Welcome to The FR, where we wish you glad tidings and good cheer.
In this edition:
Digital is Great for Some, but Cash still Works for Many
The Equity Market is Trading like it’s 2008
Start Spreading the (Big Tech) News
2019 Outlook for Cryptocurrency
An Investor Battle over Pernod
Happy Holidays and New Year!
A full U.S. cashless revolution is a lousy idea.
In the U.S., digital and card payments solutions are getting better and better. That’s great for merchants and consumers alike. Bravo, fintech. But what’s not cool is the proliferation of cashless merchants that have been on the rise in the UK (especially London) and, unfortunately, in New York. If modestly sized countries in the North Atlantic that are equal to or smaller than California want to go cashless, that’s their prerogative. But in a massive country like the US, it’s a different kettle of fish. According to Pew Research, there are about 40 million disabled Americans. There are also about one million Americans who have rheumatoid arthritis or Parkinson’s disease in addition to the 12 million Americans who are are least 80 years old. Add up these numbers and you’ve got about twice as many Americans that fit into at least one of these categories as the entire populations of Sweden, London, Scotland, Wales or Northern Ireland. Of course, many older and/or disabled Americans are fully capable of going cashless, but many are not. That’s why we hope that U.S. shops and restaurants embrace cashless solutions on one hand, but don’t exclude those who would prefer to pay with genuine greenbacks. Paper currency and the many people who use it (i.e., veterans, grandparents, people bravely battling debilitating conditions) serve an important role in our nation. And the last thing America needs today is more exclusion.
Technical analysis: Snake oil or savoir in these desperate times?
If you haven’t noticed, the equity market is trading like it’s 2008 these days. Yes, we’ve seen a few up days, but they have been drowned out by economic numbers, China trade war concerns and the president’s apparent belief that it’s okay to treat Fed Chairman Jerome Powell like he’s Rosie O’Donnell. For those investors who choose to actively manage their own portfolios, life was hard enough before the current crop of looney-tunes factors and passive flows came onto the scene. Now, it’s even more difficult. That’s why we think technical analysis is poised for an unlikely induction into the hall of respectability. MIT’s Andrew Lo certainly thinks so, as does Institutional Investor’s senior contributing writer, Richard Teitelbaum: “Behavioral economics focuses on individuals’ tendencies toward what are irrational investment decisions — say, loss aversion, herd behavior, and anchoring. Those are exactly the same dynamics that technical analysts say they can capture en masse by reading price and volume patterns.”
Start spreading the big tech news.
In the wake of Amazon’s big move to Gotham, with promises of waves of $150,000 jobs (see our prior weekly briefing on the matter), Google this week announced in a blog post that it will establish a new campus in New York, dubbed Google Hudson Square. The tech giant plans to lease a building at 550 Washington St. in Manhattan and make it the centerpiece of its new 1.7-million-square-foot aforementioned campus. Google also said it plans to invest $1 billion in capital improvements to the campus, which will include two nearby buildings at 315 and 345 Hudson Street.
According to The Wall Street Journal (SUBSCRIPTION), William Floyd, Google’s director of public policy and government relations, said in an interview that the company’s plan to add 7,000 staff in New York over the next 10 years is “a conservative estimate.” The company has outpaced every previous growth estimate it has set in the city, he told the WSJ.
With Apple’s news that it plans to build a giant new campus in Austin, Texas, as well as new sites in Seattle and Culver City, California, one wonders how big tech may change the landscape — for good or ill — of American cities as we continue to lurch forward into the 21st century.
What does the future hold for crypto?
It’s certainly been a wild ride for bitcoin and other crypto assets in 2018 (as we recapped here), but what does 2019 hold? More wild fluctuation, or perhaps some stability?
Coindesk published an interesting take this week from Gary Gensler, a former chairman of the Commodity Futures Trading Commission under President Barack Obama. Gensler argues that crypto finance markets can only gain true widespread trust by coming within established public policy frameworks. He notes that cryptocurrencies have given bad actors new ways to conduct old crimes, while adding, “What investor protection does exist in crypto markets seems little more than an effort to stay ahead of law enforcement’s and regulators’ attention.”
For 2019 and beyond, Gensler is optimistic about the applications that permissioned private blockchain projects could have in the financial sector, rather than the cryptocurrencies themselves.
We’ve heard this ‘blockchain not bitcoin’ line of thinking from financial institutions for a few years now, and Gensler seems to come down on that side. As for the future of bitcoin itself, well, that is anyone’s guess. But we’d bet on more dizzying ups and downs for 2019.
Pushing back against pushing Pernod.
There’s nothing we find more refreshing than a Pernod with lemonade on the rocks on a hot summer’s day. But activist fund Elliott Management isn’t so sated with the French drinks company’s profit-making measures. Elliott, which owns a 2.5-percent stake in Pernod Ricard, sent a letter to the its board this month asking for 500 million euros in cost cuts and suggested options such as merging with another spirits company in an attempt to boost profit margins and improve investor returns.
However, some of Pernod’s other investors are pushing back against Elliott’s agitation this week. Investment firms J. Stern & Co. and Groupe Bruxelles Lambert have come out in defense of Pernod’s strategy, with GBL stating that it "fully supports the family values of Pernod Ricard based on long-term value creation.”
It will be interesting to see how this investor battle plays out, and if Elliott’s accusations that Pernod is underperforming gain traction or face even more pushback.
The FR will not be publishing an edition on Saturday, Dec. 29. We hope you enjoy your time with friends and family, and we will return on Jan. 5.
Quote of the Week
“Cheers to a new year and another chance for us to get it right.”
~ Oprah Winfrey