Friday 24/02/23

1. In MACRO & CRYPTO NEWS, China backtracks, Turkey cuts interest rates and SBF faces further charges
2. In TECH NEWS, Alibaba posts sales growth, Apple continues with China, Nvidia and WPP benefit from AI as AI replaces Web3 as the hot new thing while the EC bans staff using TikTok and Sunak is urged to do the same
3. In MANUFACTURING NEWS, Rolls-Royce gets a boost while war boosts BAE Systems’ prospects
4. In MISCELLANEOUS NEWS, retail sales slow, consumer confidence improves and middle classes still can’t afford EVs while EV production rises over January
5. AND FINALLY, I bring you some examples of synchronicity…

So China tries to play peacemaker, Turkey cuts rates and SBF faces more charges…

📢 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:

In China rolls back unconditional support for Russia (Financial Times, James Kynge) we see that China appears to be positioning itself as a potential peacemaker between Russia and the west and has reiterated that it is against Russia using nukes. Some commentators are saying that China is keen to see a political solution to the war and is set to put forward a “position paper” today that will reinforce its stance. China tries to play peacemaker in Ukraine war to woo Europe (Financial Times, Joe Leahy, Kathrin Hille, Henry Foy and Max Seddon) says that the China’s motivation

📢 *** I will be doing my monthly roundup next Tuesday 28th February at 5pm with Jake Schogger of the Commercial Law Academy. It’s FREE – so why not come along and join us for a fun look back on the month where AI went a bit crazy 🤣?!? You must register HERE to attend 👍 ***

will at least partly be down to wanting to improve relations with European trading partners as well continuing to get whatever access it can to cutting-edge European technology (which seems to be harder to come by these days as US-China sanctions bite!). * SO WHAT? * The way that China has acted during the Ukraine war has dented its relations with the West (particularly as it has essentially helped Russia by buying its oil while the West has shunned it) and it seems that China is keen to address this. This is all just posturing at the moment – it’s all about the detail and execution. We’ll just have to wait…

Turkey cuts interest rates in effort to boost economy following earthquake (Financial Times, Adam Samson) shows that the pesky Erdogan is at it again and has cut its interest rate by 0.5% to 8.5% to reduce borrowing costs in the wave of the recent earthquake. * SO WHAT? * Prior to the disaster, Erdogan had called for an earlier-than scheduled election on May 14th but some are now saying that he’ll delay it. He has been facing a great deal of criticism for his response to the earthquakes (and his alleged role in them from the point of view that he was too lax on building standards) and is facing his toughest test of power in his twenty year reign. FWIW, I have seen it before when other leaders have had their backs against the wall (I think the best recent example of this was Angela Merkel in 2011) and their response to disaster has turned their fortunes around and paved the way back to power. It’s not looking great for Erdogan right now, but it is early days.

Then in Sam Bankman-Fried hit with further criminal charges (Financial Times, Joe Miller and Scott Chipolina) we see that FTX’s founder SBF is now facing new charges of securities fraud and conspiracy to commit bank fraud in addition to the original charges (all of which he has pleaded not guilty to). It is alleged that he made over 300 donations to Democrats and Republicans under various guises to avoid contribution limits and influence politicians. The drama continues…

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!

Alibaba posts sales growth, Apple continues to believe in China, the AI buzz continues but TikTok faces push-back…

Alibaba ekes out sales growth despite Covid-hit quarter (Financial Times, Ryan McMorrow) highlights the embattled Chinese e-tailing giant’s solid performance despite a very difficult economic backdrop in the final quarter of last year as it posted sales growth of 2%. China faced a lot of lockdowns in this period, so this performance is not shabby! * SO WHAT? * Given the government’s change in stance over zero-covid, you can see why the company is feeling a bit more positive on the outlook! After all, if it did OK when things were very tricky, they should be able to do well if China’s economy bounces back in the way everyone is expecting it to. It is also talking a good game about developing ChatGPT-like AI functionality (but then, so is everyone, 🤣 eh ??). Alibaba has suffered from its association with sister company Ant Group and founder Jack Ma and its high margin e-commerce platforms TaoBao and Tmall have suffered. If nothing else, the company still has around $21bn remaining in its share buy back programme, so you would have thought that that will at least provide a floor under the share price.

Apple/Luxshare: AR deal shows growing trust in Chinese suppliers (Financial Times, Lex) is a really interesting article which contends that Apple’s ongoing relationship with Luxshare Precision demonstrates Apple’s commitment to China is very much still valid. The supplier has now been tasked with developing Apple’s new premium product – its AR headsets that some say will retail at between $3,000 and $5,000 a pop! This is in addition to producing iPhones, Watches and Airpods. * SO WHAT? * Not only does this underline Apple’s commitment to China production, it also shows how difficult it is to diversify outside China. Luxshare is now knocking on the door of other Apple suppliers Foxconn and Pegatron, which is perhaps why Foxconn is looking to diversify into cars, weaning itself off its reliance on the American tech giant. It is a good idea for Apple to create jobs in China as it has actually been doing quite well there and diversifying its suppliers will help with any production disruptions (and presumably prevent any big price rise demands!).

In AI news, Nvidia, Other Chip Companies Race to Cash In on ChatGPT Frenzy (Wall Street Journal, Asa Fitch) shows that chip makers are benefitting from the massive buzz surrounding generative AI at the moment and Nvidia’s CEO said yesterday that the tech has now reached an inflection point where businesses are now taking AI very seriously and throwing a lot of resource at it to seek out threats and opportunities. * SO WHAT? * This comes at a good time for chip makers, who are currently experiencing a bit of a slowdown. Nvidia is way out in front as the market leader in chips used at the data centres which are used to power AI capability (according to Omdia estimates it had about an 80% market share of AI processors as of 2020!), but the hype has awoken interest by companies such as Intel and AMD, who also want a part of the AI action. At the moment, Microsoft has ChatGPT, Google has Bard and Baidu has Ernie. The size of the AI chip market is surely about to explode, no?

Artificial intelligence gives WPP’s revenues a big boost (The Times, Katie Prescott) shows that the world’s biggest advertising company is using AI more frequently, with the recent Nike campaign featuring Serena Williams being a prime example where it played a 1999 Serena Williams against a 2017 Serena (this is WILD) and it conceded that the increased adoption of AI is going to “challenge a lot of jobs”, although there will always have to be someone there to control the tech. * SO WHAT? * It is interesting to see how WPP has done so well – but it is also interesting to note how French rival Publicis is also performing strongly. As advertising is often seen to be a leading economic indicator, could this mean that this is another sign that the global economy is staging a rebound?? FWIW, I think that advertising is changing because in recent years we’ve seen the battle between analogue and digital advertising – but since Apple’s privacy changes in 2021, digital advertising has changed because users aren’t tracked (and targeted) like they used to be, which has meant that the pendulum has swung back in favour of old-fashioned analogue expertise. If you then throw AI into the mix that will again alter the way advertising campaigns are created and run, which I think that makes for a very interesting future!

I thought that AI start-ups: funding buzz passes from Web3 to artificial intelligence (Financial Times, Lex) was right on the money as it said that investment that had been pouring into Web3 last year is now going to be flowing into generative AI companies (I mean, Microsoft’s recent $10bn investment in OpenAI, is a particularly impressive example of this!). Rivals such as Cohere and Tome have raised money and are raising money and Canadian VC firm Radical Ventures is putting together a half-billion dollar fund that will be investing in AI start-ups! * SO WHAT? * It is possible that AI may have more legs than Web3 because it has more immediate practical benefits and usage than Web3 but valuation for such start-ups may prove to be tricky because we don’t yet know the scale of the costs that will be involved or what regulation may come in. For example, if newspapers decide to charge AI companies for the right to “train” their bots we don’t yet know how much that would cost and we also don’t know whether regulators will step in to limit AI in terms of IP and data privacy. Still, none of that is really going to kill the buzz and anyone who is in AI at the moment is going to benefit – at least for now! 

Meanwhile, in social media developments, European Commission bans staff using TikTok on work devices over security fears (The Guardian, Mark Sweney) shows that the EC sent an email to all staff telling them to delete the app from all work phones and devices along with any personal phones that use its apps and e-mail by March 15th over cybersecurity concerns. TikTok’s parent ByteDance denies that there’s any kind of problem and Sunak urged to ban officials from TikTok after EU staff delete app (Daily Telegraph, Gareth Corfield) shows that our own PM could well be considering this course of action for government officials as well (but it might not be enough to save us from having to watch Matt Hancock iron his shirts). Parliament’s TikTok account was shut down in the summer and the app has also been banned on all federal government devices in the US. The pressure is on!

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!

Rolls-Royce jumps and BAE Systems benefits from war…

Rolls-Royce shares jump 18% on new boss Tufan Erginbilgic’s turnaround plan (The Times, Robert Lea) highlights a new dawn for the engine manufacturer as the new CEO Tufan Erginbilgic outlined a robust turnaround plan on the back of strong results for last year. Rolls-Royce: tail winds support new chief executive (Financial Times, Lex) says that he wants Rolls-Royce’s operating margins to at least approach rival Pratt & Whitney’s and to put the rocket boosters under productivity. * SO WHAT? * Given what he said, it sounds like there are going to be more job losses but at least the financials are getting back onto a stronger footing. No doubt the Small Modular Reactors will be in line for review and given big development costs, long cash generation lead times and lack of

clarity about the government’s financial commitment, it won’t necessarily be the slam dunk that it may have appeared to be.

Elsewhere, Threat of war boosts BAE Systems order book to £59bn (The Times, Robert Lea) shows that BAE Systems beat market expectations for sales, profits and cashflow thanks to a fat order book powered by the increase in defence spending that was itself prompted by the Ukraine war. It is thought that there will be a lot more spending flowing through as governments spend on increasing their defence capabilities and restocking the gear that they’ve sent to Ukraine already. BAE’s share price has risen by 50% since the Russian invasion! It looks like the outlook is pretty good – but whether this has already been absorbed in the share price is a moot point.

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!

Retail sales fall, consumer confidence rises and we look at the latest in EV news…

In a quick scoot around some of today’s other interesting stories, Retail sales stall as consumers cut back, says CBI (The Times, Arthi Nachiappan) cites the latest CBI survey which says that retail sales lost momentum this month prior to an expected fall in March as incomes continue to feel the pinch but then Consumer confidence rebounds as economy avoids early recession (The Times, Arthi Nachiappan) cites another survey by GfK which reflects an unexpected bounceback in consumer confidence as the UK avoided a recession! * SO WHAT? * Some positivity at last! OK, so the businesses in the CBI survey were still overall pessimistic (but less so than previously) but it is interesting to see how consumer sentiment is changing. This may help to cushion the blow of a downturn this year, but it is early days yet!

That said, Middle classes cannot afford electric cars, warns Vauxhall owner (Daily Telegraph, Howard Mustoe) cites the boss of Stellantis as saying that cars are still too expensive for mass-adoption (he wants governments to get involved in offering

incentives – we don’t have any now!) and everyone and their dog continues to complain about the slow rollout of chargers. * SO WHAT? * I think that the government has got enough on its plate without having to stump up £10k (or whatever) for people to buy EVs. It may well be that this pause in demand for EVs is just what the UK needs in order to give everyone breathing space to get the charging network sorted. If the economy then turns up in the meantime, hopefully punters will start considering spend on big ticket items – by which time perhaps car makers will have made more efficiency improvements and narrowed the price differential with traditional cars.

Talking of EVs, Electric car production nears record for January (The Times, Robert Miller) cites the latest figures from the SMMT which reflect a rise of almost 50% in terms of production in January versus the previous year. EV production accounted for 40% of all cars produced over the month – but let’s not too ahead of ourselves here, we’re talking a total number of 28,329 EV and hybrid vehicles that were made in January. Piffling. I can’t see things improving in a meaningful way here for quite some time as there are more pressing priorities.

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…

Today, I thought I’d bring you a couple of videos that display impressive examples of synchronicity. This one is pretty amazing, but if we’re talking synchronicity, I had to show you this Japanese boy band (this is their most viewed video with 45million hits). Fun fact: the lead guy in this band is an ex-MMA fighter and he’s now a politician 😱😱😱! Talk about a varied career!!!