Friday 06/09/19

1. In MACRO NEWS, the US and China agree to resume trade talks and BoJo’s difficulties continue
2. In TECH NEWS, Facebook moves into dating and Samsung relaunches its folding phone
3. In RETAIL NEWS, it’s all good for Lululemon and Boohoo, less so for Flannels and Monsoon
4. In INDIVIDUAL COMPANY NEWS, the Tesla 3 goes to #3 and WeWork settles for a much lower valuation
5. In OTHER NEWS, I bring you the heart-warming story of the Mighty Quinn…

So markets rally on the resumption of US-China trade talks while BoJo’s nightmare continues…

Markets breathe easier as US and China agree to resume trade talks (The Times, James Dean) shows the latest reaction to scheduled talks between Liu He (China’s vice-premier and lead trade negotiator) and Robert Lighthizer (the US trade representative) in Washington early next month, which were agreed over the phone yesterday. Markets generally went higher and investors sold out of “safe haven” assets like gold as hopes of a resolution rose yet again. * SO WHAT? * TBH, this is just noise as talks have been held so many times before and either resulted in nothing or very small concessions. IF there is any proper resolution to the ongoing impasse, world markets will immediately skyrocket IMO – but I’d even be cautious about that given that either side can be prone to bending conditions. However, both Trump and Xi would emerge looking like gods and it would do the former’s campaign for presidential re-election next year the power of good. I guess it all depends on whether China is willing to string things out and gamble on Trump losing to a candidate who might be easier to negotiate with or whether it wants to stem the pain sooner and hammer something out.

Boris Johnson’s brother quits over Brexit in fresh blow to PM (Financial Times, Sebastian Payne and Jim Pickard) is yet another bump in the road to Brexit for older brother Boris Johnson as Jo Johnson said he would stand down from parliament at the next election. BoJo will try again to dissolve parliament on Monday after an unsuccessful attempt on Thursday. * SO WHAT? * It’s interesting to see that after constantly pushing for a general election to “let the people decide” that Corbyn is wavering yet again. He is being urged by remainers of all parties not to push for a

general election until they get proper assurances that the Brexit date will be delayed. If he wants any chance of winning an election, I would say that he really has to get his act together. He voted “Leave” in the referendum, but is now the rallying point for Remain, he spent ages on the fence on remain/leave/second referendum, continued to push for a general election and now he got what he wanted, he’s dithering again. It just seems to me that the voting public wants clearly defined positions as human nature seems to demand black and white rather than shades of grey (which, TBH, is unrealistic) and the nearest you are going to get to this is LibDems (who have been Remainers from the off) versus Conservatives (who have “purged” the doubters and are positioning themselves as the face of “Leave”). The problem, though, is that I’d argue hardly anyone knows who the leader of the LibDems is – let alone what their policies are outside Remain – and that the Leave/let’s-just-get-this-thing-done/”at-least-Boris-is-actually-doing-something”/UKIP vote will swing to the Conservatives. The other problem, of course, is European Brexit negotiator Michel Barnier. This guy has been “negotiating” with the UK all along and so I just don’t think it’d be in his interest to budge as it would make him look like a kn0b – plus any climbdown would increase suspicions that the situation in Europe is actually worse than it seems on the surface. There’s probably slightly more chance of him negotiating a better deal with BoJo than with May (because BoJo is “new”) but not much. I think that someone would have to step in on the European side IN ADDITION TO Barnier to change anything, but I just don’t think anyone will. France’s Macron is massively pro-European and so would probably make things even harder, Germany’s Merkel is a dead-woman-walking as far as political clout is concerned and Spain and Italy have big leadership problems of their own to deal with – let alone get involved with Brexit. I’m open to ideas as to how an improved deal might be made, but I just can’t see any at the moment.

There’s good news for singletons as Facebook launches online dating in the US and Samsung decides to relaunch its folding phone…

Facebook launches online dating service in US (Financial Times, Camilla Hodgson) highlights the start of Facebook’s much-anticipated dating service in the US as it hopes that its position as the world’s biggest social media platform – on which 200m people list themselves as being single – will turn into a frenzy of love matches (or, at least, more revenues 😍). Facebook Dating was first launched in Colombia last year and asked users to create a separate dating profile while the feature itself stays within the “standard” Facebook app. Users then select which photos and personal details from their profile to include but their name and age will NOT be changeable. Friends are never suggested as potential matches although there is a “Secret Crush” feature that lets users select up to nine people from their Facebook friends who will get a notification if they are also on Facebook Dating and if the interest is mutual they BOTH get a notification. There’s no swiping right or left as per Tinder and Bumble and a new feature for the US launch will be the ability to add Instagram posts to their profiles, with the promise of more to come. * SO WHAT? * Facebook’s entry into this marketplace puts it up against the likes of Match Group – which owns Match.com, OkCupid and Tinder – eHarmony, Hinge and The League. It is indeed a hugely interesting market – eMarketer estimates that the number of adults who use dating apps will hit about 25m in 2019 and Tinder had about 8.5m

users in the US as of March 2019. On the one hand, you’d think that Facebook is uniquely placed to clean up here because of the sheer size of its user base – but users will need to be convinced that their data (which, TBH, is probably even more sensitive when it comes to romance!) will be safe. It would present another potentially very lucrative advertising channel because it will be aimed at a more defined group and possibly put pricing pressure on the competition. However, like I said, I think that Facebook’s success here is not a certainty given increasing mistrust by users over how their information is used. Surely it is only a matter of time before Facebook wades into recruitment in a big way to take on Microsoft-owned LinkedIn.

Samsung putting its reworked folding phone on sale today (Daily Telegraph, Matthew Field in Berlin) heralds the relaunch today of the £1,900 Samsung Galaxy Fold in South Korea, to be rolled out in the UK, France, Germany and Singapore by September 18th. You will recall that the phone with the folding screen was announced in February and due to launch in April, but a proper rollout had to be postponed due to cracks in the screen after only a few days of reviewer testing. Chinese rival Huawei postponed the launch of its Mate X foldable phone (which had been due to launch in September) for the second time following the whole US-blacklist thing. This all comes just one week before Apple is expected to unveil the iPhone 11 Pro. * SO WHAT? * Whatevs. This thing is ridiculously expensive, but the company will probably do well from the “halo effect” where customers don’t buy the top-of-the-range but maybe the next best thing or others in the range. Let’s hope for Samsung’s sake that the thing doesn’t spontaneously combust or something as it could do with a bit of good news!

Lululemon and Boohoo smash it but Flannels and Monsoon don’t…

In a quick look at the retail landscape, Lululemon Athletica boosts fiscal-year outlook (Wall Street Journal, Allison Prang) shows that the posh sportswear company upped its forecasts for full-year revenues and earnings as its Q2 earnings jumped by 31% versus the previous year while Boohoo boosts full-year guidance as sales soar (Financial Times, Jonathan Eley and Myles McCormick) shows that the UK online fashion retailer outperformed expectations and also hiked up its forecasts for the full year. Boohoo’s share price has risen by about 73% so far this year and hit an all-time high of 285.8p in trading yesterday, making it more valuable than Asos which has had two recent profit warnings.

On the other hand, Ashley’s Flannels debut ends hastily after protesters force shutdown (The Times, Ashley Armstrong) shows that the Sports Direct-owned up-market fashion chain’s first foray into London was less than ideal as animal welfare protests outside the new shop disrupted things enough to make it shut early. Flannels sells brands like Balmain, Burberry, Gucci and Brioni – as well as limited edition £3,000 sneakers – but clearly sales won’t have been good yesterday. Then Monsoon to face legal challenge (The Times, Louisa Clarence-Smith) shows that landlords aren’t taking things lying down as British Land has decided to launch a legal challenge to Monsoon Accessorize’s CVA, which would slash store rents by between 25 and 65% across Monsoon Accessorize’s 258 shops. Given that CVAs have become so prevalent these days, it was only a matter of time before landlords decided to push back.

Tesla sees strong UK sales and WeWork opts for a reduced valuation…

Tesla Model 3 was UK’s third bestselling car in August (The Guardian, Jasper Jolly) highlights the success of Tesla’s “mass-market” offering as its sales of electric vehicles generally have doubled in the past year, according to the latest figures published by the Society of Motor Manufacturers and Traders (SMMT) yesterday. It is now the UK’s third best-selling new car, beaten only by the Ford Fiesta and VW Golf. * SO WHAT? * Nice, but this is from an incredibly low base (electric vehicles represent just 1.1% of all car sales this year) and the charging network is still rubbish. I don’t know this for sure, but I wonder whether this is just a blip as shipments are just playing catch-up with the order book (I think that the first UK deliveries only started arriving in June this year). Keeping its #3 spot over

the next year or two would be even more impressive especially as the competition is hotting up all the time.

WeWork set to slash its IPO valuation by over $20bn (Daily Telegraph, James Titcomb) sounds highly dodgy, don’t you think? Given that the office space unicorn was valued at $47bn in its last funding round 8 months ago it sounds highly suspicious that they are now talking about valuing themselves at $20-25bn ahead of next week’s investor roadshow ahead of the IPO. * SO WHAT? * This is just another company with pumped-up valuations wanting to sling more investor money into their cash-burning furnace. Other recently-listed companies like Uber, Lyft and Slack have been hugely disappointing in terms of share price performance since listing and I would be willing to bet money that WeWork will be just the same. FWIW, I think that there are more profitable companies in this space that are actually profitable and have a track record that encompasses down markets as well as ones that are going up – WeWork only really has experience of the latter. As my favourite Warren Buffet saying goes, “You never know who’s swimming naked until the tide goes out.”

And finally, in other news…

I thought I’d end the week on a really heart-warming story about a brave little lad in A sick child couldn’t leave his house. So strangers came to his window by the dozens to entertain him (The Washington Post, Cathy Free https://tinyurl.com/y5g3na66). This does give you some faith in human nature!