Monday 07/12/20

  1. In MACROECONOMIC NEWS, Trump causes chaos, Brexit clogs up supplies but UK jobs get a Covid jab
  2. In FAST-FOOD/HIGH STREET NEWS, Burger King and Wendy’s slug it out in India, Nando’s has a crisis and Mike Ashley gives Debenhams another go
  3. In INDIVIDUAL COMPANY NEWS, Disney has a dilemma, Airbnb pumps up the IPO price and Cadillac dealers say no to electric
  4. AND FINALLY, I bring you a gamer-specialist chiropractor and sushi for those who don’t like fish…

1

MACROECONOMIC NEWS

So Trump continues to stir, builder supplies get caught in a bottleneck and UK jobs get a vaccine booster…

*** 📣 Watson’s Daily is going to start a monthly competition for SILVER members. The prize will be three weeks of commercial awareness sessions with me. Watch out here and on social media for the launch…***

Trump sows post-election chaos and reaps the fundraising rewards (Financial Times, Demetri Sevastopulos) is actually a story that came out on Friday (after I published Friday’s Watson’s Daily) but I thought it was so outrageous that I had to include it here! Anyway, the story is that Donald Trump and friends are stirring up conspiracy theories about voter fraud which have helped him to raise massive sums of money for another potential crack at the White House in 2024. He has raised $207m since the November election and will probably be used to push his rhetoric on social media and give him more say over future Republican primary races. * SO WHAT? * Trump has zero chance of changing the election result, but his threat of a return to power could make him a strong party kingmaker – so even if he doesn’t return, he will have a big say on who could take his place next time around. Can you imagine this kind of caper in any other developed country in the world?!?

Then in Builders run short of supplies as UK port holdups raise Brexit concerns (The Guardian, Zoe Wood) shows that builders are running short of all sorts of supplies because UK ports are proving to be a bottleneck for deliveries in the run-up to Brexit. Britain’s biggest container port, Felixstowe, has been handling about 30% more goods than it normally does since September as businesses have been ordering in stock to replenish supplies post lockdown

and pre-Brexit. Washing machines, fridges and toys are said to be in short supply and the problems have spread to other ports. Patchy supply and higher demand has led to higher prices – timber prices have risen 20-40% due to Scandinavian supply problems, for instance. * SO WHAT? * The problem has been so acute that container vessels have started to partially unload or avoid the UK altogether and dump cargo at Rotterdam, Antwerp and Zeebrugge instead. Shipping costs have gone through the roof and this will no doubt be passed on in higher prices to consumers at a time when money could well be tight going into next year.

Jobs on rise around Britain as bosses prepare for brighter times (Daily Telegraph, Oliver Gill) cites analysis by the Institute of Directors which shows that execs are getting more optimistic about a restoration of normality due to the availability of coronavirus vaccines. Hiring is on the rise, according to Reed, with almost every region of the UK reporting more jobs – especially in the North West. As if this wasn’t enough good new for you, footfall rose on the high street last week by 115% as non-essential shops reopened. * SO WHAT? * Although I am as pleased with the vaccine news as the next person, I do wonder whether the euphoria is being overdone. I personally think that anything purely domestic-focused will do especially well initially as activity increases “at home” (continued staycations for the majority of next year perhaps?), but then as the vaccine(s) get rolled out more widely, confidence will return more strongly and we will see a return of other things we used to take for granted like international travel. There could be a sudden wave of jobs coming back in specific sectors and although initial wages may be low, they may accelerate upwards due to increased demand. I would also expect a spike in the number of start-ups who will rise from the coronavirus ashes as people feel more confident about the future and the government tries to stoke economic activity from the grass roots.

2

FAST-FOOD/HIGH STREET NEWS

Burger King and Wendy’s fight for India, Nando’s has issues and Mike Ashley has another go at Debenhams

Burger King and Wendy’s throw down gauntlet in India’s fast-food war (Financial Times, Benjamin Parkin and Stephanie Findlay) shows that US fast-food companies are facing off in a battle for hungry Indian consumers. You can understand why the two are putting so much effort into a market of 1.4bn people – and the popularity of the IPO of Burger King India last week highlights the keen interest of investors who are betting on India’s increasing taste for burgers and fries. Demand for the shares were 157 times oversubscribed as retail investors got involved! Burger King said it will be using the proceeds to increase the number of outlets from 261 currently to 700 by 2026. Mind you, rival Wendy’s is also keen to make its mark as it announced a delivery-only partnership with online restaurant group Rebel Foods, which is backed by investors such as Sequoia Capital and Goldman Sachs. Wendy’s intends to increase the number of its physical outlets to 150 from the current handful. * SO WHAT? * The fast food market is hugely

fragmented in India, but American-style offerings have continued to grow in popularity since the advent of McDonald’s, KFC and Domino’s in the 1990s. Sales have been dented by lockdown, but they are expected to bounce back strongly longer term. Mind you, they have had to change offerings in the country since many do not eat pork or beef. That said, there is clearly HUGE potential in this market!

Elsewhere, Nando’s in debt crisis talks (Daily Telegraph, Oliver Gill) shows that the chicken supremo is holding discussions with Barclays about its massive debt pile (over £300m in loans) to get waivers in place. Nando’s employs almost 17,000 staff in 400 sites, so there is a lot hanging in the balance. Uncertainty on the UK high street continues…

The drama rolls on in Ashley makes last-ditch bid to rescue Debenhams (The Times, Louisa Clarence-Smith and Ashley Armstrong) shows that Mike Ashley’s Frasers Group is launching a final bid to buy the troubled department store on the cheap after administrators FRP Advisory said it would go into liquidation in the new year if a buyer wasn’t found. * SO WHAT? * Mike Ashley tried to buy Debenhams before and failed, but maybe this time around he could buy it for pennies and have an excuse to cut it up as much as he wants. The tough times continue…

3

INDIVIDUAL COMPANY NEWS

Disney ponders its future, Airbnb aims high and Cadillac dealers say “no thanks” to electric…

Disney faces digital dilemma despite streaming success (Financial Times, Anna Nicolaou and Alex Barker) shows that The Walt Disney Company is wrestling with how to adapt to changing consumer trends that will determine its future. On the one hand, its streaming service Disney Plus has been a roaring success with 70m subscribers in its first year (versus Netflix boss Reed Hastings’ initial prediction of 20m “at best”), some of its older businesses could be up for review if the company decides to concentrate on streaming and theme parks. * SO WHAT? * ABC and ESPN Plus are looking tired but the problem is that the “traditional” businesses still bring in money and the new ones are not exactly firing on all cylinders at the moment – hence the feeling of risk. Plans to bring Hulu to the rest of the world this year have been scrapped and it is still possible that Disney could sell this business. Management niggles between CEO Bob Chapek, who took the job in February, and long-serving exec chairman Bob Iger continue to simmer away (allegedly), but word is that Chapek is getting his ducks in a row for when Iger steps away from the business.

Airbnb boost IPO price range to between $56 and $60 a share (Wall Street Journal, Maureen Farrell) shows that Airbnb is looking to hike the proposed price range of its forthcoming IPO to $56-60 a share versus initial projections of $44-50, which would imply a company valuation of up to $42bn. Food delivery company Door Dash, which is making its market debut this Wednesday,

one day before Airbnb, has also hiked its price range from the original $75-85 a share level to $90-95. * SO WHAT? * This just goes to show how hungry investors are for IPOs at the moment! Airbnb and DoorDash investor roadshows (where companies meet investors to persuade them to buy in the IPO – usually in person, but currently via videoconference) must have gone stunningly well for them to have the confidence to hike up their valuations so much! Mind you, given that over $140bn has been raised in IPOs in US exchanges during 2020 (which is way more than the previous yearly record that was set at the peak of the dotcom boom in 1999) and the prospect of vaccine rollout is becoming a reality for 2021, you can see why investors are happy to splash the cash.

Meanwhile, About 150 US Cadillac dealers to exit brand, rather than sell electric cars (Wall Street Journal, Mike Colias) highlights the fact that about 17% of Cadillac-franchised dealers have decided not to renew their agreements with GM (which owns the marque) as they were asked to either accept a buyout offer or spend around $200,000 to make dealership upgrades including charging stations and repair tools. Buyouts ranged from between $300,000 to over $1m. * SO WHAT? * Although EV ownership is rising, there are still many sceptics out there and you can understand why franchisees, who perhaps sell only a handful of Cadillacs versus other marques in the GM stable (e.g. Chevrolet, Buick and GMC), would not want to fork out for expensive upgrades at this time. Tesla is one company that is cutting out the middleman dealership by selling directly to customers but “traditional” car companies still have a dealership legacy which may make cutting prices more difficult when EV sales volumes rise to decent levels.

4

...AND FINALLY...

…in other news…

We all know that gaming has become even more popular than it was under lockdown – so for those who have perhaps overdone it somewhat, there’s this: Japan now has video gamer chiropractic treatments to reduce discomfort and improve performance (SoraNews24, Casey Baseel). I also thought I’d include this as an option for those who like the idea of sushi but don’t like fish: Ho ho ho! Merry fried chicken sushi appears in Japan! (SoraNews24, Casey Baseel). I guess you could just put some KFC on vinegared rice though…

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Some of today’s market, commodity & currency moves (as at hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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