Russia needs opportunity to rejoin an international system, Kissinger says

Former US Secretary of State Henry Kissinger attends a luncheon at the US State Department in Washington, DC, on December 1, 2022.

Roberto Schmidt | Afp | Getty Images

Former U.S. Secretary of State Henry Kissinger on Tuesday said Russia must be given the opportunity to one day rejoin the international system following any peace deal in Ukraine and dialogue with the country must be ongoing.

“This may seem very hollow to nations that have been under Russian pressure for much of the Cold War period,” Kissinger told the World Economic Forum in Davos, Switzerland, via video link.

However, he said it was important to avoid an escalation of conflict between Russia and the West as a result of it feeling the war had become “against Russia itself.”

This, he said “may cause Russia to reevaluate its historic position, which was an amalgam of an attraction to the culture of Europe and a fear of domination by Europe.”

“The destruction of Russia as a state that can pursue its own policies will open up the vast area of its 11 time zones to internal conflict and to outside intervention at the time when there are 15,000 and more nuclear weapons on its territory.”

Finnish foreign minister: We have to be prepared for a long conflict in Ukraine

“So this is why I believe in dialogue with Russia while the war continues, an end of fighting when the prewar line is reached, and a continuing process of discussion by Europe, America and at that point Russia … while the conditions of sanctions and other pressures will be maintained until a final settlement is reached.”

“I believe this is the way to prevent the war from escalating,” he said.

Ukrainian membership in NATO

United Airlines (UAL) earnings Q4 2022

A grounds crew member directs an United Airlines airplane to a gate at Terminal A at Newark Liberty International Airport (EWR) in Newark, New Jersey, US, on Thursday, Jan. 12, 2023.

Aristide Economopoulos | Bloomberg | Getty Images

United Airlines‘ fourth-quarter profit and outlook for early 2023 topped Wall Street estimates thanks to strong travel demand and high fares.

Consumers’ appetite for air travel and willingness to pay higher fares has helped airlines return to profitability despite higher costs for fuel, labor and other expenses tied to ramping their networks back up. Meanwhile, aircraft delivery delays and training backlogs have constrained airlines’ growth, keeping fares high.

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United reported an $843 million profit for the last three months of 2022, a 31% increase compared with three years earlier, on revenue of $12.4 billion. That revenue was almost 14% higher than the same period in 2019, before the pandemic, despite flying 9% less, helping it post a profit despite a 21% increase in unit costs from three years earlier.

United shares gained about 3% in extended trading Tuesday.

The quarterly update is another sign of a strong year-end for airlines, despite severe winter storms and disruptions during the popular holiday travel period.

Last week, Delta Air Lines‘ profit and revenue surpassed Wall Street’s expectations though higher costs, partly due to an expected pilot labor deal, weighed on its first-quarter profit forecast. Also last week, American Airlines, which reports on Jan. 26, hiked its profit and sales forecast for the fourth quarter.

Here’s how United performed in the fourth quarter compared with what Wall Street expected, based on average estimates compiled by Refinitiv:

  • Adjusted earnings per share: $2.46 versus an expected $2.10
  • Total revenue: $12.4 billion versus expected $12.2 billion

For the first three months of 2023, United expects to generate revenue 50% higher than the same period of 2022. It expects first-quarter earnings per share to be between 50 cents and $1, above analyst consensus of 25 cents, according to Refinitiv.

United expects to expand flying 20% in the first quarter from a year ago, it said in a filing.

It forecast capacity growth in the high teens for the full year over 2022. It forecast unit revenues, or revenue per available seat mile, for the full year to come in flat compared with 2022, a sign that air fares’ sharp rise this year could continue to abate as airlines add back more flights.

United also said in an investor presentation that staffing issues, plane shortages and outdated tech would restrict industry capacity this year.

As the airline industry confronts a Covid-induced labor shortage, United and others are hoping to boost pilot and crew counts into the next fiscal year. The company on Tuesday noted the debut of its Calibrate apprenticeship program, which it launched in November, and the United Aviate Academy which started in early 2022. The airline also on Tuesday said it opened a renovated and expanded flight attendant training facility in Houston.

United hasn’t yet reached a new labor agreement with its pilots. Delta and its pilots’ union have reached a preliminary agreement for big raises, but pilots haven’t yet voted on it.

United said in its investor presentation that it expects new contracts with pilots, flight attendants, technicians and airport employees to keep its non-fuel costs steady over 2022.

United executives will hold a call with analysts and media at 10:30 a.m. ET Wednesday.

—CNBC’s Rebecca Picciotto contributed to this report.

This story is developing. Please check back for updates.

Gen Z is driving luxury sales as wealthy shoppers get younger

Peter Cade | Stone | Getty Images

Luxury shoppers are getting wealthier and younger, with purchases by some of the newest consumers expected to grow three times faster than older generations over the next decade, according to a new report.

Generation Y, also known as millennials, and Generation Z accounted for all of the luxury market’s growth last year, according to a report from Bain & Co. Spending by Gen Z and the even younger Generation Alpha, or those under 13, is expected to make up a third of the luxury market through 2030, reflecting “a more precocious attitude toward luxury” among the younger ranks than older generations, the report said.

Gen Z consumers are starting to buy luxury goods — everything from designer handbags and shoes, to watches, jewelry, apparel and beauty products — at age 15, three to five years earlier than millennials did, the report said.

“By 2030, younger generations (Generations Y, Z, and Alpha) will become the biggest buyers of luxury by far, representing 80% of global purchases,” it said.

Luxury sales have so far been largely immune to rising interest rates, a slowing economy and high inflation. Bain estimates that global sales of personal luxury goods sales surged 22% in 2022, to 353 billion euros, or roughly $381 billion.

This year, luxury sales are expected to grow between 3% and 8%, depending on China’s recovery and the economies in the U.S. and Europe.

The U.S. regained the top spot for luxury sales in 2022, surpassing China, with 25% sales growth and total sales of 113 billion euros, or about $121 billion. China’s luxury sales dropped 1% due largely to Covid lockdowns. Europe also saw strong growth, at 27%, helped in large part by American tourists spending on luxury goods in Europe over the summer.

Accessories, led by handbags, led the growth in 2022 and are expected to continue driving luxury goods sales in the coming years.

Sales of leather goods soared 23% to 25% last year, and were up over 40% from pre-Covid levels. While new models and “hero products” accounted for some of that growth, the biggest driver of growth came from price increases — such as the Chanel small Classic Flap bag, which is now priced over 60% higher than before the pandemic. Bain estimates that 70% of sales growth in leather goods in 2022 came from price increases.

Analysts and luxury executives say the appeal of luxury brands to ever-younger consumers is tied to a surge in wealth creation over the past few years, along with social media.

“What has changed is the affluence level of the U.S. customer, and the prevalence of social media that tells the customer what is cool, ” said Jan Rogers Kniffen, CEO of retail consulting firm J Rogers Kniffen WWE. “The generation before the Z’s pushed the age of first luxury purchase to 18 to 20. Wasn’t 15 to 17 the next logical stop? Is that the bottom? Probably not.”

Buying luxury shoes and handbags online has become much more accessible in recent years as luxury companies have embraced online sales and a host of secondhand luxury good websites have emerged.

Bain said Web 3.0, including the metaverse and NFTs — a type of digital asset called nonfungible tokens — will help future luxury sales to younger consumers even further.

Morgan Stanley CEO Gorman says deal activity will return once the Fed pauses

Morgan Stanley Chairman and Chief Executive James Gorman speaks during the Institute of International Finance Annual Meeting in Washington, October 10, 2014.

Joshua Roberts | Reuters

Morgan Stanley CEO James Gorman said he’s more confident on the markets than the rest of Wall Street, seeing a return of deal-making as soon as the Federal Reserve stops hiking interest rates.

“I’m highly confident that when the Fed pauses, deal activity and underwriting activity will go up. I would bet the year on that, in fact,” Gorman said on an earnings call Tuesday. “We’re not of the view that we’re heading into a dark period. Whatever negativity in the world is out there. That’s not our house view.”

His comments came as his New York-based firm reported fourth-quarter earnings that topped Wall Street expectations, boosted by the bank’s record wealth management revenue and growth at its trading business. The company’s shares traded up 6% on Tuesday following the results.

Despite the overall stronger-than-expected results, Morgan Stanley’s investment banking business suffered a big slowdown amid a collapse in IPOs and debt and equity issuance.

Revenue from investment banking came to $1.25 billion in the fourth quarter, down 49% from a year ago. The bank said the drop was due to the substantial decline in global equity underwriting volumes and lower completed M&A transactions.

Gorman said deal activity will get a boost once financial conditions start to loosen. He said the Fed’s next move will likely be a smaller 0.25 percentage point rate hike, followed by a pause. He added he’s not sure if the central bank will cut rates this year.

“I’m a little more confident about the medium-term outlook for the markets,” Gorman said. “We want to make sure we’re positioned for growth. This thing will turn. M&A underwriting will come back, I’m positive of it. So we want to be well-positioned for it.”

The Fed has raised its benchmark interest rate to a targeted range between 4.25% and 4.5%, the highest level in 15 years, marking the most aggressive policy moves since the early 1980s.

“There’s a lot of money sitting around waiting to be put to work. Our job is to be the flow of capital between those who have it and those who need it. So I’m pretty confident actually about the outlook,” Gorman said.

Correction: Morgan Stanley CEO James Gorman said, “Our job is to be the flow of capital between those who have it and those who need it.” An earlier version misstated the quote.

Tech execs could be jailed for failing to protect kids: UK proposal

The Union Jack flag flies on top the British Parliament Building in London, England.

Wilfred Frost | CNBC

Tech executives could face the possibility of jail time for breaching online safety standards under a proposal in the U.K. after Prime Minister Rishi Sunak’s government reached an agreement with Conservative lawmakers who sought to amend the Online Safety Bill.

The legislation is a highly anticipated bill that aims to make the internet safer for kids by enforcing age verification requirements and putting more responsibility on tech platforms to shield minors from harmful content.

The latest agreement could mean severe punishment for company leaders who deliberately fail to protect kids from online harm. Michelle Donelan, the U.K.’s secretary of state for digital, culture, media and sport, said in a statement Tuesday that the changes “deliver our shared aims of holding people accountable for their actions in a way which is effective and targeted towards child safety, whilst ensuring the UK remains an attractive place for technology companies to invest and grow.”

Conservative lawmakers had proposed an amendment to impose criminal liability, including the possibility of a jail term of up to two years, on senior managers for failing to meet the child safety requirements. Donelan said in the statement that she’s “sympathetic to the aims of the amendment,” but believes the bill already includes other provisions for holding senior managers accountable.

Still, she said, the final amendment “will be carefully designed to capture instances where senior managers, or those purporting to act in that capacity, have consented or connived in ignoring enforceable requirements, risking serious harm to children.”

Criminal penalties would include imprisonment and fines “commensurate with similar offences,” she said.

“While this amendment will not affect those who have acted in good faith to comply in a proportionate way, it gives the Act additional teeth to deliver change and ensure that people are held to account if they fail to properly protect children,” Donelan said.

Critics of the legislation fear the age verification stipulations will lead to invasions of privacy and have a chilling effect on speech.

Bills seeking to protect kids in similar ways have also been introduced in the U.S. with bipartisan support. California passed its own Age-Appropriate Design Code, modeled off of U.K. guidelines, that similarly puts more of the onus on platforms to protect kids from online harms.

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Apple announces new Mac mini, MacBook Pro with M2 Pro and M2 Max chips

Apple’s 2023 MacBook Pro

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Apple on Tuesday announced new Macs that can be purchased with either M2 Pro or M2 Max chips, the most powerful Apple processors for MacBooks and the Mac mini to date.

The company unveiled refreshes to its 14-inch and 16-inch MacBook Pro laptops, both of which can now be configured with the latest processors. Apple also announced an update to its Mac mini computer with support for the M2 or M2 Pro chips. Apple no longer sells an Intel version of the Mac mini, which means the Mac Pro is the last computer that can be configured with an Intel processor.

The launches come after Apple’s chief financial officer, Luca Maestri, warned in October that the company’s Mac sales would decline in the December quarter on an annual basis. That may be in part because Apple didn’t ship these computers in time for the holiday shopping season.

The updated Macs are launching into an uncertain economic environment for the consumer, as customers may feel the pinch from inflation or spend more cautiously against fears of a potential recession.

Apple is set to report earnings later this month. In January 2022, it reported December quarter Mac revenue of $10.85 billion, up 25% year over year.

The Mac mini starts at $599 with an M2 chip, $100 less than the prior version, or $1,299 with the M2 Pro. The new 14-inch MacBook Pro starts at $1,999. The 16-inch MacBook Pro model will cost at least $2,499. All will be available beginning Jan. 24, although customers can order the computers beginning Tuesday.

Putin is a tyrant who wants to enslave Ukraine, Poland’s president says

Russian President Vladimir Putin speaks during a news conference after a meeting of the State Council on youth policy in Moscow, Russia, December 22, 2022. 

Sergey Guneev | Sputnik | Reuters

Poland’s president, Andrzej Duda, has slammed his Russian counterpart, saying Vladimir Putin is behaving like a colonialist.

“Vladimir Putin wants to enslave Ukraine, he wants to expand his regime across the Ukrainian territory, [to] take away Ukrainians’ freedom. Why? Because Ukrainians decided they want to be part of the community of free nations. They want to be part of the European Union, they want to be part of NATO,” Duda told CNBC’s Steve Sedgwick in Davos, Switzerland, on Tuesday.

Duda, one of Putin’s fiercest critics and Ukraine’s most vocal allies, said Russia’s invasion of Ukraine last February was spurred on by Kyiv and other former Soviet republics moving away “from the old Soviet sphere of influence towards free, democratic countries.”

Polish President Andrzej Duda and Ukrainian President Volodymyr Zelensky shake hands and hug during their press conference on August 23, 2022 in Kyiv, Ukraine.

Alexey Furman | Getty Images

He said the “free world” — a Cold War term referring to Western democracies — had to ask itself, “do we allow countries to be enslaved by tyrants like Putin who deny all democratic rules, who want to introduce terror, who try to enslave others and take advantage of their own potential for their own benefit? Or do we think that the free world can progress and every country has the right to self-determine?”

“If that’s what we believe in, we have to defend Ukraine,” he said.

Modern-day Russia and Poland share a turbulent history. Poland was invaded by the Soviet Union in 1939 and remained heavily influenced by the Soviets until 1989 — when a series of revolutions in Eastern Europe ended Communist rule and helped spur on the dissolution of the Soviet Union in 1991.

‘Imperial, colonial aims’

Group member Poland plays an instrumental role in the NATO military alliance, effectively marking the eastern frontier of NATO territory with Ukraine and Belarus. It has not been immune to the effects of the Ukraine war, as millions of Ukrainian refugees crossed in to seek local refuge or head into Europe beyond. In November, a stray missile landed on Polish territory, killing two citizens.

The war in Ukraine has prompted widespread concerns among countries that used to be within Russia’s sphere of influence — particularly Latvia, Lithuania and Estonia — that Putin aspires to recreate a Russian empire.

Lithuania's president says sanctions on Russia must go further

Duda said Poland “was fully aware of the fact that these imperial, colonial aims are resurfacing,” adding that Warsaw rejected any notion of coming under “Russkiy mir” — a term that means “Russian world” and refers to Russia’s cultural influence and the notion of “Russianess.”

“Russia is basically behaving like a colonial country. It wants to colonize others, take away their freedoms, exploit their resources. It wants to juice other people’s potential, their economic potential, their natural resources. Today, that’s what’s happening in Ukraine. It would be the same for other countries,” the Polish president said.

Latvia president says providing Ukraine with military assistance is the ‘absolute priority’

Duda described Russia as wanting to extend its sphere of influence for centuries. “Poland was partitioned for 123 years. Parts of Poland were under Tsarist rule, so we’re perfectly aware what is happening. So that’s why we’re defending ourselves. If someone says ‘Russkiy mir’ — ‘Russian world’ or ‘Russian peace’ — we say absolutely no! Anything but Russia, anything but the Russian sphere of influence.”

CNBC has reached out to the Russian Foreign Ministry for comment.

Nest co-founder is back with new device for the home, focused on food

Matt Rogers went from Apple to Nest Labs and into many homes with the now-Google smart thermostat. He’s looking to get into your home again, this time to solve America’s food waste problem.

Chewie Labs

Matt Rogers has always liked to look at areas that are overlooked. 

Before he left Apple to start smart device company Nest Labs in 2010, for instance, no one thought twice about their home thermostat and took its technology for granted. Nest’s smart thermostat, which allows users to control their home’s heating from an app on their phone, ended up pioneering the way for the smart home revolution and changing the way people think about their energy use.

After Nest, Rogers began work on several philanthropic projects, many focusing on climate-related initiatives. In addition to co-founding Incite.org, he served as Chairman of Carbon180, an NGO focused on reducing carbon emissions, until September 2022, and he’s currently chair of Advanced Energy Institute, a research and education organization.

What stuck out to Rogers through his environmental work was how much food is thrown away each year. With more than one-third of food in the United States being wasted and food being the single most abundant material found in landfills, Rogers felt there had to be a better way to prevent so much food from being thrown in the garbage.

“Waste is one of these areas that we’ve kind of taken for granted but doesn’t have to exist,” Rogers said. “It’s super important in the climate fight, people need to realize how bad it is that we throw food in the trash and it becomes methane in landfills.”

That’s how Rogers — along with Harry Tannenbaum, who Rogers worked with at Nest — came up with the idea for Mill, his latest venture that launched Tuesday focused on creating sustainable technology to help combat food waste.

Mill users put their food waste — including meat and dairy, items that aren’t normally able to be composted — into a new kitchen bin that dehydrates the food overnight, turning it into an odorless, coffee ground-like material the company calls food grounds. Once the bin fills up, which Rogers says takes about three weeks on average, its contents can be packaged up and sent back to Mill via mail. The company then repurposes the grounds into an ingredient for chicken feed and sends it to farms.

The start-up charges users a $33 monthly subscription fee to recycle their food scraps. It’s a system he hopes may help eliminate food waste from the American home.

“We’ve kind of gotten used to the way things are, but it doesn’t have to be that way,” Rogers said. “So when you come at it with fresh eyes, you actually end up building an entirely new system.”

During his time at Nest, Rogers said he found that systems need to be significantly easier to use and create a better overall user experience if people are going to change their daily habits. Nest made it easy for individuals to control the climate of their home from their smartphones. Mill now makes it easy for people to get rid of food waste and reduce their carbon footprint. It eliminates smelly food scraps going in the trash bin with minimal steps; it offers an alternative to composting, which often attracts fruit flies and requires more maintenance than Mill’s system. 

The bin can automatically dehydrate the waste every night, or users can program the bin to begin the dehydration process at times that best fit with their schedules. This is another lesson Rogers said he learned from Nest: while some people like to have their systems operate automatically, others like to have control.

Mill also includes some smart technology. An optional app lets users monitor their food waste from their phones and see how much they are putting into their bins. Rogers said making users aware of their waste habits — similar to how Nest makes them aware of their energy consumption habits — may help change purchasing behaviors over time, enabling them to save some money at the grocery store on food they don’t need to buy.

“If we start to think about things differently, actually, this is where individual actions can drive systemic change,” Rogers said. “That’s a really big deal.”

Ultimately, Rogers envisions Mill having the potential to reach beyond the household kitchen, to cities which have zero waste goals. 

“We’re in this for large-scale impact,” Rogers said. “We want to build a big business that also is good for the planet, and we want this to be for everyone.”

CNBC is now accepting nominations for the 2023 Disruptor 50 list – our 11th annual look at the most innovative venture-backed companies. Learn more about eligibility and how to submit an application by Friday, Feb. 17.

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Prices have not peaked yet, says Unilever CEO

Unilever CEO Alan Jope photographed at the World Economic Forum in May 2022.

Hollie Adams | Bloomberg | Getty Images

The CEO of consumer goods giant Unilever said Tuesday that prices would likely continue to rise in the near term, adding that his firm had a playbook for high inflation thanks to its business dealings in markets like Argentina and Turkey.

Speaking to CNBC’s Joumanna Bercetche at the World Economic Forum in Davos, Switzerland, Alan Jope talked about how his firm was managing its operations in the current climate.

“For the last 18 months we’ve seen extraordinary input cost pressure … it runs across petrochemical derived products, agricultural derived products, energy, transport, logistics,” he said.

“It’s been feeding through for quite some time now and we’ve been accelerating the rate of price increases that we’ve had to put into the market,” he added.

“So far, the consumer response in terms of volume softness has been very muted, the consumer has been very resilient,” Jope said.

“We do see the prospect of higher volume elasticity as winter energy costs hit, as households’ savings levels come down and that buffer goes away and as prices continue to rise,” he said.

Unilever CEO: Inflation is at its peak, but further price rises are still to come

Last October, Unilever published its third-quarter results for 2022, with the firm reporting price growth of 12.5%.  

Jope was asked if he foresaw any moderation when it came to inflationary pressures. “It’s very hard to predict the future of commodity markets,” he replied.

“Even if you press the oil major CEOs, they’ll be a little cagey on giving an outlook on energy prices.”

Unilever’s view, he said, was that “we know for sure there’s more inflationary pressure coming through in our input costs.”

“We might be, at the moment, around peak inflation, but probably not peak prices,” he went on to state.

“There’s further pricing to come through, but the rate of price increases is probably peaking around now.”

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Unilever has a global footprint and owns brands including Ben & Jerry’s, Magnum and Wall’s.

During his interview with CNBC, Jope touched upon the international dimension of his business and how the experience of operating in a range of markets was steering it through the current climate.  

“Nobody running a business at the moment has really lived through global inflation, it’s a long time since we’ve had global inflation,” he said.

“But we’re used to high levels of inflation from doing business in places like Argentina, or Turkey, or parts of Southeast Asia,” he added.

“So we do have a playbook, and the playbook is that it’s important to protect the shape of the P&L by landing price.”

“And so it’s not that we’ve taken more price, we just started acting earlier than many of our peers, and the guidance that we’ve been getting from our investors is they support that and feel that that’s an appropriate action.”  

This, Jope explained, was “something we have learned from being in these high inflationary markets, though … much of that inflation is currency weakness, historically.”

“But now those markets are having to deal with the combination of commodity pressure and currency weakness. So our instinct is to act quickly when costs start coming through.”

Idea of de-globalization is a ‘mirage,’ says historian Niall Ferguson

Historian Niall Ferguson gives a speech at a gala dinner in Hong Kong. Ferguson argued at the 2023 World Economic Forum in Davos that the world is not experiencing major de-globalization.

South China Morning Post | South China Morning Post | Getty Images

The idea that a major trend of de-globalization has begun is a “mirage” that is not borne out by data, according to the historian Niall Ferguson.

The “Ascent of Money” author and Hoover Institution senior fellow also took aim at arguments that the world is facing a “polycrisis” — when crises in various global systems combine, resulting in more severe and unpredictable effects — or a “geopolitical recession.”

This is “just history happening,” he said on a panel at the World Economic Forum in Davos, Switzerland.

“This is how history works. You get stuff that is not so perceptible, the economic convergence, the technological change, which were obviously going to alter the way the global economy worked.”

“You had a financial crisis in 2008-9, you had a populist protectionist backlash from 2016 to 2019, then you have had ‘cold war II’ from about 2018 between the U.S. and China, a pandemic, and then a war in eastern Europe.”

It would be surprising if that series of events hadn’t produced structural changes in the world economy, Ferguson said.

Global trade relative to global output has somewhat declined since the financial crisis, global capital flows have reduced, and the dominance of the U.S. as a cultural force is waning, he noted, from which you could argue globalization peaked around 2007.

But, he continued, other examples should make us skeptical of this idea.

There is continued strong trade in areas such as the European Union with no sign of an overall peak; Russia’s trade with Europe has actually increased in euro terms since the start of the war in Ukraine due to higher prices; and “the globalization of trade in services just keeps on going,” he said.

“A lot of what appears to be a peak in globalization followed by a plateau or decline has to do with price movements. Huge distortion is created by the commodity super cycle, which peaked in 2010-11, and that’s what’s driving the numbers,” he said.

He also observed Apple iPhones continue to be designed in California and assembled in China, though later in the session said he believed the “new cold war” between China and the U.S. would lead to a divide between software and hardware, with the West continuing to use Chinese apps such as TikTok, but chips and other physical products being produced by U.S. allies.

“It’s all a mirage. There is not major de-globalization going on here,” he concluded.