Wednesday 03/05/23

1. In MARKETS, MACRO & OIL NEWS, UK listing rules get a revamp, UK manufacturing is in a rut and BP unveils “heinous” profits
2. In TECH/AI NEWS, an AI pioneer departs with a warning, education companies take an AI hit, Amnesty uses AI and Bluesky emerges as a Twitter rival
3. In FINANCIALS NEWS, First Republic’s rescue fails to calm, HSBC unveils strong results and Icahn gets a huge kicking
4. In MISCELLANEOUS NEWS, Ford posts profits, Lordstown is in a pickle, UK property prices rise and shops get a pre-coronation boost
5. AND FINALLY, I bring you a cake-off…

So UK listing rules face scrutiny, “meh”nufacturing is in a rut and BP posts big profits…

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:

City red tape to be cut in effort to rival New York (Daily Telegraph, Simon Foy) shows that the FCA is looking to overhaul the existing listing rules in a bid to make London a more attractive place for companies to list. It will move closer to the rules over in the US in a number of areas, one of which will be having a “single segment” system replace the existing “premium” and “standard” system. At the moment, only “premium” listed companies can be included in the FTSE indexes, which are the indexes used by tracker funds. If this goes through, it would be one of the biggest changes in London’s stock market rules since the 1980s! * SO WHAT? * This needs to get done because London is losing its mojo while New York is eating its lunch. The aim is to get fast-growing companies to list on the LSE and the FCA is to launch a consultation today on potential reforms.

📢 I’m going to be doing the monthly round-up TODAY at 5pm. If you would like to attend, you will need to register HERE. See you later!

Manufacturing sector stuck in doldrums (The Times, Arthi Nachiappan) cites the latest CIPS and S&P Global manufacturing PMI which shows that UK manufacturing is still in decline as new orders, output and stock levels all went lower. Weaker demand from the US, China and Europe were blamed but, weirdly, manufacturers were at their most optimistic for 14 months as 61% of respondents forecasted rising output in the coming year due to market conditions (and supply chains) improving. Manufacturing counts for about 10% of the UK’s GDP. Its performance stands a stark contrast to the far more dominant services sector, which continues to grow.

Then in BP exceeds profits forecast with £4bn in first quarter (The Times, Helen Cahill), we see that the oil giant unveiled profits that came in above City forecasts for Q1 despite energy prices weakening since the Ukraine invasion. Its gas marketing and trading business put in a particularly impressive performance. * SO WHAT? * This stellar performance once again prompted calls to close windfall tax “loopholes”, but I have to say I don’t see the government revisiting this any time soon. Pretty much all oil companies have said that they will just not bother with the North Sea and all the tax hassles it entails and that any tax they pay will mean that less is invested in renewables.

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!

An AI pioneer departs with a warning, education companies suffer an AI hit, Amnesty gets caught out and Bluesky emerges as a Twitter rival…

AI pioneer Geoffrey Hinton warns about growing risks as he quits Google (Financial Times, Madhumita Murgia) shows that the British scientist who is often seen as the godfather of modern AI has decided to leave Google after spending over ten years there in order to be able to speak more freely about the pitfalls of AI. One of his main concerns was that the scramble for AI supremacy between Google and Microsoft could advance development without any rules and guidance in place. * SO WHAT? * This is pretty big – and underlines concerns about the rampant development of AI at the moment. Regulation is most definitely needed – but it seems to be slow in coming!

Education companies’ shares fall sharply after warning over ChatGPT (Financial Times, Bethan Staton) highlights investor concerns about the whole education sector as edtech company Chegg, which does online study guides, announced a revenue warning as students switched to using ChatGPT. Chegg’s share price halved in trading yesterday and had a knock-on effect on other companies such as Pearson (down 15%), Duolingo (-10%) and Udemy (down by over 5%). * SO WHAT? * This is one of the first examples of a company acknowledging the direct impact of AI on its finances. Interestingly, the chief exec of Pearson said that its business model was different to that of Chegg and that combining its IP with Pearson’s AI could actually be quite lucrative. Although Chegg’s chief insisted that AI could also be an opportunity, this sounds less convincing because what AI does is quite similar to what Chegg does (gives students answer to questions on college courses). As I’ve said on many previous occasions, AI is going to change the face of education in terms of how we learn and how our learning is assessed. It’s coming and, at the moment, there doesn’t seem to be much going on to adapt to it.

Amnesty made images of ‘human rights abuse’ with AI (Daily Telegraph, Gareth Corfield) shows that the campaigning charity used AI images to mark the two year anniversary of protests in Colombia against government-imposed tax rises, despite having access to original videos and images of the 2021 protests! Although the pictures were actually labelled as AI-generated, their use was criticised for devaluing true life reporting. Amnesty said that it used the images to portray victims whilst still protecting their identities. * SO WHAT? * OK so it sounds like there were legitimate reasons for the use of AI in this case, but it will cast doubt on everything IMO as many people will be wondering whether what they see is actually real. It could also ultimately devalue real photography because, for the sake of argument, why send a photojournalist into a dangerous war zone when you can you can do it all from the comfort of your laptop?? I suspect that legitimate news sources will resist and continue to do the job properly – but what about smaller agencies with squeezed budgets?? This is yet another example of how AI could change how we perceive and interact with the world.

Then in Jack Dorsey’s Bluesky emerges as latest challenger to Elon Musk’s Twitter (Financial Times, Hannah Murphy) we see that a new social media platform, called Bluesky, is emerging as a potential contender to Twitter. It was originally funded by Twitter and even has Twitter co-founder Jack Dorsey on its board – but it is now completely separate to it. The platform is still invite-only, is in beta mode and only has 50,000 users but visits to the app have jumped considerably over the last month. It looks quite similar to Twitter and its posts are called “skeets” (= Sky + Tweets). * SO WHAT? * This all sounds like fun but the fact is that things like this eventually hit major hurdles such as moderation and technical difficulties (as Mastodon and Hive have found). I guess the thing about this platform that gets everyone excited is the fact that Jack Dorsey is actually involved. It will also need to come up with funding and how to monetise, so this is far from being a Twitter killer at the moment!

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!

Banking jitters continue, HSBC posts solid results and Icahn gets a Hindenburg bashing…

Wall Street suspends shares in Californian bank as fresh crisis fears grip the market (Daily Telegraph, Simon Foy) shows that banking jitters have not disappeared as yet because shares in PacWest were suspended after cratering by up to 39% as investors bet on who would fall next. Ten members of Congress wrote to Fed chief Jerome Powell to ask him to pause interest rate rises to avoid recession. Another bank, called Western Alliance, has along with PacWest, also come under pressure since SVB failed given that all three banks have a higher-than-normal proportion of uninsured deposits. The drama continues…

HSBC’s impressive results fail to quell break-up calls (The Times, Patrick Hosking) shows that the bank managed to triple its profits in Q1 thanks to rising interest rates, falling borrower defaults and a profit from the rescue of SVB UK. Agitating shareholder Ping An dismissed the performance as being thanks to a collection of one-offs and is continuing its campaign to get the company to separate out its Asian business. A shareholder vote is due at the end of this

week regarding the potential spin-off but the idea does not seem to have gained enough traction among the main shareholders as yet.

Then in Icahn group’s shares tumble after attack by short seller Hindenburg (Financial Times, Ortenca Aliaj and Antoine Gara) we see that US short seller revealed a short position in Icahn Enterprises yesterday as it released its latest signature damning reports. Icahn Enterprises is the publicly listed fund that is run by famous investor activist Carl Icahn, who most recently acted as the catalyst for the massive shake-up going on at Disney at the moment. One of the most worrying things about the report is that it alleges that Icahn has been using money taken in from new investors to pay dividends to the old investors (which basically has echoes of a Ponzi scheme!). Icahn, along with his son Brett, owns 85% of Icahn Enterprises. The share price fell by almost 20% on the news yesterday. * SO WHAT? * As always, Hindenberg’s research is pretty entertaining – and it piles criticism onto the only big institution that publishes research on Icahn Enterprises, Jefferies, because of its perennial “buy” rating and that it assumes that its dividend will be safe “into perpetuity”, which is pretty much unheard of. It’ll be very interesting to see how Icahn defends himself here.

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!

Ford unveils profits, Lordstown unveils a nightmare, property prices pop and UK shops get a boost…

In a quick scoot around some of today’s other interesting stories, Ford Posts $1.8 Billion Profit, Cuts Mustang Mach-E EV Prices (Wall Street Journal, Nora Eckert) shows that the company managed to reverse a previous-year loss, posting a $1.8bn profit in Q1 due to a rebound in demand for its F-series pickup trucks and buyer demand for high-end models. It is leaving its full-year forecasts unchanged. It was also worth noting that Ford cut prices – for the second time this year – on its electric Mustang Mach-E.

Meanwhile, Tesla rival is facing collapse as backer threatens to pull support (Daily Telegraph, Howard Mustoe) shows that things are going markedly less well with US electric truck maker Lordstown Motors as Foxconn, a major investor, has threatened to withhold new funding. * SO WHAT? * It had agreed to shell out money in stages but it is now baulking at the original agreement given that Lordstown’s share price has ducked under $1, losing an eye-watering 99% of its $1.6bn value at flotation. Another SPAC-

backed company (potentially) bites the dust! It does go to show that listing rules are there for a reason and if you try to swerve them by going down the SPAC-backed listing route, there is a big risk that you will get found out further down the road!

Elsewhere, House prices make surprise jump amid mortgage approval boost (The Times, Tom Howard) highlights the latest Nationwide figures which show that house prices rose last month for the first time since August last year! This surprised analysts, who were expecting another fall. The annual rate of price inflation is, however, still negative and it is widely believed that the latest boost is a blip, not a trend.

Then in Shops enjoy a weekend boost before coronation (The Times, Isabella Fish) we see that the early May bank holiday gave a boost for UK retailers, according to research from Springboard, as footfall increased across the board. You would have thought that there would be another boost for the Coronation, although the magnitude of it will depend very much on the weather!

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…

With the Coronation coming up, I thought it would be appropriate to alert you to cake. We all know that M&S’s Colin the Caterpillar is a ‘pillar of society (I thank you) and an integral part of many a celebration, so I thought it would be good to see him put through his paces in ‘I compared two supermarket Coronation caterpillar cakes – one was fit for a King’ (The Mirror, Danielle Kate Wroe). Who won?? You’ll have to read to find out…