👋 Warren Buffett finally sold Apple

Good morning Investor! “I try to buy shares of unpopular companies when they look like road kill and sell them when they've been polished up a bit. Lost dollars are simply harder to replace than gained dollars are to lose.”

— Michael Burry

MARKET UPDATE

Shares of Palantir (PLTR) rallied by 8% leading into earnings, followed by a subsequent drop of 6% in after hours trading as revenue matched expectations.

TODAY’S BIG HEADLINES

• Warren Buffett finally sells Apple

• LVMH files lawsuit against Visa and Mastercard

• Shell sold millions of ‘phantom’ emissions credits

• Airbnb is being phased out

MEGA CAPS

Warren Buffett finally sells Apple🍏

Fleeting Moments: The Berkshire Hathaway (BRK.B) annual shareholders meeting took place over the weekend. Investors from all corners of the globe flocked to the CHI Health Center in Omaha, Nebraska, like moths to a flame, eager to hear the Oracle of Omaha, Warren Buffett, wax lyrical about the state of the markets and the Berkshire portfolio. It’s like a wildlife documentary, but with more suits and fewer animals.

Apple Exodus: According to Inc, Berkshire has been shedding Apple shares like a dog sheds fur in summer. They sold 115 million shares during the first quarter, marking the second quarter in a row where they’ve been a net seller of the stock. This sell-off has whittled their total position size down from a whopping $174.3 billion to a still-impressive $135.4 billion. Despite this, Buffett remains as bullish on Apple as a rodeo rider, stating that “Unless something really extraordinary happens,” he’s sticking around. This leaves Berkshire sitting on a mountain of cash, a staggering $189 billion! That’s enough cheddar to make a mouse faint.

The Proof is in the Pudding: The real reason for the sale? Buffett’s crystal ball is showing a change in US taxes. He saw an opportunity to cash in on the capital gains the company has made in Apple, given that the tax rate on those gains is currently a modest 21%. Buffett believes that change is inevitable and that higher taxes are on the horizon.

Tax Avalanche: Buffett predicts that the US government is unlikely to tighten its purse strings anytime soon. Therefore, it’s more likely that we’ll see taxes for the general public rise like dough in a bakery to pay off the country’s burgeoning debt burden. In fact, it’s getting so bad that by 2051, payments on just the interest of the debt are projected to become the largest line item in the federal budget! It’s like a financial snowball rolling downhill, and it’s only getting bigger.

LEGAL DISPUTES

LVMH files lawsuit against Visa and Mastercard📝

Courtroom Drama: Over the weekend, the Telegraph dropped a bombshell. Louis Vuitton’s parent company, LVMH (MC) , has decided to play hardball with payment juggernauts Visa (V) and Mastercard (MA). The fashion titan has unleashed a barrage of legal claims, adding fuel to the fire of a long-standing feud over credit card fees. This feels like an episode of Better call Saul!

Lawyers-palooza: LVMH, the proud parent of illustrious brands such as Tiffany & Co, Christian Dior, and Bulgari, has rallied its troops for what’s being dubbed a “legal blitz”. It’s starting to resemble a WWE Royal Rumble, but with more paperwork and fewer folding chairs. This isn’t a new trend, mind you. We’ve already seen the likes of Levi’s, Superdry, and AllSaints all step into the legal ring with the payment duo, arguing that their fees are as anti-competitive as a cheetah in a turtle race. They claim these fees cost businesses billions, which, like a bad meal, end up being regurgitated to the consumer in the form of higher prices. It’s like a schoolyard alliance against the lunch money bully.

The Devil is in the Details: The nitty-gritty of the lawsuit remains as elusive as a chameleon in a bag of Skittles. However, it’s widely suspected to be tied to the ongoing tug-of-war over interchange fees. These are the fees retailers begrudgingly fork over to banks when they accept card payments via Visa or Mastercard. Despite the legal onslaught, interchange fees have been frozen in time since 2015, capped at 0.2% for debit cards and 0.3% for credit cards. It’s like a financial Ice Age. I wonder if Scrat ever managed to find his beloved acorn.

Market Seesaw: Despite the legal tempest, both companies continue to grow like Jack’s beanstalk, even managing to squeeze out more profit through increased efficiency. It’s like they’ve found the golden goose, and it’s laying eggs at an incredible rate. Our wager? In the long run, this legal hullabaloo will have as much impact on their performance as a feather on a sumo wrestler. This cash cow isn’t going to stop producing the goods anytime soon.

COMMODITIES

Shell sold millions of ‘phantom’ emissions credits🛢️

Credit Crunch: Shell (SHEL), the oil behemoth, has been caught with its hand in the proverbial cookie jar. Its flagship carbon capture project has been selling emissions credits for CO2 reductions that were as real as unicorns, raking in $200 million (CAD) over a decade. And here we were thinking oil was the golden goose! These revelations are the result of investigative reports by Greenpeace and the Financial Times. This windfall is in addition to the $777 million (CAD) in subsidies that Shell has already pocketed from provincial and federal governments. Talk about having your cake and eating it too!

Buzzword Bingo: Carbon capture has long been hailed as a magic wand to reduce CO2 emissions. The snag? Its commercial viability is as elusive as a shy groundhog. Consequently, governments have been doling out subsidies like candy at a parade to incentivize companies to adopt it. A case in point is Shell’s Alberta-based carbon capture facility, Quest. Shell struck a deal with the Albertan government to register and sell carbon credits, which at the time, were valued at double the amount of carbon it actually captured at its Quest facility. This practice continued for eight years, an eternity in hamster years!

The Devil in the Details: Between 2015 and 2021, Shell managed to register around 5.7 million phantom credits, with one credit equivalent to one ton of CO2. Shell then sold most of these “phantom” credits to other energy titans such as ConocoPhillips, Suncor Energy, Chevron, and Canadian Natural Resources. The kicker? By selling credits to these firms, it effectively gave them a free pass to continue, and even expand, their own emissions-producing processes. It’s like selling water guns at a fire sale!

REAL ESTATE

Airbnb is being phased out…eventually🏠

Regulatory Rumble: Airbnb (ABNB), the short-term rentals company, has been locking horns with city regulators for years. But now, the gloves are coming off, with many cities looking to ban the concept outright. Maui, Hawaii, is leading the charge.

State of Play: Hawaii is currently grappling with a housing crisis, a common tale in many parts of the world. With the highest housing costs nationwide and one of the highest rates of homelessness, lawmakers are hoping that phasing out short-term rentals will be the lifeboat to steer clear of the looming iceberg of the housing crisis.

Action Stations: Two bills that could regulate “transient accommodations” are on the horizon and look set to pass. If they do, they could clip the wings of the short-term home rental industry, which has blossomed in recent years like a butterfly emerging from its cocoon.

The Nitty-Gritty: The two companion bills, HB1838 and SB2919, could give counties new powers to change residential zoning, including the ability to phase out short-term renting. From an investment standpoint, the key is that if these bills pass, governments worldwide could have a regulatory blueprint to follow. This could be a major blow to Airbnb. But, like a stubborn mule, Airbnb isn’t going down without a fight. They’ve hired Hawaii’s former attorney general, David Louie, to argue against the bills, claiming that if passed, these proposed measures could result in lawsuits challenging their constitutionality. It’s also worth noting that, even if passed, these changes would take several years to implement, like a slow-cooking stew. So, for now, it’s a waiting game.

MORE NEWS

Additional market-moving events🌎

• The Rise of Taiwan: Investors are flooding into Taiwan ETFs, scrambling for exposure to the artificial intelligence supply chain. (Reuters)

• Tesla’s Slimming: Tesla have reportedly performed even more layoffs over the weekend and on Monday, hitting different segments of the company, including software, services, and engineering. (The Verge)

• Take a Hike Jack: Jack Dorsey has departed the board of decentralized Twitter-competitor Bluesky. (TechCrunch)

• Savings? What’s that?: According to the San Francisco Fed, Consumers have now spent all $2.1 trillion of their pandemic savings. (Fortune)

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