Split US Congress Sets The Stage for Market Mayhem: SYZ Private Banking

us congress

By Adrien Pichoud, chief economist and senior portfolio manager at SYZ Private Banking

The world’s economies are struggling with the ravages of a year unlike any in living memory, and the US is experiencing a presidential election like no other. Yet, whoever sits in the White House in January 2021, Congress will determine whether the next president can implement his agenda. Facing weeks of market volatility, with cash and government bonds offering negative yields, we argue investors should stand ready to grab opportunities in equities.

The race for the White House matters less than the fight to control Congress and the legislative agenda. From an economic point of view, regardless of how the Covid-19 pandemic develops, the presidential race will not alter the need to focus on recovery. 

Despite the geopolitical tensions and stakes for US democracy, we do not see a scenario after 3 November that would significantly change the American economy’s underlying health, nor the global ‘Japanification’ picture of historically low interest rates and growth.

 

Congress is king

A clean sweep by one party of the presidency, the House of Representatives and the Senate would be the most market-disruptive outcome – giving the next administration a free hand in shaping the US legislative agenda. However, we anticipate a still-split Congress will limit the ambitions of either president. Under current polling, this congressional status quo is the most likely result and will be driven by disagreements over handling the pandemic.

Polls and bookmakers all point to Democrat nominee Joe Biden winning the presidency, the Democrats retaining control of the House of Representatives and Republicans maintaining their Senate majority. President Donald Trump began to lag in opinion polls around the arrival of the pandemic in the US, which has killed about 210,000 Americans.

Before March, Trump was happy to run a re-election campaign on the strengths of the American economy, and many investors anticipated a second Republican administration. Covid-19 has forced the president to switch tactics, stirring social and racial tensions, while disclosures about his tax returns suggest he cannot afford to lose. But Trump cannot now avoid the subject of Covid-19, having tested positive for the virus just one month before the vote.

After the election, the greatest political risk for investors would be a contested result. Trump has repeatedly cast doubt on the validity of the ballot and refused to commit to a peaceful handover. This sets the stage for legal challenges, social unrest and market volatility.

 

Covid-driven consensus

In the run up to the vote, investors should not be too distracted by the noise of the presidential campaign season. For all its polarised politics, the pandemic has created a broad consensus in the US around the need for the federal government to support businesses and wages.

With the Federal Reserve (Fed) committed to maintaining very low interest rates, whoever is elected president is likely to have fewer fiscal constraints than his predecessors. Therefore, the partisan differences are not about whether to compensate firms and employees for their loss of income, but how much to pay them. This means fiscal policy next year can be more proactive, with fewer constraints on government spending.

Importantly, both candidates’ agendas commit the US to lasting, significant public deficits. Even once a vaccine for Covid-19 is widely available, some economic sectors, such as tourism and entertainment, will need continued government support, else they will downsize or disappear. The airline industry, for example, is not expecting a return to pre-pandemic activity levels before 2023.

 

Contrasting agendas

Trump arrived in office in January 2017 with an aggressive tax cut and promises to undermine the existing multilateral order. During his term, equity indices reached new highs and interest rates hit new lows. A second Trump administration may target further tax cuts, roll over the trade tensions with China and Europe that dominated markets before the pandemic and provoke more social unrest.

The priority for either administration will remain the still-fragile economic recovery and, until this looks secure, a Biden presidency would have little incentive to rush toward higher taxes – especially as long as infrastructure spending remains cheap to finance under the Fed’s current monetary policy.

Recovery permitting, Biden wants to reverse a number of business-oriented policies, as well as improve the US’s international standing. He has campaigned for a programme of broad government spending on infrastructure, healthcare, clean energy and education, totalling $7trn. This would be partly financed by a combination of increased corporate and personal taxes and savings on prescription drug prices. Implemented in full, the programme would significantly raise public deficits and debt.

Some of Biden’s proposals, if and when eventually implemented, would therefore be negative for some stock market sectors. The prospect of raising the corporate tax rate from 21% to 28% – offsetting half of Trump’s 2017 cut – would trim S&P 500 earnings by as much as a high single digit. This could undermine those sectors that benefitted most from earlier tax cuts, such as financials and industrials. Democrat promises to reform the healthcare system – a higher priority than ever during the pandemic this year – are already reflected in pharmaceutical companies’ prices. This said, a Biden administration would also look to unleash an ambitious spending plan, supporting renewable energies and largescale infrastructure.

 

Capitalising on volatility

Faced with these uncertainties, it would be highly risky to position portfolios for a specific election outcome, especially if market volatility intensifies with a contested result.

Despite the political noise, we expect the currently favourable market environment that relies heavily on fiscal support and very accommodative monetary policies to persist. Therefore, we do not see a scenario in which it would make sense to resort to holding cash or move to zero-yielding government bonds.

We continue to invest in investment grade credit, which offers carry yield in this context, as it enjoys the Fed’s implicit backstop. Secondly, we believe it makes sense to hold diversifying assets, such as gold and long-term government bonds, or instruments that can benefit from the high volatility levels of coming weeks. We are keeping some exposure to equities, preferring quality companies with high levels of long-term free cash flow. Any period of intense volatility in the weeks ahead will offer opportunities to build or add exposure to such names.

This election’s vitriol – the danger of social unrest, uncertainties over the president’s Covid-19 infection and a Supreme Court appointment that threatens existing healthcare policies – will keep financial markets on alert in the coming weeks. So, while stock markets continue to benefit from very low rates and plentiful liquidity, they may react abruptly to the election outcome, depending largely on the make-up of Congress.

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4 Tips for Increasing CapEx and Maximizing ROI

capex

Since 2011, capital expenditures (CapEx) have steadily increased in the hospitality industry. Hotels are routinely devoting more resources to enhancing the guest experience and developing their presence in the market. This is different from simply increasing operating expenses, which tend to be shorter-term, routine expenses that can be deducted from taxes. 

The increase in CapEx can be a sign of great things, but it’s still important to use it properly — hopefully in ways that will yield more returns for your business.

While everyone has their own way of doing things, recent patterns have shown that certain areas of spending and attention will help you get the most ROI on your CapEx.

 

1. Invest in Technology

Technology is often one of the best investments you can make to ensure guest satisfaction. Visitors rely on their connection to the outside world — from traveling for work to staying in touch with friends and family. That’s why getting a strong, high-speed Wi-Fi connection will keep people coming back time and time again, translating into a higher ROI. 

Other technological touches like smart TVs and electronic key card access also make great investments for convenience and entertainment.

 

2. Pay Attention to Common Spaces

On average, guests spend much more time in shared spaces than they used to — and less in their rooms. Therefore, these areas are some of the best places to invest in upgrades. Understanding the feeling and aesthetic you want to embody and running with it can work wonders. 

If you have a lounge you want to make more comfortable, consider cozier seating options. If luxury is what you’re going for, install new marble flooring or unique art. It’s all about understanding your guests and finding what they want in a space. That way, it feels unique, and your money goes to good use.

 

3. Design With the Future in Mind

Stretching your investment is one of the key factors in making it go far. That being said, designing with the future in mind is one of the best ways to save money and effort in the long run. While it would be great to only have to think about comfort and style, streamlining aesthetics, technology and quality for the long term can help you get the most out of your CapEx.

 

4. Consider Outdoor Space and Curb Appeal

Since guests spend more time in shared spaces, consider sprucing up your outdoor areas. Many hoteliers have already jumped on the trend of spending for curb appeal, and overall, it tends to work in their favor. The exterior is the first thing guests see, after all, so it’s important to make it count. Consider adding outdoor seating options or even a playground if you tend to draw a lot of families with young children.

 

Boost Your Hotel’s CapEx With These Tips

Even as CapEx increases, you can make the most of your budget by planning smarter investments. From the tech to the ambiance, your hotel can become a place guests will remember and want to return to.

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Dream Without Limits

dreamr

Dreamr’s mission is to provide a mobile platform with the tools and resources that empower people to practically pursue their dreams and aspirations from anywhere in the world. To put it simply, they are leveraging technology and global online connection to create an entirely new way to pursue your dreams. To date, there is no set of resources that makes pursuing your dreams and aspirations practical. We take a closer look at the firm to discover more about their innovative ways.

Using Dreamr is a very simple way of connecting yourself with other, like-minded people. The first step in using Dreamr is to declare your dream in text or video. This will enable you to make new like-minded connections using Dream Connect. Once you have used the app’s networking features to build a supporting community around your dream, you will be able to crowdfund around individual and shared dreams using the Dreamr’s planned integrated crowdfunding feature. Finally, you have the ability to monetize your skills by listing a service in our peer to peer marketplace.

Christopher Adams, the man behind the app, is a specialist in UX and UI design. Since leaving the University of Nevada, Las Vegas, he has been focused on developing digital products for the modern age with a focus on positivity and giving back. Dreamr is latest manifestation of these efforts.

Dreamr is a digital ecosystem of networking and financial tools designed to empower people to dream without limits. It has always been the Dreamr mission to give the world a platform that offers everyone the tools and support they need to pursue their dreams and inspire individuals to help others do the same. Naturally, it is only fitting that the team align themselves with people who bring the Dreamr mission into their daily lives.

Dreamr is offering a free platform for you to make connections with people who believe in your dreams and can offer support through all means necessary.

Dreamr is designed to function as a distinct alternative to the social media apps and sites that exist. Currently there is no platform; social, financial, educational or otherwise that exists to nurture the dreams and aspirations of upcoming generations. At the moment, social media is designed to consume user’s time and attention by introducing addictive behavior. In addition to this, it historically shown little regard for providing real value to the end user. Social media has made it easy for people to share false or exaggerated versions of themselves online. This makes it easy for many interactions that people face on social media to be superficial. Social media can, and should, be used as a force for good and Dreamr is determined to be a pioneer in this way for the industry. Dreamr is aiming to be a positive network, one where you can utilise your connections to motivate and collaborate towards whatever it is that will make your dream come true and provide real fulfilment in life.

The company has an application development team of 30 individuals working around the clock to make sure their video content is crystal clear and that there are no data storage issues. The company culture at Dreamr is worth noting. You don’t have to be in Nevada to work for Dreamr, as it is a distributed organization with contributors from all around the globe. They insist on a positive, collaborative work environment free of politics for their employees. Dreamr also takes an innovative approach to compensation through a “results oriented work environment”, where individuals and teams are paid on deliverables vs. expectations. The more the employees perform, the more they are rewarded. In addition to this, they also have incentivized performance, as well as providing the perks and benefits for all their employees.

They are ensuring that Dreamr is a place where video content will be king. With the launch of each new smartphone comes a better and more stable camera, and the ease and quality of which video content can be generated is improving constantly.

Looking ahead to what the future holds for the firm, Dreamr is expected to be launched in American and India first followed by Latin America in the next 12 months.

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Decentralization, Decarbonization, Digitalization and The Emergence of New Business Models Will Shape the Global Power Sector

solar power

Frost & Sullivan’s recent analysis, Growth Opportunities from Decarbonization in the Global Power Market, 2019-2030, reveals that the 2020s will be crucial for all the participants in the power industry as the transition toward renewable energy is expected to increase, while coal takes a downturn in most developed markets.

Falling costs and renewable-friendly energy policies adopted by several countries in the six major geographies—North America, Latin America, Europe, the Middle East, China, and India—are prominent reasons why solar photovoltaic (PV) and wind capacity additions are expected to soar this decade. An estimated $3.40 trillion will be invested in renewable energy during the next decade, including $2.72 trillion in wind and solar. By 2030, 54.1% of installed capacity will be renewable (including hydropower), and 37.9% will be a combination of solar and wind.

“Decentralization, decarbonization, and digitalization are the three key pillars of the global energy transition,” said Vasanth Krishnan, Senior Research Analyst, Industrial Practice, Frost & Sullivan. “The power sector will witness strong growth in decentralization during the decade, with annual global investment increasing from $53.14 billion in 2019 to $92.54 billion in 2030. Pressure will continue to build for further decarbonization within the power system as the rate of adoption of digital technologies increases in both existing and future plants to boost operational performance.”

Krishnan added: “The surge in need for flexibility is the most significant trend observed across developed markets. System operators are coming under increasing pressure to manage the system with uncertain renewable output, declining coal output, and demand-side variability. As a result, technologies and solutions such as battery energy storage systems (BESS), gas engines, demand-side response (DSR), and virtual power plants (VPP) are witnessing unprecedented adoption rates amongst utilities, solution providers, and end consumers.”

Conventional power plant operators will require extreme physical and digital agility to compete with alternative power sources and stay profitable in the longer term. In this regard, digital solutions will enable conventional thermal power plants to increase operational efficiency and asset utilization to meet the present and future needs of a smart power grid. Growth opportunities for market participants will vary considerably, depending on the region:

  • North America: High energy costs drive strong market growth for energy service and performance contracting, which will more than double its size during the decade to be worth $19.14 billion in 2030.
  • Latin America: Population and GDP growth, coupled with increasing electrification and industrialization, are forecast to drive electricity demand by 3.15% per annum to 2030.
  • Europe: By 2030, $12.91 billion is expected to be invested annually in battery energy storage. Total installed capacity is expected to go up from 2.91 GW in 2019 to 70.02 GW by 2030.
  • India: Renewable energy will account for 72.04% of capacity additions in India during the next decade. Competitive solar PV and wind project costs will be key to future investment.
  • China: Adoption of energy storage will accelerate rapidly in China. The country accounts for 62% of global battery storage production capacity and is investing to boost capacity further. This will benefit the energy storage sector, as it should enable battery prices to decline.
  • Middle East: Bolstered by Saudi Arabia’s shift in energy policy, the solar power market in the Middle East will witness a surge in activity levels in the 2020s. Saudi Arabia, the UAE, Qatar, and Iran are expected to be major markets for solar PV.

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Medical Cannabis Sector Set to Benefit from US Presidential Election

CBD 3

Nawan Butt, Portfolio Manager of The Medical Cannabis and Wellness UCITS ETF (CBDX) says the second half of 2020 is looking positive for the Cannabis market as it is set to benefit from major catalysts on a macro and company specific level.

On a macro basis, he expects Cannabis to be a key talking point in the US Presidential election in November, and through the Democrats, it predicts greater long-term support for either or both of the SAFE and STATES Acts, which will help strengthen medical cannabis businesses in the US. (1)

In addition to this, he says multiple companies continue to commercialise their medical cannabis and CBD wellness strategies as key markets and research projects come online.

Nawan Butt, Portfolio Manager of CBDX, The Medical Cannabis and Wellness UCITS ETF said: “Under current regulations it is difficult to measure the appetite for cannabis investments in the United States. Due to their inability to invest in cannabis, US investors have found the next best associated growth vertical to capitalise on this opportunity.

 “Ancillary businesses have seen massive demand as a high growth sector of the economy. Despite the current climate we have seen large equity capital financings close for ancillary plays including Industrial Innovative Properties Ltd (IIPR – a leading cannabis greenhouse REIT) and GrowGeneration (GRWG – cannabis hydroponics supplier). Both these financings were completed in excess of their original size, and anecdotally were 5x and 3x oversubscribed respectively. These anecdotes speak to the pent-up demand for growth stocks which is currently unavailable to many investors.” Said Butt, of  CBDX, Medical Cannabis ETF  

Commenting on the performance of the Cannabis market in 2020, he said the first six months show a great test of resilience for nascent industries in high growth verticals such as cannabis.  The sector as a whole experienced a similar fate to other high-growth vertical but has come to outperform broader market indices such as the S&P 500 and the FTSE 100[1].

The underlying problem caused by the pandemic is the disruption of business as many industries experiences a stop in earnings with mandated shutdowns. Falling under the umbrella of medical services, most of the cannabis sector remained unaffected and continues with jobs and earnings growth.

However, within underlying sub-sectors, he stresses a differentiation of performance. Ancillary services combined for the strongest performance as companies with arms-length businesses to cannabis experience excess demand from investors in anticipation of progressive cannabis legislations in the US.

Pharmaceutical cannabinoids found a boost under the umbrella of healthcare and maintained strong upsides in valuation as the healthcare sector works overtime in an attempt to heal the world.

Butt further added: “There are few public companies operating in the CBD wellness space and their immediate shedding of excesses in response to business slowdown has stabilised valuations. Second quarter earnings results will provide us with a better idea of their earnings growth in times of duress, especially in retail.”

Lastly, is the medical cannabis sub-sector which experienced difficulty operating in a capital-intensive industry with profitability still a promise of tomorrow? The silver lining here is the rationalisation of industry participants which will consolidate future sales on the basis of more reliable infrastructure.

The Medical Cannabis and Wellness UCITS ETF, is a UCITS compliant Medical cannabis ETF listed on the LSE, XETRA and SIX. The fund tracks a rules-based Medical Cannabis and Wellness Equity Index from Solactive, consisting of publicly listed companies conducting legal business activities across nine thematic sub-sectors in the medical cannabis, hemp and CBD industries.

The Medical cannabis ETF, CBDX, seeks to provide targeted exposure to the rapidly expanding legal medical cannabis industry that is set for further growth as more countries legalise cannabis for medical use. When you trade ETFs, your capital is at risk.

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Bed Bath & Beyond Inc. Hires Industry Expert Wade Haddad To Lead Store Optimization and Real Estate Strategy

Bed Bath & Beyond

Bed Bath & Beyond Inc. (Nasdaq: BBBY) today announced the appointment of Wade E. Haddad as Senior Vice President (SVP), Real Estate and Construction, effective today. Mr. Haddad joins with over 25 years of real estate experience and will lead the Company’s recently announced store optimization strategy, a key part of its previously disclosed comprehensive restructuring plan. 

In this new role Mr. Haddad will be a central part of the team overseeing the comprehensive modernization of the Company’s operations, unlocking value from the property portfolio while establishing the optimal network to support new omnichannel services such as Buy-Online-Pickup-In-Store (BOPIS), Curbside Pickup, and same day delivery. Mr. Haddad will report to John Hartmann, Chief Operating Officer (COO) and President of buybuy BABY, and will lead an enterprise-wide team to optimize the Company’s approximately 50 million square foot real estate portfolio including the store fleet across all banners, as well as its offices, distribution and fulfilment centers.

COO John Hartmann said, “We have taken a number of important steps to unlock value from our real estate portfolio, while better harnessing our stores to deliver for customers through new services such as BOPIS and Curbside Pickup. Our store optimization and real estate strategy will allow us to serve our customers even better in the future, and support our efforts to build a sustainable, durable business model. Wade has decades of experience in multi-brand portfolio management for leading retailers, with a proven track record driving efficiency and creating value. His vision and expertise will help accelerate our plans to enhance the omni-always shopping experience for our customers.”

Prior to joining Bed Bath & Beyond, Mr. Haddad held several roles at Ascena Retail Group, a multi-brand retail corporation with a portfolio of several thousand stores. Most recently, Mr. Haddad was SVP, Real Estate & Store Development, where he operationalized an industry-leading real estate and store development function across all eight brands under Ascena. Prior to that, he held senior roles at Ann Inc, Klinger Advanced Aesthetics, Bieri Company, and The Taubman Company, a leading owner and manager of regional shopping centers.

Mr. Haddad said, “Bed Bath & Beyond is one of the most iconic brands in the retail space, with an exciting growth strategy to rebuild its authority in the Home, Baby, Health and Wellness markets.  I’m excited to join the Company at such a key moment in its history, to harness its real estate portfolio and optimize its store footprint in ways that support the Company’s vision, accelerate its plans to grow and better serve its millions of loyal customers.”

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US Dollar Second Only to Gold as Good Investment Right Now

us dollar

As long as currency-debasing policies abound, then gold, will remain a primary investment for the fund. The US dollar (USD), however, also remains key according to Fenton. Unlike gold, going long on USD is anti-consensus, as is evident from positioning reports, the press, and the price action.

Naysayers of the world’s reserve currency forget its potential as an asset in what are still crisis conditions, says RWC Diversified Returns Fund Manager Clark Fenton.

As aggressive fiscal and monetary policies mean risk is shifting from private to government balance sheets, foreign exchange will feature more prominently, more so in the near term than government debt while heavy-handed central banks keep QE programmes at full throttle. 

As long as currency-debasing policies abound, then gold, will remain a primary investment for the fund. The US dollar (USD), however, also remains key according to Fenton. Unlike gold, going long on USD is anti-consensus, as is evident from positioning reports, the press, and the price action.

“We concede that the cost of USD has gone down, with US real rates of interest plummeting. However, we do not think the Fed will take its policy rate negative. Critical USD funding markets such as commercial paper would struggle to function under such a scenario.

“Meanwhile, we think other governments will struggle to keep policy rates where they are, for example, the Bank of England. Negative nominal rates out to seven years on the yield curve suggest more inevitability than debate. 

“The failure of American leadership to respond effectively to the coronavirus has been tragic and humiliating. However, what is bad for the world’s largest economy is bad for the world.  Yes, the USD looks less attractive in isolation, but do the large alternatives actually look much better?” 

Fenton believes despite talk of the US dollar losing its cherished position as the global reserve currency, amid wider political disruption in the US as Presidential elections loom, the dollar is still so widely used by financial institutions that its position is unassailable.

“Foreign exchange is by definition a relative investment. Most of the world’s governments have a choice between politically-unpalatable corporate and household defaults on a massive scale, or more stimulus and forbearance. The latter goes hand in hand with currency depreciation. 

“But the most compelling reason to own USD is because of how it behaves in a liquidity crisis.  It rallied powerfully in March even when havens like government bonds and gold were losing value. This is the supply argument. 

“The USD trades like a scarce asset when there is a liquidity squeeze by virtue of its status as the lead funding currency. The Bank for International Settlements recently reported that non-US bank claims on the US official sector rose $564 billion in the first quarter, larger than any quarterly increase in bank claims on the official sector globally ever recorded. In other words, global finance still relies on the US dollar.”

Fenton believes the dollar should then still be a very influential defensive component of a portfolio, as ongoing uncertainty keeps the potential for dollar scarcity alive. The currency, he believes, could even perform like a precious metal in the right set of circumstances.

“As a defensive asset, we believe the USD will perform well in financial turmoil, but it is less likely to be manipulated in the meantime. Furthermore, recent USD weakness has been highly correlated to the rise of other risky assets, so a reversal should boost its protective properties. 

“Foreign exchange volatility has fallen significantly, meaning convexity is relatively inexpensive. Cheap convexity with the potential trigger of a sudden change in correlation is a great combination for an investment playing a defensive role.

“Finally, while it serves as a counterbalance, the US dollar position is more than a hedge.  In other words, there are certain scenarios when it could perform at the same time as precious metals.”

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The Billion Dollar Cost of the US-China Trade War

trade war

Two years after Trump imposed the first $34 billion of tariffs on Chinese goods, sparking an on-going and bitter trade war, the billion dollar cost to businesses around the world is continuing to rise. With the latest postponement to US-China trade talks, every delay will cost businesses more and it’s imperative they happen soon. This latest breakdown brings further uncertainty to global SMEs and is the latest example of governments letting them down.

Trump’s executive order against TikTok and WeChat is a sure sign of economic tensions between the U.S. and China, escalating the trade war.

Newly released figures from trade finance provider Stenn reveal the cost of the US-China trade war and how it has impacted businesses in the UK, US and China.

The global study was conducted of over 700 senior executives at medium-large sized firms in the UK, US and China.

Tensions are rising as senior US and Chinese officials plan to assess the nations’ trade agreements this month (August 2020) and look to review the phase one trade deal. The US-China trade war has also featured as a prominent part of Trump’s presidency, and is key in the 2020 presidential election with Joe Biden claiming he will end the tariff war if elected.

 

Figures:

  • UK firms estimate the US-China trade war will cost them $3.93 million (approx. £3 million) each on average, meaning it could cost up to a staggering $170.1 billion[1] (approx. £130.4 billion) across the UK
  • In the US, firms estimate the US-China trade war will cost them $3.7 million each on average
  • Chinese firms have been worst hit with businesses estimating the tariffs will cost them $4.46 million each
  • As the US has imposed tariffs on more than $360bn (£268bn) of Chinese goods, China has retaliated with tariffs on more than $110bn of US products
  • The severity of business concern about the trade war is worst felt in the US. 41% of firms are very concerned, compared to just 24% in the UK and China
  • Businesses across all three markets are seeing significant impact to industries, with higher operating costs, fewer orders, and being less likely to trade internationally as a result of the US-China trade war
  • To insulate themselves from the effects of the US-China trade war, businesses are implementing a number of changes including raising prices, switching suppliers to outside of China, postponing orders and making impacts to recruitment.

 

Cost of the US-China trade war to businesses (each)

The UK

The USA

China

 

$3.93m

$3.7m

$4.46m

 

Changes organisations are making or planning to make to insulate itself from the effects of the US-China trade war, a possible recession, or any other negative macro-economic changes

The UK

The USA

China

Raise prices

29%

39%

28%

Switch suppliers to outside of China

33%

31%

n/a

Postpone orders

24%

24%

25%

Make long-term strategic changes

35%

41%

62%

Take on more staff

19%

19%

22%

Reduce our staff numbers

21%

27%

27%

Boost marketing in other locations (i.e. attempt to reduce reliance on US imports)

14%

17%

40%

 

How has the US-China trade war affected your business?

 
 

The UK

The USA

China

Our operating costs are higher due to tariffs

21%

40%

48%

Our supply chain has been impacted due to restrictions on what we can import and export

29%

31%

56%

We have seen a reduction in business (fewer orders)

30%

26%

48%

We are more reluctant to trade internationally

25%

31%

30%

We are cutting back costs

29%

30%

35%

We are buying from/selling to different countries to avoid tariffs

20%

26%

35%

Our business is benefiting from the trade war

9%

9%

10%

 Dr. Kerstin Braun, President of Stenn Group, commented: “The US-China trade war has come at a huge cost to businesses and now the coronavirus has exacerbated the financial toll. Insolvencies will continue, particularly for firms that were already indebted prior to the crisis and unable to qualify for further loans.

“With tariffs still in place, Trump thinks he’s hitting China when it’s down, but he’s hurting US companies as well. It’s counterproductive.

“The phase one deal failed to cover the significant issues that prompted the war in the first place. This includes China’s preferential support of state-owned enterprises and technology transfer from American companies doing business there. Current actions, including sanctions on Chinese officials and the upcoming ban and possible forced sale of TikTok in the US won’t level the playing field for international companies operating in China.

“Purely protectionist policies – on both sides – will harm global companies. Tech companies in both countries need to maximise their customer base in order to spread R&D costs widely. Only then will innovation become affordable and turn their products into market leaders.

“Both sides need to accept the larger picture. For the US, it’s that China as an economic power is not going away. For China, it’s that to be in the world marketplace means complying with international business standards.

“No resolution will come until after the US presidential election in November. Any phase two deal will be long-awaited good news for global trade, which took a hit from the tariff war in 2019 to the tune of $420 billion in lost revenue for exporters. For businesses, it will help to provide some relief at a time when firms are seriously struggling to deal with the financial impact of COVID-19.”

 

[1] 35,600 medium sized businesses and 7,700 large businesses in the UK according to ONS. This totals 43,300 medium & large sized firms in the UK. 43,300 multiplied by $3.93 billion equals $170.1 billion.

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Microsoft Commits to Achieve ‘Zero Waste’ Goals by 2030

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Microsoft Commits to Achieve ‘Zero Waste’ Goals by 2030

Every year, more than 11 billion tons of waste are produced worldwide according to the United Nations Environment Programme. A by-product of our daily lives and every sector of the world’s economies, the trash we discard pollutes our land, clogs our waterways, depletes our natural resources and contaminates the very air we breathe. Microsoft have recognised the urgent need to protect the world’s ecosystems and reduce the carbon emissions that come from the creation, distribution and disposal of waste. That’s why this week they announced their goal to achieve zero waste for Microsoft’s direct operations, products and packaging by 2030. 

Microsoft’s zero-waste goal is the third sprint in their broad environmental sustainability initiative launched earlier this year focusing on carbon, water, ecosystems and waste. They are hoping that by setting themselves these ambitious goals their customers will also be empowered to do the same.  

To address their own waste creation, Microsoft will reduce nearly as much waste as they generate while reusing, repurposing or recycling their solid, compost, electronics, construction and demolition, and hazardous wastes. They’ll do this by building first-of-their-kind Microsoft Circular Centers to reuse and repurpose servers and hardware in theidatacentersThey’ll also eliminate single-use plastics in their packaging and use technology to improve their waste accounting. They have also stated they will make new investments in Closed Loop Partners’ funds. And finally, they’ll enlist their own employees to reduce their own waste footprints. 

By 2030, they will divert at least 90 percent of the solid waste headed to landfills and incineration from their campuses and datacenters, manufacture 100 percent recyclable Surface devices, use 100 percent recyclable packaging (in Organisation for Economic Cooperation and Development, OECD, countries), and achieve, at a minimum, 75 percent diversion of construction and demolition waste for all projects. This work builds on their ongoing waste reduction efforts that started in 2008 which resulted in the zero waste certifications of their Puget Sound Campus and their datacenters in Boydton, Virginia and Dublin, Ireland. 

 

Microsoft Circular Centers 

To meet the growing demand for their cloud services, their datacenter footprint – and the 3 million servers and related hardware that power it – must expand. Today, these servers have an average lifespan of five years and contribute to the world’s growing e-waste problem. To reduce this waste, Microsoft plan to repurpose and recycle these devices through new Microsoft Circular Centers, which will be located first on their new major datacenter campuses or regions, and eventually added to existing ones. 

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Using machine learning, Microsoft will process servers and hardware that are being decommissioned onsite. They’ll sort the pieces that can be reused and repurposed by themtheir customers, or sold. They will use their learnings about reuse, disassembly, reassembly and recycling with design and supply chain teams to help improve the sustainability of future generations of equipment. Microsoft Circular Centers build on Microsoft’s earlier circular cloud initiatives to extend the lifecycle of their servers and minimise the waste sent to landfills.  

In Amsterdam, the Microsoft Circular Center pilot reduced downtime at the datacenter and increased the availability of server and network parts for Microsoft’s own reuse and buy-back by their suppliers. It also reduced the cost of transporting and shipping servers and hardware to processing facilities, which lowered carbon emissions. Microsoft expect the Circular Centers to increase the reuse of their servers and components by up to 90 percent by 2025. 

 

Eliminating single-use plastics in packaging

Approximately 300 million metric tons of plastic are produced every year, 50 percent of which is used one time. And, half of this plastic waste comes from packaging. The scale of this problem and its impact on our oceans, waterways and land requires bold action, which is why we are eliminating single-use plastics from our packaging by 2025. This includes plastic film, primary product packaging and our IT asset packaging in our datacenters.

 

Improving Waste Data 

Today, there is no consistent, high-quality data about the amount of waste, the type and quality, where it is generated and where it goes. In addition, data differs considerably depending on the waste category. For example, data about hazardous waste and electronics is well accounted for and tracked due to regulations and robust management systems for both. However, data about construction and demolition waste does not have consistent measurements or reporting. Waste data needs a standardised methodology, better transparency and higher quality. Without more accurate data, it’s nearly impossible to understand the impact of operational decisions, what goals to set, and how to assess progress, as well as an industry standard for waste footprint methodology. 

Since it’s difficult to solve a problem that many don’t fully understand, Microsoft are investing to digitise waste data across the company to identify opportunities to improve waste data collection. This digital solutions for their operations will include technology to track and report on dashboard waste, Power BI platforms for e-waste chain-of-custody and improving Microsoft Power Apps which helps them capture real-time waste data. As they gain clarity and confidence in their broader waste footprint, Microsoft will include more precise waste data in their public reporting. 

 

Climate Innovation Fund Investment: Closed Loop Partners 

Microsoft are investing $30 million in Closed Loop Partners’ funds to help accelerate the infrastructure, innovation and business models for supply chain digitisation, e-waste collection, food waste reduction, and recycling industry products to build a more circular economy at scale. Closed Loop Partners is a pioneering investor in circular economy innovation with a track record of working with corporate partners to pilot new solutions. In addition to benefiting from the technologies that are being developed, Microsoft plan to use learnings from their partnership to inform Microsoft’s circular economy initiatives in their devices and cloud value chains, specifically packaging, e-waste and waste diversion from landfills. 

 

Empowering Customers 

Microsoft will share their learning from their own zero waste journey with their customers, who are already using Microsoft technology to better understand, measure and reduce their own waste footprint. In 2019, Microsoft along with H&M, Target, PVH Corp. and others partnered with Eon to explore the need and to formulate a suggestion of global standard powered by Azure called Circular ID. This platform tracks a garment in an effort to create a more sustainable fashion economy by reusing clothing through rental, resale or recycle, rather than being destroyed. 

Dutch nonprofit Madaster Foundation is also using digital identities to eliminate waste. Madaster’s platform tags materials with an identity, so they can be recycled, resold and reused, driving more sustainable construction decisions. Vancouver-based Spud.ca and its eGrocery software platform platformFoodX, an online organic food delivery company, built a logistics platform on Microsoft Azure and Dynamics 365 that uses AI to lower food waste. In one year, SPUD diverted 265,971 kilograms of waste from the landfill, preventing 444 tons of carbon from entering the atmosphere, and saved 3,564,275 liters of water. 

Of course, recycling and reusing materials to divert them from landfills is key to reducing waste. Colchester Borough Council in the U.K. provide services to 192,500 residents, from licensing to recycling. The council is moving function-specific systems to Dynamics 365, unifying its data across intelligent business applications. The recycling tracking system provides reporting via Microsoft Power BI, showing data like heatmaps of problem spots for collections or where residents need more encouragement to recycle. 

Resource management firm Veolia is embracing technology to transform its business with circularity in mind. It is using Microsoft technology across its business, from dispatch and garbage collection, and with the use of sensors to collect data including vehicle location, bin weight and location, photo capture of bin contents and more. The data is used for a wide range of scenarios including flagging improper bin contents to prevent problems with downstream recycling and processing. 

 

Enlisting Their Employees 

Microsoft’s employees play an important role in the company’s waste footprint. As with their carbon and ecosystems announcement, Microsoft are inviting their employees to participate in their waste reduction efforts. To show employees the impact of their actions and how much waste they generate, they are developing an internal Power BI waste data dashboard. This will be available starting with employees based at the Puget Sound campus and expand to campuses around the world. The dashboard will display the average waste generated per employee and can be used to test effectiveness of waste reduction campaigns, implementation of waste prevention initiatives and more. 

In addition, they will launch their first waste reduction challenge, a month-long, online challenge connecting individual action to collective impact later this year. Their employees will have the opportunity to learn how they can participate in Microsoft’s corporate waste program and commit to taking impactful action in their daily lives. The challenge will focus on actions employees can take at home during the global health crisis. These challenges will incorporate themes of waste prevention, material reuse, circular economy and waste equity. They will also create more opportunities for employees to become actively involved, both in company-wide activities, like the annual weeklong hackathon that will include a call for proposals on waste reduction. 

 

Microsoft’s Collective Challenge 

No one person or organisation can solve the global waste problem. It will take all of us doing our part, including using better data to understand the problem and make smart waste policy decisions. 

Zero waste is an ambitious goal, but Microsoft have stated that minimising their own waste footprint is essential to preserving the natural resources and reducing waste-associated carbon emissions to ensure that economies and societies around the world thrive for generations to come. 

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Faegre Drinker hires two leading restructuring Partners in US and UK

James Conlan

Faegre Drinker today announced the addition of two of the world’s leading restructuring attorneys, James F. Conlan in the U.S. and Patrick Corr in Europe, as partners in the firm’s growing finance and restructuring practice. Both come from Sidley Austin, where they previously held senior practice leadership positions.

“It’s our pleasure to welcome Jim and Patrick to Faegre Drinker,” said co-chair Andrew Kassner, whose practice also focuses on restructuring and insolvency. “Some of the most sophisticated businesses in the world have benefited from their commercial acumen and legal excellence. We welcome the opportunity to strategically support their successful practices while leveraging many of our existing practice strengths including product liability and mass torts, M&A and litigation.”

“In addition to their impressive practices, Jim and Patrick’s commitment to creating solutions designed for clients aligns to our culture at Faegre Drinker,” said co-chair Tom Froehle. “Their decision to join us at this moment for the global economy is an important one. One of the drivers for our combination is to attract top-tier talent. Jim and Patrick are that and add considerable momentum to what has been a promising beginning for our combined firm.”

Over his 30-plus-year career, Conlan has earned a reputation as one of the most respected restructuring lawyers in the field with deep experience in the courtroom and boardroom. Well-known companies have hired him to work on their most complex restructurings and bankruptcies. Conlan has worked on matters spanning multiple industries, including automotive, consumer products and packaging, energy and manufacturing, as well as matters at the cutting edge of restructurings driven by mass torts and sovereign debt. At Sidley, his positions in the restructuring practice included co-chair, chair and global practice leader.

Conlan has consistently earned praise from clients for his courtroom skills and the credibility he brings to the boardroom and C-suite in high-stakes situations. He has been recognized as one of the “Best of the Best” lawyers in Corporate Reorganization and Bankruptcy by Expert Guides (2018), and as an “Outstanding Restructuring Lawyer” by Turnaround & Workouts (2016). In addition, Chambers USA has recognized Conlan repeatedly for his work in restructuring law (2010–2020).

Corr, who served as the head of Sidley’s European restructuring and insolvency practice before joining Faegre Drinker, has earned praise for his work in contentious and non-contentious corporate recovery and turnaround matters. Clients have singled him out for his creative thinking coupled with technical precision. He is ranked in the leading industry guides, including Chambers UK, Chambers Europe, Chambers Global, IFLR 1000, The International Who’s Who of Insolvency & Restructuring Lawyers and Best Lawyers. Corr was recently inducted to The Legal 500 Hall of Fame for Corporate Restructuring and Insolvency.

“Faegre Drinker is a dynamic firm built for the kind of clients we serve, and the high-stakes restructurings we work on,” said Conlan. “It has all the key elements, including talent, depth in crucial practice areas, and a global reach. But most important is its relentless focus on clients. The firm’s focus on providing ‘excellence without arrogance,’ particularly resonated with us.”

“We were attracted to the firm’s diverse platform, which will allow us to bring a high level of support to clients, especially in cross-border matters,” said Corr. “It is clear that Faegre Drinker has emerged as a global powerhouse, and we are thrilled to be joining a newly combined firm and part of its continued growth.”

Conlan and Corr join Faegre Drinker’s growing finance and restructuring practice, which also recently added two partners in New York and, together with subject matter experts around the firm, is comprised of over 100 professionals. The group advises clients across diverse industries on matters ranging from financial transactions, to corporate debt restructurings, to bankruptcy and litigation matters.

“Faegre Drinker’s finance and restructuring practice has long advised clients on complex insolvency and restructuring needs,” said finance and restructuring practice group leader Mike Stewart. “Jim and Patrick’s decision to join our team expands Faegre Drinker’s ability to counsel clients on such complex matters globally and complements the talent and capabilities of our existing team.”

Conlan will spend his time across the firm’s offices, including New York, Chicago and Philadelphia, and Corr will be based in London.

Faegre Drinker launched global operations, effective Feb. 1, 2020, the result of the combination of Faegre Baker Daniels, an international law firm with deep roots in the Midwest, and Drinker Biddle & Reath, a full-service national law firm with storied mid-Atlantic origins. The merger brought together more than 1,300 attorneys, consultants and professionals in 22 locations across the U.S., UK and China.

The launch came just six weeks before the firm began remote operations in response to the coronavirus pandemic, but it has not slowed its integration efforts or plans for strategic growth. The firm has hired more than a dozen lateral partners and counsel since the beginning of the year. 

About Faegre Drinker

Faegre Drinker is a firm designed for clients, providing exceptional transactional, litigation and regulatory services to organizations ranging from emerging enterprises to multinational companies. With more than 1,300 attorneys, consultants and professionals in 22 locations across the United States, in the United Kingdom and in China, Faegre Drinker is one of the nation’s top-50 law firms. Faegre Drinker Consulting and the District Policy Group, the firm’s advisory and advocacy divisions, based in Washington, D.C., provide public policy, regulatory and technical services to key sectors of the economy. Additional services include Tritura Information Governance, the firm’s data science subsidiary, and Innovative Health Strategies, a health care consultancy that helps hospitals operate efficiently and improve quality of service. Learn more at FaegreDrinker.com.

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