Monday 21/02/22

1. In MACRO & OIL NEWS, Biden and Putin set up a summit, oil prices whipsaw and Big Oil pays
2. In CONSUMER/REAL ESTATE NEWS, BoJo is to ditch Covid restrictions, high energy prices have unexpected consequences, residential property asking prices rise and Canary Wharf offers new terms
3. In CAR-RELATED NEWS, China’s driverless ambitions drag, Lotus aims for an IPO and UK dealerships want to hang onto furlough cash
4. In INDIVIDUAL COMPANY NEWS, Apple has mixed news and PrimaryBid gets a boost
5. AND FINALLY, I bring you “the most famous physical therapists on the internet”…

So there’s talk of talks, the oil price whipsaws and Big Oil wants to make big payouts…

Joe Biden and Vladimir Putin agree ‘in principle’ to Ukraine summit (Financial Times, James Politi, Aime Williams, Max Seddon and Victor Mallet) shows that the two leaders are talking about talks to ease tensions over Ukraine with Russia having amassed up to 190,000 troops on the border. We’ll just have to see what happens.

Meanwhile, Crude oil swings to loss on possibility of Biden-Putin summit (Financial Times, Hudson Lockett) shows that markets and oil prices moved on developments in Ukraine, firstly falling when concerns increased about an invasion and then rising a bit on news of talks. This is to be expected. However, there will be much bigger moves either if Russia invades or if talks bring an end to the tension. At the moment, things are finely balanced and moves will depend entirely on sentiment.

Meanwhile, Big Oil on course for near-record $38bn in share buybacks (Financial Times, Tom Wilson) shows that the world’s seven supermajor oil companies – including BP, Shell, ExxonMobil and Cevron – have benefited so much from high oil prices that they are on the verge of returning a whopping $38bn to shareholders via buybacks this year, according to data from Bernstein Research. To put that in perspective, the last time oil breached $100 a barrel in 2014, $21bn was spent on share buybacks. * SO WHAT? * Investors love buybacks. They often put a floor under share prices, which limits downside, and they suggest confidence in the company’s future (because if the company thought things weren’t going to go well in the future, they would wait for prices to go lower before buying back their shares). However, critics say that instead of handing money to shareholders, they should be ploughing the money into the transition to renewable energy. As things stand currently, such criticisms are falling on deaf ears.

BoJo moves to lift restrictions, high energy prices have unexpected consequences, asking prices for residential property rise and Canary Wharf comes up with new ideas…

Boris Johnson to ease Covid restrictions and roll back testing in new plan (Financial Times, Jasmine Cameron-Chileshe and Sarah Neville) shows that the British PM is edging ever-closer to England’s long-term strategy of “living with Covid” that will include things like scaling back the provision of tests and abandoning the enforcement of self-isolation following a positive test. Measures are to be finalised in a cabinet meeting this morning, followed by a statement to the House of Commons and then a press conference later on. * SO WHAT? * Clearly the lifting of pretty much all restrictions could have a massive impact on sectors that have suffered acutely during the pandemic, like the leisure sector. However, I think that the spectre of inflation is looming large and will restrict spending power quite severely.

Talking of rising prices, Soaring energy prices leave UK comparison sites with little to compare (The Guardian, Jenn Selby) highlights an interesting consequence of skyrocketing energy bills – that comparison websites like MoneySupermarket and GoCompare are suffering because they can’t offer customers anything as utility providers don’t have any cheap deals! Such sites make their money from getting customers to switch, which earns them commission, but things have got much more difficult and last week, MoneySupermarket said it had seen a 25% drop in profits last year and revenues from home services, which included energy switching, fell by 34%. * SO WHAT? * Clearly these businesses are going to have to pivot in order

to find ways of earning revenue and it is thought that travel insurance, car insurance and broadband are among the areas that they will be targeting more keenly. This lack of cheap deals won’t last forever, but it is going to be painful for these companies in the meantime.

In real estate news, Asking prices for UK homes show record rise (The Guardian, Phillip Inman) cites findings from Rightmove which show that asking prices for British homes rose by 2.3% in February, the biggest monthly increase in the 20 years it has kept records! This now means that the average advertised cost of a home is now a chunky £348,804! Asking prices have risen by 9.5% over the last 12 months. * SO WHAT? * This is going to make getting on the housing ladder even more difficult than it already was as wealthier buyers got caught up in the FOMO as the housing market got hotter. I suspect ongoing demand and the relative lack of homes actually coming onto the market will keep prices high but rising interest rates and inflation may take some of the heat out by the end of the year IMO.

In commercial property, Canary Wharf launches flexible office service as work patterns shift (Financial Times, George Hammond) highlighted a new flexible office service being launched by London office landlord Canary Wharf Group, called MadeFor, which will fit out offices according to a client’s spec and offer more flexible terms than a traditional lease. The chief exec reckons it could account for up to 20% of the group’s portfolio over the next few years. * SO WHAT? * Given how work patterns and office requirements are changing, I think it is eminently understandable that Canary Wharf Group has had to change its traditional ways. Hearing how Clifford Chance recently said that it was reducing its office footprint, it is imperative that CWG hangs on to as much as it can. I suspect that this is going to be bad news for the likes of WeWork as this will be another competitor to contend with.

China lacks chips, Lotus aims for an IPO and dealerships want to keep their hands on furlough cash…

China’s driverless dreams troubled by US chip dependency (Financial Times, Edward White) says that efforts by Jidu Automotive (a JV between Baidu and Geely) and the likes of Nio, XPend and Human Horizons to develop driverless cars are being held back by their dependence on chips designed by non-Chinese companies such as Nvidia, Qualcomm and Intel. Domestic chip design houses such as MetaX, Integrated Circuits and Biren Technology are making ground but they remain years behind their American rivals in terms of tech. * SO WHAT? * This state of affairs is tricky for China, which is putting more effort into making itself technologically self-sufficient in order to insulate it from future economic/trade sanctions. Xi’s efforts to boost the importance of semiconductors and EVs have prompted thousands of new companies to enter the market. Meanwhile, Zeekr (which is owned by Geely) has partnered up with Intel’s Mobileye to launch a self-driving car in 2024 and Great Wall Motor is partnered with Qualcomm as they need best-of-breed chips to get to where they want to go. It is thought that Chinese chip maker SMIC is about five years behind Taiwan’s TSMC in tech-terms, but you do wonder what will happen when China catches up and overtakes…

Elsewhere, Lotus plans flotation to drive growth (The Times, Robert Lea) shows that the Geely-owned sports car manufacturer has started an international roadshow for

investors and rich customers that could be a precursor to a flotation, potentially in Shanghai at the beginning of next year (although London and New York remain options). * SO WHAT? * This sounds like a decent-enough plan as it is due to open a manufacturing plant in Wuhan next year where it will build its first ever Lotus 4×4 and a zero-emission executive car as it aims to take a big bite out of the Chinese EV market as well as the British, Japanese and American markets. It’ll be interesting to see how this develops!

Then in Dealerships steer clear of repaying furlough (The Times, Robert Lea) we see that those dodgy car dealers are wanting to keep their greasy paws on the money they got paid by the government over lockdown despite expecting to post massive profits when they start reporting this week. Lookers, Pendragon (which owns Stratstone and Evans Halshaw) and Bristol Street Motors are all set to report record profits and are paying – or intend to pay – dividends again but none of them has said that they would be paying back the furlough money they received. Privately-owned Arnold Clark, Synter and Constellation Automotive (which owns Cinch, webuyanycar.com and British Car Auctions) have not indicated that they will be paying back any furlough either. * SO WHAT? * OK, so you can’t blame them for wanting to keep hold of this free money, but morally you would have thought that they should be paying it back, because you can be sure as anything that if things get tricky again they will be putting their hands out for more! Even if they didn’t pay it back to the government, it should NOT be paid to shareholders. FWIW, I think they need to be saving it for a rainy day/investing it in making their dealerships more EV friendly etc.

Apple is a mixed bag while PrimaryBid gets a boost…

Apple finds itself under scrutiny in Washington’s Big Tech clampdown (Wall Street Journal, Ryan Tracy and Tim Higgins) shows that US lawmakers are starting to look more closely at how Apple runs its App Store as the Senate Judiciary Committee voted 20-2 this month to push through legislation that could limit the fees that Apple collects on digital app revenues. * SO WHAT? * This is interesting because it seems that even the “saintly” Apple, which has seemed to dodge the scrutiny of companies like Meta and Amazon, is now being sucked into the vortex. I think that this is only right given its market power, but Big Tech’s lobbying power overall is so huge that I wonder whether such scrutiny will stick for long. In any case I don’t think that this should affect sentiment too much for the time being as I am sure that all of their legal teams will want to drag everything out for as long as possible.

I thought that Why Apple, Amazon and Google are uniting on smart-home tech: matter explained (Wall Street Journal, Shara Tibken) was worth mentioning here because it highlights the combined efforts of Apple, Google, Amazon and Samsung to make smart-home

technology more compatible under a new standard called Matter. It is going to be rolling out this year and will be a common language spoken by most new – and some older – smart home products. This means that you will be able to buy any gadget you wanted and connect to it with whichever app you want. * SO WHAT? * This sounds like a great step forward and will surely advance the cause of the much-vaunted Internet of Things that I imagine has been held back by all these companies hanging grimly on to their own standards. It is also likely to lead to an increase of more affordable devices that will be easy to set up and used together. Who will win??

Then in Retail investor platform PrimaryBid wins SoftBank backing (Financial Times, Daniel Thomas) we see that SoftBank and Hedosophia, an investment group, are leading a $190m fundraising to boost expansion plans at PrimaryBid, a UK start-up that aims to give UK retail investors access to share trading in IPOs and other fund raisings. PrimaryBid has already been involved in IPOs for Deliveroo, PensionBee and Soho House, so it has form. * SO WHAT? * The latest funding round has given it an implied valuation of around $700m, so it’s not quite a unicorn yet! Still, with rising interest from individuals over lockdown in share trading and their own personal finances, it sounds like a good shout for PrimaryBid to offer them access to IPOs which are much more weighted towards institutional investors in many jurisdictions. 

…in other news…

I just couldn’t find anything amusing/interesting today for this section, so I thought I’d introduce you (if you haven’t already come across them) Bob and Brad, “the most famous physical therapists on the internet”. Before you think WTF, check them out. These two guys are absolutely hilarious but also incredibly knowledgeable and when I’ve had sports injuries I’ve used a lot of their stretches and found their advice really valuable! Of course, if you have a problem you need to see your doctor/physio first, but I’d just say that I’ve always found the advice these guys dish out is solid 👍. Watson’s Daily is all about enhancing your life – so have a look at what Bob and Brad have to offer HERE! This is just a random one – but they have sooooo many videos I would have thought they will have something on their channel that will help you!