TAOST Recap For Week Ended 13 December 2019

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Subject: TAOST Recap For Week Ended 13 December 2019

TAOST Wrap

Week Ended Friday

13 December 2019

Just think...

"Exactly how much money will will you spend in 2022?

That's the kind of question you're being asked when it's suggested that you 'know your retirement number.'"

-- The Trader

Traders:

Fewer charts this week as it was burdened with an extensive "honey do" list. I'll catch you up on charts next week.

Last Week

In Sum

S&P 500 +.7%,

Nasdaq +.9%

DJIA +.4%.

The markets quietly rallied on the week to end in record territory (at least for the Nasdaq and S&P 500). Most of the excitement was triggered around - what else - news that China agreed to an initial trade deal with the U.S. As you may have guessed, I’m very skeptical of such headlines so we shall see what materializes.

The Federal held interest rates steady (as expected) at its midweek meeting and signaled that they're not looking to raise anytime soon. The committee voted 10-0 to leave rates unchanged. It was the first unanimous vote since May. Jerome Powell noted in his statement that “our economic outlook remains a favorable one, despite global developments and ongoing risks.”

WeWork continued to provide headlines with negative news around some of its recent acquisitions. It announced on Thursday that it would shut down Spacious, the company it acquired for $42.5 million just four months ago. It sold Conductor, a content marketing platform, back to its founders for an undisclosed amount and its in a battle with the CEO of Managed by Q, the NYC based on-demand office services startup it acquired in April for $220 million, who is trying to win back ownership of his old firm.

Finally, I've mentioned before the lack of wage growth (despite unemployment at 50 year lows) and how that is puzzling economists and no one seems to have a good explanation as to why. Well it was suggested to me this weekend that a rising share of U.S. workers are subject to noncompete agreements -a factor holding down wages and mobility. A recent study by the Economic Policy Institute found that roughly half of businesses, or 49.4% use noncompete agreements for at least some employees (the data was based on private-sector American businesses with 50 or more employees). Nearly a third, 31.8% of the respondents indicated that all their employees had noncompetes, regardless of their pay or job duties. So why are noncompetes bad news for wages? The study goes on to explain that job hopping had historically been a good way for people to get a raise and noncompetes are limiting this. Not sure I totally agree as millennials move... and what's more, I think a small share of the overall labor pool is subject to noncompetes. That said, I understand the premise and think it's likely an issue for thos that do have to deal with noncompetes.

SPY -- S&P 500 ETF Trust

Macro News

Paul Volcker, Fed Chairman who waged war on inflation, died last Sunday at the age of 92.
Concerns are high that banks will pull back from lending ahead of regulatory capital calculations on Dec. 31, triggering flashbacks of when overnight repo rates jumped as high as 10% in September. A new plan from the New York Fed includes overnight lending across New Year totaling $225B and $190B in longer-term repo loans - starting next week - that will provide cash to borrowers into 2020. Together with $75B of cash already provided to the market to cover year-end, the Fed will have $490B in lending outstanding, nearly double the scale of its recent repo interventions.
Investors and policy makers are bracing for new disruptions to short-term cash markets going into the end of the year. Fed officials have so far committed about $350 billion to efforts aimed at calming the market for overnight repurchase agreements, or repos, where banks and other firms borrow cash for short periods in exchange for collateral. That includes injecting cash into money markets for the first time since the financial crisis and buying Treasury bills, a move some investors have compared to the postcrisis quantitative easing.
The S&P 500 is having its best run in six years, but individual investors are fleeing: They’ve pulled $135.5 billion from U.S. stock-focused mutual funds and exchange-traded funds this year, the biggest withdrawals on record. Analysts point to apprehension around the long-running U.S.-China trade war and lingering recession worries.
Russia will be barred from competing in next year’s Tokyo Olympics and the 2022 Beijing Winter Games after the World Anti-Doping Agency on Monday banned the powerhouse from global sports for four years as punishment for tampering with a Moscow lab database.
The Financial Stability Board called for "vigilant monitoring" of the tech industry's shift into financial services in a new report released last Sunday. "The risks are similar to those from financial firms more broadly, stemming from leverage, maturity transformation and liquidity mismatches, as well as operational risks." They would also crimp the ability of banks to generate capital through retained profits, while widespread access to customer data may mean that Big Tech could dominate the market for certain services.
China's Communist Party has ordered all state offices to remove foreign hardware and software within three years, FT reports, in a move which could hit Microsoft , Dell and HP. Substitutions will take place at a pace of 30% in 2020, 50% in 2021, and 20% the year after, earning the policy the nickname "3-5-2." Earlier this year, Washington banned U.S. companies from doing business with China's Huawei, and expanded its blacklist in October to include a number of Chinese surveillance firms like Hikvision.
Just five metro areas—Boston; San Diego; San Francisco; Seattle; and San Jose, Calif.—accounted for 90% of all U.S. high-tech job growth between 2005 to 2017, new research shows. The nation’s 377 other metro areas accounted for 10% of the jobs created during that period in 13 high-tech industries such as software publishing, pharmaceutical manufacturing and semiconductor production. Among the smaller cities that gained tech jobs were Madison, Wis.; Albany, N.Y.; Provo, Utah; and Pittsburgh.
U.S. factories are demanding a white-collar education for blue-collar work. Within the next three years, American manufacturers are on track to employ more college graduates than workers with a high-school education or less. It is part of a shift to automation that has boosted factory output, created opportunities for women and reduced prospects for lower-skilled workers.
Almost 130 companies from the banking and insurance sectors have signed the United Nations Tobacco-Free Finance Pledge since its launch late last year. The signatories manage $8 trillion of assets—around 10% of the funds managed by the global asset management industry. And in a sign that tobacco aversion is spreading beyond the public markets, French bank BNP Paribas promised to withdraw all corporate lending to the big cigarette manufacturers. AXA, one of the world’s largest insurers, will no longer underwrite them.
China is planning a real-world pilot of its digital currency, the first phase of which could begin before the end of this year, according to a report from influential Chinese financial news publication Caijing. That would support recent speculation that China is on the verge of becoming the first major economy to issue sovereign digital money.
A new U.S. trade deal with Mexico and Canada gained backing from House Democrats. That makes it likely for ratification by Congress and marks a victory for 45. In Mexico City, the revised USMCA was signed by representatives from the three countries. The agreement is expected to result in tangible benefits for several U.S. business sectors; it could also help cushion the U.S. as global growth slows.
A group of students and community organizations sued the University of California in an effort to bar it from requiring applicants to submit SAT or ACT scores, alleging the use of the scores is discriminatory.
Investors are split about the direction of government-bond yields in 2020, a sign of confusion about the course of the economy and monetary policy. Economists surveyed last month by The Wall Street Journal predicted that the yield on the benchmark 10-year Treasury note could end next year above 3% or just slightly higher than 1%. The average forecast of 1.97% was only modestly higher than where the yield settled Wednesday, at 1.786%.
Boris Johnson's Conservatives won the UK general election with a landslide. So: Brexit will take place at the end of January, with a merely months-long timescale for subsequent U.K.-EU trade negotiations; the opposition Labour Party will not contest the next election under the hard-left Jeremy Corbyn; and nationalists won big in both Northern Ireland and Scotland, making it more likely that the United Kingdom will break up. Markets responded positively.

Micro News

SoftBank has decided to end its relationship with struggling dog-walking startup Wag. The Japanese behemoth has agreed to sell its nearly 50% stake back to the company, according to the WSJ. The price of the deal is unknown, but it is reportedly “well below” the roughly $650 million valuation at which SoftBank made its $300 million investment early last year. The Vision Fund is also giving up its two seats on Wag’s board. Other investors that have backed the company include General Catalyst, Battery Ventures and Acme.
iPhone shipments to China plummeted 35% year-on-year in November, marking a second month of double-digit decline for the popular Apple product, in spite of significant discounts on the new iPhone 11 for Chinese consumers. Apple faces fierce competition from Chinese smartphone makers—it ranks fifth in market share in China, after four domestic brands, with Huawei at the lead. iPhone shipments to China fell 28% YoY in the third quarter while Huawei's rose 66% for the same period.
Electric scooter startup Unicorn has shut down and is not giving customers refunds for pre-ordered scooters. The company, which was launched by Tile co-creator Nick Evans, only received about 350 orders for its $699 scooters, despite spending considerable resources on digital advertising. Unicorn claimed it does not have enough resources to deliver scooters or give out refunds because the company says it is completely out of funding.
Tesla will begin charging drivers a monthly fee for “premium connectivity” features. The changes will affect customers who ordered vehicles after June 30, 2018. Those who purchased before that date, except for buyers of the entry-level Model 3 vehicle, will have the premium connectivity package for the life of the vehicle, which will cost $9.99 per month.
Companies that specialize in flipping houses have long avoided Los Angeles, finding the sprawling metro too complicated to turn a quick profit. That is changing. Zillow Group Inc. said it is launching a business in the city this month. Two of its main homebuying rivals, Opendoor and Redfin Corp. , started operations in Los Angeles earlier this year.
Mercedes-Benz and Bosch are testing a self-driving vehicle taxi service that will shuttle passengers in San Jose, California. The test will use Mercedes-Benz S-Class vehicles and will operate between the city’s downtown area to West San Jose along a fixed route. The test will initially only be open to a select number of people who will be able to book rides using an app developed by Daimler.
In a 103-page document made public on Monday, Amazon Web Services claims it didn’t win the $10B JEDI cloud contract as a result of repeated public and private attacks from President Trump against Amazon and its CEO, Jeff Bezos.
Two of the biggest drugmakers are pushing deeper into cancer treatment. In efforts to bolster their offerings in the competitive cancer-drug market, Merck agreed to buy ArQule for about $2.7 billion, and Sanofi said it would acquire Synthorx for $2.5 billion.
Huawei will (alongside Nokia) be a supplier to the 5G network of Telefonica Deutschland, the German arm of the Spanish telecoms giant. So much for U.S. pressure to steer clear of the Chinese giant over alleged security risks. Germany is yet to finalize its security rules around 5G equipment suppliers.
Walmart is partnering with Nuro for an autonomous grocery delivery test in Houston. Nuro will either use custom-built R2 vehicles or retrofitted Toyota Prius vehicles to deliver Walmart grocery orders directly to consumers who opt-in to the service in the Texas city.
Maintenance employees of Ford-owned electric scooter company Spin have unionized. Employees responsible for charging, repairing, collecting and distributing scooters have unionized under the San Francisco chapter of the Teamsters, with about 40 employees joining the union. The Teamsters will also attempt to unionize scooter maintenance workers for other companies, like Lime and Bird.
Lyft introduced a car rental service allowing customers to rent a vehicle without having to go to the counter. The service that has no mileage limits, cars can be taken for a day or up to two weeks, and 22 will be set minimum age for a renter. Lyft will also charge the "local market rate" for gas and provide renters with two $20 ride credits to cover the cost of taking a Lyft to and from the rental points.