Lithium: From Hot Commodity to Big Short
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Your Money Briefing. Money and market stories from the Wall Street Journal. Welcome to Your Money Briefing. This is Charlie Turner in New York. In a moment, we'll talk about why lithium has turned from a hot investment into one of the biggest shorts.
It's a really nascent market. It's very small and really subject to quick changes in sentiment. So that's why we saw kind of exacerbated moves last year. And now we're kind of seeing the flip side of that.
We'll talk with The Wall Street Journal's Amrith Ramkumar in a moment. First, here are some money headlines. You may know that billionaire investor Warren Buffett has largely steered clear of investing in tech companies. Instead, as he has said, opting to invest in companies he understands. The one big exception to this is Apple, which makes a product that Buffett understands, the iPhone. The Wall Street Journal says Buffett's Berkshire Hathaway continued to load up on Apple in the second quarter.
What caused lithium to go from a hot trade in 2017 to a big short in 2018?
Berkshire increased its holdings of Apple stock by 12.4 million shares in the quarter, taking its stake to $46.6 billion by the end of June, according to a new securities filing. Berkshire has repeatedly added shares of the iPhone maker, including more than doubling its stake in early 2017. As of March 31st, Berkshire was Apple's second largest shareholder after Vanguard Group, holding nearly 5% of Apple's stock. The Wall Street Journal's Robin Friedman writes that many homeowners dream of hosting a mortgage-burning party as they approach retirement. But paying off the mortgage isn't always the best strategy. Sometimes it's better to keep that money in the bank for other purposes, such as building retirement savings or paying down higher interest debt.
In other cases, paying off a mortgage makes sense, especially when you have ample retirement savings and plan to stay in the home for a while. Your decision depends on the terms of your mortgage, the amount of your savings, and your expected retirement income. Find Robin Friedman's article, When Retirees Should Not Pay Off Their Mortgages, at WSJ.com. Next, lithium, last year's Wall Street darling, is this year's big short bet. This is your Money Briefing from The Wall Street Journal. Welcome back. What a difference a year makes for lithium, the metal used in making batteries that power electric vehicles and smartphones. Lithium was one of the hottest investments of 2017 as prices for the commodity rose, as did shares of the companies that produce lithium.
But this year has been a different story. Lithium has become one of 2018's biggest short bets. Joining us with more is Wall Street Journal Markets reporter Amrith Ramkumar. Well, Amrith, so much for going long on lithium. First, why did prices for lithium rise sharply in 2017?
The key really was a bullish sentiment around electric vehicles. So like you mentioned, lithium is a commodity that's used in the rechargeable batteries that go into smartphones. But people were really looking at the growth for EVs as the catalyst that could really push prices higher and support some of these companies that are producing it. And so people say there is really just a rush into them and that the higher prices led to all this excitement, which then incentivizes more producers, as you can imagine, to start looking for ways to bring on more supply to take advantage. So it's a really nascent market. It's very small and really subject to quick changes in sentiment. So that's why we saw kind of exacerbated moves last year.
And now we're kind of seeing the flip side of that with some people trying to take advantage of the rapid swings.
So this expected demand and short supply for lithium, that boosted stocks of lithium producers rather exponentially.
Right, and the key is there are a few large producers that control a lot and already have a lot of production currently available, and they currently have deals with battery companies and the tech and auto companies that use this stuff. But there are also a lot of small companies that are rushing to take advantage of this boom,
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