Friday 05/10/18

1. In MACROECONOMIC AND OIL NEWS, Trump has a new trade template and high oil prices pile on pressure
2. In CONSUMER ELECTRONICS NEWS, Samsung expects and Nintendo aims for a Switch revamp
3. In RETAILER NEWS, Ted Baker takes a hit and BHS eyes a limited comeback
4. In INDIVIDUAL COMPANY NEWS, Elon Musk does it again and UNILAD goes under
5. In OTHER NEWS, I bring you the new Vladimir Putin calendar. You’re welcome. For more details, read on…

So Trump wants to use “Nafta 2.0” as a template and high oil prices pile on the pressure for Asian economies…

Trump aims to model new trade deals on revised Nafta (Wall Street Journal, Jacob Schlesinger and Josh Zumbrun) highlights the potential way forward for trade negotiations as the Trump administration wrestles with how to apply principles of the new US-Mexico-Canada Agreement to other trade partners. Next up on the negotiation agenda are Japan and the European Union who have already started talks. This will then be followed by talks with the UK and the Philippines. * SO WHAT? * It’ll be interesting to see whether the principles in the USMCA will translate over to other countries with which is has no existing trading agreements, but at least it gives potential trading partners some idea of what to expect.

In Oil price rise puts Asian economies under pressure (Financial Times, Emma Dunkley) we see that the recent oil price hike to a four-year high is having a major knock-on effect to Asia’s biggest oil importers. India is having a

particularly tricky time of it because it is suffering from the triple whammy of a massive current account deficit, a falling rupee (it fell to its lowest ever level to the dollar yesterday) and the fact that it is the world’s fourth largest importer of oil. As ING economist Prakash Sakpal put it, “The Indian rupee is getting more battered. But they are pretty much sailing in the same boat and the problem is the oil pushing cost of imports higher and dragging the current account to even larger deficits”. Retail petrol and diesel prices have been cut to ease the burden on consumers and businesses but this has just made India’s budget deficit even worse. The Indian central bank is expected to raise interest rates shortly in order to help prop up the rupee. * SO WHAT? * These are tough times indeed for emerging economies who are facing growing costs due to dollar-denominated debt becoming increasingly expensive as US interest rates continue to rise. Indonesia is another Asian economy which is taking a pasting at the moment – its rupiah is now at its lowest level versus the dollar since the Asian financial crisis hit twenty years ago. Although panic over the Turkish lira and Argentinian peso has subsided for the moment, investors continue to feel rather nervous about ongoing risks faced by emerging economies with big current account deficits.

In consumer electronics news, Samsung expects strong numbers and Nintendo considers a console revamp…

Samsung Electronics expects third-quarter operating profit to be its highest ever (Wall Street Journal, Timothy W. Martin) shows high expectations from the world’s largest smartphone and semiconductor maker for third quarter operating profits at results due to be unveiled later this month. On the other hand, some analysts have concerns over the sustainability of its particularly strong performance in memory chips and recently weaker smartphone sales as it battles with Apple for customers at the top end of the food chain and a number of Chinese rivals at the cheap-and-cheerful end. * SO WHAT? * Prices for NAND flash memory (used to store content on devices) 

and DRAM (the chip that gives devices multi-tasking speed) are both expected to drop next year and, given that Samsung is the world’s biggest maker of both, you can see why there are concerns.

Nintendo aims to stay in the game with console revamp (Daily Telegraph, Tom Hoggins) shows that the gaming giant is planning on releasing a new version of the Switch console next year. The release is slated for the second half of 2019 but some sources say it could be released in the summer. It’s not currently clear what features and upgrades are going to be implemented but it will no doubt aim to make a better console whilst also keeping costs down. * SO WHAT? * The Switch has been a massive hit for Nintendo but sales are losing steam as fewer new games releases in 2018 have resulted in a slowdown in console sales, which the company will want to pep up by bringing out a new version. As always, the key thing for the success of ANY console sales is the strength of the game lineup and future pipeline.

In retailer news, Ted Baker feels weather effects and BHS looks like making a return of sorts…

Ted Baker takes a hit as weather challenges high street trading (Daily Telegraph, Ben Woods) shows that even the strong falter every now and then as it reported a fall in profits yesterday and said that the rest of the year would “remain challenging”. The shares fell by 13% on the news initially but recovered to finish the day 8% down as the company took a hit from House of Fraser-related charges, the winter snows and the unusually hot summer. * SO WHAT? * Ted Baker has certainly been seen to be one of the stronger players on the UK high street, but it just goes to show that even the best suffer. Mind you, online sales were up by a very healthy 24% – so it wasn’t all bad! IMHO, success in apparel retail depends not only on appealing design – it really depends on how fast your turnaround is 

from design-to-being-in-the-shops so you can adapt more quickly to customer tastes (and possibly weather). Will investors use this opportunity to buy on weakness given that the company has, until now, been a company that can do no wrong?

BHS brand set for limited return to UK high street (Financial Times, Jonathan Eley) heralds the potential return of the brand as its Qatari owners reached a concessionaire agreement with Beales, a privately-owned department store group. A trial has started this week in nine stores and Beales’ chief exec (and former retail director for BHS, funnily enough) Toby Brown said that “It’s an ideal marriage. Different concessions – menswear, womenswear, homewares and lighting – will be trialled in different locations. It’s to understand if the brands can still resonate with the customer”. * SO WHAT? * This sounds like Beales is flogging a dead horse. After the high profile scandals and subsequent pension disasters I would have thought that the BHS “brand” counts for b*gger all. Still, no doubt Brown got a good deal to peddle this stuff, so maybe someone will do well out of it.

In individual company news, Elon Musk does it again on Twitter and UNILAD goes from hero to zero…

Musk mocks watchdog that fined him (The Times, James Dean) shows that Tesla is in dire need of someone who can rein in Musk’s urge to be a kn0b on Twitter as he tweeted “Just want to [say] that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point”. This is the SEC that just fined him and his company $40m for sending that August tweet and forced him to step down as chairman. Tesla shares fell by 4% yesterday, he then made this tweet and then the shares fell again by 3% in after-hours trading. * SO WHAT? * WTF was he thinking?? Just as his company hit production targets that it’s been striving to achieve for ages he goes 

and does this! Tesla needs a chairman – and it needs one RIGHT NOW before Musk ends up making more gaffes that could needlessly cost them money. Company execs must be tearing their hair out right now.

I thought that Debts force Facebook video firm to the wall (The Times, Simon Duke) was quite interesting as it shows how Unilad, maker of some of the most popular videos on Facebook, has gone into administration with debts of over £6m. The company has been one of the world’s biggest producers of videos for Facebook, earning a cut of revenues generated by ads that sit next to its (often) viral content. * SO WHAT? * Given its huge popularity (it has 60million followers on its social media channels and its videos are viewed four billion times per month) you do wonder how things came to this. I would have thought that someone would want to scoop this up for a song – not everyone can make viral videos and now its financial problems are out in the open I would have thought there should be a number of potential buyers. 

…And finally, in other news…

Yes, folks – it’s that time of year again. The leaves are starting to change colour, the falling temperatures are making people up and down the country change their duvets – and the latest Vladimir Putin calendar has been published in Putin’s 2019 calendar has him hugging a puppy and the obligatory shirtless shot (Metro, Martine Berg Olsen https://tinyurl.com/y8djr978). If only our very own PM had something like this. I’m not sure whether a calendar would work but I’m sure that one of those wobbly dashboard dancing figures would go down a storm. Just imagine this…

…but with Theresa May on top of a glitterball! I’d buy one…

As always, thank you for reading Watson’s Daily!