WSJ : Warren Buffett Occasionally Writes to Shareholders About Overheated Market

Warren Buffett Occasionally Writes to Shareholders About Overheated Markets. Not This Year.
The Berkshire Hathaway chairman acknowledges that ‘often, nothing looks compelling’ in the hunt for equity investments

Warren Buffett spoke only obliquely about the stock market in his letter to shareholders Saturday.

The Berkshire Hathaway BRK.B -0.64%decrease; red down pointing triangle chairman and CEO’s storied reputation as a stock picker leads many investors to study his annual missives. Buffett doesn’t always opine on markets, and in his latest letter he limited such commentary to a few thoughts on the general hunt for good investments.

“Understandably, really outstanding businesses are very seldom offered in their entirety, but small fractions of these gems can be purchased Monday through Friday on Wall Street and, very occasionally, they sell at bargain prices,” Buffett said.

He wrote that Berkshire is impartial in the choice between investing in businesses it can control with at least 80% ownership and purchasing small portions of companies in the stock market. In either case, Buffett wrote, the pickings can be slim.

“Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities,” he said.

With Berkshire’s stash of cash and Treasury bills surpassing $320 billion—larger than the market values of most big U.S. companies—observers have been eager to hear how Buffett is thinking about opportunities to invest. One challenge for the price-conscious investor: The stock market is trading near records and at valuations that are elevated relative to historical averages.

In his past notes to shareholders, Buffett occasionally weighed in on the perils of investing in overheated markets. Here are some highlights:

Euphoria prevails
“As this is written, little fear is visible in Wall Street. Instead, euphoria prevails—and why not? What could be more exhilarating than to participate in a bull market in which the rewards to owners of businesses become gloriously uncoupled from the plodding performances of the businesses themselves. Unfortunately, however, stocks can’t outperform businesses indefinitely.”

— Feb. 27, 1987

Apt to be severe
“If investor expectations become more realistic—and they almost certainly will—the market adjustment is apt to be severe, particularly in sectors in which speculation has been concentrated. Berkshire will someday have opportunities to deploy major amounts of cash in equity markets—we are confident of that. But, as the song goes, ‘Who knows where or when?’”

— March 1, 2000

The clocks have no hands
“The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities—that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future—will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”

— Feb. 28, 2001

The hangover may prove to be proportional to the binge
“Despite three years of falling prices, which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us. That dismal fact is testimony to the insanity of valuations reached during The Great Bubble. Unfortunately, the hangover may prove to be proportional to the binge.”


— Feb. 21, 2003

A heavy price
“We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. In the end, what counts in investing is what you pay for a business—through the purchase of a small piece of it in the stock market—and what that business earns in the succeeding decade or two.”

— Feb. 26, 2010

Bubbles blown large enough
“Over the past 15 years, both internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the ‘proof’ delivered by the market, and the pool of buyers—for a time—expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop.”

— Feb. 25, 2012

A painfully long period
“On occasion, a ridiculously-high purchase price for a given stock will cause a splendid business to become a poor investment—if not permanently, at least for a painfully long period. Over time, however, investment performance converges with business performance.”

— Feb. 23, 2019

WSJ : Why the Nippon-U.S. Steel Deal Still Has a Chance of Getting Done

Why the Nippon-U.S. Steel Deal Still Has a Chance of Getting Done
As unlikely as it might seem, a victory by the Japanese company can’t be ruled out

No matter how dead Nippon Steel’s 5401 -0.47%decrease; red down pointing triangle bid to buy U.S. Steel X -2.56%decrease; red down pointing triangle might look, don’t rule out a victory by the Japanese suitor just yet.

President Trump opposes the deal. But he also has changed his mind about TikTok, cryptocurrencies, Elon Musk and the timing of tariffs. He still could change his mind about this proposed sale, however faint that possibility might seem at the moment.

He could even declare, after further review, that approving the sale is “common sense,” as he likes to say.

There could be great upside for U.S. Steel shares, now around $37, if he did. Nippon Steel’s offer is valued at $55 a share, or $14.1 billion. Another U.S. steelmaker, Cleveland-Cliffs CLF -5.26%decrease; red down pointing triangle, has indicated it could make a play if Nippon Steel walks away and pays its $565 million breakup fee.

The prospect of another suitor provides some downside protection for U.S. Steel’s stock price, even if Cliffs isn’t likely to come close to matching the price Nippon Steel offered.

Trump has said U.S. Steel shouldn’t be owned by a foreign company. That is in line with President Joe Biden’s order last month blocking the deal just before he left office. U.S. Steel and Nippon Steel are asking the U.S. Court of Appeals for the District of Columbia Circuit to overturn that decision. They claim the government violated their due-process rights by making a predetermined decision on political grounds and then citing a nonsense reason after the fact. Justice Department attorneys in a court filing this week said the government wants Biden’s order to remain in effect.

Even if the lawsuit is a long shot on the merits, it puts the Trump administration in the potentially awkward spot of having to defend Biden’s reasoning in court. That might be all the more awkward because Biden’s rationale indeed strained credulity.

Biden’s opposition on the campaign trail last year was a direct appeal for votes in Pennsylvania. “I told our steelworkers I have their backs, and I meant it,” he said in March, before he withdrew his candidacy for re-election. In his Jan. 3 executive order blocking the deal, he said he believed Nippon Steel “might take action that threatens to impair the national security of the United States.”

The Committee on Foreign Investment in the U.S., which reviewed the proposed transaction, didn’t reach a consensus on national-security concerns or recommend blocking the sale when it referred the matter to Biden for a decision. Two weeks after Biden’s order, the U.S. approved the sale to Japan of more air-to-surface missiles.

There is a rather simple way forward, if the president were so inclined: He could withdraw Biden’s decision on the grounds that the prior administration’s process was deeply flawed, and then direct Cfius to start the review process over from scratch. That would buy time for the parties to come up with a deal that addresses Trump’s priorities, whether they are grounded in protectionism or other concerns.

It is possible that there would be only minimal political cost to Trump from reversing Biden’s decision. He could position himself as siding with union workers rather than union bosses. Steelworkers aren’t a monolith any more than auto workers, who supported Trump in droves last election.

United Steelworkers, which represents U.S. Steel employees in collective-bargaining agreements, opposes the sale. Yet plenty of workers have turned up for rallies to support it, concerned its failure would mean lost jobs because the company will close or move plants. Some local union officials joined an amicus brief—arguing for the deal—filed with the court.

All of this is backdrop for Trump’s cryptic comment at a Feb. 7 press conference with Japan’s prime minister, where he said Nippon Steel had “agreed to invest heavily in U.S. Steel, as opposed to own it, and that sounds very exciting.” U.S. Steel shares dropped on the remark, which investors saw as a hard no to a sale. Really, though, it is difficult to know what he was thinking, and no details have emerged since. It could have been an opening stance, a softening of his position, or a throwaway line.

U.S. Steel and its workers would benefit more from a sale to Nippon Steel than from having it as a minority investor or joint-venture partner. U.S. Steel needs capital to modernize its aging mills. Nippon Steel would have greater incentive to invest capital in a company it owns than in one it doesn’t control. And it isn’t going to pay a control premium, like it is offering now, for a minority or JV stake.

Some finality would be welcome, because the battle for U.S. Steel has become chaotic. In addition to the lawsuit against the government, U.S. Steel is suing Cleveland-Cliffs, alleging it conspired with steelworker union leaders to sabotage its Nippon Steel deal. (Cliffs denies the claims.) U.S. Steel also faces a proxy fight by an activist investor with ties to Cliffs. A Cliffs takeover bid could face challenges, too, because the combined companies’ U.S. market concentration might trigger antitrust concerns.

U.S. Steel’s importance lies largely in domestic politics and symbolism. It is the third-largest U.S.-based steel producer and the 24th largest in the world. Ultimately it is a small company in an industry awash in overcapacity globally. Nippon Steel is the world’s fourth-largest steelmaker. As part of the deal, it committed to invest $2.7 billion in U.S. Steel’s plants, with most going to its oldest steel mills near Pittsburgh and in Gary, Ind.

For U.S. Steel and its workers, the Nippon deal offers clarity and fresh capital. For Trump, it would be an expedient solution to a thorny problem that he could blame on his predecessor. He could still revive it.

WSJ :The Long Nights and Drug Addiction That Drove a Banker to Insider Trading

The Long Nights and Drug Addiction That Drove a Banker to Insider Trading
John Femenia says he conceived of the scheme while high on stimulants and working late as an investment banker

John Femenia ran an insider trading ring that netted him and his friends millions of dollars before they went to prison. It all started with long hours as an investment banker and a crippling addiction to Adderall.

Femenia was a 28-year-old investment banker working for Wells Fargo WFC -1.44%decrease; red down pointing triangle when he tipped off his friends about confidential deals that the bank was working on. His friends would buy shares of companies that were in line to be acquired, reap the profits when the deals were announced and then kick back some of the gains to Femenia.

In two years, Femenia and his friends made more than $11 million trading off of confidential information, prosecutors said. He spent about three years in prison.

He says he came up with the scheme while he was abusing Adderall, which he started taking to deal with his long hours at Wells Fargo. The Wall Street Journal reported in December on the widespread use of ADHD medications on Wall Street and the psychological changes it causes in abusers.

“I got an Adderall prescription to be able to work long hours and stay focused,” the now-43-year-old Femenia said. “But it changed the person that I was while I was on it. This is a no-joke drug. It’s medical-grade meth.”

Since getting out of prison in 2018, Femenia has built a life in the suburbs with his wife and two children and launched a real-estate lending business. But Femenia says his crimes will always be a google search away. Instead of burying the past, he wants to warn others about how prescription drug abuse can upend lives and destroy careers.

“I blame myself for what happened,” he said. “I was the one who willingly took Adderall. But I honestly don’t think I would have gotten into trouble and made those choices if I didn’t take it.”

Life as a PowerPoint jockey
Femenia grew up on Long Island and was a good kid by his own account. He was an Eagle Scout who enrolled in the Merchant Marine Academy. After graduation, he served in the Navy reserves and spent years working on ships and boats in the Pacific Ocean. While working in the engine room of an oil tanker, he grew interested in finance and decided to go to business school.

At Columbia Business School, Femenia set his sights on Wall Street. His classmates warned him about the long hours in investment banking and talked about using Adderall (an amphetamine) to stay focused and work hard.

Femenia started working as an investment banker in 2009 at Wells Fargo, first in North Carolina and then in New York City.

The hours were immediately difficult for him. He says he was a “PowerPoint jockey” doing the grunt work of an investment banker from 9 a.m. until midnight, at least six days a week.

Even though he didn’t think he had attention-deficit hyperactivity disorder, Femenia soon got an Adderall prescription through a doctor who didn’t ask too many questions.

“I got psyched out after seeing people work these 18-hour days and all nighters and I thought, ‘I can’t do this without help,’” he said.

About a year later, he found another doctor who wrote him a second prescription. He was taking around 80 milligrams a day—twice the maximum daily dosage. He knew he was addicted and tried to quit several times, but the withdrawal symptoms were so strong that he couldn’t get out of bed and get to work. He kept on taking the pills.

The Adderall had made him frenetic, aggressive and willing to take new risks—a common occurrence when it comes to drug abuse.

“Once someone has an addiction, the part of their brain that helps them make good decisions literally gets turned off,” said Samuel Glazer, a psychiatrist in Manhattan who has counseled several Wall Street bankers about substance abuse.

The insider trading ring
One night in 2010, while working late and high on Adderall, Femenia looked through some of the bank’s internal folders on a shared computer drive. He saw that project folders that were changed over the weekend were likely to be tied to live deals.

“My mind on Adderall would go off on these tangents and come up with elaborate schemes, and that’s really how it all began,” Femenia said.

At the time, Femenia was on the hook for tens of thousands of dollars on a friend’s mortgage he had cosigned because the friend was struggling to pay.

Femenia told his friend to buy the shares of a company that he thought had a good chance of eventually being acquired. He enlisted another friend from college to buy the stock, too. Femenia’s friends netted north of $500,000 in profit from trading on the deal, according to court records.

The scheme went on for about two years, and Femenia’s childhood friend used a shell company with a corporate bank account to buy and sell stock. Femenia says he didn’t know the full scale of the ring and received hundreds of thousands of dollars in kickbacks.

The biggest score was in 2012, when Femenia found out about Chicago Bridge & Iron’s $3 billion purchase of Shaw Group. Around 10 people connected to Femenia bought Shaw stock and call options in the weeks before the deal, according to court records. The day the deal was announced in July, the Shaw Group’s stock doubled. All in, the ring netted $7 million in profit, court records show.

After the announcement, Femenia’s childhood friend and the friend’s girlfriend wired more than $1 million to a precious-metals dealer in Manhattan to buy 550 gold bars. They flew to Las Vegas the next day and laundered more than $100,000 through a casino.

But the FBI was on their trail. Agents showed up on Femenia’s doorstep and told him they knew he was sharing confidential information and asked him to help their investigation. Femenia first slammed the door on them. Then he started cooperating.

Femenia was arrested in December 2012 and later pleaded guilty to five charges of fraud and money laundering in 2013. He reported for a five-year sentence at a federal penitentiary in 2015. Eight other co-conspirators did jail time, too.

Getting clean
When he checked in for his first day in jail, he brought a bottle of Adderall with him, but correctional staff told him he couldn’t keep the drugs. He said he spent two weeks in jail withdrawing from the drug, and it took over a year to stop craving it. Eventually, he shaved off 20 months through drug rehab and standard good behavior.

He said he still finds it hard to talk about his past with his friends and family because he was determined to start a new life for himself and his wife after prison.

“Every single day I reflect on what I did,” Femenia said. “I still get angry with myself. But I figured out how to make money again, and I figured out how to do it against really bad odds. And I’m happy about that.”

He said his message to people who are taking Adderall only to try to thrive on Wall Street is to stop before it’s too late.

“Taking this stuff on a consistent basis will alter your personality and decision-making,” he said. “Do whatever you need to do to get off it. It doesn’t matter if you need to take a couple of weeks off. Do whatever you need to do.”

WSJ : How Porsche, Volvo and Rivian Are Injecting Unique Driving Styles Into Sel

How Porsche, Volvo and Rivian Are Injecting Unique Driving Styles Into Self-Driving Cars
Automakers are using software and AI to make vehicles of tomorrow more collaborative, working alongside passengers

A Porsche programmed with aggressive, sporty moves; a Volvo tuned to a more cautious pace; an autonomous Rivian that takes the scenic route, on-road or off.

In the future, cars won’t only drive autonomously: Using software and artificial intelligence, their makers will give them distinct driving styles.

Already, chip maker Nvidia is developing AI-based tech to help automakers create personalized driving systems that reflect their brands, says Ali Kani, Nvidia vice president and general manager of automotive.

To function most effectively and distinctively, these self-driving cars will need to take in not just the behavior of vehicles around them, but elements such as geolocation, weather, traffic, and road type and condition. These new self-driving systems must also operate with utmost certainty. “When ChatGPT gets things wrong, we laugh,” Kani says. “If this is done wrong, someone could die.”

Unlike today’s advanced driver-assistance systems, which generally disengage when a driver intervenes, the cars of tomorrow will ideally be collaborative, working alongside occupants. “So far, car companies have given us systems that make us safer,” says Alex Roy, an autonomous-vehicle expert and partner at New Industry Venture Capital, a venture-capital and private-equity firm. “But none has given us the systems that help make us better drivers, to amplify the driver’s will behind the wheel.”

Here’s how three automakers are reimagining self-driving vehicles:

Porsche

Porsche wants owners of its future self-driving cars to feel the thrill of the racetrack—without the risk. To make this possible, the German sports-car manufacturer says it first must perfect how these vehicles react on the road.

The brand is testing a fleet of prototypes—aided by virtual models that simulate millions of hours of driving on tracks—to figure out how sharply fully autonomous vehicles could accelerate, brake, turn and shift lanes in the years to come. This could allow Porsche’s future hardware and software to make on-road transitions more aggressively, more precisely and closer to its vehicle’s limits, than other carmakers’ autonomous vehicles.

If the programming is too restrictive and won’t let the car approach its limits—squealing its tires or flirting with the edge of the road—that “eliminates the point of owning that car,” says Roy of New Industry Venture Capital. For a Porsche owner, “what’s primary is fun,” he says.

Still, such driver-assistance systems would include functions that automatically brake to prevent collisions, warn of objects in blind spots, and keep even sporty cars in their lane to ensure safety for all on the road, according to Porsche. Vehicles that can steer and brake better are intrinsically superior at avoiding obstacles.

The automaker has a long way to go to reach full autonomy, but it is already piloting driver-assistance systems that safely enhance performance with its adaptive cruise control known as InnoDrive. The system allows vehicles to automatically accelerate or decelerate to a set speed—all while maintaining a fixed distance from the car ahead, remaining in its lane, and even coming to a complete stop if needed.

Depending on what drive mode it is set in—Normal, Sport or Sport Plus—InnoDrive can change how aggressively it changes speed to match the car in front of you, or how much gravitational force it will allow occupants to feel going into a turn, such as a freeway on-ramp, according to Porsche spokesman Calvin Kim.

Porsche can even adapt InnoDrive to be model-specific, allowing distinct vehicle lines to behave differently from each other. For example, the 911 sports coupe could be tuned to behave more aggressively than the Macan compact SUV.

“What’s a dream sports car?” Roy asks. “It is a car that you can drive as fast as you want, that won’t let you crash.”

Volvo

The nearly century-old Swedish automaker pioneered the use of three-point seat belts, rear-facing child seats and side-impact protection systems, among other lifesaving innovations.

As it hones its self-driving cars, it says safety will remain top priority.

Volvo will use data collected by its Accident Research Team, which has visited tens of thousands of crash sites in the past six decades, to train its autonomous vehicles. Data on road type and condition, driver behavior and response of vehicle safety systems would help its vehicles prepare for and avoid accidents.

“We see data as a new safety belt,” says Alwin Bakkenes, head of software engineering at the company.

In the lead-up to full autonomy, Volvo’s systems will work in conjunction with drivers, inviting them to steer and make adjustments on their own, says Bakkenes. “This provides a better customer experience and enhances safety because we keep our drivers in the loop.”

Additionally, Volvo’s AI will be able to decipher natural language commands. “An owner could say, ‘Could you please overtake this car?’ Or, ‘Could you hold back a bit more because I feel uncomfortable with how that car in front is driving,’ ” Bakkenes says.

Volvo is also developing means for its autonomous cars to communicate clearly with other road users, to ensure their safety. This includes signaling—with lights, sounds, text or other means—to people at a crosswalk that they have been detected and when it is safe to cross.

Rivian

Electric, all-wheel-drive startup Rivian Automotive wants to inject more adventure into its future autonomous vehicles by inspiring people to go places.

That means “automating the boring stuff” such as highway driving or commutes, and making exciting experiences “more fun or accessible,” says Wassym Bensaid, chief software officer at Rivian.

When off-roading, this could include using cameras, radar and online mapping data to detect the type and passibility of terrain. The systems could then automatically select the proper drive modes and display—on the vehicle’s screens or windshield-projected displays—instructions on how to traverse the trail, according to Bensaid. It could even help explore trails or roadways that are inadequately or incorrectly mapped, and update existing cartography, he says.

When hauling a mountain bike or kayak, instead of passengers needing to find a loop route, or a ride back to the vehicle, the Rivian could drop passengers off at one end, then drive autonomously to the other end and wait to pick them up.

The vehicle could also suggest scenic, off-the-beaten-path routes, and then use its suite of exterior cameras, onboard Wi-Fi signal and augmented-reality displays to project “a rich in-cabin experience that blends with the environment,” Bensaid says. This could include showing occupants layers of historical imagery, geological data or pathway options as they traverse the landscape.

“It could even record scenes and landmarks around the car, edit them into a video, and post them to your social,” he says.

FT : Pollution from Big Tech’s data centre boom costs US public health $5.4bn

Pollution from Big Tech’s data centre boom costs US public health $5.4bn
Research suggests the price of treating illnesses related to building of computing infrastructure in the US is on the rise

Big Tech’s growing use of data centres has created related public health costs valued at more than $5.4bn over the past five years, in findings that highlight the growing impact of building artificial intelligence infrastructure.

Air pollution derived from the huge amounts of energy needed to run data centres has been linked to treating cancers, asthma and other related issues, according to research from UC Riverside and Caltech.

The academics estimated that the cost of treating illnesses connected to this pollution was valued at $1.5bn in 2023, up 20 per cent from a year earlier. They found that the overall cost was $5.4bn since 2019.

The issue is set to be exacerbated by the race to develop generative AI, which requires huge computing resources to train and power fast-developing large language models.

Microsoft, Alphabet, Amazon, and Meta have forecast AI spending could exceed $320bn this year, up from $151bn in 2023. Meanwhile, OpenAI and SoftBank last month unveiled plans for a massive $500bn US AI infrastructure joint venture called “Stargate”.

The findings from UC Riverside and Caltech were derived by using a widely used modelling tool from the US Environmental Protection Agency. The EPA model translates the estimated air quality and human health impacts into a monetary value.

The estimates suggest Google generated the largest health costs of $2.6bn over the five years between 2019 to 2023, followed by Microsoft, at $1.6bn, and Meta, at $1.2bn. Each company’s associated public health cost rose year-on-year. Other firms, such as Amazon, were not included in the analysis as they do not release key data needed to model their impact.


Data centres cause pollution through high electricity use, often sourced from fossil fuels. Back-up generators, needed in case of an outage, are commonly powered by diesel, which also contributes to air pollution. Meanwhile, the waste from the hardware such as chips can release harmful chemicals into the environment.

Big Tech’s impact on public health was calculated by distributing Google and Microsoft’s North American electricity consumption figures over their US data centre locations and using their public sustainability reports. For Meta they used its disclosed per-location electricity usage data, which the first two companies do not provide.

The analysis does not account for the purchase of market-based instruments that are meant to represent investments in new renewable energy in the US and that tech companies buy to offset the pollution from their electricity consumption. These instruments include renewable energy certificates.

Instead, the research focuses on the pollution generated in the specific area where the data is being processed, in an accounting approach known as “location based”.

“Unlike carbon emissions, the health impacts caused by a data centre in one region cannot be offset by cleaner air elsewhere,” said Shaolei Ren, associate professor at UC Riverside.


Google, Meta and Microsoft said their usage of back-up generators was below the estimated levels for the research, which is based on a median estimate of usage from publicly disclosed levels. The companies did not give detailed, per-location figures for their usage of back-up generators.

Google added that the health cost estimates were overstated and that it did not “account for our clean energy purchases in the local markets where we operate” and therefore “promotes an inaccurate emissions estimate generated under false pretences, undermining the progress of clean energy resource growth and creating a false narrative of health harms.”

The company added that its purchases enable it to achieve, on average, around 64 per cent carbon-free energy.

Microsoft said it was focused on “delivering significant local, economic, social and environmental benefits to the communities where we operate”.

Meta said it complies with air quality requirements and remains committed to “maintaining net zero greenhouse gas emissions for our global operations, building innovative and sustainable infrastructure, reporting transparently on our sustainability goal progress, and supporting the communities where we operate.”

Due to where data centres are located, such as West Virginia or Ohio, the health impact disproportionately affected lower-income households, according to the research.

Ren said there was an opportunity for tech groups to reverse the trend of a “growing public health threat” by strategically placing their data centres in less populated locations to have less impact.

According to a separate report by Berkeley Lab, supported by the Department of Energy, US data centre energy use represented about 4 per cent of total US electricity consumption in 2023 and is forecasted to rise to between 7 and 12 per cent by 2028, driven largely by AI workload demand.

“There is a concern around pollution as [AI] is energy intensive and people are using it more and more,” said Antonis Myridakis, a lecturer in environmental sciences from Brunel University London. “It is an important factor contributing to air quality and public health, it is not something we can ignore.”

FT : Investors told of golden age of US-Saudi co-operation at Miami conference

Investors told of golden age of US-Saudi co-operation at Miami conference
Trump is strengthening bonds with the oil-rich kingdom as he strains ties with other traditional allies

Billionaires attending an investment conference in Miami hosted by Saudi Arabia were told of a new dawn of co-operation between the oil-rich kingdom and the US in an hour-long address by US President Donald Trump.

Yasir al-Rumayyan, governor of Saudi Arabia’s sovereign wealth fund, hosted the top executives of finance giants BlackRock, Citadel and many others as part of an annual effort to attract billions in new investment.

But Trump’s attendance, which was announced just days before the conference, underlined the importance of the kingdom to the president and his inner circle.

Moguls including Leonard Blavatnik, Sir Martin Sorrell and Marcelo Claure waited hours for an audience with the star speaker due to heavy security. Many passed the time by taking selfies with the president’s cost-cutting tsar Elon Musk.

Trump appeared at the conference just days after his envoys met Russian President Vladimir Putin’s foreign minister for talks in Riyadh aimed at ending the war in Ukraine. Saudi Crown Prince Mohammed bin Salman has close ties to both leaders, and Riyadh has previously helped negotiate a US-Russia prisoner swap.

The exclusion of Ukraine from those talks has fractured US relations with Europe. But Trump’s presence at the Saudi conference shows ties between Washington and Riyadh remain firm as the president helps promote the kingdom’s economic development on a world stage.

“The speech of President Trump added so much value to this,” said Rumayyan.

Richard Attias, chief executive of the event, titled Future Investment Initiative Priority Miami, said Trump’s attendance caused a late surge in interest from business leaders that forced him to turn many away.

“I may have lost many friends in the last few days,” Attias said.

The FII event was hosted at a ritzy beachfront Miami hotel, confirming a recent change in tone from Saudi Arabia to US investors. The kingdom is no longer content to merely write cheques to US companies as it focuses more on its hugely ambitious domestic development plans. It now demands they open offices in Saudi Arabia or provide capital for its mega projects such as futuristic cities in the desert and bets on healthcare, artificial intelligence, sports, and advanced manufacturing.

“The kingdom is rightly saying we are beyond the suitcase form of relations,” said one executive affiliated with the government’s development efforts, referring to US investment firms’ practice of sporadically visiting Riyadh seeking cash to invest elsewhere.

“This is not the Saudi Arabia of 20 years ago . . . You need boots on the ground.”

The Trump family has a growing business with the kingdom, which has invested $2bn with the private equity fund of Jared Kushner, the president’s son-in-law. The LIV golf tour owned by the Public Investment Fund hosts events at multiple Trump-owned golf courses.

Executives at Wall Street firms lined up to proclaim their support for Saudi Arabia’s message.

On a panel, Robert Kapito, president of BlackRock, said the world’s largest investment manager was eager to beat its rivals in making Saudi Arabia an investment hub.

“This is the largest career alpha opportunity that I have ever seen,” said Kapito of Saudi Arabia’s development plans. “For those who are competitors of mine, we are building a big office and we are going to be there first.”

“[We] are all here to leap forward with the kingdom,” proclaimed private equity billionaire Robert Smith of Vista Equity Partners.

But few firms have large-scale investment operations in Saudi Arabia, with many holding small offices mostly focused on fundraising.

On the first night of the event, Rumayyan, the head of the Public Investment Fund, hosted a private dinner at Miami’s Faena Hotel with a handpicked assortment of about 80 of the conference’s most powerful attendees.

Rumayyan travelled to Washington after the dinner to meet Trump at the White House to help broker a merger between PIF-backed LIV and the PGA Tour.

In his address at the conference, Trump repeated his claim that Zelenskyy was a “dictator,” a statement that has shocked many of America’s allies.

One executive said that while many of Trump’s claims were half-truths the audience cheered, underscoring that few business leaders have the appetite to publicly challenge the president’s most controversial policies on trade, immigration, and Russia’s war in Ukraine.

Trump made a vociferous appeal for investment in the US but few references to Saudi Arabia’s economy. Last month, Saudi Arabia’s Prince Mohammed pledged to invest $600bn in the US over four years.

“I come today with a simple message for business leaders from all across the nation and all around the world . . . there’s no better place on earth than the current and future United States of America under a certain president named Donald J Trump,” he said.

Trump did not walk back his comments on emptying Gaza of Palestinians into bordering countries, a plan rejected by both Jordan and Saudi Arabia. The kingdom insists that a Palestinian state must be part of negotiations to normalise relations with Israel.

It was left to Trump’s Middle East envoy Steve Witkoff to try to explain the US plan on a panel with Jared Kushner to an audience that included top Saudi figures including ambassador to the US Princess Reema bint Bandar al-Saud.

Witkoff said that while the president does not have “an eviction plan” for Palestinians in Gaza, “he wants to shake up everybody’s thinking”.

“[He’s] engendered discussion throughout the entire Arab world on different types of solutions that before he talked about [them] people would have never considered,” he said.

Witkoff, a property mogul like Trump, called Saudi Arabia “one of the most investable real estate marketplaces in the world as people begin to see the upside of what’s happening”.

FT : UK steelmakers face £150mn annual bill from carbon charges, industry warns

UK steelmakers face £150mn annual bill from carbon charges, industry warns
Decision to wind down free emission allowances is an ‘earthquake moment’ for producers

Britain’s steel industry has warned that it faces more than £150mn in annual costs under government plans to phase out allowances that allow manufacturers to emit greenhouse gases for free.

Ministers plan to wind down carbon allowances over 10 years from 2027, in what the sector called an “earthquake moment”. 

UK Steel, the industry trade lobby group, has warned ministers that the sector could face annual carbon costs as high as £167mn by 2037 — the expected end of the phaseout period — depending on the price of carbon.

This forecast factors in the country’s two biggest producers moving to less polluting electric arc furnaces and the industry as a whole producing about 7mn tonnes of steel a year.

“Our biggest concern is about the fact that the government is removing free allocations and how many free allocations you would receive, that would have a tremendous impact on the costs that we face,” said Frank Aaskov, director of energy and climate change policy at UK Steel. 

“It would be an absolute earthquake moment for this industry if free allocations are removed,” he added. 

The government has been consulting on plans to remove free carbon allowances for industry under the Emissions Trading Scheme (ETS) as part of plans to introduce a carbon border tax from 2027. The consultation ends on March 10.

Britain’s most energy-intensive producers currently receive a certain amount of allocations for free under the government’s ETS to ensure they can compete with rivals based in countries with weaker climate mitigation policies.

Britain’s steel industry has been under pressure to reduce its carbon footprint to help the UK meet its net zero emissions pledge by 2050. Tata Steel UK, which owns the vast Port Talbot site in south Wales, last year closed its two remaining blast furnaces as part of a government-backed deal to build one electric arc furnace. Under the agreement, ministers committed £500mn of state aid for the Indian-owned group.

British Steel, which currently operates Britain’s only two remaining blast furnaces, has been locked in talks with ministers about securing an even greater level of support.

The Chinese-owned group is considering building two smaller electric arc furnaces at its flagship Scunthorpe site in Lincolnshire. Trade unions want the company to keep operating the blast furnaces during the transition and are lobbying ministers for relief from any associated carbon costs. 

Aaskov said that the sector’s overall emissions would still be “significant” under the new scheme, even though they would fall dramatically with the closure of the final two blast furnaces.

Some parts of the manufacturing process “such as rolling, reheating and downstream processes” would still emit significant carbon, he added. 

The industry was not against phasing out of the free allocations but was “cautious” about it happening too abruptly, he said, arguing that it needs to be managed carefully. 

“There is no plan B,” said Aaskov, adding that there were “a lot of concerns if [the carbon border tax] will provide protection against leakage”. 

The government is bringing in the “carbon border adjustment mechanism” to protect industries from unfair competition from regions with lower carbon costs. 

The government said it would “not allow the end of steel making in the UK”, adding that its recently published steel strategy consultation would examine the long-term issues facing the industry. The government had also committed up to £2.5bn to rebuild the sector.

It added that the new carbon border tax mechanism “will ensure that importers pay a fair and comparable carbon price to those faced by domestic producers, giving industry the confidence to invest in the UK knowing that their efforts to decarbonise aren’t undermined”.

>>> Barrons Weekend Summary

Cover:
-Energy has become a crucial issue in President Donald Trump's second term, as he aims to tame inflation through oil drilling and sees oil and gas as America's most powerful asset in trade negotiations. The US has abundant resources, unlike its biggest rivals like China. Trump's early moves in energy have been controversial and have not been beneficial for stocks. Some of his decisions, such as halting payments on energy loans and grants, have landed in court. Tariffs on Canadian and Mexican energy products have unsettled American companies and upset allies. The fallout and the possibility of Trump removing sanctions on Russian oil have knocked oil prices and stocks lower. Some of the best opportunities in energy align with Trump's interests, but they tend to be in areas with demand drivers beyond federal policy. Natural gas is the best positioned among energy segments. Exporting LNG is a profitable business, with Cheniere Energy's stock doubling in three years. However, the field is becoming more competitive, leading to a glut of LNG by 2027, causing Venture Global's stock to fall 30%.

Interview:
-Andrea Auerbach, the global head of private investments at Cambridge Associates, has witnessed the growth of the private-market investing industry since the early 1990s. The industry now encompasses venture capital, private equity, and private credit, with assets under management expected to reach $15T this year, up from $10T in 2021. Auerbach, who has been closely involved in the industry's expansion, has seen the industry's growth, including its recent struggles with rising interest rates. Many private asset managers are now looking to expand by tapping retail investors, including through 401(k) assets. The "democratization" of alternatives has significant implications for the industry.

Tech Trader:
-Intel shares have surged due to the Trump administration's promise to support domestic chip manufacturing and reports of semiconductor companies considering purchasing parts of Intel. However, investors should be cautious as the likelihood of transformative deals is low and Intel's challenges remain unchanged. The rally began after Vice President JD Vance vowed more chips would be made in the US, and Taiwan Semiconductor Manufacturing was considering taking a stake in Intel's chip factories. Intel stock rose by nearly 40% over five trading sessions through Tuesday. The flurry of news reports contradicted each other, with some citing Trump's support for TSMC's stake in Intel's factories.

The Trader:
-Walmart missed expectations for its full-year sales forecast, expecting a 3% to 4% growth. Despite a strong holiday quarter, the company's sales outlook is conservative due to inflation and economic uncertainties impacting consumer spending. Walmart's management believes US shoppers are resilient, but the Street is seeking more reassurance. The company's conservative sales outlook could indicate the impact of inflation on discount retail. The final reading of the University of Michigan's consumer sentiment index for February was 64.7, a 10% decrease from January, and all five index components fell this month. Existing home sales in January also came in lower than expectations. The company's conservative sales outlook may not send an upbeat message about the consumer during a time of ongoing inflation and tariff threats.
-The Consumer Analyst Group of New York (CAGNY) is holding its annual conference, showcasing updates from staples companies. The stocks of General Mills and Conagra Brands fell after their presentations, with the latter notching its worst percentage decrease in nearly three years in intraday trading. The problem is that "big food" was already "limping into CAGNY," as people are buying less branded packaged food, as their sales are still trailing overall food sales. Inflation-squeezed shoppers are doing without, trading down to private labels or buying more alternatives like fresh bakery and produce items. The stocks have stagnated, with the S&P 500 index up 23% and the Consumer Staples Select Sector SPDR exchange-traded fund up just 9% over the past year. The average packaged-food stock is down around 3% since the start of 2025, with big names like Kraft Heinz, General Mills, Conagra, and Campbell's down more than that. Berkshire Hathaway is losing money on its $9B Kraft stake.

Features:
-The firing of nearly 7,000 Internal Revenue Service employees, which began during the tax-filing season, is expected to unwind recent improvements in taxpayer services. Tax experts suggest that the cuts in the IRS workforce could lead to longer wait times on the phone, delayed refunds, and issues with resolving matters. The Department of Government Efficiency (DOGE), run by President Donald Trump's advisor Elon Musk, is responsible for the layoffs. The employees are probationary workers, who have been with the agency for less than two years. These workers are the ones the IRS has been hiring recently to improve its capabilities after years of dismal service and near-zero audit rates for complex tax returns. To avoid problems, taxpayers should know when to call the IRS hotline, get things right the first time on their tax return, and keep a paper trail in case of mishandling.
-Americans are experiencing increased anxiety about the economy due to high food prices and policy changes causing concerns about inflation. The University of Michigan's consumer sentiment index surprised to the downside in February, coming in at 64.7, a drop from December's reading of 74 and January's reading of 71.1. This sentiment could have troubling repercussions for the economy, as consumers often spend more when they feel better about the financial outlook and retrench in times of uncertainty. The Trump administration's recent policy changes have heightened uncertainties about the economic outlook. Democrats and independents were more likely to report a negative change in sentiment, while Republicans' sentiment was largely unchanged. Concerns about President Donald Trump's policies, particularly tariffs, have fueled pessimism. February's median inflation expectation for the year ahead spiked to 4.3%, the highest reading since November 2023.

Europe:
-Investors have been rushing into European stock markets due to their undervaluation after long-time laggard returns. The MSCI EMU index of large- and mid-cap European stocks trades for about 14 times expected earnings for the next 12 months, less than two-thirds the 22 times forward price/earnings multiple on the S&P 500 index. Many investment "tourists" now find they have too much company and are taking their winnings and going home. However, more experienced global investors can still find compelling values among individual European stocks rather than broad exchange-traded funds. European stocks have outpaced U.S. stock indexes of late, despite the dominance of big technology names among the latter. Bank of America's latest survey of fund managers found that 12% of respondents were overweight European stocks, the highest percentage of accounts since last June.

Emerging Markets:
-No update

Commodities:
-Energy has become a central focus in President Donald Trump's second term, as he plans to tame inflation through oil drilling and sees oil and gas as America's most powerful asset in trade negotiations. The US has abundant resources, unlike its biggest rivals, like China. Trump's early moves in energy have been controversial and have not been great for stocks. Some of his decisions, such as halting payments on energy loans and grants, have landed in court. Tariffs on Canadian and Mexican energy products have unsettled American companies and upset allies. The fallout and the possibility of Trump removing sanctions on Russian oil have knocked oil prices and stocks lower. Some of the best opportunities in energy align with Trump's interests, but they tend to be in areas with demand drivers beyond federal policy. Natural gas is the best positioned among energy segments, followed by nuclear power, oil, solar, and wind. Cheniere Energy's stock doubling in the past three years. However, the field is becoming more competitive, and analysts predict a glut of LNG by 2027. Natural-gas producers, such as Antero Resources and Chart Industries, can benefit from increased LNG exports. The Trump administration is pro-nuclear, with Chris Wright as secretary of energy and a focus on commercializing affordable and abundant nuclear energy. The more promising stocks today are providers of fuel for nuclear plants, such as Cameco and smaller uranium miners like Uranium Energy and enCore Energy. Trump's plans to ease environmental restrictions and open up more federal land for drilling, including in Alaska, are expected to boost the industry. Solar energy is also expected to grow in the Trump years, with domestic manufacturing agendas lifting companies like First Solar. Despite the challenges, the industry is positioned to continue growing, with investors expecting increased go-public activity across the nuclear technology space in the next 12 months.