Tuesday 04/04/23

  1. In OIL NEWS, the price jumps on OPEC’s production cut, we look at the reasons behind the cut and how it helps US shale while Putin pushes exports to a new high
  2. In TECH NEWS, we compare GPT-4 and Bard, universities express unease with AI detection, TikTok continues to be under pressure and WANdisco execs take flak
  3. In FINANCIALS NEWS, investors flee on the Swiss bank merger investigation, HSBC faces pressure from Hong Kong shareholders and NatWest limps on while Numis and Peel Hunt are gloomy about deal making
  4. In INDIVIDUAL COMPANY NEWS, CATL faces EV scrutiny, Glencore wants more copper, car sales rebound, Cineworld pauses and Smythson posts a loss
  5. AND FINALLY, I bring you a fact about tea you didn’t know and some coronation merch…

1

OIL NEWS

So the oil price rise has repercussions…

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:

Oil price rise fuels fears for inflation (The Times, Callum Jones and Martin Strydom) shows that oil prices jumped by their fastest rate in over a year after OPEC+ companies surprised the market by cutting production. * SO WHAT? * This all prompted speculation that oil would be heading for $100 a barrel again, which will make it more difficult to control inflation. The voluntary cuts will kick in from May and go until the end of the year.

Why Opec+ is cutting oil output now (Financial Times, David Sheppard) looks at the reasoning behind OPEC+’s latest actions and what the implications could be. The obvious answer here is to restrict supply so that the price goes up – but the thing is that oil prices weren’t that weak. They were hovering around the $80 a barrel mark (the recent banking shenanigans saw a bit of a blip, which sent the price down briefly to around $70 a barrel), which isn’t too bad, but this latest move could be interpreted as the bigger members of OPEC+ (particularly Saudi Arabia) asserting

themselves and sending a message to the US that they are not necessarily going to play ball. They have made a show of getting closer to both Russia and China, announcing agreements and co-operation in various areas and continue to ignore Biden. * SO WHAT? * The main likely impact of higher oil prices is upward pressure on inflation. However, although many analysts are putting their price targets up, it is worth remembering that China (the world’s second biggest oil consumer) is not going to want oil prices to go too high – so it may well stop (or reduce) buying for its strategic reserves as a result, which may put some kind of ceiling on the upside.

Oil price: new unimproved Opec+ helps US shale drillers (Financial Times, Lex) contends that the oil production cut will actually benefit US shale drillers (e.g. Chevron, Conoco and Exxon) as much as OPEC+ members and that the recent move was one borne out of worries that global oil demand would fade due to the cumulative effects of higher interest rates and slowing economic growth. The article suggests that production cuts are likely to put a floor under prices but tepid growth prospects for the world economy are likely to keep prices below $100 a barrel for the rest of the year.

All the while, Putin pushes Russian oil exports to record high (Daily Telegraph, Rachel Millard, Matthew Field and Adam Mawardi) shows that Putin has been increasing seaborne deliveries of Russian crude to record levels in order to finance his war machine and will obviously benefit from higher prices that will result from less oil being made available.

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!

2

TECH NEWS

We look at GPT-4 vs Bard, university doubts, America’s TikTok challenge and WANdisco problems…

Battle of the chatbots: how does GPT-4 stack up against Bard? (Financial Times, Madhumita Murgia and Kari-Ruth Pederson) is an interesting article that pitches the two much-hyped chatbots against each other. The FT asked them both to tell jokes, pick stocks and imagine a conversation between Xi and Putin among other things. Definitely have a look for more details, but the upshot of it is that GPT-4 kicks Bard’s @rse as things stand currently – although it’s still not perfect yet!

In Universities express doubt over tool to detect AI-powered plagiarism (Financial Times, Bethan Staton) we see that universities are reluctant to use a new tool from popular plagiarism detection software Turnitin to detect whether essays are being created using AI. Turnitin is already being used at 10,000 educational institutions around the world and will be launching the new tool today that can detect the usage of AI with a 98% hit rate. Some educational institutions, such as Cambridge, have said they will opt out of the new service. * SO WHAT? * This sounds pretty impressive when you compare it to OpenAI’s own plagiarism detection system, which is only correct 26% of the time! However, as far as I’m concerned, this is a non-starter unless it can be 100% accurate as those poor 2% caught by false positives could be subject to extreme and needless stress. IMHO, the whole educational establishment needs to change – along with the way knowledge is examined and graded. I think that we’ll have to go old school and get more handwritten exams, multiple choice tests and, potentially, interviews because projects and dissertations just won’t cut it any more. The problem is that if you, as a student under pressure, think that everyone else is using it you will be much more likely to use it yourself. A bit like drug-taking in the Tour de France…

Meanwhile, America faces a giant TikTok challenge (Financial Times, the editorial board) takes a look at where the Americans are right now on the whole TikTok debate. It summarises the events that have led us to where we are right now (an impasse!) where TikTok faces the very real potential reality of being banned – although it’s such a popular service that it is highly likely that there will be a First Amendment challenge and repercussions from other governments around the world to ban the likes of Facebook, Google and Twitter in their own countries to show solidarity with China. * SO WHAT? * I think that you can’t just single out TikTok for all this data stuff – and if you apply it to TikTok, you have to apply it to EVERYONE – Facebook, Google and Twitter included. As I have mentioned before on the podcast, Facebook has YEARS of data and yet no-one’s really mentioning that in the same breath as TikTok are they! At the moment, US controls are less restrictive than those that apply in the EU and are soon to be applied in the UK. I still believe that there needs to be some kind of global version of NATO or something that covers the internet, metaverse and AI with cross-border and multi-regional jurisdiction given its growth and potential direction in future. Will this happen? It would be great, but I just can’t see it at the moment.

WANdisco top executives step down as fraud investigation advances (Financial Times, Ian Johnston) shows that the misery at the once-fêted WANdisco continues as the disgraced company’s CEO and CFO have now left the company, leaving vacant spots for new leadership. This has all come about as a result of the investigation into potential fraud regarding the falsification of almost $15m in revenues. At the moment, the investigators see that the working theory – that the fraud has emanated from one sales employee – remains intact. What an absolute mess!

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!

3

FINANCIALS NEWS

Investors take fright, HSBC defends itself, NatWest is a struggle and the lack of deal making hits Numis and Peel Hunt…

Swiss bank merger investigation sparks exodus by investors (The Times, Robert Miller) shows that investors in UBS and Credit Suisse sold down their holdings on news of the investigation into the whirlwind shotgun marriage of Switzerland’s two biggest banks by the Attorney General. Although this is just my opinion, I would be incredibly surprised for the investigation to scupper the merger as this is just too important to fail – no matter what public opinion might be. I think there will be huge pressure on this investigation to show what was right with the deal rather than what was wrong with it. This won’t stop lawyers, though, who will be making fat fees from investor disgruntlement.

Meanwhile, HSBC forced to defend SVB UK deal to fractious Hong Kong shareholders (Financial Times, Kaye Wiggins) shows just how fine a line HSBC has had to tread as it seems that it wasn’t that long ago that it was facing criticism for shifting the onus of its business to Asia (but China really). Hong Kong shareholders are now accusing it of pandering to the UK government via its acquisition of SVB UK but HSBC kept on defending its actions by saying that the deal (which meant HSBC was able to buy SVB’s operations in the UK for £1!) was just too good to miss. Sure this

could yet blow up in HSBC’s face – but SVB UK could also potentially be a fantastic future growth driver that it wasn’t banking on! Time will tell…

Then in NatWest: UK still struggling to cheque out (Financial Times, Lex) we are reminded that the UK government still owns 41.5% of NatWest (which was Royal Bank of Scotland) and that it has been trying to sell down its stake over the years as part of a plan that has an exit objective of August 2025. * SO WHAT? * Given recent banking shenanigans, you would have thought that bank share prices aren’t going to exactly sky-rocket from here. The problem is that the bank was bailed out in the financial crisis at an equivalent share price of 502p for an 84.4% stake and the current share price is 267.70p with little hope of it reaching the bailout level any time soon. If the government’s holding out for a profitable exit they may well be waiting for a very long time…

London float drought set to continue, says Numis (The Times, Ben Martin) shows that one of Britain’s leading independent investment banks, Numis, is painting a downbeat picture about the deal pipeline until at least the autumn. Peel Hunt warns of loss amid fall in dealmaking (The Times, Ben Martin) shows that one of Numis’s main rivals is also experiencing the same thing – but then so are all investment banks at the moment, which is why there have been so many redundancies. Tough times…

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!

4

INDIVIDUAL COMPANY NEWS

China’s CATL faces scrutiny, Glencore wants more copper, car sales rebound, Cineworld pauses and Smythson books a loss…

In a quick scoot around some of today’s other interesting stories, China’s battery king faces scrutiny over EV market dominance (Financial Times, Edward White, Cheng Leng and Claire Bushey) is an interesting article which shows that China’s EV battery giant CATL’s success is now attracting concerns from both the US and China. * SO WHAT? * The US is concerned that too many of its car manufacturers are relying too much on its batteries (Ford recently signed a deal and a big one is imminent with Tesla) while China is concerned that having too many US customers makes CATL vulnerable to subsequent sanctions – something that Huawei knows only too much about.

Talking of EV-related things, Glencore launches $22bn copper raid as battle for battery resources explodes (Daily Telegraph, Rachel Millard) shows that the metals giant has launched a massive bid for a rival copper miner, Teck Resources, in order to ensure supply of increasingly scarce battery materials. * SO WHAT? * Canada’s Teck rejected the offer, but if it DID eventually go ahead, this would be Glencore’s biggest acquisition since its tricky takeover of Xstrata for $30bn in 2013. Although Teck is way smaller than Glencore, it has a highly-rated portfolio of copper, zinc and steelmaking coal mines. It doesn’t sound like Glencore is going to go away…

Elsewhere, As Dealerships Get More Stock, Auto Makers’ Sales Rebound (Wall Street Journal, Ryan Felton) shows that US car manufacturers are seeing a rebound in sales in Q1. This comes after a difficult 2022 which saw the worst performances in over ten years thanks to supply chain problems and production capacity issues. US sales for GM, Hyundai, Nissan and Honda have all been stronger and Ford is expected to report numbers later today. It certainly sounds like things are picking up!

Cineworld set to emerge from bankruptcy with creditors in control (The Times, Dominic Walsh) shows that the troubled cinema operator is likely to come out of bankruptcy protection after agreeing a restructuring that will see most of its lenders cut its debt via a debt-for-equity swap. Cineworld is the world’s second biggest cinema chain after AMC and filed for bankruptcy protection in September last year. How the mighty fall! It wasn’t so long ago that it was going to buy rival Cineplex – and then Covid happened.

Then in Smythson books full-year loss (The Times, Jessica Newman) we see that the luxury leather goods retailer took a massive hit as the costs of shutting stores racked up. It just goes to show that not all luxury goods companies are doing well. Ripe for a takeover by someone like LVMH perhaps??

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!

5

...AND FINALLY...

…in other news…

Do you like tea? Have you ever drunk PG Tips? If so, prepare to be amazed (well, sort of) by People are only just realising what PG Tips stands for – and why the name changed (The Mirror, Grace Hoffman). And if you want a bit of light entertainment while you are drinking your brew, I just saw this video yesterday of “Biff” from Back To The Future singing about the questions people keep asking him. I think he’s brilliant! It’s a bit of an old video (and a bit grainy), but I think it stands the test of time – particularly if you are a fan of the films! If you’ve never seen them then this may pass you by though! If that’s the case, maybe you’d prefer this video where he sings a song about what it’s like to be a father to a daughter.

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Some of today’s market, commodity & currency moves (as at 0633hrs 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 **
7,673 (+0.54%)33,601 (+0.98%)4,124 (+0.37%)12,189 (-0.27%)15,581 (-0.31%)7,346 (+0.22%)28,287 (+0.35%)3,313 (+0.49%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$80.807$85.296$1,980.111.240691.08927132.8301.1390127,912

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