Mr Toad’s wild interest rate ride – June 7

Not so much of a roller coaster ride but a descent faster than gravity’s pull

From early May this year to Friday … and FED cuts 3x in ’19 seem to be the crowded projection … what could happen?

Here’s another way to look at it for the graphically challenged

May 1Jun 7change
30 yr2.9202.570-0.350
10 yr2.5202.090-0.430
2 yr2.3101.850-0.460
3mo2.4302.280-0.150

Seeking Alpha’s last SA for FA podcast covered some possible risks to these changes and i found it succinct and aligned with my concerns

Hacking tools and hands for hire – cheap!

Much has been said / printed about the cybersecurity risks we all face with our digital information and transactions. But, i believe many of us underestimate just how easy and cheaply it is for ‘bad folks’ to get access, tools and other resources to do the work … for example, quote: “In another case, McGuire and Bromium found a database of passwords and PIN numbers that appeared to belong to customers of Qatar National Bank, a global bank with tens of billions of dollars in revenue, for sale for roughly $10.”

That quote was from an article referenced by Washington Post – https://www.cyberscoop.com/corporations-beware-dark-net-markets-selling-tools-targeting-accounts/

WAPO pointed to a Bloomberg post – you may need subscription https://www.bloomberg.com/news/articles/2019-06-06/access-to-bank-networks-for-sale-on-dark-web-new-research-says

An interesting costing estimate, quote: “The price for commissioning an attack on a specific corporation averaged about $4,500, the researchers found. Bespoke corporate espionage services, targeting either individuals or specific information from a particular company, were available for fees ranging from $1,000 to $15,000, they said.”

What we have is a failure to communicate …

Heisenberg Report posted a fabulous post on current trade issues – leveraging source material from Goldman. https://heisenbergreport.com/2019/06/06/just-call-it-a-coin-flip-40-chance-trump-slaps-europe-with-auto-tariffs-goldman-warns/

This quote is priceless – a combo of Heisenberg and Goldman: quote –

“The bank does an admirable job of dancing around the punchline in the interest of not coming across as overtly snarky, but the bottom line is that there isn’t even an agreement on what’s being negotiated. In fact, it doesn’t appear that the two sides agree on what Trump and Jean-Claude Juncker actually said at the famous Rose Garden press conference last July. Here’s Goldman:

A divergence of opinion on what should be included in the trade deal appears to be the main stumbling block for negotiations. When the European Council passed its two negotiating mandates in May, it limited the scope of the negotiations to ‘non-auto industrial goods’ and ‘non-tariff barriers’. Agriculture is unambiguously excluded from the mandates. Conversely, the Office of the US Trade Representative (USTR) published negotiating objectives that specifically include the reduction or elimination of EU agricultural tariffs and the establishment of “specific commitments for trade in products developed through agricultural biotechnologies”.

Child labor – consumers are responsible

Washington Post published an article today about child labor in the cocoa farms of West Africa – CHILDREN. Consumers are responsible for supporting products and supply chains that do not / cannot promise conflict and child-labor free outputs.

Purposeful consumption – or responsible consumption – is a new priority for me. If you purchase the product you are responsible for the intended AND unintended consequence of that product’s full supply chain. Elective ignorance no longer removes culpability. You buy it, you’re responsible. We all need to consumer carefully … purposefully, responsibly.

Article – subscription may be required

Apple’s WDC from Morningstar

Morningstar was out this morning on Apple’s WDC so far … they made a point that hit me too. quote: “One of the most important announcements, in our view, was Project Catalyst, which helps developers port existing iPad apps onto the Mac, facilitated by the latest macOS, Catalina. We believe these moves in aggregate will usher Apple toward having its MacBook offerings running on its ARM-based A-series processors in lieu of Intel processors. However, we don’t believe this will meaningfully come to fruition for at least another three or four years, if not longer, given Apple’s 100 million Mac and MacBook installed base and the incumbent applications written for Intel’s x86 architecture.” (bold is mine)

Developers are the key and refreshing to see focus put back where it belongs. Devices are the delivery systems and need to be hip and fabulous, services need to be valuable and meaningful to users, but without apps …. nothing. There are two transitions that seem to be setting up – a) iPad / Mac blurring and interoperability (moving the iPad closer to Mac than iPhone which makes sense) and b) x86 to ARM in Mac … both totally make sense, but without developers paving the way for those, again … nothing. If I’m close to right, it surfaces how Apple is playing a long game.

Potential 5G unintended consequences?

Bloomberg posted an article on NOAA positioning that some 5G frequencies may interrupt their ability to predict weather – as i understand it (the non-scientist view), NOAA tracks waves emitted from water molecules in the atmosphere as part of their prediction toolbox. 5G disrupts that ability to the tune of 30% degradation. https://www.bloomberg.com/news/articles/2019-06-04/march-to-5g-could-trample-hurricane-tracking-scientists-warn

Again, on these 5G posts … I am NOT pushing any position on 5G safety. I am just forcing myself to risk manage my investment priority in the IOT narrative over the next 10 years. I am making risks I find visible — no more.

Who’s FED?

Mr Duy’s points are all good and worth reading https://blogs.uoregon.edu/timduyfedwatch/2019/06/04/powell-tells-us-what-we-should-already-know/ … quote: “Bottom Line: The Fed stands ready to adjust policy as needed to respond to unexpected shocks; this is true even if the shocks emanate from the White House.

The Heisenberg Report has another good read on the topic https://heisenbergreport.com/2019/06/04/not-so-lonesome-doves/“Meanwhile, GOP lawmakers are pondering the possibility of trying to push through a veto-proof version of the bipartisan resolution nullifying Trump’s border emergency. Trump says that won’t happen. He’s probably right. Trump is also probably right to assume that eventually, the Fed will cut rates in order to ensure the trade war doesn’t completely derail the economy. At that point, assuming any easing is accompanied by more days like Tuesday, the president will feel like he has more scope to push his hardline trade agenda, which is increasingly inseparable from the rest of his agenda, whether it’s immigration or national security.”

Eric from EPB who has also had a good bead on rates over the last 12-18 months https://seekingalpha.com/article/4268161-weekly-dashboard-interest-rates-plunge … a snippet quote (disclosure -> you should read the full article) “For now, the outlook for economic growth remains one of deceleration in which lower interest rates over time are likely.”

My concern is that this action, if a rate cut, will prove difficult to discern if monetary, political or social engineering.

Thought provoking article – ‘should read’

Eric B posted an article this weekend that I found one of the most provoking reads in several weeks.

Here was my comment to the author

Eric … one of the most thought provoking article I have seen in the recent up-roar of tariffs and inverted yield curves. One of your key elements here is to expand our analysis horizons from days / quarters (typical) to decades using the JPN / EU patterns. The other point you made but did not hammer too hard – is that the employment trend (older people working longer) and the financial insecurity of the younger cohorts (especially 25-35 yrs) – think low income and high debt – is a vicious cycle (or virtuous) – that younger cohort will enter their later years worse off than the current older cohort, so … older folks work longer than boomers; and the cycle continues with greater values at each spin. These are important long term trends for us investors and I applaud your effort to extend our analysis horizons.

Btw … this is not important for investors, but business folks working on longer term product roadmaps and strategic plans. Many of our future growth variables and assumptions need to be challenged in the context of these demographic and debt pressures building across the globe.

Potential tariff impacts

Another great graphic of all the ‘suggested’ tariffs and what will be impacted by both Mexico and China – this says nothing about India (… yet). Sourced from Goldman via Heisenberg Report – who will escape the financial impact?

Farmers’ risk

Jeff Miller (WTWA) posted this graphic and once i understood how it’s structured, my jaw hit the desk.

This is a risk-filled planting season as both the weather and trade tirades converge with a vengence.

Mr Toad’s wild interest rate ride – May 19

Could it be … China?

Could it be … Mexico?

Could it be … Brexit or Italy?

Could it be … slowing economy?

If you know, would you let everybody know? I am working to figure out if I just buy 3m Tbills or wait for Mr Toad to ascend to grab longer durations.

AI Patents

Another great dataset from Statista … Patents can be cash machines later but can be hard to tell which ones generate the cash, e.g., NOK and QCOM from the early cell phone days. MSFT was a surprise as the top one with such a gap.

BMO Earnings Conf Call

Disclaimer: Not recommendation just an observation and opinion

https://seekingalpha.com/article/4267058-bank-montreals-bmo-ceo-darryl-white-q2-2019-results-earnings-call-transcript

This conference call seemed better to me than the recent RY (posted earlier). The comments around expenses and differentiating between a specific business and the enterprise was refreshing. I just thought the leadership team had a better grasp of their business and strategies.

I also really appreciated this comment by CEO in opening remarks – quote: ” As I look across the bank we’re building on our strong foundation and differentiating strengths to grow our businesses and deepen customer loyalty. “

I am long BMO for ~ 10yrs but have reduced my position to core buy/hold/DRIP, and include this as a core holding in my equity income growth sub-portfolio with RY and BNS.

NXP buys MRVL connectivity portfolio

this is a complete surprise to me and will need an investigation into why (if possible). i had opinion that MRVL connectivity portfolio (especially the Bluetooth) was a solid IOT play. Quote below from https://briefing.com

NXP Semi to acquire Marvell’s (MRVL) Wireless Connectivity portfolio in an all-cash, asset transaction valued at $1.76 bln 8:31 AM ET 5/29/19 | Briefing.com

The acquisition encompasses Marvell’s WiFi Connectivity Business Unit, Bluetooth technology portfolio and related assets. The acquisition will enable NXP to deliver complete, scalable processing and connectivity solutions to its customers across its focus end markets. The acquisition includes approximately 550 people worldwide. NXP expects the acquisition to create new revenue opportunities in its target end markets. With approximately $300 million in revenue in Marvell’s fiscal 2019, NXP anticipates revenue associated with the acquired assets to double by 2022. The acquisition is expected to be accretive to NXPs non-GAAP operating profit in the first full quarter after the transaction closes