Thursday 20/06/19

  1. In MACRO & INVESTMENT NEWS, the US keeps rates on hold, UK manufacturing orders fall, the Hargreaves/Woodford thing takes another turn and Vanguard cuts prices
  2. In TECH NEWS, Oracle unveils strong revenues, YouTube considers changes on kids’ content and Slack targets a $26 per share flotation price
  3. In INDIVIDUAL COMPANY NEWS, Bathstore heads for the plughole and Airbus announces strong orders
  4. In OTHER NEWS, I bring you an inspirational 103-year old sprinter and a very cool Uber. For more details, read on…



So the Fed keeps rates steady, UK manufacturing orders fall, the Hargreaves Lansdown/Woodford thing drags on and Vanguard gets even more aggressive on pricing…

Fed feels the pressure but holds rates steady (Daily Telegraph, Tom Rees) shows that the US Federal Reserve (aka “the Fed”) managed to resist increasing pressure from Donnie T to cut interest rates for the first time in ten years but said that it would be willing to cut in order to prevent an economic slowdown. The federal funds rate is currently 2.5% but now the market believes that a rate cut at the next meeting in July is a dead cert. * SO WHAT? * The US economy has continued to power ahead in relation to many other countries but the outlook has been looking increasingly tricky as the US-China trade war has rumbled on. Wall Street had hoped for a cut yesterday, but I guess it got the next best thing – a big hint that there will be a rate cut at the next meeting.

Meanwhile, back in the UK, Manufacturing orders drop to lowest level in 3 years (Financial Times, Valentina Romei) cites the result of a survey conducted by the CBI which shows that UK manufacturing orders dropped to their lowest level in almost three years. After manufacturing saw rising activity in the first quarter leading into the original Brexit deadline due to businesses stockpiling products, domestic orders showed up as being particularly weak. * SO WHAT? * This is a bit of a no-sh!t-Sherlock conclusion, but it is evidence of what we already know nevertheless. Basically, everyone needs clarity as far as Brexit is concerned, but then again we already know that.

How Hargreaves kept faith in faltering fund (The Times, Ben Martin) is the latest story in British newspapers’ apparent bid to bore us to death about how a fund manager went from hero to zero by putting too many eggs in too few baskets whilst being egged on (#dadjokewordplay) by his besties at Hargreaves Lansdown. Hargreaves is, understandably, trying to cover its own backside as a company by saying that it raised concerns about Woodford’s investment strategy back in

November 2017 although it still kept his funds on its “best-buy” list. * SO WHAT? * Everyone and their dog tried to take their money out of the Equity Income Fund when all of this kicked off, forcing Woodford to ban withdrawals (because he was having to sell assets to meet redemptions – and the speed of withdrawals was faster than the speed at which he could sell assets). This then led to more bad PR and everyone taking pot-shots at the formerly high-flying fund manager. These pot-shots are deserved, given his poor performance, but EVERY fund manager makes bad decisions at some time or other. There are many important issues that have been raised in this whole debacle in my opinion: firstly, that financial services companies such as Hargreaves Lansdown seem to be making an absolute killing from stuffing hapless clients into funds that may or may not be suitable; secondly, that internal controls need looking at (the fact that Hargreaves Lansdown’s research director Mark Dampier AND HIS WIFE sold out of the funds about three weeks before the suspension, looks very dodgy although every report I read is at pains to point out that “there is no suggestion of wrongdoing”) and thirdly, that there needs to be more oversight of the weighting of funds – or at least more transparency to clients so they know what’s going on. I think it’s OK to concentrate investments – just as long as investors are in the loop.

Vanguard trades blows in fund fee war with M&G (Financial Times, Chris Flood) heralds a bit of a kerfuffle going on in Europe’s asset management market as Vanguard announced that it is cutting fees across its $215m UK domiciled active funds to mark the three-year anniversary of its launch in 2016. M&G Investments, the asset manager owned by Prudential, has tried to retaliate by introducing a simplified fee structure for its UK-based funds. * SO WHAT? * UK investment managers are generally finding it tough to raise funds at the moment and so Vanguard’s price cut makes things even worse. It’s like Vanguard came along three years ago, punched UK investment managers in the face, kicked them in the unmentionables and is now starting to put the boot in while they are on the floor. Vanguard’s tactics of low pricing has proved to be a big hit with investors over the years, making it the world’s second biggest fund manager with $5.6tn in assets. The continued pressure on UK active fund managers continues…



Oracle unveils solid revenues, YouTube mulls changes and Slack eyes $26 per share…

Oracle’s revenue beats targets in latest quarter (Wall Street Journal, Asa Fitch) highlights the company’s better-than-expected sales and profits for the quarter as its fast-growing software licensing and cloud business outpaced hardware revenues. * SO WHAT? * It’s good to see that Oracle is trying to move with the times and the success of its cloud business echoes that of Microsoft, Amazon and Salesforce’s. Some say that it has a way to go yet to become a major cloud computing player, but I guess it’s going in the right direction. Whether that is fast enough is the key!

YouTube weighs major changes to kids’ content amid FTC probe (Wall Street Journal, Rob Copeland) says that execs at the Google unit are thinking about making some major changes in its existing offering for kids. They are discussing the transfer of all children’s content into the existing YouTube Kids app to protect children from unsuitable videos following increasing pressure from the likes of the Federal Trade Commission and other consumer groups. There is also talk about switching off “auto-play” that plays a new video after you’ve watched an existing one.* SO WHAT? * This would be a huge change as children’s videos are some of the most popular on the platform and generate millions of dollars in advertising. The unit has come under increasing criticism for being too

slow on addressing hate-based content and false news as well as being too lax when it comes to content for children. I personally believe that this needs addressing asap, so it’ll be interesting to see how this plays out. Hopefully, other companies that publish content for kids will take note and everyone can improve – which will ultimately be better for advertising as advertisers will feel more comfortable that they are not inadvertently harming anyone.

Slack’s reference price set at $26 for Thursday trading debut in direct listing (Wall Street Journal, Corrie Driebusch and Maureen Farrell) heralds the latest puffed-up IPO to hit the New York Stock Exchange as the likely $26 price it will float at tomorrow implies a company valuation of $15.7bn. This is going to be a direct listing (like Spotify’s listing last year) and although $26 is the “reference price”, some expect it to open significantly higher. * SO WHAT? * A direct listing differs from a more conventional listing in that a company floats existing stock on a public exchange without raising any money or using any underwriters (which can theoretically lead to more volatility in share price as employees can dump their stock with no restrictions, for example). In a direct listing, it also doesn’t choose the price or who gets to buy in the night before – so it’s altogether more nervy. Many that are involved in “traditional” listings will probably be praying for Slack to drop like a stone or have ridiculous volatility because if it’s a success, more companies will take this route and bypass investment banking fees (although actually, direct listings still need investment banking support). Instead of investment banks having their cake AND eating it, more direct listings mean that they will just have cake. With maybe a bit of a nibble.



Bathstore heads for the plughole and Airbus announces strong orders…

In another bit of bad news for the UK high street, Bathstore face collapse putting 700 jobs, 168 stores at risk (The Guardian, Zoe Wood and Sarah Butler) shows that the UK’s biggest bathroom specialist will potentially be the latest retailer to go down the plughole as advisory firm BDO has been called in to handle a potential administration as the company failed to find a buyer. * SO WHAT? * The tough times continue on the high street, but this retailer has also been hit by consumers not wanting to spend on big ticket items like new bathrooms given the uncertain economic backdrop. Stagnation in most of the residential property market won’t be helping either.

Following on from yesterday’s news that Boeing got orders for its 737 MAX aircraft from IAG, Anything Boeing can do, we can do better (The Times, Callum Jones) highlights orders from American Airlines, Wizz Air, Frontier Airlines and Jetsmart for its A321 XLRs, which were only launched on Monday this week. Nice.



And finally, in other news…

I’m feeling in a kind of inspirational mood this morning, so I thought I’d leave you with 103-year-old Julia ‘Hurricane’ Hawkins just set a new world record for 50-metre dash (Mental Floss, Claudia Dimuro and the incredibly cool You can hail an Uber to the Great Barrier Reef (National Geographic, Sarah Reid Wow! Amazing on both counts!

Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq *DAX *CAC-40 *Nikkei **Shanghai **
7,404 (-0.53%)26,504 (+0.15%)2,926 (+0.30%)7,98712,309 (-0.19%)5,518 (+0.16%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)