Thursday 21/10/21

  1. In MACRO, ENERGY AND CRYPTO NEWS, inflation growth eases – but wages, paint prices and utility bills rise – SMRs could be the future of nuke and Bitcoin hits a new high
  2. In CHINA CRACKDOWN NEWS, new home prices fall , Evergrande’s planned asset sale fails and South Korea feels Chinese heat
  3. In ELECTRIC VEHICLE NEWS, Tesla keeps its winning streak and Coventry is open for giga-action
  4. In INDIVIDUAL COMPANY NEWS, PayPal pursues Pinterest and Facebook plans a rebrand (and gets a fine)
  5. AND FINALLY, I bring you some photos of squirrels…



So speculation intensifies about interest rates, an online sales tax divides, Zemmour is the new threat, Goto goes under and the government wants to push heat pumps…

📢 It’s Thursday – so it’s time the one hour weekly ZOOM call for SILVER and GOLD subscribers where I will do a detailed review of the week as well as chance for Q&A and discussion 👍 The ZOOM call will start at 5.30pm and run until 6.30pm. See you there! I will also be doing another call straight afterwards aimed at university societies. If you want details for that, please ask your presidents to get in contact with me! The details are also on our socials.

UK inflation falls despite rising petrol prices and supply chain crisis (The Guardian, Richard Partington) highlights something I mentioned yesterday – that the UK rate of inflation eased from 3.2% in August to 3.1% in September, according to data from the Office for National Statistics. However, when you consider UK employers ready to increase pay in order to keep staff (Financial Times, Delphine Strauss), which cites findings by research group XpertHR that show over 80% of private sector employers expect to increase pay at their next reviews and random things like Paint prices to soar as cost of raw materials and supply delays rise (Financial Times, Harry Dempsey), which cites Akzo Noble (owner of brands including Dulux) saying that prices will rise further due to higher costs and shortages of additives, petrochemicals and packaging and Expect 18 more months of rising bills, UK householders warned (The Guardian, Jillian Ambrose), you can see that pressure on household finances is ongoing – and seemingly growing all the time!

Having said that, Mini nuclear reactors vie for key role in UK’s push to hit climate targets (Financial Times, Nathalie Thomas and Sylvia Pfeifer) shows that the advent of Small Modular Reactors (SMRs) is getting a bit closer as the UK government has now named a potential site next to where some old reactors are being decommissioned. Rolls-Royce is leading a consortium to produce a UK design and expects the cost of each reactor to be £2.2bn for the first five and then £1.8bn for further units. * SO WHAT? * SMRs have a lot of good things going for them – they are cheaper and quicker to build and their footprint is much smaller than traditional reactors. Given that our existing reactors are all to be retired by 2035 and that we have recently realised that we are not quite there yet on the renewable energy front, pouring money into this kind of technology makes a lot of sense. However, even in the best case scenario it seems that a Rolls-Royce SMR won’t see the light of day until 2031. Let’s just hope that we manage to generate more electricity in the meantime – especially considering the ongoing take-up of electric vehicles that will soak up increasing amounts of power in the next few years.

Then in Bitcoin climbs past $65,000 to new record high (Daily Telegraph, James Warrington) we see that Bitcoin rose to a new record high following the launch of the first Bitcoin ETF, which I referred to yesterday. It smashed through the $65,000 level, passing its previous peak in April meaning that it has now risen by more than 120% this  year! Ether also rose on renewed confidence in crypto assets. As I keep saying, the biggest danger to crypto IMO is regulation. If central banks, politicians and lawmakers decide to clampdown, as they have done in China, the future of at least some crypto assets could start to look decidedly uncertain. But until then, it just seems to be having a great run.



New home prices lose momentum, Evergrande fails again and South Korea feels the heat…

China new home prices hit by first month-on-month fall since 2015 (Financial Times, Thomas Hale, William Langley and Andy Lin) cites the latest data from the National Bureau of Statistics which shows that prices of new homes across China fell month-on-month in September for the first time since April 2015 and the ongoing crackdown could potentially slow things down even further. Given that China’s property sector accounts for around 30% of China’s GDP, you can see that any wobbles will have big repercussions.

Talking of wobbles, Evergrande’s plan to sell property services division collapses (Financial Times, Thomas Hale) shows that embattled-and-massively-indebted Chinese real estate developer Evergrande has failed in its latest attempt to raise some cash by selling its property services unit. It also turns out that Evergrande’s asset sales have so far only been limited to the offloading of part of its stake in Shenjing Bank as the pressure continues to build on its mounting interest rate payments. It seems that no-one is willing to lend it a helping hand…

Then in South Korean companies face own ‘Squid Game’ in Xi Jinping’s China (Financial Times, Song Jung-a and Edward White) we see that South Korean companies, particularly those involved in the entertainment industry, are taking a real pasting. Game developer Krafton (which makes PlayerUnknown’s Battlegrounds) has watched its share price fall below its IPO price as it suffered from China’s crackdown on “spiritual opium” (Xi Jinping’s opinion of gaming) by imposing three-hour weekly limits on online gaming for younger kids. Other developers such as Pearl Abyss and Nexon are also rethinking their plans for China as a result and now Krafton is actually accelerating plans for India, whose gaming market has more than doubled in size between 2015 and 2019. South Korea’s $13.7bn cosmetics industry is also feeling Beijing’s ire as authorities clamped down on so-called effeminate fashion trends popularised by South Korean celebs. * SO WHAT? * I think that doing business in China has always been a toss-up between the tempting upside of massive market potential and the ever-present risk that the authorities will just shut you down (either directly or indirectly). It has been the major growth market for many companies and industries over the years, but it seems that after the spread of clampdowns on various areas of the economy over the last year the environment is getting much more difficult. Having broader geographical focus is definitely desirable in current circumstances and I think that the emergence of K-Pop and South Korean entertainment in the last few years could be the industry’s way to spread its wings permanently beyond Asia.



Tesla continues its winning streak and Coventry could be the next gigafactory…

Tesla posts record quarterly earnings on supply chain resilience (Wall Street Journal, Rebecca Elliott) shows that the electric car company managed to post a third consecutive quarter of profits thanks in some part to its relative lack of supply chain disruptions. Rising production in China helped to power the delivery of 73% more vehicles than it did in the same quarter last year as it also managed to cut expenses. * SO WHAT? * Tesla’s vertical integration has helped it a lot with supply chain issues that have been

hobbling rivals, but it is not completely immune. Two new production facilities should also be coming online by the end of the year – one in Berlin and the other in Austin, Texas. Meanwhile, rivals continue to play catch-up…

Then in Mayor’s nod for Coventry gigafactory (The Times, Robert Lea) we see that Cov is bidding to put itself on the map by offering up the site of Coventry Airport, which has the potential to be one of the biggest sites for a gigafactory. The West Midland’s mayor, Andy Street, is backing the plan to close the airport and turn it over to EV battery production but, as yet, there is no planning permission, insufficient power supply and no customers – so this is purely theoretical at the moment. Still, it sounds good and could really help long term EV production in this country.



PayPal eyes up Pinterest and Facebook is set to make changes…

PayPal is in talks to buy Pinterest (Wall Street Journal, Dana Cimilluca and Cara Lombardo) shows that the payments company and social media platform are in early stage talks that may or may not lead to a deal. Given that Pinterest is a $40bn company, there would be a LOT of money involved. * SO WHAT? * PayPal’s investors didn’t react too well to the deal when it was announced as its share price fell by over 6% on the news whereas Pinterest’s rose by almost 13%! I suspect that this is because investors probably think that PayPal will over-pay.

Theoretically, I can see that the two might be a good fit as Pinterest is wanting to make more money from e-commerce and PayPal is obviously all over that. The question is that would the benefits from a deal justify what would probably be an enormous price! We’ll just have to wait and see…

In the meantime, UK competition watchdog fines Facebook £50m over Giphy deal (Financial Times, Kate Beioley and Adrienne Klasa) shows that the UK’s Competition and Markets Authority has just slapped Facebook with a £50.5m fine regarding its purchase in 2020 of Giphy. It’s still unclear as to whether the CMA will give Facebook the go-ahead for the purchase of Giphy but a decision is expected by the end of the year, when it could still tell the social media giant to sell Giphy.



…in other news…

Tough week? Feeling in need of a gentle lift? How about taking a look at Rwandan refugee takes incredible photos of squirrels to handle trauma (The Mirror, Jessica Taylor). OK, so the title’s a bit bizarre but the photos are quite surprising! It’s good that he found something to give him the headspace he needs 👍

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Some of today’s market, commodity & currency moves (as at 0757hrs 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 **
7,223 (+0.08%)35,609.34 (+0.43%)4,536.19 (+0.37%)15,121.68 (-0.05%)15,523 (+0.05%)6,706 (+0.54%)28,709 (-1.87%)3,595 (+0.22%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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