FT : Top US gas producer says pipeline fights endanger industrial world

Top US gas producer says pipeline fights endanger industrial world
EQT chief lambasts ‘movement to cancel energy infrastructures’ after latest delay to Mountain Valley project

The largest US natural gas producer has lambasted a “war on infrastructure” that risks sparking a Europe-style energy crisis in parts of the US, days after the latest delay to a new pipeline fast-tracked for approval by Congress.

EQT chief executive Toby Rice told the Financial Times that the US had “oceans of natural gas”, but companies like his in the prolific Appalachian shale region were struggling to add supplies because new pipeline capacity had been blocked.

“The industrial world that we enjoy now is severely compromised because of the lawsuits, the pushback and the movement to cancel energy infrastructures and modern society. We’ve run out of flexibility,” said Rice, 41, who describes himself as a “shalennial”.

His comments followed the announcement last month of another delay to the Mountain Valley Pipeline, a 303-mile gas project stretching between West Virginia and Virginia that is opposed by green campaigners and some landowners.

When MVP was first announced in 2014 it was expected to be completed by 2018 and cost $3.5bn. It is now forecast to cost $7.2bn and begin operations next year.

“The ramp-up of MVP’s contractor workforce has been slower and more challenging than expected, due to multiple crews electing not to work on the project based on the history of court-related construction stops,” Equitrans Midstream, one of the owners of MVP, said in a securities filing.

In June, Congress passed a law specifically to fast-track construction of the MVP following the intervention of Joe Manchin, a West Virginia senator who holds the balance of power in the Senate. A month later the Supreme Court cleared the legal path for construction to resume.

But several attempts to pass laws in Congress to streamline permitting processes more broadly, which were supported by both the fossil fuel and renewable energy lobbies, have failed over the past two years.

Rice said the fact it now took an act of Congress to get a single pipeline built in the US “should scare the hell out people”, particularly when cities in New England have to import liquefied natural gas from abroad during winter freezes.

He warned that parts of the US could face the kind of energy crisis that hit Europe after Russia’s full-scale invasion of Ukraine. Rice said Europe was vulnerable because it had “shut down building infrastructure”.


“What’s happened in Europe is happening in the United States. We’re just five years behind,” Rice said.

Since 2016 at least four pipelines — PennEast, Constitution, Atlantic Coast and Northeast Direct which could have connected EQT’s shale gasfields to the US east coast — have been cancelled. However, capacity on other pipelines in the north-east has been expanded, according to data from the Energy Information Administration.

Opponents of the MVP project argue that it poses a risk to properties and sensitive ecosystems and prolongs the lifespan of the fossil fuel industry, whose emissions are the main cause of climate change.

“When companies make investments in expensive, capital-intensive, fossil fuel infrastructure it creates its own momentum for them to keep using the asset at a time when we need to move beyond fossil fuels,” said Casey Roberts, an attorney at the Sierra Club, an environmental group.

Last year the build out of interstate natural gas pipelines in the US fell to a record low of 897mn cubic feet a day, down from a peak of 28bn in 2017.

Pipeline capacity constraints have the ability to curtail gas flows from Appalachia into New England. Last winter, prices for gas to be delivered in Boston briefly soared to almost $30 per million British thermal units, comparable to prices in Europe, where utilities were scrambling to find international supplies to replace Russian energy.

In a note to clients in September, consultancy Wood Mackenzie said that a failure to build new pipelines in the north-east would raise gas prices, dent demand and accelerate the energy transition away from gas in that market. As a result, north-east gas production would be downgraded significantly to 30bn cubic feet a day or by 10bn cu ft/d below the base case in 2040, it said.

Williams, a $42bn pipeline company, previously clashed with former New York Democratic governor Andrew Cuomo after his administration denied water quality permits for its $1bn Constitution pipeline even though it had been approved by federal energy regulators.

“Permitting has become highly weaponised in Democratic states, and so it’s being used completely inappropriately,” said Alan Armstrong, Williams chief executive.

FT : Citadel’s Ken Griffin warns against hedge fund clampdown to curb basis trad

Citadel’s Ken Griffin warns against hedge fund clampdown to curb basis trade risk
Founder of $62bn firm hits out at US proposals to treat big players in his industry like broker-dealer arms of banks

Ken Griffin, the founder and chief executive of $62bn US hedge fund Citadel, has warned regulators that they should focus their attention on banks rather than his industry if they want to reduce risks in the financial system stemming from leveraged bets on US government debt.

Global regulators have warned about growing risks emerging from the so-called Treasury basis trade — selling Treasury futures while buying US government bonds and extracting gains from the small gap between the two using borrowed money.

But Griffin said they should focus on the risk management of banks that enable the trade by lending to hedge funds, rather than try to increase regulation of the hedge funds themselves.

The US Securities and Exchange Commission, which regulates hedge funds, has proposed a new regime for the Treasury market that would treat hedge funds like the broker-dealer arms of banks.

“The SEC is searching for a problem,” Griffin told the Financial Times. “If regulators are really worried about the size of the basis trade, they can ask banks to conduct stress tests to see if they have enough collateral from their counterparties.”

Hedge fund bets against US Treasuries futures climbed to new highs in the seven days to October 24, with record net shorts against both the two-year and five-year future. Most, but not all, of these bets are in the basis trade.

Citadel, alongside rival hedge funds Millennium Management and Rokos Capital Management, is among many that are routinely using the basis trade.

The Bank for International Settlements and researchers at the US Federal Reserve are among those to have warned about the risks of a rapid build-up of hedge fund bets in the Treasury market, which is magnified by leverage levels that can exceed 100 times.

If the trade moves against them and hedge funds are forced to sell their Treasury bonds at the same time, regulators worry it could lead to a collapse of the world’s most important bond market, with severe implications for the wider financial system.

The BIS blamed a “disorderly reduction in margin leverage” as a contributor to the collapse of the US Treasury market in March 2020 at the onset of the pandemic. However, in the Fed’s latest Financial Stability Report last month, the central bank said risks related to the basis trade “are likely mitigated by tighter financing terms applied to hedge funds by dealer counterparties over the past several quarters”.

The prime brokerage divisions of banks play a key part in the basis trade because they lend money to hedge funds while using their Treasury bonds as collateral. Banks are expected to evaluate how the portfolios of their hedge fund clients perform under various market stresses to make sure they have enough collateral to withstand a market shock.

Griffin said he was not opposed to regulations capping the amount of borrowing by hedge funds in the Treasury market, provided the proposals were “subject to sound economic analysis and proposed for public comment”.

He noted that the basis trade brought down the cost of issuing government bonds, as hedge funds buy large quantities of Treasuries to pair against their short futures positions.

“The ability for asset managers to efficiently gain exposure to Treasuries through futures allows them to free up cash to invest in corporate bonds, residential mortgages and other assets,” he said.

This is because futures are leveraged products requiring a fraction of the cash posted as collateral to maintain the position, rather than paying full price for a Treasury bond now.

“If the SEC recklessly impairs the basis trade, it would crowd out funding for corporate America, raising the cost of capital to build a new factory or hire more employees,” Griffin said. “It would also increase the cost of issuing new debt, which will be borne by US taxpayers to the tune of billions or tens of billions of dollars a year.”

Addressing risks elsewhere in the financial system, the Citadel founder said “the risks lie where there is a significant mismatch between assets and liabilities relative to the leverage employed”, pointing to the collapse this year of Silicon Valley Bank.

The US lender’s $180bn in deposits provided cheap short-term funding and because loan demand was weak it bought long-term bonds that were unhedged, but rising interest rates devalued the bonds, leading to a liquidity crisis when customers tried to withdraw their money.

“Silicon Valley Bank using customer banking deposits to invest in long-dated Treasuries is profoundly different from a hedge fund buying a Treasury bond and selling a futures contract that can be closed out by delivering the bond,” Griffin said.

The SEC under chair Gary Gensler has unleashed the largest regulatory blitz since the financial crisis. A rule that would force larger players to register as broker-dealers or government securities dealers is among proposed regulations that would subject hedge funds to increased oversight.

“Regulators should focus on the banks instead of requiring every hedge fund that’s going to partake in the Treasury market at any reasonable scale to be a registered broker-dealer,” Griffin said. “This is a much more cost-effective way to address any concerns that the SEC or other regulators in this space might have.”

FT : Russia’s approach to Israel reveals problems in the Kremlin

Russia’s approach to Israel reveals problems in the Kremlin
Unrest in the north Caucasus follows the stoking of an anti-western, anti-imperialist mood at home

On October 29, several thousand angry men stormed the airport at Makhachkala, capital of Dagestan in Russia’s mainly Muslim north Caucasus. They were looking for Jews believed to have arrived from Israel. The police seemed inactive, much like during Yevgeny Prigozhin’s abortive mutiny in June. In a second Dagestani city, Khasavyurt, a mob searched for Jewish refugees allegedly placed in local hotels. In Karachay-Cherkessia, protesters demanded the eviction of all Jews from the republic. In Nalchik, also in the north Caucasus, a Jewish cultural centre under construction was set on fire and antisemitic graffiti scrawled on its walls.

As happened after the Prigozhin mutiny, Vladimir Putin appeared to have temporarily lost control. This time, it occurred in the Caucasus, where Putin’s rise to power began with ruthless military campaigns. In both cases the explanation is the same: enthusiasts attempt to help the government carry out its policy more decisively, as they interpret it. With the Wagner group, this meant fighting Ukraine with full force. With the Dagestani mob, it meant openly supporting Palestinians in defiance of the west and Israel. The current war in the Middle East is not the first during Putin’s long rule, but the consequences are different. The reason lies in Russia’s fundamentally changed foreign and domestic policy.

After 9/11, Putin was the first foreign leader to phone his US counterpart, George W Bush, to express his condolences. Twenty-two years later, after Hamas’s attack on Israel, Putin was careful, even ambiguous, in his words, even though Israel has not joined western sanctions against Russia and has limited its aid to Ukraine. One reason is that the war against Ukraine has changed Russia so much that it has a different approach to the Arab-Israeli conflict and domestic antisemitism.

By disputing Ukraine’s right to exist, Russia is acting as the arbiter of and successor to the Soviet and tsarist empires. Their legacy includes friendships with Arab states, directed against Israel and the west, and unofficial antisemitism in Soviet institutions that marked out domestic opponents in ethnic and cultural terms. This is not to mention the pogroms of the late tsarist era. 

In foreign policy, this legacy manifests itself in the Kremlin’s attempts to rally countries against the world order under the banner of anti-westernism and anti-imperialism. Inside Russia, it labels critics of the war, many of whom went abroad, including to Israel, as insufficiently patriotic. The Kremlin sees ordinary people in and outside Russia as having a natural hostility towards liberals, gay people, intellectuals and political, cultural and financial elites, as well as imbued with a certain antisemitism.

After the failure of Russia’s blitzkrieg attack on Ukraine in early 2022, the Kremlin became consumed with the idea of opening a second front. It tried a gas front against Europe last winter, and a grain front stoking fears of world food shortages and migration crises. It hoped for a flare-up over Taiwan, or domestic political problems in the US. Now that a second front has opened in the Israel-Hamas war, Moscow may hope to propose a bargain to the west: “We’ll help you get out of the mess in Palestine, you help us do the same in Ukraine.” This accounts for a Hamas delegation’s visit to Moscow on October 26.

However, Russia’s decision-making is too degraded for its leaders to use such opportunities. They are in the grip of destructive emotions, obsessed with grievances and fixated on revenge. This reduces their ability to play a constructive role in the Middle East. While conducting its aggressive geopolitical game, the Kremlin has overlooked the consequences at home. Its intense anti-western sentiment has generated violence in the north Caucasus which contradicts the image of domestic harmony that Putin aims to project.

Miss Tweed : LVMH mulls buying back Off-White license from Farfetch

Miss Tweed : LVMH mulls buying back Off-White license from Farfetch

LVMH has been in on-and-off-talks with Farfetch over the past few months about acquiring the license to manufacture and distribute the fashion brand Off-White, several industry sources said. Founded by former Louis Vuitton menswear creative director Virgil Abloh in 2013, Off-White suffers from underinvestment by Farfetch, which owns the license through its New Guards Group (NGG) unit.

LVMH owns only the trademark name, not the license, and is unhappy about seeing the value of its asset decline. Lossmaking Farfetch has had to shed staff and put many expansion projects on hold to save money, as Miss Tweed reported last month.

LVMH has been complaining about the damage done to Off-White by selling items at a discount, closing boutiques – such as its London flagship this summer – and holding back on marketing and development projects aimed at helping it grow and remain visible, several industry sources said. Farfetch has not opened as many boutiques as it pledged to when it bought the brand’s license in 2019. Initially, the goal was to open 30 stores in three years. In the end, around half of that, or some 15 stores, were opened, industry sources have said.

To save money, Off-White had to cancel its 10-year anniversary show, which it had planned in New York in September in homage to Abloh. Cutting funds to grow Off-White and other brands run by NGG has caused friction with the company’s co-founders, Davide De Giglio and Andrea Grilli, who abruptly left in June. The brand’s last real fashion show was in March.

“LVMH executives have been complaining about how Farfetch and NGG are managing Off-White,” one senior industry source said. “LVMH has sent some of its people to Milan to oversee the management of Off-White, but they are having trouble having some sort of influence on this situation.”

“New Guards has the license of the trademarks for the Off-White brand,” a spokeswoman for Farfetch told Miss Tweed in an email. “This license expires in 2035 and includes the right for either party of opt out of the agreement effective as of January 1, 2026, subject to a notice provision.” Farfetch and LVMH declined to comment on the talks about the Off-White license.

If LVMH wishes to take the license back for free by Jan. 1, 2026, it will need to give notice by end-December 2024, a source with knowledge of the matter said.

MICHAEL BURKE
“There have been discussions between LVMH and NGG about the license for many months now,” one of the sources said, adding that the person leading the talks on the LVMH side was Michael Burke. The 66-year-old executive, who ran Louis Vuitton for a decade, is one of the closest lieutenants of LVMH CEO Bernard Arnault. Burke had a good understanding with Abloh. Burke was the one who appointed him as creative director of Louis Vuitton menswear. He has been involved with many of the tributes paid to Abloh since he passed away two years ago. Burke did not reply to several requests for comment.

Burke is expected to become head of LVMH’s Fashion Group, the unit that includes brands such as Celine and Givenchy. If LVMH acquires the license and owns the whole of Off-White, it is likely that the brand will come under Burke’s supervision and join the Fashion Group.

Some industry sources say you cannot blame Farfetch for underinvesting in Off-White. It has had little incentive to do so since it is likely to lose the license in just over two years. On the other hand, LVMH is worried that if it waits until the end of 2024, Off-White’s image and brand equity will have suffered so much that it may not be worth investing to help it take off again. In January 2026, LVMH “will get a dead body if it waits that long,” one person close to the talks told Miss Tweed on condition of anonymity.

CULTURAL SIGNIFICANCE
Therefore, the question is: how motivated is LVMH to fully own Off-White? The brand has been regarded as one of the most disruptive voices in fashion this past decade with a distinct coolness and authentic message of inclusivity. But what is its growth potential without its star designer and founder? Can it really reach the goal it set in 2020 of €1 billion in revenues by 2030? Abloh died of a rare form of cancer in November 2021 at the age of 41, leaving behind his beloved wife Shannon, with whom he was close since high school, and two small children.

“Abloh was the voice of Off-White and had cultural significance,” one industry insider said. “He could also connect with people and consumers in ways no one could.” Abloh has often been compared to the late Karl Lagerfeld in how prolific he was in coming up with original and striking designs for everything – not only fashion but in other areas as well such as music, electronics, homeware and sports goods. He had a strong point of view and was truly connected with the times, critics say. His creations stood out in their freshness and brightness.

To replace Abloh, Off-White appointed Ibrahim Kamara as the brand’s new art and image director. Under him, the brand’s story will no doubt be different, fashion experts say, and it will take time to spread and be adopted. If Abloh was into baggy and oversize proportions, Kamara has produced closer-to-body silhouettes with quite a bit of tailoring, and a few asymmetric skirts at his last show in Paris in March. However, he preserved the brand’s utilitarian inspiration with an emphasis on buckles and removable harnesses. There were lots of all-black looks ornamented with rows of tiny metallic circles around perforations. Kamara has also focused on a bright blue shade he wants to make synonymous with Off-White.
“Off-White is a very innovative brand in its thinking,” Kamara, 33, told journalists at the Paris show in March, WWD reported. “We’re experimenting, we’re still developing our own codes.”

Born in Sierra Leone and raised in Gambia, Kamara moved to London when he was 16 and graduated from the prestigious Central Saint Martins fashion school. Before joining Off-White, the designer worked with Abloh while he was at Louis Vuitton.

In 2021, Kamara was appointed editor-in-chief of Dazed magazine and previously consulted for many brands including Chanel, Burberry and Marc Jacobs. His shows have been getting positive reviews and his efforts at staying true to the brand’s disruptive free spirit have been applauded by critics. However, the brand has lost momentum in recent months, not only because of underinvestment but also due to consumers’ fading appetite for luxury streetwear in the current inflationary environment. Off-White’s “Out of Office” calf leather sneakers cost €475 and “Jitney” leather bags cost €1,490. When Abloh was alive and was a world superstar, the brand could get away with such prices. It continued to enjoy growth in 2022 as people bought legacy products, the last designed by Abloh. But can it justify such prices now that he is no longer there?

ABLOH’S BRAIN
Hence, it’s not entirely clear if getting the license back is worth the trouble for LVMH. Originally, the group was interested in Abloh, the man and his brain, not the Off-White brand. LVMH bought a 30 percent stake in the IP of Off-White when Abloh started working as creative director for Louis Vuitton menswear in 2018. It raised that holding to 60 percent in July 2021, four months before the designer passed away. Last year, LVMH bought the remaining 40 percent from Abloh’s wife, Shannon. Now LVMH owns 100 percent of the brand’s IP.

Originally, Arnault was keen to invest in Abloh’s brand to use him as an internal creative consultant for the group and get him involved in all sorts of projects. “Additionally, LVMH and Mr. Abloh have agreed to another arrangement to join forces,” the French group said when it announced in 2021 that it owned 60 percent of the brand. “It will leverage together the group’s expertise to launch new brands and partner with existing ones in a variety of sectors beyond the realm of fashion.”
LVMH has developed a habit of buying stakes in the brands of the designers it hires. When Jonathan Anderson became creative director of the group’s Spanish luxury brand Loewe in 2013, the group took a minority stake in his J.W. Anderson brand, which is based in London.

COLLABORATIONS
Off-White is the master of collaborations. It has done more than 100 of them over the past decade and some have been hugely successful, such as its work with U.S. sportwear brand Nike. Last month, Off-White produced a special capsule for Mattel’s Monster High dolls. The collection featured four dolls dressed in edgy Off-White looks. In January this year, it did one with the Chicago Bulls basketball team. It was a tribute to Abloh’s love of basketball and to his home city.

When Farfetch acquired New Guards Group, the deal gave the company an enterprise value of $675 million. The idea was to leverage Farfetch’s marketplace and sell NGG’s brands online. NGG has the license to manufacture and distribute nine fashion brands including Off-White, Palm Angels, Heron Preston and Opening Ceremony. It owns a controlling stake in all of them except Off-White – which is the crown asset, generating around €300 million in sales. NGG has some 70 boutiques and more than 300 points of sale. It pays a royalty of around 10 percent to LVMH on the sales Off-White, industry sources estimate.

Last year, Off-White’s underlying profitability, or Ebitda, was around €100 million. Several industry sources estimate that it would cost around €200 million for LVMH to secure the license earlier than planned, if a deal was concluded in the near future. However, that’s far from certain, several industry sources said. The situation is complex.

First, relations between LVMH and Farfetch have never been particularly cordial, even before this Off-White affair. The group has always refused to let its flagship Dior and Louis Vuitton sell handbags or ready-to-wear on Farfetch’s marketplace, and negotiations between Arnault and Farfetch CEO José Neves have been tough in the past regarding e-concessions on the company’s platform, sources close to the company say.

For Farfetch, NGG without Off-White does not have quite the same aura and weight on the fashion market. That being said, industry sources say Palm Angels has been growing fast and could eventually catch up with Off-White in terms of size.

NGG’s total revenues last year reached more than €620 million. In 2019, many investors and analysts criticized Farfetch for buying NGG, but it turned out that this was actually the only unit generating profits within the company. This year, NGG’s overall sales are forecast to be lower due to the current downturn.

When Richemont publishes results on Friday this week, investors expect the Swiss group to clarify its intentions vis-à-vis Farfetch. Meanwhile, LVMH will be maneuvering to avoid having to “White Off” its investment in the luxury streetwear brand.

WSJ : LVMH to Buy Eyewear Brand Favored by the Stars

WSJ : LVMH to Buy Eyewear Brand Favored by the Stars
Deal for Barton Perreira comes as luxury giant uses glasses to tap aspiring high-end shoppers

PARIS—LVMH Moët Hennessy Louis Vuitton LVMUY 1.01%increase; green up pointing triangle has agreed to buy Los Angeles-based eyewear maker Barton Perreira, part of the luxury conglomerate’s push to extend its reach to goods with mass-market appeal.

Eyewear has emerged in recent years as one of the first purchases that aspiring luxury consumers make before moving on to more expensive items such as handbags. That is prompting LVMH and other luxury-goods companies to wean themselves off licensing agreements with third-party manufacturers and develop in-house eyewear operations.

LVMH’s purchase of Barton Perreira—valued at roughly $80 million, according to people familiar with the deal—adds a renowned frame maker to the French company’s burgeoning eyewear division.

Barton Perreira has built up a devoted following in the U.S. in recent years, with A-listers including Sandra Bullock, Demi Lovato and Ryan Gosling spotted wearing its eyeglasses. The label, whose frames are manufactured in Japan, operates stores in New York; Aspen, Colo.; Kansas City, Mo., and Bozeman, Mont.

The brand was founded in 2007 by Bill Barton and Patty Perreira, who had previously worked together for Oliver Peoples before that brand was acquired by Oakley. They will both stay on at the company, whose glasses sell for hundreds of dollars a pair.

LVMH plans to expand the brand outside the U.S. by selling its glasses in high-end stores it already works with throughout Europe and Asia. It also plans to open a number of stand-alone Barton Perreira stores, initially in Europe.

“The brand is well-known and well-established in the U.S., but we see massive opportunity to expand it,” said Alessandro Zanardo, who runs LVMH’s eyewear division, Thélios.

Luxury groups have been moving into eyewear, beauty products and fragrances as a means to attract a new group of younger consumers who might not have the means to purchase a handbag or a watch but could do so in the future.

The eyewear industry is also changing, with some consumers buying glasses more frequently in line with fashion trends.

“More and more, it follows the logic of fashion for consumers,” Zanardo said.

The eyewear market is expected to reach $246.47 billion by 2030, up from $161.61 billion in 2023, according to research firm Fortune Business Insights.

Thélios creates and distributes frames for Dior, Fendi and Givenchy, among other LVMH brands. It has doubled its sales over the past two years, driven by buying up the licenses for more LVMH brands as well as expanding into new markets.

LVMH created Thélios in 2017 to move away from the traditional model in the luxury industry, whereby brands would license out their names to specialist manufacturers to design frames and produce glasses.

Bringing eyewear operations in-house has allowed LVMH to capture a greater share of the profit from the products and given the company greater control over quality, distribution and marketing.

Previously, a brand’s selection of eyewear had only a small connection to the rest of its offering, Zanardo said. Now, each brand’s aesthetic is more closely linked to its eyewear products.

“We’ve tried to control this value chain so that we go from the maison right up to the final consumer in a very consistent way. All the dots are together,” Zanardo said.

Aside from buying up licenses for LVMH brands including Céline, Stella McCartney and Fendi, Thélios has also sought to expand through deals. In September, it said it would buy French high-end sunglasses brand Vuarnet for an undisclosed sum.

The eyewear unit has also expanded its manufacturing capabilities. Last week, it bought an Italian factory located close to its roughly 200,000-square-foot plant, which it inaugurated in 2018. It also owns a metalworking atelier nearby.

Zanardo said that luxury brands in the past hadn’t always given eyewear sufficient attention and that some consumers perceived their glasses as simply a logo slapped onto a piece of plastic.

“The goal is to really dignify eyewear into the sphere of luxury,” Zanardo said.

WSJ : The Final Push for a Sub-Two Hour Marathon Is Here

The Final Push for a Sub-Two Hour Marathon Is Here
The new men’s marathon world record of 2:00:35 set in Chicago shows that super shoes and training advances have athletes closer than ever to breaking a once-unthinkable barrier

Kelvin Kiptum lowered the men’s marathon world record by a whopping 34 seconds at the Chicago Marathon in early October. It’s the next 36 seconds, however, that loom larger in the sport as it chases a historic milestone: a sub-two hour marathon.

The two-hour mark is to the marathon what a four-minute mile was before Roger Bannister broke the barrier in 1954. Both milestones are arbitrary—they possess the allure of a nice round number—yet the pursuit of them has propelled athletes to change their approach to running.

Several factors have aligned to bring marathoners to the verge of a 1:59:59 result. Revolutionary “super shoes” introduced in recent years were a massive element in shaving big chunks of time off the men’s marathon world record, which a decade ago was still at 2:03:23. Now, runners like the 23-year-old Kiptum, are adapting their training to the shoe and finding even greater success through unconventional approaches. Nutrition advances have propelled further incremental gains.

One big aspect is simply the perception that breaking two hours in a race is even possible. The idea that it was impossible—or far off in the future—was shattered when Eliud Kipchoge ran 1:59:40 in a stunt race on a closed course in Vienna back in October 2019. The event wasn’t a sanctioned race, and the Kenyan great was propelled by dozens of rotating pacers.

The effort culminated years of research and thousands of dollars of investment by Jos Hermens, the Dutchman who founded the sports agency that represents Kipchoge and the NN Running Team with which he trains.

“After the 1:59, more people psychologically were ready to run faster,” said Hermens. “But of course, then there was a year of no marathons.”

Indeed, the two-hour mark might already have been breached had the pandemic not disrupted athletes’ training and wiped the calendar clean of races. Hermens estimated that it set the sport back “two to three years.”

It was the technological advance of chunky “super shoes” that laid the foundation for the recent surge in performance. Nike introduced its first such shoe, which pairs a highly cushioned sole with a springy carbon-fiber plate that propels its wearer forward, in 2016. Seven years later, you’ll find super shoes on the feet of every elite athlete and thousands of amateurs.

“We have had a complete recalibration of the sport,” Kara Goucher, a two-time Olympian, wrote in an email. “A woman running sub 2:12 or a man running sub 2 hours was thought impossible in 2015—and it probably was. But with the advancement of shoe technology it has completely changed the game.”

At first worn only for races, super shoes have also become the preferred trainers during hard sessions on the roads for most professionals because they improve running economy and make it easier to recover, coaches say.

This isn’t to say athletes always wear carbon-plated shoes—most say they still do their easy runs in regular trainers. But super shoes are undeniably on heavier rotation. Hellen Obiri, the 2023 Boston Marathon winner, said that she wears On Running’s super shoe during her long runs. Kipchoge does most of his workouts with marathon-pace efforts in carbon-plated shoes too, said Hermens.

Debut marathoner Ed Cheserek, a 17-time NCAA running champion who trained with Kiptum in Kenya over the summer, said that he wears various models of Skechers GOrun Speed Elite carbon-plated shoes during workouts. “They’re so much lighter,” he said, adding that they’ve made it easier for him to increase his weekly volume to a peak of about 150 miles.

Super shoes also mean that athletes can race more often. Kiptum set the world record in his third marathon in a 11-month period. Sifan Hassan raced the 1,500-, 5,000- and 10,000-meters at World Championships in Budapest six weeks before turning in a 2:13:44 to win in Chicago, the second fastest women’s marathon in history.

Both Kiptum and Hassan raced Chicago in prototypes of Nike’s Alphafly 3, its latest super shoe model that will be available to the public in January 2024.

“You can see how the athletes are after the finish. They’re more fresh,” Hermens said. “When Haile Gebrselassie broke the world record [in 2008] we nearly had to push him onto the podium. Now they jump on the podium.”

Around the same time that shoe technology rocketed forward, food scientists made a breakthrough that allowed athletes to optimize their carbohydrate intake during races. Runners need fuel to keep from fading hard, but guzzling sugary gels and liquids can cause gastrointestinal distress and costly mid-race port-a-potty stops.

Maurten, a Swedish sports nutrition company, seemingly solved that problem in 2015 when it introduced hydrogel, a carbohydrate-rich substance that doesn’t dissolve until it passes through the stomach and enters the intestine. Available as a powder that can be added to water or a thick gel with the consistency of clumpy Jell-O, it’s the preferred fuel of many elites, including Kipchoge and Kiptum.

There’s also been a shift in conventional wisdom around when and how to get into marathoning. For decades, most pro runners started out racing shorter distances, like the 5- and 10-kilometers, and gradually built up to half and full marathons in their late-20s and early 30s. That’s what Kipchoge did on his path to a world record.

There were two reasons: maturity and money. Running 26.2 miles fast—and training to do so—is physically and mentally grueling. The thinking is that “the faster you run at shorter distances, the easier the pace is at longer effort,” said professional marathoner-turned-agent Josh Cox.

Appearance fees for track meets also used to be higher than for marathons. But marathon organizers have upped their purses and athletes are following the money. Kiptum’s first race as a professional was a half marathon at age 18. He ran his first marathon in December 2022, two days after turning 23.

Tigst Assefa, the woman who shattered the world record by more than two minutes with a 2:11:53 in Berlin in September, specialized in the 800 meters as a teenager, representing Ethiopia at the 2016 Rio de Janeiro Olympics. Nagging injuries prompted her to shift to longer road races in her early 20s. At 25 in 2022, she ran her first marathon and then won her second in Berlin.

To be sure, the two-hour barrier is unlikely to be broken at this weekend’s New York City Marathon due to the hilly terrain along the route. The course record of 2:05:06 set in 2011 has survived the dawn of the super shoe era and none of the professionals racing have run within three minutes of Kiptum’s world record.

Hermens believes the first sub-2:00 marathon will happen in 2025 because of how the 2024 Paris Olympics will impact top athletes’ training priorities. Kipchoge has said he wants to win a third consecutive gold medal in the Olympic marathon, but the hilly Parisian course isn’t conducive to record-breaking times.

It’s a sign of all the things that must align—what Cox refers to as “the Three C’s: the course, the competition and the conditions”—for records to break.

“It’s definitely possible in the years to come,” said Cox.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary:For years, laptops and desktops were the bread and butter of the tech sector

Cover:
-For years, laptops and desktops were the bread and butter of the tech sector, and demand was even able to withstand the pressure from smartphones. The pandemic in 2020 caused PC sales to increase by some 25%. But by 2022, as the pandemic restrictions were lifted, PC sales were falling once again. This time, PC makers like Dell Technologies, HP and Lenovo Group are taking a different approach to rev up sales: The PC business is going all in on artificial intelligence.

Interview:
-Barron’s spoke to Charles Kantor, a senior portfolio manager at Neuberger Berman and a manager of the Neuberger Berman Long Short fund. Kantor explained that the principle of the fund is that “you make more by losing less. We are trying to make money while protecting the downside to drive attractive, risk-adjusted returns. But underpinning all of that is a belief in fundamental research—and we think we’re in an environment where doing fundamental research should make a difference.”

Tech Trader:
-Apple reported fiscal fourth quarter results that were even better than Wall Street estimates. Nevertheless, the results failed to impress investors as they made it clear that the quarterly report suggested that for all of the results, the company has stopped growing. The growth, or lack thereof, problem was highlighted in the revenues. They were $89.5 billion, down 1% from the year-ago period, marking a fourth consecutive quarterly decline.
-Rate cuts tend to come when the economy is under threat, thus defensive sectors tend to perform the best over those stretches. Communications services companies such as AT&T and Verizon Communications—as well as those in healthcare, utilities, and consumer staples, tend to thrive in relative terms because people need their products even when times are harder.

The Trader:
-Meta Platforms is the top tech stock now according to Barron’s. Technology stocks have gotten hit—but not all of them equally. Higher profits had pushed the tech sector in the first months of 2023, but the third-quarter earnings results were weaker than anyone expected – such as Alphabet,
which is down about 6% since it reported better-than-expected earnings on Oct. 24 after gaining 50% to start the year. The Technology Select Sector ETF has lost about 8% from its record high hit in late July.
Yet, META has withstood the pressure and the stock has lost a mere 0.1% since earnings.
-While market volatility has fallen, the shares of companies reporting earnings have been moving in allay directions. Roku, Shopify, and Palantir Technologies gained more than 20% after their reports, while Paycom Software, ON Semiconductor, and Estée Lauder (EL) dropped 19% or more. Even if the numbers were not bad, even good, the problem for stocks is that the S&P 500 is already up double digits for the year, reflecting these profits, and investors are always looking to the future.

Features:
-A mere six months ago Chevron was Wall Street’s favorite big energy company. Now, Chevron stock has fallen 17% in 2023, making it the worst performer by far among the half-dozen global super majors this year. Exxon Mobil., rather, dropped a mere 2% over the whole year so far. Most of Chevron’s drop has come during the past few weeks after an unsatisfactory earnings report that included news of a surprise delay in the development of a key oil field in Kazakhstan, while Chevron’s $60B deal to buy Hess failed to excite investors but was seen as a sign of weakness by some.
-Thanks to the yield on the 10-year Treasury sliding on Friday, it’s likely mortgage rates will also fall, pleasing buyers and home building investors alike. The 10-year Treasury yield, with which mortgage rates often move, fell Friday morning after October’s Labor Department jobs data came in cooler than expected. The drop in the yield continues a slump that started earlier this week. At 4.510%, it’s the lowest since Sept. 22, according to Dow Jones Market Data.

Europe:
-The Bank of England decided to follow the lead of the Federal Reserve and the European Central Bank, keeping interest rates unchanged. Like the Fed, the BOE is trying to keep inflation in check. But, its efforts so far have failed to bring inflation within the target despite a series of rate hikes. Between December 2021 and August 2023, the BoE lifted borrowing costs to bring the benchmark to a 15-year high of 5.25%. Now, officials say they are taking a more cautious approach as they evaluate the effects of previous hikes.

Emerging Markets:
No updates this week

Commodities:
-The electric vehicle industry has slowed down and “no one immune from this downcycle,” according to Evercore ISI analyst Stephen Richardson. Meanwhile, lithium miner Albemarle reported third-quarter earnings per share (EPS) of $2.74 from revenues of $2.3B on November 1. That’s far lower than the $3.77 and $2.5 billion, respectively that Wall Street had expected. Consider that a year ago, Albemarle reported EPS of $7.50 from sales of $2B. Thus it’s clear that lithium is losing its luster.

Streetwise:
-Walt Disney could use some ideas for solving its ESPN problem, says Jack Hough. It won’t be easy even with television guru Bob Iger backin the captain’s chair at Disney. The company is evaluating the possibility of bringing in a new partner for ESPN. And to understand the importance of ESPN, consider that ESPN could contribute between 20% and 25% of Disney’s total segment operating income for its fiscal year ended September, and nearly all of its media and entertainment income. Indeed, “sports are easily the best-performing part of traditional TV, and ESPN bills itself, justifiably, as The Worldwide Leader in Sports.” ESPN holds an unparalleled set of sports TV rights. Its operating income this fiscal year could total $2.8 billion—not the worst starting point for a crisis.

WSJ : Where Are Commodities Prices Headed?

Where Are Commodities Prices Headed?
China’s economy, war in the Middle East and a predicted El Niño are among the factors experts are looking at

Individuals investing in commodities haven’t had a smooth ride over the past few years.

U.S. crude-oil futures briefly turned negative during the height of the pandemic in 2020 before rebounding to more than $82 a barrel recently. World food prices reached their highest level on record last year, in part as the Russia-Ukraine war spooked markets, but have fallen back more recently. And commodities from lumber to copper rode high and then fell, as global inflationary pressures and recession concerns drove trading.

So what happens next?

We asked experts what to expect over the next six to nine months. Here is what they said.

Agriculture
Russia’s invasion of Ukraine last year sent the price of key grains soaring as investors worried that supplies from the two countries—which before the recent war supplied roughly 30% of wheat exports—would be interrupted.

Wheat hit a record price of $12.25 a bushel in the aftermath of the February 2022 invasion, though the price has subsequently fallen, recently fetching $5.61, according to FactSet data. Corn also jumped during the early months of the war to $8.18 a bushel, close to the record of $8.31 in 2012. It recently traded at $4.75. Prices have fallen back amid recession concerns and because war-related supply problems haven’t been as bad as expected.

But some strategists predict the downturn could end soon because prices are nearing the production break-even, or the level at which the cost of production equals the revenue for a product. That means if prices fall further, producers will lose money.

“I don’t know how much more they can drop, given energy prices rising,” says Jake Hanley, a senior portfolio strategist at Vermont-based Teucrium, a provider of agricultural exchange-traded funds. Diesel fuel, for instance, is a key cost for farmers in the U.S. and abroad, and it puts a floor under prices unless energy prices retreat.

Hanley says the war in Ukraine could still lead to supply disruptions and higher prices in the grain sector. Currently, both sides are letting grain shipments pass through the Black Sea without hindrance, though that could change. “The worst-case scenario is no grain leaving the Black Sea,” he says.

Another factor that could raise agricultural prices, Hanley says, is the expected return of the warm, damp Pacific Ocean weather system known as El Niño. Because it tends to disrupt normal weather patterns, El Niño could lead to smaller harvests in different parts of the world. “The risk to these prices is more substantial to the upside,” Hanley says.

What’s more, forecasters predict a Modoki El Niño—a type of El Niño event where the warming occurs in the central equatorial Pacific region instead of the eastern equatorial region. In 2015, a Modoki El Niño event cut corn production in Brazil—the world’s third-largest corn producer—by about one-fifth as drier-than-usual weather hit a key growing area. Shawn Hackett, president of Hackett Financial Advisors in Boca Raton, Fla., says the Modoki El Niño system is likely to change the weather patterns in Brazil again, which could affect corn and soybean production.

Individuals seeking to profit from potential gains in commodities might be better off investing in specialized ETFs rather than futures contracts, Hackett says.

“Futures contracts are highly risky for individual investors,” he says, partly because they tend to be for vast volumes of each commodity. For instance, wheat futures contracts are traded in 5,000 bushel units, which would mean a minimum contract size of $28,050 based on the recent price.

By contrast, ETF investments can be small, large or anywhere in between, depending on the requirements of the investor.

Crude oil
Anyone with a gasoline-powered car or truck knows that oil prices have risen. A barrel of U.S. benchmark crude oil recently cost $82, up from $67 in March. But prices could easily go higher, analysts say.

Part of the recent increase is due to voluntary production cuts from both Saudi Arabia and Russia, two of the largest oil producers. “Those cuts are putting a lot of wind in the sails of the oil market,” says Stewart Glickman, an energy-stock analyst at New York financial-research company CFRA.

Another upside risk: If the recent conflict between Israel and Hamas spreads into the wider Middle East region, it could disrupt oil supplies and drive up prices. Even fear of that happening could do the same thing.

In addition, global demand for oil looks set to stay stable or grow in the immediate future. “American fuel consumption isn’t likely to change even if there is a delayed recession, as employment is high,” says Peter McNally, global head of sector analysts at London investment researcher Third Bridge. High employment means people will be driving to work.

An increase in electric-powered vehicles and hybrid cars might make a small difference in terms of reducing oil consumption, but such vehicles are still a fraction of the overall cars on the road globally—around 2%, according to data from Australia-based PD Insurance and the International Energy Agency. “It’s going to take a while before EVs or hybrids materially crimp oil consumption,” Glickman says.

China, which has struggled economically in recent quarters, presents another possible demand driver, according to Glickman. Expectations for China’s potential growth trajectory are so low, even a mildly better-than-expected increase in energy demand from that country could lift oil prices, he says.

Glickman sees crude prices averaging between $95 and $100 in the near future.

Mined resources
China also has been the driving force behind much of the demand for industrial metals such as copper, aluminum, lithium, steel, nickel and zinc over the past two decades, so the recent weakness in China’s economy explains why prices for these metals have slumped lately. Such metals are used in manufacturing, notably automobiles, as well as in construction.

Copper, for example, recently fetched $3.66 a pound, down from $4.27 in late January as Chinese demand fell.

Should China’s economy show signs of a rebound, industrial-metals prices likely would move higher, experts say. A rebound would depend largely on the government providing an economic stimulus, says Rob Haworth, senior investment strategy director at U.S. Bank’s asset-management group in Seattle.

There is another reason to expect an increase in industrial-metals prices, though: The electric-vehicle revolution will need lots of materials. An electric-car battery, for example, uses up to four times as much copper as a gasoline-powered vehicle. More broadly, the route to clean energy requires vast quantities of mined materials.

FT : Warren Buffett’s Berkshire cuts stocks for fourth straight quarter

Warren Buffett’s Berkshire cuts stocks for fourth straight quarter
Conglomerate’s cash pile swells to record $157bn as investor struggles to find appealing alternatives

Warren Buffett’s Berkshire Hathaway continued to sell off stakes in publicly traded companies, shedding more than $5bn of exposure to US and foreign stocks in the third quarter as the firm struggled to find appealing investments in a volatile market.

The sales mean the sprawling conglomerate has sold stocks for four straight quarters, with divestments approaching $40bn. It has cut positions in companies such as oil major Chevron, automaker General Motors and insurer Marsh & McLennan.

The value of Berkshire’s stock portfolio shrank to $319bn from $353bn at the end of June, a decline fuelled by the slide in the broader market as investors came to believe that the Federal Reserve would keep interest rates higher for longer.

That has weighed on the valuations of publicly traded companies and prompted some portfolio managers to search for better returns in fixed income markets.

Buffett’s investment shifts are closely followed by fund managers and the wider public for clues as to where the 93-year-old investor sees attractive returns.

He directed the proceeds of those stock sales, as well as the cash flows Berkshire’s many businesses generated, into cash and Treasury bills. The company’s cash pile surged nearly $10bn to a record $157.2bn at the end of September, a sum that gives it formidable firepower for acquisitions.


Berkshire has been one of the big beneficiaries of rising interest rates, which in the US climbed above 5 per cent this year. The company disclosed that the interest income it was earning on its insurance investments climbed to $1.7bn in the quarter, lifting the sum to $5.1bn over the past 12 months. That eclipsed the total interest Berkshire earned on its cash reserves in the preceding three years combined.

Buffett disclosed that the company repurchased $1.1bn worth of Berkshire stock in the quarter, down from the $1.4bn it spent in the second quarter.

The company’s operating businesses, which span the BNSF railroad, Geico insurer and aircraft parts maker Precision Castparts, reported a 41 per cent rise in profits to $10.8bn during the quarter. The gains were fuelled by its insurance unit, which reported strong underwriting profits of $2.4bn, offsetting weakness at BNSF and its large utility business.

Ajit Jain, a Berkshire vice-chair who oversees its insurance operations, told shareholders in May that the company had wagered heavily on the Florida insurance market and had written policies in the hurricane-prone state.

It was a risky bet that Jain estimated could cost Berkshire as much as $15bn if the state was hit by powerful storms. But this year, the state experienced a relatively tame season.

Berkshire on Saturday reported that significant catastrophe losses — individual insurance losses that top $150mn — had only reached $590mn in the first nine months of the year. That figure is down from $3.9bn in the same period last year, when Hurricane Ian pummelled Florida.

“While the margins have been healthy, we have a very unbalanced portfolio,” Jain said at the annual meeting. “What that means is if there’s a big hurricane in Florida, we will have a very substantial loss.”

He estimated in May that Berkshire could register a profit of $7bn if hurricane season ended without a big storm.

The company’s overall results were dragged down by declines in the value of its stock portfolio, which it must account for in its profit statement. Berkshire said it registered a net loss of $12.8bn, or $8,824 per class A share, compared with a $2.8bn net loss a year before.

Buffett has long characterised the net earnings figures as meaningless, saying the figures can be “extremely misleading to investors who have little or no knowledge of accounting rules”.

Shares of the company have climbed 13.9 per cent this year, below the 15.1 per cent total return of the S&P 500 stock index.

TechCrunch : Musk says X subscribers will get early access to xAI’s chatbot, Gro

Musk says X subscribers will get early access to xAI’s chatbot, Grok

Elon Musk’s AI startup, xAI, is creating its own version of ChatGPT.

That appears to be the case, at least, from Musk’s tweets on X late Friday evening teasing the AI model xAI has been quietly developing. Called Grok — a name xAI trademarked recently — the model answers questions conversationally, possibly drawing on a knowledge base similar to that used to train ChatGPT and other comparable text-generating models (e.g. Meta’s Llama 2).

Grok leverages “real-time access” to info on X, Musk said. And, like ChatGPT, the model has internet browsing capabilities, enabling it to search the web for up-to-date information about specific topics.

Well, most topics.

Musk implied Grok will refuse to answer certain queries of a more sensitive nature, like “Tell me how to make cocaine, step by step.” Judging by a screenshot, the model answers that particular question a bit more wryly than ChatGPT; it’s not clear if it’s a canned answer or if the system is, in fact — as Musk asserts in a tweet — “designed to have a little more humor in its responses.”
Early Friday, Musk said that xAI would release its first AI model — presumably Grok — to a “select group” on Saturday, November 4. But in a follow-up tweet tonight, Musk said all subscribers to X’s recently launched Premium Plus plan, which costs $16 per month for ad-free access to X, will get access to Grok “once it’s out of early beta.”
Little’s known about Grok so far — or xAI’s broader research projects, for that matter.

In September, Oracle co-founder Larry Ellison, a self-described close friend of Musk, said that xAI had signed a contract to train its AI models on Oracle’s cloud. But xAI itself hasn’t revealed anything about those AI models’ inner workings — or, indeed, what sorts of tasks they can accomplish.

Musk announced the launch of xAI in July with the ambitious goal of building AI to “understand the true nature of the universe.” The company, led by Musk and veterans of DeepMind, OpenAI, Google Research, Microsoft Research, Tesla and the University of Toronto, is advised by Dan Hendrycks, the director at the Center for AI Safety, an AI research nonprofit, and collaborates with X and other companies in Musk’s stead, including Tesla.

In an interview with Tucker Carlson in April, Musk said that he wanted to build what he referred to as a “maximum-truth-seeking AI.” Is Grok this AI? Perhaps — or it’s a step toward something even bigger.

“In some important respects, it (xAI’s new model) is the best that currently exists,” Musk was quoted as saying in a tweet Friday afternoon.

Musk’s AI ambitions have grown since the billionaire’s split with ChatGPT developer OpenAI co-founders Sam Altman and Ilya Sutskever several years ago. As OpenAI’s focus shifted from open source research to primarily commercial projects, Musk grew disillusioned — and competitive — with the company on whose board he sat. Musk resigned from the OpenAI board in 2018, more recently cutting off the company’s access to X data after arguing that OpenAI wasn’t paying enough for the privilege.