Wednesday 24/03/21

1. In MACRO & JOBS NEWS, Abu Dhabi invests big in the UK, unemployment comes down, young people take a hit and working practices at Goldman Sachs and Citi change
2. In CHIPS & EV NEWS, Intel commits to up production, Bitcoin chips away at chip supply and Geely targets Tesla while Tesla tries to keep China sweet
3. In MUSIC NEWS, industry revenues rise, vinyl overtakes CDs and NFTs provide big income to musicians
4. In INDIVIDUAL COMPANY NEWS, Adidas heads outdoors, Cineworld plans to open, GameStop has weaker sales and Trustpilot has a strong market debut
5. AND FINALLY, I thought I’d leave you with the news that Gordon Ramsey has gone vegan…

So Abu Dhabi commits to the UK, unemployment falls and working practices in Goldman Sachs and Citi come under scrutiny…

Abu Dhabi agrees multibillion-pound investment in British business (Financial Times, Andrew England and George Parker) highlights the agreement of a massive investment partnership with the UK (the exact size of which was undisclosed), with a commitment to pour money into British health, tech, infrastructure and clean energy. This marks the first such deal done by the UK and Office for Investment which was launched in November to help attract foreign capital. * SO WHAT? * It will certainly be useful to have some extra reddies to hand in these key areas. Relations with some of the Gulf states can be controversial at times, but TBH the UK government needs all the money it can get at the moment. Hopefully, this money can do a lot of good.

Unemployment in surprise fall back to 5% in January (The Times, Gurpreet Narwan) cites the latest data from the Office for National Statistics which shows that the unemployment rate fell in the three months to January despite the UK entering into a third national lockdown. This just goes to show how important furlough has been in terms of containing what would otherwise be certain jobs carnage. However, Young people hit hardest as Covid wreaks havoc on jobs (Daily Telegraph, Tim Wallace) shows that young people are being disproportionately hit by job losses with two-thirds of the drop in numbers on the payroll being made up by the Under-25s. At the other end of the scale, only 5,000 aged over 65 left employment during this period. Hospitality and retail were particularly hard-hit, which probably goes some way to explaining this phenomenon.

Mind you, it’s not all plain sailing for those in employment either. David Solomon commits to Saturdays off for Goldman Sachs bankers (Financial Times, Robert Armstrong) shows that the Goldman chief is at least having to look like he gives a 💩 by responding to the recent report from junior investment banking analysts about overwork by enforcing a Friday 9pm to Sunday

morning “no work” rule. Goldman Sachs’ junior bankers rebel over ’18-hour shifts and low pay’ (The Guardian, Kalyeena Makortoff) says that the concern has spread from the US to the UK and Zoom-free Fridays to reset balance at Citi (The Times, Callum Jones) signals Citigroup’s token effort at giving employees balance. * SO WHAT? * Most of the people reading this will find it quite incredible how much some of these bankers get paid (I know, because I used to headhunt them into a whole host of investment banking roles across various levels of seniority!). Much is made of the whole “if-you-think-in-terms-of-pay-per-hour-worked” argument bringing these people down to below minimum wage, but working overtime in the City is the norm. In every broking job I have ever done in the City, you are presented on your first day with a form you have to sign from HR that is a waiver on working hours. Everyone signs it. Working conditions in places such as Goldman Sachs (and they are just the tip of the iceberg, BTW) IN CERTAIN AREAS are notorious and anyone going in there believing otherwise is extremely naiive. When anyone came to me asking to get into M&A or corporate finance, in particular, I would tell them a selection of the horror stories that I had experience or seen with my own eyes and/or heard from insiders or “escapees”. Many people just do not realise the sheer sacrifice it takes to get on in such areas – I even told them to expect to lose contact with friends and family while relationships of all kinds take a back seat. When all’s said and done, the fact is that CLIENTS want things done by a certain time and, as everyone knows who works in a job that involves projects and hard deadlines, if you have to work around the clock to get things done, that’s what you do. I am by no means condoning these horrendous work practices – I’m just saying that it’s not just the banks that are guilty – it’s the clients who make them jump! There was a particularly pertinent cartoon in the Daily Telegraph’s Alex today where the boss said that in order to ease working conditions he suggested that he would employ twice as many junior bankers but at half the salary – but that this didn’t go down well with his existing cohort! Although David Solomon was probably told by HR to do something to address the issue for PR purposes, I actually think that this incident may even make hiring more effective because the people that DO apply will do so in full knowledge of what it will be like. Ironic, no?

Intel aims to put a dent in the chip shortage and Tesla faces more competition in the shape of Geely…

Given all the recent drama about chip shortages, Intel CEO presses turnaround effort with $20billion investment plan (Wall Street Journal, Aaron Tilley) shows that Intel’s chief exec is doubling efforts to increase semiconductor production to meet burgeoning demand by using a mix of increased outsourcing and earmarking $20bn for new chip factories (aka “fabs”= fabrication). The company reiterated its commitment to being both a chip designer and manufacturer and said that it would keep most production in-house. Bitcoin mining boom adds to chip price inflation (Financial Times, June Yoon) highlights yet another source of demand that is sucking up semiconductors as the increasing amount of computer power needed to mine bitcoin necessitates the use of more chips. * SO WHAT? * The grumblings about America’s chip industry have been growing louder over the years as increasing amounts of production have shifted to Asia. The sudden spike in demand as the pandemic hit has left many short of what they need – to the extent that president Biden last month pledged to address the chip shortage and review supply chains in critical areas like this. All of this isn’t really going to help right now, but it may help to avert future shortages. The demand just keeps on coming!

Meanwhile, things are hotting up in EVs in China’s Geely challenges Tesla with launch of premium electric car brand (Financial Times, Christian Shepherd) where the Chinese car manufacturer announced that it was launching a premium EV brand in a bid to compete with Tesla in its own backyard. The new brand is called Zeekr and it is expected to start deliveries in the third quarter. Beijing is targeting EVs to make up over 20% of car sales in China by 2025 and, given that Tesla currently has the best-selling electric car right now in the form of the Model 3, you can see why Geely (which also owns Volvo Cars, which has its own Polestar EV brand) wants a piece of the action! Geely/luxury electrics: paying up to take on Tesla (Financial Times, Lex) says that Geely should do well here, especially as the government is key to encourage local manufacturers but with the likes of Nio also doing well, Tesla will need to continue its efforts to maintain its position while these local players snap at its heels. Tesla boss Elon Musk’s China charm offensive rolls on with praise for climate plans (Wall Street Journal, Liza Lin) shows just how important China is to Tesla (it accounts for about 20% of the company’s global revenues) as he sought to calm recent scrutiny of his vehicles following the restriction of the use of Tesla vehicles by military staff and employees of some key state-owned companies. * SO WHAT? * China is a key part of Tesla’s growth so it is imperative that Elon keeps the regime sweet. Still, if restrictions/paranoia increase and domestic carmakers’ offerings improve, Tesla’s share in the market is likely to come under a lot of pressure in the not-too-distant future.

Music revenues rise, vinyl’s revival continues and NFT’s give musicians a lifeline…

It’s really interesting to see Music industry revenue hits highest level since 2002 (Financial Times, Nic Fildes) which highlights just how much we have relied on music under lockdown as figures from the IFPI global music industry body showed that total revenues increased by 7.4% in 2020 in its sixth consecutive year of growth! This is mainly due to the explosive increase in paid-for subscriptions on Spotify, Apple Music and Deezer. Things really have changed so much in the ten years since we saw illegal file sharing and the collapse of CD sales! Streaming now makes up for 62% of sales across the music industry. Mind you, Vinyl records to spin ahead of CDs in vintage boom (Daily Telegraph, Ben Woods) highlights the return of vinyl as revenues hit their highest level for 15 years, showing that there’s life in the vinyl old dog yet!  No doubt this will put more pressure on the music industry to give more to struggling artists.

Musicians turn to NFTs to make up for lost revenue (Wall Street Journal, Anne Steele) shows that musicians, shorn of making a living from live performances, have had to pivot over lockdown and some have decided to connect to fans via blockchain and sell them NFTs (Non Fungible Tokens). NFTs are virtual deeds that confer ownership of a digital asset. They are then uploaded to a digital ledger (the blockchain) where it tracks things like where it was created, where it went and for how much. The original creator is able to see this certificate (called a “smart contract”) which enables them to take a cut of, say 10-30%, any resales. A number of music acts (like Deadmau5 and 3LA) have made huge amounts of money doing this with music and other merch and it looks like there is real growth potential here. I suspect we will be hearing much more about NFTs in the future…

Adidas seeks the outdoors, Cineworld announces plans to open, GameStop has disappointing sales and Trustpilot has a strong debut…

In other big stories today, Adidas prepares to take on North Face in outdoor foray (Financial Times, Olaf Storbeck) shows that the sportswear company has designs on becoming one of the world’s four biggest outdoor brands by 2025 as it believes that walking, hiking and skiing will become as big as football, running and gym training. It is currently around six or seven in this space and is betting on lockdown pursuits becoming long-term pursuits. It wants to take on the likes of The North Face, Patagonia and Arc’teryx but at the same time it is going to ditch other pursuits like lacrosse and Aussie Rules Football and reduce exposure to wrestling and cricket. At the moment, Adidas sells waterproofs and boots under the Terrex brand but it clearly wants to stop pussy-footing around and make a real splash in this area. * SO WHAT? * I think that this sounds like a very canny move, but we’ll have to see what products it comes up with I think before getting too excited! 

Other than that, Cineworld to reopen US cinemas next month (Financial Times, Alice Hancock), echoing actions by rival AMC Entertainment, but there are uncertainties surrounding how quickly restrictions will be lifted. GameStop shares slump as pandemic forces changes (Wall Street Journal, Sarah E. Needleman) shows that the games/electrical goods retailer had an underwhelming Christmas although there is talk of new management and Trustpilot surges on debut in London (Wall Street Journal, Louise Moon) shows that the customer review website shot up by up to 16% in its first day of trading on the London Stock Exchange, but then finished flat on the day. It had been priced at the top end of its range. * SO WHAT? * Although trading flat is not exactly headline-grabbing, I would have thought that the investment banks working on the deal and the company itself will have been relatively pleased with the performance as I always think that, when you see IPOs doubling on their first day, you must wonder whether you actually got the valuation right and could have actually squeezed more money out of investors. It looks great for the punters and the overall feelgood factor, but is not so good for the company or their advisers. Still, there’s more time yet for this to work up a head of steam!

…in other news…

I thought I’d leave you today with the shocking revelation in Gordon Ramsay teases fans he’s ‘turning vegan’ with aubergine steak recipe (The Mirror, Paige Holland) 😜. If you like what’s in that article, I would really suggest that you try this recipe for a Japanese aubergine dish. It is one of my favourite things and is incredibly simple! Go on – give it a go! It also works well with courgettes I find…