Wednesday 10/08/22

1. In MACRO & CRYPTO NEWS, Russian oil flow to central Europe stops, Xi Jinping tightens his grip on power and Coinbase takes flak
2. In CONSUMER TRENDS NEWS, it looks like we are spending on travel, fashion, streaming and property, not so much on used cars and we will be spending more on olive oil while IWG sees a slowing influx
3. In TECH NEWS, Microsoft cuts spending and chipmakers expect a slowdown
4. In INDIVIDUAL COMPANY NEWS, Musk sells Tesla shares, Abrdn suffers while L&G gets a boost and Domino’s pulls out of Italy
5. AND FINALLY, I bring you a sighting of the “Loch Ness monster” and a great drum cover of a Top Gun classic…

So Russia cuts oil flow, Xi Jinping grabs more power and Coinbase has a ‘mare…

Russian oil flow halted through Druzhba pipeline to central Europe (Financial Times, Tom Wilson, Harry Dempsey and Max Seddon) shows that a dispute over payments has led to the oil flow being stopped five days ago. This part of the pipeline takes Russian oil across Ukraine to refineries in Slovakia, the Czech Republic and Hungary. * SO WHAT? * This is yet another instance that highlights the reliance that has been built up over the years on Russian oil. It is thought that stocks in these countries will only last another few weeks, so a solution to the impasse needs to be found pronto. So far, the northern part of the Druzhba pipeline, which goes through Belarus to Poland and Germany has not been affected by the current stoppage but you can guess what might happen next…

Then in Xi Jinping grasps ‘knife’ of internal security to complete grip on power (Financial Times, Tom Mitchell) we see that China’s president secured an even tighter grip on power than he already had by appointing a strong ally in the form of Wang Xiaohong as

public security minister in June, who helped form the military response to Pelosi’s Taiwan visit last week. His predecessors were not particularly close to Xi Jinping, who is expected to continue as head of the Chinese Communist Party and its Central Military Commission for an unprecedented third term in power at a party congress this year. This will be further consolidated by his reappointment as state president at the annual session of China’s parliament next year. The “knife” in the title of the article refers to the internal security infrastructure of China. It sounds like he’s making good progress in consolidating his power, giving little away to those who may criticise him.

Crypto winter comes early for Coinbase (The Times, Robert Miller) highlights challenges being faced by Coinbase Global, one of the world’s biggest crypto exchanges, as it posted a big swing into a chunky loss for Q2 as punters lost their crypto appetite. Trading volumes more than halved as many (including the trading platforms themselves) believe we are heading into a “crypto winter”…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

We take a look at what consumers are spending on, what they’re not spending on and what they’re not doing…

Consumers are spending on travel, it seems, as Flight prices soar amid travel chaos (Daily Telegraph, Hannah Boland) cites travel agency Kayak which says that airline ticket prices have shot up by around 30% versus pre-pandemic levels in the month of August due to everyone wanting to get away (mind you, average airfares to Athens and the Algarve are now more than double what they were in 2019!) and IHG launches $500m buyback and raises dividend as travel rebounds (Financial Times, Oliver Barnes) shows that the owner of Crowne Plaza and Holiday Inn, InterContinental Hotels Group, did so well in its first half results that it was confident enough to increase its dividend and launch a share buyback. It said that the Americas were showing strong recovery, Europe is picking up strongly and Asia is showing positive signs as well. It was particularly interesting to see that business travel was particularly strong (I’m assuming that is in America).

Consumers are also spending on fashion, as per Ralph Lauren, Michael Kors buck consumer spending woes (Wall Street Journal, Suzanne Kapner) which shows that the luxury end of retail continues to do just fine as Ralph Lauren saw revenues rising by 8% in Q1 and Capri Holdings – which owns Versace, Jimmy Choo and Michael Kors – reported an 8.5% rise in quarterly revenues despite China lockdowns. In contrast, at the more “humble” end of the retail spectrum, Allbirds and Signet Jewelers both warned that US consumers were feeling the pinch from inflation which sent their shares down by over 20% and 13% respectively. Warner Music revenues hit right note (The Times, Callum Jones) shows that we’re still spending on music streaming, although streaming royalties slowed down over the last quarter thanks to the widespread slowdown in the global advertising industry. UK builder Bellway reports record revenue as house prices climb (The Guardian, Mark Sweney) shows that the housebuilder had a great

year for revenues and predicts a strong 2023 as demand remains strong while Mortgage lenders turn away customers in scramble to lock in rates (Daily Telegraph, Szu Ping Chan and Melissa Lawford) shows that the frenzy to get mortgages is intensifying to the extent that a number of building societies – including Coventry Building Society, Suffolk Building Society and Saffron Building Society – are not taking any new applications until they’ve cleared the backlog!

On the other hand, Shortage of cars puts brakes on second-hand motor sales (Daily Telegraph, Howard Mustoe) shows that sales of used cars in the latest quarter actually fell to below pre-pandemic levels as supply chain problems have effectively restricted the number of cars being made available. Talking of a restriction in supply, Heatwave lights a fire under olive oil prices (The Times) shows that the recent/current heatwave has hit production, according to Spain’s Acesur which supplies Britain with olive oil, meaning that prices could rise by 25%! * SO WHAT? * Overall, it looks to me like some consumers (particularly the more affluent ones) are doing pretty well, going on business trips, buying luxury treats while others are having trouble buying used cars (prices of used cars have gone up by 40% over the last three years!) and scrambling to buy property while they can. It just seems like EVERYTHING is getting so expensive right now!

Meanwhile, IWG growth hit by slow return to office (Daily Telegraph, Lucy Burton) shows that IWG (formerly known as Regus and one of the world’s biggest office providers) saw its share price fall by 11.4% yesterday as it unveiled higher losses than the market expected at its results and walked back its previously bullish stance on a return-to-office boom. This is quite interesting given the recent performance of WeWork, which has seen occupancy rates return to pre-pandemic levels.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Microsoft cuts costs and chipmakers expect a slowdown…

Microsoft tried to reduce business expenses by restricting spending on travel and company gatherings (Wall Street Journal, Aaron Tilley and Sarah Krouse) shows that even the mighty Microsoft is asking its staff to rein in some employee expenses as part of a wider effort to cut costs. At the moment some business travel, outside training and company gatherings are being targeted after last month’s Q4 results referred to such efforts. * SO WHAT? * I’m so sorry to be gloomy here, but usually moves like this are a precursor for big redundancies – there is already a hiring freeze in some parts of the business. It just goes to show that pretty much everyone is now battening down the hatches for a global economic slowdown (notice I didn’t say the “R” word there – we’re not quite there yet!).

Chip makers expect demand slowdown to expand beyond PCs, smartphones (Wall Street Journal, Asa Fitch) shows that the chip industry is showing signs of slowdown as the world’s economy goes backwards in the face of geopolitical, economic and supply chain pressures. The CFO of Micron Technology remarked that “the market is worse than we thought it would be” after two years of acute shortages in the face of massive demand. Recent news from chip makers has not been great – Intel shocked the market recently with a loss on the quarter and a downgrade in its full-year forecasts. Maybe this is why semiconductor makers are really pushing governments to put money into manufacturing capabilities given that they are expensive and time-consuming to make.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Musk sells Tesla shares, Abrdn takes a hit, L&G gets a boost and Domino’s exits Italy…

In a quick scoot around other interesting stories today, Elon Musk sells nearly $7bn worth of Tesla stock amid Twitter uncertainty (Wall Street Journal, Rebecca Elliott) shows that the eccentric billionaire sold a big slug of Tesla shares over the last few days amid uncertainty about what’d going to happen with Twitter. He sold around 7.9m shares between Friday and Tuesday, leaving him with 15% in the company. Neither party commented. * SO WHAT? * On the one hand, investors could take this as good news as a big seller is now out of the market but the problem is that he previously said that he wouldn’t sell any more shares – and that’s what he’s just gone and done! I think a big official statement is needed here otherwise the shares will just be in limbo!

In financials news, Abrdn announces pre-tax loss of £320m for first half of 2022 (The Guardian, Kalyeena Makortoff) shows that the investment group suffered over the first half as customers withdrew cash at a faster pace against the backdrop of worsening market conditions while L&G boosted as companies rush to offload pension schemes (Financial Times, Ian Smith) shows that the insurance giant benefited from a major uptick in the risk transfer market (where companies shift all of their pension liabilities to insurers).

Domino’s shuts up shop in Italy after failing to win over the home of pizza (Financial Times, Oliver Barnes) shows that the pizza purveyor has given up in the country after seven years of trying to flog its wares to Italians. It had suffered from falling sales, rising running costs, big debts and a massive increase in local competition. Ah well, you can’t win them all!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

You can understand the excitement that the photographer might have had at first glance in Recent Loch Ness Monster sighting turned out to be an Alpaca going for a swim (The Mirror, John Bett) but this did make me laugh.

Then I saw this drum cover of Top Gun/Kenny Loggins classic Danger Zone. Love that song! If I had more time now (and space!) I really would love to play the drums. I used to play the piano and the violin (I played piano for about 11 years with a blind piano teacher!), but the drums do look like a lot of fun don’t they?? Particularly great if you are having a bad day – you can vent in a constructive manner 😁