Thursday 24/03/22

1. In MACRO, ENERGY & MARKETS NEWS, we take a look at the Spring Statement, Biden’s bid to unite Europe, Scholz’s tricky position, BoJo on windfarms, Russia’s market opening again and how Ukraine will affect thinking on China and Japan’s relations with Russia
2. In EV NEWS, BP pours money into chargers and the SMMT says Britain is behind on EVs but Americans are warming to the EV life
3. In COMMERCIAL REAL ESTATE NEWS, GLP hunts for warehouses and Big Tech continues to fire physical expansion
4. In INDIVIDUAL COMPANY NEWS, Tencent’s revenue growth takes a knock and Saga relies on cruisin’
5. AND FINALLY, I show you how your coffee choices reflect your personality…

So the Spring Statement underwhelms, Biden is set to unite Europe and BoJo gets windy…

📢 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:

• Who will benefit from the Spring statement (I’m asking this because it’s just too easy to say who is going to suffer!)? 
• Should ESG investors buy oil and defence stocks now? Why?

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 crisis in Ukraine is beyond words. Many stories that we see now of tragedy, sacrifice and loss make everything else pale into insignificance. However, I will continue to bring you news on this and everything else in the business and financial markets news because it may well have repercussions that have major consequences for us all and that we still need to understand better.

The Spring Statement was announced yesterday and I think it would be fair to say that, to most, it was underwhelming – and to some, it was disastrous. Rishi Sunak banks public finances windfall for pre-election tax cut (Financial Times, George Parker, Chris Giles and Jim Pickard) does a reasonable overview of the main bits of the Statement yesterday saying that Sunak had thrown the public a few bones in the form of a £6bn cut in National Insurance for 30m workers and a small cut in fuel duty but when you consider that official forecasts now say that inflation is going to peak close to 9% by year end, this is scant consolation. The independent Office for Budget Responsibility said that household disposable incomes probably wouldn’t return to pre-Covid levels until the end of 2024 while many pointed out that we are now seeing a fall in living standards not witness since 1956. Sunak’s spring measures for poorer households look little more than hopeful (The Guardian, Nils Pratley) warns that the measures offered will do little to help low-income households and could easily be eclipsed by macroeconomic factors that would render them useless, Fears for families as inflation hits 10-year high (The Times, Mehreen Khan) shows that things are going to get tighter for families as they continue to battle with rising fuel, energy and fuel prices and VAT rise ‘risks killing off many restaurants’ (Daily Telegraph, Melissa Lawford) shows that pubs and restaurants aren’t too happy either as they are going to have to start paying VAT at 20% from April after almost two years of no-or-reduced rates. * SO WHAT? * I think that Sunak’s tinkering pales beside energy crisis (Daily Telegraph, Ben Wright) makes an excellent point in that this is NOT the Budget and that the Chancellor might be keeping his powder dry for later in the year and At last, some clear blue water between No11 and No10 (Daily Telegraph, Matthew Lynn) suggests that this Statement was made with half an eye to an election that could happen in spring 2024 when Sunak would like to be able to say that the current government has navigated the country through Brexit, Covid, the war and a period of massive inflation whilst then being in a position to offer some freebies to voters. Whilst not being particularly impressed by this Statement, I would say that NO amount of money would have been enough to satisfy everyone. Yes, the government could have been more supportive but I guess that when you are faced with dire economic circumstances, rampant inflation and a war with Russia you have to make difficult

choices. I wonder whether Sunak is waiting for a few months to save a few quid whilst at the same time saving his powder for when the 💩 could really hit the fan later on this year if energy prices are still high. By waiting a bit longer, the businesses that were looking pretty wobbly anyway will fail and households will have a period of time to readjust to higher bills while potentially utility bill rises might have the edge taken off them as we head into the warmer temperatures of spring and summer. I am not trying to defend Sunak here – I am just thinking about the reasoning behind him not taking the easier option of just doling out the cash as a crowd-pleaser (which is what everyone was calling for). Overall, this is painful, but I would be more worried if he displayed the same level of inaction in the Budget later on this year. He may even be hoping that by then the Ukraine/Russia war will be over as well and that we might have more certainty by then to issue more effective measures. Wishful thinking?

Meanwhile, Biden heads for Europe with mission to maintain west’s unity in response to Russia (Financial Times, James Politi and Henry Foy) shows that the US President is going to try and throw his weight around to “unite the rest of the free world” against Russia via a three-day visit to NATO HQ starting today. The easy bit was getting widespread condemnation of Russia’s actions but the much stickier bit is going to be getting countries that have been drinking the Russian Kool-Aid for years to wean themselves off it and crack down on the invader via ostensibly non-military means. Olaf Scholz warns immediate Russian energy ban would trigger recession in Europe (Financial Times, Martin Arnold, Joe Miller, Erika Solomon and Valentina Romei) is a prime example of a Euro-wobbler (but for good cause since it is so reliant on Russian gas). In the meantime, and still on the subject of energy, Boris Johnson to back more UK onshore wind farms to boost energy security (Financial Times, Jim Pickard, Nathalie Thomas and Sebastian Payne) highlights plans by BoJo to push through proposals next week to encourage the building of more offshore windfarms and relax planning permission for onshore ones although Wind farms knock 8pc off house prices, experts warn ahead of planning overhaul (Daily Telegraph, Melissa Lawford) shows that such expansion isn’t going to be 100% plain sailing. Still, I guess if the government is going to be pushing oil and nuclear, it needs to show that it’s still committed to wind power.

Elsewhere, Traders brace for falls as Moex reopens (The Times, Tom Howard) shows that the Moscow Exchange reopens today after being shut for almost a month following the invasion of Ukraine. Stocks fell by 45% on news of the invasion, but then recovered a bit the following day after which the exchange closed. The market will only be open for four hours and there will be trading on just 33 stocks, including Sberbank, Gazprom and Aeroflot. Short-selling will not be allowed. Even if the government pours money in here to stop the inevitable slide, you wonder how long this could last especially if foreign investors continue to abandon.

I thought that it was also worth mentioning another couple of stories to read if you have access and if you have the time because they raise important questions. Foreign businesses in China need to heed the lessons of Russian exodus (Financial Times, Peggy Hollinger) prompts discussion about how what’s happening with Russia in the aftermath of the invasion of Ukraine could be a sign of things to come should China start throwing its weight about with Taiwan and that businesses would be advised to take precautionary measures. Treatment of Uyghurs, muslim groups in Xinjiang and the ongoing crackdown in Hong Kong is also making more sanctions look increasingly likely. Invasion of Ukraine forces Japan to rethink foreign policy over Russia (Financial Times, Kathrin Hille) points out that Japan’s subtle courting of Russia over the last decade or so is now looking somewhat misguided and that it needs to go back to the drawing board on foreign policy in forging partnerships to guard against China. Both of these stories raise interesting points following the invasion of Ukraine that don’t have easy fixes, but that need to be addressed.

BP ups the charging game, Britain falls behind on EVs but Americans warm to them…

BP to triple the number of chargers (The Times, Emily Gosden) shows that BP is making plans to increase the number of charging points from 8,000 currently to 24,000 by 2030 as part of a £1bn plan to be unveiled this week. This is an increase on its original plans for 16,000 and it is doing this via its Pulse brand, which used to be known as Chargemaster. This is particularly important given Britain falling behind in the race to electric vehicle targets (The Times, Robert Lea), which cites a report, entitled Plugging the Gap, published by the Society for Motor Manufacturers and Traders (SMMT) that concludes that we are not providing enough publicly available chargers to hit government targets for EVs. It also says that we are falling behind Europe on investment in this area and that there are major regional disparities with far more chargers being concentrated in London and the south east. * SO WHAT? * The SMMT is bound to say this because it is representing its members. However, I do think that they make many valid points regarding the relative lack of incentives to buy EVs versus our European cousins and given that households are

going to get no respite from tightening budgets due to inflation and fuel costs etc., buying expensive EVs is surely going to be pushed down the priority list for most.

Meanwhile, across The Pond, High gasoline prices have consumers thinking electric (Wall Street Journal, Scott Patterson) shows that more American motorists are seriously considering going electric as fuel costs continue to stay at high levels. Petrol prices hit a new high on March 11th at $4.33 a gallon – about $1.35 higher than they were a year ago – and Northern Trust reckons that for every $1 the petrol price rises, households are paying another $50 on their bills. A recent survey by consumer-tracker Piplsay said that people are nervous about rising fuel prices and 49% say that running a non-EV just isn’t affordable. * SO WHAT? * Clearly, higher oil prices are freaking people out around the world and even gas-guzzling Americans are getting worried. The main thing I have against the proliferation of EVs in the US, though, is that the country is so vast that having a big enough charging infrastructure is going to be very tricky indeed. I really think that EVs should do well in built up towns and cities, but apart from that I don’t thing EV adoption is going to grow particularly quickly. I do, however, think that EVs make much more sense in, say, the UK because it is smaller and more universally built-up so improving the charging network should, arguably, be easier.

Warehousing’s allure continues and Big Tech keeps expanding its physical footprint…

I mentioned the attraction of warehousing the other day and GLP taps flight to safety in warehouses with European fund (Financial Times, George Hammond) highlights the fact that Asia’s biggest warehouse operator (based in Singapore) has just raised €1.2bn in new funds to buy European warehouse assets as investors migrate away from shops and offices. European warehouses: demand for space will keep investors satisfied (Financial Times, Lex) reiterates the massive size of Prologis’ ambitions but adds that there is still mileage to be had in being present in the warehousing space considering the ongoing growth prospects. * SO WHAT? * Although everyone is all over this sector, I still think that there is growth to be had given that

the last few years have taught us the value of having inventory and that online shopping is going to continue to grow. Having inventory requires warehouses – and I think this requirement is going to continue.

Then in Big Tech: growing power drives land grab (Financial Times, Lex) we see that the American tech giants are not only expanding online – they are buying up office space like there’s no tomorrow. Although you probably won’t be surprised about Amazon being one of the most land-hungry Big Tech companies in the US, Microsoft is adding to its HQ and Meta has also been in expansion mode with the extension of its Menlo Park campus and data centres around the world. Apple and Alphabet have also been active as well and given that they’ve all got massive piles of cash and impressive incomes, it is unlikely that this Big Tech-fuelled land grab is going to end any time soon. * SO WHAT? * When you consider the increasing demand for gigafactories, nuclear power stations, warehousing etc., it would seem that commercial property is going to continue to be a very active area for quite some time to come!

Tencent has difficulties and Saga cruises..

Tencent’s revenue growth hit by China’s regulatory crackdown (Financial Times, Primrose Riordan) shows that Chinese tech giant Tencent suffered its lowest revenue growth ever following Beijing’s ongoing regulatory crackdown, which has sucked resources away from game development while advertising performance also weakened. Gaming got hit by the government restricting gaming time of minors and online advertising was dented by education and game sectors being affected by the crackdown. * SO WHAT? * I don’t think the clouds have gone away just yet but I think that Tencent is big enough and ugly enough to get through this even though Xi’s regime has never really truly warmed to this company and what they do.

Meanwhile, Cruises put Saga back on course as losses halve (The Times, Ashley Armstrong) shows that losses have subsided considerably thanks to a recovery in cruise bookings following the relaxation of Covid restrictions. Its insurance business also seems to be chugging along OK as well. The company concedes that there are still uncertainties but it thinks that it will feel minimal impact from the Ukraine/Russia war although, of course, that will no doubt depend on how long things go on for and whether it is contained or escalates.

…in other news…

I’m not sure if there’s a tea equivalent out there but apparently you can tell a lot about someone’s personality by their coffee choices! Have a look at Your coffee order could determine whether you’re selfish or fun, expert says (The Mirror, Zahna Eklund). For the record, I’m a double-espresso drinker by default, unless I think that the establishment’s coffee is going to be 💩 in which case I’ll probably opt for a cappuccino or flat white. In terms of tea, fave “conventional” tea is Darjeeling but I also like jasmine, oolong and mint teas as well (that thing they do in Morocco with the tea is quite entertaining).