Friday 03/03/23

1. In MACRO NEWS, we look at China’s tricky position, a Russia sanction crackdown and pressure on the ECB
2. In TECH NEWS, China delays dent Arm’s valuation, Salesforce outperforms, Apple blocks the update of a GPT-powered app and Barcelona gets buzzy
3. In CONSUMER & RETAIL NEWS, consumers return to the high street and the over-50s return to work while Macy’s suffers and Nordstrom shuts down
4. In INDIVIDUAL COMPANY NEWS, Taylor Wimpey plans job cuts, Purplebricks’ story becomes a cautionary tale and there’s hindsight on Worldpay/FIS
5. AND FINALLY, I bring you Bieber pasta…

So we look at China’s balancing act, a Russia sanction crackdown and renewed pressure on the ECB…

📢 I’ll shortly be publishing my annual P/Review where I roundup the news of the year in 2022 and then outline predictions for themes in 2023. Because it’s such a big report 😱, I will be publishing it in stages. There is nothing like this anywhere else, and it will help your understanding of what’s going on enormously so keep an eye out for it! In the meantime, I’ve recorded a special podcast where Ralph Hebgen and I talk through some key themes to watch out for this year. You can listen to it HERE or watch it HERE.

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:

Caught between Russia and the west, China is treading a tightrope on Ukraine (Financial Times, Zhou Bo) highlights the precariousness of China’s position currently – and what’s really interesting is that the person who wrote this article is a former senior colonel in the People’s Liberation Army and now senior

fellow at the Center for International Security and Strategy at Tsinghua University! I’d say that the main takeaways from this are that the only way that the Ukraine war will turn into WW3 is if China gives military support to Russia. From China’s point of view, Russia is a strategic partner, its biggest neighbour and Ukraine’s biggest trading partner and although it has expressed mild disapproval for Russia’s invasion, it also doesn’t want an expansion of NATO. In addition, it has said that it is against the use of nuclear weapons, which will severely reduce the chances of a nuclear war. The main conclusion here, though, was that the longer the Ukraine war continues, the more likely it is that China will have to get involved somehow as a party that Russia will actually listen to.

US launches new crackdown on Russian sanctions busting (Financial Times. James Politi) follows on from what I was saying yesterday but gets more specific as Elizabeth Rosenberg, assistant Treasury secretary for terrorist financing and financial crimes, described the UAE as a “country of focus” for the US, saying that had exported over $18m worth of goods to “US-designated entities”. * SO WHAT? * As I said yesterday, this sounds to me like a bit of bluster as I would have thought it’s going to be really hard to monitor and prove – and they’ll just go and deny it anyway, say that it is typical arrogant westerners throwing their weight around and potentially make them more inclined to sidle up even more to Russia. I guess acknowledging this is a warning shot more than anything else!

Pressure mounts on ECB after inflation increase (The Times, Mehreen Khan) shows that the pressure is increasing on the ECB to continue with its interest rate policy as core inflation across the eurozone rose unexpectedly in February and particularly embolden ratesetters’ calls for a 0.5% interest rate increase. * SO WHAT? * This comes just after Germany’s inflation also rose, catching everyone by surprise. We won’t have to wait long to see whether another 0.5% rise is on the cards. This is quite interesting considering that other countries (including Britain) are looking to increase interest rates, but by smaller increments.

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!

China could dent Arm, Salesforce outperforms, Apple gets careful and Barcelona talks gadgetry…

China holds up Arm’s exit from troubled joint venture (Financial Times, Ryan McMorrow, Qianer Liu, Kana Inagaki and Anna Gross) shows that Arm’s upcoming flotation in the US is being delayed by Arm’s attempts to cut off its troubled joint venture in China as China drags its feet in providing the necessary paperwork to make it happen. * SO WHAT? * Given the tech/chip war currently raging between the US and China, it is likely that China is not particularly keen to see the back of Arm, hence its lack of speed. Arm/SoftBank: delays on Chinese joint venture transfer will dent valuation (Financial Times, Lex) contends that the longer the delay, the worse it’ll be for Arm’s valuation when it does float because the chip industry is currently in a downturn. SoftBank, which really needs the cash (presumably one of the main reasons for it to choose the US to float, because it will probably get a higher valuation) had originally mooted a valuation of at least $60bn for Arm, which it originally bought for $32bn in 2016 but at the moment, it may only fetch less than $34bn.

Salesforce’s Marc Benioff pledges to put profits first amid activist face-off (Financial Times, George Hammond and Ortenca Aliaj) highlights a better-than-expected set of earnings at the embattled workplace software company as it vowed to profits over growth following intensifying pressure from activist investors who want a proper shake-up. The share price is 40% off its lockdown highs and activists have been getting antsy about what happens from here for the company to increase profits. * SO WHAT? * It is interesting to note that Salesforce said that it was disbanding its M&A committee – which is saying something given that the company has pretty much been in growth mode for the last 24 years! Salesforce: Software titan shows the range of its acting chops (Financial Times, Lex) suggests that this switch in focus has come

at the right time but that activist investors will have to keep their eye on its charismatic co-founder and CEO Marc Benioff, whose growth mindset will need monitoring to make sure he doesn’t slide back into old habits of acquisition.

Then in Apple Blocks Update of ChatGPT-Powered App, as Concerns Grow Over AI’s Potential Harm (Wall Street Journal, Aaron Tilley) we see that Apple has recently postponed the approval of an update for e-mail app BlueMail because there are worries that its new AI feature – powered by ChatGPT – could show inappropriate content and recommended that it move its age restriction up to 17 and older or include content filtering. * SO WHAT? * I suspect there will be a lot more cases like this in the future as AI continues to be more widely adopted, but this latest development would suggest that Apple is keeping a VERY close eye on developments. Interestingly, the app got no pushback from Google Play’s app store…

I thought I’d include The New Tech That Will Take Us Beyond the Smartphone. Maybe. (Wall Street Journal, Joanna Stern) because it reports back from this year’s Mobile World Congress (MWC) in Barcelona and the potential trends we’ll be seeing in the next few years. Overall, phones are increasingly going to be using AI (surprise, surprise!) across their operating system and services; mixed reality (VR + AR) headsets are going to be the next big thing – and get lighter and better; the internet of things (IoT), where devices talk to each other, will continue to advance – to the extent that IoT will merge with the metaverse. Before you all fall asleep, examples of where this could work include sensors in a plane that report problems to real engineers who use a virtual version to test repairs or you may be able to generate your own digital avatar that you can use to safely explore both our medical and physical status. This all sounds great – but it also sounds like it’s not going to happen for a very very long time – if ever! Still, it’s quite fascinating though…

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!

People return to the office, including the over-50s while Macy’s and Nordstrom have a ‘mare…

Back to the office, back to the shops (The Times, Isabella Fish) cites the latest data from the BRC- Sensormatic IQmonitor report which shows that people are returning to the office in greater numbers now, but there’s still some catching up to do to reach pre-pandemic levels. The return of commuters has also helped to increase footfall to shops last month by 10.4%, with recovery being particularly robust in high streets and shopping centres while footfall declined in out-of-town retail parks. Although there’s a way to go yet, it seems that we are at least heading in the right direction.

Sharp rise in over-50s coming out of retirement in boost for Jeremy Hunt (Daily Telegraph, Melissa Lawford) highlights the increasing trend in the UK of “unretirement” as official data from the Institute for Fiscal Studies shows that the number of 50 to 64-year-olds preparing to return to work rose sharply in Q4 of last year.

It is thought that this trend has been driven by the cost of living crisis and Pension funds urge UK government to review tax rules for over-55s (Financial Times, Josephine Cumbo and Delphine Strauss) highlights calls for the government to stop penalising “returners” for coming back to work after accessing their pension by investment managers such as Aegon, Canada Life and Fidelity. It’ll be interesting to see whether this is something the government will act on in the upcoming budget.

Over in the US, Macy’s, Best Buy Sales Decline, Reflecting Shopper Pullback (Wall Street Journal, Suzanna Kapner and Dean Seal) shows that consumers are cutting back on their purchases of apparel and economics in order to spend on groceries and other basics and  Nordstrom to Close, Liquidate Its Canadian Stores (Wall Street Journal, Suzanne Kapner) highlights the luxury department store chain’s latest development in its sorry saga as it announced intentions to shut down and liquidate its Canada operations. It really is a jungle out there!

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!

UK real estate’s woes continue and we look at what went wrong with FIS/Worldpay…

In a quick scoot around some of today’s other interesting stories, Taylor Wimpey plans job cuts amid downturn in UK housing market (The Guardian, Julia Kollewe) shows that the housebuilder is suffering with slowing sales and will cut headcount as part of a broader effort to save £20m in costs per annum. It slowed its land purchases last summer and will be building fewer homes than planned this year. UK housebuilders are generally having a tough time at the moment and this is just another one.

How Purplebricks crumbled under the weight of a flawed business model and overambition (Daily Telegraph, Riya Makwana) shows that it’s not just the builders that are suffering, though, as online estate agent Purplebricks has now put itself up for sale. What a fall from grace for the estate agent that hit a peak valuation of £1bn to what is now worth just £23m. Apparently, the company has received credible expressions of interest but nothing firm as yet. * SO WHAT? * This is an example of a company that expanded too

early and it then had a disastrous attempt to spread its operations outside the UK to Australia, the US and Canada. Although the idea of cutting out the estate agent sounded like a good idea at the time, it turns out that it wasn’t. I have to say I’m at a bit of a loss as to what a buyer would actually be buying – because it’s not as if there are loads of branches and staff to cut! Maybe another estate agent could buy its systems or something, but whatever happens I would have thought the price would be quite modest.

Worldpay and FIS: the ‘original sin’ that tore up a $43bn merger (Financial Times, James Fontanella-Khan, Nicholas Megaw and Ivan Levingston) is an interesting article that delves into where this partnership went wrong. Initially, it sounded like a decent combination of FIS, which provides payment processing tech to banks, and Worldpay’s customer base. Insiders said that the two companies just weren’t compatible and that, in hindsight, the merger was prompted by just wanting to be bigger for the sake of it (and to fend off any potential unwelcome approaches). They may well be better off apart and be able to react more quickly to industry trends…

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…

My eldest son was off school yesterday because of a teachers’ strike so I made us both lunch. I saw this recipe pop up the other day on YouTube for some reason and I thought I’d give it a go because it doesn’t have many ingredients and it’s really quick to do. Although I was a bit sceptical initially I have to say it turned out way better than I thought it would! This is apparently, according to his ex personal chef, Justin Bieber’s go-to post-gig pasta dish – so now in our household it will forever be called “Bieber pasta” 🤣! Due to my initial scepticism, I couldn’t help myself and did fry up some mushrooms to go on the top of this in case the pasta turned out to be a bit bland – and used this amazing garlic chilli oil. I don’t get any kickbacks from this – I just put the link here because it’s not easy to get and this is my fave website for buying Japanese food and ingredients. This stuff is AMAZING and it goes in anything (it’s great in scrambled eggs, on the side of ramen, the list goes on and on). It is addictive – you may find yourself eating it neat with a spoon 🤣…

Although I’m not a big fan of his music, I am now a firm “Belieber” of his ex-personal chef 👍 I thengyao