Wednesday 21/08/19

1. In MACRO NEWS, Italy’s PM resigns, Trump mulls measures to avert slowdown and UK factory orders turn a corner
2. In RETAIL NEWS, Home Depot goes downbeat, Walmart sues Tesla, Shopify aims for Amazon, Lidl and Sainsbury’s make strides and Asos asks suppliers for discounts
3. In TECH NEWS, Apple puts a chunk of cash into TV and gun sellers thrive on Facebook
4. In INDIVIDUAL STORIES, Bayer sells off its animal health unit and bananas look seriously endangered
5. In OTHER NEWS, I bring you a golden toilet…

So Italy’s PM resigns, Trump considers economic stimulus and UK factory orders stabilise…

Giuseppe Conte resigns as Italy’s prime minister (Financial Times, Hannah Roberts and Davide Ghiglione) shows that the well-documented political turmoil in Italy has come to a head, plunging Italy further into turmoil as it now has to cobble together a new administration if it is to avoid having another election. Italy’s coalition government, comprising of the League and Five Star (the political party, not to be confused with eighties group Five Star), have only been together for just over a year but have been squabbling the entire time. It has locked horns with the EU on a number of occasions over its spending plans, which the EU says do not comply with its budgetary rules. The size of Italy’s debt is second only to Greece in the eurozone. * SO WHAT? * Italian politics is always a complete mess – and things are just going to get messier. Unfortunately, it’s the people who will suffer the consequences of each political party’s thirst for a bit of power – but then again, it is the people who voted. God knows what this latest situation will throw up, but it’s unlikely to be any good. In the meantime, the debt just gets larger and Germany isn’t going to be able to cover for them…

In Trump weighs options to spur the economy (Wall Street Journal, Rebecca Ballhaus, Andrew Restuccia and Richard Rubin) we see that the US president is trying to style out an economic slowdown by saying “we’re very far from a recession”, whilst at the same time considering various measures to boost the economy. Such actions could include more tax cuts (and specifically, a cut in capital

gains taxes) and piling the pressure on the Fed to slash interest rates. * SO WHAT? * Cutting capital gains tax is not necessarily a sure-fire way of boosting the economy and the Fed is supposed to be independent – so should, in theory, be immune to Trump’s tweet barrage. Trump is going to have to have some kind of  plan in the background, though, if he wants to get re-elected next year and he has been talking about introducing a payroll tax cut, which is separate to income tax and would be another way to boost workers’ take-home pay. Clearly, the elephant in the room here is the ongoing US-China tariff war, which is creating log-jams everywhere. IMO, if he manages to hammer out a half-decent deal with China, I think all of this could all go away. However, China has the power to make Trump’s life harder by refusing to sign any deal, knowing that this will increase pressure on him and force him to take other measures to stimulate the US economy. If that were to be the case, Trump could lose the election and the Chinese would get another crack at negotiation with his successor. Is this a gamble the Chinese are willing enough or patient enough to take?

Factories pick up pace after new orders tumble (The Times, Gurpreet Narwan) cites the latest report on industrial trends from the CBI which shows that a fall in orders appears to be stabilising. Factory orders had fallen by the steepest margin for ten years in the three months to July, which was attributed to businesses running down stocks they’d built up in the run-up to the original Brexit date. However, CBI deputy chief economist Anna Leach pointed out that “Despite signs of stabilisation in the data this month, UK manufacturers remain on the receiving end of a double whammy: the slowdown in the global economy and Brexit uncertainty. Trade tensions between nations such as China and the US only exacerbate the demand uncertainty facing UK manufacturers”.

Home Depot suffers, Walmart sues Tesla, Shopify takes aim at Amazon, Lidl and Sainsbury’s make ground and Asos asks for discounts…

Home Depot cuts sales outlook as it warns on hit from tariffs (Financial Times, Naomi Rovnick) highlights difficulties at the US home improvement retailer as it blamed the ongoing US-China trade war for denting its sales growth this year. The world’s biggest home improvement retailer, which has almost 3,000 stores in 50 states, left its full-year earnings per share forecast unchanged as chief exec Craig Menear believes that the “stable housing market” would continue to underpin the business.

Walmart sues Tesla over solar cells that allegedly sparked fires (Wall Street Journal, Patrick Thomas) brings to light allegations by Walmart that Tesla’s solar panels have been the cause of at least seven roof fires at some of its outlets. It wants Tesla to remove the roof-mounted panels from over 240 Walmart locations and swallow the cost. Walmart started using solar panels made by SolarCity (which was bought by Tesla in 2016) in 2010. * SO WHAT? * This just piles on the misery for Tesla – something it could well do without given the problems with its cars at the moment. It just goes to show that although you may be seen as an innovator and environmental champion with cutting edge technology, success isn’t guaranteed. No comment from either side on this, but I’m sure there will be updates.

Now bigger than eBay, Shopify sets its sights on Amazon (Financial Times, Tim Bradshaw) looks at the world of e-commerce and Shopify in particular, which has seen its share price shoot up by over 150% so far this year, giving it a higher valuation than Twitter, Square, Spotify – and eBay.

Retailers use Shopify’s tools to build websites, list products and take payments under their own brand name without thrusting their own name in everyone’s faces. The Canadian company announced that it is now moving into logistics, to help their customers Amazon-like fulfillment capability. * SO WHAT? * This is an important development and fans would probably say that Spotify is the acceptable face of e-commerce that lets the little guys compete against big, bad Amazon. Good luck to it! Many have tried and failed, so let’s hope this one succeeds as Amazon could do with some competition! It will be a very expensive gambit, though, as providing back-end software will be rather different to growing a robust logistics network.

Meanwhile, in the world of UK supermarkets, Lidl attains its biggest UK grocery market share at 5.9% (The Guardian, Kalyeena Makortoff) highlights the ongoing success of the German discounter as its continues to attract new customers and Sainsbury’s outperforms its big rivals (The Times, Ashley Armstrong) shows Sainsbury’s relatively stable sales performance versus its major rivals, as evidenced by the latest figures from Kantar Worldpanel. Having said that, analysts at HSBC were keen to point out that “Sainsbury’s improved momentum appears largely voucher-driven. It will not be sustainable without improvement in the underlying offer”. Just in case you were wondering, Aldi’s market share is currently 8.1% 😜.

Asos asks suppliers for 3% discount in effort to repair finances (The Guardian, Rob Davies) shows that online fashion retailer Asos is trying to squeeze discounts from suppliers following two profit warnings in seven months, the most recent of which was last month. It’s asking for a 3% discount from September 1st, with a view to cutting even more costs to improve profitability. * SO WHAT? * This just goes to show that continued stellar growth for e-tailers isn’t a given. Asos emphasises that their own growth/survival is good for everyone, so I suspect that suppliers will probably take the hit. If they don’t, then Asos could be in big trouble.

Apple splashes the cash on TV while gun sellers use Facebook…

Apple splashes $6bn on new shows in streaming wars (Financial Times, Anna Nicolaou and Tim Bradshaw) highlights Apple’s $6bn spend on original shows and movies prior to the launch of its new video streaming service, TV+, that should be going live over the next two months. Although this sounds like a lot, it’s way lower than Netflix, which is spending $15bn on content this year. * SO WHAT? * We all knew that this was going to happen when the TV+ stuff was announced back in March, but there are still no details on pricing and offering beyond chat about the more high-budget series offerings like “The Morning Show”, which will cost more per episode than “Game of Thrones”! I think that original content will be the way to go, but TV+’s success will also depend on pricing – precise details of which aren’t available at the moment. TV+ will launch around the same time as Disney+ and

trailers for both services were released on Monday. I predict a content “arms race” which will eventually result in industry/channel consolidation as consumers hit subscription fatigue. It will take a few years, though.

Gun sellers are sneaking onto Facebook’s booming secondhand marketplace (Wall Street Journal, Parmy Olson and Zusha Elinson) highlights a rather unsavoury element to Facebook’s e-commerce offering as gun sellers are placing ads on Marketplace for very expensive gun cases or boxes (which have guns in them, details of which are kept off the selling page) to get around the ban on arms sales. One seller offered a gun case for $950 (it should cost $30), but then revealed in subsequent communication that there was an AR-15 style semiautomatic rifle with 670 rounds of ammo and six magazines included 😱. * SO WHAT? * This is clearly not right and puts more pressure on the social media giant to get its house in order. Facebook is coming under a lot of pressure at the moment for data usage and dodgy ethics in general and so stories like this are a bit of a PR headache that could get much worse if it turns out that a shooter in a future massacre has bought a gun via this method.

Bayer makes a $7.6bn disposal and bananas come under threat…

In Bayer to sell animal-health unit to Elanco for $7.6billion (Wall Street Journal, Ruth Bender) we see that Bayer is selling a division for a chunk of cash as part of its bid to shore up its coffers in anticipation of massive liabilities from the Roundup weedkiller/cancer litigation. The enlarged entity would be a powerful force in the prevention and treatment of diseases for pets and livestock and would become the #2 in this space after Zoetis.

I know this isn’t really a company story, per se, but I think that the consequences of Deadly banana fungus reaches

Latin America (Financial Times, Gideon Long and Emiko Terazono) are pretty shocking as it turns out that the spread of a fungus that stops plants from producing fruit is threatening the Cavendish banana, a variety that accounts for half of global production and 95% of the world’s exports. The Colombian agriculture and fishing institute (ICA) has declared a “national emergency” and expanded preventative measures across the whole country. Latin America’s plantations account for two-thirds of the global trade in bananas. * SO WHAT? * This could be a complete nightmare for the whole of Latin America with Colombia, Ecuador, Costa Rica and Guatemala being particularly vulnerable . There are no new resistant varieties and no effective treatment for Panama disease once its infection has taken hold. Given the lack of investment in new varieties in recent years, researchers say that the introduction of a saleable new variety could take at least five or six years. Conclusion: treasure your bananas!!!

And finally, in other news…

I thought I’d bring you some important information today: Blenheim Palace set to install £1million gold toilet for visitors to use (Evening Standard, Harriet Brewis https://tinyurl.com/y2nxsx4c). Get booking those toilet slots, people – before they get flushed away!