- In MACRO & MARKETS NEWS, the US and Russia extend talks and tech stocks have a wild ride
- In CONSUMER/RETAIL/HIGH STREET NEWS, luxury does well, UK retailers have a solid Christmas, Aldi keeps the pressure on and Lululemon suffers from Omicron
- In FINANCIALS NEWS, Aussie pension funds grow and Fly Now Pay Later is a thing
- In INDIVIDUAL COMPANY NEWS, GTA and FarmVille get together, HBO Max aims higher and Microsoft sees staff go to Meta
- AND FINALLY, I thought I’d bring you some pretty inspirational people…
MACRO & MARKETS NEWS
The US and Russia extend talks and tech has a ride in markets…
Hello everyone! I referred in yesterday’s Watson’s Daily to other “themed” podcasts coming to you very soon – so look out for the next one that I shall release today on how to sort out your personal finances (this is the one with my wife, who is a financial planner for high net worth individuals). Something new for 2022 perhaps??
I will be launching the Watson’s Yearly THIS Thursday January 13th at 5pm (THE DAY AFTER TOMORROW!!!) with a 2021 review/2022 preview webinar with Jake Schogger from the Commercial Law Academy. PLEASE CLICK HERE TO SIGN UP! You will need to register to attend this event.
US and Russia agree to extend talks over Ukraine crisis (Financial Times, Henry Foy, Ben Hall and James Politi) shows that there weren’t any negotiation breakthroughs at talks in Geneva yesterday after eight hours of discussions – but the good news is that there were no breakdowns either (so far). Both the US and NATO have flatly refused to accede to one of Russia’s main demands not to expand NATO any further and there are more talks to come. The US continues to threaten Russia with economic sanctions that would be way more wide-reaching than those imposed in the wake of the annexation of Crimea in 2014. Russia/Ukraine: markets have not priced in worst-case scenarios (Financial Times, Lex) shows that markets are not yet pricing in the threat of war. Generally speaking, when wars break out, energy prices skyrocket (and already sky-high gas prices would continue
to be moon-bound). This would squeeze retail suppliers such as Centrica and major consumers of energy, such as chemical manufacturers. Coal-producers may also benefit. Companies with operations in Ukraine, such as Ferrexpo, could also be very vulnerable to an escalation in tensions. * SO WHAT? * There is a lot of posturing going on here. I can’t see the US taking military action even if Russia does invade Ukraine, but I can imagine it imposing big sanctions. The problem with this, though, is that they’d be shooting themselves in the foot because of the amount of business US banks (and others) do with Russia and, TBH, Russia’s in quite a good place financially at the moment, what with its forex and gold reserves being at their highest level since at least 2007, high oil prices and massive demand for gas. It seems to me that Russia could survive an economic siege for some time.
Wall Street rally saves tech stocks after Nasdaq slips into correction territory (Daily Telegraph, Tim Wallace) highlights an eventful day in trading yesterday for US tech stocks after the NASDAQ fell by over 10% below the intraday record of November 22nd (this is what makes it a “correction” – in that when an asset, security or market falls by this much, it can be classified as such) but traders used the opportunity to buy, so it bounced back. * SO WHAT? * There could be an element of profit-taking in tech stocks at the beginning of this year, but many will home in on the IMF highlighting inflation risks in the US that could push the Fed to raise interest rates sooner rather than later (they are stating the bleedin’ obvious here as we’ve seen this sort of chat already). The IMF are never really that ground-breaking in the “exciting forecasts” department 🤣 but I guess it just gives traders an excuse to sell…
CONSUMER/RETAIL/HIGH STREET NEWS
Rich people enjoy life, UK retailers have a decent Christmas, Aldi draws the battle lines and Lululemon gets a dose of Omicron…
Booming luxury car sales signal happy days for the super-rich (Daily Telegraph, Howard Mustoe) shows that rich people are enjoying themselves by splashing out on toys like the Rolls-Royce Boat Tail (yours for a mere £20m!) as low borrowing costs and rising stock (and property) markets continue to swell the ranks of high net worth individuals. Rolls-Royce and Bentley have done particularly well in sales over 2021 (it was a record year in sales for both) and it was interesting to note that the chief of Rolls-Royce observed that the age of an average customer was now 43 – down from 56 over the last decade – thanks to fortunes being made in tech and cryptocurrencies! Credit Suisse reckons that the number of dollar millionaires in the world rose by over 10% in 2020, but there was a 24% in the ultra high net worth category over the same period (those who have wealth of over $100m). 894 superyachts worth $5.2bn were sold last year versus “only” 465 worth $3.2bn in the previous year, according to VesselsValue. * SO WHAT? * I think that there has been a noticeable difference in fortunes for many rich people and the rest of us and adds to the age-old saying that money attracts money. However, as long as they spend on plumbers, builders, makers of furniture, staff for their houses, restaurant trips etc. then at least the joy will be spread to some extent.
Meanwhile, in the real world, Retailers cheer after Britain goes on pre-Christmas spending spree (The Times, Ashley Armstrong) shows that retail sales in the run-up to Christmas beat pre-pandemic levels (they were up by 2.1% versus 2020 and 4.6% higher than they were in 2019), according to the latest figures from the British Retail Consortium and KPMG. This sets the stage for a raft of retailers reporting this week. The likes of Sainsbury’s, Tesco, M&S, JD Sports, Halfords, Dunelm and Currys will
have their Christmas trading figures pored over by investors who will also be considering the latest figures from Barclaycard which showed that consumer card spending grew by 12.2% in December versus December 2019. This was driven by spending on fuel and at supermarkets while spending on non-essential items grew, but at a slower rate. The figures also showed that spending at restaurants fell by a chunky 14.1% in December due to Omicron concerns. * SO WHAT? * This sounds like good news, but we will no doubt see more as the Christmas trading updates come out. My feeling is that everyone pushed the boat out for Christmas following the wash-out of last year but that higher household bills, rising inflation and higher interest rates (plus the usual post-Christmas blues) are highly likely to make people more wary with how they spend. I think that the fact that spending on non-essential items in the lead up to Christmas was an early sign of what’s to come for at least the next few months.
Among the retailers themselves, Aldi pledges lowest prices in challenge to rivals (Daily Telegraph, Laura Onita) shows that traditional supermarkets are going to have a fight on their hands as the German discounters are fighting back after a period of time where the Big Four retailers have been able to make ground thanks to online and delivery capability. Aldi has now promised to offer the lowest prices this year – so it’s up to everyone else to respond. Tesco leading fight against the German discounters (Daily Telegraph, Ben Marlow) suggests that Tesco, the biggest of the Big Four supermarkets, is best equipped to take the fight to the discounters because it now has its highest market share for four years at 28% of the market, has also committed to low prices and can really make the most of its store footprint and online capabilities. It also doesn’t have debt to worry about like the recently-acquired Asda and Morrisons. This should be good news for consumers!
Then in Lululemon caught cold by Omicron (The Times, Callum Jones) we saw that one of the lockdown athleisure winners, Lululemon Athletica, has had to rein in revenue and earnings forecasts for the quarter due to initially strong trading losing momentum as Omicron fears made a negative impact. The company’s share price has fallen by almost a third since its November high as investors wonder where the next uptick will come from.
Aussie pension funds grow and Fly Now Pay Later garners interest…
Australia’s pension funds rise to take on global finance giants (Financial Times, Gayle Bryant) is an interesting article which highlights the imminent consolidation of the pension fund industry in Australia as the Australian Prudential Regulation Authority (Australia’s financial services regulator) is pushing for mergers in the A$3.3tn superannuation sector. It sounds like the idea is for industry players to consolidate into three to five different megafunds following a spate of mergers last year. This means that players would be big enough to play in the big leagues but that there would be enough competition for customers. * SO WHAT? * This kind of consolidation would undoubtedly give the survivors a lot of clout, but there is a danger that the bigger the funds, the more unwieldy they become.
Then in Travel finance start-up Fly Now Pay Later raises £55m for US expansion (Daily Telegraph, Ben Woods) we see that a start-up which enables travellers to pay for trips in instalments, called Fly Now Pay Later, has managed to raise £55m to expand in the US. This brings the total amount raised to $150m after two previous funding rounds. Customers can use it to pay for a holiday in 12 monthly instalments via its travel partners or Anywhere app with interest rates ranging from 0% to 40%. Over 250 companies currently use its services. * SO WHAT? * I think that this is an excellent idea given the cost of many holidays! However, given the likely amounts involved I think that a rock-solid credit checking procedure will be vital to its ongoing success – but at least it seems to have some serious finance in place! Ultimately, I think that consumers will be increasingly willing in future to spend more on holidays as the Coronavirus years will have enabled some people to save more but I think it will also make some people value holidays and “experiences” more. Given that the holiday industry isn’t exactly going full pelt at the moment, this may well be a good time for such a company to consolidate its existing offering and get what it needs in place to enable smooth scaling when people feel that they can go back to normal.
INDIVIDUAL COMPANY NEWS
GTA and FarmVille get together, HBO Max outlines ambitions and Microsoft staff get pinched by Meta…
Grand Theft Auto and Farm Ville united in $13bn video games deal (Daily Telegraph, Ben Woods) highlights the GTA maker Take-Two’s major acquisition of FarmVille maker Zynga in a massive punt on the future of mobile gaming. Take-Two is more of a PC/console game specialist (e.g. GTA, Red Dead Redemption and Civilisation) whereas Zynga is more about mobile games (Empires & Puzzles, Golf Rival and Harry Potter: Puzzles & Spells) and the deal was struck at a 64% premium to Zynga’s closing price on Friday. It is thought that the new enlarged company could reap cost savings of $100m a year with the prospect of adding $500m to annual sales. * SO WHAT? * This is the latest in a line of recent gaming megadeals such as Electronic Arts’ purchase of Codemasters in February and China’s Tencent’s acquisition of developer Sumo Digital in July. I think this sounds like a good deal strategically, but it really is difficult to come out with hit after hit when it comes to games. Let’s hope these deals work!
Elsewhere, HBO Max tries to close gap with Netflix and Disney in streaming wars (Financial Times, Anna Nicolaou) highlights HBO Max’s ambitions in the increasingly competitive world of streaming. At the moment, it has 74m subscribers to HBO Max and HBO as at the end of 2021 versus the 61m it had at the end of 2020. Still, it has a long way to get to the level of Netflix (214m subscribers) and Disney (118m subscribers) but there will be more growth to come, not least because it is trying to get access to the UK market via Sky at the moment. * SO WHAT? * Ultimately, I think that the business of streaming comes down to size and money. Growing a streaming service is one thing, but keeping the momentum is quite another – and I think such businesses become more and more expensive over time due to the necessity of churning out new content. This is why size is important because with size comes more money.
Meanwhile, Microsoft hit by defections as tech giants battle for talent to build the Metaverse (Wall Street Journal, Aaron Tilley) shows some shenanigans between two tech giants as it seems that Microsoft competitors are snapping up staff with experience of working on the company’s HoloLens AR headset – in some cases by offering to double their salaries! At the moment, Microsoft employs 1,500 staff in this area, so these are clearly tricky times! Is AR finally going to make a splash this year??
…in other news…
Given that it’s a new year, I thought it would be good to show you a few things that might inspire you! It’s probably not advisable for you to attempt any of these world records that were made towards the end of last year, but they are pretty amazing! Have a look at THESE AMAZING PEOPLE! My fave is British gymnast Ash Watson (no relation of mine!) and his amazing backflip! That looks a) sensational and b) ridiculously dangerous!!!
Some of today’s market, commodity & currency moves (as at 0746hrs 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 **|
|7,445 (-0.53%)||36,068.87 (-0.45%)||4,670.29 (-0.14%)||14,942.83 (+0.05%)||15,768 (-1.13%)||7,116 (-1.44%)||28,222 (-0.90%)||3,567 (-0.73%)|
|Oil (WTI) p/b||Oil (Brent) p/b||Gold Per t/oz||£/$||€/$||$/¥||£/€||$/₿|
(markets with an * are at yesterday’s close, ** are at today’s close)