Thursday 05/08/21

1. In MACRO, MARKETS & SUPPLY CHAIN NEWS, Germany’s Greens make up ground, the UK’s pingdemic holds back growth, the LSE looks at rule changes and the lorry driver shortage continues to bite
2. In BATTERY & CAR-RELATED NEWS, Tesla has a big battery fire, Nissan ponders battery recycling, a British battery start-up edges towards an IPO and automakers commit further to EVs while GM and Toyota announce solid performances
3. In FINTECH & FINANCIALS NEWS, Robinhood has quite the day and Commerzbank falls to loss while Legal & General hits £1bn
4. In MISCELLANEOUS NEWS, US house prices continue to rise, petrol prices hit a record high and Uber’s ridership increases
5. AND FINALLY, I bring you eel cola and a Nutella game-changer…

So Germany’s Greens eye the election, UK has a pingdemic pullback, the LSE considers rule changes and the delivery driver shortage continues…

📢 It’s Thursday – so it’s time for my 30-minute Instagram Live At Five where I will run through the week’s key stories AND the one hour weekly ZOOM call for paying subscribers where I will do the same but in more detail and with much more interaction 👍 The ZOOM call will start at 5.30pm and run until 6.30pm. See you there!

In wake of summer floods, German Greens seek fresh election momentum (Financial Times, Erika Solomon) shows that Germany’s Green party is starting to campaign with September’s election in mind and is, intriguingly, choosing to invoke memories of Chernobyl rather than the recent floods or southern Europe’s wildfires with potential voters. As things stand currently, the Greens have a slight chance of leading Germany but a much stronger chance of getting into government. They experienced a surge in popularity a few months ago which subsided after its chancellor candidate Annalena Baerbock’s reputation was called into question. However, they now have around 20% of the vote in the polls versus the CDU’s 28% and the Social Democrats’ 17%, so it is all to play for. Given that Germany is the driving force of Europe, September’s election results could have a huge effect on the continent, so I shall try to keep you up-to-date on the situation!

Back home, I don’t think you’ll find it too surprising to see Pingdemic drags on economic recovery (The Times, Philip Aldrick), which cites the latest Purchasing Managers’ Index from IHS Markit/CIPS and shows that although labour shortages, rising wages and higher costs are driving prices up at their fastest rate for at least 25 years the true potential of the economy is being held back by millions of staff being forced to self-isolate under Covid-19 rules.

Then in Listing rules to be eased to woo startups to FTSE100 (Daily Telegraph, James Titcomb, Simon Foy and Laura Onita) we see that the LSE is pushing through rule

changes to make it more attractive for high growth companies, such as The Hut Group, to enter the FTSE100. FTSE Russell, which owns most of the major UK indexes, is looking at changing the current “free float” rule where companies can only list on the main exchange if they have 25% of their shares available to be publicly traded and reducing it to 10%. The new rules could be implemented in time for the spring “window” where a number of companies are expected to list and could include Klarna which, if it listed on the LSE, could be in the top 20 biggest companies of the FTSE100. New rules would also make it easier for companies with a dual-class share structure (e.g. Wise and Deliveroo) to join the bigger indexes, which would mean that the companies in question could attract a wider share of investors, including tracker funds. * SO WHAT? * Some investors are obviously going to whinge about this and say that standards are slipping, but I guess it just means that they are going to have to spend more time doing their homework. The danger, of course, is that tracker funds just buy these shares blindly and that active funds who don’t really want to buy shares that have very small free floats or whose leaders happen to be particularly eccentric will be forced to do so in order to at least keep pace with the benchmark. Still, free float does not always equal “dodgy”, so I would have thought that if the fund managers do their jobs they have a decent chance of avoiding the landmines.

The lack of lorry drivers in the UK is continuing to bite as per Shop owners take the wheel after UK driver shortage hits supplies (Financial Times, Andy Bounds, Judith Evans and Jonathan Eley) which shows how convenience store owners are just getting in their own vans and picking up their own supplies from wholesalers as deliveries just aren’t being made and John Lewis hands up to £5k pay raise to lorry drivers amid national shortage (The Guardian) shows that John Lewis has joined the likes of M&S and Tesco in bumping up pay and perks to attract new drivers. * SO WHAT? * I think that it’s getting increasingly important for the government to get involved and change the rules for lorry drivers in order to ensure goods get to supermarket shelves in particular as the current situation is really limited the upside to our economy at the moment. They remain in feet-dragging mode for now, though…

Tesla has a fire, Nissan considers battery recylcling, a British EV charging start-up chases an IPO and automakers further commit to an EV future…

I have to confess that Tesla ‘big battery’ fire fuels concerns over lithium risks (Financial Times, Henry Sanderson) is a story that I managed to overlook – so I’m trying to rectify that now by bringing it to your attention! This article highlights a fire at one of Tesla’s largest battery installations – at Moorabool near Geelong in Australia – which brings into focus the dangers of lithium ion batteries. The “Victorian Big Battery” is the biggest in the country and has 210 packs that can store up to 450 megawatt-hours of energy for the electricity grid. It had been scheduled to start operation before the peak summer demand this year but this will be delayed until all safety concerns are met. * SO WHAT? * As time goes by, there is increasing reliance on big lithium ion batteries to store renewable energy but there have been 38 big lithium ion battery fires since 2018 and they are harder to put out, something I mentioned earlier this week. I don’t think this is a disaster right now, but it is something that we are going to have to give more consideration to as such battery packs become increasingly prevalent.

Meanwhile, Nissan aims to maintain lead over Tesla and VW in reusing batteries (Financial Times, Kana Inagaki) shows that Nissan is pulling ahead of EV rivals regarding giving its car batteries a second life. It has so far been collecting batteries from old Leafs around the world that are then used to store renewable energy at 7-Eleven convenience stores, power railway crossings and delivery robots in factories. * SO WHAT? * What a brilliant idea! As we accelerate towards an electric world, it is becoming increasingly important to generate and store electricity as well as recycle the batteries that are being used in the first place otherwise all the effort will be for nothing! It’s great to hear that Nissan is already doing this and I hope that other manufacturers will continue in their efforts.

Electric vehicle charging start-up backed by Leahy eyes £500m market float (Daily Telegraph, Rachel Millard) shows that a British energy tech start-up – Myenergi, which makes charging systems – is heading towards an IPO that could value it at up to £500m! Not bad for a company started in 2016! It is most known for its Zappi EV charging system that lets you power up your car by using rooftop solar panels. In addition to an IPO, the company is also considering options to be sold to private equity or a company in a related industry. * SO WHAT? * Given the current momentum in EV sales, I think that the upside here is enormous in terms of uptake, but you would have thought that other companies are going to get involved in a big way for precisely the same reason! A company like this needs to take advantage of its momentum now and get that much-needed cash injection to expand before bigger players start to get more involved and provide more competition IMO.

As for the car makers themselves, Auto makers aim to boost EV sales to 40-50% of US sales by 2030 (Wall Street Journal, Ben Foldy and Stech Ferek) shows that auto makers including GM, Ford and Stellantis are aiming to up their efforts on EVs as president of the Alliance for Automotive Innovation, John Bozzella, observed that “This industry’s going to spend $330billion over the next five years on electrification alone” – clearly this is a proper chunk of change. Meanwhile, GM sparks back into the black (The Times, Callum Jones) shows that America’s biggest carmaker is confident enough to raise forecasts for the full year although its latest quarterly results fell short of market expectations as the costs of an EV recall in particular dented the financials. Conversely, Toyota: record profits presage a downhill path (Financial Times, Lex) highlights record quarterly profits for the Japanese manufacturer but it left its full-year estimates unchanged. It benefited most this quarter from US buyers as rivals GM and Ford had production problems caused by the semiconductor shortage. * SO WHAT? * It will be interesting to see how much semiconductor shortages and overall supply chain issues affect vehicles sales. So far, it’s put the boosters underneath second-hand car sales in particular, but I think that auto makers really need people to buy NEW cars in order to finance the huge investment needed in EVs. It’s all very well announcing ambitious objectives, but if they don’t sell loads of cars – SOON – then deadlines and plans will all go out of the window. They really need to take advantage of consumers who want to buy and are sitting on larger-than-usual amounts of cash saved under lockdown.

Robinhood becomes its own meme stock, Commerzbank suffers and L&G announces £1bn in profits…

In Robinhood soars after retail traders flock to shares (Financial Times, Madison Darbyshire and Eric Platt) we see that the trading app that had a rather underwhelming stock market debut recently had a storming day yesterday as its share price shot up by 50% which prompted a number of trading halts on the NASDAQ (it actually went up by 82% at one stage!). Momentum has been gathering recently as famed investor Cathie Wood of Ark Invest (and who is the one who reckons Bitcoin will hit $500,000), was one of many big-name investors piling in. Options trading also began on Robinhood yesterday and the hype has now pushed Robinhood’s valuation above companies such as Ford, Kraft Heinz and asset manager T Rowe Price. * SO WHAT? * This is kind of hilarious. As I have said before, much as though I like the idea behind better access to trading overall, I think that Robinhood’s biggest threat is regulation. If options trading, for instance, results in more retail investors losing their shirts, they need to get involved. I think it is dangerous for people who have zero understanding of what they are doing piling into stuff they don’t understand (especially if they get more into debt to do it). This is not investment – it’s gambling and people need to be protected for their own sake as it is society at large that will have to pick up the pieces if it all goes wrong.

Elsewhere, Commerzbank swings to loss as restructuring costs bite (Financial Times, Olaf Storbeck) shows a European bank that hasn’t done very well in Q2 thanks to costs of a failed IT project and €500m in a major restructuring. New chief exec Manfred Knof is currently trying to turn things around – and clearly there’s a lot of mess to be cleared up – but he left full-year guidance unchanged. This does contrast somewhat with banks generally having a blowout Q2 in both Europe and the US.

Then in Legal & General’s profit exceeds £1bn after mixed Covid impact (Financial Times, Ian Smith) we see that the British insurer has benefited from more people dying from Covid as this resulted in the reduction in the amount it had to pay out in pensions. On the other hand, it saw a huge rise in the number of coronavirus-related claims in H1. Overall, though, it posted a 14% rise in its adjusted operating profit over the period, which came in above analyst expectations as it also benefited from its exposure to housebuilding.

US house prices and UK petrol prices pile the pressure on and Uber saw a rise in ridership…

In other news today, the pressure continues on central banks regarding what to do about inflation as ‘It has never been like this’: US house price spiral worries policymakers (Financial Times, Lauren Fedor and Colby Smith) shows just how hot the US property market continues to be and Petrol prices reach eight-year high as demand rises (Daily Telegraph, Louis Ashworth) shows how the high oil price continues to filter through to pump prices, which is hitting

staycationers driving long distances in the UK. The average price for a litre of petrol was 135.1p, the most it’s been since September 2013. As always, the RAC said supermarket forecourts are the cheapest places to fuel versus motorway service stations. High fuel prices are bound to affect inflation as they are part of the basket of prices that is used to calculate the number!

Meanwhile, Uber ridership rebounds from pandemic lows (Wall Street Journal, Meghan Bobrowsky) highlights a good quarter for the ride-hailer from a ridership point of view as it rebounded from the disaster of last year, but ongoing concerns about driver shortages and the effect of the Delta variant continue to linger. Its rides business is doing OK, but overall performance is being dragged down by the cost of its food-delivery business at the moment.

…in other news…

I thought that I’d leave you today with the incredibly bizarre Our Japanese-language reporter tries eel cola so you don’t have to (SoraNews24, Shannon). But don’t worry, if that’s left you feeling a bit queasy, Nutella fans are losing their minds after learning ‘correct’ way to eat the spread (The Mirror, Courtney Pochin) is something I think we can all get behind (unless you’ve got a nut allergy of course).