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3
Mar-18
Saturday

Tax reduction flow on effect

8
Australian politicians continue to debate the pros and cons of tax reductions.  In the meantime, the National Retail Federation published results of its survey, indicating that about half of consumers who expect a tax refund this year will put the money into savings and 35% will pay down debt. Our simplistic analysis tells us that the 15% (that remains) will result in additional spending.

US company's share buy backs surge

6
The Wall Street Journal reported that US companies are buying back their shares at an aggressive pace. Announced buybacks have surged since the US passed a $1.5 trillion tax cut in December, exceeding $200 billion in the past three months. Some of the biggest buyers include Cisco Systems, at $25 billion, Wells Fargo, at about $21 billion; and PepsiCo, at $15 billion.  Clearly, these companies know something that convinced them that buying their own stock is a good investment. A clue for the market?
2
Mar-18
Friday

SFG leaning towards raising equity

9
AFR reported that Specialty Fashion Group (SFG) is leaning towards equity raising rather than a fire sale.  Lazard Asset Management, the largest institutional shareholder, refused to sell its 13% holding to a potential bidder. SFG is under pressure as its earnings have fallen more than 60 percent since 2010.

Trump imposes tariffs on steel and aluminium

12
The Wall Street Journal reported that the US President has decided to impose tariffs of 25 percent for steel and 10 percent for aluminium.  Markets tanked in response, expecting any action to impose tariffs to escalate tensions with China and other US trading partners. The Commerce Department has previously recommended tariffs on all steel and aluminium imports.

Not all millennials are comfortable with credit

10
Bloomberg reported that US millennials who lived through the Great Recession are avoiding credit card debt. Only about one in three millennials carry a card, and the generation is more likely than older consumers to use cash or debit cards instead of traditional credit cards.

Will interest rates end US market recovery?

13
The Wall Street Journal reported that by the end of February, the S&P 500 and Dow Jones Industrial Average were up 5.1% and 4.9%, respectively, from their February lows.  The big question remains about inflation and the related expected interest rate rises in the US – has this already been factored in by the markets, or are we in for another wild ride?
1
Mar-18
Thursday

Harvey Norman slump in profits due to IT misspending?

15
According to AFR Harvey Norman blamed a slump in profits (19% down) on investments in e-commerce and IT systems.  It looks like yet another Australian retailer "took IT seriously" and in the process seriously wounded the business. When will the large retailers learn that 'expensive' usually guarantees trouble rather than success?  BTW: we got the above quote from a department store executive after they spent $500 million on IT.  We will report back once we see any benefits.

5G will make the NBN irrelevant

16
The AFR commented in its editorial about the incoming 5G mobile technology.  It quoted Telstra's CEO that "5G or mobile technology is not going to replace NBN."  We beg to differ - the matters will be much worse.  5G will make the NBN unnecessary, so we will end up with 5G networks and a half-cooked NBN.  The smart people who channelled $50 billion of Nation's wealth into a black hole should be congratulated.

Walmart to launch first kids' apparel line

13
USA Today reported that Walmart is launching four new private apparel brands, including its first kids' line, in a move that could “make the retail giant more top-of-mind when it comes to fashion”.  The article then stated that the move was also made to help Walmart gain ground in the race against rivals such as Amazon.  We think that USAT got their thinking upside down.  The only way a retailer can protect a product from online competition is to give it a unique brand.  So, this is absolutely the right strategy, but its core value rests in removing the ability to compare prices with Amazon.

Economic dysfunction: this too shall pass

16
In his periodic reflection on the state of the world, George Friedman of Geopolitical Futures wrote that we have entered a period of economic dysfunction, slow growth and unequal distribution of wealth.  This will lead to domestic political tension and deep international friction. Countries will be focused on their own problems, and those problems will create trouble abroad. It is a world that can best be described as parochial, tense and angry.  The only hope, as George Friedman writes, is that like all the past difficult periods, this too shall pass.  “Twenty years means everything in our lives, but it means nothing in history.”
28
Feb-18
Wednesday

Toys R Us UK expected to tumble into administration

11
The Guardian reported that Toys R Us in the UK is expected to tumble into administration next week, after last-ditch talks to find a buyer faltered.  The move will put 3,200 jobs at risk and follows the recent decision by its bankrupt American parent to try to sell the loss-making UK business as well its other European stores.

Nordstrom planning shift from public to private company

13
According to Reuters, Nordstrom Inc’s founding family group is finalising plans to submit an offer to take the U.S. department store operator private.  Nordstrom is about to receive the offer as it prepares to report fourth-quarter earnings on March 1 and update investors on its financial performance during the key holiday season. Nordstrom’s stock has risen close to 30 percent since Thanksgiving, on investors’ expectations of solid profits.  Who said that department stores are doomed to fail?