Monday 21/10/19

1. In MACRO & COMMODITIES NEWS, BoJo goes on the Brexit offensive again while China’s pig cull impacts corn
2. In CONSUMER-RELATED NEWS, job fears and Brexit uncertainty hit consumer confidence and house price rises are at their lowest rate since the financial crisis
3. In INDIVIDUAL COMPANY NEWS, Huawei admits US sanctions impact, Tesla pressures Europeans on self-driving and Casper tries to side-step rivals’ mis-steps
4. In OTHER NEWS, I bring you a micro pig cafe and some world wonders…

So BoJo tries again and corn prices fall on weaker demand…

Boris Johnson to make new Brexit push on Monday (Financial Times, George Parker) shows that BoJo is continuing to try to push through his new Brexit deal as he still believes he can deliver Brexit on October 31st despite losing yet another vote on Saturday. He is now aiming to win a “meaningful vote” today (which commons speaker John “or-daaaaah” Bercow could yet block) or to secure a majority when legislation implementing his deal is voted on tomorrow. OMG this is getting ridiculous! My advice to you, if you want to know more about this is to have a look at Brexit: what happens now? (BBC, Peter Barnes https://tinyurl.com/yb5f67rk) because this does a good job of identifying the current options. It’s all so darn complicated (and mind-numbing)!

You may well recall the current crisis regarding pigs in China being culled en masse due to the African swine fever epidemic (a disease for which there is no cure) which is so serious that it’s affecting China’s consumer price index and

putting upward pressure on European pork prices. African swine fever takes toll on China’s corn sector (Financial Times, Sun Yu) shows that other areas are seeing collateral damage as companies related to China’s corn sector are suffering due to the dramatic fall in demand for hog feed, which is a major use for the crop. * SO WHAT? * To put this into perspective, China is home to about HALF of the world’s pig population and almost a third of China’s annual corn output is used in hog feed – but the pig population has fallen by 41% since the epidemic broke in August last year (although some believe that the official stats on this are dodgy – and that the reality is that it’s more like 90%). Chinese corn traders and animal feed plants are now feeling the impact but farmers are not keen to replenish herds too soon because they fear it could all happen again. Corn traders are hoping that demand for poultry feed (which is another major use of the crop) will see stronger demand given that pork prices in major cities are now a whopping 84% higher than they were a year ago, meaning that more people will be eating chicken. However, Liu Chunlin, general manager of an animal feed factory in Jiangxi, says that pigs eat the feed equivalent of 30 chickens in their lifetime so a rise in chicken demand is unlikely to make up for the current shortfall in demand.

UK consumer confidence wobbles and house prices get properly sluggish…

Job fears and Brexit uncertainty take toll on consumer confidence (The Times, Callum Jones) cites a report by Deloitte which shows a weakening trend in consumer confidence due to job security and Brexit concerns. This follows another survey carried out by Deloitte this month which showed that most businesses were preparing to cut costs and hiring activity. * SO WHAT? * Until now, the jobs market has been pretty hot and consumers have still been spending. However, Deloitte’s chief economist, Ian Stewart, observed that “a decline in consumer confidence this quarter, combined with a fall in official unemployment figures, show that the period of remarkable resilience in jobs and earnings is coming to an end”. Uncertainty is

killing everyone at the moment! It’s difficult to know what is going to have bigger long terms effects at this stage – BoJo’s new deal, no-deal, another delay or a general election. I am assuming that he abandonment of Brexit altogether would be least damaging in the short term given that we know more about being in the eurozone than we do about being outside it. 

Lowest October rise in UK house prices since 2008 financial crisis (The Guardian, Rupert Jones) cites the latest data from property website Rightmove which says that UK house prices have risen by their lowest margin since the 2008 financial crisis due to – surprise, surprise – Brexit uncertainty. There is usually a seasonal bounce at this time of year of 1.6% on average for the last decade, but this year saw a monthly rise of just 0.6%. Uncertainty seems to be putting sellers off although buyers are remaining steady. * SO WHAT * It’s tricky currently but I get the impression that there is a whole load of activity will erupt when we get any kind of certainty around Brexit.

Huawei continues to hurt from US sanctions, Tesla pushes for more self-driving concessions and Casper aims to succeed where rivals have failed…

Huawei admits that US sanctions are hurting (Financial Times, Kiran Stacey) sounds a rather more downbeat note after the company recently reported rising revenues. Its execs have said that although they’ve been able to source replacements for a lot of the hardware sourced from the US, they haven’t been able to replace computing services sold by Google. * SO WHAT? * As things stand currently, customers with Huawei mobiles can still access Google’s Play app store, Google Maps and other products from Google Mobile Services due to a temporary exemption that allows US suppliers to continue to service existing equipment, but they are NOT available on new Huawei models. Clearly, this is likely to have a negative impact on new handset sales and although the company is working on its own alternative operating system (called Harmony) it is years away from being ready. Ultimately, I think that current US actions will come back to haunt them in years to come when a Chinese alternative operating system becomes fully functional. I would have thought that companies like Huawei were at least considering the development of something in the background anyway, but the heavy US sanctions will have put the rocket boosters under such plans. In the meantime, the company will suffer.

Tesla pressures Europeans to change course on self-driving cars (The Telegraph, Olivia Rudgard) shows that Europe is thinking about relaxing restrictions on Tesla’s Autopilot system as it put forward proposals last month.

Thus far the system has been restricted in Europe because of UN rules governing the speed of lane changes. * SO WHAT? * It’s good for Tesla that its proposals are at least under consideration but even if it does succeed, how many people are really going to use their cars like this?? I can recall at least two driver fatalities (one in China in 2016 and an ex-Navy SEAL in the same year) that seemed to me to be largely swept under the carpet, but if this happens more often as its cars increase in popularity Tesla could cause itself (and its investors) some major problems. Mind you, when it DOES eventually work 100% of the time, driverless taxis will be huge – but I don’t expect this to happen for many many years…

Bed-in-a-box start-up aims to avoid rival float nightmares (Daily Telegraph, James Titcomb) highlights plans for US online mattress seller Casper to float sometime this year as it backs itself to do better than its British cousins Simba and Eve Sleep. The company is working with Morgan Stanley and Goldman Sachs on a flotation it hopes will value it above the $1.1bn  private equity valuation. * SO WHAT? * Surely this should be a tough sell after UK-listed Eve Sleep ditched plans to merge with Simba. Given the relatively low barriers to entry to this business, you can see why the players in the mattress-in-a-box market have suffered – Eve Sleep floated in 2017 at 101p a share – and it is now trading at under 3p a share (!). Casper is talking a good game by saying it’s more than just beds (basically they sell other bedroom and bed-related stuff) and is investing in physical stores, but this just sounds like a disaster waiting to happen IMO. Good luck to them – but surely it would be better to consolidate existing players to get some real economies of scale going and THEN float on the stock market. This move smacks of desperation to me in that they want to raise money now while there is still some positive sentiment.

And finally, in other news…

Today, I thought I’d bring you the very cute Have coffee with adorable piggies at Tokyo’s brand-new micro pig cafe in trendy Harajuku (SoraNews24, Casey Baseel https://tinyurl.com/y3cdcejs) as well as the very impressive 27 natural wonders everyone should see in their lifetime (Insider, Meredith Cash https://tinyurl.com/yxhl5e2a).  Wow!