Today’s News

The Big Picture

• ASX flirts with correction territory as sell-off deepens. The ASX200 clawed back some losses yesterday after briefly entering a technical correction at the open, defined as a 10% fall from a recent peak. It wasn’t alone, with the Japanese Nikkei 225 down 3.5% and Korea’s Kospi falling 6%. Markets remain volatile, but it’s a timely reminder to stay the course and remain invested. This is the largest market crash since the last one you can no longer remember. (AFR)
  
  

• Energy chief warns Middle East war could reshape markets for years. International Energy Agency head Dr Fatih Birol says world leaders are underestimating the long-term impact of the conflict, with more than 40 energy assets already damaged or destroyed. He told the National Press Club the current crisis has already surpassed the 1970s oil shock, with losses of around 11 million barrels per day compared to 5 million back then. (ABC)
  
  

• Australia’s oil buffer under threat as Asia feels the squeeze. While Australia hasn’t yet felt direct supply disruptions from the Middle East conflict, the pressure is building. More than 80% of Australia’s oil is imported from Asia, which in turn sources 60–70% from the Middle East. As regional nations prioritise domestic supply and with just two local refineries still operating, shortages at home may not be far off. (ABC)
  
  

• Surging insurance costs push retirees to breaking point. Home insurance premiums have jumped 51% over the past five years, according to Finity, leaving many retirees struggling to keep up. Some say retirement is beginning to feel more like a ‘prison’ than a reward. (ABC)
  
  

• Carmakers slam the brakes on EV ambitions. At least 12 global automakers, including Honda, Mercedes-Benz, Ford and Volvo, are scaling back electric vehicle plans amid weaker demand and reduced government support in the US and EU. Rolls-Royce is the latest to pivot, confirming it will continue producing petrol vehicles beyond 2030. (FT)
  

Companies in the news

• Uber joins DiDi in raising prices across Australia. The ride-sharing giant will lift fares by an average of 6% nationwide, following a similar move by rival DiDi. Uber says the increase is part of a broader pricing reset, not a temporary fuel surcharge. (The Guardian)
  
  

• Qantas confident on fuel supply, but risks loom. The airline says its fuel needs are secured until at least the end of April, with CEO Vanessa Hudson citing ongoing discussions with government. However, industry experts warn confidence beyond that point is low, with Asia and Europe expected to feel the strain. (AFR)
  
  

• WiseTech co-founder allegedly offered $5m to withdraw complaint. A recording has emerged of Richard White offering a payment to a female employee who accused him of inappropriate behaviour. In the audio, he reportedly says she would need to withdraw her claim. The allegations are part of a broader review launched after multiple women came forward. (AFR)
  
  

• Kyle Sandilands launches legal action against ARN Media. The former radio host is suing ARN Media following the termination of his $100m contract. Shares in ARN fell 4.5% at the close of trading yesterday. (ABC)
  
  

• Amazon scores first true box office hit with Project Hail Mary. A decade after entering Hollywood, Amazon has landed its biggest theatrical success, with Project Hail Mary generating US$80.5m on opening weekend. It marks the strongest debut for a non-franchise film since Oppenheimer. (WSJ)
  

What the…?

RIP Metaverse. Mark Zuckerberg’s infamous metaverse has finally been laid to rest, with Meta announcing last week that the digital universe will no longer be accessible to new users from June 15. Meta has reportedly lost around US$80bn on the project, after Zuckerberg’s vision of an immersive digital world, where users could meet, work and play, failed to eventuate.

It’s easy to point and laugh at the Metaverse’s failure, but at the time, in a COVID-era world where the future of face-to-face interaction was being questioned, the hype was real. In a 2022 report, McKinsey forecast the Metaverse would generate up to US$5 trillion in revenue by 2030. Consultants weren’t the only ones giddy with Metaverse fever, as companies like Disney and Gucci even appointed their own ‘Chief Metaverse Officers’.

We weren’t able to find these roles still active on LinkedIn, but we have a sneaking suspicion they may have been redeployed as ‘Head of AI Strategy’. (NYT)

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Today’s Insight

Income investing through Royalties

This was taken from our recent Equity Mates Investing episode titled ‘Think beyond dividends: Income options for all investors with Tom Wickenden’ (Spotify | Apple | YouTube)

Bryce: Now, Tom, you mentioned royalties earlier. We’ve had a number of experts on the show talk about how royalties play a part in their portfolio. So can you talk us through what the option is here?

Tom: Yeah, so Betashares has the first of its kind in the world, a royalty focused passive ETF. So traditionally direct royalties at least are the realms of larger companies and institutions. For example you give financing to some mine or some pharmaceutical company and you then have rights to future revenue streams. Very appealing, but I can't give a $4 million loan to a gold mine, unfortunately. So there are lots of global listed equities that do this, usually across mining and resources, pharmaceuticals and IT. And it's really appealing.

Franco-Nevada is a really good example. They are the biggest gold mining royalty runner in the world. Essentially, they give loans to different gold mines. They do their own due diligence, they look at the gold mines and say, do we think this will be profitable? do we think there'll be lots of gold in the ground? If yes, we'll give them some money upfront. And then they don't have to dig anything, they don't have to set up operations, don't have to worry about inflation impacting operation costs. They just get a future percentage revenue of the underlying mines. The famous example is a mine called Gold Strike. So in 1986, they gave $2 million for a 4% of future royalties from this Gold Strike mine. They thought there was about 600,000 ounces of gold in that mine. A few years later, they found 20 million ounces, and to this day, they've mined 44 million ounces. So that $2 million loan has netted them over $1 billion. So an the incredible upside. An incredible example. And now they have a huge diversified portfolio as well. So they get benefits diversification.

Ren: Yeah. Royalties are becoming more of an alternative asset class as well. And where my mind goes here is particularly music royalties. You hear all these big artists selling their catalogues for millions of dollars upfront, but then the investor gets the income from Spotify and Apple Music and all of that on the backend. And so yeah, Betashares have the ETF: ROIL, which gives people access to, that consistent stream of income, which is nice.

Today in Equity Mates