Thursday 15/12/22

  1. In MACRO, ENERGY & CRYPTO NEWS, the Fed hikes interest rates, the BoE looks likely to follow while inflation slows, Hunt considers more energy aid, Binance tries to reassure, more SBF dirt is uncovered, Hong Kong suffers crypto fallout and the FCA sticks the boot in
  2. In NEWS ON THE ECONOMIC DOWNTURN, UK house prices weaken, restaurants and pubs restrict hours, insolvencies rise and rail unions stick to their guns
  3. In CHINA NEWS, authorities stop counting asymptomatic Covid cases, Chinese insurers pull Covid cover and China has Arm problems
  4. In INDIVIDUAL COMPANY NEWS, HSBC caves to pressure and Inditex reiterates its China commitment while TikTok targets kids with harmful content
  5. AND FINALLY, I bring you some Christmas-themed cocktails…

1

MACRO, ENERGY & CRYPTO NEWS

So interest rate rises slow, Hunt throws a bone to business and the crypto nightmare continues…

📢 It’s Thursday, so it’s time for the one hour weekly Zoom call for SILVER and GOLD subscribers! This will be the LAST call I do THIS YEAR 😱! Click HERE to access the joining details. *** 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:

  • Why is bitcoin so strong and what do you think it will do in the next 3-6 months?
  • Is China taking the right stance with Covid right now? What would YOU do?

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 😜!

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

Fed raises rates by half a point as central banks enter new phase (Financial Times, Colby Smith and Kate Duguid) shows that the Fed raised its benchmark rate by 0.5% to 4.5%. The rate rise was less than the 0.75% hikes we have become accustomed to, but TBH this was well-flagged. Many expect other central banks to follow this lead and although UK inflation slows to 10.7% in November (Financial Times, Chris Giles) shows that inflation slowed to a rate below market expectations thanks to a slowdown in the rise of petrol and diesel prices, Interest rates expected to rise despite fall in inflation (The Times, Arthi Nachiappan) reiterates that inflation is still at very high levels and needs reining in. As things stand at the moment, the Bank of England has implemented eight consecutive interest rate rises but expects inflation to revert to its 2% target by 2024. It is, however, expected to raise rates at today’s meeting. All eyes will be on whether or not it follows the Fed’s lead with a “reduced” 0.5% hike.

It looks like Chancellor Jeremy Hunt is willing to throw a bone to businesses in Hunt looks at prolonging energy aid for all companies (Financial Times, Jim Pickard, Daniel Thomas and Nathalie Thomas) as he is said to be looking at how to support businesses with their energy bills once winter is over, which would indicate a softening of the current stance that only “vulnerable industries” will be eligible for help after March 20th. So far so great, but what may be disappointing is that the aid they get will be lower than it is now. * SO WHAT? * Although providing aid universally will be way easier to implement than targeting it, vulnerable businesses will get less than they would have done. The government has said that it will give businesses a proper steer on what’s happening April onwards by the end of this year.

The crypto-winter is continuing in earnest in Binance founder insists ‘business as usual’ after $1bn pulled out in a day (The Guardian, Alex Hern) as Changpeng Zhao (aka “CZ”) has been forced to defend his business due to over $1bn being pulled out of Binance in just one day! He tried to reassure nervous crypto bros and gals, saying that this just proves there is confidence in Binance’s structure (🤣🤣🤣what is this guy smoking?!?), saying that “I actually think it is a good idea to ‘stress test withdrawals’ on each CEX on a rotating basis”. What an absolute 🍆. Binance: crypto exchange could land with a FUD (Financial Times, Lex) calls it like it is – that there is a wider withdrawal from crypto in the aftermath of the FTX collapse – but also that the interconnected nature of crypto exchanges could prove to be their biggest weakness. FTX chief gave himself unfair VIP trading access, says regulator (Daily Telegraph, Matthew Field) highlights further dirt on Sam Bankman-Fried and the depths of his dodginess as he gave himself access to trading systems that allowed him early access to trades and almost unlimited amounts of money via his trading company Alameda Research, according to a legal filing from the US Commodity Futures Trading Commission (CFTC). This is just getting weirder and weirder, don’t you think? Meanwhile, Crypto hangover hits Hong Kong (Financial Times, Primrose Riordan) shows that Hong Kong’s recent plugging of crypto looks pretty mistimed, especially as regional rival Singapore has just been tightening controls on crypto. For now, though, Hong Kong financial secretary Paul Chan is reining it in a bit by saying that Hong Kong will take a cautious approach to crypto. Then in Incoming FCA chair says crypto firms facilitate money laundering (Financial Times, Laura Noonan) we see that Ashley Alder, who will soon be at the forefront of efforts to regulate crypto firms, has been telling MPs that he thinks that crypto platforms were “deliberately evasive”, enabled money laundering and created big risk. It’ll be interesting to see how this view clashes with the government’s previously-stated desire to make the UK a crypto hub of some sort. * SO WHAT? * Despite all this, bitcoin continues to be weathering all of this flak pretty well – although I still don’t know why or how!

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

NEWS ON THE ECONOMIC DOWNTURN

House prices slow down, hospitality suffers, insolvencies rise and unions get stronger…

London property prices tumble as mortgage costs hit landlords (Daily Telegraph, Alexa Phillips) shows that London house prices dropped by £5,000 in a month, according to the latest data from the Office for National Statistics although they actually rose everywhere else! A Knight Frank estate agent said that London prices would continue to lag the rest of the country apart from the most expensive areas which would benefit from cash buyers who aren’t affect by the cost of living crisis. In another interesting stat, almost 75% of estate agent branches said that the majority of homes they sold in November went for less than the asking price.

Understaffed restaurants and pubs cut festive hours (Daily Telegraph, Daniel Woolfson) highlights more misery for the hospitality sector – as if rail strikes weren’t bad enough, they are having to shorten hours because they can’t find the staff, according to trade association UK Hospitality and data company CGA.

The gloom continues in Insolvencies surge as cost of living crisis hits businesses (Daily Telegraph, Eir Nolsøe) as the latest data

from the Insolvency Service shows that company insolvencies shot up by 20% in November versus November 2021 to reach the second highest level since before the pandemic as corporate failures have picked up gradually since September. Sadly, I think the rate of failure will gather pace in the new year as businesses do their best to hang on for until the end of 2022 and subsequently reassess.

Then I thought I’d include How union’s hard line keeps paying off for rail industry workers (Daily Telegraph, Oliver Gill and Ben Butcher) as it is an interesting analysis of why the RMT strikes are working. Even though rail staff are way better paid than the average worker (£37,740 – £58,868 across four categories of rail worker versus the national average wage of £33,000 in 2022) the RMT rejected a 9% pay offer on Monday that is also way above what is on offer to other public sector workers. Their wages have also risen faster than the national average wage for the last ten years! Average pay has risen by 26% between 2011 and 2022, but train drivers’ pay has risen by 39% over the same period. On the other hand, pay for nurses and police officers have not kept up with inflation for the last ten years. The painful drama continues…

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

CHINA NEWS

China’s treatment of Covid continues to evolve and it has Arm problems…

China stops counting asymptomatic cases as Covid crisis deepens (Financial Times, Edward White and William Langley) highlights a novel way of helping your numbers look good – you just change the parameters! China won’t count asymptomatic Covid-19 cases any more but it will accelerate vaccinations at a time when the country has been hit by another outbreak. This will make it difficult to contextualise the rate at which this disease is spreading over this crucial winter period. Central Beijing remains deserted apart from delivery riders – but now even online vendors are warning of delivery delays because of lack of drivers. Chinese insurers pull coronavirus coverage as cases mount (Financial Times, Cheng Leng) doesn’t give much cause for confidence either as the whole Chinese insurance industry has stopped selling cheap policies that cover Covid infections as it tries to minimise the impact of a likely rush of claims due to the simultaneous relaxation of Covid measures and the emergence of a new outbreak.

Waterdrop, ZhongAn Online P&C Insurance and Yong An Insurance have all removed such policies. You do wonder whether the government is going to have to foot the bill in some way if this all escalates…

Further to what I said yesterday about China complaining to the WTO about US export controls, Export controls hit China’s access to Arm’s leading-edge chip designs (Financial Times, Qianer Liu, Anna Gross and Demetri Sevastopoulo) gives an example of where such controls are harming Chinese tech as even the mighty Alibaba can’t access some of the most advanced chip designs after Arm decided that the US and UK would not approve licences to export to China. * SO WHAT? * This is pretty momentous as it will be the first time that the British company will not have been able to export its most advanced designs to China! I suspect we will see more of this until such time as the WTO changes things or if there is a thawing of US-China relations…

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

INDIVIDUAL COMPANY NEWS

HSBC relents, Inditex commits to China and TikTok targets kids…

In a quick scoot around other interesting stories today, HSBC pledges to stop funding new oil and gasfields (The Times, Ben Martin) shows that Britain’s biggest bank has promised to stop financing new oil and gasfields just two months of being accused of greenwashing. This was part of a revised greener energy policy. Sounds good, but it’ll be interesting to see if rivals follow suit.

In retail, Inditex insists China remains ‘core’ market despite Covid disruption (Financial Times, Barney Jopson) shows that Zara’s owner reiterated its commitment to the Chinese market despite strict Covid restrictions denting sales there. It believes that there is strong demand there. More broadly, the company posted an 11%

rise in quarterly sales on a global basis, but profit growth was more pedestrian in comparison as costs continued to rise because of inflation. Sounds pretty decent considering, no?

Then in TikTok ‘targets children with suicide content within minutes’ (Daily Telegraph, Charles Hymas and Matthew Field) we see a worrying trend as the Center for Countering Digital Hate (CCDH) did an experiment and found that the social media platform exposed teenagers to self harm, suicide and eating disorder content every 39 seconds in its “For You” feed in the test. * SO WHAT? * The imminent online safety bill will place a duty of care on social media companies to protect kids – and if they don’t, they will be fined up to 10% of their global turnover. Monitoring this will clearly be difficult but this sort of thing is waaaaaay overdue!

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…

I thought that this sounded pretty good – and it’s quite easy for me get to 😁! I may well go there next week when I’m “off” and give these things a try: ‘I tried a Christmas Dinner cocktail at a hidden bar – the dessert drink blew my mind’ (The Mirror, Courtney Pochin). I’ll probably go to Borough Market as well – particularly as the stuff in this video looks amazing! I do like Borough Market at Christmas but haven’t been for years (for obvious reasons)! If you can get there I would recommend it 👍

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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 **
7,496 (-0.09%)33,966.35 (-0.42%)3,995.32 (-0.61%)11,170.89 (-0.76%)14,460 (-0.26%)6,731 (-0.21%)28,036 (-0.45%)3,169 (-0.25%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$76.717$81.973$1,793.761.239171.06570135.6991.1627817,726

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