Monday 26/07/21

  1. In MACRO, COVID & CRYPTO NEWS, the UK’s economy grows apace, inflation is higher than they are saying, Germany has Covid issues, the race for a Covid pill gets serious, a digital Yuan puts pressure on, crypto losses could be unlimited and CoinBurp gets indigestion
  2. In PROPERTY NEWS, AXA IM splashes out on life sciences property, Leicester Square could get a makeover, Selfridges is up for sale and now is the time to bag yourself a Knightsbridge “bargain”
  3. In SUPPLY CHAIN NEWS, US school cafeterias struggle while supply shortages hit builders and other businesses
  4. In MISCELLANEOUS NEWS, ministers try to limit Chinese influence on nuke power, Universal signs a deal with Lomotif and winos cheer
  5. AND FINALLY, I bring you a brilliant bar, a model to buy for someone you hate and the best Olympic celebration so far IMO…

1

MACRO, COVID & CRYPTO NEWS

So the UK’s economic growth continues to gather momentum, Germany has Covid issues, the race for a Covid pill is well and truly on and crypto hiccups abound…

UK economy growing at fastest rate in 80 years, says forecaster (The Guardian, Zoe Wood) cites the EY ITEM Club (yes, it’s a stupid name for an economic forecasting group sponsored by accountants EY. ITEM stands for I’m Totes Exciting Mate. Sorry – it really stands for Independent Treasury Economic Model, but I think my version sounds less dull 😜) as being of the opinion that the British economy is growing so fast that it could bounce back to its pre-pandemic size by the end of this year! They reckon that GDP will grow by 7.6%, the fastest annual growth rate since 1941 😱 and it is driven by – you’ve guessed it – vaccine rollout and rising consumer spending (yes, these guys are geniuses). Don’t worry, though – these wild economists in “da Club” (I really want it to sound exciting so this is what I’m going to call it) cover their 🍑 by saying that the “future pattern of the pandemic and any renewed pandemic-related restrictions will have a significant bearing on whether the forecast is achieved”. * SO WHAT? * TBH, these guys are stating the bleedin’ obvious. Still, I guess that their prediction of GDP growth of 7.6% is quite eye-catching. As I’ve said before, I’ve worked with tons of economists over my career and I’ve come to the conclusion that it is very difficult (and rare) for them to say anything truly original (it takes a lot to stick your neck out). Some will take this lot quite seriously because they are “independent” as opposed to being part of a bank, but they are just the same as all the others so it’s best not to get too hung up on what they say.

Talking of economists, True level of inflation is 2.8%, claims economist (The Times, Philip Aldrick) cites the opinion of Simon Ward, an economic adviser at Janus Henderson Investors, who argues that the real inflation rate is actually being understated by the ONS because it doesn’t give sufficient weighting to some parts of the economy that have seen the sharpest price rises (e.g. hospitality). * SO WHAT? * It sounds like the implication here is that the ONS has fiddled with the weightings a bit and reflects unusual spending patterns we saw last year, understating the true situation. If this is actually the case, then this will give the Bank of England’s MPC even more food thought when they consider what to do with the interest rate.

In coronavirus news, Merkel aide warns of rising Covid infections and possible curbs on unvaccinated (Financial Times, Erika Solomon) shows that Merkel’s chief of staff, Helge Braun, is warning that infections could get worse over the coming month and may result in more restrictions on those who are unvaccinated, following a big uptick in cases over the last week. * SO WHAT? * This is a particularly tricky development given the proximity of Bundestag elections due in September because this could potentially affect voter turnout. Braun stopped short of saying that there would have to be another full, strict lockdown but said that if there was a fourth wave, tough restrictions on the unvaccinated would have to be imposed. I guess this is the same for many countries but this balance between opening the economy up and keeping citizens safe is going to continue for quite some time to come. I would argue that full lockdowns now could be devastating for businesses and economies because I suspect that most of them are not expecting it and a second kick in the teeth could prove to be fatal.

Covid-19 pill race heats up as Japanese firm vies with Pfizer, Merck (Wall Street Journal, Peter Landers) shows that Japan’s Shionogi & Co has started human trials of the first one-a-day pill for Covid-19 sufferers as it joins others others to provide an alternative to injections. Shionogi’s pill aims to neutralise the virus five days after a patient takes it. * SO WHAT? * Wouldn’t this be great?! It would be way easier to take and distribution could be rapid. I’d say that this would be particularly good in third world countries and places that are off the grid as you won’t have to worry so much about storage problems.

Meanwhile, in the world of cryptocurrencies, China’s digital Yuan puts Ant and Tencent in an awkward spot (Wall Street Journal, Jing Yang) highlights China’s ongoing development of its own digital currency as it calls on help from private sector companies to test it. Ant Group (operator of Alipay) and Tencent (operator of WeChat) basically have to take part despite the fact that this could cannibalise their own user base. The People’s Bank of China published a white paper on crypto last week saying that China needs more stable and convenient payment services that are operable across platforms and that the e-CNY (!) would be aimed at domestic retail payments. * SO WHAT? * On the one hand, it’s dangerous for Ant and Tencent to get too involved with this because the new crypto could be a danger to their business model, but it would be arguably even more dangerous for the two NOT to take part and risk Beijing’s ire (Ant in particular knows what that’s like!).

Cryptocurrencies could lead to ‘limitless’ losses for UK government (The Guardian, Kalyeena Makortoff) sounds like it’s going to be the usual Bank of England dig at crypto, but actually it’s a warning from insolvency experts at Begbies Traynor who say that the government could face massive losses if businesses that accept crypto as payments go bust. * SO WHAT? * More and more companies are accepting crypto as payment, including the likes of Lush (!?) and WeWork, but experts are now saying that it is an easy way for directors to hide cash from authorities. Administrators who are responsible for winding a business down when it fails say that it will make it much harder to track down funds that they can often claw back to pay creditors, like the HMRC. At the moment, they say that there is nothing that they can do to stop this from happening as things stand, but the Treasury is currently in a consultation about how to regulate crypto assets.

Then in CoinBurp tokens to hit market as FCA says firm not yet authorised (Daily Telegraph, Rachel Millard) we see that a cryptocurrency broker, CoinBurp, that is planning to launch new tokens today is actually not yet fully authorised. This means that it will not be able to claim it is FCA-authorised or registered, which will make it much less popular with investors. CoinBurp raised $6m last week to build a platform to trade Non Fungible Tokens (NFTs). This just goes to highlight the risks with these things. Remember the FCA banned Binance Markets (one of the world’s biggest Bitcoin exchanges) last month, so it has form in spoiling the crypto party.

2

PROPERTY NEWS

There were also some interesting developments in real estate…

In a quick scoot around some interesting developments in different classes of real estate, Axa IM prepares to spend €2bn on life sciences property (Financial Times, George Hammond) shows that the French asset manager has earmarked a chunk of change to invest in specialist lab space and offices in Europe as it bets on rapid growth in Europe that will result from an increased focus on science following the pandemic. Europe lags the US on this, so it has got a lot of catching up to do in this very hot sector.

Back in London, though, Plan to transform fast food corner of Leicester Square into a ‘destination’ (Daily Telegraph) highlights potential plans to transform that bit next door to the Odeon cinema which currently houses a Zoo Bar, Burger King, Pizza Hut and Chiquito into a new “destination” as owner Soho Estates is asking commercial property adviser Colliers to get a new tenant in (ideally a global brand like Lego or M&Ms, which have taken up residence in other corners of the square). About time though, no? I don’t see movie stars nipping into Chiquitos for a quick enchilada after their premieres 😂.

In terms of landmark properties, Selfridges up for sale as Westons seek £4billion (The Times, Ashley Armstrong) shows that the billionaire Weston family is going to launch an auction to sell Selfridges to the highest bidder. This is the department store business in its entirety, which includes the Oxford Street flagship store along with 24 other outlets. The Weston family has owned Selfridges

since 2003 after they took it private for £598m. An unnamed bidder emerged last month, so it is hoped that a formal auction will flush out other potential buyers who could include sovereign wealth funds. * SO WHAT? * £4bn would certainly be a nice return and the company is perhaps seizing the opportunity to take advantage of the relative success of its department store business, which stands in stark contrast to its more dowdy rivals. I would have thought that this would be a very nice trophy asset for a sovereign wealth fund, but you do wonder whether this is a go-er long term as I still believe that department stores are in terminal decline. Mind you, given that the £4bn valuation is made up of £2bn of property assets, maybe there is room for manoeuvre in terms of future use/disposals.

Meanwhile, if you feel that you’ve just got too much money knocking around, Covid restrictions create ‘bargains’ in Knightsbridge (Daily Telegraph, Jessica Beard) shows that you might be able to lighten the load in your wallet because, according to Knight Frank, property prices in Knightsbridge have dropped so much that Knightsbridge has become “one of central London’s best bargains” 😂. Prime prices and rents in some inner-London locations have fallen due to the rise of remote working and restrictions on international travel. Apparently, if you are interested you should get in now before the rich foreigners are allowed back in – typical FOMO chat from an estate agent, no?? Surrounding areas in central London have already seen an uptick in prices, as Knight Frank pointed out recently.

3

SUPPLY CHAIN NEWS

Lots of businesses continue to suffer supply chain issues…

We have heard a lot about tricky supply chain issues at the moment (particularly with things like semiconductors and empty supermarket shelves etc.) but Supply chain woes come to school cafeterias (Wall Street Journal, Jaewon Kang) show that schools in the US are struggling to get food for student breakfasts and lunches ahead of the “back to school” season and so they are having to cut menu choices. In the UK, Building crisis refuses to blow away (Daily Telegraph, Ben Gartside) shows that senior bods in the construction industry think that there’s a danger that current shortages of materials – such as bricks, cement and timber – will continue for the next six to nine months as demand continues to be strong for existing and future projects.

Then in Supply shortages from cardboard boxes to cooking gas (The Times, James Hurley and Richard Tyler) we see that there are shortages in cardboard, wood, steel ties (for bricklayers – not weirdly heavy ties for the office), gas bottles etc. that are slowing businesses down across the country. * SO WHAT? * The current state just goes to show how important it is to have robust supply chains – something that has been very much under the spotlight during lockdown. This has been made worse in the UK by Brexit, which has led to a shortage of delivery drivers due to increased red tape and other restrictions. Supplies of parts and raw materials have been restricted anyway – but this is being exacerbated by mounting delivery issues. If this doesn’t get solved soon businesses really are going to lose out on revenues as they won’t be able to take full advantage of the current upswing in sentiment and consumer spending.

4

MISCELLANEOUS NEWS

The UK gets nervous about China, Universal Music signs a deal and British winos have something to celebrate…

In a sign of worsening UK-China relations, Ministers ‘try to limit’ China’s role in UK nuclear power (Daily Telegraph, Rachel Millard) shows that China’s future role in the construction of nuclear power stations is now hanging by a thread as the government is now looking at ways of stopping China’s state-owned China Nuclear Generator (CNG) being part of the £20bn Sizewell C power plant project in Suffolk in addition to all future UK power projects. * SO WHAT? * I think that this would be a pretty punchy move – but I wonder whether this is being used as a negotiating tactic. I would have thought that excluding the Chinese permanently will go down like a bag of cold sick in Beijing and really limit any kind of upside to future trade negotiations.

Meanwhile, Universal Music strikes licensing deal with video-sharing app Lomotif (Financial Times, Anna Nicolaou) shows that Vivendi’s Universal Music has signed a deal with the increasingly popular Singapore-based video-sharing app as part of a wider effort by the music industry to get more money out of social media. Lomotif is a smaller rival to TikTok. The size of the deal was undisclosed and it is expected that it will run for about two years. * SO WHAT? * Universal Music has already signed deals with Snap, TikTok and Triller in the last six months as social media really starts to take off as another revenue stream in addition to streaming. I would also say that, on the other side of this, it is a sign that Lomotif is taking a seat at the top table with the grown-ups!

Then there’s a reason to toast in Wine trade cheers Brexit boost as EU rule scrapped (Daily Telegraph, Tim Wallace) as the government has decided to use its new Brexit freedoms to cut EU red tape on wine imports. There will no longer be a requirement for imports to come with a VI-1 form which includes lab tests to verify the acidity of the wine. The change will come into force once new laws are passed. * SO WHAT? * Some say that this reduction in red tape sets a hopeful precedent for other products, but that remains to be seen!

5

...AND FINALLY...

…in other news…

Now that we are all gradually being released from captivity, I thought I’d bring to your attention a bar that puts you back into captivity once more in Inside the bar behind bars – jail-themed boozer where punters are ‘inmates’ (The Mirror, Nia Dalton). Sounds fun, no? I also thought that this ridiculous model is the perfect gift for someone you hate: The crazy ordeal of putting together Japan’s 366-piece sushi plastic model kit (SoraNews24, Casey Baseel). How frustrating would this be?? And finally, given that the Olympics is now on, I thought I’d leave you with this brilliant celebration I saw on the BBC website. I think it would be fair to say that this guy was quite pleased 😂. That poor Japanese lady behind him just didn’t know what to do!

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Some of today’s market, commodity & currency moves (as at 0757hrs 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 **
7,027 (+0.85%)35,061.55 (+0.68%)4,411.79 (+1.01%)14,836.99 (+1.04%)15,661 (+0.95%)6,565 (+1.28%)27,833 (+1.04%)3,468 (-2.33%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$71.13$73.19$1,807.361.374321.17753110.241.1671838,658.86

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