David Fuller and Eoin Treacy's Comment of the Day
Category - General

    The End of Petrol and Diesel Cars? All Vehicles Will be Electric by 2025, Says Expert

    No more petrol or diesel cars, buses, or trucks will be sold anywhere in the world within eight years. The entire market for land transport will switch to electrification, leading to a collapse of oil prices and the demise of the petroleum industry as we have known it for a century.

    This is the futuristic forecast by Stanford University economist Tony Seba. His report, with the deceptively bland title Rethinking Transportation 2020-2030, has gone viral in green circles and is causing spasms of anxiety in the established industries.

    Prof Seba’s premise is that people will stop driving altogether. They will switch en masse to self-drive electric vehicles (EVs) that are ten times cheaper to run than fossil-based cars, with a near-zero marginal cost of fuel and an expected lifespan of 1m miles.

    Only nostalgics will cling to the old habit of car ownership. The rest will adapt to vehicles on demand. It will become harder to find a petrol station, spares, or anybody to fix the 2,000 moving parts that bedevil the internal combustion engine. Dealers will disappear by 2024.

    Cities will ban human drivers once the data confirms how dangerous they can be behind a wheel. This will spread to suburbs, and then beyond. There will be a “mass stranding of existing vehicles”. The value of second-hard cars will plunge. You will have to pay to dispose of your old vehicle.

    It is a twin “death spiral” for big oil and big autos, with ugly implications for some big companies on the London Stock Exchange unless they adapt in time.

    The long-term price of crude will fall to $25 a barrel. Most forms of shale and deep-water drilling will no longer be viable. Assets will be stranded. Scotland will forfeit any North Sea bonanza. Russia, Saudi Arabia, Nigeria, and Venezuela will be in trouble.

    It is an existential threat to Ford, General Motors, and the German car industry. They will face a choice between manufacturing EVs in a brutal low-profit market, or reinventing themselves a self-drive service companies, variants of Uber and Lyft.

    They are in the wrong business. The next generation of cars will be “computers on wheels”. Google, Apple, and Foxconn have the disruptive edge, and are going in for the kill. Silicon Valley is where the auto action is, not Detroit, Wolfsburg, or Toyota City.

    The shift, according to Prof Seba, is driven by technology, not climate policies. Market forces are bringing it about with a speed and ferocity that governments could never hope to achieve.

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    How North Korea Managed to Defy Years of Sanctions

    DANDONG, China — As the end of the fashion season approached, and the suits and dresses arrived in her company’s warehouses here in the Chinese border town of Dandong, the accountant crammed about $100,000 into a backpack, then boarded a rickety train with several co-workers.

    She asked to be identified only by her surname, Lang, given the sensitivity of their destination: North Korea.

    After a six-hour journey, she recalled, they arrived at a factory where hundreds of women using high-end European machines sewed clothes with “Made in China” labels. Her boss handed the money to the North Korean manager, all of it in American bills as required.

    Despite seven rounds of United Nations sanctions over the past 11 years, including a ban on “bulk cash” transfers, large avenues of trade remain open to North Korea, allowing it to earn foreign currency to sustain its economy and finance its program to build a nuclear weapon that can strike the United States.

    Fraudulent labeling helps support its garment industry, which generated more than $500 million for the isolated nation last year, according to Chinese trade data.

    North Korea earned an additional $1.1 billion selling coal to China last year using a loophole in the ban on such exports, and researchers say tens of thousands of North Koreans who work overseas as laborers are forced to send back as much as $250 million annually. Diplomats estimate the country makes $70 million more selling rights to harvest seafood from its waters.

    China accounts for more than 80 percent of trade with North Korea, and the Trump administration is counting on Beijing to use that leverage to pressure it into giving up its nuclear arsenal. The Chinese government took a big step in February by announcing that it was suspending imports of coal from the country through the end of the year.

    But China has a long record of shielding North Korea from more painful sanctions, because it is afraid of a regime collapse that could send refugees streaming across the border and leave it with a more hostile neighbor.

    In addition, Beijing now has a sympathetic ear in South Korea, whose newly elected president, Moon Jae-in, echoes its view that sanctions alone will not be enough to persuade Pyongyang to abandon its nuclear program.

    While North Korea remains impoverished and dependent on food aid, its economy appears to be growing, partly because of a limited embrace of market forces since its leader, Kim Jong-un, took power more than five years ago.

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    Cyberattack Is Blunted as Governments, Companies Gain Upper Hand

    This article by Jordan Robertson and by Rebecca Penty

    Governments and companies around the world began to gain the upper hand against the first wave of an unrivaled global cyberattack, even as the assault was poised to continue claiming victims this week. 

    More than 200,000 computers in at least 150 countries have so far been infected, according to Europol, the European Union’s law enforcement agency. The U.K.’s National Cyber Security Centre said new cases of so-called ransomware are possible “at a significant scale.”

    "For now, it does not look like the number of infected computers is increasing," said a Europol spokesman. "We will get a decryption tool eventually, but for the moment, it’s still a live threat and we’re still in disaster recovery mode."

    At Germany’s national Deutsche Bahn railroad, workers were laboring under "high pressure" Monday to repair remaining glitches with train stations’ electronic departure boards, a spokesman said.

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    Brace for Chaos If U.S Expands Airline Laptop Ban

    This article by Justin Bachman and Michael Sasso for Bloomberg may be of interest to subscrib ers. Here is a section:

    While companies won’t abandon trans-Atlantic trips, an electronics ban may dampen corporate travel when combined with other recent regulations that have made traveling more onerous, said Michael McCormick, executive director of the Global Business Travel Association. When faced with having to part with their computers—potentially putting sensitive corporate information at risk—some companies may tell employees to leave their computers at home.

    “I think business travelers would be far more willing to accept a far more rigorous screening at the airport, rather than having to part with their tools when they travel,” McCormick said.

    The threat of laptop loss—be it theft, damage, or misplacement as checked luggage—is likely to make some companies consider whether some meetings can be conducted via Skype or other virtual methods, said Andrew Coggins, a management professor at Pace University’s Lubin School of Business. “People don’t want to let their laptops go,” he said.

    That may be bad news for airlines who count heavily on business travel for profitability.

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    Amazon Makes Major Push Into Furniture

    This article by Brian Baskin and  Laura Stevens for the Wall Street Journal may be of interest to subscribers. Here is a section: 

    The online retail giant is making a major push into furniture and appliances, including building at least four massive warehouses focused on fulfilling and delivering bulky items, according to people familiar with Amazon’s plans.

    With that move, the Seattle-based retailer is taking on the two companies that dominate online furniture sales— Wayfair Inc. W -5.95% and Pottery Barn owner Williams-Sonoma Inc. Furniture is one of the fastest-growing segments of U.S. online retail, growing 18% in 2015, second only to groceries, according to Barclays. About 15% of the $70 billion U.S. furniture market has moved online, researcher IBISWorld says.

    But even the biggest players in online furniture are struggling to get the market right. Unlike established categories such as books and music or even apparel, retailers are still hammering out basic concepts like how much variety to offer on their sites and the most efficient ways to deliver couches and dining sets to customers’ homes.

    While Amazon has been selling furniture for years, it has lately decided to tackle the sector more forcefully.

    “Furniture is one of the fastest-growing retail categories here at Amazon,” said Veenu Taneja, furniture general manager at Amazon, in a statement. He said the company is expanding its selection of products, with offerings including Ashley Furniture sofas and Jonathan Adler home décor, and it is adding custom-furniture design services. Amazon is also speeding up delivery to one or two days in some cities, he adde

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    Container shipping: rising tide

    Thanks to a subscriber for this article by Richard Milne for the Financial Times may be of interest to subscribers. Here is a section:

    Soren Skou, chief executive of Danish conglomerate AP Moller Maersk said global demand for containers — a proxy for trade growth — was at its highest level in years in the first quarter.

    “It’s a very strong quarter for global trade. Five per cent is significantly above global [gross domestic product] growth. It’s driven by strong growth in Europe, and continued strong growth in the US,” he told the Financial Times.

    Global trade growth has been sluggish ever since the 2008/09 financial crisis. That has hurt container shipping lines — of which the Danish group’s Maersk Line is the largest — with annual growth falling from more than 10 per cent before the crisis to 1 to 3 per cent in recent years. Maersk recorded only its second ever loss since the second world war in 2016.

    Maersk Line still made a loss of $66m in the first quarter of 2017 as a rise in freight rates from record lows last year was offset by an 80 per cent jump in fuel costs. But the group stuck to its full year forecast of a profit of more than $616m at Maersk Line as a sign of its confidence in improving shipping markets.

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    Stretching Thin

    Thanks to a subscriber for this heavyweight 114-page emerging market fixed income focused for report from Deutsche Bank which may be of interest. Here is a section on Saudi Arabia: 

    Large FX buffers buy time despite high fiscal breakeven KSA also has a high fiscal breakeven, expected to reach USD84 in 2017 according to the IMF and somewhat lower according to our estimates at USD72. As such fiscal reform is a priority, but over USD500 billion of SAMA reserves and the potential for part-sale of oil assets give flexibility of timing. However, arguably, the size and conservative nature of the Kingdom makes early reform a necessity.

    Saudi Arabia’s approach to breaking its hydrocarbon habit has been to undertake something akin to a revolution in the country, as outlined in the Vision 2030 document and the shorter-term National Transformation Program 2020. The challenges are significant, given the elevated fiscal breakevens, delivering 11% budget deficit in 2017. Ambitions for achieving a balanced budget by 2020 (“Fiscal Balance Program 2020”), suggests the bulk of the social and economic overhaul should be front-loaded. 

    The National Project Management Office (NPMO), announced in September 2015 and tasked with moving projects forward in a coordinated fashion, has stalled. Furthermore, headline projects such as the Makkah Metro or the North-South rail line have been pushed out. Of the USD1 trillion pipeline, the only actual new project awards have been limited to Aramco investments. Until the NPMO is fully in place, any major project awards will be exceptions.

    By contrast the establishment of the Bureau of Capital and Operational Spending Rationalization – an entity aimed at reviewing the feasibility of projects less than 25 per cent complete has moved forward with a review of some of the SAR1.4 trillion of projects in development. On the first round, approximately SAR100 billion of costs have been cut. Some projects will be cancelled, others retendered or converted to self-financing PPP-style contracts, but the certainty is that these cannot continue to be financed substantially from the public purse. There has also been additional controls on current spending with cuts in civil service allowances. The switch from an Islamic contract year to a slightly longer Gregorian one amounts to a 3% pay cut.

     

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