Thursday 04/11/21

1. In INTEREST RATES & ENERGY NEWS, the US and Europe dismiss interest rate speculation while the UK is on the cusp, green energy faces hurdles as industry calls for energy storage while coal miners profit
2. In RETAIL/SUPPLY CHAIN NEWS, Ikea and Next cite supply chain restrictions while UK poultry uses only half of the emergency visas
3. In TECH NEWS, Qualcomm benefits from chip hunger and Facebook and Instagram return after another outage
4. In INDIVIDUAL COMPANY NEWS, Allbirds has a strong debut, Lufthansa returns to profit and BMW goes electric – but slowly
5. AND FINALLY, I bring you an M&S shopping hack and a scary zombie mushroom…

So the US, Europe and UK continue to face inflationary pressures, green energy faces big hurdles and industry appeals for more energy storage while coal miners are coining it in…

📢 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! I will also be doing another call straight afterwards aimed at university societies. If you want details for that, please ask your presidents to get in contact with me! The details are also on our socials.

You will no doubt be aware (especially if you are a regular reader of Watson’s Daily) that everyone is talking about inflation at the moment and when to increase interest rates (the go-to tool used by central banks to rein in rising prices). US recovery would be threatened by rate rise says Fed chairman (The Times, Callum Jones) shows that the official position of America’s central bank, the Federal Reserve, is that although it just said that it will start tapering its economic support for the country’s economic recovery this month it won’t be increasing interest rates yet. ECB boss Lagarde insists interest rate is unlikely (Daily Telegraph) shows that the president of the ECB is also resisting calls to increase rates, saying that conditions for such a move have not yet been met but Housing market braces for higher interest rates (Daily Telegraph, Louis Ashworth) shows that the expectations are that a rate rise will be announced at today’s meeting of the Bank of England’s Monetary Policy Committee (MPC), mainly because the governor (Andrew Bailey) and other senior members of the MPC have been doing nothing to quell such expectations after only recently changing their stance dramatically. Service growth adds to rate rise calls with Bank decision on knife edge (The Guardian, Richard Partington) cites the latest results from the IHS Markit/CIPS survey which show a stronger-than-expected rise in activity for the all-important services sector, which will put even more pressure on the Bank of England to act sooner rather than later. * SO WHAT? * If interest rates DON’T go up, Bailey in particular is going to look like a complete tool because he has personally stoked speculation that interest rates will rise. Investors will be angry about him effectively misleading markets by doing

this. Mind you, I DO think that if he leaves rates unchanged, he might actually be able to get a temporary effect of raising rates without actually doing so (he’s sort of already had that with banks raising mortgage rates recently) which will buy him time to see more data and then ACTUALLY raise them in the December meeting. Conversely, if conditions aren’t actually as good as everyone is saying, he will have covered his 🍑 by actually leaving interest rates where they are. Oooh. Who knew Bank of England meetings/inflation chat/interest rate chat could be sooooo exciting?!?

On the energy side of things, Vestas and Orsted warn of tough times for renewable energy (Financial Times, Nathalie Thomas) shows that Danish energy company Orsted and wind turbine manufacturer Vestas are pretty downbeat about conditions for renewables as lack of wind, supply chain issues and increasing costs have made life more difficult for them. Vestas actually cut its full-year forecasts for operating profit margin for the second time this year and Orsted, the world’s biggest offshore wind farm developer, reiterated a downbeat outlook for 2021 thanks to lower wind speeds for the first nine months of this year. * SO WHAT? * We have seen this year that renewables, as things stand right now, are NOT the answer to our power generation needs because they just aren’t reliable enough (although the irony, of course, is that we need MORE renewables in order to reverse changes in climate that are MAKING our CURRENT efforts in renewables unpredictable!). Energy groups call for $3tn long duration storage push (Financial Times, Tom Wilson) shows that some of the world’s biggest energy and engineering companies have got together to form the Long Duration Energy Storage Council yesterday, calling for up to $3tn of investment into long duration energy storage, which will clearly be able to go some way towards smoothing out the volatility of renewable energy supply because it means that we’ll be able to hang on to more of what we generate for longer. This certainly sounds like something we all need to get behind!

Meanwhile, though, Coal miners profit from energy market turmoil (Financial Times, Neil Hume) shows that rising coal prices have resulted in miners like Thungela Resources (a Johannesburg-based miner which demerged from FTSE100 company Anglo American in June) seeing their share prices skyrocket. Glencore, Peabody Energy, Whitehaven Coal and Exxaro Resources are among the thermal coal miners to have benefited from strong demand for their product, especially from Asia. * SO WHAT? * This is going to be great news for investors who are allowed to invest in coal because they will get GOOD returns – but those who can’t will be left on the sidelines…

Ikea and Next cite worries about supply chains and UK poultry does without using emergency visas…

Ikea warns supply chaos and inflation will slow growth (Daily Telegraph) shows that, on the one hand, it is seeing strong underlying demand, but rising raw material prices and supply chain bottlenecks have hit net profits for the year to August – and it doesn’t see the situation changing any time soon. Next tempers its latest profit rise with caution over Christmas sales (The Times, Ashley Armstrong) paints a similar picture, although its recent performance has been very strong. The company is, however, painting a downbeat picture for the final quarter in that it expects profits to be hit by bigger spend on marketing to beef-up sales and the increased cost of using air freight. * SO WHAT? * It seems to me that there really is a risk here of pent-up consumer demand dissipating by the 

time supply chain problems ease if economic circumstances get more difficult. However, I do think that this will be a particular problem for the car industry as they are in the business of selling big ticket items that will be particularly vulnerable to tightening household budgets. They also face the other problem of potentially lower sales of petrol/diesel-powered vehicles as consumers put off purchases to wait and upgrade to an EV later on.

UK poultry industry to use only half of emergency visas for foreign workers (Financial Times, Judith Evans and Peter Foster) heralds the latest situation in the poultry industry as the British Poultry Council said producers only expect to take up 2,500-3,000 of the 5,500 emergency visas announced by the government to cover the period up to Christmas because they’ve nurtured fewer birds and employed more locals. Conversely, meat producers are likely to take up their full allocation of 800 visas for butchers. * SO WHAT? * I’m surprised by the former but not by the latter given the panic over food supplies leading into Christmas. It’ll be interesting to see how this develops.

Qualcomm booms and Facebook/Insta get back online…

Qualcomm posts record sales amid surging demand for 5G smartphones (Wall Street Journal, Meghan Bobrowsky) shows that the mobile phone chip giant posted record quarterly sales, and forecast more to come, due to booming demand for 5G phones. This is something we saw recently echoed by Samsung’s results and

although Qualcomm reckons chip shortages will continue in the first half of 2022, it expects the supply balance to be restored in the second half. In the meantime – cher-chiiiiing!

In Facebook and Instagram Messaging functions back up after outage (Wall Street Journal, Joseph Pisani) we see that both services came back online after suffering an outage yesterday afternoon – in what was the third disruption for Meta Platforms in a month. Facebook/Meta just isn’t catching a break at the moment, eh?

Allbirds has a good float, Lufthansa becomes profitable again and BMW takes the slow road…

In a quick scoot around some of the other interesting news today, Green trainer maker flies on market debut (The Times, Ashley Armstrong) highlights the successful debut of the eco-friendly trainer maker Allbirds on the NASDAQ as its share price ramped up by a whopping 95%! Allbirds claims that its shoes have a 30% lower carbon footprint than other trainers. * SO WHAT? * It’s not going to be a popular opinion, but I think that Allbirds is going to be a massive failure! It just has low barriers to entry and all the other trainer giants can make these shoes and swat them aside if they decide to put a bit of money aside to wade into this market. I think this is very niche and it will either get swallowed up by a big company that just wants to buy into the know-how they have already or swept aside.

Meanwhile, Lufthansa returns to profit as air travel resumes (Financial Times, Joe Miller) highlights a return to form for the airline as it managed to post quarterly profits that came in above analyst expectations, thereby becoming the second major European airline to pick itself off the floor

following last year’s pandemic lows. The German airline is still streamlining its business but it managed to turn a loss into a profit in the latest quarter. The question is, will the momentum continue??

Then I thought I’d mention BMW: taking the slow road to an electrified future (Financial Times, Lex) because it highlights the German carmaker as taking a more measured approach to the transition to EVs. It set out its plans for the future after announcing strong Q3 results and observed that many makers’ headlong dash to EVs does not sufficiently take into account the carbon footprint of a vehicle’s entire life cycle. It also cited limitations of car charging networks and forecast that 50% of the vehicles it sells by 2030 will be electric – which is far more reserved when you consider that Mercedes-owner Daimler wants that figure to be 100% by the same year. VW’s Audi is targeting ALL of its new vehicles to be electric after 2026. * SO WHAT? * This isn’t really what investors want to hear and so it is likely that the company’s share price may lag because of its more conservative view. However, I really do think that it is the more sensible option because charging networks (and the power generation to feed them!) will take quite some time to make mass-adoption truly viable. If that proves to be the case, BMW could be a massive winner IMO…

…in other news…

I thought I’d leave you today with some potentially useful advice in Mum explains Marks & Spencer hacks to get 80% off your food shop all year round (The Mirror, Levi Winchester) and a shocking discovery in some local woods in Woman finds terrifying ‘zombie-like’ mushroom with ‘eyes and mouth’ on woodland walk (The Mirror, Alahna Kindred). A scary mushroom 😱! Who’d have thought!