Friday 05/04/24

1. In TMT NEWS, LG is downbeat, Samsung is upbeat, a Chinese robot maker is determined, the music industry pushes back against AI, Google’s move to charge for AI power could bring cheer for rivals, X dishes out the blue ticks, Disney wants a password crackdown and Vodafone/Three faces scrutiny
2. In REAL ESTATE NEWS, European house prices fall, the UK housing market perks up and Kering buys its Saint Laurent store in Milan
3. In CONSUMER & RETAIL TRENDS NEWS, UK wage growth slows, retailers suffer and Amazon sellers face a rise in scam returns
4. In MISCELLANEOUS NEWS, EV demand continues to wane, Ford delays EV launches, JP Morgan moves into advertising and Alaska Air gets some compensation from Boeing
5. AND FINALLY, I bring you a fun dad…

So LG’s downbeat, Samsung’s upbeat, Shenzhen Inovance gets feisty, music takes on AI, Google’s stance on AI has implications, X dishes out the blue ticks, Disney wants a password crackdown and Vodafone/Three faces scrutiny…

Don’t miss our next news roundup for April, it’ll be on Monday 29th April at 5pm with Jake Schogger of the Commercial Law Academy. HERE’S THE LINK TO REGISTER! See you there!

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:

In tech hardware news, LG Electronics Expects Operating Profit to Slide in First Quarter (Wall Street Journal, Kwanwoo Jun) shows that the South Korean consumer electricals giant reckons that its Q1 operating profit will be 11% weaker than it was a year ago thanks to a slow recovery in demand for home appliances. It is expected to release its full quarterly earnings later this month. On the other hand, Samsung Electronics Forecasts 10-Fold Profit Increase (Wall Street Journal, Kwanwoo Jun) reckons that its Q1 operating profits are going to rise tenfold, something that analysts are guessing means that their semiconductor business is bouncing back strongly thanks to the AI boom.

Meanwhile, Chinese robot maker says protectionism will not stop its march (Financial Times, William Langley and Gloria Li) shows that Shenzhen Inovance, China’s biggest industrial automation company, remains defiant in the face of increasing protectionism in the West and vows to continue in its efforts to be among the top three companies in this space within five years. The company reckons that the role it plays in keeping global supply chains running will keep it insulated from sanctions because “our industry solves problems concerning people’s livelihood”. Inovance is China’s biggest automation company and has a market cap of about $25bn. * SO WHAT? * Shenzhen Inovance (aka “little Huawei”) has benefited from working closely with domestic manufacturers and, along with other domestic rivals including Estun, has managed to build up an impressive 45% market share in industrial robots in the first nine months of last year versus the 24% it had in 2017. TBH, I don’t blame them for talking a good game, but given the environment of China paranoia at the moment I would have thought that other companies in this space, like Europe’s ABB and Siemens, will very much want to protect their turf. Surely Europe’s entire manufacturing sector will have learned from the last few years that relying on any key inputs from countries like Russia or China is just storing up potential problems for the future. It’s just whether they can resist China’s inevitably cheap prices that will be a feature (yet again) of efforts to build up market share at the expense of other established players from “friendly” countries.

In AI news, Music industry raises tempo in battle against AI (The Times, Katie Prescott) shows that the global industry is pushing back against the unlicensed use of its artists’ work by tech

companies for training AI models. The International Confederation of Music Publishers (ICMP), which is a global trade body that represents the music publishing industry and covers about 90% of the world’s commercially released music,  launched a site called RightsAndAI.com that will allow labels to protect their copyright. This week, a number of artists and estates of artists signed a letter that was co-ordinated by the Artists Rights Alliance appealing to AI companies to respect their copyright. The industry is also getting increasingly concerned about voice cloning. * SO WHAT? * The UK music industry is threatening to sue Voicify for producing songs copying the voices of famous artists while Universal Music Group and others are suing Anthropic for allegedly distributing copyrighted lyrics using its Claude 2 technology. I think that the music industry is just getting started. At some point I think that the AI companies are going to have to play ball because without the raw material, they have nothing.

If costs force Google to charge for AI, competitors will cheer (The Guardian, Alex Hern) follows on from what I was talking about in yesterday’s Watson’s Daily where I highlighted a story about Google considering charging for AI-powered search. Basically, AI search costs a lot because of the computing power it needs to run so charging for this service could potentially give rivals like Perplexity and Anthropic license to do the same – or at least it would mean that they are no longer undercut by the biggest search engine in the world! The AI evolution continues…

In media news, Dismay as X’s most-followed accounts given blue ticks for free (The Guardian, Alex Hern) shows that X has decided to award blue ticks to users with more than 2,500 “verified subscriber follows”. This basically reverses the company’s previous stance where blue ticks were given to anyone that signed up to its pair-for tier, originally known as “Twitter Blue”. * SO WHAT? * TBH, I think there’s a lot of fuss about nothing here as there turned out to be an inherent “coolness” associated with NOT having a check mark because it showed you weren’t paying for it – a message that the company certainly didn’t intend to convey, hence the new stance of giving them back to “influencers” and celebs. At the moment, this is just noise as far as I’m concerned and CEO Linda Yaccarino really needs to come out with some kind of coherent strategy sooner rather than later otherwise the negativity surrounding the platform will continue to fester.

Then in The Password Sharing Crackdown Is Coming to Disney (Wall Street Journal, Alyssa Lukpat) we see that Disney is going to start clamping down on password sharing for its streaming services starting with a few countries in June before rolling it out elsewhere. * SO WHAT? * This should be a good move for profitability and is something that Netflix in particular has implemented to very good effect. I would have thought that the impact from this will last for at least a couple of quarters but this move will no doubt be a useful addition to all the other measures that Disney is bringing in to boost profitability.

Then in Vodafone and Three’s £15bn merger to be investigated (Daily Telegraph, James Warrington) we see that the CMA is now going to move to a deeper phase two inquiry into the proposed deal over fears that it could potentially lead to higher costs and less choice for consumers. The CMA has now got until September 18th to complete its in-depth review. Both companies said that they were expecting this to happen, so no drama – yet!

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!

European house prices fall, the UK housing market picks up and Kering buys a building…

European house prices fall for first time in a decade (Financial Times, Martin Arnold) cites the latest data from Eurostat which shows that European house prices fell overall thanks to strong growth in the property markets of some eastern and southern countries like Croatia, Bulgaria, Lithuania, Poland and Portugal balancing out weakness in many northern EU states including Germany and France. Interestingly, Greece was not included in the data but its housing market has been very strong. * SO WHAT? * This correction has proved to be less severe than expected and Germany’s market has started to show signs of recovery at the start of this year thanks to lenders cutting their mortgage rates. This is yet another factor that the ECB will need to consider when it has its next interest rate meeting.

Then in Housing market springs into life over Easter (The Times, Tom Howard) we see that more homes were put up for sales last Thursday than on any other day this year, according to stats from Rightmove! Easter is traditionally a busy time in the housing market because of better weather (in theory!) and the fact that, generally speaking, deals agreed now should mean that movers have a decent chance of moving in before the end of the school summer holidays. * SO WHAT? * Now that mortgage rates are retreating from the highs of summer 2023, activity in the market appears to be picking up. Developers and estate agents alike will

be hoping for a better year than 2023 which was beset with rising mortgage rates, the ongoing cost-of-living crisis and fears of a house price crash.

Then in Gucci owner Kering buys Milan building for €1.3bn in Europe’s biggest property deal since 2022 (Financial Times, Joshua Oliver and Adrienne Klasa) we see that Kering bought a retail block on one of Milan’s swankiest shopping streets from Blackstone for a whopping €1.3bn in what is one of Europe’s biggest property deals since March 2022! * SO WHAT? * This is the latest deal in what seems to be an emerging trend of fashion houses buying flagship locations. Prada bought its New York flagship store in December for $425m, LVMH bought a building on the Champs-d’Élysées for €950m around the same time and Kering also bought a building on the corner of Fifth Avenue and 56th street in New York for $963m! The head of real estate at Blackstone remarked that there is “exceptional investor demand for high-quality real estate in the strongest markets”. However, Kering’s €1.3bn real estate bet is a pricey distraction (Financial Times, Lex) shows that although this can make some financial sense given rent levels, there are better returns to be had elsewhere for the company that has only just announced a profit warning. This purchase means that it has a smaller financial buffer, which in turn puts a lot of pressure on Kering’s main brand, Gucci, to stage a dramatic turnaround in the company’s fortunes. It continues to lag luxury rivals so there is a lot riding on Kering’s efforts.

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 wage growth slows, retail spending weakens and Amazon returns cause problems…

Wage growth slowdown could mean interest rate cuts this summer (The Times, Jack Barnett) cites the latest research from the Bank of England which shows that businesses expect to raise wages by their lowest amount over the next 12 months (4.9%) since June 2022. This will no doubt be taken into consideration by the Bank of England’s Monetary Policy Committee at the next meeting on interest rates because it implies that one of the main things that could stoke another bout of inflation – strong wage growth – is easing. As things stand, markets are implying that there will be three or four interest rate cuts this year from either June or August from the current level of 5.25%.

In the meantime, Retailers suffer worst run since Covid (The Times, Jack Barnett) cites a survey by BDO which shows that retail sales have been falling for six months, having dropped again in March. This is the longest losing streak outside Covid but poor weather has been blamed for last month’s weakness. Weak demand for household goods was a major drag on the headline figure although there were some bright spots in fashion and lifestyle products. Household finances still appear to be recovering from a cost-of-living crisis and consumer sentiment

has got stuck in a rut recently, according to the latest research from GfK. Consumer confidence has yet to fully recover although the overall situation seems to be improving as various indicators show a strengthening of the economy. Fingers crossed 🤞!

Then I thought that Amazon Sellers Plagued by Surge in Scam Returns (Wall Street Journal, Sebastian Herrera) was worth mentioning because it highlights something I’ve never heard before – return fraud! Basically, third party sellers on Amazon are getting scammed by customers who order expensive items and then replace them with rubbish, sending them back as returns. Amazon is so keen to prioritise the customer that they are reimbursed almost immediately with virtually no checks at all – and the third party seller is left holding a pair of flipflops instead of the expensive pair of trainers that they sent to the customer. The National Retail Federation says that around 13.7% of returns in 2023 were fraudulent, accounting for $101bn in overall losses for lenders. * SO WHAT? * This is a tricky problem as online platforms are always likely to favour the customer IMO. If platforms wait for retailers to verify the return it dents the customer experience whereas if it continues doing what it’s doing, more third party retailers – who’ve already had a rocky few years – will suffer. Amazon – and other big platforms – really need to step up here.

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!

EV demand slows, Ford delays EV launches, JP Morgan goes into advertising and Alaska Air gets some compensation from Boeing…

In a quick scoot around some of today’s other interesting stories, Demand for electric slows as drivers turn back to petrol (Daily Telegraph, Christopher Jasper) cites research from the SMMT that shows that EV demand is slowing down sharply as drivers are ditching the electric option in favour of petrol. EV registrations increased by 3.8% last month versus March last year whereas overall car sales increased by 10%. Hybrid and petrol cars displayed the strongest growth. It is also worth noting that March gains were mostly powered by fleet and business purchases as sales to individuals actually fell. I guess it’s not surprising, therefore to see Ford to delay rollout of new electric pickup and SUV as EV sales slow (The Guardian) as the company announced that it will delay the launch of its much-hyped electric pickup by a year – so it won’t come out until 2026! It added that it will also delay the launch of its large SUV by two years until 2027! EV market share has now declined to 7.1%. * SO WHAT? * I like the idea of EVs, but I am old enough to remember the hype surrounding diesel vehicles and how much more efficient they were. I remember at the time thinking that diesels smell and that they surely aren’t great for the planet so for MANY years I stuck with petrol until two cars ago, in 2009, I relented and bought a diesel. 2015 saw the dieselgate scandal and when I got my current car, I decided to return to petrol power because it turns out that the government and car manufacturers had actually been lying to us this whole time! I really think that we are nowhere near there at the moment from an infrastructure point of view, a production point of view and a pricing point of view. Maybe this is why the government doesn’t provide incentives because it’s worried that if everyone bought EVs at the same time, the grid wouldn’t be able to cope and there’d be chaos. While I think that EVs make a lot of sense for some, they are just not practical (at

the moment) for everyone. The problem for manufacturers is that they have to plan years in advance – so perhaps the policymakers jumped the gun here and they are leaving the car makers high and dry.

I thought that JP Morgan’s pivot to advertising means all companies are adtechs now (Financial Times, Lex) was very interesting because it highlights a new business direction for America’s biggest bank – advertising! Basically, it’s using the data of customers spending patterns to offer ads to brands. The business is called Chase Media Solutions and in making this move, it’s taking on the might of Google and Meta who controlled over 47% of ad spend last year, according to research group Emarketer! Digital players had a stranglehold on user data until privacy changes were made in 2021 by Apple and Google regarding how data was collected and utilised for targeted ads. * SO WHAT? * Advertising’s not going to replace JP Morgan’s consumer or investment banking businesses anytime soon – but margins in advertising are high and it has the capability. FWIW, I think this is verging on the immoral. Banks can see a complete picture of their customers’ spending habits and I don’t think people signed up to have their activity tracked. Surely policymakers should look into this latest invasion of consumer privacy. In the meantime, I think this will be VERY lucrative for them – and I’m sure that other banks will try to follow their lead!

Then in Alaska Air Receives $160 Million Payment From Boeing (Wall Street Journal, Will Feuer) we see that Alaska Air Group just got an initial compensation payment to make up for lost profits due to the whole mid-air door plug blowout debacle on one of its flights in January. Alaska said it expected further payments. * SO WHAT? * I suspect that Boeing will not only be paying compensation to Alaska Air. I think that the direct (lost profits) and indirect (loss of reputation) repercussions from this incident will continue for some time yet. Meanwhile, I’d expect rivals such as Airbus to prosper as a result…

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…

You end up doing plenty of things you never even dreamed you’d do when you become a parent! This guy takes parenting to a new level I think 😲! If only I was as practical as this!!!