Tuesday 19/03/24

1. In MACRO & ENERGY-RELATED NEWS, the Bank of Japan goes crazy, China’s industrial production rises, the Eurozone’s trade surplus hits a record high and the world’s biggest solar panel maker announces deep cuts
2. In REAL ESTATE NEWS, Evergrande faces accusations, British Land sells half of its stake in Meta’s abandoned office block and L&G decides to exit the property market
3. In TECH NEWS, Nvidia’s got a kick-🍑ss new chip and Google is in talks with Apple about chatbots
4. In MISCELLANEOUS NEWS, Ford’s in trouble, Nissan-Honda doesn’t look convincing, Fisker pauses production, UK wages grow, Reckitt’s in a pickle and potential suitors abandon Currys while Deloitte launches a major overhaul and PE firms invest in pro services
5. AND FINALLY, I bring you a heart-warming moment…

So the BoJ goes wild, China’s industrial production rises, the Eurozone’s trade surplus increases and the world’s #1 solar panel maker slashes jobs…

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:

Bank of Japan ends era of negative interest rates (Financial Times, Kana Inagaki) highlights the Bank of Japan’s move to raise interest rates out of negative territory (they were, until now, at -0.1%) for the first time since 2007! They’ve been very low for years (and were at zero for quite some time), but then the BoJ cut interest rates to -0.1% in 2016 as it tried to encourage banks to lend more in order to stimulate spending. * SO WHAT? * This is a pretty amazing move, although I’d say that this has been well-flagged in recent weeks. What with unions recently negotiating the biggest single pay rise for workers since 1992, more companies passing inflation costs on to consumers via higher prices and labour shortages boosting wage levels it seems that there are concrete things to get positive about after years of economic stagnation. The central bank reckons that mild inflation looks set to continue.

Then in Jump in China’s industrial production buoys recovery hopes (The Times, Jack Barnett) we see some positive news for China’s economy as official figures from the National Bureau of Statistics said that retail sales rose by 5.5% over the year to February (in line with expectations) while industrial production increased by 7% in the same period (some way above expectations – and the biggest increase in two years!). * SO WHAT? * This is great news for China and would imply that

official projections of about 5% GDP growth for the year will actually be achievable.

Meanwhile, Eurozone monthly trade surplus rises to record high (Financial Times, Martin Arnold) highlights the bloc’s highest monthly trade surplus since data started in 2002 (after all the adjustments)! * SO WHAT? * This trade surplus of €64bn represents a tremendous rebound following the whopping €335bn trade deficit it suffered when natural gas and oil prices shot up in 2022. Germany’s performance was a major driver behind this surplus as it reported its highest trade surplus for over six years! The key here, though, is whether this is sustainable…

In energy-related developments, World’s largest solar manufacturer to cut one-third of workforce (The Guardian, Alex Lawson) shows that the world’s biggest solar manufacturer, Longi, is cutting up to 30% of its workforce as it accelerates the cost cuts it started to put in place last year. Staff numbers were believed to be in the region of 80,000 at the peak of last year. * SO WHAT? * Initially, you would have thought that Russia’s invasion of Ukraine would be GOOD for renewables as countries suddenly decided that they wanted to be less reliant on Russian gas and be more energy independent. However, it’s turned out not to be the case as rising energy bills pushed up inflation, which then pushed up interest rates – and this all put upward pressure on costs. If you then couple that with countries deciding to invest in fossil fuel projects AS WELL AS renewables, you get a perfect storm of high costs AND waning demand which has resulted in a surplus of production that has nowhere to go. This is presumably why US solar panel makers are so concerned as there really is a danger of cheap Chinese solar panels continuing to flood the market. Although it’s not solar power, it’s worth remembering that Danish wind power company Ørsted decided that costs had risen so much that it was willing to cancel not one – but TWO US offshore windfarm projects – so this is not just a solar panels thing.

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!

Evergrande slides further into deep doo-doo, British Land offloads half of its ex-Meta building and L&G has had enough of property…

Chinese authorities accuse Evergrande of inflating revenues by $80bn (Financial Times, Thomas Hale, Chan Ho-him and Cheng Leng) shows that the China Securities Regulatory Commission is looking to slap a $580m fine on Hengda Real Estate, Evergrande’s mainland business, after accusing Evergrande and its founder of inflating its mainland Chinese revenues by almost $80bn over the course of 2019 and 2020. I get the distinct feeling that this isn’t going to be the last such revelation regarding Evergrande’s demise…

Then in British Land sells half stake in office block abandoned by Meta (The Times, Tom Howard) we see that the property developer has managed to offload a 50% stake in what would

have been Meta’s office block to Royal London Asset Management for £192.5m. * SO WHAT? * This is pretty good business as Meta had to pay a “surrender premium” of £149m (pretty much the equivalent of seven years of rent!) to get out of the lease. This now gives 1 Triton Square an implied valuation of £385m and it is now being transformed into a laboratory space which British Land thinks will attract higher rents. It is sobering, however, to think that by the time the building is fully kitted out (which will take about two years) the building will have been empty for almost nine years!

Meanwhile, L&G to exit property market amid slump in new homes (Daily Telegraph, Hannah Boland) shows that Legal & General has decided to exit the housebuilding market thanks to higher costs and the mountain of admin involved. It is going to sell British housebuilder Cala, which is expected to go for up to £1bn. This marks a shift in strategy from the previous CEO to the current one as the latter is keen on streamlining the whole business.

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!

Nvidia unveils an even more advanced chip while Google has talks with Apple about chatbots…

Just when you thought things couldn’t get even better for the AI chip company, Nvidia unveils powerful chip in push to extend dominance in AI market (Financial Times, Michael Acton and Camilla Hodgson) shows that Nvidia has unveiled an even more powerful AI chip in its ongoing efforts to remain at the cutting edge of this hot tech! The new Blackwell GPU (aka GB200) has 208bn transistors versus the “paltry” 80bn 😮 in its previously most-powerful chip, the H100. CEO Jensen Huang said that the chip was twice as powerful as the current generation of GPUs and has five times the “inference” (the rate at which AI models can respond to queries). * SO WHAT? * Such an announcement was actually widely expected but this will put even more pressure on companies trying to compete (e.g. Intel and AMD). Nvidia also announced new partnerships with companies including SAP, Snowflake and NetApp while it continues its fruitful relationship with TSMC. Nvidia is on a massive roll at the moment – and we’re now getting to levels where investors will be wondering how sustainable their growth is actually going to be! The thing is, it sounds like its tech is sound and I have seen this sort of

questioning before – with Apple in the early 2000s. If Nvidia can keep on pushing forward and remaining at the forefront it could well extend its dominance.

Then in Google in talks to install chatbots on every iPhone (Daily Telegraph, James Titcomb) we see that Google and Apple are exploring a deal that could mean we get chatbots on every iPhone that will be powered by Google’s Gemini bot. The idea is that they will be the driver behind Apple’s AI tools such as Siri. * SO WHAT? * This would be a major boon to Google as it has recently faced some ridicule over Gemini for bizarre answers and generating weird images. However, this would not come without issues as there would be questions over whether Google will have access to iPhone users’ data – and it may also attract the attention of regulators as Google already pays Apple a reported $18bn a year to be Apple’s default search engine (via Safari). Apple has already held discussions with OpenAI, according to Bloomberg. FWIW, it seems to me that Apple always wants the best trinkets and Gemini seems to me to be distinctly second-rate versus ChatGPT but maybe a combination of the two giants’ capabilities will make for a better AI. If I was Apple, though, I’d be much happier doing a deal with OpenAI on this, particularly as OpenAI doesn’t also make mobile phones that compete with its core product!

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!

We look at the latest developments in cars, consumer and retail and professional services…

In a quick scoot around some of today’s other interesting stories, in car-related news, Ford’s Assisted-Driving Technology Under Scrutiny as U.S. Probes Fatal Texas Crash (Wall Street Journal, Ryan Felton) shows that the National Highway Traffic Safety Administration has opened an investigation into a recent fatal crash involving a Ford SUV whose driver-assistance tech is suspected to be at least partly at fault for the incident. It occurred last month and involved a Ford Mustang Mach-E SUV which hit the rear of a Honda CR-V that was in stationary traffic on the Interstate Highway 10. The driver of the Ford said that the Honda was at a “complete stop with no lights on” and, sadly, the Honda driver died as a result of the crash. The report said that the Ford had “partial automation” engaged at the time of the crash. Nasty. We’ll just have to wait and see what happens here.

In other car news, This Nissan-Honda team will struggle to match EV rivals (Financial Times, Lex) sounds a sceptical note on the newly-announced venture between these two fierce rivals because it argues that although they will be able to cut costs they won’t have much time to pit themselves against cheap Chinese EV imports. * SO WHAT ? * I have to say that I’m more sceptical about the success of Chinese carmakers in Japan. I think that the Japanese are extremely proud of their automotive heritage and China’s overtaking of Japan’s economy a few years back still hurts. Japanese car makers have a combined 90% market share of the domestic car market that I just can’t see Chinese makers making much of a dent in no matter how cheap the prices are. The fact that EVs still only form a 2% share of the market as the popularity of hybrids (which Toyota is good at) remains could give Nissan-Honda just enough time to catch up (although it will be tight!)…

Then in Ailing EV Maker Fisker to Pause Production for Six Weeks (Wall Street Journal, Dean Seal and Sean McLain) we see that the troubled EV maker is pausing production while it has talks with a big automaker that could result in an investment that could save the company. Its finances have been dodgy for a while now and things just ain’t looking good. We’ll just have to see whether it manages to save itself somehow…

Meanwhile, in consumer-related news, Jump in UK minimum wage keeps Bank of England on alert (Financial Times, Delphine Strauss and Laura Onita) shows that the Bank of England will be keeping a close eye on a second jump in the UK minimum wage and whether or not it stokes further inflation. * SO WHAT? * Official figures showed last week that UK wage growth was at last slowing down from record highs but the statutory national living wage is going up by its sharpest rate since 2001 (up by 9.8%) and it will kick in from April. Younger workers and apprentices will get an even bigger increase (of up to 21% in their hourly pay!). The question will be whether companies are willing to shoulder the increased costs or whether they will pass them on to the end customers. If enough of them pass on costs, this could push inflation up and mean that interest rates will remain higher for longer.

Elsewhere, Reckitt to continue selling controversial baby milk (The Times, Alex Ralph) shows that the company is going to continue to sell Enfamil premature baby formula products in the US despite last week’s judgment by an Illinois state court where a mother who said here premature baby died after consuming Reckitt’s product was awarded $60m in damages. * SO WHAT? * Reckitt’s denies a causal link but Reckitt’s baby formula woes will stoke calls for a break-up (Financial Times, Lex) draws comparisons with Bayer and its nightmares with its weed killer “Roundup” being accused of causing cancer (Bayer has had to pay $20bn for related lawsuits which were a legacy of its acquisition of Monsanto which made Roundup) as Reckitt’s nightmare comes from a product made by Mead Johnson which Reckitt bought for $18bn in 2017. Some are now speculating that the resulting tanking of the company’s share price will make Reckitt’s a takeover target – but I think it’d be a brave company to buy out the whole thing, particularly with the threat of court cases and damages hanging over it! I would have thought a break-up would be a better option here…BTW, the death of any baby is a terrible tragedy, particularly if it really is the fault of this baby formula. However, for the purposes of what I am saying here, I am focusing on the commercial aspect of this story…

Then in Currys raises forecasts as bid interest recedes (Daily Telegraph, Hannah Boland) we see that the company is going it alone as excitement surrounding potential bids for the ailing electricals retailer – Elliott Advisors (who were rejected) and JD.com (who didn’t make an offer in the end) – has now come to nothing. The company raised its profit forecasts for the year as it says that it is getting its Nordic business back on track whilst seeing positive momentum in the UK and Ireland. Back to the drawing board then!!!

In professional services news, Deloitte launches biggest reorganisation in a decade to cut costs (Financial Times, Simon Foy and Stephen Foley) highlights the Big Four accountancy firm’s launch of its biggest overhaul of its global operations since 2014 in an effort to cut costs and right size itself after a prolonged period where there has been a lack of deals. The number of divisions will be cut from five to four. The divisions are audit and assurance; strategy, risk and transactions; technology and transformation; and tax and legal. Cuts are expected to be made across the board in terms of seniority. Ouch.

Meanwhile, Private equity groups step up pursuit of white-collar partnerships (Financial Times, Antoine Gara and Stephen Foley) shows that private equity firms are looking at buying chunks of consultancies, talent agencies and accounting firms. The latter is seen to be particularly attractive due to being stable businesses and potentially ripe for consolidation…who said M&A was dead?!?

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…

I just love moments like this. With all that’s going on in the world at the moment it’s nice to know that humans can actually be nice to each other when they try 😍!