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VW, Ford, Daimler fear chip shortage could persist for some time

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Technicians work in the assembly line of German carmaker Volkswagen’s electric ID. 3 car in Dresden, Germany, June 8, 2021.

Matthias Rietschel | Reuters

Car manufacturers including Ford, Volkswagen and Daimler are still struggling to deal with the impact of the global chip shortage, with executives from each of the companies warning a lack of silicon is likely to remain a problem.

Volkswagen CEO Herbert Diess, Daimler CEO Ola Kallenius and Ford Europe chairman of the management board Gunnar Herrmann told CNBC’s Annette Weisbach at the Munich Motor Show on Monday that it’s hard to tell when the complex issue will be resolved.

Germany’s Volkswagen, Europe’s largest carmaker, has lost market share in China as a result of the chip shortage, Diess said.

“We are relatively weak because of semiconductor shortages,” he said. “We are hit more in China than the rest of the world. That’s why we are losing market share.”

Diess said his colleagues in China have been pushing for more semiconductors, describing the lack of chips as a “really big concern.”

The Wolfsburg-headquartered company was expecting the semiconductor situation to improve after the summer holidays but that hasn’t been the case. Malaysia, where many of Volkswagen’s suppliers are based, has been hit hard by the coronavirus in recent weeks, leading to several factory shutdowns.

Diess said he believes the chip shortage issues will start to dissipate as countries reduce Covid-19 transmission, but he expects there to be a general shortage of semiconductors for some time. “We will face a general shortage of semiconductors because the internet of things is growing so fast so there will be constraints which we will try to manage,” he said.

Raw materials crisis

Ford Europe’s Herrmann, meanwhile, estimates the chip shortage could continue through to 2024, adding that it’s difficult to pinpoint exactly when it will end.

The shortage is thought to have been exacerbated by the move to electric vehicles. For example, a Ford Focus typically uses roughly 300 chips, whereas one of Ford’s new electric vehicles can have up to 3,000 chips.

Beyond chips, there are now other shortages to contend with. Ford is facing a “new crisis” in raw materials, Herrmann said.

“It’s not only semiconductors,” he said, adding that lithium, plastics and steel are all in relatively short supply. “You find shortages or constraints all over the place.”

Car prices will rise as the cost of raw materials goes up, Herrmann said.

Despite the imbalances, Herrmann said Ford Europe’s incoming order bank was “fantastic” and that “demand is actually extremely strong.”

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Build cash positions ahead of extreme market moves, strategist says

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People eat outside of the New York Stock Exchange (NYSE) on September 16, 2021 in New York City. Despite a rise in retail sales, the Dow slipped lower on Thursday as investors continue to have concerns from the delta variant and news of a slight rise in jobless claims.

Spencer Platt | Getty Images News | Getty Images

Financial markets appear vulnerable to what could be an extreme move in either direction, according to Paul Gambles, co-founder of investment advisory firm MBMG Group.

As a result, Gambles said investors should consider sitting on the sidelines and build up their cash positions significantly.

His comments come as market participants remain cautious given a flurry of risks on the horizon. These include fears of rising inflation, persistent concerns about the economic outlook amid the ongoing coronavirus pandemic, supply shortages and valuation concerns.

Some investors are also wary of the possible implications of China’s indebted property firm Evergrande, which is on the brink of default.

“Our advice is just be a little bit cautious. We think that the market is very finely poised waiting for what potentially could be a very, very big move,” Gambles told CNBC’s “Squawk Box Europe” on Friday.

“We’ve got no idea which direction that could be; I realize that doesn’t sound helpful, but frankly there are just so many unanswered questions out there right now,” he continued. “Until we start to get answers to those, our advice is actually unless you can really afford to take what could be a pretty big hit, and possibly even a permanent hit, then it is better to just sit on the sidelines.”

‘It’s a coin flip’

Gambles said MBMG Group, which says it has over $1.5 billion assets under advice, has looked to raise cash levels “quite dramatically” of late, warning market risk had “suddenly gone up and off the scale” compared to just one month ago.

Gold and gold miners were “one of the best ways to hedge risk” for the moment, he added, suggesting there was also still some value in Treasuries.

“Take those profits,” Gambles said. “You should be able to swallow your fear of missing out rather than expose yourself to the risk of what could be some pretty significant losses if we get a reversal.”

“We are not saying that there is an absolute crash nailed on here, far from it. What we are saying is it’s a coin flip as to whether things are good or things are bad and, you know what, it has got the potential to be pretty extreme in either direction,” Gambles said.

He said it was the first time he’d advised clients to hold cash for some time.

“This is a potentially pivotal moment and we’ve got no idea whether it is going to be a good or bad outcome,” Gambles added.

‘Cash is trash’

Not everyone is in favor of building cash positions.

Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, told CNBC’s “Squawk Box” earlier this week that investors should not deal with market risk by hiding out in cash.

“Don’t keep it in cash,” Dalio said from the SALT conference in New York City. More than a year after saying “cash is trash,” Dalio said on Wednesday that he still feels that way.

Ray Dalio, billionaire investor and founder of Bridgewater Associates, pauses during a Bloomberg Television interview at the Grand Hyatt in Beijing, China, on Tuesday, February 27, 2018.

Giulia Marchi | Bloomberg via Getty Images

Instead, the hedge fund billionaire said the most important thing for an individual investor was to know “how to diversify well.”

Dalio argued that doing so across countries, currencies and asset classes would outperform cash.

Correction concerns

Daniel Lacalle, chief economist at Tressis Gestion, told CNBC on Friday that he expected financial markets to turn lower in October, saying a constellation of factors could force investors to come “back to reality.”

“I believe that what we are likely to see is first the backlash from very aggressive expectations and very optimistic expectations about the recovery,” Lacalle said, noting the recovery pace remains for now.

Lacalle said market estimates that were far too bullish had become “embedded” in earnings and macro growth projections. In addition, tapering from the U.S. Federal Reserve and European Central Bank, as well as concerns about a slowdown in China, were likely to trigger a market correction.

The risk of a “very aggressive” correction or a spillover effect to the sovereign debt market was somewhat limited, Lacalle said, given that the Fed and the ECB were expected to continue to be supportive.

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Sustainable property a ‘real opportunity’ for investors

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Investing in sustainable buildings could offer a real solution to reducing emissions in one of the world’s most polluting sectors, said Taronga Ventures, an investment firm focused on sustainable innovation and tech.

Buildings currently represent 39% of global greenhouse emissions, according to U.N. data. Almost one-third (28%) of the global total is the result of running buildings — referred to as operational emissions, while 11% comes from building materials and construction.

“It is a widely unknown fact,” Avi Naidu, co-founder and managing director of Taronga Ventures told CNBC’s “Squawk Box Asia” Friday.

“Many people think that it’s transport, it’s methane, it’s food that is a big driver, but actually it’s the built environment,” said Naidu, whose company invests in innovation within real estate and construction.

Dispelling misconceptions

That lack of awareness, however, presents a “huge opportunity” for investors, said Naidu, noting that the technology and appetite for sustainable building solutions are already there.

“There is a misconception in markets and particularly from landlords [that] it will cost more. Absolutely, as technology is first introduced it sits higher on the cost curve, [but] as it gets more widely adopted we see it go further and further down the cost curve,” he said.

The exterior of the Parkroyal Hotel in Singapore.

VW Pics | Universal Images Group | Getty Images

“We’re also starting to see consumers and investors pay a premium for products and assets that are ESG aligned and much more sustainable,” he continued.

Environmental, social and governance — or ESG — investing has grown increasingly popular in recent years, mainly in the wake of the Covid-19 pandemic.

“So a lot of the cost is being increasingly mitigated by the ability to command greater rents, greater asset values, and that’s really how landlords should be thinking about it,” he said.

Decarbonizing the economy

Decarbonizing the economy could be a market opportunity worth up to $30 trillion within the next two decades, according to Goldman Sachs.

For its part, Taronga Ventures is investing in green building solutions “across the value chain,” said Naidu. That includes design, construction, and operations, but also the repurposing and ultimate destruction of buildings.

Read more about clean energy from CNBC Pro

As we build new stock, “we have an opportunity to think about different materials, different kinds of concrete, different methodologies that make the process safer, smarter and obviously, from a carbon perspective, more efficient,” he said.

Naidu’s comments come ahead of the 26th U.N. Climate Change Conference of the Parties, known as COP26, in Glasgow in November, where world leaders will discuss efforts to combat the climate crisis.

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Italy forces green pass, France suspends workers

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In this photo illustration, a digital “green pass” which certifies immunity or the Covid-19.

Diego Puletto | Getty Images News | Getty Images

LONDON — Italy has become the first European country to make a Covid certificate mandatory for all workers, as countries start to take stronger measures in an effort to boost inoculation rates. 

From mid-October, any Italian worker that fails to present a valid certificate will face suspension and could have their pay stopped after five days, the government said on Thursday.

The document, which can be digital or paper, outlines whether a person has been vaccinated, recovered recently from the virus, or tested negative for Covid. It was originally created at the EU level to support intra-European travel, but Italy was among the first countries to also use it as a requirement to enter venues such as museums and gyms.

According to data from the European Centre for Disease and Control, 73.8% of Italians are fully vaccinated against the virus.

However, authorities want to avoid another surge in cases as the winter approaches.

“We are extending the obligation of the green pass to the entire world of work, public and private, and we are doing so for two essential reasons: to make these places safer and to make our vaccination campaign even stronger,” Roberto Speranza, Italy’s health minister, told journalists on Thursday, according to euronews.

The announcement followed a decision in France to suspended around 3,000 health workers for being unvaccinated against Covid-19.

France suspends unvaccinated health workers

French authorities estimated last week that about 12% of hospital staff and 6% of doctors in private practices were unvaccinated against the coronavirus, according to France24. Earlier this summer, the government made vaccination mandatory for workers in the health sector by Sept. 15.

The country’s Health Minister Olivier Veran said the suspensions were temporary and that continued healthcare was assured, during a radio interview Thursday. He told RTL that “responsibly caregivers were vaccinated to protect themselves and their patients.”

Other European countries have taken a similar approach: Greece has also made vaccination compulsory for nursing home staff and healthcare workers and Italy has said that health workers who are unvaccinated could be suspended without pay.

In France, 80.7% of the population is fully vaccinated against the coronavirus. The average across the EU stands at 71.5%.

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