>>> Europe : Brokers Upgrades & Downgrades - 16th of December 2024

>>> Up
* Broadcom Raised to Outperform at CICC; PT $220
* Bunzl Raised to Outperform at RBC; PT 4,000 pence
* DSV PT Raised to 2,300 kroner from 1,450 kroner at Citi
* Glencore Raised to Outperform at BMO; PT 475 pence
* Lonza Raised to Buy at Stifel; PT 625 Swiss francs
* Lundin Mining Raised to Buy at Veritas Investment Research Co
* Panostaja Raised to Buy at Inderes; PT 50 euro cents

>>> Down
* 1&1 Cut to Neutral at Citi; PT 15 euros
* About You Cut to Hold at Jefferies; PT 6.50 euros
* DCC Cut to Sector Perform at RBC; PT 5,800 pence
* Diploma Cut to Underperform at RBC; PT 3,900 pence
* Dustin Cut to Hold at ABG; PT 6 kronor
* Ford Cut to Underperform at Jefferies; PT $9
* Leroy Cut to Equal-Weight at Barclays; PT 51 kroner
* Netflix Cut to Hold at Loop Capital; PT $950
* SAP Cut to Hold at HSBC; PT 260 euros
* Siegfried Cut to Sell at Stifel; PT 900 Swiss francs
* SpareBank 1 Ringerike Hadeland Cut to Neutral at SpareBank
* SpareBank 1 Nordmoere Cut to Neutral at SpareBank; PT 150 kroner
* Traton Cut to Hold at Pareto Securities; PT 32.50 euros

>>> Initiation


>>> Call

WSJ : Why Musk Doesn’t Have Access to SpaceX’s Biggest Government Secrets

Why Musk Doesn’t Have Access to SpaceX’s Biggest Government Secrets
Executives haven’t sought higher security clearance for the CEO to avoid questions about his drug use and contact with foreign officials; the answers might no longer matter

The payloads SpaceX launches into the heavens for the U.S. military and spy agencies are usually treated as a government secret, shared only with select employees at the rocket company who hold special security clearances.

Elon Musk, its founder and chief executive, isn’t one of them.

As SpaceX deepened its ties with the national-security agencies in recent years, the company’s lawyers advised senior executives not to seek a higher security clearance for Musk that would give him access to details about sensitive programs SpaceX is involved in, according to people familiar with the matter.

The reason, these people said, was that Musk would have had to answer questions from the government about his contacts with foreign nationals and drug use previously reported by The Wall Street Journal. In internal discussions, the lawyers and executives posited scenarios in which Musk might inadvertently disclose secrets to foreign officials with whom he regularly speaks, the people said. The Journal reported in October that Musk has been in regular contact with Russian President Vladimir Putin since late 2022.

His current “top-secret” clearance took years for him to obtain following his public use of marijuana on a 2018 podcast. SpaceX’s national-security business was rapidly growing at the time.

The SpaceX lawyers began analyzing the risks of seeking a higher security clearance for Musk after the Journal reported in June of last year about Musk’s use of ketamine, according to one person familiar with the review. The lawyers and executives concluded that if SpaceX sought a higher security clearance, it would risk Musk being turned down, or worse, losing the top-secret clearance he already has.

Those concerns could soon become irrelevant. President-elect Donald Trump appointed Musk, who spent about $200 million in support of his presidential run, to lead a new Department of Government Efficiency, which will advise the incoming administration on cutting spending and regulations. As president, Trump will have the power to give Musk and others working for DOGE broad access to classified information as they search for cuts.

Although Trump hasn’t indicated publicly whether he intends to do that, SpaceX already has been scouting locations for a secure facility where Musk and other DOGE staffers could review highly classified information.

Representatives for Musk, SpaceX and the Trump transition team didn’t respond to requests for comment. A spokeswoman for the Pentagon’s Defense Counterintelligence and Security Agency said a federal privacy law prevented her from commenting on the details or status of an individual’s security clearance.

Hundreds of thousands of private defense contractors have access to government secrets as part of their jobs. Their security clearances are the same as those held by government employees and generally have three levels: confidential, secret and top secret.

Musk’s current top-secret clearance gives him access to some national-security secrets, but he lacks special authorizations that the government requires of most SpaceX employees who work on classified programs, according to the people familiar with the matter. Those employees—more than 400—have permissions for what is known as “sensitive compartmented information,” the government’s term for need-to-know secrets about how intelligence is collected and where it comes from, one of the people said. A smaller number of SpaceX employees have access to secrets the government deems even more sensitive called special access programs.

Musk’s top-secret clearance, without those authorizations, doesn’t entitle him to access certain information about SpaceX’s spy satellite program, called Starshield, which offers satellite hardware and services to national-security agencies, the people said. He isn’t allowed to enter most SpaceX facilities where classified work is done and discussed, and he rarely is privy to classified elements of cargo that his rockets blast into space, such as sensors and other hardware attached to spy satellites.

The CEOs of Boeing, Lockheed Martin and their rocket joint venture, United Launch Alliance, have authorizations for sensitive compartmented information, according to people familiar with their clearances.

Musk had a secret-level clearance before he secured the top-secret clearance in 2022, a process that took years, according to people familiar with his clearance. The unusually long government review of his application was believed within SpaceX to have been the result of Musk’s 2018 podcast interview with Joe Rogan in which he smoked marijuana, which is illegal under federal law, the people said.

“Most of the stuff that I’m aware of…the reason to keep it top secret is it’s so boring,” Musk said in October at a town hall meeting in Pennsylvania in which he disclosed that he had a top-secret clearance. “We don’t want to give exact instructions on how to make a nuclear bomb or something like that, but unless there’s a genuine risk to the country, all the information in the government should be public.”

SpaceX, which Musk founded in 2002, has worked with national-security agencies since its early days. It won a launch contract in 2005 with an unnamed U.S. intelligence agency. Later, the company began handling regular launches for military and spy agencies. More recently, it entered into a $1.8 billion classified contract with the National Reconnaissance Office, a spy agency that operates satellites, according to people familiar with the matter and company documents viewed by the Journal.

The company’s Starshield unit is the military outgrowth of its better-known Starlink business, which uses thousands of satellites in low-Earth-orbit to power high-speed internet connections for consumers and businesses. Employees who work on Starshield generally have the kind of enhanced clearances that Musk doesn’t.

Starshield won an initial $70 million order from the military in August 2023 to provide communications services to the Pentagon.

Around that time, SpaceX lawyers and executives were discussing whether Musk should have greater access to the company’s classified work. It couldn’t be determined Musk was aware of the discussions, prompted by the Journal’s June 2023 story that highlighted his ketamine use, or whether he had expressed an interest in having a higher clearance.

After that 2023 article, Musk said in an X post that ketamine is a better way to deal with depression than more widely prescribed antidepressants, and he later posted that he had a prescription for it.

In January of this year, the Journal reported that Musk used illegal drugs including LSD, cocaine, ecstasy and psychedelic mushrooms. His lawyer said there were unspecified “false facts” in the article, and that Musk is “regularly and randomly drug tested at SpaceX and has never failed a test.”

Were Musk denied a higher clearance, SpaceX lawyers told company executives, it could have had broader implications for SpaceX, according to the people familiar with his clearance.

The government could have revoked Musk’s existing top-secret clearance if he failed the security vetting, and SpaceX might have needed to seek a waiver from the government to continue to do some of its national security work because Musk is SpaceX’s senior management official. The company also might have had to create extra layers of security to wall Musk off from a growing part of its business.

SpaceX was prepared to answer questions from government officials about Musk’s drug use after the Journal reported on it, but the Pentagon didn’t ask, and SpaceX executives decided the company didn’t need to self-report to the government based solely on news accounts, said the people familiar with his clearance.

The federal questionnaire for contractors and employees seeking a security clearance instructs applicants to disclose whether in the past seven years they have used any of a variety of listed drugs, including ketamine. Government contractors can lose their security clearances over drug abuse, a term broadly defined in federal regulations as the use of an illegal drug or of a prescribed drug “in a manner that deviates from approved medical direction.”

The questionnaire also requires applicants to report “close and/or continuing contact with a foreign national.”

Musk would have had to fill out a new questionnaire and likely undergo a polygraph examination to receive a higher clearance through traditional channels.

As president, Trump will have the power to authorize access to government secrets and could waive security requirements. The Supreme Court has ruled that the president’s authority to control the flow of national-security information stems from his role as commander in chief.

Trump has said DOGE will exist outside the government and serve in an advisory rather than a decision-making role. Already, Musk and his co-head, biotech company founder Vivek Ramaswamy, have identified the Pentagon as a potential target for spending cuts.

They likely will need special clearances to view sensitive information as they pick through military spending on classified programs, looking for efficiencies. Trump will be in a position to provide them.

FT : Assad dispatched $250mn of Syria’s cash to Moscow

Assad dispatched $250mn of Syria’s cash to Moscow
Central bank sent planeloads of dollars in 2018 and 2019 when dictator was indebted to the Kremlin

Bashar al-Assad’s central bank airlifted around $250mn in cash to Moscow in a two-year period when the then Syrian dictator was indebted to the Kremlin for military support and his relatives were secretly buying assets in Russia.

The Financial Times has uncovered records showing that Assad’s regime, while desperately short of foreign currency, flew banknotes weighing nearly two tonnes in $100 bills and €500 notes into Moscow’s Vnukovo airport to be deposited at sanctioned Russian banks between 2018 and 2019.

The unusual transfers from Damascus underscore how Russia, a crucial ally to Assad that lent him military support to prolong his regime, became one of the most important destinations for Syria’s cash as western sanctions pushed it out of the financial system.

Opposition figures and western governments have accused Assad’s regime of looting Syria’s wealth and turning to criminal activity to finance the war and its own enrichment. The shipments of cash to Russia coincided with Syria becoming dependent on the Kremlin’s military support, including from Wagner group mercenaries, and Assad’s extended family embarking on a buying spree of luxury properties in Moscow.

David Schenker, who was US Assistant Secretary of State for Near Eastern Affairs from 2019 to 2021, said the transfers were not surprising, given that the Assad regime regularly sent money out of the country for “a combination of securing their ill-gotten gains and Syria’s patrimony abroad”.

“The regime would have to bring their money abroad to a safe haven to be able to use it to procure the fine life… for the regime and its inner circle,” he said.

“Russia has been a haven to the Assad regime’s finances for years,” said Eyad Hamid, senior researcher at the Syrian Legal Development Programme, noting that Moscow became a “hub” for evading western sanctions imposed after Assad brutally put down an uprising in 2011.

Assad’s escape to Moscow as rebels closed in on Damascus has even enraged some former regime loyalists, who see it as proof of Assad’s overriding self-interest.

His shaky rule had been propped up by Iran and its proxy militant groups, which had intervened in 2012, and Russia, which brought its warplanes to bear down on what remained of the Syrian rebels and Islamist insurgents in 2015.

Syria’s relations with Moscow deepened dramatically as Russian military advisers bolstered Assad’s war effort and Russian companies became involved in Syria’s valuable phosphate supply chain. “The Syrian state could be paying the Russian state for a military intervention,” said Malik al-Abdeh, a London-based Syrian analyst.

The Assad regime moved bulk shipments of US and euro banknotes into Russia between March 2018 and September 2019. 

Russian trade records from Import Genius, an export data service, show that on May 13 2019, a plane carrying $10mn in $100 bills sent on behalf of Assad’s central bank landed in Moscow’s Vnukovo airport.

In February 2019 the central bank flew in around €20mn in €500 notes. In total there were 21 flights from March 2018 to September 2019 carrying a declared value of over $250mn.

There were no such cash transfers between Syria’s central bank and Russian banks before 2018, according to the records, which start in 2012.

A person familiar with Syrian central bank data said foreign reserves were “almost nothing” by 2018. But due to sanctions, the bank did have to make payments in cash, they added. It bought wheat from Russia and paid for money printing services and “defence” expenses, the person said.

They added that the central bank would pay according to “what was available in the vault”. “When a country is completely surrounded and sanctioned, they have only cash,” the person added.

Russian records show that regular exports from Russia to Syria — such as shipments of secure paper and new Syrian banknotes from the Russian state-owned printing company Goznak, and consignments of replacement Russian military components for Syria’s Ministry of Defence — took place in the years before and after the large amount of banknotes were flown to Moscow.

But there is no record of the two Russian lenders that received the banknotes from Damascus in 2018 and 2019 taking any other shipments of bulk cash from Syria or any other country over a ten-year period.

Even with Syria’s state coffers wrecked by war, Assad and his close associates over the past six years seized personal control of critical parts of the country’s devastated economy, said people with insight into the regime’s workings.

First lady Asma al-Assad, an ex-JP Morgan banker, built a powerful position influencing international aid flows and heading a secretive presidential economic council. Assad and his acolytes also generated revenues from international drug trafficking and fuel smuggling, according to the US.

Hamid, of the Syrian Legal Development Programme, said that “corruption under Assad was not a marginal affair or a side effect of the conflict. It was a way of government.”

Syrian cash transfers had previously elicited sanctions from Washington. The US Treasury in 2015 accused former Syrian central bank governor Adib Mayaleh and a central bank employee called Batoul Rida of facilitating bulk cash transfers for the regime to Russia, and managing fuel-related deals to raise foreign currency. Rida was also accused by the US of trying to procure the chemical ammonium nitrate from Russia, which is used in barrel bombs.

Records show the cash delivered to Moscow in 2018 and 2019 was delivered to Russian Financial Corporation Bank, or RFK, a Russian lender based in Moscow controlled by Rosoboronexport, the Russian state arms export company. 

The US Treasury sanctioned the bank this year for facilitating cash transfers, enabling “millions of dollars of illicit transactions, foreign currency transfers, and sanctions evasion schemes for the benefit of the Syrian government”.

In March 2018 records show Syria’s central bank also shipped $2mn to another Russian bank, TsMR Bank, which has also been sanctioned by the US. 

As Russian financial institutions were receiving cash from Syria, Assad’s other international backer, Iran, set up schemes to funnel hard currency to the beleaguered regime. Assad’s key money men took important positions in these companies, according to corporate records analysed by the FT. 

Yassar Ibrahim, Assad’s closest economic adviser, is a shareholder in a Lebanese company called Hokoul SAL Offshore, alongside his sister Rana, who has also been sanctioned by the US. 

Hokoul, according to the US Treasury, is directed by Iran’s Revolutionary Guard Corps-Quds Force and Lebanese militant group Hizbollah to move hundreds of millions of dollars “for the benefit of the brutal Assad regime”. Ibrahim’s role in the company has not previously been reported.

While the cordon of western sanctions forced the regime out of the dollar banking system, corporate records analysed by the FT show that key Assad lieutenants continued to move assets into Russia.

In 2019 the FT reported that Assad’s extended family had from 2013 bought at least 20 luxury apartments in Moscow using a complex series of companies and loan arrangements.

And as recently as May 2022 Iyad Makhlouf, Assad’s maternal cousin and a major in Syrian General Intelligence, which allegedly monitored, oppressed and murdered citizens, established a property company in Moscow co-owned by his twin brother Ihab called Zevelis City, Russian corporate records show. 

Iyad’s brother Rami Makhlouf was the regime’s most important businessman, at one point believed to control over half of Syria’s economy through a web of companies including mobile phone network SyriaTel. But after Rami fell out of favour with the regime in 2020, Syrians with insight into the regime say Iyad and Ihab remained close to Bashar and his wife Asma. 

Corporate filings show that Zevelis City was established by a female Russian employee of the US sanctioned Syrian-Russian banker Mudalal Khoury, who has been accused by the US of facilitating large movements of money from Syria to Russia on behalf of the Assad regime. 

Khoury appears to have played a pivotal role in embedding regime interests in Russia’s financial system, and in 2015 the US Treasury said Khoury “has had a long association with the Assad regime and represents regime business and financial interests in Russia”.

Schenker said that given the pressure Assad had faced from western governments, especially the US, for more than a decade, “Assad always knew that he would never be acceptable company in, say, Paris.

“He wasn’t going to be buying apartment buildings there, but he also knew that if this was going to end, it was going to end badly. So they had years to try and spirit away money, to set up systems that were going to be reliable safe havens.”

FT : London Stock Exchange suffers biggest exodus since financial crisis

London Stock Exchange suffers biggest exodus since financial crisis
Main market set for fewest listings in 15 years as allure of New York grows despite planned UK reforms

The London Stock Exchange is on course for its worst year for departures since the financial crisis, as fears mount that more FTSE 100 businesses will quit the UK in favour of New York.

A total of 88 companies have delisted or transferred their primary listing from London’s main market this year with only 18 taking their place, according to the London Stock Exchange Group.

This marks the biggest net outflow of companies from the main market since 2009, while the number of new listings is also on course to be the lowest in 15 years as initial public offerings remain scarce and bidders target London-listed groups.

The exodus has continued despite efforts by the UK government, regulators and the LSE to boost the City’s attractiveness by reforming market rules and the domestic pensions system.

Ashtead, the equipment rental company with a £23bn market valuation, this month became the latest big business to propose moving its primary listing from London to New York. It would join six other FTSE 100 groups to have ditched the blue-chip index in favour of overseas venues since 2020.

Including Ashtead, these movers had a combined market valuation close to £280bn on Friday — about 14 per cent of the current total value of the FTSE 100.

The defectors include £39bn gambling giant Flutter, which owns Paddy Power, and £55bn building materials group CRH. Both have moved their main listing to New York in the past 18 months.


A series of takeovers by private equity bidders has also depleted the exchange. Cybersecurity group Darktrace and investment platform Hargreaves Lansdown are among those that have agreed to be bought this year.

“We cannot be taken seriously as a global leader in finance if we do not have a thriving equity capital market,” said Charles Hall, head of research at stockbroker Peel Hunt.

“The UK market does not have any god-given right to be a leading listing venue, but it requires nurturing and support to be successful in a market that is increasingly global,” said Hall, adding that “more companies will depart” unless action is taken.

Factors cited by companies moving their main listing to New York include a deeper pool of investors and the prospect of better liquidity in their shares.

For some, the move reflects the growth of their North American operations. Ashtead makes 98 per cent of its operating profit in the US, while plumbing group Ferguson, which moved in 2022, derives 99 per cent.

Nine companies in the FTSE 100 glean more than half of their revenue from the US, according to Bank of America, including data group Experian and education company Pearson.

Analysis by the Financial Times last year identified London as the European stock exchange most at risk of suffering departures of big companies to the US.

The analysis ranked companies based on their valuation discount compared with a group of US peers, the share of their revenues generated in the US and the proportion of North American investors on their register.

The 18 large London-listed groups identified as flight risks included Rio Tinto and British American Tobacco. The pair have been pressured by investors to move their primary listing to Australia and the US, respectively.

“More UK companies are thinking about moving their listings to the US, and the UK’s valuation gap to the US has become larger,” said Goldman Sachs in a note on Friday.

The FTSE 100, oriented towards “old economy” sectors such as energy and mining, has gained nearly 8 per cent this year. The US benchmark S&P 500 — home to higher-growth stocks such as the Magnificent Seven technology groups — has generated roughly 27 per cent over the same period.


French pay-TV operator Canal+ could be valued at more than €6bn after it lists in London on Monday as part of its split from media conglomerate Vivendi, according to analysts and people close to the operation. That valuation would make it the largest primary listing in London since Haleon was spun out of GSK in 2022.

But one senior banker in London said they expected more listings to transfer to the US next year, particularly among fast-growing businesses. “The US is now such a big capital market relative to anywhere else that [generally] people feel they’re going to get a better deal in the US,” he said.

Sharon Bell, a European equity strategist at Goldman Sachs, said many businesses searching for higher valuations felt forced away from the UK by a lack of domestic investor interest.

“It is very sad,” said one FTSE 100 chief executive following Ashtead’s announcement. The “America first” rhetoric of president-elect Donald Trump could also push companies to speed up any delisting plans, the executive added.


Many advisers and executives say privately that recent reforms — including planned changes to the pensions system and an overhaul of the UK’s listing rules — have not yet moved the dial.

But LSEG chief David Schwimmer said last year that the idea that a US listing offered a higher valuation was “a myth”.

City advisers hope the UK market will get a shot in the arm if China-founded fast-fashion group Shein presses ahead with a planned IPO in London.

“Companies will make bespoke decisions that are pertinent to their business mix and location,” said LSEG in a statement. “The UK market remains the third-largest in the world by capital raised year to date and is seeing the most dynamic set of reforms anywhere in the world.”

Chancellor Rachel Reeves said on Friday that the Canal+ listing was “a vote of confidence in the UK’s capital markets, the stability we are delivering and our plan for change”. 

But one FTSE 250 executive said that more needed to be done to entice investors.

“I don’t think it’s high on the government’s priority list,” the executive said, “even if it’s something they regularly trot out.”

>>> Weekend Papers Summary

FINANCIAL TIMES
-The National Assembly of South Korea has impeached President Yoon Suk Yeol following his decision to impose martial law (failed). The Constitutional Court must approve the impeachment within 180 days of the parliamentary vote. In the meantime, Yoon will be suspended from duties and constitutional authority will be passed to Prime Minister Han Duck-soo. The motion passed by a margin of 204-85, with opposition parties only needing the support of eight out of 108 lawmakers from the president's People Power party.
-Russia is withdrawing some of its Syria-based forces following the fall of Bashar al-Assad's regime, according to satellite photography and a Ukrainian intelligence assessment. Images show an increase in ground vehicles at the Hmeimim air base, the arrival of large transport aircraft, and the disassembly of Russian helicopters and air defenses. But, it is unclear whether this is the start of a partial or complete withdrawal. Russia's presence in Syria is a legacy of its intervention in the Syrian civil war from 2015, and its future in the country depends on negotiations with a new government in Damascus. Losing the air base at Hmeimim and Russia's naval base at Tartus would be a strategic problem for Moscow.
-Porsche SE is set to write down its stake in Volkswagen by up to 40% due to uncertainty over potential plant closures and strikes. The company expects to write down VW's value between €7B and €20B due to the lack of financial data. Porsche also expects to write down its stake in Porsche AG by €1B to €2B. The book value of both stakes will remain significantly higher than their respective stock market values. The announcement comes as VW prepares to enter the fifth round of negotiations with union IG Metall.
-McKinsey will pay $650M to settle a US criminal investigation into its work for opioid manufacturers. The deferred prosecution agreement with the US Department of Justice acknowledges McKinsey's responsibility for conspiring with Purdue Pharma to aid and abet misbranding of prescription drugs. The firm has previously paid $1B in civil settlements over its work, which ceased in 2019. The agreement limits McKinsey's ability to work for other pharmaceutical companies and prohibits the firm from marketing, selling, promoting or distributing controlled substances. Martin Elling, a former senior partner who advised Purdue Pharma, has also agreed to plead guilty to one count of knowingly destroying documents with the intent to obstruct justice.
-Ukraine has fired its commander, Oleksandr Lutsenko, who led operations in the eastern Donetsk region. Lutsenko is accused of having failed to stop Russia's sweeping offensive, which has taken an area half the size of London in just the past month. Lutsenko will be given another post in the army's ground forces and replaced by Brigadier General Oleksandr Tarnavskyi. Ukraine's top general, Oleksandr Syrsky, said battles were raging against a Russian army "superior?.?.?primarily in manpower." Deep State, a Ukrainian war-tracking group close to the defence ministry, said Ukrainian troops defending four villages south of Pokrovsk were under threat of encirclement, with Russian forces attacking "from all sides."
-The Syrian economy faces a critical challenge as over 90% of the population lives below the poverty line and receives less than 6 hours of electricity daily. Pantries are often empty due to shortages of essential goods, high inflation, and the crumbling Syrian pound. Over 80% of the country's oil products were imported from Iran, which supported Assad during the war. Domestic manufacturing has been severely hampered, with factories destroyed and workers sent to war. The government has haemorrhaged cash to fund military spending, public sector salaries, and subsidized goods, which are essential parts of the Ba'athist state.
-TikTok has lost an emergency bid to temporarily halt a deadline under a US "divest or ban" law, leaving the app's fate uncertain in the country. The US Court of Appeals for the District of Columbia Circuit rejected the emergency motion filed by the platform and its Chinese parent company, requesting the law be stayed from taking effect next month while it asks the Supreme Court to take up a challenge. The law, signed by President Joe Biden earlier this year, orders TikTok to be banned in the country if the app fails to divest from its parent by January 19, 2025. The ruling places TikTok's future in the hands of the Supreme Court, which will need to decide if it will hear the appeal.

NEW YORK TIMES
-South Korea's National Assembly has voted to impeach President Yoon Suk Yeol, following his declaration of martial law. The vote has suspended Yoon from office, and Prime Minister Han Duck-soo will serve as interim leader. Yoon has expressed his intention to fight the impeachment in the Constitutional Court, which could take up to six months to decide whether to reinstate or formally remove him. The National Assembly received a strong vote in favor of impeachment, with 12 lawmakers from Yoon's party joining the opposition.
-South Korea's president, Yoon Suk Yeol, may have sealed his political fate by declaring martial law on December 3, triggering public outrage. The National Assembly voted to impeach Yoon, who was suspended from office. Yoon's approval ratings have been some of the lowest in South Korea's history, with scandals and unpopular decisions leading to low approval ratings. The Constitutional Court will decide Yoon's fate, which could take months. Yoon faced angry voters who were upset at his leadership amid growing inequality, rising prices, and threats from North Korea.
-The New York FBI field office reported that investigators received a tip from the San Francisco Police Department identifying Luigi Mangione as a suspect before he was arrested in the killing of UnitedHealthcare CEO Brian Thompson. The tip was one of many law enforcement officials received in the days after Thompson's death. Mangione's family reported him missing in San Francisco weeks before the killing. The timing of when the bureau gave that information to the New York police remains unclear, as well as whether it might have helped speed his arrest. Mangione was not on the department's radar before being captured in Altoona, Pennsylvania, after a McDonald's customer recognized him from pictures distributed by authorities.
-Jessica Tisch, New York's police commissioner, was tasked with overseeing a manhunt after the death of UnitedHealthcare's CEO. She was informed of the incident while giving her sons breakfast. She ordered that all officers receive photos of the gunman and assigned 10 analysts from the intelligence bureau to work with detectives. Over five days, investigators scoured thousands of hours of footage and analyzed ballistics and dove in Central Park. Not only did the police in New York, but also the FBI in San Francisco, who recognized a surveillance photo of the suspect as a man declared missing by his family.
-Scott Bessent, the Treasury secretary pick for President-elect Donald Trump, has proposed a three-pronged plan to revive the US economy, aiming to increase growth to 3%, cut the budget deficit to 3% of GDP, and increase US energy production by three million barrels of oil per day. Bessent, a hedge fund investor and student of "Abenomics," has been involved in meetings with Japanese Prime Minister Abe and has bet against the yen.
-President-elect Donald Trump has been ordered by a federal judge to appear in a defamation lawsuit against ABC News and its anchor George Stephanopoulos. The deposition is expected to occur next week, as Trump is defending several cabinet nominees and working on his transition team. The suit was filed in March, alleging Stephanopoulos damaged Trump's reputation by repeatedly claiming responsibility for raping writer E. Jean Carroll.
-Iran's recent obliteration of its dominant presence in Syria has sparked a public backlash over the billions of dollars spent and Iranian blood shed to support the Assad regime. Critics, including conservatives, have been circulating on television, talk shows, social media, and newspapers. Former lawmaker Heshmatollah Falahatpisheh has suggested Iranians should rejoice at the fall of President Bashar al-Assad, stating that no one will waste Iran's money for maintaining a spider web. The sentiment has spread, with even those who fought in Syria questioning the worth of the money spent.
-Senator Mitch McConnell, a polio survivor, has defended the polio vaccine amid reports that Robert F. Kennedy Jr.'s lawyer has petitioned federal regulators to withdraw the vaccine. McConnell argued that the petition could jeopardize his confirmation as health secretary in the incoming Trump administration. He emphasized that efforts to undermine public confidence in proven cures are dangerous and advised anyone seeking Senate consent to serve in the incoming administration to avoid association with such efforts.
-New Jersey residents have been captivated by bright lights in the night sky, believed to be drones. Federal authorities have provided few answers about the objects or their origin, leaving residents and local leaders frustrated. While U.S. officials have not corroborated the reported drone sightings, they suggest many might be manned aircraft. Lawmakers are frustrated with the lack of information and are urging the federal government to share more about its investigation.
-California and 11 other states are expected to be granted permission by the Biden administration to ban the sale of new gasoline-powered cars by 2035, a highly ambitious climate policy. However, President-elect Donald Trump is expected to revoke this permission soon after taking office, as he pledges to scrap Biden-era climate policies. California is expected to fight any revocation, paving the way for a legal battle with the new administration. California has long been a leader in climate policies and innovation.
-Elon Musk has asked a federal court to block OpenAI's transition from a nonprofit to a for-profit company. OpenAI responded with a legal filing, arguing that Musk is merely attempting to stifle OpenAI's efforts to build a rival company, xAI. The filing argues that Musk's motion would debilitate OpenAI's business and mission. OpenAI also disputed Musk's claims in a previous lawsuit.

NEW YORK POST
-The NY Post claims that a newly minted Iranian drone carrier, the Shahid Bagheri, sailing in the Persian Gulf. The carrier, a converted shipping container, was last seen on November 12 when it was captured by satellite imagery in Bandar Abbas. The Shahid Bagheri, a converted shipping container, was outfitted to support drone operations and was believed to have headed straight to the Persian Gulf to partake in naval exercises. The carrier left its home Iranian port between November 12 and November 28, and was believed to have been heading straight to the Persian Gulf to partake in naval exercises. The new images show the overhauled ship, along with two other Iranian drone vessels, Shahid Roudaki and Shahid Mahdavi, off the Bandar Abbas port in the Persian Gulf. Theories have swirled in the US that Iran could be behind the mysterious drone sightings across the tri-state area.
-President-elect Donald Trump is considering saving the failing Waldorf-Astoria hotel in Washington, DC and rebranding it as a Trump International Hotel. The Trump Organization, the incoming commander-in-chief's company, is considering options such as a licensing deal or possibly buying back the lease on the government-owned, 125-year-old Old Post Office building. The luxury lodge became a popular hangout for Republican insiders during Trump's first four years in the White House. Republican operatives spent $266K there in its first six months alone, according to FEC data. However, visitor numbers dropped after Hilton took over the hotel and the real estate mogul ended ties with the hotel. It is still "to be determined" whether the Trump Organization would want to wrestle back full control of the hotel by buying back the lease it sold in 2022 or agree to a licensing deal.

>>> Barrons Weekend Summary

Cover:
-The stock market is surging and shows no sign that it will let up in 2025, with investors encouraged to embrace the expanding bubble. Despite events like the presidential election, escalating conflicts overseas, and uncertainty about inflation and the Federal Reserve's rate-cutting plans, investors have been able to reload and capitalize on the growth in the tech-heavy Nasdaq Composite. The S&P 500 is on track to post a gain of almost 30% this year, while the tech-heavy Nasdaq Composite is up nearly 35%. Despite initial ebullience, conditions are less benign today, with the S&P 500's price/earnings ratio approaching frothy. Positive sentiment about the economy and markets has fueled the rise of animal spirits, including equities, Bitcoin, and art.

Interview:
-Barron's has consulted economist Nicholas Bloom, a Stanford University professor, to discuss the debate surrounding the value of remote and hybrid work in corporate and nonprofit sectors. Bloom, who has studied remote work for over two decades and co-founded a research platform, believes the shift to more flexible work arrangements will be enduring due to its broader economic benefits. He has tracked the growth and scope of remote work and the relationship between hybrid work and productivity enhancements.

Tech Trader:
-In 2024, tech companies like Amazon, Microsoft, and Alphabet spent $133B on building AI capacity, a 57% increase from the previous year. Nvidia also saw a 174% increase in data center revenue, reaching $80B over the past three quarters. However, investors are now questioning the return on investment and productivity gains of AI. David Cahn of Sequoia Capital estimates that for AI to be profitable, every dollar invested on infrastructure needs four dollars in revenue. While profits are unlikely to come in 2025, investors will still want to see progress in AI infrastructure. Microsoft's AI strategy focuses on attracting customers to pay for Microsoft 365 Copilot, an AI assistant for popular apps like Word, Excel, and PowerPoint. Copilot costs $360 per user per year, in addition to other software costs ranging from $72 to $657 per year. This high cost of AI makes it a significant investment for investors looking to track its potential in the market.

The Trader:
-The Nasdaq Composite soared above 20,000 for the first time ever on December 11, 2024, less than five years after crossing 10,000 and just weeks after the S&P 500 index crossed 6000 for the first time. However, the excitement quickly faded as the NASDAQ retraced its gains and finished the week up just 0.3% at 19,927. The S&P 500 declined 0.6%, and the Dow Jones Industrial Average dropped 1.8%, ending Friday with a seven-day losing streak. The NASDAQ’s rally has been driven by Big Tech names like Tesla and Alphabet, which may be masking fundamental weaknesses in the broader market. Most stocks outside of the tech industry have been in the midst of a gradual but persistent selloff. For 10 straight days through Friday, more stocks in the S&P 500 fell than rose, the longest such streak since 2000, according to Dow Jones Market Data. The iShares S&P 500 Value exchange-traded fund has fallen for 10 straight days, its worst streak since launching in 2000. The recent rally has been driven by the most exuberantly priced assets.
-Exxon Mobil plans to spend more money on oil and low-carbon products next year, despite oil prices expected to fall next year. CEO Darren Woods believes Exxon is in a different league compared to its competition. However, investors don't like oil companies hiking their spending, as they recall a bygone era of overinvestment and diminishing returns from a decade ago. Exxon argues that it can spend more on high-return projects while decreasing its cost base. The company has outperformed all of its Big Oil competitors over the past five years, investing more than its peers and resulting in more than doubled expected earnings and 70% reduction in net debt. Exxon has returned $140B to shareholders in the form of buybacks and dividends.

Features:
-Inflation remains volatile, with the Federal Reserve having more work to reach its 2% annual target. The Consumer Price Index rose 2.7% year over year in November, above economists' forecasts and October's 2.6%. The Producer Price Index for November rose at a 3% annual rate, beating estimates for 2.6%. Stubborn inflation means the central bank may not be able to cut rates as many times as expected. If the Fed keeps rates higher, it could dent the broader stock market, with the S&P 500 up 28% this year, partly reflecting expectations of continued rate lowering and minimal economic interruption.
-Google parent Alphabet has announced its new quantum-computing chip, Willow, which can complete tasks that would take leading supercomputers 10 septillion years to complete. This breakthrough could bring practical applications closer to reality. Google shares have risen nearly 10% this week on the news. Quantum computing harnesses the principles of quantum mechanics to solve complex problems more quickly than traditional computers. The Massachusetts Institute of Technology named it a breakout technology in 2017. Recent advancements have led to an uptick in interest, with the Defiance Quantum exchange-traded fund up nearly 15% in the past month. Despite the quantum revolution likely taking a long time to play out, the explosion of AI-linked techs has made investors salivate over any technology that could be 'next'.

Europe:
-Government collapses in Germany and France and President Elect Trump’s threat to apply tariffs against the EU to balance the US’s $175 billion trade deficit with the European Union, don’t bode well for Europeans. Meanwhile, Europe is also struggling with China dominating green technologies and consuming electric vehicles. Investors have noticed this, with the iShares MSCI Eurozone exchange-traded fund slipping by 2% over the past six months. Nevertheless, 2025 could be better, with bargains in underperforming stocks. Germany's election in February is expected to bring Christian Democratic leader Friedrich Merz to power, who is expected to unleash budgetary stimulus. Germany's debt to GDP ratio of 64% allows it to invest 1% to 2% per annum on infrastructure. European stocks are 20% cheaper than US peers, even excluding the "magnificent seven" outperforming tech giants.

Emerging Markets:
-No update

Commodities:
-Goldman Sachs predicts that gold prices could break through the $3,000 barrier by the end of 2025, even if the dollar remains high. The team advises investors to watch the Federal Reserve's actions, not the dollar, to determine how high gold prices can go in 2025. Gold prices tend to rise when the US dollar falls, and vice versa, as most gold is priced in dollars. However, both the dollar and gold have rallied this year. The reason for the dollar's strength matters for gold prices, as when economic growth or higher interest rates drive strength in the dollar, gold prices typically soften. However, if the dollar is rising due to the threat of tariffs, which tend to be inflationary, gold and dollar prices tend to move together. The analysts predict that the Federal Reserve and most other central banks will continue their monetary easing cycles in 2025, driving gold higher. The team's base case model shows gold prices will increase by 7% to $3,000 if the Fed cuts rates by another 125 basis points, or 1.25 percentage points, by the end of 2025.

Streetwise:
-Google has introduced a new "quantum computing" chip called Willow, capable of performing calculations, that would take today's fastest supercomputers longer than the age of the universe, in less than five minutes. This development has caused shares of parent Alphabet to rise more than 5% on both Tuesday and Wednesday. The potential for quantum computing in fields like drug discovery outweighs its dangers in code breaking and cyberwarfare. However, the Defiance Quantum ETF (QTUM) has seen a 38% increase this year, compared to 29% for the Global X Artificial Intelligence & Technology ETF (AIQ), making quantum computing even hotter than AI. Quantum computing and AI are not alternatives but complements, and to suggest otherwise raises questions about their bona fides. The article suggests that understanding quantum computing is crucial for understanding the technology, as it is already appearing in everyday conversations and requires a guide to pretending to understand it.

FT : Peter Hargreaves’ Blue Whale sells major tech stocks over AI concerns

Peter Hargreaves’ Blue Whale sells major tech stocks over AI concerns
Fund cuts exposure to ‘Magnificent Seven’ because of heavy spending on artificial intelligence

Blue Whale Growth, the investment fund backed by billionaire Peter Hargreaves, has reduced its exposure to the ‘Magnificent Seven’ group of major US tech companies due to concerns over their vast expenditure on artificial intelligence.

Stephen Yiu, manager of the fund, told the Financial Times that he had “aggressively” sold shares in Microsoft to cash in profits, pushing the stock out of the fund’s top 10 holdings in the third quarter for the first time since its launch in 2017.

He said: “Microsoft’s return on invested capital [is] likely to decline from here, given the significant investment made in AI infrastructure.”

Yiu said he would “consider selling out” of Microsoft completely if the tech company’s AI investments outweigh its cash generation.

Shares in the Magnificent Seven — Microsoft, Nvidia, Apple, Alphabet, Meta, Amazon, and Tesla — have rocketed in recent years and represent about a third of the S&P 500’s market capitalisation.

But top investors including Warren Buffett in the US and Terry Smith in the UK have recently scaled back or sold out of certain Magnificent Seven companies. Wall Street has grown increasingly nervous about when returns will materialise from a Big Tech capital spending splurge that is set to surpass $200bn this year.

“A lot of people talk about the Magnificent Seven, and we are [backing] Nvidia,” said Yiu, referring to the US chipmaker. “Outside of Nvidia, we are increasingly less positive on the [other] six. The capital intensity of these stocks is going up significantly because they are spending a lot on AI infrastructure.”

“I’m not suggesting that six of the Magnificent Seven stocks will disappear but . . . we think they could be a drag on the market,” he added.

Blue Whale manages £1.3bn, invests in global stocks and has had a sizeable holding in US tech companies since inception. It was financially backed by Hargreaves, who co-founded the investment platform Hargreaves Lansdown, and former Artemis fund manager Yiu.

Hargreaves’ family holding in the Blue Whale Growth fund is worth more than £200mn. The fund returned 24 per cent this year to the end of November, compared with rival funds’ 15 per cent on average.

Yiu’s decision to sell down some of the Magnificent Seven is the latest sign that investors have concerns over the companies’ future prospects. He said the fund’s exposure to some of these stocks, excluding Nvidia, now amounts to only 5 per cent of his portfolio — far less than the MSCI World’s 20 per cent.

Yiu has reduced the fund’s holding in Microsoft from 8 per cent in January to about 2 per cent.

The fund manager also recently sold down Meta, the parent company of Facebook, to take profits “due to concerns about further AI ramp-up” in company spending. He has cut his holding from 5 per cent of the fund to 3 per cent.

“The problem with Meta is we are concerned [it] is overspending on AI going into next year,” Yiu said. “Ultimately you need to translate your spend into profit and at the moment we are not seeing enough of that.”

He also sold his stake in Amazon in 2021 and Alphabet, Google’s parent company, in 2022.

Other investors have dumped large US tech stocks recently. Smith, who runs the £23bn Fundsmith Equity, said last month that he had sold out of Apple just two years after investing in it.

Buffett, one of the world’s best-known investors, continued to slash Berkshire Hathaway’s holding in Apple last month and has cut almost two-thirds of the stake in just over a year.

Yiu said Nvidia represented nearly 10 per cent of his fund, valuing the stake at around £100mn. He has had to sell shares as Nvidia’s market value has grown, which he said has netted a profit of £100mn.

The fund manager is also backing Broadcom, which he said builds AI infrastructure and is a beneficiary along with Nvidia of the money being spent on AI by the rest of the Magnificent Seven.

According to Blue Whale’s latest accounts, the fund’s parent company reported a profit of £4.1mn in the year to March, up from £3.9mn the previous year.