Thursday 04/08/22

  1. In MACRO, ENERGY & CRYPTO NEWS, Pelosi’s visit has repercussions, the Saudis refuse to play ball with Biden, the Bank of England decision is due, the UK services sector slows down, Turkey has a ‘mare, energy price drama continues and crypto wallets get drained
  2. In CAR NEWS, BMW hits reverse, Nissan plans a push on rentals and Lucid cuts production
  3. In TECH NEWS, SoftBank moves to sell down its Alibaba stake, Nintendo takes a chip hit, Avast-Norton looks likely while Samsung and Hynix rethink China exposure
  4. In MISCELLANEOUS NEWS, SocGen reports, Nationwide focuses on the wealthy, Hugo Boss vibes with the young’uns and eBay puts in a solid
  5. AND FINALLY, I bring you cutting technology in the pet heat regulation arena…

1

MACRO, ENERGY & CRYPTO NEWS

So Pelosi causes a stir, the Saudis don’t play ball, the Bank of England is due to make a decision, UK services sector growth slows, Turkey has a ‘mare, high energy costs cause havoc and crypto wallets get raided…

📢 It’s Thursday, so it’s time for the one hour weekly ZOOM call for SILVER and GOLD subscribers! *** THIS CALL WILL RUN FROM 6PM TILL 7PM ***. As usual, during this call, I will do a round-up of the week’s news and then open it up to questions from you. After that, depending on how much time we have, we will also debate the following:

  • Should the Pelosi trip to Taiwan have taken place? What do you think the implications will be?
  • When will the housing market bubble burst? Where will it burst?

You can just listen into the debate if you want to, but I thought I’d give you the heads up on topics for if you would like to engage. You will definitely get more out of this call if you take part in the debate, though 😜!

Taiwan tension to wreak havoc at ports and disrupt shipping (Daily Telegraph, Matt Oliver and Louis Ashworth) shows that Nancy Pelosi’s overnight stay in Taiwan was well-received in Taiwan but caused anger in China. The result of this anger was China embarking on live-fire military exercises close to Taiwan in a show of force over four days. An analyst at maritime intelligence company Dryad Global said that clients were now being advised that there is now a substantial threat to the safety of vessels and crew members. * SO WHAT? * I think this is pathetic posturing over a wizened old lady have a few meetings with a few people (she’s only the SPEAKER for God’s sake!). I really do think that the REAL reason behind all of this is that the Chinese economy is doing badly and that the regime wants to take attention away from this, the disastrous state of its real estate sector (which is hugely important to the economy) and its Covid failures to get a whole “us against the world” thing going on. Unfortunately, this could well mean that an invasion of Taiwan is more likely and it will give international companies even more impetus to avoid investment in anything related to China given the very real threat of major sanctions should an invasion go ahead. Ultimately, I don’t think that the avoidance of China investment will be healthy for the future because if that happens the end game could be that both Russia and China get effectively cut off from the West, meaning that there are no ties to stop the two leaders from invading wherever they like. In that scenario, it will be a case of who has the biggest army and who can throw the most money and resources at the military. I really hope that it does not get that far.

Meanwhile, Saudis reject Biden plea for major oil boost (Daily Telegraph, Rachel Millard) shows how little clout Biden has in foreign affairs as his pleas for an increase in oil production fell on deaf ears. Basically, Saudi Arabia has the US and the rest of the world by the balls and can pretty much do what it likes. It seems to vacillate between wanting to be BFFs with the US and with Russia and, at the moment, that’s obviously going to be a bit tricky. I guess we’ll just have to wait until Saudi Arabia actually wants something that the West has before we see any movement. BTW, in case you were wondering, I have nothing against Biden – I just think that nothing seems to be going right for him at the moment, and that this is not the time to be ineffectual. Maybe Pelosi’s Taiwan jaunt was a bit of a testosterone moment for the old fella to remind the Chinese he’s still there, but it may well have repercussions for many countries other than the US!

In the UK, Fear of persistent inflation may push Bank to raise interest rates (The Guardian, Larry Elliott and Phillip Inman) shows that there’s a possibility that the Bank of England will hike interest rates by 0.5% today in a move that has never happened since the Bank went independent in 1997. We won’t have to wait too long to see whether Andrew Bailey and chums make the decision!

Meanwhile, Services sector grows at slowest rate since February of last year (The Times, Mehreen Khan) cites the latest S&P/CIPS survey which shows that the UK services sector is experiencing its weakest growth since February 2021. The health of the services sector is vital to the UK as it accounts for almost 80% of our GDP.

Although we are all tearing our hair out over here about our inflation situation, spare a thought for the Turkish people as Turkey inflation set to exceed 80% (The Times, Mehreen Khan) highlights the latest data which shows that consumer prices rose to 79.6% in July versus the same period last year, its highest level since 1998. * SO WHAT? * President Erdogan’s policy of going against pretty much every other economist/minister/leader/central banker around the world in CUTTING interest rates to tame inflation (everyone else and their dog INCREASES them) is clearly not paying dividends. Having said that, rising interest rates around the world have not yet tamed inflation either (it takes quite a while for them to take effect) so I guess that Erdogan will be hanging onto that as long as he can before admitting failure (although I don’t ever see that happening! He’s just not that kind of guy…). I think that Erdogan’s nightmare scenario will be other countries breaking out of this inflationary spiral and Turkey’s situation getting worse just as he gets into the final straits of a campaign leading into elections next year.

In energy news today, IMF urges Europe to pass on energy costs to consumers (Financial Times, Valentina Romei) shows that the IMF is clearly living in its own fantasy world as it said that passing on rising energy costs to consumers will encourage “energy saving” and a shift towards renewables. What a pile of 💩. It added that governments should help the most vulnerable. This is precisely the reason why no-one should take the IMF too seriously (unless you want them to give you money – in which case, take them very seriously!). Yes, of course the most vulnerable should be protected – however, there are a lot of people stuck in the middle and without their spending power, economies are just going to stagnate. It really is amazing how people in institutions like this lose touch of reality. I think that governments need to get a bit more creative and provide a mix of finance options to target different parts of society. The IMF will no doubt argue that passing on higher energy costs is needed because they are expected to stay high for a few years – but I would argue that this gives governments time to, say, subsidise energy bills over perhaps the next three-to-six months whilst putting together something more robust that will tide us over for the next couple of years. Just passing on all the costs right now and going forward sounds like a supreme act of idiocy and economic suicide. I know what you’re thinking – hey Peter, just say what you really mean 🤣! Rant over.

The whole gas problem continues to rumble on in Germany faces ‘chain reaction’ without its gas from Russia (Daily Telegraph, Tim Wallace) shows that the country could be letting itself in for a “chain reaction of unforeseen consequences” if Russia cuts off gas supplies completely, according to Commerzbank analysts. They said that key industries could be severely disrupted which would have knock-on effects to other parts of the economy and Firms face 500% rise in energy bills (The Times, Emily Gosden) cites projections from analysts at Cornwall Insight which suggest that British businesses could face massive increases in their energy bills as wholesale energy prices jump.

In the wonderful world of crypto, Solana wallets ‘drained’ in blow to crypto network (Financial Times, Scott Chipolina) shows that thousands of accounts linked to the Solana blockchain have been hacked, draining at least 7.767 digital wallets. The Solana Foundation said that the draining was due to a bug but they still haven’t got to the bottom of it. It is worth noting that in recent hacks, users didn’t get their funds back because transactions generally can’t be reversed on blockchains. Solana is designed to process up to 50,000 trades a second and some think that it could be “the Visa of the digital asset ecosystem” but stunts like this will undoubtedly set it back (or even prove fatal if users don’t get their money back). Yet another example of why crypto needs more regulation IMO…

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

CAR NEWS

BMW suffers, Nissan thinks creatively and Lucid cuts production…

BMW suffers reverse amid supply chain bottlenecks (Daily Telegraph, Louis Ashworth) highlights BMW’s disappointing performance and outlook as it said that car deliveries will be lower this year versus last year thanks to parts shortages, China lockdowns and Ukraine war disruption. It has painted very downbeat picture of the second half, which is interesting as it sounds like this is in complete contrast to recent performance at arch-rival Mercedes-Benz and other up-market car makers.

Nissan plans rental push for electric vehicles to keep precious metals in Japan (Financial Times, Eri Sugiura) shows that the Japanese car maker is launching a new long-term rental subscription service that will enable drivers to rent its EVs for a number of years rather than just buying them in an effort to keep precious metals the cars rely on within the country. It is hoped that

this will stop the flow of Japanese cars being sold abroad as second-hand models, taking their precious metals with them. * SO WHAT? * This sounds like an interesting development and comes not long after Toyota started offering a subscription service in Japan for its first major EV model. Fascinating though this is I can’t help wondering whether they would be better off designing cars in such a way that the batteries could be taken out more easily and then people would only have to “rent” the battery itself. No doubt this is easier said than done!

Meanwhile, EV maker Lucid cuts production outlook in half (Wall Street Journal, Sean McLain and Ryan Felton) shows that yet another EV start-up – this time, Lucid – is having to cut production due to supply chain and logistical problems. It says that it is now only expecting to manufacture 50% of the cars versus its original plans – the second time it’s had to cut its production target this year. The company’s share price fell by over 12% in after-hours trading.

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

TECH NEWS

SoftBank sells, Nintendo falters, Avast moves forward and Samsung/Hynix have a rethink…

SoftBank raises $22bn in moves to sell down Alibaba stake (Financial Times, Ryan McMorrow and Kana Inagaki) shows that the company has sold down a third of its Alibaba stake so far this year via derivatives that give it a right to retain the shares. If it decides not to buy the shares back, this could be the end of a very profitable era for SoftBank where the Alibaba stake was arguably its making. Unfortunately, given the flak that Alibaba has been taking recently, SoftBank would be cashing out at multiyear lows but I guess it could do with the cash as its other tech holdings have suffered from the tech sell-off we’ve been seeing this year.

Chip drought sees wheels come off at Nintendo (The Times, Dominic Walsh) shows that Nintendo’s Q1 performance fell short of forecasts as it continued to suffer from the ongoing global chip shortage. It said that although current production was playing catch-up, it expected to be back on track from the end of the summer as the shortages ease. * SO WHAT? * It wasn’t just Nintendo that has suffered from the lack of chips – Sony reported pretty much the same thing last week. It was interesting to see that Nintendo disappointed, however, as it has a reputation for providing overly-conservative forecasts.

Meanwhile, UK regulator makes U-turn on Avast-Norton cyber security deal (Financial Times, Kate Beioley) highlights a massive 40% jump in the UK-listed Avast’s share price as the Competition and Markets Authority (CMA) made a U-turn, saying that it would green-light an $8bn merger with US software company NortonLifeLock. The CMA had originally voiced concerns, saying that the merger would reduce competition in the sector and result in higher prices for customers, but clearly it has now changed its mind.

Then in Samsung and SK Hynix rethink China exposure following US chips act (Financial Times, Christian Davies and Song Jung-a) we see that both South Korean companies are reconsidering their thinking about their Chinese investments as the US is about to bring in restrictions on the production of advanced chips following the passing of the Chips and Science Act last week. There will be $52bn in grants to encourage advanced chip manufacture in the US, but they will only be accessible by those who do not upgrade or expand their existing chip capacity in China for 10 years. This is all part of wider plans to improve US supply chains whilst also discouraging investment in China.

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

SocGen reports, Nationwide focuses on the wealthy, Hugo Boss is down with the kids and eBay does well…

In a quick scoot around other interesting stories today, SocGen reports €1.5bn loss on Russia exit but higher-than-expected revenues (Financial Times, Sarah White) shows that French bank SociétéGénérale went into a €1.5bn loss over Q2 as it sold its Russian operations, but managed to report better-than-expected revenues. It also announced new growth targets, all of which resulted in a 3.7% bump in the share price.

Staying in the financials sector, Nationwide targets wealthy buyers amid fears of mortgage chaos (Daily Telegraph, Rachel Mortimer) shows that Britain’s biggest building society is now looking to focus in on rich homebuyers by offering to lend them up to £5m as concerns increase about the plight of the less well-off in the cost-of-living crisis. Those who earn more than £100,000 a year will be allowed to get a mortgage worth up to 5.5x their annual income – up from the previous limit of 4.49x. It has also increased its maximum loan size and eased lending limits which could, in some cases, double the amount that applicants can borrow. * SO WHAT? * Given the cost-of-living crisis, it probably makes sense to go after this market as the affluent continue to remain relatively immune to rising prices and it comes after similar moves from the likes of HSBC and Halifax.

Elsewhere, Hugo Boss brands back in fashion with young buyers (The Times, Dominic Walsh) shows that the German fashion group is confident enough to raise its guidance for sales and profits after a strong Q2 performance. It seems that its “bolder look and feel” had boosted its popularity with younger consumers. Frasers Group has a 30% stake in the company, so Mike Ashley will be very pleased with this!

Then in Careful consumers boost eBay (The Times, Robert Miller) we see that the online auction site managed to beat market expectations for Q2 despite rising inflation. I would imagine that sites like eBay will see more activity in a downturn as people look for items to buy for a bargain and/or sell to make some extra cash.

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…

Although you could argue that pets should stay indoors when it’s really hot outside, if you absolutely, positively have to take them outside then perhaps this device could be just the ticket: The heat’s ruff on pets – but a new wearable fan in Japan is helping hot dogs keep cool (SkyNews). It’s this season’s must-have accessory for those heat-sensitive pets-about-town 😁

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Some of today’s market, commodity & currency moves (as at 0633hrs 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 **
7,446 (+0.49%)32,812.5 (+1.29%)4,155.17 (+1.56%)12,668.16 (+2.59%)13,588 (+1.03)6,472 (+0.97%)27,957 (+0.82%)3,189 (+0.80%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$91.057$99.756$1,777.331.215351.01665133.8661.1954523,085.9

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