Thursday 30/03/23

1. In MACRO NEWS, Britain progresses towards the CPTPP, Shapps reiterates commitment to 2030, Spain tries to address pension shortfall and Erdogan tries to curry favour with lower energy bills
2. In FINANCIALS NEWS, UBS goes backwards to go forwards and Binance faces more allegations
3. In TECH NEWS, AI continues to ruffle feathers, we look at what the TikTok fight is really about and what might come after Alibaba’s split, increasing exasperation with the meh-taverse and EA’s plans to cut 6% of its staff
4. In INDIVIDUAL COMPANY NEWS, Asda profits slide, Next sees rising profits, GameStop shrinks to grow and S4 Capital sees losses treble
5. AND FINALLY, I challenge your knowledge and show you how to train like John Wick…

So Britain heads towards the CPTPP, Shapps commits to 2030, Spain tries to fix its pension shortfall and Erdogan tries to curry favour…

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:

Britain poised to sign Indo-Pacific trade deal in Brexit victory (Daily Telegraph, Melissa Lawford) heralds a new direction for Britain as it is on the verge of becoming the first non-founding member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which currently comprises of 11 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. China, Taiwan and Ecuador are in the throes of applying to join. What is the CPTPP and why does Britain want to join? (Daily Telegraph, Eir Nolsøe) says that joining the CPTPP means that we will be able to trade without tariffs on almost all of our goods to around 500 million customers of the member countries who will, including the UK, account for 15.4% of the world’s GDP. * SO WHAT? * The CPTPP’s members account for 13% of the world’s economic output and 15% of global trade and fans of the deal point out that 90% of growth among the world’s middle classes will be in the Indo-Pacific over the next seven years. However, trade with CPTPP countries currently only accounts for about 8% of Britain’s exports but the signing of this deal should mean that this increases. Pacific trade deal will mean Britain can never rejoin the EU (Daily Telegraph, Shanker Singham) is a very bullish article on CPTPP by someone who is a former trade advisor but given that we’ve already signed trade deals with seven out of the eleven members (Canada, Chile, Japan, Mexico, Peru, Singapore and Vietnam, with another two – Australia and New Zealand – to come into effect) I fail to see how much more we are actually going to get out of joining the trading bloc! That said, after Brexit, we needed a trade deal and the fact that we will now be exposed to a very dynamic region will be very useful considering that the US and EU’s share of the world economy has been falling over recent years. The EU’s share of the world economy has dropped from over 25% to around 18% since 2000 and the US’s share has fallen from around 31% to just under a quarter over the same time period. Trump ditched the forerunner of the CPTPP (the TPP), so it will be interesting to see whether Biden decides to reengage – particularly as China is pushing to join. If China joins I think it could be a game changer – and be a nightmare for the US.

Following on from the EC’s climbdown on the 2035 deadline for the sale of EVs, Grant Shapps vows to press ahead with UK ban on sale of new petrol and diesel cars (Financial Times, Jim Pickard, Peter Campbell and Attracta Mooney) shows that the UK energy secretary is sticking with plans to ban the sale of new petrol and diesel-engined cars by 2030 and phase out hybrids from 2035. I think he is on a hiding to nothing and that he will be under enormous pressure from the automotive lobby to relax his stance.

📢 It’s Thursday, so it’s time for the one hour weekly Zoom call for SILVER and GOLD subscribers! Click HERE to access the joining details. *** NB, TODAY, THIS CALL WILL RUN FROM 6.30PM TILL 7.30PM. THIS IS 30 MINS LATER THAN USUAL***. During this call, I will do a round-up of the week’s news and then open it up to questions from you. After that, depending on how much time we have, we will also debate the following:

• Will Apple’s launch into BNPL in America signal the end of Klarna? Why?
• What do YOU think will make the metaverse actually work? How would that roadmap look?

You can just listen into the debate if you want to, but I thought I’d give you the heads up on topics for if you would like to engage. You will definitely get more out of this call if you take part in the debate, though 😜!

Northern Ireland ‘offers backdoor for drivers dodging net zero rules’ (Daily Telegraph, James Crisp, Jack Simpson and Joe Barnes) shows that if Shapps does stick to his guns it would mean that drivers could buy non-UK compliant cars in Northern Ireland and sell them over on the mainland in future!

Meanwhile, Spain’s fix for pension shortfall: make younger people pay (Financial Times, Barney Jopson) is a really interesting article which highlights a problem that is only getting worse for many of the world’s advanced economies – the problem of finding the right balance between how to provide decent pensions for existing retirees, how to be fair to young people and how to maintain financial stability. While France (and other countries) are trying to address this by upping the retirement age and making people work longer, Spain is looking to make younger people pay more into the social security system (presumably one of the reasons for this is that it already has a retirement age of 65!). * SO WHAT? * It is worth noting that pensions in Spain are quite generous. Pensions equate to about 80% of net pre-retirement income, which is more than France’s 74% and 62% average for OECD countries. As things stand at the moment, there are three people of working age for every one pensioner, but that is expected to drop to 1.7:1 by 2050 thanks to one of the highest life expectancies in the world (83) and a late baby boom. Although Spain is keen to treat pensioners well, making young people pay more just adds to the burden they already face with high unemployment, low wages and job insecurity. This is a real problem that is facing many advanced countries as people live longer because they live healthier lives and have better access to healthcare.

Then in Erdoğan to slash Turkey’s energy bills ahead of tough election (Financial Times, Adam Samson) we see that Turkey’s president is making moves to curry favour with his electorate ahead of what will be the closest election of his two decades in power on May 14th. He has committed to cut residential and business electricity bills by 15% next month and industrial groups will get a 20% discount on their natural gas bills. Nothing like freebies before an election, eh?! * SO WHAT? * Erdoğan’s unfathomable economic policies and patchy response to the February 6th earthquake will make the election trickier than usual and give the opposition coalition of six parties the chance to pounce.

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!

UBS opts for past inspiration and Binance gets into more trouble…

UBS rehires chief who axed 11,000 jobs to steer Credit Suisse takeover (Daily Telegraph, Simon Foy) shows that UBS decided to look into its past to prepare for its future as Sergio Emotti, who was chief of the UBS until 2020, slides back into the seat that was occupied by Ralph Hamers. Why UBS brought Sergio Ermotti back as chief executive (Financial Times, Owen Walker and Stephen Morris) mentions Hamers’ poor performance when the pressure was on in the immediate aftermath of the deal but I suspect that Ermotti’s experience as a hatchet man and battle-hardened leader of something of UBS’s size gave the company’s chairman, Colm Kelleher, the impetus to go for the tried-and-tested option. * SO WHAT? * There will be major job cuts at the newly-enlarged entity and Ermotti has form in headcount reduction on an industrial scale.

I also think that his familiarity with the company will help him to make changes more quickly than, say, a complete outsider would.

Elsewhere, Binance hid extensive links to China for several years (Financial Times, Scott Chipolina) highlights more problems for the embattled crypto platform Binance as the Commodity Futures Trading Commission says that Binance hid major links to China for a number of years and did its best to avoid regulation by not disclosing the location of its executive offices. Binance has gone to great lengths to show that it is not a Chinese company and reiterated that the Chinese government does not have access to its data apart from when responding to law enforcement requests. Oh dear…

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 AI kerfuffle continues, TikTok encompasses wider issues and we look at developments for Alibaba, the metaverse and EA…

Elon Musk joins call for pause in creation of giant AI ‘digital minds’ (The Guardian, Alex Hern) shows that over 1,000 AI experts, researchers and investors signed an open letter calling for the immediate pause on the development of “giant” AIs for six months in order to assess the opportunities and dangers of AI. The letter contends that AI labs are in a break-neck race to make increasingly powerful digital minds that could get out of control. Big tech companies cut AI ethics staff, raising safety concerns (Financial Times, Cristina Criddle and Madhumita Murgia) shows that this job may be harder as teams specialising in evaluating ethical issues surrounding AI have been cut in the great tech slowdown. Microsoft, for example, cut its entire ethics and society team in January and Twitch ditched its team last week! The list goes on…Meanwhile, Generative AI Is Already Changing White-Collar Work as We Know It (Wall Street Journal, Gretchen Tarrant) discusses the thoughts of a number of top companies who believe that most jobs will be changed in some form or other by the use of AI. They urge people to embrace it as a way to free employees from mundane tasks and help them focus on the good stuff, although they also concede that it is still far from perfect. * SO WHAT? * I agree that we all need to pause for breath with AI, but the problem is there is no governing body to oversee anything like this. While open letters and hand-wringing are all very well, they ultimately do nothing and everyone is probably going to carry on finding new ways of making money using AI until someone stops them. Do you think that Microsoft will stop pouring money into OpenAI and let others catch up?? I think not! Until we get some kind of supervisory body this AI thing is just going to grow exponentially – unchecked.

What the fight over TikTok really means (Financial Times, Gillian Tett) takes a step back from all the TikTok shenanigans that are going on at the moment to take a look at who actually owns TikTok. Although ByteDance goes on about how it is 60%-owned by foreign investors, the fact of the matter is that founder Zhang Yiming has real control over the “voting” shares while the government owns “a golden share”, which comes with rights to veto and the power to nominate board members. If things get really bad, it is possible that the government will strongly urge foreign investors to sell out of their holdings if the arguments persist.

FWIW, I think that the difficulties that are being faced at the moment just go to show how intertwined US and Chinese corporate relationships have become – and consequently, how difficult they are to unravel!

Then in Alibaba: a bouquet of six small poppies for party bosses (Financial Times, Lex) we see a bit more reflection on the news that Alibaba is going to split itself into six. The company’s share price jumped by 12% on the news, but this article doubts that the split will necessarily make the business more competitive. It actually contends that the split is more about pleasing politicians and regulators who will no doubt find it easier to regulate six smaller entities rather than one massive one! Maybe Tencent will be next up for a break-up…

The Metaverse Is Quickly Turning Into the Meh-taverse (Wall Street Journal, Meghan Bobrowsky) is an interesting article which contends that big companies are losing interest in the metaverse. Disney shut its metaverse division this week, Microsoft recently closed down a social VR platform it bought back in 2017 and even Mark Zuckerberg spent more of his most recent earnings call on AI than the metaverse – and he was the one that changed his company’s name as he believed in it so much! Prices for real estate on the metaverse have fallen by almost 90% versus this time last year in Decentraland, according to WeMeta, and expensive hardware, glitchy tech and a worsening economic environment have meant that priorities have changed. * SO WHAT? * I think that the main upshot of this is that metaverse adoption is going to take longer than the initial hype was suggesting. I personally do not think it is dead as there are so many current technologies that will, I think, thrive and make more sense in a metaverse environment – particularly the use of crypto currencies and investment in crypto assets. But until then, tech companies are tightening their belts and concentrating on the “right now” rather than further into the future.

Electronic Arts Says It Is Laying Off 6% of Workforce (Wall Street Journal, Sarah E. Needleman) shows that the Great Tech Cull is continuing as the company behind such franchises as Madden NFL and The Sims is not immune to the carnage going on in the rest of the tech industry. It is thought that the company has about 13,000 employees as at the middle of last year and it said that the cuts started earlier this quarter and will continue into early next quarter. It will be the first major videogames publisher to make significant cuts…

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!

Asda’s profits slide, Next’s profits rise, GameStop shrinks to grow and S4 Capital sees losses treble…

In a quick scoot around some of today’s other interesting stories, Asda profits slide as supermarket chain cuts prices (Financial Times, Laura Onita) highlights Asda’s profit slippage of almost 25% last year while sales remained flat as UK supermarkets cut prices to be competitive, Next bracing for the ‘challenge’ of 2023 as profits rise (The Times, Helen Cahill) highlights decent performance from Next whilst warning of challenging times ahead as Next: retailer’s attempt to size up is stymied by rising costs (Financial Times, Lex) suggests that there are concerns that there’s not much upside for now and that other retailers, like M&S and Frasers Group, may provide a bit more excitement in the near term.

Ryan Cohen’s Grand Plans for GameStop Keep Shrinking (Wall Street Journal, Sarah E. Needleman and Dana Mattioli) shows that the one-time meme stock has been quietly working away in the background to turn around its fortunes. It ditched its e-commerce ambitions and focused on its physical stores whilst cutting costs. This resulted in GameStop recently posting its first profit in two years but it remains to be seen how much upside there can be from grinding away doing the same old stuff!

Losses treble at Sir Martin Sorrell’s S4 Capital (The Times, James Warrington) sees advertising company S4 Capital in a tricky spot as its slew of acquisitions has piled up the costs, which hit the company’s finances. It had accounting issues that led to delayed results but it has continued to win major new clients and boost its revenues above £1bn for the first time. It sounds like the company is pretty cautious about the outlook though! Still, I don’t think this was a total disaster and, given that advertising is often seen as a leading economic indicator, I think things could have been worse!

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…

Given that I just mentioned Asda above, do you know how it got its name? Read People are only just figuring out what Asda stands for and it’s mind-boggling (The Mirror, Danielle Kate Wroe) and find out! I would say that “mind-boggling” is stretching things somewhat – I’d say more “interesting”. Or if that’s a bit too sedate for you, how about learning what Keanu Reeves has to do to train for the John Wick movies. For any judo fans amongst you, I think Keanu does OK but when he does his osoto-gari he definitely needs to pull more on the left arm to close the gap with the opponent and point his toes in the sweep – this will give him a lot more power. Keanu mate, if you’re reading this, I can make myself available to show you how it’s done 😜.