Monday 10/10/22

1. In MACRO & CRYPTO NEWS, Janet Yellen criticises OPEC’s decision and we see whether the crypto winter is thawing
2. In REAL ESTATE NEWS, investors continue to withdraw from property funds while residential property prices look increasingly overvalued
3. In LEISURE NEWS, West End retailers fear slowdown, city restaurants hope for a pick-up and pubs keep closing
4. In MISCELLANEOUS NEWS, Amazon commits to electrification, Rivian does a major recall, Meta’s virtual reality faces actual reality and UK firms try different ways to tackle rising energy costs
5. AND FINALLY, I bring you Elvis in a pot…

So Yellen reiterates displeasure with OPEC as we see whether the crypto winter is thawing…

Cutting oil output risks global economy, warns US Treasury secretary (The Guardian, Julia Kollewe) shows that the US is still whinging about the OPEC decision last week to make big cuts to oil production to keep the oil price high, as Janet Yellen weighed in this time. She said it was “unhelpful and unwise” for the world’s economic growth. This assessment comes ahead of an IMF meeting in Washington this week where downgrades are expected to be made to global growth forecasts. * SO WHAT? * So far this is just wind and bluster. As far as I can see, there’s nothing that anyone can do to retaliate against the decision as everyone still needs oil and is restricted in what they can do given the fragility of the global economy. It’ll be interesting if affected countries can actually come up with anything more substantive than words, because that’s all we’ve seen so far. I wonder what Trump would have done in this scenario??

Is the ‘crypto winter’ melting into spring? (Financial Times, Scott Chipolina, Kate Duguid and Valentina Romei) shows that the crypto industry seems to be bottoming out after a spate of high-profile failures, such as the collapse of lending platform Celsius and hedge fund Three Arrows. In the last few weeks, bitcoin has been “rangebound” between $20,000-$25,000 after collapsing from a peak of $69,000 in November but it seems that The Merge (which refers to the shift to ethereum’s greener, less energy-thirsty blockchain system) has not really done much to boost ether. * SO WHAT? * Although things seem to be stabilising at the moment, I think that crypto has lost the perception of it being a safe store of value and in current times, investors are much more sceptical. If budgets are being squeezed, then logic would suggest that people won’t spend on crypto – but then again, when they get desperate (remember how popular crypto has been in Turkey as citizens turn to other sources of raising funds against a backdrop of ridiculously high inflation?) they might be prepared to gamble and throw money at digital assets once more. 

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!

Investors abandon property funds and there’s evidence that residential property is overvalued…

Investors pile out of UK property funds after bond market shock (Financial Times, George Hammond, Joshua Oliver and Adrienne Klasna) shows that the rate of withdrawals from UK commercial property funds is gathering pace following the government’s mini-budget announcement last month. The commercial property market is already straining from the sudden jump in borrowing costs and a drop in the volume of deals and there’s a real risk of a fire sale of property assets as investors rush to exit. I said last week that withdrawals from property funds were ramping up but according to data from Calastone, a fund trading provider, volumes of withdrawals shot up eightfold in the 10 days following the mini-budget than the number over the previous three weeks. * SO WHAT? * Are we looking at an impending fire sale of commercial property assets?? Commercial property has been getting increasingly two-tiered with top notch environmentally-friendly properties seeing continued strong demand while property that requires upgrading is just not feeling the love. I would have thought that the sheer volume of recent withdrawals doesn’t just suggest short-term panic – it suggests a shift of sentiment, which means

that more property could potentially come to market, which will push prices down. I would have thought that this would be a great time for funds without too much debt to pick up some bargains…

Meanwhile, in residential property, House prices ‘overvalued by a third and likely to fall’ (The Times, James Hurley) cites research by the Oxford Economics consultancy which reckons that house prices are overvalued by about 30%, using figures that look at affordability versus mortgage payments and earnings. * SO WHAT? * It did say that this was unlikely to happen in the short term as many people were still on fixed rate mortgages, but those who come off them will feel the difference and may then be forced to sell up, putting downward pressure on house prices. I would add that house prices, like stock prices, all have “fair value”. HOWEVER, it’s not always fundamentals that power prices – it’s often PERCEPTION that does. Even if house prices are deemed to be too expensive, there will still be people out there desperate to buy properties, particularly if the supply of properties onto the market isn’t very high. If they are desperate enough, they will buy and push prices up because of FOMO. The problem is that when reality hits in THAT scenario, the drop-off is precipitous and very painful…

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!

The UK hospitality sector continues to face uncertainty…

London faces consumer growth slowdown, warn West End retailers (Financial Times, Daniel Thomas) cites the latest research from the New West End Company, which says that footfall in London’s West End is currently about 20% lower than it was pre-pandemic thanks to the economic slowdown but businesses reliant on overseas travellers may do OK from the VAT cut identified in last month’s mini-budget and, of course, the weaker pound. Although monthly sales since May have been in line with or above pre-pandemic levels, forecasts for the rest of the year have been revised down. Interestingly, though, although footfall has been weakening, sales were rising – which would suggest that spend per head is increasing.

City restaurants starved of staff and diners (The Times, Dominic Walsh) uses top-end restaurant Pied à Terre to illustrate the

massive rises in costs that restaurants are facing while OpenTable data shows that more diners are booking through its system as a whole but London bookings have actually fallen. One of the main issues for London restaurants is the number of people who are working from home, particularly in the City – which, according to date from CGA, Nielsen IQ and Alix Partners, has lost 14% of its licenced premises over the last two years. Meanwhile, Pubs closing at the rate of 50 per months in teeth of spending crisis (Daily Telegraph, Hannah Boland) cites research from Altus Group which shows frightening stats for the industry. * SO WHAT? * The hospitality industry is in a very precarious state at the moment as it faces big energy bills as well as rising staff, raw ingredient and beverage costs. The next hurdle for the industry will be when the 50% discount on business rates in the industry is due to come to an end on March 31st. It will no doubt push for that to be extended as well as, presumably, VAT reductions/exemptions and more certainty over energy bills. Very tough times.

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!

Amazon wants electric, Rivian has a recall, Meta faces reality and we see how Britain’s companies are cutting energy costs…

In a quick scoot around other interesting stories today, Amazon to up electric fleet by thousands across UK and continent (The Guardian, Sarah Butler) shows that the e-tailing giant is to invest over €1bn in Europe over the next five years to add more electric vans, lorries and cargo bikes to its existing fleet. As part of that, it plans to install hundreds of fast-charging points for EVs at European warehouses and delivery hubs. Sounds good, eh? Mind you, Rivian recalls nearly all of its vehicles due to loose fasteners (Wall Street Journal, Sean McLain) shows that there’s a big bump in the road for Rivian (in which I believe Amazon owns an 18%-ish stake) as the vehicles are being recalled for a fault that could potentially cause drivers to lose steering control. This is clearly an expense that the company could well do without but I guess this is what happens with fledgling automotive companies!

Reality bites in Zuckerburg’s virtual mission (The Times, Callum Jones) shows that Meta Platforms is expected to unveil a new VR headset this week at its annual Connect event and update everyone on its own developments in the metaverse. This should be interesting I am sure!

Then in How Britain’s firms are cuttting energy costs (The Guardian, Alex Lawson) we see how British firms are planning to cope with higher energy costs. Curry’s plans to turn down the brightness of its TVs, Oxford Street’s lights will be LEDs these Christmas and smaller shops are investing in insulation and more efficient equipment. * SO WHAT? * I suspect that all businesses will be keen to reduce costs where they can. I went past a Porsche garage the other day at night and the lights were still on! Surely the government needs to bring in fines for companies that leave their lights on after a certain time. Cleaners etc. still need lights, but other than that I would have thought more efforts can be made on an ongoing basis…

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…

It’s amazing how Elvis’s spirit continues to live on with his huge musical legacy – but Mum spots face of Elvis in pot of McDonald’s ketchup (Metro, Jasper King) shows that he also continues to touch everyday lives via condiments. Uh huh huh, thangyaverymuch 😎