Coronavirus - Macro Investment Aspects Only

[odysseus2000]

Interesting to look at the Royal Mail, 2nd quarter volume.

Huge rise in packages (ex Amazon) although letters are down, the GLS (General Logistic Services) business is also thriving:

https://www.investegate.co.uk/royal-mai ... 43376122T/

Regards,

[redsturgeon]

Just got back from Heathrow.

Anyone know what percentage of normal flights are currently going out? It looked like a ghost town!

John

August 17th European flight volumes down by 60%:

https://apex.aero/coronavirus

Regards,

Last three years passenger figures for July were almost 8 million through Heathrow.

July 2020 around 800,000!

I thought it looked quiet!

John

[Mike4]

Last three years passenger figures for July were almost 8 million through Heathrow.

July 2020 around 800,000!

I thought it looked quiet!

John

No wonder my CoPD has almost cleared up!

[ursaminortaur]

Germany is looking at extending its furlough scheme to 24 months.

https://www.theguardian.com/world/2020/aug/18/germany-to-extend-coronavirus-furlough-to-24-months

Germany is expected to extend its pandemic furlough scheme to 24 months after Angela Merkel indicated that she welcomed the proposal to let the Kurzarbeit programme run on.

The chancellor’s spokesperson said on Monday she was “positively” inclined towards the suggestion to extend the scheme, which allows firms to put their staff on part-time work to reduce their cost. Britain’s furlough scheme initially only allowed staff to be sent home and not work, but staff have been allowed to work part-time since July.

The finance minister, Olaf Scholz, first proposed extending the benefit programme, which is currently limited to claims lasting a maximum of 12 months, on Sunday. “The corona crisis won’t suddenly disappear in the next few weeks,” said Scholz, who was recently announced as the centre-left Social Democrats’ candidate for chancellor in next year’s elections.

[odysseus2000]

More evidence of the secular change from brick and mortar to clicks, this time for white goods, with AO reporting very large growth:

https://www.investegate.co.uk/ao-world- ... 00056309W/

Regards,

[dealtn]

More evidence of the secular change from brick and mortar to clicks, this time for white goods, with AO reporting very large growth:

https://www.investegate.co.uk/ao-world- ... 00056309W/

Regards,

Not a single mention of profit, only revenue. The shares have done very well in recent months. I wouldn't be investing though. I doubt they could ever compete with the likes of Amazon, should they ever be bothered, in a low margin revenue race. Dixons (as was) were knocking them out the park in terms of profitability, with their "clicks" and "bricks" model, until they bought Carphone Warehouse (doh!).

It will no doubt make an interesting business case study in the future.

[dealtn]

dealtn
A month ago when the latest monthly numbers came out we had this exchange. Apparently "no sign of rebounding". Now a month later with 8.7% growth (2 positive months in a row) you are using the "D" word. Now I get why lazy journalists will be focussing on the 2 successive quarters that make a technical recession, but it isn't difficult to see a different story.

https://www.bbc.co.uk/news/business-53748278

I've attached the BBC news report. Is it obvious from the graph yet?

It may be that the statisticians have been told to make the first two quarters as bad as possible and to make the next quarter as good as possible. Certainly the monthly figures are encouraging, but the current monthly data was recorded before the recent surges in c19 and counter measures in the economy.

If everything was going to return to the pre-covid way of doing things one could be optimistic that the economy would return to its pre-covid level, but there have been some secular changes in the way that many business operate with much more home working and that may be a more serious long term hit to the economy.

It is currently not clear to me which way things are going. I would like to believe the re-bound that began in May will continue and things will return to the previous levels, but there seem to be many areas of the economy that have changed so much that a return to the pre-covid level may not happen, countered by those business that are doing much better with the new ways of working.

Regards,

UK retail sales now above pre-Covid levels it seems.

https://www.bbc.co.uk/news/business-53859148

More "figure fiddling" from the ONS?

Or are you willing to admit your previous claim of "no signs" of recovery is now out dated?

[odysseus2000]

The latest retail sales figures are very good and unless proven otherwise more reliable than GDP estimates. The problem I have is reconciling these figures with GDP.

If we assume that retail sales are 2/3 of GDP as noted by:

https://www.investopedia.com/terms/r/retail-sales.asp

Then with GDP down by over 20% (1st half of 2020):

https://www.ons.gov.uk/economy/grossdom ... k/june2020

How do the figures stack up? The retail sales figures released today note that the rise was 3.6% in July, much smaller than the 12% and 13.9% in May and June, but that now retail sales are above pre-C19 levels.

Perhaps in the UK one can argue that retail sales are not 2/3 of GDP, but if you don’t then it suggests the rest of the economy is not doing well or some of the figures are incorrect.

Often there are revisions in GDP, although retail sales should be more accurate. However, retail sales are, as I understand it, calculated by sampling techniques and given the recent fiasco of exam results one can be a little wary of such approaches.

It may be that GDP is subsequently revised sharply higher for the first half of 2020 as otherwise I can not see how one can reconcile these figures.

However, I could have this completely wrong and I would much prefer to have the economy doing well than doing badly and I may be mis-understanding these figures and/or making errors. If so please correct.

Still overall, at least at face value, the retail sales figures are the most encouraging indicator I have seen this horrible C19 business began. I will be happy to be proved to have been over pessimistic if good numbers continue.

Regards,

[dealtn]

If we assume that retail sales are 2/3 of GDP as noted by:

https://www.investopedia.com/terms/r/retail-sales.asp

Retail Sales are not 2/3 of GDP.

Consumer spending is about 2/3 of GDP, but made up of much more than Retail Sales. (You would expect some correlation though).

[odysseus2000]

If we assume that retail sales are 2/3 of GDP as noted by:

https://www.investopedia.com/terms/r/retail-sales.asp

Retail Sales are not 2/3 of GDP.

Consumer spending is about 2/3 of GDP, but made up of much more than Retail Sales. (You would expect some correlation though).

Thank you for correcting my errors.

If we take the ONS definitions for the UK

https://www.ons.gov.uk/businessindustry ... ilindustry\\

we have two components for the Retail Industry:

Retail Sales Index, released today

https://www.ons.gov.uk/businessindustry ... ilindustry

and

Index of Services, released 12 Aug 2020

https://www.ons.gov.uk/economy/economic ... s/june2020


Also on the 12th of August there was released an document describing the impact of c19 on the economy including the statement of the UK being in a technical recession:

https://www.ons.gov.uk/economy/grossdom ... y/june2020

Although the Retail Sales Index data is encouraging when set in the context of the Index of Services the overall picture is still not a happy one, but it is moving in a positive direction, albeit slowly.

Regards,

[odysseus2000]

The relative weakness of the FTSE100 is captured in the statistic that Apple's market cap is now greater than the cap of the FTSE100:

https://www.standard.co.uk/business/app ... 29486.html

Regards,

[odysseus2000]

UK seen set for record breaking economic growth:

https://www.ft.com/content/35e187a5-896 ... cca6086909

Regards,

[odysseus2000]

Global dividends, worst quarter since 2009:

https://www.ft.com/content/a136da68-4cc ... 19b11f75e6

Regards,

[odysseus2000]

Many firms plan to continue remote working:

https://www.bbc.co.uk/news/business-53901310

This will have substantial negative impact on lots of other business if this becomes, as I think likely, a permanent situation. However, for the business that do it successfully there are substantial savings in overheads which should feed through to the bottom line. If for example business can become so on-line that they can dispense with some offices there will be savings from no rent, rates and utilities. It will however, be bad for suppliers of such facilities.

Regards,

[dealtn]

It will however, be bad for suppliers of such facilities.

It might also be bad for some workers who are less able to work from home too. Not everyone has a spare room to use as an office for instance. Younger people living in small flats, or multi-occupier properties, or even still with parents, could be struggling relative to others.

It's an interesting issue.

[odysseus2000]

It will however, be bad for suppliers of such facilities.

It might also be bad for some workers who are less able to work from home too. Not everyone has a spare room to use as an office for instance. Younger people living in small flats, or multi-occupier properties, or even still with parents, could be struggling relative to others.

It's an interesting issue.

Yes, this is a good point.

I have seen several small business being run from garden sheds which will need insulation for winter and summer, but this seems possible given what I have seen.

However, for some there is just no space and for them some kind of business premise will be needed, whether that could be a pod in building of pods is possible but once you get to needing such kinds of things it becomes more likely that the old bricks and mortar business becomes more viable or perhaps people rent other peoples spare bedrooms. There are several sites that allow you to rent your parking space to someone else, so I imagine that renting a spare room could be done via similar methods.

Regards,

[odysseus2000]

Seems to be dawning on the CBI that we are seeing secular changes in work patterns and they are beginning to worry, rather than embrace the new reality:

https://www.bbc.co.uk/news/business-53925917

Regards,

[Watis]

Seems to be dawning on the CBI that we are seeing secular changes in work patterns and they are beginning to worry, rather than embrace the new reality:

https://www.bbc.co.uk/news/business-53925917

Regards,

The coronavirus has forced a step-change in working practices in months that I had hitherto thought would take another generation before they came to pass.

It had become clearer even before lockdown that the catering industry was getting top-heavy, by that I mean that there were too many restaurants and cafes for the available demand. I give you Carluccios, who went into administration prior to lockdown and came out of it with less than half the number of restaurants. And a branch of Prezzos near my home closed a year or so back.

I think that the Government is on a hiding to nothing in trying to encourage workers back to their offices on the grounds that they need to spend money in shops around their workplaces.

Instead, what needs to happen is for businesses to figure out where employees who are working from home and saving a fortune on commuting and food costs are going to spend their bounty. The businesses that get that right will prosper!

Watis

[odysseus2000]

Seems to be dawning on the CBI that we are seeing secular changes in work patterns and they are beginning to worry, rather than embrace the new reality:

https://www.bbc.co.uk/news/business-53925917

Regards,

The coronavirus has forced a step-change in working practices in months that I had hitherto thought would take another generation before they came to pass.

It had become clearer even before lockdown that the catering industry was getting top-heavy, by that I mean that there were too many restaurants and cafes for the available demand. I give you Carluccios, who went into administration prior to lockdown and came out of it with less than half the number of restaurants. And a branch of Prezzos near my home closed a year or so back.

I think that the Government is on a hiding to nothing in trying to encourage workers back to their offices on the grounds that they need to spend money in shops around their workplaces.

Instead, what needs to happen is for businesses to figure out where employees who are working from home and saving a fortune on commuting and food costs are going to spend their bounty. The businesses that get that right will prosper!

Watis

As for business that will do well with all this home working:

Zoom, already a huge winner

Apple, lots of useful electronics

Tesla, new cleaner and better cars

Netflix, more leisure time

Google, more targeted searches

Amazon, more and more home shopping

eBay, more time to hunt for bargains

Paypal, more volume from home shopping

Qcom, CSCO for 5G

Salesforce

All of these are US corporations. There maybe a few UK or European ones, but these stand out as market leaders who have richly rewarded their share holders, whereas most UK/European business are commodity plays with the usual race to the bottom in margins. There may be UK/European niche plays like Spirent in 5G, Betfair, Playtech in gambling

If anyone can suggest UK/European business that will do well I would be happy to get their ideas.

Regards,

[dealtn]

As for business that will do well with all this home working:

Zoom, already a huge winner

Apple, lots of useful electronics

Tesla, new cleaner and better cars

Netflix, more leisure time

Google, more targeted searches

Amazon, more and more home shopping

eBay, more time to hunt for bargains

Paypal, more volume from home shopping

Qcom, CSCO for 5G

Salesforce

All of these are US corporations. There maybe a few UK or European ones, but these stand out as market leaders who have richly rewarded their share holders, whereas most UK/European business are commodity plays with the usual race to the bottom in margins. There may be UK/European niche plays like Spirent in 5G, Betfair, Playtech in gambling

If anyone can suggest UK/European business that will do well I would be happy to get their ideas.

Regards,

How does home working, and a reduction in commuting lead to increased demand for (you favourite) cars?