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COOL STORY, BRO
The US and China show signs of getting back together after a messy ‘it’s complicated’ stage. The two countries took a big step towards a trade agreement with a partial truce, branded as a ‘Phase One deal’. Here we go again.
Under the latest “deal,” the US will call off the tariffs that were expected to go into place on October 15th, no longer increasing the 25% tax to 30% on $250B worth of Chinese goods. In response, China will purchase $40 to $50B worth of American agricultural products. Because reciprocation is key to a successful relationship.
A bigger trade deal could come over three stages, but there is no timeline for the proposed second and third acts. Details surrounding the second and third phases are limited, but it’s expected to center around the US’ demands for China to crack down on intellectual property theft and to stop demanding US companies hand over commercial trade secrets in order to do business in China.
How will phase one shake out?
There are questions as to whether Beijing will actually purchase the $50B worth of goods promised. While Donny Politics has already tweeted out (because of course he did) a sincere thank you to our brothers from other mothers across the Pacific, Beijing officials have not confirmed the number and insist that the purchases must align with the real needs of Chinese companies. The two Presidents have yet to sign anything official, but signatures are expected to take place next month.
The bottom line …
US and Chinese stonks were up on the news, with the S&P, Dow, and NASDAQ climbing more than 1% on Friday. The Dow was up as much as 517 points before investors came to the realization that many pressure points, such as the new round of tariffs in December and policies regarding Huawei, need to be resolved before a final deal can be signed.
While this is a step in the right direction, investors are skeptical that the US-China cold war will heat up again by Christmas, as tensions remain in other areas, namely export controls, industrial policies, and company delistings.
Uber announced that it will take a majority stake in grocery delivery company Cornershop, an on-demand delivery service for grocery stores, pharmacies, and food retailers in Chile, Mexico, Peru, and Toronto.
The size of the stake wasn’t disclosed but Cornershop was almost purchased outright by Walmart for $225M before the deal was bagged by Mexican antitrust agencies.
Uber is following suit in the latest trend of delivery services bridging the gap between grocery stores and their customers in a more cost-effective manner. Postmates recently partnered with Walgreens to deliver Plan B, Juul pods and Pedialyte in New York City, and DoorDash inked a deal to become Walmart’s courier of choice.
Unlike its delivery competitors, Uber is looking to fulfill a grand vision of becoming the on-demand service for your life. Think hotel concierge on steroids. In addition to its wildly unprofitable ride-sharing service, Uber’s UberEats’ orders doubled last year, and the company launched a gig-work app just last week.
The bottom line …
The cost of delivering products to customers’ doors is much higher than poorly compensated delivery drivers would indicate. More and more retailers and grocers will need to partner up with delivery services, as it could be the only cost-effective way to ship useless stuff millennials are too lazy to leave the house for. Enter Uber, which is making a concerted effort under CEO Dara Khosrowshahi to diversify and build out product offerings that are … wait for it … actually profitable. There’s a novel concept.
IN OTHER NEWS
- We’ll take it from here. SoftBank is done leaving its WeWork investment to chance. Masa Son has prepared a finance package that will give SoftBank full control over WeWork via investments in the form of billions of dollars in debt and new equity. If a deal is reached, nearly all of Adam Neumann’s voting power would be surrendered to SoftBank, giving the firm more leverage to make necessary changes to turn WeWork’s financials around. This may be We’s only option as reports indicate that the company could run out of cash by the end of November. You hate to see it.
- Renault more. Thierry Bolloré is OUT as Renault’s CEO. On Friday, the board voted to remove Bolloré after he decided not to resign. How very French of him. Of Renault’s 18 directors, 15 said they were in favor of the move, while three wouldn’t vote. Renault’s decision comes as the firm looks to distance itself from Nissan’s former CEO, Carlos Ghosn. You might remember that Renault has a global partnership with the Japanese automaker. For what it’s worth Renault’s revenue and profits (or lack thereof) also played into the decision.
- Lamborghini mercy. VW is trying to decide what to do with its Lamborghini brand, as the firm moves to more than double its market value to $220B. Herbert Diess, CEO of VW, wants to focus on the company’s main global brands, namely VW, Porsche, and Audi. In the meantime, the German automaker is looking into a sale or stock listing for Lamborghini. Not for nothing, but at least a Lamborghini will pass an emissions test.
- Watch your mouth. Ken Fisher’s Fisher Investments is $600M poorer after Ken’s sexist comments at an investment summit caused the state of Michigan to pull its pension fund dollars. When called out on his comments, Fisher said he’d made similar remarks before, without any backlash. Really, that’s the best excuse you could muster? Fisher Investments manages more than $100B in assets, and even with Ken’s apology on Thursday, it’s yet to be determined whether more investors will pull out.
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