Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Where we’re going, we don’t need spades

Written by Tom Gillingham, associate partner
Edited by Kevin Pringle, partner
9 November 2020

Good morning,

It’s funny what counts as entertainment these days. In the Scottish central belt’s lockdown-that-isn’t-officially-a-lockdown, I’ve used my spare time to turn our garden into a muddy hellscape in the pursuit of future horticultural nirvana.
 
Commenting on this new endeavour, a friend glibly suggested ‘digging’ for Bitcoin would probably be a better use of my time.
 
Sadly, they’re not wrong, even if Bitcoin ‘mining’ requires computing power rather than a second-hand shovel.
 
In the past few days, the value of the leading cryptocurrency passed $15,000 for the first time since 2017. While some way off the dizzying heights of the almost $20,000 reached at the peak of its bull run towards the end of the same year, it is a significant recovery on the sub $5,000 prices seen in early 2019.
 
Cryptocurrencies are still a deeply polarising asset class. Bitcoin evangelists talk in terms of whales and rocket emojis, of ‘hodling’ (look it up!) and finally going to the moon. Critics mutter about Ponzi schemes and spiralling carbon footprints.
 
Given the jagged chasm between the crypto faithful and the foes, it is perhaps serendipitous that some commentators are suggesting that the divide in the American electorate underpinned this latest Bitcoin rally
 
Regardless of the real reason behind its recent rise, there are fresh signs that increasing numbers of hedge funds are dipping their toes into the crypto pool – lured in by the promise of high returns, the company of large traditional market trading firms, and a growing sense that Bitcoin may be becoming a new ‘safe haven’.
 
So that’s how I’ll console myself when I next trudge out into the rain, spade in hand. I’m effectively in the company of top hedge funds and investment managers as we go further past the point of no return, all quietly hoping that we’re digging in the right direction.

News

US President-elect Joe Biden will make tackling the coronavirus pandemic his top priority. Announcing the first steps in his transition plan, his team said there would be more testing and Americans would be asked to wear masks. He will also rejoin the Paris climate agreement and reverse the decision to leave the World Health Organization.
 
The prospect of a green recovery from the pandemic is looking increasingly unlikely. Research for The Guardian has shown that countries around the world are diverting money into the fossil fuel economy to stave off a devastating recession, and promises of moves towards a low carbon future are failing to materialise.
 
Police are heading into the “unknown” with Britain’s departure from the European Union transition phase looming. A senior officer has warned that under-pressure forces still do not know whether they will retain access to European mechanisms and databases.

Business and economy

Japan’s SoftBank Group Corp today reported a 131.7 billion yen loss from speculation on tech stocks after an attempt to diversify using its cash. Chief Executive Masayoshi Son has said the company will drop operating profit as a measure of performance, due to the move away from running businesses to a closer focus on tech investing.
 
Big tech companies are emerging as another winner from last week’s US election. Shares in the likes of Microsoft, Facebook, Apple and Amazon rose sharply in the hours after the polls closed on 3 November. Stocks in this sector have already been amongst the best performers this year, despite the pressures of the Covid-19 pandemic. (£)
 
EU and UK officials will resume Brexit trade talks in London later today, at the start of what is being suggested is another key week in the search for a future trade deal. The two sides will try to bridge the significant remaining differences on fishing quotas and competition issues.

Columns of note

Writing in The Sunday Times, Matthew Syed wrote about the fact Joe Biden “must stop America choking” after this election. Drawing parallels to a faltering sports start, he suggests that the US has become too “instinctive” in its democracy and that hubris is what allowed US institutions to unravel. He says America is not alone in this challenge, but highlights that Biden cannot rely on self-correction alone. (£)
 
In the Guardian, Labour leader Keir Starmer welcomes Joe Biden’s election, writing that it offers the UK a chance to move the ‘special relationship’ towards a more optimistic future. He says it is time for the US and Britain to return to the world stage and to lead.

Cartoon source: The Times

Markets

The week ahead
 
After a torturous wait for results, all eyes will turn to emerging details of what US president-elect Joe Biden’s leadership might look like.

His victory speech spoke of his intent to “restore the soul of America”, but there will also be widespread interest in his approach to the Covid-19 pandemic and his foreign policy plans. The global markets’ reaction to these first signs could be an interesting early indicator of investor sentiment towards Biden’s presidency.
 
Later in the week, the European Central Bank holds its annual forum online. At the same time, there is a slew of companies reporting in Europe and the US this week. Key names to watch include McDonald’s, Disney and Siemens, alongside ITV, WHS and JD Wetherspoons.
 
In the US, inflation data on 12 November will be a key data point of interest, while China also has a series of indicators scheduled, likely to give more insight into that country’s post-pandemic recovery. Finally, in the UK, growth and labour figures are expected.

What’s happening today?

AGMs
Prophotonix

GMs
Angus Energy

UK economic announcements
Retail sales

Int. economic announcements
(07:00) Current Account (GER)
(07:00) Balance of trade (GER)

Source: Financial Times

did you know

On 22 May 2010, two pizzas were bought for 10,000 bitcoin. Now, that same quantity of the cryptocurrency would be worth $154,270,000.

Parliamentary highlights

House of Commons

Oral questions
Home office (including topical questions)
 
Legislation
Financial services bill: Second reading

House of Lords 

Oral questions
Support for freelancers who work in the entertainment and music industries – Baroness Kennedy of Cradley
 
Legislation
Immigration and Social Security Co-ordination (EU Withdrawal) Bill –
consideration of Commons amendments/reasons – Baroness Williams of Trafford

Scottish Parliament 

No business scheduled

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