Tuesday 17/12/24

• From today, you will start to see an audio version of Watson’s Daily at the top of the newsletter. A number of you have been asking for this, so here it is! I tried it with AI and didn’t like it – so it’s me that reads it out 😁. I hope that you find this new functionality useful!
• I will be publishing a “Watson’s Yearly Competition” on Monday 30th December. One of the prizes will be working with me in person at my office where you will be helping me to write Watson’s Daily for a day. I’ll release more details soon! Follow Watson’s Daily on Instagram for more…
• The last Watson’s Daily of this year will be published THIS FRIDAY 20TH DECEMBER. However, please keep checking into the website over the seasonal break as I will be uploading all sorts of content (including a new commercial awareness course)
• I will be doing a review of 2024 and themes to look out for in 2025 on Tuesday 14th January at 4.30pm. If you want to attend this, HERE is the link to sign up. I hope to see you there – this will be a good way to start the year!

Inflation’s darkest days are behind us, says Christine Lagarde (The Times, Jack Barnett) quotes the chief of the ECB as saying that “the direction of travel is clear and we expect to lower interest rates further”, which just builds on last week’s interest rate cut, which was the central bank’s fourth one this year. Later on this week, the Bank of England is expected to keep interest rates on hold while the Fed is expected to cut by 0.25 percentage points.

Meanwhile, Germany poised for snap election as Olaf Scholz loses confidence vote (The Times, Nick Alipour) shows that chancellor Scholz lost the confidence vote yesterday, as expected, which will herald an election early next year (probably February 23rd). Scholz and his ministers will remain in place in a caretaker capacity until the next government is formed.

EU takes UK to court in blow to London’s efforts to ‘reset’ relations (Financial Times, Andy Bounds, George Parker and Peter Foster) highlights a fly in the ointment for EU/UK relations as the European Commission is taking the UK to the European Court of Justice in two cases – firstly, for the UK’s treatment of EU citizens after Brexit and secondly, its failure to conclude bilateral investment deals with six member states. We’ll have to see how this pans out but I have to say that I think that it feels like the EU is shooting itself in the foot here. As I’ve said before, the populists are gaining momentum across Europe and I would have thought that the EU could do with a socialist government ally at a tricky time.

Back home, UK private sector employment falls, fuelling fears of recession (Financial Times, Jack Barnett) cites the latest S&P Global flash UK purchasing managers’ employment index which shows that private sector employment in December fell more sharply than any month since January 2021. * SO WHAT? * Clearly this is the response to the new measures in the Budget but I guess the key is whether this is a short-term thing or whether it’s the beginning of a proper downturn in hiring. This came as an additional blow to the fall in manufacturers’ confidence that I mentioned yesterday. I think we need to get Christmas out of the way and regroup once Trump gets into power in the New Year. The UK-Europe reset and potential end to wars in the Middle East and Ukraine next year could have a major effect on everyone’s fortunes next year so I don’t think it’s right to get too downbeat at this moment in time.

Then in Argentina’s economy exits recession in milestone for Javier Milei (Financial Times, Ciara Nugent) we see that President Javier Milei’s “chainsaw economics” is working as Argentina’s economy emerged from a major recession in Q3 of 2024. This is the first growth shown by the country after falling into recession in late 2023, around the time when Milei came to power. Over the course of that year, he has implemented major spending cuts and a deregulation drive. Growth was driven by consumer spending bouncing back, capital inflows and growth in both agriculture and mining exports. Manufacturing and construction remain problem areas though. * SO WHAT? * Milei faces midterm elections later next year, so will need to make sure this milestone is felt by ordinary Argentinians to win their votes!

Bitcoin hits new record on hopes Trump will build national fund (Daily Telegraph, Matt Oliver) highlights bitcoins continued momentum as it broke the $106,000 mark yesterday as Trump suggested at the end of last week that he could create a “strategic reserve” of bitcoin when he takes office, in the same way that the country has a strategic “stockpile” of oil. * SO WHAT? * Bitcoin has shot up by over 190% so far this year! According to data website BitcoinTreasuries, the top owners of bitcoin are the US, then China, the UK, Bhutan and El Salvador. Data provider CoinGecko says that governments around the world hold 2.2% of bitcoin’s total supply as of July. As I’ve said before, although I just am not convinced about the fundamentals of bitcoin, the momentum most certainly is with it. The only fly in the ointment I can see is if some kind of scandal emerges – but then I think this is unlikely given how many crypto cheerleaders will be in the White House with a personal interest in its fortunes.

TikTok’s CEO meets Donald Trump as it seeks to avert US ban (Financial Times, Hannah Murphy, Christopher Grimes and James Politi) reveals that TikTok’s CEO Shou Zi Chew met Donny T at Mar-a-Lago yesterday, probably in a bid to avert a US ban (it was a private meeting). The app is facing a ban in the US if it doesn’t divest from parent company ByteDance under a law that comes into force on January 19th. TikTok’s attempt to avert a ban via the court route has fallen flat so you can’t blame the TikTok guy from giving this a go. Trump has previously said that he will “save” the platform. * SO WHAT? * TBH, I think that Trump has got a lot to gain by letting TikTok off. First of all, he knows that TikTok isn’t winning on the legal front, so he could potentially extract a lot of concessions from the platform because he is most definitely in the driving seat on negotiations – and he’ll also look like a hero to young people who don’t want to be cut off from one of their favourite platforms. I would have thought that this will be a positive for his support base whereas he could alienate this demographic if he continues to go down the route of banning it. Isn’t it ironic how the president who first attempted to ban it at the end of his first term could be the only one that could actually save it! It’s a bit like him doing a full 180 on bitcoin that he’d previously described as a “scam”…

Then in Trump announces SoftBank plans to invest $100bn in US projects (The Guardian, Robert Tait) we see that the president-elect announced a mammoth $100bn investment by Japan’s SoftBank that would be unleashed over the course of his four-year presidency. The investment will bring 100,000 new jobs, mainly in AI and in his typically understated style described it as “a monumental demonstration of confidence in America’s future” and something that had been made possible due to his winning the presidency 🙄. * SO WHAT? * TBH, I think Son (the CEO of SoftBank) is often full of 💩 but he does have access to a lot of money and can still attract investment, although his credibility has taken a battering over the last few years. He’s clearly just wanting to make sure that he gets unfettered access to the US. His decision to float Arm in the US definitely looks like it was the right thing to do!

Trump may not spare Big Tech after all (Financial Times, Richard Waters) is an interesting article that examines the theory that Big Tech can breathe a sigh of relief when Trump gets to the White House. With Musk as Trump’s new BFF and FTC chair Lena Khan on her way out (she was hated by many tech leaders) – to be replaced by a more merger and AI-friendly candidate – many think that this administration will be the most tech-friendly one ever. However, Andrew Ferguson has also expressed concerns about the monopoly power of Big Tech, as has vice-president-elect

JD Vance. Interestingly, Vance named venture capitalist and podcast host David Sacks as the incoming administration’s main adviser on AI and crypto – and he recently called for Google to be broken up. In addition to this, there is a deep distrust in the Republican party of Big Tech regarding claims of censorship. * SO WHAT? * Overall, I still think that Big Tech will be sheltered to a great extent by the next administration. Why would Trump want to harm an industry that has been the driver of US economic outperformance for the past few decades? I know this is cynical but I think he’ll protect what he wants and ditch what doesn’t suit him (which is probably why you’re seeing previous Trump critics like Zuckerberg and Bezos donating money to his cause). Also, let’s not forget that any appointments now can definitely be changed – in Trump’s first crack at power he made all sorts of appointments that didn’t work out. Given that he was an inexperienced first-timer back then – and a political unknown – this was probably bound to happen, so perhaps this time around maybe the appointments will actually stick…

Meanwhile, CEOs Are Feeling a Lot More Upbeat About the New Year (Wall Street Journal, Ben Glickman) cites the findings of a recent survey of over 300 listed company CEOs by Teneo which show that 77% of chief execs reckon the global economy will improve in the first half of 2025 versus 45% who believed this the same time last year. At least some of this confidence stems from Trump’s return to the White House which they believe is likely to lead to lower corporate taxes and less regulation. Interestingly, the biggest bump in confidence came from the CEOs of the biggest companies and over 80% of CEOs reckon that M&A will gather pace in 2025.

Then in Europe signs €10.6bn Iris² satellite deal in bid to rival Elon Musk’s Starlink (Financial Times, Peggy Hollinger) we see that Europe has launched its most advanced space programme in a decade that will involve the building of a €10.6bn satellite network to take on Elon Musk’s Starlink to provide high-speed connectivity to Europe. * SO WHAT? * The Iris² constellation will be Europe’s third major space project after the Galileo navigation system and Copernicus, the observation network. The project was actually announced two years ago with a budget of around €6bn but that has obviously been jacked up. It will put 290 satellites into low and medium earth orbits and is projected to start kicking in by early 2030. This is a great – and necessary – move otherwise Musk’s Starlink service is just going to steamroller over everyone else. We need some (home-grown) competition!

Canal+ shares slump a fifth on disappointing London debut (Financial Times, Daniel Thomas, Rachel Millard and Adrienne Klasa) highlights an underwhelming performance for the market debut for Canal+ yesterday as the French broadcaster’s share price tanked by over 20% in its first day of trading. At this price, the group is worth about £2.3bn but cheerleaders of the deal reckon it’ll be worth over €6bn in time (but then again they would say that!). TBF, advisers did say that the initial trading period for the newly spun-off company could be tricky as some funds may have to sell because they can only own shares in French stocks and others may be selling for tax reasons. So much for Rachel Reeves’s billing of the IPO being a “vote of confidence” in the London market. * SO WHAT? * OK, so one trading day does not reflect the entire future of a company. FWIW, I found the timing of this IPO quite interesting as you don’t normally get them at this time of year so maybe they just wanted to get the deal away before Christmas so they could get this messiness out of the way first and start with a clean sheet in the New Year…

Then in Royal Mail takeover by Czech billionaire Daniel Křetínský approved (The Guardian, Jasper Jolly) we see that EP Group got approval from the UK government to buy Royal Mail’s parent company, International Distribution Services (IDS) for £3.6bn. The government will retain a “golden share” in IDS which means that it will have to approve of any changes to its ownership, tax residency or HQ. The EP Group had to make a number of concessions to get the deal through but it is now expected to complete in Q1 of 2025.

Examining the LSExodus (Financial Times, Robin Wigglesworth) asks the question ” does the current exodus from the LSE actually matter?” The short answer is no, not really. What this

exodus from London to New York does highlight, though, is the widening valuation gap between the two exchanges – in other words, companies are generally able to get a higher valuation in New York than they are in London, which obviously makes it more attractive for many businesses to list stateside. * SO WHAT? * Obviously if you work at the LSE or a small-cap stockbroking specialist then yes, this is a pain but the article contends that once UK stock markets start putting in a stronger performance, the money will come back. It cites the example of the Japanese market which was in the doldrums for decades (I know because I was in it 🤣!) but then got its mojo back and continues to hit new highs and increased investor interest.

In for £2,300, early Revolut investors could soon be millionaires (The Times, Patrick Hosking) highlights the potential windfall that a group of small investors could potentially enjoy as the rules have now changed, allowing them to sell out of their holdings. Some investors who put an average of £2,309 into shares of Revolut in 2016 via the Crowdcube crowdfunding platform will have seen their investment grow to over £900,000 – or 404 times their original sum! Wow! Revolut only initially allowed its own employees to cash out but it has since relaxed the rules to allow more people to sell their shares as well. * SO WHAT? * Don’t worry if this gives you serious FOMO – the success of Revolut is the exception rather than the rule as the vast majority of investments on crowdfunding sites fail or never make a return for investors. That being said, this is pretty impressive isn’t it!

In a quick scoot around some of today’s other interesting stories, Lamborghini delays first all-electric model until 2029 (The Times, Aaliyah Ahmed) shows that the supercar maker has become the latest car manufacturer to rein in its EV plans by delaying the launch of an all-electric model from the original 2028 to 2029. It’s not the only supercar manufacturer to have made such a move – both Ferrari and Aston Martin have also announced delays in EV launches. The demand just isn’t there at the moment.

Then in US backs graphite factory to loosen China’s EV supply chain grip (Financial Times, Nic Fildes and Harry Dempsey) we see that the US energy department has agreed to finance a new US graphite factory to be built by Australian group Novonix. This will be the first large-scale synthetic graphite facility in North America when it’s finished. This is just part of an effort to push back against China’s dominance in graphite supplies. The facility is due to be at full capacity in 2028.

This version of the Deadpool bye bye bye dance came up on my feed recently and I’m a fan – but it got me thinking of other amusing dance moments in films gone by like the classic Stifler dance-off and, of course, Tom Cruise as Les Grossman in the closing credits of Tropic Thunder. There are some great moves in there 🤣 (apologies in advance for the swearing)…