Thursday 07/07/22

1. In MACRO, ENERGY & CRYPTO NEWS, BoJo faces all kinds of nightmares, markets stay calm, Qatar benefits from the war, Macron nationalises EDF, a crypto broker goes bankrupt and Facebook ploughs on with NFT plans
2. In CONSUMER & RETAIL NEWS, recruiter Robert Walters rides high on a hot job market, but consumers worry about debt and avoid the high street while Trainline gets a boost, pool companies suffer and AO World plumps for domestic focus
3. In INDIVIDUAL COMPANY NEWS, Amazon does a deal with Grubhub whilst also facing challenges, Greystar gets deeper in real estate and GSK gets approval for a spin-off
4. AND FINALLY, I bring you a gamechanger hangover-prevention pill and some impressive dancing (not me)…

So Germany and Turkey have problems, coal and gas prices rise and the cryptocrash bank stops withdrawals…

📢 It’s Thursday, so it’s time for the one hour weekly ZOOM call for SILVER and GOLD subscribers! *** THIS CALL WILL RUN FROM 6PM TILL 7PM ***. As usual, during this call, I will do a round-up of the week’s news and then open it up to questions from you. After that, depending on how much time we have, we will also debate the following:

• If YOU got landed the job of chancellor, what would YOU do to head off a UK recession?
• If you could put ALL of your money into one industry right now, what would it be and why?

You can just listen into the debate if you want to, but I thought I’d give you the heads up on topics for if you would like to engage. You will definitely get more out of this call if you take part in the debate, though 😜!

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*** NEWS JUST OUT (0930hrs) – Boris Johnson to resign as prime minister as government crumbles (Financial Times, George Parker, Jim Pickard and Sebastian Payne). He’s expected to make a statement at lunchtime. ***

Boris Johnson sacks Michael Gove as even allies tell him ‘game’s up’ (Financial Times, George Parker, Sebastian Payne and Jim Pickard) highlights the dire situation BoJo is currently in as yesterday saw an exodus of ministers following the resignations of Sunak and Javid. He was urged to quit and retaliated by sacking Michael Gove. If he does go, Boris Johnson’s replacement: runners and riders (Financial Times, Sebastian Payne) identifies some of his potential replacements. Liz Truss, Nadhim Zahawi, Rishi Sunak, Sajid Javid, Penny Mordaunt and Tom Tugendhat are all mentioned (Sunak seems to be the frontrunner according to the bookmakers’ odds) but we’ll just have to see how this all unfolds. Expect loads of noise from the media on this.

In the meantime, the newly-installed chancellor has a right old job on his hands in Nahim Zahawi to review corporation tax rise as Boris Johnson battles to stay in office (Financial Times, Jim Pickard, George Parker and Sebastian Payne) which identifies one area that he could address to get the electorate onside. The corporation tax rise slated for introduction next April could be rolled back but Zahawi has little hope of easing crises in economy (The Times, Mehreen Khan) is a much more damning piece which highlights just what the new guy is up against – massive inflation, the worst ever current account deficit and a plummeting currency that’s going to make the cost of living crisis worse. He may even be called on for an emergency summer budget. Will he be doling out the nice things, though, like VAT, fuel duty and income tax cuts to steady the ship?? Interestingly, Resurgent markets look beyond drama at No 10 (The Times, Russell Hotten) shows that European markets rebounded yesterday while the oil price fell below $100 a barrel and sterling remained largely unmoved. Markets clearly shrugged their collective shoulders and went “meh”.

In energy, Russia’s war helps Qatar boost its influence over global energy flows (Financial Times, Tom Wilson and Simeon Kerr) shows that QatarEnergy, the state-owned gas producer, very recently unveiled JV agreements with Shell, ExxonMobil, ConocoPhilips, TotalEnergies and Eni to develop a massive $29bn project known as North Field East that will significantly increase its export capacity by 2026. It is hoped that it could leapfrog Australia to become the second-biggest gas producer in the world behind the US. * SO WHAT? * Qatar was actually the #1 LNG producer in the world in 2010, but since then it has been pushed down the pecking order by the US and Australia. Qatar is now becoming more important as countries rush for non-Russian gas – and it’s likely that gas revenues will help to finance the hosting of this year’s World Cup in November. It also has a strong reputation among its Asian clients for being reliable, something that will also appeal to potential European customers. At the moment, around two-thirds of Qatar’s long-term contract exports go to Asia, but the country wants this to be split more evenly with around half going to Europe in the future.

Meanwhile, Macron to nationalise nuclear giant EDF amid blackout fears (Daily Telegraph, Rachel Millard) highlights a dramatic turn of events in France as Macron announced that the French state would take control of the 16% of the company it doesn’t already own, thereby fully-nationalising it. * SO WHAT? * There has been a lot of speculation surrounding the company given its massive debt levels (about €43bn) and the immediate need for France to have enough energy, so I guess that this statement will be a source of relief.

In crypto news, Cryptocurrency broker Voyager Digital files for bankruptcy protection (The Guardian, Dan Milmo) shows that the US crypto broker and lender has filed for bankruptcy protection after suspending all withdrawals and trading last week. Crypto bankruptcy: Voyager restructuring hinges on uncertain revival (Financial Times, Lex) says that liquidation isn’t on the cards at the moment as the company plans to reorganise into a new listed company, with current account holders getting equity in the new company. Whichever way you look at it, this is an absolute shocker. * SO WHAT? * Anyone who believes you can earn 12% interest on deposits when banks around the world have been offering super-low rates risk-free is living in a world of fantasy. Whether they are going to be patient enough to keep their money in the new company is debatable.

Then in Facebook owner Meta to push ahead with digital collectibles plan (Financial Times, Hannah Murphy) we see that Meta remains undeterred in its intention to roll out access to digital collectibles to its 3bn users despite crypto assets falling around our ears at the moment. It is pushing ahead with its plans to help creators monetise their assets via tradeable NFTs in contrast with rivals such as Google and Apple, who are more cautious on the asset class. Meta’s ultimate aim is to make NFTs cheap and easy to trade but at the moment it is looking at ways that NFTs could be used in selling “memberships” and “subscriptions” to creators’ content that will be accessible across platforms. * SO WHAT? * This sounds interesting, but clearly we are in the early days at the moment.

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!

The job market remains tight but more consumer trends are emerging and AO World tries to dig itself out of a rut…

Booming pay and job moves boosts recruiter Robert Walters (Financial Times, Daniel Thomas) shows that the super-hot, super-tight white collar jobs market is doing wonders for the British recruitment firm as roles in accounting, legal, financial services and tech earned them fat fees in Q2. It is confident that full-year profit will come in above market expectations as demand is not expected to slow down yet. * SO WHAT? * When you realise that job-movers in these areas can get a nice 20-25% wage uplift (on average) when they jump ship versus inflation hitting 10% or thereabouts in the UK, it is a no-brainer for many (although there are lots of other things you need to take into account other than just money when you move!).

Meanwhile, increasing concerns about household finances are reflected in Demand for debt services by Lloyds customers jumps 30% (The Guardian, Joanna Partridge) which cites a Lloyds Bank report that shows demand for debt services shot up by 30% in the first half of this year as three-quarters of its 26m UK customers are worried about rising prices and Shoppers avoid the high street as living costs mount (Daily Telegraph, Louis Ashworth) cites the latest reports from Springboard which show that footfall at key

locations is likely to stay below pre-pandemic levels for the foreseeable future as consumers rein in spending. On the other hand, Trainline back on track as bookings and tourism surge (The Times, Patrick Hosking) shows that the rail ticketing company is coming back to life as rail travel generally is recovering thanks to both rising commuter and leisure traveller numbers and although Pool stocks: post-pandemic lull for companies trading water (Financial Times, Lex) shows that companies that made a ton of money installing pools and supplied related equipment over lockdown – like Pool Corp, Pentair and Fluidra – have suffered a slowdown since those heady days, the servicing and maintenance of these pools should become a nice little earner.

Following on from what I said on Tuesday, AO World pressure heralds a different kind of crisis (Financial Times, Jonathan Eley) highlights the company going cap in hand to investors, raising £40m in an equity issue, whilst also announcing that it was going to focus on profitability in the domestic UK market. * SO WHAT? * This comes after a disastrous foray into the Netherlands and Germany and although this equity raising has plugged the financing hole for now, it faces uncertain prospects in a world where most consumers are looking to limit outgoings, especially on the big-ticket discretionary items that AO World sells. Disaster has been averted for now, but I think it now needs to hunker down for a difficult period.

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!

Amazon strikes a deal, Greystar doubles down and GSK gets spin-off approval…

In a quick scoot around other interesting stories today, Amazon strikes deal with US food delivery service Grubhub (Financial Times, Madhumita Murgia and Mark Wembridge) shows that Amazon has agreed a deal which could earn it a 2% stake in Grubhub, the US business of Just Eat Takeaway. The agreement will also give Amazon Prime users in the US membership of Just Eat’s Grubhub subscription service. Just Eat’s shares jumped by 15% on the news after losing almost 50% of its market value this year but Just Eat Takeaway: Amazon deal is less appetising than it appears (Financial Times, Lex) suggests that the deal is probably better for Amazon’s customers than it is for Grubhub. Meanwhile, UK watchdog opens investigation into Amazon’s marketplace practices (The Guardian, Sarah Butler) shows that the UK’s Competition and Markets Authority (CMA) has now started an investigation into whether Amazon gives its own brands preference over third party rivals, rendering its current practices as anti-competitive. Amazon to share more data with rivals after EU antitrust deal (Financial Times, Javier Espinoza) shows that the e-commerce behemoth is going to share more data with rivals to help them sell more online and give users a broader choice of products to appease EU antitrust regulators. Their climbdown will result in the shutting down of two major probes into the company’s handling of data and alleged anticompetitive practices. This means that Amazon will swerve massive fines for breaking EU law. * SO WHAT? * It’s all go at Amazon, isn’t it! The Grubhub deal sounds quite good for Amazon Prime customers who will get access to a service that normally costs $9.99 and the regulator stuff seems to be pushing it into better practices. The momentum appears to be with the regulators at the moment…

Elsewhere, Greystar raises fresh funds as residential rental investment surges past €30bn (Financial Times, George Hammond) shows that US group raised €1.55bn from institutional investors this week (they were originally targeting €1bn) to invest in residential rental accommodation in Europe. * SO WHAT? * This class of real estate is seen as being a decent inflation hedge in commercial real estate because shorter leases (usually reviewed on an annual basis) help landlords charge tenants more versus office and retail leases that are multiyear agreements. Investors have already been pouring money into student accommodation, rental apartments and affordable housing in Europe and it looks like this trend is continuing. The one big risk, though, is that rising inflation will mean that they won’t be able to raise rents as much have they been able to before.

Then in GSK shareholders approve spin-off of consumer brands (The Guardian, Jasper Jolly) we see that shareholders have approved a demerger of the pharmaceutical company’s consumer brands into a new company, called Haleon, that will be floated in a stock market listing. Haleon has a stable of well-known brands including Sensodyne, Advil and Panadol, and it will be aiming for a valuation of up to £45bn. * SO WHAT? * This will be a welcome bit of news for the London Stock Exchange, which has not been doing particularly well of late, as per Floats dry up in London as volatility puts off companies (The Times, Tom Howard), which says that the amount of money raised by companies joining it fell by 94% in the first half of this year…

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…

It seems that a vital medical breakthrough has been made. Yes, the answer to many prayers – is it too good to be true? See for yourself in New £1 pill ‘that prevents hangovers’ launches in UK after 30 years of research (The Mirror, Kieren Williams). This is the website. I am neither condoning drinking to excess nor endorsing this particular item, but if it works it’s surely a game-changer, no?? I thought I would also end on a couple of videos from someone I’ve followed for a while now, but if you like Michael Jackson’s music, you will be freaked out by Ricardo Walker! Here he is with “Bruno Mars” and here he is with his crew with more impressive moves. Amazing!