Paging Larry

Sep 14, 2018   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

Despite the would-be hurricane, it was a pretty good week in the markets.  Apple introduced its next round of product updates, Tesla looks like it just might meet its production goals, and the nastiness of politics didn’t rear its ugly head this week.  Truthfully, while mainstream media focused on Hurricane Florence, the Dow Jones Industrial Average (DJIA) quietly gained a couple hundred points.

Let’s get the economic news out of the way.  The Federal Reserve released its Beige Book this week and it showed that economy continues to expand at a “moderate” pace.  Labor markets remain tight around the country, with most districts experiencing widespread shortages of both high-skill and low-skill workers.  Wage growth is mostly moderate, but some districts are seeing big wage gains for construction workers.  I think the takeaway is that things are continuing to improve moderately.  Along the same lines, the University of Michigan Consumer Sentiment Index jumped above 100 in September which is the second strongest read since 2004.  For now, it’s full steam ahead.

In company news, Apple held its annual WWDC event during which it announces its new products.  If you’re in the market for an iPhone or an Apple Watch, you’ll be pleased by the new offerings.  I am still somewhat unhappy about the lack of a headphone jack and its push to Face ID, but truth-be-told, they make good products at a very premium price.  In other company news, it seems Larry Page, CEO of Alphabet (otherwise known as Google), has been missing for some time now.  He’s not missing in the literal sense, but it seems he has quietly stepped aside from the day-to-day operations to instead spend time on his private Caribbean island.  Sources say Page’s absence is “bordering on emeritus, invisible to wide swaths of the company.”  Mr. Page hasn’t presented at a product launch in five years or participated in a press interview in over three.  Perhaps he just needs a break, but investors are beginning to wonder.

In a bit of further intrigue, there is a possible coup afoot.  We learned this week there may be a plot to oust Theresa May, the Prime Minister of the U.K.  The BBC reports that a group of fifty lawmakers in Theresa May’s government, who oppose her proposals for a post-Brexit deal with the EU, have met to discuss how and when they could force her out of office.  A leadership contest could ensue if fifteen percent of conservative lawmakers, currently 48, demand a vote of no confidence.  Creating further intrigue, the U.K. government met yesterday to discuss the eventuality of a “no-deal” Brexit.  It is reported they are readying a second set of documents outlining further preparations in case it leaves the EU without an agreement in March 2019.  Brexit chief Dominic Raab warned that the U.K. will not pay the $51B break-up fee if there is no final Brexit deal.

In closing, let’s talk about Amazon.  The company has come under some scrutiny lately about its workplace policies and treatment of its employees.  Mr. Bezos was worth $108 billion at the end of last year and has gained over $50 billion in net worth since the start of this year.   So, we have the richest person in the world and an internet retail giant that reportedly took in $5.6 billion in U.S. profits last year.  However, it might come as a surprise, as it did to me, that Amazon paid zero dollars in federal income taxes last year.  In case you might be wondering how this is legal, it seems the company’s global headquarters is not in Seattle as you might think, but instead in Luxembourg, a country of 1,500 people.  So, while President Trump may demonize Mr. Bezos for his ownership of the Washington Post and Amazon’s use of the U.S. Postal system, it seems there could be another reason you might not like the man.  Going back to 1995, Mr. Bezos originally wanted to build Amazon’s U.S. headquarters on a Native American reservation near San Francisco to skirt U.S. federal income taxes, but California stopped the deal from going through.  Instead he made the headquarters Luxembourg.  Now you know.

September 14, 2018

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