Wednesday 17/11/21

1. In MACRO & ENERGY NEWS, the US and China hold nuke talks, Brazil’s inflation goes crazy, UK employment goes up, Germany delays Nord Stream certification and Qatar invests in Rolls-Royce’s SMRs
2. In RETAIL & LEISURE NEWS, Walmart ups forecasts, Home Depot continues its winning streak, M&S decides to rent dresses, Wagamama upgrades earnings and Revolution Bars gets hit by higher bouncer costs
3. In REAL ESTATE NEWS, Landsec returns to profit and mortgage lenders fight for customers
4. In MISCELLANEOUS NEWS, Rivian > VW, Peloton wants cash, Arm/Nvidia gets investigated and Redefine Meat unveils something amazing
5. AND FINALLY, I bring you a dog phone and the most uplifting video I’ve seen for a while!

US and China engage, Brazil’s inflation goes crazy, employment rises in the UK, Germany drags its feet on Nord Stream and Qatar backs Rolls-Royce’s SMRs…

In US and China agree to hold talks on nuclear arsenals (Financial Times, Demetri Sevastopulo and Tom Mitchell) we see that the Presidents of both countries have agreed to hold talks as tensions have mounted recently regarding China’s military and the recent testing of a nuclear-capable hypersonic weapon. It’s all very early stages, but I’d say that it is a move in the right direction and, you never know, an agreement with something like this could pave the way for talks about the trade war that’s been going on for years into the bargain. Taiwan is still feeling the strain, though, and China did not budge on its stance on the country and any bids for independence.

High inflation returns to Brazil: ‘each week there are different prices’ (Financial Times, Michael Pooler) shows just how skyrocketing prices for basics has pushed inflation to double digits (10.67%) for the first time for over five years – something that’s not going to help President Bolsonaro get re-elected in October next year. Among the G20 countries, it is only behind Turkey (20%) and Argentina (52% – yes, you read that right!) in terms of inflation rate. * SO WHAT? * Although Bolsonaro is saying that such inflation is a global thing, the situation has not been helped by its currency, the real, weakening by more than other currencies – it has lost 25% of its value versus the dollar since the beginning of 2020, for instance – meaning that inflation has hit Brazil particularly hard. It has also not been helped by having suffered the worst drought in almost a

century as this has resulted in a lack of hydroelectricity generation, which has led to higher energy bills. No wonder Bolsonaro is going to expand the welfare programme – he wants the votes of those on lower incomes!

Talking of high inflation, UK jobs market booms despite end of furlough scheme (The Guardian, Richard Partington) cites the latest figures from the Office for National Statistics which show that the number of people on UK company payrolls went up sharply last month despite the government’s furlough scheme shutting down at the end of September! * SO WHAT? * This makes it look even more likely that interest rates will rise by the end of this year given that worries about the effect of the end of furlough on employment were cited as one of the main reasons why the Bank of England’s Monetary Policy Committee didn’t raise them at the most recent meeting despite rampant UK inflation.

Germany suspends certification of Nord Stream 2 pipeline (Financial Times, Erika Solomon and David Sheppard) shows that the country’s regulator has “temporarily suspended” certification of the Nord Stream 2 pipeline, which led to an immediate rise in UK and continental European gas prices. Ah, European bureaucracy. You can’t beat it, eh?!? In the meantime, energy bills will be going up and putting even more upward pressure on inflation…

As energy supply issues persist, nuclear power generation continues to look like a decent bet. Qatar backs Rolls-Royce in nuclear reactor plans (Daily Telegraph, Howard Mustoe) shows that the Qatar Foundation certainly seems to think so as it is on the verge of investing up to £100m in the company’s plan to develop a new generation of Small Modular Reactors (SMRs). A formal agreement is expected later this week and it will dilute Rolls-Royce’s current 80% stake in the venture, but this is unlikely to bear fruit until the 2030s.

Walmart and Home Depot continue their winning streak, M&S goes into rentals, Wagamama cooks up a storm but Revolution Bars suffers from higher bouncer costs…

Over in the US, Walmart raises forecast and says shelves are stocked for holiday shoppers (Wall Street Journal, Sarah Nassauer) shows that the retailer posted yet another quarter of rising sales as customers shopped early for the winter holidays. Footfall was higher over the quarter versus the equivalent period last year and average spend per trip was also up. The company remains comfortable with stock levels (presumably because it chartered its own vessels to ensure supply) and sales over the quarter beat analyst expectations. Home Depot sales rise, continuing pandemic streak (Wall Street Journal, Matt Grossman) shows that the lockdown DIY trend is alive and well, with sales growth gaining pace over the quarter particularly in appliances and flooring.

Meanwhile, in the UK, M&S comes to the party with dresses for hire (The Times, Ashley Armstrong) shows that the high street stalwart is launching a new service for customers to hire its womenswear collections for 20% of their price. It will make items from some of its collections, including its most recent collab with Ghost, available on Hirestreet, a fashion rental platform. M&S will be the biggest brand on Hirestreet and customers will be able to do things like rent a £79 Ghost dress for £15 or a leather coat worth £250 for £41. * SO WHAT? * I think that this is a really interesting idea and shows that M&S is trying to think

outside the box and get itself involved in the latest trends where customers are trying to be more sustainable. Another tick in the box for M&S, I think! It really does seem to be turning things around…

Elsewhere on the high street, Wagamama owner serves up tasty earnings upgrade (The Times, Dominic Walsh) shows that The Restaurant Group (TRG) which, in addition to Wagamama, owns Chiquito, Frankie & Benny’s and Garfunkel’s announced an earnings upgrade yesterday. Its decision to lift its full-year guidance buoyed its share price and left 2022 projections unchanged. * SO WHAT? * TRG cut deeply over the pandemic in terms of outlets and jobs and as long as the global economy recovers it stands a decent chance of doing well IMO as it has already trimmed the fat. Will it be able to take advantage of low rents and the availability of better locations??

Then in Revolution Bars hit by higher costs of recruiting security staff (Financial Times, Alice Hancock) we see that the bar operator has seen its costs increase by 16% as it has had to pay more to employ licenced bouncers after many took alternative jobs under lockdown (and left the country after Brexit). Other than that, though, trading has been good, so the costs have been covered. Rather amusingly, Revolution Bars’ chief exec Rob Pitcher (what a great name for a guy that works in bars 🤣) observed that sales of gin and tonic were weaker because “people have been drinking gin and tonic at home and wanted to drink cocktails instead”! It was interesting to see that Christmas bookings are building, but much later than normal (presumably because people are cautious about having to cancel big groups) and that although large company bookings were behind schedule smaller groups and family parties were making up the shortfall.

Landsec returns to profit and mortgage lenders scramble for customers…

In the world of real estate, it is interesting to see Return of workers and shoppers pushes Landsec back to profit (Financial Times, George Hammond) as the FTSE100 commercial property landlord has had a particularly rough pandemic, so a return to profit in the six months to September was particularly welcome. The lifting of lockdown restrictions has helped to push the value of its property portfolio up and the company said that it is now

concentrating on central London offices, major retail destinations and mixed-use developments in cities. It’s amazing what difference a year makes, eh?

Meanwhile, in the residential property market, Mortgage war looms as banks try to woo young with low deals (Daily Telegraph, Will Kirkman) shows that banks have been offering younger borrowers cheaper mortgages as competition for small-deposit buyers intensifies despite most of the cheaper rates disappearing recently due to fears of interest rate rises. It looks like lenders will compete with each other to attract such buyers in the run-up to Christmas as they try to fulfil year-end targets against the backdrop of a falling market. Mind you, despite all this, mortgage rates are still higher than they were pre-pandemic!

Rivian’s now bigger than VW, Peloton is seeking more cash, the Arm/Nvidia deal is getting closer scrutiny and Redefine Meat is doing something pretty ground-breaking…

In a quick scoot around some of today’s other interesting stories, we all know that electric pick-up truck maker Rivian had a storming market debut last week but now Electric Rivian overtakes Germans in the fast lane (The Times, Robert Miller) shows that, despite the company only planning to produce 1,200 vehicles this year, it is now valued about VW’s market cap of $141bn. VW is Europe’s biggest automotive manufacturer and also owns the Porsche, Audi and Lamborghini marques among many others. Clearly the world has gone mad and thrown everything at something they deem to be the future of motoring!

All is not well on the bike either as Peloton, in reversal, plans to raise $1billion in stock offering (Wall Street Journal, Sharon Terlep) highlights a fall from grace for the lockdown hero as it announced a stock offering yesterday as revenues continue to disappoint. It said only a few weeks ago that it didn’t need to raise capital to make up for bigger losses and slowing momentum. * SO WHAT? * Peloton tried to put a positive spin on all this, saying it wanted to “expand our liquidity position”, but I reckon that it’s trying to get some money while the going’s sort of good – and definitely before it weakens significantly. Peloton benefited from being in the right place at the right time last year but since then it’s been involved in a tragic fatality involving its running machine and seen competition eat into its market share. Where does it go from here? I really think it needs to sign more deals with gyms to broaden its distribution.

Elsewhere, Nvidia’s $40bn swoop for Cambridge chip firm Arm faces security enquiry (Daily Telegraph, James Titcomb) shows that Culture Secretary Nadine Dorries has instructed the Competition and Markets Authority (CMA) to begin a deeper investigation on the basis of both competition and national security of Nvidia’s proposed acquisition of Arm from current owner SoftBank. * SO WHAT? * This has been well-flagged and the volume of objections to this deal have been building up considerably around the world since it was first announced. Both parties have the power to torpedo the deal, so it will be interesting to see how this plays out. I would have thought that letting the deal go through will be applauded by the Americans (it’s an American company) but blocking it will please the Chinese (whole industries have been condemning the deal because they think that access to ARM will give Nvidia unfair advantage). Will this be used as a negotiating chip with either side I wonder?

Then in Redefine Meat brings 3D printed vegan cuts to restaurants (Financial Times, Emiko Terazono) we see that Israeli start-up, Redefine Meat, has launched a 3D printed plant-based “meat” which can make whole “cuts” of “meat” using a combination of soy and pea protein, chickpeas, beetroot, yeast and coconut fat. It is working in partnership with food flavouring company Givaudan and can “print” 10kg of plant-based meat per hour (its product array includes beef and lamb flank as well as minced beef and pork) which will soon be available in restaurants including Marco Pierre White’s steak houses and Indian restaurant Brigadiers in the UK! * SO WHAT? * One of the biggest challenges so far for producing plant-based meats is replicating the fibrous and juicy texture of meat, so this is a massive step forward. Amazingly, 3D printing is already capable of recreating the marbling of steak or the streaks in bacon! Other companies trying to print food include Spain’s Novameat and Israel’s Aleph Farms. The development of meat alternatives continues to amaze me! Will this catch on??

…in other news…

As you know, I am a dog fan! I like cats as well, but I’ve never owned one. I just loved this today though: Dogs will be able to videocall owner by shaking DogPhone device’s hi-tech balls (The Mirror, Katharine Hay), but if you want something to put a spring in your step today, I would recommend that you watch Three minutes of golden retriever madness that will make your day (The Mirror, Bethan Shufflebotham). This should put a smile on the face of anyone, surely?!