Wednesday 22/03/23

1. In MACRO, ENERGY & BITCOIN NEWS, we see the upshot of the Xi-Putin summit, Ukraine bagging a $15.6bn IMF loan, Rolls-Royce turning the screw as energy prices fall and bitcoin’s boom during banking’s bust
2. In BANKING NEWS, Yellen wades in on World Bank reform and First Bank support while UBS/Credit Suisse repercussions hit home and Jezza presses on with “Big Bang 2.0”
3. In AUTOMOTIVE NEWS, Brussels tries to appease on e-fuels, Ford launches a new EV, used EV prices drop and Maserati aims to emulate Porsche/Ferrari
4. In INDIVIDUAL COMPANY NEWS, Google launches Bard, Just Eat lays off staff, GameStop booms, Nike’s sales jump, Netflix bets big, Kingfisher reflects a DIY decline and FTSE100 companies make more money in the US
5. AND FINALLY, I bring you the key to selling anything…

So we see the upshot of the Xi-Putin meetings, Ukraine gets a massive loan, Rolls-Royce ups the ante and bitcoin rockets…

📢 JUST A REMINDER FOR YOU! I will be reviewing the business and financial markets news of March with Jake Schogger of the Commercial Law Academy NEXT WEEK, so if you want to watch/listen in, you need to register HERE. Hopefully see you there!

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

In Xi Jinping-Vladimir Putin talks highlight Russia’s role as ‘junior partner’ to China (Financial Times, Max Seddon and Joe Leahy) we see that Russia is very much the junior in the relationship as it is believed that it needs China onside to stand any chance of winning the war in Ukraine. So far, China has really helped Russia’s war effort with bilateral trade hitting a record $190bn in 2022 and it can assist even more with the planned Power of Siberia 2 gas pipeline which would mean that Russia could circumvent Europe with its gas exports. China’s imports of Russian energy rose from $52.8bn to $81.3bn in a year as Russia became China’s second biggest supplier of coal and crude oil. Vlad will be hoping that the gas pipeline thing could be a case of history potentially repeating itself because when Russia faced sanctions over its annexation of Crimea in 2014, it got past sanctions thanks to China signing a deal for the Power of Siberia pipeline which offered it a cheap gas supply. However, Xi Jinping backs Vladimir Putin on Ukraine but holds out on Russian gas pipeline (Financial Times, Max Seddon, Kathrin Hille and Polina Ivanova) suggests that Xi is potentially playing hardball as he did not commit to a pipeline agreement, the signing of which Putin had been portraying as pretty much a done deal. * SO WHAT? * Xi has Putin by the short and curlies – and Putin knows it. But given how increasingly important China is becoming to Russia there’s not really much Putin can do about it apart from perhaps cosying up even more with the Middle East (and China seems to have that covered as well!).

Meanwhile, Ukraine clinches $15.6bn IMF loan (Financial Times, James Politi) shows that the IMF has thrown Ukraine a massive bone to bolster its economy, although it still has to get final sign-off from the IMF’s board in the next few weeks. Ukraine has been pushing for this for many months.

Meanwhile, State pension age plan shelved as life expectancy falls (Daily Telegraph, Melissa Lawford, Ben Riley-Smith and Eir Nolsøe) shows that the government is postponing a plan to raise the state pension age from 66 to 67 between 2026 and 2028 and then to 68 by the mid-2040s. Funnily enough, it is thought that it would be

better to quietly brush this under the carpet until after the next general election! * SO WHAT? * Given that Brits are currently very hard done by on this front versus the French, who are currently outraged and protesting about raising the retirement age from 62 to 64, this seems to be the sensible option! Unfortunately, I suspect this age is just going to continue to creep up over time as funding pensions will get more expensive as populations age and there aren’t enough new humans popping out to keep the whole thing going!

Rolls-Royce eyes mini-nuke project in Finland as UK drags its feet (Daily Telegraph, Howard Mustoe) shows that the British engineering company will potentially build its Small Modular Reactors in Sweden and Finland under plans that are under discussion with Finland’s government-owned utility company Fortnum. An early stage deal has been signed and Rolls-Royce is trying to chivvy the UK government into getting its own orders in. * SO WHAT? * The Czech government has also expressed an interest in the tech but Hunt seems to be set on running a competitive tender. Everyone and their dog has suddenly become interested in energy security since Russia invaded Ukraine and mini-nukes is definitely one of the options being considered to become more energy-independent.

Then in Energy bills ‘will fall below £2,000’ from July (Daily Telegraph, Tom Haynes) we see that, on a more day-to-day level, annual household energy bills are likely to drop below £2,000 from July thanks to falling wholesale prices. This will be the lowest they’ve been since April last year. This is still clearly a lot of money, but it will ease some pressure on household budgets. I guess the next question will be what will happen next winter??

Meanwhile, in the midst of all the mayhem, Bitcoin Booms in Wake of Bank Crisis (Wall Street Journal, Vicky Ge Huang and Caitlin Ostroff) highlights the fact that the world’s best-known cryptocurrency has shot up by 21% so far this month – and almost 70% so far this year – despite the ongoing crackdown on crypto companies by regulators in the wake of the FTX collapse. Funnily enough, bitcoin was launched in 2009 in the wake of the financial crisis and it was seen by many as a an alternative to the existing banking system that had just let everyone down. * SO WHAT? * As usual with bitcoin, no-one can really give a proper explanation as to why it’s moved although this article says it was thanks to a small number of doshed-up crypto traders buying in. Supposedly, thinner volumes means that smaller traders can have an outsize impact on the price – but this sounds like a weak (albeit plausible) reason. It’s the sort of explanation that, when I was a stockbroker, I would get if I asked a trader when the trader just wanted to get rid of me (and didn’t know the real answer!).

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!

Yellen wades in, UBS/Credit Suisse ripples continue and Jezza ploughs ahead regardless…

Janet Yellen pushes for first steps in World Bank reform by April (Financial Times, Camilla Hodgson, Attracta Mooney and Aime Williams) shows that the US Treasury Secretary is, along with German development minister Svenja Schulze, pressing for a “binding schedule of reform” of the World Bank to address climate change. Thus far, its efforts have been deemed as insufficient. Yellen wants the World Bank to publish a roadmap by April.

In First Republic rallies as Yellen says US prepared to give more support (Financial Times, James Politi) we see that the share prices of First Republic and other regional US banks strengthened yesterday as they reacted to Janet Yellen stating the Treasury’s commitment to support smaller lenders if there was a need but First Republic hires Lazard to explore options after share price tumbles (Financial Times, Joshua Franklin and Ortenca Aliaj) shows that they fell again (First Republic’s share price fell by around 13% in after-hours trading and is now down by over 80% this month) because investors were worried about the fact that around two-thirds of First Republic’s clients had over $250,000 in deposits (the level that the government would guarantee in the event of a banking failure – which means that withdrawals would also be high!). There was also concern about the amount of long-dated investments and mortgages it had on its balance sheet which have seen their value plummet as interest rates have risen sharply over the last year. Banking Turmoil Tests the American Consumer (Wall Street Journal, Gabriel T.Rubin) gives an indication as to the impact on consumers as unrest in the sector may make it more difficult in future to get loans for houses, cars and other big purchases as banks cut their loan book (I would also imagine that banks are tightening lending criteria to minimise potential exposure to defaults). It may also be that the turmoil

adversely affects consumer confidence as well – a big thing when you consider that consumer spending accounts for around 70% of US GDP. * SO WHAT? * It seems that this bank turmoil is not over yet despite everyone’s swift actions and reassurances.

Meanwhile, over in Europe, Thousands of UK jobs at risk after UBS takeover of Credit Suisse (The Guardian, Anna Isaac) just reiterates what I said the other day that there are going to be tons of job losses as a result of UBS’s forced takeover of Credit Suisse. Some at Credit Suisse say they reckon investment banking will be hardest hit while potentially 20% of workers could lose their jobs across other divisions. Swiss freeze Credit Suisse bonuses (The Times, Ben Martin) shows that the Swiss government put its foot down when it heard that Credit Suisse was going to pay out deferred bonuses (when you get a bonus in many places in the investment banking, generally speaking you don’t get it all at once as a cash lump sum. It tends to get paid in tranches in cash and/or shares over a few years – and this is done in order to stop people from leaving once the bonus cheque has cleared, which used to happen a lot 😁). It used powers under the Banking Act to intervene. * SO WHAT? * When UBS signed the deal, it said that it would be able to cut costs by $8nm by 2027 – and that pretty much means a shedload of redundancies. No plans have been announced yet but in London around 5,000 people work at Credit Suisse and 6,000 work at UBS. There will be carnage…

Back in the UK, Jeremy Hunt to press ahead with ‘Big Bang 2.0’ despite banking crisis (Daily Telegraph, Simon Foy and Melissa Lawford) shows that Jezza is going to bring forward plans (aka the “Edinburgh Reforms”) to reform banking despite the fact that many think that this will increase risk. Interesting timing, but I guess that’s his prerogative. As I keep saying, I don’t think that the banks that have been at the centre of all the downfall have been inherently bad – it’s just that everyone panicked at the same time and caused a run on banks. Still, I’m not sure why he brought it all forward!

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!

Brussels tries to play nice, Ford launches a new EV, used EV prices fall and Maserati has high hopes…

Brussels makes e-fuels offer to resolve spat with Germany (Financial Times, Guy Chazan and Alice Hancock) highlights efforts by the European Commission to appease the Germans on a proposed ban on the sale of combustion-engined cars from 2035 by creating a new category of vehicle that could only run on e-fuels. * SO WHAT? * The Germans spoiled the passing of the 2035 rule and pushed for an exemption for e-fuels – so maybe this could satisfy them. There has been no official statement yet, but just the very existence of this hastily-put together new category just does to show how important it is to get the Germans onside. When you consider that car manufacturing makes up about 20% of Germany’s industrial revenues you can see why they are keen to make any kind of deal work for them.

Ford’s new electric Explorer inspired by American SUVs (The Times, Robert Lea) announces the launch of a new all-electric car from Ford that will take the company closer to its goal of being 100% electric by 2025. The mid-sized electric Explorer debuted in London yesterday as the eco-friendly evolution of its gas-guzzling Explorer SUV. It will go on sale in Europe with deliveries expected next year. It will probably have a range of around 300 miles and cost around £40,000. Another step forward for Ford! By the end of next year, it will be selling only electric cars in Europe.

Second-hand electric car prices fall as demand dwindles (Daily Telegraph, Howard Mustoe) cites AutoTrader findings which shows that the prices of used EVs fell by 13% over the last year as more supply comes to market – the number of second-hand battery-powered vehicles has rocketed up by a whopping 261% in the last year but demand has lagged, hence the price drop to an average of £33,060. This comes as the prices of some new Tesla models have been falling. * SO WHAT? * I think that the fact is that they are still too expensive for most people and that those who are on the fence have plenty of reasons to sit on their hands. They can say that a big ticket purchase right now will cause unnecessary pressure on finances, that the charger network still needs improving and that more and more desirable models are coming to market.

Then in Maserati/IPO: business model needs tuning for listings race (Financial Times, Lex) we see that the Stellantis-owned Italian sportscar maker is keen to follow the examples of Ferrari and Porsche before them to do an IPO and see its shares skyrocket. The problem is it’s not the same as either! The average selling price of its cars its below €100,000. This is way below Ferrari’s €500,000 cars and Porsche’s broad price range of luxury cars, which it sells in more volume. FWIW, Maserati plans to bring out an electric version of all of its models by 2025 and have an entirely electric range by 2030. * SO WHAT? * This sounds like a nice idea in theory, but it seems that its cars are probably more comparable to BMWs and Mercedes. Still, the electrification plans sound good but maybe it would be an idea to wait a bit longer to get a better valuation…

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!

Google unleashes Bard, Just Eat slims down, GameStop surprises, Nike’s sales jump, Netflix splashes the cash, Kingfisher experiences DIY fatigue and FTSE100 companies make more money in the US…

In a quick scoot around some of today’s other interesting stories, Google launches Bard chatbot amid ‘misleading or false information’ fears (Daily Telegraph, Matthew Field and Gareth Corfield) shows Google launching its Bard chatbot as it tries to compete with Microsoft-backed ChatGPT. It was launched with the warning that it might “display inaccurate or offensive information”. This new chatbot will be opened to users in the UK and US from today. Let the fun continue…

Just Eat to lay off 1,700 delivery staff as takeaway boom ends (Daily Telegraph, Matthew Field) highlights big headcount reduction in an attempt to cut costs as the lockdown momentum has receded.

Over in the US, GameStop Shares Surge After It Posts Surprise Profit (Wall Street Journal, Sarah E.Needleman) shows that the share price of embattled meme-stock GameStop rocketed up by a massive 48% in trading yesterday as it managed to surprise the market yesterday with news of its first quarterly profit after seven consecutive quarters of losses! It has been focusing on getting its store offering right and cutting costs – all of which seems to have worked! The company said that it would continue to prioritise profitability and cut its European footprint.

Nike Sales Jump as It Works Through Inventory Glut (Wall Street Journal, Inti Pacheco) shows that the sneaker maker unveiled strong quarterly sales as it saw success working through its big inventory. As things stand currently, demand does not seem to be slowing down despite the currently tricky macro situation. China in particular had a strong rebound versus the end of last year.

Elsewhere, Netflix Bets Big on ‘The Electric State’ as It Seeks to Build Franchises (Wall Street Journal, Sarah Krouse and Robbie Whelan) shows that the streamer is putting its money where its mouth is and pouring money into projects that could become the next big franchise. It’s got a whole list of A-listers involved in an upcoming sci-fi movie called “The Electric State” with a budget thought to be around $200m, which would make it one of Netflix’s expensive ever films. The idea is that it could lead to TV, merch and game spinoffs. * SO WHAT? * I think that this is a very high risk strategy, but if it pays off the returns could be enormous. If it doesn’t it will have been a very expensive mistake! Spending on content is needed, though, but this is a difficult thing given the rate at which content is consumed. This is why I think the idea of all the other spinoffs is good.

Profits dive at Kingfisher as pandemic DIY boom fades (The Times, Isabella Fish) shows that the DIY boom has been running out of puff as Kingfisher, which owns B&Q and Screwfix, announced a sharp fall in profits. * SO WHAT? * The company does expect demand to be supported by the ongoing trend of home working and sales of insulation materials to keep household bills down but I do wonder what their next hit product is going to be! After a lockdown where people bought outdoor heaters, BBQs and stuff to make their home working environment better I am at a loss as to where the next big growth is coming from! Usually, DIY retailers tend to do well in a strong property market as movers paint their new abodes and put up new shelving etc. so we’ll have to see whether things pick up from spring!

I thought I’d include FTSE 100 companies now make more money in the US than the UK (Daily Telegraph, Oliver Gill and James Titcomb) because I think it’s pretty interesting to note that sales by the UK’s biggest publicly quoted companies are now higher in the US than they are in the UK, which may be part of the explanation behind why more companies are considering a listing in the US. I would have to say that there’s not really much the London market can do to combat the attractions of the US where companies would probably get higher valuations, access to more investors and executive pay is way more.

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…

Now I have to say that I’m not a fan of Jordan Belfort of Wolf of Wallstreet fame, but I have to say that his explanation of sales in the infamous “sell me this pen” scene is absolutely spot on – and can be applied in so many aspects of life. Enjoy!