Tuesday 02/11/21

  1. In MACRO, INFLATION & CRYPTO NEWS, India commits to an emissions target, factory prices skyrocket, diesel prices reach new highs and Bitcoin attracts more interest
  2. In FINANCIALS NEWS, Franklin Templeton makes a bolt-on acquisition, Barclays has leadership turmoil and Nubank seeks a $50bn valuation
  3. In AUTOMOTIVE NEWS, Jaguar suffers from lack of chips and Rivian Automotive prepares for market
  4. In INDIVIDUAL COMPANY NEWS, HNA presents a potential template for an Evergrande restructure, Ryanair mulls a delisting from the LSE and Darktrace sees its shares crater again
  5. AND FINALLY, I bring you a dodgy-looking illusion…

1

MACRO, INFLATION & CRYPTO NEWS

So India commits, inflationary pressures increase and Bitcoin garners further interest…

I thought I’d mention India steps forward with new climate pledge at COP26 (Financial Times, Jim Pickard, Camilla Hodgson and Leslie Hook) because it is the lead story in today’s Financial Times, but I think that Indian PM Narendra Modi’s pledge to cut emissions to net zero by 2070 is laughable. 2070?!? 2070?!? How is that a step forward??? ANYONE can say that because they’ll all be dead by the time that happens!!! India is the world’s third worst polluter and added that it aims to get half of its energy from renewables by the end of this decade. Various other countries said they’d target net zero by various random years with a zero on the end but the biggies – US and China – made NET ZERO promises at all! So far, I’d have to agree with Greta Thunberg’s criticism of politicians making “blah, blah, blah” promises. China’s Xi Jinping, Brazil’s Jair “slayer of the rain forest” Bolsonaro and Turkey’s mild-mannered 😂 president Erdogan were all notable absences. I guess at least they are not pretending! Of course US president Joe Biden offered up some hot air, wagging the finger at everyone else but then failed to offer any new advances himself. Money is what is going to make a difference here. If banks don’t lend money to fossil fuel companies to finance projects and more companies put their money where their mouth is regarding climate change commitment then we stand a fighting chance for change. I have been very sceptical about the successful implementation of environment-enhancing measures until now, but given that the world is dragging itself out of one of the most serious pandemics ever known, is hugely in debt and we are STILL talking about building back better, I think we actually stand a chance of making a difference this time around. If we enter another downturn in the next few years, activists can always remind politicians of the

promises made in the direst of circumstances, reducing any wiggle room for excuses. Also, I think that the increasing prevalence of social media can help to keep awareness going more than has been possible before. Even oil companies are trying to change to renewables and Saudi Arabia’s Mohammed bin Salman, for all his faults/controversies, seems to be keen to wean his country off the black stuff. Let’s hope that promises turn to action for all our sakes!

You’ll no doubt be aware of the intensifying inflation/interest rate chat going on at the moment as we are now just days away from the Bank of England’s Monetary Policy Committee meeting to decide what they are going to do with the interest rate. Soaring costs force factories to increase prices at a record rate (The Times, Simon Duke) shows that manufacturers have raised their prices by their steepest rate for over two decades, according to the latest IHS Markit/CIPS Purchasing Managers’ Index and UK diesel prices reach record high in blow to households and businesses (The Guardian, Jillian Ambrose) highlights diesel prices reaching their highest price ever just one week after petrol prices reached their highest ever price! All of this will filter down to, and put further pressure on, household finances. As things stand at the moment, the market is expecting the Bank of England to raise the inflation rate when it meets this Thursday.

Then in Bitcoin surge spurs City to recruit crypto natives (Financial Times, Jonathan Guthrie) we see the interesting phenomenon of a growing trend of recruitment in crypto-related jobs as companies seem to be desperate to recruit staff with the requisite crypto know-how. Bitcoin accounts for around 40% of the value of all cryptocurrencies and it seems that companies (even ones who were previously more crypto-sceptic) are now recruiting in order to ready themselves for any potential boom in trading that increased legitimacy might bring. Will crypto be able to survive the expected onslaught of politicians and regulators?

2

FINANCIALS NEWS

Franklin Templeton goes shopping, Barclays has trouble at the top and Brazil’s Nubank announces a valuation target…

Franklin Templeton buys alternatives firm Lexington for $1.75bn (Financial Times, Antoine Gara and Harriet Agnew) shows that asset manager Franklin Templeton is buying the private equity firm Lexington Partners as part of its efforts to expand in the alternative assets business. It has most recently bought private credit manager Benefit Street Partners, real estate investor Clarion Partners and K2 Advisors, the hedge fund. It’s quite interesting to see that this acquisition comes only days after the mutual fund firm T Rowe Price announced the $4.2bn acquisition of credit manager Oak Hill Advisors. * SO WHAT? * I guess this gives the companies concerned more scale and breadth of service offering to their clients who are getting increasingly picky about their investments and who they park their money with. It’s also a move to fight back against the growing might of passive funds, like Vanguard, who charge way lower fees. If managers can point to various different services in their offering, they feel more justified in their fee structures.

There’s a lot of hoo-hah in today’s press about the departure of the head of Barclays in articles like Jes Staley: why did the FCA investigate and are its findings public (The Guardian, Kalyeena Makortoff), which say that his departure was prompted by preliminary findings of an investigation linking him to dodgy financier Jeffrey Epstein, Barclays/Jes Staley: risk taker got it right on strategy, wrong on Epstein (Financial Times, Lex), which says that it’s now lost quite a successful leader to be replaced by someone who is quite different (CS Venkatarakrishnan) and Barclays all at sea after another rushed exit (Daily Telegraph, Simon Foy), which points out that this is the latest Barclays CEO to have to leave under a cloud for controversial reasons (although, TBH, he put in six years as CEO there which isn’t that bad for being a grand fromage!). * SO WHAT? * At the end of the day, they lost a relatively successful leader unexpectedly, and investors and others will be a bit concerned as to whether the “new” guy can keep the momentum going.

Nubank targets $50bn valuation in New York IPO (Financial Times, Michael Pooler and Nicholas Megaw) shows that the loss-making Brazilian digital lender is targeting a valuation north of $50bn in its proposed New York IPO, which will make it one of Latin America’s biggest companies. It wants to raise over $3bn from the flotation. If it achieved such a valuation, this would make it the third biggest US IPO so far this year! Will investors be as bullish about Nubank’s future as the company itself?!?

3

AUTOMOTIVE NEWS

Jaguar suffers from the chip shortage and Rivian Automotive prepares for floation…

Chip shortage puts brakes on Jaguar (The Times, Alex Ralph) highlights another poor performance by Jaguar Land Rover, as its Indian owner Tata Motors announced retail sales fell by almost 20% in Q1 thanks to the worldwide chip shortage. Sales almost halved in the UK but weren’t as bad in China, Europe and North America. The company aims to prioritise production of their most profitable vehicles and cut costs, but the good news is that demand is strong with global orders being at record levels. * SO WHAT? * The company has been caught out by having an over-reliance on diesel-powered cars that it must address. It’s up against the clock as rivals continue to develop their respective offerings in an increasingly competitive market.

In Rivian Automotive targets IPO valuation just above $60billion (Wall Street Journal, Corrie Driesbusch and Mike Colias) we see that the EV start-up has unveiled its hoped-for valuation one week ahead of its flotation. Shares are being priced at between $57 and $62 each, giving the company an implied valuation of over $60bn, which would make it about the same size as Ford and bigger than Honda. Management will be embarking on a roadshow to persuade investors to buy the shares. * SO WHAT? * As is customary these days, the whopping valuation will be taking a lot of management objectives on trust because the company is MASSIVELY loss-making! Still, fantasy doesn’t seem to be too much of a hurdle these days when it comes to electric vehicles 😂. As the old saying goes, “buy the mystery, sell the history”…

4

INDIVIDUAL COMPANY NEWS

HNA’s treatment could be a sign of things to come for Evergrande, Ryanair considers delisting from London and Darktrace’s shares fall again…

HNA’s $170bn restructuring plan approved as focus turns to Evergrande (Financial Times, Edward White and Thomas Hale) is a really interesting article because it could signal a way forward for the tricky problem of what to do about the massively indebted Evergrande. HNA used to be China’s most aggressive offshore dealmaker but investigations into its heavily-leveraged acquisitions and opaque ownership structure struck alarm bells with the state, which is now going to implement a streamlining of its structure and take more control. Could this be a potential solution to Evergrande??

Meanwhile, Ryanair plans to scrap London listing as Brexit bites the City (The Times, Dominic Walsh) shows that Ryanair is thinking about delisting within the next six months because trading in its shares in London was shrinking in relative terms to overall trading volume in its shares. * SO WHAT? * This sounds pretty dramatic, but I guess that CEO Michael O’Leary is now wondering whether all the flak he takes from investors is worth it. I’m not sure whether he’s doing this in a fit of pique now that things seem to be turning around for the company, but we’ll just have to see. I really wonder whether he’s threatening to do it in order to get some concessions or something.

Then in Darktrace shares plunge again as investor lock-up ends (The Guardian, Mark Sweney) we see that shares in the cybersecurity firm Darktrace fell yet again in trading yesterday just one week after joining the FTSE100. The initial drop was thought to be due to a damning note from City broker Peel Hunt, which poured doubt on the technology behind its digital security products. * SO WHAT? * I think that this is very concerning and Darktrace really needs to come back to the market with a robust statement otherwise we could have another Nikola on our hands. It is very rare that a note has this much of an impact, so the analysts at Peel Hunt must be loving this…

5

...AND FINALLY...

…in other news…

I thought I’d leave you today with something that really doesn’t need much by way of explanation: Woman takes cute snap of hubby cuddling dog – but misses rude optical illusion (The Mirror, Paige Holland). 🤣🤣🤣

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Some of today’s market, commodity & currency moves (as at hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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