Curated Insights 2019.11.29

With Tiffany, LVMH grows in jewelry. And Tiffany gets another chance to shine

“We expect to bring Tiffany time and capital, which are two things that are not too easy to get when you report quarterly to the stock market,” LVMH finance chief Jean-Jacques Guiony told analysts during a call Monday morning, after the deal was announced.

LVMH’s plans for Tiffany have three main parts: Increasing the brand’s value, improving its retail network and expanding its product offerings. LVMH hasn’t yet said how many of Tiffany’s 300 stores it may close. But LVMH is famous for finding the top retail locations in major markets, and for shuttering stores that don’t perform.

Tiffany has come under pressure as French luxury brand Cartier has been investing more in targeting younger shoppers. Cartier parent company Richemont’s jewelry business, which is headquartered in Switzerland, has an operating margin of about twice that of Tiffany.

Based on how he has handled a slew of other luxury brand acquisitions, including of Italian jewelry house Bulgari, LVMH CEO Bernard Arnault is expected to help Tiffany grow outside of the Americas, a market that represents about 41% of the jewelry company’s sales today.


​Charles Schwab stock could surge after a TD Ameritrade deal

“Schwab is the new breed of brokerage firm,” says Chip Roame, managing partner at Tiburon Strategic Advisors. Along with its 12.2 million brokerage accounts, Schwab is the largest custodian for registered investment advisors, or RIAs; a major sponsor of exchange-traded funds; and one of the industry’s biggest robo-advisors (offering managed portfolios of ETFs). Its banking division brings in 70% of the firm’s revenue from interest income (though it is under pressure as interest rates have come down). Customers are flocking, lured by the free equity-trading regime that Schwab helped instigate. The company added 363,000 brokerage accounts in the third quarter, up 6% year over year. Buying TD “makes huge strategic sense,” says Roame. TD would double Schwab’s brokerage accounts, add $1.3 trillion in assets, bring in custody service for 7,000 RIAs, and provide a thriving active-trader platform.


Why did PayPal pay $4 billion for a coupon browser extension?

Honey’s surprisingly reassuring privacy policy pledges that it won’t track “your search engine history, emails, or your browsing on any site that is not a retail (shopping or service) website.” That’s because it doesn’t need your data to make a profit. Just like Rakuten, Honey makes money by charging retailers a small percentage of sales made with the coupons it finds. But why would stores pay to let consumers buy their stuff for less? For the same reason they pay credit card companies and payment processors like PayPal: to make your experience as smooth as possible, and to do everything to prevent you from abandoning your shopping cart, even if that means offering you a lower price.

Kodali says one compelling aspect of Honey is its mobile app, where consumers can add items from different retailers to their cart and pay for them all at once. “That has been something that nobody in retail has solved,” she says. “That’s the only thing that I could imagine could take on a $4 billion evaluation.” Instead of shopping on Amazon, you can use Honey to buy from all your favorite stores at the same time, and automatically apply any available coupons. It’s a valuable service that could help differentiate PayPal from everyone else.

A fall in house prices would not devastate Germany’s economy

The first is that far fewer Germans own their own home. While more than three quarters of Spaniards are owner-occupiers, the figure here is just over half, according to Eurostat data.

A second factor here is that, if prices do crash, homeowners with mortgages are also less likely to be as exposed to increases in interest rates. While Spanish mortgages tended to be pegged to Euribor (which tends to reflect movements in rates set by the European Central Bank), Germans tend to go for fixed rate deals — insulating them just in case the ECB does ever manage to raise borrowing costs.

A bursting of a bubble here is also less pernicious as far as the jobs market goes, as it is not the case that almost 15 per cent of workers here are tied up in the construction industry, as was the case in Spain before the crash. The proportion is much smaller, so German unemployment is not about to soar to 25 per cent, as Spain’s did, should the market crash.

How quants and QE shook the cult of the stockpicker

The fees such funds can charge have been hit. The average performance fee for equity hedge funds, a loose proxy for stock pickers, has dropped from 19.1 per cent at the start of 2008 to 16.4 per cent in the second quarter of this year, according to data group HFR. That fall is roughly in line with the average for all hedge funds, but much steeper than for event-driven funds, the other strategy that focuses on stocks.

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