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Battery Shortage In 2022

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In his Daily Market Notes report to investors, while commenting on the battery shortage in 2022, Louis Navellier wrote:

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Q3 2021 hedge fund letters, conferences and more

Jim Cramer Gets Exercised

Yesterday, we saw a major relief rally as Omicron fears calmed.

It helped that millions of investors saw Jim Cramer on CNBC on Monday tell us he caught Omicron last week and still felt good enough to have a workout in his home gym, feeding hopes that Omicron, while very contagious, only delivers mild symptoms. That is still not the official medical conclusion. Kramer was a fully vaccination-boosted patient with no comorbidities and even optimistic investors must wait to see how hard the fast-moving variant hits the large blocks of unvaccinated people in the US and around the world.

Perhaps as much as a concern is the risk of policy mistakes that may be made regarding trying to contain the new variant. In the same vein, there are concerns about mistakes by the Fed in addressing inflation:  Are they being aggressive enough?  Will they be too aggressive and hurt a reopening recovery?  Fortunately, the primary market driver, earnings growth, remains strong as do general economic outlooks.  Consumer confidence numbers came in strong today too.

Santa Claus Rally

With interest rates still moderate despite the very high inflation statistics and announced plans to tighten monetary policy, stocks remain the most attractive investment alternative, and prospects for further gains in 2022 are good enough to expect a Santa Claus rally next week, especially if the outlook for Omicron infections increasingly look out to be as mild for most people as they were for Cramer.

Interestingly, regarding the port bottlenecks, major European ports, like Hamburg and Rotterdam according to The Wall Street Journal are “roughly flat or lag behind 2019 levels.”  However, major U.S. ports are processing almost 20% more container volume than they did in 2019.  The bottom line is U.S. consumers continue to boost spending on goods, while European consumers remain much more cautious.  According to the Bank of England, the U.S. accounts for almost 90% of a 22% worldwide surge in durable goods orders since the end of 2019.  U.S. GDP growth is forecasted to grow at a 6% annual pace in 2021 and 4% in 2022.  The primary reason that the U.S. dollar is strong is due to higher GDP growth as well as higher absolute interest rates than Europe and Japan.

A strong U.S. dollar will eventually help to suppress inflationary pressure since almost all commodities are priced in U.S. dollars.  Furthermore, since approximately half the sales in the S&P 500 are outside of the U.S., many multi-international companies will be posting better than expected sales due to a “currency tailwind.”  As a result, it is hard to not be optimistic about 2022, since the U.S. is driving overall global growth.

Battery Shortage In 2022

The Wall Street Journal recently featured a very good article on the demand for batteries as California and other states strive to store growing solar energy during off-peak hours.  In fact, the demand for large battery storage packs, which resemble shipping containers, for electric grid storage is further complicating the automotive industry’s transition to electric vehicles (EVs).  As an example, Volkswagen Group recently had to halt the production of its EVs at two plants in Germany due to supply shortages.  LG Chem primarily supplies Volkswagen Group with lithium-ion batteries from its massive battery plant in Poland, but VW is investing in six new European giga factories, while its manufacturing plant in Chattanooga, Tennessee will be supplied by SK Innovations new battery plant in Georgia.

Interestingly, Ford’s F-150 Lightning has almost 200,000 orders and new reservations have been temporally suspended due to 200,000 vehicles representing almost a three-year order backlog.  Although Ford has pledged to double the production of the F-150 Lightning and reopen its order books, you might be wondering why it takes Ford three years to produce 200,000 F-150 Lightning trucks, when Tesla is making over 200,000 EVs per quarter?  The answer lies in the ongoing shortage of lithium-ion batteries for all EV manufacturers.  Tesla has wisely shifted to less efficient, but safer (from fires) iron-phosphate batteries at its Shanghai manufacturing plant, otherwise it would also be impeded by the acute shortage of lithium-ion batteries.

General Motors has announced that its new EVs by Cadillac and GMC will be using 75% less cobalt than other lithium-ion batteries.  The fact of the matter is that due to a shortage of raw materials to make lithium-ion batteries, like cobalt, new battery technologies and formulas will be necessary, otherwise, the EV revolution is expected to stall.  Even Tesla has not yet formally revealed its new larger 4680 batteries that it is supposed to use at its new manufacturing plants at Austin and Berlin.  As well as Tesla has done boosting its EV production with multiple battery suppliers and technologies, I am starting to worry that complications with its 4680 batteries, including the supply of raw materials may impede Tesla’s ambitious sales growth.  As a result, I expect that the EV battery shortage will be big news in 2022, just like the semiconductor shortage has been big news this year.

Overall, the Green Energy Revolution is going to take decades and likely depend on new battery technologies that do not excessively rely on cobalt and other rare earth minerals.  One reason that fossil fuel prices remain high is that a lack of investment in new production as governments try to break away from fossil fuels has caused acute shortages to emerge, so it will be interesting if any governments try to slow down their transition to EVs and greener energy.  As an example, the Biden Administration has pledged for the federal government to buy 600,000 EVs, but between Ford, GM, and Stellantis (formally Chrysler), the Big 3 combined are not expected to manufacture 600,000 EVs by the end of the Biden Administration’s first term.

Encouraging Economic News

The economic news this week was very encouraging.  The Conference Board announced on Wednesday that its consumer confidence index surged to 115.8 in December.  Interestingly, the Present Situations component was relatively flat at 114.1 in December.  However, the Expectations component surged to 96.9 in December.  Obviously, if consumer expectations are high, it bodes well for the holiday shopping season as well as the outlook for the New Year.

The National Association of Realtors reported on Wednesday that existing home sales rose 1.9% in November.  Although absolute home sales were down 2% compared to October, year-to-date, existing home sales have risen 10%.  The inventory of existing homes for sale in November declined 9.8% from October, which represents a 2.1-month supply at the current sales pace.  In the past 12 months, median home prices have risen 13.9%.  The National Association of Realtors noted that in the past 12 months, expensive home sales, between $500,000 to $750,000 have risen 31%, while homes between $750,000 to $1 million rose 37% and homes above $1 million have surged 50%.  Median home prices are expected to continue to rise due to tight inventory as well as strong expensive homes sales.

Coffee Beans

Venus could be becoming "more habitable" after evidence of bacterial "lifeforms" were found in its clouds, scientists have said. The scientists believe that ammonia present in Venus' atmosphere could neutralize surrounding droplets of sulfuric acid, with pH at a level life could potentially survive at. Source: Sky News. See the full story here.