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

    Amazon steps closer to modern Sears

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

    Amazon.com (AMZN.O) became a $1.6 trillion behemoth in part by using e-ecommerce to put brick-and-mortar retailers out of business. Jeff Bezos’ company, originally online only, already opened small physical stores, and may now add a department store format, according to the Wall Street Journal.

    That’s sadly ironic, with names like J.C. Penney and Neiman Marcus going bust in recent years. Yet it underlines how Amazon is, in some ways, a 21st-century Sears, Roebuck & Co. The storied U.S. group – another recent casualty of bankruptcy after years with investor Eddie Lampert in charge – produced the first of its famous mail-order catalogs in 1893, with a first retail store following in 1925. In a foreshadowing of today’s buy-now-pay-later enthusiasm read more , Sears even launched a credit program in 1940.

    Amazon can get more from stores by making them multitask as showrooms, instant gratification for customers unwilling to wait for delivery, and mini warehouses helping with challenging last-mile logistics. Still, it’s a reminder that what’s old can be new again. 

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    Evergrande Slumps as Investors See No Bailout After Huarong

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

    Huarong’s bailout was reassuring for investors who went through months of agony guessing just how determined the Chinese government was in combating moral hazard. But even with $300 billion in liabilities that could roil banks, suppliers and home buyers, junk-rated Evergrande is seen as a separate case as authorities crack down on excessive leverage in the property sector. 

    Investor concerns grew Thursday evening after Chinese regulators demanded Evergrande resolve its debt risks and refrain from spreading untrue information. People’s Bank of China and banking watchdog officials summoned the company’s executives, telling them to maintain operations and protect the stability of financial and property markets, according to a joint statement.  

    “The Chinese government’s stance to prioritize social harmony and equality over corporate profit is becoming increasingly clear,” said Anthony Leung, head of fixed income at Metropoly Capital HK. “Evergrande is completely different in the sense that it is the poster child of an industrywide reckless risk-taking culture.”

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    It's Not Just Poppies

    Thanks to a subscriber for this article from Outcrop magazine. Here is a section:

    Plus, it would be many years before any mines would be developed, even if (as now seems possible) the Chinese are allowed by the Taliban to bring their can-do attitude to the task.

    China has been cosying up to the Taliban (some of their leaders were on a Beijing visit a few weeks ago) and the Chinese government made it clear this week they had "maintained contact and communication" in recent days with the bearded ones now in charge in Kabul.

    China has also said it wishes to help the "reconstruction and development" of Afghanistan.

    Clearly, Beijing wishes to draw Afghanistan into its Belt and Road Initiative (BRI). It is a telling detail that the 76km-long border between the two countries includes a pass that was a route on the old Silk Road, the template for the new BRI. Expect to see a highway and rail line this time rather than horses and camels.

    China may be able to achieve what others have failed to do: make Afghanistan a vassal state. In that case, they will have under their control Afghanistan's mineral wealth.

    The British Raj failed to subdue the Afghans — it's famous retreat from Kabul in 1842 ended with the entire 16,000-man army dying or being killed. Then the Soviet invasion came a cropper in more recent years.

    And now the Americans have been humiliated.

    Rare earths would be uppermost on Beijing's mind when it comes to mineral resources.

    The USGS estimated that rare earths in Helmand province could contain up to 1.4 million tonnes of rare earth elements, which would dwarf what Australia could potentially supply to the world. China's control of those resources, as well as their downstream processing capabilities, would enable Beijing to maintain its stranglehold on those vital critical metals.

    And presumably the Chinese would like to get their hands on the iron ore.

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    Luxury Stocks Sink as China's Comments on Wealth Cause Jitters

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

    Luxury stocks sink in Europe, dragging the Stoxx 600 Index lower, after Chinese state media said President Xi Jinping offered an outline for “common prosperity” that includes income regulation and redistribution, putting China’s wealthiest citizens on notice. 

    LVMH -4.3%, Burberry -4%, Kering -3.5%, Hermes -3%, Richemont -2.2%

    “This is a rather nervous market reaction to leadership statements in China about the ‘third wealth redistribution,’” Bernstein analyst Luca Solca says in an email

    “I am not sure there is necessarily a lot to fear from that,” he adds. “Time will tell”

    NOTE: Since Xi took office in 2012, the ruling party has made it a priority to end poverty and build a moderately prosperous society, goals that the party sees as central to promoting well-being and strengthening its governance

    Income inequality in the country is wide -- the richest 20% earn more than 10 times poorest 20% -- and hasn’t budged since 2015

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    Chip Crisis Shows Signs of Easing, But There's a Catch

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

    Still, it’s probably too soon to declare an end to the shortage. Outbreaks of the delta variant of Covid-19 and the long-term efficacy of vaccines make predictions even harder than usual. Some chip analysts have said that reports of weakness are primarily seasonal and that sales will pick up through next year.

    Shortages also vary by part. So even if you can walk into a store and find plenty of laptops, you’ll still struggle to get a new car or a video game console. In some cases, chip delivery times are longer than 20 weeks, the longest wait in at least four years.

    But as I wrote last month, the pandemic rush to computers and printers won’t repeat itself. Once a worker or student buys a laptop, they don’t need another one for several years. Retailers are offering extensive discounts on nearly every PC-related category, with the exception of graphics cards. (It’s still a good time to be in the games business.)

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    Shipping bottlenecks set to prolong supply chain turmoil

    This article from the Financial Times may be of interest to subscribers. Here is a section:

    The disruptions started in the second half of last year after demand for goods sank when the pandemic struck and carriers cut sailings, but locked-down consumers then ordered products online at an unprecedented rate.

    Shipping companies’ efforts to catch up have been set back by the Suez Canal blockage in March and the Yantian terminal closure, as well as border restrictions and port worker absences.

    An indefinite partial shutdown at Ningbo-Zhoushan is the latest problem that could deepen the strain on global logistics. Shipping lines have already started to omit calling at the Chinese port near Shanghai.

    About 350 containerships capable of carrying almost 2.4m 20ft boxes are waiting off ports globally, according to VesselsValue. The congestion has been getting worse with idle capacity reaching 4.6 per cent of the global fleet, up from 3.5 per cent last month, data from Clarksons Platou Securities shows.

    Lars Mikael Jensen, head of global ocean network at Maersk, the world’s largest container shipping group, agreed that the situation had shown no signs of improvement since the Delta variant of Covid emerged.

    “It’s not getting any better on aggregate,” he said, adding that maritime transport networks are “still super stretched — it only takes a small thing then you’re back to square one or square one minus”.

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    Inflation Tempers Americans' Enthusiasm About Red-Hot Economy

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

    By global standards, the U.S. has bounced back fast. But as data on the recovery continue to pour in, there’s plenty to support the suspicion that the glass is still half-empty.

    Consumer sentiment fell in early August to the lowest level in nearly a decade by one measure and U.S. retail sales fell in July by more than forecast.

    The following charts help explain why Americans still aren’t clear how impressed they should be.

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