Thursday 06/05/21

1. In MARKETS, MACRO, VACCINE & CRYPTO NEWS, the FTSE hits new highs, Asia suffers, the US offers beer for vaccines, Biden stirs up patents and Dogecoin goes bananas
2. In CAR-RELATED NEWS, Tesla’s about to lose millions, the UK considers stockpiling EV materials, GM responds, UK car sales rise, Direct Line collects fewer premiums and petrol prices continue to rise
3. In RETAIL-RELATED NEWS, Pepco aims at an IPO, Boohoo posts strong sales and DHL delivers
4. In MISCELLANEOUS NEWS, Maersk warns about supply chains, food delivery gets crowded and Peloton does a massive recall
5. AND FINALLY, I bring you a nifty shoe rack hack and a chirpy McDonald’s drive-thru employee…

So the FTSE hits new highs, Asia suffers, the US tries to entice people to get vaccinated, Biden gets pharmaceuticals companies rattled and Dogecoin rises…

📢 It’s Thursday – so it’s time for my 30-minute Instagram Live At Five where I will run through the week’s key stories AND the one hour weekly ZOOM call for paying subscribers where I will do the same but in more detail and with much more interaction 👍 The ZOOM call will start at 5.30pm and run until 6.30pm. See you there!

In a quick scoot around some of the “big picture” stories today, FTSE hits highest for over a year as confidence in recovery grows (The Times, Patrick Hosking) highlights strong performance from the UK’s premier index as it saw its biggest one-day rise in over two months as confidence in economic recovery continues to build and concerns about a potential US interest rate hike eased. Meanwhile, Covid paralyses Asia as western economies prepare for blast-off (Financial Times, Robin Harding) is well worth a read as it talks about the reversal in fortunes for Europe/US and Asia in the earlier stages of the pandemic and what’s happening now. Although Asia’s output is higher than pre-pandemic levels, growth is expected to slow down over the coming months as new waves of the virus have struck India, Indonesia, the Philippines and Thailand, scuppering their chances of getting back to normality sooner rather than later. Even Japan is having difficulties. * SO WHAT? * The divergence in fortunes could potentially become even wider because a strengthening dollar could worsen Asia’s financial situation as a lot of debt is held in dollars (so debt will become more expensive) and it would be worse still if the US decided to increase interest rates as well. Some parts of Asia, like Taiwan and South Korea – who are heavily exposed to semiconductors which are seeing huge demand at the moment – will not fare as badly, but those with more reliance on things like tourism are really going to suffer.

Meanwhile, Biden backs suspending jab patents (The Times, Callum Jones) shows that the US president is stirring things up as he has come out in support of a plan to temporarily waive IP rights for Covid-19 vaccines in order to help boost supplies to developing countries. This put a dent in some of the share prices of vaccine producers such as Moderna and Pharma industry fears Biden’s patent move sets dangerous precedent (Financial Times, Nikou Asgari, Donato Paolo Mancini and Hannah Kuchler) shows that this move has spooked the drugmakers as it will endanger that steady stream of income they get when their drugs are patent protected. The companies say that it will discourage US innovation and result in a brain drain abroad. The WTO put forward proposals to do this back in October and the general consensus at the moment is that this is needed in order to boost the global production of jabs. * SO WHAT? * This has come as a shock to the pharmaceutical industry that has enjoyed watertight protection over the years and they say that they are worried that this could be the one that breaks the seal, meaning that treatments for other conditions could get the same treatment. The EU and UK have yet to voice any official support for this move, but if everyone gets behind this the impact could be huge. In a related yet separate note, Beer and cash for vaccines: the US campaign to win round jab supporters (Financial Times, Nikou Asgari) shows that the US is getting creative about getting people to take their vaccines as they are being offered money, museum tickets and sometimes marijuana! I guess you have to do whatever you can to tackle vaccine hesitancy!

Then in something altogether more frivolous in comparison, Dogecoin’s record-breaking rise shoots ‘joke’ currency to wider attention (The Guardian, Richard Partington) highlights the rather weird fact that this cryptocurrency is now worth more than Ford, BP or Tesco! Dogecoin jumped by over 40% in trading yesterday to reach $0.68 against the dollar, according to CoinMarketCap. Its value has seen a monumental rise of 14,000% since the start of this year and its market value is now equivalent to the yearly economic output of Sri Lanka 😱! Apparently, it is rising in anticipation of Elon Musk hosting Saturday Night Live this week as Musk fanboys and fangirls want to make sure they have a seat at the table in case he does another Musk and sends Dogecoin skyrocketing again.

Tesla faces a big potential hit, the UK considers stockpiling EV materials, GM looks forward, UK car sales rise, Direct Line sees fewer premiums and petrol prices look set to keep rising…

Tesla to lose hundreds of millions of dollars in emission credit sales (Financial Times, Peter Campbell and David Keohane) shows that Tesla is going to lose a massive chunk of money this year after carmaker Stellantis (which was formed by the merger of Fiat Chrysler and PSA) announced that it will abandon the deal with Tesla it entered into in 2019 because it will now comply with European emissions rules without it. The original deal was signed between Fiat Chrysler and Tesla in 2019 and allowed Fiat Chrysler to pay Tesla to offset emissions from its own lineup in the form of emissions credits. To put a figure on it, about two-thirds of the €300m that Fiat Chrysler earmarked for credit payments went to Tesla in Europe! * SO WHAT? * This will be an absolute nightmare for Tesla who, in the recent quarter, made $518m selling credits in the most recent quarter, whilst reporting a net profit of $438m. When you add in the $101m it made from selling about 10% of the $1.5bn bitcoins it bought in February, it makes its most recent results look decidedly less impressive! Tesla needs to address this – and quickly.

Staying with EVs for the moment, UK explores stockpiling of metals for electric cars (Daily Telegraph, Alan Tovey) shows that ministers are considering the creation of a national stockpile of rare earth materials to protect against the current Chinese stranglehold on supplies. Officials at the Department for Business are looking into options to protect access to materials such as lithium and cobalt, putting even more pressure on potential lithium mines in Cornwall to succeed. * SO WHAT? * The International Energy Agency (IEA) warned Western governments to accumulate supplies of such materials in order to help them achieve climate change goals amid fears that China is cornering the market. When you consider that three countries dominate the supply of lithium, cobalt and rare

earths which make up 75% of global output, you can see where the IEA is coming from. The DRC produces 70% of the world’s cobalt, China produces 60% of rare earth elements – and when you add in processing, it’s even more incredible! China refines around 35% of all of the world’s nickel, 50-70% of the world’s lithium and cobalt and almost 90% of other rare earth elements. Stockpiling would provide a buffer, but clearly this would not be a long term solution.

In other car-related news, GM stands by profit forecast despite chip shortages (Financial Times, Claire Bushey) highlights a new bullish earnings forecast at the top end of its guidance after its Q1 figures showed impressive resilience in the face of chip shortages. GM/electric cars: love me, love my truck (Financial Times, Lex) says that although its fortunes are currently very much driven by pick-up trucks and SUVs, it has a decent EV pipeline and the upcoming launch of the electric GMC Hummer could prove to be a turning point after the much-hyped Chevy Bolt, which didn’t quite live up to expectations. * SO WHAT? * Investors may consider GM as a potential dark horse of the sector as it is currently trading on 9x forward earnings versus Tesla at 101x and even more value could be created if GM decides to spin off its EV operations at some point in the future. What it lacks in first-mover advantage it makes up for in scale and mass-production expertise – pretty much like everyone else! Tesla is going to have some tough competition!

Meanwhile, in other car-related trends, Car sales recover as showrooms open again (The Times, Robert Lea) cites the latest official figures from the Society of Motor Manufacturers and Traders (SMMT) which show that sales are increasing and the trade itself is raising forecasts for this year. They are still below pre-pandemic levels, but at least they are going in the right direction! Insurer feels impact of fewer motorists on move (The Times, Patrick Hosking) shows that Direct Line (which owns the Churchill and Privilege brands) saw its income from premiums fall as fewer people drove and the amount of holiday travel fell sharply and Six months of rising petrol prices and there’s more to come (The Times, Emily Gosden) highlights the prospect of continued price rises for petrol as oil heads towards $70 a barrel. Great for EV sales, eh??

Poundland’s owner aims for an IPO, Boohoo benefits and DHL delivers…

In a quick scoot around retail-related news today, Pepco and Poundland chains target multibillion valuation in IPO (Financial Times, James Shotter) shows that South African conglomerate Steinhoff is set to raise up to $1bn when it lists its Pepco chain of discount retailers later this month. Pepco operates about 3,200 stores in Poland, Romania and Hungary (in addition to Poundland in the UK) and Steinhoff will sell about 17.9% of the company to the public, with the final price being set on May 14th. This is likely to be one of the biggest listings for the Warsaw stock exchange this year.

Boohoo crying all the way to the bank as sales surge by 41% (The Times, Ashley Armstrong) shows that the fast-fashion retailer continues to benefit from online shopping but sounded a bit cautious on the outlook and DHL raises earnings forecast again as shoppers shift online (Financial Times, Harry Dempsey) shows yet another company that is raking it in because of the growth of online shopping and general economic recovery. It had its best Q1 results ever! Logistics companies across the board are benefiting but I imagine that everyone is trying to guess how sustainable this is all going to be.

Maersk warns on supply chains, food delivery sees more competition and Peloton does a recall…

In other news, Maersk boss warns over global supply chain and freight rates (Financial Times, Richard Milne) shows that shipping container giant Maersk is warning companies about the fragility of global supply chains. The company will benefit from rising container shipping prices and profits for the rest of the year as a result. * SO WHAT? * This is interesting considering that there have been so many events, particularly in the last year or so, that have highlighted massive imbalances in global supply chains (e.g. two-thirds of the world’s rubber gloves are made in Malaysia – a problem that came up early in the pandemic as everyone scrambled for PPE – car makers and electronics companies are crying out for semiconductors and then a massive ship blocked the Suez Canal!). The answer to this will be more warehousing and a change in Just In Time manufacturing principles, but it will cost and it will take time.

Food delivery groups braced for threat from rival apps (Financial Times, Tim Bradshaw) shows that the world of food delivery – already a pretty competitive area – is going to see more players including the likes of GoPuff, Gorillas, Weezy and Dija enter into the market fresh from getting $14bn to play with from investors. These newbies can use

this money to BUY customers with heavy discounts to get market share. * SO WHAT? * This is quite an interesting area and you should read this article in full if you can. The main “takeaway” 😂 I get from this is that competition is going to be hotting up just as sales might be vulnerable as economies open up. I still think that you need scale in this area to make money and drive down costs, so I can see more consolidation among the players in the coming months and years. Great news for M&A lawyers and investment bankers!

Peloton recalls all treadmills as CEO apologises (Wall Street Journal, Sharon Terlep and Allison Prang) shows that Peloton is about to embark on an expensive recall of its kit as it did a U-turn on its initial stance of doing nothing following the death of a six-year old who was pulled under the rear of one of the machines. The company did not say whether they’d give refunds and sales of the Tread+ have been stopped. The company’s share price fell by almost 15% in trading yesterday on the news. Nightmare. * SO WHAT? * Firstly, this is a massive tragedy. From a business perspective, though, it could prove to be disastrous. I would not be surprised if the CEO had to leave, such is the negative PR on this. I would have thought that this could be a difficult rut to climb out of as the brand has now been tainted (although it would not be impossible). Rivals will no doubt be scrambling to make sure their treadmills are safe, but this is going to be VERY expensive for Peloton. Very sad for the kid and his parents, though.

…in other news…

This may be a bit self-indulgent of me but I saw this and thought I’d have a go at this because it’s such a good idea – but then thought you might find it useful as well, so here it is: Woman shares ‘genius’ way to organise shoes and declutter wardrobe floor (The Mirror, Paige Holland). Simple yet good, no? Then how about it for the very enthusiastic employee in McDonald’s customers left in stitches at worker who ‘sounds like Austin Powers’ (The Mirror, Rosaleen Fenton). He does NOT sound anything like Austin Powers, but he is amusing!