IMF growth forecasts for 2020 were released this week and were inclusive of the “momentous” and “remarkable” Phase 1 trade deal between the US and China. It would appear the critics of the deal win the first round as China’s growth forecast for 2020 was revised higher by 0.2 percentage points to 6%, while that of the U.S. was marked down by 0.1 percentage points to 2.0%. While I’m sure the diehard Trump supporters will discard this report as another in a long line of “deep state conspiracies”, one opinion worth reading is how China is retooling – whereas where are we? My thinking is the trade deal is at best a Pyrrhic victory for the US – tempered by a possible coronavirus black swan.
In a similar vein, is a recession in store for the trucking industry? That is perhaps the implication of the 2H 2019 data. Trucking, shipping and freight are indicators I tend to keep an eye on and one possibility is recession – which I discount. In my view, this slowdown is a return to normalization – coming off the sugar highs of the tax plan of 2017 followed by the tariff front loading of 2018. Others to watch in this space include CAT, CMI and NAV. There are, however, opposing views, such as Larry Kudlow’s, “You’ve gone from 1.5% to 2% growth. We had it going at almost 4%, then the Fed tightened.” Oh yes, the infamous Fed tightening defense. Well sir, unless your boss can pull another rabbit from his hat, I doubt the ‘blame anyone else game’ has much longer to run. There does come a point when your policies have to stand on their own merits.
In my inbox this image arrived.
Now, I own CLX, CL, PG, GIS, K, KHC, KO and PEP. If you’re counting, that’s 8 of the 14 company owners of the 26 listed brands. In an exchange telling of the times in which we live:
Me: So just because they sold themselves to a larger corporation now makes a product like Burt’s Bees less natural? Or am I missing your point?
Resp: They do tend to alter the original ingredients
Me: Well, I guess since there is no acknowledged standard, natural would be in the eye of the beholder.
Point is the definition of “Sold Out”. My assumption being a merger or acquisition. Obviously someone else saw this as a breaking of the “natural” covenant – of which there are no standards. I cannot prove or disprove the “tend(ing) to alter ingredients” allegation. Another example of society’s ongoing inability to communicate.
The final act for the week was the Steve and Greta show. In Davos, Mnuchin questioned her economic credentials in regards to climate change. While he may have been technically correct, his flaws were to attack a school girl on an issue where the US has ceded any moral high ground. He lost the round “bigly” on optics alone.
My opinion is that even if climate change could be denied, the planet and our environment would be better served by implementing many of the Paris Accord action items. Greta’s zeal is both her charm and achilles heel. To blast the Paris accord as not being enough may well be correct, but at least it is a beginning. My preference for the moment is to incentivize constant incremental improvement in the vein of Deming’s Law and to bring the ESG conversation to the forefront. However, to ignore the realities of economics in this quest is begging for the Law of Unintended Consequences to bite you. One example being a retooling of worldwide supply chains if plastic containers were outlawed. Doable, yes – but at what cost and in what time frame. Another example is even more ghastly – Healthcare and Pharmaceuticals. These two consume roughly 4% of petrochemical production although part of this could be attributed to packaging. Impacted products would currently include Aspirin, Heart valves, Hearing aids, Artificial limbs, Antihistamines, Rubbing alcohol, Cortisone, Anesthetics and more. Two possible consequences emerge, 1) even greater increases in health care costs, and/or 2) Bringing back Sarah Palin’s (2009) death panel debate except the options today could be a heart valve for someones’ life today versus a possible future life. Oh, the conundrums we face.
As we swing into the final week of January, it’s time to break out the month end reports. For my part, my activity was abnormally high due in part to some initiatives previously discussed. Hoping your week is great!
Seeking Returns 