☀☕ Japanese Trading Houses, older than Buffett 📊 Also: China's Slow 618 (JD, BABA); China's Driverless Robotaxis (BIDU) 🎓 "Bullishness"

• US large-cap S&P 500 closed 
• Tech-heavy Nasdaq Composite closed 
• Pan European STOXX Europe 600 closed 1.09% DOWN 🔻
• HK/China's Hang Seng Index closed 0.64% DOWN 🔻
• Japan's broad TOPIX closed 0.43% DOWN 🔻

📝 Focus

• Japanese Trading Houses, older than Buffet

📊 In the Markets

• China's Slow 618 (JD, BABA) 
• China's Driverless Robotaxis (BIDU)

📖 MoneyFitt EXPLAINS

• 🎓 "Bullishness"

📝 Focus

Japanese Trading Houses, older than Buffett

Warren Buffett's Berkshire Hathaway announced on Monday that it had further added to its holdings in Japan's five biggest trading houses, Itochu, Marubeni, Mitsubishi Corp, Mitsui & Co and Sumitomo. Berkshire now owns more than 8.5% of the companies, having first announced positions of about 5% (then worth $6.2bn) on Buffett's 90th birthday in August 2020, along with plans to increase its stakes to as much as 9.9%. As is typical for Berkshire, the plan is to hold them for the long term. Buffett said at the time that he decided to invest in the trading companies because they were similar to Berkshire Hathaway, with diversified business operations. 

“We’re looking for managements that we trust, and we’re looking for things we understand... These five companies are a cross-section of not only Japan but of the world... They are really so much similar to Berkshire... I think the Japanese companies will be around forever” - Warren Buffett, CEO of Berkshire Hathaway

.....▷ Buffett's announcement that he'd raised his stakes to about 7.4% back in April showed his optimism for the Japanese market and added fuel to a Japanese market that was already quietly up 5%. The market has since blasted up another 15% to hit multi-year highs as other investors joined Buffett's bullishness🎓 about Japan's improving economic conditions and increasingly shareholder-friendly corporate governance reforms (see Actively Japanese MFM.) The five stocks are all up by more than 30% so far this year, with Marubeni leading the pack with a storming 62% gain.

.....▷ Known as sogo shosha, Japanese trading houses have a rich history rooted in Japan's economic development. These companies are major players in international trade, providing a wide range of services such as importing, exporting, logistics and finance and dealing in a variety of materials, products and food, often serving as intermediaries.

.....▷ Trading houses are often considered bellwethers of the Japanese economy due to their involvement in various sectors and their global reach. As such, their performance can be influenced by factors such as commodity prices, foreign exchange rates, and geopolitical events. When the Japanese economy is performing well, and global trade is thriving, trading houses can benefit from increased demand for their services and diverse business portfolios.

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📊 In the Markets

Trading was thin on Monday with US markets shut for the Juneteenth public holiday. Japanese stocks snapped a six-day winning streak but remain at 33-year highs (which sounds good but also means it's been underwater since then.) European shares fell, with investors looking for more stimulus from China with evidence mounting that its economy is struggling to maintain momentum from the December reopening (see below.) Traders this week will also be looking to testimony from Federal Reserve Chair Jay Powell on Wednesday and Thursday for more clues on the Fed's rate and economic outlook. 

.....▷ In Credit Suisse news, the UBS CEO has hinted at keeping the CS domestic retail bank within UBS, but not as a separate brand, and CS’s horrific mishandling of Archegos (see MFM) could cost UBS hundreds of millions of dollars in penalties from regulators. 

"We allege that Hwang and Archegos propped up a $36 billion house of cards by engaging in a constant cycle of manipulative trading, lying to banks to obtain additional capacity, and then using that capacity to engage in still more manipulative trading," - Gurbir S. Grewal, Director of the SEC’s Division of Enforcement

China's Slow 618: China is expected to cut key lending benchmarks later today for the first time in 10 months to boost its slowing economy, with the retail and factory sectors in particular failing miserably to sustain the strong rebound seen in the first quarter. The effectiveness of rate cuts may be limited due to businesses and consumers (see below) preferring to pay off debts than embarking on a new round of investment or consumption, so Beijing is also likely to introduce targeted fiscal stimulus measures (i.e. government spending and tax-based) in addition to the rate cuts.

Say hello to Joy, e-commerce giant JD.com's mascot, who just turned 10

- Image credit: JD.com

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.....▷ In China, the two biggest e-commerce sales periods each year are JD.com's 618 Shopping Festival on June 18th to celebrate its founding date, and Alibaba's Singles Day on November 11th. (Singles Day was originally created by Chinese university students in the 1990s as a way to celebrate their single status and challenge a traditional nuclear family culture, but it somehow morphed into the world's largest online shopping event.) All e-commerce platforms participate. 

.....▷ Last weekend saw the end of the 2-week frenzy, and though all sorts of new records were announced (number of small merchants, total subsidies etc.), ominously missing were the actual sales numbers (gross merchandising value, or GMV) from both JD and Alibaba's Taobao / TMall, though they did say that they were "better than expected" and higher than last year's. Syntun, a third-party data provider, estimated 618 GMV from China's major e-commerce platforms (including Douyin and Pinduoduo) grew just 5.4%, the slowest rate since 2020. Both Alibaba and JD.com fell about 2% in HK trading on Monday. (Like its bigger rival Alibaba, JD.com is planning to split up its business into separate listed units, with 2 already trading in HK and 2 more submitted.)

China's Driverless Robotaxis: Last Friday, $51bn market cap Baidu, the dominant search engine in China and widely described as China's Google (since Google's forbidden from operating there), said that it obtained a licence to offer driverless ride-hailing in the southern China tech megacity of Shenzhen. This comes 3 months after the service got the green light for (one area of) Beijing and will be the fourth city in which it can operate its fully driverless Apollo Go robotaxis (i.e. no safety operator present to take over.) Apollo Go passed the 2 million ride milestone in January. Baidu also makes EVs in a JV with Geely, the Chinese carmaker which also owns Volvo and Lotus (and minority stakes in Proton and Polestar.) Other leading robotaxi players include Alibaba-backed AutoX and Pony.ai, backed by Toyota, Didi Chuxing and HongShan (Sequoia).

- Image credit: Baidu

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.....▷Later the same day, Elon Musk said that Tesla's market capitalisation (number of shares X latest share price, currently at $816bn) is directly tied to whether or not it can solve autonomous driving. “Really, the value of the company is primarily on the basis of autonomy,” he said at a conference. He also said that Tesla is close to achieving fully autonomous vehicles (a claim he's been making for several years, though to be fair, he added: "although I've said this before.")

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MoneyFitt EXPLAINS 

🎓 Bullishness

Bullishness is the general stock market term used for wanting to buy something because you think it's going to go up. It's because BULLS attack UPwards with their horns (while BEARS slash DOWN with their claws to kill their prey.)

Don't get caught up with specific numbers deciding when something is or isn't "a bull market", nowadays pegged as 20% or more up from its recent low point (or down from its recent high for "a bear market".) An old-school market is simply when you're feeling pretty good after prices have gone up, and you think it will probably keep going that way.

Of course, the key in a bull market is not to be too greedy. Think of it as buying things you want anyway but at higher and higher prices. In a way, bear markets let you buy the things you want at a lower price... isn't that better? (That's why you shouldn't panic in a bear market.)

But you're allowed to be a little greedy by staying invested in the market since historically, stock markets over the long term do tend to go up... though rarely in a straight line.