Tariffs (pt 1) — Check out the USDCAD on Monday..
And check out the USDMXN… (also on Monday)…
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Also think about oil — remember Canada exports a lot of oil — priced in CAD. Futures ticking up. I wrote before that tariffs will have a huge impact and we are already starting to see the consequences — link here. Trump has created an inherently inflationary dynamic, because tariffs don’t work one way — they create a trade war — i.e tit for tat. You end up with prices costing companies and the consumer more, which is inherently inflationary.
Of course, since drafting this post Trump then suspended tariffs on both Mexico and Canada. It’s almost like someone thought — I don’t know — maybe tariffs are bad and inflationary?! And by some miracle, some advisor got through to Trump? Who knows! My read on this, though, is basically we are dealing with an empire near the end of its life, trying everything it can to maintain the supremecy of the USD. Which brings me to my favourite chart:
One of my favourite Mungerisms is “all I want to know is where I’ll die, so I’ll never go there”. The same thing is true for empires. The trouble with being an empire is that eventually you die. Now, that might be centuries from now. But Trump’s erratic actions re: tariffs do give me pause…
NZ
Being AI — everyone’s favourite AI hype train tech stock — trading suspended as there are no independent directors (they resigned) — also noting their website is just a landing page right now. Link. But the main thing with Being AI is the friends we made along the way! Is this the end of NZ’s “only” “AI” stock? Who knows?! But again — as have mentioned before — why did the NZX allow the listing this glorified school-and-mailing company??? (Yes, I know there’s some AI projects too — do I understand them? No. Ask deepseek). Trading was suspended on Monday, and still is at the time of writing.
Fletchers — New king crowned — all hail king Peter Crowley, new chair. Was impressed by him at the ASM — calls a spade a spade (unlike some other directors…). Unsure why Barbara Chapman needs to stay on for another 3 months — it seems like her “long goodbye” just might go on for a while more yet. My instinct with Fletchers is to break it up — it’s a grab-bag of assets that doesn’t really make sense as a conglomerate. Sell them!
Tariffs — Considering the flow-on impact of tariffs for many of our companies…F&P Healthcare, etc…
Two takeaways here — slowing growth rate in the co’s “profit engine” (ads), as well as quite flat cloud revenue. See below:
YouTube advertising revenue: $10.47 billion vs. $10.23 billion expected
Google Cloud revenue: $11.96 billion vs. $12.19 billion expec.
Traffic acquisition costs (TAC): $14.89 billion vs. $15.01 billion expec.
Now, don’t get me wrong — Google (sorry, Alphabet) is a very profitable company and likely will continue that way. But those numbers — eh? Kind of a shrug? It makes me wonder if we’re starting to see a slow-down in the broader tech market, especially in ads (of course, there’s other platforms taking ad-spend share too, i.e TikTok).
The other major takeaway is capex — co expects to spend +$75bn in 2025, mostly on data centres and AI. Remember that way back when, Google was a capital-light model. It made money from advertising, was like “hey, we are the biggest search engine in the world, give us some money” and everybody was like “yeah, ok”. But now Google is starting to look like an oil company or resources company that requires a lot of capex — the hope is that ROIC on all that AI stuff pays off — but you’ve also got to remember that capex requires renewing. It’s not just a one time cost! We’re seeing this across the board, with Microsoft and Meta too. As a percentage of revenue, Big Tech is starting to rival the last oil spending spree…and then some… (see below, c/o The Information):
