Tuesday 13/12/22

1. In MACRO, ENERGY & CRYPTO NEWS, the EU struggles against the US’s green attraction, the UK economy unexpectedly rebounds, factories hybernate, Rolls-Royce rivals jockey for position, Binance faces possible charges, FTX’s former chief is arrested and a bitcoin miner slides
2. In EV NEWS, Geely’s Zeekr looks hot, Rivian shelves plans for a European electric van plant and UK EV demand drops
3. In CONSUMER-RELATED NEWS, employers hire less, UK house prices are projected to fall, young adults drive the luxury boom and heated blankets are quite literally hot property
4. In M&A NEWS, Amgen moves forward, Thoma Bravo hoovers up Coupa Software, Microsoft buys a 4% stake in the London Stock Exchange and Jewson is sold off
5. AND FINALLY, I bring you some winter fitness inspo…

So the EU struggles against the US, UK factories hybernate, Rolls-Royce rivals gear up, Binance is targeted, SBF gets arrested and a bitcoin miner denies bankruptcy…

📢 I’m going to be doing my annual P/Review on Thursday 5th January where I will roundup the news of the year in 2022 and then outline predictions for themes in 2023. In order to attend that, you need to register HERE. The idea is that this will set you up for the year by putting everything into context for you and giving you a heads-up of what to expect in the coming year! This will be backed up by publication of Watson’s Yearly, which is the more detailed written version of the presentation that also contains a roundup of every G20 country and how my predictions from the previous edition performed! There is nothing like this anywhere else, and it will help your understanding of what’s going on enormously so if you’d like a spot, please sign up!

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

EU struggles to counter Joe Biden’s big green push (Financial Times, Andy Bounds and Sam Fleming) shows that the EU is struggling to match the attractions of Biden’s massive green package although Ursula von der Leyen is now saying that the EU

would match US financial support (via the stupidly-named Inflation Reduction Act which has a $369bn pot of money to dole out) and relax its rules on the amount allowed for state subsidies to make staying in Europe more attractive for companies. However, the practicalities of doing this are rather different, particularly as there are also World Trade Organisation rules that are also restrictive on state subsidies. In the meantime, companies will be weighing up their options of going stateside…

In energy news, Struggling factories prepare for hibernation (Daily Telegraph, Gareth Corfield) shows that plunging UK temperatures and booming wholesale electricity prices are forcing some businesses, who are not protected by the energy price cap that covers households, to shut down until rates fall back to a more reasonable level. This is clearly a difficult situation right now but Rolls-Royce rivals gear up for mini-nuke race as power system creaks (Daily Telegraph, Howard Mustoe) shows that other nuke start-ups are snapping away at the heels of Rolls-Royce and its much-vaunted Small Modular Reactors (SMRs) that could supply our electricity in the future. They include companies like US start-up Holtec, London-based Nucleo and Last Energy. This is a good thing IMO and will keep Rolls-Royce honest!

In the wild world of crypto, US weighs up possible charge against crypto giant Binance (Daily Telegraph, Matthew Field) shows that the US Justice Department is looking into making charges against Binance executives for unlicensed money transmissions, conspiracy to launder money and sanctions violations. This is still under consideration, but many players in the crypto world are being scrutinised now because of what happened to FTX. Talking of which, Former FTX CEO Sam Bankman-Fried arrested in Bahamas (Wall Street Journal, Alexander Saeedy, Justin Baer, Dave Michaels, Vicky Ge Huang and Andrew Scurria) highlights yesterday’s arrest after the US filed criminal charges for charges including wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering! This is going to make a great film/Netflix doc/book in the not-too distant future! As if that wasn’t enough drama for you, Bitcoin miner forced to deny bankruptcy after web post (Daily Telegraph, Matthew Field) shows that a London-listed bitcoin miner Argo Blockchain was forced to deny it had gone bankrupt after “accidentally” saying it had on its own website! It said yesterday that it was in “advanced” talks to source additional funding whilst also selling assets to stay afloat. * SO WHAT? * The world of crypto continues to implode – and yet bitcoin remains stubbornly stable! I really think someone needs to do a deep dive into that as it looks to me like something funny is going on…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

It’s a mixed bag for EVs…

Geely/luxury EVs: Zeekr sub-brand should find US investor appetite (Financial Times, Lex) is a really interesting article which highlights the success of Zeekr, the two-year old “luxury” sub-brand of Geely that is looking at potentially listing in the US to raise around $1bn. It’s only got one model on the market (the Zeekr 001) and its estimated value of $10bn sounds quite punchy, but its vehicles have proved to be hugely popular and sold out of all available production for this year in September! * SO WHAT? * Zeekr could also do well in Russia, where sales of Chinese cars doubled in November as US and European markets ditched the market. Zeekr plans a launch in Europe next year and then the US the year after! Given its brand positioning, you would have thought it would be well-placed to displace Tesla off its China perch in the not-too-distant future!

Meanwhile, Rivian halts plan for European electric van plant with Mercedes-Benz (Financial Times, Peter Campbell and Patricia Nilsson) shows us that Rivian has suspended plans in order to conserve cash and focus on existing production in the US against a tricky economic backdrop. The two companies had signed a

memorandum of understanding in September to open a joint plant in Central Europe to make electric delivery vans, citing buying and other synergies as being advantageous to both. The plant in Poland will still go ahead, just without Rivian (although the door remains open to them). * SO WHAT? * This is probably the sensible thing for Rivian to do right now as it already makes a pick-up truck and SUV, a delivery van for Amazon in the US and is working on a new generation of consumer vehicles. UK van maker Arrival and US group Faraday Future have both had to issue “going concern” warnings as they just burn cash at a ridiculous rate, perfectly demonstrating just how hard it is to make the vehicles. It seems that is one thing to make the vehicles in the first place – but quite another to build and distribute them at scale!

Then in Electric car demand falls as charging costs rocket (Daily Telegraph, Matthew Field and Chris Price) we see that stats from online car marketplace AutoTrader show that fewer than 20% of car buyers were looking for an EV in November, down from 27% in June. Given the rising price of electricity and the high purchase prices of EVs, this is hardly surprising!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Consumers continue to face hurdles and there are some interesting trends emerging…

Pessimistic employers hiring fewer new workers (The Times, Helen Cahill) cites research from BDO which shows that employers have cut new staff hiring for the third consecutive month as pessimism abounds, particularly about the impact of higher energy costs and a fall in consumer spending. * SO WHAT? * The services sector has seen the sharpest fall in optimism, which isn’t great because it makes up about 70-80% of the UK’s GDP. The Office for Budget Responsibility reckons that we are already in recession (although officially we are not).

Then in House prices forecast to slump 10pc with mortgages hitting incomes (Daily Telegraph, Szu Ping Chan) we see that Credit Suisse reckons house prices will fall by at least a tenth next year thanks to rising interest rates and a recession continuing to squeeze household finances. * SO WHAT? * The majority of economists expect house price weakness short term but it was also interesting to see in this article that JP Morgan Asset Management’s chief market strategist, Karen Ward, reckons that the recession will actually be shallower than market expectations because of the continued strength of the UK jobs market, reasonably healthy balance sheets and households to streamlining spending to fund purchases. Clearly this remains to be seen, but it’s interesting to hear a less negative outlook for a change!

Meanwhile, Young adults still living with parents drive luxury boom (Daily Telegraph, Szu Ping Chan) cites analysts from Morgan Stanley who say that one of the drivers behind the current luxury boom is young people! Apparently, 42% of those aged under 34 in the UK still live at home with their parents (the highest share since records began in 1996!) and they seem to be spending it on luxury goods because they don’t have to worry about utility bills etc. With house prices remaining higher for longer it is likely that the trend will continue. Fun fact: 50% of all young adults between the ages of 18 and 29 now live with their parents – the highest proportion since 1940!

Then in Heated blankets red hot due to cold (Daily Telegraph, Daniel Woolfson) we see that electric blanket stocks are running low as households look for ways to keep warm without turning their heating on. John Lewis reported a 69% hike in sales of the blankets in the week commencing November 21st versus the previous year! Mind you, that’s nothing versus sales of electric blankets at Currys – which have skyrocketed by a whopping 3,000% versus the same week the previous year (although that might have been from a low base)! Dehumidifiers are also hot property as well, along with hot water bottles. * SO WHAT? * We’ve already seen furniture retailers like Dunelm and Ikea benefiting from sales of blankets and heavy curtains, so this kind of thing comes as no surprise. I would have thought that sales will continue to be brisk for some time to come…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

M&A activity appears to be having a little flurry at the moment…

In a quick scoot around other interesting stories today, Amgen hunts for new revenue in $28billion deal (Wall Street Journal, Joseph Walker) shows that Amgen did indeed go ahead with its offer to buy Horizon Therapeutics, as I mentioned yesterday, but Amgen/Horizon: swoop on rare disease specialist will push up debt load (Financial Times, Lex) reckons that the price paid was pretty full (it’s a 67% premium to the three-month average the Ireland-based drugmaker has been trading at recently). It makes strategic sense, but will give them a much bigger debt burden to deal with in an environment where debt has become much more expensive due to higher interest rates.

In tech, Thoma Bravo continues tech deal spree with $8bn Coupa Software buyout (Financial Times, Antoine Gara) shows that the business software provider is being taken over by the US-based private equity firm which has been on a tech shopping spree thanks to the global tech sell-off throwing up bargains. Thoma Bravo only recently raised $32.5bn and it has bought a number of publicly listed US tech companies this year including IT specialists

Anaplan, SailPoint Technologies, Ping Identity and ForgeRock. Meanwhile, Microsoft to take 4% stake in London Stock Exchange Group (Financial Times, Nikou Asgari, Tim Bradshaw and Mark Wembridge) shows that the US tech giant has just agreed to put up £1.5bn for a stake in the LSE as part of a 10-year strategic partnership. This should help to improve the LSE’s data and analytics and significantly enhance its revenue growth. Although some reckon this could help it more realistically take on the might of the long-established Bloomberg, I think that just won’t happen because of Bloomberg’s reputation and excellent customer service – plus the fact that pretty much everyone is on it.

Then in UK building materials provider Jewson to be sold by French owner (Financial Times, Abby Wallace) we see that current French owner Saint-Gobain is going to sell the UK building materials merchant as part of a general move to ditch its British business. Jewson’s 600 branches will be transferred to Danish group Stark in a deal worth £740m. The business was profitable but European businesses have been performing better, according to Saint-Gobain.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

You may know that I’ve been doing CrossFit for the last year-and-a-half or so to get some exercise in between sitting at this desk for very long periods of time! I’m going to be doing my first CrossFit competition next year in February, which I’ll probably show you a bit more of on social media. Anyway, one of the major skills you have to learn as part of it all is skipping – but specifically “double-unders” where the rope passes under you twice for every one jump you do. If you stand next to someone who’s good at this, it’s like standing next to a fan! I’m not (well, I can do some) and when I looked on YouTube for inspo, I found “Lauren Jumps” who is absolutely incredible! I would really like to learn how to do that “release” skill she does but have a look at this – she makes it look easy!!!