Hopefully, Xi listens better to Huawei than Trump listens to Apple

NOTE: Bloomberg changed the 1st full showing of this interview to Friday, the 31ST, 9PM EDT.

The Tariffs Ate My Earnings

If there’s a running theme in the latest batch of industrial earnings, it’s rising costs…A hodgepodge of higher costs — from rising raw material prices, labor shortages and supply-chain pressure — threatens manufacturers.

❝ Amid a busy day for manufacturers, Boeing Co., General Motors Co. and Pentair Plc had their numbers tarnished by mounting expenses. The culprits were varied: at Boeing, an escalating bill to get the delayed KC-46 Tanker program ready to make deliveries kept the company from raising its 2018 outlook as expected; GM’s profit will take a hit because of fallout from President Donald Trump’s tariffs on steel and aluminum; Pentair said higher input costs would weigh on third-quarter results before price increases recoup some of the lost margin toward the end of the year. United Parcel Service Inc., meanwhile, is still struggling to profitably handle the flood of e-commerce shipments…

❝ Rising costs are not an unusual phenomenon in the late stages of an economic recovery. Generally speaking, these cost pinches seem to be hitting hardest at shorter-cycle companies— such as consumer-goods or automotive manufacturers — that are arguably at or nearing a peak in growth. Whatever the extra source of cost, companies aren’t going to take the hits lying down. Many have used second-quarter earnings calls to pledge counteracting cost cuts and more aggressive price increases to help protect margins. But tariffs and rising trade tensions put us into new territory.

RTFA for the thrilling details. Unless you’re one of the dolts who takes orders from the Fake President. In which case you will be ignoring any analysis from respected business sources like Bloomberg – skipping past any facts counter to the economics dream world which received its best global test from Herbert Hoover.

We all know how well that turned out.

Our #1 Export is Debt — Fewer foreigners are willing to buy


Mandel Ngan/AFP/Getty Images

❝ Since he first hit the campaign trail, Trump has been squarely focused on boosting domestic production by limiting cheap imports from places like China and Mexico and replacing them with homegrown offerings. Much more rarely has he talked about selling those homegrown offerings — be they Ford Explorers or Boeing 747s — to the rest of the world.

It’s a curious state of affairs, like encouraging people to cook by banning restaurants. Disconcertingly, Trump’s brand of import substitution is now playing out in the world’s biggest debt market.

❝ Debt is, without a doubt, the U.S.’s biggest export. The U.S. Treasury market is not just worth trillions ($13.9 trillion, to be exact), but also represents the “risk-free” rate against which other financial assets are judged, if not fully pegged. To overstate its importance is difficult: It is huge, big-league — one of the few markets to which Trump’s brand of hyperbole might actually apply.

And yet U.S. Treasuries have been finding far fewer foreign buyers in recent months — a trend that has so far been offset by higher domestic demand. U.S. investors have been buying longer-term government debt at a record pace since June, while recent data shows Japanese buyers, the biggest owners of U.S. Treasuries, have reduced their holdings for two consecutive months…

❝ Adversaries of import substitution have long argued that the strategy boosts short-term growth at the expense of longer-term health. It flies in the face of comparative advantage — a central tenet of classical economic theory — and precludes economies from enjoying all of the benefits that come with specialization, including lower prices.

A similar dynamic applies to the transformation of the U.S. Treasury market. While a pickup in domestic demand can initially help offset selling by foreign investors — such as the People’s Bank of China attempting to stabilize the yuan or Saudi Arabia reducing reserves to deal with lower oil prices — it may well leave the market more fragile over the longer term.

❝ U.S. pension funds, banks and insurance companies can opt to “Buy American” with Treasuries, but there are limits and there are risks. Those risks became painfully clear during the eurozone debt crisis, when troubled European Union members used central bank liquidity facilities to buy their own debt after foreign buyers went on strike. The move helped them weather the worst of the crisis, but it also became a pressure point as investors fretted over a “feedback loop” of codependency and negative sentiment between banks and bonds.

❝ Perhaps more relevant to Trump’s ambitions are the self-apparent limits that a domestically funded budget will put on his growth plans. The president wants to boost fiscal stimulus while cutting taxes — a plan that will only work as long as the U.S. is able to issue and sell its debt. Few think that foreigners will stop purchasing U.S. debt altogether, but the loss of a significant pool of players will by definition place a cap on the market.

Sad.

This is an opinion piece at Bloomberg — by Tracy Alloway. She is one of the sharpest people on that payroll – witness her current role as co-host on Bloomberg TV Middle East from Abu Dhabi as well as a managing editor at Bloomberg Markets.

Bloomberg/Halperin/Twitter + Trump poll

Trump poll

24 hour poll posted on Twitter this morning by Mark Halperin, Managing Editor of Bloomberg Politics and much more. He also offered a version without the option of Boycotting the election. After seeing the response to this, the original version.

I find this especially interesting. Over the course of the day, the first 2 options went from fairly even and totaling about 43% of the poll – to the current 50:7 split. The two options of Hillary or Boycott only dropped from 57% down to 43% – about the same proportions as present, though.

The critical decision being almost half Republicans – or pretend Republicans – would rather not vote or would vote for Hillary instead of voting for Trump.

The checkmark by Hillary was in the screenshot I grabbed. I guess that was the last voter’s choice. You can see the count was up to over 2000 voters which is a larger sample than many legit polls.

Clicks ahead of bricks

Online shoppers outnumbered their brick-and-mortar counterparts during U.S. retailers’ pivotal Black Friday weekend, underscoring the challenges facing American malls this holiday season.

More than 103 million people shopped online over the four-day weekend, which started Thursday on Thanksgiving, according to an annual survey commissioned by the National Retail Federation. That compares with fewer than 102 million who ventured into traditional stores, the trade group said.

The growth of e-commerce — including people using their smartphones to buy gifts — helped boost the total number of U.S. shoppers to more than 151 million over the weekend. That figure, which accounts for the overlap between online and offline buyers, topped the 136 million that the trade group had predicted. Other factors, including an earlier rollout of holiday promotions, also are changing consumers’ behavior…

The ritual of Black Friday — the post-Thanksgiving day that has long marked the beginning of the holiday season — also has changed. Frenzied consumers still line up in front of stores to take advantage of deals on toys and televisions, but crowds were smaller at many U.S. malls Friday. The event is also seen as an opportunity for window shopping, rather than spending…

Actual sales reporting at this point part-way through the weekend shows brick-and-mortar sales down 1.2 to 1.4% and online sales up about 18%. Looks like a tipping point to me.

Howard Davidowitz was on Bloomberg Surveillance with Tom Keene, Friday morning. Among other topic he feels that two-thirds of the 1200 major shopping malls in the United States should go bankrupt and disappear. Only 400 are worth keeping!

Plus — Davidowitz is a hoot.

Tim Cook: “I’m Proud to be Gay”


Tim Cook, CEO of Apple

Throughout my professional life, I’ve tried to maintain a basic level of privacy. I come from humble roots, and I don’t seek to draw attention to myself. Apple is already one of the most closely watched companies in the world, and I like keeping the focus on our products and the incredible things our customers achieve with them.

At the same time, I believe deeply in the words of Dr. Martin Luther King, who said: “Life’s most persistent and urgent question is, ‘What are you doing for others?’ ” I often challenge myself with that question, and I’ve come to realize that my desire for personal privacy has been holding me back from doing something more important. That’s what has led me to today.

For years, I’ve been open with many people about my sexual orientation. Plenty of colleagues at Apple know I’m gay, and it doesn’t seem to make a difference in the way they treat me. Of course, I’ve had the good fortune to work at a company that loves creativity and innovation and knows it can only flourish when you embrace people’s differences. Not everyone is so lucky.

While I have never denied my sexuality, I haven’t publicly acknowledged it either, until now. So let me be clear: I’m proud to be gay, and I consider being gay among the greatest gifts God has given me.

Being gay has given me a deeper understanding of what it means to be in the minority and provided a window into the challenges that people in other minority groups deal with every day. It’s made me more empathetic, which has led to a richer life. It’s been tough and uncomfortable at times, but it has given me the confidence to be myself, to follow my own path, and to rise above adversity and bigotry. It’s also given me the skin of a rhinoceros, which comes in handy when you’re the CEO of Apple.

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