Comment of the Day
Video commentary for July 25th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: oil steadies, Stocks steady, gold and silver ease back, Treasuries pause, India intervenes to support the rupee, Renminbi steadies.
Weaker ad landscape, higher regulatory risk expected to weigh on Alphabet's Q2
This article from S&P Global may be of interest. Here is a section:
Alphabet Inc (NASDAQ:GOOG). is expected to report another quarter of slowing growth as macroeconomic headwinds and intensifying regulatory scrutiny weigh on its core advertising business.
Fears regarding a potential recession are driving many companies to scale back ad budgets, directly impacting Alphabet's growth prospects. The Google LLC parent company faces headwinds from difficult comparisons to 2021 when its revenue growth skyrocketed partly due to a rebound off early pandemic lows.
Alphabet is expected to report second-quarter revenue of $70.10 billion, up 13.3% from the prior year, according to S&P Capital IQ estimates as of July 20. The projected growth rate is down from 23% growth in the first quarter and significantly below Alphabet's performance through 2021.
"A challenging macro landscape and tougher comparisons will lead to a sharp deceleration in growth into the early parts of next year," said Angelo Zino, a senior equity analyst at CFRA Research.
My view - Most companies understand that marketing/advertising are integral to both boosting and sustaining sales. Therefore, if revenue growth is falling at major advertising sellers, that’s a clear reflection of slowing demand within the wider economy. The disappointing manufacturing data last week’s sends the same message.
Amazon to Use Rivian Vans as EV Maker Works Toward Delivery Goal
This article from Bloomberg may be of interest to subscribers. Here is a section:
Amazon.com Inc (NASDAQ:AMZN). is starting delivery of packages to US customers using the first of as many as 100,000
electric vans built by Rivian Automotive Inc (NASDAQ:RIVN)., which aims to hand over thousands of the vehicles this year.
Vehicle roll-out starts Thursday in Chicago, Dallas, Kansas City, Phoenix, San Diego, Seattle and St. Louis
Amazon expects to have Rivian vans deployed across more than 100 cities by year-end
Amazon has delivered 430,000 packages and driven 90,000 miles using Rivian pre-production battery-powered vans since 2021
Rivian CEO RJ Scaringe tells Bloomberg Television his company is working “as hard we can” to hit initial delivery target of 10,000 vans to Amazon by year-end “We’ll certainly have many thousands of vehicles on the road by the end of this year, but not providing a specific number,” Scaringe says in interview to air Thursday
Scaringe says forthcoming layoffs to help company “more efficiently structure parts of the team”
Rivian is “trying to be as intentional and thoughtful in terms of what that means for the business, what that means for the individuals, as we work through that process”
Rivian has made “remarkable progress” since partnership between with Amazon was announced in 2019, Udit Madan, a transportation executive with Amazon, says in Bloomberg Television interview
Rivian shares pared an early gain of as much as 6.1% to trade up 3.3% at 3:11 p.m. in New York
My view - There are more new automotive companies active today than at any time since the invention of the internal combustion engine. EVs have fewer moving parts and most of the value is in the battery. That significantly lowers barriers to entry. Those with sufficient capital have been able to start brands and those with continuing access to capital are likely to survive.
The Tension in Japan's Dialed-Up Defense Ambitions
This article from Bloomberg may be of interest to subscribers. Here is a section:
DM: The government has begun a comprehensive review of Japan’s defense strategy. Why is that important and what are the likely outcomes?
SS: A new national security strategy document is going to be issued. The first leader to issue was Shinzo Abe, in 2013. So this will be only the second statement by Japan, ever. It’s significant this is all together in one place, not just bombs and bullets. It’s about what Japan needs to do to achieve its interests in the world and how to proceed? In 2013, the language on China was pretty benign compared with what I think we will see in the next one. Russia will be near the top of concerns after the Ukraine invasion. North Korea continues to be a problem, given its missiles and the ability to launch them undetected.
There will also be a cabinet decision in December on the next 10-year defense plan. This is where we will see how serious Kishida is about defense. Within the 10-year plan will be a five-year plan on how much Japan spends and on what. The other issue that needs to be handled deftly is that of counterstrike capability.
DM: Japan is one of the most indebted economies. How does all this get financed?
SS: I don’t know how they pay for it. Debt servicing is somewhere near 23% of Japan’s budget. Social security is about a third. The budget doesn’t have a lot of latitude. I’m not convinced about 2% of GDP, but let’s use that as a reference point. Last year, Japan spent about 1.3% of GDP on defense. You get to 2%, you are basically doubling it. That’s big.
My view - Japan’s re-armament is unlikely to be derailed by Abe’s assassination. They look around Asia and don’t like what the geopolitical landscape is promising for the Japanese economy. That’s especially true as the USA is less reliable as a guarantor of security globally.
Eoin's personal portfolio: leveraged positions in commodities closed July 6th 2022
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.