Tuesday 16/10/18

1. In MACROECONOMIC AND CURRENCY NEWS, we see something funny going on with the US and Saudi Arabia, SoftBank suffering from its association with the kingdom and Bitcoin’s latest move towards legitimacy
2. In INDIVIDUAL COMPANY NEWS, Superdry’s not looking so super, Convatec takes a bath and Aston Martin plunges further
3. In OTHER NEWS, I bring you a talented man making sweet music on calculators. For more details, read on…

So Trump and Saudi Arabia set us up for a BS story, SoftBank suffers by association and Bitcoin gets a boost…

Trump signals backing of Saudis over Khashoggi disappearance (Financial Times, Andrew England, Tony Barber and Demetri Sevastopulo) shows us a prime example of the makings of what I think is an extremely clumsy cover-up. Trump sent his secretary of state, Mike Pompeo, to “get to the bottom” of the disappearance of dissident journalist Jamal Khashoggi whilst at the same time saying that “rogue killers” could be responsible for the killing. CNN and the Wall Street Journal have said that Saudi Arabia was thinking about saying that the journalist was killed “by mistake” in an interrogation by some mysterious operatives. Meanwhile, a joint investigation between the Saudis and the Turks has been instigated well after the incident was alleged to have taken place and apparently a few hours after what appeared to be a visit from a group of cleaners entering the embassy through the main entrance (although that could admittedly be innocent – or a double-bluff! Oooh, controversial…). * SO WHAT? * I will bet my mortgage on the fact that Trump will be satisfied with the findings of the investigation and do his level best to calm the increasing hysteria surrounding this incident – which is why he’s clearly softening everybody up with this theory of “rogue operators”. The fact that the Saudis have gone from outright denial of any incident to suggesting that it may have happened, albeit via the hands of some unidentified “rogue operators” AT A CONSULATE, sounds highly suspicious to me. I would also be willing to bet that the joint investigation by the Turks and Saudis will unveil no fault and that this whole thing will just drift away over time via a mixture of clever PR (probably bankrolled by the Saudis) and a willingness by everyone who makes money from dealing with Saudi Arabia to move on. The fact that Mohammed bin Salman (aka “MBS”) has consistently been jailing those who don’t agree with him has been successfully overlooked by the international community so far and I see no reason why this will stop, especially with the country’s enormous power over oil. Everyone just has too much to lose from p!ssing off the Saudis…

…which brings me to SoftBank/Saudi Arabia: present value (Financial Times, Lex) where SoftBank’s close association with Saudi Arabia saw the Japanese company’s share price sold off by 7% (almost half of its massive flagship Vision Fund comes from the kingdom) as investors feared the worst. * SO WHAT? * Unless this whole controversy goes away, the ability of the Vision Fund to do more deals will get trickier and any talk of additional investment by MBS – supposedly up to $45bn in a new fund – will go quiet for now at least. Having said that I personally think that, as far as SoftBank is concerned, this will prove to be a storm in a teacup and the share price will bounce back IF the whole Khashoggi thing gets swept under the carpet (which, unfortunately, looks likely). At the end of the day, everyone knows about the Vision Fund and I’m pretty sure that most businesses chasing big investment are not going to say no to getting finance from it.

I think that Fidelity says it will trade Bitcoin for hedge funds (Wall Street Journal, Justin Baer) is a major step in Bitcoin’s history as Fidelity Investments has announced that it will store and trade Bitcoin and Ether for hedge funds and other professional investors in the new Fidelity Digital Asset Services business.  This division will execute trades through various digital currency exchanges and platforms but there are no plans to broaden its coverage to retail customers at the current time. * SO WHAT? * Most large financial services firms thus far have turned their noses up at the prospect of trading digital currencies due to concerns about risk, regulation and volatility so this is a huge step towards legitimacy for Bitcoin and Ether. The new business will expand into other assets as time goes on, but this move by such a respected firm may well prompt others to follow.

JUST A LITTLE THOUGHT FOR YOU: I’ve been looking at the oil price since this whole Khashoggi thing exploded with evidence from the Turks and it seems that the price has not really moved as much as I thought it would have done given all the initial rhetoric, outcry and threats of sanctions flying about. This would imply to me that the market sees this event as noise – and interestingly enough I don’t know whether you’ve noticed, but the oil price seems to be weakening further – which suggests to me that the market may be thinking that the Saudis could increase oil production as a way to keep the Americans sweet – after all, this is what Trump asked the Saudis to do when he imposed sanctions on Iran. We’ll just have to see…

In individual company news, Superdry and Convatec crater and Aston Martin continues its downward slide…

Superdry profit warning knocks £1.5bn off shares (The Guardian, Julia Kollewe) highlights a bad day for the apparel retailer as it announced an £18bn dent in its profits due to warm autumn weather, generally tricky trading conditions and unexpected forex costs. The shares were walloped by 20% as a result. As chief exec Euan Sutherland put it, “Superdry is a strong brand with significant growth opportunities, backed by robust operational capabilities, but we are not immune to the challenges presented by this extraordinary period of unseasonably hot weather”.

Talking about big share price drops, Convatec shares

plunge as CEO departs and it cuts sales forecast (Daily Telegraph, Jack Torrance) details a one-day share price drop of over 30% as colostomy bag and catheter maker Convatec announced a major cut in forecasts and the “standing down” of its CEO Paul Moraviec with immediate effect. The downgrade was largely caused by its biggest infusion pump customer deciding to cut the amount of inventory it carries but Convatec also cited tougher trading conditions and price pressure in supplying the NHS.

Luxury cars left battered (The Times, Louisa Clarence-Smith) highlights a new low for the much-hyped Aston Martin Lagonda as selling pressure has seen the share price fall from a flotation price of £19 to the current £14.87. Jefferies had initiated coverage of the car maker with a £14 price target, saying that although it had a credible growth plan the flotation price wasn’t sufficiently pricing in execution risk as it entered into competitive areas. It argued that the £19 price put it up with the likes of Hermes and Ferrari, both of whom have more of a track record.

…and finally, in other news…

Every now and again you see something that makes you think “this person clearly has too much time on their hands”, but then you are rather glad they did. This is one such example: Japanese netizen kills time by learning to play a hit J-pop song on…calculators (SoraNews24, Dale Roll https://tinyurl.com/y9mxtvhf). That’s serious dedication to something completely pointless right there!