EnergyX | April 9th, 2024 (2)

Today's insights are courtesy of EnergyX. Invest in EnergyX alongside GM and other industry leaders as they meet the 20X demand for lithium.

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GOOD MORNING

Here's everything you need to know today:

Recent revelations by Unusualwhales shed light on U.S. politicians profiting from investments in defense companies amid ongoing military conflicts.

President Biden has announced a $6.4 billion grant to Samsung to expand chip production in Texas, aiming to strengthen America's tech infrastructure and reduce foreign manufacturing reliance.

Meanwhile, Tesla announces significant layoffs following sluggish sales, signaling a strategic shift and necessary recalibration in its workforce.

Goldman Sachs reports a 28% profit jump in Q1, reflecting a robust revival in its investment banking sector and a positive outlook despite past challenges.

Let’s dive into more detail below.

WAR

These Politicians are Profiting From Conflict

Investments in defense stocks by key U.S. politicians amid ongoing military engagements call into question the integrity of public service

BREAKING NEWS
Recent data from Unusualwhales has brought to light the financial gains of U.S. politicians from investments in companies that are seen as beneficiaries of ongoing military conflicts, particularly in Eastern Europe and the Middle East. The report highlights the potential conflict of interest when public servants stand to profit from companies that benefit from military engagements, sparking a broader discussion about the relationship between public service, private wealth, and morality.

WHAT HAPPENED
A recent analysis from Unusualwhales has cast light on the investment practices of several U.S. politicians, revealing substantial holdings in sectors likely to benefit from military conflict. Key figures like Kevin Hern, Mark Green, Tommy Tuberville, Nancy Pelosi, Michael McCaul, Maria Salazar, Alan Lowenthal, Lois Frankel, Patrick Fallon, and Diana Harshbarger are among the top investors in defense, energy, and technology companies—industries that typically experience increased demand and valuation during wartime.

Particularly notable within their investment portfolios are major defense stocks such as Lockheed Martin Corporation (LMT), a leading defense and aerospace provider, and Raytheon Technologies Corporation (RTX), renowned for its aerospace and defense services. Also included is the Direxion Daily Aerospace & Defense Bull 3X Shares (DFENDD), an ETF that aims to amplify the investment returns of the aerospace and defense industry index. These strategic investments underscore the complex relationship between elected officials' portfolios and sectors that can be directly affected by international conflict and defense spending.

One company of note is Lockheed Martin (LMT), which recently secured a substantial $4.1 billion contract to bolster missile defense capabilities. Coinciding with this news is the revelation of consistent investment behavior from politician Kevin Hern, who has been routinely acquiring shares of LMT in increments of up to $15,000 since 2019. His most recent purchase on March 29th suggests sustained confidence in the company's profitability and prospects, highlighting the ongoing intersections between political actors and major defense contracts.

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Electric Vehicles

Tesla Hits Brakes on Staff

Major layoffs announced by Tesla in response to sluggish sales and stock dips

BREAKING NEWS
Tesla (TSLA) has just announced significant layoffs that have analysts sounding the alarm over the electric vehicle giant's future. Following a quarter of lower-than-expected deliveries and a burgeoning inventory surplus, CEO Elon Musk has delivered the unwelcome news of a global workforce reduction by more than 10%. Early reactions have seen Tesla’s stock dip, as the market digests the implications of such a move from a company once synonymous with exponential growth.

WHAT HAPPENED
Tesla's usually bullish narrative hit a snag with the announcement of a large-scale staff reduction as reported by the EV-focused outlet Electrek. The move, confirmed by Musk, comes in the wake of a Q1 performance that fell short of targets, showcasing a concerning buildup of inventory. With approximately 140,000 employees worldwide, this decision could potentially leave 14,000 individuals without employment. Musk, known for his distaste for such measures, describes the layoffs as a necessary evil amidst preparations for what he terms "our next phase of growth."

The underlying message is clear: Tesla is entering a period of tightening its belt, acknowledging a shift from its previously unbridled expansion to a more cost-conscious era.

Historical data on the company's employment patterns reveals a recurring theme of layoffs as a strategic tool for cost management and organizational restructuring. In 2017, Tesla trimmed its workforce by 2%, followed by more substantial cuts of 9% in 2018 and 7% in 2019. After a period of relative stability, the pattern resumed in 2022 with another 10% reduction. The current cutback in 2024 aligns with past actions during times of financial recalibration, reflecting Tesla's pragmatic approach to navigating the volatile landscape of the electric vehicle market.

WHY IT MATTERS AND WHAT’S NEXT ➔

CHIPS

Biden Boosts Samsung with $6.4 Billion

This funding boost aims to strengthen America's tech infrastructure and reduce reliance on foreign manufacturing

BREAKING NEWS
President Biden has announced a $6.4 billion grant to Samsung to expand chip production in Texas, a significant development for the U.S. technology sector. This strategic investment is part of a broader initiative to strengthen the semiconductor ecosystem in the U.S. and reduce dependency on foreign chip manufacturing.

The decision comes at a crucial time as GPU manufacturers like Nvidia, which holds 84% of the discrete GPU market, face capacity limitations and struggle to meet escalating demand. This funding aims to boost production capabilities and ensure a stable supply of critical components essential for various tech industries.

WHAT HAPPENED
On Monday, the Biden administration announced plans to award Samsung up to $6.4 billion to expand its semiconductor production capabilities in and around Austin, Texas. This substantial grant aims to reinforce the U.S. semiconductor industry's infrastructure as part of a national strategy to enhance technology manufacturing capabilities. As part of the expansion, Samsung will upgrade its site in Austin and develop a new high-tech manufacturing hub in Taylor, Texas.

This development includes ambitious plans to triple Samsung's high-bandwidth memory (HBM) chip production in 2024 compared to 2023. Furthermore, Samsung has unveiled a roadmap targeting a 13.8-fold increase in HBM shipments by 2026 from 2023 figures, marking a significant commitment to advancing U.S. chip manufacturing.

WHY IT MATTERS AND WHAT’S NEXT ➔

BANKING

Goldman Sachs Stick 28% Profit in Q1

A 28% profit jump and revitalized investment banking sector boost CEO David Solomon's strategy amid challenging times

BREAKING NEWS
Goldman Sachs has delivered a striking performance in the first quarter of 2024, exceeding expectations with a 28% surge in profits driven by a robust revival in investment banking. This success provides a welcome boost for CEO David Solomon, whose tenure recently faced formidable challenges from being called a "bully" and consumer banking venture Marcus.

The upswing in financial metrics, notably a 32% hike in investment banking fees and notable gains in asset management and trading, underscores the firm's resilience and strategic recalibration.

WHAT HAPPENED
The financial titan reported a net income of $4.1 billion on revenues of $14.2 billion, attributed to a diverse revenue stream that includes a substantial increase in advisory and underwriting fees. Despite a tumultuous year marked by an exodus from consumer banking and the departure of high-profile executives, Solomon's leadership saw Goldman's stock jump over 5% in early trading.

His optimistic outlook on the 'reopening of capital markets' seems to be taking shape, even as shareholder scrutiny intensifies over governance and compensation practices. This scrutiny comes in light of proxy advisory firms ISS and Glass, Lewis & Co.'s recommendations to limit Solomon's power by separating the CEO and chairman roles.

WHY IT MATTERS AND WHAT’S NEXT ➔

1. Stock Market Retreat Amid Rising Yields and Middle East Tensions

The S&P 500 and Nasdaq closed significantly lower as rising yields and concerns over Israel's potential response to an Iranian attack impacted market sentiment.

2. Dow's Losing Streak

The Dow Jones Industrial Average marked its sixth consecutive losing day, nearing a break-even point for the year after significant early gains were lost.

3. Goldman Sachs' Strong Earnings

Despite overall market downturns, Goldman Sachs saw a nearly 3% rise in its stock after reporting strong first-quarter earnings, contrasting with the broader market's struggles.

4. Retail Sales Exceed Expectations

March saw a 0.7% increase in retail sales, indicating sustained consumer spending despite inflationary pressures, surpassing the 0.3% increase forecasted by economists.

5. Technology Stocks Decline

Major technology stocks, including Salesforce, contributed heavily to the Nasdaq's drop, with Salesforce plunging over 7% amid acquisition talks.

6. Iran Launches Direct Attack on Israel

This significant escalation in Middle East tensions influenced global markets, adding to the volatility and concerns of a broader conflict affecting global economic stability.

7. Oil Market Fluctuations

After initial gains due to geopolitical tensions, oil prices settled lower but remained a concern for inflation and economic stability.

8. Market Response to Geopolitical Uncertainty

The CBOE Volatility Index spiked to its highest level since October, reflecting increased market anxiety due to the unfolding situation in the Middle East.

9. Impact on Treasury Yields

The yield on the 10-year Treasury note rose, reaching levels not seen since mid-November, influenced by strong retail sales and ongoing inflation concerns.

10. Investor Sentiment Weighed Down by Geopolitical Risks

The direct conflict between Iran and Israel, coupled with the strong U.S. consumer spending data, led to fears of persistent inflation and higher interest rates, weighing down market sentiment and leading to a broad market sell-off.

CONTINUE READING ➔

Today's insights are courtesy of EnergyX. Invest in EnergyX alongside GM and other industry leaders as they meet the 20X demand for lithium.

Learn More About EnergyX ➔

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