What I think I learned last week #41
It is la rentrée in France, that season of rebirth when the country comes back to work after the vacation season.
President Trump, trying to distract from legal troubles, decided to attack Google, Facebook, and, get this, Twitter, saying they were “trying to silence” people. Really? If Twitter were trying to silence people, I know of one case where they have completely failed. Trump then suggested, without evidence (of course) or knowledge of the US Constitution, that the companies’ activities may be illegal.
Trump also went back to the trade war theme. He threatened to leave the World Trade Organization, and after EU trade commissioner Cecilia Malmström offered to scrap tariffs on all industrial products (including autos) if the US does the same, Trump said her offer was “not good enough.” He claimed that European consumer habits were to buy their own cars.
Switching from autos to automation news, the China Development Research Foundation, a government think-tank, and venture capital fund Sequoia China published a report stating that automation has replaced the jobs of up to 40% of workers in some Chinese industrial companies over the last three years. Not only demonstrating the precariousness of labor in the face of increasing technology, this also shows the effectiveness of Chinese policy to upgrade manufacturing technologies through artificial intelligence.
Venezuela’s inflation rate is now running at 100,000%.
Little known facts about the decline of Venezuela: In 1950 Venezuela enjoyed the fourth-highest per capita income in the world, behind only the US, Switzerland and New Zealand. In 1958, Venezuela’s GDP per capita was 90% of the US rate. As late as 1980, it boasted the world’s fastest-growing economy in the 20th century. In 2001 Venezuela still ranked as Latin America’s wealthiest country.
Argentina returned to the troubled economy list. In an effort to protect the peso, the central bank raised interest rates by 15 percentage points, bringing interest rates to 60%. The currency still dropped 12%. The government reportedly is also planning on closing or merging 10-13 ministries in an attempt to save money.
One economy not in decline is the US. US economic growth was faster than initially thought as the Commerce Department revised upward its estimate of the US economy growth in the second quarter, to an annual rate of 4.2% from an earlier estimate of 4.1%. This was the best performance in four years.
US personal spending rose 0.4% last month, in line with expectations.
US stock markets continue to hit records due to strong earnings. Earnings for S& P 500 companies that have reported are up 25% for the second quarter, according to FactSet. This is the second highest earnings growth since the third quarter of 2010.
Hedge funds are not taking advantage of strong markets. The average hedge fund has fallen roughly half a percent this year, preliminary numbers from Hedge Fund Research show, while David Einhorn’s Greenlight Capital hedge fund, which lost 7.6% in August alone, is down more than 25% so far in 2018.
More stock market news: Amazon shares broke above $2,000 for the first time on Thursday as it tries to match Apple in the trillion dollar club (for market cap).
Facebook plans to cover 100% of its electricity use with renewable energy purchases by the end of 2020. Fast Company estimated that in 2017, Facebook’s carbon footprint was 979,000 tons of CO2 equivalent, as much as the emissions from 100,000 homes.
Despite evidence of more usage of renewable energy, oil prices continued to climb, hitting a 6-week high.
Earnings disappointments were registered by Big Lots and Dollar Tree, leading both to large stock price declines for these two retailers who cater to frugal shoppers. In a strong economy, consumers tend to move up from the frugal category into the mainstream discount, such as Walmart and Target, both of whom posted strong earnings the week before and saw strong stock price moves.
A Reuters poll shows that global investors have raised their equity holdings to a four month high in August.
Finally, everyone in the US knows that if you want to gamble and lose money, you go to a casino. Same case in France, as the stock price of retailer Casino hit a 22 year low.
And that is what I think I learned last week.