pandemic and the exclusion of layoffs at closing establishments in the JOLTS survey, which WARN notices capture provided firms remain in business. Not surprisingly, Goldman's tracking estimate based on December and January WARN notices for the large states covered not only shows that the recent drop in initial claims is unlikely, but that it is also consistent with a layoff rate of around 1.1%, higher than the 0.9% in the November JOLTS report.
And now, another core pillar of the US labor market is being dismantled, and it has to do with the Fed's favorite labor market indicator: the JOLTS report of job openings.
As UBS economist Pablo Villaneuva writes in a recent report by the bank's Evidence Lab group, Job openings in the JOLTS survey have not declined much since the March peak. Indeed, the BLS reports that openings were only 12% below the March 2022 peak in November and remain 48% above the pre-pandemic, 2019 average. This slight move downward has, as we noted recently, led to only a small decline in the vacancies-to-unemployment ratio, from 1.99 in March to 1.74 in November, still well above the 2019 average of 1.19.
Of course, such a high level of job openings is alarming to the Fed for the simple reason that it means Powell has failed at his mission at cooling off what appears to be a red hot jobs market; no wonder the Fed Chair has frequently flagged the high level of job openings as a sign of ongoing strength in the labor market. The bottom line, as UBS notes, is that "the BLS measure, although it has declined, remains historically high."
However, as in the abovementioned case of unexpectedly low jobless claims, there may be more here than meets the eye. According to Villanueva, "a range of other measures of job openings suggest normalization in the labor market softening much more convincingly, often to pre-pandemic levels" - translation: whether on purpose or accidentally, the BLS is fabricating data.Also, the UBS economist flags, job openings are not a great indicator of current labor market conditions they lagged the last two downturns in the labor market.
So what's the real story?
Well, as usual there is BLS "data" and everyone else... and as UBS cautions, other measures of openings tell a very different story: "Our UBS Evidence Lab data on job listings is weekly and more timely than the BLS series. The last datapoint is for the week of December 31. It shows openings down 30% from the March 2022 peak and only 25% higher than the 2019 average."
While BLS bureaucrats and Biden sycophants can argue UBS data is inaccurate, other longer dated series also indicate weaker openings. Take for example the NFIB Small Business Survey includes labor market measures that have correlated strongly with the JOLTS data over time but have weakened more sharply than the JOLTS measure in recent months. The percentage of small firms unable to fill open positions has a correlation of 0.95 with JOLTS openings since 2000. This series has declined 20% relative to the peak in May 2022 and is only 13% above the 2019 average. The NFIB series on percentage of firms with few or no qualified applicants tells a similar story.
Finally, the "Opportunity Insights" measure of openings (see here) is also below pre-pandemic levels.
So what's going on here?
As the UBS economist puts it, "in short, other surveys of job openings generally suggest that the BLS measure may be overstating labor market tightness. One reason to think the accuracy of the JOLTS data may have declined is that the sample shrank noticeably at the start of the pandemic. In 2019, the survey response rate was 60%. In December, it was 30%."
Or perhaps it's not gross BLS incompetence (or propaganda): maybe it's just a data quirk at key economic inflection points. As UBS observed in August, job openings tend to lag other labor market indicators. Ahead of the 2001 recession, the private sector job openings rate was still rising as private employment peaked and started printing negative. Again in 2007, as job openings were peaking, payroll employment in the revised data had slowed considerably, and job openings remained near their peak as employment was beginning to contract outright.
Whatever the reason for the discrepancy in this latest labor series, the bigger picture is getting troubling.
We already knew that the employment as measured by the Household survey has been flat since March even as the Establishment survey signaled 2.7 million job gains since then. Shortly thereafter the Philadelphia Fed found that contrary to the BLS "goalseeking" of 1.1 million jobs in Q2 2022, the US actually only added a paltry 10,000 jobs in the second quarter of 2022. As such, the validity and credibility of the US nonfarm payrolls report is suspect at best.
And now, we can also stick a fork in the JOLTS report, whose accuracy has just been steamrolled by UBS with its finding that job openings - a critical component of the US labor market and the Fed's preferred labor market indiator - are far lower than what the Dept of Labor suggests.
Bottom line: while it is obvious why the Biden admin would try hard to put as much lipstick as it can on US jobs data, the same data when measured with alternative measures shows a far uglier picture, one of a US labor market on the verge of cracking and hardly one meriting consistent rate hikes by the Fed.
Which, considering that in less than 24 hours the Fed will hike rates by another 25 bps, is extremely important, and we wish that we weren't the only media outlet to lay out the facts as the negative impact of continued policy error and tightening by the Fed will impact tens of millions Americans, not to mention the continued errors - whether premeditated or accidental - by the US Department of Labor. Alas, as so often happens, since nobody else in the "independent US press" is willing to touch the story of manipulated jobs data with a ten foot pole, it is again up to us to explain what is really going on.
Freeport LNG, the second largest US liquefied natural gas exporter, reported Tuesday afternoon to the Federal Energy Regulatory Commission (FERC) that it has "successfully and safely progressed the cooldown of the Loop 1 transfer piping and reinstatement of BOG management."
Freeport LNG asked FERC for approval to begin "(1) the nitrogen cooldown of the LNG rundown piping system and (2) the introduction of hydrocarbons to Unit 13 (Train 3) for LNG train commissioning and cooldown." They also asked for a response from the federal energy agency by tomorrow.
Combing through Freeport's letter to FERC, Houston-based energy firm Criterion Research told clients, "the key part of this request is that it would allow Freeport to begin flowing natural gas into the pretreatment facility and then permit the initial production of LNG to flow into LNG Tanks 1 and 2 onsite."
Freeport also said that "subsequent approvals will be necessary to commence Loop 1 LNG circulation and ship loading to Dock 1, as well as the transition of Unit 13 into full, commercial operations."
The next steps for Freeport LNG will be to (1) secure approval from the FERC to begin feed gas flow & initial liquefaction operations, (2) complete that startup, and (3) request subsequent approval to commence LNG circulation and ship loading to Dock 1 #natgas#ongt#LNG#enelystpic.twitter.com/SShFMhfSMw
Natural gas flows to the LNG terminal increased today, much larger than in the previous weeks.
Even with the prospects of a partial restart at the second largest US terminal, NatGas prices have slid to 20-month lows due to unseasonably warm weather, increased production, and an abundance of supply.
As of Tuesday afternoon, NatGas prices have yet to bounce even on this news and reports of colder air pouring into the Lower 48.
Cosmetics company NYX Professional Makeup has received backlash on social media after featuring ads for a lipstick with bearded men.
The company appears to be finding out that going woke eventually equates to going broke, as respondents accused them of “erasing women” with the ads for Smooth Whip lip cream.
In an Instagram post, the company wrote the caption “[itsmechrxs] making us whip out our Smooth Whip in Pom Pom REAL quick. #nyxcosmetics #nyxprofessionalmakeup #crueltyfree.”
“Apparently you don’t need us as your customer base any longer. I’ll leave [your] product like you left me Tired of being marginalized!!!!!!” one women replied.
Another responded “Not attractive at all… Doesn’t make me want to run out and buy your products EVER.”
“…DOESNT matter what year it is dude. Men are men and women are women stop trying to erase us,” another women asserted.
“You need to wake up. Stand up for your right as a woman,” another added, claiming “This is another example of men wanting to still be in control.”
“I’m so turned off by these ads with men wearing lipstick,” another person wrote.
“Not good for your company using a man what are you thinking boycotting,” another commented, while someone else bluntly responded “men should not wear makeup. This is gross.”
Another woman responded “I’m not so much disgusted but confused, why just put a picture with a man wearing lipstick and not a woman too? How does this ad make me want to buy [your] product when I can’t relate to it … I get makeup is for everyone so why not?”
In the age of mass Silicon Valley censorship It is crucial that we stay in touch. We need you to sign up for our free newsletter here. Support our sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Also, we urgently need your financial support here.
The International Monetary Fund published its latest World Economic Outlook on Monday, painting a slightly less gloomy picture than three and a half months ago, as inflation appears to have peaked in 2022, consumer spending remains robust and the energy crisis following Russia’s invasion of Ukraine has been less severe than initially feared.
However, the IMF predicts the slowdown to be less pronounced than previously anticipated.
Global growth is now expected to fall from 3.4 percent in 2022 to 2.9 percent this year, before rebounding to 3.1 percent in 2024.
The 2023 growth projection is up from an October estimate of 2.7 percent, as the IMF sees far fewer countries facing recession this year and does no longer anticipates a global downturn.
One of the reasons behind the cautiously optimistic outlook is the latest downward trend in inflation, which suggests that inflation may have peaked in 2022.
The IMF predicts global inflation to cool to 6.6 percent in 2023 and 4.3 percent in 2024, which is still above pre-pandemic levels of about 3.5 percent, but significantly lower than the 8.8 percent observed in 2022.
“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Pierre-Olivier Gourinchas, the IMF’s chief economist, wrote in a blog post released along with the report.
“Inflation, too, showed improvement, with overall measures now decreasing in most countries even if core inflation, which excludes more volatile energy and food prices, has yet to peak in many countries.”
The risks to the latest outlook remain tilted to the downside, the IMF notes, as the war in Ukraine could further escalate, inflation continues to require tight monetary policies and China’s recovery from Covid-19 disruptions remains fragile. On the plus side, strong labor markets and solid wage growth could bolster consumer demand, while easing supply chain disruptions could help cool inflation and limit the need for more monetary tightening.
In conclusion, Gourinchas calls for multilateral cooperation to counter “the forces of geoeconomic fragmentation”.
“This time around, the global economic outlook hasn’t worsened,” he writes. “That’s good news, but not enough. The road back to a full recovery, with sustainable growth, stable prices, and progress for all, is only starting.”
However, just because the 'trend' has shifted doesn't mean it's mission accomplished...
That looks an awful lot like Central Bankers' nemesis remains - global stagflation curb stomps the dovish hopes.
Mark Houck, 48, was acquitted yesterday in a high-profile prosecution by the Biden Administration under the Freedom of Access to Clinic Entrances (FACE) Act. Houck was accused of pushing a Planned Parenthood escort during a clash outside an abortion clinic. It is a rare victory for Houck and the Thomas More Society (which represented Houck) under the act. Houck insisted that he was trying to protect his twelve-year-old son in the encounters with Love. There is also an interesting wrinkle in the jury deliberations.
The FACE Act prohibits “violent, threatening, damaging, and obstructive conduct intended to injure, intimidate, or interfere with the right to seek, obtain, or provide reproductive health services.”
The Biden Administration alleged that Houck “forcefully shoved” Bruce Love, a 72-year-old volunteer at a Philadelphia Planned Parenthood on Oct. 13, 2021. The trial explored two different encounters with Love.
In the first encounter, Houck was across the street on a sidewalk counseling two women who had left the Planned Parenthood clinic. Love followed the women. The Justice Department says that Houck elbowed Love because he was a clinic escort. Houck testified that Love startled him and made contact with him, causing him to say “What are you doing?” and hip-check him out of reflex.
Houck testified that he told Love to “Stay away from my son” and “Don’t come near us” when Love approached them on the sidewalk after the first incident.
His son, Houck Jr. also testified and said that Love stood close to him as he taunted his father saying “You’re hurting women. You don’t care about women.” He then said Love said the same to him and added “Your dad’s a bad person. Your dad’s harassing women.” He said that he moved away from Love out of fear.
It was a highly contested account, but the Biden Administration decided to prosecute and later went to Houck’s home to arrest him. The arrest drew criticism after a large number of FBI agents descended on the home.
What was interesting is that the jury previously declared itself deadlocked and was sent home on Friday. However, a juror was then reportedly replaced by an alternate juror on Monday afternoon. They then quickly reached an acquittal. It is not clear if the deadlock was due to that one juror, but a consensus that formed during that day.
It is not uncommon for jurors to overcome a deadlock, particularly after an Allen charge. Named after the United States Supreme Court case Allen v. United States (1896) where it was first used, it is called the “dynamite charge” to break deadlocks. It is unpopular with most defense attorneys because it encourages the majority to work to convince the minority often breaking down the resistance of holdouts.
It is not clear if the jury simply overcame its divisions after a weekend break or whether the replaced juror was a holdout.
The acquittal in a FACE Act case is relatively rare given the “cut-and-dry” language of the law.
We recently discussed an English case that showed its own efforts against pro-life protesters when a woman was arrested for praying near a clinic.
Punxsutawney Phil will make his annual prediction on the prospects for an early spring this Thursday, February 2nd, and my guess is that he will see his shadow indicating six more weeks of winter. At least, that is what I would recommend to my fellow Pennsylvania prognosticator. There are processes unfolding in the upper part of the atmosphere over the polar region of the northern hemisphere that suggest there may very well be additional cold air outbreaks for much of the nation as we head through February and into March. In fact, a brutally cold air mass is headed to the Northeast US for Friday into Saturday with zero degrees on the table in New York City.
One part of the country that may not be vulnerable to cold air outbreaks in coming weeks is the Southeast US and, in particular, the state of Florida where a persistent upper-level ridge may keep it warm right into spring training season. In addition to the prospects for more cold, the overall weather pattern should remain quite active as well across the nation with numerous rain/snow/ice events on the way. Even the state of California - which has experienced a break in the action for the past ten days or so - will see a stormier pattern return to the region in early February; especially, the northern half.
The month of January is likely headed to a finish that will result in it turning out to be the 2nd or 3rd warmest on a nationwide basis compared to any in the last 40 years. This unusually warm month of January has been quite a contrast to December which featured some bitter cold air masses across the nation including one that arrived in the Mid-Atlantic region just in time for the Christmas Eve/Christmas weekend. Each of these past two months has been quite active with multiple storm systems impacting many parts of the country. In particular, the state of California was pummeled by ocean storms in the period from late December to around the third week of January. Looking ahead, one change in the upper atmosphere over the polar region of the Northern hemisphere suggests that cold air outbreaks can continue for much of the nation into February and the active weather pattern is likely to continue with multiple storms on the horizon bringing more rain, ice or snow.
One way to monitor the potential for wintertime Arctic air outbreaks into the central and eastern US is to track the temperature pattern in the stratosphere over the polar region of the Northern Hemisphere. The stratosphere is the second major layer of the atmosphere just above the troposphere and below the mesosphere. It occupies the region of atmosphere from about 12 to 50 km, although its lower boundary tends to be higher nearer the equator and lower nearer the poles. The stratosphere defines a layer in which temperatures rise with increasing altitude. At the top of the stratosphere, the thin air may attain temperatures close to 0°C. This rise in temperature is caused by the absorption of ultraviolet (UV) radiation from the sun by the ozone layer. Such a temperature profile creates very stable atmospheric conditions and the stratosphere lacks the air turbulence that is so prevalent in the troposphere. Consequently, the stratosphere is almost completely free of clouds or other forms of weather.
Sudden stratospheric warmings (SSWs) are among the most impressive dynamical events in the physical climate system. During the winter months in the polar stratosphere, temperatures are typically at or below minus 70°C. The cold temperatures are combined with strong westerly winds that form the southern boundary of the stratospheric polar vortex which plays a major role in determining how much Arctic air spills southward toward the mid-latitudes. This dominant structure is sometimes disrupted in some winters by being displaced, split apart or even reversed. Under these circumstances, the winds can decrease or change directions and the temperatures in the lower stratosphere can rise by more than 50°C in just a few days.
In response to the stratospheric warming (and associated layer expansion) at the high latitudes, the troposphere cools down dramatically (with layer contraction) at the high latitudes and pressure rises. This tropospheric cold air can then be more easily transported from the high latitudes to the middle latitudes given the "high-latitude blocking" that often sets up over places like Greenland and northeastern Canada. The entire process from the initial warming of the stratospheric at high latitudes to the cooling in the troposphere at middle latitudes can take several weeks to unfold. [For more information on the stratospheric warming phenomenon visit our "Meteorology 101" page for an extended video discussion on the topic].
Current stratospheric warming event
During the middle part of January, the polar vortex normally positioned near or over the North Pole began to get "stretched out" and two separate warming areas began to show up aloft. By the last week of January, a significant area of warming developed at stratospheric levels over the Siberia region of the Northern Hemisphere and the polar vortex was displaced a bit away from its prior location. By the early part of February, this area of warming is expected to rotate to a position centered right near the North Pole and the polar vortex will become displaced and shrunk in size compared to the way it looked a few weeks ago. This stratospheric warming event is likely to result in the displacement of cold air masses from the high latitudes into the middle latitudes during February and perhaps even into March – delaying the start of spring in much of the nation. The one exception to this outlook may be the Southeast US and, in particular, the state of Florida which may enjoy warm weather from now right into the spring training season thanks in large part to the stubborn high pressure ridge aloft in that part of North America.
Active pattern to continue with rain, ice and snow
In addition to the prospects for more cold air outbreaks across much of the nation, the overall weather pattern is likely to remain quite active in coming weeks. Upper-level high pressure ridging is likely to remain centered over the southwestern Atlantic/Southeast US – typical of La Nina winters – and this will present a natural temperature gradient with colder-than-normal air to be centered over the central US. This "battleground" region in between the ridge (mild) to the south and east and the upper-level low (cold) to the north and west has been and will continue to be a conduit for the movement of low pressure systems to move from the south-central states to the Northeast US. Out west, California has experienced a break in the action during the last ten days or so, but a stormier pattern is likely to return to the Golden State beginning early in February; especially, the northern half.
By Jan-Patrick Barnert and Sagarika Jaisinghani, Bloomberg Markets Live reporters and strategists
Tesla Inc.’s move to slash prices across the US and major European markets has triggered similar cuts across the electric-vehicle sector with Ford Motor Co. being the latest to follow suit today [ZH: as we said would happen]
If other automakers and dealers match Tesla price cuts, core CPI could drop by more than 1% M/M
But the new trend goes well beyond the EV industry, and could quickly become the next big earnings headwind.
Companies that until now have defended their profitability from surging cost inflation by charging more are finding that they have less power to do so as price growth starts to cool. Indeed, many are now starting to lower prices at a time when expenses remain inflated, putting their profit margins under strain.
The list of firms showing signs of earnings stress is growing. Ford and Chinese electric-vehicle maker Xpeng Inc. have both followed Tesla’s lead on price, while apparel makers Lululemon Athletica Inc. and Hennes & Mauritz AB served notice of the impact on margins as they marked down goods to help manage bulging inventory just as expenses are soaring.
Elsewhere, video-games makers including Ubisoft Entertainment SA are offering discounts to counter weak consumer demand, an issue that’s also a thorn in the side of appliance maker Electrolux AB.
“Falling inflation is going to be a significant headwind for profit margins given the sequencing of costs falling later than end price,” said Michael Wilson, a strategist at Morgan Stanley who was top-ranked in last year’s Institutional Investor survey. Investors should be careful what they wish for as peaking inflation is “very negative for profitability.”
The growing pressure on profit margins presents a potential hurdle to the equities rally of the last four months. While investors have been fretting over rising interest rates, peak inflation and a possible recession, they’ve at least been able to count on robust company earnings as a reason to stay invested. Now that leg of support appears to be crumbling.
According to data compiled by Bloomberg, earnings per share estimates for the S&P 500 have fallen since peaking in June 2022, while revenue projections have flatlined. With about 125 index members having reported so far this results season, sales are beating estimates by the smallest percentage since data going back to the fourth quarter of 2020, the data show.
For JPMorgan Chase & Co. macro strategists led by Dubravko Lakos-Bujas, 2023 corporate guidance “should be less optimistic relative to current estimates.” Lower pricing power, demand destruction, wage pressures and higher interest expenses stand to push margins lower, they say.
Kasper Elmgreen, Amundi SA’s head of equities, warns that “profit margins have to come down,” pointing to a reversal in once helpful factors such as tax, interest rates and inflation.
“The resilience last year was about consumers that had strong savings,” Elmgreen said. “Now you’re starting to get worried and confidence indicators are collapsing. Real incomes are under pressure. And that’s going to manifest itself in consumption.”
Chinese electric vehicle maker Xpeng has pushed back its profit goal until 2025, after having previously aimed to break even by late 2023 or early 2024.
The technology sector faces a particularly tough time. Companies from Amazon.com Inc. to Alphabet Inc.’s Google have recently laid off staff after years of growth. The sector announced 97,171 job cuts in 2022, up 649% compared with the previous year, according to consulting firm Challenger, Gray & Christmas Inc.
Reducing costs can only go so far before companies start hitting their own margins, said Karim Chedid, head of investment strategy for iShares EMEA at BlackRock Inc.
“The drivers of company profits last year are not going to be repeated this year,” Chedid said. “And they’re going to find it difficult to defend margins again.”
Pfizer Inc shares recovered much of their premarket trading losses, down about 40bps to $43.38 by early afternoon trading. The big story today, besides the drug company forecasting Covid product sales will slump this year, is the massive losses in market capitalization this month.
Year-to-date, Pfizer shares are down 15%, evaporating $43 billion in market cap -- the worst monthly decline since 2009.
Here's what Wall Street analysts are saying about the weaker-than-estimated sales outlook for Pfizer's Covid products (list courtesy of Bloomberg):
Wells Fargo (equal weight): Analyst Mohit Bansal expects the stock to be weak on the guidance miss "with focus on how 2023 can be a COVID trough year."
Says the outlook being below consensus was "not a huge surprise" as investors expected it
"The guidance for the most part came in line with our expectations, but we suspect the stock could be weak as it missed sell side consensus by a good margin," he writes
BMO Capital Markets (outperform): Analyst Evan David Seigerman says the 2023 revenue guidance was light due to lower Covid revenues and higher expenses
"All in we think it's better than it could have been, given the uncertainty around how the company would forecast Covid-19 revenues," the analyst writes
Cantor Fitzgerald (overweight): Analyst Louise Chen says the guidance miss was "widely anticipated" and that was why the stock had been weak into the earnings report
"We continue to believe that the sales potential of PFE's products and pipeline remain underappreciated in 2025+," Chen writes
Bloomberg Intelligence:
"Pfizer's potentially confusing 2023 forecast that's about 20% below consensus adjusted EPS is largely attributable to about $2 billion of incremental SG&A and R&D expenses as the company launches 19 new drugs and indications in the next 18 months," analyst John Murphy writes
* * *
Pfizer Inc shares slid as much as 3.5% in premarket trading (before bouncing back) after the company forecasted COVID-19 vaccine sales for 2023 would miss the average Wall Street estimate by more than $2.5 billion.
The New York-based drug company expects Covid vaccine sales this year to be around $13.5 billion, below analysts' $16 billion forecast. Sales for its Covid pill Paxlovid were forecasted at about $8 billion, below the $9.2 billion expected by analysts.
Pfizer expects revenue for Covid-19 vaccines and pills to slide this year because of large government stockpiles but might see an increase in sales in 2024.
Revenue might fall even more this year as Americans appear to be pushing back on getting booster after booster.
Pfizer projects revenue this year to be between $67 billion and $71 billion after skyrocketing 23% to $100 billion in 2022.
For the fourth quarter, revenue was up by 2% to $24.29 billion, supported by the growth in the primary care business as Covid vaccine demand slumped.
Pfizer shares dropped as much as 3.5% in premarket trading. Shares are down 12.5% since topping around $54.70 in December.
But, as things tend to do, Pfizer shares were panic-bid back into the green as the cash market opened...
Analysts have been concerned about Covid vaccine demand woes this year, leading Wells Fargo's Mohit Bansal to downgrade the company from a buy in mid-January to equal weight. Bansal was concerned about near-term earnings risk due to falling demand for Covid products.
UBS analyst Colin Bristow cut Pfizer to neutral from buy, reiterating Bansal's point about slumping demand for Covid products and a product pipeline that's "not quite ready for prime time."
There are currently nine buys and 15 holds, though no sells on Pfizer by analysts. Their average 12-month target is around $53.44.
What's clear in this quarterly report is that Americans are pushing back against taking their gene therapy drug that government officials, big pharma, mainstream media, celebrities, and anyone else pushed so hard over the last few years.
Over the past decade, we extensively covered a bizarre surge in banker suicides, pointing out the various conspiracy theories linking various high-level bank executives and inside scandals at the very highest levels across financial institutions, and no bank had more high profile suicides than Deutsche Bank.
Then, shortly after the mid-2010s, news of bankers taking their lives gradually faded away, perhaps in no small part because much of nascent fraud moved from Wall Street and to various startups/silicone valley/crypto.
That benign trend, however, may be bout to reverse again: according to Bloomberg, an unnamed banker (we expect his name to emerge within a few hours) working at London's office of Perella Weinberg Partners died by suicide in the days after the firm’s UK headquarters were searched as part of a German investigation into insider trading. Citing sources, Bloomberg notes that the deceased banker was one of the suspects in the probe.
“We are incredibly saddened by the tragic loss of our colleague and extend our heartfelt condolences to the family, loved ones and friends,” a spokesperson for Perella Weinberg said in an emailed statement. “We are focused on supporting our colleagues at this very difficult time.”
On Jan 25, the Perella Weinberg UK office was searched by officials as part of an investigation by Frankfurt prosecutors. They were looking into allegations that a London-based employee at Perella Weinberg disclosed information on planned takeovers that other suspects then traded on, Bloomberg reported previously.
Raids were also conducted in Frankfurt, Munich and the wider area of the Bavarian capital, as well as in Austria. Prosecutors said last week that they’d made an arrest as part of an investigation into five German suspects since November 2021 over allegations they used insider information about takeovers that took place between 2017 and 2021.
The suspects were able to earn a “two digit million” euro amount by trading on the information, according to a joint statement from the investigators and Germany’s financial regulator Bafin.
“As we confirmed last week, we are assisting with an investigation by German law enforcement authorities and the firm is not the subject of any investigation,” a Perella Weinberg spokesperson told Bloomberg.
Immigration officials released 521 convicted criminal aliens and 795 with pending criminal charges in December 2022, per data released by U.S. Immigration and Customs Enforcement (ICE).
The number of convicted criminal aliens and those with pending charges released was up by 58 percent from the month prior and 48 percent from October 2022.
Convicted criminals are defined as people who violate immigration law and have a criminal conviction at the time they’re taken into custody by ICE. The exact convictions aren’t detailed.
Other immigrants have pending criminal charges at the time of arrest.
Most of the releases stemmed from orders of recognizance, or an interim determination that the alien in question is “not a detention priority.”
Others were under orders of supervision, were released due to a field office being “unable to obtain a travel document,” or were put on parole. The latter is a case-by-case determination for “urgent humanitarian reasons or significant public benefit” enabled by federal law.
“The law explicitly requires that those who cross the border illegally be detained, but the Biden administration clearly doesn’t want to detain or deport anyone. So it isn’t surprising that they are releasing criminal aliens as well,” Ron Kovach, press secretary at the Federation for American Immigration Reform, told The Epoch Times via email. “Public safety and the rule of law are under attack to advance their radical open borders agenda.”
Immigration officers told The Washington Times, which first reported on the data, that the releases stemmed from wanting to clear out room in preparation for the end of Title 42, a public health order that gives authorities the ability to quickly expel some illegal immigrants due to concerns that they may have COVID-19.
ICE didn’t dispute the report but declined to comment.
Authorities also released more than 28,000 immigrants in December 2022 who violated immigration law but didn’t have a criminal conviction or any pending charges beyond the immigration law violation.
Another 203 convicted criminals were bonded out, or given bond by a judge or a DHS official after a court hearing. Another 91 were bonded out with pending criminal charges. And another 1,414 were bonded out with no convictions or pending charges.
Early statistics from January indicated the numbers might decline from the December 2022 levels.
The numbers come after the termination of enforcement proceedings against tens of thousands of illegal immigrants because authorities failed to provide documents telling the immigrants to appear in court.
“What caused this substantial spike in incidences of DHS officials not filing an NTA after you took office and, consequently, tens of thousands of immigration cases against illegal aliens being dismissed because of DHS’s [Department of Homeland Security’s] failure to file paperwork?” a group of senators wrote (pdf) to Homeland Security Secretary Alejandro Mayorkas, a Biden appointee.
Illegal immigrant apprehensions and releases have skyrocketed since President Joe Biden took office and dramatically remade the U.S. immigration system to make it easier for illegal immigrants to enter and remain in the country.
Under federal law, U.S. authorities are supposed to hold illegal immigrants until their cases are resolved many illegal aliens claim asylum, but the claims are ultimately rejected after several years but authorities have said that they don’t have enough space to hold all of those whose cases are awaiting resolution. Federal officials have been using a program called alternatives to detention to release hundreds of thousands of aliens but have lost track of many of them.
President Vladimir Putin on Tuesday signed a decree ordering the establishment of joint military training centers with Belarus, in a potential sign that Russia's 'Union State' ally under Alexander Lukashenko is preparing to join the Ukraine invasion, which is soon to hit its one year mark by the end of February.
"In a decree published Tuesday, Putin tasked the defense and foreign ministers to conduct talks with Belarus and sign an agreement to establish the facilities," the AFP reports. "The document did not specify where they would be based."
Currently, Moscow and Minsk are participating in joint air force drills which are scheduled to last until Feb. 1st, and there's been an increase in Russian top level official visits to Belarus of late.
Putin had made a rare visit to Belarus on Dec.19, where he met with President Lukashenko in Minsk, and the two discussed the formation of a "unified defense space" - but no details were offered in terms of operational details involved in implementing such a plan.
Ukraine has meanwhile continued to fear that the Kremlin's next escalation and potential large-scale mobilization could involve the formal entry of Belarus into the war. Lukashenko had at the start of the invasion allowed Russian troops to use his territory as a launching pad.
Last week there were reports that Kiev offered Belarus a 'non-aggression' pact, which is without doubt geared toward preventing a feared Belarusian cross-border offensive. This also came amid claims that Russia is launching drones against Ukraine's energy infrastructure from Belarus.
Lukashenko had confirmed Ukraine's offer last week:
"On the one hand, they ask us not to fight Ukraine under any circumstances, not to move our forces there. They offer us to sign a non-aggression pact," Lukashenko told officials in a meeting in Minsk, according to the Belta state news agency. On the other hand, Ukraine has been training and arming people to fight Belarus, he added.
⚡️Pictures from today’s joint air drills between Belarus and the Russian federation, somewhere in southern Belarus. pic.twitter.com/VJTb2UnAcU
He again denied that there are any plans to send Belarusian troops into Ukraine, but he's also remained a staunch defender of Putin's order for Russia to invade, and has called out the "completely insane" actions of nearby NATO countries such as Poland and Lithuania.
The cost to fuel electric vehicles in the United States is higher than gas-powered cars for the first time in 18 months, a consulting company said.
“In Q4 2022, typical mid-priced ICE (Internal Combustion Engine) car drivers paid about $11.29 to fuel their vehicles for 100 miles of driving. That cost was around $0.31 cheaper than the amount paid by mid-priced EV drivers charging mostly at home, and over $3 less than the cost borne by comparable EV drivers charging commercially,” Anderson Economic Group (AEG) said in an analysis.
However, luxury EVs still enjoy a cost advantage against their gas-powered counterparts.
It costs luxury EV owners $12.4 to drive every 100 miles on average if they charge their cars mostly at home or $15.95 if they charge their cars mostly at commercial charger stations in the 4th quarter of 2022.
Meanwhile, the fuel costs for luxury gas-powered cars are $19.96 per 100 miles on average.
AEG is a consulting firm based in Michigan that offers research and consulting in economics, valuation, market analysis, and public policy, according to the company’s website.
The fuel costs in the analysis are based on real-world U.S. driving conditions including the cost of underlying energy, state taxes charged for road maintenance, the cost of operating a pump or charger, and the cost to drive to a fueling station, AEG said.
Insurers List Crashed Low-Mileage Tesla on Auctions: Analysis
Insurance carriers are sending low-mileage Tesla Model Ys to salvage auctions because they are too expensive to repair.
Of more than 120 Model Ys that were totaled after collisions, then listed at auction in December and early January, the vast majority had fewer than 10,000 miles on the odometer, according to a Reuters analysis based on online data from Copart and IAA, the two largest salvage auction houses in the United States.
Copart and IAA auction listings note whether the vehicles were involved in front, rear, or side collisions, and typically include after-crash photos of each vehicle. But the listings do not disclose specific details on the type of damage suffered.
Copart listings in some cases included the names of insurance companies that had bought back crashed vehicles, then listed them at auction. Those companies include State Farm, Geico, Progressive, and Farmers. Geico is part of Warren Buffet’s Berkshire Hathaway Inc.
A group of Swiss lawmakers has moved forward a proposal to allow countries to give Swiss-made weapons to Ukraine, in a move that would soften Switzerland’s centuries-old policy of neutrality toward foreign conflicts.
"The majority of the committee believes Switzerland must offer its contribution to European security, which requires more substantial aid to Ukraine," the Swiss parliamentary security committee said in a statement.
The decision would represent a significant break from the policy of Swiss neutrality, though its supporters insist that the measure would not violate their law of neutrality since Bern would not be sending weapons directly.
Switzerland’s neutrality has held strong since at least 1815, when Bern helped other European powers defeat Napoleon Bonaparte for the second and final time. Since then, the country has managed to avoid direct participation in any foreign conflict. Even during World War II, Bern studiously avoided taking sides in order to avoid being drawn into the war.
But the war in Ukraine has tested this policy. In May of last year, Swiss authorities agreed under pressure from the West to freeze the assets of several hundred sanctioned Russians, including President Vladimir Putin. Bern also closed its airspace to Russian planes.
Despite these shifts, allowing Swiss weapons to see the battlefield has so far been a red line. Last year, Switzerland denied several requests from Germany and Denmark to re-export Swiss-made arms to Ukraine.
The country is currently considering a similar request from Spain, but leaders in Bern have signaled that Madrid’s petition is unlikely to be approved.
If passed, the proposal would create an exception whereby Swiss weapons could be re-exported to an active war zone as long as they are used to fight "a violation of the international ban on the use of force."
Newly empowered House Republicans are kicking off their long-planned investigations into a wide variety of issues, beginning with hearings on the US-Mexico border crisis, the origins of Covid-19, and pandemic relief programs.
The House Judiciary Committee's first meeting of the new Congress, led by Chairman Jim Jordan (R-OH), will be "The Biden Border Crisis: Part I."
Then, the House Energy and Commerce investigations subcommittee will hold a hearing titled: "Challenges and Opportunities to Investigating the Origins of Pandemics and Other Biological Events," as part of its probe into the origins of Covid-19.
Meanwhile, the House Oversight and Accountability Committee, led by James Comer (R-KY) will kick off a hearing on waste, fraud and abuse related to federal pandemic spending, The Hill reports.
"I don’t think history will be kind to the PPP loan program," said Comer during a Monday appearance at a National Press Club event, referring to the program that provided businesses with forgivable loans. "I think it’ll be eventually viewed in the same manner that the big bank bailouts were when people find out where a lot of that money was going."
Republicans had been plotting extensive investigations into the Biden administration for more than a year before the midterm elections. Speaker Kevin McCarthy (R-Calif.), in preparation for taking the House majority, organized GOP members into “task forces” to come up with oversight and legislative priorities. Republican members of committees started investigations last year when they were in the minority.
Republicans now have control over committee hearing topics, a better chance of getting answers from administration officials, and are armed with subpoena power to compel testimony and documents though no committee has used it yet.
Next week, the Oversight panel is set to hold a hearing on the U.S.-Mexico border and a hearing with former Twitter employeesabout the platform’s suppression of the New York Post’s story on the Hunter Biden hard drive in 2020. -The Hill
Speaking of the Bidens, the Oversight panel is also conducting an 'extensive probe' into the business dealings of President Biden's family which will focus on Hunter Biden.
Republicans on the House Oversight, Judiciary and Intelligence committees have also sought information related to President Biden's mishandling of classified information, while the House Foreign Affairs and Armed Services committees are going to be investigating the botched withdrawal from Afghanistan.
And in what will hopefully take the spotlight - House Republicans have formed the Select Subcommittee on the Weaponization of the Federal Government under the House Judiciary Committee, in response to those who wanted a "Church-style" committee to investigate how the DOJ and intelligence agencies were used in a character-assassination plot against former President Trump and others.
Last week I posted an article on the implosion of the official vaccine narrative.
That’s a controversial topic so not surprisingly it generated some heat on both sides. And a few readers expressed the wish that I’d stay in my lane (precious metals investing) and avoid venturing into unrelated and less well understood territory.
But believe it or not, the public health establishment losing its credibility is related to precious metals, via something called the trust horizon. It works like this: When things are good and the people in charge of big systems seem to be running them well, we’re content to trust the experts. We keep most of our money in banks, brokerage houses, and crypto wallets that exist for us only as websites. We buy produce that’s grown in a different hemisphere and shipped via boats, trains, and trucks to corporate chain grocery stores. We vaccinate ourselves and our kids according to the schedules set by the NIH or the CDC. We pop pills on our doctor’s orders without doing any research. We eat processed foods on the assumption that the FDA keeps them free of dangerous additives. And we believe what we see on cable news.
In other words, our trust horizon, defined as the distance from ourselves at which we’ll believe what we’re told, is global. We assume everything everywhere is working for our benefit and we’re thus willing to put our welfare in those distant hands.
But let some big systems fail to take proper care of us and we pull back, finding people and institutions closer to home that we can see and judge first-hand. We move our money out of distant banks and brokers and into local credit unions whose managers live down the street. We start buying groceries from farmers markets or directly from local farmers. Instead of popping whatever pill is standard for our ailments we look into “food as medicine” and other lifestyle remedies like exercise, supplements, and meditation. We homeschool our kids and join gun clubs. We buy homesteads and start raising chickens.
So where are today’s Americans on the trust horizon spectrum? Well, the military industrial complex is starting (potentially nuclear) wars all over the place. Government debt is growing exponentially. Wall Street has turned the markets into one big casino. Universities have become (very expensive) insane asylums. Congress is full of insider traders who amass fortunes while “serving the public.” And our presidents, well, insert your sarcastic phrase here.
It's safe to say that for a growing number of disillusioned people, trust now extends to – maybe -- the governor’s mansion, city hall, local farmers, their church and one or two community banks. And that’s about it.
Where does gold come in?
The biggest of the big systems that the experts have failed to manage is money. If we can’t trust the monetary authorities to maintain the value of the dollar (and in the past year we’ve learned that we emphatically cannot) then we need other forms of money to trust. And that would be gold and silver, the forms of money that disillusioned people have been running to since literally before the Roman Empire.
The advantage of precious metals lies with the concept of “counterparty risk.” Fiat currencies and pretty much everything else in today’s world require someone (the counterparty) to keep a promise for the thing in question to perform as advertised.
For your dollars to hold their value, the Fed must keep the money supply under control. For your bank account to work your bank has to stay solvent. Likewise your brokerage house. But gold and silver have no counterparty risk. No one must keep a promise for them to stay valuable. They are what they are, regardless of the behavior of the world’s experts. That’s why those experts hate precious metals and why regular people rediscover them every few generations.
Looked at this way, you can draw a direct line from the vaccine mess to gold and silver coins and bars stored in a safe place. And the line is getting thicker and stronger with every new scandal.
Here we go again... French President Emmanuel Macron in Monday comments signaled openness to sending Ukraine advanced fighter jets, something which Kiev has broadly asked its allies for since nearly the start of the Russian invasion.
"Nothing is excluded in principle," Macron said immediately following talks with Dutch Prime Minister Mark Rutte when pressed by reporters about the question of fighter jets for Ukraine. The Dutch premier himself had weighed in too saying, "There is no taboo but it would be a big step." But he noted, "It is not at all a question of F-16s, there has been no demand (from Ukraine)."
Macron added that the French "are not making this request at the moment for fighter jets" - in what appears a first confirmation that the Ukrainian government has not yet gone through with a formal ask. Macron's fresh remarks, however, are likely to be seen from Kiev as an invitation to proceed with a formal request, while will putting more pressure on Paris and the Western alliance. Ukrainian officials have long been going through Poland, it seems, to press the jet issue with NATO command in Brussels.
Macron stipulated that jets for Ukraine must "not be escalatory" - meaning that they would "not be likely to hit Russian soil but purely to aid the resistance effort." But obviously advanced fighters would be escalatory by the very nature of sending them after Moscow has reiterated its "red lines".
As for the rest of Europe, on the same day that the White House said that it would not be sending jets, Britain's Prime Minister Rishi Sunak said it would not be practical.
"The UK’s … fighter jets are extremely sophisticated and take months to learn how to fly. Given that, we believe it is not practical to send those jets into Ukraine," a spokesperson for the British prime minister told reporters. "We will continue to discuss with our allies about what we think what is the right approach."
Indeed given training on the Abrams M1 tank could take at minimum six months, something as sophisticated as Western-made fighter jets could take years for pilots unfamiliar with their systems to get combat ready on. Germany too has issued a firm "no" amid mounting pressure from Ukraine for jets.
Meanwhile it's no surprise that the European country pressing the hardest to send jets continues to be Poland. Warsaw has been pressing the rest of NATO to transfer jets since the opening months of the war.
On Monday Polish officials expressed readiness to send US-made F-16s to Ukraine, but emphasized it would only do so in coordination with NATO. "We will act in full coordination here,"Polish Prime Minister Mateusz Morawiecki said.
Since he started lobbying for F-16 deployments so quickly, is it rude to point out that Admiral Stavridis is a Managing Director of the Carlyle Group, whose recent acquisitions include StandardAero, a global defense contractor that provides maintenance services for F-16 engines https://t.co/pgdBROIywf
A spokesman for the Ukrainian presidency's office, Andrii Yermak, posted a statement to Telegram saying "Work on obtaining F-16 fighters continues. We have positive signals from Poland, which is ready to pass them on to us in coordination with NATO."
The Ukrainian official then aimed his statement at Moscow, stressing provocatively that "Tanks, fighter jets a great combination for turning Russian enemies into fertilizer."
Markets have a habit of getting over-excited. They get FOMO and become over hasty. Although the outlook is improving, there is certainly little to justify some of the more speculative hype dominating market moves. Time a bit of rational thinking and common sense – consider Tesla as an example of misplaced hopes...
Common Sense vs Hastiness
This morning I find myself struggling to figure out this market. Markets are broadly risk-on, when all my logic is screaming risk-neutral until we really see how inflation and interest rates are likely to settle. We will get more direction when we see and hear what Central Banks actually do – the Fed tomorrow and the BOE and ECB on Thursday – rather than how the market hopes they will act!
The fact the IMF is now revising global GDP forecasts higher in the light of US strength, China reopening and general resilience is positive. It’s clear the overall global picture is much less bleak than it seemed just a few weeks – a clear example of my mantra: “Things are never as bad as you fear, but seldom as good as you hope.”
Curiously, I am less worried about macro geopolitics– China will have absorbed lessons from Ukraine, and is as keen for an economic boom as anyone else. Russia is effectively a busted but rabid mad dog – which is a problem. Energy insecurities are being addressed. That said, we should be looking at a new World Order – figuring out what the renimibisation of commodities, the rise of an independent post-US Gulf as the world’s premier capital spigot, and the emergence of a real South Asian economic growth block, collectively mean. Clue: significant.
On the immediate threat-board I’m worried how potential failure in domestic politics across the West will play out. I can’t help but feel the latest political incompetency in the UK spells further destabilising ructions within the Conservative Party to come.
But what worries me most is the apparent return of Overly Euphoric markets. Stocks are behaving as if earnings are about to boom, consumer and government spending is about to go through the roof, and rates are going to return to negative yields – all of which are highly unlikely. The cost of living crisis, unsustainable debt, embedded inflation, plus the need to unravel the consequences of a decade of over-easy rates, need to be addressed – not brushed under the equity market carpet!
The worst thing you can ever believe about markets is they are intelligent. They aren’t. They are simply the sum of what everyone is thinking. The critical thing about the sum of what everyone is thinking: not everyone is right. Some views are easier to accept than others. This becomes important in equity markets.
The worlds of equity tend to be inhabited by optimists – who are always prepared to believe the economic glass is half full. This makes then susceptible to the dread market condition of Euphoric Shock – and believe foolish things. The issue with Euphoria is its dangerously infectious and triggers the dangerous conditions of FOMO (fear of missing out) and Hastiness. This means equity markets are vulnerable to optimistic upside meaning stocks tend towards overvaluation.
In contrast, debt/fixed income investors are a dour bunch of pessimists who spend their lives staring into half-empty cups – always assuming the worst about everything. They are vulnerable to DnG – Doom and Gloom – always assuming the worst is yet to happen. As a result bonds tend to be soberly priced to the downside risks.
Its more fun to go to parties with equity investors, but you are likely to have a least bad hangover if you go to ones hosted by bond traders…. Human history is littered with examples of putting our trust in the wisdom of others, when the reality is they didn’t have a clue what was happening. Getting it absolutely wrong is not uncommon. Particularly in markets.
A good example may be the current furore over Indian ports-to-energy-to-everything confabulation called Adani. (Interesting to see Gulf SWF’s ostentatiously subscribing to the new equity IPO yesterday – what’s the deal one wonders?) Hindenburg called Adani out as swimming naked last week, and the company has been forced into damaging rebuttals that have only increased the sense they are wrong-uns. $25 bln of debt now looks distinctly distressed in the face of the many questions investment committees and auditors will be asking from their positions of perfect hindsight. That there might be “inconsistencies at the core” of one of the largest Indian companies will, I am sure, be a matter of considerable shock and surprise to many investors… Ahem..
No matter how much we analyse, consider, stress test, scenario model, and delve into the market outlook – trying to predict the outcomes.. there is always that element of doubt. What am I missing about the downside? What factors haven’t I spotted that will support upside? It boils down to that most rare of market imputs.. Common Sense.
But in periods of Euphoria – we have the onset of FOMO and Hastiness. They act like leverage. This is a little understood market phenomena – hastiness occurs when FOMO is rife, and people feel they need to make decisions in a hasty way. Hastiness is the antithesis of Common Sense.
Let me try to explain by picking one of the overly-hasty stock stories of the current market: Tesla.
Regular readers will know I am not a fan of Elon Musk, but I have no problem with Tesla. It’s a very good auto company. They deserve full credit for the emergence of the EV market, and should probably trade at a premium to the sector – while they retain a clear market lead. But today, Tesla is massively overpriced for what it is and what can happen around it. I see its fair value being on a P/E about 14/15 times – at the moment it trades on 55! Its auto-competitors trade in single digits. It is a good firm, but way, way too expensive to its future prospects.
I simply don’t get the current enthusiasm for Tesla. The stock is up nearly 50% this year. 66% of analysts rate it a buy, only 9% reckon it’s a sell. Following rather puffy results last week, the stock soared 33% over the week. That’s staggering for a stock that already looked overpriced, but it can still be explained by factors like “the Musk effect”: which basically boils down to the hope his companies will still produce extraordinary returns, no matter what the pedestrian truth might be. There is a large element of froth.
One of my colleagues – who is a Tesla fan – sent me a summary of all the positive Tesla comments from analysts. They boiled down to the following:
Improved visibility/demand trajectory.
2mm units in the coming year is very achievable.
Strong quarterly results and corporate message.
Building a moat round customer base by cutting margins
Price cuts will trigger further demand, swamping production.
Order rates outpace capacity by factor of 2:1
Battery production increasing.
Falling auto margin will be offset by stronger energy and services revenues.
Maintaining leadership in EVs.
Good positive stuff.. They paints a picture of a company at the forefront of its sector. But nowhere in any of the buy-side analysis is any of the kind of stuff we used to read about Tesla when it was described as the most innovative auto disruptor on the planet. The current reports are surprisingly quiet about the kind of data driven, tech multipliers, or the auto-driving revolution the analysts promised us were going to make Tesla worth trillions – back when it was a “disruptive”, hi-tech, hi-growth stock.
Now it’s just a stock – albeit a good one. Today. Tomorrow is another place entirely.
Telsa has matured. Forget the hype – all that matters is the price. What makes Tesla worth 50 times earnings when Toyota is worth 10 times but produces 7 times as many cars? Telsa makes great EVs, but so do lots of others. I recently drove the new Volvo. Not a Tesla.. but very fine in its own way, and highlights the competition is learning. In China, where analysts expect Tesla to do well, it faces massive competition. It is too many years since Tesla introduced a new model. Detriot, Germany, Japan and elsewhere have all played catch-up and filling Tesla’s shallow competitive moat.
What has happened to Tesla’s E-Truck? What happened to autonomous driving? How does cutting their margins (they slashed car prices a few weeks ago) justify a stock rally – when halving its margins means it has to run twice as fast to stand still?
You could argue it’s all about outlook – as EVs increasingly dominate the Autosector, Tesla’s 17% market share will increase. That’s fine – let’s assume it becomes as large as Toyota. Why would it be worth a greater multiple? Now it’s a large, growing business, but recent price cuts demonstrate its competitive moat is shallow. Declining margins and increasing competition isn’t a good look – especially when all the evidence on consumers struggling to keep up payments on car leases is looking bleak.
One analyst, Vijay Rakesh of Mizuho was in the press saying that lates numbers show “good results” and “margins better than feared”. He warned about “weak consumers and affordability” as challenges, but he still expects a further 33% upside to $250! Why?
I remain highly sceptical and unconvinced. If EVs really are the future of personal transport. I have my doubts across lithium batteries, power grids and chargers, and alternatives. I expect the market will get even more competitive. It took 20 years for Tesla to go from “interesting story – but will it ever mean anything” to potentially the most overpriced stock in market. Who knows who may do create another new paradigm shift in autos via hydrogen, or capacitance, or hybrid? Anything is possible.
Look at the history of any other new emerging tech sectors and ask how many of the original aircraft manufacturers survived the first 30 years… Whatever happened to Wright Brothers, Sopwith, Fokker, Curtis…
