Canadian Billionaire, Wife, Found Dead In "Suspicious" Suicide

The billionaire founder of Canadian generic drug Apotex Inc, Barry Sherman, and his wife Honey, were found dead in their Toronto home on Friday under what police described as "suspicious" circumstances.

Honey and Barry Sherman

Police said they were investigating the mysterious deaths after responding to a midday medical call at the Sherman’s home in an affluent section of northeast Toronto. Two bodies covered in blankets were removed from the home and loaded into an unmarked van on Friday evening.

“The circumstances of their death appear suspicious and we are treating it that way,” said Constable David Hopkinson. Homicide detectives later told reporters gathered outside the home that there were no signs of forced entry, and no suspects were being sought as of this moment.

Const. David Hopkinson if Toronto Police said they are calling deaths of Honey and Barry Sherman suspicious pic.twitter.com/MJ577PeIdq

— Joe Warmington (@joe_warmington) December 15, 2017

The Shermans recently listed their home for sale for nearly C$7 million ($5.4 million). A real estate agent discovered the bodies in the basement while preparing for an open house, the Toronto Globe and Mail reported, citing a relative.

Their neighbors, who according to Reuters include business associates and some of Canada’s most powerful politicians said they were saddened by the deaths.

Deeply shocked to learn of the deaths of Honey and Barry Sherman, such remarkable people. Grappling with this terrible news.

— Bob Rae (@BobRae48) December 15, 2017

“Our condolences to their family & friends, and to everyone touched by their vision & spirit,” Prime Minister Justin Trudeau wrote on Twitter.

Sophie and I are saddened by news of the sudden passing of Barry and Honey Sherman. Our condolences to their family & friends, and to everyone touched by their vision & spirit.

— Justin Trudeau (@JustinTrudeau) December 16, 2017

Linda Frum, a member of the Canadian Senate, said she was "gutted by the loss" of the couple, two weeks after presenting a Senate medal "to one of the kindest and most beloved members of Canada"s Jewish community."

Ontario"s health minister, Eric Hoskins, described the couple in a tweet as "wonderful human beings, incredible philanthropists, great leaders in healthcare."

I am beyond words right now. My dear friends Barry and Honey Sherman have been found dead. Wonderful human beings, incredible philanthropists, great leaders in health care. A very, very sad day. Barry, Honey, rest in peace.

— Dr. Eric Hoskins (@DrEricHoskins) December 15, 2017

Toronto Mayor John Tory said in statement he was “shocked and heartbroken” to learn of the deaths, noting that the couple had made extensive contributions to the city.

“Toronto Police are investigating, and I hope that investigation will be able to provide answers for all of us who are mourning this tremendous loss,” Tory said.

Sherman, 75, founded privately-held Apotex in 1974, growing it into the world"s 7th largest drugmaker and the largest Canadian-owned pharmaceutical firm, with annual sales of more than C$2 billion and over 11,000 employees, by introducing large numbers of low-cost generic drugs that took market share from branded pharmaceuticals. He stepped down as chief executive in 2012 but remained executive chairman.

"All of us at Apotex are deeply shocked and saddened by this news and our thoughts and prayers are with the family at this time," the company said in a statement.

Barry Sherman was ranked 363 on Forbes richest people in the world list; the publication put his net worth at $3.7 billion. He ranked just above eBay billionaire Jeffrey Skoll, and was believed to be the 5th richest person in Canada. The couple was known for their philanthropy, giving tens of millions of dollars to hospitals, universities and Jewish organizations, CBC reported. “They were extremely successful in business, but also very, very giving people,” former Ontario Premier Bob Rae told CBC. “It’s going to be a very, very big loss.”

While there is no additional information on whether the suicide was foul play , in February the Globe and Mail reported that Lobbying Commissioner Karen Shepherd was investigating a complaint about a 2015 political fundraiser that Trudeau had attended.

Proctor & Gamble Concedes Proxy Fight, Names Nelson Peltz To Board

Two months after narrowly losing a proxy vote that would have granted him a seat on Proctor & Gamble’s board, Trian’s Nelson Peltz has somehow managed to win a crucial battle in the largest and most expensive corporate proxy battle in modern history.

To wit, the consumer-products giant announced Friday that it would add Peltz to its board, according to the Wall Street Journal. The company said it would add Peltz to the board beginning March 1.

P&G’s stock, which has lagged the broader market this year, rose over the summer after Peltz started his proxy fight. Shares tumbled on Oct. 10, the day Peltz lost his proxy vote at the company’s annual shareholder meeting in Cincinnati.

Afterwards, Peltz revealed that he intended to challenge the results of the narrow vote in court.

Trian is disagreeing with the P&G and is to challenge the count...

 

“According to our proxy solicitors, today’s vote is too close to call and it will take more time to determine the outcome. We await the certified election results by the independent inspector of election. Trian is pleased with the support we have received from shareholders and all of the nation’s independent proxy advisory firms. We believe shareholders’ voices are being heard at P&G today, thanks to Trian’s involvement.

 

“With approximately $3.5 billion invested in P&G, Trian has a vested interest in the long-term success of the Company. If elected to the P&G Board, Nelson Peltz plans to start engaging collaboratively with his fellow directors. He has a long history of working collegially with boards and management teams and is looking forward to working closely with P&G’s leadership to revitalize P&G. Regardless of the final voting results, Trian believes management and the Board have been put on notice by shareholders – a continuation of the past decade’s underperformance is simply unacceptable. Trian is confident that P&G shareholders will hold the Board and management accountable and will be far less tolerant of lackluster performance going forward.

 

“Trian believes in P&G’s potential and wants to see the Company grow market share again and deliver long-term sustainable value for the benefit of all stakeholders. We feel strongly that a shareholder voice is needed in the boardroom and that Trian’s approach will help revitalize P&G."

On Friday, P&G revealed that a certified vote count showed the results of the vote were “extremely close” and because so many shareholders had voted for Peltz, the company apparently decided it would be easier to give him what he wants.

Peltz’s Trian Fund Management has invested about $3.5 billion in P&G. He then called on the company to end the dispute and appoint him to its 11-person board.

Per WSJ, Peltz’s pitch was that the company needed to streamline its businesses and consider bringing in outside talent. The company’s CEO, David Taylor, said Peltz would interrupt a turnaround plan he was in the middle of executing.

The two sides have battled publicly for months about the best structure and strategy for the world’s biggest consumer-products company. Mr. Peltz argued the company needs to streamline it businesses and bring in outside talent. P&G Chief Executive David Taylor countered that Mr. Peltz will disrupt a turnaround that is under way at the maker of Tide detergent and Gillette razors after a decade of market-share losses and stagnating profits.

 

“We have had constructive discussions with Nelson and we are committed to working together for the best interests of all P&G shareholders,” Mr. Taylor said in a news release. P&G said it and Mr. Peltz have agreed that it won’t take on excessive leverage, substantially reduce R&D spending or break up the company.

 

In addition, P&G said it would also add Novartis AG Chief Executive Joseph Jimenez to its board on March 1.

 

P&G is the biggest U.S. company by market value to face a proxy contest. The two sides spent at least $60 million and crisscrossed the country for weeks to win support from shareholders, from major index fund managers to thousands of P&G retirees. At the end of the campaign, the company’s shareholders were essentially evenly split.

P&G shares jumped in after-hours trade...
 

New York City Developers Are Relying On A Shrinking Pool Of Buyers

Most of New York City’s largest developers are probably optimistic about the near future now that one of their own is occupying the most powerful office in the world. Bu, this very specific group of taxpayers stands to benefit immensely from several of the provisions that have appeared in the Senate or House plans: Repealing the AMT and estate taxes would allow them (and their heirs) to shave a pile of percentage points off their tax bills. And those are just two examples.

To be sure, the tax plan’s passage isn’t assured – now that Alabama Democrat Doug Jones has defeated Republican Roy Moore. With Jones expected to be seated some time after New Year’s, the time pressure facing Republicans has intensified. Because at the start of the next Congress, their already precarious two-vote majority will shrink to one. Beyond this, Republicans haven’t agreed on a final version of the bill yet, and existing differences between moderates, deficit hawks and conservatives within the party could prove insurmountable.

But regardless of what happens with the tax plan, there’s a much more pressing problem facing developers in the Big Apple: A glut of “luxury” apartments priced in the low-seven or high-six figure range is coinciding with a precipitous drop in sales volume, according to Reuters.

While prices have been steady in recent years, sales volume for condos in Manhattan are still 30% below their pre-crisis peak.

In other words, the market’s dependence on a small, well-heeled pool of buyers – a pool that is shrinking as prices rise to unsustainable levels and wealth in the US becomes increasingly concentrated in the hands of the wealthiest – could be a major vulnerability in the coming years.

In the past five years, however, Manhattan has seen a different kind of development boom. Prices for these units are higher than they ever were before but the number of units built and sold is way off levels achieved a decade ago, Warshawer said.

 

“As prices have risen, less of the market share is comprised of cheaper units,” she said.

 

In 2013, 7,787 units were sold for under $1 million for a total $4.7 billion in sales. This year is projected to end with 5,040 units sold at under $1 million for $3.4 billion in sales.

Indeed, apartments priced in the seven-figures are increasingly going unsold – while affordable housing becomes increasingly harder to

The median sales price of high-end apartments edged higher in 2017, but the closely watched average square-foot price slid a bit for condos as prices leveled off after years of heady growth, the report said.

 

While the average and median sales price for all residential units has jumped since 2007 by 61 percent to $2.2 million and 44 percent to $1.2 million, respectively, transaction volume is off 30 percent from peak activity a decade ago, CityRealty said.

 

CityRealty examined sales registrations from the city’s Department of Finance. Much of Harlem and nearby areas were excluded because its market size.

Units sold at 432 Park Avenue, a 96-story tower marketed by developers as the tallest residential building in the Americas, garnered the most number of sales in a listing of the 25 highest-priced condos, CityRealty said. But elsewhere, the ultra-high-end market is suffering as nearly a third of the apartments in Manhattan’s recently developed “Billionaire’s Row” have gone unsold.

As we highlighted back in August during Starwood Property Trust’s Q2 earnings call, CEO Barry Sternlicht warned of a doomsday waiting at the end of New York"s "Billionaire"s Row", predicting an imminent "debacle." He mentioned the out-of-balance mezzanine loan at JDS Development and Property Markets Group’s 111 West 57th Street project and predicted more distress in the luxury residential market, including at 53 W 53, a supertall condo being developed next to the Museum of Modern Art by Hines, Pontiac Land Group and Goldman Sachs.

“We are beginning to see the cracks of the high-end residential market in Manhattan,” Sternlich warned.

Indeed, and while developers stand to benefit personally from the Republican plan, proposals to eliminate or reduce the mortgage deduction or deductions on state and local taxes could further damage their sales figures by favoring renters over buyers.

Toronto"s Housing Bubble Is Crushing The Strip Club Industry

Until now, Canada"s soaring housing prices were just another innocent asset bubble spawned by low interest rates and an endless supply of Chinese cash that needed to get laundered.  That said, massive bubbles are almost always followed by severe unintended consequences that can have a crippling impact on society as a whole...and in Toronto those unintended consequences are now manifesting themselves in the form of a rapidly deteriorating supply of strip clubs.

As Bloomberg points out today, the soaring value of Toronto real estate has made it all but impossible for strip club owners to turn down multi-million offers from condo developers leaving only a dozen strip clubs in a city whose purple neon lights used to be easily visible from the distant fringes of our solar system.

Condos are killing the Toronto strip club. In a city that once had more than 60 bars with nude dancers, only a dozen remain, the rest replaced by condominiums, restaurants, and housewares stores. Demand for homes downtown and for the retailers that serve them is driving land prices to records, tempting owners of the clubs, most of which are family-run, to sell at a time when business is slowing.

 

“Sometimes I feel like the last living dinosaur along Yonge Street,” says Allen Cooper, the second-generation owner of the famous—or infamous—Zanzibar Tavern. The former divorce lawyer says he has been approached by at least 30 suitors for his property in the past few years but is holding out for a “blow my socks off” offer. “I don’t know how many condos we’re going to get, but it seems like just a wall” of them, Cooper says.

Of course, with ~1-acre plots of land selling for C$225 million, it"s not difficult to understand why strip club owners are increasingly choosing to shut off their neon signs for good...even with the consolidation of market share it"s nearly impossible to make that lap dance math pencil out.

Remington’s Men of Steel, a male dance club behind a heavy door, sold to KingSett Capital Inc., which last year flipped it to Cresford Developments as part of a bigger portfolio on that block that went for about C$160 million ($125 million), according to real estate data supplier Altus Group. That club is closing next year, to be replaced by a 98-story condo.

 

The fading of the strip-club era can be seen in a five-block area along Yonge Street, near Toronto’s counterpart to Times Square, Yonge-Dundas Square. It was once dubbed Sin Strip for its neon-clad bars, sex shops, and movie theaters. Today there are about 20 development applications for condos and commercial buildings on the stretch.

 

Farther north, an entire city block is a construction site as two condo towers and some retail space replace a strip of colorful and creaky buildings that once offered body piercing and pole-dancing shoes. “We target a very specific market, mostly men. We’re not a shopping destination, so more people doesn’t mean a lot more business,” says Bill Greer, general manager and three-decade veteran of the Brass Rail Tavern, a two-story club in the area. “I don’t think we’ll be around in 10 years’ time.” Just outside the Brass Rail’s doors, a 75-story residential tower opened this year on a piece of land that cost C$53 million. An 80-story luxury tower is under construction following a C$225 million deal for less than 1 acre, according to data from Altus.

But at least one Toronto strip club owner, Spiro Koumoudouros of the House of Lancaster, has drawn a line in the sand saying he"s not going anywhere..."What am I going to do, sit at home and die?"...if only we could all exhibit such courage in times of extreme crisis. 

Finally, since we know your interest in this story was only prompted by your desire to see a larger version of the teaser pic...here you go:

Elon Musk"s First Payload To Mars: His "Midnight Cherry Tesla Roadster Playing Space Oddity"

In late November, we reported on Elon Musk’s desperate attempt to boost market confidence with a shock and awe performance unveiling Tesla’s new semi-truck and roadster. While the event was a thriller, it appears the laws of physics may have finally caught up with Tesla’s stock - now in a bear-market from September highs.

Musk is undeniably the greatest snake oil salesman modern financial markets have ever seen, and that is why he is planning the next spectacular event before a further correction.

On Friday evening, Musk tweeted what the payload of the Falcon Heavy would be— his “midnight cherry Tesla Roadster playing Space Oddity”.

But the story gets better, because the powerful Falcon Heavy rocket will launch his Tesla into the orbit around Mars. Musk added, the Tesla “will be in deep space for a billion years or so if it doesn’t blow up on ascent.”

Payload will be my midnight cherry Tesla Roadster playing Space Oddity. Destination is Mars orbit. Will be in deep space for a billion years or so if it doesn’t blow up on ascent.

— Elon Musk (@elonmusk) December 2, 2017

As Musk would say, the show must go on with the Falcon Heavy launch expected “next month” (January 2018) from Pad 39A at Kennedy Space Center in Florida. According to ARS Techinca, “a static fire test of the rocket’s three cores, and 27 engines, on the launch pad this month.”

Falcon Heavy to launch next month from Apollo 11 pad at the Cape. Will have double thrust of next largest rocket. Guaranteed to be exciting, one way or another.

— Elon Musk (@elonmusk) December 2, 2017

In simplest terms, the Falcon Heavy is three of the company’s Falcon 9 rockets strapped together. It will then create enough lift as proposed by Musk to propel his Tesla out of low Earth orbit onto a trajectory to Mars. When it comes to timing— don’t take the company seriously. Musk has pushed back Falcon Heavy’s maiden flight more than once: it was originally planned for a summer launch but moved to November and now to January 2018.

Musk said, at a press conference in July, that the Falcon Heavy might not even make it to orbit on its first attempt to leave the atmosphere. That means the upcoming event could turn into a very expensive firework showing.

While the practical use for a Tesla roadster on Mars is still unknown, it would buy Musk some time to keep the stock elevated for perhaps a few more secondly offerings. If Musk is successful in this latest endeavor, it would signal that NASA’s ambitions to Mars could be fulfilled by a Falcon Heavy. So far, no private company has launched a rocket beyond low-Earth orbit, nevertheless to another plant.

Phil Larson, an assistant dean at the University of Colorado, and a former SpaceX official said, “the launch of the biggest rocket since the U.S. Moon booster is a game changer for our country’s space exploration future and for national security. The fact that development of such a capability is coming from U.S. industry is a very positive sign for our economic competitiveness.”

As we have highlighted before, the short thesis for Tesla (see: Jim Chanos Adds To Tesla Short, Sees Musk Stepping Down) explains the financial circumstances of why Musk is attempting to conduct the great show ever known to man through SpaceX, as it means the cross promotion would keep his scheme alive. In the mean time, the short theses build:

1. Negative Cash Flows

“If you can’t make money selling a $100,000 car to rich people, how are you going to make money selling a $45,000 car to normal people?” Rocker told The Times. He was referring to the upcoming mass-market Model 3. “I’m saying they’re going to lose money on every Model 3 they build and sell,” Spiegel said. Based on Tesla’s Q4 2016 earnings report, he figured the combined average selling price for non-leased Model S and X is about $104,000 and the combined average cost of building them about $82,000.

 

2. Competition from the Big Guys

Electric vehicles are still only a tiny fraction of total new vehicle sales in the US. Tesla sold about half of them. In March, according to Autodata, Tesla sold 4,050 vehicles in the US, similar to Porsche. All automakers combined sold 1.56 million new vehicles. This gave Tesla a market share of 0.26%. “Tesla faces a formidable set of competitors, and they’re coming in with guns blazing,” Wahlman told The Times. “Once the market is flooded with electric vehicles from manufacturers who can cross-subsidize them with profits from their conventional cars, somewhere around 2020 or 2021, Tesla will be driven into bankruptcy,” Spiegel said.

 

3. Tesla’s vanishing tax credits

The federal tax credit of $7,500 that EV buyers currently get is limited to 200,000 vehicles for each automaker. Once that automaker hits that point, tax credits are reduced and then phased out. Of all automakers, Tesla is closest to the 200,000 mark. Under its current production goals, the tax credits for its cars could start declining in 2018. This would give competitors, whose customers still get the full tax credit, a major advantage. About 370,000 folks put down a refundable $1,000 deposit on Tesla’s Model 3, perhaps figuring they’d get the $7,500 tax credit. But as it stands, many won’t. Rocker thinks that this is going to be an issue. The refundable deposit “commits them to nothing,” he said. Those that don’t get the tax credit may just ask for their money back and buy an EV that is still eligible for the credit.

 

4. The Question of patent protection

Tesla has made its patents available to all comers, thus lowering its patent protections against competitors. Also, the key part of an EV, the battery, is produced by suppliers; they, and not Tesla, own the intellectual property. This is true for all automakers. But Tesla might still be closely guarding crucial trade secrets that are not patented.

 

5. Musk’s distractions from his day job

Musk has a lot of irons in the fire: Tesla, SpaceX (with which he wants to build a colony on Mars or something), solar-panel installer SolarCity which Tesla bailed out last year; projects ranging from artificial intelligence to tunnel digging; venture capital activities…. “He’s all over the map, from tunneling to flights to Mars to solar roof tiles,” Rocker said. These announcements have the effect of boosting Tesla’s stock: “It’s ‘Let’s get the acolytes excited. Implant in the brain! Let’s buy Tesla stock!’”

 

6. Execution risk

“Investing is all about possibility and probability,” Yusko said. “Is it possible that Tesla will produce 500,000 cars in the next two or three years? Yes. Is it probable? No.” Tesla has missed many deadlines and goals, and quality problems cropped up in early production models. As Tesla is trying to make the transition to a mass-market automaker, execution risk will grow since mass-market customers are less forgiving.

 

7. Investor fatigue

Having lost money in every one of its 10 years of existence, Tesla asks investors regularly for more money to fill the new holes. In March, it got $1.2 billion. In May last year, it got $1.5 billion. Tesla will need many more billions to scale up production and to digest the losses. Tesla has been ingenious in this department. But when will investors get tired of it? “We’re awfully close to the point where people wake up and realize these guys are seriously diluting our equity” with new stock and convertible bond issues, Yusko said. According to The Times, Yusko “is looking for the moment when the true believers begin to lose faith.”

 

*Update

8. Emerging solid-state battery technology

Musk has invested a lot into his Gigafactory and technology producing lithium-ion batteries. The EV game is all about the best battery technology and a new threat has emerged using solid-state technology. If Tesla does not adopt to these new battery trends consumers would likely gravitate to EVs who posses such technology, because of the longer distance and shorter charge time.

 

"I Was Expecting Many More People": Black Friday Tumbles To 3rd Spot In Busiest Shopping Days Of The Year

It has been an odd year for retail: with an estimated 6,000 store closures, and 65,000 fewer retail jobs than at the start of the year, many have said shorting retail, and especially malls, is the next "big short" trade. Indeed, one look at the performance of the mall heavy CMBX 6 BBB- tranche confirms that the bottom has fallen out of the legacy "bricks and mortar" space.

And yet, despite what should be a furious race to the bottom for market share by all still solvent non-Amazon retailers, this has not happened in what appears to be a strange manifestation of rational pricing. In fact, according to Market Track, last year the discounts were 6% deeper than this year across 17 categories in Black Friday circulars, the WSJ reports, and notes that only three of 10 major retailers the firm measured had better prices this year.

This was obvious to potential buyers like Delaney Dauchy, 15, who was shopping with her mother at a mall in Thousand Oaks, Calif., and told the WSJ that the deals aren’t as good this year. She recalled a seven-for-$28 deal on underwear at Victoria’s Secret last year; this year, she said it was five-for-$28. The Dauchys said there were smaller crowds than past years and Black Friday deals have been going on all week. “I’m not sure it seems extra special,” Anne Dauchy, 47, said.

?? Black Friday alert! ?? The 10 toys we"re tracking are cheapest at Target, where they cost $849.80. For more info: https://t.co/BVIi10s1A7 #BlackFriday pic.twitter.com/m4Ki5dnDuH

— WSJShoppingElf (@WSJShoppingElf) November 24, 2017

To be sure, there are still deals to be had: on Friday, retailers dangled the usual promotions, many of which were identical to last year, including 30% off at Coach and 50% off at the Gap. By Thanksgiving Day, shoppers were already taking advantage of the bargains. Kevin Krause, 27, was first in line waiting outside the Kohl’s store in Medford, Ore., Thanksgiving afternoon. The store opened its doors at 5 p.m., but by 3:15 there was already a line forming.

However, as the WSJ confirmed, lines at many other locations were far shorter - if present at all - compared to prior years, such as this Best Buy at the Fair Lakes Shopping Center in Fairfax Country, VA, where there was virtually no excitement opened this years, especially when compared to 2011.

Then (in 2011)...

... and now.

A similar comparison with Macy"s, which the WSJ compares between 2011 and now. The difference is self-explanatory.

Naturally, in light of the smaller bargains, the lack of shopper euphoria is understandable: yet what is surprising is why there aren"t bigger bargains? After all, neither the industry, nor the economy has turned on a dime. Speculating on the reason, the WSJ writes that "even as this year has proved one of the most challenging for retailers, analysts are predicting robust holiday sales, underpinned by rising wages, low unemployment and strong consumer confidence."

What rising wages? Aside from various "soft" surveys, and management expectations, wage growth remains abysmal, and real wage growth has been negative for three months!

What the WSJ probably means is that between near record low personal savings and a surge in credit card usage, Americans are spending like there"s no tomorrow... they are just not spending their own money.

Anyway, the always optimistic National Retail Federation expects sales to increase as much as 4%, to $682 billion in November and December, compared with the same period a year ago, which would make it the strongest season since 2014. The delusion about US households" spending power continued: "I’d be fully expecting people to be thinking about spending more, not be holding back as much as in the past,” said Andrew Duguay, a senior economist at Prevedere, a predictive analytics company.

Spending more of what?  Here is America"s savings rate: unfortunately people don"t have "more" to spend... 

And yet, maybe the NRF is on to something. In an interview with the WSJ earlier this week, Neiman Marcus Group CEO Karen Katz attributed a jump in the luxury retailer’s gross margin in the latest quarter to stronger full-priced sales. “We’ve gotten our inventory in perfect alignment with our sales,” Katz said.

That could change in the days leading up to Christmas. Shoppers have been trained to wait for deals—a practice made easier by online price comparisons. If they hold off on making purchases, retailers will likely slash prices more than planned as the season progresses.

To be sure, the lack of deals now may mean even greater discounts in the coming months:

In a Long Island, N.Y., Wal-Mart Thursday evening, Andre Valadas said it had been hard to snag one of the discounted Sharp TVs being sold at the store or at a Best Buy across the parking lot, but glanced at his phone often to text with friends nearby looking for a similar deal.

 

The 34-year-old software engineer expects prices to fall further. “I hope that if they don’t have deals right now they will have a them in a few weeks closer to Christmas,” Mr. Valadas said.

 

Retailers still have to contend with headwinds that include a shift in consumer spending away from apparel and accessories and toward dining, travel and entertainment, as well as the explosive growth in online sales.

The above is bad news for bricks and mortar retailers, who may have gotten a brief reprieve only to lose even more customers to online alternatives like Amazon.

And speaking of, Adobe Systems said online sales on Thanksgiving increased 17% as of 5 p.m. to $1.52 billion. It also expects online sales to increase 14% to $107.4 billion during the November-December period, compared with the previous year. Amazon said Thanksgiving was one of its biggest mobile shopping days, as orders placed through its app increased 50% over last year. Best selling items included Keurig coffee makers and its Echo speaker devices.

Indeed, no matter what happens to traditional retail, Amazon is likely to be winner. The online retailer, whose stock hit another all time high, is expecting a big Black Friday as more shoppers choose to skip the stores.

“If you go back to the creation of Black Friday, it was this amazing opportunity for customers to get great deals,” said Dorion Carroll, vice president of mobile shopping at Amazon, in an interview earlier this week. “So they would flock to the stores and all of that would be great, until it wasn’t. It got too crowded.”

In fact, it may come as a surprise to some, that Black Friday is no longer the busiest shopping day of the year. It ranks No. 3, behind the Saturday before Christmas and Cyber Monday, according to the consulting firm Customer Growth Partners.

Several dozen people still gathered in line early Friday morning to be the first inside a Target store in Houston when it opened at 6 a.m., though some said the crowds were notably smaller than years past. Once inside, shoppers like Freddy Cespedes, 42, owner of a small security company, found the best advertised stuff was already picked over the night before.

“I was expecting a lot more people,” said the Black Friday novice though he acknowledged he, like many people nowadays, primarily shops online.

The Cardinal Sin Of International Finance

Authored by Nick Giambruno via InternationalMan.com,

As Doug Casey has correctly noted, the prime directive of any organism - whether it’s an amoeba or a person or a corporation or a government - is to survive.

That’s why the US government protects the petrodollar so zealously. It needs the system to survive.

Why Everyone Uses the US Dollar… for Now

In the 1970s, the US government struck a series of deals with Saudi Arabia, creating the petrodollar system. The US promised to coddle and protect the Saudi kingdom. And, in exchange, Saudi Arabia would use its dominant position in OPEC to ensure that all oil transactions happened in US dollars.

 

Until recently, virtually anyone who wanted to import oil from any country needed US dollars to pay for it.

 

The dollar is just a middleman here. But countries and businesses use it in countless transactions amounting to trillions of dollars that have nothing to do with US products or services.

 

Plus, if foreign countries are already using dollars for oil, it’s just easier to use the dollar for other international trade. That’s why, in addition to oil sales, the US dollar is used for about 80% of all international transactions.

World leaders who have challenged the petrodollar recently have ended up dead…

Take Saddam Hussein and Muammar Gaddafi, for example. Each led a large oil-producing country—Iraq and Libya, respectively. And both tried to sell their oil for something other than US dollars, before US military interventions led to their deaths.

In October 2000, Saddam had started to sell Iraqi oil for euros only. Iraq said it would no longer accept dollars for oil because it did not want to deal “in the currency of the enemy.”

A little over two years later, the US invaded. Immediately after Baghdad fell to US forces, all Iraqi oil sales were switched back to dollars.

Thanks to WikiLeaks’ release of Hillary Clinton’s emails, we know that protecting the petrodollar—not humanitarian concerns—was a primary reason for overthrowing Libya’s Gaddafi.

According to her leaked emails, the US (and France) feared that Gaddafi would use Libya’s vast gold reserves to back a pan-African currency. This gold-backed currency would have been used to buy and sell oil in global markets. Also, it would have likely displaced a version of the French franc that’s used in Central and Western Africa.

The US and France backed a rebellion, both militarily and financially, that overthrew Gaddafi in 2011.

After Gaddafi’s death, plans for the gold-backed currency—along with Libya’s 4.6 million ounces of gold—vanished.

Of course there were other reasons the US toppled Saddam and Gaddafi. But protecting the petrodollar was a serious consideration, at the very least.

Putin Is a Tougher Adversary

The dollar’s special status gives Uncle Sam tremendous leverage. So it’s no surprise that Russia wants to undermine the petrodollar system.

Russian President Vladimir Putin summed it up this way:

Russia shares the BRICS countries’ concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.

Essentially, Putin is saying they all want to ditch the dollar.

That’s largely because the US uses the dollar as a political weapon. For example, the US tried to sanction Russia for its actions in Crimea and Ukraine. These sanctions made it harder for Russia to access the US dollar–based financial system. So of course Russia is going to push for an alternative.

Shortly after the sanctions, Russia struck a massive deal to sell oil and gas to China for yuan. The deal totally bypassed the US financial system… and any sanctions.

China’s Permanent Bypass Around the US Dollar

Russia is the world’s largest energy producer. China is the world’s largest energy importer. Normally, they would trade with each other exclusively in US dollars.

But, as I’ve told you in recent weeks, China is now introducing a more permanent way around that.

I call it China’s “Golden Alternative” to the petrodollar. It’s a streamlined way for Russia and everyone else to sell oil to China for yuan—or effectively gold.

China’s “Golden Alternative” to the Petrodollar

China is launching a practical and attractive alternative to the petrodollar system. It will allow anyone in the world to trade oil for gold. It will also totally bypass the US dollar.

 

Here’s how it will work…

 

The Shanghai International Energy Exchange (INE) is introducing a crude oil futures contract denominated in Chinese yuan. It will allow oil producers to sell their oil for yuan.

 

Of course, China knows most oil producers don’t want a large reserve of yuan. So producers will be able to efficiently convert it into physical gold through gold exchanges in Shanghai and Hong Kong.

Bottom line, two of the biggest players in the global energy market are totally bypassing the petrodollar system.

Informed observers say Russia is already converting a large portion of its yuan earnings to gold.

Of course, other countries are interested in sidestepping the US financial system and US sanctions, too. China’s Golden Alternative will give anyone the option to do just that.

This will make the US dollar a much less effective political weapon.

Other countries on Washington’s naughty list are enthusiastically signing up. Iran, another major oil producer, is accepting yuan as payment. So is Venezuela, which has the world’s largest oil reserves.

I think others will soon follow. From the perspective of an oil producer, it’s a no-brainer.

With China’s Golden Alternative, an oil producer can participate in the world’s largest market and try to capture more market share. It can also easily convert and repatriate its proceeds into gold, an international form of money with no political risk.

But this doesn’t apply to one critical holdout… Saudi Arabia.

Twisting the Saudis’ Arm

Saudi Arabia is the world’s largest oil exporter. A lot of that oil goes to China, the world’s largest importer.

Beijing still reluctantly pays for Saudi crude in US dollars. The Saudis won’t have it any other way, at least for now.

This bothers China. It can only import Saudi crude by obtaining and then using US dollars. And that, of course, means it has to stay in Washington’s good graces.

Trump’s Treasury secretary really drove this point home recently. He threatened to kick China out of the US dollar system if it didn’t crack down on North Korea.

China would rather not depend on an adversary like this. This is one of the main reasons it’s launching the Golden Alternative.

Saudi Arabia, however, refuses to participate. It won’t sell its oil in anything but US dollars because that would break its longstanding petrodollar agreement with the US.

When China, Russia, and others trade oil for yuan, it’s a significant blow to the petrodollar. But if Saudi Arabia switched to yuan, it would take out the petrodollar… and cause an immediate financial panic in the US.

The truth is selling oil for yuan would cost Saudi Arabia a whole lot.

It would immediately lose American diplomatic and military protection. Then the media and think tanks would quickly start pounding the table for the US military to force democracy on Riyadh.

Last year Trump said, “If Saudi Arabia was without the cloak of American protection, I don’t think it would be around.”

He’s absolutely correct.

Of course, the Saudis know all of this. So they’ve been on a short leash… until recently.

In a surprise move, Saudi King Salman recently became the first sitting Saudi monarch to ever visit Russia.

Until recently, the visit would have been unthinkable. Saudi Arabia has been one of the US’ closest allies since the petrodollar system started in the 1970s.

Meanwhile, Russia and Saudi Arabia have been enemies for decades. Most recently, the Saudis and Russians have been on opposite sides of the Syrian Civil War.

That’s why King Salman’s historic visit to Moscow is so remarkable. The Saudis are clearly hedging their bets against the US and the petrodollar system.

Saudi Arabia is now drifting closer to Russia.

The Saudis have committed to invest up to $10 billion in various Russian sectors. But, even more significantly, they’ve agreed to buy the S-400 missile system, Russia’s top line air defense system, as part of a $3 billion weapons purchase.

This deal signals a geopolitical earthquake. The Saudis have never bought Russian military equipment before.

Ever since the birth of the petrodollar, the Saudis have depended on American military protection. After all, it’s what they get in return for pricing their oil in dollars.

The S-400 system deal suggests the Saudis are hedging their bets. First, they’re not buying an American system. Second, they’re buying a Russian system that’s capable of deterring an American attack.

Saudi Arabia is making significant moves to give itself alternatives to American protection.

At the same time, China is cutting back on Saudi crude.

A few years ago, Saudi oil made up over 25% of Chinese oil imports. They were Beijing’s No. 1 supplier. Today, the Saudis’ market share has dropped below 15%.

In other words, the Saudis are losing massive market share and getting pushed out of the biggest oil market in the world. This is mainly because they refuse to sell oil to China in yuan.

China has made itself clear. It’s willing to expand business with anyone who will accept yuan as payment.

Today, Russia has overtaken Saudi Arabia as China’s top supplier. Its share of the lucrative Chinese market has grown from 5% to over 15%.

Russia’s enthusiastic acceptance of yuan as payment is the main reason for this shift.

In the meantime, Angola, an African oil producer, has also come on board. The country now accepts yuan as payment for its oil exports to China. It even made the Chinese yuan its second legal currency in 2015.

Chinese imports from Angola have shot up since. It’s now China’s No. 2 supplier, after Russia.

None of this bodes well for the petrodollar system.

The Saudis have two choices… rip up the petrodollar or get shut out of the world’s most lucrative oil market.

One way or another—and probably soon—the Chinese will find a way to compel the Saudis to accept yuan. The sheer size of the Chinese market makes it impossible for Saudi Arabia to ignore China’s demands indefinitely.

What to Watch For…

China might not convince the Saudis to ditch the petrodollar system tomorrow. But it’s making significant progress.

A few months ago, Saudi Arabia announced it was willing to issue Panda bonds to finance its government spending deficit. (Panda bonds are yuan-denominated bonds from non-Chinese issuers that are sold in China.)

This is remarkable. The Saudis’ currency is pegged to the US dollar. Up until this point, they’ve exclusively used US dollars for all of their major financial initiatives.

Issuing debt in yuan—instead of US dollars—is a significant move. It means Saudi Arabia is drifting closer to China.

Also, the Saudis recently inaugurated the massive Yasref refinery in the Saudi city of Yanbu. The refinery is an $8.5 billion joint venture between Saudi Aramco and China’s Sinopec.

These are noticeable steps. But the Saudis still haven’t given China what it really wants—oil for yuan.

However, it could happen soon…

The Largest IPO in History

In the coming months, the Saudis plan to float a 5% stake in Saudi Aramco, the state oil company.

Saudi Aramco is the most valuable company in the world. It will likely be the biggest equity offering ever. It could triple, or even quadruple, Alibaba’s current record initial public offering (IPO) of $25 billion.

The IPO’s success will depend on Saudi Arabia recruiting big cornerstone investors. But so far, Western investors haven’t shown a lot of enthusiasm.

For China, however, it could be the perfect opportunity to buy political influence in Saudi Arabia.

If China bought a large stake in the Aramco IPO, it would help cement its relationship with Saudi Arabia. It would also put more distance between the Saudis and the Americans.

And critically, it would give the Chinese more leverage to compel the Saudis to accept yuan for oil.

China is in the process of negotiating not just a 5% stake, but potentially a larger one.

Bottom line…the Saudis haven’t made a clean break with the US yet. However, they are drifting toward China financially and Russia militarily.

The Saudis are clearly setting up the option to dump the petrodollar.

If the Saudis sell oil to China in yuan, it would kill the petrodollar overnight. However, short of that, things still look very dire for the petrodollar.

The petrodollar system is facing serious erosion, thanks in large part to China’s Golden Alternative. That’s already baked into the cake.

And with that, severe inflation in the US is a certainty.

This will likely be the tipping point…

After the collapse of the petrodollar, the US government will be desperate enough to implement capital controls, people controls, nationalization of retirement savings, and other forms of wealth confiscation.

I urge you to prepare for the economic and sociopolitical fallout while you still can. Expect bigger government, less freedom, shrinking prosperity… and possibly worse.

It’s probably not going to happen tomorrow. But we know where this trend is headed.

It’s possible that one day soon, Americans will wake up to a new reality. Once the petrodollar kicks the bucket and the dollar loses its status as the world’s premier reserve currency, you will have few, if any, options.

The sad truth is, most people have no idea how bad things could get, let alone how to prepare…

Yet there are straightforward steps you can start taking today to protect your savings and yourself from the financial and sociopolitical effects of the collapse of the petrodollar.

We recently released a special Guide to Surviving and Thriving During an Economic Collapse. Click here to download the PDF now.

When Will The Tesla Stock-Promote Finally Fail

Via AdventuresInCapitalism.com,

The history of industry leading consumer tech products has not been kind to investors who overstay their welcome. You need look no further than all the hundreds of notable recent failures, to realize that these companies almost always flame out. The list below (in no particular order) is a nice trip down memory lane of former favorites, that are now either bankrupt or shells of their former selves—often consumed by some other entity that fortunately put them out of their misery. Of course, the list below, is just from the past decade or two;

Palm, Gateway, Research In Motion, GoPro, FitBit, Heelys, Handspring, Compaq, BlueRay, Garmin, Delorean, Casio, Sega, Tamaguchi, TiVo, Betamax, AOL, Walkman (Sony), Set Top Boxes (Scientific American), Kodak, Atari, Napster, Netscape, Polaroid, etc.

Let’s just say, it’s hard at the top. You must guess each change in technology, each generation of improvement and design it for fickle consumers, while constantly outlaying capital for research and development that may never go anywhere. All the time, others are constantly trying to overtake you.

If you look at the lifecycles of these companies, they often follow a similar trajectory from ingenious creation with huge margins, to a few generations of new products with smaller margins, to massive competition as deep pocketed competitors and venture capitalists try and emulate your product, to missing a product cycle, to becoming obsolete. These consumer product companies rarely last more than a decade; often just a few years. In the end, consumer focused tech is vicious and Darwinian, with very few long-term competitive advantages.

Of course, Tesla (TSLA – USA) is something of an anomaly here. While the companies in the above list, all produced prodigious cash while they were industry leaders, Tesla seems to incinerate cash while in the lead—using repeated equity and now debt offerings to plug the hole. While other companies had a huge stash of cash to fall back on when others overtook them, Tesla’s cash balance leaves it only a few quarters from insolvency. Add in a host of questionable related party transactions, convoluted financial statements (what the hell is pro-forma revenue?), the inability to ever hit company guidance, deceptive disclosures and a business that seems to lose more money with each vehicle it produces, is it any wonder that Tesla is one of the most shorted large-cap stocks today? If I had to choose the most obvious pending bankruptcy of a large-cap stock, it is clearly Tesla.

At the same time, I have to give Elon Musk credit. He has created a company that is a rather successful cult, even if it is still a failing auto company. Every time that skeptics ask real questions, he deflects them with futuristic sci-fi pronouncements. What other automobile CEO is obsessed with Mars while his assembly line fumbles along? What other CEO talks of hyperloops, while his main product on auto-pilot will kill you if used as currently designed. This “visionary “status has deferred timelines and made all logical financial metrics meaningless to investors—which may be the point of all his hubristic talk in the first place. Extend, pretend, blatantly mislead investors, raise more capital. It’s the junior mining model—applied to auto production—on a scale that would make anyone in Vancouver blush.

Automobile production is a decidedly unsexy industry, with massive capital outlays, high fixed costs, huge cyclicality and low returns on invested capital throughout the cycle—the technical definition of an awful business. The leading players produce millions of vehicles a year, yet trade at mid-single digit cash flow multiples, due to how awful the industry is. Why is Tesla valued like a high-tech growth stock, where investors ignore accelerating operating losses; if the best-case outcome is that it becomes a cyclical auto manufacturer with depressing returns on capital? A new technology like electronic vehicles (EV) sounds cutting edge, but so was automatic transmission, air conditioning, power steering, fuel injection, etc. All the other auto makers copied these technologies and caught up within a few years—much like what is now happening in EV. So, how has Tesla become such an epic bubble, if it is competing (poorly) in an industry that is notorious for destroying capital? It is clearly the promotional genius of Elon Musk. Naturally, he won’t be the first or last “visionary” to have a comeuppance.

So, going back to my question, which is the genesis of this article; when will the Tesla stock promote finally implode?

Long-time readers of this site know that I no longer short companies. This was a hard-learned lesson from when I was short Research in Motion, about two years too soon and watched as it went up 3-fold on me—before ultimately collapsing as I had predicted. Unfortunately, I was not short much by the time of the collapse as a small position had mushroomed into something pretty large and I was forced to keep covering at accelerating losses—lest I be forced to sell good longs to fund the repeated margin requirements of the short. While my thesis had been right, my timing was wrong. As long as investors believed in Blackberry, it didn’t matter that Apple and Samsung were building competing products that were likely to be better. It didn’t matter that Chinese players were producing low-end models that were likely to be almost as good, but at a fraction of the cost. It didn’t matter that competition from cash rich competitors grabbing for market share would crush margins. No one on Wall Street cared—until the iPhone finally showed up and people realized it was better. Then the Research in Motion collapse began.

For the past year, Tesla was a bet on pending mass production of affordable EV cars. Earlier this summer, we saw the first of the Tesla Model 3s to be produced. Even the normally ebullient journalists struggled to hide their disappointment with the product. This is understandable, dozens of competing EV models are coming, starting as soon as 2018. Will they be better than the Model 3? Based on what we know thus far, they’re unlikely to be worse. As they continue to advance EV technology, auto companies with far greater resources than Tesla, will eventually surpass it—much like with Blackberry. Then again, Research in Motion was coining money while at the top of its game—Tesla consumes money, while racking up debt. This won’t be a game of margins and profits—all the incumbents need to do is show that they can break even producing a comparable vehicle. At that point, the funding for Tesla will subside and its debt will bury it.

I was too early with RIMM and I don’t want to be too early with TSLA. So, I’ve been patient. I’ve been waiting for the competitors to show up. They’re now coming. The Tesla Model 3 is a dud—competing products will begin showing up in 2018 and they look much better. However, I’m not going to short TSLA. I’m going to use long-dated puts—much like I’ve played all subsequent dead-man-walking companies with an uncertain mortality date.

The problem with puts, is that long-dated puts are expensive. Fortunately, there’s a way to offset this cost, the bear put spread. This is the purchase of a put and the sale of a put at a lower price. By doing this, your gains are capped by the price of the put you’ve sold, but since your cost is much lower, you get to play with many more of them. Besides, you don’t need Tesla at zero to win with these, you just need Tesla’s share price to drop materially from here. If my timing is wrong, my losses are small and I can reload when they expire. Besides, I don’t expect TSLA to be a zero immediately. It is much more likely to limp towards zero, as opposed to imploding towards zero—making the bear put spread even more attractive than straight puts. Let’s just say that for the past few months, I’ve been adding to this position. The net cost of the spread is cheap and the timing now seems increasingly pregnant.

When will Tesla’s stock promote finally implode? When people realize that it’s a cash incinerating vanity project for Elon Musk, at a time when new, better products are coming to the market. That point is coming soon. Very soon.

Why Goldman Just Downgraded GM To Sell

After GM"s stock surged over 35% in the past two months, Goldman finally decided they had seen enough this morning and downgraded the stock to sell with a $32 price target. 

So what caused the downgrade?  Well, Goldman figures GM is facing just a few "minor" headwinds over the next couple of years which include collapsing industry volumes and declining margins on crossover products which should result in a ~22% decline in EBIT next year...oh, and the fact that the company suddenly trades at an historically high multiple, just as earnings are about to collapse, was also viewed negatively by Goldman"s auto team.  Here"s the summary of their downgrade:

"Looking ahead into 2018 and given the current valuation level, we see a downward infection in GM earnings and consequently downgrade shares to Sell. We expect that a normalization in SAAR coupled with the company’s product launches in 2018 will weigh on GMNA pro?tability. Our work on pickup trucks and crossovers suggest that GM likely experiences volume and mix headwinds that exacerbate the cyclical pro?t headwinds. Combined, we see this driving 2018E EBIT -adjusted down by 22% yoy and compressing overall corporate margins. We see 28% downside to our 12-month price target of $32."

On overall industry volume, Goldman sees a 15% decline in U.S. SAAR over the next couple of years to 15mm which they think will be prompted by, among other things, "challenging consumer affordability" which will result from rising interest rates and a tightening of auto credit.

US cycle peaked, and production cuts likely continue: We believe cleared through pent-up demand (given sales above normalized levels since 2013) and challenged consumer affordability (rising interest rates, tightening auto credit) will drive a normalization in US SAAR beginning in 2018, ultimately translating into declines in utility vehicles and passenger cars. As GM generates 106% of Automotive pro?t and 108% of FCF in North America, we expect this cycle normalization to pressure GMNA results going forward.

Meanwhile, Goldman sees GM share loss on pickup trucks in 2018 and declining pricing power on crossovers due to a flood of competitive models in that segment.

Pickup truck changeover leaves GM vulnerable to share loss in 2018: Historically,n pickup truck refreshes drive market share losses of 100bps to 300bps in the year during the launch. As GM approaches a 2018 changeover with incremental downtime and given Ford’s recently refreshed F-Series, we expect share shifts to pressure GM. We see a $2bn headwind in volume/mix at GM related to its 2018 pickup refresh.

 

Growing competition in crossover utility vehicles (CUVs) should weigh onn pricing: As the industry has bene?tted from a mix shift to higher variable pro?t crossovers (from passenger cars), OEMs have shifted their product strategy and 40% of vehicles launching over the next few years are CUVs. As a result, competition in the segment has been intensifying and GM’s CUV pro?tability has begun to compress; we believe this trend likely continues particularly as overall sales slow. As CUVs represent 27% of GM’s portfolio (vs. 22% at Ford), we believe the company will see more pressure relative to its peer, and competition in this segment will weigh on GM’s ability to drive positive pricing.

All of which should result in a "minor" 24% decline North American EBIT in 2018.

Oh, and Goldman figures it also doesn"t help that GM"s stock recently soared to record high multiples just as earnings are getting set to collapse.

Meanwhile, GM shareholders are finally starting to take notice that at a 35% surge in share price, or $18.5 billion in market cap, might not have been completely warranted just because a couple of hurricanes wiped out a few cars in Texas and Florida.

Mapping What Every State In America Is Best At

Company towns used to be a defining feature of the American economy. Nowadays, as Raul at HowMuch.net notes, thanks to globalization and offshoring, it is much harder to find employers that exert such influence over a small town (with a few notable exceptions).

That being said, specific industries still tend to grow in clusters and can dominate the economy of a particular region. To understand this new reality, we mapped the most important industries by state according to the U.S. Bureau of Economic Analysis, which takes into account an industry’s collective output as a percentage of the overall GDP. For simplicity, we excluded government jobs and real estate.

The result is one of the easiest snapshots of the U.S. economy you will ever find.

Source: HowMuch.net

The government groups companies into particular industries using the North American Industry Classification System (NAICS). Basically, someone looks at a company and decides where it belongs on a list of industries. This is more complex than it sounds, especially if a parent company holds many different unrelated subsidiaries (like Amazon), or when a business model strides the line between different industries (anyone care to debate if Airbnb is a technology company or in the hospitality industry?). We simply generated a color-coded map of the results of this debate.

You can immediately see some interesting groupings in the map.

 Computer & electronics companies dominate the West Coast, oil & gas remains ascendant in the Southwest, and insurance companies take the greatest market share in the Upper Midwest.

Take a look at the deep South, where you see a lot of red signifying the ambulatory healthcare services industry. This single industry dominates in 13 different states. Think about the Fortune 500 companies headquartered in these places, and it’s pretty easy to understand why these industries are so important. For example, Apple, Facebook, and Google are all headquartered in Silicon Valley in California.

Things tend to be much more diverse across the Northeast, where you see many different industries all grouped together. This is also easy to explain: it’s one of the most population-dense places in the country and it has the smallest states in terms of geography. This environment lets a lot of different industries grow together.

Factory towns may be a thing of the past, but it remains true today that similar businesses tend to grow and expand in areas with the same economic conditions.

This is true for less populous states like North Dakota and places with big cities too, like Colorado. If you’re looking for a job in one of these states, then our list gives you a good idea of where the biggest opportunities might be.

 

Visualizing The Massive Impact Of EVs On Commodities

What would happen if you flipped a switch, and suddenly every new car that came off assembly lines was electric?

It’s obviously a thought experiment, since right now EVs have close to just 1% market share worldwide. We’re still years away from EVs even hitting double-digit demand on a global basis, and the entire supply chain is built around the internal combustion engine, anyways.

At the same time, however, as Visual Capitalist"s Jeff Desjardins notes, the scenario is interesting to consider. One recent projection, for example, put EVs at a 16% penetration by 2030 and then 51% by 2040. This could be conservative depending on the changing regulatory environment for manufacturers – after all, big markets like China, France, and the U.K. have recently announced that they plan on banning gas-powered vehicles in the near future.

THE THOUGHT EXPERIMENT

We discovered this “100% EV world” thought experiment in a UBS report that everyone should read. As a part of their UBS Evidence Lab initiative, they tore down a Chevy Bolt to see exactly what is inside, and then had 39 of the bank’s analysts weigh in on the results.

After breaking down the metals and other materials used in the vehicle, they noticed a considerable amount of variance from what gets used in a standard gas-powered car. It wasn’t just the battery pack that made a difference – it was also the body and the permanent-magnet synchronous motor that had big implications.

As a part of their analysis, they extrapolated the data for a potential scenario where 100% of the world’s auto demand came from Chevy Bolts, instead of the current auto mix.

THE IMPLICATIONS

If global demand suddenly flipped in this fashion, here’s what would happen:

Some caveats we think are worth noting:

The Bolt is not a Tesla

The Bolt uses an NMC cathode formulation (nickel, manganese, and cobalt in a 1:1:1 ratio), versus Tesla vehicles which use NCA cathodes (nickel, cobalt, and aluminum, in an estimated 16:3:1 ratio). Further, the Bolt uses an permanent-magnet synchronous motor, which is different from Tesla’s AC induction motor – the key difference there being rare earth usage.

Big Markets, small markets:

Lithium, cobalt, and graphite have tiny markets, and they will explode in size with any notable increase in EV demand. The nickel market, which is more than $20 billion per year, will also more than double in this scenario. It’s also worth noting that the Bolt uses low amounts of nickel in comparison to Tesla cathodes, which are 80% nickel.

Meanwhile, the 100% EV scenario barely impacts the steel market, which is monstrous to begin with. The same can be said for silicon, even though the Bolt uses 6-10x more semiconductors than a regular car. The market for PGMs like platinum and palladium, however, gets decimated in this hypothetical scenario – that’s because their use as catalysts in combustion engines are a primary source of demand.

Comparing Bitcoin, Ether, & Other Cryptos

Unless you’ve been hiding under a rock, you’re probably aware that we’re in the middle of a cryptocurrency explosion. In one year, the value of all currencies increased a staggering 1,466% – and newer coins like Ethereum have even joined Bitcoin in gaining some mainstream acceptance.

And while people like Jamie Dimon of J.P. Morgan and famed value investor Howard Marks have been extremely critical of cryptocurrencies as of late, many other investors are continuing to ride the wave. As Visual Capitalist"s Jeff Desjardins has noted in the past, the possible effects of the blockchain cannot be understated, and it could even change the backbone of how financial markets work.

However, even with the excitement and action that comes with the space, a major problem still exists for the layman: it’s really challenging to decipher the differences between cryptocurrencies like Bitcoin, Ethereum, Ethereum Classic, Litecoin, Ripple, and Dash.

For this reason, we worked with social trading network eToro to come up with an infographic that breaks down the major differences between these coins all in one place.

(click image for massive legible version)

A DESCRIPTION OF MAJOR COINS

Here are descriptions of the major cryptocurrencies, which make up 84% of the coin universe.

BITCOIN

Bitcoin is the original cryptocurrency, and was released as open-source software in 2009. Using a new distributed ledger known as the blockchain, the Bitcoin protocol allows for users to make peer-to-peer transactions using digital currency while avoiding the “double spending” problem.

No central authority or server verifies transactions, and instead the legitimacy of a payment is determined by the decentralized network itself.

Bottom Line: Bitcoin is the original cryptocurrency with the most liquidity and significant network effects. It also has brand name recognition around the world, with an eight-year track record.

LITECOIN

Litecoin was launched in 2011 as an early alternative to Bitcoin. Around this time, increasingly specialized and expensive hardware was needed to mine bitcoins, making it hard for regular people to get in on the action. Litecoin’s algorithm was an attempt to even the playing field so that anyone with a regular computer could take part in the network.

Bottom Line: Other altcoins have taken away some of Litecoin’s market share, but it still has an early mover advantage and some strong network effects.

RIPPLE

Ripple is considerably different from Bitcoin. That’s because Ripple is essentially a global settlement network for other currencies such as USD, Bitcoin, EUR, GBP, or any other units of value (i.e. frequent flier miles, commodities).

To make any such a settlement, however, a tiny fee must be paid in XRP (Ripple’s native tokens) – and these are what trade on cryptocurrency markets.

Bottom Line: Ripple runs on many of the same principles of Bitcoin, but for a different purpose: to serve as the middleman for all global FX transactions. If it can successfully capture that market, the potential is high.

ETHEREUM:

Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications.

In the Ethereum blockchain, instead of mining for bitcoin, miners work to earn ether, a type of crypto token that fuels the network. Beyond a tradeable cryptocurrency, ether is also used by application developers to pay for transaction fees and services on the Ethereum network.

Bottom Line: Ethereum serves a different purpose than other cryptocurrencies, but it has quickly grown to displace all but Bitcoin in value. Some experts are so bullish on Ethereum that they even see it becoming the world’s top cryptocurrency in just a short span of time – but only time will tell.

ETHEREUM CLASSIC:

In 2016, the Ethereum community faced a difficult decision: The DAO, a venture capital firm built on top of the Ethereum platform, had $50 million in ether stolen from it through a security vulnerability.

The majority of the Ethereum community decided to help The DAO by “hard forking” the currency, and then changing the blockchain to return the stolen proceeds back to The DAO. The minority thought this idea violated the key foundation of immutability that the blockchain was designed around, and kept the original Ethereum blockchain the way it was. Hence, the “Classic” label.

Bottom Line: As time goes on, Ethereum Classic has been carving out a separate identity from its bigger sibling. With similar capabilities and a different set of principles, Ethereum Classic could still have upside.

DASH:

Dash is an attempt to improve on Bitcoin in two main areas: speed of transactions, and anonymity. To do this, it has a two-tier architecture with miners and also “masternodes” that help the network perform advanced functions such as near-instant transactions and coin-mixing to provide additional privacy.

Bottom Line: The innovations behind Dash are interesting, and could help to make the coin more consumer-friendly than other alternatives.

BONUS: BITCOIN CASH

Although not included in the graphic, we also wanted to add a quick word on Bitcoin Cash. This new currency “hard forked” from Bitcoin about a month ago, as a result of miner disagreements about the future of Bitcoin. Here’s a detailed summary of the announcement.

The Aramco IPO: A Geopolitical Game Of Thrones

Authored by Cyril Widdershoven via OilPrice.com,

The already strong bilateral relations between Saudi Arabia and China are hitting new levels, as the Kingdom and the Chinese Tiger have decided to set up a joint US$20 billion investment fund. The fund was announced by Saudi minister of energy Khalid Al Falih, after meeting with Chinese vice-prime minister Zhang Gaoli in Jeddah. Falih indicated that both countries will share the total investments and will be splitting the revenues of the fund, which is going to target projects in infrastructure, energy, mining and materials. This is not a surprise, as Saudi Arabia has already been heavily investing in energy and petrochemicals in China the last decades. Saudi Aramco’s main downstream investments lately almost all have been focusing on increasing the Saudi footprint in downstream China, mainly to lock in Chinese demand for crude and products. Falih also reiterated that both countries will sign around $20 billion in value of projects in the coming days. As reported in the press, Saudi Arabia will be willing to invest in the fund partly in yuan. The current visit by the Chinese is of significance, as it could be a precursor to a hefty Chinese involvement in the eagerly awaited Saudi Aramco IPO next year. In March, during a visit of the King Salman to China, the two countries signed several energy and space technology deals worth $65 billion.

Saudi Arabia has, in recent years, shown a willingness to form more in-depth relationships with its main Asian customers, China, India and Japan. The Chinese energy demand, which is still the main driver of the global oil and gas market growth, is considered to be vital for Saudi Arabia’s future. The Kingdom is currently in a heavy battle with Russia and arguably Iran for the title of China’s biggest oil supplier, a title that Russia took from Saudi Arabia at the start of this year. Several analysts have been very worried about this development as it could weaken the IPO of Saudi Aramco. However, Aramco’s prominent position in the Chinese market, and the ongoing investments that the Saudi oil giant is making in downstream production and capabilities in China, will contain any negative repercussions from loss of market share. In the long-run, Aramco’s position in China will only strengthen, which will allow the Kingdom to lock in a hefty portion of its export volumes.

The fact that both sides are willing to set up a new investment fund, holding $20 billion, is a clear sign of not only the readiness of Saudi Arabia to link its future to China, but also its eagerness to support any Chinese involvement and interest in the Aramco IPO. The willingness of Saudi Arabia to consider funding in yuan not only reflects the interest of Riyadh in China, but also indicates the rising importance of the Chinese currency in Gulf markets. The possible threat to the U.S. dollar, English Pound or Euro, should not be overestimated though. The total trade value between both China and Saudi Arabia is still low in comparison to other trade partners. The current focus is still on the extension of an energy-based economic relationship. This can and will however change in the coming years, analysts expect.

The increased influence that China, in stark contrast to its historically inward-looking strategies, has gained in the Gulf region, Iran and the Horn of Africa, has been recognized in Riyadh. Saudi Arabia is aware that an economic relationship with such an influential country also increases security. China’s involvement and links with Saudi adversaries, such as Iran, Syria, or even Qatar, are seen as potential mitigating forces in a regional conflict.

The growing friendship and intricate economic-strategic relationship between Beijing and Riyadh will have an impact on the Chinese relationship with other Arab countries and Iran. China could become involved in the ongoing sectarian and political battle that is currently raging in the Gulf region.

The Financial Times reported this week that China could be willing to invest in, or even buy outright, Saudi Aramco’s 5 percent. There is still no clarity on where Aramco will be listed or how the rights of minority shareholders can be protected, which means a major national entity stepping in is entirely realistic. After the IPO, the Saudi government will still be a 95 percent shareholder, owning and deciding the future of the oil giant. Saudi’s new crown prince Mohammed Bin Salman has linked his future, and that of his grand-scale economic diversification plans called Saudi Vision 2030, to the success of the Aramco IPO. Valuing the company at more than $2 trillion, the risks are clear. A failure of the sale could be not only putting part of Saudi’s economic plans on hold, but could mean a destabilization of the Saudi regime or even a removal of the crown prince. The FT, in a blog, indicated that China could step in as a financial savior. With around 8.5 million bpd of crude oil imports, which is 2.5 million bdp more than in 2014, the attractiveness of having a stake in Saudi Aramco is huge. Even though an energy diversification program is in place, China’s imports from Saudi Arabia are going to increase.

For Beijing, a stake in one of its main suppliers is a very attractive proposition. It will not only lock in Saudi crude oil and petroleum product exports to China but it will also provide some additional political and strategic clout in the heart of the Middle East.

As the U.S. is beginning to remove its military assets, new players have stepped in. Riyadh’s new leader, MBS, will have looked at the opportunity to play the two main other players, Russia and China, against each other. On both sides, the rewards for Saudi Arabia will be high. Moscow is needed to stabilize oil markets, and could assist gas flows to the GCC, while China is needed as an export destination. Both at the same time are needed to stabilize the Gulf region, as they are linked already to Iran, and increasingly Egypt. China’s historical reluctance to be militarily involved outside of its own influence spheres in Asia has changed. The current aggressive buildup of Chinese military hardware and forces in the Gulf region and Africa is forcing a realignment of Saudi geopolitics. An economic-financial bridge could be forged via Aramco. Current deal discussions in Jeddah could be linked to this.

Aramco and the Saudi crown prince will be weighing their options. The attractiveness of having the Chinese onboard is clear, but providing China with too much influence in the region could spell trouble for the Saudis. Playing other investors, financial institutions and countries against each other is now the name of the game. HBO would be wise to have a real good look at the GCC adventures right now. A real Game of Thrones is now being played out, and while Aramco’s IPO may be the first battle, it will be far from the last.