Overflowing Oil Reserves

Good morning.

Giant news for snackers: The era of shrinkflation may be coming to an end.

Inflation-weary customers and snack fans have noted — often with anger — that their favorite bags of chips, cookies, and other treats are getting smaller, and they are not wrong. But on Wednesday, PepsiCo, which owns Ruffles, Doritos, Tostitos, and Lay's, told CNN that it is launching a "bonus" line of its snacks, which will include 20% more chips in each bag — for the exact same price as a regular bag. In other words, bags of chips are now the same size that they were two years ago. Now the industry can go back to worrying about its own shrinkage in the age of Ozempic. 

Our oil well overfloweth. 

On Wednesday, the International Energy Agency published its World Energy Outlook report for 2024, predicting that demand for fossil fuels will start to ebb pretty quickly as we move into the second half of the decade — and we might even end up with surplus sloshing around. This comes the same week that OPEC trimmed its demand forecasts for this year and next: It had previously been starkly at odds with the IEA.

Well, Well, Well

The last few weeks have been a bit deflating for OPEC. First, it gave up on its quest to drive prices up to $100 a barrel, and now it's conceded that demand won't be quite what it thought — it took a strong position this summer that peak fossil fuels were not even "on the horizon." Now, the horizon feels like it's coming to meet OPEC.

The IEA's 2024 report repeated its previous prediction that fossil fuel demand will peak by the end of the decade. It was keen to underscore that "energy security" will be the watchword going forward. It's an issue that was thrown into sharp relief after Russia invaded Ukraine in 2022, and is once again bubbling to the top of policymakers' minds as conflicts mount in the Middle East. Apart from the shadow threat of "geopolitical hazards," however, the IEA report was pretty upbeat:

• "In the second half of this decade, the prospect of more ample — or even surplus — supplies of oil and natural gas, depending on how geopolitical tensions evolve, would move us into a very different energy world from the one we have experienced in recent years during the global energy crisis," IEA executive director Fatih Birol said in a statement.
• "It implies downward pressure on prices, providing some relief for consumers that have been hit hard by price spikes," Birol said, adding that any resultant "breathing room" could free up policymakers to invest in renewable energy.

It's Getting Hot in Here: The IEA's report said that although CO2 emissions are set to peak imminently, based on our current trajectory, the world will still heat up by 2.5 degrees Celsius by the end of the century. That's a lot higher than the 1.5-degree goal set at the Paris Agreement in 2016.

Written by Isobel Asher Hamilton

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FanDuel has found its TV Diamond in the rough.

On Wednesday, the bankrupt sports broadcaster Diamond Sports announced it is seeking court approval to take its rapidly decaying portfolio of local Bally Sports regional sports networks (RSNs) and rebrand them as FanDuel channels, part of a naming-rights deal with the betting giant. It's just the latest development in the ongoing convergence of sports media and sports gambling.

Bally's Well That Ends Well

Diamond Sports needs a win. The company, which filed for Chapter 11 bankruptcy in March, will stop carrying MLB games next year in 11 of the 12 markets it currently services (though it did this summer re-sign deals with 13 NBA and nine NHL teams). Meanwhile, Amazon has rescinded its roughly $115 million cash-infusion offer that was meant to serve as both a lifeline amid bankruptcy proceedings and a potential bridge to a streaming future, sources told the Sports Business Journal in August.

Like the rest of sports media, the company is now embracing the wide, wild, and wildly lucrative world of legalized gambling:

• Terms of the deal were not disclosed, though Diamond says it will receive a "significant" rights fee payment as well as certain media and ad spend commitments. FanDuel, which already operates a national cable and satellite channel called FanDuel TV, will have the right to acquire as much as 5% of Diamond's equity once it fully U-turns out of bankruptcy.
• Translation: Expect sports gambling content to be featured heavily on the FanDuel-branded RSNs. Sports gambling revenue is projected to reach nearly $15 billion in the US this year, according to Vixio Regulatory Intelligence.

Join the Team: Sportsbooks have become key partners for sports media outlets, in more ways than one. From Aug. 15 through week three of NFL play, FanDuel, DraftKings, and BetMGM spent a combined $75 million on linear TV advertising, up more than 13% year-over-year, according to iSpot. Meanwhile, sports blog Deadspin has mutated into a gambling referral site. Sports Illustrated has launched (and since unwound) an SI-branded sportsbook. Even Mickey Mouse has a second life as a sports bookie: Disney's partnering with Penn Entertainment to launch an ESPN-branded sportsbook, ESPN Bet. 

Written by Brian Boyle

It's not just lonely at the top. It's confusing, too.

LVMH chairman Bernard Arnault briefly claimed the title of richest man in the world in May, according to the Bloomberg Billionaires Index, but a month later fell behind Elon Musk. He has since tumbled all the way to fifth (pity the man who only has $182 billion).

He may take a tumble yet again after Wednesday — shares in LVMH, which the Arnault family owns nearly half of, fell 3.7% after the high-end fashion and leather goods firm announced sales at its core division fell for the first time since 2020, when the pandemic shut down businesses.

When Luxury Turns to Drudgery

LVMH's share price, down 18% this year, had already been depressing the value of Arnault's personal purse, and the reason for the drop is no secret.

Chinese consumers, who once exhibited a seemingly quenchless appetite for high-end goods, are mired in an economic funk. On top of that, the ruling Communist Party has cracked down on ostentatious displays of wealth — finance workers get rejected from dates and are mocked online as "rats" while celebrities have been told to tone down their looks, the BBC reported last week. In other words, keep your Louis Vuitton and Christian Dior at home.

"Consumer confidence in Mainland China today is back in line with the all-time low reached during COVID," said Jean-Jacques Guiony, LVMH's CFO, on an investor call. "We cannot expect discretionary consumption to expand in this context." But, somewhat surprisingly, LVMH blamed its disappointing performance on another market:

• Asia sales outside Japan fell 16% year-over-year in the third quarter, but LVMH turned around and pointed the finger back at Japan, where it said its contraction "mainly arose." But sales in Japan grew 20%, so what's the problem? It wasn't as much as the staggering 57% growth in the second quarter, which LVMH blamed on the stronger yen.
• Overall, LVMH revenues underperformed, dropping 3% year-over-year to €19.1 billion ($20.7 billion) against analysts' estimate of 1% growth — and sales at the core fashion and leather goods division fell 5%. As LVMH is the world's largest luxury firm and a sector bellwether, that was enough to trigger minor tremors: L'Oreal fell 2%, Hermès 1.3%, and Kering 0.8%.

Cereal Business: In 2020, Goldman Sachs dubbed a group of stocks — GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L'Oréal, LVMH, AstraZeneca, SAP, and Sanofi — GRANOLAS, Europe's answer to the Magnificent Seven, noting their earnings growth, low volatility, and strong fundamentals. But the group's gains are down to roughly 7% this year, MarketWatch noted. The Magnificent Seven are up 41%.

Written by Sean Craig

Do You Have Credit Card Points Saved Up? Then you need to know about impending legislation that could devastate the future of credit card rewards programs. If passed, the Credit Card Competition Act could not only jeopardize your hard-earned points and miles, but also your financial safety. Learn how you can take steps to protect your points.