Tuesday 27/04/21

  1. In MACRO, BITCOIN & VACCINE NEWS, Goldman Sachs reckons the UK’s growth rate will be greater than the US, Bitcoin recovers, the US plans to shares vaccine doses, the EU sues AstraZeneca and Germany’s confidence is hit
  2. In TRAVEL & CAR NEWS, the EU tries to get a travel agreement with the US, BA’s boss reckons rich holidaymakers will make up for lost business travel, Tesla posts record quarterly earnings and Lyft sells its autonomous driving unit
  3. In CORONATRENDS NEWS, Pearson benefits from online learning, pet mania boosts stocks and OnlyFans benefits from lockdown
  4. In INDIVIDUAL COMPANY NEWS, Meituan gets the Alibaba treatment, Spotify raises prices, HSBC announces profits and Thoma Bravo agrees a $12.3bn deal
  5. AND FINALLY, I thought I’d leave you with what kids would do if they were President of the World…

1

MACRO, BITCOIN & VACCINE NEWS

So UK growth prospects look good, Bitcoin recovers, the US shares vaccines, the EU sues AstraZeneca and German confidence takes a hit…

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In a quick scoot around some of the “big picture” news today, Britain’s economy will grow faster than America’s, Goldman predicts (The Times, Philip Aldrick) shows that Goldman Sachs reckons that the UK could be in for the steepest recovery since the war, with a projected GDP growth rate of 7.8% versus a forecast of 7.2% growth for the US. Some will be rather surprised about this since Biden’s recent $1.9tn stimulus package is way more than that UK’s but economists seem to be raising their forecasts on UK growth on what seems like a daily basis.

Bitcoin finds itself back in favour (The Times, Callum Jones) highlights Bitcoin’s return to the over-$50,000 level after recently hitting $63,000 and then dropping 21% in less than two weeks. Market commentators have said that big stimulus programmes could yet provide further boosts to bitcoin but, as usual, I have yet to see a convincing explanation as to its moves. * SO WHAT? * I always feel with Bitcoin that if you believe in it you just have to get in and enjoy/experience the ride because there is so little legitimate comment out there (IMO). Soooooo much of it is fluff/pseudo-trader-y comment masquerading as expertise. I really think that the main long-term driver for Bitcoin is how widely it is accepted by the establishment. As things stand at the moment, there is always the danger that the politicians and central bankers who hate it so much will suddenly clamp down on it and all that feelgood will just evaporate.

Meanwhile, in vaccines, US plans to share up to 60m doses of AstraZeneca’s Covid vaccine with other countries (Financial Times, Kiran Stacey and Aime Williams) shows that the US is very generously saying that it will donate a load of vaccines that have been shunned by numerous countries 😂. Still, it is surely better than nothing – also, better late than never, especially when you consider India’s current dire situation.

Talking of shunned vaccines, EU to sue AstraZeneca over vaccine supply shortfall (Financial Times, Michael Peel) shows that the EU is continuing in its pursuit of AstraZeneca, alleging that the company breached its deal to supply vaccines to the bloc. The EC said that a first hearing of the case will occur before the Brussels Court of First Instance tomorrow. * SO WHAT? * I struggle to understand what this whole charade is going to achieve! It will cost money and take ages to resolve – and in the meantime, the virus is still out there. I wonder whether this is just a “hail-Mary” move from the EU – by taking it to court they look like they are no pushovers and if they win, they look like heroes. If, on the other hand, they lose they will just look a bit more incompetent than they were before. It seems to me that are willing to take this risk – and maybe by the time some kind of judgment is made the whole vaccine situation will have calmed down.

Meanwhile, German firms’ optimism hit by third wave of coronavirus (Daily Telegraph, Tom Rees) cites the latest results from the closely-followed Ifo survey which show that recent signs of confidence in the German services sector have “disappeared again” due to a combination of a third wave and car industry supply chain problems. Finance minister Olaf Scholz warned on the weekend that stubbornly high infection rates would mean that lockdown would last until June.

2

TRAVEL & CAR NEWS

The EU tries to get a deal with the US, the BA chief tries to make positive noises, Tesla has a great quarter despite challenges and Lyft sells off its autonomous vehicle division…

There are moves afoot to try and get worldwide travel going again in EU in talks with US over pass scheme for vaccinated travellers (Financial Times, Mehreen Khan, Michael Peel and Aime Williams) as the two sides talk about an open travel arrangement that will allow vaccinated Americans to come over to Europe. EU authorities are keen to get tourism going again both from outside the continent and within it. On a separate note regarding flying, Chief executive says rich holidaymakers will make up for fall in business-class flying (The Guardian, Gwyn Topham) shows that BA’s chief, Sean Doyle, is hoping that rich people going on their holibobs will make up for the massive loss of business travellers (until they return). * SO WHAT? * What is this guy smoking?!? I have NEVER heard this explanation before in previous downturns when companies restrict business travel (although I am willing to be corrected on this). He is clearly talking his own book because the airline has spent a whopping £6.5bn on refurbishing business class cabins and lounges since 2018. He is clearly assuming that all rich people will just go on holiday despite all the constantly changing travel restrictions and that they won’t just all go to Cornwall this year and punt the foreign getaway into 2022. I really think that business travel is going to take quite some time (maybe end of this year at least?) to recover to pre-pandemic levels. You can’t blame the chief exec for trying to put a sunny spin on things. It does seem like he is polishing a  💩 though…

Meanwhile, in automotive land, Chips are down but Tesla sales are up (The Times, Callum Jones) shows that Tesla has managed to shrug off all sorts of challenges (including chip shortages) on the way to a great Q1 performance with revenues shooting up by 74%. Profits reached record levels as strong demand in China managed to offset global supply issues. The company managed to deliver more than

double the number of vehicles in the Q1 period versus the same period last year and Musk said that he thought that Tesla’s Model Y could become the world’s best-selling vehicle by next year. However, Tesla’s publicity nightmare in China comes at crucial juncture (Financial Times, Christian Shepherd) harks back to recent problems that Tesla has been experiencing in China regarding customer service, showing how vulnerable it could be in a market that makes up 20% of the company’s global revenues. * SO WHAT? * The Chinese government wants 20% of car sales in the country to be electric by 2025 and it has so far been pretty supportive of Tesla. However, the government will also no doubt be keen to push domestic makers like Nio, Xpeng, Li Auto – and now Zeekr, the high end brand of Geely (which owns Volvo Cars) and maybe the current kerfuffle is designed to get potential buyers to at least think more about buying domestic. Remember that, recently, a ban was put in place on military personnel and employees of some state-owned companies from owning Teslas due to “security concerns”, which all seems like part of an overall effort to discredit Tesla in an indirect way. I think that Tesla would be well-advised not to rely so much on China in the future (although it this will be difficult as it is the world’s biggest car market), otherwise it could find itself in a difficult spot.

Lyft to sell autonomous driving unit to Toyota for $550million (Wall Street Journal, Preetika Rana) is just the latest evidence of how difficult it is to be in the field of self-driving as it is the latest company to sell its autonomous driving division to a unit of Toyota, not long after rival Uber offloaded its autonomous driving division late last year. Toyota is buying it for $550m, with $200m coming up front and the remainder to be paid off over five years. * SO WHAT? * I continue to think that self-driving is a brilliant concept but that the execution is so tricky that it will be years before we see mass-use. I can, however, imagine it as being something that might work in Japan given citizens’ general propensity to follow rules (I think that they will be less tempted to try to get one over on the autonomous vehicles!) and the readiness to adopt new technologies. Still it will be YEARS before this gets on the road in any major way IMO. Selling it off will be good for Lyft because it will enable it to become profitable more quickly.

3

CORONATRENDS NEWS

Pearson, pets and OnlyFans benefit from lockdown…

All sorts of trends have emerged under the pandemic and Pearson’s sales boosted by demand for online learning (Daily Telegraph) shows that the educational publishing company announced an increase in revenues yesterday as schools and universities switched to online learning, which helped to boost sales. Overall sales increased by 5% in Q1 versus the previous year but its global online learning division saw a 25% increase. * SO WHAT? * This is great, but you do wonder whether this will be sustainable. I actually think that there is still growth to be had in online learning as a great deal CAN be done online. However, like other lockdown “winners” I suspect that the stellar growth rates of last year will be difficult to replicate.

‘Pet mania’ brings out animal instincts in eager investors (Financial Times, Naomi Rovnick) highlights the boom in the number of people buying pets under lockdown and how many pet-related companies have really profited from this trend. They have done so well that it may surprise you to note that some pet-related stocks have outperformed the tech-focused NASDAQ over the past year! One pet-focused ETF with the “PAWZ” ticker shot up by 76%! * SO WHAT? * The question is whether this trend is sustainable. I would say that it IS because these pets are going to be around for a good few years yet, so the likes of Pets at Home and Chewy are likely to continue to benefit from our increased affinity with our furry friends. I think that Richard Buxton, a

 fund manager at Jupiter Asset Management, made an excellent point when he said that “I think once people get used to pet ownership it tends to continue through their lives. It is very hard to part company with a pet”. When you consider that, according to a PFMA/Kantar survey, over 50% of new pet owners are aged under 34 you could argue that the trend of pet ownership will continue for many years into the future. I just hope that people who bought pets under lockdown won’t abandon them when they end up going back to the office.

Another trend was identified in OnlyFans feels the lockdown love as transactions hit £1.7bn (Financial Times, Alice Hancock and Patricia Nilsson) as the platform commonly used by sex workers and celebs to sell content via subscription has been another lockdown winner as transactions have risen sevenfold to £1.7bn due to the number of users ballooning from 20m pre-pandemic to over 120m! It enables people including fitness instructors, musicians and creators of adult content to sell exclusive video clips and other content to fans who pay between $5 and $50 a month for access. * SO WHAT? * It’ll be interesting to see whether interest in this will continue – but I think that, on balance, it will – especially given the type of content it has. It’s interesting to note that US rival Patreon has made the conscious decision of NOT allowing adult content on there – and so this presumably leaves OnlyFans with a pretty clear run. The company takes a 20% cut of payments and revenues and growth rates are such that it could be worth billions if it went public. I think this is really interesting as there definitely seems to be a trend for getting people to pay for quality content.

4

INDIVIDUAL COMPANY NEWS

Meituan gets clobbered, Spotify ups prices, HSBC sees profits increase and Thoma Bravo buys Proofpoint for $12.3bn…

In other news, Meituan become second Chinese tech giant to be hit with antitrust probe (Financial Times, Yuan Yang and Tabby Kinder) shows that China’s market regulator has just opened its second-ever antitrust investigation into Meituan, the takeaway delivery and lifestyle services platform just weeks after it fined Alibaba a record $2.8bn for abuse of market position. The Chinese crackdown on Big Tech continues…

Meanwhile, Spotify raises prices for users in UK, US and Europe (Daily Telegraph, Margi Murphy) highlights the raising of prices for subscriptions across the board. * SO WHAT? * The price increases have been mooted for a while, but it will be interesting to see what effect it will have on overall numbers as the increases filter through. Given that founder Daniel Ek is thinking about buying Arsenal at the moment, you’d think that a bit of extra cash might come in handy 😂.

Elsewhere, HSBC profit surges 79% on improving global economic outlook (Financial Times, Stephen Morris and Tabby Kinder) highlights HSBC’s excellent Q1 performance, leading it to upgrade its global growth forecast for 2021 from 4.8% to 5.6% while Thoma Bravo agrees $12.3bn deal for cyber security group Proofpoint (Financial Times, Ortenca Aliaj, James Fontanella Khan and Kaye Wiggins) highlights a major deal that will take Proofpoint private as the tech-focused private equity firm continues putting fat deals together. According to Refinitiv, this will be the biggest PE-backed software buyout in history.

5

...AND FINALLY...

…in other news…

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Some of today’s market, commodity & currency moves (as at 0747hrs 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 **
6,963 (+0.35%)33,981.57 (-0.18%)4,187.62 (+0.18%)14,138.78 (+0.87%)15,296 (+0.11%)6,276 (+0.28%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$62.35$66.08$1,780.721.388161.20680108.2454,697.54

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