Thursday 07/04/22

1. In SANCTIONS, CONSEQUENCES & COVID NEWS, the US imposes “severe” sanctions, Russia retaliates, global trade continues to suffer the effects of war and VTB UK is on the verge of administration while Shanghai’s Covid problems could have global repercussions
2. In ENERGY NEWS, BoJo aims for a massive boost in offshore wind power and electricity heads for renationalisation
3. In CAR NEWS, VW wants to concentrate on premium models while Lookers predicts ongoing strength in used
4. In MISCELLANEOUS NEWS, Meta works on new coins, Amazon hits challenges, UK consumers get pushed into 35-year mortgages and Gymshark restructures
5. AND FINALLY, I thought I’d bring you the ultimate gift idea for the lazy b***ard in your life 🤣

So sanctions and consequences rage while Shanghai’s Covid problems continue to bite…

📢 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, WHICH WILL BE THE NEW REGULAR TIME ***. 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:

• If you were Elon Musk, what would you do to boost Twitter’s fortunes?
• How can Inditex (owner of Zara et al.) catch up with Shein?

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 😜!

*** PLEASE ALSO NOTE THAT THERE WILL BE NO WATSON’S DAILY TOMORROW. I’M TAKING MY ELDEST SON IN TO HOSPITAL FOR AN OPERATION STARTING AT 7.30AM SO I DON’T KNOW HOW LONG I WILL BE THERE FOR. PLEASE SEND POSITIVE VIBES – HE IS NOT LOOKING FORWARD TO IT! ***

US imposes ‘severe’ sanctions on Russian banks after Bucha atrocities (Financial Times, Courtney Weaver, James Politi, Colby Smith and Jasmine Cameron-Chileshe) shows that the US has turned the sanctions volume up a notch as it is now imposing “full blocking sanctions” that will stop Sberbank (Russia’s biggest financial institution) and Alfa-Bank (Russia’s biggest private bank) from transacting with any US institutions or individuals. In addition to this, the US also slapped Putin’s two adult daughters with sanctions along with various other individuals, prohibited any new American investments in Russia and further tightened sanctions on big Russian state-owned enterprises. The UK government also tightened sanctions by freezing Sberbank’s assets, banning imports of Russian iron and steel products and prohibiting any new investment into Russia. Meanwhile, Companies brace for ten-year Russia ban (The Times, Ashley Armstrong) shows that Russia is threatening to retaliate with more sanctions of its own as a ten-year ban from doing business in the country has been suggested if they do not return by May. * SO WHAT? * It sounds like the US is running out of options regarding what they can do

sanctions-wise and I think that the Russian threat is just plain stupid and something designed to play to the gallery. The fact is that whoever “wins” in the Russia/Ukraine war, Russia’s economy is going to be decimated and it will need all the help it can get to get back to anywhere near former glories. It won’t be able to do that on its own. I guess the threat is, however, one way of flushing out companies who might be wavering.

Meanwhile, we see the continued consequences of the invasion in Global trade falls 2.8% as Russia’s war in Ukraine hits container traffic (Financial Times, Martin Arnold and Valentina Romei) which cites the latest findings from the Kiel Institute for the World Economy (no, I’ve never heard of them either 🤣) which show that the value of global trade dropped between February and March as the Russia/Ukraine war resulted in a steep fall in container ship traffic from both countries. This shouldn’t come as a surprise, but it does put a number on it. Russian bank’s British division on the verge of administration (Daily Telegraph, Helen Cahill) shows that Russia’s #2 lender is close to putting its UK division into administration after sanctions prevented it from paying its debts – again, not surprising given the circumstances.

Elsewhere, Shanghai lockdown ‘will have a global effect on almost every trade’ (Financial Times, Thomas Hale, Gloria Li, Harry Dempsey and Eleanor Alcott) highlights the ongoing effects of the lockdowns in major Chinese cities on transport and logistics in the country. The trucking industry in particular is taking a real bashing because trucks have to avoid no-go areas. China is facing its worst Covid outbreak since Wuhan over two years ago and the increasingly strict restrictions are having a hugely disruptive effect on the flow of goods between airports, ports and big cities. Supply chain data firm FourKites reckons that cargo volumes running through the world’s largest port in Shanghai have fallen by around a third since March 12th as freight has been rerouted. Snoring colleagues, brushing teeth with the boss: inside Shanghai’s big office sleepover (Wall Street Journal, Elaine Yu, Natasha Khan and Cao Li) shows how some companies in Shanghai are now sleeping at the office for days or weeks at a time. * SO WHAT? * This really is a terrible state of affairs for all involved and I suspect that the repercussions won’t take long to have more of a global impact. I do wonder whether this is a reflection of the poorer efficacy of China’s vaccines, a distribution problem or a particularly virulent strain. If it’s the latter, then we may all be in for a nasty spring surprise.

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!

The government goes power-crazy…

Boris Johnson aims for fivefold boost to offshore wind power capacity (Financial Times, Nathalie Thomas and Sebastian Payne) shows that BoJo is due to announce plans today to quintuple the UK’s offshore wind power capacity by the end of the decade as part of a wider plan to make 95% of our electricity “low carbon”. Specific targets for other cheap renewables will not yet be forthcoming but there are plans for nuclear to account for 25% of our forecasted electricity demand by 2050. The plan was due to be unveiled a few weeks ago but there have been delays as politicians have been arguing about how much it’s all going to cost.

Then in UK to renationalise electricity system oversight (Financial Times, Nathalie Thomas) we see that the UK government is also going to create a new public body to take over some of the duties of the National Grid. It will oversee the transition away from fossil fuels, taking some of the responsibilities of the National Grid that the latter has had since privatisation in the 1990s, including some oversight of the gas network. * SO WHAT? * It does seem that the government is actually doing something towards ensuring a smooth transition away from fossil fuels but clearly the result will depend on successful execution of a proper strategy (and how much money the government’s willing to throw at this.

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!

VW aims high and Lookers stays bullish…

Volkswagen scraps models to target more pricey cars (Daily Telegraph, Howard Mustoe) shows that the company is planning on taking quite drastic steps to cut its model line-up right down in order to concentrate on producing fewer more profitable vehicles. In its pursuit of margins over volumes, it will cut the number of models it has across its marques from 100 currently to 40 by 2030, which will no doubt leave gaps for other car manufacturers to step in. * SO WHAT? * The company is banking on customers being OK with less choice, but given development costs etc. I think that this looks like a smart move. It will be interesting to see how the market segments if other manufacturers decide to go down the same road.

Lookers says used car prices to remain high this year (Financial Times, Peter Campbell) shows that the car dealership is remaining confident that the used car market

will remain buoyant because of the ongoing limited availability of new cars and owners changing vehicles at the end of fixed-term finance deals. It posted record annual profits thanks to strong demand in 2021 and Lookers/car sales: tight supply is more certain than strong demand (Financial Times, Lex) points out that the company has now reversed all of its 2020 losses and suggests that demand will remain stable for a while yet. * SO WHAT? * I think that increased consumer spending on holidays and household bills will put a bigger-than-expected dent in households’ ability to fork out big lump sum for a cars (generally in the form of a deposit). I also think that there is a real danger that, with the advent of EVs, people will just decide to wait a bit longer so they can go EV on their next purchase. If this happens, then I think that the market for used petrol and diesel cars is going to go down the toilet rapidly with supply flooding the market as we approach the 2030 deadline.

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!

Meta innovates, Amazon gets into a spot of bother, consumers go for 35-year mortgages and Gymshark restructures…

In a quick scoot around other interesting stories today, Facebook owner Meta targets finance with ‘Zuck Bucks’ and creator coins (Financial Times, Hannah Murphy) shows that Meta is looking at introducing virtual coins, tokens and lending services to its apps as part of a broad ambition to get into finance, undaunted by its miserable failure so far to launch a cryptocurrency. It is looking at alternative revenue streams and new features to excite users as they get increasingly jaded with what is already on offer. Rather than introducing a cryptocurrency with a blockchain backbone, it is thought that the company is looking at introducing in-app tokens that Meta controls, a bit like Robux in children’s game Roblox. It’s all in the early stages but sounds quite exciting, no? I think that, given Meta’s likely big role in the metaverse, getting something like this right could be huge for Meta’s future.

Amazon’s having a few problems at the moment. Sacked worker’s union victory brings appeals from more US sites (The Guardian, Gloria Oladipo) shows that staff at over 50 Amazon warehouses have been emboldened enough by last week’s vote to establish Amazon’s first ever union, Amazon Labor Union (ALU) that they have contacted the organisers of that vote. Amazon, which is the second largest employer in the US, tried very hard to prevent it from happening and it failed. Then in Pressure on Amazon in tax dispute (The Times, Callum Jones) we see that the

US Securities and Exchange Commission has put pressure on Amazon to be more open about its tax affairs by preventing the company’s move to block a shareholder vote on greater transparency. * SO WHAT? * Both of these things will be a thorn in the side of Amazon, but I think it’s big enough and ugly enough to look after itself. The good thing is that people and organisations feel confident enough to take on the monster – whether or not this will work ultimately is another thing as Amazon has plenty of fire power and has a couple of quid to spend on decent lawyers!

In the UK, Home buyers pushed into ultra-long loans (Daily Telegraph, Rachel Mortimer and Melissa Lawford) cites data from the FCA which shows that although average mortgage terms are based on 25 years, the appetite for 35-year loans has increased thanks to the red-hot property market at the moment. Is this a sign that we’re at the top of the market??

Then in Gymshark restructure will cut tenth of staff but create 100 jobs (Financial Times, Ian Johnston) we see that the British sportswear group is doing a reshuffle that will make over 10% of its staff redundant. The reshuffle is part of a repositioning by the company to make it ready for global expansion. Gymshark was keen to point out that the restructure was not due to poor financial performance (it saw its sales increase by over 50% in the year to July 2021). This does sound a bit iffy to me (why are they restructuring so drastically here if the company is on an expansion drive??), but I guess everyone will give them the benefit of the doubt for now at least given performance until now.

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!

…in other news…

So what gift do you buy for the lazy b**tard in your life? A motorised twisting fork for eating spaghetti? These prism glasses so you can read lying down? No, the answer is here: Motorized Electric Gaming Bed from Japan takes gaming furniture to the next level (SoraNews24, Casey Baseel). Note the supply of pot noodles in one of the photos. This guy is in it for the long term 🤣.