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Goldman Says Market Melancholy Is Recipe for Big Earnings Season

This article by Sarah Ponczek for Bloomberg may be of interest to subscribers. Here is a section:

Relax, says Goldman Sachs -- enough has changed that a replay is unlikely. Bulls should take heart, says David Kostin, the firm’s chief U.S. equity strategist, because whatever euphoria infected markets in the first part of the year has long ago dissipated. Hedge fund clients who were aggressively positioned heading into April are more conservative now, with exposures sitting near the bottom of their 12-month range.

“Going into Q1 earnings season, it was peak optimism,” Jeff Schulze, an investment strategist at ClearBridge Investments in New York, said by phone. “Now you have exactly the opposite situation where that optimism has been converted to pessimism.

As long as companies can hit those estimates, I think the market will reward those, rather than punishing them.”

Fundamentally, the second quarter will look a lot like the first as far as results go. S&P 500 companies are forecast to report 20 percent growth from a year ago and sales are likely to rise 8 percent, mirroring the previous period, which was the best since 2011.



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Art accelerates past wine to take the chequered investment flag

Thanks to a subscriber for this report by Frank Knight which may be of interest and includes a number of interesting graphics. Here is a section:

This time last year art was almost at the back of the Knight Frank Luxury Investment Index (KFLII), but 12 months later it has moved through the field to overtake wine and claim first place with growth of 21% to Q1 2018. Salvator Mundi, a work by the Old Master Leonardo da Vinci, turbo charged the headlines when it was sold for a staggering $450m last year, but paintings by less well-known artists have also been notching up multi-million dollar results, says Sebastian Duthy, of Art Market Research. “Prices for works by Impressionists and post-war artists have dominated auction sales for the past two decades. But this picture has been changing, with works by some contemporary artists appreciating rapidly in the last few years. “In March, artist Mark Bradford hit the headlines when his painting ‘Helter Skelter I’ was sold by ex-tennis star John McEnroe for a record $10.4m at Phillips in London. In May, rapper Sean Combs, aka P Diddy, paid $21.1m at Sotheby’s for a painting by artist Kerry James Marshall. The figure represents an 800-fold increase on the $25,000 paid for the same work in 1997.”



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Imperial Takes on Juul as Big Tobacco Faces Upstart Rival

This article by Sam Chambers for Bloomberg may be of interest to subscribers. Here is a section:

The rise of a new entrant in the U.S. and last year’s 18 percent decline in the cigarette market in Japan, where heated-tobacco devices have become popular, have investors worried that an industry known for steady profit growth faces an increasingly uncertain future. Imperial’s shares have fallen 17 percent in the past year.

Cooper told investors this week that Japan was the only market where she expects rapid disruption for the tobacco industry and that the popularity of e-cigarettes in the U.K. and the U.S. means overall nicotine consumption is growing there.

Juul gives vapers a hit comparable to that of a cigarette because it contains benzoic acid, which makes it easier to deliver nicotine at a lower temperature without being harsh to the throat. After its success in the U.S., the startup vape brand is expanding internationally. To fund that effort, the company is said to be raising $1.2 billion in a financing round that would value it at $15 billion. Juul’s slim device, which looks like a flash memory drive, has captured the imagination of young consumers as word spreads via social media.



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Replaced His Acura's Windshield. Then the Self-Driving Feature Tugged Him Into Oncoming Traffic

This article by Bill Howard for Extreme Tech may be of interest to subscribers. Here is a section:

“I thought [the repair} was a pretty standard procedure,” Ash told CBC News. But after the repair was completed, when he went to drive the car, “It was actually pulling me into oncoming traffic. … it was a startling feeling to have the steering wheel actually pulling you into traffic.” Ash said he was able to control the car and get it back into lane.

According to Ash, a technician at the glass shop pointed at the camera, but Ash doesn’t recall hearing that person suggesting having the camera re-calibrated, which would most likely be at the dealership. Ash told CBC there was fine print in the invoice that talked about having the camera re-calibrated — fine print being the thing almost no one ever reads until there’s a problem. And the manual, which many people do read, says nothing about this.



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Mexico's young democracy is facing its sternest test yet

This article by Ana Campoy for Quartz may be of interest to subscribers. Here is a section:

The most troubling and tragic threat to Mexico’s democracy is violence. Since campaigning began in September 2017, 132 politicians (jpg), including 48 official and aspiring candidates, have been killed, according to Ellekt, a consulting firm.

The most recent murder happened on June 25 in the southern state of Oaxaca. Emigdio López Avendaño, a candidate for local representative from AMLO’s party, MORENA, was gunned down along with four of his supporters.

The level of violence represents a huge spike from the run-up to last presidential election, in 2012, when less than a dozen politicians were killed, according to Ellekt. The firm’s director, Rubén Salazar, attributes the increase to state governors’ waning control over municipalities. Thanks to free elections, voters have been kicking out incumbents from governor’s offices around the country—a step forward for democracy. But at the municipal level, it’s had the perverse result of clearing the way for local strongmen to hijack the election process, sometimes at gunpoint.

“These changes have happened faster than the transformation of the political and democratic culture at the local level ,” he said in an interview in Artistegui Noticias (link in Spanish).



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Email of the day on Amazon's impact on pharmacies

Thank you for your superb service. Can you please advise your views on how vulnerable do you think the pharmacy shares are in the US after Amazon's entry to the field? Thank you in advance.



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How to read Turkey's election results

This article by Kemal Kirişci for Bloomberg may be of interest to subscribers. Here is a section:

This weekend’s vote was, in short, a surprise. Contrary to predictions, Erdoğan won decisively, and his new presidential system has received a seal of approval from the electorate. However, the AKP’s failure to secure an absolute majority in parliament is an important message for Erdoğan. It remains to be seen whether Erdoğan will take this as an opportunity to address the long list of challenges facing Turkey and reconstruct its democracy and economy, and regain the respect that he once enjoyed internationally. The March 2019 municipal elections will be the next test of his performance.



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China, Europe Warn Trade War Could Trigger Global Recession

This article from Bloomberg may be of interest to subscribers. Here is a section:

Later this week, the U.S. Treasury Department is expected to release fresh rules on Chinese investment in technology companies, Bloomberg reported on Monday, putting additional pressure on China -- which hit back against the plans. Chinese investment has provided jobs and tax income for the U.S., and it should view commercial activities “objectively,” Foreign Ministry spokesman Geng Shuang told reporters in Beijing on Monday.

The U.S. is due to impose tariffs on $34 billion of Chinese imports from July 6, and Trump has threatened to impose levies on another $200 billion of Chinese goods. If that threat is realized, it could cut as much as half a percentage point off China’s economic growth, and also hit the American economy, economists have said.

Anxiety over the economic fallout is cutting deep in financial markets, with China’s yuan sliding to a six-month low Monday. The S&P 500 Index fell to the lowest since May and the Dow Jones Industrial Average sank for the ninth time in 10 sessions.

As if to reinforce concerns about the economic outlook, the Dutch Bureau for Economic Policy Analysis on Monday published its latest trade monitor, showing world trade momentum dropped in April to the lowest since 2015. The measure has fallen sharply since hitting a seven-year high at the start of 2018.



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Supreme Court Rules States Can Collect Sales Tax on Web Purchases

This article for the Wall Street Journal may be of interest to subscribers. Here is a section:

“Many states will pick up on those details and incorporate them into their own regulatory regimes,” said Eric Citron, an attorney who represented South Dakota. He said he expected nearly every state with a sales tax to move legislation or regulations to enforce collections. “Complete compliance will become the norm within the next year or two,” he said.

Amazon originally set up its business model to avoid state sales taxes, limiting its physical presence to a handful of warehouses. But it changed strategy to build more warehouses closer to consumers as it has relied more on its Prime two-day shipping offer—and started charging sales tax on items it sells directly.

Amazon hasn’t collected the taxes for most independent merchants who sell on its platform. About $200 billion in sales originated with independent merchants selling on Amazon world-wide last year, according to Factset analyst estimates, compared with about $116 billion in direct sales by Amazon. The company declined to comment on the ruling.



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Spotlight on Australia as Banks Fuel Rally to Highest in Decade

This article by Matthew Burgess and Abhishek Vishnoi for Bloomberg may be of interest to subscribers. Here is a section:

Rude Health
“There’s been a few shots on the trade side, but nothing has fully broken out,” said Dermot Ryan, a fund co-manager at AMP Capital in Sydney. “Ultimately, the stock market looks at the valuation and health of the sectors. The resources sector is in rude health at the moment.”

Not as Sensitive
“Australia sometimes acts as an EM by proxy, but with one key difference: it’s not as sensitive to the potential negative impact from increasing tariffs on Chinese and U.S. goods,” said Kerry Craig, global market strategist at JPMorgan Asset Management in Melbourne. “We’re not as crucial in the supply chain as many north Asian economies. While there would be some impact on the materials sector if Chinese growth was expected to take a hit and metals demand fell, it’s more than likely that China would respond by increased infrastructure spend to keep the ship steady.”

Pretty Cheap
“The banks look pretty cheap,” for a longer-term investor, said Don Hamson, managing director at Plato Investment Management in Sydney. “It’s been a bad 18 months, but maybe we’re coming toward the end of it.”



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