Plus: Don't look now, Elon, but Jeff Bezos is putting his space helmet back on.
| | | As the author of last year's Nightmare Before Christmas, Southwest Airlines isn't getting off easy. | On Tuesday, the airline was dealt a whopping $140 million fine by the Department of Transportation for its holiday meltdown that stranded tens of thousands of passengers for days on end in 2022. It appears the DoT bureaucrats know full well the most important holiday truism: Don't make anyone bunk with the in-laws any longer than necessary. | | | | |
| INDUSTRIALS | US Steel Gets a Big Buyout, But Not Everyone's a Fan | | | | | The sign may still say "US Steel," but ownership is heading to Tokyo. | Once the world's largest corporation, US Steel agreed to sell itself to Japan's Nippon Steel for just over $14 billion in a deal announced Monday. Though regulators and steel mill employees will have their say before the deal closes, Nippon is primed to grow its presence in the US auto industry, The Wall Street Journal reported. | Steel City | The all-cash deal, expected to close late next year, values US Steel at $55 a share, a 40% premium to its share price when markets closed Friday. US Steel CEO David Burritt said on an investor call that the merger is good not only for the companies involved but the US in general as the deal "creates a more competitive market here with one of the US' greatest allies." | Nippon can manufacture roughly 66 million metric tons of steel a year, but it's seen slowing demand in its home country and is looking to expand into South Asian, Indian, and US markets, the WSJ reported. Adding US Steel would allow Nippon to produce closer to 100 million metric tons of steel a year and supply the US' Big Three automakers, which recently settled labor negotiations and are ready to ramp up production again. The deal would also make Nippon the second-largest steel producer behind China Baowu Steel Group. | While US Steel has hinted at a sale for the past few months, the Nippon deal was a slight surprise, especially to many of the US company's employees: | - This past summer, US Steel rejected an unsolicited buyout of more than $7 billion from rival Cleveland-Cliffs although the United Steelworkers union, whose members staff both steelmakers, supported the offer. However, the union opposes the deal with Nippon, with the union's leader saying neither company sought labor's input.
- "We remained open throughout this process to working with US Steel to keep this iconic American company domestically owned and operated," Union President Dave McCall said. "Instead, it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company."
| Together is Better: Few American brands are more steeped in history than US Steel. Founded by J.P. Morgan, Andrew Carnegie, and other industry titans 120 years ago, the company helped build everything from the United Nations Building in New York City to the San Francisco-Oakland Bay Bridge. For some, seeing it sell to a foreign company is like if Diageo bought Jack Daniels or Yamaha acquired Harley-Davidson. | But in a rapidly polarizing world orbiting around the US and China, the deal could be a good litmus test for the US policy of friend-shoring, or concentrating manufacturing supply in the countries of traditional US allies. And Japan is as friendly as they come. Bloomberg's Brooke Sutherland argues that "America First" and "Build America, Buy America" are popular slogans, but we live in a big, complicated world. | Written by Griffin Kelly | | | | |
| INDUSTRIALS | Jeff Bezos Is Ready to Rejoin the Space Race | The billionaire space race is back on. | Jeff Bezos' space exploration company Blue Origin is finally ready to launch rockets again after a 15-month hiatus. Meanwhile, Bloomberg published a splashy profile on Project Kuiper, Amazon's satellite internet business that miraculously escaped companywide cost cuts in a bid to ultimately challenge Elon Musk's Starlink. | Ground Control to Major Jeff | In the heady days of 2021, society's 1% was high on the billionaire space race and touting the future of space tourism. Bezos himself blasted within a whisker of outer space in a Blue Origin rocket and Richard Branson rode on Virgin Galactic's first commercial space flight, again just grazing past the edge of our atmosphere. SpaceX's Elon Musk refrained from any space travel himself, but since 2021 his business has enjoyed more success than his rivals — bearing in mind that a massive explosion doesn't necessarily count as a failure in the space business. | Blue Origin grounded its rockets in September 2022 after an unmanned craft erupted in the bad kind of explosion, but now it's ready to start flying again. Both Blue Origin and Project Kuiper are still light years behind SpaceX in terms of both launches and lucrative contracts. However, analysts told Bloomberg that Project Kuiper doesn't need to rush to market: | - Once Project Kuiper has flung a significant number of its satellites into space, it can sell the subsequent internet connectivity alongside Amazon's industry-dominating cloud computing service AWS. Vertical integration with Blue Origin is a ways off, however, as the rocket intended to fly Kuiper satellites into space is years behind schedule, per Bloomberg.
- Analysts also told Bloomberg that Project Kuiper will have a ready-made selling point: Book with us and you won't have to worry about the whims of Elon Musk. Bezos' mission next year is to be nice and predictable.
| Pony Up: The UK has been jonesing to get in on commercial space flight, so far with limited success. When Virgin Orbit, Virgin's answer to Starlink, launched a supposedly historic flight this year it failed to reach orbit — and not long afterwards the business filed for bankruptcy, a common occurrence among satellite companies. However, whereas that (failed) launch was transported by a modified airplane, the UK now has a facility that can launch legitimate rockets. The country just licensed its first-ever vertical rocket launch site on the island of Shetland, of tiny pony fame. If the rockets that take off there aren't suitably fluffy and pint-sized, we will be sorely disappointed. | Written by Isobel Asher Hamilton | | | | |
| PERSONAL FINANCE | More Americans Than Ever Own Stocks | You can dismiss the stock market as a private club for the rich all you want, but in 2022, 58% of Americans held stocks, according to a recent poll from the Federal Reserve. It's the highest mark ever in the history of the triennial survey. | Attack the Stock | We all know the story: Stuck at home with nothing to do and perhaps a little extra cash, millions of Americans flocked into the stock market in 2020 for the first time ever. Easy-to-use brokerage apps and a relative market crash sparked by the onset of the pandemic created an on-ramp for regular Joe Schmoe's to masquerade as DIY Gordon Gekkos. | The once-every-three-years survey, conducted in 2019 and 2022, paints the perfect before-and-after picture of what we'll call the Robinhood bump: | - In 2019, 53% of US households held stocks either directly or indirectly via retirement accounts and other such funds, though direct ownership still sat at just 15%. Those numbers increased to 58% and 21%, respectively, by 2022.
- The influx of stock ownership radically reshaped what the average portfolio looked like. In 2022, the median value of households' direct stockholdings sat at about $15,000, or roughly just half of what it was in 2019.
| Crash Course: New entrants learned everything you need to know about equities in the past three years. They go up. They go down. Sometimes violently so. Despite an early-pandemic panic, the S&P 500 still rose 16% in 2020, and surged another 27% in 2021. By 2022, investors witnessed a profits-over-growth course correct, with the index falling 19%, before bouncing back 23% so far in 2023. | Shifting Tastes: Owning stock is something of an American pastime. US households keep about 39% of financial assets in equities, higher than most other countries, according to data from the Organization for Economic Cooperation and Development. But Americans are now turning toward bonds and money-market funds, typically left untapped by individual investors. We bow to anyone who managed to score a 2.8% rate on a 30-year mortgage in 2020 before pouring cash into a money-market fund with 5% returns in 2022. | Written by Brian Boyle | | | | |
Comments
Post a Comment