Watson’s Weekly 06-02-2021

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE DAY IN BRACKETS REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

• The week started off with widespread condemnation of Europe trying to enforce a border between Great Britain and the island of Ireland to stop vaccine exports (Monday) and then failing. True to form when someone senior (Ursula von der Leyen) mucks up, someone else was blamed for it – and it was vice-president Valdis Dombrovsksis (and former PM of Latvia) who became the fall-guy although he said that the whole thing was reviewed and approved by everyone.
• Eurostat figures indicated a double-dip contraction (Wednesday) as GDP fell in Q4, but not by as much as the market was expecting.
• Mario Draghi (former ECB president) was asked by the current Italian president, Sergio Mattarella, to help form a government (Thursday) as previous PM Giuseppe Conte tried and failed to do so. The coalition, such as it is, is made up of parties with diametrically opposite opinions and agendas so this will be a tall order even for a man of Draghi’s standing and reputation.
• The UK is looking to do an overhaul of state aid (Wednesday), tearing up the European rulebook in the process – but I would imagine it can’t stray too far from it otherwise there could be repercussions
• The Bank of England is expecting a recovery in the second half of this year (Friday) due to a vaccine-fuelled boost, especially if the vaccine rollout continues apace

• The EU continues to take a lot of criticism for vaccine distribution problems (Monday) and so many countries in Europe are getting impatient and just going ahead with buying their own vaccines (Wednesday) from China and Russia. From many people’s point of view, Europe has not turned up in their hour of need whereas China and Russia have. Vlad must be loving this.
• Vlad will especially love the fact that the Russian Sputnik V vaccine showed a 91.6% efficacy rate in a peer review (Wednesday), showing that his gamble to release early is now going to pay off. He now needs to persuade the 54% of Russians that are sceptical about the vaccine to go ahead and take it!
• It was interesting to note that the Germans, French and Swiss – one by one – announced that they were not going to recommend the AstraZeneca/Oxford vaccine (Thursday) due to there not being enough data on the efficacy of the vaccine for the over-65s. Maybe this is just as well given the supply shortages.
• Johnson & Johnson sought to get its one-shot vaccine approved (Friday) from regulators. This would be great as it just gets one more vaccine into the global armoury. It would be particularly useful as it only needs to be taken once and can be refrigerated at a realistic temperature.

• Some of the richer UK lockdowners have been buying supercars (Monday) as they’ve not been able to spend their money freely, but at the more “normal” end of the scale, Bank of England figures say that households repaid the most credit card debt since records began in 1993 (Tuesday). Others have been spending on property. Mortgage approvals have increased (Tuesday) BUT the latest Nationwide figures say that property prices are falling (Wednesday), which would suggest to me that perhaps we’ve peaked. Potential buyers may now decide to sit things out and wait to get their £15,000 in savings from falling prices rather than rely on Sunak’s Stamp Duty holiday. People seem to be taking an increased interest in their personal finances, according to Hargreaves Lansdown (Tuesday) – and what’s particularly notable here is that, in the first half of the financial year, the average age of people opening accounts was 37 years old! The average age was 54 in 2012!
• Gambling was a pastime that shot up in popularity over lockdown as bored lockdowners aimed to “earn” some money. The Gambling Commission is now cracking down on online gambling  (Wednesday) and will be bringing in restrictions to some games that are seen to be particularly addictive. If this crackdown has the same effect on online gambling as maximum stakes on FOBTs did on high street betting shops, this could prove to be disastrous for the industry. Betting companies will be doubly keen to put even more of their efforts into the massive stateside growth potential brought about by the relatively recent legalisation of sports betting.
• The Treasury has instructed the UK financial regulator, the FCA, to regulate Klarna (Wednesday), the Buy Now Pay Later (BNPL) specialist. I think it’s high time this happened as Klarna is effectively providing credit to the demographic that has been worst hit by unemployment during the pandemic – young people. Thus far it has been allowed to grow unfettered, but given what’s going on in the worldwide economy at the moment, things could potentially come crashing down if too many young people are not able to make the payments.

• Daimler said it was splitting itself into two companies – one focusing on cars and the other on trucks (Thursday). This got a positive reaction from investors on the announcement. I would say that, generally speaking, investors like it when companies decide to focus on fewer areas because it makes the story simpler. If, for instance, you are investing in the theme of trucking evolution over the next 10 years, you might baulk at having to invest in Daimler as it is now because you might not like the car side of the business. However, you would be interested in buying the new truck-focused business.
• Chip shortages continue to plague the car makers as GM had to cut production as a result (Thursday) – as well as Ford (Friday). These are just the latest makers to suffer and there’s no visibility as to when this is going to end
• Tesla announced that it would be doing a recall in the US of 135,000 cars (Wednesday), which is a lot considering that last year the company shipped just under 500,000 vehicles globally. I would have thought that this is going to be expensive as the recall involves the touchscreen – not some spring or something. Tricky.
• Tech companies benefited from increased ad spending. Google announced record revenues for Q4 (Wednesday) while Snap and Pinterest also benefited (Friday) from higher ad spending. I would have thought that Google’s sheer ongoing power will provide ammo for lawmakers and politicians alike when they eventually get around to deciding what to do about Big Tech.
• Other interesting stories this week included the return of a reformed/reforming Ant Group (Thursday) that could get another crack at launching an IPO if it behaves itself, Asos buying Topshop from the stricken Arcadia (Tuesday) as the online retailer bought the brands and not the shops and Amazon boss Jeff Bezos stepping back from being the CEO (Wednesday) putting a trusted lieutenant into the hot seat.

• Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published shortly

My favourite “alternative” story this week was the old sketch that just makes me laugh every time and always gives me a lift!