Tuesday 30/05/23

1. In MACRO & POWER NEWS, China falters, Erdogan wins, Sánchez gambles and nukes need to hurry up
2. In TECH NEWS, AI chips get scarcer, WPP does an AI deal but there are power issues
3. In RETAIL & CONSUMER NEWS, Amazon takes on Evri while UK food prices calm a bit
4. In MISCELLANEOUS NEWS, Cali increases electrification efforts, US high-schoolers increasingly forego college and UK house prices slip
5. AND FINALLY, I bring you tea and cheese…

So China’s confidence falls short, Erdogan stays in power, the Spanish PM takes a gamble and SMRs need to hurry up…

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:

‘Confidence is a big problem’: China’s economic recovery loses steam (Financial Times, Joe Leahy, Xinning Liu, Thomas Hale and Chan Ho-him) highlights a tricky time in China’s economic growth as young people are finding it tough to get jobs – even tougher than it was during the pandemic in some cases! Youth unemployment hit a record high of 20.4% last month, although the headline unemployment rate actually fell. Graduate prospects are getting increasingly uncertain what with industrial production, profits, property sales and credit growth all coming in below market expectations in April and early May. Commodity prices are falling and even consumer spending, which got an initial boost after the lifting of zero-Covid restrictions, has cooled off on lukewarm economic prospects. A weaker property market has been taking a particularly notable toll on consumer confidence and China developers: the main quake is over but the aftershocks are not (Financial Times, Lex) points out that although the central bank tried to pep things up this year by doling out around $29bn in loans and April new home prices rebounded in April, there was also a notable increase in the number of new court-ordered liquidations and developer defaults – showing that there’s still a lot to sort out in the real estate sector. Property developer KWG became the latest to default earlier this month and, given that this was a shock to the market given its previously solid reputation, it raises concerns that all is not yet well in the sector – and the fact that China Vanke, the second-biggest local developer, missed its

earnings estimates provided further evidence of this current state of affairs. Although opportunities undoubtedly exist, it does sound like the sector is a bit of a minefield at the moment. Clearly, China’s economy is still a work in progress…

Meanwhile, ‘I can do it’: Erdoğan promises Turkey more strongman medicine (Financial Times, Adam Samson and Ayla Jean Yackley) highlights more Erdoğan for Turkey as he managed to win the run-off election on Sunday, extending his two-decades of power. After the dust settles, he’s going to have to deal with the country’s economic hangover as investors fret about his unorthodox policies and Turkish lira plunges as Erdoğan claims mandate to continue divisive rule (The Guardian, Ruth Michaelson) highlights one of the immediate effects of his victory. Here we go again!

Talking of elections, ‘All or nothing’: Spain’s Pedro Sánchez gambles on snap election (Financial Times, Barney Jopson) shows that Spain’s PM has decided to call a snap election five months ahead of schedule just a day after his Socialist Party took a massive kicking in the local and regional elections! He says he’s holding it to “clarify” the will of the people while others say this is a daring move that will give him a chance to consolidate votes on the left (and limit the effects of party in-fighting) whilst throwing the far-right into disarray.

Then in Nuclear power: governments should get cracking on SMRs (Financial Times, Lex) we see that the topic of Small Modular Reactors (SMRs) is coming up again as the UK races towards net zero power generation by 2035. Funding to the tune of $275m for a new SMR to be built in Romania by NuScale is good news, as is news of the world’s first SMR plant in Darlington, Canada which is to be built by GE/Hitachi. However, the UK is still in the midst of a competition to identify the best design – but it’ll need to hurry up if it’s to meet the 2035 target (Rolls-Royce’s SMR is scheduled to start production in 2032, for instance). Given that the cost of SMR electricity is to be around $65-75/MWh versus that generated by a “traditional” nuclear power plant of over $124/MWh, you can see the attraction!

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!

AI chips face burgeoning demand, WPP does a deal but AI could scupper net-zero objectives…

The AI Boom Runs on Chips, but It Can’t Get Enough (Wall Street Journal, Deepa Seetharaman and Tom Dotan) is a really interesting article that highlights the shortage of advanced chips, called GPUs, that power AI. Nvidia has a near-monopoly on these chips and the clamour in demand for them since the launch of ChatGPT has outpaced supply. One AI observer described demand as “like toilet paper during the pandemic” and Elon Musk said that “GPUs at this point are considerably harder to get than drugs”!  * SO WHAT? * The lack of chips has restricted the processing power of cloud-service providers like Amazon and Microsoft as AI developers need increasing amounts of capacity to develop and operate the growing complexity of their models and assist other companies in building their own AI services. Nvidia has said that it will be boosting supplies to meet demand – and investors have bought into the shares in the belief that Nvidia will continue to benefit, sending the company’s share price up by a whopping 167%! Many AI founders reckon that the chip shortage will last until at least next year.

Meanwhile, How data giants are putting the world’s net-zero plans at risk (Daily Telegraph, Melissa Lawford) just reminds us that the

world’s computing and information storage sector has a bigger carbon footprint than the airline industry because of its reliance on data centres! Did you know that just one data centre can soak up as much electricity as 50,000 homes?? The sudden boom in AI, and the computing power it requires, means that power usage is just going to continue to rise. In 2019, analysis from The Shift Network said that IT and computing accounted for 3.7% of global carbon emissions while a 2018 paper by researchers Lofti Belkhir and Ahmed Elmeligi said that it would hit 14% of global emissions (based on levels in 2016) by 2040. Data processing and storage sucks up electricity because a) it needs electricity to run, b) it needs to be kept cool (which uses more power and water) and c) the equipment itself is expensive to make and maintain. Clearly there is massive opportunity here for the use of renewables…

Then there was an interesting development in WPP’s Nvidia deal ‘to change advertising’ (The Times, Isabella Fish) which shows that the world’s biggest advertising agency announced a partnership with Nvidia to develop a platform that will create automated digital ads using AI. WPP says that commercial content will be produced more rapidly on a platform that will be based on Nvidia’s Omniverse Cloud platform. I have no doubt that other companies will follow suit…

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!

Amazon chooses Evri and UK food prices slow down…

In retail news, Amazon hires Evri as Royal Mail year-long dispute rolls on (Daily Telegraph, Oliver Gill) shows that Amazon has taken on Evri (which used to be called Hermes) to help with deliveries as Royal Mail has continued to struggle with delivering on time because of the ongoing strikes. Interestingly, a trial showed that Evri met delivery targets on over 97% of occasions and will, as a result of the latest development, deliver millions more next day parcels. As Royal Mail staff strike, there are plenty of other players out there who are willing to eat their lunch…

Meanwhile, UK food inflation falls in May, raising hopes prices may have peaked (The Guardian, Phillip Inman) cites the latest figures from the BRC which show that food inflation actually fell in May, prompting hopes that grocery prices may have peaked! Annual food price inflation cooled from 15.7% to 15.4% while fresh-food inflation fell from 17.8% to 17.2% while the government is currently in talks about a voluntary price cap on essentials such as bread and milk, although the industry itself has been quick to criticise this move. The slight cooling off is thought to be thanks to lower energy and commodity costs. I think we’ll all be thankful for this – if it continues!

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!

California puts effort into networks, high-schoolers swerve college and UK house prices calm down…

In a quick scoot around some of today’s other interesting stories, California’s Electric-Truck Drive Draws Startups Building Charging Networks (Wall Street Journal, Paul Berger) is an article that highlights the race by EV charging start-ups looking to benefit from California’s incoming regulations that will make some trucking companies and owner-operators to start buying EVs starting in January next year. This law change will mean that there will be a big move to electric fleets which will require a decent charging network. The charging network remains a key concern but companies like TeraWatt Infrastructure, Next Era Energy and Zeem Solutions are looking to be part of the solution. * SO WHAT? * The EV conundrum persists here with doubters saying that they need to see a better network to stimulate demand for the vehicles while others say that they need to see the demand for EVs to go up before justifying investment in the infrastructure. Clearly a solution (or range of solutions) has to be found here to meet next year’s deadline…

More High-School Grads Forgo College in Hot Labor Market (Wall Street Journal, Harriet Torry) highlights an interesting phenomenon

that seems to be developing stateside at the moment as the latest Labour Department stats show that the college enrolment age fell to 62% last year from 66.2% in 2019 for high school graduates, which was itself down from 70.1% in 2009. * SO WHAT? * Massive growth over the last few years in the number of jobs that don’t require a college degree and the cost of living crisis have no doubt had a role to play here. That can then be extended as people get used to earning a wage and decide to avoid uni altogether. It seems to me that more people these days are questioning the need for a university/college degree and the return they get on their outlay on fees – particularly as more learning has increasingly gone online since Covid. I do wonder whether we will see the same phenomenon making its way over to the UK and beyond…

Then in Movers warned as house prices dip (The Times, Isabella Fish) we see that house prices have lost a bit of momentum in the wake of higher mortgage rates and the ongoing cost-of-living crisis. Stats from Zoopla say that the average house price has fallen by 1.3% while buyers’ confidence has increased and agreed sales have hit their highest point so far this year. It’ll be interesting to see the effect that last week’s mortgage rate hikes have on subsequent data…

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…

Are you a dunker? I’m afraid I’m not. I don’t like to put the structural aspect of a decent biscuit in jeopardy but I can see the appeal. Here’s one expert’s spin on it: You’ve been drinking tea wrong – etiquette expert warns against dunking biscuits (The Mirror, Ariane Sohrabi-Shiraz).

Meanwhile, somewhere on a ridiculously steep hill in Gloucestershire, ‘I lost consciousness chasing a 3kg Double Gloucester down a hill – it was worth it’ (The Mirror, Saffron Otter) highlights a peculiarly British way of spending a Bank Holiday – risking your life chasing a round of cheese down a hill! Apparently, the cheese can reach speeds of up to 70mph!!!