Today’s Spot Markets live session is with Neil Collins, the former City editor of the Telegraph, FT columnist and now co-host of ‘A long time in finance’ with Jonathan Ford.
Comments from Izabella and Neil that address audience questions have been put in bold
Spot Markets Live – 11/07/22
Hello and welcome to Spot Markets Live, the real-time markets chat that takes you on a whirlwind tour of the markets.
Is anyone out there?
(My usual communing with the other side)
So our sessions are happening every Monday at 11am for now, with a limited controlled live audience until we get the tech up to scratch.
(Regarding Technical issues Graham from Coodash is probably watching – so do keep reporting)
But, soon enough, we will roll things out further. Do spread the word.
Today, the imitable Neil Collins is back with us. Neil is the former City editor of the Telegraph, FT columnist and now a co-host of the “A long time in finance” podcast with Jonathan Ford.
Bonjour = [Responding to comment about how my Abba experience went] Neil was not at Abba with me yesterday. But I did end up going with Jemima Kelly, formerly of FTAV.
Feeling a little worse for wear.
but not too bad
mainly because my brain feels like it was hacked by a 70s pop sensation experience.
The Abbatars as they are called are really extremely effective. And this is the first time I have actually thought there might be some substance to this metaverse thing.
They’ll be making Avatars of you next, Iz
I am anticipating the technology to be used for political campaigning very shortly.
Yes ! It would be nice to live forever as your bestest self. Neil do you fancy being permanently uploaded into the Finance Hero Journalist Cloud?
Better that than being permanently downloaded
But seriously, i do think this tech is coming. ALthough as Jemima said, it all felt a bit peak Post Capitalism.
Sort of the moment where the embarrassement de riches gets to the excessive point where Abba can charge money for a video experience
Or when reality blurs into fantasy
Last week we had Ben Harrington of Betaville with us. Betaville is a sort of Alphaville tribute band, albeit the Alphaville of old. [The Blind Spot of course is more like a spinoff, though hopefully more successful than when Paul McCartney left the Beatles to form the Wings.] Betaville has everything bar this live chat. So hopefully Ben will be cooperating with us in the future. He was kind enough to give us a little scoopette confirming the EDF nationalisation that came last week.
The latest on that, btw, is (nice dateline):
AIX-EN-PROVENCE, France, July 10 (Reuters) – The French
government is preparing for a total cutoff of Russian gas
supplies, which it sees as the most likely scenario in its
forward planning, French Finance Minister Bruno Le Maire said on
With about 17% of its supply coming from Russia, France is
less dependent on Russian gas than some of its neighbours, but
the government has been preparing contingency plans.
A cutoff is particularly problematic now because France’s
nuclear power generation would struggle to pick up the slack as
many reactors are currently down for maintenance.
EDF was already a French government pensioner
Its business model for Hinkley Point is so successful that it has already been abandoned for Sizewell C
Unsurprisingly, Markets are down today. FTSE is off about a percentage point at 7112. Dax is down 1.25 per cent. That’s on the back of a weak Hang Seng close.
Aveva, Reckitt, Coca-cola HBC and RELX are barely nudging their way into positive territory. Any ideas why?
Reckitt is embroiled in the baby food supply scandal in the US. But don’t know much more about it.
Top losers are the miners, Anglo American, Antofagasta [fears of more China slowdown] and then there’s ABRDN, Smurfit and IAG.
I can’t help feeling that IAG’s problems are self-inflicted. Were John Kong still in charge at BA he would have knocked heads together
Have you experienced airport woes yet?
No. I’ve stayed on the ground, except go as far as Inverness
Easyjet et al saying they will have resolved the issues by next summer
which is nice
Although, European markets are also down because of supply chain fears and Vlad the tank implying rationing is near for Europe.
Stay at home and sweat!
Possibly not a good time to visit Europe anyway, given the Summer of imminent Discontent
It does look like the rationing is nearing.
But let’s look at more entertaining M&A news
We must be grateful to Elon Musk, providing us with with some fine distraction
Matt Levine has been on it.
At the Blind Spot we are nice about giving credit where it’s due, and Matt Levine remains an utter must read
Twitter has appointed Watchell, Lipton Rosen & Katz to fight its corner
they go up against Crosby Stills Nash and Young
Apparently, that’s a gag
Oh, sorry Skadden Arps Slate Slate Meagher & Flum
they’re a folk rock supergroup
who sound like an extended legal entity
Oh dear, another failed gag
oh dear, went over my head. I just know Abba
so what’s your take on Mr. Musk?
Because Levine just thinks for musk this is just an expensive hobby
What fun the lawyers are going to have. Only $20bn at stake
Musk’s case to scrap the deal looks vanishingly thin
but with almost infinite funds he could go on fighting until the Delaware counts can’t take any more
But there is some speculation that maybe Twitter won’t want to sue because if they do they won’t be able to pass discovery. I.e. if it emerges that they were indeed lying about their robot twitter users, then this could open a can of worms where other investors sue them for misleading them in corporate filings?
He has provided no evidence that they were lying
and if they were, they’re in deep trouble filing false returns
So Elon is facing off with them, hoping they won’t sue
Why should they sue when the courts are surely likely to try and force Musk to complete the deal?
However, even if the judgment goes against him, I can’t see him paying up $20bn
But that’s the point where they would sue him
so who really has the upper hand?
Best of luck with that!
Roger: quite possibly!
Oh no another major knowledge gap from me!
Dickens’ Bleeak House
Bleak house was never on my reading list
That’s the trouble with today’s youth
I can definitely give you a good rendition of Wuthering Heights
I look forward to it
But what does it mean Neil, when a billionaire like Musk just goes around pretending he wants to buy companies for the Lols. Do you think this is buyers’ remorse because of the market, or like Levine says, it was all about a overly indulgent billionaire hobby for Musk?
Musk doesn’t believe that the usual rules apply to him
Does that remind you of somebody?
mr. BoJo maybe
before we go down the UK politics cesspit
What else has caught your eye today Neil?
There’s always Wirecard, the gift that keeps on giving
The story that refuses to die.
what’s the latest?
you spoke with Dan McCrum on your latest podcast right?
Author of a fine book with a rather banal title
doesn’t do it credit
lol get it
It’s called Money Men, but it is much more than that. Its cast of thousands and the twists and turns make it read more like a detective story
The latest twist is an admission that some documents were just straight forgeries
Here’s the FT story
To persuade Softbank to cough up in an equity raise
Just audacious levels of lying.
Yeah, so i think the Wirecard story is indicative of what I call “The Entire Economy is Fyre Festival”
and it speaks to my Abba point
because in this day and age, deepfakes, fakes,.. everything is so easy to manufacture and present as real
And any one man band can present themselves like a 500-people plus op
Trust me i cover crypto
Do you really exist, Izi?
yes Neil I’m real
I know. You left your glasses behind when you did a podcast for us.
Yes, but what was embedded in those glasses?
anyway, lets get back to base reality and the world of bricks and mortar — although yet, again, following in our theme what is really real and isn’t
Ah yes, Purplebricks
Neil you have some thoughts
This business was always shy about breaking down where the revenue came from
Purple Bricks for those who don’t know is a real estate agent that tried to flip the concept of real estate fees.
but it turns out there is a reason why the estate agents operate the way they do
Now we know the answer. There was none. Or rather not enough
At the height of the buying frenazy of “a new model in estate agency” the shares touched £5
The price today? 15p
well this is the thing with all the new-fangled disruptive “models” that were supposed to revolutionize everything from taxis to food delivery
when it cuts to the chase, they have failed to be resilient to core market forces
Uber is another one
as is deliveroo
As is German-based Gorillas
It’s also reflected in the prices of whizzy internet-based clothes retailers
Joules is the latest casualty
Meanwhile, the old store groups soldier on. ABF (Primark) Next, JD Sports and perhaps most surprising of all, Marks & Spencers
I wouldn’t say they were fashionable, but they have somehow scrambled back into the mainstream
I spoke with Bruno Monteyne, senior analyst covering European food and household, personal care and cosmetics at Bernstein Research, a couple of weeks ago about how these instant online grocery competitors are likely to fare.
I also spoke to his colleague William Woods
They think that out of the incumbents, online has only got at best to a margin of 2-3 per cent. Which means overall it’s still margin dilutive.
But the instant companies, like Delivery Hero and Gorillas, are going to have even higher overheads and even worse unit economics.
(Dario: I’ve never heard of Toshi….)
He frankly doesn’t understand how they survive, and said it’s all “bananas” but he has learnt that stuff he has always thought was bananas, has somehow become normal. So hard to apply conventional logic in some cases.
Here’s a quote from my interview
“Grocery ecommerce from the old Ocado style point of view a high asset turn business. If you do it well, you can turn your capital three times better. But given that the industry never makes an excess return (it never makes an excess return because there’s no proper differentiation because you go from the nearest to the cheapest), if you’re lucky supermarkets makes 4-5 per cent Ebit margin and online makes 1-1.5 per cent. That might sound miserably low, but from a returns point of view it is as good or as bad as the old world. So that’s sort of the best to achieve. But this does assume you’re at scale.”
Basically, he also sees consolidation in the big supermarket names
only regulators really standing in the way
(Ah, parent of LVMH. Deep pockets, then)
One has to wonder whether we will all end up like Switzerland, where it’s basically a duopoly of Coop and Migros.
And funnily enough, having spoken to a bunch of Swiss finance types, they think that’s why Switzerland is handling inflation better, because the duopolists had a lot more margin to absorb.
I doubt that. Even though half the industry is owned by private equity, there seems to be sufficient competition in the UK
Yes, in the Uk, it’s razor-thin margins. But the question is for how long?
And don’t forget that the competition authorities blocked the merger between Asda and Sainsbury. Completely!
So, Neil you’re off to do a recording for ALTIF. Can you give us the scoop who you are speaking to?
Podcast with Fergal Sharkey
ooh. yes, I can see why you have to go and do some homework.
Once a pop star, now a thorn in the side of the water industry
Got to go read up so you have some good questions.
Good to have been here. Bye
But I’m still here so don’t go!
and do feel free to engage directly
I want to look at the political fallout in the UK
but from a markets POV
I’m most interested in the creeping nationalisation of so many strategic assets. EDF is obviously the big one. [Not directly related to Boris.]
As already noted, this is meaningful for us Brits because Hinkley Point is being developed by EDF and a minority Chinese partner. Can we trust a nationalised French company to run our nukes?
What do you think?
But also interesting to me is the subtle elevation of lots of military bods into positions of power.
It does feel a bit like some sort of military conservatorship is coming our way bit by bit.
Am I crazy?
At the moment, the UK leadership frontrunners are Rishi and Liz Truss depending on what newspaper you read.
But I have a feeling, there is a not-insignificant chance of Penny Mordaunt charging ahead flanked by Tom Tugendhat.
And Tom was in the actual army.
He’s definitely bigging up the army connection
Meanwhile, speaking of military control, a very interesting story is going on with the UK’s fertiliser market. You can go with the Telegraph,
Or you can go with Farmers Weekly.
This fits my “Uk is about to go into a state of military conservatorship” theory
Ince is one of only two fertiliser plants in the UK that are struggling to stay above water because of the increase in gas prices.
They produce carbon dioxide which is essential for meat processing.
The Ince plant is currently due to close in August because its parent company CF Industries doesn’t think it can operate in a viable way.
Ince employs about 300 people.
The government has been encouraging a buyer “and a markets solution” that can keep it operational, but supposedly none of the bids according to CF would be able to do that. Not quite sure why they care about whether the new owner can keep it operational. Surely better to get any money for a loss-making plant than none?
According to the Telegraph:
A spokesman for CF Industries said: “CF Industries has spoken with several parties. In the course of those discussions, at no point thus far have the parameters of any transaction – proposed or outlined – appeared likely to secure the long-term future of the Ince manufacturing facility and its employees.”
Anyway, security and agricultural lobby people are a bit worried this will leave the UK drastically over-exposed to CF Industries’ last remaining plant in Teeside. They’re not wrong.
The government gave CF a loan to maintain carbon dioxide supplies. But now it wants a market resolution.
Part of that resolution was what the Telegraph called an “audacious” bid by former army chief Lord Dannatt, who is apparently into agricultural affairs.
I mean, it’s always been a cliche that army folks go into the city after leaving the army. But the idea of Dannatt running a bid to secure the future of Ince does feel meaningful. For now the bid has failed.
Sir, The article “Generals caught in US election crossfire” (September 10/11) on ex-US military leaders meddling in US politics is newsworthy. Why does such interference not merit the same attention when it occurs in the UK? When General Sir Richard Dannatt attended a Conservative party conference in 2009 while still a serving military officer and criticised the Labour government, neither the FT nor other respected titles saw this as undermining British civil-military relations. Britain is not immune to such tensions; but they are rarely commented on.
[In response to comment] Like I said, I’m not a military expert, and it’s not like there hasn’t always been a revolving door between military service and city activity. But.. if Penny gets the job,… in a time of renewed Cold War anxiety, I think it’s all becoming a bit meaningful.
I met Penny at some point I think in 2019 or earlier. She was doing the local political rounds. She definitely has stature. But what do I know?
[In response to comment] 11:54 I don’t see the gas price coming down any soon, and the issue isn’t really resolvable with higher prices.
We are basically in a transition from a market economy to a war economy
A war economy can keep unviable assets going with things like rationing, a market economy can’t.
Productivity isn’t really the issue, and even if it was that’s not going to get us through the Summer of discontent, in my opinion.
which is likely to become the year of discontent by 2023
This isn’t the only supply chain shock coming our way btw:
Britain is on the edge of dairy shortages as a crippling lack of workers forces farmers to slash production, the country’s biggest milk and butter maker has warned.
Arla Foods, the company behind Lurpak butter and Cravendale milk, also predicted that dairy prices will surge even higher with grocery bills already rising at the fastest pace in 13 years.
Rationing is coming. I was a bit over zealous in calling this in Feb in terms of the timings, but i don’t think I was fundamentally wrong.
Germany has already started rationing hot water and dimming street lights
and this is THE SUMMER. [Wait till winter.]
On the tech front: Do keep letting us know about the trouble you may or may not be having
To finish off I will just remind everyone that US CPI is out this week.
It’s expected to reach a new high of 8.8 per cent year on year.
Leaked Uber docs reveal bare-knuckle expansion tactics:
– Leaked Uber files detail how politicians helped ride-sharing
giant’s global rise – Axios
But frankly, I think this is yesterday’s news and a bit overhyped. The formatting on the story is horrible too.
What is worth watching is that China’s State Administration for Market Regulation announced 28 cases involving merger deals that were not reported for antitrust reviews.
Offenders, which also include Bilibili and Weibo, have been fined nearly US$75,000 for each case, some dating back as early as a decade ago
And last and not least, I am going to start Nationalisation Watch.
Uniper, Germany’s biggest importer and storer of gas, this week asked for a German government bailout, warning losses due to reduced supplies from Russia and soaring gas prices could reach 10 billion euros ($10 billion) this year. read more
It’s everything Jeremy Corbyn wanted but failed to get, but being driven by market economics not socialism.
12:04 Another thank you to Neil again, and just a quick housekeeping note.
I am taking a break next week (not in Germany). And since it is the summer rather than outsourcing this to a third party, what I might do is just shutter SML until my return in August. We have enough data on the problems, so this will give us a chance to optimise everything. And what I think will be a wise thing to do is keep the system on standby for emergency markets sessions if and when anything drastic and unexpected does happen over the rest of July.
If you’re reading this in transcript form and want access, you can sign up here for a Coodash login.
I’m hoping by September to recruit an experienced pro to operate this on a daily basis though.
On that note, I’m outta here. And do stay safe in these choppy waters.
thank you for joining again!
12:14 D: Yes that would work – you already have the Scroll button so once I’m back a few pages you can pop that up and then I’ll be able to hit that when I’m ready
12:11 GH: hanks for all the feedback
12:11 GH: Looking at that one D, because it is a live chat we obviously want it to update to the new message, we may be able to do something that stops that if you have scrolled a certain amount
12:09 GH: Will address copy line bug
12:09 D: there is a tricky UI issue in that if I want to scroll up and read prior messages it resets back to the bottom as soon are there is a new post
12:08 WS: but it doesn’t work for me 😉
12:07 GH: yes copy line button to the right
12:07 WS: oh – there is a copy this line button
12:06 WS: so i can’t follow Roger’s link below
12:06 WS: can’t copy paste text from the comments box
12:06 WS: one more bug?
12:06 DGG: thanks izzy!
12:05 WS: thanks Izzy – have a super holiday.
12:05 RF: Good story on Uniper’s problem
12:05 RF: https://news.sky.com/story/ukraine-war-pushes-uniper-one-of-europes-biggest-utility-companies-to-the-brink-12645640
12:03 D: Germany looks horribly exposed to energy shortages
12:01 DGG: What impact could that have?
11:58 DGG: that is crazy!
11:58 DGG: it’s affecting all of us, D. I’m doing the same
11:57 D: Is it just my browser or does the comment line get deleted when somebody posts, I’m using Notepad and then pasting here
11:57 WS: dairy prices been way too low forever imo
11:55 WS: so does gas price go up permanently so that productivity benefits of fertiliser aren’t cost effective?
11:53 WS: why is it non viable mediium long term? doesn’t gas price come down or fertisiliser price go up? hopefully we keep farming.
11:51 RF: I feel sure this is a second career for Dannatt, not a continuation of his first one
11:51 DGG: So it’s fascinating to see them coming out of the woodwork for this occasion
11:50 DGG: Indeed, the UK military has always been the quiet professional types. Great for low-keyness
11:47 DGG: wah!
11:46 RF: Or Flynn in the US
11:46 RF: Service is no guarantee of sanity …D Davies for example
11:46 DGG: interesting
11:45 WS: would be more worried about remote detonation of a nuclear power station!
11:45 D: Isn’t EDF on the hook contract wise?
11:44 WS: wouldn’t the power stations be taken over with force majeure?
11:44 DGG: When you say military bods, who do you mean?
11:43 DGG: When have we ever trusted the French
11:43 DGG: Re-nationalising the commanding heights
11:42 WS: thanks Neil.
11:42 DGG: Thank you Neil!
11:40 WS: i was sad to see Morrisons go to PE, as both investor and customer, but shops are holding up well for now imo
11:36 DGG: https://www.lvmh.com/news-documents/news/lvmh-announces-2022-innovation-award-prize-list-and-its-grand-winner-toshi-during-viva-technology/
11:36 DGG: It just won the 2022 LVMH Innovation Award
11:36 RF: Delivery services for humdrum good seem doom in a cost of living crisis… esp once the PE cash runs out
11:35 D: There is an element of last man standing with retailers isn’t there – high street is decimated
11:35 DGG: Some online clothes retailers are well positioned – those in the luxury sector. Check out Toshi. Bullish on their surivival as their margins, tight as all other online retailers, still benefit from a more significant markup as a result of their luxury delivery services.
11:28 WS: woodford fave right?
11:28 DGG: I had no idea about the Deutsche Bank thing. New to me, but not all that surprising considering the things DB gets up to these days…
11:28 DGG: What really gets me wondering with Wirecard, that was mentioned on ALTIF is, what if they could have just gotten away with it?
11:23 DGG: haaa
11:17 RF: jarndyce v jarndyce
11:16 JC: My bet remains that the case will still be ongoing long after Twitter exists as a platform
11:14 WS: as Levine says, what if he loses but refuses to pay?
11:13 RMC: missing s/t?
11:13 RF: Don’t put it past Elon
11:13 WS: i am still laughing
11:12 WS: lol @11:11
11:10 DGG: But I have noticed issues with catering for EasyJet, which suggests the problem goes deeper than staff cuts.
11:10 DGG: I have found the airport woes to be overstated – bar the sudden cancellations, all the airport’s I’ve been to this summer have been peacable and fine.
11:08 LP: Sorry for the inconvenience
11:07 LP: There does seem to be a probem with the text box clearing, working on a fix currently, a workaround would be to type your message elsewhere and then paste it here to send a comment without the box clearing.
11:07 RF: Fresh lockdowns looming in China
11:07 WS: text disappears from input box whenever a new topline comment is posted
11:07 WS: issue is intermittent
11:06 Izabella Kaminska: I’m on firefox and all well for me
11:06 DGG: (desktop chrome too)
11:06 WS: (on chrome on a desktop)
11:06 WS: Same issue in the typing box for me
11:05 DGG: And yes I remember Melenchon using the hologram in the penultimate elections!
11:05 DGG: I’m having the same issues as John actually, the text I type vanishes from time to time
11:04 LP: I see what you mean, looking in to the problem now
11:03 JC: The text entry box intermittently closes
11:03 JC: It’s like a race against time
11:03 JC: I am but on a tablet
11:02 JC: Thanks Luke
11:02 LP: Hi John, try using google chrome if you aren’t already, it’s the most reliable browser for using coodash
11:01 WS: hellos
11:01 RMC: hi
11:00 RR: Yep! All herr
11:00 DGG: Hello!
10:59 JC: Ok there we go. Rabble rabble. How was ABBA?
10:59 JC: Lose the typing box suddenly
10:59 JC: Probably me
10:59 JC: Problems