Monday 25/06/18

  1. In MACRO & OIL NEWS TODAY, we see more trouble brewing on the US/China trade wars, Erdogan wins in Turkey and US shale oilers do well whatever OPEC decides.
  2. In TECH NEWS, YouTube fights Facebook for creators, Amazon marches on in Japan and Commerzbank (yes, I know it’s a bank and not a tech company, but bear with me) has a dabble with AI to create research reports.
  3. In INDIVIDUAL NEWS, there’s one restaurant chain that’s actually expanding on the UK high street.
  4. In OTHER NEWS, I bring you some World Cup-themed interior design ideas and some shocking news about halloumi. For more details, read on…



So Trump targets more areas to annoy China, Erdogan – surprise, surprise (NOT) – wins the election and shale oilers rub their hands…

Trump plans new curbs on Chinese investment, tech exports to China (Wall Street Journal, Bob Davis) shows Trump’s latest moves to p!ss China off as he is looking at banning many Chinese companies (specifically, firms with at least 25% ownership) from investing in US tech firms and blocking certain tech exports in a bid to slow down China’s progress in its “Made in China 2025” manifesto where it is aiming

to be a global leader in 10 areas of tech including IT, aerospace, electric vehicles and biotech. More details on Trump’s measures and their implementation are expected to be announced by the end of this week. *SO WHAT? * The final details are being hammered out, so the measures that are eventually announced could be different to those above. Just 

by way of observation it would seem that the investment restrictions will have less impact than you’d think because there’s already been a huge drop-off of inward investment from China – but industry is probably more concerned about taking a dent in exports.

In Trump’s trade war ‘could trigger fresh downturn’ (The Guardian, Angela Monaghan) we see that the Bank for International Settlements (BIS) is getting in on the Trump-bashing as Agustin Carstens, the BIS general manager, says in the organisation’s annual report on the global economy that “One possible trigger of an economic slowdown or downturn could be an escalation of protectionist measures. Its impact could be very significant, if such escalation was seen as threatening the open multilateral trading system. Indeed, there are signs that the rise in uncertainty associated with the first protectionist steps and the ratcheting up of rhetoric have already been inhibiting

investment”. No sh!t, Sherlock. The report went on to congratulate central banks for helping to lead their respective economies out of the depths of the financial crisis ten years ago, but that a normalisation of monetary policy (i.e. raising interest rates and unwinding quantitative easing) was essential “to rebuild policy space”. *SO WHAT? * Nothing earth- shattering here, but this is just the latest report to back up the consensus opinion that Trade Wars Are Bad and that Getting Back To Normal Is Good. And they probably pay a lot of people a lot of money to come up with this stuff…

Erdogan claims victory in Turkey elections (Financial Times, Laura Pitel, Funja Guler and Ayla Jean Yackley) heralds another five years of Recep Tayyip Erdogan as he won in yesterday’s presidential and parliamentary elections with 52.5% of the vote, with main challenger Muharrem Ince getting 30.8%. Erdogan’s ruling Justice and Development Party (AKP) will have a majority in parliament when combined with its allies in the ultranationalist party. Ince has grudgingly conceded defeat and will make a statement at midday local time today. * SO WHAT? * Although the AKP garnered a reduced vote (42.4% this time around versus the 49.5% it got in the November 2015 elections), the ultranationalist

Nationalist Movement Party (MHP), which has strong links with the AKP, performed particularly well by getting 11.2% of the vote which, combined with the AKP, gives the government a majority. Erdogan can rest easy after Ince’s fiery rhetoric and campaign promises to restore Turkey’s checks and balances eventually came to naught. It’ll be interesting to see how he interacts with the Eurozone, especially on immigration, given his own particular style and his backing from the MHP.

US shale companies motor ahead despite OPEC (Wall Street Journal, Rebecca Elliott and Christopher M Matthews) shows how US shalers will benefit from OPEC’s decision on Friday to boost oil production by 600,000 barrels of oil per day as the prices will continue to be strong, given that the output rise was relatively modest. US oil production has been growing at record levels this year, hitting 10.9million barrels a day this month, making it the world’s second biggest oil producer after Russia but ahead of Saudi Arabia. * SO WHAT? * Increasing production to take the edge off the oil price is no bad thing given that high prices – although great for the oil producers in the short term – have long term costs in that they dent economic growth which then leads to reduced demand. Although OPEC tried to put

US shalers out of business by driving down oil prices from $100 a barrel in 2014 to less than $30 a barrel in 2016, US shale production has actually proved to be pretty resilient and they have survived to play a major part in making America OPEC’s biggest competitor in oil production.



In tech news, Youtube fights to fend off Facebook, Amazon continues to motor in Japan and Commerzbank dabbles with AI to generate research reports…

YouTube fights to keep curators happy as Facebook circles (Financial Times, Tim Bradshaw and Hannah Kuchler) highlights YouTube’s current efforts to help its content creators make money as ad revenue (the “traditional” way for creators to earn money from their legions of subscribers) has come under pressure following numerous instances of companies having their ads placed next to content that, shall we say, doesn’t exactly reflect what their brands stand for. YouTube is looking at helping creators sell merch to their fans and adding new kinds of paid subscriptions as competition is hotting up from Facebook with its newly-launched IGTV on Instagram and Watch that aim to attract content creators. * SO WHAT? * YouTube is humungous in this area with 1.9bn monthly logged-in users (up from 1.5bn a year ago) and Neal Mohan, YouTube’s head of product, points out that “We have creators with viewerships bigger than many or most cable channels, that have followings that are bigger than the populations of many countries”. However, Facebook also has a rather large audience and, with the introduction of its new services, you can see that it is trying to keep traffic that it previously lost to YouTube – for instance, lots of Instagram creators have been directing traffic to their YouTube channels until now. For now it would seem that creators won’t be abandoning one platform for another. As Lele Pons, who has over 25m followers on Instagram and who will be launching a new cooking show on IGTV, put it, “I will still be posting on YouTube as much as Instagram – you never know what works. On the internet, you never know what will happen”. Still, YouTube would do well to watch out for Facebook – look at what it did to Snapchat.

Amazon’s scale in Japan challenges rivals and regulators (Financial Times, Kana Inagaki) looks at how Japan has become Amazon’s second biggest overseas market by revenues after Germany and how its growth has now attracted the attentions of the Japan Fair Trade Commission which is now investigating allegations that the company has forced suppliers to absorb costs when it offers discounts in its online marketplace. Amazon overtook local rival Rakuten in 2016 and had a 23% market share in Japan’s internet retail market versus Rakuten’s 18.5% but the latter is trying to up its game by creating its own logistics and delivery network within the next two years (Amazon has its own proprietary network). There will be intensifying competition between the two as Amazon increases its efforts to push groceries via Whole Foods and Rakuten turns on the pressure via its tie-up with US group Walmart in online grocery delivery. * SO WHAT? * Clearly, I have no idea what the investigation is going to bring up, but it is interesting how Amazon has done so well in Japan considering the fact that the country has often been a graveyard for retailers originating from outside Japan. Its cutting- edge infrastructure will be tough (and very expensive) to beat for any of its rivals, but they have to keep fighting otherwise Amazon will just pulverise them.

Although Commerzbank sets AI to work writing analyst reports (Financial Times, Laura Noonan) doesn’t sound exactly tech because Commerzbank is, well, a bank – the fact that it has announced that it is experimenting with using AI to generate reports is very techie. It’s generating

reports on sports at the moment, but the intention is to see whether it can write analyst reports as MiFID II forces banks around the world to cut research costs. The bank is partnering up with Retresco, a content automation company, and the project is at an early stage. The idea of report automation has been bandied around by other bankers as well and is particularly relevant given that MiFID II is applying increasing pressure on research costs. * SO WHAT? * Earnings reports are a real ball-ache for researchers to write as it is often the case that they just plug numbers into their model and send them out to clients with some kind of bland overview like “numbers were in line. No surprises”. They sort of have to send this stuff out because everyone else will be doing the same and, although fund managers complain about this limited value-add research, they still need the raw numbers. This area is obviously ripe for automation, but I think it will be years (if ever) that they will replace research analysts as it is the INTERPRETATION of the raw data that contains the real value.



In individual company news, I bring your attention to a restaurant chain that’s actually in growth mode at the moment…

Lounge suits diners as big names struggle (The Times, Dominic Walsh) highlights a company called Loungers that runs 126 outlets with the Lounge and Cosy Club brands, which has opened 12 new sites this year and is on track to reach 140 by the end of 2018. Loungers’ chief exec, Nick Collins, said this would be the third consecutive year of at least 25 openings and it has a healthy future pipeline.

* SO WHAT? * The chief exec says that Loungers’ has succeeded where the likes of Byron, Prezzo and Jamie’s Italian have failed because of its choice of locations and its “third space” formula which pits it more against the likes of Costa Coffee, Caffe Nero and local sandwich shops rather than dining operators. So it’s not all bad on the high street!



… And finally, in other news…

Given England’s surprisingly strong win in the World Cup yesterday, maybe you could be inspired to indulge in a little light interior design as per the bloke in Woman Comes Home To Find Her Fella Has Turned Living Room Into Football Pitch (Ladbible, Claire Reid c). Nice.

And then I thought I’d end on a warning note – Britain Facing Halloumi Shortage As Farmers In Cyprus Struggle To Meet Demand (Ladbible, Rebecca Shepherd Oh no! I love this stuff!

As always, thank you for reading the WIFI!