Monday 27/03/23

1. In MACRO NEWS, Putin plans nukes in Belarus and Russia adopts China’s renminbi
2. In BANKING NEWS, we look at the ongoing impact of the current banking crisis
3. In TECH NEWS, we look at the practicalities of banning TikTok in the US and why Chinese apps are so popular while Twitter has a source code leak and Musk offers stock options
4. In MISCELLANEOUS NEWS, Northvolt aims to become Europe’s biggest battery maker, Britain’s battery plans look tricky, experts give their views on John Lewis and foreign buyers evaporate after a crackdown on “Londongrad”
5. AND FINALLY, I bring you something to while away a bit of time…

So Vlad goes nuclear and embraces the renminbi…

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 Vladimir Putin plans to deploy tactical nuclear weapons in Belarus (Financial Times, Max Seddon and Felicia Schwartz) we see that Putin is looking at deploying tactical nuclear weapons in Belarus, upping the ante in the Ukraine war. This represents a marked escalation in tensions and Putin said that this was in response to a request from Belarussian leader Alexander Lukashenko. That said, UN National Security Council spokesperson Adrienne Watson said that the US has yet to see any evidence of Russia edging towards using nuclear weapons.

📢 JUST A REMINDER FOR YOU! I will be reviewing the business and financial markets news of March with Jake Schogger of the Commercial Law Academy THIS WEDNESDAY, so if you want to watch/listen in, you need to register HERE. Hopefully see you there!

Russia embraces China’s renminbi in face of western sanctions (Financial Times, Anastasia Stognei) shows that Russia now recognises the renminbi as one of its main international reserve currencies, rather than the dollar, as western sanctions continue to bite. China has been touting the currency for wider global adoption, but it has not become widespread but clearly Russia is pretty interested now that it had $300bn of its international assets frozen and been frozen out of global markets (although it seems like it’s taken a while!). * SO WHAT? * This seems to be an inevitable move and, in doing so, Russia is tying itself much more closely to China as a trading partner. This could be tricky as Beijing has, in the past, suddenly devalued its currency – and it’s very hard to predict. Still, there aren’t too many options for Russia at the moment…

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!

The banking repercussions continue…

Jay Powell and Janet Yellen struggle to calm nerves in banking crisis (Financial Times, James Politi and Colby Smith) reminded us that although both the Fed chief and the US Treasury Secretary presented a united front last week by reassuring depositors that their money was safe, investors weren’t wholly convinced (bank shares were sold off). This wasn’t helped by Yellen’s subsequent squirming when asked by a senator whether all banks deposits – even those above the current limit of $250,000 – would be guaranteed. IMF chief warns global financial stability at risk from banking turmoil (The Guardian, Anna Isaac) provides unhelpful observations from the IMF chief as the lender of last resort does what the IMF knows best – stating the obvious (a bit like the credit ratings agencies who are geniuses at telling us what’s already happened 🤣).

In terms of actual and immediate consequences of the recent bank shenanigans, Traders pile into bets on gold price rally (Financial Times, Nicholas Megaw) shows that traders are continuing to push the gold price up as investors flock to the traditional “safe haven asset” against the backdrop of banking turmoil, Money market funds swell by more than $286bn as investors pull deposits from banks (Financial Times, Brooke Masters, Harriet Clarfelt and Kate Duguid) shows that Goldman Sachs, JP Morgan Chase and Fidelity all saw big inflows into money market funds as investors fretted about the safety of bank deposits. So far, in March, a deluge of $286bn has poured into these funds, making it the biggest month of inflows since the depths of the pandemic as they tend to hold very low-risk assets that can be quickly traded. Still, Deutsche Bank leads sell-off in European bank shares (The Guardian, Anna Isaac and Mark Sweney) shows that investors are trying to seek out the next potential Credit Suisse, putting pressure on the share price. Deutsche Bank has lost 28% since the beginning of the month and fell by up to 14% on Friday before settling down at the end of the day 8.6% down.

City braces for tighter regulation after banking turmoil (Financial Times, Laura Noonan, Siddharth Ventkataramakrishnan, Ian Smith and Emma Dunkley) shows that City bosses are expecting greater

oversight following the recent banking collapse whilst the government intends to simultaneously unpick some of the more unwieldy financial services regulations (via the “Edinburgh reforms”) to make it more nimble but ‘A devastating impact’: SVB’s collapse leaves start-ups with a funding hole (Financial Times, George Hammond and Tim Bradshaw), which highlights the negative impact recent events are going to have on start-ups who may find banks are much more nervous about doling out the cash and Wine growers fear funding will wither after fall of Silicon Valley Bank (Financial Times, Patrick McGee and George Hammond) looks at even broader repercussions as the wine trade worries about higher costs of doing business and the ongoing impact of climate change. * SO WHAT? * As time goes on, the repercussions of the events of recent weeks will continue to emerge. As far as the top-down situation is concerned, I think that Yellen and Powell are having to tread a fine line of committing enough to reassure a nervous market and over-committing funds that will become a burden that could hold back future growth.

Bank failures: lessons of past crises echo today (Financial Times, Lex) does a great job of giving us the history of how banking safeguards have developed over the years after various crises but also makes the point that the more safeguards there are, the smaller the incentive for banks to impose measures that mitigate/eliminate financial risks in the first place! It may not be 2008 all over again – but this banking turmoil is not without danger (The Guardian, Richard Partington) observes that although this latest run on banks isn’t the same as 2008. This time around, the problems centre on a few troubled banks while major lenders are in a much healthier position now than they were then thanks to tighter regulation on capital and liquidity requirements. * SO WHAT? * The difficulty in the UK lies in a shaky economy trying to avoid recession while the government insists on removing some aspects of legislation that were put in place in the wake of the 2008 financial crisis to avoid another one! This is clearly going to be a tricky job. This time around, will the government decide to use public money to encourage crowdfunding of private businesses?

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!

We look at the practicalities of a TikTok ban and the latest at Twitter…

Banning TikTok in the U.S. Is Easier Said Than Done (Wall Street Journal, Byron Tau) reckons that the US government has a number of methods at its disposal to attack the company’s core business interests but apparently limiting access to its content could be more susceptible to legal challenge while enforcement could also be problematic. Donald Trump’s attempt to ban TikTok via executive order never came to fruition (he left office while this was being debated) but two federal judges were doubtful about its legality. A change in the law might actually be necessary to effect a blanket ban as the 1977 International Emergency Economic Powers Act (IEEPA) does not allow for things like the regulation of “personal communication”, which is something that could cover some aspects of TikTok’s service. There are a number of proposals being debated at the moment that could target TikTok either directly or indirectly – like the Data Act and the Restrict Act, but they have yet to be finalised. The government could also make it difficult to partner with US cloud services and force Apple and Google to delist the app from their respective app stores (although there is no precedence for this). A TikTok Ban May Be Just the Beginning (Wall Street Journal, Christopher Mims) suggests that a TikTok ban could just be the tip of the iceberg as other apps like CapCut, Shein, Temu, Alipay and WeChat could also potentially be targeted while Why Chinese Apps Are the Favorites of Young Americans (Wall Street Journal, Shen Lu, Karen Hao and Raffaele Huang) contends that although their algorithms are clearly very advanced, the fact that they have had to survive a highly competitive domestic market means that they are just that much better-developed than other American apps. In America at the

moment, four out of the top five downloaded apps so far this month are Chinese – and the fifth is Facebook! It seems that Chinese apps have really honed the way they understand what users want, which has also added to their appeal. * SO WHAT? * Although TikTok is being targeted at the moment, if you were to apply the same rules to all then there are going to be a lot of unhappy users out there! As I’ve said before, the thing is that it seems somewhat unfair to target Chinese apps and leave the others untouched. As I’ve said here and in the podcast, Facebook is a prime example of a company that has YEARS of data on so many people and yet nothing is being said about it or Instagram, for instance. It certainly seems to be a case of “do as I say, not what I do” here!

Twitter takes legal action over source code leak (Financial Times, Richard Waters and Hannah Murphy) highlights the social media company’s legal action to stop a potentially damaging leak of the source code that glues its service together after parts of its were posted online on GitHub. Source code is highly valuable to hackers who could use it to attack the system. Given how many people Elon Musk has sacked since he took over the firm, it’s not exactly surprising that something like this would happen IMO!

Meanwhile, Elon Musk Offers Employees Stock Grants Valuing Twitter at About $20 Billion (Wall Street Journal, Alexa Corse) highlights Musk in a more benevolent mood as he announced stock awards for staff and said in a note to staff that he sees a way towards a “>$250B valuation” – a tenfold upside to current levels. * SO WHAT? * This should no doubt buy Musk some goodwill and a bit of time, but he’s going to have to publish some kind of proper roadmap and actually deliver on it.

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!

Northvolt chases the money, Britain gets left behind, expert give their opinion on John Lewis and foreign property buyers ditch London…

In a quick scoot around some of today’s other interesting stories, Northvolt in talks to secure $5bn to become Europe’s biggest battery maker (Financial Times, Ivan Levingston and Richard Milne) shows that the Swedish start-up is angling for a ton of cash from a number of banks to fund its goal of being the #1 battery manufacturer in Europe. It already has one gigafactory underway but it is keen to build another one either in Germany or the US – but I guess this will depend on how much money it can get in incentives from either side. European battery making seems to be going from strength to strength!

On the other hand, Britain’s electric car fate is sealed without homegrown batteries (Daily Telegraph, Howard Mustoe) suggests that our battery manufacturing hopes may be dead in the water unless the upcoming Advanced Action Plan comes up with something that manufacturers can look forward to! * SO WHAT? * As things stand, particularly with the high profile failure of Britishvolt, battery manufacturing in the UK is looking particularly vulnerable although Nissan continues to invest in batteries made

here and BMW has indicated that it could potentially be supplied by batteries made in the UK. Mind you, it’s going to have to be pretty spectacular if it is to offer any kind of attraction versus the US’s Inflation Reduction Act and its expected response from the EU.

Meanwhile, How to solve a problem like John Lewis? Retail experts give their view (The Guardian, Sarah Butler and Zoe Wood) gives a really interesting insight from retail industry insiders about what needs to be done to restore John Lewis’s fortunes – ranging from ditching loss-making stores, cutting costs, be more innovative, focus more on sorting out the core businesses. * SO  WHAT? * As I keep saying, I think the company is wasting too much time on peripheral things and needs – as a matter of urgency – to expend its energy and resources on its core offering.

Then in Foreign property buyers plunge after ‘Londongrad’ crackdown (Daily Telegraph, Matt Oliver) we see that efforts to stop criminals laundering money via British property seem to be working as research has shown that the number of purchases by companies based in tax havens has fallen by almost a third in volume and by around 90% in value. A lot of this would have been made up by Russians who tend to invest via Cyprus or the Bahamas. This does make you wonder what was going on before the Ukraine war shined a light on all this kind of activity!

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…

Feel like a bit of a break?? Well see whether you can do this: Tricky brainteaser takes 15 seconds to solve – but can you beat the clock? (The Mirror, Amber O’Connor). I warn you – this is very annoying 🤣.