Tuesday 18/09/18

  1. In TRADE WAR-RELATED NEWS, Trump’s proposed China tariffs get more detailed and Apple gets exclusions
  2. In BEVERAGE-RELATED NEWS, Coca-Cola looks at cannabis drinks and Innocent advances
  3. In RETAIL-RELATED NEWS, Sweden’s H&M unveils a solid performance and the new Boohoo chief could earn a hefty £50m bonus
  4. In CAR-RELATED NEWS, Indonesia’s Go-Jek aims for $2bn in funding, Jaguar slims down to a three-day week and a Saudi fund backs Tesla rival Lucid Motors
  5. In OTHER NEWS, I bring you an invisible car. For more details, read on…



So there’s more detail on Trump’s new China tariffs and Apple manages to get special treatment…

Trump raises stakes with new China tariffs (The Times, Callum Jones) follows on from what I was saying yesterday about Trump slapping $200bn-worth of tariffs on China, just with a few more details. Namely, the 10% tariffs will kick in from September 24th but the rate will then increase to 25% by the end of the year – a move intended to give US companies time to re-jig their supply chains. Trump says he’s got another $267bn of tariffs lined up for if China decides to retaliate and boast-tweeted that “Tariffs have put the US in a very strong bargaining position…” whilst China’s Global Times said that “we are looking

forward to a more beautiful counterattack and will keep increasing the pain felt by the US”. The Great P!ssing Contest continues…

Meanwhile, Apple avoids US tariffs on smartwatches, earbuds (Wall Street Journal, Tripp Mickle) shows that Apple managed to get an important exemption from Trump as the company manufactures almost all of its gadgets in China. * SO WHAT? * This all comes at a rather delicate time for Apple as it’s just unveiled a ton of gadget-p0rn and wants to sell boatloads of it to power future growth. It is thought that Apple will have enough inventory for now but if China decides to retaliate against Trump’s latest moves, Apple looks like a great target for China to use as an “example”. Even if it does tighten the screws, Apple’s fat profit margins could stand a bit of a squeeze for the short term – but I am sure it is hoping for a reasonably swift resolution to all this drama.



In retailer-related news, Coca-Cola looks at cannabis-infused drinks and Innocent continues to take market share…

Coca-Cola explores cannabis drinks business (Financial Times, James Fontanella-Khan, Alistair Gray and Mamta Badkar) is rather topical given that Canada will be legalising cannabis for recreational use next month! The world’s biggest beverage group by revenues is looking closely at using the non-psychoactive chemical in majijuana (called cannabidiol) for “wellness drinks” and is keen to be an early mover in this space. Coke is rumoured to have held preliminary talks with Canada’s Aurora Cannabis to develop beverages but there’s been no official confirmation. Even so, Aurora’s share price spiked by 14% in trading yesterday and other pot-related stocks such as Tilray, Green Organic Dutchman (!) and Organigram all rose between three and six per cent as well. * SO WHAT? * This is all part of Coke’s effort to diversify away from its traditional beverages and they are not the only ones sniffing around cannabis. Corona beer maker Constellation Brands recently just sunk $4bn into Canadian cannabis group Canopy Growth to bring its stake in the business to 

38% and Diageo, which owns brands such as Johnny Walker, is also rumoured to have been looking at investment opportunities in this space recently. Decriminalisation of cannabis use appears to be a “growing” trend with countries such as Germany and Australia OK-ing it for medical purposes and other countries considering something similar to Canada, which will be legalising recreational use from October 17th. Analysts with ArcView and BDS Analytics predict spending on cannabis globally to shoot up from $9.5bn last year to $32bn in 2022. These kind of predictions have led to deal-making in the sector with Canopy making a number of acquisitions and Aurora Cannabis’ $2bn acquisition of MedReleaf in May.

Talking about Coca-Cola’s diversification into different beverages, Big rise in sales for Innocent as it sucks up market share (Daily Telegraph, Jack Torrance) shows that revenues at smoothie-maker Innocent rose by a very healthy 22% last year and its biggest-ever sales increase boosted the company’s operating profits by 25% despite higher ingredients prices and currency movements. * SO WHAT? * No doubt Innocent’s owners at Coca-Cola are pleased with what’s going on, although there may be headwinds in the event of a no-deal Brexit which could make imports of highly perishable raw materials problematic. 



In retail-related news, H&M puts in a solid performance and Boohoo’s chief is in line for a potential £50m bonus…

H&M bucks the retail trend with 9pc sales rise (Daily Telegraph) gives another example of a retailer that’s doing OK as the Swedish purveyor of fast fashion and home furnishings saw a 9% sales increase. * SO WHAT? * This shows a solid performance, but there have been some teething problems with its new logistics systems. Still, good news in a difficult environment.

Boohoo chief set to get £50m if shares climb 180% by 2023 (The Guardian, Rob Davies) is a story that’s doing

the rounds this morning as all sorts of feathers are being ruffled because of news that incoming boss John Lyttle (who was the COO of Primark) will be in line for a £50m payout if he manages to increase the company’s share price by 180% by 2023. The incentive plan, which was approved by major shareholders, will not kick in until the company’s share price rises above a threshold of 60% and will be in addition to his day-to-day package of up to £1.5m. * SO WHAT? * TBH I think this is a storm in a teacup. It’s only making the headlines because there have been a number of recent high profile payouts for company leaders who have stirred up a lot of controversy e.g. at Persimmon, Melrose and GVC Holdings. FWIW, I think that this sort of payout is verging on the ridiculous given what company minions get paid, but then again you could argue that everyone benefits if the company’s share price goes up by that amount in terms of job security and (possibly) their own pay. This could be in the form of higher wages and/or via some exposure themselves to the upside in the form of company share schemes etc. 



In car-related news, Indonesia’s Go-Jek aims high, Jaguar goes to a three-day week and Tesla rival Lucid Motors gets juiced up…

Go-Jek aims to raise at least $2bn in fresh funding (Financial Times, Henry Sender and Don Weinland) shows the ambitions of the Indonesian ride-hailing company as it tries to raise at least $2bn in its latest funding round. Go-Jek started off in ride-hailing but has since diversified into motorcycle-hailing (very useful in Jakarta’s slow-moving traffic) and food delivery to the extent that the company was valued at $5-6bn at its most recent funding round at the beginning of this year. It now operates not only in Indonesia, but also Vietnam, Thailand, Singapore and the Philippines. * SO WHAT * This confidence is in complete contrast to the new-found caution/scepticism in China towards such companies. One person familiar with the fund raising said that “These tech companies are building the infrastructure for the new

economy. One day, Go-Jek will have the largest market cap in Jakarta”. 

Meanwhile, in the automotive sector, Jaguar factory forced to adopt three-day week as sales stall (Daily Telegraph, Alan Tovey) shows how sluggish sales have led to JLR to cut production accordingly although a company spokesman said this was “temporary” but added that “we are however continuing to over-proportionately invest in new products and technologies, and are committed to our UK plants”. * SO WHAT? * Demand for Jaguar Land Rover’s cars is slowing down as drivers hold off on big-ticket purchases ahead of Brexit and move away from diesel-powered vehicles. Let’s hope that this really is a temporary move – otherwise a lot more jobs will be lost.

Saudi fund charges up Tesla rival (The Times, James Dean) shows that the competition is continuing to hot up in electric cars as Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, has invested $1bn in Tesla rival Lucid Motors to help it launch its first electric vehicle in 2020. This comes shortly after news that it has built up a 5% stake in Tesla.



…And finally, in other news…

Do you remember that rather questionable “disappearing car” unveiled by John Cleese’s Q in the Die Another Day Bond film? Well some are saying that this is available to mere mortals in This picture of a ‘disappearing’ black car has baffled the internet (Metro, Jimmy Nsubuga). Very clever ;0)

As always, thank you for reading Watson’s Daily!

Some of today’s market, commodity & currency moves (as at 0810hrs 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
7,302 (-0.03%)26,062 (-0.35%)2,889 (-0.56%)7,89612,096 (-0.23%)5,349 (-0.07%)23,455 (+1.59%)2,680 (-0.25%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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