Wednesday 13/11/24

As readers of Watson’s Daily, you will no doubt understand the importance of “commercial awareness”. If you’d like to know more about it and how to improve it, I’m running a commercial awareness bootcamp with Jake Schogger of the Commercial Law Academy on Saturday November 16th. We only do this once a year, so if you’re interested now’s the time! We cover a lot of ground and it’s very reasonably priced for the huge amount you get. If this sounds like something you’d be interested in, click HERE to get registration and even details (for more about the event and the topics we’ll be covering, you’ll need to scroll down that page).

Also, and hopefully you’ll know this by now, it was 10 years ago on November 7th that I published the first edition of what was to become Watson’s Daily. I wanted to mark this by going into London and having an informal meet-up but that got postponed because of the threatened Tube strikes (although they subsequently got cancelled at the last minute!). Anyway, I’m going to do this in London TOMORROW in Soho (BrewDog in Poland Street from 5pm) so if you’re around and you want to say hello I’ll be there! I will let you know timings this week. Hopefully see you there! Ralph said he’d come along as well 👍

Wall Street bonuses expected to soar after Trump victory (The Times, Louisa Clarence-Smith) cites research by Johnson Associates, a US compensation consulting firm, which reckons that Wall Street bonuses are set to increase by anything between 25% and 35% by extrapolating the results of Wall Street firms over the first three quarters of the year. Bonuses are, of course, highly variable depending on what role you play, how much money you and your team have brought in, and, of course, whether you have a collection of compromising photos of your boss how desperate your company is to keep you. The fact of the matter is that pretty much every sector in the industry is performing well currently so it’s going to be difficult for bosses to make any attempt to manage expectations down.

Trump bump 2.0 may not pack the same punch for media stocks (Financial Times, Lex) takes a look at the current “Trump trade” – which has been great for tech, oil companies, crypto and the dollar (highlighted in Dollar hits six-month high as Trump tariff talk fuels inflation fears (Financial Times, Nicholas Megaw, Rafe Uddin and Mari Novik)) – but which has, in the past actually been good for the media sector despite Trump’s apparent disdain for it. Despite his hatred for a number of media outlets, The New York Times, the Washington Post and the Wall Street Journal all saw a rise in new subscribers over the course of his first presidency – while cable networks Fox News Channel, MSNBC and CNN all saw an increase in views. The market actually reckons that this is going to happen again but there’s a chance that the “bump” might not be as pronounced this time because his first stint as president was a shock for everyone and his antics

attracted a lot of attention. However, this time around, the electorate will know what to expect and may become more apathetic more quickly. The other major difference this time around is that the way people consume media is changing – more people get their news via social media and podcasts and interest in news websites has fallen. The use of social media to get your news fix is particularly notable among young people – 43% of those between 18 and 29 prefer to get their news via social media. * SO WHAT? * There is an argument that investors should take an interest in media stocks not because they’ll get a bump like last time – but because there’s a lot of consolidation going on. I think another major consideration here is how the Trump administration will treat AI – will it crack down on the scraping by AI models of premium content on news websites or will it take a more AI-friendly approach? I think that Musk could play a major role in this as he’s been a vocal advocate of caution on the direction that AI is taking and social media platforms have come under fire from media groups and content creators for using their work without paying for it. If scraping is allowed to continue pretty much unfettered then I’d argue that the need for consolidation will be more urgent.

In Why the euro is tumbling (Daily Telegraph, Tim Wallace) we see that the euro weakened as Trump’s momentum gained pace in the latter stages of the election campaign and when the magnitude of his victory became clearer it weakened further. Investors have been saying that Trump’s tariffs on imports are bad for Europe (and particularly Germany, because the US is its second biggest trading partner) – which explains why the euro is weaker against the dollar, but the euro is also losing ground against the pound (sterling is now at its highest level versus the euro in almost two years). In short, it looks like the pound is holding up better than the euro because Europe is more likely to be adversely affected by Trump’s tariffs than we are (well that’s the perception at the moment anyway!).

Then in energy news, Nuclear fusion start-up claims milestone with unconventional reactor (Financial Times, Malcolm Moore) highlights an exciting development in the world of nuclear fusion as OpenStar, a small start-up in New Zealand, says that it has created plasma in under two years and for less than $10m thanks to an unconventional reactor design. * SO WHAT? * Plasma is needed for the nuclear fusion process (hydrogen isotopes bang into each other inside a plasma and fuse together, releasing loads of energy) and the design that OpenStar is using could be superior to the existing “tokamak” design because it is easier to modify. The company says on its website that it reckons nuclear fusion is six years away from being commercially viable! Fingers crossed!

Musk’s influence on Trump could lead to tougher AI standards, says scientist (The Guardian, Dan Milmo) is an interesting article which contends that Musk’s potential influence in government could mean that more stringent safety standards for AI could be imposed, according to someone who has worked closely with him. Musk has long warned about the unfettered development of AI and that it could lead to the downfall of humanity. After all, he was one of 30,000 signatories to a letter last year that called for a pause in the development of the tech. This ex-colleague says that Musk could potentially persuade Trump to impose safety standards that limit the development of Artificial General Intelligence (AGI), which is more advanced than human levels of intelligence. Obviously, we’ll need to hear more on this as it’s just an opinion at the moment…

In Amazon steps up effort to build AI chips that can rival Nvidia (Financial Times, Michael Acton and Tim Bradshaw) we see that Amazon is about to launch its new AI chips as part of efforts to reduce its reliance on Nvidia’s chips. The company is pouring money into making custom chips in order to make its data centres more efficient and ultimately cut costs for itself and, of course, its customers. These developments are being managed via Annapurna Labs, a semiconductor start-up that Amazon bought in early 2015 for $350m. * SO WHAT? * Nvidia is way out in the lead on chips at the moment but although Amazon, Microsoft and Meta are big users of Nvidia’s wares, they are also developing their own capabilities in order to reduce their reliance on it. I don’t think that Nvidia will be quaking in its boots just yet, but these tech giants have the finances and the incentive to continue their efforts. The best Nvidia can do is to keep innovating to ensure it stays in front of the pack.

I thought that China’s Baidu joins Meta in race to make AI-integrated smart glasses (Financial Times, Eleanor Olcott) was an interesting given the race in wearables at the moment! So Baidu yesterday unveiled AI-powered smart glasses that use its LLM Ernie. They will help wearers track calorie consumption, answer questions about their environment, play music and film videos. The glasses will only be sold in China initially. * SO WHAT? * Although the US may be ahead of China in AI at the moment, China might be leading the world in terms of gadgetry capability and so this could be quite interesting, particularly as there’s been a lot of buzz surrounding the smart glasses joint venture between Meta and Ray-Ban. I think that although capability is important, so are aesthetics and price. Once those can be cracked, I think we may all be able to throw away our mobile phones! IMO, the Ray-Ban Metas are almost there in that they look good – and their capabilities are improving with every generation.

SoftBank returns to profit as Indian IPOs boost Vision Fund gains (Financial Times, David Keohane) shows that the company reported a $7.8bn profit over the latest quarter thanks to some successful IPOs in India and rising tech valuations. The numbers smashed analyst forecasts

(this was the company’s biggest quarterly profit in two years!) and SoftBank performance strengthens credibility of its AI vision (Financial Times, Lex) contends that, after a turbulent few years that have damaged its credibility, the company now has a decent base from which to move forward in its AI investments. Following the high profile disaster of WeWork, the company has been building up its stakes in companies invested in the AI boom – and Arm in particular.

In media news, Advertisers set to return to X as they seek favour with Elon Musk and Donald Trump (Financial Times, Hannah Murphy, Daniel Thomas and Eric Platt) shows that advertisers are starting to change their tune as the guy they vilified not so long ago for the “streamlining” of X’s moderation capabilities has suddenly become a wee bit more powerful. Brands like Disney, IBM and Apple left X in a huff last year, but it looks like they’re going to have to come crawling back although some are remaining steadfast. * SO WHAT? * I think things are still in limbo at the moment. It’s interesting to note that, on the day after the election result, 115,000 users deleted their X accounts – the biggest number of exits in a day since records began – but I think that things could go either way for X’s fortunes. People could abandon it because it may increasingly be associated with “the establishment”, or it could do well precisely BECAUSE it is part of the establishment – and that it may benefit from ad revenues as companies queue up to curry favour with Musk, Trump & Chums. Still, Insta and TikTok are very viable alternatives and could benefit at X’s expense. Another interesting theory being floated at the moment is if X could be merged with Trump’s Truth Social…

Meanwhile, French newspapers to sue Elon Musk’s X over copyright violations (The Times, Aaliyah Ahmed) shows that the battle between content creators and platforms continues, this time via a coalition of media outlets (including Le Monde, Le Figaro, Le Parisien, Telerama, Courrier International, Huffington Post etc.) who are taking legal action against X, which they say has been using their content without paying. Digital platforms are required to compensate news publishers when redistributing their content under French law. X has made no comment but this argument has been something that X has come up against on numerous occasions in different jurisdictions and against different publishers. Meta and Google have, in the past, been ordered to negotiate and make payments to French media outlets – so you’d think that X is going to have to cough up as well…

Elsewhere, Indian food delivery app Swiggy rises in market debut (Financial Times, William Sandlun and George Russell) shows that the Indian food delivery app, Swiggy, had a nice little pop on its market debut yesterday although it only ended up by 2.3% at the close. It is competing against market leader Zomato.

M&S overtakes Waitrose as grocer to Middle England (Daily Telegraph, Hannah Boland) provides further evidence that M&S is on a roll as Kantar data shows that M&S has overtaken Waitrose in terms of market share – the first time that M&S has ever overtaken Waitrose outside the Christmas period while Supermarket sales at highest level since first lockdown (The Times, Jack Barnett) highlights the fact that spending at supermarkets has risen to its highest level since March 2020 and Aldi closes in on third-biggest supermarket as Asda sales tumble (Daily Telegraph, Hannah Boland) highlights the advance of Aldi at the expense of a rudderless Asda (well, Lord rose took over the day-to-day running of the supermarket – but only recently). * SO WHAT? * It certainly feels to me like the retailers will be looking at a decent Christmas performance! FWIW, I think that a resurgent M&S and a John Lewis with the bit between its teeth is not only a weird mental image, but also means that the customers will benefit – whether that’s through pricing or overall shopping experience.

In leisure news, Flutter beats expectations as revenues rise by 27% in quarter (The Times, Louisa Clarence-Smith) shows that the world’s biggest online betting company (which used to be called Paddy Power Betfair) benefited from strong demand for sports betting in the US at the start of the NFL season. It was confident enough to raise its full-year guidance for the second quarter in a row. * SO WHAT? * It certainly looks to me like its decision to move its primary listing from London to New York this year was a good one – and given that its business balance has been shifting over the Pond since 2018 when sports betting started to get legalised, it makes sense.

In a quick scoot around some of today’s other interesting stories, UK jobs market cools as businesses warn over budget hit to hiring and prices (The Guardian, Richard Partington) cites the latest numbers from the ONS which show that the UK labour market is slowing down as the unemployment rate rose slightly over the last quarter from 4% to 4.3% while Firms say budget spells big job losses – why don’t forecasters agree? (The Times, David Smith) is an interesting article which argues that forecasters are taking a broader view that the increase in public spending could actually help unemployment to fall. * SO WHAT? * So who’s right? It’s possible that both businesses and the forecasters could be right because the increase in public sector spending could well result in an increase in public sector jobs while businesses in the private sector that have high exposure to temps and lower-paid workers in general will suffer, implying that there will be a labour shift. Anyway, it’s too early to tell just yet – and anyway, a more confident consumer may yet come to the rescue…

Elsewhere, Volkswagen to Invest $5.8 Billion in EV Startup Rivian Through Joint Venture (Wall Street Journal, Sabela Ojea) shows that VW is creating a JV with Rivian to benefit from the latter’s software while Inside VW and Rivian’s Big Bet to Rescue Each Other (Wall Street Journal, Stephen Wilmot and Sean McLain) highlights Rivian’s need for cash. This sounds great in theory but have the two troubled companies left it too late??

I thought I’d mention NHS drones fly blood samples in UK skies for first time (The Times, Katie Prescott) because, as you know, I am very sceptical about drones generally – but THIS is the only reason why I think they can be a force for the good! Samples were transported between London hospitals in just two minutes rather than the usual 30 minutes! Wow!

Here’s a classic lockdown Zoom sketch. It does contain strong language, but I still laugh at this now despite having seen it so many times! Doesn’t lockdown seem like a lifetime ago now?!