Thursday 02/12/21

  1. In MACRO, MARKETS & ENERGY NEWS, the OECD gets downbeat on Omicron but upbeat on the UK and we see the world’s first floating nuclear power plant, nuclear fusion (not fission), Drax moving to biomass and Nissan’s solar farm
  2. In CONSUMER TRENDS & RETAIL NEWS, UK house prices keep rising, household bills are set to rocket, car dealer Pendragon goes bananas, Selfridges looks set to change hands and Debenhams gets a new lease of life
  3. In M&A AND IPO NEWS, Seedrs goes to an American buyer, Abrdn keeps shopping and LadBible gets set for a listing
  4. In MISCELLANEOUS NEWS, Big Tech’s protection comes under attack, Meta’s crypto chief quits and Lithium shortages could cause problems for EVs
  5. AND FINALLY, I bring you a couple of ways to open jars 💪 and…battered pigs in blankets 😱 wha—–?!?

1

MACRO, MARKETS & ENERGY NEWS

So the OECD warns of the impact of Omicron and we see new initiatives in nuke power, biomass and Nissan’s solar farm…

📢 It’s Thursday – so it’s time for the one hour weekly ZOOM call for SILVER and GOLD subscribers where I will do a detailed review of the week as well as chance for Q&A and discussion. The ZOOM call will start at 5.30pm and run until 6.30pm. See you there!

Those geniuses at the OECD have come up with another earth-shatteringly startling conclusion in Omicron could cause severe global slowdown, warns OECD (The Guardian, Richard Partington) and they also cover their *rses by touting two potential scenarios: on the one hand, if Omicron is more contagious than other variants and/or is more resistant to existing vaccines, supply chain problems could get worse as movement restrictions are re-imposed, which would continue to fuel inflation; on the other hand, if things really go downhill with the new variant, even tighter restrictions will severely dent demand for goods and services, which would lead to an economic slowdown, which would lead to inflation weakening. So, in other words, they are saying that the Omicron variant may cause inflation to rise – or fall. Yah. Thanks for that. * SO WHAT? * This kind of thing always makes me laugh. Basically, they haven’t got a clue and are coming up with scenarios that will cover their *rses whatever happens. It’s a bit like Carol Kirkwood on the BBC saying that there’s going to be a 50% chance of weather where you are 🤣. I guess you can’t blame them, though. I find that when things are difficult to predict with any certainty (e.g. the oil price – predicting that, especially on a long term basis, is a bit of a mug’s game) the next best thing is to think of a few realistic scenarios and then colour those with some numbers. The reality, though, is that this is creating a whole load of uncertainty at the moment – and most businesses really don’t like uncertainty because it can totally scupper future plans. As it is, reports are emerging of Christmas party bookings being cancelled, but if it goes on longer a lot of businesses are going to start to feel extreme pain again (e.g. restaurants and pretty much the whole leisure industry). Things are getting tougher precisely at the wrong time for many who have survived thus far. Putting all this aside, however, I suspect there will be some huge opportunities for investors to buy up assets on the cheap in the coming months as businesses just can’t take any more pain themselves and how they have reacted since the depths of the pandemic may give potential investors a very useful insight into the future viability of these businesses. Even more opportunities for private equity IMO…

Despite that, FTSE has best day in four months amid hopes Omicron not severe (The Times, Robert Miller) shows that the London market rebounded in trading yesterday on comments from the World Health Organisation that the Omicron variant has milder effects than previous forms of Covid. Maybe billionaire hedge fund manager Bill Ackman was right after all. Markets certainly want to believe that! Many businesses will also be praying for that, for sure…

Meanwhile, in energy, World’s first floating nuclear power plant fuels Russia’s Arctic ambitions (Financial Times, Nastassia Astrasheuskaya) highlights a new Russian innovation, the Akademik Lomonosov, which is currently moored on a port on the northern coast of Siberia. Moscow wans to open up a major shipping lane through the Arctic, called the Northern Sea Route (NSR) to facilitate better supply of natural resources and this floating power plant

will enable that. As one local resident put it “It is the first year we have had heating and hot water year round” 😱. The state nuclear corporation Rosatom is responsible for the development of the NSR and nuclear-powered icebreakers will smash their way through to make the route viable all year round. It also expects the current floating plant in Pevek to power a number of resources projects. Rosatom also plans to install four more of these floating nuclear power plants by the end of the decade. * SO WHAT? * I think that this is a really interesting development for a couple of reasons: one, that the Russians have managed to do this and two, that the Suez blockage earlier this year has highlighted the importance of having an alternative shipping route. Apparently, a ship would take 27-28 days to go from South Korea’s Busan to Rotterdam via the NSR but 40 days via the Suez Canal. Still, you do wonder what would happen in the event of  damage/breakdown/malfunction as it is floating ON the sea…

In other energy developments, Tiger Global-backed nuclear fusion group secures $1.8bn in funding (Financial Times, Sarah Provan and Myles McCormick) shows that Commonwealth Fusion Systems has managed to raise a huge amount of money from high profile investors such as Tiger Global Management and Bill Gates to develop the very complex technology of fusion. At the moment, nuclear power is generated by fission (which splits atoms to produce electricity) but Commonwealth is developing fusion (which pushes atoms together). There are major advantages with fusion over fission – it could provide the world with a potentially inexhaustible supply of energy with zero CO2 emissions, it’s cheaper to run because it can use widely available elements like hydrogen, waste from the process stays radioactive for a much shorter time period than plutonium and there is no risk of meltdown. * SO WHAT? * This sounds great, but the difficulty has been in making enough of it to make it viable. I’m sure that a big slug of money like this will help to at least see whether this could actually become a reality or not!

Elsewhere, Drax accelerates push to biomass (Financial Times, Camilla Hodgson) shows that the UK power company is planning to double the production and sales of wood pellets to burn for fuel and is still on track to be able to shut down its coal units despite them being used again in the current energy crunch. The company’s chief exec Will Gardiner said that Bio Energy with Carbon Capture and Storage (BECCS) presents massive opportunity and predicted that “Drax could be permanently removing 12m tonnes of carbon from the atmosphere each year” by the end of the decade! Sounds impressive, no? * SO WHAT? * This certainly sounds positive and it seems that the company is putting its money where its mouth is. Drax has already converted four out of the six units at its Yorkshire power station from coal to wood biomass. It reckons there will be strong demand for these pellets in Asia and Europe over the coming years but some doubt the viability of BECCS at scale.

Nissan builds solar farm to power factory for Leaf cars (Daily Telegraph, Howard Mustoe) highlights another company that’s trying to move with the times as the Japanese car manufacturer is installing a solar farm at its Sunderland plant that will be able to power the production of its battery-powered Leaf cars for sale in Europe. This would be part of the company’s £13bn push into decarbonisation and will double the amount of sustainable power it uses in its site. The farm should be completed by May next year and would mean that the plant will meet 20% of its energy needs on its own! How poetic is that?!

2

CONSUMER TRENDS & RETAIL NEWS

UK consumers face challenges, Pendragon knocks it out of the park, Selfridges is close to getting new owners and one Debenhams gets repurposed…

House prices jump 10pc in a year as sales near 2007 level (Daily Telegraph, Will Kirkman) cites the latest date from Nationwide which shows a major jump in house prices and it seems that buyers are keen to get things sorted in order to beat potential interest rate rises, further fuelling an already brisk market. In the meantime, Households face huge rise in bills (The Times, Patrick Hosking) cites a study by the Independent Centre for Economics and Research which shows that an average family’s household costs are going to rise by a whopping £1,700 next year as higher fuel and energy prices are set to bite, along with potentially higher grocery bills. * SO WHAT? * Higher house prices are often associated with better consumer confidence, but at the moment it feels to me like the market is being driven less by confidence and more by a combination of FOMO and lack of properties available. Household budgets continue to get squeezed but if the labour market remains tight and wages keep rising, I think that consumers will be happy (if not increasingly nervous) to keep spending until they realise that wages aren’t rising as fast as costs. However, that’s not going to go on forever. For the moment, though, I think we will keep spending in order to get the Christmas we had snatched away from us last year…

It’s interesting to see in Car dealer goes up another gear with third rise in forecast profit (The Times, Robert Lea) that one of the country’s biggest car dealerships, Pendragon (which owns Stratstone, Evans Halshaw and Car Store) has been doing so well that it has increased its year-end profit guidance for the third time in five months! This either means they are 💩 at forecasting or that they are just doing incredibly well (or maybe a bit of both)! Amazingly, the latest figures show that average prices across the group have shot up by 28% over the last two years and that its profit margins have hit new highs. * SO WHAT? * Car sales (well, second hand car sales) have been going bananas in the last six to twelve months as people

have sought to avoid public transport while they return to work. New car sales have suffered because of semiconductor shortages and other supply chain problems, but used car sales have become so hot recently that they are now selling for more than their new equivalent! Will this continue into next year as household budgets continue to feel the pinch?? Will consumers feel confident enough to splurge on a big ticket item like this? Car sales have been powered to a certain extent by consumers spending money they’ve saved under lockdown, but this won’t last forever – particularly as they are now having to pay more for basic items. For now, though, car dealers are loving it!

Then in retailer news, Selfridges sale to Thai group agreed (The Times, Ashley Armstrong) shows that the billionaire Canadian Weston family has agreed to sell Selfridges to Central Group. The family had been looking to sell for about $4bn, but it sounds like they will get less than this and that they want to complete the deal by the end of this year. Central Group is a Thai-family-owned conglomerate with 3,700 shops around the world covering a wide range of product categories. * SO WHAT? * I guess that this will take some of the uncertainty away as speculation about a new buyer has been going on for ages. It remains to be seen what Central Group will bring to the party but I think that there could be opportunity here as some of its rivals on Oxford Street are either downsizing (John Lewis), being demolished (M&S) or leaving (House of Fraser). If Selfridges can continue to innovate and provide shoppers with a quality shopping experience they could do really well IMO!

Talking of department stores, From Debenhams to creative hub: new lease of life for closed shops (The Guardian, Sarah Butler) is a really interesting article that shows how one former Debenhams outlet in Sunderland is reopening as a music and arts venue and community hub called Pop Recs. I have said before that unless local councils get creative about what to do about the gaping holes being left in their town centres by department stores closing down, previously bustling areas are going to become ghost towns. Hopefully initiatives like this will encourage new businesses and footfall because – as I keep saying – the best way for retailers to survive against the onslaught of online shopping is to provide a superior customer experience IMO! Let’s hope that more good can come from the downfall of department stores.

3

M&A AND IPO NEWS

Seedrs goes American, Abrdn continues to shop and LadBible aims for an IPO…

Seedrs bought by US group after merger of UK rivals was blocked (Financial Times, Daniel Thomas) highlights the acquisition of UK crowdfunding business Seedrs by US investment group Republic for $100m. Seedrs had a proposed merger with rival Crowdcube turned down by the Competition and Markets Authority earlier this year. It was the first regulated equity crowdfunding business in the world and has invested £1.5bn to date (one of the most notable ones being Revolut, for instance). This is part of Republic’s European expansion and heralds another opportunistic swoop by an American company!

Then in Abrdn close to £1.5bn Interactive Investor takeover (Daily Telegraph, Giulia Bottaro) we see that both companies are to unveil a takeover today. This is quite interesting as it is another example of companies putting more money into servicing the retail investor market (something we saw with AJ Bell earlier this week). Online broker Interactive Investor had been preparing to do an IPO next year, but this will now fall by the wayside as it joins the

FTSE100 asset manager. * SO WHAT? * I just wonder, is this increased interest in online trading going to be THAT big in the future? FWIW, I think that many retail traders are sentiment-driven and will abandon the market if we see a sustained downturn, but clearly companies want to make sure they are well-positioned to get a piece of the retail investor pie should this lockdown fad turn into a proper and sustained change in behaviour.

Meanwhile, LadBible’s publisher is set for £360m London listing (Daily Telegraph, James Warrington) shows that the publisher LadBible Group – which comprises of brands such as Unilad, GamingBible, SportBible and Tyla, in addition to LadBible – is looking at a very lucrative stock market listing. The company, which produces social media content, was founded in 2012 and has grown rapidly since then. It now reaches over 1bn people a year and has built a huge following on Facebook, Instagram, SnapChat and TikTok, putting pretty much all other rivals in the shade. * SO WHAT? * It’ll be interesting to see whether a flotation will change the company as it originally fielded criticism for its bro-centric culture, although now its audience is thought to be almost 50% female. In an age of digital advertising, I think this company is going to continue to be a winner – but it needs to keep adapting to stay ahead of (and make!) consumer behaviour!

4

MISCELLANEOUS NEWS

Big Tech faces another test, Meta’s crypto guy moves on and lithium shortages loom…

In other interesting news stories today, Big Tech’s liability shield is under siege (Wall Street Journal, John D. McKinnon) shows that US legislators are looking at scaling back the legal protections that internet platforms use to get away with posting user content without being liable for it. This protection was granted by Section 230 of the Communications Decency Act of 1996. If the law is changed, it could mean that people who have suffered as a result of content on these platforms will be able to recover damages in court. It is also possible that tech platforms could be held liable for content that interferes with users’ civil rights. * SO WHAT? * This sounds logical enough for me as the internet was a different place back in 1996! Obviously the tech companies are against any change because it would make them liable for the consequences of behaviour they’ve been encouraging! No doubt they will fight this with hordes of very expensive lawyers, so we’ll just have to see how that goes. This is waaaaaaaaaaay overdue IMO, but for any changes to truly work, they need to be adopted globally.

Talking of Big Tech, Executive leading Meta’s faltering digital currency project quits (Financial Times, Dave Lee) shows that David Marcus, the exec responsible for Facebook’s spluttering digital currency project, said he will leave the company by the end of the year. Did he jump or was he pushed?? Either way, it does show how disappointing things have been for Marcus after a very high-profile start.

Finally, Lithium spike runs Britain’s electric car dreams off track (Daily Telegraph, Howard Mustoe) is an interesting article which highlights potential shortages of lithium as EV demand rises against the backdrop of semiconductor shortages and other supply chain problems. Lithium prices are rising and although there are cheaper alternatives, like sodium, they are not yet ready for commercial use. Lithium carbonate (used in cheaper EVs) prices are up by 289% so far this year and lithium hydroxide (used in longer-range motors) prices by 192% and the likelihood is that they will go higher as EVs get more popular. The problem is that lithium mines take about five to seven years to develop whereas a gigafactory can be build in 1-2 years. Although lithium itself is fairly common, the difficulty is in extracting it. You really should read this article in full if you can – it’s really interesting! Ultimately, rising lithium prices are bound to be passed on to the consumer, which will limit sales potential upside in the short term at least.

5

...AND FINALLY...

…in other news…

I thought I’d leave you today with a useful tip in Woman shares ‘best mum hack’ to open even the toughest jars in seconds (The Mirror, John Bett) although I would add that when I am confronted with tricky jar situations I put on washing up gloves (as long as they’re dry, of course!) and get twisting (the jar, not myself, obviously). That works every time 😉.

It also seems that we are now at that time of the year when chip shops up and down the land start to batter unusual things to get the punters in. Who can forget the deep-fried Quality Street choccies or the deep-fried Christmas dinner with battered sprouts of last year?? Well now it seems that we’ve got another contender for the how-to-make-something-pretty-calorific-into-something-monstrously-calorific prize in Chip shop sells ‘amazing’ battered foot-long pigs in blankets just for Christmas (The Mirror, John Bett). Is nothing sacred??

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Some of today’s market, commodity & currency moves (as at 0800hrs 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 **
7,169 (+1.55%)34,022.04 (-1.34%)4,513.04 (-1.18%)15,254.05 (-1.83%)15,473 (+2.47%)6,882 (+2.39%)27,795 (-0.50%)3,574 (-0.09%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$66.40$69.72$1,775.191.328341.13136113.251.1740756,883

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