Tuesday 11/08/26

I thought that China bypasses shipping chokepoints with ‘Ice Silk Road’ through Arctic (Financial Times, Alice Hancock) was a particularly interesting article because it reminds us about a) the ongoing effects of global warming (polar ice is melting) and b) the potential future for shipping. This is because Sea Legend, a Chinese container shipping company that serves the Turkish and North African markets, is going to launch its first regular container shipping service through the Arctic this week. The service, which will be branded the “Ice Silk Road”, will run weekly and will hug the coast of northern Russia as it travels from Ningbo on China’s east coast on its way to Felixstowe in the UK. It is going to cut the usual 40-day sailing time between Ningbo and Felixstowe pretty much in half, depending on the weather conditions in the Arctic Circle. * SO WHAT? * Using this route can avoid choke points like the Bab al-Mandab Strait into the Red Sea, where the Houthis could attack – and it can also save time and cost. Orders for ice class vessels have been increasing to the extent that levels are now at the highest in over a decade! However, using this route has not become mainstream because many companies do not want to damage the delicate Arctic ecosystem with an oil spill or pollution. Vessels often have to navigate without GPS and they are a long way from search and rescue. However, interest in using this route is rising and I guess that the longer the geopolitical situation remains unstable the more this will become a viable option for shippers.

There are some pretty interesting developments in the pipeline for Hong Kong at the moment! Hong Kong set to include trading firms in ‘big bang’ tax reforms (Financial Times, Arjun Neil Alim) shows that Hong Kong authorities are looking at amending proposed legislation to include a tax break which means that staff of proprietary trading firms won’t incur tax on performance-related pay. * SO WHAT? * This bill was introduced in June and is meant to help “attracting more funds and family offices to establish a presence in Hong Kong”. This prompted Singapore to discuss making its own tax changes to stay competitive as prop traders including Jane Street and Citadel Securities gain more prominence. Things like this will certainly make working in Hong Kong more attractive, although tax rates there are already very low.

Then in Hong Kong’s plan to clear rural villages for a new gateway to China (Financial Times, William Langley) we see that there are some serious plans afoot to transform Hong Kong’s New Territories – that are currently made up of fish farms, towns and brownfield sites – into an industrial and tech belt that will rejuvenate the Asian financial hub. The project is called Northern Metropolis and is intended to not only spark more life into Hong Kong – it will also build closer ties to China and link up with the Greater Bay Area. In the meantime, villages are going to be cleared to make space for four economic hubs focused on commerce, professional services, tech and eco-tourism. There will be a load of new residential developments that are intended to house a third of the city’s population. * SO WHAT? * Fans of the project say that The Northern Metropolis could help to diversify Hong Kong’s economy outside its traditional areas of finance and trade into the tech boom that has powered its neighbour in Guangdong province. Other big megaprojects have

come and gone in the past but I would suggest that it really looks like this one is going to stick given how this will bring Hong Kong “closer” to the mainland.

There seem to be a lot of natural disasters at the moment what with wildfires and earthquakes hitting various parts of the world. Colombian earthquake kills at least 111 people (Financial Times, Joe Daniels) brings our attention a 7.4 magnitude earthquake that killed at least 111 people in Western Colombia yesterday. * SO WHAT? * Maybe it’s just my imagination but it does seem to me like we’ve been seeing a lot of natural disasters recently – and I wonder whether there will be more as El Niño takes hold this year as this weather pattern is famous for extremes. Quite aside from the tragic human death toll, I wonder whether insurance companies are going to have to adjust their risk assumptions as a result of all this.

Meanwhile, Yen sinks as effect of US-Japan intervention fades (Financial Times, Ian Smith and David Keohane) shows that the yen has lost about half of the gains it enjoyed in the wake of the US-Japan intervention and it looks like the yen is set to weaken further unless the Bank of Japan decides to raise interest rates.

Back home, Andy Burnham ‘may raise taxes by £25bn’ to fund pledges (The Times, Chris Dorrell) cites worries expressed by economists that the new PM is going to have to find a chunk of change in order to fund his spending promises. Households may have to bear the burden in order to finance the defence budget and cost of living support. The PM and new chancellor have said that they will honour Labour’s manifesto pledge not to increase VAT, national insurance or income tax. This cuts the possibilities down considerably given that these three areas make up the majority of the government’s tax take!

Then in Burnham to give councils more powers to block vape and betting shops (The Guardian, Aletha Adu and Alexandra Topping) we see that the PM is gradually dishing out potential crowd-pleasing powers that could come into play at the beginning of next year. He has said that he wants communities to have more control over their high streets where traditional shops, pubs and other services have been disappearing, to be replaced by vape and gambling shops. * SO WHAT? * This sounds like a nice idea – but what’s better, a gambling shop or an empty shop? For all the hand-wringing about the disappearance of shops and more from our high streets, the fact of the matter is that consumer behaviour is changing. If we don’t go to the shops and get our retail fix online because of the convenience and variety, then we only have ourselves to blame for the demise. No amount of fiddling around the edges like this is going to fix that because they’re not going to come back. I would suggest more should be done to encourage businesses to return to the high street – or at least give it a go – rather than fending them off. BTW, I am not FOR gambling and vape shops – it’s just that I think that putting into place measures that encourage businesses to USE the high street would lead to a better outcome IMO!

Wall Street giants partner with Nvidia on $500bn AI financing deal (Financial Times, Antoine Gara, Michelle Chan, Eric Platt, Sujeet Indap and George Hammond) highlights a new partnership between Nvidia and a consortium of Wall Street players comprising the likes of Apollo Global, Blackstone, BlackRock, Brookfield Asset Management, Goldman Sachs and KKR that has put together a funding package of over $500bn for AI infrastructure development. This deal is still subject to a final agreement but the idea is that the firms will create pools of capital that finance Nvidia’s AI objectives “at attractive rates for Nvidia customers”. This just seems to be Nvidia’s latest step in finding sources of capital.

OpenAI’s head of ethics leaves start-up less than one year after joining (Financial Times, Cristina Criddle and Rafe Rosner-Uddin) highlights what could be a potentially worrying development as it turns out that the company’s head of ethics who joined last July actually exited the company last month. She was just the latest in a recent outflow of safety researchers. Prior to that, she had been the chief ethicist at Meta. * SO WHAT? * Ethicists (and philosophers!) are hired by tech companies to work on the effect of tech on users and the wider society – and this can influence product development and regulatory work. The position at OpenAI won’t be replaced because the company maintains that “AI ethics doesn’t just live with one owner or team at OpenAI, and ethical considerations are deeply embedded into the model-building process driven by a number of teams across research”. I would say that this is mildly concerning, though, because if there isn’t a centralised person who has this responsibility, no-one will take responsibility. And if no-one takes responsibility in an AI firm then dangerous things could happen…

Mark Zuckerberg attacks ‘closed’ AI rivals as Meta returns to open models (Financial Times, Jamie John) finds Zuck in aggressive mood as he criticised closed AI models that will benefit only

a small number of companies and governments as he announced the new Muse Glimmer “open” AI model that can be downloaded and modified by outside developers. Meta also yesterday announced a $1bn fund for communities that host its US data centres. Big Tech companies have faced major backlashes from residents near data centres so I guess this is a “sweetener” fund that can presumably be used to make the prospect of living next to a data centre more palatable.

Trump media group racks up losses and pushes into nuclear fusion (Financial Times, Alex Rogers and Ryohtaroh Satoh) shows that TMTG posted big losses in Q2 as it shelved crypto deals, pushed fast access to Trump’s Truth Social Posts for a fat fee and announced a pivot into nuclear fusion via its $6bn+ merger with TAE Technologies. TAE Technologies hasn’t yet made any revenue from its fusion business but it says that its plant will be in operation from 2031. As far as the fast access to Truth Social posts is concerned, about 10 groups have signed deals thus far for prices ranging between $60,000 and $100,000 per month and the company is working on an “expansion” for retail traders and others. * SO WHAT? * I continue to think that it’s outrageous that a sitting president can so blatantly make money from his work in office. How is OK that he’s offering those who can pay chances to front-run the market?? It just beggars belief – but no-one seems to be saying or doing anything about it…

Then in UK raises cost projections for Palantir’s NHS data platform (Financial Times, Amy Borrett and Laura Hughes) we see that the National Infrastructure and Service Transformation Authority has just revised its estimates for the lifetime cost of Palantir’s FDP project for NHS England to £1.1bn. At the same time, forecast benefits have been downgraded to £808m. * SO WHAT? * All of this is going to put further pressure on the NHS to exercise the break clause in the contract next year.

Shein IPO pitched to investors at sub-$30bn valuation (Financial Times, Arjun Neil Alim, Eleanor Olcott and William Langley) shows that the online clothing giant’s advisers are pitching the company to potential investors at a level that is 70% below the valuation it enjoyed at its peak. The company has tried and failed to list in New York and London over the past few years because of political resistance and concerns about its supply chain. * SO WHAT? * The company has been hit by US tariffs and the closure of tax loopholes that allowed it to skirt paying import duties when shipping orders into the US or EU. Rival Temu has also upped its game. Some are expressing concern that the chances of Shein attracting major Chinese investors are not amazing currently.

See How a Tesla-SpaceX Merger Gives Musk a Shortcut to His $1 Trillion Payday (Wall Street Journal, Theo Francis and Andrew Mollica) is an interesting article that considers the implications of a potential merger between Tesla and SpaceX. Funnily enough, Musk stands to benefit quite handsomely because the stretch target conditions that he would have to meet to unlock a $1tn pay package – which was agreed last autumn – would suddenly become significantly easier to achieve. A clause at the bottom of the fifth page of the 16-page 2025 CEO Performance Award Agreement basically says that half of the targets in the agreement would pretty much be

ticked off in the event of Tesla being taken over or acquired. This is all theoretical now but it does make you think!

UK missile and drone interceptor start-up raises $300mn at $3.4bn valuation (Financial Times, Sylvia Pfeifer and Ivan Levingston) shows that British defence group Cambridge Aerospace has managed to raise a chunk of change at a valuation that puts it amongst one of the UK’s most valuable start-ups. The company has now raised over $630m since 2024. Cambridge wants to use the proceeds to invest in boosting production of its two main systems – Starhammer and Skyhammer. Skyhammer is already in production but Starhammer is expected to hit the market next year. This is great – but will the company stay British or become yet another takeover target??

Elsewhere, Worst period for hedge funds since 2008 after AI stock rout (Daily Telegraph, Louis Goss) cites data from Hedge Fund Research which shows that hedge funds have had their worst month of performance since January 2008 because of the collapse in value of US and Asian tech stocks.

In a quick scoot around some of today’s other interesting stories, Multimillion-pound homes ‘risk £500k plunge in value’ (Daily Telegraph, Melissa Lawford) cites the latest figures from the UK’s biggest estate agent Connells which shows that almost 46% of homes bought for at least £2m are now worth less than the owners paid for them. The share of households facing such a loss has increased significantly since 2022. At that point only 6.9% of households were sitting on losses! * SO WHAT? * I will just repeat what I said before – that although the “mansion tax” sounds good and is something that many can get behind I actually think that it would be very difficult to enforce (particularly retrospectively) because there would have to be so much admin involved to check the prices that you wonder how much such an initiative would actually raise. Maybe one could do this as a one-off when someone buys a home but doing it after that would be nigh on impossible IMO. The “mansion tax” is supposed to come into force in April 2028.

Then in Vistry shares dive as Allianz cuts insurance cover for suppliers (Daily Telegraph, Pui-Guan Man) we see that shares in the housebuilder plummeted by almost 10% in trading yesterday on reports that Allianz Trade told suppliers that it was changing its credit limits for Vistry, meaning that cover could be cut by up to 70%. * SO WHAT? * Vistry’s already having financial difficulties and is having to resort to aggressive discounting and construction delays – so this is going to just add to the company’s current nightmare. It’s not looking good…

World Cup boosts retail but consumers driven indoors by heatwaves (The Times, Jack Barnett) cites another set of figures, this time published by the BRC and KPMG, which showed that the World Cup managed to boost retail sales last month although hot weather kept consumers away from the high street. In terms of patterns, food sales and “affordable luxuries” did well but non-food sales were hit by the particularly hot weather, although clothing sales were good. * SO WHAT? * Economic data has been getting increasingly positive over the last few weeks. GfK’s consumer confidence index rose at its fastest monthly pace in almost three years and inflation fell more sharply than expected in June while the economy returned to growth in May. The labour market is also showing signs of recovery. It seems that all the pressure will be building up on the new PM not to scupper this fragile upturn.

Then in John Lewis managing director Peter Ruis quits job after less than three years (The Guardian, Jasper Jolly) we see that the current MD is leaving in order to make way for the new guy whose experience includes being CEO of River Island, The White Company and cycling shop Wiggle in addition to spending 13 years at New Look. Let’s hope that this guy can keep the momentum going…

Here’s how to make the perfect chips – crunchy on the outside, fluffy on the inside! I’ve done this before many years ago and although it is a massive pain in the 🍑 to do (and time-consuming), it really does work! This guy uses a vacuum chamber  but I just put mine in the fridge – as per Heston’s directions.