Monday 09/11/20

  1. In TRUMP/BIDEN NEWS, Trump kicks and screams his way out of the White House and we see what Biden has in store
  2. In FINANCIAL NEWS, Buffett benefits, fund raising is about to increase, Scottish Widows gets a conscience and there’s a rush on UK bank loans
  3. In MISCELLANEOUS NEWS, China drives demand for European luxury goods and private equity targets Reebok
  4. AND FINALLY, I bring you a must-have Aldi product…



So we take a look at the White House loser and winner and what’s in store for America and the rest of us…

I don’t want to dwell on the result of the American election too much because we are all going to be bored to death with this by the media in the coming weeks and months but I’ll try to bring you some of the key bits and pieces 😁. Reality TV presidency cancelled after 4-year run (Financial Times, Demetri Sevastopulo) actually does quite a good job of summarising the main bits of Trump’s presidency starting from his tumultuous entry to office until the current time where “Adiós Trump” T-shirts were being promoted by Democrats. He’s not going without a fight, though. Election 2020: What are the Trump legal claims (Wall Street Journal, Deanna Paul, Brent Kendall and Corinne Ramey) looks at what Trump meant when he said that he would contest the result through the courts. Lawsuits have been filed in various states and Rudy Giuliani, one of Trump’s lawyers, said that they would be focusing on three areas: allegations regarding restrictions on observing the mail-in ballot count, allegations over votes being cast by dead people and allegations over backdated ballots. No evidence backing any of those claims has been provided as yet, however. It is likely to be an uphill battle. The last time when the election was contested like this was in 2000 when it was George W Bush versus Al Gore in 2000 when they were fighting over a few hundred votes in one state. This time around, the fight is going to be over tens of thousands of votes in at least four states.

On the other hand, Biden set to unwind Trump agenda after winning US election (Financial Times, Courtney Weaver) has a stab at guessing what Biden is going to do in office: re-enter the Paris climate accord, reverse back into the World Health Organization, reinstate the “Dreamer” path to US citizenship and announcing a new coronavirus task force. What does a Biden presidency mean for the world (Financial Times, Katrina Manson, Aime Williams and Michael Peel) suggests a more conciliatory and less

confrontational relationship with countries outside America (especially with its allies), which will probably mean it will rebuild bridges that were being burnt by Trump, a harder line on Russia, more support for Nato, potentially letting Iran back into the fold and a less confrontational approach with China. Europe and the UK will want to talk about things like aircraft subsidies, digital taxation and ending tariffs on products including wine and cheese. Interestingly, For business, Biden bodes a less hospitable but more predictable presidency (Wall Street Journal, Greg Ip) shows that the election result could be a dream scenario for business as it will get a more moderate Democratic president whose more “extreme” plans won’t be able to pass the Senate – and it won’t have the unpredictability that Trump’s presidency had. That said, What can Silicon Valley expect from Joe Biden (Financial Times, Kiran Stacey and Richard Waters) suggests that although a Democrat will be back in office, it will not enjoy the same cosy relationship it had with Obama as Big Tech companies have evolved and grown considerably in the intervening years. In the past, Biden has talked about the possibility of splitting them up, but hasn’t followed up any of this chat up with detail. Some say that he could take a less aggressive approach and start by changing some rules rather than reaching for the sledgehammer from the off. He is also expected to raise corporate taxes – and it is thought that a higher tax on profits generated by intangible overseas assets could be more acutely painful for Big Tech, but then again, without a majority in the Senate it is likely that this will fail to see the light of day. * SO WHAT? * Overall, once all the dust has eventually settled, I think that America will be left with a president who is more conciliatory, less unpredictable and less Twitter-friendly than Trump. It doesn’t sound like he is going to hit reverse on everything that Trump has done – for instance, he is unlikely to be particularly friendly with China – but he I would expect him not to be able to do anything too radical policy-wise given his lack of majority in the Senate. I would have thought that may not necessarily be a bad thing, though, as it could mean that the US economy’s rise could be steady as opposed to the potentially very volatile ride that Trump seems to prefer.



Buffett wins, a fund-raising spree is expected, Scottish Widows gets all moral and bank loan applications rise…

Stock market surge hands a $30bn boost to Buffett (The Times, Tom Howard) shows that Warren Buffett’s Berkshire Hathaway made a whopping $30bn profit in Q3 due to the value of its investments rising in the summer rally. His 5.8% stake in Apple alone shot up in value by $20bn since the end of June! If you were thinking of buying into the thoughts of the “Sage of Omaha”, you will have to scrape together a rather hefty $313,885 to buy just ONE of its shares! * SO WHAT? * OK, so paper gains like this don’t really mean that much because a gain ain’t a gain until you’ve sold it BUT it is interesting to see this as a reflection of what markets have done since their lows as Buffett invests in big companies.

Talking about investment, Scottish Widows dons green cloak with move to drop risky business (The Times, Tom Howard) shows that Scottish Widows, one of Britain’s biggest pension providers, has started to sell off £440m of its holdings in businesses that it reckons pose “the most severe investment risk”. It has said that this could grow if company boards don’t improve the way they do business. Portfolio managers now have six months to re-jig their portfolios according to the new rules or face fines or termination! * SO WHAT? * It’s interesting to see a serious investor taking proper measures to make its funds more ethical. The problem for the fund managers on the ground, though, is that everyone now knows the rules and can therefore work out which stocks they are going to sell – which could be great news for hedge funds looking for a “shorts” shopping list. Doing things like excluding commodities companies or those with questionable

practices (e.g. Aberdeen Standard Investments selling off most of its stake in Boohoo after the summer scandal in Leicester) sounds great, but is often much more difficult to execute in practice because most companies are not 100% “evil”. When, for instance, commodity prices are weak it is easy to take the moral high ground and sell off anything to do with fossil fuels. However, if prices suddenly rise on a world economy going crazy for trade in the event of mass Covid-vaccination, ethical funds risk getting left behind. Fund managers get paid on performance and if they continually underperform because of ESG restrictions, the temptation to increase exposure to “unethical” winners will only rise. Interestingly – and perhaps unsurprisingly – managers can still invest in such companies if they can show that they can influence the companies they hold to improve their business practices.

City braced for rush of last-minute fundraising (The Times, Miles Costello and Ben Martin) highlights a potential rush of fundraisings as companies look to shore up their balance sheets before a November 30th deadline. Listed businesses in the UK have been raising money from the stock markets since April under more relaxed rules that enable them to raise money from specific institutions rather than all investors at the same time. This will stop at the end of this month and if companies want to raise money after that date, they will have to engage in a more expensive and laborious process of doing things like rights issues. * SO WHAT? * It is likely that companies in retail and hospitality will be most likely to want to raise cash given the current lockdown. Companies aren’t just coming to markets to raise money thoughBanks creak under pressure of new loan applications (Daily Telegraph, Lucy Burton and Michael O’Dwyer) shows that banks are already seeing a run on loan applications under the government’s coronavirus loan schemes. Although banks are being encouraged to lend, you would have thought that the longer all this goes on, the higher the likely incidence of loans going bad. Still, everyone is doing what they can to survive…



China rides to the rescue and Reebok is targeted…

We’ve all seen the latest figures which show that China’s economy is recovering and that spending is trending upwards on things like cars, and China demand for Europe’s luxury goods lifts virus-hit economy (Financial Times, Valentina Romei and Thomas Hale) shows that this phenomenon is now powering a recovery in the European luxury sector. According to data published over the weekend, Chinese imports from Germany rose by an annualised 24% and by 21% for Italy and companies like Kering and Salvatore Ferragamo have been seeing stronger sales from China. This upswing will definitely be welcome in countries and companies who are still wrestling with the coronavirus.

Private equity firms circle Reebok (Financial Times, Sara Germano and Kaye Wiggins) shows that private equity companies Permira and Triton are among those looking to make a move for Reebok as its current parent, Adidas, is looking to sever ties. Adidas bought Reebok over ten years ago but Reebok has not really made much ground in this time. * SO WHAT? * No-one has officially commented on this, but given Reebok’s anaemic performance over the years you would have thought that it needs a bit of a revamp. Permira has more form in footwear with investments in Dr Martens and Golden Goose – whereas Triton appears to be less plugged in to this area. Adidas has been considering a sale off and on for years, so no reason to get too excited just yet.



…in other news…

I thought I’d leave you today with another Christmas gift idea in Shoppers stockpile Aldi’s fur throw after it returns to stores for first time in a year (The Mirror, Paige Holland). I just had a look and it appears to have sold out online already! Get yourself into those stores!

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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)