Thursday 16/03/23

1. In MACRO NEWS, we take a look at the budget and its winners and losers
2. In FINANCIALS NEWS, Credit Suisse causes a massive panic, Stripe raises money and Charles Schwab limps on
3. In TECH NEWS, the metaverse hits actual reality, the US threatens to ban TikTok, the UK invests in a “BritGPT”, Brussels looks to restrict imports of Chinese green tech and Zipline launches a short range delivery service
4. In INDIVIDUAL COMPANY NEWS, Trainline finds a way, Inditex beats H&M and John Lewis gets a new CEO
5. AND FINALLY, I bring you the most ridiculous (yet practical) fascinator

So we have a look at some of the winners and losers of yesterday’s Budget and initial reactions…

📢 I’ll shortly be publishing my annual P/Review where I roundup the news of the year in 2022 and then outline predictions for themes in 2023. Because it’s such a big report 😱, I will be publishing it in stages. There is nothing like this anywhere else, and it will help your understanding of what’s going on enormously so keep an eye out for it! In the meantime, I’ve recorded a special podcast where Ralph Hebgen and I talk through some key themes to watch out for this year. You can listen to it HERE or watch it HERE.

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:

So…Chancellor Jeremy Hunt announced the budget yesterday. If you want to see a broad breakdown and some of the details, have a look at this: Budget 2023: key points at a glance (The Guardian, Heather Stewart). However, Winners and losers from the Budget 2023 – and what it means for your money (Daily Telegraph, Rachel Mortimer and Charlotte Gifford) does a good job of identifying what we really want to know – who were the winners and who were the losers! WINNERS included older workers (the abolition of the lifetime tax-free pension allowance), parents (who will be entitled to 30 hours of free childcare per week for children under five – previously, this was only applicable to three and four-year-olds), payers of energy bills (the household energy price guarantee will be extended for an extra three months until June), drivers (the 5p cut to petrol and diesel duty is being extended for a year and local authorities get access to £200m to sort out potholes), pubs (duty on average strength draught beer will be frozen), leisure centres (£63m will be made available to keep leisure centres and swimming pools going) and foster families (who get a higher tax-free allowance). LOSERS included British business (corporation tax will rise from 19% to 25% next month, as planned, for businesses with profits of over £250,000. Those with less than £50,000 will still pay 19% while those in between will get some relief. On the plus side, every pound invested in equipment can be offset from taxable profit), new parents (they will have to wait for over two years to get the full 30 hours entitlement as it will be released in stages), taxpayers (income tax, inheritance tax and National Insurance thresholds will be frozen and high earners will pay 45% at the lower threshold of £125,140 versus the current £150,000. The lowest threshold of £12,570 will be frozen), savers (Hunt has maintained

📢 It’s Thursday, so it’s time for the one hour weekly Zoom call for SILVER and GOLD subscribers! 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:

• Will the Conservatives win the next election with this budget? Why?
• What would you like to see regulators and banks doing to stop a repeat of SVB?

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 😜!

the minimum savings allowance threshold), flyers (increase in Air Passenger Duty for domestic flights and long-haul flights. Short haul international flights will see a freeze in APD) and smokers (the price of a pack of ciggies will be £1.15 higher on average as tobacco duty was lifted in line with inflation, plus a 2% levy).

There were plenty of opinions expressed as per Middle classes are the big winners in budget handouts (The Times, Mehreen Khan), which said that the big winners were the middle classes with young children, motorists and older moneyed professionals – and not the striking public sector workers. He had more money to play with than had been thought last November thanks to falling energy prices and rising inflation pushing up tax revenues. Hunt accused of ‘a tax on the City’ as he battles to boost business investment (Daily Telegraph, Oliver Gill) reflects the cries of anguish from business – although the 100% tax relief on capital investments was welcomed, UK small businesses hit out at lack of help in Budget (Financial Times, Daniel Thomas) focuses on the disappointment of small businesses who were hoping for more help with rising taxes, energy bills and labour shortages and There’s no such thing as free childcare (Financial Times, Clear Barrett) praises the idea of free childcare starting at a younger age but wishes it would click in sooner although  Nurseries worry about England’s huge expansion of free childcare (Financial Times, Bethan Staton) would suggest that even if it did, the current provision would not be enough particularly as thousands of nursery providers shut down as a result of the pandemic.

Other than that, More foreign workers will be let in to fill labour market gaps (Financial Times, Jim Pickard) highlights the government quietly allowing more foreign workers into the UK to plug the skills and labour gap – by firstly putting construction workers on the Shortage Occupation List. Brexiteers will clearly not like this, but the fact is there’s a labour shortage so something had to be done. They will join vets, civil engineers, graphic designers and care workers. * SO WHAT? * The Budget never satisfies everyone and those who didn’t get much from it will complain loudly while those who benefited from it will probably be celebrating in a muted fashion. It seems that Jezza targeted potential voters with his policies with an eye to an election that is due next year – but he’s a politician and they would all do the same thing IMO! It is good that the economy is in a place to have “given” him some extra cash to play with and proving the IMF/ECB doom-mongers wrong on the UK (again).

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!

Credit Suisse causes massive panic, Stripe raises money and Charles Schwab limps on…

Although yesterday was a “big day” for many because of the Budget, there was something that markets were taking far more seriously – the potential collapse of Swiss banking stalwart Credit Suisse and the prospect of banking contagion stemming from the collapse of Silvergate last week and then SVB and Signature. More than £75bn wiped off FTSE 100 amid Credit Suisse crisis (The Guardian, Kalyeena Makortoff) highlights the market sell-off that happened yesterday after the bank said that it had found “material weaknesses” in its financial reporting controls and because its biggest shareholder, Saudi National Bank said it wouldn’t be putting more money in (because current regulations stop it from owning over 10%). However, Credit Suisse takes $54bn loan from Swiss central bank after share price plunge (The Guardian, Kalyeena Makortoff and Graeme Wearden) showed the bank taking a “precautionary” humungous loan from Switzerland’s central bank to maintain its liquidity and bolster confidence that it wouldn’t go under. Credit Suisse: what is happening at Swiss bank and should we be worried? (The Guardian, Kalyeena Makortoff) breaks down the reasons why everyone is tearing their hair out – essentially it comes down to investors being worried that Credit Suisse is the tip of the iceberg and that banks generally are in a worse state than they are letting on.

Is Credit Suisse, the bad apple of European banking, really ‘too big to fail, too big to be saved’? (Daily Telegraph, Simon Foy) is an interesting article that discusses the possibility of it failing (after all, controls were put in place in the wake of the financial crisis to deal with such things). * SO WHAT? * Overall, I’d say that Switzerland is unlikely to want to see it fail because it will really damage their reputation as a proper financial centre and I’d add that Credit Suisse has been a basket case for a while now with scandal after scandal so I would imagine that its problems are mainly its own rather than something more systemic. I think that if enough investors believe this, markets will calm down (and I think that Switzerland’s central bank getting involved should have helped this greatly). If things get worse, though, perhaps it could be nationalised.

More banks could go under, warns Larry Fink (Daily Telegraph, Matt Oliver and Eir Nolsøe) cites BlackRock’s chief exec, Larry Fink, as saying that recent banking failures in the US could herald the start of a “slow, rolling” crisis that could see further failures. * SO WHAT? * This sounds dramatic, but much in the way that I am generally a bit sceptical about economists because they are forever changing their forecasts, I am VERY sceptical of fund managers who make market commentary because by and large they will be talking their own book. You never know – behind the scenes they may be looking for a chance to buy into banks when the share prices are at rock bottom because of all of this! This is pure speculation of course, but hopefully you see what I mean…

Elsewhere, Stripe raises more than $6.5bn at $50bn valuation in fall from 2021 peak (Financial Times, George Hammond) shows two things IMO: firstly, it shows how the fintech was willing to swallow its pride and raise money at a valuation that was about 50% from its peak and secondly, it shows just how desperate it must have been to get the money in by listing against a backdrop of economic conditions that are far from ideal! It will, however, mean that the company will be able to meet the billions of dollars of tax liabilities tied to its employees stock units. * SO WHAT? * Stripe is perhaps seen as a bellwether of last year’s super-hot tech names – but it is not alone in suffering. Its closest quoted rival, Dutch payments company Adyen, has seen its share price plummet by 55% from its 2021 peak and PayPal is faring even worse – it’s now at 25% of the levels it enjoyed in the boom times of 2021! Perhaps lesser companies would have walked away and waited for better times – although in Stripe’s case it had the added pressure of vesting employee stock units. Ever-willing to jump onto the hype fun bus, the company said that it would benefit from AI as it said that it is currently working with OpenAI, creator of ChatGPT, to integrate AI into its payment processing. If in doubt, mention AI in there somewhere and your stock is bound to boom 🤣…

Then in Charles Schwab: US’s favourite broker is far from broken (Financial Times, Lex) we see that America’s largest brokerage, Charles Schwab, lost 25% of its value over the last week due to investor fears of contagion and that it will see big withdrawals à la SVB. However, unlike SVB, it is better capitalised, better insured and better backed. Sure, there is a risk of contagion, but equally, the sell-off could have been overdone – although we’ll only be able to judge this in hindsight 😜.

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 feels reality, TikTok faces a ban, the UK wants to build its own chatbot, Brussels aims to restrict China green tech imports and Zipline offers fun delivery…

Meta: virtual reality ambitions meet real-world problems (Financial Times, Lex) follows on from this week’s news of big layoffs at Meta Platforms and says that Zuck is doing the right thing for now by cutting costs and doing the right thing for the future by investing in the metaverse and artificial intelligence but that it is coming at a high price. Cutting spending on the metaverse may help more (Meta is currently spending about double what Google is on R&D currently), but it will need to rely on its size (over 2bn users) to lumber on forwards.

Sell TikTok or face US ban, White House tells app’s Chinese owners (Daily Telegraph) sounds a stark warning from the Biden administration to ByteDance, which reiterates a threat that Trump made during his presidency. * SO WHAT? * At the moment, 60% of ByteDance’s shares are owned by global investors, 20% by employees and 20% by the founders. TikTok’s chief exec Shou Zi Chew is sheduled to appear before Congress next week. If it was banned, there would be major legal hurdles and big ramifications given the popularity of the platform.

Meanwhile, UK to invest £900m in supercomputer in bid to build own ‘BritGPT’ (The Guardian, Dan Milmo and Alex Hern) shows that the Treasury is going to throw almost £1bn at building an exascale computer and establishing a new AI research body. This sounds quite impressive, but we’re not going to know the fruits of this for quite some time…

In Brussels to curb imports of Chinese green tech (Financial Times, Andy Bounds and Alice Hancock) we see that the European Commission is expected later today to unveil measures in the Net Zero Industry Act that will restrict the proliferation of Chinese green technologies by booting bidders from public contracts and making it more difficult for buyers to access subsidies. This will be part of a general drive to address China’s dominance in areas such as solar panels and heat pumps. Feisty! I wonder how China will retaliate?

Then in Delivery drone operator Zipline launches short-range service (Financial Times, Patrick McGee) we see that the world’s biggest drone logistics service, Zipline, yesterday unveiled a short-route delivery system using its P2 Zip drone that will enable customers in some US cities to get prescriptions, lab tests or – bizarrely – order-made salads within 10minutes. Hmmm. Sounds like hype to me although I like the idea! Surely this would be great for transporting organ donations and blood to hospitals etc.

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!

Trainline is on track, Inditex whups H&M and John Lewis gets a new CEO…

In a quick scoot around some of today’s other interesting stories, Trainline navigates strikes to lift sales (The Times, Katie Prescott) shows that net annual ticket sales shot up by 72% since last year despite all the disruption caused by the strikes! Sales got a nice boost from ticket sales to foreign travellers visiting Europe which attract higher commissions. UK ticket sales were up by 55% and international sales by 125% versus the previous 12 months! Impressive stuff! I would have thought that this is going to improve from here as strikes reduce, more people travel for leisure and more people return to commuting – but maybe not at the same pace!

Zara owner Inditex makes material gains over H&M (The Times, Isabella Fish) shows that Inditex is again beating rival H&M as it was able to pass on higher material costs to customers while H&M couldn’t. Inditex (owner of Zara, Massimo Dutti, Pull & Bear etc.)

saw its profits rise by 27% and revenues by 18% in the year to January 31st – and it even announced a chunky dividend increase into the bargain! In contrast, H&M’s profits fell by two-thirds in 2022 versus the previous year. * SO WHAT? * Inditex wins again! You do wonder whether it’s going to be too late now for H&M to raise prices – so at least Inditex has been able to do it so far. This is a highly competitive sector but I think that Inditex is way ahead at the moment in so many ways. Where does it go from here though??

Then in John Lewis looks to chief executive for turnaround (The Times, Isabella Fish) we see that the ailing retailer has just recruited a new CEO, Nish Kankiwala, who has been an NED for John Lewis since April 2021. However, I think this is an opportunity missed because although Kankiwala has an impressive background in consumer goods, he is notably light on experience in retail. I really think that a retail expert needs to be brought in to address the core business!

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…

This has got to be the most ridiculous (and yet practical) example of headwear ever to be worn at a racecourse: Crafty woman sneaks pizza into Cheltenham Ladies’ Day with unusual fascinator (The Mirror, Zahna Eklund). Amazing!