MoneyFitt

12 December 2022

🇭🇷🇦🇷  ⚽️  🇲🇦🇫🇷

Happy Double-12 Monday🎄! (Couples Day 🧑🏻‍💻🧑🏽‍💻💸)

US large-cap S&P 500 closed 0.73% DOWN 🔻 Tech-heavy Nasdaq Composite closed 0.7% DOWN 🔻 Pan European STOXX Europe 600 closed 0.84% UP ▲ HK’s Hang Seng Index closed 2.32% UP ▲▲Japan’s Nikkei 225 closed 1.18% UP ▲ 

📊 IN THE MARKETS

Producer Prices worse, Fed up Weds, Out of cash, No bonus beans, Final Jumbo

📝 FOCUS

Shots fired: Twitter Blue vs AppleBoss Fight! US Trustbusters have Microsoft (back) in their sights

📖   MoneyFitt EXPLAINS

🎓🤖 Producer Prices

📊 IN THE MARKETS

US markets continued to drift lower on Friday as it digested November US producer price 🎓 inflation data that was slightly higher than expected thanks to a jump in the cost of services (a vast and important driver of consumption-led inflation.) Producer prices are the prices that producers get for their goods and services (“at the factory gate”) before retail costs and markups and can be a lead indicator of how consumer price inflation may trend in future.

The PPI rose 0.3% in November from 0.3% in October. In the 12 months to the end of November, the PPI increased 7.4%, the lowest since May 2021. Excluding volatile food and energy components, core producer prices were also up 0.3% in November over October, but compared to a year ago the core PPI was up by just 4.9%, the slowest since April 2021. 

Consumer price inflation numbers will be out on Tuesday, with the Fed’s latest hike due on Wednesday, though the focus will be on what Fed Chair Jay Powell says about how high rates will ultimately rise, since a 0.50% midweek hike seems a foregone conclusion.

HK stocks closed up again, again on relaxations to China’s zero-Covid policy. Another new reason emerging for the apparently sudden policy turn is that local governments seem to have run out of money, with the costs of mass testing and the contact tracing system becoming unsustainable.

Meanwhile, the bean counters at Big Four accounting firm, EY, have counted the beans and told US staff they will not be getting holiday bonuses this year, thanks to the challenging economic outlook in the US and globally. (Merit bonuses are usually paid to top performers at this time of the year in addition to the main bonuses awarded in June.)

After a 55-year run, the 1,574th and last of Boeing’s iconic 747 Jumbo jets rolled off the production line north of Seattle. Airlines are demanding more fuel-efficient aircraft, and many airlines have already retired them from their passenger fleets.

📝 FOCUS

Shots Fired. Twitter Blue vs Apple

So Twitter (Hellscape Version) will re-re-relaunch its subscription service Twitter Blue on Monday at a higher price for Apple users. 

This seems to be recognising the support Musk got from other tech titans in last week’s tirade against Tim Cook’s Apple, when he again whined (with some justification) about the huge revenues Apple generates from sales and in-app transactions through the iOS AppStore.

Spotify, Facebook, Fortnite developer Epic Games, Tinder owner Match Group and others have also been vocal about what Musk has called a “30% tax on the internet” (which includes NFTs, which probably ended up saving iOS users millions.) Musk has also said that the fee is “literally 10 times higher than it should be.” (Apple takes a 30% fee from app developers who make over US$1 million through the ‌App Store‌ in a year, and 15% from small developers who make less than that. Small developers make up 98% of App Store developers but only a tiny fraction of sales.)

It’s a clever approach to load the expense onto Apple customers, though it still depends on demand by Twitter users for the ability to edit tweets, upload 1080p videos and get a blue checkmark. But if Apple sees the risk of many more developers doing the same, and giving Apple customers a reason to migrate to Android, it may rethink its policies. A long shot, of course.

Apple has made an increasing amount of money from services in recent years, which is seen as attractive to investors as it is not only fast-growing but a potentially more sustainable and reliable source of revenues than hardware sales. Services include News+, Music, TV+, Arcade, Fitness, iCloud, AppleCare, App Store (incl. ads), Apple Pay, Apple Card and iTunes. In the fourth quarter of Apple’s 2022 fiscal year (which ended, very weirdly, on 24th September,) services made up about 20% of total revenue, more than iPads and wearables (about 10%) but less than iPhones (about 50%.) The iPhone is obviously “hardware,” but it’s the central plank of an entire business ecosystem platform that combines hardware (the iPhone itself, AirPods, Beats etc), an operating system (iOS), and a marketplace (the App Store).

Boss Fight! US Trustbusters have Microsoft (back) in their sights

Big win for Sony, the maker of PlayStation, the market-leading gaming console. The US antitrust agency, the Federal Trade Commission will sue Microsoft to block the software titan’s US$75 billion acquisition of “Call of Duty” and “Candy Crush” developer, Activision Blizzard. The concern is that the deal, which would make Microsoft the world’s third-largest gaming company, would “harm competition” in the gaming sector, worries echoed across the pond by competition regulators in the UK and EU.

Specifically, the concern is that Xbox’s control of the Call of Duty blockbuster franchise would hurt competitors to the Xbox console and Microsoft’s cloud-gaming businesses (despite a commitment from Microsoft to make CoD available on other platforms for another decade, which Nintendo happily accepted.) The FTC is also concerned that the deal might give Microsoft an unfair advantage in “game streaming” too, which many believe to be the future of the industry. 

The bigger picture seems to be that the FTC and other regulators are looking to clip the wings of Big Tech from using their financial muscle to expand their spheres of influence ever wider. From Microsoft’s perspective, having managed to avoid the most recent rounds of Big Tech antitrust scrutiny, the FTC action must bring back nasty memories of the battles with the FTC and DOJ in the 1990s, first over the Windows operating system and then its Internet Explorer browser.

(See our Trustbuster Explainer from 22-11-22 here and our Focus piece on the Activision deal from 27-11-22 here.)

Thank you for spending a few minutes of your time with us. Remember to take time for yourself and be thankful for what you have.

📖 MoneyFitt EXPLAINS

🎓🤖 Producer Prices 

Producer Price Indices (PPIs) are a measure of inflation in the prices of goods and services sold by producers. Consumer Price Indices (CPIs) measure the average change in the prices paid by consumers for a basket of goods and services.(PPIs measure the prices of goods and services at the wholesale level, while Consumer Price Indices measure the prices of goods and services at the retail level.)They are important because they provide an indication of the direction of the economy, and can be used to make decisions about pricing, production, and investment.The impact of producer price indexes on consumer prices is indirect, but it can be significant. When producer prices go up, businesses typically pass those costs on to consumers in the form of higher prices for goods and services. There is often a lag between when producer prices increase and when consumer prices increase, but the two are usually closely linked over time.In other words, the impact of producer price increases on consumer prices may not be immediately apparent, but may become more evident over time as the higher costs are passed down the supply chain.

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