Thursday 27/06/19

  1. In MACRO AND BITCOIN NEWS, China manages to skirt US tariffs, foreign investment in the UK hits a new low and Bitcoin breaks $13,000
  2. In UK RETAIL NEWS, Bathstore goes down the plughole, Bonmarche eats humble pie, Pizza Express gets stuffed and Boots unveils a new flagship
  3. In CAR-RELATED NEWS, Apple buys an autonomous start-up, TDR buys BCA and UK car production continues to weaken
  4. In OTHER NEWS, I bring you a new way of cross-training…



So China swerves US tariffs, foreign investment in the UK weakens and Bitcoin smashes through $13,000…

American tariffs on China are being blunted by trade cheats (Wall Street Journal, Chuin-Wei Yap) highlights how goods worth billions of dollars are avoiding US tariffs by entering the US via other countries, such as Vietnam, in a practice called transshipment. Funnily enough, exports to Vietnam from China of electronics, computers, machinery and other hardware have shot up in the first five months of this year versus the same period last year according to the latest trade data. The Vietnamese Ministry of Industry and Trade said that “The phenomenon of trade fraud through labeling of the origin of goods as being produced in Vietnam is increasing. Such fraudulent labeling not only directly affects products and consumers, but also significantly reduces the reputation and competitiveness of goods manufactured in Vietnam”. Mind you, it’s not only Vietnam that is used in transshipment – Taiwan, Cambodia, Serbia and Mexico also play a part in the charade. * SO WHAT? * This is interesting because it weakens Trump’s tariff threats in real terms. Yes, the headline tariffs will still create headaches, but if the Chinese manage to get around them I would have thought that the main countries to suffer will be those who allow transshipments to carry on within their borders. China will just re-route elsewhere. TBH, I would have thought this sort of thing goes on all the time with many countries – and it’s just the high profile nature of the US-China trade conflict that has brought this to the fore.

Foreign investment into UK falls to lowest level in six years (Financial Times, Valentina Romei) cites official data from the Department for International Trade which shows that foreign investment into the UK’s most productive

industries has continued to fall and is now at a new low. Uncertainty of future trading arrangements has obviously been the main reason for this and findings from fDi Markets, a research firm, show that this drop in foreign investment has come at a time when the rest of the EU has seen an uptick. The financial services and automotive sector has seen jobs drop by around a third, but things were even worse in advanced engineering, environment and infrastructure investment where job creation fell contracted by about 40%. * SO WHAT? * I don’t think anyone would be surprised by this. I would say, however, that Brexit will not have been the only factor at play here – financial services have been hit by other things such as MiFID II as well as costs associated with GDPR. The automotive sector has been a universal nightmare for all concerned as fewer new cars are being sold on a global basis while manufacturers are wrestling with higher production costs associated with changing technology and tighter emissions standards. Still, it has obviously had a negative effect – my point is that it isn’t the ONLY negative factor!

Then in Bitcoin surges past $13,000, boosted by ‘Facebank’ (Financial Times, Daniel Shane and Siddarth Shrikanth) we see that Bitcoin is now at its highest level since the beginning of last year and the euphoria related to this rise is helping to power other cryptocurrencies such as Ethereum, to new highs. * SO WHAT? * I would have thought that the recent rise has a lot to do with Facebook wading into the market with Libra last week bringing a new aura of legitimacy to cryptocurrencies generally. However, Libra is different because it will be pegged to a BASKET of currencies and will be backed by some ACTUAL assets, whereas others such as Bitcoin and Ethereum have no backing. No one ever seems to come up with a proper explanation of why Bitcoin goes up or down so I just think that investing in it is just down to luck with timing. Yes, there are clearly short term trading opportunities (volatility creates that) but I think Libra will be better long term.



Bathstore drowns, Bonmarche gets humble, Pizza Express gets sliced and Boots opens a swanky new flagship…

Bathstore goes into administration, putting 500 jobs at risk (The Guardian, Julia Kollewe) shows that Britain’s biggest bathroom specialist has fallen into administration having failed to unearth a buyer. Unfortunately, the company’s billionaire owner, Warren Stephens, decided not to pour any more money into it. Administrator BDO said that Bathstore will continue to trade for the moment, but 500 jobs are now hanging in the balance. Ryan Grant, joint administrator, said that the company should be able to fulfil most of the outstanding customer orders but installation services have stopped. * SO WHAT? * One of Bathstore’s rivals, Better Bathrooms, fell into administration in March – so it’s not alone in its nightmares. It has been particularly hard hit by a slower housing market and weakening consumer confidence due to Brexit uncertainties. The thing is – who would want to buy such a retailer now? Natural choices like B&Q’s parent Kingfisher or builders merchants are having their own problems, so I wonder whether it’s time for Sports Direct’s Mike Ashley to put in a cheeky bid for the company of 50p or something ???? Bathstore at House of Fraser, perhaps?? I bet you he’s thinking about it…

Then Bonmarche U-turn over ‘inadequate’ takeover bid (The Times, Elizabeth Burden) shows that the directors of the ailing over-50s fashion retailer have been forced to eat humble pie shortly after dismissing a takeover offer from

its biggest shareholder, Philip Day, as being too low. Day has made a lot of money by buying up problem retailers in the past like Jane Norman and Peacocks and is known for being the owner of Edinburgh Woollen Mill and a rival bidder to Mike Ashley for House of Fraser. Bonmarche’s share price halved following a profit warning and yesterday’s poorly-received quarterly update resulted in a 26.2% fall to just 11.5p. * SO WHAT? * Clearly, the company’s management are living in a fantasy world and had to admit that Day’s offer – that they described as “inadequate” when it was made two months ago – suddenly looks “fair and reasonable”. I wonder whether Day will punish this arrogance by coming in with a lower offer – or even take a leaf out of Mike Ashley’s playbook and wait for it to go into administration before buying it for peanuts.

Slump in casual dining takes a slice out of Pizza Express (Daily Telegraph, Oliver Gill) highlights the gloomy mood at one of the UK’s biggest restaurant chains captured in its annual report. In it, the company blamed “labour and property cost pressures”, last summer’s “extreme weather” and “intensifying competition” in China as being behind its poor performance. * SO WHAT? * Just another example of difficulties in casual dining.

Boots unveils London flagship as regional stores face the axe (Daily Telegraph, Laura Onita) shows mixed news from the pharmacy/retailer as it unveiled a swanky new flagship store in Covent Garden yesterday on the one hand and then talked about cutting staff at other stores on the other. Everyone will be watching the new store’s performance closely to see whether it will be a sign of a brighter future for the tired retailer.



Apple buys into driverless, TDC buys BCA and UK carmaking continues to fall…

Apple buys autonomous vehicle start-up (Financial Times, Shannon Bond) shows that Apple has just beefed-up its existing self-driving project (codenamed “Project Titan”) by buying, which had been looking for a buyer for some time. Its latest round of funding valued it at $200m but Apple has not revealed the price it paid. * SO WHAT? * I suspect that this snapping up of start-ups will continue as the likes of Uber, General Motors’ Cruise and Aurora continue their race to be leader of autonomous driving.

I mentioned the possibility of this the other day but TDR Capital agrees to buy car auctioneer BCA in £2bn deal (Financial Times, Anna Gross and Philip Geordiadis) highlights private equity firm TDR Capital’s acquisition of owner and car auction house BCA Marketplace. The deal is worth £1.9bn and comes in at a roughly 25% premium to what BCA shares were trading at before the announcement. * SO WHAT? * TDR said that it will be doing a review of BCA’s operations after completion

of the deal, but this news will come as welcome relief to embattled fund manager Neil Woodford, whose funds held BCA. The car industry is going through a tricky period at the moment and so it’ll be interesting to see whether TDR opts to grow domestically or whether it will try to boost the company’s fortunes by going for international expansion. 

In Carmaking suffers year of falls in production (The Times, Philip Aldrick) we see continued gloom in the UK carmaking industry as the latest figures from the Society of Motor Manufacturers and Traders (SMMT) show that the number of cars made in the UK has fallen for 12 consecutive months and is now on course to hit its lowest levels since 2011. As usual, the SMMT’s chief exec Mike Hawes complains that “The sector is facing multiple seismic challenges simultaneously: technological, environmental and economic. Political instability and uncertainty over our future overseas trade relationships, most notably with Europe, is not helping”. * SO WHAT? * It shouldn’t be a surprise that our car production is going down the pan, but I still say that the industry is now paying for the arrogance it showed with diesel. Hindsight is a wonderful thing, but surely our UK car makers should have seen this coming given the increasing number of cities around the world that were banning diesels on the grounds of pollution. Getting clarity on Brexit will go a long way to helping the industry because at least everyone will know what they are dealing with.



And finally, in other news…

I thought I’d leave you today with a great way to cross-train that will get you noticed in Woman only runs backwards because it’s ‘more fun than forwards’ (Metro, Jen Mills Good luck with this at the local park ????

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Some of today’s market, commodity & currency moves (as at 0830hrs 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 **
7,416 (-0.08%)26,537 (-0.04%)2,914 (-0.12%)7,91012,245 (+0.14%)5,501 (-0.25%)21,338 (+1.19%)2,997 (+0.71%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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