Month: January 2024

Boeing announced better than expected revenue, profits, and cash-flow for Q4…

All sectors of its business beat top-line expectations:

• Revenue $22.02 billion, estimate $21.06 billion

  • Commercial Airplanes revenue $10.48 billion, estimate $10.04 billion

  • Defense, Space & Security revenue $6.75 billion, estimate $6.17 billion

  • Global Services revenue $4.85 billion, estimate $4.84 billion

But, that good news was dominated by news that the beleaguered planemaker pulled guidance…

“While we often use this time of year to share or update our financial and operational objectives, now is not the time for that,” Chief Executive Officer Dave Calhoun told employees in a memo.

“We will simply focus on every next airplane while doing everything possible to support our customers, follow the lead of our regulator and ensure the highest standard of safety and quality in all that we do.”

And the result of that… shares are rising…

…presumably, no guidance is not bad guidance?

And finally there’s this…

…as opposed to “focused on DEI”?

Paramount Global Class B shares rocketed higher in premarket trading after a report from Bloomberg specified media mogul Byron Allen offered $14.3 billion to purchase all of Paramount Global’s outstanding shares. 

The report, citing “people familiar with the terms,” said Allen offered $28.58 for each voting shares of Paramount, a 50% premium versus non-voting shares. Including debt, the deal’s total value is worth about $30 billion. 

Around 0700 ET, Paramount’s non-voting shares jumped 17% and soared as high as 22% earlier this morning. If the gains hold into the cash session, this would be the largest intraday move for the stock since March 2020. 

Bloomberg confirmed with Allen’s firm, Allen Media Group, that the centimillionaire (near billionaire) made an offer:

“This $30 billion offer, which includes debt and equity, is the best solution for all of the Paramount Global shareholders, and the bid should be taken seriously and pursued,” Allen’s company said in the statement.

People familiar with the deal said Allen plans to sell the Paramount film studio, real estate, and other intellectual property. He wants to keep TV channels, including the Paramount+ streaming service, but the people did not explain why. 

Paramount owns major brands, including CBS, Showtime Networks, Paramount Pictures, Nickelodeon, MTV, Comedy Central, BET, Paramount+, and Pluto TV.

Bloomberg noted Allen “sent Walt Disney Co. Chief Executive Officer Bob Iger a text offering $10 billion, albeit tentatively, for Disney’s flagship ABC broadcast network as well as the FX and National Geographic cable channels. Iger, who had previously suggested he’d considered offers, later said he didn’t want to sell.” 

It’s unclear what Allen’s precise plan is. He seems to be focusing on either media entertainment outlets or news stations. The coincidence of his offer with the beginning of the presidential election cycle might hint at his intentions.

Via SchiffGold.com,

Valentine’s Day is here and you might find yourself buying (or wishing you had remembered to buy) a Valentine’s Day present. A classic romantic present involves gold, diamonds, and sometimes both. And both diamonds and gold seem at first blush to have a lot in common.

Both are or at least can be beautiful. Diamonds are one of the shiniest gemstones (high refractive index if you’re science-minded) and can be perfectly clear or come in a wide range of colors. Gold is of course famously appealing to look at. Both diamonds and gold convey luxury and wealth, and both are regularly used to make luxury products such as rings, bracelets, watches, and earrings. 

The expense of both diamonds and gold is one reason why it’s so common for both diamonds and gold to be part of an engagement ring- the expense of these materials makes engagement rings expensive which helps them serve as a costly sign of commitment. 

Some have argued that the similarities between diamonds and gold are even greater, given that some are turning to diamonds as a store of value and as an investment. But this overlooks why gold has historically been preferred as a store of value to diamonds, and how new technological developments have made the differences between diamond and gold even greater.  

First, diamonds lack the history of gold. While gold has spontaneously emerged as a treasured metal and as a store of value or as a currency from civilization to civilization, the emergence of diamonds as a valuable commodity is much more recent and historically contingent. While diamonds were always recognized as gemstones, broad-based demand for diamonds did not emerge in the West until the 1800s and their famous role as the central stone in an engagement ring did not emerge until the mid 1900’s due to savvy marketing campaigns.

So demand for gold is more stable and organic than the demand for diamonds. When central banks look to preserve the value of their currency, they often increase strategic gold reserves, not strategic diamond reserves. 

While diamonds and gold might be seen as similar because both have industrial uses as well as usage in jewelry and investment, that overlooks the fact almost all gold is used for jewelry or as an investment while 80% of diamonds are used by industry. While every single ounce of gold could be used in industry, jewelry, or as an investment, because gold is fungible and divisible, the opposite is true for diamonds. Diamond value varies dramatically between individual stones. The value of a diamond depends on its size, its color, its clarity, and its cut. Many diamonds are worthless for any non-industrial purposes. While gold can be used as bullion converted to jewelry then melted back into bullion, cutting a diamond over and over would destroy its value. Demand for gold is driven by every sector. Demand for small industrial diamonds is not driven by demand for large diamonds that could feature in jewelry, and vice versa. 

Both gold and (gemstone quality) diamonds are valuable because of their relative rarity compared to demand. Gold is rare because the element, gold, is genuinely rare. Diamonds have been rare, because while they are made of carbon, a common element, the specific arrangement of carbon atoms that make up a diamond is rarely produced in nature, at least not in the form of large diamonds. 

But advances in technology have changed that. It is now much cheaper to buy a lab-grown diamond for an engagement ring than to buy a diamond mined out of the earth. And these lab-grown diamonds are not stones that happen to resemble diamonds such as cubic zirconia, they are genuine diamonds created in a lab. Advances in technology have driven down the prices of both lab-grown and naturally mined diamonds. The value of lab-grown diamonds is down by over 70% since the start of 2016 and even natural mined diamonds have fallen by over 25%. It is unlikely that technological improvements in creating lab-grown diamonds will stop improving meaning lab-grown diamonds will be able to supply diamonds to both the industrial market and the jewelry market. 

If you think diamonds are prettier than gold, I wouldn’t argue. But I know which one I would rather have as part of my investment portfolio. 

On Tuesday night, a massive explosion was reported on part of a natural gas pipeline near the Texas-Oklahoma border. 

Local media KVII-TV reports emergency responders from across the area, including the Booker Fire Department in neighboring Texas, responded to the pipeline fire near Laverne, Oklahoma, around 9:45 pm local time. 

“Crews from several departments are staged at a safe distance until the gas can be turned off,” Booker Fire Department said in an update. 

Footage uploaded on social media shows the pipeline fire. Several media outlets have said flames reached as high as 500 feet. 

🚨#BREAKING: Significant gas pipeline has exploded releasing massive flames hundreds of feet into the sky ⁰⁰📌#Elmwood | #Oklahoma

Currently, numerous emergency crews and authorities are on-site in Elmwood Oklahoma, responding to a significant uncontrolled gas pipeline… pic.twitter.com/YB7P8Brjv8

— R A W S A L E R T S (@rawsalerts) January 31, 2024

🚨#UPDATE: Here is a Nest Cam video capturing the moment when the pipeline explosion initially occurred. pic.twitter.com/Fn71VUnz24

— R A W S A L E R T S (@rawsalerts) January 31, 2024

Good question.  

Is it infrastructure sabotage season?

pic.twitter.com/Jqg0gESGr5

— Marc 🇺🇸 (@gopher_marc) January 31, 2024

According to the fire department, the affected part of the NatGas pipeline must be depressurized before fire crews can combat the fire.

US NatGas futures held steady around $2/MMBtu as the pipeline situation did not concern traders. Prices are under pressure on milder weather trends for the Lower 48 through the first half of February. 

The cause of the pipeline fire remains unclear.

By Greg Miller of FreightWaves

The Red Sea crisis — and the Middle East situation in general — is worsening. There’s growing conviction that shipping diversions around the Cape of Good Hope will increase in scope and last much longer than initially expected. That should be good news for shipping stocks over time, due to durably longer voyage distances.

The Houthis hit the JP Morgan-owned product tanker Marlin Luanda with a ballistic missile on Friday, setting a cargo tank on fire. The tanker was chartered by trading house Trafigura and loaded with Russian naphtha. The fire was extinguished on Saturday, with all crew safe.

On Sunday, a drone attack by an Iranian-backed militia killed three U.S. service members and injured at least 40 more at a U.S. military site in Jordan. The Biden administration has vowed to respond, raising the specter of a wider Middle East conflict.

“Red Sea diversions are on the rise as continued attacks on vessels in the region are prompting more shipping companies to avoid transiting the area,” said Jefferies shipping analyst Omar Nokta in a client note on Monday.

The vast majority of larger container ships already avoid the Red Sea, and detours are rapidly spreading to bulk commodity shipping.

Citing data from Clarksons, Nokta said that crude tanker transits of the region are now down 22% versus their 2023 average; at the beginning of this year, they were down 5% from last year’s average. Product tanker transits are down 51% versus 2023, after being down 29% versus last year’s average at the beginning of the year, with liquefied natural gas carrier transits down 87% (from 36%) and liquefied petroleum gas carrier transits down 62% (from 23%).

‘The script has flipped’ for Zim

Nokta significantly upgraded his view on Israeli container liner operator Zim, maintaining that “the script has flipped” and Houthi attacks turned Zim’s business “from cash burn to cash machine.”

Nokta had previously estimated that Zim would post adjusted net losses of $260.1 million this year and $506.3 million next year.

His new forecast is drastically different. He projects adjusted net income of $751 million this year, followed by losses of $337 million next year.

“Red Sea diversions are likely to continue for an extended period, tightening capacity for longer,” he said.

Zim’s stock closed up 7.5% on Monday, on a day when most shipping equities ended in the red.

‘Tanker equities should also be added to the list’

According to Evercore ISI shipping analyst Jonathan Chappell, “The adage is that one should stock up on canned beans in times of war. We clearly do not make light of these tragedies, but tanker equities should also be added to the list.”

Chappell noted that in periods of geopolitical risk, shipping stocks provide material beta (a measure of volatility versus the broader market). He presented data on outsized tanker stock gains versus the S&P 500 since the invasion of Ukraine and the Hamas attacks on Israel.

Deutsche Bank analysts Amit Mehrotra and Chris Robertson wrote: “We believe the recent attacks will result in even more ship owners and operators diverting vessels from the area, which could put further upward pressure on spot rates in the coming week.”

“We believe the companies with exposure to the mid-sized crude and product tanker segments will benefit the most from the disruptions,” they said, pointing to Frontline, International Seaways and Scorpio Tankers.

Did the Federal Reserve jump the gun on the pivot?

Last month, investors cheered after the Fed announced that interest-rate cuts are coming in 2024. Since then, the S&P 500 has powered to new record highs, and technology stocks have gone bananas. 

The latest swap contracts tracking Fed meeting dates for the full year 2024 showed 70% odds for 5.2 cuts. 

The unexpected pivot (as outlined earlier) might be premature and may have been a gift to the Biden administration in an election year. 

An example of a premature pivot and no impending economic doom could be news from Lamborghini on Tuesday that supercars are sold out until 2026. 

“It’s a bit early to give a prognosis, but we have no sign of weakness in the market,” Chief Executive Officer Stephan Winkelmann told reporters on a call. 

According to Bloomberg, the Italian supercar maker logged over 10,000 vehicle sales last year. Its first plug-in hybrid model, the Revuelto, was a massive hit with the rich, with two years of backlog orders. 

The trend of ultra-wealthy elites splurging on supercars indicates that the economy isn’t slowing down as quickly as thought, suggesting that an imminent need for rate cuts might be unnecessary. 

By Tsvetana Paraskova of OilPrice.com

Russia and China are still at odds over the costs and delivery prices of a new major Russian natural gas pipeline to China, which could lead to delays in construction, according to the prime minister of Mongolia, which is planned to host a section of the infrastructure.  

“The Chinese and Russian sides are still doing the calculations and estimations and they are working on the economic benefits,” Mongolia’s Prime Minister Luvsannamsrai Oyun-Erdene told the Financial Times in an interview published this weekend.  

“Those two sides still need more time to do more detailed research on the economic studies,” the Mongolian official told FT.

The delay in the agreements suggests that Russia would have to wait more years than originally anticipated in order to have a larger gas pipeline outlet in China that could partly replace the gas volumes it has lost on the European market.   

Currently, Russia supplies pipeline gas to China via the Power of Siberia pipeline, one of the biggest projects recently completed by Gazprom and the first conduit for Russian gas to China. Now, there’s talk about the Power of Siberia 2, but negotiations between Russia and China haven’t progressed much. An agreement on the Power of Siberia 2 has not been reached yet due to some sticking points, including the prices at which Gazprom will deliver the gas.

The Power of Siberia 2 pipeline was designed to ship gas from Russia’s Western Siberia Altai region to northeast China via Mongolia.

Russia could launch construction of the Mongolia section of the major natural gas pipeline to China as early as in the first quarter of 2024, Russian Deputy Prime Minister Viktoria Abramchenko said at the end of last year.

The design for the Mongolian section of Power of Siberia 2, Soyuz Vostok, is expected to be approved in the first quarter of 2024 and construction could begin then, Deputy Prime Minister Abramchenko said in October 2023, as quoted by Russian news agency TASS.

What are the roots of a living language, and how many are at risk of extinction?

This graphic via Visual Capitalist, from Stephen Jones, CEO of Derivation.co, shows the state of living languages around the world.

Mapping Out Living Languages

Across the 7,168 living languages today, 43% are at risk of being endangered.

In fact, a language dies off every 40 days. The vast majority of endangered languages are found in Indigenous communities, which risk the loss of culture and knowledge that they contain. At current rates, 90% of the world’s languages could disappear over the next 100 years.

According to data from Ethnologue, languages are classified across 12 states of vitality and three broader categories:

• Endangered: Children do not learn and use the language, it is no longer the norm.

• Stable: A language is used in the home and community, all children learn the language, but it is not formally used in institutions.

• Institutional: A language is used beyond the community across institutions.

Today, over 88 million people speak endangered languages.

The region of Oceania has the largest density of endangered languages, with 733 at risk. With a population of 8.8 million, Papua New Guinea is home to the most languages in the world. Often, small linguistic communities will have only a couple hundred people speaking the language.

Africa has 428 that are endangered, many which are clustered around the equator. Displacement, drought, and conflict are some of the key reasons that languages risk being endangered.

In North and Central America, 222 languages are at risk of extinction. In fact, 98% of Indigenous languages in the U.S. are endangered, one of the highest rates in the world.

On the other end of the spectrum, there are 490 institutional languages with 6.1 billion speakers worldwide.

Revitalizing Languages

Thanks to key initiatives, languages can be preserved.

For instance, during the 1970s, the Māori language was spoken by just 5% of Māori schoolchildren. Fast forward to today, and 25% speak the language, driven by efforts from the Māori, leading the government to protect it by law.

In Hawaii, just 2,000 people spoke the native language in the 1970s. After the government ensured it was taught in schools, the number of speakers jumped to 18,700 in 2023.

Advancements in AI are also providing tools to preserve languages. Google and Microsoft, for instance, are developing AI tools that can translate languages at impressive speeds, allowing for dying languages to become more accessible so they are not erased.