Thursday 14/11/24

As readers of Watson’s Daily, you will no doubt understand the importance of “commercial awareness”. If you’d like to know more about it and how to improve it, I’m running a commercial awareness bootcamp with Jake Schogger of the Commercial Law Academy on Saturday November 16th. We only do this once a year, so if you’re interested now’s the time! We cover a lot of ground and it’s very reasonably priced for the huge amount you get. If this sounds like something you’d be interested in, click HERE to get registration and even details (for more about the event and the topics we’ll be covering, you’ll need to scroll down that page).

Also, and hopefully you’ll know this by now, it was 10 years ago on November 7th that I published the first edition of what was to become Watson’s Daily. I wanted to mark this by going into London and having an informal meet-up but that got postponed because of the threatened Tube strikes (although they subsequently got cancelled at the last minute!). Anyway, I’m going to do this in London TODAY in Soho (BrewDog in Poland Street from 5pm) so if you’re around and you want to say hello I’ll be there (although I won’t be there all night)! Hopefully see you there! Ralph said he’d come along as well 👍IF YOU WANT TO CONTACT ME THIS EVENING, THE BEST WAY WILL BE TO DO IT VIA LINKEDIN.

US inflation up but Fed likely to continue cutting interest rates (The Times, Jack Barnett) highlights the latest data from the US Bureau of Labor Statistics which showed that the annualised rate of inflation was actually up by 2.6% in October from 2.4% in September although core monthly and annual inflation (which remove more volatile elements such as food and energy) stayed flat. This was expected by the market and although the headline rate is still above the Fed’s 2% rate, ratesetters continue to make noises about further interest rate cuts. The market expects a 0.25 percentage point cut at the next meeting in December.

Meanwhile, Donald Trump secures control of Congress as Republicans win House majority (Financial Times, Lauren Fedor) shows that Republicans now have a majority in the House of Representatives which means that Trump now controls both chambers of the US Congress. This means that he now has the heft to push a pretty radical agenda. This really is quite something. * SO WHAT? * Trump had a unified government the last time he was in office but then Democrats managed to win back control of the House at the midterm elections in 2018. However, this time around many reckon Trump will have a stronger grip on Congress given the sort of loyalty he commands. I would also suggest that he knows a lot more about what he’s doing this time whereas you got the impression he was learning on the job in his first term. It is worth noting that Senate Democrats can still block some of Trump’s policies (like tightening immigration on the border with Mexico or repealing the Affordable Care Act, for example) but Trump will certainly have the upper hand.

RWE scales back €55bn renewables bet after Trump win (Financial Times, Laura Pitel) highlights an example of the effect of Trump’s victory last week as the German company, which is one of Europe’s biggest power producers, has decided to rein in its aggressive push into renewables. It was already under pressure to do so by parties such as activist investor Elliott, but Trump’s victory – and the perception of the negative impact this will have on renewables – has forced its hand. In a statement made yesterday, it outlined plans to cut net investments in green projects to €7bn in 2025-26 from €10bn in 2024. RWE’s lean away from green should satisfy the sceptics (Financial Times, Lex) says that investors were baulking at the potential costs of the transition to renewables so this latest move will no doubt be seen as a positive, particularly as it’s combining this with doing a €1.5bn share buyback (which investors love). * SO WHAT? * RWE won’t be the last company to contribute to the renewables fallout from Trump’s election. In this case, it was battling against investor sentiment already – and I suspect that this will be true elsewhere. For purer renewable plays (particularly wind, which Trump is specifically targeting), I would have thought that there will be some consolidation along with a few failures in order to weather the inevitable storm coming from America.

That being said, Ill wind for renewable energy in US to boost UK projects (The Times, Emma Powell) cites the CEO of SSE as saying that Trump’s championing of fossil fuels at the expense of renewables means that supply chain shortages could ease for us – although the downside would be more demand from the US for parts (e.g. gas turbines) for gas-fired plants. * SO WHAT? * At the moment, it seems that everyone’s focusing on the negative impact of Trump’s win on the

whole renewables ecosystem but it won’t all be bad. Like I said before, I think that there will have to be more consolidation within the industry but taking a big player in the supply chain out of the reckoning may accelerate things for the rest of us.

China arms itself for potential trade war with Donald Trump (Financial Times, Edward White and Joe Leahy) highlights what is now in China’s arsenal should Trump decide to deepen the trade war with the country. It was caught unawares when Trump won back in 2016 and his tariffs but now it has the “anti-foreign sanctions law” that allows if to fight back with its own countermeasures, such as putting companies on an “unreliable entity list”. It is also able to weaponise its dominance of many natural resources such as rare earths and lithium which, TBH, I don’t think we’ve seen the full extent of yet. * SO WHAT? * I get the impression that China retaliation so far has been quite targeted – but if Trump follows through on his threat to slap 60% tariffs on ALL Chinese imports then the gloves could really come off.

Elsewhere, How Spain is outperforming its European peers (The Times, Jack Barnett) is a really interesting article that delves into why Spain is doing so well while other countries in the Eurozone (particularly Germany) are having such a nightmare. Spain’s economy expanded by 3.4% year-on-year in Q3 as GDP increased by 0.8% versus the previous quarter making it one of the best growth rates in the eurozone. * SO WHAT? * This is particularly impressive when you consider that it was only back in 2012 that it was at the epicentre of the European government debt nightmare – but now it’s got the highest economic growth rate of any advanced economy!  Like others in the Eurozone, Spain has benefited from inflation weakening over the last year but in addition to this it has reaped the benefits of a more relaxed approach to immigration (PM Sanchez has even gone as far as saying that “The contribution of migrant workers to our economy is fundamental”), the ongoing strength of its tourism industry, inward investment from overseas (particularly in high value-added sectors) and supportive fiscal policy. At the moment, it is thought that the economic impact from the recent floods that hit Valencia and Barcelona will be limited in the overall scheme of things.

Back home, Labour loses 40% of council seats defended since UK general election (Financial Times, Lucy Fisher) highlights a disappointing trend for the government as a large number of the council seats that Labour has defended in by-elections since the general election have been lost in a sign of its falling popularity since its victory in July. Most of these seats were lost to the Conservatives. * SO WHAT? * There is usually a bit of push-back after a general election but this is quite substantial and will clearly be something that gives Kemi Badenoch to work with. It is also worth noting that Starmer’s personal approval ratings have fallen faster than any British PM in the modern era from +11 prior to the election to -38 this week, according to research by a group called More in Common. 

Then in Reeves to force UK council pensions to consolidate into 8 ‘megafunds’ (Financial Times, George Parker and Mary McDougall) we see that the UK chancellor is intending to force the consolidation of Britain’s fragmented local government retirement schemes (collectively worth £391bn), which she said could unleash £80bn worth of investment. * SO WHAT? * This is not as extreme as some measures that had been suggested most recently – like forcing pension funds to invest in British assets or creating one massive megafund to rule them all. The eight enlarged funds would be worth about £50bn on average by 2030, be authorised by the FCA and would bring to a close the role of councils in administering their money. Reeves is planning next year to enact “some of the biggest reforms to pensions in a generation”. The devil will be in the detail but this sounds like a major move.

In crypto news, Bitcoin clears $93,000 and Dogecoin soars amid Trump-fueled crypto rally (The Guardian, Lauren Aratani) shows that bitcoin hit another high yesterday – but other cryptocurrencies have also felt the love! Dogecoin, for instance, has seen its value skyrocket by 150% since election day while bitcoin has risen by a third over the same time period. Bitcoin’s big bang moment is impossible to ignore (Financial Times, Katie Martin) is an interesting article which takes a look, from a crypto-sceptic’s point of view, at why the current move is gaining traction. Reasons include the likelihood that the regulatory regime is going to be more positive/supportive about crypto and because there’s talk of the US building up national reserves of bitcoin to a scale that will rival gold reserves. If the latter, in particular, happens then bitcoin could be moonbound…

Amazon Launches ‘Haul’ to Sell Low-Priced Items to Compete With Temu, Shein (Wall Street Journal, Denny Jacob) shows that Amazon.com is launching a new element to its app that’s focused on items that cost $20 or less as a way to combat competition from the likes of Temu and Shein. It’s called Amazon Haul (sounds more like a trucking logistics company to me 🤣) and was rolled out to some customers in the US yesterday. The new storefront offers fashion, electronics and other items in a more “fun, easy and affordable” way and there’s a lot of effort to give it its own identity. * SO WHAT? * This is targeted at Amazon customers who want to save money and who are willing to wait for products to be sent from China. This sounds quite interesting and shows that even the mighty Amazon is taking the threat of Shein and Temu seriously. I do wonder, though, how profitable it will be. Still, it’s early days…

Back home, Homebase collapses into administration with thousands of jobs at risk (The Guardian, Joanna Partridge) highlights the failure of the DIY store that nobody seems to want (it’s had a lot of owners over the years!). The owner of The Range and Wilco, CDS Superstores, has bought 70 of the stores – saving up to 1,600 jobs in the process – in addition to the brand and intellectual property. Homebase will continue to trade online and stores bought by CDS will keep trading until the handover, upon which time they will be rebranded as The Range

superstores. Homebase recently agreed the sale of 11 of its UK stores to Sainsbury’s but the future of 49 remaining outlets and 2,000 jobs hang in the balance. * SO WHAT? * This is nasty. Homebase has suffered a lot throughout the cost-of-living crisis but I wonder whether CDS is getting a bargain here – buying at the bottom – because it seems that the UK economy is picking up and the housing market is also gaining ground (the fortunes of DIY/soft furnishing stores tend to move in line with what’s happening in the housing market). We’ll just have to see…

Then in Just Eat Takeaway to sell US arm Grubhub at a loss of more than $6.5bn (The Guardian, Joanna Partridge) we see that the food delivery company is selling Grubhub to delivery-focused casual dining chain Wonder for just $650m a mere four years after it snapped it up in a deal that was worth $7.3bn in June 2020😱! Just Eat Takeaway has been trying to offload this turkey since 2022 as online food shopping collapse. * SO WHAT? * Just Eat Takeaway bought Grubhub originally to give it access to the US food delivery market and “won” the deal in competition with Uber (didn’t Uber dodge a bullet there, eh?!). It sounds like a reasonable deal and it was probably powered by less fluff than the deal done in 2020! What a shocking loss though! The deal is expected to close in Q1 of 2025.

AI frenzy allows old school US telecoms to dodge death (Financial Times, Lex) is an interesting article which points out that some fuddy-duddy telecoms companies have been benefiting big time from the AI fun bus. For example, US regional telecoms company Lumen Technologies has been raised from the (almost) dead as its share price has boomed by an astonishing 700% since the spring thanks to it signing $8bn worth of contracts with the likes of Google, Amazon and Meta as their internet backbone provider. AI hyperscalers and datacentres alike need access to the company’s ultrafast fibre network. It certainly seems that Lumen and its peers look set to benefit from Big Tech!

In social media news, What is Bluesky Social and why are people flocking to it after Trump victory? (Daily Telegraph, Matthew Field) shows that Bluesky, a Jack Dorsey-founded alternative to X, has seen a major uptick in popularity since Trump won the election. Apparently, it has seen 1m new users sign up in the seven days since the election! It is now heading for 15m users and has been near the top of the download charts in the US and UK in the last few days. Interestingly, although X has seen record usage recently, there has been a sudden rise in deactivations. Bluesky

is very reminiscent of Twitter of old and is set up as a public benefit corporation in the US. * SO WHAT? * Although this is good news for Bluesky, it still only has 15m users versus the 600m monthly active users on X. The is, as yet, no advertising on the platform. It remains to be seen as to whether it can ever get the reach that X can.

In streaming news, Spotify Takes Aim at YouTube in Battle for Podcasts (Wall Street Journal, Anne Steele) shows that Spotify is now trying to beak YouTube’s dominance of video podcasts. It is now going to pay hosts of popular videos and hit certain viewing thresholds and it is planning on offering premium subscribers a way to access popular shows without ads from January in certain countries. * SO WHAT? * It seems that while Spotify is popular for podcasts, there is an increasing trend of people watching or listening to their favourite shows on YouTube. It is interesting to note that Spotify overtook Apple as the #1 podcast platform in the US in 2021 but last month YouTube became the #1 for podcast listening in the US. Since the pandemic, video podcasts have been growing faster than audio podcasts on Spotify and the number of users has boomed by 88% over the last year!

In a quick scoot around some of today’s other interesting stories, Geely Automobile Nearly Doubles Profit on Strong Sales (Wall Street Journal, Jiahui Huang) shows that the Chinese automaker almost doubled its profits and grew its revenues by 20% in Q3 thanks to rising sales and a better product mix. Its sales were strong both domestically and overseas. What a contrast to most of the European and US makers!

UK renters hit by housing supply squeeze (Financial Times, Valentina Romei) cites the latest RICS survey which shows that a combination of the falling supply of rental properties coming to market and rising demand has pushed prices up for tenants who are already being hit hard by rent rises. * SO WHAT? * Although the raising of stamp duty for landlords buying rental properties in the the recent Budget might be good for buyers (= more landlords selling out) the

shortage of rental properties will remain a problem. It is worth remembering, though, that although individual landlords seem to be selling out, a recent report said that corporate landlords and buying up – so maybe the shortfall of rental properties won’t be AS bad as it seems…

There’s more disappointment for the LSE in Klarna chooses New York over London for much-anticipated IPO (The Guardian, Kalyeena Makortoff) as the Swedish BNPL giant has filed for an IPO in the US. A price range and the number of shares available in the IPO are yet to be announced. * SO WHAT? * Maybe this is a reaction to the imminent regulation by the FCA or maybe it’s just trying to get a better valuation Stateside – or maybe it’s a bit of both! Why not stick it to the UK and get a pumped up valuation from the arguably more profligate Americans while you’re at it, eh?!

Just for a change, I thought I’d talk a bit about drinking and fighting 😱. On the drinking side of things I thought I’d show you the right way to make and drink a flaming Sambuca and, let’s say, a more casual way of drinking one. I actually love Sambuca! Then, given what’s coming up tomorrow/early hours of Saturday, I thought I’d give you a boxer’s perspective of the upcoming Jake Paul vs Mike Tyson fight. FWIW, I think the longer it goes on the more likely Paul will win, but if Tyson gets through Paul’s defences his power will mean that it will be curtains for the young lad. Whatever happens, I hope that both fighters will be OK afterwards…