Wednesday 03/09/25

I’m back from holiday! No more holiday for me now until the end of the year – so strap in for what will no doubt be a dramatic final quarter of 2025 shenanigans! I went to Canada. I developed affection for poutine and got soaked in the Niagara Falls (not at the same time though). Fantastic place, lovely people! Highly recommended ⭐⭐⭐⭐⭐

US sliding towards 1930s-style autocracy, warns Ray Dalio (Financial Times, James Fontanella-Khan) is a really interesting interview with hedge fund billionaire and Bridgewater Associates founder Ray Dalio who warned that “gaps in wealth”, “gaps in values” and the erosion of trust were behind the “more extreme” policies in the US. He added that other investors were too scared of Trump to criticise him. He cited his objection to the state’s creeping involvement in corporate America (as per its recent action of taking a 10% stake in Intel), the attacks on Fed independence and voiced concerns about America’s burgeoning debt. He said that Washington was spending around $7tn but only taking $5tn in revenue which would force huge debt issuance at a time where international investor confidence in assets like US Treasuries is wavering because of Trump’s policies.

Meanwhile, US curbs TSMC’s tool shipments to China (Financial Times, Michael Acton and Demetri Sevastopulo) highlights the administration’s ongoing crackdown on tech to China as it has now revoked TSMC’s authorisation to export US chipmaking tools to China without a licence. This follows on from last week’s decision to revoke the “validated end user” status of Samsung and SK Hynix who make memory semiconductors in China. * SO WHAT? * Although this latest move doesn’t stop TSMC from exporting US chipmaking tools to China completely, it does mean that their exports will be much more closely monitored than is currently the case.

On the other hand, Judge blocks Donald Trump’s deployment of the National Guard in California (Financial Times, Stefania Palma) highlights some pushback against Trump’s act in June where he deployed the National Guard in California to quell protests over the administration’s crackdown on immigration. A San Francisco judge ruled that the government had violated the Posse Comitatus Act despite the White House claiming that the demonstrations qualified as a rebellion. He said that “there was no rebellion, nor was civilian law enforcement unable to respond to the protests and enforce the law”. The decision will come into force on September 12th and will stop the government using the National Guard or any troops to “execute the laws”. * SO WHAT? * Trump’s administration is looking to depl0y US troops across a number of US “sanctuary cities” which restrict or forbid co-operation with federal immigration authorities, so this decision could throw a spanner in the works – if it sticks. Trump has already deployed the National Guard in Washington and is looking to station them in Chicago, which is also a Democratic party stronghold.

US court reinstates antitrust commissioner Donald Trump tried to fire (Financial Times, Stefania Palma) is another example of resistance as the court of appeals for the District of Columbia circuit has temporarily reinstated a Democratic FTC commissioner following Trump’s recent attempts to fire her. It said that Rebecca Slaughter should be reinstated while her appeals process continues. She is the last Democratic commissioner remaining at the FTC! The government could now decide to put the matter before the Supreme Court…

Meanwhile, Xi Jinping shows solidarity with Vladimir Putin and Kim Jong Un at lavish China parade (Financial Times, Joe Leahy, Ryan McMorrow, Kathrin Hille and Christian Davies) highlights the show of strength between the communist leaders which culminated in one of China’s biggest military parades marking the 80th anniversary of the victory over Japan in WW2. Fun fact: it’s the first time the Chinese, Russian and North Korean leaders have been in the same place at the same time. They were joined by 20 other national leaders. This was clearly designed to be a show of strength that will put the US, Europe and Japan on watch…

Back home, Pound falls as UK long-term borrowing costs hit highest level since 1998 (Financial Times, Emmily Herbert, Ian Smith, Sam Fleming, Delphine Strauss and George Parker) reflects the repercussions of news that long term borrowing costs in the UK hit their highest level since 1998 yesterday. Sterling fell by up to 1.5% versus the dollar in its biggest single-day drop since April. Borrowing costs are now the highest in the G7.

Elsewhere, Turkish stocks fall after court ousts Istanbul opposition leadership (Financial Times, John Paul Rathbone) highlights President Erdoğan’s ongoing suppression of his opposition as an Istanbul court ruled that the appointment of the head of the main opposition party was invalid. Dozens of opposition mayors and officials have been arrested in clampdowns, weakening any opposition to Erdoğan’s power. The benchmark BIST100 fell by almost 6% initially on the decision. The government maintains that Turkey’s courts are independent 🤦‍♂️.

Then in Gold hits new record price amid fears for American economy (The Times, Robert Miller) we see that gold breached $3,500 per ounce as investors continue to seek out safe haven assets in an uncertain global economy. Fun fact: so far this year, the gold price has appreciated by a chunky 35%! This has been thanks to continued purchases by central banks, diversification away from the dollar, safe haven demand and a generally weak dollar.

In Kraft Heinz to split a decade after merger in bid to revive growth (The Guardian, Julia Kollewe) we see that the Chicago-based food group has announced that it will split into two publicly traded companies ten years after it was created in a mega-merger. One will concentrate on sauces, spreads and seasonings while the other will focus on grocery staples and the demerger is expected to complete in the second half of next year. Kraft Heinz break-up won’t bring home the bacon (Financial Times, Lex) contends that the move won’t really do much to address what the real problem is – that it just hasn’t evolved fast enough to meet consumer tastes. * SO WHAT? * These things just seem to go in cycles. One moment, big is best, the next it’s all about “streamlining” and “focus”. The thing is that ingredient prices have rocketed over the last few years thanks to bad harvests, wars scrambling finely balanced supply chains and consumer moves away from highly processed products. I guess that a demerger might by the companies a bit of time but they still need to address the fundamentals. Maybe someone else will buy one of the businesses.

In other consumer goods news, Modelo maker hit by lower beer sales to Hispanic consumers in US (Financial Times, Peter Wells) we see that Constellation Brands has announced that it will be downgrading its full year forecasts thanks to lower demand from Hispanic customers and the impact of Trump’s tariffs. Constellation produces Modelo and distributes Corona under licence. It

is now suffering from its relatively high exposure to Hispanic customers who account for around 50% of its beer sales. * SO WHAT? * This weakness isn’t just a Constellation thing – Molson Coors and Coca-Cola have also noticed weaker demand from their Hispanic customer base. With Trump’s ongoing zeal at hunting them down, it’s difficult to know when Hispanics are going to start spending again so I would have thought that corporates are going to have to take this into account for the longer term numbers-wise…

Elliott launches campaign against PepsiCo after taking $4bn stake (Financial Times, Oliver Barnes and Gregory Meyer) highlights Elliott Management’s next target as it turns out that the activist investor has built up a chunky stake in the beverage company in order to agitate for change. This is one of the hedge fund’s biggest positions (the stake also makes it one of PepsiCo’s top five investors) and comes at a time when Pepsi is losing ground. Elliott wants the company to review its bottling operations, focus more on fast-growing brands and boost corporate oversight in order to jolt it back to life. * SO WHAT? * Pepsi and Coca-Cola used to slug it out to be the most popular US soft drink but over the last few years, it’s fallen to fourth place after Coke, Dr Pepper and Sprite. The company could do with a kick up the jacksy, so it seems that now would be a good time to get things moving…

In WH Smith flees the high street and runs straight into calamity (Daily Telegraph, Daniel Woolfson) we see that the former high street stalwart is having all sorts of nightmares thanks to incorrect profit forecasts for its US business, which is putting the management team under a lot of pressure. * SO WHAT? * Parallels are being drawn with a similar accounting scandal that hit Tesco back in 2014 where it hugely overstated profits but fraud was involved in that case whereas no suggestions like that are being made here. This probably explains why big investors actually bought into the dip this time rather than abandon ship. At the moment, people seem to be looking at this as a pure accounting problem rather than a strategic one…

Elsewhere on the high street, Asda owner considers bid for Costa Coffee (Daily Telegraph, Hannah Boland) shows that TDR Capital has emerged as one of the potential buyers of Costa Coffee as current owner Coca-Cola has been looking at potentially selling the chain that it bought a few years ago for £3.9bn. It is rumoured to be thinking of selling the business for just £2bn. TDR Capital may want to add to its high street presence that it has built up by buying pub chain Stonegate and the UK business of chicken restaurant chain Popeye’s.

In supermarkets news, Waitrose makes Tesco executive new boss (Daily Telegraph, Hannah Boland) shows that another Tesco alum is about to join the posh supermarket. Tom Denyard, who was at Tesco for almost a decade, will start his job as MD of Waitrose in January. * SO WHAT? * The appointment follows the hiring of chairman Jason Tarry last September, who is also ex-Tesco.

It sounds like this should work well given the shared backgrounds and their experience of retail unlike the predecessors who had no idea. It turns out that Waitrose sales are now growing at their fastest pace in around three years! The supermarket is also starting to open new stores again.

Then in Sainsbury’s tests facial recognition to stop shoplifters (The Times, James Hurley) we see that the supermarket is testing out facial recognition tech to combat the rising epidemic in shoplifting. It’s going to test out the tech in two stores (in Sydenham and Bath) before potentially rolling it out across more than 1,400 shops. It maintains that records will be deleted instantly if the software doesn’t recognise the face of reported individuals. * SO WHAT? * There were huge objections to this when Sainsbury’s tested it out before and I don’t think anyone’s going to like this. After all, given how many retailers have been hacked just this year I think trust in things like this will not be high. They may lose shoplifters but they may also lose customers as well…

And whilst we’re on the subject of security/invasion of privacy, Starmer considers digital ID rollout in bid to tackle illegal migration (Financial Times, George Parker, Jim Pickard and Mari Novik) shows that the PM is looking at launching a digital ID programme that is supposed to cut the number of illegal immigrants. It’s just one of a number of measures currently being considered.

In a quick scoot around some of today’s other interesting stories, Google spared break-up in US monopoly case (Financial Times, Stefania Palma, Michael Acton and Stephen Morris) shows that the tech giant has managed to avoid a feared order to be broken up following previous accusations that it had created an illegal monopoly. The decision not to force a break-up was very much influenced by the emergence of AI as an alternative to traditional search. * SO WHAT? * There had previously been speculation that Google would have had to sell its Chrome browser and possibly its Android operating system. This is a big win for Alphabet – and, indirectly, Apple. Google is going to have to make some concessions but the worse-case scenario has definitely been avoided.

The AI funding madness continues in AI start-up Anthropic valued at $170bn in expanded funding round (Financial Times, George Hammond and Cristina Criddle) which highlights yet another massive hike in the company’s valuation in its latest funding round (it was last valued at around $60bn in March!) while Behind This Season’s Bumper Earnings: Job Cuts, Price Hikes, Glum Workers (Wall Street Journal, Theo Francis) does a neat summary of the performance of US corporates in the earnings season just gone – that they have largely exceeded profit

expectations but that’s been down to cutting costs, raising productivity and using new tech rather consumers actually spending more. For sustained outperformance, companies need consumers to spend more!

Elsewhere, UK in advanced talks to build warships for Denmark and Sweden (Financial Times, David Sheppard, Sylvia Pfeifer and Richard Milne) highlights an important new development for the British defence industry – but more specifically for Scottish shipbuilders. News of advanced talks came hot on the heels of news that emerged over the weekend about the UK’s biggest ever warship export deal – which came from Norway. Britain continues to deepen military alliances with Scandinavia. The new orders aren’t nailed on yet as we’re competing with French makers in the bidding.

Then in Jaguar Land Rover manufacturing and retail ‘severely disrupted’ by cyber incident (The Guardian, Lauren Almeida and Dan Milmo) we see that JLR’s operations have been “severely disrupted” by a cyber incident which has forced it to shut down its systems. At the moment, there’s no evidence that customer data has been leaked but the sudden nature of the shutdown implies that this is serious…

How quickly can you solve this??