David Fuller and Eoin Treacy's Comment of the Day
Category - Technology

    Kraft Heinz Cut to Junk by Fitch Following Lackluster Earnings

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

    Kraft Heinz Co. was downgraded to junk status by Fitch Ratings, which predicted the company’s leverage will remain high for an extended period as the maker of Jell-O and Classico pasta sauce works to stabilize declining sales.

    The food company was cut to BB+ from BBB- by the credit-ratings company, with a stable outlook. Fitch said the company may need to divest a sizable portion of its business in order to reduce its debt.

    The downgrade follows Thursday’s earnings report, in which Kraft Heinz reported a drop in fourth-quarter sales that sent its bonds and stock tumbling. It was the latest sign that the company’s turnaround plan still has a long way to go.

    Kraft Heinz said Thursday it would release a more detailed turnaround plan around the time of its next earnings report in early May, though many investors and analysts had been looking for it sooner.
     

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    Email of the day on rare earth metal miners

    Maybe 18 months ago you were looking at Rare Earths outside China. One you mentioned in Australia - Alkane Resources - has recently perked up considerably on gold exploration but also on the likely demerger of its Rare Earths project at Dubbo. I'm a shareholder so noticed(!) You might like to re-visit some time as it is a happy graph for holders

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    Japan Seen Needing U.S. Help to Check China's Digital Yuan

    This article by Yuko Takeo, Emi Urabe and Toru Fujioka for Bloomberg may be of interest to subscribers. Here is a section

    “We sense the digital yuan is a challenge to the existing global reserve currency system and currency hegemony,” said Nakayama, a top member of the ruling party group that drafted the proposals. “Without the U.S., we cannot counter China’s efforts to challenge the existing reserve currency and international settlement system.”

    The comments indicate the heightened concern among policy makers in Japan over the likely impact of a digitized yuan expected for later this year. China’s plan and Facebook’s efforts to launch its own Libra currency have sparked central banks around the world to get up to speed on how digital currencies would function and what their impact could be.

    “There are 1.4 billion people in China, so within the one belt, one road digital economic framework, the digital yuan has a high likelihood of becoming the standard within that digital economy,” 

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    China's Drug Patent Grab Makes Coronavirus Scary for Pharma

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

    The coronavirus outbreak in China is already threatening to undermine the global economy. It may soon create a similar shake-up in the drug industry.

    I’m not talking about pharmaceutical companies’ attempts to develop a vaccine, but about intellectual property. Chinese researchers have applied for a patent on an antiviral drug candidate called remdesevir owned by Gilead Sciences Inc. The drug is being tested in clinical trials in short order, but the company could eventually be cut out. 

    If the patent is granted, it will confirm long-standing drugmaker fears about China’s commitment to IP protection, raising concern about the industry’s future in a crucial market. It also could further erode the already weak incentives for pharma to invest in drugs to combat emerging infectious diseases. The risks of seizing the patent may outweigh any benefit.

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    Tech in 2020: Standing on the Shoulders of Giants

    This presentation by Benedict Evans may be of interest to subscribers. Here is a slide on where he thinks the next big thing is:

    China Says U.S. Response Harmful; Flights Halted: Virus Update

    This summary of today’s news from Bloomberg may be of interest. Here is a section:

    Chinese officials took issue with U.S. comments about the country’s response to the coronavirus outbreak, and promised they would bring the infection under control.

    “U.S. comments are inconsistent with the facts and inappropriate.” Chinese Ministry of Foreign Affairs Spokeswoman Hua Chunying said in statement posted online Friday. The World Health Organization “called on countries to avoid adopting travel bans. Yet shortly afterward, the U.S. went in the opposite direction, and started a very bad turn. It is so unkind.”

    U.S. officials said this week that they had difficulty getting specialists from the Centers for Disease Control and Prevention to the front lines of the outbreak in China, and late Thursday the State Department advised Americans traveling in China to come home. Commerce Secretary Wilbur Ross on Thursday also said the outbreak may help bring jobs back to the U.S.

    China’s ambassador to the United Nations, Chen Xu, said during a press conference in Geneva that the country had been transparent about the disease.

    “We have conducted our business in an open and transparent manner with the outside world,” he said.

    Xu said that China would work with the World Health Organization to bring the disease under control, following a declaration by the WHO that the outbreak was an international emergency. The declaration will “not only coordinate global prevention control measures but enables us to mobilize international resources to respond to the epidemic,” he said.

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    Shell Dives With Scaled Down Buyback Program a Key Concern

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

    Morgan Stanley (equal-weight, PT 2,270p) says 4Q results should trigger “a negative response,” as both earnings and cash flow were lower than consensus expectations and gearing increased on a quarterly basis

    Analysts Martijn Rats and Sasikanth Chilukuru say that while integrated gas was largely hit by lower trading profits, margins within chemicals appear to have been hit more than expected by the weaker macro

    Oil products and upstream seen benefiting from strong marketing results and higher production volumes, respectively

    RBC (sector perform, PT 2,600p) says the decision to reduce the quarterly run rate for its buyback to $1b from $2.75b into 2020 was largely factored into the stock’s recent performance and the new rate “looks well covered,”

    Given gearing is 29%, analyst Biraj Borkhataria says that “Shell is right to be more cautious”

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    Part 2: Fiat Money vs. Cryptocurrencies Private vs. Public digital currencies

    Thanks to a subscriber for this report from Amundi which may be of interest. Here is a section:

    5. Electronic money (E-MONEY) and cryptocurrencies (C-MONEY) vs. central bank money (CB-MONEY): the death knell for paper money? Credit cards or electronic money in general are being used for an increasing number of ever smaller payments due to better, quicker, easier and more widespread infrastructure. The dissemination of electronic payments, and of cryptocurrencies to a lesser extent has reduced the use of notes and coins, i.e. central bank money. Central banks accompany this trend, by removing high-denomination notes from circulation and / or by taking steps to limit payments in cash. With new forms of E-MONEY and C-MONEY, it is evident that payments are currently seeing another period of rapid innovation and transformation. The use of e-payments is booming, while technology companies and financial institutions are investing heavily to be the payment providers of tomorrow. However, despite the continuing digitalisation of the financial system, cash in circulation is not dropping for most countries. The demand for cash still increase in several advanced economies since the Great Financial Crisis, driven by store-of-value motives. Negative rates represent another factor for accumulation of cash. The total elimination of paper money is nevertheless being seriously discussed, for at least two reasons: • The rapid expansion of e-payments, it would help fight the black market and organised crime, • It would free central banks from any constraints on how deeply they can cut interest.

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    Email of the day on corona virus outbreak.

    Two aspects of the current outbreak I find especially concerning, speaking as a retired veterinarian of some fifty years’ experience. I understand the symptoms can vary from barely perceptible with no fever to severe and fatal Some. people with the virus may be unaware they have it but may be very infectious to others, acting as symptomless carriers. My experience with animals which are subject to lockdown on account of infectious disease is that they tend to become very stressed and anxious, this in turn tends to make them more liable to spread infection on account of diminished resistance. I would suggest bottling up millions of Chinese in these cities has its own hazards regarding virus spread.

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