BGC in Japan, plus other earnings and macro +2

09:44 07-Nov-19

BGC Partners has marked its return to Japan by opening an office in Tokyo in order to launch its G10 Forward FX desk.  This is another step in the growth investments that have been holding the earnings results (and thus stock price) back in order to build long term growth. 

Although we have talking points (but no detail) this morning about progress in the trade war, much damage has already been done.  As business migrates away from America, its currency will gradually become less important to global trade.  If shale collapses than the yen might eventually compete with the euro, or possibly the pound for denomination of hydrocarbon trade.

Ironically, the U.S. withdrawal from the Paris accord that I referenced yesterday may accelerate that process.  In response, the president of Finland said

The E.U. is the front line out here. That’s very obvious. The question is, will others listen to Europe?

but that statement could apply much more broadly.  My answer is that the rest of the world will NOT listen unless the E.U. starts taking true care of its populace, by mitigating its negative interest rate policy, which still seems possible, though far-fetched.  Assuming there is change, but not to the euro, then the yen would be the heir-apparent.

It's easy to lose track of the big picture in the midst of earnings season, but I find such considerations, however far off, to be more important than the following earnings notes:

Investors have been cheering ABB's continued transition since earnings.  It has also played the AI buzzword on its energy management software.  All that I actually see engineered is an acceptable exit point for me.

Not to be outdone, AES announced a partnership with Google Cloud which is a little more interesting, but still lacks detail.  Nonetheless, its earnings were good enough to move my minimum fair value up to $15, but the stock is still well above that.

Since I've mentioned it, GOOG is even further from levels that would interest me, despite some fantastic technology, as I think investors are underestimating the long-term regulatory risk as well as eventual index risk for large components like the FANGs.

Instead, it seems to be GRoDT week, as eMagin finally gets a grip on its yields, according to this morning's report.  The balance sheet is going to keep me hands off for now, but the improvement is worth noting.

The situation is similar or Himax, which I had thought might do better after the info we got from MagnaChip and UDC.  Instead, its report indicates that recovery is going to be a long, slow slog, after timing its sensor bets incorrectly.  Even so, I continue to think the company is reasonably well managed and am willing to hold a few shares through extended depressed pricing.

That's it for now.  More on Westport tonight.