Monday 25/04/22

  1. In MACROECONOMIC NEWS, Macron wins, Putin abandons Ukraine deal and Britain’s Russia sanctions cost
  2. In CONSUMER, LEISURE & RETAIL-RELATED NEWS, we look at employment trends, leisure trends and retail trends
  3. In INVESTMENT NEWS, Blackstone goes for it in real estate, Elliott provides a SPAC-boost and emerging markets give cause to think
  4. In MISCELLANEOUS NEWS, Twitter considers Musk’s offer, Netflix faces further challenges and the UK cracks down on CBD
  5. AND FINALLY, I bring you a new way of eating toast…

1

MACROECONOMIC NEWS

So Le Pen loses again, Putin changes tack and Russia sanctions cost Britain…

Emmanuel Macron defeats Marine Le Pen to be re-elected French president (Financial Times, Victor Mallet, Leila Abboud and Sarah White) shows that Macron has got his second term in office after defeating Le Pen in the vote yesterday, but around 28% of voters abstained, the highest level since 1969. He won by 58.55% of the vote to 41.45%, which is a bigger margin than had been expected. * SO WHAT? * The win will mean more of the same (for France, but also for Europe) and averts the uncertainty that Le Pen would have brought. I wonder whether this will signal the end of the Rassemblement National party and open the door once more to the socialists. Having said that, it seems that a largely disgruntled electorate signalled openness to nationalism and euroscepticism during the course of the election process – something that Macron should not ignore. This makes Macron the first French president to get re-elected for 20 years! 

Meanwhile, Vladimir Putin abandons hopes of Ukraine deal and shifts to land-grab strategy (Financial Times, Max Seddon) shows that the Russian president was apparently close to a peace deal last month, but decided against it following the sinking of the Moskva, the flagship of Russia’s Black Sea fleet. He is, instead, aiming to seize as much territory as he can. In the meantime, Sanctions on Russia to cost Britain £6.2bn (Daily Telegraph, Helen Cahill) puts a figure on how much sanctions on Russia will cost us over the next nine years. The export ban of luxury goods, oil refining goods, quantum computing products and some iron and steel products, the freezing of the assets of Russia’s biggest banks and assorted oligarchs will all add up, according to a report published by the Foreign Office. In addition to this, there will be repercussions from supply chain disruption, businesses shutting down and companies in limbo due to ongoing uncertainty. There will be more disruption to come as more sanctions get put in place – imports of Russian coal and oil will stop by the end of 2022.

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, LEISURE & RETAIL-RELATED NEWS

Interesting trends are emerging in employment, leisure and retail…

I’ve been talking a lot recently about insufficient wages and unionisation as disgruntled employees increasingly want to voice their frustrations about below-inflation pay rises and Workers are changing jobs, raking in big raises – and keeping inflation high (Wall Street Journal, Gymnn Guilford) shows what’s going on in the US as a Zip-Recruiter survey showed that employees were using tight labour markets to negotiate above-inflation pay rises when jumping ship. Interestingly, it is these job switchers who are driving current wage growth as average annual wage growth reached 6% in March versus the latest inflation figure coming in at 8.5%. The problem, though, is if more people move and earn more money, this then drives inflation up even further. Mind you, it’s this frustration that’s driving workers to unionise – Apple store workers seek to unionise, following efforts at Amazon, Starbucks (Wall Street Journal, Sebastian Herrera) shows that more workers at big companies are getting bolder about unionising as Apple’s retail employees are showing increasing interest while Unions use cost-of-living crisis to asset power (Daily Telegraph, Louis Ashworth) reflects similar sentiment increasing over here. Militancy is increasing as real pay, excluding bonuses, is falling. It is interesting to see that the popularity of unions is growing from the traditional areas of manufacturing and mining as social media is used increasingly to communicate and recruit new members.

Meanwhile, in leisure, Back to good old days for Bourne’s UK holidays (The Times, Louisa Clarence-Smith) shows that Britons are continuing to power the popularity of staycations as bookings are up by 20% versus pre-pandemic levels. Blackstone-backed Bourne Leisure, which owns Butlins, Haven Holidays and Warner Leisure Hotels is reporting solid growth in both bookings and inquiries. * SO WHAT? * I keep saying that I believe that there is a sizeable part of the population that will want to get away on holiday, but spend less money doing so (and not put up with last minute Covid-related rule changes etc.), which is where staycations come in. I also believe that the casual dining

sector will also see the same kind of uplift as it is deemed to be an “affordable” treat against a pretty grim economic backdrop.

Staying with leisure, PureGym has mighty plans for expansion (The Times, Dominic Walsh) shows that Britain’s #1 gym is going to use a £300m investment by KKR to double its current footprint to over 1,000 clubs. In addition to this, it wants to open 1-2,000 franchised sites by the end of the decade in the Middle East, North America and Asia. It already has a very small presence in Saudi Arabia and Washington. * SO WHAT? * I can really imagine that this model will work abroad and the company can use its expertise in shaking up the gym market to good effect, backed by its KKR-shaped sugar daddy! IMO, overseas expansion (particularly in markets not used to the low-cost strategy) will reap more profits than planned domestic expansion. I think that the domestic market, whilst it hasn’t reached saturation point just yet, risks becoming more commoditised as time goes on.

Meanwhile, in retail, Morrisons slashes prices in battle of the supermarkets (Daily Telegraph, Hannah Boland) shows that the UK’s #4 supermarket is cutting prices of over 500 products as it vies with its rivals to tempt cash-strapped consumers to its portals in the midst of the current cost-0f-living crisis. * SO WHAT? * It seems to me that all of the supermarkets are trying to emphasise their value proposition in difficult current circumstances as they try to price-match others, but I really think that the German discounters Aldi and Lidl will go from strength to strength as their blip under lockdown – presumably thanks to not doing deliveries of their full range unlike their larger rivals – reverts to the norm and they take more market share once more.

Then in Uniqlo bets on UK high street after exiting its largest ‘European’ market (Daily Telegraph, Laura Onita) we see that Fast Retailing, which owns the Uniqlo brand, is looking to the future. It has just opened its new flagship store on Superdry’s old site on London’s Regent Street that now houses Uniqlo in addition to its more formal brand Theory. It is now accelerating its expansion abroad in order to reduce its reliance on Japan, which currently accounts for over a third of its revenue.

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

INVESTMENT NEWS

Blackstone keeps snapping up assets, Elliott provides a boost for SPACs and emerging markets need a review in the light of current events…

Blackstone takes aim at publicly listed real estate vehicles (Financial Times, Antoine Gara and Mark Vandevelde) shows that the private equity firm seems to be set on hoovering up publicly listed real estate investment trusts (REITs) at the moment that have lost their appeal to investors as inflation and recession combine to dent valuations on public markets. Blackstone announced a purchase of American Campus Communities last week for $13bn – and it looks to me like they are seeing bargains that they can potentially take private now before perhaps flipping them again in a few years when current market turbulence is behind them. * SO WHAT? * This is interesting because investors might prefer to invest in Blackstone’s real estate portfolio rather than risk exposure to the volatility of publicly traded REITs that may be adversely affected by sentiment on inflation etc.

Elliott investment in travel group is rare bright spot for Spacs (Financial Times, Nikou Asgari) shows that activist hedge fund Elliott Management is investing in a

SPAC, in a rare bit of good news for the embattled blank-cheque investment vehicles that were once so popular. It is, along with Siris Capital, investing $20m in a deal for travel tech group Mondee. This latest move shows that although SPACs have fallen out of favour since the peak of the pandemic, there is still life in them yet!

Emerging markets in the spotlight as Russia and China pose new questions (The Times, Emma Powell) shows that repercussions of the recent war in Ukraine and lockdowns in China highlight the very real risks investors run when putting money into emerging markets. According to the Institute of International Finance, investors withdrew $9.3bn from emerging markets last month and investors are now pondering whether to avoid such markets altogether in future. Some Latin American companies who are currently benefiting from rising commodity prices (because they are net exporters of commodities) may be OK for the moment but China is the biggie what with its unpredictable lockdowns and nightmare property sector that remains in massive debt. * SO WHAT? * At the end of the day, higher risks mean higher potential rewards, but right now things are looking particularly shaky. At the end of the day, it’s at time like these that investors earn their fat bonuses and weigh risks with potential rewards further down the line.

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

MISCELLANEOUS NEWS

Twitter considers, Netflix ponders and the UK cracks down on CBD

In a quick scoot around other interesting stories today, Twitter, Elon Musk are in talks to strike a deal (Wall Street Journal, Cara Lombardo and Dana Cimilluca) shows that Twitter is now seriously considering Elon Musk’s takeover approach and could even reach an agreement this week! The two sides met yesterday to discuss the proposal, but details clearly needed to be fleshed out. * SO WHAT? * This is quite an interesting turn of events because Twitter was widely expected to reject Musk’s advances. The drama continues.

Meanwhile, Netflix: free riders will dismount rather than give streamers free rein (Financial Times, Lex) follows on from last week’s drama regarding the cratering in the number of subscribers and suggests that there could be more to come as people increasingly see this kind of service as a non-essential as they cut expenditure.

Then in UK crackdown on CBD upends rapidly growing market (Financial Times, Kate Beioley and Patricia Nilsson) we see that UK regulators and cannabis start-ups are headed for a bust-up as the Food Standards Agency (FSA) published a list of 3,500 ingestible products with CBD, but any products that aren’t on the list are to be withdrawn from sale immediately. The UK is the first country to regulate CBD in food and out of over 900 applications made for FSA approval only 70 made it through to the next stage, meaning that a ton of start-ups are about to lose out as their products are removed from sale. * SO WHAT? * I think that this is an important step in what has been, until now, a bit of a free-for-all in terms of standards etc. However, many products and companies will have been caught in the crossfire and I suspect there will be many unwitting casualties as a result. In the meantime, however, it is unclear how all of this is going to be enforced on a practical level.

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…

In life, I think we all take certain things and skills for granted. How to eat toast is one of them, for example. But oh no – what you and I have been doing for years has been debunked in Food expert claims your should always eat toast upside down as taste is ‘life-changing’ (The Mirror, Courtney Pochin). Will you be giving this a go??

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Some of today’s market, commodity & currency moves (as at 0758hrs 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 **
7,522 (-1.39%)33,811.4 (-2.82%)4,271.78 (-2.77%)12,839.29 (-2.55%)14,142 (-2.48%)6,581 (-1.99%)26,591 (-1.9%)2,929 (-5.13%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$98.160$102.59$1,918.141.273291.07147128.0631.1883838,650.3

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