# 675 – ☀️ No sunlight for the solar business – The Average Joe

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    # 675 – ☀️ No sunlight for the solar business

    victorlei

    April 17, 2024

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    Good morning. The warming of ocean waters is causing coral reefs to undergo near-record bleaching events:

    • Currently, 54% of ocean waters are experiencing heat stress high enough to cause bleaching of coral reefs — vital for food, tourism, and coastline protection.

    • This surpasses the previous record of 56% observed from 2014 to 2017 — and the trend suggests it may soon exceed that mark.

    Climate scientists say this is just a decades-old prediction coming true. Let’s hope their next forecast — that all reefs experience bleaching by 2050 — doesn’t become a reality.


    SOLAR

    2024 Was Supposed To Be Solar’s Big Comeback Year. Instead, the Industry Is Cloudier Than Ever.

    The solar industry is stuck in the Three-Body Problem, with issues like higher interest rates, declining feed-in tariffs, and backlash against Environmental, Social, and Governance (ESG) constantly tearing it apart. After a rough two years, renewable energy analysts were banking on the hope that 2024 would bring much-needed sunshine to the fast-growing solar business — but instead of supercharging the sector, it finds itself under darker clouds.

    No sunlight: By 2043, over half of US energy could come from solar — but that power won’t be generated on Americans’ rooftops. A Solar Energy Industries Association forecast shows a 13% drop in solar installations by US homeowners this year, pushing over a hundred solar contractors out of business. Two factors are to blame…

    • Higher interest rates: Similar to the impact on EVs, rising rates affect more than 90% of residential solar sales financed through loans or leases.

    • Reduced returns: Utility firms in California (which represents 37% of the residential solar market) have cut compensation for surplus energy sent back to the grid by 75% — with other states likely to follow suit (WSJ).

    China looms

    The Invesco Solar ETF ($TAN), reflecting the solar industry, has halved in value over the past year. Recovery for domestic solar panel producers like SolarEdge ($SEDG) and First Solar ($FSLR) may not happen until 2025 as they grapple with competition from cheaper, entrenched Chinese counterparts.

    • China produced 91% of polysilicon solar panels in 2022 — the most popular and highest-quality variety, representing three-quarters of US installations.

    • Making matters worse, China can manufacture these panels at a 44% lower cost than US-based companies.

    On the bright side… After a record year for small-scale solar installations in 2023, solar is still the preferred source for new energy production among power utilities. This year, US power producers will install 63 gigawatts of new electricity generation — with solar contributing 60% and battery storage 23%. But even that won’t help the industry bounce back… unless the Fed wants to chime in.


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    LARGECAP RECAP

    🎵 DOJ to file antitrust lawsuit against Live Nation, Ticketmaster

    There’s nothing more dangerous than Swifties… just ask Live Nation ($LYV), the parent company of Ticketmaster. After being thrust into the limelight from ticket sale issues during Taylor Swift’s Eras Tour, the company’s chokehold on the music industry — from festivals to ticketing and artist management — is now at risk.

    • The Department of Justice (DOJ) is expected to launch an antitrust lawsuit against Live Nation this week, alleging that the company’s larger promoter and ticketing platform has “undermined competition” in live events.

    • Live Nation, which merged with Ticketmaster under an agreement with the DOJ, had already violated an agreement where it promised not to retaliate against venues not using its platform.

    Big Music’s final stand: According to Axios, analysts anticipate Live Nation will likely settle to protect its 80% market share in primary ticket sales and preserve its cultural permanence through music festivals, including Lollapalooza, Austin City Limits, and Bonnaroo. But an eventual agreement could cost billions, potentially opening the door for rising independent alternatives to challenge the status quo in the music industry.

    💰 Investment banking makes a comeback as dealmaking picks up

    Last week, big banks like JPMorgan ($JPM) and Citi ($C) reported mixed earnings — stoking fears that higher interest rates could eat into banks’ profits this year. But there was one bright spot: investment banking. And this week, Goldman Sachs ($GS) and Morgan Stanley ($MS) comfortably beat expectations, buoyed by their investment banking (IB) revenue.

    • Goldman reported over $2B in profits from IB fees, a 33% year-over-year (YoY) increase — and the bulk of the company’s 28% overall profit surge.

    • Morgan Stanley also posted strong results, with a 14% profit spike thanks to wealth management revenue, IB fees, and equities trading, all of which beat expectations.

    Let the dealmaking begin: With capital markets rebounding after a rocky 2022 and 2023, companies are considering their next moves. While initial public offerings (IPOs) remain the slowest since 2019, mergers and acquisitions (M&As) have doubled this quarter — bolstering investment banks’ performance. Some experts predict an IPO rebound, including Citi’s CEO Jane Fraser, who’s “cautiously optimistic” it’ll pick up in Q2.


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    Markets & Economy

    Volkswagen ($VWAGY) workers to vote on union this week: It would be a major coup for the United Auto Workers, who have struggled over the years to unionize outside of the Big Three automakers. Of the 13 union drives the UAW has planned this year, VW is considered the most promising. [Read]

    UnitedHealth ($UNH) beats earnings estimates despite cyberattack: The health insurer is still dealing with the fallout of an ongoing cyberattack — but that didn’t stop United from posting $99.8B in revenue. Overall, the company still saw a net loss of $1.41B, so it wasn’t all great. [Read]

    Homicides are plummeting in many major cities: Despite lots of talk about rising crime on the campaign trail, several cities are witnessing a decline in murders, including Miami (-33%), Philly (-37%), and Boston (an impressive -82%). Unfortunately, LA and Atlanta saw slight bumps. [Read]

    Business & Wealth

    Amazon ($AMZN) tries to take on Trader Joe’s — by mimicking it: The retail giant recruited a top manager from the iconic grocery brand, aiming to replicate closely-guarded secrets (like, say, how TJ’s makes those dark chocolate peanut butter cups so addictive). It’s yet another case of Amazon trying to dominate every retail sector, including groceries. [Read]

    Strikes force Lufthansa ($DLAKY) to adjust guidance: Ongoing strikes due to poor working conditions have led to frequent flight cancellations and scheduling snafus. Now, they’re projecting losses of ~$902M this quarter. [Read]

    Childcare costs spiral out of control: March saw a 4.4% increase in childcare costs compared to the previous year, prompting some parents to exit the workforce. The cost jump is mostly a labor issue — providers are struggling to retain staff. [Read]

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    DIGIT OF THE DAY

    The Travel Industry Is So Back — 2024 Travel Spending Set to Surpass 2019 Levels, Adding $11.1T To The Global Economy

    Pack your bags and grab your passports, because travel is taking flight like never before. According to the Conference Board’s consumer confidence survey, a record number of US adults are planning trips abroad in the next six months, thanks to increased wealth from the booming stock market and higher interest rates on bank deposits.

    • The World Travel & Tourism Council (WTTC) predicts global tourism will contribute $11.1T to the global economy in 2024 — surpassing 2019’s high of $10T.

    • Domestic travel is outpacing international travel, with domestic spending expected to hit a record $5.4T this year, a 10% bump from 2019.

    What’s the future forecast? While ~77% of countries surveyed are set to surpass their 2019 tourism figures, the US and China are struggling to attract foreign tourists — with inbound international tourism spending down by 25% and 60%, respectively, compared to pre-pandemic levels. As tourism flourishes, the travel industry is set to see more promising job opportunities. WTTC’s Julia Simpson remains optimistic, stating to Bloomberg, “Travel isn’t just back, travel is booming.”


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