Tundra Pie Pro

Nov 2, 2018   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

In case you didn’t notice, it was another very volatile week in the markets.  Fortunately, there were more bulls than bears and we look to finish the week higher.  More importantly, the Dow Jones Industrial Average has reclaimed 25,000, which is both a psychological and technical floor.  Earnings announcements continue to flood in with many companies reporting solid earnings and revenue growth with forward guidance to match.   There were a few notable exceptions but not as many as one might think.  Earnings announcements will begin to slow next week after which we should see the news focus on the outcome of the mid-term election and once again return to economic data.

Speaking of economic data, perhaps the best news we learned this week is that the economy added 250,000 jobs in the month just ended, versus an expectation of only 193,000.  Some might argue the quality of these jobs is poor, representing low-wage or entry level positions.  While it is hard to deny many of these jobs are entry level, it does speak to the general health of the economy that vast numbers of jobs are being created.  It also speaks to the deep pockets of consumers who continue to spend with reckless abandon.  While we don’t encourage our clients to spend recklessly, it should be noted that consumer spending makes up 71% of gross domestic product (GDP) or put another way, it is the gasoline for our economic engine.

In other news, last week I mentioned that the methodology for generating FICO scores will be changing next year.  The new UltraFICO score would be more favorable to those with blemished records.  This loosening of standards is not ideal, lest we forget the financial crisis.  So, I was pleasantly surprised to learn this week that both Capital One Financial and Discover Financial Services are becoming more cautious in their handling of credit limits.  They both reported they will be tightening lending standards as a precaution against a future economic downturn, both citing the length of the current recovery as justification.

Another story that caught my attention had a headline, “Tech Giants May Face Billions in New Taxes.”  How could one not be a little intrigued with a headline like that?  It seems the European Union (EU) is tired of tech companies finding tax avoidance loopholes.  As one example, Reuters documented in 2014, Google had moved $12 billion from its Dutch arm to a Bermuda-based, Irish-registered affiliate called Google Ireland Holdings.  The money was received as royalty payments from its Irish affiliate Google Irish Limited, where most non-U.S. revenues are apparently channeled.  If you didn’t follow that, you’re not alone.  Well, the EU decided enough is enough.  Its proposal is to impose a tax based on the revenue of tech companies rather than their profit.  If implemented, this tax could mean billions in taxes on the largest technology companies, including Google, Microsoft, and Apple.

In closing, I often like to talk about innovation in the economy.  After all, it is disruptive innovation that frequently leads to new markets and investment opportunities.  However, this week I bring an innovation that while disruptive, seems downright strange.   Pizza Hut and Toyota have teamed up to make a zero-emission robotic pizza-making truck.  The vehicle, dubbed the Tundra PEI pro, is programmed to have the pies freshly baked as you drive to your delivery destination.  You heard that right, Pizza Hut wants to bake pies in a Tundra.  It does seem to hit on all the key trends, i.e. robotic and zero-emission.  The only thing missing is self-driving.  I don’t know about you, I’m not sure I want a future where pizza is baked in the back of pickup trucks.  That’s one innovation I plan to skip.  Now you know.

November 2, 2018

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