Month: December 2024

Super Micro Computer said an external review of its business found no evidence of wrongdoing and that the company will appoint new top financial leadership.

The company is looking for a new chief financial officer, chief compliance officer and general counsel, it said in a statement Monday.

On November 5, 2024, the Company announced that the Special Committee’s investigation preliminarily found that the Audit Committee had acted independently and that there was no evidence of fraud or misconduct on the part of management or the Board of Directors.

The Special Committee’s final findings support those initial findings, and the Company is now disclosing the details of the Review, along with measures recommended by the Special Committee.

The Special Committee’s investigation was intended to assess whether the information brought to the Audit Committee’s attention by EY, and certain other matters identified during the Review, raised substantial concerns about (i) the integrity of the Company’s senior management and Audit Committee, (ii) the commitment of the Company’s senior management and Audit Committee to ensuring that the Company’s financial statements are materially accurate, (iii) the Audit Committee’s independence and ability to provide proper oversight over matters relating to financial reporting, and (iv) the tone at the top of the Company with regard to rehiring certain former employees and financial reporting.

The Special Committee’s key findings are summarized as follows:

• Management and Audit Committee integrity: The evidence reviewed by the Special Committee did not raise any substantial concerns about the integrity of Supermicro’s senior management or Audit Committee, or their commitment to ensuring that the Company’s financial statements are materially accurate.

• Audit Committee independence: As to the matters investigated by the Special Committee, the Audit Committee demonstrated appropriate independence and generally provided proper oversight over matters relating to financial reporting. The Special Committee also had no reservations about the independence of the Audit Committee and each of its members.

• Appropriate tone at the top: With respect to the rehiring of former employees, the tone at the top of the Company was appropriate and fully consistent with a commitment to proper financial reporting and legal compliance.

And due to the lack of problems found, the board says no restatement of reported financials is expected.

As announced on November 18, 2024, in its compliance plan to Nasdaq, the Company believes it will be able to complete its Annual Report on Form 10-K for the year ended June 30, 2024, and its Quarterly Report on 10-Q for the fiscal quarter ended September 30, 2024 and become current with its periodic reports within the discretionary period available to the Nasdaq staff to grant.

As previously disclosed, the Company does not anticipate any restatements of its quarterly reports for the fiscal year 2024 ended June 30, 2024, or for prior fiscal years.

Specifically, with reference to Revenue recognition and sales practices

• Based on a thorough review of 52 sales transactions from April 1, 2023 to June 30, 2024, including two sales transactions specifically designated by EY, the Special Committee did not disagree with any of the Company’s revenue recognition conclusions for any quarter during this period.

• The Special Committee reviewed underlying sales transaction information (including sales orders, purchase orders, shipping documents, payment information, and the Company’s revenue recognition determinations), discussed transactions with accounting personnel, and conducted email reviews as appropriate. The sample was focused on sales that included large dollar amounts, involvement of rehires, discussions with now former auditors, customers with high sales concentrations at quarter ends, and/or changes in delivery dates.

• The Review also examined merchandise returns and warranty practices to assess if there was any pattern or practice of shipping non-working or incomplete products near quarter ends.

• Based on its investigation, the Special Committee did not disagree with the Company’s revenue recognition conclusions. Additionally, the Special Committee did not find evidence of a pattern or practice of the Company shipping incomplete products at or near quarter ends to recognize revenue.

• The evidence reviewed by the Special Committee did not give rise to any substantial concerns about the integrity of Supermicro’s senior management or Audit Committee, or their commitment to ensuring that the Company’s financial statements are materially accurate.

• The Audit Committee demonstrated appropriate independence and generally provided proper oversight over matters relating to financial reporting.

For now the market is happy about this…

Do we really trust the ‘independent’ investigation after an external auditor abandoned ship?

Among its findings, the independent Special Committee determined that the resignation of the Company’s former registered public accounting firm, Ernst & Young LLP (“EY”) and the conclusions EY stated in its resignation letter were not supported by the facts examined in the Review, the Special Committee’s interim findings reported to EY on October 2, 2024, or the Special Committee’s final findings.

Did EY just make it up?

That’s quite a dive from $122 to $17…

And, having found no evidence of misconduct, why did the company fire CFO David Weigand, and seek a chief compliance officer, chief accounting officer, and general counsel?

Back in April, when Intel stock was in freefall and yet still about 50% higher than where it is today, we said that it was time for the company’s well-meaning if absolutely clueless CEO, Pat Gelsinger, to resign.

Pat Gelsinger, it’s time pic.twitter.com/I421ZwSV9c

— zerohedge (@zerohedge) April 25, 2024

A few months later we followed up with an appeal that was pretty clear:

*INTEL SUSPENDING DIVIDEND STARTING 4Q 2024
*INTEL ANNOUNCES $10B COST REDUCTION PLAN

Someone. Fire. Gelsinger.

— zerohedge (@zerohedge) August 1, 2024

If only he had listened to us then, the once-iconic chipmaker would have been in a far better place today, and the outcome would still be the same because early on Monday Intel reported that Pat Gelsinger fired himself, when he and retired from the company and stepped down from its board of directors just as the company is in the middle of trying to execute on a turnaround plan.

Intel CFO David Zinsner and Intel Products CEO Michelle Johnston Holthaus are serving as interim co-CEOs while the board searches for Gelsinger’s replacement, the company said in a statement. Frank Yeary, independent chair of the board of Intel, will serve as interim executive chair.

Gelsinger’s departure is hitting at a tumultuous time for the US chipmaker. Once the industry leader in computer processors, the company is now working to preserve cash to fund a turnaround plan — one Gelsinger called the “most audacious rebuilding plan” in corporate history. The company has fallen out of investor favor amid a shift in the semiconductor industry toward artificial intelligence hardware. Companies are spending on computers built around accelerator chips for AI, an area where Intel’s offerings have barely made a dent.

“We know that we have much more work to do at the company and are committed to restoring investor confidence,” Yeary said.

“As a board, we know first and foremost that we must put our product group at the center of all we do. Our customers demand this from us, and we will deliver for them.”

It would have delivered for them long ago by firing Gelsinger, as the spike in the stock this morning makes abundantly clear.

And now just find a willing buyer since the stock is trading at a 50% discount just to the SOTP liquidation value of the foundries.

Authored by Brayden Lindrea via CoinTelegraph.com,

Elon Musk filed another motion to block ChatGPT-creator OpenAI from converting to a for-profit enterprise, while also alleging that it has been engaging in anti-competitive practices.

Musk accused OpenAI, its CEO Sam Altman, president Greg Brockman and stakeholder Microsoft of violating terms of Musk’s “foundational contributions to the charity,” according to his motion for a preliminary injunction filed on Nov. 30.

Musk co-founded OpenAI in 2015 and was an early board member until he left the company in 2018. 

He has since launched xAI — the firm behind AI chatbot Grok — which he said is falling victim to OpenAI’s anti-competitive practices.

“OpenAI’s path from a non-profit to for-profit behemoth is replete with per se anticompetitive practices, flagrant breaches of its charitable mission, and rampant self-dealing,” Musk’s lawyers wrote.

Extract from Elon Musk’s motion in the US District Court Northern District of California. Source: CourtListener

Through a “series of exclusive arrangements” with Microsoft, the two companies have engaged in “predatory practices,” enabling them to seize control of almost 70% of the generative AI market, lawyers for Musk said, adding:

“Microsoft and OpenAI now seek to cement this dominance by cutting off competitors’ access to investment capital, while continuing to benefit from years’ worth of shared competitively sensitive information during generative AI’s formative years.”

Allowing this to continue will hurt xAI and the public, which has become increasingly concerned about “rushed” and “unsafe” AI products, they added.

California law allows a nonprofit to convert to a for-profit stock corporation, but not to a limited liability company.

OpenAI said it remains nonprofit at its core but has established a for-profit subsidiary capable of issuing equity to raise capital and hire world-class talent. Still, those tasks would be administered at the direction of the nonprofit. 

An injunction to preserve what is left of OpenAI’s nonprofit character is the only “appropriate remedy,” Musk’s lawyers said.

“No objective observer can look at OpenAI today and say it bears any resemblance whatsoever to what it promised to be. Enough is enough.”

Source: Elon Musk

An OpenAI spokesperson slammed Musk’s latest attempt in a note to Cointelegraph:

“Elon’s fourth attempt, which again recycles the same baseless complaints, continues to be utterly without merit.”

In March, OpenAI leaked emails from Musk in 2015 showing support for the firm to find over $1 billion in funding to compete with the likes of Google and Facebook (now Meta).

OpenAI claimed Musk was harassing the firm in a related October filing.

“Since launching a competing artificial intelligence company, xAI, Musk has been trying to leverage the judicial system for an edge. The effort should fail; Musk’s complaint does not state a claim and should be dismissed,” OpenAI added.

In June, Musk threatened to ban Apple devices at his companies when Apple touted integrating OpenAI’s ChatGPT into its iPhone, iPad and Mac operating systems. Later, Apple launched Apple Intelligence on Oct. 28.

By Daphne Howland of RetailDive,

Despite the push to move up the holiday season to ease the constraints of one of the shortest shopping windows in years, plenty of people saved their lists for after Thanksgiving Day. 

Shoppers are expected to be careful about spending again at the holidays this year. For a couple of years now, inflation has dominated the news, obscured retail sales growth, shaken up consumers and even overshadowed the presidential election that took place early this month. While inflation has eased and some retailers have made a point of slashing prices in recent weeks, budgets continue to be tight for many households. They may not get much relief if the tariffs promised by now President-elect Donald Trump come to pass.

This could have consequences for holiday sales. Nordstrom earlier this week said that sales trailed off at the start of the fourth quarter, suggesting that the momentum it experienced in Q3 may not hold up.

Still, Black Friday was busy. This year, worldwide, Black Friday hit its peak at just after 2 p.m. Eastern time, according to Block, which tracked transactions across its Square, Afterpay, and Cash App Card platforms. U.S. retail sales (excluding auto sales) were up 3.4% compared to Black Friday last year, according to Mastercard’s SpendingPulse report, which measured in-store and online retail sales, included all payment types and was not adjusted for inflation.

Buy now, pay later plans helped finance purchases, driving 8.8% more in online spend than last year, reaching $686.3 million, per Adobe Analytics, which found that to be especially true for mobile shopping, with a 79.3% share compared to desktop so far.

“Our real-time insights show that consumers are comfortably in the gift-giving spirit as price reductions and deals occur across sectors, supporting budgets for holiday shopping,” Michelle Meyer, chief economist at the Mastercard Economics Institute, said in emailed comments.

Further numbers around Thanksgiving weekend sales will continue to be crunched in coming days, but here are the ups and downs of Black Friday so far.

Winners

E-commerce

Cyber Monday appears to be losing its meaning, with many shoppers using their phones and computers on Black Friday to make headway on their holiday lists.

Salesforce found that on Friday online sales in the U.S. rose 7% year over year to $17.5 billion, while Adobe found that they rose 10.2% to $10.8 billion. Between 10 a.m. and 2 p.m., $11.3 million was spent online every minute, per Adobe. 

“Crossing the $10 billion mark is a big e-commerce milestone for Black Friday, for a day that in the past was more anchored towards in-store shopping,” Vivek Pandya, lead analyst at Adobe Digital Insights, said in emailed comments. “And with consumers getting more comfortable with everything from mobile shopping to chat bots, we have tailwinds that can prop up online growth for Black Friday moving forward.” 

Chatbots and AI

The current buzz around artificial intelligence is giving rise to both fear and excitement, as questions swirl about the forward leap in tech and its effects, and they made their mark on Black Friday this year. AI and AI agents drove more than $14 billion in global online sales on Black Friday, and retailers employing generative artificial intelligence had a 9% higher conversion rate than those that didn’t, according to Salesforce.

Chatbots powered by AI were influential, as bot-driven clicks to retail sites rose by a whopping 1,800% compared to last year, Adobe found. A fifth of those surveyed by Adobe said they used chatbots to find deals, with 19% using them to find items and 15% using them for brand recommendations.

“Digital retailers who are using generative AI and agents in their customer service experiences saw a nine percent higher conversion rate compared to those who are not,” Caila Schwartz, director of consumer insights at Salesforce, said in emailed comments. “For an industry that is often concerned with margins, especially ahead of rising costs in 2025, this percent increase is a game-changer.”

Toys

The toy category has encountered some rough times lately, with an 8% downturn in sales last year. Circana analysts over the summer warned that signs of a turnaround earlier this year held no guarantees, given ongoing macroeconomic uncertainty around unemployment, record consumer debt, student loans and consumer confidence.

But toys had a good day on Black Friday, with online sales up 622% compared to average daily sales last month, according to Adobe. Top sellers included Harry Potter Lego sets; items related to the “Wicked” movie; card and board games; Disney Princess toys and dolls; and the Cookeez Makery oven playset, per that report.

Losers

In-store shopping

Employing old-fashioned seasonal enticements like doorbusters and entertainment, the Mall of America said that people began lining up early afternoon on Thanksgiving Day and that it welcomed more than 13,000 shoppers in the hour after it opened at 7 a.m. on Black Friday.

In general, however, it looks like this year’s e-commerce boost came at the expense of brick-and-mortar stores. Nora Kleinewillinghoefer, a partner in the consumer practice of Kearney, noted that “Black Friday felt quieter” this year in stores, while Michael Brown, also a Kearney partner, noted a relatively subdued day at Garden State Plaza in New Jersey, though he said that shoppers included younger people and some apparel retailers were busy.

Overall, store traffic on Black Friday was down 3.2%, with footfall down 7% in the Midwest, 2.1% in the Northeast, 3.5% in the South and 3.2% in the West, according to data from RetailNext. Mastercard found that Black Friday online sales rose 14.6% year over year, while in-store sales rose just 0.7% year over year.

Moreover, online carts were more than twice the size of in-store carts, according to payment firm Block.

This is in part due to early shopping that seems to have been conducted primarily online, in a year when “the period between Black Friday and Christmas is unusually short,” according to emailed comments from Darpan Seth, CEO of omnichannel order management advisory and software firm Nextuple.

It’s also because retailers are now better at making more goods available online that in previous years may have only been available in stores, Seth said.

Prices and margins

Black Friday has long been about getting good deals, but some discounts this year were especially steep.

Categories more exposed to inflation and higher-priced items were primed for deep price cuts. Plus retailers themselves may preemptively clear out inventory that could eventually be subjected to Trump’s tariffs, according to Nextuple’s Seth.

Adobe found that “discounts exceeded expectations” and were a purchase motivator for toys (with peak discounts of 27.8% off list price), as well as for electronics (27.4% off), televisions (24.2% off), apparel (22.2% off), computers (22% off) and sporting goods (19.5% off). Discounts are expected to remain elevated through the shopping weekend, per that report.

In fact, Black Friday-esque discounts may be found throughout the holiday shopping period, according to Joe Shasteen, global manager of advanced analytics at RetailNext.

“Broader economic pressures, such as high grocery prices and the rising cost of living, may have further impacted shoppers’ behavior,” Shasteen said in emailed comments. “Inflation-fatigued consumers appear to be prioritizing essential purchases and carefully weighing discretionary spending, underscoring the continued importance of value-driven shopping decisions this holiday season. Additionally, many retailers have extended Black Friday deals to widen the shopping window, offering consumers more time to find discounts and spread out their shopping across the holiday period.”

Black Friday

Thanks once again to e-commerce, Thanksgiving Day itself is stealing Black Friday’s thunder as a red-letter retail sales day. This year, shoppers spent $6.1 billion online on Thanksgiving, a record amount that was 8.8% above last year, according to Adobe.

That growth outpaces last year, too, when Thanksgiving Day online sales grew 5.5%, per Adobe’s report. What’s more, holiday shopping in general has been spread out beyond the Thanksgiving-to-Cyber Monday period, experts said.

“With brands expanding their deals across days or even weeks, the once-frenzied in-person rush is evolving into a digital-first experience,” Kearney’s Kleinewillinghoefer said in emailed comments. “Black Friday is no longer just a single shopping event — it has become part of a broader sales extravaganza. With Cyber Monday dominating e-commerce and Travel Tuesday catering to wanderlust, the holiday season is now a crowded marketplace of endless deals.”

Stellantis NV Chief Executive Officer Carlos Tavares has abruptly resigned from the automaker, citing ‘different views’ with the board of directors, according to an overnight press release. This development comes as auto demand in key markets, including North America, Europe, and China, continues to deteriorate, plunging the entire industry into a vicious downturn. 

“The process to appoint the new permanent Chief Executive Officer is well under way, managed by a Special Committee of the Board, and will be concluded within the first half of 2025,” Stellantis stated, adding, “Until then, a new Interim Executive Committee, chaired by John Elkann, will be established.” 

Stellantis’ Senior Independent Director, Henri de Castries, commented on Tavares’ departure: “However, in recent weeks different views have emerged which have resulted in the Board and the CEO coming to today’s decision.”

The world’s fourth-largest carmaker has recently warned about sliding sales and bloated inventory in North America, which led to the profit warning announced in September. By early October, Stellantis CFO Natalie Knight informed her team about the need to take “drastic measures” to shore up the Jeep and Ram parent’s finances. Then, in recent weeks, after a nightmare of a year, the automaker began pausing production of certain models. 

Goldman’s George Galliers commented on Tavares’s departure to clients this AM:

CEO resignation confirmed – Yesterday evening, Stellantis confirmed that it had accepted the resignation of its CEO, effective immediately, citing different views on future direction. Previously, the CEO was due to retire in early 2026, hence, yesterday’s departure is just over 12 months earlier than expected. Stellantis confirmed its FY24 guidance for an adj. operating income margin of 5.5-7.0% (GSe 6.2%, company compiled consensus 6.2%) and ind. free cash flow of -€5 to -€10bn (GSe -€7.3bn, cons -€6.9bn). While the outgoing CEO has a long-standing reputation and this announcement is earlier than expected, in light of recent tensions with stakeholders and the step-down in 2024’s financial performance, we expect the market to focus on the likely successor. The CFO is due to attend our 16th Annual Industrials and Autos Conference this week.

Press reports of tensions with key stakeholders – Stellantis’ financial performance this year has fallen short of expectations, with the company suffering from excess inventory in North America and late to market product launches in Europe. At our 15th Annual Industrials and Autos Conference, the departing CEO spoke about the industry facing a Darwinian race and, therefore, the need to drive efficiencies and cost savings. However, over the course of 2024, press reports suggest this has created tensions with stakeholders including Stellantis’ US dealers, US workforce, and politicians in Italy and the UK. In addition, the industry continues to undergo significant pressure as a result of the ongoing transition to BEVs, necessitated by regulation in the UK and Europe, and the potential risk from Chinese competition.

Successful historical performance under the outgoing CEO – The outgoing CEO oversaw the creation of Stellantis through the merger of PSA and FCA, with STLA going on to report a strong 13.4% adj. operating margin in FY22 and 12.8% in FY23 as well as combined ind. FCF >€23bn during the period. Previously, as CEO of PSA, he oversaw a turnaround that led PSA to increase adj. op. margins from 1.5% in 2014 to 8.5% in 2019 with adj. op. income seeing an 8x increase. Even in 2024, we believe the levels of profitability achieved by STLA in emerging markets is notably stronger than peers. Past financial turnarounds, and industry-leading margins were achieved through rigorous pricing and a tough stance on cost. Despite the downturn in STLA’s N.American and European performance, in 2024, as a producer of 5 to 6mn units operating in multiple different jurisdictions, the stewardship of Stellantis will be a substantial role for the outgoing CEO’s successor.

Galliers reaffirmed a “Buy” rating on Stellantis shares trading in Europe, noting, “We apply a P/E target multiple of 5.0x to our 2025 EPS to derive a 12-month price target of €16/$17.” 

Shares in Milan plunged 8.5% on the news, the lowest intraday print since July 2022. On the year, shares have fallen 45%. 

Here’s what other Wall Street analysts had to say (list courtesy of Bloomberg):

Bernstein (market-perform)

• Analysts led by Daniel Roeska struggle to “identify any scenario under which these events can be positively spun as far as the stock price is concerned”
• Say investors will now likely have to wait until the arrival of the next CEO for more reliable answers
• Think the market will be wondering why the board “considered that not having a permanent CEO for some months was preferable to keeping the current CEO”

RBC (sector perform)

• Analyst Tom Narayan says this announcement is a surprise, but wonders if it was related to the CEO’s already planning to retire in early 2026
• Management changes made in early October did seem “odd” and this could also have played a role
• “Entirely possible that Stellantis can get through this rough patch,” but a bunch of potential headwinds such as CO2 compliance in Europe, Chinese competition, risk of US tariffs leave RBC on the sidelines

Morgan Stanley (overweight)

• Think overall investor opinions of the CEO were favorable, despite the company’s “considerable underperformance” this year, analyst Javier Martinez de Olcoz Cerdan writes
• Tavares was overall recognized for role in delivering merger, efforts on cost-cutting, commitment to execution and “agile” Chinese OEM strategy
• Wonders if exit may herald a new strategic direction, creating uncertainty for investors until a new CEO is appointed

JPMorgan (overweight)

• Analyst Jose Asumendi says exit of a CEO and a CFO in such a short period seems unprecedented, creating “challenge” for investors
• Chairman John Elkann, who will lead the interim leadership committee, does have good track record across differing industrial groups which provides “solid base” for now
• However, there is unlikely to be any significant major earnings improvement priced in by investors for FY25 until the management team is reset

Jefferies (hold)

• Not entirely surprising news, but leaves the company without a CEO at a time when a number of “critical decisions” need to be made, analyst Philippe Houchois writes
• Understands that Tavares wanted to actively contribute to turning around performance before his previously planned 2026 exit, but that the board likely sanctioned his proposals or management style

European automakers have been struggling as a whole.

The collapse in profitability under Tavares’ watch has been disastrous. 

After years of abusing Iranian sanctions and flooding China’s economy with cheap Iranian oil, China’s larger independent refiners are set to shun Iranian oil “imminently” because of their exposure to the US banking system, said Energy Aspects, which expects sanctions to tighten under Trump.

These plants only started buying Iranian crude this year after receiving guidance from the US State Department that sanctions wouldn’t be enforced by the Biden administration, according to a note from the industry consultant, which didn’t name the refiners. If confirmed that would be the latest foreign policy scandal by the captured and corrupt Biden admin, which has made a mockery of sanctions enforcement, especially if the alternative is sharply higher oil and gas prices.

In any case, with the imminent arrival of Trump, the Chinese refining sector will be under significant pressure to consolidate and the government might be “willing to sacrifice the teapots to score some easy points against Trump by clamping down Iranian imports.”

Limiting access would raise the cost of feedstock and slash margins for teapots and help Beijing to trim capacity.

Activity by independent refiners has picked up in the spot market, with a number of plants securing barrels from the Middle East in recent trades, on top of WAF grades purchased two weeks ago. These were all unsold, discounted barrels from the previous cycles.

With Iranian oil set to become extremely scarce, China’s independent refiners have snapped up barrels from across the Middle East and Africa as offers of Iranian oil remain scarcer and more expensive than usual, in part due to broadening US sanctions.

In a separate Bloomberg report, we learn that a large Chinese processor bought about 10 million barrels of grades from Abu Dhabi and Qatar, according to traders who asked not to be identified. The cargoes are for loading in December and January, and helped to clear an overhang of unsold crude from previous trading cycles, they added.

China’s independent refiners, known as teapots, typically favor cheaper Iranian crude and take around 90% of the OPEC producer’s exports, but a slowdown in the amount of oil available to purchase has forced a change in buying habits. The incoming Trump administration has also led to some large processors backing away from Tehran’s crude due to their exposure to US banking, according to Energy Aspects.

Traders and shippers put the scarcity of Iranian supply down to the broadening of US sanctions in October to include more dark fleet tankers plying the Iran-China trade. That move has crimped the number of vessels available for ship-to-ship transfers, tightening supply and driving prices higher (see “Satellite Analysis Shows Enormity Of Secretive Oil Shipping Hub Funneling Iranian Crude To China“).

Flows of Iranian oil to China have dipped more than 10% this month compared with October, according to Kpler. Meanwhile, the volume of West African crude is at the highest on a monthly basis in at least two years, partly driven by the spike in Iranian oil prices, Sentosa Shipbrokers wrote in a report.

Beijing’s move to issue more import quotas to teapots has also spurred buying activity, traders said. Refiners were asked to submit requests to purchase more crude a few months ago and were provided verbal approvals this week, but some started buying ahead of the confirmation, they added.

Refiners in Shandong province collectively sought an allocation of about 3.8 million tons, or 28.5 million barrels, which will be valid until the end of the year, according to traders.

The initial build-up of Middle Eastern oil was spurred by bumper trading activity in contracts linked to the Dubai market in recent months. That led to the delivery of cargoes that ultimately went unconsumed and had to find buyers at a later date, traders said.

President-elect Donald Trump has already rattled the market with the threat of tariffs on China, Canada, and Mexico, and investors are closely watching to see how his administration will approach Iran. Sanctions on the OPEC producer are expected to tighten, according to Energy Aspects.

Key concerns include the possibility dark fleet tankers will be sanctioned en-route to their destination, a move that would spook the ports waiting to receive the vessels and lead to cargoes being stranded at sea.

We previously discussed how ship-to-ship transfers off Malaysia are also set to face more scrutiny, a process used to mask the origin of Iranian cargoes by re-labeling them as Malaysian oil.

Authored by Robert Burrows via BondVigilantes.com,

Renewed concerns of European fragmentation: France’s economic and political struggles…

Source: Bloomberg, as at November 2024

What is incredibly surprising is how little differentiation there is among European issuers. Perhaps this signals that there are no concerns within Europe and that the European Central Bank (ECB) has all the necessary tools to stem any divergence. Perhaps investors already view the bloc as a shared fiscal union, suggesting there should be no differentiation.

Source: Bloomberg, as at November 2024

As France grapples with deepening economic and political challenges, the possibility of European fragmentation will likely become a topic of discussion once again. The country’s long-standing fiscal pressures, political instability, and rising populism are troubling for France and the broader European Union (EU). With France playing a pivotal role in the EU’s economic and political structure, its struggles raise questions about the strength of European unity, especially in an era marked by increasing global uncertainty.

France’s economic troubles: debt and stagnation

France’s economic challenges are rooted in years of sluggish growth, high unemployment, and rising public debt. The nation’s debt-to-GDP ratio now exceeds 110%, a level that puts increasing strain on the government’s ability to invest in its economy.

France continues to run worrying deficits akin to the equally worrying US.

Source: Bloomberg, as at November 2024

However, the difference between France and the US is that the US is in a position to raise taxes. Whether the US does is another story altogether, but at least it is in the position to do so. France, on the other hand, is likely at or close to peak tax-raising levels. If there are any further tax increases, the tax revenue could in fact fall as per the Laffer curve1 That leaves reduced spending as the only viable option to bring deficits under control. It is doubtful that the electorate will tolerate significant reductions in spending. Another consideration is that the US can control its monetary policy. In contrast, France is a hostage to the policy set by the ECB for the EU as a whole.

Source: OECD. Provisional 2023 data. *Japan and Australia unable to provide provisional, therefore numbers used are 2022 data.

Meanwhile, inflationary pressures from rising energy prices, supply chain disruptions, and the global fallout from the Ukraine war are making life increasingly difficult for French citizens.

Fiscal constraints, including the country’s ‘excessive deficit procedure’ limit the government’s ability to spend its way out of these problems. This economic stagnation has hit low- and middle-income families the hardest, fuelling social unrest and discontent. With a growing sense that economic inequality is deepening, populist movements are gaining traction in France, pushing back against traditional political parties and calling into question the benefits of European integration.

Political instability and fragmentation in France

France’s political landscape has fractured, as seen in the recent election. The traditional parties of the centre-left and centre-right, which have long dominated French politics, have weakened considerably. The recent election saw no party win a majority; a left-leaning coalition won 188 seats, the centrist coalition won 161 seats, and the far-right won 142 seats. Consequently, the far right became the single largest party and no party was able to claim a majority. The outcome was a fragile centre-right government propped up by Marine Le Pen’s far-right party.

The rise of Marine Le Pen’s far-right National Rally and Jean-Luc Mélenchon’s far-left La France Insoumise reflects deep divisions within French society. These parties tap into frustrations over economic stagnation, immigration, and disillusionment with the EU’s role in France’s domestic affairs.

This political fragmentation has not just created a challenging environment for Emmanuel Macron’s government, but it has severely hampered its ability to push through much-needed reforms. Macron’s centrist platform, which was supposed to bridge the political spectrum, has instead alienated both sides, and attempts at pension reform, labour law changes, and economic liberalisation have been met with widespread protests, most notably the ‘Yellow Vest’ movement.

The inability to implement structural reforms is compounding France’s economic challenges. With the government hamstrung by opposition forces and increasing populist sentiment, France’s political future is uncertain. As France teeters on the edge of further instability, the implications for the European Union are significant.

A recent hint of concern for the EU came from the European Commission’s acceptance of France’s budget proposals (which are unlikely to come to fruition given the government’s instability) and allowing France to postpone its deficit reduction efforts from 2027 to 2029. In contrast, the Commission’s judgement on the Dutch budget, which is well within the rules, has been delayed. Perhaps the Commission is fretting over larger issues.

The European Union: a fragile union?

France and Germany have always been key pillars of the European Union. However, as economic and political instability deepens in both France and, more recently, Germany, it brings into question the stability of the EU itself. In recent years, the EU has already faced major challenges, from Brexit to the sovereign debt crises in Greece, Italy, and Spain. The COVID-19 pandemic, followed by the energy crisis and the war in Ukraine, have further tested the bloc’s resilience.

In France, populist leaders like Marine Le Pen have openly criticised the EU’s bureaucracy and called for reclaiming French sovereignty, particularly in immigration, trade, and economic policy. Though Le Pen’s position on leaving the EU has softened in recent years, her anti-EU rhetoric still resonates with a sizable portion of the French electorate. This raises concerns about France’s continued commitment to EU integration.

Should France’s economic situation deteriorate further, and populist movements gain even more ground, it could trigger renewed debates over the future of the EU. The rise of populism in one of the EU’s core member states could embolden other Eurosceptic movements across the continent, leading to renewed fragmentation pressures.

Energy crisis and inflation: pressures across Europe

The energy crisis and surging inflation are not unique to France, but they have heightened economic tensions across Europe. Germany, once the EU’s economic engine, is also facing severe challenges due to rising energy prices, weakening manufacturing and industrial sectors, and constrained fiscal spending due to the debt brake. Countries like Italy and Spain, which have already faced sovereign debt crises in the past, remain vulnerable to economic shocks.

While the EU has shown resilience in the face of these challenges, France’s fiscal problems could add further strain. If one of the EU’s key economies falters, it would complicate efforts to maintain unity, especially when fiscal solidarity is already a contentious issue. A divided French government could struggle to support broader EU initiatives, such as energy transition policies and climate goals, which require unified political will and significant financial investment.

The consequences of French economic decline for the EU

If France’s economic and political situation worsens, it could destabilise the European Union in several ways. First, the loss of French leadership in EU policy debates could leave a vacuum that is difficult to fill. France has long been an advocate of closer European integration, especially in areas like defence, foreign policy, and economic regulation. A weakened France could slow the pace of EU reforms and complicate decision-making within the bloc.

Second, France’s decline could embolden other Eurosceptic countries. Italy’s populist movements, Hungary’s nationalist government, and Poland’s increasing resistance to EU authority all point to a growing sense of disillusionment with European integration. France’s struggles could add fuel to this fire, leading to more calls for looser ties within the EU or, in extreme cases, further exits from the union.

Finally, renewed economic fragmentation could strain the ECB’s ability to manage monetary policy across the eurozone. As countries face diverging economic challenges, the ECB could find it increasingly difficult to balance inflation control with the need for growth stimulus in struggling economies. This could lead to further financial instability, making it harder to hold the eurozone together.

Conclusion

France’s economic and political difficulties are not just a domestic issue; they have profound implications for the European Union as a whole. The combination of rising debt, political fragmentation, and populist movements within France could exacerbate concerns about the future of European integration. As one of the EU’s most important members, France’s trajectory will play a crucial role in shaping the future of the union. While the EU has survived numerous challenges in the past, France’s ongoing struggles could spark renewed debates over fragmentation, threatening the unity that has been a cornerstone of the European project for decades.

Total federal student loan debt in the U.S. stands at approximately $1.73 trillion, with 43 million borrowers as of 2023, and has experienced significant growth over the past 15 years, increasing by about 232.7% since 2009.

The average federal student loan debt across the 50 U.S. states, Puerto Rico, and the District of Columbia amounts to $29.9 billion per state in 2024, according to the Education Data Initiative.

This visualization, via Visual Capitalist’s Kayla Zhu, shows the average student loan debt per borrower, by state. Only federal student loan debt is included.

Data comes from the U.S. Department of Education and U.S. Census Bureau via the Education Data Initiative, and is updated as of October 2024.

Which State Has the Highest Student Loan Debt?

Below, we show the average federal student loan debt by state as of October 2024.

State	Average Federal Student Loan Debt
District of Columbia	$54,795
Maryland	$43,692
Georgia	$42,026
Virginia	$40,137
Florida	$39,262
Illinois	$39,055
South Carolina	$38,770
North Carolina	$38,695
New York	$38,690
Delaware	$38,683
Vermont	$38,404
Oregon	$38,168
Hawaii	$38,158
California	$37,829
Alabama	$37,709
Colorado	$37,392
Mississippi	$37,254
New Jersey	$37,201
Michigan	$36,974
Tennessee	$36,886
Washington	$36,762
Connecticut	$36,672
Pennsylvania	$36,267
Alaska	$35,821
Arizona	$35,675
Missouri	$35,675
Massachusetts	$35,529
Ohio	$35,033
New Hampshire	$34,884
Louisiana	$34,866
Nevada	$34,589
Maine	$34,292
New Mexico	$34,280
Minnesota	$34,071
Montana	$33,945
Arkansas	$33,858
Utah	$33,746
Texas	$33,581
Kentucky	$33,470
Idaho	$33,281
Rhode Island	$33,270
Indiana	$33,243
Kansas	$33,119
Wisconsin	$32,628
Nebraska	$32,377
West Virginia	$32,358
Oklahoma	$32,103
Wyoming	$31,503
Puerto Rico	$31,022
South Dakota	$30,928
Iowa	$30,925
North Dakota	$29,647
Other/Unspecified*	$25,279

Washington, D.C. leads the U.S. in average federal student loan debt at $54,795 per borrower and has the highest share of borrowers, with 17.2% of residents in debt.

Many borrowers in D.C. are recent graduates, including a significant number with master’s degrees, compounding the strain of the city’s steep cost of living.

Second-ranked Maryland, which borders D.C., is also one of the most educated states in the country. Around 43% of Maryland residents have earned at least a bachelor’s degree, significantly higher than the national average of 35%.

North Dakota has the nation’s lowest average student loan debt, and it’s the only state with average debt under $30,000, at $29,647. Only about 11.2% of state residents have student loan debt.

To learn more about labor statistics by state, check out this graphic which shows the union membership rates by state.

Authored by Andrew Korybko via Substack,

France and the US are expected to apply a three-pronged policy for pushing back against this…

Thursday was an historic day for African geopolitics since Chad announced that it’s expelling French troops while Senegal said that it plans to do the same in the near future. These are France’s last military outposts in the Sahel after it was expelled from Burkina Faso, Mali, and Niger, which now form the Sahelian Alliance that’s also merging into a Confederation. The immediate consequence is that Russian influence will likely surge while France is expected to turn the Ivory Coast into its top regional base.

These trends align with the larger one of Africa becoming a theater of competition in the New Cold War. The West wants to retain its declining unipolar hegemony while Russia and China are leading the push by the non-West to accelerate multipolar processes there. The first manifests itself through coups, Color Revolutions, and insurgencies (collectively known as Hybrid War) while the second takes the form of Russia helping its partners counteract these threats as China provides no-strings-attached economic aid.

The latest development confirms that the African Hinterland is the continent’s bastion of multipolarity while the coastal periphery serves as both the entry point and redoubt for unipolarity, which mirrors the dynamics in Eurasia. This in turn lends further credence to Professor Alexander Dugin’s theory about the historical rivalry between land powers and sea powers. In the African context, Eurasia’s land powers are helping their fellow Hinterland partners liberate themselves from the influence of Eurasia’s sea powers.

These same sea powers, in this case France (which historically has a dual sea-land identity) and the US, are now retreating to the sea-aligned Ivory Coast after being kicked out of the Sahel. This will place more pressure on Nigeria, which is an African land power that has a long history of close ties with Western sea powers like the UK and the US. The aforesaid were on full display during summer 2023’s Western-backed debacle after it unsuccessfully pressured Niger to reinstall its ousted leader and threatened to invade it.

The failure to reap any tangible dividends from this needlessly aggressive policy led to a grand strategic rethinking that culminated in Nigeria becoming an official BRICS partner after October’s summit. This was a positive step, but nothing has yet been done to resolve the country’s infamous corruption nor its seemingly intractable spree of long-running ethno/religious-regional conflicts, both of which can be externally exacerbated by the West to manipulate its foreign policy or punish it if this approach fails.

It’s one thing for the West to lose its geostrategic position in the Sahel, which includes some of the world’s poorest countries (Senegal is head and shoulders above the rest but still has lots of poverty), and another entirely to lose Nigeria, which has huge energy reserves and is Africa’s most populous country. France and the US’ post-Sahelian retrenchment in the Ivory Coast is only useful insofar as providing a base from which to destabilize the Sahelian Alliance/Confederation but is useless vis-à-vis Nigeria.

Observers can accordingly expect the West (led by the US and France) to apply a three-pronged policy for pushing back against the latest multipolar achievements: 1) more Hybrid War against the Sahelian Alliance/Confederation; 2) more outreaches to Nigeria; and 3) Hybrid War against it too if this fails. The Ivory Coast will play a central role in the first aspect; the second will take diplomatic and economic forms; while the third can manifest through covert support (including military) for existing armed groups.

No suggestion is being made about the success of this predicted policy, just that part or all of this sequence will likely unfold due to the friction between Western/non-Western and unipolar/multipolar interests in Africa, which was worsened by France’s latest military blow in the Sahel. It and the US might still need time to cook up a plan for how to most effectively respond to everything, but nobody should doubt that they’ll do something, and whatever it is will be aimed at restoring their lost hegemony.

Authored by Nathan Worcester via The Epoch Times (emphasis ours),

America’s nuclear energy industry has something special going for it.

“Nuclear energy is one of the few issues that receives bipartisan support across the country,” Maria Korsnick, the president and CEO of the Nuclear Energy Institute, told The Epoch Times in a statement.

Democrat-aligned billionaires like Bill Gates have invested heavily in advanced nuclear, as have Republican-aligned billionaires like John Catsimatidis. Meanwhile, sustained, large-scale opposition to nuclear power from the left has mostly dissipated, at least in the United States. Environmentalists increasingly see it as an attractive source of carbon-free baseload power.

Physicist James Walker, CEO of the microreactor firm Nano Nuclear Energy Inc., pointed out that the ADVANCE Act of 2024, key legislation for the deployment of new reactor technologies, was backed by Republicans and Democrats alike. As part of the Fire Grants and Safety Act, it gained overwhelming support from both parties in the House of Representatives, where it passed 393 to 13, and in the Senate, where it passed 88 to 2.

A Nov. 12 policy blueprint from the Biden White House outlines a plan to triple the country’s nuclear energy capacity over the next quarter century.

It certainly appears that the outgoing administration and Democrat-led Senate are pro-nuclear. Yet, with Donald Trump’s reelection, “there also might be additional benefit,” Walker told The Epoch Times.

He hopes the new administration will spur domestic production of a fuel used by advanced nuclear reactors. Russia and China dominate the supply chain for that fuel, which is called high-assay, low-enriched uranium (HALEU).

Earlier this year, the U.S. banned the importation of Russian uranium, with any waivers set to expire by 2028. In October, the Department of Energy awarded six companies contracts for HALEU production.

“I can’t see, even under the new administration, that relationship being remedied enough that we can go back to sourcing Russian weapons-grade material,” Walker said.

At a Nov. 21 Heritage Foundation roundtable on nuclear energy, Constellation Energy’s David Brown said that American firms involved in producing low-enriched uranium, also supplied by Russia and other countries, have generally set the end of this decade as their launch date, but progress has been slow.

Even amid the bipartisan push for advanced reactors, some scientists and activists worry HALEU is far more easily weaponized than low-enriched uranium, which has become more of a concern recently as the possibility of nuclear war lurches back into public discourse.

“The risk of nuclear war is currently higher than it has been since the Cuban Missile Crisis,” Matthew Bunn, a nuclear and energy policy analyst at the Harvard Kennedy School, told The Epoch Times via email.

“The acute issue is Iran, which is now closer to the edge of a nuclear weapons capability than ever before.”

‘We Need to Revolutionize How We Think’

Trump’s vision includes a new National Energy Council that, in his words, will cover “all forms of American energy” and blaze a trail to American energy dominance. Its prospective members include his pick for energy secretary, fracking innovator Chris Wright. Wright sits on the board of directors of a fission reactor company, Oklo Inc.

The council’s chair, likely Interior Secretary Doug Burgum, would also be part of the National Security Council.

Trump’s planned Department of Government Efficiency, or DOGE, will be led in part by businessman Vivek Ramaswamy. During his own presidential run, Ramaswamy called to eradicate the Nuclear Regulatory Commission or NRC.

He described the agency as “the damper on the revival of nuclear energy in the United States of America.”

Some other insiders have shared similar frustrations with the regulatory status quo.

“We need to revolutionize how we think, how we regulate,” said Jack Spencer, an energy and environmental policy researcher at the Heritage Foundation, during the Nov. 21 nuclear energy roundtable.

Doug Bernauer, the CEO of microreactor startup Radiant Nuclear, objected to the pace of reactor licensing in a Nov. 20 post on X.

“No new nuclear reactor design has been licensed in over 50 years in the US. … Will DOGE fix nuclear?” Bernauer wrote.

Mixed Reactions From Industry to DOGE

Some in the nuclear industry have reservations about DOGE.

John Kutsch, the leader of the Thorium Energy Alliance, hopes the administration makes its cuts carefully.

“There’s actual useful things the Department of Energy does,” he told The Epoch Times, citing the agency’s role in nuclear weapons management.

Kutsch believes the closure of the Bureau of Mines during the 1990s was a mistake that ultimately hampered American mining. He said he doesn’t want to see something similar happen again.

“We don’t have critical materials readily available in this country because we can’t open up a mine to save our lives,” he said.

Walker also sounded a note of caution about possible cuts.

“Downsizing something like the NRC might not inherently make it better, because they still will need a lot of people to do a lot of work,” the nuclear industry entrepreneur said.

Walker was cheerier about the prospect of using artificial intelligence to speed up licensing of new reactor designs, at least if such an approach proves technologically feasible.

“You could probably reduce the number of people by an order of magnitude,” he said.

Walker hopes that the administration can develop a better approach to regulating advanced reactors. The current framework, he said, is adapted to the large, light-water reactors currently operating on the U.S. grid.

DoE Destruction of Uranium-233 Worries Thorium Advocates

While Kutsch defended some aspects of the Department of Energy, he’s not happy with its approach to uranium-233, a uranium isotope that can be used in thorium-based nuclear energy production.

“This is what gets me mad about bureaucracies,” said Kutsch, whose organization in 2023 signed a memorandum of understanding with El Salvador.

Kirk Sorensen of Flibe Energy, a molten salt reactor company exploring thorium in one of its designs, described uranium-233 as “a marvelous pre-fuel” during the Heritage roundtable with Spencer and Brown.

The Department of Energy has started eliminating the U-233 stored at Oak Ridge National Laboratory.

“Originally created in the 1950s and 1960s for potential use in reactors, U-233 proved to be an unviable fuel source,” the Department of Energy stated in a June post on its disposition project webpage.

Sorensen said the department’s U-233 disposition “should be stopped immediately.”

Kutsch said much of that stored U-233 could be used in thorium-based molten salt reactors or in nuclear medicine.

Sen. Tommy Tuberville’s (R-Ala.) proposed bill, the Thorium Energy Security Act of 2022, aimed to facilitate U-233 storage and mandate reports on China’s thorium-based reactor research. It never moved out of committee.