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J.P. Morgan analyst Stephen Tusa pored over the financials of partner Safran, a French aerospace company. He didn't like what he found.
J.P. Morgan analyst Stephen Tusa pored over the financials of partner Safran, a French aerospace company. He didn't like what he found.
(Bloomberg) -- Bitcoin is likely to remain under pressure for weeks after tumbling about 35% since hitting a record high last month, according to one of the biggest investors in the largest cryptocurrency.“I think we are going to consolidate for a while, four to six weeks,” Michael Novogratz, chief executive officer of Galaxy Digital LP, said in an interview, calling a $40,000-to-$50,000 price range fair.Bitcoin fell as low as $42,133 on Monday following a volatile weekend that saw Tesla CEO Elon Musk whipsaw investors with a series of tweets in the wake of his decision to stop accepting the coin for car purchases because of its environmental impact. Bitcoin’s digital ledger uses a worldwide network of computers to function, a process that’s become known as mining.“I took his mining comments at face value,” Novogratz said. “I don’t think that’s Bitcoin-specific, that’s everything specific: The gold market, YouTube -- all uses a lot of electricity. And Elon has businesses in clean energy.”The cryptocurrency industry is looking at its Environmental, Social, and Corporate Governance (ESG), and how to mitigate Bitcoin’s impact through things like carbon offset credits, he said.“Like all industries, ESG is important, and the crypto industry including Galaxy is going to address it,” Novogratz said.Bitcoin should still finish the year higher even after the recent slide, Novogratz said. The U.S. Securities and Exchange Commission could approval of a Bitcoin exchange-traded fund at the end of this year or early next year, he said.“My guess is the next catalyst is the ETF,” Novogratz said.While Bitcoin continues its gyrations, New York-based Galaxy -- which hopes to list on a U.S. exchange in the second half of the year -- reported strong first-quarter results Monday. Even after the recent volatility, Bitcoin is up around 45% for the year.Net comprehensive income, excluding non-controlling interests, increased to $860.2 million, from a net comprehensive loss of $26.9 million in the prior-year period. Counterparty trading volumes grew more than 290% year over year. Its preliminary assets under management rose to $1.27 billion as of March 31, a 58% jump from the prior quarter.Galaxy is involved in a slew of businesses, ranging from mining to helping companies with acquisitions to investing in startups. In May, Galaxy acquired crypto custodian BitGo for $1.2 billion. Erin Brown, who was previously chief risk officer at Jump Trading, was named chief operating officer Monday.Galaxy is currently trading more than 90 coins. The bulk of the portfolio is in 15 coins, however, including Bitcoin, Ethereum and some DeFi coins, used in decentralized-finance applications like peer-to-peer lending and payments.“Let’s not miss the big picture for the small picture,” Novogratz said. “We are going through a once-in-a-generational shift in this crypto blockchain evolution, where the financial infrastructure is starting to be rebuilt. That process is picking momentum.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The payments will reach more than 65 million children, according to senior administration officials.
(Bloomberg) -- AT&T Inc. was once the poster child for firms willing to sacrifice their credit ratings for the sake of debt-fueled acquisitions. Now, the company is making its biggest push yet to cut debt and ditch its long-held status as the world’s largest borrower.The telecom giant will reduce net debt by $43 billion as a part of a plan to spin off its media operations in a deal with Discovery Inc., according to an investor presentation accompanying the announcement. If its gross debt of $190 billion declines by roughly the same amount, AT&T would drop behind Verizon Communications Inc. in the rankings of the most indebted non-financial companies globally, according to data compiled by Bloomberg.AT&T has been on a yearslong effort to tame a debt load that once swelled to about $200 billion, largely accumulated via its 2018 acquisition of Time Warner Inc. With the Discovery transaction, AT&T will reach its goal of reducing leverage to 2.5 times a year ahead of schedule, and possibly spare bondholders from any potential ratings action that would push it closer to speculative grade.“This is a big step forward to reaching that leverage goal,” said Bloomberg Intelligence analyst Stephen Flynn. “Debt reduction should be the No. 1 priority.”AT&T’s bonds were among the best performers in the U.S. investment-grade market Monday. The most actively-traded securities, the 3.5% bonds due 2053, tightened 11 basis points, the most since November, according to Trace. The annual cost to protect AT&T’s debt against default for five years dropped the most since February.AT&T has chipped away at its debt load and streamlined its business through a series of refinancings, exchange offers and asset sales in recent years. Yet it recently deviated from its debt diet when it pledged to spend up to $23 billion on spectrum to expand its 5G network, a move largely financed by bonds and loans.That drew a downgrade from Fitch Ratings and a negative outlook from S&P Global Ratings in March. Verizon, which borrowed $25 billion in the year’s largest bond sale to help fund its own spectrum purchases, saw its positive outlook changed to stable by Moody’s Investors Service.U.S.Square Inc. is looking to raise $2 billion from a debut junk-bond sale, one of the largest inaugural new issues of the year, according to data compiled by Bloomberg. Eight other deals kicked off marketing Monday.High-grade issuance is set to remain strong and steady this week, with $30 billion to $35 billion of fresh supply expected following a $42 billion week headlined by Amazon.com Inc.’s jumbo saleRally-weary U.S. junk bonds posted the biggest loss in two months last week. Still, investor demand remained robust, with more than $13 billion of deals pricedBank of America expects U.S. investment-grade corporate debt spreads to widen “in coming months” as Treasury yields push higherFor deal updates, click here for the New Issue MonitorFor more, click here for the Credit Daybook AmericasEuropePrimary market participants expect the SSA sector to maintain its dominance of weekly activity, according to a survey conducted by Bloomberg News on May 14. Public-sector borrowers have led sales for 16 out of 19 weeks this year, according to data compiled and analyzed by Bloomberg.Some 16 mandates hit screens, including an inaugural green bond from Air LiquideOther borrowers planning sales include engineering and technology company Technip Energies, which will hold investor calls on Monday and Tuesday ahead of an inaugural euro seven-year saleCovered bond supply is set to get a boost from Raiffeisen-Landesbank Steiermark and United Overseas Bank, while Spanish lender Cajamar is planning a Tier 2AsiaIndian dollar bonds have been rebounding in recent weeks on bargain hunting after the Covid-19 crisis left them among Asia’s worst performers at times last month.Spreads on investment-grade Asian dollar bonds narrowed 2-3 basis points on Monday, according to tradersThere was mix of investment-grade and high-yield bond deals in the primary market on Monday, including HSBC Holdings Plc and National Australia Bank Ltd.China Huarong Asset Management Co. has reached funding agreements with state-owned banks to ensure it can repay debt through at least the end of August, by which time the company aims to have completed its 2020 financial statements, people familiar with the matter saidFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The air is leaking out of the crypto complex, led by sharp declines in popular trades, including bitcoin, dogecoin and crypto platform Coinbase Global on Monday.
Cathie Wood's firm believes the concern about Bitcoin mining's impact on the environment is misguided.
Dividend stocks are always popular. They offer investors a clear path to returns, with regular cash payments and a yield – a return on the original investment – that usually far exceeds bond yields. But not all dividend stocks are created equal, and some offer better opportunities than others. Dividend yield is a key metric. Among S&P listed companies the average yield is only 2%. However, the highest yields aren’t always the way to go. Investors should also consider share appreciation or upside potential – these factors aren’t always connected to dividends, but they will affect the general returns available from a given stock. To that end, we’ve used the TipRanks database to pull up two high-yield dividend stocks that share a profile: a Buy-rating from the Street’s analyst corps; considerable upside potential; and a dividend yielding over 8%. Let’s take a closer look. New York Mortgage Trust (NYMT) We’ll start with a real estate investment trust (REIT), a logical place to turn for high dividend returns. REITs typically pay out higher than average dividends, as a way of complying with profit-return regulations in the tax code. New York Mortgage Trust, which holds a portfolio of adjustable-rate residential mortgage loans, commercial mortgages, and non-agency mortgage-backed securities, is typical of its niche, both in the quality of its portfolio and its high yield dividend. In its recent 1Q21 financial release, NYMT listed several metrics of interest to investors. The company sold off non-agency RMBS and CMBS totaling $111.6 million, purchased $347.3 million in residential loans, and finished the quarter with $4.72 billion in total assets. The company saw net investment income of $30.3 million, and was able to fund its dividend payment, to the tune of 10 cents per common share. At that payment rate, the dividend yields 8.91%. This was the second dividend declaration in a row at 10 cents; the company has been gradually increasing the payment since cutting it back last summer during the worst of the corona crisis. B. Riley analyst Matt Howlett was impressed by NYMT’s management of the recent economic crisis, and that factor takes a lead role in his recent initiation report. “Over the last decade, NYMT has delivered among the highest economic return within the space due in part to strong asset selection, low leverage, and a highly efficient operating structure. While the March 2020 liquidity crisis was a setback for the industry, NYMT managed the crisis admirably, in our view, and avoided any major wear and tear on the company. In fact, we argue that as NYMT has rebuilt, its originations have become more direct (acquiring loans vs. securities), and its cost of capital has been declining,” Howlett opined. In line with these comments, Howlett rates the stock a Buy, and his $6 price target implies a one-year upside potential of 36%. Based on the current dividend yield and the expected price appreciation, the stock has ~45% potential total return profile. (To watch Howlett’s track record, click here) Overall, there are four recent reviews on record for NYMT, and they break down to 2 Buys, 1 Hold, and 1 Sell for a Moderate Buy consensus rating. The shares are selling for $4.45, and the average price target of $5.17 suggests room for ~17% upside from that level. (See NYMT stock analysis on TipRanks) Global Net Lease (GNL) Next up, Global Net Lease, is another REIT. The portfolio here is built on commercial real estate properties. A review of the company’s portfolio shows 306 such properties, totaling 37.2 million square feet of leasable space, let to 130 tenants. GNL operates in 10 countries, and boasts that 99.7% of its total square footage has been leased. The average lease has 8.3 years remaining – an important factor, as the long term provides stability to the portfolio. In the first quarter of 2021, GNL showed a top line of $89.4 million, up 12.8% from the year-ago quarter. The company ran a net loss, but at $800,000 that loss was significantly smaller than the $5 million lost in 1Q20. Net operating income was up from $71.9 million one year ago to $81.8 million in 1Q21. GNL reported sound liquidity in the quarter, with $262.9 million in cash or cash equivalents and an additional $88.6 million available in credit. And most importantly, GNL reported collecting 100% of rents due in Q1. GNL declared a 40 cent dividend for common shareholders during the quarter, and through it distributed a total of $36.2 million. At that rate, the dividend annualizes to $1.60 and gives a high yield of 8.59%. The dividend was cut last year during the corona crisis, but has been kept stable for five quarters since then. All of this adds up to a company that is sound on fundamentals of its business, and that has attracted notice from analyst Bryan Maher. In his note for B. Riley, Maher writes, “GNL's strong portfolio metrics provide for an attractive setup for the balance of 2021…. Given that GNL, in our view, is not over-levered and can borrow at exceedingly low rates, combined with prudent use of its in-place ATM, we are not concerned about the REIT's ability to finance acquisitions to hit our $300.0M target for 2021.” The analyst summed up, "Given GNL's well-crafted industrial/ office net lease portfolio and strong operating metrics, we reiterate our Buy rating on the shares." The Buy rating comes with a $23 price target attached. At current share price, that implies an upside of ~25% for the next 12 months. (To watch Maher’s track record, click here) Some stocks fly under the radar, and GNL is one of those. Maher's is the only recent analyst review of this company. (See GNL stock analysis on TipRanks) To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Consequently, data retrieved from Glassnode affirmed the Bitcoin supply held by long term holders has returned to accumulation mode, even as price dips.
‘When same-sex marriage became a possibility in New York, he declined to consider it because he did not want to take on any possible financial obligations that a future divorce might entail.’
AT&T ruined a lot of shareholder value by trying to get success in the media business, a veteran media analyst Craig Moffett tells Yahoo Finance Live.
The hedge fund investor's closed-end fund continues to trade at a big discount to its asset value despite solid gains in 2021 and huge returns in 2019 and 2020.
The telecom company has long been a favorite of dividend investors, but its hefty debt load had called into question the sustainability of its payout.
(Bloomberg) -- It’s a Wall Street nightmare. You score hundreds of millions of dollars on a trade and you just can’t get paid.That’s what Goldman Sachs Group Inc. faces in a transaction pitting its traders against Mexico’s dominant power company, championed by none other than President Andres Manuel Lopez Obrador, according to people with knowledge of the matter. At issue: roughly $400 million the Wall Street bank believes it’s owed from a natural-gas trade that went wild when a deep freeze hit Texas in February.In private discussions with Goldman Sachs, state-owned utility Comision Federal de Electricidad has blamed rogue traders, ejected staff and even hinted that the side lacking financial sophistication in the trade was, perhaps, the Wall Street bank, the people said.If the impasse continues to escalate, it risks dragging the bank into a political blowup.The freakishly cold storm that battered the central U.S. set off sweeping blackouts as ice formed on wind turbines and some pipelines froze, forcing oil and gas wells to shut. As power suppliers and traders struggled to track down fuel to meet obligations, prices skyrocketed. The surge benefited companies that happened to be on the right side of trades, but their ability to collect depends on what happens to gas suppliers, power generators and utility customers, some of whom have filed price-gouging lawsuits.The cost of paying Goldman Sachs could ultimately come from Mexican households, many of whom were left without power in the winter -- not so much because of local malfunctions but because authorities in Texas cut off fuel exports when their own lightly regulated system failed. It’s little surprise then that officials south of the border are reluctant to write a check to a giant U.S. bank.Yet anybody who bails on such a bet risks becoming persona non grata on Wall Street, complicating their future access. On the other side, Goldman’s leaders have to consider how angry they want to make the government of Mexico, a market where the firm has been expanding.The descriptions of the dispute and the underlying transaction between Goldman and a CFE subsidiary were provided by people with knowledge of the matter, who asked not to be identified publicly discussing the talks. A representative for Goldman Sachs didn’t comment for this story.The bank and CFE are heading into arbitration over the matter, a spokeswoman for the utility told a Whatsapp chat room with journalists on Monday, noting “the CFE considers that it has solid and sufficient arguments.”On the face of it, it was a routine natural-gas contract. Goldman had entered into the arrangement with CFE International, an arm of CFE. The investment bank’s obligations were tied to a monthly index of gas prices, while the CFE unit would be exposed to daily rates at certain hubs, such as the Waha hub in West Texas.The daily price there surged by nearly 100 times, whereas the monthly price was left largely unchanged, leaving the CFE subsidiary on the hook for an unusually large amount. But instead of the contract getting settled in the Wall Street firm’s favor, the situation has devolved into an acrimonious spat.The Mexican utility has argued that the traders who initiated the deal at its subsidiary weren’t authorized to do so, and some of them have since left, the people said. CFE has also argued it shouldn’t have to fulfill the contract because of the unforeseeable, extreme price action. And it has asserted that Goldman failed to strike a rock-solid contract because it didn’t get an explicit nod from the parent company as a guarantor on the trade, undermining the bank’s ability to extract the money.For Goldman, the dispute boils down to a contractual obligation that its counterparty is duty-bound to fulfill, even if the debt resulted from unforeseen disaster. The bank has also privately argued that such a trade was routinely carried out between the two sides and that the subsidiary even represented in documentation that it had a guarantee from the parent company, a person close to Goldman said. Chat logs during the deal indicate that CFE’s subsidiary was seeking approvals on various aspects of the trade from its parent, the person said.It’s unclear how and when Goldman will be able to realize the money it insists it’s owed, especially as CFE becomes a central part of the Mexican president’s campaign to reshape the domestic energy market.Read More: Mexico Blames U.S. as Energy Crisis Spills Across the BorderSince winning in a landslide in 2018, Lopez Obrador has sought to roll back energy reforms by his predecessor and has said he wants to turn CFE back into an economic champion. He’s broadly blamed private companies for fleecing the nation in deals hatched with corrupt officials, and he’s taken particular issue with gas contracts that he says unfairly benefited businesses at the expense of the state utility.“We are going to continue to comply with the commitment not to increase the price of electricity, even with speculation and the increases in gas prices that are taking place in Texas and the United States,” he said during his morning press conference on Feb. 18.(Updates with comment from CFE spokeswoman in ninth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The company’s decision to unwind its media efforts has broad ramifications for the telecom and content world—and investors.
After a three-month run of immense popularity to start 2021, special purpose acquisition companies have seen investor appetite dry up.
Coinbase, the largest cryptocurrency exchange in the U.S., could see profits come under pressure as more companies embrace blockchain and competition in the exchange space increases, according to at least one strategist.
Bitcoin prices slumped on Sunday, only to recover at the start of the week as Tesla CEO Elon Musk took to Twitter to say the company hasn't sold any.
(Bloomberg) -- A year ago, as the pandemic ravaged country after country and economies shuddered, consumers were the ones panic-buying. Today, on the rebound, it’s companies furiously trying to stock up. Mattress producers to car manufacturers to aluminum foil makers are buying more material than they need to survive the breakneck speed at which demand for goods is recovering and assuage that primal fear of running out. The frenzy is pushing supply chains to the brink of seizing up. Shortages, transportation bottlenecks and price spikes are nearing the highest levels in recent memory, raising concern that a supercharged global economy will stoke inflation.Copper, iron ore and steel. Corn, coffee, wheat and soybeans. Lumber, semiconductors, plastic and cardboard for packaging. The world is seemingly low on all of it. “You name it, and we have a shortage on it,” Tom Linebarger, chairman and chief executive of engine and generator manufacturer Cummins Inc., said on a call this month. Clients are “trying to get everything they can because they see high demand,” Jennifer Rumsey, the Columbus, Indiana-based company’s president, said. “They think it’s going to extend into next year.”The difference between the big crunch of 2021 and past supply disruptions is the sheer magnitude of it, and the fact that there is — as far as anyone can tell — no clear end in sight. Big or small, few businesses are spared. Europe’s largest fleet of trucks, Girteka Logistics, says there’s been a struggle to find enough capacity. Monster Beverage Corp. of Corona, California, is dealing with an aluminum can scarcity. Hong Kong’s MOMAX Technology Ltd. is delaying production of a new product because of a dearth of semiconductors. Read More: How the World’s Companies Wound Up in a Deepening Supply Chain NightmareFurther exacerbating the situation is an unusually long and growing list of calamities that have rocked commodities in recent months. A freak accident in the Suez Canal backed up global shipping in March. Drought has wreaked havoc upon agricultural crops. A deep freeze and mass blackout wiped out energy and petrochemicals operations across the central U.S. in February. Less than two weeks ago, hackers brought down the largest fuel pipeline in the U.S., driving gasoline prices above $3 a gallon for the first time since 2014. Now India’s massive Covid-19 outbreak is threatening its biggest ports. For anyone who thinks it’s all going to end in a few months, consider the somewhat obscure U.S. economic indicator known as the Logistics Managers’ Index. The gauge is built on a monthly survey of corporate supply chiefs that asks where they see inventory, transportation and warehouse expenses — the three key components of managing supply chains — now and in 12 months. The current index is at its second-highest level in records dating back to 2016, and the future gauge shows little respite a year from now. The index has proven unnervingly accurate in the past, matching up with actual costs about 90% of the time.To Zac Rogers, who helps compile the index as an assistant professor at Colorado State University’s College of Business, it’s a paradigm shift. In the past, those three areas were optimized for low costs and reliability. Today, with e-commerce demand soaring, warehouses have moved from the cheap outskirts of urban areas to prime parking garages downtown or vacant department-store space where deliveries can be made quickly, albeit with pricier real estate, labor and utilities. Once viewed as liabilities before the pandemic, fatter inventories are in vogue. Transport costs, more volatile than the other two, won’t lighten up until demand does.“Essentially what people are telling us to expect is that it’s going to be hard to get supply up to a place where it matches demand,” Rogers said, “and because of that, we’re going to continue to see some price increases over the next 12 months.”More well-known barometers are starting to reflect the higher costs for households and companies. An index of U.S. consumer prices that excludes food and fuel jumped in April from a month earlier by the most since 1982. At the factory gate, the increase in prices charged by American producers was twice as large as economists expected. Unless companies pass that cost along to consumers and boost productivity, it'll eat into their profit margins.A growing chorus of observers are warning that inflation is bound to quicken. The threat has been enough to send tremors through world capitals, central banks, factories and supermarkets. The U.S. Federal Reserve is facing new questions about when it will hike rates to stave off inflation — and the perceived political risk already threatens to upset President Joe Biden's spending plans. “You bring all of these factors in, and it’s an environment that’s ripe for significant inflation, with limited levers” for monetary authorities to pull, said David Landau, chief product officer at BluJay Solutions, a U.K.-based logistics software and services provider.Policy makers, however, have laid out a number of reasons why they don’t expect inflationary pressures to get out of hand. Fed Governor Lael Brainard said recently that officials should be “patient through the transitory surge.” Among the reasons for calm: The big surges lately are partly blamed on skewed comparisons to the steep drops of a year ago, and many companies that have held the line on price hikes for years remain reticent about them now. What's more, U.S. retail sales stalled in April after a sharp rise in the month earlier, and commodities prices have recently retreated from multi-year highs. Read More: Fed Officials Have Six Reasons to Bet Inflation Spike Will PassCaught in the crosscurrents is Dennis Wolkin, whose family has run a business making crib mattresses for three generations. Economic expansions are usually good for baby bed sales. But the extra demand means little without the key ingredient: foam padding. There has been a run on the kind of polyurethane foam Wolkin uses — in part because of the deep freeze across the U.S. South in February, and because of “companies over-ordering and trying to hoard what they can.”“It’s gotten out of control, especially in the past month,” said Wolkin, vice president of operations at Atlanta-based Colgate Mattress, a 35-employee company that sells products at Target stores and independent retailers. “We’ve never seen anything like this.”Though polyurethane foam is 50% more expensive than it was before the Covid-19 pandemic, Wolkin would buy twice the amount he needs and look for warehouse space rather than reject orders from new customers. “Every company like us is going to overbuy,” he said.Even multinational companies with digital supply-management systems and teams of people monitoring them are just trying to cope. Whirlpool Corp. CEO Marc Bitzer told Bloomberg Television this month its supply chain is “pretty much upside down” and the appliance maker is phasing in price increases. Usually Whirlpool and other large manufacturers produce goods based on incoming orders and forecasts for those sales. Now it’s producing based on what parts are available.“It is anything but efficient or normal, but that is how you have to run it right now,” Bitzer said. “I know there’s talk of a temporary blip, but we do see this elevated for a sustained period.”The strains stretch all the way back to global output of raw materials and may persist because the capacity to produce more of what’s scarce — with either additional capital or labor — is slow and expensive to ramp up. The price of lumber, copper, iron ore and steel have all surged in recent months as supplies constrict in the face of stronger demand from the U.S. and China, the world’s two largest economies.Crude oil is also on the rise, as are the prices of industrial materials from plastics to rubber and chemicals. Some of the increases are already making their ways to the store shelf. Reynolds Consumer Products Inc., the maker of the namesake aluminum foil and Hefty trash bags, is planning another round of price increases — its third in 2021 alone.Food costs are climbing, too. The world’s most consumed edible oil, processed from the fruit of oil palm trees, has jumped by more than 135% in the past year to a record. Soybeans topped $16 a bushel for the first time since 2012. Corn futures hit an eight-year high while wheat futures rose to the highest since 2013.A United Nations gauge of world food costs climbed for an 11th month in April, extending its gain to the highest in seven years. Prices are in their longest advance in more than a decade amid weather worries and a crop-buying spree in China that’s tightening supplies, threatening faster inflation.Earlier this month, the Bloomberg Commodity Spot Index touched the highest level since 2011. A big reason for the rally is a U.S. economy that’s recovering faster than most. The evidence of that is floating off the coast of California, where dozens of container ships are waiting to offload at ports from Oakland to Los Angeles. Most goods are flooding in from China, where government figures last week showed producer prices climbed by the most since 2017 in April, adding to evidence that cost pressures for that nation’s factories pose another risk if those are passed on to retailers and other customers abroad. Across the world’s manufacturing hub of East Asia, the blockages are especially acute. The dearth of semiconductors has already spread from the automotive sector to Asia’s highly complex supply chains for smartphones.Read More: World Is Short of Computer Chips. Here’s Why: QuickTakeJohn Cheng runs a consumer electronics manufacturer that makes everything from wireless magnetic smartphone chargers to smart home air purifiers. The supply choke has complicated his efforts to develop new products and enter new markets, according to Cheng, the CEO of Hong Kong-based MOMAX, which has about two-thirds of its 300 employees working in a Shenzhen factory. One example: Production of a new power bank for Apple products such as the iPhone, Airpods, iPad and Apple watch has been delayed because of the chip shortage.Instead of proving to be a short-lived disruption, the semiconductor crunch is threatening the broader electronics sector and may start to squeeze Asia’s high-performing export economies, according to Vincent Tsui of Gavekal Research. It’s “not simply the result of a few temporary glitches,” Tsui wrote in a note. “They are more structural in nature, and they affect a whole range of industries, not just automobile production.”In an indication of just how serious the chips crunch is, South Korea plans to spend roughly $450 billion to build the world’s biggest chipmaking base over the next decade.Meanwhile, running full tilt between factories and consumers are the ships, trucks and trains that move parts along a global production process and finished goods to market. Container vessels are running at capacity, pushing ocean cargo rates to record highs and clogging up ports. So much so that Columbia Sportswear Co.’s merchandise shipments were delayed for three weeks and the retailer expects its fall product lineup will arrive late as well. Executives at A.P. Moller-Maersk A/S, the world’s No. 1 container carrier, say they see only a gradual decline in seaborne freight rates for the rest of the year. And even then, they don’t expect a return to the ultra-cheap ocean cargo service of the past decade. More capacity is coming in the form of new ships on order, but they take two or three years to build.HSBC trade economist Shanella Rajanayagam estimates that the surge in container rates over the past year could raise producer prices in the euro zone by as much as 2 percent.Rail and trucking rates are elevated, too. The Cass Freight Index measure of expenditures reached a record in April — its fourth in five months. Spot prices for truckload service are on track to rise 70% in the second quarter from a year earlier, and are set to be up about 30% this year compared with 2020, Todd Fowler, a KeyBanc Capital Markets analyst, said in a May 10 note.“We expect pricing to remain elevated given lean inventories, seasonal demand and improving economic activity, all of which is underpinned by capacity constraints from truck production limitations and driver availability challenges,” Fowler said.What Bloomberg Intelligence Says:“Most modes of freight transportation have pricing power. Supply-demand imbalances should help keep rates high, albeit they should moderate for current unsustainable levels as supply chains improve. This is stressing networks, creating bottlenecks in the supply chains and capacity constraints.”--Lee Klaskow, senior analystFor London-based packaging company DS Smith Plc, challenges are coming from multiple sides. During the pandemic, customers rushed to online purchases, raising demand for its ePack boxes and other shipping materials by 700%. Then came the doubling of its supply costs to 200 euros ($243) a ton for the recycled fiber it uses to make its products.“That’s a significant cost” for a company that buys 4 to 5 million tons of used fiber annually, said Miles Roberts, DS Smith’s group chief executive, who doesn’t see the lockdown-inspired web purchasing as a temporary trend. “The e-commerce that has increased is here to stay.”At Colgate Mattress, Wolkin used to be able to order foam on Mondays and have it delivered on Thursdays. Now, his suppliers can’t promise anything. What’s clear is he can’t sustain the higher input costs forever and still maintain quality. “This is kind of a long-term issue,” Wolkin said. “Inflation is coming — at some point, you’ve got to pass this along.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
What does a weekend meltdown in bitcoin prices portend for U.S. stocks? Bitcoin (BTCUSD) is supposed to be an asset that isn’t highly correlated with equity markets, or any other traditional asset for that matter, but some analysts have pointed out that the cryptocurrency has traded in closer step with parts of the market amid the recent turbulence in equities as investors attempt to assess the most effective strategies for playing an economy recovering from the worst pandemic in more than a century. In a blog post on Sunday, Mott Capital’s Michael Kramer said that bitcoin’s recent breakdown could signal that risk appetite on Wall Street is in transition — presumably in a bearish direction.
New York City and Virginia have approved plans to help employers offer their workers an easy-to-access retirement account. The two governments are the latest to sponsor auto-IRA programs, which are individual retirement accounts that act as an employer-sponsored plan (such as a 401(k)). Auto-IRA programs are touted as beneficial because they make it simpler and seamless for employees to save for retirement.
Large and popular companies including Chipotle, McDonald’s and Amazon are raising their starting salaries, and experts believe that the trend will likely put more pressure on businesses of all sizes to offer higher wages to stay competitive.