Friday 11/06/21

1. In MACROECONOMIC & CRYPTO NEWS, US consumer prices rise rapidly, the ECB holds firm, G7 multinationals say “meh” to global corporate taxes and regulators call for a crypto clampdown
2. In EMPLOYMENT NEWS, Goldman Sachs wants vaccine status, UK employment gets tricky and John Lewis embraces flexible working
3. In HIGH STREET NEWS, Starbucks faces shortages and Selfridges is up for sale
4. In MISCELLANEOUS NEWS, the IPO market heats up for summer and Hornby trains run well during lockdown
5. AND FINALLY, I bring you an air guitarist and flying food…

So US inflation rises, the ECB stays unmoved, G7 multinationals don’t panic about the corporate rate chat and regulators call for more focus on cryptocurrencies…

In Sharp rise in American consumer prices stokes fears of inflation (The Times, Callum Jones) we see that American consumer prices rose by their fastest pace since August 2008, the aftermath of the financial crisis. The headline rate was up by 5% in May versus the same month last year! If you strip out the food and energy costs (because they have been abnormally volatile), the index would have posted its biggest annual increase for almost thirty years! Lagarde plays down inflation fear as ECB sticks with stimulus plan (The Times, Philip Aldrick) shows that, in Europe, the ECB is sticking with its aggressive stimulus measures for another three months despite hiking up its growth and inflation forecasts. As in America, inflation pressures continue to build in Europe (although Eurozone inflation is currently running at 2% versus 5% in the US)…

Following on from all the minimum global corporation tax chat this week, Multinationals shrug off G7 tax assault (Financial Times, Richard Waters, Emma Agyemang, Aziza Kasumov and Tim Bradshaw) suggests that although the agreement between the G7 members is ground-breaking in the sense that they actually managed to come to some kind of agreement, there has been zero panic among the companies that this new plan is supposed to affect. This collective “meh” reaction of the market could imply that there is widespread belief that it won’t actually be implemented in the end because the smaller tax haven countries will collectively kick up such a fuss that it won’t get anywhere. Also, it seems that the extra tax raised will be fairly minimal according to some calculations although

companies with a high proportion of overseas sales, who rely on intellectual property and IP licensing fees via lower-tax jurisdictions will be most affected. To give you an idea of how this has been received so far by a company that should potentially be feeling the pain, chip company Nvidia reported an effective tax rate of less than 2% last year by booking profits in the British Virgin Islands, Israel and Hong Kong – but its shares closed out at a record high just after the G7 news! Ironically, Big Tech companies will be among those who will be least affected by a new minimum rate as they have already reshuffled following rules put into place by the Trump administration. Conclusion? Tax advisers will be the biggest winners here!

In what has proved to be a rather eventful week for cryptocurrencies, Global regulators call for toughest rules for cryptocurrencies (The Guardian, Kalyeena Makortoff) shows that the Basel Committee on Banking Supervision, which comprises of regulators from the world’s biggest financial centres is calling for much tougher treatment of crypto-assets that will mean banks will be forced to put aside enough capital to cover 100% losses! This would be way higher than any other asset and reflects the perception that cryptocurrencies are inherently much more risky than other asset classes. It added that new tighter rules could also apply to stablecoins (digital assets tied to the value of a traditional currency). These proposals will now go out for consultation. * SO WHAT? * Central banks and politicians (apart from the ones from El Salvador!) keep banging on about crypto but they just don’t do anything about it. It will be good to get something in motion to give everyone a bit more certainty as opinions in banks and governments are very mixed at the moment. For instance, Goldman Sachs and Standard Chartered are embracing crypto by launching their own trading desks whereas HSBC and NatWest are steering clear (at least for the moment!). El Salvador just approved cryptocurrency as legal tender whereas China is going in the opposite direction and clamping down further. The Bank of England and the ECB are among the many central banks who seem to use every opportunity to attack it. I think that we all need more clarity!

Goldman seeks vaccine proof, the UK jobs market gets tighter and John Lewis embraces flexible working…

There are some interesting developments going on in employment at the moment. Goldman Sachs’ US bankers must disclose vaccine status (Daily Telegraph, Lucy Burton) highlights the fact that Goldman has told all of its US bankers that they’ve got to disclose their vaccine status as the company plans to make a return to the office. US staff are due to return on Monday while UK staff will be returning on June 21st (UK staff haven’t been sent the “mandatory action required” memo – yet). If you’re fully vaccinated you won’t have to be tested on-site and won’t have to wear a mask at work. * SO WHAT? * I think that this is pretty interesting in that I imagine that this is the way that a lot of companies will go in order to get people back into the office. Although some places are being a bit more fluffy about the whole thing, I think Goldman Sachs is just doing what they secretly want to do. Although there will no doubt be resistance to this sort of thing (discrimination, equal rights etc.) I would expect employers to adopt the position of “if you don’t like it, go and get another job” etc.

John Lewis embraces flexible working model (Daily Telegraph, Laura Onita) shows that the embattled department store/supermarket operator seems to be at the

other end of the scale to Goldman Sachs’ “in person” approach and has said that its 5,000 office-based staff will be allowed to work from home three days a week, with all new vacancies coming with the flexible working option. * SO WHAT? * I really hope I’m wrong in saying this, but I think that this will be a pre-cursor to loads more job cuts. The axe has been wielded already as the business continues to be buffeted by evolving consumer behaviour, but I think that if I was working at John Lewis at such a difficult time I would want to show my face to bosses more – not less.

Staffing crisis looms despite new low in furloughed jobs (Daily Telegraph, Russell Lynch) cites the latest figures from the Office for National Statistics which show that businesses now only have 7% of staff on furlough – way less than the 20% who were on it in May 2020. The reopening of hospitality has given lots of people jobs but the Recruitment and Employment Confederation is now warning that the UK is currently experiencing the worst shortage of candidates for four years! The furlough scheme will start tapering off next month and come to an end in September. * SO WHAT? * There are some who say that people on furlough may be contributing to labour shortages because they are quite enjoying getting paid 80% of their wages to do nothing (well, the Euros are starting today after all 😂), but I guess we just won’t know what the real situation is until the scheme comes to an end. I would also suspect that there will be businesses out there who will be holding on for the good times to return but will fail anyway, but it’s too early to tell at this stage.

Starbucks experiences shortages and Selfridges goes up for sale…

Starbucks shortages take edge off revival (The Times, Callum Jones) highlights a shortage of supply of some items in the US like cups, oat milk, cup stoppers, cake pops and mocha flavouring as people start to return in bigger numbers to coffee shops. * SO WHAT? * I guess this is probably a temporary thing but I would have thought that this was a function of a sudden uptick in customer numbers and supply chain issues. At least they are getting people through the door though! Mind you, if Starbucks is feeling it, others must be as well…

Selfridges up for sale with £4bn price tag (Financial Times, Jonathan Eley) is a story that’s doing the rounds in most of today’s newspapers as the retailer received an unsolicited approach. The current owners – the Weston family – bought it for £598m in 2003. * SO WHAT? * No matter how committed the owners are to it, you would have thought that a decent offer under current circumstances – department stores falling out of favour, changing customer behaviour, Covid damage etc. – would be rather tempting. I suspect that they will try to wheedle out other potential buyers to get a bidding war going but I have to say that it certainly looks like a pretty decent offer versus what they paid for it in 2003!

The IPO pipeline is looking good for summer and Hornby benefits under lockdown…

Although things have been slowing down a bit recently on the IPO front, Robinhood and Didi to kick off a hot IPO summer (Wall Street Journal, Corrie Driesbusch) says that we are about to see a summer IPO boom as both companies look set to begin trading in July – and the pipeline of other deals is making the dot-com boom of the late 90’s look positively pedestrian! Some bankers have said that they have been working with over two dozen companies who have filed for IPOs confidentially and are looking to pitch investors in the next few weeks. Some are already saying that there will be more IPOs this year than there were last year – and figures from Datalogic suggest that they could have their biggest year ever after raising over $63bn so far in 2021!

Then in Crisis helps put Hornby back on track (The Times) we see that many people opted for a bit of nostalgia under lockdown as the maker of toy trains (and owner of Scalextric and Airfix!) managed to make its first profit for nine years! Sales were up 28% versus the previous year! I guess this falls into the whole theme that we saw last year of consumers opting for trusted brands sold by the likes of Reckitt Benckiser, KraftHeinz and the like when times were looking uncertain.

…in other news…

I thought I’d leave you today with inspiration from School teacher leads double life as air guitar champion – and is second-best in world (The Mirror, John Bett) and perhaps a glimpse of the future in Flying beef bowls?!? Yoshinoya completes drone delivery of its signature gyudon (SoraNews24, Casey Baseel). I’m not sure about the practicality of the latter if everyone does it, but it sounds like a nice idea!