Thu. Jan 27th, 2022

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Dear reader,

Data is a strange mercury commodity, as Lex’s notes reflected this week. Two pieces of information separately may be worthless, but together valuable. We hope the sum of our writing is worth more than the parts. Please let me know how we are doing

One number – $ 44 billion – has stood out above all others over the past seven days. This is the top of Taiwan Semiconductor Manufacturing Company’s giant target for capital expenditure this year. The figure is a proxy for the world’s insatiable appetite for memory and processing power.

TSMC has overtaken sluggish US rival Intel. It’s better positioned than Samsung to dominate contract chip manufacturing for people like Apple because it does not manufacture competing smartphones and other devices.

Lex thinks TSMC is ready to invest heavily in the latest 5-nanometer processors. We also reckon investors are too scared that the chip cycle will turn into overcapacity again. This makes TSMC shares worth holding.

We are less confident that record shipments of computers will be sustained in 2021, which will benefit Apple, Microsoft, Lenovo, HP and Dell. Homeworkers have upgraded their kit for the long term and computer sales will grow lose his woma.

Cloud computing companies like Amazon Web Services will continue to benefit from the distribution of data, which is expected to reach 175 settets by 2025. If you were not familiar with that criterion, I can tell you with authority that zettagrepe is very zero at the end of them.

The UK’s Prudential Regulatory Authority, which is paid to think the unthinkable, is concerned about the financial instability that would arise if cloud servers crashed. He plans to supplement his operational resilience with a cloud charter for banks. Lex wonders unflatteringly whether the PRA knows enough about technology to write it.

Data also rattled the cage of the British Financial Conduct Authority this week. City fund managers and traders believe that real-time stock prices cost too much. “Have you seen our overhead costs?” data companies answer. The watchdog has launched a review. Lex reckon the solution should be an American-style “consolidated band” that compiles information from multiple sources. Waffles and fudge are more likely to be on the FCA menu.

Regulators need to be more concerned about hidden data than poorly organized information. California start-up Signal develops a anonymous digital payment app. It deploys a so-called “privacy coin”. The project is small, but the Securities and Exchange Commission will pay close attention.

Citizens will have greater confidence in such an investigation if politicians and government officials with inside information show greater honesty. Richard Clarida, vice chairman of the Federal Reserve, resigned after applications showed he was actively trading mutual funds while the Fed was preparing a major stimulus response to the pandemic. America’s rag blanket of rules against possible insider trading by officials weakens public confidence, says Lex.

Confidence in the security of personal data is also low. All the bank bosses that Lex knows are terrified of getting a major burglary in public. We are also positive about cyber security because the scale and effectiveness of hacks – especially ransomware – increased during the pandemic. So we like cyber security group listed in the UK Donkerspoor, despite his links to controversial tech entrepreneur Mike Lynch.

Lex chart showing global ransomware damage costs

Darktrace software is good for detecting new computer viruses. Their epidemiological analogues still dominate the news. Lex reckons vaccine skepticism will hurt earnings of tennis-ax Novak Djokovic. By the end of the week, he had lost his battle to stay in Australia for the Open.

Omicron’s relatively low intensity – and public fatigue – means that full-scale restrictions are unlikely to resume, which is good for the travel industry. The British government is desperate to avoid deeper restrictions as Prime Minister Boris Johnson fights to retain his job. It can hardly be coincidental that ministers enter into an agreement to order private hospitals if the pressure on the NHS increases. This will hurt the margins of Spire Healthcare and peers. Coronavirus sal private hospitals benefit in the longer term.

The delivery of babies is one of their services. Birth rates bounces back around the world faster than after previous global crises. This reflects last year’s economic recovery, also evident in the strong results of UK supermarkets. As inflation continues, the boost to their bottom line.

Inflation is often good for supermarket earnings

In last week’s column, I focused on the weaknesses that authoritarianism causes in its version of capitalism. This encourages oligarchs and their companies to take some of their earnings and business transactions overseas. This week, Lex explored Kazakhstan’s numerous London connections. We too war game the financial impact of a Russian invasion of Ukraine and pointed to the dependence of some sound panels and garment retailers on material from China’s oppressed Xinjiang region.

Western systems of government are hardly perfect. But their benefits were evident in a week when the British prime minister was forced to apologize for disregarding the lock-up rules and Prince Andrew was called upon to file lawsuits over his friendship with sex offender Jeffrey Epstein.

Top quartile greetings,

Jonathan Guthrie
Head of Lex

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