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  • Writer's pictureMike V.

Weekend Reading

Tiger 21 investors raise cash

The rich appear to be losing faith in this bull market. The 750 members of Tiger 21, a coalition of investors with $75 billion in assets, increased their cash holdings by 20% in the first quarter, bringing the group’s total allocation to levels not seen since the start of 2013. The move also marks Tiger 21’s first cash-raising effort in three years. The ongoing tariff tiff with China tops their list of market concerns, along with an unsustainable budget deficit and the failure to make progress with North Korean relations. A bigger cash pile will also come in handy, they say, in the face of any other “black swan” events that could rattle stocks. Tiger 21 President Michael Sonnenfeldt said that members are also worried about “continued government dysfunction, failing infrastructure, stock markets being ‘priced to perfection’. The group is backing away from hedge funds, while real estate is still the asset of choice. Tiger 21 has one foot on the brake because of concerns the expansion is long in the tooth.

Bloomberg: Self-Driving Trucks Will Carry Mail in U.S. for the First Time

Letters and packages moving between Phoenix and Dallas will travel on customized Peterbilt trucks run by TuSimple, an autonomous startup. There will be five round trips between the two cites, with the first haul leaving from Phoenix. It’s the first time that the Postal Service has contracted with an autonomous provider for long-haul service. “This pilot is just one of many ways the Postal Service is innovating and investing in its future,” the USPS said in a press release that cited the possibility of using “a future class of vehicles” to improve service, reduce emissions and save money. After the initial trial, which is expected to last about two weeks. Two years ago, the USPS Office of Inspector General outlined a step-by-step approach for the adoption of autonomous vehicles, and then earlier this year put out a request for ideas on using autonomous technology in its delivery fleet. While self-driving mail trucks are still years—if not decades—away, autonomous long-haul trucking might be realistic much sooner.

Jaguar Land Rover's loss due to weak Chinese demand

Tata Motors' stock slumped 7% after it revealed a record £3.6 billion ($4.6 billion) loss at its Jaguar Land Rover business. Revenue fell 6% at Britain's biggest car manufacturer as weak demand in China offset higher sales volumes in the UK and North America. Jaguar Land Rover realized £1.3 billion in cost savings and invested £3.8 billion in a bid to turn around its business. Demand in China meant overall retail sales slid about 6% to below 579,000 vehicles. Wholesale volumes also fell 11% to around 565,000 units.

Fed Chairman Jerome Powell investors 'need to focus' on business borrowing at 'historic highs'

There's a "moderate" risk that "near record levels" of business debt will spill over into the broader US economy and spark another financial crisis, Federal Reserve Chairman Jerome Powell. Collaterized loan obligations (CLOs) have been a key funding source for riskier business borrowing, Powell said. Business debt has clearly reached a level that should give businesses and investors reason to pause and reflect," Powell said. "Investors, financial institutions, and regulators need to focus on this risk today, while times are good."

There's only a "moderate" risk that business debt at "historic highs" will spill over into the broader economy and potentially spark another financial crisis. Business debt is "near record levels" and recent lending has been "concentrated in the riskiest segments," (CLOs) — actively managed securitization vehicles that buy up riskier assets — as a key source of funding for riskier business borrowing, given they hold 62% of outstanding leveraged loans. "Regulators, investors, and market participants around the world would benefit greatly from more information on who is bearing the ultimate risk associated with CLOs," Powell said.

Barron’s: Tesla Stock Is Dropping Because an Analyst Sees a ‘Code Red’ Situation

Wedbush’s Daniel Ives on Sunday reiterated a Neutral rating while lowering his price target from $275 to $230, below FactSet’s average near $301. Tesla stock, down more than 35% in 2019 as of Friday’s close, is off about 11% this month and is driving toward new year-to-date lows. “With a code red situation at Tesla, Musk & Co. are expanding into insurance, robotaxis, and other sci-fi projects/endeavors when the company instead should be laser focused on shoring up core demand for Model 3 and simplifying its business model and expense structure in our opinion with headwinds abound.” The company, which recently raised cash in a move that reassured some investors, has reportedly begun a round of intense cost management. A major stakeholder slashed its stake in the first quarter. “It all comes down to hitting profitability in the third and fourth quarters and beyond for Tesla, which thus far based on mixed signs of Model 3 demand in the field is becoming incrementally more challenging,” Ives wrote.

Bloomberg: Morgan Stanley Slashes Price Target for Tesla to $10

“Demand is at the heart of the problem,” analysts led by Adam Jonas said in a note. “Tesla has grown too big relative to near-term demand, putting great strain on the fundamentals.”

Jonas lowered his “bear case” for Tesla shares from a previous estimate of $97, which assumes Tesla misses its current sales forecast in China by about half. “We give Tesla credit for tapping into the world’s largest EV market for a number of years” in China, Jonas said. Musk raised concerns over the company’s cash burn, referring to Tesla losing $700 million in the first quarter. The carmaker raised about $2.4 billion in capital recently, but Musk said this won’t last long. Tesla isn’t alone in battling weaker global markets, including China. Germany’s central bank warned the nation’s auto industry -- one of the key pillars of Europe’s largest economy -- is facing more trouble as China’s slowdown deepens. The slump comes just as incumbent carmakers are spending heavily to develop electric cars.


Tries revving up sales with loans. The motorcycle maker is introducing 100 new models through 2027, to find new customers outside a pack of aging riders in the U.S. Harley expects those buyers to be younger and less wealthy than the baby boomers who drove its sales in recent decades, making financing more important to securing their business.

Barclays, Citigroup and JP Morgan Chase fined $1.2 billion for currency rigging

Barclays, Citigroup, JPMorgan and Royal Bank of Scotland have been fined $1.2 billion by EU antitrust regulators for rigging the spot foreign exchange market for 11 currencies. “Companies and people depend on banks to exchange money to carry out transactions in foreign countries. Foreign exchange trading activities are one of the largest markets in the world, worth billions of euros every day,” Commissioner Margrethe Vestager. “Today we have fined Barclays, The Royal Bank of Scotland, Citigroup, J.P. Morgan and MUFG Bank and these cartel decisions send a clear message that the Commission will not tolerate collusive behavior in any sector of the financial markets. The behavior of these banks undermined the integrity of the sector at the expense of the economy and consumers,” Vestager added. The EU investigation that has been ongoing for the past six years. A similar case with the US regulators is ongoing where Barclays, BNP Paribas, Citigroup, J.P. Morgan, Royal Bank of Scotland and UBS have entered related guilty pleas, and been collectively fined more than $2.8 billion. US regulators said the foreign exchange rate rigging was done through chat rooms with such names as “The Cartel,” “The Mafia” and “The Bandits’ Club,” through tactics with such names as “front running,” “banging the client,” “painting the screen” and “taking out the filth.”

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