CITY 45
28 May 2022 THE WEEKCommentators
Elon Musk’s $44bn deal to acquire Twitter is still “on hold” while
the world’s richest man queries the social media platform’s exact
number of “robot accounts”, says The Economist. “Identifying
bots is hard”, but this sounds like a classic “dog ate the
homework” excuse. Musk may be suffering from “an epic case
of buyer’s remorse”. And who can blame him for getting cold
feet? “The value of tech stocks has tumbled” since the deal was
announced at the end of April. Musk has agreed to pay $54.20
per share; last week, Twitter’s shares were trading as low as $37.
The acquisition also risks harming “much bigger interests” –
notably Tesla, the “source of most of his wealth”. Twitter’s board
says it intends to enforce the acquisition agreement. “But it is in a
tight spot.” Compelling Musk to make good on his offer would
mean months in court, with no guarantee of success, and there is
no obvious alternative buyer to support the share price. Musk’s
endgame is probably to use this leverage “to edit his contract”,
and negotiate a lower price. He may well get his way.“Switzerland is the inflation time-warp envied across Europe,”
says Tom Rees. As its neighbours struggle to stop prices boiling
over (German inflation is now at a 40-year high of almost 8%),
prices in the Alpine nation are rising at a relaxed 2.5%, making
it “a bastion” of the “benign” pre-Covid era. What’s its secret?
Unlike much of Europe, Switzerland isn’t “vulnerable” to
“Russia’s hold over Europe’s gas markets” because it is powered
by a more diverse energy mix. Around 60% of its electricity
comes from hydropower; and nuclear power accounts for a third.
Meanwhile, “a strong Swiss franc” is keeping the cost of imported
goods lower: “the safe haven currency has risen almost 7%
against the euro in the last 12 months”. Crucially, economists
believe that due to Switzerland’s “subdued wage dynamics”,
there is “little risk of any price pressures becoming persistent” as
is happening elsewhere. The Swiss aren’t immune to complaining
about inflation which, by their standards, is rather “steep”. But
they have beaten us hands down in this game. A pity their
prowess is so “difficult for the likes of the UK to replicate”.The message from the Government is clear, says Larry Elliott: the
“booming labour market” is “the silver lining to the dark cloud
hanging over the economy”. There are now “more job vacancies
than there are people officially classified as out of work”. Still,
there are two big problems with this idea that “Britain has
returned to the balmy days of postwar full employment”. The first
is that job losses will likely rise as recession looms. The second is
that the “narrative only holds true for the better-off parts of the
country”. Indeed, a study by Sheffield Hallam University into
Britain’s “hidden unemployed” (defined as people who are on
incapacity benefits, who would be working in a full-employment
economy) suggests an unemployed total of 2.34 million: “a million
higher than the Government’s preferred yardstick”. A geographical
breakdown of hidden unemployment suggests it is “highest in
areas affected by the deindustrialisation of the 1980s and 1990s”- particularly in Wales, Scotland and northern England. If the
economy does go into “a tailspin”, these weak labour markets
are likely to be hit hardest. So much for levelling up.
“Where is Paris Hilton when you need her,” asks Elaine Moore.
Until recently, the reality star was a fixture on “late-night US
chat shows” talking up her enthusiasm for NFT investments.
Now these “non-fungible” digital tokens, “the most speculative
of speculative assets”, are crashing – one index is down 78% –
Hilton and other “celebrity hawkers” have vanished. “Was this
just a bubble at the tail-end of the tech rally? Was it a grift all
along?” Or could NFTs live on in a different guise? Could they
live on, in the way that e-commerce survived the dotcom crash?
There is certainly a chance they could “move from expensive
cartoon monkey jpegs... into something more sustainable”. But in
spite of the billions of dollars of investment, “there is still haziness
around NFTs”. Why pay for digital artwork or video clips that
anyone can look at online? Right now, there’s not much to do
with them “other than show them off”. But that could change. As
“digital contracts” that verify ownership via permanent record-
keeping, NFTs could, in theory, “be used for anything”.Stuart Kirk
Should investors worry
about climate risk? Not
according to HSBC’s “head
of responsible investing”,
said Kalyeena Makortoff
in The Guardian. In an
extraordinary speech to
the FT’s Moral Money
conference last week, Stuart
Kirk took a rhetorical axe to
the notion that investors
have a duty of care, claiming
that, throughout his career,
there was “always some
nutjob telling me about the
end of the world”. “Who
cares if Miami is six metres
underwater in 100 years?” he
asked. “Amsterdam has been
six metres underwater for
ages.” In an accompanying
slide, Kirk – a former editor
of the FT’s Lex column –
stated that “unsubstantiated,
shrill, partisan, self-serving,
apocalyptic warnings are
ALWAYS wrong”. It was a
PR disaster for HSBC; Kirk
has now been suspended,
amid calls for his sacking.He has now been “sent to
re-education camp”, said The
Wall Street Journal, but Kirk
was merely saying “what
many in his industry believe
but are too timid to say”. All
credit to him “for exposing
the hubris of the regulatory
climate emperors even as
his superiors shrink in fear”.
Kirk is no climate denier,
said Ben Wright in The Daily
Telegraph. And his remarks
about Miami were intended
to emphasise the power of
human ingenuity. His
“apparent heresy” was
daring to suggest that the
financial (as opposed to
ecological) risks had been
overstated. Kirk’s talk was
nodded through by HSBC;
now he is being “hung out
to dry”. His superiors might
reflect that nothing could
more clearly expose “the
intellectual deficiencies”
of the ESG orthodoxy
“than its inability to brook
challenge or debate”.The mirage
of full
employment
Larry Elliott
The Guardian
Switzerland is
winning the
inflation game
Tom ReesThe Sunday TelegraphElon Musk’s
buyer’s
remorse
Editorial
The Economist
Can NFTs
survive the
tech rout?
Elaine MooreThe Financial TimesCity profile