Friday 03/11/23

1. In MACRO & OIL NEWS, Japan launches a stimulus, the Bank of England leaves interest rates unchanged, the ONS works on employment figures and Shell profits
2. In TECH & TELECOMS NEWS, we look at some takeaways from Bletchley Park, Apple reports declining revenues and BT announces bigger profits
3. In AUTOMOTIVE NEWS, the UAW wins a deal, Toyota announces a recall, JLR has record sales and Ferrari raises guidance
4. In RETAIL & CONSUMER GOODS NEWS, Amazon shuts down its clothing stores, UK supermarkets jockey for position and Beyond Meat makes layoffs
5. In MISCELLANEOUS NEWS, we look at contrasting fortunes for Novo Nordisk and Moderna while amusement parks consolidate in the US, Hoka shoes power Deckers Outdoor and Trainline benefits from RTO
6. AND FINALLY, I bring you an epic prank…

So Japan tries to stimulate, the Bank of England leaves rates unchanged, the ONS tries harder and Shell make money…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

Well done to Jack for winning yesterday’s grand final of the Watson’s Daily x Commercial Law Academy Autumn Whirlwind Commercial Awareness Competition 2023! From around 800 entries in the first round, 30 made it through the second round and after careful consideration of their written entries, 5 made it through to the final. Jack was our champion but you also voted him as your winner! Well done to all the finalists in particular – doing a presentation to that many people can be a nerve-wracking experience and you all did a great job! It looks like we’ll be doing more competitions in the not-too-distant future, so watch this space…

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Japan’s PM Fumio Kishida bets on $113bn stimulus to tackle inflation pain (Financial Times, Kana Inagaki) shows that the Japanese PM is doing his best to battle the twin challenges of the fallout from high inflation and rock-bottom approval ratings. The $113bn will be soaked up by tax cuts and cash handouts. This will include temporary cuts to income and residential taxes and cash handouts to low-income households and there will be an extension to existing subsidies to take the edge of rising petrol and electricity prices. Businesses will also be given support to increase wages and bolster supply chains. Approval ratings have fallen since they

hit a high in May because of scandals involving his son and closest aide as well as data management problems with a national identification system. Kishida’s term is due to end in September next year, so the clock is ticking…

Bank of England warns UK faces stagnating economy as it keeps rates at 5.25% (Financial Times, Sam Fleming and Delphine Strauss) shows that our central bank decided to leave interest rates unchanged whilst adding that they could stay at elevated levels “for an extended period of time”. Bank of England warns of recession risk in run-up to expected election next year (The Guardian, Richard Partington) shows that the Bank also warned of potential recession next year, whilst also batting away speculation of interest rate cuts but Despite the Bank of England’s hawkish tone, the next interest rate move is likely down (The Guardian, Larry Elliott) suggests that increasing pressure from business – and unions – will eventually prompt the Bank to relent and that the next move will be down. It has been criticised for leaving it too late to increase interest rates so it won’t want to be accused in future of cutting them too late as well – as that would be a double-whammy for the economy.

Statistics agency steps up efforts to improve key UK jobs data (Financial Times, Delphine Strauss) follows on from recent news that job stats are getting unreliable because the response rate to surveys has fallen so far as to render the results useless. The ONS has now restarted in-home interviewing to prompt a better response to its labour force survey (LFS) and being more focused on chasing up non-respondents. * SO WHAT? * These stats need to be fixed as a matter of urgency because the Bank of England relies on them to make interest rate decisions. One important thing that the Bank needs to understand is how many people are unemployed versus how many are just inactive (not working or looking for a job). This sort of thing isn’t that well covered by looking at benefits and tax records so the ONS is now trying to collect more feedback from young people and it is taking on more staff to help increase the sample size of the LFS. The ONS expects to published data based on the new-look survey from March 2024.

Then in Oil and gas lift Shell profits amid green energy losses (Daily Telegraph, Jonathan Leake) we see that Shell’s profits hit a whopping $6.2bn in Q3, boosted by oil and gas production and higher oil prices. The oil price increase helped to mitigate losses at its renewables division. Although not great for the planet, concentrating on oil and gas is clearly right for the company at the moment and I would suggest any plans for net zero are firmly on the (fossil-fuelled) backburner…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

We look at the Bletchley Park takeaways, Apple’s falling revenues and BT’s bigger profits…

AI companies agree to government tests on their technology to assess national security risks (Financial Times, Anna Gross, Cristina Criddle and Madhumita Murgia) shows that companies including OpenAI, Google DeepMind, Anthropic, Amazon, Mistral, Microsoft and Meta – along with many governments (but not China) – yesterday signed a “landmark” agreement to agree to allow governments to test their latest models for national security and other risks before they are officially released. The document won’t, however, be legally binding but I guess it is a first step! In addition to this, an international panel of experts will publish an annual report on the changing risks of AI. Five takeaways from UK’s AI safety summit at Bletchley Park (The Guardian, Dan Milmo and Kiran Stacey) makes an interesting list of key lessons from the summit: that it was a diplomatic triumph to get all those big hitters under one roof, that the US has commercial and political strength in AI, that Musk brought extra attention to the summit, that opinions remain divided as to the damage that AI can do to society and that countries are at different stages with regard to regulating it. Meanwhile, AI generated false ‘evidence’ of accounting scandals (Daily Telegraph, Adam Mawardi) served as a timely reminder that AI is less than perfect as an academic was forced to apologise that AI-generated evidence that he submitted to an

Australian parliamentary inquiry proved to be false. What a lazy idiot. He blamed Google’s AI chatbot Bard, which he used for the research 🤣! It just goes to show how damaging this stuff can be and how easy it is to be taken in by convincing-sounding words put together by a bot! Professor James Guthrie maintains that his arguments for an overhaul of the consultancy industry “remain important”, so clearly he has lost grip of all reality as no-one is going to take him seriously any more…

Elsewhere, Apple suffers longest revenue decline in more than 20 years (Daily Telegraph, Gareth Corfield) shows that the tech giant has hit its longest continuous decline in revenues since 2001 after it revealed its fourth consecutive quarterly drop in sales. This is thanks to a global drop-off in smartphone sales and the economic slowdown in China. * SO WHAT? * Although iPhone sales kept ticking along, the sale of Macs fell sharply (by a third, in fact!) but now that the company has unveiled a new line-up, it expects this to rebound. It’ll be interesting to see how it does in the all-important quarter going into the end of the year!

Then in Rising bills help BT ring up bigger profits (The Times, Katie Preston) we see that bills for customers and the implementation of a number of cost-cutting measures has helped BT increase its half-year pre-tax profits by 30%. I guess at least someone is benefitting from higher bills!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

The unions win in the US, Toyota announces a recall, JLR sees record sales and Ferrari zooms into the distance…

So after a protracted period of strikes among US car manufacturers, Car Companies Agree to Pay Striking Workers in Unusual UAW Win (Wall Street Journal, Nora Eckert) shows that Ford, GM and Stellantis have agreed to pay striking workers for their time on the picket lines as part of the new deal reached last month with the United Auto Workers union. This is a highly unusual move – but just goes to show how strong the UAW’s bargaining position is! At the moment, deals reached with the car companies will raise workers’ pay by 25% over four years in addition to other benefits. Mind you, The UAW Beat Detroit. Tesla Will Be a Different Beast (Wall Street Journal, Tim Higgins) shows that the anti-union Tesla may be a harder mountain to climb, but the UAW’s leader, Shawn Fain, may be emboldened enough by his union’s recent victory in getting his union members one of the biggest wage increases in history that he may well give it a shot! There’s a difference between mobilising already-unionised labour forces to do something and those that are non-unionised…

Meanwhile, Toyota Recalls More Than 1.8 Million RAV4s Over Battery Fire Risk (Wall Street Journal, Alyssa Lukpat) highlights a major recall from the Japanese car manufacturer due to potential fire risk. Batteries in some RAV3s in 2013-2018 models are too small and could move around during forceful turns and potentially

catch fire, according to a company statement. Ouch. At least the company managed to double its profits in the latest quarter!

In Record sales push Jaguar Land Rover into fast lane (The Times, Lottie Hayton) we see that JLR returned to profit in Q3 and was even confident enough to raise its forecasts for the full year. This was its fourth consecutive quarter of growth and suggests that the turnaround is not just some kind of fluke! * SO WHAT? * JLR suffered in the past from supply chain problems and being too invested in diesel but things are now changing. However, it is now committed to electrification and deliveries of an electric Range Rover are due to start next year, adding to its sole current electric offering, the I-Pace.

Then in Ferrari Raises Guidance After Sales Mix, Customizations Lift Profit (Wall Street Journal, David Sachs) we see that the prancing horse is confident enough in its Q3 performance that it has decided to raise its full-year guidance. It beat market expectations for profits and revenues thanks to an improving sales mix and rising demand for vehicle customisation. * SO WHAT? * It looks like the ultra-wealthy remain insulated from the cost-of-living crisis and that the general downturn for luxury players such as LVMH and Kering is not something that has affected Ferrari (or even Prada!). Although Porsche recently said that it expects a challenging year as its would-be buyers are becoming more reticent, I guess that Ferrari is a step up given that the price for entry level vehicles at both brands is considerably different.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Amazon shuts clothes stores, the UK supermarkets jockey for position ahead of Christmas and Beyond Meat makes more cuts…

In retail news, Amazon Is Shutting Down Its Clothing Stores (Wall Street Journal, Sebastian Herrera) shows that the e-tailing giant is calling it quits for its two “Amazon Style” stores, ending its brief foray into apparel sales at physical locations. This comes after other physical outlets for Amazon, including bookstores and specialty outlets, also shut down. It’s still going with Amazon Fresh and Whole Foods market, but it seems that non-groceries are proving to be a no-go. * SO WHAT? * It seems to me that Amazon is failing with non-etailing. Whole Foods was already established before it bought it, so it can’t really lay that much claim to growing it IMO – and I still think Amazon Fresh is a bit of a gimmick. I think it should give up and just go all in in what it’s good at – selling stuff online! The idea of selling the tech behind its Amazon Go stores might have some mileage, but that will depend on how much it charges as I think there will be limited uptake on something that allows people to just walk out of a shop without going to a cashier…

Meanwhile, Sainsbury’s declares it is winning back Lidl and Aldi customers (The Guardian, Sarah Butler) shows that Sainsbury’s is taking back market share from the German discounters, potentially helping it to hit full-year profit forecasts at the higher end of expectations despite non-food sales (including at Argos) falling over the summer. Food retailers enlist celebrities as Christmas ad rivalry moves online (The Guardian, Sarah Butler) shows that the

supermarkets have been lining up the celebs in the Christmas ad campaigns. M&S has Ryan Reynolds, Rob McElhenney, Peter Crouch and Dawn French on its roster while Waitrose has gone for Graham Norton hosting a slick party and Sainsbury’s is going with 80’s popstar Rick Astley, who presumably will never give you up or even let you down in the Christmas season 🤣. UK supermarkets: market share gains invite ‘Tescopoly’ comparison (Financial Times, Lex) shows that Tesco is also winning back market share from the Germans and now Sainsbury’s and Tesco have a combined market share of 42.2% versus 41.7% last year (although this is still less than the 47.5% share they had at their peak!). They could yet increase this as rivals such as Wm Morrison and Asda have hugely leveraged balance sheets which means that Tesco and Sainsbury’s have more ammo to drive prices down further this Christmas.

Elsewhere, Beyond Meat to lay off workers as ‘veggie misinformation’ bites (The Times, Max Kendix) shows that things continue to go from bad to worse for the plant-based burger firm as it announced that it would be cutting a whopping 19% of its non-production staff and 8% of its global workforce. Not only that, the company had to slash its sales forecasts in the face of waning demand and more competition from players such as Tyson Foods and Impossible Foods. * SO WHAT? * I think that the major factor here is that the products just aren’t cheap enough. In a cost-of-living crisis, people just want to eat – and alt-meat is just too expensive at the moment. I wonder whether we’ll see further consolidation in this business either among the smaller players or by larger players such as Tyson Foods just gobbling them up.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Novo Nordisk sees sales soar, Moderna not so much, amusement parks consolidate in the US, Hoka boosts Deckers Outdoor and Trainline benefits from more people returning to the office…

In a quick scoot around some of today’s other interesting stories, Novo Nordisk’s sales of weight loss drugs soar (Financial Times, Hannah Kuchler) highlights the gift that just keeps giving for the company – its anti-obesity drugs! Demand for them continues to exceed supply – and it just gets better as the drugs can even be used to treat other conditions! * SO WHAT? *Its Wegovy drug is experiencing massive demand, which will still outpace supply despite the company expanding production capacity. It will face more competition if rival Eli Lilly’s Mounjaro diabetes drug is also approved for treating obesity but I would have thought there is still enough demand to go around!

In contrast, Moderna shares hit by quarterly loss and waning Covid vaccine demand (Financial Times, Hannah Kuchler) shows that Moderna suffered a way bigger quarterly loss than the market had been expecting which was then made worse by the company offering up a disappointing outlook. The shares of the Covid hero dropped by 18% in response. The share price has dropped by over 50% this year. What a turnaround. It just goes to show the risks of being too exposed to one product…

Meanwhile, over in the US, Six Flags, Cedar Fair Strike Big Theme-Park Merger (Wall Street Journal, Lauren Thomas and Will Feuer) shows that two theme-park operators are getting together to become a major player in the industry in an all-paper deal that would see the enlarged entity retaining Six Flags as its corporate name while, perhaps somewhat confusingly, trading under Cedar Fair’s ticker on the stock market (TBF, it is quite a good ticker – it is

“FUN”). The whole industry is struggling to bounce back after the pandemic nightmare and Cedar Fair/Six Flags: rollercoaster groups huddle ahead of trouble (Financial Times, Lex) says that while this merger is defensive in nature, it may be the way forward as it can cut costs and make the combined offering more attractive by offering a higher value loyalty pass across the whole network while a broader geographical footprint should help to reduce bad weather losses.

I thought I’d include Deckers Outdoor: lace affair leaves sole mate well-heeled (Financial Times, Lex) because it highlights the success of Deckers Outdoor, which owns the Hoka brand. It’s a particularly impressive story at the moment given that much larger rivals such as Nike and Under Armour are losing ground at the moment. * SO WHAT? * Deckers bought Hoka for about $1.1m in 2012, but it brought in about $1.4bn in revenues last year – and the popularity shows no sign of weakening! Hoka has made Deckers less reliant on seasonal sales of Ugg boots and the fact that Hoka shoes are popular with the running community as well as the more fashion-conscious one is proving to be pretty handy! Momentum is looking good here – but I think another one to keep an eye out for is On Holding, which also seems to be gaining ground!

Meanwhile, on a much more mundane level, Return to the office puts Trainline on track (The Times, Katie Prescott) shows that the return to office trend is playing into the hands of Trainline as more workers use it to buy their tickets. In its half-yearly results, it said that ticket sales were up by 23% year-on-year. * SO WHAT? * Although this has been powered more by leisure travel, this would imply that there is more growth to be had if business travel starts to at least close the gap to some extent (although it may be years before it recovers to pre-pandemic levels).

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

This prank made me laugh so hard when I saw it. I am going to try this on my kids this weekend and if I film it I’ll let you know how it goes 🤣!