The Week - UK (2021-02-06)

46 CITY

THE WEEK6February 2021

Talking points

DonaldTrumpmaybegone,butthe

Scotchwhiskyindustryisstillsuffering

fromhispolicies,saidRadioClyde

News.Exportsofsinglemaltshave

fallenbymorethanathirdsincetheUS

imposeda25%tariffin 2019 –initially,

aspartofawiderrangeofmeasuresin

retaliationforEUsupportgiventothe

EuropeanaviatorAirbus.Distillersare

“continuingtopaythepriceforan

aerospacedisputethathasnothingto

dowiththem”,accordingtotheScotch

WhiskyAssociation.Sofarithascost

them£500m.Notsurprisinglytheywant

action.Ministerssaytheyarelistening

andhaveembarkedon“intensivetalks”

togetthese“unfairtariffs”removed.But

thesituationremainsinstalemate.

MuchthesamemightbesaidofBritain’swidertradetalkswith

theUS,saidGeorgeParkerandAimeWilliamsintheFT.“Hopes

ofanearlytradedealbetweenLondonandWashington”have

faded.Thenew USpresident,Joe Biden,“hasvowedtoimprove

hisowncountry’seconomybeforesigningnewtradedeals”–and

a“UK-US agreement”isn’tseenasahighpriority.Forcedonto

thebackfoot,the PMandhisTradeSecretary Liz Trussinstead

choseto markthefirstanniversaryofBritainleavingtheEUby

applyingto join a“Pacificbloc”of11countries.Thehopeisthat

if Americaisalsopersuadedtosignup totheComprehensiveand

ProgressiveAgreementforTrans-Pacific

Partnership(CPTPP)–whosemembers

includefast-growingeconomiessuchas

MalaysiaandMexico,aswellasestab-

lishedplayerslikeJapan,Australiaand

Canada–itcouldkick-startglobaltrade,

withBritainatthetoptable.But,again,

Bidenlooksinnohurrytomove.Critics

sayBritain’sCPTPPmembershipwill

bring“limitedeconomicbenefit”tothe

UKbecause“distanceremainsacrucial

factor”.Indeed,Britain’sapplicationto

joinCPTPP,whileendingfrictionless

tradewiththehugebloconitsown

doorstep,isoneofthe“paradoxesof

UKtradepolicy”.

Nonsense,wroteLizTrussherselfinThe

DailyTelegraph.Itisafeatherinourcapthat“Britainispoised

tobecomeaPacificplayer”.Themoveisevidencethat,aftera

yearasanindependenttradingnation,Britainispickingupspeed.

“Turbo-chargingtradewiththeseeconomies,whichcovernearly

£9trnofworld GDP, will bekeytofuellingoureconomic recov-

ery.”Plentyclosertohom ewouldbegto differ,said Toby Helm

in TheObserver.“Inwhat isthreatening tobecome adramatic

exodus ofinvestmentandjobs”,hundredsofUK companies are

making inquiries aboutswitchingoperationstocountries within

the EUtoavoid crippling costs.For them, theGovernment’stalk

ofa“newlynimbleGlobal Britain” has adecidedlyhollowring.

Issue of the week: Going global?

LizTruss:“turbo-chargingtrade”

Making money: what the experts think

●Silversqueeze

Hascalmreturned to

markets followinglast

week’sGameStop

mania?ByWednesday

thisweek,itlooked

thatway,saidPatrick

HoskingandBen

Martin inTheTimes.

Shares intheUS

gaming-shopchain

havemorethanhalved

invaluesinceamateur

traderson Redditpushed themintothe

stratosphere(seepage4)–andtheensuing

“silverbuying spree” that “stunned global

financial markets”has also shown “signs

of fizzling out”.After hitting an eight-year

high of $30/oz, as theybecame “analtern-

ative focusint he battlebetweensmall

trad ersand Wall Streethedge funds”, spot

silver prices fellbymorethan 5%.But

many havebeenleftponderingthe ramifi-

cations of the mighty “silver squeeze”.

●Moving markets

At the heightoft he fervour, retailinvestors

piledinto silver, noted Markets.com

analyst Neil Wilson–with the aim of

forcing hedge-fund managers shorting the

commodity to become buyers. The upshot

was aroller-coasterride for precious metal

minersint he UK aswell as the US,said

Michelle McGagh onCitywire. Shares in

London-listedFresnillo jumped16.5 %to

hit£11.50. Mininginvestmenttrus ts also

madegains.Silver is

“avery different target”

tounloved individual

shares,saidMohamed

El-ErianofAllianzon

CNBC. “The factthat

you can movesilver,

suchalargemarket,

isanindication to

everyone that they

havetotake thesenew

technicalsseriously.”

●Dramatic results

Whydid the Reddit“mob” alighton

silver, asked Dominic Frisbyon

MoneyWeek.com.Becausemanybelieve

the explanation for its perennially disap-

pointing price performance is “manipu-

lation”. The story thatalarge investment

bankis suppressing thesupply ofsilver

“has beenaround for aslong as Ihave”.

Last week,it“caug ht hold once more”

with dramaticresults. Since silver has

“a plethora of industrial uses”,especially

in new technologies, some maintain it

should be pricedat“well over $100 an

ounce”. “And yetnever hasacommodity

disappointeditsinvestorssoconsistently”

–the precious metaltradesatthe same

pricenowasitd id 40years ago. Ifit can

clear$30,there’sagoodchance silver

couldrun t o$50 –the all-time high,set in

1980. But remember, “it’s the metal that
      always lets youdown”–asanewgroup
      of tradersmaybeabout tofind out.

Silver “always lets you down”

Not so merry...

These are “surreal times” for

Robinhood, the online stockbroker at

the centre of the GameStop storm, said

The New York Times. At the end of last

week, the commission-free outfit “faced

pressure on its business model,

rumour-mongering about its allegiance

to hedge funds, and sabre-rattling from

Washington”, not to mention the anger

of investors restricted from trading in

shares and options of GameStop and

seven other companies. None of those

challenges have gone away.

Still, at least Robinhood has accessed

new funds, said The Economist. Forced

to suspend trading after the frenzy

“depleted” its required capital, it raised

$1bn. Now it has “tapped its not-so-

merry band of shareholders” for a

further $2.4bn. Founded seven years

ago by Vladimir Tenev and Baiju Bhatt,

as part ofamiss ion to “democratise

finance for all”, the start-up was the first

to offer retail investors unfettered (i.e.

no-fee) access to the stock market. But

the GameStop drama has presented

Robinhood, “onceabeneficiary of the

wave of retail investing”, with “exis-

tential threats”. Questions are being

asked about its financial dealings with

the hedge fund Citadel, which last week

rode to the rescue of fellow fund Melvin

Capital even as the latter was being

squeezed by Robinhood traders. Worse,

regulators are now on the case. The

GameStop saga has “created pain”

for ahandful of financial institutions,

Robinhood may be another “to suffer”.

TheGovernmentistalkinguptheUK’snewroleinglobaltrade–butfrustrationsonthegroundaremounting