Tuesday 12/12/23

  1. In MACRO & OIL NEWS, COP28 ditches commitment to phase out fossil fuels, Tusk returns as Polish PM and Occidental is to buy CrownRock in a big shale deal
  2. In EMPLOYMENT & BUSINESS TRENDS NEWS, Hasbro follows other big US companies in announcing job losses, UK companies are still hiring, wage increases look like slowing, small businesses face a tough time, Begbies Traynor is busy, lawyers see earnings rise and businesses get an MI5 briefing
  3. In TECH NEWS, chip giants develop the next generation, Nvidia invests big in AI companies and TikTok takes a big stake in Tokopedia
  4. In MISCELLANEOUS NEWS, we see that there could be light at the end of the tunnel for embattled renters
  5. AND FINALLY, I bring you an amazing looking chocolate pizza 🤤…

1

MACRO & OIL NEWS

So COP28 is a cop-out, Tusk returns as Polish PM and there’s a big shale deal going on…

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:

 

COP28 draft agreement drops phaseout of fossil fuels (Financial Times, Attracta Mooney, Aime Williams and Alice Hancock) shows that references to the phasing out of fossil fuels have disappeared, prompting criticism that Saudi Arabia and others don’t give a 💩 about global warming. The document will have to be signed off by almost 200 countries currently at the summit in Dubai. As things stand currently, the document basically talks about achieving net zero as a vague aim by 2050 rather than drawing a line in the sand and talking about the complete phase-out. They still say that the objective is to limit temperature rises to 1.5ºC, as per the 2015 Paris climate accord, but removing the commitment to phasing out fossil fuels takes out some of the urgency in doing this. * SO WHAT? * Although this does sound like a huge step backwards, I do wonder whether the commitment to zero fossil fuels is actually realistic anyway – so perhaps one could argue that this is just being honest about it. I personally don’t think that ANY of the oil producing states will EVER stop relying on fossil fuel – how can they? That’s what their economies have been built on! However, there is no reason NOT to at least strive towards this – as the saying goes, if you aim for the moon and don’t get there, you will at least get the stars! In other words,

aiming for phase-out means that even if we don’t get it, a great deal can still be achieved. The main problem is that the big, rich polluting countries will go on polluting and hiding behind various regulations and political commitments while the smaller countries continue to suffer.

Then in Polish parliament votes in Donald Tusk as prime minister (Financial Times, Raphael Minder and Barbara Erling) we see that Poland’s former PM is set to return to the highest office, replacing PM Morawiecki after a no-confidence vote. * SO WHAT? * Brussels will no doubt be relieved as the current government has been a thorn in its side, so having a Euro-fanboy in the top job will be very useful (particularly as Europe seems to be going the way of the nationalists at the moment). He has, in the past, been president of the European Council, president of the European People’s Party in addition to being Poland’s PM. I would have thought that his appointment will help to unlock a ton of EU money that has been blocked because of the incumbent regime’s stance on the rule of law.

In oil news, Occidental to Buy CrownRock in Nearly $11 Billion Deal as Oil Patch Consolidates (Wall Street Journal, Benoît Morenne) highlights a massive cash-and-shares deal that is the latest example of consolidation in the sector while Occidental/CrownRock: shale deal risks tempting fate again (Financial Times, Lex) observes that the deal is on the pricier side as there won’t be many cost synergies. * SO WHAT? * With oil prices hovering at around $76 a barrel and Occidental (aka “Oxy”) saying that its break-even point is at $40, the deal might turn out OK – but perhaps the deal was borne more of FOMO as the industry consolidates rather than any particularly strong strategic reasons…

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

EMPLOYMENT & BUSINESS TRENDS NEWS

Hasbro joins others in making headcount reductions, UK companies continue to hire while wage pressures look set to ease, small businesses have a tough time, Begbies Traynor get busy, lawyers rake it in and businesses get briefed by MI5…

Hasbro announces job cuts in run-up to Christmas (The Times) shows that Hasbro is about to cut a whopping 20% of its workforce as troubles persist in the festive period in a post-pandemic hangover. They are not the only ones reducing headcount and The Companies Conducting Layoffs in 2023: Here’s the List (Wall Street Journal, Joseph De Avila) makes for sobering reading as it lists the major job cuts from big companies on a month-by-month basis. Hasbro, Spotify and Twilio have been the biggies from this month, but others include Maersk, ByteDance, various investment banks, retailer and financial services companies over the course of 2023. It seems to me that the cuts are coming from a lot of companies who hired into a pandemic upturn and they are now having to “rightsize” to survive in more “normal” conditions.

Back home, Firms still recruiting despite economic woes, says survey (The Times, Tom Howard) shows that most businesses are still looking to hire despite the tricky economic backdrop, according to recruitment giant Manpower Group, while Falling UK inflation will ease pressure for high pay awards, says thinktank (The Guardian, Larry Elliott) highlights findings by the Resolution Foundation which say that pay awards are likely to ease although worker perception of the cost-of-living will mean that they won’t completely diminish.

Meanwhile, Banks risk a repeat of the 2008 crash as small businesses face a brutal Christmas (Daily Telegraph, Ben Marlow) sounds a note of caution about banks potentially repeating the same mistakes as they did back in 2008 by not lending to small businesses (something that hampers growth). The Federation of Small Businesses (FSB) has filed a “super-complaint” to the FCA over “banks that excessively demand personal guarantees for business loans” (this includes things like putting up their houses as collateral or remortgaging their homes etc) but it remains to be seen as to whether or not banks will go

into super-protective mode once more instead of giving SMEs the help they need to navigate the current tricky economic climate.

Not everyone is suffering though – Begbies Traynor hiring as insolvencies increase (The Times, Tom Howard) shows that the insolvency and administration experts are bracing themselves for more activity by hiring additional insolvency practitioners. It thinks that there will be an uptick in failing businesses that have fallen victim to higher-for-longer interest rates and the cost-of-living crisis. Recent data from the government’s Insolvency Service showed that corporate liquidations are now at their highest levels since the global financial crisis! Begbies is just one of those companies that benefits from other companies’ misery…

Also, UK lawyers’ earnings up 5.6% to £43.7bn (The Times, Jonathan Ames) cites a report by TheCityUK, a lobby group for the financial and professional services industry, which shows that annual revenues in the UK’s legal profession showed an uptick over the last year. The increase was mainly generated by City law firms (fun related fact: around 40% of UK lawyers work in London!) as 37% of the revenue from the UK’s legal services market originated from corporate, insolvency and banking work.

I thought I’d also include UK business leaders receive first briefing from MI5 (Financial Times, Lucy Fisher) because senior business executives were briefed yesterday on declassified intelligence by MI5 yesterday. The government is trying this new initiative to encourage better co-operation with businesses on matters of national security. The meeting involved the Security Service (aka MI5) and around a dozen companies and trade bodies in “strategically important” sectors of the UK economy and covered things such as IP theft and risks posed by terrorist organisations. This new forum will meet on a quarterly basis. * SO WHAT? * It seems to me that matters outside business are gaining more importance and recognition these days – remember Goldman Sachs recently setting up a division that doles out advice to paying customers on geopolitical developments and their commercial impact. It seems that more companies are waking up to the fact that they don’t operate in vacuums and that paying attention to what goes on in the world around them is vital for the long-term health of their respective organisations – particularly in areas like tech, as China is finding out!

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

TECH NEWS

Chip companies want more, Nvidia invests a lot in AI companies and TikTok buys a big chunk of Tokopedia…

Semiconductor giants race to make next generation of cutting-edge chips (Financial Times, Christian Davies, Song Jung-a, Kathrin Hille and Qianer Liu) shows that the world’s leading chip companies are racing to produce “2 nanometre” (aka “N2”) processor chips for the next generation of tech which could go into volume production in 2025. TSMC is the favourite to lead the sector but Samsung and Intel aren’t far behind! TSMC has already shown N2 prototypes to some of its biggest customers, including Apple and Nvidia. Talking of which, Nvidia emerges as leading investor in AI companies (Financial Times, Tim Bradshaw and Ivan Levingston) highlights that the AI chip hero is, unsurprisingly, one of the most prolific investors in AI start-ups this year according to estimates by Dealroom. Nvidia participated in 35 deals in 2023, which is almost six times the number it participated in last year! Clearly it is putting money in to keep it ahead of the pack – and its activity has overtaken that of famous VC firms like Andressen Horowitz and Sequoia.

Meanwhile, TikTok to take over Indonesia’s Tokopedia in bid to overcome ecommerce rules (Financial Times, William Langley) shows that TikTok has agreed to invest $1.5bn in a 75.01% stake in Tokopedia, an e-commerce unit of Indonesia’s GoTo tech group. This acquisition will include TikTok Shop’s Indonesia business. This comes not long after Indonesia banned transactions via social media in September, which severely clipped TikTok’s wings in what was looking like one of its largest and most promising markets. Clearly, bets in the country are back on now and this move could form the template of similar moves in other jurisdictions whose regulations preclude TikTok’s participation. TikTok/GoTo: bargain buy rewrites script for scrolling players (Financial Times, Lex) highlights the attraction of Indonesia – and that although its GDP per capita is low, it has a large, young population that is social media-savvy that had helped the country become TikTok’s biggest market outside the US! * SO WHAT? * It sounds like this is a strategic triumph from TikTok’s point of view, but it is possible that it may actually prove to be TOO good and attract further attention from Indonesian authorities in future!

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

MISCELLANEOUS NEWS

There could be an end in sight for embattled renters…

In a quick scoot around some of today’s other interesting stories, there seems to be some good news (finally) for beleaguered tenants as Increases in soaraway rents finally set to slow (The Times, Tom Howard) cites Zoopla data which shows that although the online estate agent expects rents to rise in 2024, it thinks that the rate of increase will slow down. Rents over the past year have

increased by 9.7% and are now, on average, a third higher that where they were pre-pandemic. Zoopla’s data shows that the number of people looking to rent is now falling, which means that there will be less of a gap with the relative lack of rental properties available. * SO WHAT? * I am sceptical here as Zoopla is surely bound to talk a good game. IMO, as long as landlords continue to get out of (or avoid) buy-to-let, rents are going to stay high. I would suggest that trends in landlord activity in the market will be a much better predictor of the future direction of rents.

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…

A few years ago, I took my youngest son (he was about 7 years old at the time) to watch a Harlequins rugby match at The Stoop. When I asked him what he liked best about it, he said “The chocolate pizza!” 🤦‍♂️. However, if what he had was as good as this chocolate pizza, then I could understand his excitement 🤣!

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