Monday 01/07/24

1. In MACRO NEWS, Biden causes concern, Le Pen wins the first round and South Africa gets a new cabinet
2. In PROFESSIONAL SERVICES NEWS, Bain pulls back in China, financial services don’t embrace AI fully and Hogan Lovells launches a “microaggressions” hotline
3. In M&A NEWS, BlackRock buys Preqin, TDR Capital looks to offload BPP and Boeing agrees to buy Spirit AeroSystems
4. In MISCELLANEOUS NEWS, the UK haulage industry wants better electric truck infrastructure, a Cambridge start-up makes a battery breakthrough, older renter numbers rise, M&S launches new services and a new AI-generated ad causes a stir
5. AND FINALLY, I challenge you to think of something that rhymes with “orange”…

So Biden causes concern, Le Pen wins and South Africa moves forward…

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Democrats line up to defend Biden as poll shows rising unease over fitness (Financial Times, Steff Chavez, James Fontanella Khan, Lauren Fedor and Christopher Grimes) shows that top Democrats have been lining up to support Joe Biden on Sunday even as a new CBS News-YouGov poll showed that 72% of US voters think he should end his re-election campaign after that disastrous TV debate he had last week. This is up from 63% in February. Supporters say that Biden has been successful in keeping the divisions in the Democratic party together and that if leadership changes, it throws everything up in the air. Meanwhile, Biden’s family reportedly tell him to stay in presidential race as blame shifts to advisers (The Guardian) shows that Biden isn’t going to be able to rely on his family to get him out of his predicament – if he steps aside, he’s going to have to do it all on his own. Some are now blaming his poor performance on being “over-coached, over-practiced”. Meanwhile, If Biden drops out now, how do the Democrats choose a new candidate? (The Guardian, Joan E Greve) does a decent job of looking at Biden alternatives. Interestingly, Democrats still have to get together in Chicago from 19th to 22nd August to formally select their presidential nominee and various names have been mooted as possible alternative candidates, including Kamala Harris (the existing vice-president), Gavin Newsom (California’s governor) and Gretchen Whitmer (Michigan’s governor). We’ll just have to wait and see what the old man decides to do! * SO WHAT? * As you know, I think the whole US presidential process is way too complicated, takes too long, is too expensive (which means that presidents are likely to have a long list of donors that they need to satisfy) and even then throws up two candidates like this. One of them is a liar, a cheater and presided over multiple bankruptcies of his companies over the years – not to mention someone who has been impeached twice and is a convicted felon. The other one has trouble stringing a sentence together, locks up confidential

documents in his garage and gets tired after 4pm, according to his aides (who tried to come up with excuses for his disastrous TV performance). It is, unfortunately, a joke and everyone else in the world is going to be the punchline. I hope that the Democrats will come to their senses and put someone else in. I’m not ageist – I just don’t want someone who is prone to losing their train of thought under pressure to be the one with their finger hovering over the big red button for nuclear war, especially in the current geopolitical climate.

Far right wins first round of France’s snap election, survey shows (Financial Times, Leila Abboud, Ian Johnston, Adrienne Klasa and Sarah White) shows that Marine Le Pen’s far-right Rassemblement National part his smashed incumbent “dead-man-walking” president Emmanuel Macron’s centrist alliance in the snap election that he called, where there was an unusually high turnout. The extreme right-wing RN party and its allies won 33.2% of the vote while the extreme left-wing Nouveau Front Populaire (NFP) get 28%. Macron’s Ensemble alliance and allies got just 22.4% of the vote in this first round. It looks like the RN and its allies could win the most seats in the National Assembly which could then lead to a majority in the final round of voting on July 7th. It is now expected that there will be a lot of back-room bargaining going on between left-wing and centrist parties in an attempt to block a victory for the far-right. * SO WHAT? * If the RN manages to get 289 seats in the 577-strong lower house, it will mean that Macron will have to embark on a tricky power-sharing agreement referred to as a “cohabitation” where two opposing parties have to govern the country together. Since the end of WWII, there have only ever been three cohabitations but none of them has been between parties that are such polar opposites. In the event of an RN win, it would be responsible for domestic affairs and set the budget while Macron would get to remain chief of the armed forces and set foreign policy – although Le Pen and her PM-in-waiting Jordan Bardella have indicated recently that they would challenge his authority. At this moment in time, the best outcome that Macron can hope for is a hung parliament with no party getting a majority. If that came to pass, he could try to form some kind of technocratic government but he would not be able to dissolve parliament again for another year.

Elsewhere, Cyril Ramaphosa unveils new South African cabinet after coalition breakthrough (Financial Times, Rob Rose and David Pilling) highlights a breakthrough in South Africa as newly re-elected president Ramaphosa announced his new coalition’s cabinet yesterday a month after his ANC party lost its majority for the first time since the end of apartheid 30 years ago. This development was greeted with relief by markets, particularly as his eight-party cabinet managed to exclude the country’s two most extreme political groups. * SO WHAT? * This is good for the moment, but there is still a risk that the government could yet split given how many different parties are involved.

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!

Bain pulls back in China, financial services fail to embrace AI fully and Hogan Lovells launches a controversial hotline…

In Bain’s new boss says consultancy pulling back from work in China (Financial Times, Simon Foy and Stephen Foley) we see that the new boss of the consultancy Bain & Company announced that the firm will be withdrawing from advising in “sensitive industries” in China, without mentioning any specifics (but presumably that means tech, pharmaceuticals and biotech among others). Following the well-publicised raids last year by Chinese authorities on its Shanghai offices, Bain continues to operate in the country but it now puts all of its Chinese work through a central risk committee. * SO WHAT? * Geopolitics is definitely going to factor into business decisions much more than it used to as many countries continue to ring-fence what they perceive to be their intellectual property whilst also having an eye on NOT rendering themselves vulnerable to sanctions. I guess that management consultancies like Bain have had decent tenure in countries like China and so it is probably more preferable for them to continue a presence than not as a full withdrawal would leave quite the hole in its expertise. Still, restrictions into what activities it can get involved in is surely bound to blunt their capabilities.

Financial services shun AI over job and regulatory fears (Financial Times, Cristina Criddle and Akila Quinio) shows that financial services are not currently using AI to its full potential, according to the co-founder of Monzo and group partner at Silicon Valley start-up incubator Y Combinator, Tom Blomfield. He says that they are too scared of job losses, potential regulatory crackdowns and institutional inertia. A recent Capgemini study found that only 6% of retail banks are planning on implementing AI in a meaningful way across their businesses although McKinsey reckons that doing so could add up to $340bn in value every year to the global banking sector, which roughly equates to 4.7% of total industry revenues. * SO WHAT? * Although I think that these tech investors are probably biased (given that they no

doubt invest in a lot of these AI companies) they also make valid points about how AI can speed things up (e.g. money laundering monitoring). I suspect that the main worries that banks have are not really about how many jobs that AI can help them cut (I would have thought that they have zero issue with that), it’s more about how secure their data and their clients’ data is and how prone the models are to hallucination and/or just being plain wrong. I also suspect that no-one really wants to be the first mover on this so perhaps it will need a smaller bank to put this into practice first before others start to adopt it when it’s deemed to be “safe”. I suspect a similar reticence happened with the adoption of internet banking for the same reasons.

Then in Law firm launches anonymous ‘microaggressions’ hotline (The Times, Jonathan Ames) we see that City law firm Hogan Lovells has launched a “microaggressions” hotline for staff to report “interactional bias” anonymously. This includes complaints about gender, race, sexual orientation and disability. * SO WHAT? * I think that this could well lead to a very fraught working environment although it is probably well-intentioned. I would question the anonymity because those who report such microaggressions are likely to be in the minority and those who are accused may well be able to guess the source of the report. If it is a case of a subordinate reporting a boss, things could get very tricky. If I was being cynical about this I would say that this is more about the company covering its 🍑 against future lawsuits, much in the way that HR is very keen on setting up your desk, chair and keyboard on your first day (in a big firm) because they are protecting themselves against potential RSI claims further down the line (as well as potentially just being nice to you – although I think it really is about the lawsuits 🤣!). I also think that this will be a bad idea because it will foster a working environment where everyone will be treading on eggshells and be paranoid about everything they say (and I say this as someone who had to endure casual racism against me for a number of years during my career) which, ironically, won’t be good for mental well-being. 

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!

BlackRock buys Preqin, TDR Capital looks for a buyer for BPP and Boeing buys Spirit AeroSystems…

BlackRock agrees to buy UK data group Preqin for £2.55bn (Financial Times, Brooke Masters, James Fontanella-Khan and Arash Massoudi) shows that the asset manager has agreed to buy Preqin, a UK private markets data group, for a lump cash sum as part of its move into alternative assets. Preqin specialises in monitoring the performance of private equity and hedge funds, so this will no doubt prove to be a useful acquisition! At the moment it looks like BlackRock will keep Preqin as a separate offering although it will integrate its data feeds into the company’s Aladdin and eFront risk management products. * SO WHAT? * In doing this, BlackRock has made its first move into the provision of financial information, something that seems to be becoming more of a trend at the moment as there have been a few deals involving specialist data providers over the last few years (e.g. S&P Global’s $44bn takeover of IHS Markit in 2020, the LSE’s purchase of Refinitiv in the same year in addition to other smaller deals). It was in the running to buy Preqin with both S&P Global and Bloomberg – and won!

Then in TDR Capital pursues City training business sale (Financial Times, Ian Smith) we see that PE firm TDR Capital (famous/infamous for being the firm that backed the acquisition of Asda and pubs group Stonegate) is looking at selling off its UK education business, BPP. It has appointed bankers from Houlihan Lokey and Morgan Stanley to lead the sales process that is expected to roll into action later this year. I think that this is another sign of growing confidence in the market as M&A activity continues to increase!

Elsewhere, Boeing agrees to buy Spirit AeroSystems in $4.7bn deal (Financial Times, James Fontanella-Khan, Maria Heeter and Arash Massoudi) shows that the US aircraft manufacturer is bringing the parts supplier it used to own back under its wing after splitting it off in 2005. It had to reach a separate agreement with Boeing rival Airbus before this could go ahead. Spirit makes the body of Boeing’s 737 Max Jet, which has come into extreme focus since manufacturing problems came to light. Boeing is buying it to boost safety in the manufacturing process.

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 haulage calls for better electric truck infrastructure, a Cambridge start-up makes a battery breakthrough, older renters get targeted, M&S launches new services and an AI-generated ad causes a stir…

In a quick scoot around some of today’s other interesting stories, UK haulage industry calls for investment in electric truck infrastructure (The Guardian, Lisa O’Carroll) shows that the Road Haulage Association is calling for the new government to throw some money at the currently miniscule charging infrastructure for electric trucks after observing that there is just one public charging point for HGVs in the entirety of the UK! Although the take-up of electric cars is rising, there are now only 300 electric HGVs registered. * SO WHAT? * Clearly, there is a valid point to be made here! However, I guess the problem is the same with HGVs as it was with electric cars – do you sell the vehicles first to create demand or create the network first to increase vehicle sales?! You would have thought that, with HGVs, you definitely need to create the infrastructure! Currently, energy company Gridserve is at the forefront of a government-backed trial to unveil 200 chargers that can deliver 350kW.

Meanwhile, I thought I’d include a story that came up at the end of last week – Cambridge start-up scores electric car breakthrough with five-minute charge (Daily Telegraph, James Titcomb) because it highlights that a company called Nybolt which claims to have developed an EV that can be charged in just five minutes – the same length of time it takes to fill a car with petrol! It introduced the prototype vehicle, which has a range of 155 miles, last week. * SO WHAT? * Although it is in talks with eight carmakers about using its tech in its high-end vehicles, it is hopeful that volume manufacturers will adopt it to – and will thus eliminate range anxiety in the process! It took less than five minutes to charge the battery from 10% to 80%. For comparison, it takes around 15 minutes to charge a Tesla Model 3 to around 80% on a fast charger, while other vehicles can take much longer. Basically, Nybolt’s batteries can be charged at higher voltages without the danger of catching fire. This will be particularly useful for drivers who can’t charge their vehicles at home! This sounds very exciting, don’t you think??

Although we hear a lot of comment in the news about young people not being able to get onto the housing ladder, in Middle aged and forever renting: developers’ new target market (Financial Times, Joshua Gabert-Doyon and Joshua Oliver) we see that there is an increasing number of older people who have not been able to get on it either! According to data from Paragon Bank, the over-35s accounted for over 57% of England’s private renters last year, which is an increase from 49% in 2013. Estate agent Savills reckons that new demand from the over-35s for private rental tenancies will shoot up by 8x by 2030. Corporate landlords are now noticing this trend and are looking to target this section of the market by offering tenants more stability than small landlords can provide. Companies looking at targeting this demographic include Grainger, which is the UK’s biggest listed buy-to-rent landlord, and they like this part of the market because older tenants’ earnings tend to be more stable than their younger counterparts and they also tend to move less often. Even smaller landlords are starting to favour this demographic because there tend to be fewer issues in terms of antisocial behaviour and noise (because we all want to go to bed early, right??). * SO WHAT? * Although build-to-rent could help address Britain’s problems with the supply of properties, it’s going to take some time before the building takes place. I guess the other major issue is that laws regarding renting could change under a new government, so visibility in this area is likely to be limited for now.

Then in Marks & Spencer to launch clothing repair and alterations service (The Guardian) we see that M&S is going to launch a clothing repair service as part of efforts to improve its sustainability credentials. It will offer alterations and repairs from August and has partnered with Sojo, a specialist repair and tailoring business founded in 2021. * SO WHAT? * This is yet another service that M&S is offering and it joins other companies – such as Mulberry, Barbour and Uniqlo – in providing in-house mending. M&S continues to tick all the right boxes!

Then in All-AI Ad From Toys ‘R’ Us Inspires Debate Over the Future of Marketing (Wall Street Journal, Patrick Coffee) we see that a new one minute long Toys ‘R’ Us video ad is creating a stir as it has been made only using Sora, an OpenAI tool that converts text to video that has yet to be released to the public. Watch this. It is pretty incredible what AI can do!!! This is going to cause a lot of panic…and for those of you wondering, Toys ‘R’ us currently only has two standalone stores in the US but has a presence in every Macy’s.

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…

Can you think of anything that rhymes with the word “orange”? This guy can (but TBF he seems to be quite good at this sort of thing 🤣)…