Bezos to resign as Amazon reports record profits

Safiya Bashir
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Bezos to resign as Amazon reports record profits

Jeff Bezos has announced plans to resign from Amazon this year.

The chief executive and founder has said that he will be stepping down and instead will take on the roll of executive chair.

The news came as the group released its latest financial results. In the final three months of the year, the group reported record sales of over $100bn for the first time. Results were ahead of forecasts and the company recorded an increase of net profits from $3.3bn to $7.2bn in the fourth quarter.

Andy Jassy, chief executive of Amazon Web Services, will replace Bezos. The company provides cloud computing and storage for governments and big companies and has become one of Amazon’s most important businesses. It accounts for 52% of the company’s profits.

“Amazon is what it is because of invention. If you do it right, a few years after a surprising invention, the new thing has become normal. People yawn. That yawn is the greatest compliment an inventor can receive. When you look at our financial results, what you’re actually seeing are the long-run cumulative results of invention,” said Bezos.

“Right now, I see Amazon at its most inventive ever, making it an optimal time for this transition.”

Tim Hubbard is the assistant professor of management at the University of Notre Dame’s Mendoza College of Business. He said: “Andy Jassy stepping into the CEO role at Amazon is a natural fit. Amazon Web Services is a powerhouse within the company, driving a lot of profitability.

“This transition may free up Bezos to focus on other ideas that he’s been accumulating over the years. In one way, I think it might be freeing for him to have the space to personally innovate again, without having to manage the rest of the company.”

“Given the recent successes at Amazon, especially during the pandemic, it’s going to be hard to disrupt their momentum,” he added.

FTSE 100 sees gains despite bad day for BP, silver falls

Liam Roche
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FTSE 100 sees gains despite bad day for BP, silver falls

The FTSE 100 climbed on hopes for an economic recovery and a US stimulus package, with hotels outweighing a fall in BP profits.

The FTSE 100 index rose by 30 points to 0.4%, in anticipation of negotiations between President Biden and US Senators for a $1.9tn (£1.4tn) Covid stimulus.

Spreadex analyst Connor Campbell said “all eyes were on” the negotiations after the “lowball $600bn offer made by Republicans over the weekend”.

“A swift and decisive move on the relief bill would keep any other fears at bay,” Campbell said. 

Elsewhere in markets silver fell as other companies subject to recent rallies on the back of Reddit forums also retreated. 

“Supporting a more positive mood was an apparent calming of the Reddit-inspired frenzy on markets as well as hopes for a vaccine-led exit from lockdown. On the other side of the coin weak results for index heavyweight BP and strength in sterling helped cap some of its gains for the FTSE relative to European indices,” said Russ Mould, investment director at AJ Bell.

BP

BP slumped to an overall loss of $5.69bn in 2020 as the coronavirus pandemic took its toll on the energy market.

By mid-afternoon trade BP was down by 5% to 53p, the second biggest faller in the FTSE 100, behind silver miner Fresnillo. 

“The pandemic’s hit to oil demand contributed to the kind of loss that the market just can’t ignore,” said Russ Mould, investment director at AJ Bell.

Silver

Thanks to the continued focus of Reddit traders, silver closed ahead yesterday, however much of those gains reversed in line with other markets which have been the focus of Reddit forums. 

“The swarm of retail investors that descended upon Gamestop recently has turned its attention to silver,” said David Madden, analyst at CMC Markets.

However, just one day after reaching its highest price in eight years, silver plunged down by nearly 6% on Tuesday. 

Silver prices going back down “isn’t surprising, as any longer-term price upside due to social media-driven collaboration and conspiracy theories was always going to be unsustainable,” Gavin Wendt, a senior resource analyst at MineLife, told Bloomberg.

Silver comes crashing down after eight-year high

Liam Roche
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Silver comes crashing down after eight-year high

Margins on Comex silver futures raised to $16,500 per contract

Just one day after reaching its highest price in eight years, silver plunged down by nearly 6% on Tuesday. 

The precious metal’s rally came to a halt as The CME Group raised margins on Comex silver futures. 

As of February 2, margins will rise from $14,000 to $16,500 per contract. 

Traders looking to buy and sell silver futures are now required to put up more collateral in order to prove they are able to meet their obligations. 

The decision, according to a statement by the exchange, was based on “the normal view of market volatility to ensure adequate collateral coverage.”

Ross Norman, chief executive officer of Metals Daily, described the margins rise as “standard procedure to maintain stability”. 

The announcement comes soon after silver became the focus of the Reddit investors who are reported to be behind the upturn in the value of the precious metal.  

The online community of investors have targeted various stocks, most notably GameStop, in an attempt to “short squeeze” institutional investors.

Silver prices going back down “isn’t surprising, as any longer-term price upside due to social media-driven collaboration and conspiracy theories was always going to be unsustainable,” Gavin Wendt, a senior resource analyst at MineLife, told Bloomberg. 

“There is a big difference however between trying to manipulate trading in an equity compared to a major exchange-traded commodity,” he added.

SSE on ‘strong strategic footing’

Liam Roche
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SSE on ‘strong strategic footing’

The energy company will recommend dividend between 80p per share

SSE, the multinational energy company, intends to recommend a full-year dividend of 80p per share plus RPI for the coming year. 

According to the company’s trade statement, this is based on two assumptions.

“Normal weather conditions prevailing”, causing renewables to be just over 5% below plan, and the coronavirus pandemic having an impact on SSE’s profits between £150m and £250m.

SSE earned in excess of £2bn from its disposable programme in December. The company also raised £995m by selling its Multifuel assets, as well gas exploration and production assets.

These sales, along with its commitment to treble renewables output by 2030, “underlined SSE’s ESG credentials and focus”, according to its trade statement.  

Greg Alexander, finance director of SSE, praised the company’s ability to cope with the coronavirus pandemic.

“With solid operational performance and strong strategic execution, SSE is well positioned as we move towards the end of our financial year. Our robust business model is mitigating the impact of coronavirus, our disposal programme is proceeding at pace and at Dogger Bank we have shown yet again that we can develop opportunities and create value from world-class assets,” Alexander said.

Alexander also cheered the energy policy of the UK government for laying the foundations for a positive year for SSE

“With a number of uncertainties lifting and an increasingly supportive policy environment which further underpins our clear strategic focus on the transition to net zero, SSE is on a strong strategic footing for the rest of 2020/21 and beyond.”

BP profits down as pandemic hits oil industry

Liam Roche
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BP profits down as pandemic hits oil industry

Profits fell by 96% in final quarter of 2020

BP slumped to an overall loss of $5.69bn in 2020 as the coronavirus pandemic took its toll on the energy market.

The company’s underlying replacement cost profit, a barometer for net profit/less, was at $0.1bn over the final quarter of the year. This compared to a $2.6bn profit for BP over the final three months of 2019. 

The company’s share price fell 2.7% to 259p in mid-morning trade on Tuesday.   

BP has said the results were caused by a fall in energy prices, significant exploration write-offs, reduced demand and weaker refining margins. 

The company wrote off assets valued at $6.5bn in anticipation of falling oil prices over the long-term, as well as confirming 10,000 staff would be let go across the world.

The oil industry was one of the worst affected by the pandemic during 2020 with the price of crude oil falling as low as $20 per barrel after lockdowns cut demand.

Bernard Looney, chief executive officer of BP, retained a sense of optimism over the company’s performance, while acknowledging the damaging impact of the pandemic on the oil industry. 

“Our sector was hit hard as well. Road and air travel are down, as are oil demand, prices and margins. It was also a pivotal year for the company. We launched a net zero ambition, set a new strategy to become an integrated energy company and created an offshore wind business in the US,” Looney said.

“We began reinventing bp – with nearly 10 thousand people leaving the company. We strengthened our finances – taking out costs and closing major divestments.”

Having cut their dividend in 2020, BP maintained their dividend of 5.25 cents per share in Q4. 

Analysts have mixed views on the results as Russ Mould, investment director at AJ Bell, highlighted the destruction to the oil market in the short-term but the progress in realigning their long-term strategy.

“There are two ways of looking at full year results from BP. On the one hand the pandemic’s hit to oil demand contributed to the kind of loss that the market just can’t ignore,” said Mould.

House prices fall 0.3% in January

Safiya Bashir
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0
House prices fall 0.3% in January

This January saw house prices fall for the first time in six months.

The house price index from Nationwide reported a 0.3% fall in the average UK property price to £229,748.

It is the first time that house prices have declined since June, which may be as a result of the upcoming end to the stamp duty holiday.

The housing market has boomed over the past year and UK mortgage approvals hit the highest level since 2007. New data from the Bank of England showed a surge in mortgage applications in the second half of the year as the stamp duty holiday was introduced. 

Commenting on the housing market, Nationwide’s chief economist Robert Gardner said: “To a large extent, the slowdown probably reflects a tapering of demand ahead of the end of the stamp duty holiday, which prompted many people considering a house move to bring forward their purchase.

“While the stamp duty holiday is not due to expire until the end of March, activity would be expected to weaken well before that, given that the purchase process typically takes several months (note that our house price index is based on data at the mortgage approval stage).”

 “Looking ahead, shifts in housing preferences are likely to continue to provide some support for the market,” he added, “However, if the stamp duty holiday ends as scheduled, and labour market conditions continue to weaken as most analysts expect, housing market activity is likely to slow, perhaps sharply, in the coming months.”

The stamp duty holiday is set to end at the end of March.

Hargreaves Lansdown posts 10% profit rise

Safiya Bashir
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0
Hargreaves Lansdown posts 10% profit rise

Hargreaves Lansdown has reported a rise in half-year profits.

The retail investment company has seen a growth in younger clients. The group added 84,000 new clients over the past six months – many of whom are aged between 30 and 54.

Stock trading volumes surged 123% in the second half of 2020, which led to the 10% rise in pre-tax profits to £188m.

Hargreaves Lansdown said that the vaccine hopes and the US election result led to a growth in younger clients.

Chief executive Chris Hill said: “The Covid-19 pandemic has […] reinforced the importance of saving and investing and the need for individuals to be financially resilient. Over the course of the pandemic, many have found the time and seen the need to prioritise household savings which has enabled and led them to invest for the first time.

“In turn, this change in behaviour is leading to a dynamic shift in the broader investment and wealth market. Younger people are taking a greater interest in investing for the future, recording an increased appetite for investment, and prioritising financial resilience and saving.

“Whilst events at the end of 2020 provided further stability to the external environment, with the conclusion of the Brexit deal and the completion of the US election, the Covid-19 pandemic and the resulting economic consequences will continue to impact markets and businesses over the remainder of this financial year and beyond,” he added.

Hargreaves Lansdown shares closed 4.51% lower at 1.631,50.

Klarna set to come under government scrutiny

Safiya Bashir
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0
Klarna set to come under government scrutiny

‘Buy now pay later’ firms such as Klarna are set to come under government fire following the results of a report to be published on Tuesday by the former Financial Conduct Authority (FCA) interim chief executive Chris Woolard.

Sky News reported that the sector will be coming under higher scrutiny after concerns that the company is encouraging customers to buy products that they cannot afford.

Woolard was commissioned by the FCA board to carry out a review on firms such as Klarna and Clearpay. Klarna now has 1m monthly active users and has been valued at $11bn (£8.5bn). It has been hugely successful among young customers shopping online.

A spokesman for Klarna said that it was “very comfortable operating in a regulated environment and wholeheartedly supports further regulation of the buy now pay later sector in the UK”.

“We agree that regulation has not kept pace with new products and changes in consumer behaviour and it is now essential that regulation is modern and fit for purpose, reflecting both the digital nature of transactions and evolving consumer preferences.”

To use Klarna, shoppers only have to provide a name, email, date of birth, mobile number and billing address to have their payment deferred up to 30 days.

Alice Tapper is campaigning for tougher regulation of ‘buy now pay later’ firms and said:

“Since launching the campaign, these cases of fraud have been worryingly common. This is largely thanks to just how easy it is to use these products and the little information required to access them. It’s a honeypot for fraudsters and it simply shouldn’t be this easy.”

Silver rallies to eight-year high as retail traders go again

Liam Roche
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0
Silver rallies to eight-year high as retail traders go again

Silver up by 11% to $30 per ounce

The price of silver is at its highest point since 2013 following a community of online traders turning their attention towards the precious metal. 

Big fund managers will be on alert after Redditors drove the price of GameStop up earlier this month, causing hedge fund Melvin Capital to post losses of 53%.

Last week the price of silver jumped by 6%, followed by an 11% rise on Monday, bringing its value briefly above the $30 per ounce mark.

Many coin selling websites were overrun by the increase in demand and reported difficulties in meeting delivery times. The Silver Mountain, a Netherlands-based bullion dealer, stated on its website that ‘due to extreme market volatility we cannot accept any new orders at this moment’.

The dramatic increase in demand also caused the share price of various silver mining companies to shoot up over the same period of time. This includes Silver Mines Ltd., an Australian company currently working on an undeveloped deposit, which saw a 50% rise in its share price. 

The surge of new investors in silver came about as a result of a Reddit user encouraging other members of the r/WallStreetBets forum to buy into the precious metal. In the same vein as the movement to buy stocks in GameStop, the goal was to buy the precious metal in order to put a ‘short squeeze’ on the banks. 

Ross Norman, a veteran precious metals trader, believes the Redditors are misguided this time around and that some could pay a price. 

‘There is a misnomer here that banks are constantly running short positions, but from a price perspective they are neutral, they have a long and a short that cancels each other out,’ Norman said.

‘It’s a fool’s errand, it’s financial anarchy; somebody is going to get hurt.’

Alternative markets smart investors should consider

UK Investor Magazine
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Alternative markets smart investors should consider

If you are an active investor then you probably are fairly comfortable with investing in the stock market but there are a series of alternate investment streams that you may find offer great value for the canny investor.

With most markets being available to retail investors and plenty of information out there about investment strategies, it makes sense to have a look at alternative possibilities.

A small health warning here though – these markets are for sophisticated investors and if you aren’t confident in your ability then please wait until you have completed your research before investing!

The Alternative Investment Market 

OK so this is a bit of a cheat because it is still a market that trades in shares on the London Stock Exchange, but as the name suggests the investment opportunities are different to those offered on the main market.

The Alternative Investment Market (AIM) features small and medium-sized companies that haven’t reached the size required for listing on the LSE.

The regulatory requirements are lighter and so it makes it more suitable for small, high-growth companies in new and emerging sectors.

There are investors who have made their careers by simply investing in the AIM as the returns can be significantly higher than other options but as you would expect, higher growth means higher risk.

Although we’ve looked at the London AIM there are alternative stock markets on almost every exchange around the world so if you have a particular favourite then have a look and see what alternative listing they operate.

Peer-to-Peer Lending

The peer-to-peer lending sector has come on leaps and bounds during the last few years and the range of types of lending has expanded massively.

Essentially this is a way of getting money from the investor to the borrower/company with little or no intermediary taking a cut.

Investments in this area can range from microloans to private individuals through platforms like Ratesetter to equity investments directly in the businesses using organisations like Funding Circle.

The investments tend to be safer than the stock market (as long as you diversify your portfolio) and outperforms most standard retail investment like deposit accounts.

Shout out to the charity sector too. There are a number of platforms that give microloans to people around the world to help them develop their businesses. Check out Kiva for example if you want to do some good.

Forex Trading

If you are looking for something that requires a much more active investor then foreign exchange trading could be the market for you.

The premise is simple, forex trading relies upon capitalising on movements (sometimes micro-movements) in exchange rates and then making your move.

There are a variety of indices to get involved in and successful day traders usually specialise in a basket of specific currencies so that they can build up a successful trading strategy and the knowledge that demands.

Crypto Asset trading

Crypto assets are digital assets that behave largely like physical assets.

Arguably the best known of these would be the cryptocurrency Bitcoin but there are a large number of different markets that you can look at.

Crypto isn’t confined to currencies either with a variety of different types of investment;

  • Cryptocurrencies – brands such as Bitcoin, Ethereum, Ripple or Litecoin 
  • Stablecoin – like Gemini Dollar or Paxos Standard tied to specific physical currency
  • Utility tokens – used to pay for services or time on platforms
  • Security tokens – digital bonds, equities, and other securities that trade peer to peer without financial intermediaries
  • Natural asset tokens – representing tangible goods like gold, oil, or carbon
  • Cryptocollectibles – unique digital assets like CryptoKitties, an app that enables users to purchase, raise, and even breed unique virtual pets

Again, you can make a lot of money in crypto but as with all things investing, the higher the return the bigger the risk!

Gold, Silver and Other Commodities

The easiest way to get into trading in precious metals is simply to buy some, but that doesn’t mean to say that it is the most profitable.

Instead, it is possible to invest in the metals market without ever taking possession of the physical asset and in this way, it is very similar to forex or crypto trading.

Speculators buy a set amount of metal at a set price in the hope that the underlying asset will become more sought after and in times of uncertainty this is where the smart money often goes.

Because there is a physical asset it is difficult to see a way that the investor would lose all of their money but it is true to say that the more aggressive your trading approach, the more risk you run.


Alternatively, it is possible to buy metals and simply hold them in the knowledge that over the long-term prices generally rise significantly.

Commodity trading is something that has been shrouded in mystery in the past and has largely been the domain of institutional traders but it doesn’t have to be that way.

It’s a lucrative sector and the market increased between 2019 and 2020 by some 24.12% so it’s clear that there are opportunities.

Again, this is a market that is very much for the sophisticated investor as disaster await the unwary but if you are prepared to do your research and build an investment strategy then a significant profit could await.

Investment doesn’t just have to be stocks

We hope we’ve given you some food for thought.

The investment opportunities highlighted in this article feature a variety of different risk profiles and some require more sophistication than others.

As always it pays to do your research so we’d never suggest you put your cash into anything that you don’t fully understand and for some of these sectors it is important not to risk more than you can afford to lose.

Health warning aside, it’s true that investors have made good money in all these areas and so for those prepared to go the extra mile and do their research, carefully developing a strategy along the way, there are some excellent opportunities waiting to be seized.

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