David Ross

What I think I learned last week #28

Seriously? Again, I had the news week all planned out when it came out late that Trump and Kim Jong-un are going to meet. The only safe prediction about this meeting: no hairstylists will be invited.

What else is going well for Trump? Jobs. The US economy blew past all expectations as payrolls grew by 313,000. This was 105,000 more jobs than expected and the most since July 2016. The closely-watched wage numbers rose only by 2.6%, below the expected 2.8% and last month’s 2.9%. This number was reassuring for those who thought a wage-push inflation trend was taking off based upon last month’s number. The labor force participation rate also rose 62.7% to 63.0%.

No wage inflation in the US and no wage inflation in Canada as over 500 Canadian doctors protest getting raises. They say they are offended at being paid too much. Not surprisingly, these doctors are located in the French-speaking province of Quebec.

Nine years ago, March 10, 2018 I watched the “Mark Haines bottom.” The late CNBC anchor, on the air, stated we were at the bottom as the Dow was 54% below its 2007 high point. From that moment, the bull market began and nine years later, the bull is still running. As I said back in November, I think we are in a market melt-up phase, which means the bull will be running even faster.

Amazon is taking over the Amazon! Reports tell us that Amazon has discussed with local Brazilian manufacturers plans to stock and sell all kinds of products from electronics to perfume. This would move Amazon from being a marketplace for third-party sellers to a direct retailer in Latin America’s largest retail market.

These guys just never stop. It was reported last week that Amazon is looking to offer bank accounts. The financial industry is about to be Amazoned! In addition, Amazon’s general manager for France said Amazon is about to launch its grocery delivery service in France. Watch out French grocers and global banks. As we warned back in October, once the bear is in the tent, it is very difficult to get it to leave.

The US healthcare industry continues to consolidate as fears of an Amazon disruption are forcing everyone to find a dance partner. This time, it is health insurer Cigna announcing plans for a $67 billion deal to buy pharmacy benefits manager Express Scripts.

It is being reported that Toys R Us is considering liquidation and closing all of its 800 US stores. While primary blame is placed on its 2005 leveraged buyout, its inability to compete with Amazon is also listed as a factor in the firm’s demise.

AXA is paying a 33% premium to spend $15 billion on acquiring Bermuda-based XL Group. Maybe they also are afraid of Amazon.

In non-Amazon news Facebook announced a deal with Warner Music as they prepare to battle YouTube.

How about some central bank news? Last week, the ECB removed the “easing bias” from its monetary policy message.

Least surprising news of the week: Hedge fund manager Man Group reported that women working there are paid, on average, a salary that is 30% less than men while their bonuses are nearly 60% lower. What did you expect? It is called “Man Group.”

The US trade gap rose to $56.6 billion in January, its highest level in more than nine years. This is why Trump declared a trade war.

President Donald Trump said Wednesday that he has asked China to develop a plan to reduce the current trade deficit between the two countries by $1 billion. Realizing this was less than a rounding error for the actual trade deficit, the administration later said they asked China for a plan to reduce the trade deficit by $100 billion. China replied with “Just stop buying so much of our stuff.”

It’s not just the tariffs that are making things stormy for President Trump. Adult film star Stormy Daniels is suing him for failing to sign the nondisclosure agreement regarding their “intimate relationship.” It was also discovered that the hush money that Trump’s lawyer paid to Miss Daniels was reported by the bank to US Treasury as being “suspicious.”

Oh Snap! Reuters reports that Snapchat owner Snap is laying off 10% of its engineering team. Not good news for a company that is supposed to be growing. Excellent reporting (in French) by Justine Gay explaining further the problems of Snap can be found by clicking here to go to the JDN site.

Something seems fishy: Global salmon output forecasts keep dropping. From 7%-8% three months ago, to 5% in mid-February to 4% now, forecasts are falling due to extreme cold sea temperatures in Norway, the world’s largest producer. Output from Chile, the Faroe Islands, and Scotland was also cut.

Japan’s economy improved more than first thought during the fourth quarter as capital expenditures and inventory data were revised up.

However, in Japan it is always two steps forward, one step back as we find out that real wages in Japan fell at the fastest rate in six months in January.

Brazilian inflation fell to 2.84% in the twelve months ending February. This is the lowest such February number in 18 years.

How bad is the soft drink business? It is so bad that for the first time in its 132 year history, Coca Cola is offering a product containing alcohol. It has started selling Chu-Hi alcopop in Japan.

The Wall Street Journal reports that fund managers are cooling in their enthusiasm for technology stocks, as active fund managers have cut their sector exposure to the lowest level in 15 months.

Researchers from the Federal Reserve and Cal Berkeley warn of systemic risk posed by non-bank mortgage lenders.  This comes as US mortgage rates hit a four year high.

Warren Buffett once said that “It’s only when the tide goes out that you learn who’s been swimming naked.” In Paris they are going to have to modify that phrase to something like “It’s only when you go to the museum that you learn who’s naked” as the Palais de Toyko contemporary art museum on Avenue President Wilson in the city’s lush 16th arrondissement will become the first gallery in Paris to have a special nudist day on May 5. Visitors will be able to stroll round the museum’s exhibitions as long as they leave their coat and the rest of their clothes in the cloakroom. For investors who might be visiting the museum that day, you might want to cover your naked shorts.

And that’s what I think I learned last week….