Thursday 06/01/22

  1. In MACRO & CRYPTO NEWS, US markets move on interest rate hints, Macron wants to “p!ss off” unvaccinated, the UK economy is held back, Goldman puts a price on Bitcoin and we look at the value of NFTs
  2. In CAR-RELATED NEWS, Stellantis gets a big Amazon order, carmakers continue to commit to EVs, EV sales rise in the UK and we see why range may not be the way forward
  3. In CONSUMER/RETAIL NEWS, food prices rise in Hong Kong and the UK, Brits spend on home entertainment, supermarkets face uncertainty, Majestic Wine relies on South Africa and WFH presents high street challenges
  4. In MISCELLANEOUS NEWS, Beyond Meat gets a KFC boost and metaverse hardware could be the next big thing
  5. AND FINALLY, I bring you Freddy Mercury in cat form and news of the latest Greggs offering…

1

MACRO & CRYPTO NEWS

US markets drop, Macron takes aim at the unvaccinated, the UK economy gets held back, Goldman Sachs puts a value on Bitcoin and NFTs get a price tag as well…

Hello everyone! I’m still not “officially” back until Monday, but am experimenting with a few things regarding writing Watson’s Daily that will hopefully end up with you getting it earlier than you have been. The next Watson’s Daily will be published on Monday next week – so see you then!

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In Fed signal on higher rates ‘soon’ triggers Wall Street sell-off (The Times, Callum Jones) we see that the release of the minutes of last month’s Federal Reserve meeting has caused a bit of a stir because they hint that America’s “very tight” labour market could push its central bank to raise interest rates sooner than had been expected. Investors dash out of US tech stocks in powerful market rotation (Financial Times, Eric Platt and Joe Rennison) shows that investors sold out of tech stock winners that profited under the pandemic, accelerating the recent trend of switching in to “old school” sectors like banks and big industrial groups – as well as bombed-out sectors like airlines and other travel-related companies. “Spec-tech” (refers to “speculative” technology companies with high valuations) is getting particularly badly hit in the sector rotation.

Meanwhile, the master-of-charisma-charm-and-empathy that is France’s President Macron wants to send a clear message: Macron says his strategy is to ‘p!ss off’ France’s unvaccinated as Covid surges (Financial Times, Leila Abboud). He said that he wants to effectively force the unvaccinated to get vaccinated by restricting their access to things like restaurants, cinemas and other social activities. * SO WHAT? * The way he expressed opinion was criticised because of its bluntness, but I guess he is just saying in public what many other governments and

leaders are saying behind closed doors. I really would not be surprised if people will not be able to travel abroad if they are unvaccinated – either by being restricted by their own governments or destination governments (Novak Djokovic is a prime current example of this!). Clearly this is just speculation on my part, but it is one way that the government could try to force people to take vaccines. This would be particularly unfortunate for those who aren’t taking the vaccine through necessity and not by choice.

In the UK, Stalled recovery curtails investment and saps confidence (The Guardian, Phillip Inman) cites the results of the latest British Chambers of Commerce survey which shows that Britain’s economy was losing momentum even before the Omicron variant reared its head last year due to rising inflation and a shortage of imported goods. Many respondents to its quarterly survey of nigh on 5,500 firms said that they were running low on cash and had shelved investment plans in order to just survive in the short term. Companies to raise prices as inflation fears grow (The Times, Simon Duke) cites the same report but homes in on the 58% of respondents who said that they expect to charge customers more for goods and services over the next quarter – the highest percentage ever for this survey. It certainly looks like inflation is not going away any time soon!

Meanwhile, in the wonderful world of crypto, Bitcoin is the new gold (The Times, Simon Duke) shows that analysts at Goldman Sachs reckon that Bitcoin could hit $100,000 within five years if its adoption becomes more widespread. They got to this figure by estimating the size of the “store of value” market at estimating that Bitcoin now accounts for 20% of it, giving the current stock of Bitcoin a value of $700bn. This compares with the value of gold being $2.6tn. However, if Bitcoin’s share moves up to 50%, then this could equate to each Bitcoin being worth $100,000. Having said this, analysts reckon that one major limiting factor for Bitcoin could be the massive (and increasing) amount of electricity mining of the cryptocurrency soaks up.

Meanwhile, NFT marketplace is valued at $13bn (The Times, Callum Jones) cites OpenSea, a blockchain start-up, as achieving an implied valuation of over $13bn in its most recent fundraising where it raised $300m, highlighting the ongoing surge in interest in NFTs. Open Sea claims that its platform has over 80 million NFTs and 600,000 users. This massive valuation is particularly impressive given that the company was only founded in late 2017! There are many sceptics out there, but in the meantime, OpenSea’s 90 employees must be laughing!

2

CAR-RELATED NEWS

Stellantis gets a big order, EVs get more commitment, sales rise and we see that range may not be the issue…

Stellantis asks Alexa to ride in digital dashboards (The Times, Robert Lea) shows that the owner of the Vauxhall and Peugeot brands (among others) is going to be supplying commercial vehicles for Amazon and use its Alexa virtual assistant in its cars. The announcement was made at CES, the world’s most important tech trade fair, which is going on in Las Vegas at the moment. Stellantis and Amazon said that they were going to be working together on software to form the “digital cockpit” of the future and the latter’s infotainment systems will be available in Stellantis’ vehicles in 2024. I think this will be good for both as it gives Amazon more “distribution” for Alexa and Stellantis gets a big customer.

Auto makers supercharge move into electric vehicles (Wall Street Journal, Mike Colias, Nick Kostov and Peter Landers) cites further announcements at the CES as Chrysler said it would move to 100% EV in 2028, Sony said it would “explore entering” the market for EVs, and GM unveiled the all-electric version of its top-selling Silverado pickup truck, which it said would be more high-tech and have a longer driving range than Ford’s Lightning F-150. Mind you, it looks like Ford’s offering will be hitting the market first – potentially by a year as the F-150 goes on sale in limited numbers this Spring.

Staying on the subject of EVs, North-south divide emerges as UK electric vehicle sales hit record high (Financial Times, Peter Campbell) cites data from the Society of Motor Manufacturers and Traders which show that the

rising sales of EVs are particularly acute in London and the south-east of England. It says that this will remain the case unless more is done about on-street charging in the UK generally. 20% of EV sales were in London and the south-east versus 10% in Wales and northern England. * SO WHAT? * The government really needs to up its game in terms of helping to grow the charging network if it is to stick to its target of ending the sale of new petrol and diesel cars by 2030.

Bearing this in mind, Race to leave ‘range anxiety’ in rear-view mirror (Daily Telegraph, Howard Mustoe) shows that electric car makers who are concentrating on increasing the range of their cars (as per the 600-mile Merc I mentioned yesterday) could be focusing on the wrong thing. Basically, the argument is that more range = more range, but a heavier vehicle because this requires more batteries. Therefore, rather than concentrating on the range of the car, it would be more efficient to focus on providing a better charging network if you assume that most journeys we take are less than 30 miles and that most people can’t do a journey of more than 600 miles without needing a break! * SO WHAT? * I think that this is a really interesting argument and, actually, I would have thought that THREE things would need to happen for there to be true mass-adoption. Firstly, you would have to improve the charging network (as per what the article says above) to banish range anxiety. Secondly, you would need to have charging times to decrease SIGNIFICANTLY to make it less of a chore. Thirdly, I think you need EV prices to fall as, currently, people are having to pay a premium of around £10,000 for the EV equivalent of a petrol vehicle. This will take time, though! I think that on-street charging will help in the immediate future (because it takes so many hours to charge current batteries at the moment), but I think that they will eventually be rendered useless if charging can be completed in a shorter time.

3

CONSUMER/RETAIL NEWS

Consumers face food price rises and spend money on home entertainment while supermarkets face uncertainty, Majestic Wine gets a South African boost and WFH hits the high street…

Hong Kong faces higher food prices as government tightens pandemic restrictions (Financial Times, Primrose Riordan and Chan Ho-him) shows that Hong Kong’s consumers are going to be facing a jump in food prices after authorities cancelled cargo flights from eight countries for the next fortnight (including the US, UK, Canada and Australia) to protect itself from the spread of Omicron. Closer to home, Grocery inflation adds £15 to shopping baskets in December (The Guardian, Joanna Partridge) cites data from Kantar which shows that higher food prices fed through to households over the Christmas period and Supermarkets face uncertain new year after festive boost (Daily Telegraph, Laura Onita) shows the flipside to this and, after a near-record festive period for supermarkets, the outlook is unclear as inflation and rising costs threaten profit margins. * SO WHAT? * Will the German discounters Aldi and Lidl come back to the fore once more as households get increasingly cost-conscious in 2022 with increasing pressure on their budgets? It might be harder for them to do this than it has been in the past given that other supermarkets, like Sainsbury’s, are doing a lot of price-matching. If you also factor in rumours that Amazon might be opening 260 grocery stores in the UK by the end of 2025, it looks like there might be tricky times ahead!

Meanwhile, British consumers have been spending money on keeping themselves amused in UK spends a record £9.7bn on home entertainment in 2021 (The Guardian, Mark Sweney) as the Entertainment Retailers Association (ERA) annual report showed that we spent a record amount on digital and “analogue” entertainment last year, although this was all powered to a great extent by streaming TV and music services. Will this momentum continue, though, as we get more physical freedom?

South Africa is a growing success at Majestic Wine (The Times, Dominic Walsh) shows that falling volumes of wine from New Zealand (due to difficult harvests) have been more than made up for by South African wine and Majestic reckons this trend could continue beyond Christmas. Interestingly, it added that its store managers think that Greece could also be a country to watch wine-wise. The wine seller saw record sales after a late rally in the week before Christmas and had been able to avoid supply chain issues by stocking up early.

Working from home creates new crisis for high street (Daily Telegraph, Hannah Boland) shows that the UK high street could be facing more challenges as people work from home in increasing numbers as the latest figures from Springboard show that Plan B restrictions put the mockers on the high street recovery going into Christmas. * SO WHAT? * I guess that now Christmas is out of the way, there is less impetus for people to trudge to the shops to buy presents – and that there is the risk that they revert to buying online. On the flipside, this may prove to be a boon for high streets in the ‘burbs with fewer people commuting into big cities.

4

MISCELLANEOUS NEWS

Beyond meet gets a finger-lickin’ boost and metaverse excitement rears its head…

KFC to sell fake ‘chicken’ in tie-up with Beyond Meat (Daily Telegraph) shows that KFC parent company Yum Brands announced it would be selling plant-based Beyond Fried Chicken next week for a limited time at US outlets. This heralds a new partnership for Beyond Meat. Yum’s Taco Bell chain is also working with Beyond Meat and the share price of the latter rose by 7.2% in early trading yesterday before falling 5% down on the day. Beyond Meat: faux fried chicken lacks sizzle (Financial Times, Lex) highlights Beyond Meat’s fading star as its value has fallen from $12bn at its peak to $4bn today as it faces the reality of living up to previous hype. * SO WHAT? * I think that Beyond Meat, and others like it, just need to continue to chip away at increasing distribution by doing deals with restaurants and carrying on with efforts to reduce production costs and improving the quality of its wares. Yes, it got a lot of hype at the beginning, but even as a meat-eater I really do rate Beyond Meat’s products which I think will only get better. Better and more prolific marketing wouldn’t hurt either IMO!

Investors gear up for ‘gold rush’ in metaverse hardware (Financial Times, Leo Lewis, Christian Davis and Song Jung-a) looks at a potential trend that everyone’s getting excited about at CES. The evolution of the metaverse will necessitate more processors, more computing power and more wearable devices to access and investors are getting excited by the possibility of a massive boom in the resulting demand for things like semiconductors, servers, sensors, etc. Companies such as Nvidia, TSMC, Wiwynn and Goertek could also benefit. * SO WHAT? * I know that this sounds exciting – and I’m excited as well! However, I have also seen excitement about 3D TVs fall flat – and in my first ever Watson’s Yearly report, which I published over five years ago, I got swept up in the hype around VR which – let’s be honest – has failed to catch on for quite some time now. I think that the metaverse is a great concept, but it will take many years before we really see widespread adoption IMO.

5

...AND FINALLY...

…in other news…

It seems that we now have conclusive evidence that the legendary lead singer of Queen, Freddy Mercury, has been reincarnated in cat form in Moustached cat who ‘looks like Freddie Mercury’ is capturing people’s hearts (The Mirror, Zahna Eklund). In other news, it was a historic day for LadBaby as per Ed Sheeran gives LadBaby his Greggs black card after social media star broke records with Christmas number one Sausage Rolls For Everyone (Daily Mail, Owen Tonks). TBF, I think that LadBaby has done more for Greggs’ sausage roll sales over the years than Ed has 🤣!

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Some of today’s market, commodity & currency moves (as at hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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