Wednesday 21/09/22

1. In MACRO & ENERGY NEWS, Truss talks economic policy, Sweden hikes its interest rate, Uniper edges closer to safety, German factories get a massive price shock and taxpayers stump up
2. In RETAIL & LEISURE NEWS, UK retailers and pubs hold out hopes for the mini-Budget, Fuller’s fears bills, Butlin’s gets sold back and Tui expects a return to profit while Mike Ashley departs and Gap announces cuts
3. In CAR-RELATED NEWS, Ford has a setback and Hertz orders a ton of EVs
4. In MISCELLANEOUS NEWS, it’s the end of an era for SPACs, Deloitte wants to hire and BeReal learns from rivals
5. AND FINALLY, I bring you a butter spreading hack…

So Truss talks strategy, Sweden boost its interest rate, Uniper closes in on more state help, German factories get a huge shock and businesses get a taxpayer boost…

Liz Truss plans radical shift in economic policy (Financial Times, George Parker, Jim Pickard, Jennifer Williams, Daniel Thomas, Sebastian Payne and Chris Giles) shows that the new PM is starting to set out her stall ahead of the expected mini-Budget announcement this Friday. She’s approved plans to cut national insurance, reversed a planned rise in corporation tax and to scrap the cap on bankers’ bonuses. She’s banking on growth being stimulated by easing the tax burden on businesses and the affluent, sometimes known as “trickle down” economics (i.e. if you ease the burden at the top, the effects trickle down). Although she will no doubt be criticised for disproportionately helping the rich, she can also point to what she’s going to be doing to hold down electricity bills (which will help everyone). It also looks like Chancellor Kwarteng will be announcing a cut in stamp duty in the mini-Budget to stimulate property transactions. The whole levelling-up agenda is going to have a major revamp as well and will involve things like making it easier for councils to develop specific areas. We’ll see the detail soon enough!

Sweden’s interest rate rise is biggest in three decades (Financial Times, Richard Milne) highlights the country’s central bank’s decision to raise interest rates by a full percentage point to 1.75% in order to tame inflation. This was the Riksbank’s biggest one-time interest rate rise since 1993! Sweden’s central bank was one of the last to raise interest rates this year. It went on to say that it would increase them again in November by 0.5% in November and another 0.25% in February. Sweden is indeed late to the inflation-busting party, but it’s right back in it now!

In energy news, Germany poised to take control of struggling utility Uniper (Financial Times, Madeleine Speed and Tom Wilson) shows that the German government is about to nationalise the

struggling Uniper, which has been decimated due to it having been the one of Europe’s biggest importers of Russian gas. It is expecting an €8bn injection from the government who will also buy the 56% stake Finnish energy company Fortum holds. The state already has a 30% stake that it bought in July when it last bailed Uniper out (at that time it was €15bn!). * SO WHAT? * This just goes to show how important Uniper is. This latest development will also be a relief (for the moment, at least!) in the UK as Uniper owns a number of our power stations!

German factories suffer record price shock as Moscow cuts off gas (Daily Telegraph, Tim Wallace) cites the latest release from the Federal Statistical Office which shows that German factories faced an increase of 139% in their energy bills over the last year, which contributed to prices of industrial products rising by almost 46% over the last year – the biggest increase since at least 1949! * SO WHAT? * This is just going to put even more pressure on the ECB to boost interest rates to calm inflation.

Back home, Taxpayers to fund half of businesses’ power bills (Daily Telegraph, Rachel Millard, Camilla Turner and Matt Oliver) highlights the fact that taxpayers are going to cover 50% of businesses’ electricity costs over the winter as part of a bailout to avert bankruptcies that would otherwise occur in the absence of any help. Business secretary Jacob Rees-Mogg is to announce today that the government will cap the amount companies can be charged for electricity for six months, starting in October. * SO WHAT? * This is a step in the right direction but businesses will no doubt be pushing for more clarity as six months isn’t going to be long enough to help with long-term planning! I suspect that the government is hoping that there will be an element of self-selection going on here so that it doesn’t blow all its cash too early on companies that are close to failure anyway.

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!

UK retailers and pubs hope, Fuller’s braces itself, Butlin’s gets sold back and Tui makes a sunny forecast…

Against the current backdrop of gloom, UK retailers and pub owners look to mini-Budget for help (Financial Times, Daniel Thomas and Oliver Barnes) shows that the UK retail and hospitality industries are looking with particular interest at what’s going to be announced this Friday in the way of measures that will help them to survive. They want to get clarity on business rates (which are set to rise appreciably in the coming year) among other things in Friday’s announcement, particularly as we enter the “golden quarter” (final three months of the year before Christmas). Pub group Fuller’s expects its energy costs to more than double (Financial Times, Oliver Barnes) highlights another element that is worrying the hospitality industry – energy bills – as it reckons the bills will double without any government intervention. * SO WHAT? * Businesses want clarity – and the pressure is on for Friday’s mini-Budget to deliver ahead of what it going to be a difficult quarter.

There have been some pretty interesting developments in the leisure sector! Family buys back Butlin’s for £300m (The Times, Patrick Hosking) shows that the Harris family, which owned Butlin’s for 21 years until it sold it last year for £3bn as part of Bourne Leisure, has bought back the holiday resorts business from private equity firm Blackstone for £300m. * SO WHAT? * It looks like some serious investment is needed to bring it up to date – so onwards and upwards! I guess this looks like a bit of a gamble on the enduring appeal of staycations!

Talking of vacations, Tui shrugs off travel chaos with forecast of return to profit (The Times, Dominic Walsh) shows that the Anglo-German travel operator is looking through recent problems caused by flight disruption and sticking with its year-end forecast that it will return to profit. July and August departures were at 94% of pre-pandemic levels and flight disruption costs had continued to improve. Winter bookings currently stand at 78% of pre-Covid

levels, but it is early yet – and cruises are also recovering nicely. * SO WHAT? * It’s good to see that some spending patterns are returning to near-normal levels – although I wonder whether we’ll see a prolonging of the pandemic-inspired boom in staycations (benefiting companies like Butlin’s above, for instance).

Mike Ashley to step down from Frasers Group board (The Guardian, Julia Kollewe) marks a historic day for the company as its colourful founder announced he’d be stepping down, although he will still be the company’s controlling shareholder with a near-70% stake in the company that used to be called Sports Direct. His son-in-law, Michael Murray, has been CEO since May. Mike Ashley: Frasers will benefit from shedding maverick status in City (Financial Times, Lex) highlights the ongoing rivalry with JD Sports, whose market value has exceeded that of Sports Direct since 2016, and that the “new” CEO will be better equipped to close the gap and give it a better reputation. * SO WHAT? * FWIW, I think that Ashley will still be pulling the strings in the background. It’s not as if Michael Murray is actually qualified/experienced enough to run such a company and Ashley still retains a massive stake. It might make negotiating with suppliers easier though with Murray as the figurehead as he will arguably be more palatable.]

Then in Gap is cutting 500 corporate jobs (Wall Street Journal, Suzanne Kapner) we see that Gap Inc is cutting a load of jobs from its main offices in San Francisco, New York and Asia. Gap had around 8,700 employees at its HQ locations as at the beginning of the year versus the total headcount of around 97,000. * SO WHAT? * Rivals including Walmart, Abercrombie & Fitch and Stitch Fix have all announced layoffs recently but I have to say that Gap looks to me like it is in terminal decline. I think that something very drastic needs to happen for Gap to even think of returning to the glories of old. It needs a new full-time CEO for starters! There’s a real risk here that if they don’t get anyone decent in pronto then the company will continue its slide into oblivion…

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!

Ford hits a bump in the road and Hertz orders a load of EVs…

Ford warns of $1bn inflation setback (The Times, Callum Jones) highlights a warning from Ford that inflation and supply chain problems continues to hit production, which was higher than expected. The news sent its share price down by 12.5% and made investors worry about rivals.

On a more positive note, Hertz to buy up to 175,000 EVs from GM (Wall Street Journal, Mike Colias) highlights a deal that would buy EVs from across its four main brands in North America – Chevrolet, Buick, GMC and Cadillac – over five years. * SO WHAT? * Rental car companies have been signing deals with EV makers

including Tesla and Polestar as they try to differentiate their fleets and burnish their ESG credentials. Hertz wants to be able to offer EVs across all of its business lines and I think this is great news for GM as it will give it at least some order visibility. In addition to the usual business/leisure rental I wonder whether there would be any mileage in framing the hiring of an EV as a chance to have an extended test-drive to see what it’s REALLY like to own an EV and whether things like range anxiety are actually justified. If, say, Hertz, could then get a slice of the subsequent sale of the car that could perhaps be another new revenue stream! This is just my opinion though!

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!

SPACs look like they’ve had it, Deloitte is on a hiring spree and BeReal tries to learn from predecessors’ mistakes…

In a quick scoot around other interesting stories today, Spac booster Chamath Palihapitiya (Financial Times, Ortenca Aliaj) heralds the potential end of an era for SPACs as one of its highest-profile cheerleaders has decided to give up and return $1.5bn to investors because he can’t find any suitable investment targets (SPACs have to find suitable acquisition targets within a specified time frame or pay the money back to investors). Spac implosion: Palihapitiya’s retreat marks the end of an era (Financial Times, Lex) implies that this could be the end of SPACs (for the time-being, at least), particularly as almost half of the companies he invested in are at least 40% below their listing prices. Despite this, he reckons that he’s doubled his money thanks to gains being highly skewed towards early investors!

Meanwhile, Deloitte to recruit extra 3,500 staff to meet demand (The Times, Ben Martin) shows that the Big Four accountancy firm is looking to recruit a large number of employees for its consulting business to meet growing demand from its clients. This will take its headcount up to around 11,000 by 2027 and a third of them are expected to join offices outside London. This comes shortly after

the company announced plans to increase its staff numbers in its British audit and assurance business by 40% over five years! Impressive stuff.

Then in Photo-sharing app BeReal explores paid features to avoid advertising (Financial Times, Akila Quinio, Cristina Criddle and Tim Bradshaw) we see that French start-up photo-sharing app Be Real is looking at ways of earning money that don’t involve advertising. The app’s popularity has sky-rocketed over the summer amongst generation-Zers due to its concentration on authenticity without filters! It’s gone from having just 10,000 daily active users just over a year ago to over 15m today – and some predict this will be in the tens of millions by the end of the year! * SO WHAT? * It is thought that the company wants to keep its team small and lean and avoid raising massive sums from VCs to take over the world (the previous playbook used by the likes of Facebook and Snapchat, for instance). It is racing to do this whilst at the time trying to avoid the fate of other apps such as Houseparty or Clubhouse who become “one-hit wonders”. This is a tall order – and it will also have to address other issues like how to moderate content, something that becomes exponentially more difficult to do as the company gets bigger. Is this going to be The Next Big Thing??

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…

After yesterday’s condiment hack, I thought I’d follow up with something that I’d argue is even more useful: Woman branded ‘kitchen god’ after sharing genius tip for spreading hard butter (The Mirror, Ellie Fry). I suspect it’s things like this that reinforce what you know already – that Watson’s Daily is the place to be for adrenaline-fuelled knowledge-boosting, eh 🤣?!?