David Ross

What I think I learned last week #43

Look at that! Unbelievably, I have had over 137,000 views of my LinkedIn post on what I have learned a quarter of century after receiving my CFA designation. I guess people like to waste time on LinkedIn too.


Can you believe that? American President Donald Trump declared that he and North Korean dictator Kim Jong Un have fallen in love. Seriously. Somewhere, Vladimir Putin is crying and sending a song request to the American radio host for the broken-hearted, Delilah.


I did not know that! From the Wall Street Journal: With just 8% of the world’s population, Latin America accounts for roughly a third of global murders. Nearly one in every four murders around the world takes place in just four countries: Brazil, Venezuela, Mexico and Colombia. Everyone is focused on the US-China tariff dispute, but during the week India raised import tariffs on 19 items, including plastics, home appliances and shoes as it attempts to reduce its current account deficit and protect its currency.


Brent crude jumped to its highest in four years this week after the world’s biggest oil producers, led by Saudi Arabia and Russia, decided against an additional rise in output. Brent crude, the international benchmark, rose above $81 a barrel, its highest since 2014.


Helping oil prices, Mexico saw crude oil production drop in August, down 1.3% from the previous month and down 6% from August 2017’s levels.


Speaking of Mexico, they were finally joined by Canada in agreeing to a new NAFTA deal. It will be called the USMCA for United States-Mexico-Canada Agreement. US milk will now be available in Canada. I bet you did not know that there was a difference between US milk and Canadian milk. In fact, there are many differences, as I learned from reading the Alberta Milk website.


Disappearing CEO #1: As Shakespeare once wrote, “Something is rotten in the state of Denmark.” Danske Bank, instead of waiting for a replacement, decided to immediately “relieve” CEO Thomas Borgen of his duties due to the bank’s $235 billion money laundering scandal.


Disappearing CEO #2: troubled conglomerate General Electric replaced CEO John Flannery after just 14 months. On this news, GE shares jumped 9% after falling 7% last week.


Disappearing CEO #3: Unlike the previous two firings, Pfizer CEO Ian Read announced he is retiring at the end of the year, to be replaced by COO Albert Boula.


Disappearing bonds: bond investors left in droves last week as evidenced by the largest outflows from global bonds in half-a-year. Bond funds tracked by EPFR Global saw outflows of $6.1 billion in the week ending September 26, the biggest weekly withdrawal since mid-February.


Disappearing Europe: investors have been fleeing European equity funds, withdrawing money in 28 of the last 29 weeks. The share of Europe in global equity portfolios is at its lowest since January 2015.


Disappearing Germany: The number of listed domestic companies in Germany was more than 750 in 2007. As of the end of 2017, there were only 450 such companies, a drop of 40% over ten years. ThyssenKrupp is trying to reverse this trend, though, as the German company announced that it was splitting into two.


Disappearing European growth: Recruiter Adecco’s stock price fell to a two-year low after citing a slowdown in European hiring growth. “Recent trading has been more challenging than expected, driven by continental Europe,” said CEO Alain Dehaze. Adecco hinted a quick turnaround was unlikely, warning that volume trends in early September “indicate a slight deceleration” compared with the previous two months. The slowdown compared with the second quarter was “consistent with softer market and economic data”.


In contrast, the final reading of US GDP growth for the second quarter showed a 4.2% growth rate, the fastest in nearly four years. Maybe this is why US consumer confidence jumped to an 18-year high, its best reading since September 2000.


Add this to the list of US strength: August durable goods orders jumped 4.5%, the most in six months. Year-to-date, orders are up 9.2%.


According to Fitch ratings, no large US corporation defaulted on a bank loan in August or September, making this the longest such run in four years.


With the strong US economy, the Federal Reserve increased interest rates again and said that the US economy would have at least three more years of growth.


Along with the Fed interest rate hike, US mortgage rates hit a seven year high this week, according to Freddie Mac’s weekly market survey.


It seems like I have to have an Amazon story every week, and brokerage house Jefferies provides this week’s entry as their analyst Brent Thill said Amazon could hit a $1.5 trillion market capitalization within two years.


Even larger than that potential Amazon market capitalization is the amount of global merger & acquisitions this year, which total $3.24 trillion, up 40% from the same time last year and ahead of 2007’s record pace.  North America saw $50 billion of deals on Monday alone with Barrick Gold buying Randgold, Michael Kors buying VersaceSiriusXM buying Pandora Media and Comcast winning the auction for Sky.


One merger that is not taking place involves Casino and Carrefour. The story is that Casino says it rejected an offer that Carrefour says they never made.


Japanese stocks hit a 27 year intraday high as the Nikkei Stock Average has gained 17% over the last six months.


Not so great in Indonesia. The central bank increased interest rates, but the Indonesian rupiah still hit its lowest level against the dollar since the Asian currency crisis two decades ago.


Not so great in Tesla-land either. The Securities & Exchange Commission sued Elon Musk, accusing him of securities fraud. The suit was settled when Elon agreed to give up his post as Chairman of the Board and agreed to pay a $20 million fine. I hope he at least has that funding secured.


It was a bad week for Facebook. The week started with news that Instagram’s founders were leaving Facebook, and the week ended with news of a major data breach that affected 50 million people. Not muck to “like” there.


Finally, Volkswagen, once known for creating pollution clouds, is now turning to computing cloudsPartnering with Microsoft, Volkswagen is going to develop the “Volkswagen Automotive Cloud” on Microsoft Azure to produce the largest digital ecosystem in the automotive industry.


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