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Good morning. David Meyer here, filling in for Alan.
I am very lucky to live in a part of Berlin (near the Schöneberg/Wilmersdorf border) that is packed with excellent restaurants. As someone who has worked from home for many years, it is a longstanding pleasure of mine to be able to step out at lunchtime and enjoy one of their affordably priced Mittagsmenü (“midday menu”) offerings.
Indeed, I will make sure to do so again today, right after posting this newsletter, because from Monday all restaurants and cafes in Germany will be closed for at least a month, except for takeout. That’s part of the new lockdown agreed yesterday by Germany’s federal and state administrations, in order to suppress our rapidly ascending COVID case numbers.
Ours is not nearly as harsh a lockdown as that announced yesterday in France—people here won’t be confined to their homes, and shops selling non-essential goods will be able to remain open—but then again our numbers (16,774 new cases yesterday) aren’t as bad as those in France (36,437). Yet.
Berenberg Economics said in a note this morning that the French lockdown could lead to a 3-4% GDP decline in Q4; in Germany, the decline will be more like 1%. In both countries, the hospitality sector will be hit hardest.
“I understand the frustration, indeed the desperation, especially in these areas, very much,” said Chancellor Angela Merkel yesterday. She added that restaurateurs who had come up with hygiene and safety concepts over the spring and summer, to tempt diners back indoors, will need them again soon.
That counts as an optimistic view, given our increasing understanding that the coronavirus is largely spread through aerosols (check out this excellent El Pais explainer on that point.) That means any protracted stay in an unventilated indoor space, with other people, is risky even if patrons are spaced out.
Personally, I’ve been eating exclusively in restaurants’ outdoor spaces for the last couple months. Even if this fresh lockdown only lasts a month, as is tentatively planned, that will be tricky in the Berlin winter.
“Without a clear public health plan like a vaccine or cure to the coronavirus, governments are falling back on lockdowns as the primary way to deal with rising infections,” London Capital Group research chief Jasper Lawler said in a note this morning. And uncertainty over how far those lockdowns will need to go, he warned, “means markets may not have fully baked in worst case scenarios—namely insolvency.”
Most (but not all) of the restaurants near my apartment have managed to hang on so far. I fear some won’t survive the winter, and that’s a scenario I unfortunately expect to see playing out across many sectors and geographies.
***
On a more positive note, Fortune’s 100 Fastest-Growing Companies list is out this morning. On average, companies on the list delivered a 19% return to shareholders over the past few years, while the S&P 500 produced just 11%.
This year’s #1, AppFolio, delivered three-year annual revenue growth of 34% and earnings growth of 161%.
Tech watchers will be excited to see Netflix (at #5 this year) making its tenth appearance on the list. Amazon makes its fourth consecutive appearance, and seventh overall, coming in at #10 this year. Facebook, meanwhile is making its sixth consecutive appearance, but coming in only at #52.
More news below.
David Meyer
@superglaze
david.meyer@fortune.com
TOP NEWS
Huawei chips
Some news that suggests Huawei's overall business may survive U.S. sanctions: the Trump administration is reportedly telling chipmakers that they may be able to sell their wares to the Chinese telecoms giant as long as they can demonstrate the processors won't be used for 5G. In other words, chips for Huawei's handsets, as opposed to its network equipment, may be OK. Financial Times
Boeing cuts
As its revenues plunge, Boeing has announced a further 7,000 layoffs on top of the 19,000 job cuts announced earlier this year. It's not clear that these will be the last cuts, either. The company posted a quarterly loss of $754 million yesterday, thanks to pandemic-struck airlines pausing new plane deliveries (which is when Boeing collects its cash) and cancelling orders. CNN
LVMH and Tiffany
The LVMH/Tiffany takeover drama may finally be over, after the Louis Vuitton owner agreed to buy Tiffany at a reduced price of almost $16 billion. That's around $425 million less than the earlier terms. LVMH had tried to walk away following Tiffany's payment, amid the pandemic and its hit on luxury sales, of dividends and management bonuses—Tiffany sued as a result. The suits have now been set aside. Bloomberg
Tech probes
European competition regulators have been busy in the last day. France's antitrust regulator, which already fined Apple $1.2 billion for anticompetitive practices earlier this year, has received a complaint from advertising companies and publishers who are worried about Apple's upcoming privacy enhancements. Italy's antitrust watchdog has opened an investigation into Google's alleged abuse of its position in online advertising. And this morning, Germany's antitrust authority was reported to have launched an investigation into Apple and Amazon. Reuters
AROUND THE WATER COOLER
Tech CEOs
Facebook's Mark Zuckerberg, Alphabet's Sundar Pichai and Twitter's Jack Dorsey defended their companies against attacks from the Senate Committee on Commerce, Science and Transportation yesterday, over the issue of content moderation on their platforms. Democratic senators laid into them for not removing more disinformation, while Republicans hammered them for allegedly suppressing conservative views. The committee is examining the future of Section 230 of the Communications Act, which protects platform operators from liability for what their users post. Fortune
He's Anonymous
Former Homeland Security Chief of Staff Miles Taylor has outed himself as "Anonymous", the author of a 2018 New York Times op-ed (and a subsequent book) that heralded a resistance within the administration against the actions of an "impetuous, adversarial, petty and ineffective" President Trump. Taylor's endorsing Joe Biden, unsurprisingly. NYT
Getting ready
Will the presidential election result in disaster? It could happen despite our brains' "disastrous tendency to underestimate greatly low-probability and high-impact disruptors," argues risk management consultant Gleb Tsipursky in a piece for Fortune. Tsipursky: "The large majority of organizations were seriously underprepared for the pandemic, for example. If you’re not working all virtually now, prepare if at all possible to go to all-virtual work. If you can’t, get extra security for your office ahead of potential civil strife." Fortune
Best smartwatches
It’s gift-guide time again! Here's Fortune's Aaron Pressman, explaining which of this year's smartwatches are the ones to get, including Apple's Series 6 watch, Fitbit's Versa 3, Samsung's Galaxy Watch3..and an extremely premium offering from Garmin. Fortune
This edition of CEO Daily was edited by David Meyer.
