Weekend Reading

1 June 2019 | by Ensemble Capital

A summary of this week’s best articles. Follow us on Twitter (@INTRINSICINV) for similar ongoing posts and shares.

Future of Driverless Deliveries Depends on Large Auto Makers (Kelsey Gee, @kelseykgee, The Wall Street Journal)

We live in an on demand society with things like our dry cleaning and grocery delivery just a few clicks away from being delivered to our doorsteps.  All of these on demand services still have a human component that can be a big contributor to driving the price up.  Mountain View, CA based robotics company Nuro is advancing technology to try and reduce the human component by creating tiny self-driving delivery robots.  Nuro acknowledges the complexities and the sky high cost of developing this technology and they’re teaming up with large car makers to advance the project.

How Mastercard and Visa are Beating the Tech Giants at Their Own Game (Tae Kim, @firstadopter, Barrons)

Back in 2013 Apple was hinting about a revolution of the “mobile wallet” but 18 months later, little progress had been made.  Instead of starting from scratch, Apple decided to partner with major credit card companies: Visa, Mastercard, and American Express.  The integration of mobile payments into iPhones enabled users to easily pay for items with touching their phone to a compatible card reading device.  Many consumers also took Apple’s partnership as an endorsement of these companies and their stocks have continued on an upward trajectory for the past several years.

Amazon, in Need of Drivers, Turns to Its Employees (Jennifer Smith, @jensmithWSJ and Kimberly Chin, @MsKimberlyChin, The Wall Street Journal)

As Amazon continues its explosive growth and demand for online orders they’ve now run into the problem of finding enough delivery drivers to meet the number of rapidly increasing orders.  Amazon is still heavily reliant on FedEx and the US Postal Service for delivery and Amazon has now taken a step to expand their own delivery operations.  Amazon is offering an incentive to their employees and will pay $10,000 and three months of salary if they start their own delivery business.  “FedEx and UPS have played down the threat of Amazon delivering more packages itself, saying the online giant still needs to use the established delivery giants to ship many of its packages.”

Fed’s Patience Tested as Trade Spat Clouds Growth Outlook (Nick Timiraos, @NickTimiraos, The Wall Street Journal)

Continuing tensions of a trade war between the US and China paired with potential new tariffs on Mexican imports has the market wondering about the impact to the US economy.  Some investors are concerned that a trade war will hinder growth and many bond investors are questioning if this could lead the central bank to cut interest rates in an attempt to spur economic growth.  Fed officials have stated that they’re watching this closely and are staying patient until there is a case to be made to raise or to cut interest rates. As these conversations and increased uncertainty go on, the market has been reacting in fear of a material pullback.  Ensemble President and Chief Investment Officer, Sean Stannard-Stockton wrote about his thoughts on the subject in his article Trade Wars & Recessions: Investing Under Conditions of Uncertainty.

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