Investment Ideas From the Edge of the Bell Curve
Well, this is interesting.
European supermarket giant Carrefour won’t stock PepsiCo products in France, Italy, Spain and Belgium.
Carrefour claims goods like Pepsi, Lay’s crisps and 7up now cost too much following PepsiCo’s price hikes.
A Carrefour spokesperson told Reuters the price increases were ‘unacceptable’.
I am now invested in how this strategic argy-bargy will go.
Who will win? Who has more competitive might?
Will PepsiCo reduce prices or cop it? Can it afford to?
Can Carrefour afford to not stock PepsiCo’s products? And what will happen to sales of Coke?!
Carrefour is telling customers in four European countries it will no longer sell products like Pepsi, Lay's crisps and 7up because they have become too costly, in the latest tug-of-war over prices between retailers and global food giants https://t.co/NBQZrRb3Hd pic.twitter.com/BRvagoapLY
— Reuters (@Reuters) January 4, 2024
Happy Friday!
Although it wasn’t a happy one for lithium stocks (especially Core Lithium).
Lithium stocks were the worst performers today, with Core leading the way after announcing the suspension of mining operations following collapsed spodumene concentrate prices.
CXO ended the day 11.5% lower.
Ioneer fell 6.7%.
Delta Lithium fell 6.7%.
Latin Resources fell 6%.
Sayona Mining fell 4.7%.
OpenAI’s Greg Brockman is posting heavily on Twitter again after nearly being ousted by the OpenAI board a few months back.
In this tweet, Brockman turns from AI guru to self-help guru.
Personal energy management is as important as any technical skill.
— Greg Brockman (@gdb) January 5, 2024
Manage your energy… It’s just as important as any technical skill, like coding, or air traffic control, or open-heart surgery.
Oil and gas minnow Calima Energy [ASX:CE1] is up 60% after selling a subsidiary oil business for $83.3 million.
Calima entered a binding definitive agreement with Astara Energy to sell its wholly owned subsidiary Blackspur Oil for cash consideration.
Calima management recommended the Blackspur sale because the ‘market capitalisation of the Company on the ASX has not reflected the inherent value of Blackspur, with the Blackspur sale value approximately double the current market capitalisation of the Company.’
Calima expects to distribute at least 85% of the sale funds to shareholders ‘in the most tax effective form’.
Calima chairman Glenn Whiddon commented:
‘For some time, the share price of Calima has not accurately reflected the value of Calima’s oil and gas assets vis a vis our Canadian peers. The Blackspur Sale presents an excellent opportunity for Calima shareholders to benefit from this differential.’
Online wagering firm BlueBet [ASX:BBT] is up 23% after media speculation it’s in merger talks with BetR.
Yesterday, the AFR’s Zoe Samios reported that BetR’s Matthew Tripp and BlueBet’s Michael Sullivan discussed joining forces.
Samios wrote:
‘Two wagering sources indicated BetR had wanted to take over BlueBet, but others said any transaction, if successful, would be in the form of a merger. It is unclear whether any transaction would result in a delisting of BlueBet from the ASX.
‘The talks are ongoing, but there is no guarantee a deal will be signed.’
This morning, BlueBet addressed the reporting.
The bookie was terse and circumspect.
BlueBet said it’s ‘regularly involved in discussions with third parties regarding strategic initiatives, including BetR, aimed at maximising shareholder value.’
It then ended with a generalised caution:
‘While discussions may occur, there can be no certainty that any transaction will eventuate. BlueBet will continue to update the market in accordance with its continuous disclosure obligations.’
Here’s my prediction piece for 2024, exploring the economics of AI.
***
Predictions are useless. Most of the time.
At least, that’s what Jane McGonigal argued in her book Imaginable.
Predictions are often wrong. Like the prediction of a US recession in 2023.
And even when predictions are accurate, we often don’t know what to do with them.
What do you do with a prediction of a soft landing? The implications of that prediction are wide.
McGonigal instead calls us to replace predictions with ‘episodic future thinking.’ Imagine the world under different scenarios, like a sci-fi novelist.
Imagining the ins and outs of these scenarios is more fruitful than making bland, open-ended predictions.
In that spirit, here’s some imaginings about the advance of artificial intelligence. Charlie has touched on some wider themes in his piece earlier.
I’ll focus on the business of AI here.
Who will make money from AI? How profitable will the AI industry be?
Before that, an irony.
I was reading a book on the economics of AI. The authors’ key point was that AI will make predictions cheap.
Cheap and abundant. We’ll be in a prediction surplus.
How’s that for a prediction!
Cash is king.
Markets look at any new development with cash in mind.
In the end, assets are discounted to the present value of their future expected cashflows.
This is a great model to have of how markets eventually appraise stocks…and technology.
So, for markets, the AI question is simple.
Where’s the money?
Core Lithium said it has about 280,000 tonnes of ore stockpiled. That should be enough to feed the concentrator until mid-2024 without any further mining.
However, Core also said it will likely cop an impairment of the carrying value of its Finniss operation in its upcoming half-year results.
Core chief executive Gareth Manderson said:
‘The team has moved at pace to ensure Core’s value is preserved in these tough market conditions. While suspending mining operations is a difficult decision, processing of ore stockpiles will continue to generate revenue and we will focus on managing our cash reserves prudently. We are working to put the business in the best position possible to recommence mining and proceed with BP33 when market conditions improve.
‘The Northern Territory government has been a supportive partner, and we remain committed to finding a path forward for the Finniss operation and the Territory community. We understand that this decision is difficult for employees, contractors and some local businesses. There is significant prospectivity in the NT both in the Finniss district and in our broader regional tenement holding. We will continue to take a longer-term view and explore for new lithium resources.’
$CXO $CXO.AX suspends mining operations and flags likely impairment of its Finniss project. pic.twitter.com/AA1sTe42pI
— Fat Tail Daily (@FatTailDaily) January 4, 2024
Fledgling lithium producer Core Lithium [ASX:CXO] is down 10% in early trade on Friday after a strategic review update.
With ‘weak market conditions continuing’, Core will suspend mining in the Grants open pit. Processing of stockpiles will continue. Management explained:
‘Core has decided to continue processing of established ore stockpiles and temporarily suspend mining operations in the Grants Open Pit. This approach reduces the cash cost of Finniss operations, generates revenue from stockpiles and provides an opportunity to recommence mining as market conditions improve. By suspending operations, rather than preferentially mining ore over waste, the current mine plan will be preserved resulting in improved economics of future mining activities.’
On top of that, ‘discretionary spending’ will be reduced.
Core Lithium is down 78% in the past 12 months.
Three days before Christmas, Core initiated a strategic review after the price of spodumene concentrate fell 85% in the last year.
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Investment ideas from the edge of the bell curve.
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