Hello everyone, welcome to “Finance Insights”. Let’s first focus on the situation in the Middle East, because, oil prices have risen!
Today’s Spotlight: Art auctions often reach hundreds of millions, giving birth to money laundering crimes? Middle East conflicts escalate, causing a surge in oil prices, and a chill in Asian stock markets! Rising energy prices may lead to financial strains this winter for heating! Wealthiest person in horse racing facing challenges, X value shrinking as Tesla stock prices drop again! Three-week strike crippling the United States? East coast strike threatening!
On the evening of October 1st, Iran brazenly launched 200 missiles at Israel, instantly escalating tensions in the Middle East. Iran is one of the world’s top ten oil producers, and undoubtedly this missile attack will heighten concerns in the market regarding oil supply.
As expected, Israel immediately vowed retaliation against Iran, and the US promptly announced sanctions against Iran. The best way to sanction Iran is to restrict its crude oil exports, which in turn would push international oil prices higher.
Sure enough, on the evening of October 1st, international oil prices quickly surged and continued to rise. By the morning of October 2nd, US WTI and UK Brent crude oil futures prices reached their highest levels in trading, reaching $71.84 per barrel and $75.36 per barrel, respectively, a 5.4% increase. There was a subsequent fall, with an average increase exceeding 2%.
Our American friends are probably rolling their eyes. I’ve been living in New York for many years, and it’s been a long time since I’ve seen oil prices drop below $3. Just when I was hoping for prices to drop below $3 per gallon, Iran stirred things up, and oil prices rose again!
Following the Iranian missile attack on Israel, Asian stock markets mostly declined on Wednesday as everyone observed how the situation in the Middle East would develop. Japan’s Nikkei index fell by about 1.9% on Wednesday, while South Korea, Malaysia, Thailand, and Indonesia’s major stock indices all fell by around 1%.
The prices of the US dollar and gold have surprisingly risen amidst this tense situation, with gold prices now reaching around $2,654 per ounce and continuing to rise. As I mentioned in a previous program, experts expect gold to likely surpass the $3,000 mark by the end of this year!
Comcast, a cable TV giant in the US, recently initiated a lawsuit through its European pay-TV company Sky, suing entertainment giant Warner Bros. Discovery, pointing out a violation of a copyright agreement. The core issue of this legal battle is to fight for the exclusive broadcasting rights of the “Harry Potter” film series.
According to court documents, the two parties reached a broadcast agreement in 2019, requiring Warner Bros. to provide Sky with opportunities for joint production of at least four “Harry Potter” original series every year, and Sky has the exclusive right to distribute these series on its platform for 20 years.
However, in the latest production casting for the new episode of “Harry Potter”, Warner Bros. did not provide Sky with the opportunity for joint production, leading Sky to lose the exclusive broadcast rights to this new film. This has sparked strong dissatisfaction from Comcast’s parent company, leading to a legal battle!
In the third quarter of this year, Tesla delivered a total of 462,890 electric vehicles in the global market, surpassing BYD by nearly 20,000 cars. Tesla’s delivery volume increased by 6.4% year-on-year, marking the third consecutive quarter that Tesla’s electric vehicle sales exceeded those of BYD. However, BYD’s growth in hybrid models is very strong, achieving a record-breaking 1.13 million hybrid car sales in the third quarter, the first time the company has exceeded 1 million hybrid cars in a single quarter.
Sources reveal that on Saturday last week, a factory in India producing components for iPhones suddenly caught fire, resulting in an indefinite suspension of production. Apple may have to consider shifting its supply chain back to China.
The factory that caught fire is a component factory for iPhones under the Indian electronic industry giant, Tata Group, which had received many orders to produce components for the iPhone 16. Tata Group is one of Apple’s main suppliers in India.
Due to the severe damage caused by the fire to the production facilities, the factory had to stop production. In order not to affect the shipment of iPhones, Apple has to consider moving these orders back to production on the mainland.
After the news of the fire, Apple’s stock price fell more than 3% on Tuesday. Barclays Bank previously issued a research report stating that Apple may reduce production of the iPhone 16.
Obviously, the frenzy around the artificial intelligence industry is starting to wane. In the first half of 2024, people rushed to the stock market to buy shares of Silicon Valley tech companies, especially those in the AI industry, which is no longer the same scene. People are shifting their focus to stocks in other industries.
In the third quarter, the performance of various market sectors significantly outperformed the tech sector of the Nasdaq, and even many small-cap stocks have freed themselves from a slump, leaving large-cap stocks far behind.
The US benchmark stock index rose by 5.1% this quarter, accumulating a 20% increase so far in 2024. Dow Jones Market Data shows that the index is expected to have its best performance for the first three quarters since 1997.
Not only stocks, but also bonds have followed a rising trend with the US Federal Reserve lowering interest rates. The benchmark 10-year yield is expected to end a two-quarter trend of rising yields.
Recent data shows that the inflation rate in August has cooled for the fifth consecutive month, hitting a three-year low. At the same time, US job growth is starting to rebound, consumer confidence is improving, and household spending continues to increase.
However, not everyone views the economic outlook optimistically. Dollar General, the largest dollar store chain in the US, stated that economic pressures faced by customers led to a significant reduction in sales expectations by the end of August; restaurants are continuously offering various promotions and discounts to attract customers facing financial difficulties.
Josh Emanuel, chief investment officer of Wilshire, believes the Fed’s interest rate cuts indicate a deterioration in the economy, but the stock market has yet to fully reflect this deterioration.
The summer of 2024, with record-high temperatures forcing many American families to pay significantly more for air conditioning, although summer has passed, the upcoming winter may still not be easy, as heating costs may significantly increase this year.
According to the National Energy Assistance Directors Association’s forecast, this winter, the average cost of heating for American families is expected to rise by 10.5%, partially due to low temperatures in the Northeast and Midwest regions.
Among various heating methods, electric heating is the most expensive. Consumers relying on electric heating are expected to pay 13.6% more than last year, reaching $1,208. The cost of maintaining and upgrading the power grid is a major factor pushing heating costs higher, especially in the western region, where damage to the power grid due to wildfires may lead to a 23% increase in the cost of electric heating.
Propane follows, with prices for propane heating expected to rise by 7.3% this year, reaching $1,442.
Next is natural gas, with prices expected to rise by 7.2% to $644.
In comparison, oil has become the most cost-effective heating method this year. Due to the soft oil market leading to a decline in oil prices, the cost of oil heating is expected to increase by only 6.1% this winter, reaching $1,963.
The National Energy Assistance Directors Association also found that more Americans are falling behind on electricity bills. In June of this year, about 21 million households owed a total of $13.5 billion in electricity bills. Last year during the same period, there were 20.4 million households in arrears, with a total due of $12.5 billion.
With summers getting hotter and winters getting colder, combined with increasing inflation, the cost of living continues to rise. The association has petitioned Congress, hoping to provide more financial support for American families struggling to pay their electricity bills.
These past few days, the world’s richest person, Musk, has been hit by a series of negative news. First, the valuation of the X platform has significantly reduced, and Tesla’s delivery volume in the third quarter also fell below expectations, leading to a drop in Tesla’s stock price.
After Musk spent $44 billion in October 2022 to acquire Twitter, which was then privatized and no longer publicly traded.
However, investment giant Fidelity estimated the current value of the X platform, as of the end of August, the price of X shares was just $4.2 million, a 24% decrease from Fidelity’s valuation last month, and a 79% decrease from Musk’s acquisition in October 2022 of $19.66 million.
According to Fidelity’s estimation, the current value of X is only $9.4 billion, far from the $44 billion Musk paid for it in 2022.
X itself has not immediately commented on Fidelity’s estimate. While different investors may make different valuations of X, the consensus on the devaluation of X is nearly unanimous. Many advertisers have stopped advertising on the X platform due to disagreements with the platform’s content policies.
However, this does not affect people’s dependence on this social media giant. According to X’s own data, in the second quarter of this year, the platform had 570 million active monthly users, a 6% increase from the same period last year.
Renowned tech analyst and executive partner of Deepwater Asset Management, Gene Munster, believes that if you want real-time insights into people’s thoughts, Twitter is the best resource, which is the value of Twitter.
On Wednesday, Tesla’s stock price fell, as the company announced that third-quarter vehicle deliveries were below Wall Street’s expectations.
As of the end of the quarter on September 30th, Tesla delivered 462,890 vehicles, a 6.4% increase from the previous quarter. However, the market was not satisfied with this number, as the average expectation on Wall Street was 469,828 vehicles.
It is clear that Chinese electric vehicles are putting price pressure on Tesla. Over the past few months, Tesla has continued to offer attractive financing options and incentives, hoping to drive sales in both the US and China simultaneously, but it seems the boost didn’t have the expected effect.
The data on Wednesday puts greater pressure on Tesla for the fourth quarter, as the company needs to deliver 516,344 vehicles to match last year’s total deliveries.
Starting early Tuesday morning on October 1st, ports on the US East Coast and along the Gulf of Mexico coast have come to a full stop. Workers at 36 ports numbering in the tens of thousands initiated the first major strike in half a century. JPMorgan estimates that the US economy is losing $5 billion per day due to the strike. But economists believe the harm of the strike goes beyond that amount.
Harold J. Daggett, chairman of the International Longshoremen’s Association: “We are here for one purpose, to fight for our rights and fight for our families.”
On October 1st, nearly 50,000 workers at 36 ports on the East Coast and Gulf of Mexico coast in the US launched their first major strike since 1977, threatening the US economy with huge backlash. The reason for the strike is simple; the labor and management sides did not come to an agreement on wages during negotiations.
International Longshoremen’s Association chairman Harold J. Daggett: “We will push this country to collapse within three weeks. Now is the time to fight for our members’ rights.”
President Biden has stated that he has no intention of intervening in the strike sparked by the labor dispute, but with the US election just five weeks away, this strike that could easily shake the US economy is causing economists great concern.
Vinod Agarwal, an economics professor at Old Dominion University: “The longer the strike lasts, the greater its impact will be.”
Walter James Kemessis, founder of the transportation economics group Kemessis: “If the strike lasts for more than a month, you will see an increase in the inflation rate; if it lasts for two months, you will see a significant increase in the inflation rate. Many companies will try to absorb the increased costs themselves, but at some point, they will have to pass on the costs or face bankruptcy. Many bankruptcy cases we have seen during the pandemic were caused by businesses unable to transfer costs.”
Analysts at JPMorgan estimate that the strike will cause the US to lose $5 billion in economic losses per day, but if the strike lasts too long, the harm is not just $5 billion but much more.
Walter James Kemessis, founder of the transportation economics group Kemessis: “The longer the strike lasts, two risks will emerge. Firstly, political risk, as it will increasingly impact inflation and employment, with some industrial workers idle. For the election, at least one party (the Democratic Party) will be negatively affected. The other risk is that if our critical goods face shortages, particularly in pharmaceuticals, it will pose a national security issue.”
As the supply chain directly involves national security in the US, with the supply chain heavily affected by the pandemic for three years, it has not fully recovered. With the strike only beginning for three days, the current impact is very localized, limited to maritime transport. Once it affects critical supply chains essential for national security, the strike must be stopped.
Although Biden has stated he will not intervene, if the strike poses a serious threat to the US economy and national security, he can invoke the 1947 Taft-Hartley Act, which limits the power of unions, to request a court order to halt the strike and compel workers to return to work.
Let’s move on to a business story now, and today I will tell you an interesting story.
In 2012, a piece titled “Untitled” by American contemporary artist Christopher Wool was sold at a London auction for an astonishing price of 4.9 million pounds.
Over these years, the frenzy in the art market is something many of us have heard of; we have gone from incredulity and amazement to taking it for granted. The auction of Wool’s work in 2012 was just the beginning of his path to fame, as in May 2015, at a Sotheby’s auction of contemporary art in New York, another “Untitled” piece of his fetched a staggering $29.93 million.
Now, let me ask you, have you heard of Christopher Wool? I guess many people haven’t, because he’s just one lucky winner among those so-called contemporary artists. Fudge a bit on the canvas, and you’re deemed a master, and your work can sell for millions or even billions, well, what do those authentic artists toiling away at their craft think about this?
Moreover, these actions continuously raise the barrier for the average person to experience genuine cultural and artistic appreciation, clouding the standards for art appreciation, and causing individuals to lose judgment on what truly valuable art is.
Lastly, if this continues, the auction industry could become an accessory industry for criminal organizations, and sooner or later, they’ll have to shut down shop.
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