Macroeconomics

Industrial Recession

  • Fedex is an early cyclical while TPG have their fingers in a lot of pies.
  • “The industrial sector remains sluggish due to an inventory build-up and increased geopolitical trade tensions…US manufacturing PMI has been very weak this year. Given that our industrial production outlook is down 70 basis points from June currently at 0.9%.” Fedex CEO.
  • “Certainly growth has slowed globally not going negative in terms of recessionary worries but we’re not seeing the sort of optimism and forward leaning behavior that we saw in our CEOs just a few years ago” – TPG Capital Co-CEO James Coulter, 23rd Sep, CNBC
  • h/t The Transcript
Stocks

Page Group

  • Profit warning from Page Group is a red flag.
  • “Looking ahead, the deterioration in trading conditions seen during Q3 across the majority of our regions is anticipated to continue. In the UK, heightened Brexit related uncertainty is expected to remain as we approach and go beyond 31 October. With worsening macro-economic indicators in Continental Europe, particularly in Germany, and in the US, there are signs that growth in these markets may slow. In Greater China, confidence in Mainland China continues to be affected by trade tariff uncertainty and the social unrest in Hong Kong is increasing.” Q3 Trading Update.
  • There was a slowdown across the board. Group slowed from +2.1% growth from +7.4% last quarter with UK and Asia negative.
Stocks

Uber

  • Reality sets in at Uber.
  • Uber is “turning [into] an operations company — not a product/tech company” said one former senior employee.
  • All of the perks seem to be disappearing.
  • But morale suffered as the company seemed to crack down. It stopped letting people anonymously ask questions at all-hands meetings. Starbucks showed up in coffee dispensers, and craft coffee from Stumptown, a roaster based in Portland, Ore., went away. Office supplies like giant sticky notes dried up, and the company no longer hands out “Uberversary” balloons. (from WP article).
Stocks

FCA on Insurance Pricing

  • The FCA is out with their report on insurance pricing in the UK.
  • Key chart – the blue line is customer margin against length a policy is held (tenure). The bars show dispersion of margin at each tenure.
  • What this tells you is that customer margin is correlated with tenure (but that there is dispersion so it is not the only variable).
  • In other words – the longer you are a customer the more margin you pay …
  • “The difference in average customer margin between a front book customer (tenure 0) and a longstanding customer (tenure >10) is 31 percentage points for buildings-only policies, 39 percentage points for combined building and contents policies, 33 percentage points for contents-only policies and 21 percentage points for motor policies“
  • This is something the FCA is taking action on – calculating £1.2bn could be saved (in a total market of £18bn).
Stocks

Quantum Supremacy

  • We don’t pretend to understand all the science behind this.
  • However, some experts are claiming that something important has just happened in the field of Quantum Computing.
  • The analogy used is the Wright Brother’s first flight and how it took the world another 5 years to realise what had happened.
  • h/t The Browser.
Stocks

Doordash

  • At Snippet we are huge fans of alternative data sources.
  • Thinknum is a website that uses numbers to tell stories.
  • It is very useful in terms of tracking investments.
  • For example this article shows that using online data sources Doordash (the food delivery service) has started beating its rivals.
  • This gap opened up in 2019 and is consistent across data sources.
Misc

Academic Publishing

  • Academia is the source of a lot of the world’s basic knowledge.
  • In this really interesting piece two academics analysed a database of 120 million academic publications from 25 million authors.
  • They found some very interesting conclusions.
  • Papers have become shorter, while features that attract readers – like titles and abstracts – have gotten longer (academic clickbait).
  • There is a huge increase in new authors and they publish at a much faster rate (see chart).
  • Overall these results support Goodhart’s law – any measure will eventually become a target.
Tools

NY Fed NowCast

  • Nowcast Report is a useful tool, produced by the New York Fed.
  • It gives a NowCast (the best current estimate given data to date) of US Quarterly GDP.
  • The inputs are laid out and it changes daily as prices come in.
  • Most people use the more popular brother produced by Atlanta Fed GDPNow, but we have found this one to be more rigorous.
Stocks

RIT Capital (RCP.LON)

  • An interesting investment trust we have come across is RIT Capital.
  • It is run by the Rothschild family.
  • It trades at a small premium to NAV (Net Asset Value) – so it is down to NAV growth and dividends to deliver returns.
  • They are invested in a broad range of assets – from hedge funds, to real estate, to gold.
  • Their goal is steady, long term wealth compounding.
  • Disclosure. We owns shares in RCP.LON
Stocks

Forever 21

  • Interesting to see Forever 21 file for bankruptcy.
  • They experienced huge growth that was perhaps too much to swallow.
  • “We went from seven countries to 47 countries within a less-than-six-year time frame and with that came a lot of complexity” EVP Linda Chang.
  • Clearly online competition and declining mall traffic (F21 was big in malls) were the key culprits.
  • Full story here from NYT.
Stocks

FTCH

  • Shares of Farfetch (luxury online clothing retailer) have collapsed.
  • Looks like a huge over-reaction to slowing GMV and an acquisition.
  • In fact, GMV only slowed a tiny bit and the deal looks interesting (a vertical integration).
  • More concerning is the departure of the COO (online retail is an operationally heavy business).
  • FTCH trades below 1x GMV – attractive if 40%+ growth can continue.

Common Sense Disclaimer. We plan to ponder about stocks and other investments here on Snippet. Some will look attractive and some we might recommend. Some we are buying/own ourselves (always disclosed). You should always do your own work, use common sense and invest responsibly!

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