Amazon’s plans for newly acquired Whole Foods are becoming clear. While the big wonder is how Amazon may use the grocer in its distribution plans, two things have now become clear. Firstly, Amazon is seeking to turn Whole Foods into a more disciplined and competitive store, firstly by cutting prices, and now, by consolidating power over merchandising decisions. Whole Foods formerly ran a more fragmented model where individual store operators had much more control over which products they ran, but Amazon is pulling that back.
FINSUM: We did not expect Amazon to run Whole Foods in such a different way, and we don’t think the market did either. We expected that they just wanted the store to enhance their food distribution efforts, but they obviously want Whole Foods to be a strong standalone grocer.
In what seems likely to prove both a big headache and a substantial earnings loss for Uber, the city of London has just announced that it is revoking the company’s license to operate in the city. London’s transport unit has declined to renew the company’s license and has the mayor’s full backing. The city says that Uber’s behavior as a company has not been “fit and proper” and that they have not taken safety seriously enough. The company says it will challenge the decision in the courts. Its current license will expire on September 30th.
FINSUM: It will be interesting to see if other major cities follow suit on this. Uber’s new CEO sure has a lot on his plate!
A distinguished law professor from Texas A&M has put out an article arguing that investors should stop worrying so much about a new crisis erupting on Wall Street and start paying attention to the one brewing in Fintech. William Magnuson contends that Fintech, the young financial technology sector, is where the next crisis will come from. The sector has come to grab a major position in the financial industry and is led from Silicon Valley, not New York. Its structure makes it uniquely exposed to a crisis, says Magnuson. For instance, its younger and less-well-capitalized businesses are more susceptible to quick failures (like Mt Gox in 2014), and its companies have no sense of coming together for the greater good to solve a crisis. Finally, its young technologies are less well-regulated and more opaque (making them harder to monitor).
FINSUM: So we agree that Fintech could be the epicenter of a crisis, but not any time soon. Fintech, even counting Bitcoin, is not integrated into the economy or market enough to cause a crisis. And on top of that, what is the catalyst for a meltdown?
Barron’s is making a bold argument today. They are contending that the new era of electric vehicles will usher in a wave of car company collapses. The reason why is that EVs will cause a plunge in demand. Electric vehicles are expected to last much longer than internal combustion cars, driving 2-5x the amount of miles, which will lower overall demand and reduce the amount of money a consumer spends on a car. The article, which borrows from an investment research analyst, contends that the total number of vehicle makers will be reduced from about 25 today to just 5, and they are not likely to be the big names we associate with car companies today.
FINSUM: This is quite a bearish outlook. We are not so doubtful that big auto companies can survive, but are more concerned about how self-driving cars will change the nature of car buying (from b2c to b2b) and what that will do to margins.
In what comes as very good news for the autonomous vehicle sector, President Trump’s White House has announced that they will tread lightly on self-driving car regulations. Tesla has recently been blamed for a death in a self-driving car accident, which has led to speculation that tough rules may be imposed. The administration said, counter to expectations, that it would maintain a hands off approach to regulating the sector.
FINSUM: Well there may be some safety concerns, especially in the testing phase, but this is undoubtedly good news for automotive stocks and self-driving parts suppliers.
Cryptocurrencies in general, and bitcoin in particular, have been experiencing big gains this year. Bitcoin is up from $250 per unit at the end of 2015 to around $4,200. However, Jamie Dimon, the CEO of JP Morgan just went on the record at a major conference yesterday and called it “fraud”. He said he would fire anyone at JP Morgan trading the currency because it was against the rules and because it was “stupid”. He said the currency is only good for murderers, drug dealers, and people living in broken nations like North Korea. He said the bubble in the cryptocurrency is worse than the tulip bulb mania.
FINSUM: These are incredibly strong statements about what is a growing phenomenon. We are not sure that Dimon is correct. How is gold any different than bitcoin in principal?