Monday 05/09/22

1. In BIG PICTURE NEWS, Germany decides to impose a windfall tax on energy companies, the UK tech industry worries about blackouts and we look at how the G7 oil price cap might work while the pound tumbles and has repurcussions
2. In RETAIL NEWS, Bed Bath & Beyond’s CFO dies and Matalan goes up for sale
3. In EV-RELATED NEWS, EVs leave Germany while Coventry’s giga bid gets “torpedoed” for now
4. In MISCELLANEOUS NEWS, Swimply makes use of swimming pools while UK banks get into BNPL
5. AND FINALLY, I bring you lab-grown kebabs…

So Germany goes down the windfall route, UK tech frets, we see how the oil price cap might work and sterling continues to weaken…

Given all the energy shortage chat that’s flying around at the moment, it’s not that surprising to see Germany to levy windfall tax on energy groups to fund €65bn aid package (Financial Times, Guy Chazan), which shows that the German government is going to slap a windfall tax on electricity producers in order to raise funds for its aid package that is designed to combat inflation and higher energy bills. If you throw this into the mix, Germany will have racked up €95bn worth of aid measures – one of the biggest support programmes in the developed world. Olaf Scholz said yesterday that energy producers who generate electricity from wind, solar, biomass, coal and nuclear energy (and not gas) were making “excessive” profits that were actually powered by the sky-rocketing gas price. Other initiatives by the government include the continuation of a scheme where Germans can buy a special ticket for €9 that they have been able to use on all local and regional transport over the summer (with discussion about a national version that could cost between €49 and €69 underway), one-time payments of €300 to pensioners to help with their energy costs, €200 for students and an increase in child allowance. Other measures include the expansion of the number of people who can qualify for housing allowance. * SO WHAT? * Interesting initiatives and perhaps worthy of further scrutiny  by the incoming British PM! Clearly, Germany has different drivers (more exposed to Russian gas, more exposure to manufacturing etc.) but that’s not to say we can’t learn anything from it!

Meanwhile, Tech raises alarm over power cuts (The Times, Katie Prescott) shows that data centre operators are getting concerned about the resilience of our tech infrastructure due to potential blackouts to the extent that they will be presenting to the Department for Culture Media & Sport to ensure critical services won’t be interrupted. In Europe, many data centre operators are already reporting energy use restrictions and operators are starting to stockpile fuel for if/when they need to use back-up generators. * SO WHAT? * We may not have the same problems in the UK as, say,

Germany with its major manufacturers crying out for electricity. However, our services sector makes up around 80% of GDP and a big part of that relies on a resilient IT infrastructure which depends on a robust power supply. I think that the bun-fight is only just getting started as industries and businesses fight tooth-and-nail to put themselves up the “priority” list for energy.

While there was talk at the end of last week of an oil price cap by the G7 countries, How would a G7 price cap on Russian oil work? (Financial Times, Sam Fleming, James Politi, David Sheppard and Ian Smith) shows how that might work. Essentially, the G7 countries have agreed to only enable the transportation of Russian seaborne crude and petroleum products if products are purchased at or below a pre-agreed price. The idea of this is to let Russian oil reach markets that have not banned Russian oil imports, which should take some of the edge off global oil price rises. Importers who want to get G7 or EU insurance cover and shipping services would have to observe this price ceiling – and given that G7 countries account for 90% of all global shipping insurance, this could be significant. The capping would be implemented in addition to existing embargoes. * SO WHAT? * The success of this initiative would depend on the willingness of countries to sign up to it – and that’s not a given, especially with India and China importing so much. Other countries may also decline to sign as Russia has threatened sanctions against any country that withholds oil shipments.

Then in British pound falls to lowest level since 1985 as UK economic pain mounts (Wall Street Journal, Chelsey Dulaney) we see that sterling’s weakness versus the dollar is continuing thanks to ongoing concerns by investors about the UK economy as well as the dollar actually strengthening overall. Rolex prices tick up as dollar soars (The Times, Callum Jones) is just one example of how this can impact the prices of goods and services. WatchPro said that the price of a Rolex Submariner rose from £7,150 to £7,500 and a GMT Master II from £8,400 to £9,000. I am thinking that it can’t be long before Apple puts its prices up again…

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!

Bed Bath & Beyond’s CFO dies and Matalan is up for sale…

Following recent well-publicised woes, Finance chief at troubled US retailer falls to death (The Times, Callum Jones) shows that the CFO of Bed Bath & Beyond, Gustavo Arnal, fell from the New York skyscraper where he lived. This comes just after the company announced some pretty drastic cuts. * SO WHAT? * This does go to show that there are REAL people behind meme stocks who have REAL feelings. I wonder whether the share price will be weaker at least for a short while as investors may think he knew more than is currently being let on and that the financial situation of the company is actually worse than everyone thinks. It’s not been officially called a suicide yet, but it’s not looking great.

Back in the UK, Matalan searches for a buyer as retail downturn takes toll (Daily Telegraph, Ben Woods) shows that the founding family of Matalan has hired advisors from Lazard to get a new financial backer/buyer for the business founded 37 years ago from a market stall. Although it had underlying profits of £100m last year, it has £350m of secured debt falling due at the end of January. The company employs 11,000 staff, has 11m customers and trades from around 230 shops in the UK. * SO WHAT? * Surely this is going to be a tough sell. Who wants to buy a retailer with baggage just as we are (potentially) about to fall into recession? If Matalan owns its sites (and I don’t know if it does) then maybe someone might come along with that in mind (a bit like when CB&R bought Morrisons).

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!

Germany leaks EVs and Coventry has a giga-problem…

I thought that Electric cars subsidised by German taxpayers end up on foreign roads (Financial Times, Joe Miller) was quite interesting given that Germany has been very generous in its subsidies of EVs over the years (whereas we recently scrapped the last of ours!). Official data shows that out of the 890,000 EVs registered in Germany over the last 10 years, most of which were bought with grants, only 756,517 remain in the country. Yes, some of those cars will have been taken out of service, but the majority have probably been sold to drivers in neighbouring countries at a profit! This basically means that the German taxpayer is effectively subsidising clean air outside Germany! Thus far, the government has doled out at least €4.6bn on grants to EV buyers since the scheme was launched in 2016. They have been able to claim up to €6,000 per car depending on various factors including size, initial cost and whether or not it was bought for a fleet. Denmark has

been the most common destination. * SO WHAT? * It sounds like this “leak” may not be around forever, though, as the current coalition government is planning on cutting the scheme down from September 2023. Whenever subsidies get scrapped/reduced, manufacturers take a hit as car sales pretty much always weaken as a result. Just ask Tesla!

There’s bad news for Cov in Unexploded Nazi bombs threaten Coventry’s giant battery factory (The Times, Robert Lea) as Coventry airport, a site that has been earmarked for potential redevelopment for a gigafactory by its current owners Rigby Group, has come up against a major hurdle to its ambitions. Planning permission for the site has been delayed as Coventry city council reckons there’s a good chance redevelopment will find unexploded German bombs from WW2. * SO WHAT? * Well it sounds like Rigby’s plans are well and truly torpedoed for now – and surely this latest development makes it even more unlikely that anyone else will be interested either.

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!

Swimply targets pool usage and UK banks want to pile into BNPL…

In a quick scoot around other interesting stories today, Swimply: Airbnb for swimming pools makes a splash (Financial Times, Lex) highlights a very interesting concept for a company! Swimply, which started four years ago, allows private homeowners to rent out their swimming pools by the hour! Rates can be $20-$200 an hour although the most common price band appears to be $40-$60 an hour. Swimply takes a 15% cut from hosts and 10% from swimmers. Funnily enough, business went crazy under lockdown and it has also benefited from the resulting pool construction boom. * SO WHAT? * Although it now has over 25,000 listings in the US, Canada and Australia, there are quite a lot of knotty problems involved in the business like safety, liability and angry neighbours – and the business is now getting to a size that it could be on the radar of regulators. Other competitors – including Peerspace and Swimmy – have also joined the fray, making the market a bit tighter than before. Are the good times over??

Then in UK banks pile into buy now, pay later in battle with fintechs (Financial Times, Siddarth Venkataramakrishnan and Stephen Morris) we see that the likes of NatWest, Virgin Money, HSBC and Monzo are among those to have launched their own BNPL products in the UK over the last year as they all tried to jump on the bandwagon. Given Klarna’s recent woes, this is perhaps surprising. * SO WHAT? * It seems to me that Klarna is now becoming more like a bank whereas the banks are trying to behave more like Klarna as Klarna’s previous USP – that it doesn’t do proper credit checks on you – is no longer there. Given that Klarna’s a one-trick pony and the banks are full service, I would have thought that the easy thing to do would be a bank to buy Klarna, particularly as its valuation has come down to far more realistic levels. That way, the bank could buy a brand and a client base in an attractive demographic and potentially cross-sell. I don’t think Klarna would have that flexibility the other way around.

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…

Do you eat kebabs when you are 100% sober? I would argue that the majority of people who enjoy kebabs (at night anyway) are generally in varying degrees of inebriation. With that in mind, I would have thought that this could be a great potential growth market because an attack of the raging munchies is likely to override any concerns about lab-grown meat: Lab-made kebabs might be launched as scientists make lamb meat without killing a sheep (The Mirror, Emer Scully). At least no lambs were harmed in the making of this meat (well, presumably apart from the original “source” animal)!