If you’re going to invest in Argentina, you’d better put on your big-boy pants and be prepared to lose them.
Earlier this week the country said that it had hired the banks to issue its bonds on the international market. That’s a big deal, as Argentina has been the black sheep of international markets since its 2001 default.
In a note released earlier today, Deutsche Bank AG (USA) (NYSE:DB) Equity Research analyst Mike Urban downgraded Hercules Offshore, Inc. (NASDAQ:HERO) stock from Buy to Sell. Mr. Urban also slashed the target price from $4 to $0 due to the continuous deterioration of the offshore industry owing to plunging crude oil price.
Following this news, the stock crashed 16.1% in early minutes of trading today in New York to 61 cents.
In his note, Mr. Urban sees “bleak” prospects for a recovery in short or medium-term for the offshore industry as the demand for their services is “nearly non-existent” and “steady-stream” of new capacity is still entering the market.
The analyst also highlighted that raising additional capital against its international assets would only be able to fund the cash burn in the short-term, leaving little or no chance of raising equity.
Today will be the second consecutive day that the stock can increase to double digits. Yesterday, Hercules Offshore stock dropped 13.1% after state-owned Saudi Aramco, which is the largest crude oil producer globally, announced that it is terminating its contract for Hercules’ 261 rigs to lower cost.
Out of the 17 analysts who cover Hercules Offshore stock, with an average 12-month target price of $0.86, three rate it a Buy and six have given it a Sell rating. Since last year, the stock has dropped 87%.
NEW YORK (Reuters) – Warren Buffett, the billionaire chief executive of Berkshire Hathaway Inc, told investors on Saturday that the company had found his successor, and the company’s vice chairman, Charlie Munger, identified two Berkshire executives as candidates.
In Berkshire’s annual report to shareholders, Greg Abel, the head of Berkshire’s energy companies, and Ajit Jain, a top insurance executive, were said by Munger to be “proven performers who would probably be under-described as ‘world-class.'”
“‘World-leading’ would be the description I would choose,” Munger said in a letter to Berkshire shareholders. “In some important ways, each is a better business executive than Buffett.”
Buffett’s son, Howard, would become non-executive chairman after the departure of his father, who is also Berkshire’s chairman.
In his previous letters to shareholders, the 84-year-old Buffett has said Berkshire board had been fully aware of his chosen successor but that he was keeping his options open.
Investors have long speculated about who would, or could, succeed Buffett, particularly after he was diagnosed with, and then beat, prostate cancer in 2012.
Munger, whom Buffett describes as “my partner,” is 91.
“Both the board and I believe we now have the right person to succeed me as CEO – a successor ready to assume the job the day after I die or step down,” Buffett said.
“In certain important respects, this person will do a better job than I am doing,” Buffett added.
Berkshire on Saturday also reported a 17 percent drop in fourth-quarter net income, but a 2 percent increase in full-year profit. Operating profit rose in both periods.
Neither Buffett’s nor Munger’s letter on Saturday referred by name to Matthew Rose, executive chairman of the BNSF railroad unit, who has also been mentioned by investors as a possible successor.
Buffett said BNSF is, by far, Berkshire’s most important non-insurance unit but “was not good in 2014, a year in which the railroad disappointed many of its customers” despite capital outlays far exceeding those of Union Pacific Corp, its main rival.
BUFFETT’S ABCs FOR NEW CEO
Buffett strongly suggested in his letter that his potential successor already works within Berkshire and laid out the challenges facing his successor as Berkshire grows ever larger.
He said Berkshire’s earnings and capital resources will eventually reach a level where management will not be able to intelligently reinvest all of the company’s earnings.
“At that time our directors will need to determine whether the best method to distribute the excess earnings is through dividends, share repurchases or both,” Buffett said.
Buffett said his successor will also need to avoid the “debilitating forces” that decades ago befell companies such as General Motors, IBM, Sears Roebuck and U.S. Steel.
“My successor will need one other particular strength: the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency,” he said. “When these corporate cancers metastasize, even the strongest of companies can falter.”
Buffett has run Berkshire since 1965, transforming it from a failing textile company into a conglomerate with a $363 billion market value and more than 80 operating businesses in such areas as insurance, railroads, energy, food and apparel.
The Omaha, Nebraska-based company also has more than $117 billion of equity investments.
ABEL, JAIN TOP CONTENDERS
Age will also be a factor, and Buffett said Berkshire may be best off if his successor stays on for at least a decade.
“Our directors also believe that an incoming CEO should be relatively young, so that he or she can have a long run in the job,” Buffett wrote. “It’s hard to teach a new dog old tricks. And they are not likely to retire at 65 either – or have you noticed?”
Buffett also said Berkshire’s directors believe future CEOs should be internal candidates they know well.
Abel, 52, leads Berkshire Hathaway Energy, and Jain, 63, has been Buffett’s top insurance deputy for three decades.
In Saturday’s letter, Buffett said: “Ajit’s underwriting skills are unmatched. His mind, moreover, is an idea factory that is always looking for more lines of business he can add to his current assortment.”
In last year’s letter, Buffett called Abel an “extraordinary manager.”
Bill Smead, who oversees $1.3 billion at Smead Capital Management in Seattle and invests $55 million in Berkshire, called Jain a “brilliant” insurance executive but said Abel could be a better fit as CEO.
“I think you want someone who is good at overseeing numerous stand-alone companies,” he said. “That would be advantage Abel.”
Because Berkshire Hathaway Energy is a “mini-conglomerate” itself, “you practice in the miniature and then ultimately that puts you in the position to be the one,” Smead said.
(Editing by David Holmes and Jennifer Ablan; Editing by Steve Orlofsky)
|Time||$ Pct||# Pct||Size||SPX||:01||:10||:20||:30||:40||:50|
In a research note titled “Apple: iCars, iDash and iNsanity,” sell-side research firm Berenberg posited that the law of large numbers would soon come to haunt the Cupertino-based tech giant, and tagged a measly $60 price target on Apple Inc. (NASDAQ:AAPL) stock. For any investor/ trader who has an inkling of what Apple is all about and a simple knowledge of its current valuation, the very idea of paying $60 per share for Apple stock would be laughable. Bidness Etc thinks no different.
To put the price target in context, let’s see what other sell-side firms have to say. Of the 58 analysts covering the stock (with the exception of Adnaan Ahmed, analyst from Berenberg), 41 have a Buy call on Apple stock, along with 14 Hold calls and one Sell call. The mean target price on the stock is $135.6, an upside of 4% from yesterday’s close. Mr. Ahmed’s $60 price target on the stock represents a downside of 55% from current price levels.
So why is Berenberg so bearish? According to the research note, the “central thesis” of the sell-side firm emanates from the fact that Apple is fast becoming an iPhone company. As of last quarter, it derived 70% of its revenues and 85% of its operating profits from iPhone sales, while other products such as the iPad, iPod, and Mac took the back stage. Berenberg believes that Apple would find it increasingly difficult to keep selling iPhones at a premium, due to market saturation and increasing competition, and would face decreasing average selling prices (ASP) and negative growth in the category going forward.
Berenberg also believes that the Apple Watch, even if it proves to be successful, would hardly move the needle for Apple. Therefore, the company needs to enter a new industry to enter in to a new phase of growth. The sell-side firm believes that moving in the auto industry may be one of the only options for Apple to continue growing. To that effect, Berenberg also penned an open letter to Tim Cook some 18 months back and asked him to explore opportunities in the auto arena. Berenberg has assigned a target price of $60 on Apple stock, based on a 2015 forward price to earnings multiple of 8x.
We believe that Berenberg’s investment thesis has been poorly constructed with probably an ulterior motive to make the news and ruffle some feathers. Apple reported net cash and cash equivalents of $142 billion last quarter, which roughly translate into $25 per share. Berenberg is basically stipulating that Apple’s core business is currently worth $35 per share, which is ridiculous.
We also find it hard to understand how Berenberg came up with a forward price to earnings multiple of 8x for the biggest and most successful consumer electronics company in the world. The S&P 500 index is currently trading at a price to earnings multiple of 19x and a dividend yield of 2%.
If we apply these multiples to Apple stock, which would still be undervaluing Apple shares because the company has more growth and potential than most these 500 companies, Apple shares should still trade around $120. The $120 figure has been calculated by taking the average of the dividend and P/E valuation of the S&P 500 multiples.
Stuart Gulliver, the boss of HSBC, grumbles that publicly owned businesses are now being held to a higher standard of behaviour than bishops. A more apt comparison might be medieval monks, given the self-flagellation that the London-based banking giant has felt obliged to perform in the wake of a tax-dodging scandal. It has run grovelling, full-page apologies in newspapers, admitting that the episode is a “source of shame”, and sent top brass to sit in the stocks in front of the British parliament’s tomato-wielding Treasury committee.
The cause of this penance is the leaking to the media of a list of over 100,000 people who held accounts at HSBC’s Swiss arm in 2005-07. The documents appeared to contain evidence that HSBC bankers connived in clients’ tax evasion. The bank has also had to explain why Mr Gulliver parked his pay in a Swiss account owned by a Panamanian shell company. It says the structure was designed to ensure other employees could not see what he earned, not to dodge tax.
This debacle will not have a big financial impact. In combination, however, HSBC’s legal and regulatory woes are painful. The 17% fall in pre-tax profits for 2014 was largely explained by fines, legal settlements and refunds. There is more to come: HSBC has yet to resolve allegations that it manipulated currency markets; its trading of precious metals is the subject of another probe.
Add to this the need for higher capital buffers at global banks, the soaring cost of compliance and risk-management (which now account for almost a tenth of HSBC’s global workforce of 257,000), and new restrictions on lenders shuffling funds between subsidiaries in different countries to boost their financial efficiency, and it is no wonder the bank has reduced its medium-term target for return on equity, from 12-15% to “at least 10%”. Last year it managed only 7.3%. (Another international bank with British roots and similar woes, Standard Chartered, appointed a new CEO this week.)
HSBC came through the global financial crisis relatively unscathed. But as it grew, more than doubling its headcount in the decade to the mid-2000s, governance and controls failed to keep up, jeopardising its reputation for steady, slightly boring growth. Mr Gulliver is trying to fix that by simplifying the group. Nearly 80 businesses have been sold or closed since he took over in 2011. Yet the bank still needs to take $1 billion out of its annual expenses, just to offset growing regulatory and compliance costs.
Investment banking is another concern. HSBC has long had only a modest presence in the business compared to its peers. Since the crisis it has swum against the current by expanding it, albeit gently. The unit was the worst performer in the latter part of 2014. Mr Gulliver should not put away his whip just yet.
Click here to subscribe to The Economist
Back in 2013, Elon Musk laid out his dream of developing a mass-transit system which could propel capsules carrying humans at high speed through a series of low pressure tubes. That dream now seems closer to reality than ever.
Hyperloop Transportation Technologies (HTT) – a crowd funded startup – has reportedly secured a stretch of land in California’s Quay Valley to build a five-mile prototype track, and it says could be ready for full-scale testing as early as next year, according to technology website, The Verge.
Elon Musk, who leads the fast-growing electric auto company Tesla Motors Inc (NASDAQ:TSLA), a solar energy systems startup dubbed SolcarCity Corp (NASDAQ:SCTY), and a space exploration company SpaceX, is clearly spearheading the mass-transit revolution too and said in a Twitter message last month, that he will be developing a test track of his own, perhaps in Texas. But the billionaire tech -geek has simultaneously encouraged other independent technology companies and groups to play around with the idea as well.
According to HTT, Mr. Musk’s test track will likely be smaller, and will serve as an initial prototype, which will likely be far from a commercially viable setup.
But HTT’s own initiative is facing some headwinds of its own. The startup has said that the hyperloop project will likely cost about $100 million, while a full-scale setup could amount to $7 to $16 billion, according to The Verge. HTT, which itself sourced seed money through crowd funding platform JumpStartFund is taking a bold step to undertake an IOP under the open auction model – a step normally not taken by companies with no current revenue streams, The Verge noted.
HTT’s hyperloop, however, once built will be ready to carry people straight away. The company aims to make the service available to nearby in-town residents and charge them a transport fee which it hopes will kick-start a stable revenue stream. However, there is a catch to HTT’s approach. Given that it will be designed to to cover a distance of only five miles, the speed will likely be capped at 200 mph, according to Tech Crunch.
Elon Musk’s theoretical mass transit system stipulates a network of extremely long near-friction-free tubes that can propel human capsules at a proposed speed of 760 mph using induction motors and a low pressure environment created by air compressors.
That kind of a super-fast commuter train will have to wait for technology to catch up it seems, but meanwhile HTT’s initiative, if successful will be an astonishing achievement in itself and perhaps the first real step toward making Mr. Musk’s loft mass-transit dreams a reality.
At one of Target’s shops in downtown Chicago, one recent weekend, customers congregated in the electronics department and the area that sells towels and bedding. Upstairs, the women’s clothes department was almost deserted. A quick examination of its stock revealed why: dowdy dresses, garish sweaters and jackets that any reasonably fashion-conscious woman under 60 would surely spurn.
For many shoppers, Target no longer hits the spot. In its annual results this week it admitted that the cost of retreating from a disastrous foray into Canada, and of closing underperforming shops in America, would be a whopping $5.1 billion.
It is an astonishing reversal of fortune. A decade ago Target had such a chic image that people called it “Tar-zhay” with a faux French accent. The Minneapolis-based discounter thrived after reinventing itself as a seller of designer-label clothing at affordable prices. It teamed up with designers such as Alexander McQueen, Proenza Schouler and Zac Posen, and attracted young, predominantly female shoppers with higher disposable incomes than those who usually go to discounters.
But in 2011 Target’s growth began to slow, and margins to shrink. Its designer lines had seemingly lost their sparkle, and the rest of its clothing range never was that impressive. The squeeze on Americans’ real incomes did not help, but it struggled to keep up with the rise of “fast-fashion” retailers such as Uniqlo and Zara.
Dissatisfied with its online sales, which it had been outsourcing to Amazon since 2001, Target took direct control of them, launching a slick new website. But by then its rivals were ahead of it in e-commerce. Target also expanded its food offering, hoping to coax shoppers to visit more often–and buy a higher-margin item such as a sweater even if they had only popped in for some milk. Great theory; didn’t work in practice. “They became too focused on food and consumables, and lost their Tar-zhay cachet,” says Brian Yarbrough of Edward Jones, an investment firm.
Things got far worse in 2013. During the pre-Christmas shopping season, the company suffered a massive hacking attack that compromised credit-card and other details of up to 70m customers. Shoppers deserted its stores, and profits plunged.
Meanwhile Target’s newly launched Canadian operations began bleeding money. “The Canadian debacle was a symptom of a broader set of problems,” says Sarah Kaplan, professor of management at the University of Toronto. Target seems to have stopped listening to its shoppers. The American executives it put in charge of the shops in Canada did not understand that Canadians tend to shop “off the flyer”: special-offer leaflets are the most effective way to tempt them into a store.
Last May Gregg Steinhafel, the chief executive, was shown the door. His successor, Brian Cornell, was horrified to find, on an unannounced visit to some of the Canadian shops, that they were deserted on the Saturday before Christmas. He concluded that all 133 stores north of the border must shut. Target’s first international expansion had ended in defeat.
Target’s share price has recovered sharply in recent months, as confidence has grown that Mr Cornell can turn it around. But there is much to be done. David Schick of Stifel, a stockbroker, says it needs to go back to “differentiated discount”, which means offering a selection of desirable items–a trendy handbag, say, or a novelty watch–which no rival is selling. The food department needs a facelift too, says David Strasser of Janney Montgomery Scott, a financial-services firm. He thinks Target should try to be more like Trader Joe’s, a thriving own-label supermarket chain that is part of Aldi, a German discount-grocery giant.
Target also needs to catch up with its more successful peers in becoming an “omni-channel” retailer, offering customers a seamless choice of how to shop: in stores, on internet browsers or on smartphone apps. It has only recently begun to switch its emphasis from huge, out-of-town stores towards smaller, more central ones that provide a “click-and-collect” service for online and smartphone orders.
Mr Cornell has made a good start, but it is far from certain that Target can return to its glory days in the home market. As for venturing abroad again, it would face so many nimble and successfully globalised rivals that its chances would be slim.
Click here to subscribe to The Economist.
This article was from The Economist and was legally licensed through the NewsCred publisher network.
Chesapeake Energy Corporation (NYSE:CHK) posted fourth-quarter results for fiscal year 2014 (FY14) on Wednesday. The company missed consensus earnings estimate, while beating the revenue estimate.
The crude oil and natural gas company posted a quarterly profit of $586 million, or 81 cents per share. For the same quarter last year, Chesapeake had reported a net loss of $159 million due to an asset impairment charge. The energy producer’s revenue for the quarter came in at $5.05 billion, representing 11% year-over-year (YoY) growth.
Adjusted earnings for the fourth quarter stood at 11 cents per share, opposed to consensus estimate of 24 cents per share. Reported cash flow per share was $1.2.
Bank of America Merrill Lynch released a research note yesterday, discussing the company’s tough outlook. Following the guidance provided by America’s second-largest natural gas producer, Merrill Lynch analysts see the firm’s outlook as challenged.
According to Merrill Lynch’s estimates, Chesapeake’s capital spending is elevated. The firm projects capital expenditure of $4- 4.5 billion. Based on Merrill Lynch’s assumption of $50 per barrel crude oil price, and $3 per million British thermal units (mmBtu) gas price, the oil firm will outspend by over $2.5 billion, despite generating expected revenue of $1.2 billion from its hedge positions during 2015.
If the firm continues its capital spending at the same rate during 2016, it would outspend by approximately $1.5 billion, assuming oil price of $58 per barrel and gas price of $3 per mmBtu, according to the research note.
Merrill Lynch analysts fail to get a clear picture of why Chesapeake intends to continue its capital spending at such a fast pace. Chesapeake justifies its spending by claiming it can achieve competitive returns, but some of its projects have a rather high internal rate of return (IRR). Case in point is the Mississippian Lime, where the IRR is around 18%, according to Merrill Lynch. The firm’s debt-adjusted share growth is negative, which could dilute the value of its equity.
Chesapeake’s management has referred to its maintaining capability, as it tries to justify the spending, but Merrill Lynch stays unconvinced. In the current price environment, when oil price is hovering around $50 per barrel, Merrill Lynch believes it does not make sense to outspend cash flows by more than 100%.
Chesapeake has done well to address its liquidity issues with $4.1 billion in cash and a new credit facility of $4 billion. But considering the accelerated capital spending in the firm’s most recent guidance, Merrill Lynch has lowered the target price to $17 per share, assuming the company makes no asset divestitures.
Compared to Chesapeake’s share price of $17.98 on the day research note was issued, the $17 target reflects a downside potential of 5.4%. During yesterday’s trading, Chesapeake stock dropped 4.34%, closing at $17.20 per share.
Merrill Lynch has reiterated its Underperform rating on Chesapeake stock, with a high volatility risk rating.
(Reuters) – NXP Semiconductors NV is close to a deal to acquire smaller peer Freescale Semiconductor Ltd in a $40 billion cash and stock merger that will reshape the semiconductor industry, according to two people familiar with the matter.
NXP is finalizing a deal to pay a little over Freescale’s $11 billion current market capitalization, the people said. A deal has not been finalized and the negotiations could still fall apart, the people added.
The sources asked not to be identified because the negotiations are confidential. NXP and Freescale did not immediately respond to requests for comment.
(Reporting by Reporting by Nadia Damouni in New York; Editing by Meredith Mazzilli)
A fledgling electric vehicle (EV) maker from the US, Tesla Motors Inc (NASDAQ:TSLA) is starting to grow some wings. From selling only a few thousand Model S units back in mid-2012, when the four-door electric sedan was first launched, the Palo Alto-based automaker has gone on to sell more than 30,000 EVs in 2014.
And Tesla fans and avid investors would want to take heed of the fact that the company has no intentions of pushing the foot off the accelerator. According to the Wall Street Journal (WSJ), Tesla now employs nearly twice the workforce it did a year ago.
To facilitate its goals of penetrating deeper into existing markets and taking bold steps to explore newer territories, the company had on board 10,161 employees as of 2014 – a significant addition to the workforce which stood at 5,859 headcounts in 2013, according to WSJ.
The news comes as the company’s CEO Elon Musk earlier this year complained that technology giant Apple Inc (NASDAQ:AAPL) is reportedly fishing for Tesla’s top talent to facilitate a secret EV project, by offering its employees a hefty sign-up bonus worth two and a half years of pay and as much as a 60% raise in salaries.
However, an estimate from Bloomberg suggests that Tesla has hired about 150 Apple employees – a lot more than the estimated Tesla employees that have jumped ship to join Apple.
Tesla, which only reported a quarterly GAAP profit once back in 2013, is banking on increased sales volumes as a means to find consistent profitability. In a speech earlier this year, Mr. Musk said the company will likely remain unprofitable until 2020 when it has about half a million EVs running through its production line – a strong indication of the importance of higher volumes for Tesla.
The only automaker operating from the Silicon Valley has set a lofty long-term sales goal of delivering millions of vehicles globally by the year 2025. But short-term projections are not conservative either. This year, Tesla is aiming to increase sales to 55,000 EVs, up significantly from 32,733 global EV sales in 2014.
In fact, Mr. Musk is dreaming of hitting a growth trajectory that could land the company’s stock market valuation at more than $700 billion to match Apple’s current value. Given that Tesla’s market capitalization currently stands at just under $26 billion, it seems Mr. Musk is after a lot of growth – a factor that partially explains why the company is valued at almost half that of General Motors Company (NYSE:GM), despite having sales volumes that comprise less than 1% of GM’s.
Besides arranging a hiring spree, Tesla earlier this month said it had committed $1.5 billion in capital spending for 2015 – an amount that is almost 25% of what Ford will be spending this year. For the sake of comparison, Ford is 40 times larger than Tesla by revenue and 200 times larger in terms of unit sales, according to Morgan Stanley, which has strongly bullish outlook for Tesla stock.
In a recent report Morgan Stanley said: “Who would you rather give $1.5bn to invest in 2015: [Tesla CEO] Elon Musk or your average auto company?” The report claimed that if Tesla’s roll-out of its new electric crossover, dubbed the Model X, does meet expectations, Tesla stock could post “new highs by year end.”
It’s jobs week in America, which means we’ll get a crucial update on the health of the US economy.
However, the investing world will continue to spend some time unpacking Warren Buffett’s 2014 letter to Berkshire Hathaway shareholders, which was published on Saturday.
Among other things, Buffett revealed some old mistakes. Costly mistakes.
Here’s your Monday Scouting Report:
“I bristled at Stanton’s behavior and didn’t tender,” Buffett said. “That was a monumentally stupid decision.” Instead, Buffett bought more of this failing business in this failing industry, which he eventually shut down after 20 years of misery.
That mistake beget another even bigger mistake. In 1967, Buffett bought Omaha-based insurer National Indemnity Company. Except instead of buying this company for Buffett Partnership Ltd., Buffett’s investing vehicle which held most of his personal wealth, he bought this company through recently acquired Berkshire Hathaway, which came with a ton of legacy shareholders.From Buffett: “Despite these facts staring me in the face, I opted to marry 100% of an excellent business (NICO) to a 61%-owned terrible business (Berkshire Hathaway), a decision that eventually diverted $100 billion or so from BPL partners to a collection of strangers.“
Some investing wisdom from Warren Buffett’s new letter: “Periodically, financial markets will become divorced from reality — you can count on that. …never forget that 2+2 will always equal 4. And when someone tells you how old-fashioned that math is — zip up your wallet, take a vacation and come back in a few years to buy stocks at cheap prices.”
For more insight about the middle market, visit mid-marketpulse.com.
NOW WATCH: How to invest like Warren Buffett
Everyone has their reasons for wanting to work on Wall Street. For Julissa Arce, an undocumented immigrant from Mexico who worked her way up from intern to VP at Goldman Sachs, the reason was simple: “I thought if I had a bunch of money I would be accepted.”
Arce, who spent seven years at Goldman and structured derivatives for the private wealth division, described her experience as “terrifying” to Bloomberg’s Max Abelson in a Businessweek profile.
Once the lone warrior in the upscale electric vehicle (EV) market, it seems competition for Tesla Motors Inc (NASDAQ:TSLA) is now growing by the day.
This past Wednesday, European automaker Volkswagen AG’s (OTCMKTS:VLKAY) Audi AG launched the 2016 version of its popular sports car, R8, and also announced that an all-electric version of the two-door coupe would be made available this year – according to Fox News.
The battery version of the R8 will be V-10 powered and will be strapped with a 92 Kwh battery pack, which Audi says will promise 280 miles on a full charge – which will take about two hours at a fast DC charging point. If Audi does deliver on the range promise, it will certainly trump Tesla’s electric Model S sedan, which is rated at 265 miles per full charge on an 85 Kwh battery pack.
Audi has not confirmed if the new electric R8 will be an all-wheel drive vehicle or be powered by rear wheels only, but it has said that the vehicle will pack a smashing 610 horsepower.
But the most premium Model S from Tesla dubbed the Model S P85D boasts of 691 horsepower that gets supplied to an all-wheel drive system – a factor that propels the four-door family sedan from 0-60 mph in about 3.1 seconds. The new electric Audi R8 will sprint the same distance in about 3.9 seconds, according to Fox News.
Both the electric supercars however are capped with a top speed of 155 mph. Audi is expected to reveal more about the electric R8 at the Geneva auto show next week.
Notably, Audi has said the electric version of the new R8 will not be a regular production model. Instead, it will be handcrafted on a “built-to-order” basis. The European luxury auto brand did not reveal the price of the EV, but traditionally an R8 from Audi typically costs $175,000 and upward.
Whether the new electric R8 will match up to the credentials of a Tesla Model S is a question that can best be answered only speculatively. But given Audi’s insistence on keeping a tight lid on output volumes, it seems unlikely that Audi’s EV could actually steal away much of Tesla Model S' customer base.
Unlike Audi though, some other automakers are taking bolder outright steps to take out Tesla. America’s largest automaker, General Motors Company (NYSE:GM) has promised a mass-market EV, dubbed Bolt, and the world’s largest premium automaker BMW (OTCMKTS:BAMXY) has already rolled out a mass market electric i3 and an i8 plug-in hybrid supercar. And rumors say an i5 will directly take on the Tesla Model S.
It may sound obvious. But when you invest in stocks, you’re at risk of getting wiped out.
That really is the single most important risk to investors.
Even when you think you’re well-diversified, you could see the value of your investments quickly plunge or perhaps slowly bleed 90% of its value over years as the Greek stock market did during the eurozone crisis.
Citi’s Jonathan Stubbs addresses this in a recent research note about asset allocation. He included a chart highlighting some of the ugliest maximum drawdowns of in the global stock market.
“Figure 45 shows various markets and industries which have suffered severe losses in relatively short order in recent decades, e.g., the UK (1972-74), the Nasdaq (2000-03), Greece (2008-12) and Mining (2008-09),” he writes.
“Hence, buyer beware.”
Because many of these stocks are of companies that don’t go bankrupt, the losses are just paper losses that you don’t realize until you sell. If you have a long investment time horizon, you might think it wise to wait for the value to come back.
However, an investor must be willing to be extraordinarily patient if he hopes to recoup his losses.
“It can sometimes take many years for investors to make their money back after suffering big losses,” Stubbs writes. “For example, US equities only made it back to the peak 1929 total return levels in 1945, more than 15 years after the Great Crash. Kenji Abe, Citi’s Japanese strategist, highlights that Japanese equities are still a long way short of end-1989 peak levels.”
These are all things investors need to consider very carefully before they commit their life savings to the stock market.
As Australia’s mining boom turns to bust, Towns are Dying the Death of a Thousand Cuts as Miners Leave in Droves.
Locals say the main street of Dalby resembles a ghost town these days – a sad indication of a mining boom ending too soon for some.
Things have taken a turn for the worse since the glory days of the mining construction boom, with companies responding to falling commodity prices by pulling the plug on new projects and laying off workers across the Surat Basin.
The increasing exodus of workers, investment and money from the mining towns has left houses empty and businesses struggling, with many of those left behind wondering what to do next.
Di Reilly, owner of Mary’s Commercial Hotel on Dalby’s Cunningham St, said much had changed since 2013 when thirsty miners packed into the pub every Friday and Saturday night.
“We used to open the old bar up and the whole place would be chock-a-block,” she said.
Things were going so well that Ms Reilly began a revamp of the pub before the numbers tapered off, leaving her with a half-renovated bar and plummeting income.
The old bar now sits unrenovated and empty, a dusty reminder of plans gone awry.
“They were saying it was going to last 10 years but it hasn’t,” she said.
“I was going to do the whole pub up, so I was banking on it that they would be here a little longer than they were, but it just stopped all of a sudden. It just got cut off.”
The impact on her bottom line has been astonishing, with turnover last December down $100,000, slashed in half from the previous year.
Down the road, electronics retailer Colin Fountain speaks of the boom in the past tense.
“I’ve definitely noticed a slowdown. Sometimes when you look down the street you’d think you were in a ghost town,” he said.
Further west in Chinchilla, the effects of the mining construction boom have mainly been felt in the real estate sector, where rents and house prices doubled from cashed-up workers arriving in the town.
Long-term residents said many pensioners had been forced to leave because of high housing prices and now that prices had fallen some weren’t coming back.
One real estate agent said “a hell of a lot” of property was on the market – about 400 houses were for rent or sale and buyers were scarce.
Record Low Interest Rates
On February 3, and in response to tumbling oil and mineral prices, and irrational deflation worries, Australia Cut Interest Rates to Record Low.
Australia cut its benchmark interest rate to a record low of 2.25% Tuesday, joining a procession of central banks that have eased policy settings this year in response to the deflationary impact of tumbling oil prices.
The 0.25-percentage-point cut represents a dramatic shift for the Reserve Bank of Australia—which ended 2014 with a message to financial markets that interest-rate stability was likely to feature again in 2015, to help underpin certainty for businesses and support the economy as a mining-investment boom fizzles out.
The Australian dollar fell sharply on the announcement of a cut, dropping to a fresh 5½-year low, while the stock market surged to the highest level since May 2008.
The Reserve Bank of Australia joins the Monetary Authority of Singapore, Reserve Bank of New Zealand, European Central Bank, Bank of Canada and the central banks of India, Denmark and Switzerland in either announcing substantial policy shifts or easing monetary settings—in some cases dramatically—since Jan. 1.
Throughout last year, Australia’s central bank repeatedly stressed it would be appropriate for rates to remain stable for some time. It removed that reference on Tuesday, leaving open the door to more cuts.
In Tuesday’s statement, Mr. Stevens said the jobless rate—currently 6.1%—would likely peak a little higher than had been anticipated.
I need a definition of “little” and also a definition what had been “anticipated”.
The statement made by Stevens can literally mean anything. Most likely, however, little really means little. And given that central bankers are totally clueless, it’s highly likely what had been anticipated was far too low.
Thus, vagueness aside, I will bet on the “over” line, “way over” in fact. With no recession in 23 years, and with wages and prices of goods dramatically out of line with the rest of the world, and with one of the world’s biggest property bubbles, the upcoming recession in Australia will be a doozie.
Expect an Attempt at Interest Rate “Shock and Awe”
Australia has room for 9 quarter point cuts before zero is hit. But cuts won’t happen that way. Accompanied by some sort of shock-and-awe statement, I expect Australia to cut rates 100 basis points or more at some point.
Mike “Mish” Shedlock