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Blockchain games take on the mainstream: Here’s how they can win

Gaming is now one of the most profitable sectors of the entertainment industry, with consumer spending in the United States growing 8% in 2021 to top $60.4…

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Gaming is now one of the most profitable sectors of the entertainment industry, with consumer spending in the United States growing 8% in 2021 to top $60.4 billion in revenue. Worldwide, the games market generated an estimated $180.3 billion in 2021, up 1.4%.

Within that segment are the hugely popular play-to-earn blockchain-based games, which are growing at an even faster pace given their virtual standstill some two years ago. But are blockchain games good enough to compete with more mainstream titles?

In its 2021 annual report, The Blockchain Game Alliance says that NFT games generated $2.32 billion in revenue in the third quarter of 2021, or 22% of all NFT trading volume. Making the most waves was Axie Infinity with its much-publicized popularity in the Philippines during COVID-19 lockdowns which became the first blockchain game to top $1 billion in NFT sales.

The report reveals that 68% of BGA members felt the growth was attributable to the P2E sector, and 85% said true ownership of digital goods in games is the secret sauce behind blockchain game successes.

 

Blockchain gaming
Can blockchain games compete on gameplay and appeal with mainstream titles?

 

Jack Boreham, editor-in-chief of Metaverse Insider, has been following the trends over the past two years and believes blockchain gaming or NFT games, as he likes to call them will be adopted by mainstream publishers.

The beauty of NFT games is that they invert the institutional hierarchy of video gaming so that the power comes from the base of decentralized gamers and not the executives, says Boreham. And yes, big names will come in, but not for a couple of years, and the first ones are likely to be characterized as the more off-centre brands such as Nintendo.

So, is it just a matter of P2E goading traditional video gaming, or will the two parallel streams meet, merge or consume one another? The bigger names such as Ubisoft, Square Enix and Sega have already dipped their toes in the water by introducing NFTs, but they have witnessed backlash from traditional gamers. This article talks to those gamers who have already gone down the rabbit hole of P2E to see what the future of gaming might look like and discover if blockchain can compete for the hearts and minds of gamers everywhere.

 

 

Gachapon is one of Lepricons first games, in which the gachapon machine gifts players mystery NFTs.

 

 

Traditional gamers meet the future

Phil Ingram, a long-time gamer and CEO of blockchain-based gaming platform Lepricon, is bullish on P2E gaming if the games get better.

If gaming is going to be the first killer [app] to on-ramp people for mass adoption, then we have to make blockchain gaming more like video gaming, he says.

P2E is a bit like grinding in video gaming the place where you need to kill multiple monsters or repeat actions to move up to the next level. Its very different, and no one plays video games to grind.

The fact that rewards or assets earned or won in the game actually belong to the player is helping P2E get away with some fairly unappealing gameplay at present. Blockchain is all about owning assets and that they cant be taken away from you unless you leave your private keys at a bus stop. This is the point that enables a subtle shift from publisher-first economies to player-first, he says.

The problem is that blockchain is dictating the gaming and not the other way around. Indeed, most blockchain games are glorified ways to sell NFTs.

 

 

Lepricons Street Food Pinball. A free-to-play, earn-by-playing, hypercasual platform with games like pinball is in development.

 

 

On gaming

Funnily enough, grinding is something that On Yavin doesnt mind. In fact, he calls it his personal method of practicing mindfulness. Yavin is the founder and managing partner of Cointelligence Fund, which actively invests in the Metaverse more specifically, blockchain games.

A long-time gamer himself rumor has it he was born with a keyboard in his hand with a particular fondness for World of Warcraft, Yavin still plays between 30 and 90 minutes every day.

Part of my role is to undertake due diligence on new games, to see if we will invest in them or not. My hobby has become my job.

For Yavin, there are three critical elements essential for any successful game. The first is the story, and the second is the games mechanics how it is built and how the gameplay works out.

Then the quality of the graphics and visuals is a huge determination in how successful the game will be.

 

 

Decimated, a survival role-playing game, is one of Cointelligence Funds investments.

 

 

The MMO, or massively multiplayer online gaming, is also of great importance.

When I first began gaming, it was against the machine, which could make it very sterile, says Yavin. Now, with MMO, the gameplay is very different and much more exciting, as I am playing against or with other humans. That and the social part. Gamers come together in guilds to handle joint operations. If you screw up, you can kill all the others on the team. Trust me, you dont want to do that. But when it goes well, then you can find yourself talking about that particular operation for weeks.

As part of his work, Yavin played Axie Infinity, which he found relaxing (see the note on grinding above). While money does not form part of his motivation, he feels the unfairness of spending thousands of hours on a traditional game where the game owners still own the assets.

According to Yavin, most P2E games are not fun. Actually, most are shit, he says, apologizing for the profanity.

Cointelligence Fund also invested in Moonray, an action-RPG blockchain game.

James Stell, head of investing at Blockpioneers a venture capital firm investing in games and gambling in esports also comes from the gaming world. Like Yavin, he really enjoys the social side of gaming. Stell plays between two and three hours a day after work and compares it to watching television.

Stells poison of choice is Call of Duty, which he plays with a group of real-life friends. He also has a whole other business, running a pub near London Bridge. As the convivial barman, he hears a lot of news about P2E, as his crypto friends hang out in his bar and he also hosts events related to crypto interests.

Mind you, the last time we tried to host an event for Axie Infinity, the invite list got too big and they had to move to a larger venue.

Stell doesnt see current incarnations of P2E becoming massively popular in the United Kingdom and other Western countries, given that there are easier ways to earn more money. However, he does see the nascent P2E gaming space as very innovative.

The large traditional gaming studios, which have deep war chests, are definitely eyeing the marketplace. Theyve shown a lot of interest in NFTs, but they are not going to shoot the golden goose by giving away profits before they have to. But they will come in, sooner rather than later.

 

 

 

In principle, theyre good

Unlike Stell, who sees the automatic entrance of traditional gaming companies, Yavin is betting on blockchain companies learning to think like gamers.

Yavin says P2E games arent there yet but have two important aspects that will ensure the sectors success.

The first is the social aspect, epitomized by guilds and DAOs springing up alongside the more popular games. The second is the money generated through true ownership of in-game digital assets.

Peoples lives have been changed already in places like the Philippines. I am so excited that people can leave potentially dangerous, manually difficult jobs and instead play games to support their family. As a gamer, this makes me very excited.

Axie Infinity not only led the space in replacing incomes lost during COVID-19 lockdowns but was also the focus for the formation of player guilds, providing next-level access and support. The most prominent of these is Yield Guild Games, a DAO.

The concept behind YGG is that it holds valuable NFT assets from games and then lends them to the player community so they can play the games and earn cryptocurrencies. Axie Infinity was the first P2E game that caught its attention, but it now partners with more than 40 P2E games, including big names like The Sandbox, League of Kingdoms and Splinterlands.

 

 

Axie Infinities esports tournament hosted by YGG Managers Cup
The YGG Managers Cup, an Axie Infinity esports tournament.

 

 

Gabby Dizon, co-founder of YGG, explains that the guild is growing its community worldwide, setting up sub-DAOs across Southeast Asia, India and Latin America. Already, there are more than 100,000 members on Discord and 26,000 scholars gamers who rent NFTs in exchange for returning 20% of profits to the community manager who recruited them and 10% to YGG.

“Our community takes home 70% of the earnings. We built this to support the community, and it will always be like this.

The guild has its own treasury of assets and has borrowed money from venture capital firms $4.6 million in August 2021 to purchase NFTs. Enabling resource-poor scholars to start earning is a big incentive for P2E to compete with traditional gaming.

 

 

A YGG League of Kingdoms stream.

 

 

As for the fun side of things, Dizon was playing Axie Infinity for four hours a day before helping found YGG in 2020.

And it wasnt so I could earn extra money but for the social side of things. Its like setting up a business with friends you win together, interact together and, yes, make money together. Its the community layer that makes it fresh and makes our guild relevant.

Dizon believes that all games based on economies will use blockchain in the next five to 10 years.

 

 

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London-based OG John Gower of Blockchase and AngelDAO invests in events and games and has also played Axie Infinity for the fun of it. Like Yavin, he loves the true ownership of in-game digital assets, which he sees as the secret sauce for P2E games.

I also run a number of scholarships in Axie Infinity. That way, I can give back to the community and continue to make an income on my NFTs. Its a win-win for both.

Traditional and blockchain gaming worlds collide

The WAX blockchain, a sister chain to EOS, set out to become the self-proclaimed King of NFTs, and it certainly can rival other blockchains for the sheer volume of NFTs being minted and high-profile collections dropping, including from Star Treks William Shatner, Nature Boy Ric Flair, The Princess Bride and Teenage Mutant Ninja Turtles.

However, its the WAX-based games that are now building capabilities and drawing attention from a number of users.

More evidence that the traditional gaming world is being sucked into blockchain games can be seen in the fact that Alien Worlds, the second-largest blockchain game by monthly active users, recently announced a bridge to Minecraft wherein its 170 million players can now sign up to mine and earn Trilium, the native currency of Alien Worlds.

A Female Nordic from Alien Worlds.

With six competing planets, its gameplay function is focused on hypersocial interaction via setting up Planet DAOs where players are able to vote on work proposals or invest in off-chain activities such as providing funds to charities or disaster-affected areas. Alien Worlds co-founder Saro McKenna says:

This bridge is significant in that we are linking one of the worlds most popular decentralized games to the blockchain and opening up a world of new possibilities for Minecraft players through our social metaverse. We think our combination of economics, team strategy and earning will convert Minecraft players of all ages into Web3 players.

Blockchain Brawlers, developed by WAX Studios, was launched in 2021. In the game, players can buy wrestlers (brawlers) of various rarity levels via auction. Prices for the quirky characters were initially in the hundreds of dollars but soon escalated to many thousands. Currently, the cost to buy an entry-level, common-rarity brawler and necessary equipment is around a hefty $1,000. When gameplay went live at the end of March 2022, a massive $430 million in volume was traded in the first two weeks.

 

 

Blockchain Brawlers, the first P2E game developed by WAX Studios.

 

 

To put it in context, the average player is earning 2,000 BRWL tokens and 4 Gold per day, worth around $480 at the time of writing. While lacking some of the intensity of traditional video games, Blockchain Brawlers cannot be criticized for lacking the levels of income seen in the West.

Many startups are now seriously addressing the sector, combining fun gameplay with real earnings.

Utopian Game Labs, headed by Anthony Charlton, has a strong management team with decades of gaming experience. His teams approach to creating what he claims is the best NFT treasure hunt of all time is to create a game in which digital assets are operated like they are in traditional video games.

 

 

Time Raiders from Utopian Games.

 

 

While a small indie player, we reckon our game, Time Raiders, will look and feel like a AAA game, says Charlton.

The companys approach is only to use blockchain to mint assets off-chain. The gamer plays and then decides to cash out the assets by minting them into a MetaMask wallet where they can then be traded on a secondary sales platform.

We keep the game and earn separate. In fact, we call it play-and-earn, says Charlton.

Adam Bouktila, founder of Metaxy, uses the same term play-and-earn only his company is basing its P2E game on an existing video game. The team has incorporated some interesting aspects into the earning portion, with gamers not only able to win a native token but also Bitcoin and Ether.

 

 

The new Metaxy game will allow players to earn Bitcoin in addition to native tokens.

 

 

We believe the combination of a real video game combined with an ability to earn recognized cryptocurrency will be a major game changer, says Bouktila.

And since we are based in Ireland, we are going to take advantage of all the Web2 and Web3 professionals here. Itll be guaranteed Irish.

Metaxy is building on several other elements, such as quests where rival teams can fight and loot BTC, and Bouktila says there is a mobile version in the roadmap too.

Mobile gaming, as witnessed by the popularity of Axie Infinity, is a powerful tool in the toolbox for P2E developers. Enter mobile gaming professional Hugo Furneaux, CEO of PlayEmber, who describes his business model as producing hypercasual mobile games. The numbers are impressive, with PlayEmber games racking up 100 million downloads with an average of 6 million monthly active users.

BunkerBudz, a P2E game developed by PayEmber
Bunker Budz, a P2E game developed by PlayEmber.

Most titles, like Hyper Cards and Slingshot Crash, are generally played in short bursts for example, while commuting on a train and are played primarily by women. The company is launching Bunker Budz, its first P2E title, with Bunker Galz coming soon.

Our emphasis is low CPI, low cost, but very scalable. We call our games snackable, says Furneaux. We currently create for non-gamers and think adding the attraction of P2E is going to reach a whole new audience who want to snack and earn on the way to work.

At the end of the day, P2E is more complicated than simply being the next iteration of video gaming. It combines social interaction, philanthropy, income-generation, mindfulness, and increasingly, mobile apps meaning it more and more matters less that people have to grind, or that they need to have better graphics, or even that they can earn income.

So, will big AAA names enter the P2E and NFT gaming space, or will the two tracks carry on in parallel paths? At the moment, both sides are jockeying for space, with P2E learning some tricks from traditional gaming, notably to increase the fun quotient.

But traditional gaming is currently missing a core component of community engagement: incentivizing the community with earnings. Once the P2E sector figures out how to ramp up the fun element, the race will truly be on. In the future, traditional gaming companies will likely be forced to relinquish some of their profits and control back to the gamers, whether they want to or not.

 

 

 

 

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Economics

#CannesLions2022: Pharma and health marketers lose spotlight at creativity ad fest, but does it matter?

Pharma advertising has long been considered second-tier when compared to the rest of the advertising industry. And there are some legitimate reasons why….

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Pharma advertising has long been considered second-tier when compared to the rest of the advertising industry. And there are some legitimate reasons why. Nike sneakers and Coca-Cola soda ads will likely always be more entertaining or exciting than regulated campaigns for diabetes and heart disease.

Still, the Cannes Lions advertising festival of creativity was pharma and healthcare advertising’s annual chance to shine. For the past eight years, pharma agencies and clients stood side by side with consumer companies and agency hotshots on the biggest advertising award stage in the world at the Palais in Cannes, France.

However, something changed this year. While the awards for pharma and health and wellness were handed out to widespread applause on the first night of the show, for much of the rest of the time, healthcare marketing was relegated to the back of the room and mostly off the main stages.

The pharma and health and wellness category award finalists, for instance, were tucked in the back corner of the basement of the main building. Even people who wanted to see the work complained that they had to search for them. Only three Cannes Lions official sessions this year covered health or pharma advertising topics and were mostly general topics about creativity, diversity or empathy.

There were no pharma and health case study dissections or deep dives into the unique challenges in health and pharma advertising — and, maybe more importantly for the industry, there were no pharma executives on the Cannes stages as they have been in the past. Patricia Corsi was the lone pharma-connected executive; she is the chief marketing officer of Bayer Consumer Health and served as both a speaker and health and wellness jury president.

Patricia Corsi speaks on a judge’s panel (Clara Bui/Endpoints News)

Click on the image to see the full-sized version

Even among this year’s health and wellness award winners, no gold prizes went to pharma companies. Unexpected winners like Heineken and Harley Davidson did, however, take home the gold for their respective vaccination and “Tough Turban” campaigns.

There are two schools of thought about the disappearance of Cannes Lions Health as an official programmed track. On one hand, it signifies the parity of the industry with big consumer brands, but on the other hand, it also meant fewer conversations, less networking opportunities and an overall dimming of the industries’ presences at Cannes Lions.

Rich Levy

“I would be lying if I didn’t say that I was disappointed so far,” said Rich Levy, chief creative officer of Klick Health on the first day of the show. “When you’re talking about a multibillion dollar industry in the US, I thought that 31 short list for pharma was remarkably small … I don’t think it’s an accurate view of the work that the industry is doing.”

Pharma and health and wellness entries both were way down this year. Total pharma entries dropped to 298, down from 509 last year with 11 total Lion awards given out. In health and wellness, there were 1,213 entries, down from 1,300 last year. There were Grand Prix awards given in both categories, but this was the first year it was required — in the past, judges could pass over a category for the top award if they thought it didn’t rise to the level of Grand Prix.

For the second year in a row, the Grand Prix in the pharma category went to a non-pharma company. Dell Technologies and Intel snagged the top prize for their voice app for people with motor neuron disease. The entry — created by VMLY&R New York and called “I Will Always Be Me” — helps people with MND bank a digital copy of their voice by reading a story book.

In the health and wellness category, Maxx Flash’s mosquito repellent campaign “The Killer Pack” took the top prize. The repellent is designed to address India’s mosquito problem, with a biodegradable packaging that kills mosquitoes outside while a nontoxic coil fights them inside.

Other health creatives and executives agreed with Levy’s award assessment, but also expressed concern about the limited health content. The health and pharma panels and award deep dives that were presented got solid reviews, but there were scant few in the official program, along with a handful of unofficial ones outside the main venues.

Several health agency networks set up off-site slates of healthcare and pharma programming — WPP Health and IPG Health both offered multiple panels and discussions at their own sites. CMI Media Group hosted a panel at the Pandora Beach pavilion on audio branding, while other agency creatives like Levy and Bernardo Romero, along with Ogilvy Health’s Adam Hessel and both panels of judges for pharma and health and wellness, attended sessions and networked with others in the health community.

Still, there just weren’t as many health and pharma people on the ground as there typically have been in the past as agencies cut back rosters of attendees and didn’t invite as many clients. That’s likely in part due to the Covid-19 pandemic recovery year of Cannes Lions this year as well as budget considerations in general.

Dana Maiman

Dana Maiman, CEO of IPG Health and a long-time Cannes Lions attendee said, “I’m hoping the changes honestly are just temporary. Because I remember when I first started coming here — I think this may be my 10th one or so — but back then it was consolidated. It was really liberating when it was focused and broken out, even though clearly there’s a lot of crossovers and all of that. But I think there is something very special about celebrating the creativity in our world because we can all agree it is more challenging.”

Hessel, chief creative officer at Ogilvy Health, said one reason for fewer entries was heavier curation down to just a few this year, but added that no matter the numbers, Cannes and other marketing award shows still are important for the industry.

“Just celebrating great work in any category is what the industry really needs and also maybe to pull back a bit — everybody’s looking for that one crown jewel, but there’s so much great work out there that should be celebrated,” he said, adding, “When clients see great work, they want that too, so that’s the bar.”

Corsi, meanwhile, said she wants to see more creativity from pharma marketers. She finds that creatives in the pharma industry are often trained to be more conservative, because if you cross the line, you face regulators — but she would like that to change.

“We really believe that there is a great opportunity for us to raise the bar in this category,” she said. “Work in health and wellness consistently across the years has not been the most inspiring.”

That doesn’t necessarily mean the work should be more complicated. According to Corsi, sometimes the simplest idea is the best. What she wants to see, though, is more outside-the-box thinking.

A handful of execs, including Corsi, noted that the Covid-19 pandemic has served as a wake-up call for pharma companies discovering what their role should be with patients. Pharma advertising is becoming more of a conversation as opposed to a one-off encounter, Corsi said. Even companies like Walgreens — which facilitated the vaccination of more than 30 million Americans — are taking a new approach to advertising.

Mel Routhier

“The pandemic, there’s no going back. You can’t unhear the bell, right? The bell’s been rung,” said Mel Routhier, chief creative officer of the WPP Walgreens team. “It’s a good thing for us to take stock and say we can have more purpose as a brand.”

One thing that hasn’t changed this year? The level of passion that pharma creatives are bringing to the conference.

Gena Pemberton

“What I’m taking away now, that I guess maybe I didn’t really expect, is how much passion people have in the work that they’re doing,” said first-time attendee Gena Pemberton, Omnicom Health Group’s diversity, equity and inclusion director. “[It’s] really impactful to be able to talk with people in different areas, understand a little bit more about the work they’ve done, and just seeing how excited everybody is to be together again.”

In the end, the questions remain. Does Cannes Lions need a separate pharma and health track? Or vice versa, does pharma and healthcare advertising need that spotlight at Cannes? The debate won’t be easily settled.

Franklin Williams, director of experience design at Area 23 and a pharma judge, said, “It doesn’t really matter who’s doing the work as long as the targets are being hit. So I think that’s what you’re starting to see almost as a trend and a theme. It doesn’t have to be, we did pharma because we’re pharma. We did pharma because we wanted to do good.”

The danger, of course, is that without broader inclusion, specific content and more awards, pharma may lose interest in Cannes.

“It becomes a self-fulfilling prophecy. And what I mean by that is fewer winners every year mean fewer entries the following year. And fewer entries mean fewer winners,” Levy said.

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Spread & Containment

Stock Market Today: Dow Jones, S&P 500 Edge Higher; Trip.com Stock Surges From China Covid Easing

Markets opened in the green today as they rebound from Monday’s losses.
The post Stock Market Today: Dow Jones, S&P 500 Edge Higher; Trip.com Stock…

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Stock Market Today Mid-Morning Updates

On Tuesday, the Dow Jones Industrial Average is up by 270 points as it followed modest losses on Wall Street. Investors are still weighing the risks of red-hot inflation as rates continue to rise. Aside from the U.S., European Central Bank Leader Christine Lagarde downplayed recession concerns in the eurozone, already being destabilized by Russia’s war on Ukraine. She also says that her team is ready to raise rates at a faster pace if needed, in order to combat inflation.

Shares of Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), and Goldman Sachs (NYSE: GS) raised their dividends after passing their annual stress tests. For instance, Goldman Sachs is boosting its dividend payout by 25% to $2.50 per share. On the other hand, shares of Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) are up today after China announced that it will be easing Covid-19 quarantine rules for international arrivals.

Among the Dow Jones leaders, shares of Apple (NASDAQ: AAPL) are up by 0.13% today while Microsoft (NASDAQ: MSFT) is down by 0.79%. Meanwhile, Disney (NYSE: DIS) and Nike (NYSE: NKE) are trading mixed on Tuesday. Among the Dow financial leaders, Visa (NYSE: V) is up by 0.17% while JPMorgan Chase (NYSE: JPM) is also up by 1.67%

Shares of EV leader Tesla (NASDAQ: TSLA) are up by 0.83% on Tuesday. Rival EV companies like Rivian (NASDAQ: RIVN) are down by 0.17%. Lucid Group (NASDAQ: LCID) is down by 1.09% today as well. However, Chinese EV leaders like Nio (NYSE: NIO) and Xpeng Motors (NYSE: XPEV) are trading mixed today. 

Dow Jones Today: U.S. Treasury Yields Inches Higher; House Price Increases Slows Down In April 

Following the stock market opening on Tuesday, the S&P 500, Dow, and Nasdaq are trading higher at 0.68%, 0.89%, and 0.31% respectively. Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (NASDAQ: QQQ) is up by 0.28% while the SPDR S&P 500 ETF (NYSEARCA: SPY) is also up by 0.67%. 

The benchmark 10-year U.S. Treasury yield currently hovers around 3.22% as the market continues to push against a bear market. Oil prices rallied for the third day today as major producers like Saudi Arabia looked unlikely to be able to boost output significantly. This comes as the West agreed to explore ways to cap the price of Russian oil. Brent crude, for instance, currently trades at around $116 per barrel.

Home prices increased slower than before in April and could be a potential sign of a cooling in prices. Diving in, prices rose by 20.4% nationally in April compared with a year earlier. This is according to the S&P CoreLogic Case-Shiller Index. For comparison, home prices increased by 20.6% year-over-year in March. Cities like Tampa, Miami, and Phoenix continue to lead the pack with the strongest price gains. Tampa home prices, for instance, are up by a whopping 35.8% year-over-year.

[Read More] Top Stock Market News For Today June 28, 2022 

Trip.com Stock Gains Following Better-Than-Expected Quarterly Performance On Travel Rebound; China Covid Easing

Trip.com Group (NASDAQ: TCOM) seems to be among the top gainers in the stock market now. Evidently, TCOM stock is now up by over 14% at the opening bell today. Overall, this likely stems from the company’s latest financial update. Getting straight into it, Trip.com reported a quarterly loss per share of $0.01. Furthermore, the company’s total quarterly revenue is $649 million. For reference, consensus figures on Wall Street are a loss per share of $0.08 on revenue of $575.04 million. With these commendable results, investors looking to bet on the return of travel would be considering TCOM stock.

According to Trip.com, the company has recovering travel demand in global markets to thank for its latest quarterly performance. In particular, Trip.com highlights a bump in activity from consumers across its Europe and Asia Pacific user bases. This, the company believes, is a result of easing travel restrictions amidst countries in these regions. Moreover, Trip.com also notes that staycation-related travel in China is another notable contributor to growth for the quarter. Accordingly, its local hotel bookings are now up by 20% year-over-year.

On the whole, travel firms like Trip.com continue to thrive as consumers book their vacations. For its latest quarter, the company’s air-ticket bookings on global platforms are now up by a whopping 270% year-over-year. As mentioned earlier, this is mainly led by a rebound in demand from its European and Asian Pacific operations. Looking forward, CEO Jane sun notes that Trip.com will “remain adaptive to embrace the changing environment and be flexible with our strategies to swiftly seize growth opportunities.” With all this in mind, I could understand if TCOM stock is turning some heads in the stock market today.

TCOM stock
Source: TradingView

[Read More] Best Oil Stocks To Buy Right Now? 5 For Your Late June 2022 Watchlist 

Occidental Petroleum On The Rise Following Latest Berkshire Hathaway Stake Increase

Meanwhile, the likes of Occidental Petroleum (NYSE: OXY) seem to be gaining attention in the stock market now. For the most part, this is likely a result of the latest regulatory filing from Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A). Namely, Berkshire disclosed a purchase of an additional 794,000 shares of Occidental. This adds up to a $44 million transaction, bringing its total stake to about 16.4%. In total, Berkshire currently holds about 153.5 million shares of OXY stock, worth $9 billion.

All in all, Buffett’s focus on Occidental would likely draw attention to the energy firm’s shares. This is apparent as OXY stock is currently gaining by over 6% in the stock market now. According to Berkshire’s filings since March, the company’s average purchase price per share of OXY stock is $53. Following this investment, Berkshire would be bolstering its position as Occidental’s largest stakeholder. In second place on this front is investment firm Vanguard with an almost 11% stake. As a result of all this, it would not surprise me to see OXY stock making the rounds in the stock market now.

OXY stock
Source: TradingView

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Economics

Soaring Inflation And Crashing Rates Are Sparking Trucking’s “Great Purge”

Soaring Inflation And Crashing Rates Are Sparking Trucking’s "Great Purge"

By Craig Fuller, CEO at FreightWaves

The last trucking market…

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Soaring Inflation And Crashing Rates Are Sparking Trucking's "Great Purge"

By Craig Fuller, CEO at FreightWaves

The last trucking market crash was in 2019. The current market could end up worse for small truckload fleets.

The freight market crash in 2019 was caused by two factors – a freight slowdown due to tariffs on Chinese imports and a surge of new fleets flooding the market, even as rates continued to fall. 

Until 2019, we had never seen that many new fleets enter the market, especially during a market downturn. During 2019 an average of 7,200 fleets entered the market per month compared to an average of 5,200 fleets per month during 2008-18. 

The 2019 drop in freight volumes wasn’t significant. At their deepest trough, tender volumes registered a 4.6% drop in year-over-year load requests, and that lasted for just a few short months (May-July).

Trucking is a commodity and anyone that has been around commodity markets understands that it doesn’t necessarily take a dramatic move on one side of the market to change the balance of supply/demand and cause significant price swings. 

In 2019, the trucking market already had too much capacity relative to demand. The year-over-year decline was only in the mid-single digits. But, it was enough to push rates below carriers’ operating costs.

Removing the cost of diesel from the spot rate, here is what the market looked like in 2019 (van per mile): 

  • Low: $1.51

  • Average: $1.59

  • High $1.75

We are nearing 2019’s rock-bottom, inflation-adjusted spot rates

Trucking companies have much higher operating costs now than they did in 2019, even when removing fuel from the number. Every fleet’s operating cost will be different, but using data from TCA, ACT, and FreightWaves’ own analysis, we can draw some conclusions about the cost increases that a fleet would experience in 2022 compared to 2019. 

Assuming a fleet averages 6,500 miles per truck per month and purchased a four-year-old used truck in 2019 at $50,000, plus sales tax, financed for five years at 5% interest, the monthly payment would cost around $0.15/mile. With used truck prices surging during the pandemic, a four-year-old used truck last fall would run $77,000. If the vehicle was financed with similar terms, the per mile cost would be around $0.23/mile.   

A driver employee with experience working for a top-paying fleet can expect to make around $0.62/mile. In 2019, the same driver would have made around $0.47/mile. 

Higher variable operating costs include insurance (+$.02/mile), maintenance (+$.06/mile), equipment (+$.08/mile) and driver wages (+$.15/mile).

All in, variable costs have increased at least $0.31/mile more for fleet operators in 2022 compared to 2019. These numbers are likely understated, as they don’t include increases related to back-office operations and support staff, which can vary widely among fleets. 

Adjusting the 2019 numbers, the rates per mile total: 

  • $1.82 (low) 

  • $1.90 (average)

  • $2.16 (high)

The current spot rate (net fuel) is $1.95/mile. On a variable cost-adjusted basis, the trucking spot rates have matched 2019 since May 2022 – $2.16/mile, dropping $0.21/mile. It’s likely to get worse. The month of May typically has among the highest rates we’ll see all year, with July and August being some of the weakest months. 

It is conceivable that spot rates will drop below the inflation-adjusted 2019 low of $1.82 per mile in July, since there doesn’t seem to be any near-term market catalysts to drive additional demand. 

U.S.- bound container volumes, which have been driving a substantial amount of the freight surge in the U.S. trucking market since 2020, are seeing a significant drop, as reported by Henry Byers, FreightWaves’ senior global trade analyst.  

There are also the economic challenges that are apparent in the economy, including record-low consumer confidence, declining construction and industrial activity, surging inflation, and a Federal Reserve that is determined to slow the economy down to tame inflation, even if it means putting the economy into a recession. 

All of this means that the freight market will likely encounter additional headwinds and there are more reasons to believe that trucking spot rates have further to fall.

Capacity matters

Of course, trucking is a two-sided market. Demand is only one part of the equation; capacity also matters. 

Capacity is really just a function of how much dispatchable capacity is in the market. Like 2019, the trucking industry has seen a record number of new entrants enter the trucking market to take advantage of what were strong market conditions and record high spot rates created because of government stimulus over the past two years. The number of new entrants into the trucking industry nearly doubled the 2019 monthly record average. Since 2020, the monthly average of new fleets entering trucking has increased to 13,370 per month, up from 7,200. In April, the number hit 23,479. 

This large number of new entrants means that the trucking industry has many companies that are brand new, have higher cost structures (because they joined when the freight market was peaking) and that have never experienced a downturn. 

This massive surge of dispatchable capacity was built for a market that had much more freight activity. If the economy contracts further, it could spell disaster for many of the most vulnerable operators.

The summer doldrums

Even if the economy doesn’t contract, July and August are always slower than June. It is the time of the year when supply chains take a break and get ready for the retail surges that typically begin after Labor Day. 

The retail surge is a really important part of the freight calendar and often offers some of the highest spot rate opportunities. In the first half of the year construction, auto, beverages, and fresh produce drive the surges in trucking. 

In the second half of the year, surges are caused by retailers scrambling to get inventories placed for the holiday shopping season. That may not happen this year, with many retailers’ inventories overstocked. Since their warehouses and distribution centers are full, they are reluctant to add additional inventory to their supply chain and will focus their efforts on liquidating what they currently have in stock.

Trucking spot rates will not increase significantly until the Great Purge is over

As long as the market has excess capacity, freight rates will remain depressed. It will take a substantial purge of capacity before spot market carriers can expect relief. 

FreightWaves editorial director Rachel Premack covered this topic last week in her article titled “the Great Purge.”

The unfortunate reality of trucking is that the market is often “feast or famine” and with so many new mouths to feed, the famine this year could be much worse than was experienced in 2019. 

Tyler Durden Tue, 06/28/2022 - 10:20

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