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Tesla's 2020 advance blows past 100%, leaving Wall Street in awe – BNNBloomberg.ca

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Within minutes of the stock market’s open on Tuesday, shares of Tesla Inc. shot up 17 per cent. Which feels extraordinary, except for the fact that they gained more the previous day — 20 per cent — and also surged 10 per cent one day last week and seven per cent and 10 per cent the week before that.

By the time the market closed, the stock had gained 112 per cent this year, giving the electric-vehicle maker a market value greater than that of General Motors Co., Fiat Chrysler Automobiles NV and Volkswagen AG combined. There is, not surprisingly, plenty of wonder and awe on Wall Street about the rally — no other stock on the Nasdaq 100 is even up a quarter as much in 2020 — but few concrete explanations as to what’s driving it.

Theories abound, including many of the tried and true: It’s the result of CEO Elon Musk delivering record revenue and his fourth quarterly profit in six periods; or it’s a short squeeze; or it’s the opening of a key new factory in China; or it’s an extreme case of FOMO sweeping across the investor community. Or it’s a combination of all of the above.

There is another school of thought emerging, though, that likely also helps explain the magnitude of the rally. The gist is that the long-held assumption that legacy automakers will catch up to Tesla in the electric-vehicle market is wrong. In fact, Musk may be adding to his lead, ensuring in the process that the company dominates one of the true growth markets in the world for years to come.

“There’s a recognition that Tesla is in a preeminent position in terms of EV technology,” Peter Rawlinson, the chief executive officer of Lucid Motors Inc., said in an interview Monday at the BloombergNEF Summit in San Francisco. “They’re even further ahead than has been reported, and I think the gap is widening, not closing.”

Tesla rose as much as 24 per cent to US$968.99 Tuesday before plunging suddenly in the last few minutes of trading, trimming share prices by more than US$100 each, and bringing the stock’s one-day gain to 14 per cent. Rawlinson’s praise echoed comments made recently by the CEO of Volkswagen, the world’s top-selling automaker. Tesla eclipsed the German manufacturing giant by market capitalization on Jan. 22. Not even two weeks later, its US$159.9 billion value at Monday’s close exceeded VW’s by more than US$66 billion.

Cars will “become the most important mobile device,” VW’s Herbert Diess told top executives at an internal meeting last month. “If we see that, then we also understand why Tesla is so valuable from the view of analysts,” he added, lamenting that VW isn’t also looked at as tech-like.

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Mud Slinging

Rawlinson, who was chief engineer of the Model S before joining Lucid in 2013, wasn’t always this positive, even going so far as to talk down his former employer’s product.

“I contend that Tesla is not truly luxury,” he told Bloomberg News in September 2018, when Lucid had just secured a US$1-billion investment and Musk was less than a month removed from trying and failing to take Tesla private. Rawlinson said then that Teslas were “premium and high-tech, but not luxury.” On Monday, he reiterated his view that the interiors of Tesla’s cars fall short.

But since that earlier interview, Musk has built a commanding lead in the still-fledgling U.S. EV market, and the Model 3 has risen to become one of the top-selling cars in Europe — electric or otherwise. Tesla needed only a year to construct its first overseas assembly plant in China and last month started deliveries of locally built sedans. By March, it plans to begin handing over Model Ys to customers, months ahead of schedule.

“We think they are pretty far ahead in battery and EV technology,” Adam Jonas, an analyst at Morgan Stanley, said in an interview. “Tesla has moved from being seen as an auto stock to being seen as a tech stock” that is “mentioned in the same breath as Amazon, Apple and Google.”

‘Technological Gulf’

Global carmakers from VW to General Motors Co. are pouring billions into electric vehicles, trying to capture some of Tesla’s stock-market mojo while also meeting tighter emissions standards around the world. But the inferior battery range of recent EV entrants including Audi’s e-tron crossover and Porsche’s Taycan sports car show how far legacy automakers are lagging behind, Rawlinson said.

“I’m not being critical of the Germans — it’s wonderful they’re creating these cars and coming in,” he said. “But it just shows much of this technological gulf remains.”

Lucid’s debut model, the all-electric Air sedan, is scheduled to start production in December, and the company hopes to deliver 15,000 units in the first year. Pre-production versions are exceeding 400 miles of range in testing, Rawlinson said.

Musk said during an earnings call last week that the Model Y crossover will have 315 miles of range, which would handily beat the Audi e-tron and Porsche Taycan’s U.S. Environmental Protection Agency-estimated ranges of just over 200 miles.

Traditional automakers are at a disadvantage when it comes to building battery-electric vehicles because they have to keep spending money and resources on combustion-engine cars, which influences how they think about vehicle design and battery-pack efficiency, Rawlinson said.

Head Start

Even automakers such as VW and GM, whose pockets are deep enough to invest in dedicated EV platforms, are behind because they don’t put a high enough priority on developing EV technology in-house, he said. Traditional manufacturers and even some EV startups “are saying the electric powertrain is already commodified, that it’s not a differentiator.”

Lucid will announce a contract with a major cell maker soon, but battery chemistry is only part of the battle. Pack architecture, software and thermal management are just some of the elements necessary to achieve superior range, Rawlinson said. The company is beginning to seek funding for a new electric SUV based off the same platform as the Air.

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In the meantime, Gene Munster, a reliable Tesla bull, says that while it’s premature for the electric-car maker to be valued like Apple Inc., the comparison will gain credibility as long as Musk keeps increasing revenue.

“The thesis for Tesla’s business miracle is rooted in the handful of years that the company operated with effectively no competition,” Munster, managing partner of the venture capital firm Loup Ventures and long-time Apple analyst, wrote Monday in a research note. “Tesla has nearly a decade head start in EVs as other automakers under-invested in the space.”

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Is global inflation nearing a peak? – Al Jazeera English

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Calling the top of the current wave of inflation has been a painful exercise for economists and central bankers, who have been proven wrong time and again during the past year.

But data on Wednesday, which showed that some measures of inflation had cooled in the world’s two largest economies, was likely to rekindle a debate about whether the worst might be over after a year of torrid price growth.

United States consumer prices did not rise in July compared with June due to a sharp drop in the cost of petrol, delivering much-needed relief to American consumers on edge after steady prices climbs during the past two years.

And China’s factory-gate inflation slowed to a 17-month low on an annual basis while consumer prices rose less than expected.

After wrongly predicting last year that high inflation would be transitory, most central bankers, including the US Federal Reserve, have stopped trying to put an exact date on when they expect current price growth to peak.

US central bank officials see inflation decelerating through the second half of the year, the European Central Bank puts the peak in the third quarter and the Bank of England sees it in October.

Here are some of the key data shaping the inflation debate:

Raw materials are getting cheaper…

The main culprit for the surge in consumer prices last winter – energy and other raw materials – may be the harbinger of lower inflation this time around.

Prices of critical commodities such as oil, wheat and copper have fallen in recent months after spiking earlier this year. Oil and food items soared after Russia invaded Ukraine.

Shoppers inside a grocery store in San Francisco, California, U.S
Shoppers inside a grocery store in San Francisco, California, United States [File: Bloomberg]

The fall in prices came amid weaker global demand and economic slowdowns in China, the US and Europe, where consumers are dealing with high prices.

Some indices of inflation are already being affected: fewer firms are reporting increased input costs, and wholesale price rise is decreasing in many parts of the world

…But European energy bills won’t

With winter approaching on the continent, European households are unlikely to see their energy bills come down anytime soon. Recently, there have been talks of rationing in eurozone countries, including in Germany.

This is because gas prices in Europe – which, for years, has relied on Russia for a large portion of its imports – are still four times higher now than a year ago and close to record highs. There has been much uncertainty surrounding gas flow via the Nord Stream pipeline.

Even in the United Kingdom, which has its own gas but very little storage capacity, consumers are set to see their power bills jump in October when the current price cap expires.

Increased petrol and diesel prices are seen on a display board at a filling station, in London, Britain
Increased petrol and diesel prices are seen on a display board at a filling station, in London, United Kingdom [File: Peter Nicholls/Reuters]

There is bad news for German drivers, too, who will see a subsidy at the petrol pump expire at the end of August.

Expectations are (mostly) under control

Some central bankers can take comfort in the fact that investors have not lost faith in them.

Market-based measures of inflation expectations in the US and the eurozone are only just above the central banks’ 2 percent target, while they remain uncomfortably high in the UK.

After the Federal Reserve’s meeting last month, the central bank’s Chair Jerome Powell stressed that the Fed is ready to use all of its tools “to bring demand into better balance with supply in order to bring inflation back down to our 2 percent goal”.

Consumers in the US, eurozone and UK, expect to see inflation stay above the 2 percent target for years to come.

According to a survey conducted by the Reuters news agency, a vast majority of the economists polled said that inflation would stay elevated for at least another year before receding significantly. About 39 percent of economists asked said that they expect inflation to stay high past 2023.

Core prices may be trending down…

Core inflation, the number that measures inflation while excluding the price of volatile components like food and fuel, has started to cool in the US and UK. Some economists predict Japan and the eurozone will follow suit.

Nevertheless, core inflation remains higher than most central banks’ comfort zone both in developed and developing economies. That means that central banks will continue to increase borrowing costs. The US Federal Reserve last month raised rates by 75 basis points for the second consecutive time. The bank meets again in September to consider further tightening.

A waiter walks holding a tray in a restaurant in Lisbon, Portugal
A waiter walks holding a tray in a restaurant in Lisbon, Portugal [File: Pedro Nunes/Reuters]

Wednesday’s US data hows recent interest rate hikes may already be having some effects.

And an artificial intelligence model used by Oxford Economics suggests core inflation will also peak in Japan and the eurozone in the second half of the year.

The Long Short-Term Memory network, originally developed to help machines learn human languages, parses detailed inflation data to spot patterns that helps it predict the Consumer Price Index in the future.

…But wages are pointing up

Workers’ wages have increased in the last year due to a tight labour market but not as fast as inflation.

The US Employment Cost Index also recently revealed that higher wages also resulted in a significant increase in US labour expenses in the second quarter of 2022.

According to figures released earlier this week, the cost of labour per unit of production increased by about 10 percent for non-farm firms in the US in the second quarter of this year.

One of the main factors influencing pricing over the long term is wages, and if they climb too quickly, a spiral of price rises may start.

“If that happens, we end up with an almost self-fulfilling type prophecy, where firms will start to push price increases onto their customers,” Brent Meyer, policy adviser and economist at Atlanta’s Federal Reserve, recently told Al Jazeera.

Outside of the US, the economic recovery has been more muted, and the impending recession may make it harder for labour to negotiate lower wages.

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Steep price drops will bring ‘sanity’ back to housing market in 2023: Desjardins – Global News

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Desjardins is forecasting the average home price in Canada will decline by nearly 25 per cent by the end of 2023 from the peak reached in February of this year.

In its latest residential real estate outlook published on Thursday, Desjardins says it’s expecting a sharp correction in the housing market, adjusting its previous forecast that predicted a 15-per-cent drop in the average home price over that same period.

Desjardins says the worsened outlook stems from both weaker housing data and more aggressive monetary policy than previously anticipated.

The Bank of Canada raised its key interest rate by a full percentage point in July, pushing up the borrowing rates linked to mortgages, and further increases are expected this year.

Read more:

Here’s how high interest rates are impacting Canada’s condo demand

The report also notes housing prices have dropped by more than four per cent in each of the three months that followed February, when the national average home price hit a record $816,720.

Despite the adjustment in the forecast, prices are still expected to be above the pre-pandemic level at the end of 2023.

Regionally, the report says the largest price corrections are most likely to occur in New Brunswick, Nova Scotia and Prince Edward Island, where prices skyrocketed during the pandemic.

“While we don’t want to diminish the difficulties some Canadians are facing, this adjustment is helping to bring some sanity back to Canadian real estate,” the report said.

The authors also note that the upcoming economic slowdown will ease inflationary pressures enough for the Bank of Canada to begin reversing interest rate hikes. Desjardins expects the Canadian housing market to stabilize late next year.


Click to play video: 'Bidding wars a thing of the past in Calgary’s once hot housing market'



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Bidding wars a thing of the past in Calgary’s once hot housing market


Bidding wars a thing of the past in Calgary’s once hot housing market – Jul 19, 2022

© 2022 The Canadian Press

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Canada Pension Plan reports $23-billion loss in June quarter as markets churn – The Globe and Mail

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The Canada Pension Plan Investment Board said it lost 4.2 per cent in its most recent quarter, subtracting $23-billion from the fund’s assets.

It could have been worse: The three months ended June 30 were awful for most investors. According to Royal Bank of Canada’s RBC I&TS All Plan Universe, defined benefit pension plan assets decreased by 8.6 per cent, tied with the third quarter of 2008 for the biggest decline in the 28 years RBC has been began tracking Canadian plan performance.

The S&P Global LargeMidCap Index, a measure of stocks CPPIB uses as 85 per cent of its benchmark reference portfolio, fell nearly 13.5 per cent in the quarter. The FTSE Canada Universe All Government Bond Index, the remaining 15 per cent of the benchmark, fell nearly 6 per cent. Blended, that means CPPIB beat a benchmark of negative 12.4 per cent by more than eight percentage points.

CPPIB closed the quarter with assets of $523-billion, compared to $539-billion at the end of the previous quarter. The investment losses were offset by $7-billion in contributions from the Canada pension Plan.

In the early days of the COVID-19 pandemic, when global markets tumbled, the CPPIB asset mix blunted the pain, and the pension fund manager lost much less money than an ordinary investor in the stock market. However, CPPIB often trails when public stock markets rise rapidly, as they did in several recent quarters when investors shook off their pandemic fears.

Now, we have returned to falling markets, and CPPIB is outperforming them.

“Financial markets experienced the most challenging first six months of the year in the last half century, and the fund’s first fiscal quarter was not immune to such widespread decline,” John Graham, CPPIB chief executive officer, said in a statement accompanying the returns. “The uncertain business and investment conditions we noted in the previous quarter continue, and we expect to see this turbulence persist throughout the fiscal year.”

CPPIB said its loss was driven by declines in public stock markets, but investments in private equity, credit and real estate also contributed “modestly.” CPPIB also lost money in fixed income investments, such as bonds, due to higher interest rates imposed by central banks to fight inflation.

Gains by external portfolio managers, quantitative trading strategies and investments in energy and infrastructure contributed positively. CPPIB also recorded foreign exchange gains of $3.1-billion as the Canadian dollar weakened against the U.S. dollar. (Most of CPPIB’s investments are held outside Canada, but it reports results in Loonies.)

The Canada Pension Plan, founded in 1966, is the primary national retirement program for working Canadians. The government created CPPIB in 1999 to professionally manage the plan’s money. Over time, CPPIB has embraced active management and its blend of stocks, bonds, real estate, infrastructure, private equity and other specialized investments has outperformed public markets and its reference portfolio.

While CPPIB reports quarterly, it points to its multigenerational mandate and likes to emphasize its long-term returns. The plan’s five-year net return, net of investment costs, was 8.7 per cent through June 30; the 10-year net return was 10.3 per cent.

CPPIB’s annualized return for the 10 years ended last Sept. 30 was, at 11.6 per cent, the highest 10-year performance figure in its history.

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