Friday 24/06/22

  1. In MACRO, ENERGY & CRYPTO NEWS, the Fed could get friskier, China vows to stay on track, Norway surprises, Germany braces itself on gas, the cryptocrash looks real and Ronnie does NFTs
  2. In CONSUMER TRENDS & RETAIL NEWS, confidence hits an all-time low, home workers face pressure, bikes sales fall, booze sales fall at Naked Wines and pubs, Heathrow gets optimistic, Matalan fades and Nike exits Russia
  3. In REAL ESTATE NEWS, warehouse valuations double and buy-to-let landlords suffer
  4. In INDIVIDUAL COMPANY NEWS, Juul gets cut, Netflix axes more staff and Toyota has a recall
  5. AND FINALLY, I bring you a fantasy office and a roller slide…

1

MACRO, ENERGY & CRYPTO NEWS

So inflation, growth and gas rule the conversations while it looks like the cryptocrash is real and Ronnie signals the top of the market…

Not content with last week’s aggressive interest rate hike, Support grows among Fed officials for further 0.75 percentage point rate rise (Financial Times, Colby Smith) shows that there could be more where that came from in the July meeting as members seem to want to double-down on inflation. This could get interesting (no pun intended) and potentially gives others around the world a sign of things to come. Dollar-denominated debt is going to get even more expensive (which is, unfortunately, particularly painful for poorer countries)…

Meanwhile, Xi vows to hit growth target despite zero-Covid strategy (Daily Telegraph, Louis Ashworth) shows that Xi Jinping is fully committed to hitting the previously-stated 5.5% GDP growth target, versus market expectations of 4.1%. China’s growth prospects have taken a big hit because of sudden and severe lockdowns in the face of recent Covid surges but Flu epidemic risks sweeping China left vulnerable by zero-Covid fixation (Financial Times, Sun Yu) warns that things could yet get worse because it seems that the government has fixated so much on containing Covid that it has neglected a potential flu epidemic. Some health officials have been alarmed by a flu outbreak in Southern China and when you consider that, according to official figures, 1.1bn people have received at least two Covid jabs and 2.1m received a flu-shot last year, you can understand the concern. * SO WHAT? * I suspect that every tactic will be exhausted to get China to that 5.5% growth figure, but I have to say that I don’t think anyone will believe it if it does! Most official figures from China are treated with caution as standard, but the amount of fudging that may be needed to hit that 5.5% figure will have to be of epic proportions. Still, Xi will want to demonstrate that he is a man of his word. Having said that, you do wonder what lies in store re a potential flu outbreak given the damage the Covid lockdowns have caused. I really hope that this concern proves to be overdone and that, perhaps, those permanent Covid centres that are being built at the moment will help China to get past such outbreaks more easily.

Over in Europe, Norway makes surprise 50 basis point rise (Financial Times, Richard Milne) shows that Norway has become the latest central bank to make a greater-than-expected interest rate hike to attack inflation as it raised it from 0.75% to 1.25%. This 0.5% move was the biggest single hike for almost two decades! In doing this, Norges Bank joined the likes of the Swiss National Bank and the Czech National Bank in making big recent rises.

Following on from recent newsflow, Germany moves closer to gas rationing as Russia chokes supplies (The Guardian, Philip Oltermann) shows that the government is softening Germans up for the prospect of gas rationing after the country’s economy minister Robert Habeck yesterday outlined the second of three energy emergency plan phases. He said that he would “hopefully never” have to ration gas, but added that “Of course, I cannot rule it out”. Tough times ahead…

Meanwhile, This time it is different – the crypto crash is real (Daily Telegraph, Ben Marlow) is an interesting piece which contends that the current crypto crash isn’t just one of those “buy on the dips” opportunities that crypto-bros talk about because of the magnitude of the $69,000 to $20,000 fall, the resulting contagion in other related assets and the sheer breadth of lossmaking investors. Only early adopters and hedge funds shorting cryptocurrencies will be winning at the moment – and pressure will build for the regulators to get involved and sort out this crazy industry.

And if that wasn’t enough to convince you, Cristiano Ronaldo signs NFT deal with crypto exchange Binance (Financial Times, Joshua Oliver, Scott Chipolina and Samuel Agini) should surely be a massive sign that we have reached the top of the market re cryptoassets in general! Ronnie will “work” with Binance to create a range of NFTs that will be sold exclusively on the exchange. You just know that when celebs and footballers get involved it’s all going to go pear-shaped. I mean, why would you take advice from the guy that brought you the Sixpad ab-trainer?!? He is a great footie player for sure, but I wouldn’t be going to him to buy financial products…

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!

2

CONSUMER TRENDS & RETAIL NEWS

British consumers lose confidence, spending patterns change, Matalan hits tough times and Nike exits Russia…

There is a lot of doom and gloom around at the moment isn’t there! Well Households’ confidence at a record low (The Times, Mehreen Khan) isn’t going to change that perception as the latest monthly consumer survey by market research firm  GfK reflects Britain’s lowest household confidence ever. Additionally, the government’s independent economics watchdog reckons that UK households will experience the biggest annual fall in disposable income since the 1950’s 😱! Not very uplifting.

Meanwhile, it seems that there may be changes afoot in working practices as per Home workers face pay cut as firms push for office return (Daily Telegraph, Lucy Burton), which cites reflections from a survey from the Chartered Institute of Personnel and Development (CIPD) that show 10% of companies are planning on cutting pay or benefits for home workers while 4% of companies have already done so. Interestingly, head of the CIPD’s public policy, Ben Willmott, warns that employers who are thinking of doing this may have to tread a careful path…

Consumer spending habits seem to be changing as we are spending less on bikes – as per Bike sales punctured as lockdown left behind (The Times, Tom Howard), which cites bike sales at Tandem Group (which owns brands including Falcon and Dawes) as having fallen by a whopping 55% so far this year versus the first half last year, sending its shares down by a whopping 21% on the news – and on booze, as per Naked Wines exposed as investment runs dry (The Times, Dominic Walsh) where a shocking trading update sent its shares down by over 40% and Pubs are struggling to keep doors open (Daily Telegraph, Giulia Bottaro), which cites an industry survey which shows that around a third of businesses are having to close at least one day a week thanks to the lack of staff. If they aren’t open, they are selling less booze!

On the other hand, Heathrow airport raises passenger forecast as travel demand surges (Financial Times, Sarah Provan) shows that the airport has increased its passenger forecast for the year due to better-than-expected traffic. It did, however, warn of “significant downside risks” due to the cost-of-living crisis. * SO WHAT? * I have been of the opinion that people will start to cancel holidays because of tighter squeezes on household budgets but it seems that they aren’t doing so at the moment. Although it is completely understandable that people just want to get away, the problem is that this is just storing up problems for later. I think Q4 this year is lining up to be pretty painful on the finances front.

In retailer news, Matalan warns refinancing is key to survival (Financial Times, Jonathan Eley) shows that the UK value retailer is looking pretty dicey as it is facing debt issues despite a recovery in trading activity. A big slug of debt repayment is due in January 2023 and if Matalan can’t find a solution, things could get very bad. * SO WHAT? * Matalan’s saving grace is that it is doing well in terms of trading at the moment, so you would imagine that it will find SOMEONE to help it to refinance, particularly as Matalan’s cheap-and-cheerfulness is likely to prosper in a downturn.

Then in Nike quits Russia for good over Putin’s war in Ukraine (Daily Telegraph, James Warrington) we see that Nike has now joined the likes of McDonald’s, Starbucks and Google in announcing a full withdrawal from the market due to the Ukraine war. It had over 100 stores in the country, some of which are owned by independent partners. Nike.com and its mobile app will no longer be available in the region and stores that had closed in March will not open. * SO WHAT? * This isn’t a surprise given that it didn’t renew a deal with its biggest franchisee in Russia, Inventive Retail Group, last month and given that it only makes less than 1% of its revenues from Russia and Ukraine combined, this shouldn’t be too big a problem on the finance front.

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!

3

REAL ESTATE NEWS

Warehouses continue to be attractive but buy-to-let landlords are suffering…

Urban’s warehouses double in value (The Times, Tom Howard) shows that the value of Urban Logistics Reit’s portfolio of delivery hub warehouses has doubled to £1.02bn thanks to the growth of e-commerce and the increasing need for companies to have more inventory to take the edge off supply chain problems. Warehouse vacancy rates are now at their lowest ever levels, helping to push rents up at its properties by 16.4% over the last year. Interestingly, Urban has concentrated less on fast fashion tenants (too cyclical) and more on companies that provide “essential goods”. * SO WHAT? * I suspect that demand will continue to be strong for a while to come, although the growth rate may slow because the cost-of-living crisis is bound to have ripples even here.

Then in Buy-to-let landlords face losses as lenders ramp up interest rates (Daily Telegraph, Melissa Lawford) we see that almost half a million landlords could see their properties lose money because of rising mortgage rates powered by increases in interest rates. Landlords who chanced it with Standard Variable Rate (SVR) mortgages are going to be regretting their decision very soon as a result. To give an idea of scale, an average rate of a two-year fixed rate loan of £160,000 with a 40% deposit would have cost a landlord £395 per month. However, due to mortgage rate increases, the monthly payment will have shot up by 67% to £661! Ouch…

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!

4

INDIVIDUAL COMPANY NEWS

Juul takes a body-blow, Netflix makes more layoffs and Toyota now does a recall…

In a quick scoot around other interesting stories today, FDA bans Juul products from US market in blow to e-cigarette maker (Financial Times, Jamie Smyth, Andrew Edgecliffe-Johnson and Patricia Nilsson) shows that, following on from what I said yesterday, US regulators have now banned Juul Labs from selling its e-cigarettes in the country due to its role in stoking the market in teen vaping. Its brands will be withdrawn from the US, where it gets 90% of its global sales. Altria: teen-appeal of menthol vapes means Juul is no longer minted (Financial Times, Lex) says that although this is clearly a kick in the teeth for Altria that has a 35% stake in the company, its share price has been absolutely decimated. However, if you believe the saying “sell the history, buy the mystery”, Altria shares look bombed-out at these levels having been under this cloud for some time and value investors with no qualms about investing in cancer sticks may take the opportunity to get involved.

Elsewhere, Netflix lays off 300 as share price and subscriptions fall (Daily Telegraph, James Titcomb) shows that the streaming giant is cutting another 300 employees as it continues to reposition its offering in the wake of the haemorrhaging of subscribers. It continues to work on another ad-supported subscription option.

Then in Toyota recalls EV fleet as challenge to Tesla dominance suffers setback (Financial Times, Eri Sugiura and Kana Inagaki) we see that the company is doing a global recall of its fully electric bZ4X SUV, numbering 2,700 units, just two months after launch. Hilariously, this is due to the warning that the wheels could potentially fall off! WTAF 😱😱😱. Funnily enough, owners are being urged not to drive the car until it can be repaired (so presumably that means the recall will be even more expensive because the vehicles will have to be collected somehow). God knows what must be going through Tokai Tokyo Research Institute analyst Seiji Sugiura’s mind when he said “Toyota might want to show that they are extremely careful of the first launch of their EVs” 🤣🤣🤣. Just what is this guy smoking?!? “Extremely careful”?!? I am no expert but I’m pretty sure that a key measure of whether a vehicle is fit for purpose is that its wheels stay on. Careful my 🍑. What an absolute and utter failure. You just couldn’t make it up! And while they are at it maybe they should think of a name change for the vehicle. “I drive a bZ4X” hardly rolls off the tongue, now, does it?!?

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!

5

...AND FINALLY...

…in other news…

There are undoubtedly a lot of attractions of working from home. However, offices can also be fun environments as per Inside the coolest office in Britain with tree house meeting room and even its own PUB (The Mirror, Adam Dutton). Giraffes?? However, if you want a bit more of an adrenaline hit, how about A trip down one of Japan’s most terrifying park slides (SoraNews24, Casey Baseel) which appears to be an experience just like no other. A bit of trimming may be in order, as you will see…

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Some of today’s market, commodity & currency moves (as at 0754hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
7,020 (-0.97%)30,677.36 (+0.64%)3,795.73 (+0.95%)11,232.19 (+1.62%)12,913(-1.76%)5,883 (-0.56%)26,492 (+1.23%)3,350 (+0.89%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$104.26$109.80$1,821.661.227371.05347134.6511.1650120,776.0

(markets with an * are at yesterday’s close, ** are at today’s close)