Wednesday 27/04/22

1. In MARKETS & SANCTIONS NEWS, Wall Street falls while Poland and Bulgaria get cut off
2. In AUTOMOTIVE NEWS, Tesla tanks, Ford rushes out the Lightning and Volvo buys into Carwow
3. In CONSUMER/RETAIL NEWS, household bills look set to rise by £271, equity release surges, grad salaries get punchy, consumers stockpile, Lidl offers a finder’s fee and Primark aims to raise prices
4. In MISCELLANEOUS NEWS, Maersk warns, Heathrow is downbeat, Microsoft’s earnings boom but Google’s shares slide while Bezos warns of China influence on Twitter
5. AND FINALLY, I bring you the five stages of Costco shopping…

So markets fall and Russia dishes out the sanctions…

*** I WILL BE DOING A ROUNDUP OF APRIL WITH JAKE SCHOGGER OF THE COMMERCIAL LAW ACADEMY TOMORROW! AS USUAL, I’LL BE DOING THE MARKETS/BUSINESS NEWS AND JAKE WILL BE SPRINKLING HIS LEGAL MAGIC OVER PROCEEDINGS. We’ll be covering a lot of interesting areas this month given what’s been going on! You MUST register HERE to attend – and it is, of course, FREE. PLEASE NOTE, IT WILL START AT 4PM RATHER THAN THE LATER USUAL TIME! ***

Growth fears trigger Wall Street sell-off (The Times, Robert Miller) highlights the major drop for the tech-heavy NASDAQ in trading yesterday – its biggest one-day decline since early September 2020, which wasn’t long after the congressional hearing where the heads of Facebook, Amazon, Google and Microsoft had to face criticism from politicians and lawmakers. * SO WHAT? * Some said that this was part of a wider sell-off as the markets anticipate a sharp interest rate rise in next week’s meeting of the Federal Reserve (but TBH, I think that’s a bit weak considering that Fed Chief has been flagging this for quite a while now), but also the general switching away from tech/growth stocks and into defensive stocks (stocks in industries that tend to weather economic storms – like supermarkets, pharmaceuticals etc.). I personally think that tech stocks will get on just fine as we continue to use more

cloud services and buy more online (especially if it means we get more bargains in these tricky times), but the biggest risk is that they will get regulated – but it’s possible that this won’t even happen because their lobbyists are so powerful and well-funded that I think they will be able to blunt any weapons used against them. The recent Digital Services Act from the EU sounds great, for instance, but I suspect that there will be strong resistance from the US as it pretty much targets some of the country’s biggest companies! Biden’s approval ratings aren’t great so although you would think that he would be supportive of a crackdown in theory, he may be reluctant to punish some of his country’s biggest companies.

Meanwhile, Poland and Bulgaria braced for halt to Russian gas supplies (Financial Times, Harry Dempsey, James Shotter and Nastassia Astrasheuskaya) shows that Russia is turning off the flow of gas to the two countries today as part of Putin’s decree last month to punish “unfriendly” countries who didn’t pay for gas supplies in roubles. * SO WHAT? * Bulgaria said that it was making alternative supply arrangements with other countries and Poland certainly talked a good game about weaning itself off Russian gas for the last few years anyway. I suspect we will be seeing more of this as time goes on, although I can’t imagine Putin cutting off supplies to Germany – even if Germany is now supplying tanks to Ukraine – because it is such a nice little earner! I wonder whether this is what emboldened the Germans to supply Ukraine 🤔.

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!

Tesla drops, Ford hurries and Volvo buys into Carwow…

Tesla valuation slides more than $125bn after Elon Musk’s Twitter deal (Financial Times, Eric Platt, Nikou Asgari, Antoine Gara and James Fontanella-Khan) shows that the EV maker lost 12% in trading yesterday as investors fretted that Musk would be selling some of his stake to finance his purchase of Twitter, particularly because he hasn’t yet said how he will be coming up with $21bn that he is supposed to be putting into the platform (maybe that’s why bitcoin has fallen as well – he still has a chunk of that left from his big purchase!). Volumes of Tesla stock traded yesterday were significant – the volume was triple the next highest traded stock by value – Apple. Given Tesla’s size, it had an outside effect on the markets.

Ford hurries out F-150 Lightning to grab share of electrics market (Wall Street Journal, Mike Colias) shows that Ford saw its first electric F-150 pickup trucks rolling off the production line yesterday, marking a significant milestone in the company’s move to electrification. * SO WHAT? * A lot of hopes rest on the new $40,000+ F-150 Lightning, the electric version of its best-selling petrol-powered pickup, as

it aims to be at the forefront of a new market. It is trying to triple its original output target to 150,000 units versus its order book, which now stands at 200,000. This is interesting considering that start-ups Rivian and Lucid have had to cut their vehicle output targets for 2022 because of supply chain issues. This launch will give it bragging rights against its long-time rival GM, whose Silverado electric pickup isn’t going to see the light of day for another year.

Then in Volvo takes stake in Carwow to help boost digital sales (Financial Times, Peter Campbell) we see that Volvo Cars has purchased a minority stake in online car retailer Carwow . This will help its own digital sales and presence as part of a broader effort to sell 50% of its cars online by 2025 (versus around 10% at the moment). Carwow is now the biggest web-based platform for new car sales in the UK, Germany and Spain. * SO WHAT? * This sounds like a solid idea from Volvo. Although you’d think that this may dent the impartiality of the channel’s car reviews, Mat Watson (no relation to me!) seems to love the current line-up of Volvos so this shouldn’t be a problem 🤣! TBH Tesla could probably take a stake in Carwow as well as Mat waxes lyrical about them as well!

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!

Consumers continue to be confronted by hurdles but the are also stockpiling, while Lidl offers finder’s fees and Primark puts prices up…

Households face extra £271 spend on annual food bills (Daily Telegraph, Laura Onita) cites the latest findings from Kantar which put a figure on how much extra households are likely to be paying on their food bills, something mentioned in Equity release surges to a record high (Daily Telegraph, Jessica Beard) as a driver of older homeowners taking cash out of their properties. Around 23,400 over-55s took out £1.53bn from their homes in Q1 via equity release – the highest it’s ever been and 21% higher than the same period last year. Equity release is money borrowed against the value of the property that is to be repaid with interest when borrowers die or go into long-term care. The average amount borrowed through the scheme was £131,781 according to the Equity Release Council trade body. There’s good news at the other end of the scale though in Graduates offered £60,000 wage as companies lure staff (Daily Telegraph, Tim Wallace and Rachel Mortimer) as financial services in particular fight to attract the best young talent via tempting salaries! According to Glassdoor, the average base salary was £45,000 across the top 25 companies it surveyed. Not bad, eh?

Meanwhile, UK shoppers stockpile cooking oil and other essentials as prices soar (The Guardian, Sarah Butler) shows that UK shoppers have started stockpiling some essentials. Under Covid, this was due to fear of shortages, but now this is due to people fearing price rises. Sales of sunflower oil and vegetable oil increased by 27% and 40% in the year from April 2021 while grocery price inflation in general reached its highest level in over a decade in April.

Tesco, is now introducing a limit of three bottles of cooking oil per customer now, with Morrisons and Waitrose limiting it to two. Kantar’s latest figures also showed that, out of all the supermarkets, only Aldi and Lidl increased sales, taking their joint market share to 15.4% versus the 5.5% it was at ten years ago. * SO WHAT? * Things are getting increasingly tricky for customers and so it is unsurprising to see stockpiling occur. It also seems that more customers are going to the German discounters as costs bite. I think this is really interesting because they have really carved a name out for themselves over the years. I think that other supermarkets need to do the same and work on their identity rather than just fade into overall blandness. I think that Waitrose has its own identity (upper end, expensive) whereas all the rest are much of a muchness when it comes to actual identity. Years ago, Asda was at the forefront of people’s minds when they were on a budget, but I think it has lost its way over the years on that front. They need to reclaim their identities!

In other interesting stories in the sector, Lidl to offer £22,000 for those who help find store sites (Daily Telegraph, Laura Onita) shows that members of the public could be awarded a finder’s fee if they help Lidl find sites for their new stores. The payment will be either 1.5% of the total freehold purchase price or 10% of the first year’s rent for leaseholds. They need to be “prominent locations with easy access” and have “strong pedestrian or traffic flow”. Sounds like a nice little earner, no?

In Primark unable to resist the trend for rising prices (The Times, Ashley Armstrong) we see that even the mighty Primark is not above putting its prices up as inflationary pressures have been squeezing profit margins, according to its owner, Associated British Foods. The chief exec had said in November last year that Primark would not be increasing prices, but then of course Ukraine happened.

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!

Maersk warns, Heathrow goes all downbeat, Microsoft and Google have diverging fortunes and Bezos takes a dig at Musk…

In a quick scoot around other interesting stories today, Maersk warns on trade volumes even as profits balloon (Financial Times, Richard Milne) shows that the shipping giant says that container business could weaken this year due to ongoing supply chain problems, whilst at the same time increasing its full-year profit forecasts by a whopping 25%! Mind you, Maersk: freight rates will remain a long way from mates’ rates (Financial Times, Lex) shows that big shippers like Maersk will need to watch out, though, if they are seen to be benefiting too much from the world’s supply chain woes. The container shipping industry is dominated by three major players, so it is possible that antitrust bodies could turn their focus to this industry if it is deemed that the companies are making too much money!

Heathrow fears a harsh winter after summer travel ‘bubble’ (The Times, Dominic Walsh) shows that the airport is warning that the surge in demand for summer getaways could just be a bubble that could be followed by a “winter freeze”. * SO WHAT? * This is quite interesting considering that most players in the industry – including the airlines – are talking a very good game about this year.

Interestingly, Virgin Atlantic said that Heathrow was just doing this to justify increases in charges. I personally think that there will be a drop-off in long-haul especially, because of the ongoing squeeze on household budgets. 

Then in Microsoft earnings rose last quarter with demand for Cloud services (Wall Street Journal, Aaron Tilley) we see that the software giant continued to benefit from the shift to remote working as revenues and profits were powered by cloud services and software over the latest quarter. On the other hand, Google shares slide after slowdown in advertising growth (Daily Telegraph, James Titcomb) shows that Google disappointed investors as its advertising business performance fell short of market expectations.

Finally, it was interesting to see one billionaire take a shot at another billionaire in China could exploit Tesla influence, warns Bezos (Daily Telegraph, James Titcomb) as Jeff Bezos reckons there’s a chance that Musk might be keen to appease the Chinese government because of Tesla’s operations in China and therefore his integrity and impartiality could be called into question regarding Twitter (which is still blocked in China). He backpedalled slightly by saying that “Musk is extremely good at navigating this kind of complexity”, but he has now sown this seed!

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…

Have any of you been to a Costco? For those who don’t know, it’s a membership-only wholesaler. If you have, you will definitely recognise this – and if you haven’t, this might help to prepare you for the experience! The video is HERE 🤣.