Solar power sizzles, Buffett’s enormous wealth, Dior’s €53 handbag, How much are your body parts worth?, Guinness is trendy

Greetings folks and a warm welcome to the 10th edition of Friday Finance Weekly. I will be away for a few weeks, so if I am tardy, apologies in advance. I am sure everyone is watching the Biden, will he or won’t he step down drama. My personal take is that he will step down; in fact, Vegas puts the odds of him stepping down at over 80%! It's bright and sunny in Vancouver, so let’s start with some solar news.

Solar power has been around for decades, but its growth has been truly staggering. Here’s some interesting perspective on solar power:

• Solar PV technology was invented by AT&T’s Bell Labs 70 years ago. Today, solar panels cover an area the size of Wales and contribute roughly 6% of the world’s electricity.

• While 6% figure seem inconsequential, it’s nearly three times larger than America’s total electricity consumption in 1954. Moreover, installed solar capacity doubles roughly every three years (10 times per decade).

• Many experts predict that solar will become the world’s dominant electrical source by 2030 and possibly the largest source of all energy by 2040. These predictions aren’t based on optimism but rather on solar economics.

• In earlier energy transitions (e.g., wood to coal, coal to oil, or oil to gas), efficiency gains were eventually offset by the cost of finding new fuel sources. These constraints do not apply to solar technology, which utilizes abundant resources like silicon-rich sand, sunlight, and human ingenuity.

• Currently, China produces most of the world’s solar panels and purified silicon in a highly competitive and subsidized environment. While they can’t control the price of sunlight, having a vital industry concentrated in one country presents its own risks.

• The US has acknowledged this risk by imposing tariffs on Chinese solar equipment, however additional measures could be taken:

  • Increasing the ease of installing panels at home and connecting to the grid (the US has 1 terawatt of new solar capacity waiting to be connected).

  • Implementing carbon pricing, despite its controversial nature. In Canada, this has been poorly implemented.

Why is Elton John’s solar farm the most efficient in the world? Because He Doesn’t Let The Sun Go Down On Them. Okay, the joke is lame but witty, right? Also, it's not mine—I am not creative enough. (Source: Economist)

The world’s richest list switches between the top 5 people and is often Musk or Bezos. But let’s take a look at Buffett and put his wealth into perspective.

• In 2006, Warren Buffett famously pledged to donate 99% of his vast fortune, stating, “Society has a use for my money… I don’t.” Since then, he has followed up on that promise – donating more than $55B worth of Berkshire Hathaway stock to various charitable causes.

  • The Bill and Melinda Gates Foundation received $43B worth of stock to help tackle poverty and healthcare initiatives in developing countries.

  • The remaining shares went to Buffett’s three children as gifts designated for charities of their choice and a foundation named after his late wife. These funds are now going towards causes like healthcare, social justice, the empowerment of women, and world poverty.

• Had Buffett kept all his 474,998 class A shares in Berkshire, the stock would be worth $292B today – easily placing him as the world’s richest person. With this theoretical fortune, Buffett could personally buy the entire McDonald’s Corporation, all of Coca-Cola’s stock, or all 50 of the world’s most valuable sports franchises.

• Eighteen years later, his remaining 207,963 class A shares are still worth a whopping ~$128B. Buffett indicated he will continue gifting stock to five foundations each year until his death, at which point any remaining fortune will be transferred to the charitable trusts overseen by his children.

He still pales compared to the world's richest man to have ever lived (a previous post addresses that). We often can’t truly comprehend what a billion is. Let’s add some scale to it and put it into perspective, with time.

Now we know the secret to his longevity! Now if only I can get my dad to say buffet instead of Buffett. (Source: Forbes)

Love your Dior? We knew margins were high, but did you know how high? An investigation gives us some insight into how much your bag actually costs to make.

Back in June, an investigation launched by Italian authorities led to the discovery of numerous labor infractions by luxury handbag-maker Dior.

The company’s production units were placed under judicial administration for one year following allegations that it had subcontracted work to Chinese-owned firms that mistreated workers. The court found that these third-party firms brought undocumented Chinese workers into the country who were then subjected to inhumane and dangerous working conditions.

The prosecution stated that these rampant labor violations were not an isolated incident but rather part of the brand’s usual manufacturing process. Violations such as removing safety devices from machinery allowed Dior’s contractors to produce handbags for as little as €53, which then retailed at €2,600.

News of the court’s decision back in June caused shares in LVMH to drop by 2.2%. This week, the stock dipped a further 3% following news of the French election results, placing it at €686.30 as of July 9th (-5.08% YTD).

This really is astounding to say the least. I am curious as to the margins on Birkin bags. Well, Birkin bags are over $25,000 CAD you would only have to sell your cornea to afford that (please keep reading). (Source: Reuters)

In keeping with the somewhat macabre theme, let’s explore how much our body parts are worth on the black market. According to an infographic from February 2015 (don’t worry, we have adjusted values for inflation), the black-market value for various human body parts is as follows:

Individual market values are thought to vary significantly by region, influenced by factors such as legal frameworks, socioeconomic conditions, and the healthcare infrastructure in place.

Of course, demand for black-market organs ultimately stems from supply shortages for transplantation. In the U.S. in 2014, an estimated 4,761 Americans died while waiting for a kidney transplant (National Kidney Foundation). In contrast, in Iran, where kidney sales have been legal since 1988, there are no organ shortages.

While it is impossible to state with certainty (due to the lack of official data), a 2017 report from Global Financial Integrity estimated that the illegal trade of organs generates between USD $840 million and $1.7 billion annually.

Who knew the saying "health is wealth" was to be taken literally? (Source: Buddy Loans, Futurism, Global Financial Integrity, the National Kidney Foundation)

The venerable Guinness beer is currently undergoing a revival, led by women and younger drinkers. I found this surprising but I am glad for the brand; its taste has always been unique and filling.

Following a period of anti-brand consumer sentiment, exemplified by the rise of craft beer, the trend is beginning to come full circle, with Gen Z consumers favoring classic and established brands. This shift has had a particularly pronounced effect on Guinness, which reported European sales growth of 24% last quarter, driven primarily by consumers in the UK and Ireland aged 25 to 45.

The popular beverage is owned by Diageo, a British multinational company with a portfolio of over 200 brands, including Smirnoff, Tanqueray, Don Julio, and Johnnie Walker. While Diageo’s beer portfolio has historically lagged behind its spirits, a post-Covid slump in the latter category has caused a reversal of that trend. Over the six-month period ending December 31st, beer sales volume in Europe and the U.S. grew by 7% and 4% respectively. Conversely, spirit sales decreased by 4% in each region.

Guinness CEO Debrew (such a fitting name) Crew credits social media for the uptick in female consumption, while other experts believe the beverage’s popularity among women stems from its lower gas content and fewer calories compared to lager (fun fact).

Guinness has also managed to penetrate an increasingly younger audience of rugby fans through its sponsorship of the Six Nations rugby tournament. According to one source, 38% of rugby fans in the UK prefer drinking Guinness—nearly double the rate in 2014. In hopes of replicating this success with football (soccer) fans, Diageo struck a four-year partnership with the Premier League, starting from the 2024–2025 season.

Here’s a joke for you: Four beer company CEOs order a beer. The CEO of Budweiser orders a Bud Light, the CEO of Miller orders a Miller Light, the CEO of Coors orders a Coors Light, and the CEO of Guinness orders a Coke. The first three ask the CEO of Guinness why he didn't order a Guinness, to which he replied: "I figured if you three weren't ordering beer, it would be rude for me to." Not my joke unfortunately. (Source: FT)

Have a fantastic weekend and please don’t hesitate to share this with friends and family.

Cheers,

Sam