1. Disturbing facts about India's PSUs.
From a capital outlay of Rs 3.32 trillion in 2013-14 (the last year of the Manmohan Singh regime), PSUs saw their total investment jump to Rs 8.52 trillion in 2019-20. In terms of its share in GDP, PSUs’ capital outlay rose from 2.9 per cent to 4.2 per cent in the same period. This rise was driven as much by trebling the government’s equity infusion as by the PSUs’ ability to generate more internal resources and raise more borrowing... In the five years following the pandemic, the PSU story has changed significantly. Indeed, by the end of 2021-22, capital outlay by PSUs fell almost by a fifth. The decline could be largely attributed to the PSUs’ inability to raise internal resources or even mobilise higher borrowing. The fall would have been sharper but for the government propping up the public sector with increased equity infusion, a trend that has continued since then. The capital outlay situation in the last two years has got better. At Rs 8.4 trillion in 2023-24, the declining trend has been reversed, but as a percentage of GDP (2.84 per cent) this is still lower than what prevailed 10 years ago (2.9 per cent in 2013-14)... infusing additional equity, which in any case is largely restricted to a handful of entities like Bharat Sanchar Nigam Limited, National Highways Authority of India, and Indian Railways, accounting for about 87-90 per cent of the total equity outlay announced in the last couple of years.
2. Some facts about food prices inflation index in India from the latest HCES report
Over the period from 2011-12 to 2022-23, the share of food in monthly per capita consumption expenditure (MPCE) declined from 52.90 to 46.38 per cent in rural and from 42.62 to 39.17 per cent in urban India. In rural India, the share of cereal declined from 10.69 to 4.89 per cent and pulses and pulse products from 2.76 to 1.77 per cent over this period. In urban India, the share of cereal declined from 6.61 to 3.62 per cent and pulses and pulse products from 1.93 to 1.21 per cent in the same period. Because households got free rice, wheat and coarse grains from the public distribution system (PDS), the decline in value share was more pronounced than the decline in quantity consumed. In 2022-23, a person consumed 9.6 kg and 8.0 kg of cereals in rural and urban India, respectively, in a month, compared to 11.2 and 9.3 kg in 2011-12. Given that the share of items consumed free from PDS in the index is 0.80 in rural India and 0.25 in urban India, there is no reason to expect that consumption from the PDS would have any effect on inflation per se. It is equally important to focus on other components of the food basket. The importance of beverages and processed food has crept up steadily over time. In 2022-23, its share in the overall rural and urban MPCE was 9.62 and 10.64, respectively, compared to 7.4 and 8.03 per cent in 2009-10. Hence, accurate measurement of the price of cooked meals and snacks purchased is now extremely important.
3. FT points to Hendrik Bessembinder's analysis of the best performing stocks of all time over their lifespans. Altria, formerly Philip Morris, is the best-performing stock of all time in absolute terms.
The paper writes
This report describes compound return outcomes for the 29,078 publicly-listed common stocks contained in the CRSP database from December 1925 to December 2023. The majority (51.6%) of these stocks had negative cumulative returns. However, the investment performance of some stocks was remarkable. Seventeen stocks delivered cumulative returns greater than five million percent (or $50,000 per dollar initially invested), with the highest cumulative return of 265 million percent (or $2.65 million per dollar initially invested) accruing to long-term investors in Altria Group. Annualized compound returns to these top performers relatively were modest, averaging 13.47% across the top seventeen stocks, thereby affirming the importance of "time in the market." The highest annualized compound return for any stock with at least 20 years of return data was 33.38%, earned by Nvidia shareholders.
And FT writes
One pretty obvious factor stands out in Bessembinder’s list of superstonks: They’re all old companies that have been or were around for a very long time, and few (none?) are in what would now be considered glamorous industries. This hammers home the power of longevity and steady returns over racier stocks. Of the nearly 30,000 US stocks that appear in the CRSP database, the median lifespan is just 6.8 years. Only 31 companies are present across the 98 years it spans. Of the 30 greatest compounders compiled by Bessembinder almost all have over 90 years of stock market history under their belt. The youngest is Northrop Grumman, which went public in 1951. While the mean outcome over that near-century of data is a 22,840 per cent gain, the median outcome is a loss of 7.4 per cent, because over half of all the common stocks registered by CRSP have incinerated money.
4. As they emerge as among the biggest incremental consumers of energy with their energy-guzzling AI algorithms and data centres that host them, the Big Tech firms have embarked on a behind-the-scene mission to rewrite the accounting principles of measuring pollution from energy consumption in a manner that burnish their green credentials. This must count as the mother of all greenwashing!
Sample the numbers on the accounting miracle of net zero emissions achievement claimed by Big Tech firms.
Social media group Meta, for instance, says it has already hit “net zero” emissions in its energy usage. But FT analysis of its 2023 sustainability report shows that its real-world CO₂ emissions from power consumption the prior year were 3.9mn tonnes, compared to the 273 net tonnes cited in the report.
This is a description of the current accounting method and its problems.
Companies including Amazon, Meta and Google have funded and lobbied the Greenhouse Gas Protocol, the carbon accounting oversight body, and financed research that helps back up their positions... Each time a wind, solar or hydroelectric facility generates a unit of clean power, its owner can issue an energy attribute certificate, typically known in the US as a renewable energy certificate, or REC... Companies can purchase RECs “to buy-down their environmental impact”... Doing so helps buyers demonstrate the action they are taking to finance clean power and directs investment towards green energy development... Matthew Brander, a professor at the University of Edinburgh, says the system is akin to buying the right from a fitter colleague to say you have cycled to work, even though you arrived by a car that runs on petrol... At present, the certificates must come from the same defined geographic region as the pollution they are offsetting, such as Europe and North America, but not the same grid and not at the same time. That means the clean energy that offsets the emissions could be generated in a different country, at a different time of day — or even in the past...But both timing and location matter in terms of real-world emissions. For example, one potential buyer hooked up to a coal-dependent grid and another on a much cleaner grid could buy the same certificate to offset one megawatt hour of power use — even though the emissions stemming from that usage will differ in each grid. The certificates are also very cheap. The average forward price of a single US renewable energy certificate to be bought in the next calendar year has been under $5 since at least 2022... Experts have questioned whether this is really enough to help incentivise the development of a new clean power project. Academics and experts... have shown that buying certificates typically did not drive either a new supply of renewables or a fall in emissions... Using certificates from one area while operating in another could allow buyers to understate their reliance on fossil-based electricity.
And this about the reform proposals proposed by the Big Tech companies
Google’s proposed solution is to only match energy consumption with clean energy and certificates from the grids where power is consumed, and to take the time of day of its electricity use into account... The company also argues that its approach incentivises engagement with local policymakers about how best to green their electricity grid and investments in a range of solutions, such as batteries... A rival perspective, spearheaded by Amazon, Meta and other members of the Emissions First Partnership lobby group, says that companies should be able to use certificates in a more flexible way with no restrictions at all on geographical origin.
Amazon and Meta thinks this same unit of power could be offset by certificates tied to renewable energy produced during the day in Norway, for example... also wants companies to get more credit for buying clean energy certificates from a dirty grid like India than a cleaner one like Norway’s, to reflect the carbon emissions that may have been displaced, or avoided, by the use of wind power... Academics say a crucial metric that neither approach addresses is ‘additionality’ — or checks that the clean power would not have been produced anyway without extra money from the sale of the certificates.
The stakes are very high
Large technology groups are already “by far” the biggest corporate buyers of RECs... They are also some of the “biggest players” in renewable power deals globally... Microsoft and asset manager Brookfield have teamed up to develop 10.5 gigawatts of generating capacity, enough to power the equivalent of about 1.8mn homes. The cost of adding 1GW of new capacity is around $1bn. Amazon, the largest corporate buyer of renewable energy, is also pouring money into wind and solar projects in countries, including India. It said “the majority” of its 100 per cent renewable energy goal was met in 2023 by investing in clean energy projects. It uses unbundled certificates to “bridge the gap” until some renewable schemes come online, but its use of them would “decrease over time”, it added. Meta said most of its power use was matched with renewable energy investments, including RECs, in the same grids as its data centres. It has invested in more than 8GW of operational renewable energy...Globally, the International Energy Agency has estimated that the electricity consumed by data centres will more than double by 2026 to an amount roughly equivalent to Japan’s current annual consumption. That expansion threatens the viability of Big Tech’s net zero targets. Microsoft’s emissions rose by 30 per cent between 2020 and 2023, while Google’s jumped by almost half between 2019 and 2023, increases that both companies blamed in part on the need for new data centres.
This is a serious smoking gun
The Bezos Earth Fund, Amazon founder Jeff Bezos’ philanthropic group, donated $9.25mn to the protocol last year and is also a major funder of the non-profit WRI, which co-administers the accounting oversight body.
5. FT reports that PwC China is about to be hit with a six-month business ban for its role in the audit lapses on collapsed property developer, Evergrande. The action comes after the country's securities regulator said Evergande had inflated its mainland revenues by almost $80 bn in the two years before its default in 2021 despite the audit certified by PwC which gave a clean chit to the company. It's expected that there would be fines in addition.
6. Fascinating article about how TSMC is struggling to get American workers acclimatised to its intense work culture in its under-construction facility at Phoenix, Arizona.
7. Matt Stoller has an article on abusive practices by the executives of Albertsons and Kroger, which are in the process of a controversial merger that's being litigated in courts.
Kroger and Albertsons are both monsters, and the two of them combining would create the second largest chain in the country, after Walmart, with 15% of the national grocery business. Kroger/Albertsons would employ over 700,000 people, have over $200 billion in revenue and more than 40,000 private label brands, and own and operate brands such as Safeway, Ralphs, Smith’s, Harris Teeter, Dillons, Fred Meyer, Vons, Kings, Haggen, Tom Thumb, Star Market, Jewel-Osco, and Shaw’s.
8. Rental housing market intervention by the Labour government in the UK in an effort to encourage the building of affordable homes.
UK chancellor Rachel Reeves intends to introduce a 10-year formula in October’s Budget that will increase annual rents in England by the CPI measure of inflation — currently 2.2 per cent — plus an additional 1 per cent, according to government insiders. The move is aimed at encouraging the building of more affordable homes by providing certainty over cash flows to housing associations and councils — which are grappling with heavy debt burdens and large maintenance backlogs. In recent years local authorities have almost stopped building homes, leaving housing associations — not-for-profit organisations — to build most new social housing in the UK. The government sets rent levels in subsidised social housing using a national formula. Guaranteeing higher rents will delight housing associations but could worsen the cost of living for millions of tenants and could land the government with a much higher benefits bill... The previous Conservative government made a similar promise in the early 2010s but ministers subsequently ripped it up on several occasions. David Cameron’s coalition set a 10-year annual rent settlement in 2012 based on the retail price index, plus 0.5 per cent. But then-chancellor George Osborne reneged on the agreement in 2015 with four years of below-inflation increases in order to reduce housing benefit costs for the Treasury. More recently, the Conservative government announced a five-year settlement of CPI plus 1 per cent in 2020, but was then forced to cap rent increases at 7 per cent following a jump in inflation to more than 11 per cent in 2022. It extended the settlement for one further year this April.
9. Farm subsidies world over are cornered by the richer farmers.
But between 1995 and 2023, some 27 per cent of subsidies to farmers in the US went to the richest 1 per cent of recipients, according to NGO the Environmental Working Group. In the EU, 80 per cent of the cash handed out under the CAP goes to just 20 per cent of farms.
10. Interesting facts about US manufacturing jobs.
The US was once the world’s manufacturing powerhouse, producing more steel, automobiles and consumer goods than any other nation. Employment in the sector peaked at 19.55mn in 1979 when manufacturing jobs accounted for one in five American workers. But decades of outsourcing to lower cost economies in Asia and elsewhere have cost millions of jobs, particularly in rustbelt states such as Illinois, Indiana, Michigan, Missouri, New York, Ohio, Pennsylvania, West Virginia, and Wisconsin. As of May, there were 12.96mn people working in manufacturing jobs, less than 10 per cent of the US workforce and slightly up from 12.81mn in 2019, according to the Bureau of Labor Statistics. China overtook the US as the world’s biggest manufacturer in 2010.
And solar industry competitiveness of the US and China
Multiple firms estimate China produces more than double global demand for panels, and BloombergNEF has warned that rapid innovation in south-east Asia, where the US sources the bulk of its solar panels and cells, means US factories risk being uncompetitive by the time production comes online... The panels made overseas are far cheaper than domestic ones. US-made crystalline silicon panels generate energy at an average cost of 29.5 cents per watt, according to BloombergNEF. A panel sourced in south-east Asia, meanwhile, can cost under 16 cents per watt, and in China, it is 10 cents per watt.
11. Finally, amidst a takeover threat from a Canadian retailer, NYT has a good article on why 7-eleven stores are a national institution in Japan.
7-Eleven is “one of the best brick-and-mortar retail businesses in the world,” said Hiroaki Watanabe, an independent retail analyst. Selling 7-Eleven to Couche-Tard would be, for Japan, “equivalent to Toyota becoming a foreign company,” he said. In fact, 7-Eleven started out an American convenience store chain, operated by Southland Corporation, in Dallas in 1927. It opened its first store in Japan in 1974, featuring popular American items like hamburgers. It was an instant success in Japan and within two years had expanded to 100 stores. In 1991, a Japanese supermarket operator, Ito-Yokado, and 7-Eleven Japan acquired 70 percent of Southland’s shares. In 2005, 7-Eleven became wholly Japanese-owned through a holding company, Seven & i. Today, Seven & i has more than 21,000 7-Eleven stores in Japan and operates in 20 countries and territories. In the United States, Seven & i has been exploring ways to replicate the much-coveted Japanese convenience store experience... Today, Seven & i has more than 21,000 7-Eleven stores in Japan and operates in 20 countries and territories. In the United States, Seven & i has been exploring ways to replicate the much-coveted Japanese convenience store experience.
No comments:
Post a Comment