Friday 21/01/22

1. In MACRO, ENERGY & CRYPTO-RELATED NEWS, Biden sticks his oar in, Serica does well from gas prices, Russia considers banning crypto while Turkey embraces it and both Facebook and Twitter embrace NFTs
2. In CONSUMER/RETAIL NEWS, UK consumers lose confidence, pubs recover, Boots lines up, Aldi shrugs off Deliveroo, Primark cuts jobs and Premier Foods has a decent Christmas
3. In TECH NEWS, Microsoft/Activision is up to the regulators now, EA could be the next target and Ant Group faces further scrutiny
4. In MISCELLANEOUS NEWS, EV sales > the number of chargers being installed, Britishvolt’s gigafactory gets a financial boost and, in post-coronatrend developments, supply chains ease, Netflix has subscriber problems and Peloton pauses exercise bikes
5. AND FINALLY, I bring you what is apparently the “ultimate” cheese toastie…

So Biden tries to pressure Russia, Serica benefits from higher gas prices and it’s all kicking off in crypto and NFTs…

So we’re at the end of the week, and I just wanted to highlight TWO things before embarking on Watson’s Daily proper. Firstly, if you haven’t already, please make sure you dip into Watson’s Yearly (click HERE to access it). This is currently a 15,000-word document covering all of last year, what’s going on in 2022 and an overview of each G20 country. I will be updating this document throughout the year, so it will always be relevant and it gives you a huge amount of useful information that will help to accelerate your understanding of the business and financial markets news. You will not get anything like this anywhere else. I am about to update this with full editions of the “new” Watson’s Monthly (about 30,000 everything included!). This means that at the end of the summaries in Watson’s Yearly, you will be able to click on a link that will give you a fuller report, should you need it. Editions of Watson’s Yearly and Watson’s Monthly are accessible by Silver and Gold subscribers. The new Watson’s Monthly will be published at the end of every month.

Secondly, subscription prices will be going up at the end of this month. If you want to lock in current prices (by upgrading from Bronze to Silver, for example) you must do so before the deadline. For just a small amount extra per month, you can get sooooo much more resource available to you if you upgrade to Silver. If you are serious about learning this stuff to help you in your career and/or studies it is most definitely worth the small extra outlay. If you cancel before the deadline and subsequently decide to re-subscribe, you will have to do so at the higher prices. You can access your account HERE. If you are happy where you are, though, no problem! The idea is that you will pay no more for what you are already getting 👍.

Joe Biden hardens warning to Russia after Kyiv says no attack is ‘minor’ (Financial Times, Guy Chazan, Roman Olearchyk and James Politi) gives us the latest on the situation re Russia/Ukraine/US/Europe. Ukraine has, quite rightly, hit back at Biden’s suggestion that a “minor incursion” by Russian forces may not provoke a full-blooded response from Allies. * SO WHAT? * This troop build-up is working a treat for Putin at the moment as he pretty much got what he wanted so far – a weakened US president making stupid statements (making “minor incursions” in a country that’s not yours is like saying that someone is “a bit pregnant” IMO as it is either an incursion/invasion or it is not!) and a split NATO in terms of the response. The noise continues as politicians thrash things out. Sadly, Ukraine is just sat in the middle of all this and it doesn’t really look like it can do much apart from wait.

We continue to hear a lot about gas prices and the impact on the consumer in terms of higher utility bills, but Serica Energy doubles cash after surge in gas prices (Financial Times, Nathalie Thomas) shows that the UK company that is responsible for 5% of the UK’s gas production, Serica Energy, managed to more than double its cash resources over 2021 thanks to sky-rocketing prices and bringing on new wells. * SO WHAT? * So far so great for Serica Energy, but it will have to watch out if it is seen to be doing TOO

well at the expense of consumers otherwise it could well make itself a target for the government/Treasury and attract a windfall tax on its profits to subsidise consumers who are struggling. Fun fact: over 50% of the UK’s gas requirements are met by imports.

Meanwhile, it’s all kicking off in crypto as Russia’s central bank proposes ban on crypto trading and mining (Financial Times, Max Seddon and Eva Szalay) highlights potentially dramatic action as the central bank is considering outlawing all crypto operations, according to a 36-page report published yesterday – pretty amazing when you consider that Russia is the world’s third largest cryptocurrency miner! Basically, it would shut down crypto. Bitcoin didn’t move initially, but I can see now that it is down quite strongly. One of the main reasons behind this is that the central bank says that crypto mining could be a severe drag on its attempts to decarbonise its economy given the huge amounts of energy that mining it sucks up. * SO WHAT? * If this happened, it could dent confidence in crypto quite seriously. However, if others joined Russia and China in banning it there is a risk that demand for digital currencies that AREN’T Central Bank Digital Currencies could just evaporate IMO.

On the other hand, Lira crisis fuels Bitcoin boom in Turkey (The Guardian, Ruth Michaelson) shows that things are going so badly for the Turkish lira at the moment that citizens (especially younger ones) are taking matters into their own hands and turned to trading in cryptocurrencies. It was quite shocking (yet unsurprising) to see that, in this article, the founder of a cryptocurrency hub in Istanbul said, when asked how “investors” trade, he said that “People play at cryptocurrency trading like they’re gambling, like betting…”. * SO WHAT? * As if Turkey didn’t already need it, this looks like a massive disaster waiting to happen IMO as people are turning to things like this in desperation – and, TBH, you can’t blame them. As I keep saying, regulators need to do a proper job of regulating how cryptocurrencies are promoted and traded, but they just continue to drag their feet…

Meanwhile, Facebook owner Meta dives into NFT digital collectibles craze (Financial Times, Hannah Murphy and Cristina Criddle) shows that Meta is looking at ways to enable users to mint and sell NFTs as it tries to climb aboard the NFT bandwagon! The company is also looking at how to help users display their NFTs on their social media profiles. It also sounds like the company is considering the launch of a marketplace for NFT trading. It’s all in the early stages at the moment though! Twitter embraces NFTs with new profile picture feature (Wall Street Journal, Salvador Rodriguez) shows that Twitter is also making NFT inroads as it announced a new feature that will let users have NFTs as their profile pictures! It looks like Twitter is trying to become the social network home of NFT, blockchain and crypto discovery and education. * SO WHAT? * Thus far, NFTs have been traded on fairly obscure platforms but with the entry of companies like Twitter and Facebook on the scene, the popularity of these digital assets could potentially sky-rocket IMO. ALL THE MORE REASON TO REGULATE 😁 IN ORDER TO PROTECT PEOPLE! At the moment, only Twitter Blue subscribers on Apple iOS can upload NFT profile pictures (which will appear as hexagons rather than the standard circles). Twitter Blue is currently only available in the US, Canada, New Zealand and Australia and is priced at $2.99 a month in the US. It launched last year as part of an effort to diversify its revenue stream and make it at least a bit less reliant on ad revenues. This is all quite exciting, no? 

UK consumers are showing concerns (but still spending) while retailers prepare themselves for the year ahead…

Confidence ebbs away amid fears over cost of living (The Times, Arthi Nachiappan) cites the latest findings of the GfK barometer of consumer confidence which shows that people have become much more pessimistic about their finances because of concerns about the rising cost of living. They are also less confident about their household finances in 2022 than they were at the same time last year. Given that we went through a pretty long period last year where consumer confidence just seemed to keep rising and rising, this is a bit of a turn – but given all this chat about rising utility bills, inflation rising faster than wages and recent Omicron nervousness (although that is now dissipating) it is not surprising that consumers are losing their mojo a bit. Mind you, even if they are losing their mojo, they don’t seem to be losing their mojito as Pubs busy again as drinkers make up for cancelled events (Daily Telegraph, Hannah Boland) shows that businesses like pubs and gyms are enjoying a pretty good January while City calls in staff as home working edict is reversed (Daily Telegraph, Simon Foy and Lucy Burton) suggests that the businesses that so cruelly had their Christmas snatched away from them at the last minute may have reason to hope.

In retailer news, Boots needs to scrub up more than just its stores (Daily Telegraph, Oliver Gill) goes into a bit more detail about Boots being put up for sale (something that I referred to earlier this week) by its current American owners, Walgreens Boots Alliance, for a valuation of anything between £5bn and £10bn. Walgreens has apparently sunk £2.8bn into the business since it bought it in 2014 and it has spruced up shops and the company’s finances in the meantime. * SO WHAT? * If you look at the positive investment case for buying the retailer, you could say that the current owner has done a lot of the heavy lifting over the years and even renegotiated new, cheap rental agreements when it suffered under lockdown, plus

the new buyer would get an asset that has pretty much universal presence (in the UK!). On the other hand, most of its properties are leasehold – not freehold – so this may not be so attractive for private equity buyers. Also, it is a pretty tired concept that has suffered from competition from supermarkets over the years, more players in the beauty space and other areas of its business. Still we’ll just have to wait and see how this turns out!

Elsewhere, Aldi ends Deliveroo deliveries as people return to stores (The Guardian, Sarah Butler) shows that Aldi has decided to end its grocery delivery service via Deliveroo to concentrate on its own click-and-collect shopping service as customers continue to return to their shops in increasing numbers. Mind you, Deliveroo may not be shedding too many tears as per Plan B pays off for Deliveroo as frustrated diners opt for takeaways (The Times, Dominic Walsh) shows that the company did pretty well in the fourth quarter in terms of total order value, average order value and market share. * SO WHAT? * I think that this is pretty interesting because it shows that home grocery delivery is not always as important as it’s hyped up to be and that Aldi knows that Deliveroo has the capability to act if it needs it again in the future. In the meantime, it has probably saved itself a lot of money by not having to invest in expensive delivery networks and staff.

Then in Primark vows to keep prices low as it axes jobs (Daily Telegraph, Laura Onita) we see that Primark says that it is committed to keep prices low despite rising inflation but that it is going to cut 400 store jobs as its parent company, Associated British Foods, warned that higher energy and transport costs could have a knock-on effect in other divisions. Talking of food, though, Mr Kipling’s best ever Christmas brings rising profits for Premier Foods (Financial Times, Ian Johnston) highlighted Premier Foods’ successful Christmas to the extent that the company raised its profit forecasts. That is “exceedingly” good news 👍. Interestingly, the company said that Mr Kipling cakes will be sold in US stores for the first ever time next quarter – so I wonder what Americans will make of cherry bakewells and fairy cakes!

Microsoft/Activision could be a good test for the regulators, EA might be the next target and Jack Ma comes under even more scrutiny…

In ‘Too big to be ignored’: Microsoft-Activision deal tests regulators (Financial Times, Stefania Palma, James Fontanella-Khan, Javier Espinoza and Richard Waters) we see that Microsoft’s biggest ever acquisition could be a real test as to the appetite of regulators to take on Big Tech and their Big Acquisitions, something that has been on the cards for quite some time. At the moment, we don’t know whether the deal will come under any particular scrutiny as the combined businesses actually won’t result in a monopoly per se but it will be interesting to see how this pans out. Electronic Arts: the next target in gaming sector M&A (Financial Times, Lex) suggests that EA could be next

on someone’s shopping list as the gaming sector consolidates. With Amazon, Meta, Google and Netflix all wanting to expand their gaming capabilities, there are a number of deep-pocketed potential suitors out there. Even Sony might want a nibble given EA franchises such as The Sims and Fifa. Another good thing is that EA doesn’t have a potentially nasty lawsuit hanging over it either. I certainly don’t think that it’s “Game Over” for M&A in this particular sector…

In Jack Ma’s Ant Group implicated in corruption scandal by Chinese media (Financial Times, Sun Yu) we the latest development in the Jack Ma subset of the Great China Crackdown as a documentary on state broadcaster CCTV (ironic name, don’t you think??) suggested indirectly that his Ant Group is involved in a corruption scandal with Communist Party officials. This is just the latest setback for Ant Group and probably serves as a warning to others not to get too full of themselves. Tough times.

EV sales exceed charger installations, Britishvolt gets a financial jolt, supply chains ease, Netflix weakens and Peloton makes a drastic move…

Electric car sales outpace charge point installations (Daily Telegraph, Howard Mustoe) cites figures from the Department for Transport which show that the number of public car chargers isn’t keeping pace with the number of EVs being sold at the moment. When you consider that battery-powered car sales rose by 76% last year this does highlight just how much more effort will be needed to avoid an EV disaster. * SO WHAT? * OK so this does sound like a bit of a shocker, but then again I wonder what proportion of sales of EVs are to people who have off-road chargers. I would have thought this is quite high, so the figures of chargers per 100,000 people may not be quite as shocking as it initially sounds. Obviously, industry groups like the SMMT are going to paint as dark picture as possible about the current situation because they know that more chargers = more EV sales (because there will be less range anxiety), but it is still a valid point. Things like this just keep the pressure on!

On the subject of charging, Gigafactory for electric car batteries gets £1.8bn (Daily Telegraph, Rachel Millard) shows that Britishvolt’s high profile gigafactory project in Northumberland just attracted another ton of money from investors and the government. It expects to begin construction near Blyth in April, with battery production slated to start by 2024! Great news, no?

In other post-coronatrend news, Supply chain worries ease as shipping rates decline (The Times, Robert Lea, Louisa Clarence-Smith and Dominic Walsh) shows that the Baltic Dry Index (which measures the price of shipping bulk

materials around the world and is seen as a barometer of world trade and supply chains) is now losing momentum. It tends to rise when there are difficulties in transporting goods and it has been rising throughout the pandemic. Interestingly, it started falling after reaching a peak on October 7th and apart from a bit of a rally in the run-up to Christmas, it has continued to slow down. The conclusion here is that things have not only improved a lot in the last three months – it may actually imply that the supply chain crisis may be over! You heard it here first!!!

There were other stories today of lockdown winners losing out in Netflix subscriptions are a right drama (The Times, Robert Miller) as Netflix’s share price cratered by a whopping 19.9% 😱 because of disappointing subscriber numbers in Q4. * SO WHAT? * This is hardly surprising given the “one-off” boost it got during lockdown which made it look heroic, but it is a much more crowded space now. As I’ve said before, I think that subscriber fatigue is going to kick in, revenues will go down and then we’ll get consolidation in the industry and end up back where we started! I think it will take time for this to play out, but this is where I think that things are going to go. The streamer that’s going to lose out the least, IMO, is Amazon because you get so much more for your Prime subscription than “just” TV shows and movies!

Then in Peloton hits brakes on production as sales stall (The Times) we see that Peloton is going to temporarily pause production of its connected fitness products due to falling demand. WHAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA??????????????????????? It will also stop production of its Tread treadmill machine for six weeks, starting next month. * SO WHAT? * Funnily enough, the company’s share price tumbled by a very painful-sounding 25% in trading as a result. What an absolute nightmare. I really don’t see what Peloton can do now. Is it time for a major private equity-backed gym operator to swoop in and pick it up??

…in other news…

We all like a bit of soul food from time to time, don’t we? Amiright or amiright?? Well here’s one man’s hommage to one of the ultimate comfort foods: Man claims trick to making the ‘perfect toastie’ is to put cheese on the outside (The Mirror, Brogan-Leigh Hurst). Now I must admit that, initially, I was a bit sceptical, but I can see that this would work. Just for full disclosure, my favourite toastie of all time is cheese, corned beef and caramelised onions (and then you have a side of tomato ketchup, obviously). Yes, corned beef is a bit retro, but please hear me out. When it is encased in a toastie and becomes neighbours with hot cheese and those sweet but savoury caramelised onions, something magical happens. It’s a bit like the Spice Girls. Quite good individually, but when they get together, that’s where the magic happens 🤣