Is a Heatwave Good for the Economy? 🔥

This is The Hedge, the newsletter that's like a mate who turns up with a spare fan, when Tesco, B&Q and Argos are all sold out.

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Reading Time: 4m 28sec

• Prices accurate as of Wednesday approx. 4PM BST.

🔥 It's Hot

Obviously, this week's blazing hellscape is great news for Corona (the beer, not the other thing), paddling pool manufacturers and deodorant makers, but does it help the economy as a whole?

The scorcher summer of 2018 (remember, the Love Island and the "It's Coming Home" World Cup one) was credited with dragging up the UK economy off the back off the Brexit vote. So it that a pattern?

The Office of National Statistics (ONS) actually looked into this back in 2018, and they found that the warm weather in the second quarter of the year had a notable positive impact on the economy over the cold, wet, dark and shitty first quarter.

But, other studies have found that at a certain point, it just gets too bloody hot and that trend reverses.

Researchers at Stanford University have suggested that economic growth per person peaks with an annual average temperature of 13 degrees celsius, with anything above that making us less productive. For comparison, the UK’s average annual temp is around 9 degrees.

So yes, warm weather appears to be good for the UK economy, but a heatwave probably isn’t. I've sure as shit been less productive the last few days.

Obviously, individual industries can fare better or worse.

The dairy industry in particular isn’t loving the heat, as milk sales are down compared to this time last year. That’s not surprising.

🚨 Profit Warnings All 'Round

Earnings season is upon us and there have already been a number of UK businesses who've issue profit warnings. Every quarter, public companies are required to provide the market with an update on their performance.

If things haven't gone too smoothly, they'll often issue a 'profit warning' a couple of weeks before the full announcement. This gives investors a heads up that the figures might not be looking too rosy.

It's like whenever I attempt some DIY at the house. I don't just wait for my wife to walk through the door and see the massive hole in the wall, I get ahead of that shit. I make sure to go find her and let her know, "Look, it's not gone 100% according to plan in here, but don't worry, I'll get it fixed and you won't even notice."

Sure, she still thinks I'm a numpty, but it's less of a shock.

That's what companies like, Deliveroo, Direct Line and Made.com have all done this week. They're getting ahead of the bad news.

In total there have been 136 profit warnings issued by UK companies in the first half of 2022, which is up significantly from the 82 that were issued in the first half of 2021. Almost all of these are related to crazy rates of inflation, which are impacting consumer spending and direct costs for companies.

💸 Shadow Bank Celsius is Bankrupt

So in an announcement that shocks no one at this point, Decentralised Finance (DeFi) company Celsius has declared bankruptcy. Yes, the company that was offering "risk free" yields of 18%+ has run out of cash, and they're going to use their customers money to bail themselves out.

That's because despite all the marketing material designed to make us suckers believe they're just like a regular high street bank, they're a long fuckin' way off it.

Celsius are (or were) what's known as a Shadow Bank, which is a financial institution that looks like a bank, quacks like a bank, but is not actually a bank.

Because they aren't a bank, they don't have to follow normal banking rules. You know, the ones that make sure your bank actually has the money to fund your £9 pack of Lurpak when you swipe your card.

Here's the crazy part. The terms of service for Celsius state that deposits made with the company are actually just loans to Celsius, which they can do whatever they want with. They've put these 'loans' into high risk crypto 'investments' which have now gone to shit as the crypto markets have crashed.

Because they aren't a proper bank they don't have deposit insurance, and according to their terms of service, in the event of bankruptcy they can use client money to pay off their own debts.

So remember, just because a company has a slick website and a few influencers on the take doesn't mean it's not shady as fuck. We can slag off 'red tape' all day, but when it comes to our money, it can be pretty helpful.

💷 Weekly Side Hustle

Freelancing

This is a side hustle that could turn into something much more if you want it to. There is a massive, global marketplace for you to charge good money for skills you already have. Some of the most common areas for freelancers are:

• Writing

• Video Editing

• Graphic Design

• Programming & Coding

• Marketing

• Accounting

A great place to start is Upwork. There are plenty of shit, scammy jobs on there but there are also a huge number of legit, high paying contracts too.

There are even people looking for more niche help for things like voice over work and translation services. Seriously, you can monetise just about any skill. It's pretty nuts how much opportunity there is once you start to look!

🌏 Snippets

• Winston Churchill's old apartment in Pimlico is available to rent for a cool £20k a month.

• Ex-Northern Rock mortgage customers are suing TSB Bank for £800m, saying they've been locked into expensive mortgages.

• Petrol prices are finally falling with the AA predicting the average tank will drop by £10 over the next couple of weeks.

• Netflix loses 1 million subscribers in Q2 as they announce a partnership with Microsoft to introduce ads to a new lower tier plan.

• The UK's inflation rate (CPI) is up again, hitting 9.4% compared to 9.1% last month. It's the highest rate in 40 years.

📃Survey Says

See you next week!

Jason 🚀

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