FT : Satellites/insurance: space junk funk

Satellites/insurance: space junk funk
Constellations of satellites in low-earth orbit increase collision risks

The more satellites there are flying around in low-earth orbit, the more likely they are to collide, fragment and spawn an escalating series of collisions. The space industry and its regulators need to disprove that theory — known as the Kessler Effect — to keep insurance costs down and investment plentiful.

Space is certainly getting busier. The number of working and defunct satellites within low-earth orbit has increased by half in the past two years. Starlink, the satellite broadband network planned by Elon Musk’s SpaceX, already has permission for 30,000 satellites.

That is more than the total number of orbiting objects currently being tracked by US authorities. Much of the latter is debris left over from decades of space exploration.


Space junk poses a serious risk to satellites but collisions of the kind shown in the sci-fi movie Gravity have so far been rare. The most severe crash on record was that of active communications satellite Iridium 33 with the derelict Russian military satellite Kosmos-2251 in 2009. The increase in debris can be seen on the chart above. The bigger jump resulted from China testing an anti-satellite missile in 2007. 

Constellations of satellites in low-earth orbit increase collision risks. Once fully deployed, Starlink might be “deorbiting” about 300 out-of-date satellites at any time.


Untracked debris poses the biggest unknown. Researchers put the chances of a single piece of junk hitting one of Starlink’s satellites in the 550km orbit at 0.3 per cent annually. That risk rises exponentially with the number of objects. Fortunately, most untracked debris is small and advances in tracking are bringing more of it on the radar and out of the way of satellites.

For the moment, failed launches are the biggest danger for space companies of the kind set up by Musk and rival tycoons Jeff Bezos and Richard Branson. UK-backed satellite company OneWeb recently announced it had arranged $1bn of insurance cover with broker Marsh to help mitigate this risk.

Total satellite insurance exposure remains relatively modest at just $25bn of which $4bn covers satellites in low-earth orbit, thinks David Wade at underwriter Atrium. Expect that total to rise, even as countries increase co-operation to stop the Kessler Effect becoming a reality.

FT : O’Leary says Wizz Air and easyJet must merge or be taken over

O’Leary says Wizz Air and easyJet must merge or be taken over
Ryanair boss sees airline sector as ripe for consolidation after being hit hard by the pandemic

Ryanair boss Michael O’Leary believes rivals Wizz Air and easyJet will need to merge or be taken out by other carriers as the airline industry consolidates following the pandemic. 

EasyJet revealed on Thursday it had rebuffed a takeover approach from an unnamed suitor, which a person familiar with the talks confirmed was Wizz Air.

The approach is the first sign of dealmaking in a European industry that has suffered 18 months of disruption and long been seen as ripe for consolidation.

“Both easyJet and Wizz will either need to be taken out or . . . coalesce together,” O’Leary told the Financial Times.

He suggested that large flag carriers such as the British Airways owner IAG, Lufthansa or Air France could eventually try to buy rival airlines, be they low-cost rival or smaller network airlines.

“Consolidation needs to happen and will happen. It’s an inevitability, particularly coming out of Covid,” he added. 

Consolidation needs to happen and will happen. It’s an inevitability, particularly coming out of Covid

Michael O’Leary
O’Leary believes that airlines need huge scale to survive, and that the fragmented European market is unsustainable in the long-term.

Many European governments have been unwilling to lose their national airlines and — to O’Leary’s horror — unveiled sweeping aid to help their struggling carriers survive the impact of the pandemic.

Following the interest in his airline, easyJet’s chief executive Johan Lundgren also said the pandemic could drive industry tie-ups in Europe. “I think that everybody would agree that when you go through situations like this, that there are consolidation plays happening,” he said on Thursday.

For O’Leary, a combination between Wizz and easyJet would make sense given they both run all-Airbus fleets and work in largely separate geographies.

A play for easyJet would have given ambitious Wizz an immediate large footprint in western Europe, a region it is slowly moving into after growing through its home market of eastern Europe over the past 15 years.

But, like Ryanair, it has built a formidable operating model by keeping its own operating costs very low. A tie-up with easyJet would bring with it higher costs and the need to operate from more expensive airports.

“The question would be, would Wizz improve easyJet’s costs, or will easyJet’s costs destroy Wizz’s cost base,” O’Leary said. 

Ryanair was not interested in M&A at the moment, O’Leary said, because he feared this would disrupt his airline’s fearsomely efficient business model.

Still, he revealed that he made multiple attempts to buy Wizz Air from its founding American investor Bill Franke in the years before it listed in London in 2015. “I tried to buy Wizz three or four times off him, but we could never agree a price,” he said. 

He said he was no longer interested given Wizz’s market capitalisation of about £5.5bn. 

Ryanair has more than 200 aircraft on order to help it grow over the next decade, but this week talks with Boeing about a further order for larger Max-10 aircraft collapsed after the two sides could not agree a price. 

O’Leary, who is known within the industry for going public with his negotiations with suppliers, said he was ready to wait a decade for the next crisis before he returned to the table. He said he would “happily play ball” with Airbus if it came in with an offer 5 to 10 per cent cheaper than Boeing. “I am an accountant,” he said. 

Wizz Air and easyJet declined to comment.

(ZH) "Physical Demand Will Completely Overwhelm Supply" And How Silver Could Win

"Physical Demand Will Completely Overwhelm Supply" And How Silver Could Wind Up Over $270

(Submitted by Quoth the Raven from QTR's "Fringe Finance" at http://quoththeraven.substack.com)
This is Part 1 of a two-part interview with Andy Schectman, President & Owner of Miles Franklin Precious Metals, a company that has done more than $5 billion in sales. Andy is a world-renowned expert in the field of precious metals and took the time to answer some pressing questions I had about the possibility of a real silver squeeze, the precious metals market, the Fed, and the future of money worldwide. He has been a frequent guest on my podcast, as well.

Q: Hi Andy, thanks for joining me. Is a silver squeeze really even possible given the massive size of the silver market? In layman's terms, how could it happen?
A: More silver is being consumed than is being mined each year. Last year, approximately 850 million ounces were mined globally, with a demand of over one billion ounces. The industrial demand for silver is surging in an increasingly digital world, with new applications every day in green energy and battery powered vehicles.
At the same time annual global mine supply is declining and industrial demand is increasing, a global renaissance in monetary demand is upon us. This is happening while a handful of large Wall Street bullion banks have manipulated the price of monetary metals for decades, allowing some of the biggest money in the world to accumulate massive amounts of physical gold and silver at subsidized prices.
The physical demand filters down from the top. Over 300 million ounces of silver were removed from the Comex market in 2020 by some of the most sophisticated and well healed investors in the world. Settlements on the Comex are usually mostly in dollars. The Comex was not set up to be a source of physical delivery. This is no small development. In years past, this amount would represent roughly a decade’s worth of silver deliveries. In addition, Comex deliveries in 2021 are now on pace to better the 2020’s delivery numbers. When all of this is added to record global retail physical demand in coins and bars - physical demand at some point and probably sooner rather than later, will completely overwhelm supply.
In geological terms, silver is found in a form called epithermal, meaning it is found very near the surface. This means that most of the big deposits were found years ago, even before the advent of enhanced imagery. In fact, only 30% of global mine supply comes from primary silver miners, while 70% comes as a byproduct of mining other metals such as copper and zinc.
In summary, the demand for physical silver is greater than the supply - the amount being mined each year. And it’s expanding. At the same time, silver is in the cross hairs of a new class of “deep pocket” investors, from hedge funds to home offices. And the “retail” demand is on the rise as well. As an example, our business at Miles Franklin is up between 300% - 400% and it is 95% silver. This new, large demand is, in part, being funded by savvy investors taking profits on stocks and Bitcoin.
Most commodities have one primary source of demand, like copper – which is solely and industrial metal, and gold, which is mostly a monetary metal. Silver is in demand by both industry and investors. At some point they will be in competition with each other. That point is not far off. So yes, I think a squeeze is not only possible but actually highly probable.
Q: Andy, you've been in the precious metals business for decades. Where would you pin the true price of silver and gold right now?
A: Much higher! Due to the relentless market manipulation, there is no accurate way to find honest price discovery. So far, supply and demand of physical silver has had little effect on the paper prices set on the Comes. It is impossible to determine the true, unmanipulated price.
When you factor in money creation and inflation, plus the rise in all commodities, gold at $3,000 seems on the low side to me. Of course, this is just a subjective guess.
Silver is perhaps the most undervalued asset on the planet and in my opinion, it presents the buying opportunity of a generation. The silver to gold ratio is currently 75 to 1. It takes 75 ounces of silver to “buy” one ounce of silver. Yet only seven ounces of silver are coming out of the ground for every one ounce of gold. In other words, at a 7 to 1 ratio, silver is nearly 11 times undervalued in its relation to gold. Further if you divide the current price of gold ($1,800) by 7, the current global mining ratio, you get a silver price of $270. With $3,000 gold, a minimum number I expect to see sooner than later, you get $428 an ounce.
Q: One of the things I just wrote about was China potentially backing its new digital currency with gold. Do you think China would consider backing the digital Yuan with gold? What would the ramifications be for the price of metals and the FX markets?
A: Yes, I think that is their plan. I think they will back the new digital Yuan in a nonconvertible fashion. I don’t think you will be able to trade in a digital yuan for a piece of gold, but I do believe gold backing is ultimately highly probable. The Chinese do sell gold-backed yuan bonds that can be converted into physical gold on the Shanghai Gold Exchange.
(MoneyWeek’s estimate of Cumulative gold potentially held in China is the black line)
According to the most recent estimates, the Chinese have 38,000 tonnes of gold. Broken down, 20,000 tonnes are owned by the state and 18,000 tonnes are owned by the people. That is almost 5 times as much as the 8133 tonnes the United States supposedly owns. Further, the new Chinese Belt, Road and Rail Initiative, connecting Asia and Africa and 70% of human population, is the most ambitious infrastructure project in human history and the new Digital Yuan will be the currency of choice for this project. This in effect introduces a new settlement currency to 7 out of 10 people in the world. Gold backing of their new digital Yuan with validation of the holdings on a distributed ledger would immediately create demand and credibility for the Digital Yuan. In one form or another, I believe that is exactly what will happen. You don’t want to own dollar denominated assets when that happens.
For access to part two of this interview coming next week and all of my content, become a subscriber here.
More About Andy Schectman
Prior to starting Miles Franklin, Ltd. in 1989, Andrew became a Licensed Financial Planner, specializing in Swiss Franc Investments and alternative investments. At Miles Franklin Ltd., a company that has eclipsed $5 billion in sales, Andrew has developed an operation that maintains trust, collaboration, and ethical behavior, superior customer service and satisfaction to better serve their clients. He is responsible for overseeing the firm’s operations and business functions; including strategy and planning, account management, finance, and new business.
Any of my subscribers interested in contacting Andy can reach him personally at andy@milesfranklin.com, as long as you noted that you were given that e-mail address by me.
DISCLAIMER:
I own physical silver, PAAS, PSLV and a number of other metals equities. None of this is a solicitation to buy or sell securities. It is only a look into my personal opinions and portfolio. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe.
MORE DISCLAIMER:
These are not the opinions of any of my employers, partners, or associates. I get shit wrong a lot. If I am here listing things I got right or things I think will happen in the future, note that there are likely twice as many things I got wrong over the same period of time. I’m not a financial advisor, I hold no licenses or registrations and am not qualified to give advice on anything, let alone finance or medicine. Talk to your doctor, talk to your financial advisor or your therapist. Leave me a alone and do your research elsewhere. If you can find somewhere to rate this Substack one star, please do so as to save future readers from the misery of my often wholly incorrect prognostications.

>>> House Democrats propose increasing electric vehicle tax credits to as much $

House Democrats propose increasing electric vehicle tax credits to as much $12,500 per vehicle for union-made zero emission models assembled in the US - press
- EVs would continue to receive the existing $7,500 tax credit and would be eligible for another $4,500 for being assembled with union labor in the US, and an additional $500 for meeting US domestic content requirements including using battery cells manufactured in the US.
- Under the proposal, GM and Tesla would again be eligible for the EV tax credits after hitting the cap on existing $7,500 tax credits
- Electric pickup trucks would be eligible for the tax credit if they are priced under $74K
- House Ways and Means Committee will vote on the tax credits on Tuesday as part of the overall $3.5T spending bill

>>> US Close Dow -0,78% S&P -0,77% Nasdaq -0,87% Russell -0,96%

Closing Stock Market Summary

The major indices lost about 1% on Friday, as the market faded a positive open and investors digested a mixed court ruling on Apple (AAPL 148.97, -5.10, -3.3%) versus Epic Games. The S&P 500 (-0.8%), Dow Jones Industrial Average (-0.8%), Nasdaq Composite (-0.9%), and Russell 2000 (-1.0%) closed at session lows. 

The early index gains ranged between 0.6-0.7% in a buy-the-dip effort, but that quickly unraveled on no specific news. Late in the morning, a court ruled that Apple must give developers the ability to create their own payment options. In Apple's favor, the judge said the company isn't an antitrust monopolist in the submarket for mobile gaming transactions.

Shares of Apple subsequently fell 3%, and shares of Alphabet (GOOG 2838.42, -59.85, -2.1%) fell in sympathy given it owns the Google Play store. 

The information technology (-1.0%) and communication services (-0.9%) sectors, which are home to AAPL and GOOG, underperformed along with the utilities (-1.4%) and health care (-1.2%) sectors. No sectors finished higher, as selling accelerated into the close on no news. 

Presumably, the inability to hold onto rebound gains fueled concerns about further equity weakness with the loss in price momentum. The benchmark index extended its losing streak to five sessions. The CBOE Volatility Index (20.89, +2.09, +11.1%) jumped above 20.00.

Another hot Producer Price Index report didn't appear to affect stocks all that much, but the Treasury was under some selling pressure because of it. Briefly, producer prices for final demand were up 0.7% m/m in August (Briefing.com consensus 0.6%), leaving them up 8.3% yr/yr, while core prices were up 6.7% yr/yr. 

The 10-yr yield increased four basis points to 1.34% while the 2-yr yield was unchanged at 0.21%. The U.S. Dollar Index increased 0.2% to 92.62. WTI crude futures rose 2.3%, or $1.57, to $69.75/bbl.

In earnings news, shares of Affirm (AFRM 123.70, +31.64, +34.4%) soared about 35% after the company reported better-than-expected results and issued upbeat revenue guidance. Kroger (KR 42.67, -3.46, -7.5%), on the other hand, dropped 7.5% as rising costs pressured margins. 

Reviewing Friday's economic data:

  • The Producer Price Index for final demand increased 0.7% month-over-month in August (consensus 0.6%) after increasing 1.0% in July. The index for final demand, less foods and energy, increased 0.6% month-over-monthconsensus 0.6%) after increasing 1.0% in July. On a year-over-year basis, the Producer Price Index for final demand was up 8.3% on an unadjusted basis, versus 7.8% in July. That has lifted the index past its record increase from last month. The index for final demand, less foods and energy, was up 6.7% versus 6.2% in July.
    • The key takeaway from the report is that while the month-over-month change slowed from increases seen in June and July, the year-over-year growth rate in PPI rose to a fresh record.
  • Wholesale inventories increased 0.6% m/m in July(consensus 0.5%) following a downwardly revised 0.6% increase (+1.1%) in June.

Looking ahead, investors will receive the Treasury Budget for August on Monday.

  • S&P 500 +18.7% YTD
  • Nasdaq Composite +17.3% YTD
  • Dow Jones Industrial Average +13.1% YTD
  • Russell 2000 +12.8% YTD

Barrons : The S&P 500 Has Had a Good Run. Why Wall Street Thinks a Pullback Is C

The S&P 500 Has Had a Good Run. Why Wall Street Thinks a Pullback Is Coming.

S&P 500 index funds will tumble by Christmas, one Wall Street strategist predicts. Not necessarily, says another—but they’ll lose money over the next decade. I can’t decide whether to panic or just sulk.

The index decides the fate of more than $5 trillion in linked investor assets. My only exposure is in my retirement, joint, college, healthcare, and, come to think of it, all other investment accounts. I don’t think my Chipotle Rewards account is affected, but I haven’t read the small print.

The concern, of course, is that S&P 500 trackers have had it too good for too long. The index has returned 376% over the past decade, or close to 17% a year, compounded. Among active managers tasked with beating the index, four out of five failed during the 10 years through 2020.

For Bogleheads, as devotees of the late Vanguard founder and indexing pioneer John Bogle call themselves, the explanation is simple: Stock-picking is futile. But if that’s so, the typical active manager should do no better or worse than indexes on underlying stock performance, and underperform only to the extent he or she charges extra fees. In fact, they have trailed over 10 years by an average of 2.5% a year. Stinking that badly is a skill of its own—one that theoretically shouldn’t exist.

Another explanation is that the S&P 500’s popularity has created its own tailwind. “Flows into index funds raise the prices of large stocks,” conclude researchers from Michigan State University, the London School of Economics, and the University of California, Irvine, in a working paper that has been circulating since late last year. By now, you’ve heard that five companies— Apple, Microsoft, Alphabet, Amazon.com, and Facebook —combined for one-quarter of the S&P 500’s market value. But all are still growing nicely, so why worry now?

This past Tuesday, Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, predicted a 10% to 15% slide for the S&P 500 before year’s end, but she says that doesn’t make her bearish. She points out that most 12-month stretches contain a big pullback for the index, but that we haven’t had one since March 2020. Tech giants, she has noticed, have lately traded hand-in-hand with Treasuries, suggesting that investors have come to view them as havens.

“Owning the index today in a global context is a relatively defensive position, and we believe that it’s time to play offense,” she says.

In Shalett’s view, interest rates will rise as global economies rebound, putting pressure on stock valuations. She predicts upside earnings surprises and stock outperformance for cyclical sectors like financials, industrials, energy, and materials, and for some pockets of consumer services and healthcare. “We’re very excited about buying a lot of different stocks,” she says. “We’re just not super-psyched about owning the index.”

On Wednesday, Bank of America Securities issued a similarly mixed signal. It raised its year-end S&P 500 target from 3800 all the way to 4250, which sounds optimistic. But it referred to the change as a mark to market—something typically done obligingly by accountants, not enthusiastically by forecasters. Also, the new target implies a decline of 5% or so from recent levels. Indexers have already made an easy 20% this year, so why sweat a holiday haircut? Because the bank is also predicting a 10-year average loss in the index of 0.8% a year.

It’s devilishly difficult to predict short-term stock market returns. I tend to follow such forecasts more for the rationales than the targets. But long-term returns might be more closely linked than short-term ones to starting valuations, making forecasting more feasible. BofA says one measure has predicted about 80% of 10-year returns for the S&P 500 since 1987: the ratio of the index’s price to what the bank calls its normalized earnings for the past 12 months. A typical reading is 19. The latest is 29. That has nudged the model’s predicted 10-year return below zero for the first time since 1999.

BofA’s prescription is to buy dividend-growers and inflation beneficiaries like energy, financials, and materials. It also likes small-cap stocks, which it says are more closely tied than large-caps to U.S. economic growth, and have valuations that point to positive 10-year returns.

Speculation over the new iPhone lineup has reached not-the-least-bit-frenzied levels. Supposedly, there’s a new color choice: bubble-gum pink. MacRumors.com says to expect a smaller “notch”—the little display cutaway for cameras. A faster chip and better camera are as sure as they are unnecessary.

And like last year’s iPhones, the ones that Apple is expected to introduce on Tuesday will offer 5G service. After using a 5G iPhone for a year now, I can confirm that life feels richer, food tastes better, and my bald spot is filling in. OK, nothing has changed.

Expect blowout sales just the same. Wedbush Securities analyst Daniel Ives says factories are making about 10% more iPhone 13 handsets to start than they did iPhone 12 ones last year, suggesting that Apple executives are confident. They have reason to be, with some 250 million of the world’s 975 million iPhones not having been upgraded in 3.5 years. J.P. Morgan predicts record iPhone volumes, both this calendar year and next, driven in part by the addition of 5G capability to Apple’s cheaper iPhone SE handsets.

I upgraded a perfectly serviceable iPhone last year because I received a giant subsidy to switch service from my disappointing carrier to an equally disappointing rival. Last year’s merger of T-Mobile US and Sprint turned two weak players into one strong one, and set off an industry scrum for new 5G sign-ups. Expect more big perks this year. And there’s always the possibility that Apple could announce something unexpected: grape color, no notch. Possibilities abound.

Barrons : This Magazine Owner Has Morphed Into a Digital Giant. Investors Like t

This Magazine Owner Has Morphed Into a Digital Giant. Investors Like the New Image.

Media group Future has transformed itself from a print-magazine owner worth just 30 million pounds sterling ($41 million) in 2014 to a digital-content giant with a market value that has jumped to £4.6 billion.

The transition is reflected in the stock price. In the past 12 months, shares (ticker: FUTR.U.K.) in the company that owns Marie Claire, Mac Life, Music Week, and Wallpaper jumped 151% to £38.22.

The highly acquisitive Bath, U.K.–based company boosts its new brands’ earnings through e-commerce, the clever use of customer data, and expansion into new markets. The possibility of more acquisitions and Future’s focus on the U.S. market means the stock still has momentum.

Last month, it agreed to pay £300 million to buy U.S.-based Dennis Publishing, which publishes The Week, MoneyWeek, and Kiplinger’s. In 2019, Future paid £140 million for TI media, which changed its name from Time Inc UK. In November, the company spent £594 million for price-comparison website GoCompare.

Edward James, an analyst at Berenberg, forecasts the stock will increase 28% to £48.90, predicting further M&A could add 40% to 2023 earnings per share.

“While investors may believe they have missed the “mags to riches” equity story, which has witnessed the shares rise 110% year to date and over 3,000% over the past five years, we believe there is more to come,” he wrote in a note.

The company fetches a high multiple of 27.5 times this year’s expected earnings and is valued at a 20% premium to its peers. In the full year to Sept. 30, 2020, pretax profit increased 309% to £52 million, from £12.7 million the year before, on revenue of £339.6 million. In the half year to March 31, revenue was up 89% to £272.6 million from the prior year.

“One of the advantages of our diversified model is the wealth of opportunities for continued growth, be that by geography or revenue mix,” Chief Executive Officer Zillah Byng-Thorne says. “Our strategy has served us well over the last five years and we are confident that it will continue to do so.”

The business could transform itself by further applying its earnings-generating model to new brands and deepening its move into the U.S. market—which already accounts for more than 50% of revenue. With more than 70% of revenue outside of print, the key is Future’s shift to digital, and widening advertisers’ access to customers in various regions.

With new acquisitions, Future is able to cut costs from duplicated back-office functions such as accounts, purchasing, and IT. The company uses subscription data to help advertisers target customers, and produces specialist editorial content aimed at niche audiences that span music, technology, and leisure.

Future leverages this by ranking and reviewing products to guide customers. Retailers such as Amazon.com (AMZN) display this content next to products on their sites to help users make purchasing decisions. Future earns a cut from every sale in which it has played a part.

Roddy Davidson, an analyst at broker Shore Capital, wrote in a note that “engaging content to drive e-commerce and digital advertising revenues will deliver attractive medium-term organic growth and provide good scope for medium-term forecast upgrades.”

The Dennis acquisition will add 1.2 million subscribers and help the U.S. expansion—where 56% of Dennis revenue comes from. “We remain of the view that the group’s premium rating is justified,” Davidson says. “A strong acquisition track record is also a significant positive, with more deals likely to supplement organic growth.”