Thursday 18/07/19

  1. In TECH NEWS, G7 nations can’t agree on digital tax, Neuralink announces some amazing stuff and South Koreans complain about 5G
  2. In ONLINE NEWS, Netflix loses subscribers, eBay lifts profit forecasts and FaceApp is accused of dodgy data usage
  3. In CONSUMER/RETAIL NEWS, UK inflation steadies, Watches of Switzerland enjoys good times, Hotel Chocolat puts in a solid performance and GVC benefits from online gambling
  4. In OTHER NEWS, I bring you a cautionary tale involving a vacuum robot as well as some arty buildings…



So G7 can’t agree, Neuralink announces some amazing developments and 5G ain’t all it’s cracked up to be…

G7 nations struggle to reach compromise on digital tax (Financial Times, Victor Mallet) shows how difficult it has been for the US, Japan, Germany, UK, France, Italy and Canada to agree on how to tax big tech companies who minimise what they pay by booking profits in low-tax countries. Funnily enough, the US is against measures like France’s new 3% turnover tax given that America is the country whose companies are going to be hit hardest. * SO WHAT? * It seems like everyone wants some kind of tax harmonisation to make it harder (or, ideally, impossible) for companies to just shuffle their profits around the world so they can make the minimum tax spend. Given that the G7 can’t decide with seven nations in the room, prospects for an OECD decision when this is debated in a year or so’s time – with its 129 member states – don’t look all that great. Big Tech lobbyists will obviously do their best to delay/disrupt any decision and in the meantime, places like Ireland will continue to rake in the revenues!

Elon Musk unveils plans to build mind-reading implants: ‘The monkey is out of the bag’ (The Guardian, Julia Carrie Wong) is a very exciting story about the “brain-machine interface” startup Neuralink which announced some major advances in a presentation on Tuesday night at the California Academy of Sciences in San Francisco. Basically, the company implants tiny chips into the brain which

communicate with machines and can enhance the functionality of “implantees” in conjunction with AI. Neuralink is hoping to get FDA approval for a human clinical trial next year on a version of its device that is “only intended for patients with serious unmet medical diseases”. * SO WHAT? * This sounds great, but like most of Musk’s ventures, it sounds very costly, time-consuming and is beset with practical challenges. However, everyone loves a trier – and wouldn’t it be amazing if Neuralink (and other such companies in this field) could achieve its goals! Parkinson’s could be cured, blind people could be given their sight back etc. Wow.

Then in South Koreans complain at poor quality of 5G network (Financial Times, Song Jung-a) we see that the world’s biggest 5G network is getting criticised for poor quality, slow connections and a lack of apps that take advantage of the new tech. The country launched 5G in April and over 1.6m people went 5G by the end of last month, accounting for 77% of 5G users globally. * SO WHAT? * First World problems and all that, but it would seem that these teething problems are due to a shortage of base stations and the whole US/whole world vs Huawei thing could make rapid expansion more difficult. Samsung is aiming to release a 5G smartphone next month with Apple’s offering expected next year. This sort of thing happens with every new generation – and it gets better every time. I’m sure the situation will improve vastly in the next year or so – and when it does, whole new possibilities will open up. Game-streaming, for instance, will get more popular and will ultimately kill the use of stand-alone consoles – and possibly gaming computers – as download speeds go ballistic, IMHO.



Netflix takes a beating, eBay stays positive about the future and FaceApp data usage attracts attention…

Netflix reports first drop in US users in nearly a decade (Wall Street Journal, Joe Flint and Patrick Thomas) heralds the rather big news that Netflix’s subscriber numbers are in trouble. The news sent its share price down by 11% in early after-hours trading. The company added 2.7m subscribers over the quarter – way less than the 5m it had expected and the 5.5m it added in the same period last year. * SO WHAT? * This ain’t great given that the likes of Disney, Apple, WarnerMedia and NBCUniversal are all lining up to launch their offerings later this year – you would have thought that numbers are going to go down further as rivals take away their content from the platform (they’ve already lost their two most-watched shows – “The Office” and “Friends”). Netflix will clearly hope that more good quality proprietary content will stem at least some of the tide of deserters – but it is in for a rough ride. I think that Netflix will suffer for the short-to-medium term, but its new rivals will soon come to realise how expensive the business is and potentially consolidate – I just can’t see them all operating separately forever because surely there are only so many subscriptions their customers can take!

Ebay lifts profit outlook amid tepid revenues (Wall Street Journal, Sebastian Herrera) highlights an upbeat eBay

which managed to publish better-than-expected results and up its forecasts although its revenue growth suffered. It also announced a partnership with Indian e-commerce startup Paytm Mall and sold its German flash-sale site brands4friends. The news sent its share price up by 5% – impressive, considering it has shot up by around 40% so far this year already. * SO WHAT? * This is all good, but the company has been facing increasing pressure from rival Amazon and from activist investors which will probably result in a sale of some of the assets such as StubHub and its classifieds. Personally, I don’t think that eBay is the force it once was as new rivals continue to muscle in on its core business. However, new ventures and more focus on other revenues such as advertising should help it to pull through an increasingly competitive ‘marketplace’. 

In FaceApp data use comes under scrutiny (Daily Telegraph, Natasha Bernal) we see that the sudden spike in popularity of a smartphone app that can “age” you has highlighted privacy concerns about what AI could do with a massive archive of people’s faces. The “age challenge” spread on social media has helped to push it up the app charts. FaceApp is made by the Russian company Wireless Lab and when you sign up, the Ts and Cs say that you are giving it a “perpetual, irrevocable, non-exclusive, royalty-free, worldwide, fully-paid, transferable sub-licensable licence” to use and reproduce your image. Clifford Chance lawyer Jonathan Kewley said that the app could be in serious breach of Europe’s GDPR laws. * SO WHAT? * There are all sorts of things that these photos could be used for, so let’s hope that something gets down about this pronto.



UK inflation stays steady, Watches of Switzerland has a great time, Hotel Choc continues to perform and GVC benefits further from online gambling…

Levelling fuel prices keep inflation steady at 2pc – for now (Daily Telegraph, Tim Wallace) cites the latest figures from the Office for National Statistics which show that consumer prices were up 2%, in line with the Bank of England’s target. * SO WHAT? * This is potentially good news for most as wages rose by 3.6% over last year. Having said that, prices could potentially go up sharply in the event of a no-deal Brexit as the pound would be expected to weaken, thus lifting prices of imports. If prices go up, the Bank of England may raise interest rates to keep a lid on them but consensus at the moment is that the Bank will not raise rates.

Then in a swift scoot down the high street, Time serves Watches of Switzerland very well (The Times, Ashley Armstrong) highlights the strong performance of this high end watch retailer in its first set of results since its flotation in May. Watches of Switzerland has 128 shops under the Goldsmiths, Mappin & Webb and Watches of Switzerland brands as well as the American jewellery chain Mayors. It announced a 180% hike in pre-tax profits and a 28% rise in luxury watch sales – a segment that represents 82% of the business. It is the largest retailer in the UK of Rolex, Cartier, Tag Heuer and Breitling. Average spend per customer is

£4,000 and 19% of sales are to tourists – half of them Chinese. * SO WHAT? * This looks like a great little business. Presumably, sales to tourists will rise in the event of a no-deal Brexit if the pound goes through the floor.

Further down the high street Hotel Chocolat making a mint as it spreads overseas (The Times, Ashley Armstrong) shows that the British chocolatier continues to go from strength to strength as it saw a 14% rise in sales and predicts profits to be in line with expectations despite splashing out on 16 new shops and expanding into the US (for a second time). It now has 167 stores in the UK and 10 abroad. Chief exec and co-founder Angus Thirlwell said that the chain’s success was due to the fact that “we aren’t just sitting around and waiting for people to come into our shops”. Good on them!

GVC’s online gambling bet pays off as retail business suffers (Financial Times, Alice Hancock) shows how the owner of Ladbrokes Coral has mitigated some of its disastrous UK performance with an 18% increase in revenues from its online operations, despite a strong performance in the same period last year that included the Football World Cup. * SO WHAT? * I think that this is signalling the direction that bookies have got to go as their cash cow business of FOBTs has been cut off at the knees by recent legislation. Everyone and their dog in this business is shutting shops and online is way cheaper. UK gambling groups are scrambling to make inroads into the US market at the moment following the recent trend of legalising sports betting but GVC is lagging behind the likes of William Hill, which is now the only UK gambling company to operate in all eight states that have legalised sports betting. 



And finally, in other news…

I thought I’d leave you with two “alternative” stories today. The first one is not for the squeamish: Man left ‘traumatised’ as robot vacuum causes havoc after encoutering dog p00 (The Mirror, Zahra Mulroy Yes, it went about as well as you’d expect it to…clearly the owners were rather clumsy on this. Then to balance that out, I thought I’d highlight An artist is leaving mind-bending optical illusions on buildings worldwide, and they’ll make you do a double-take (Insider, Darcy Schild Some of these paintings are incredible!

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Some of today’s market, commodity & currency moves (as at 0856hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq**DAX *CAC-40 *Nikkei **Shanghai **
7,535 (-0.55%)27,220 (-0.42%)2,984 (-0.65%)8,18612,341 (-0.72%)5,572 (-0.76%)21,046 (-1.97%)2,901 (-1.04%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)