Wednesday 24/05/23

1. In MACRO NEWS, the Bank of England faces criticism, the IMF eats humble pie and has a meddle while suggestions about crypto regulation are made by IOSCO
2. In TECH NEWS, Apple signs a massive deal with Broadcom, Meta sells Giphy, Anthropic raises money and China frets about Japan
3. In CONSUMER, RETAIL & LEISURE NEWS, UK food price inflation takes flak and SSP booms while Hilton and Marriott chase the same market
4. In INDIVIDUAL COMPANY NEWS, Tesla considers England for a gigafactory, Netflix cracks down on password sharing and Cazoo tries to climb back up
5. AND FINALLY, I bring you a tricky puzzle…

So the Bank of England faces the music, the IMF gets it wrong on the UK – AGAIN – and IOSCO urges crypto regulation…

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:

There’s a lot of commentary about this in today’s newspapers but MPs berate governor over inflation failures (The Times, Ben Martin) shows that the Bank of England’s officials faced a ton of criticism from MPs on the Commons Treasury select committee for its failure to forecast the extent of our inflation problem. About time! Bailey and chums have been absolutely useless and I’ve been saying that they’ve been getting it wrong for ages – particularly when Bailey (and other central bankers, including Jay Powell at the Fed) dismissed price rises as fleeting when the data was patently indicating otherwise! Bailey conceded that there were some “very big lessons to learn” but also tried to defend the Bank’s work. There was a lot of talk about things like “greedflation” (how companies raise prices by more than their own cost increases to pad out their profit margins – and the CMA is now looking into food and fuel prices) and why savings rates were still low despite interest rates being higher. That genius chief economist Huw Pill added that “Clearly we are very concerned about poverty”. Remember, this is the same Huw Pill who recently said that people should just accept that they are poorer. Unbelievable.

Talking about other organisations who make an art out of getting things wrong, IMF says UK no longer heading for recession but urges against tax cuts (The Guardian, Phillip Inman) shows that the IMF has now upgraded its forecasts for UK growth. It is now saying that the UK will no longer dip its toes in the icy waters of recession this year, saying that our GDP will grow by 0.4% this year and not contract by 0.3% – a forecast that it only released last month!!! How useless are their economists 🤣?!? That is actually a BIG revision (especially after only one month!). Ever eager to stick their oar in, the IMF said that the government should not implement tax cuts as they could potentially fuel inflation. IMF urges Chancellor to scrap stamp duty (Daily Telegraph, Szu Ping Chan and Nick Gutteridge) is another example of them sticking their oar in, with the assumption that stamp duty is currently causing a bottleneck in the housing market and, weirdly, labour mobility. They really are a joke. Useful if you’re a country with dire finances and need a ton of money with loads of strings attached, though…

Further to recent calls by MPs to regulate crypto like gambling because getting the FCA to oversee it would give the asset class too much legitimacy, Global watchdog calls for UK to regulate crypto in same way as stocks and bonds (The Guardian, Kalyeena Makortoff), shows that the International Organisation of Securities Commissions (IOSCO), the “regulators’ regulator” covering 130 jurisdictions, wants the UK regulate crypto like proper financial assets in order to create “a level playing field between crypto assets and traditional financial markets”. * SO WHAT? * Interesting, but ultimately, the final decision about who gets to regulate crypto is up to the UK government. As things stand currently, the FCA is the most likely candidate to oversee crypto.

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!

Apple signs a big deal, Meta is forced to sell Giphy, Anthropic has money thrown at it and China worries about Japan’s chip moves…

Apple Strikes Multibillion-Dollar Supply Deal With Broadcom (Wall Street Journal, Asa Fitch and Will Feuer) highlights a massive deal (the exact details of which have not been released) struck by Apple for Broadcom to supply it with 5G radio frequency components and wireless connectivity components. Some of the components will be built in the US, which I guess is part of Apple’s push to broaden its manufacturing base outside China (it has increased production in Vietnam and India over the last few years). * SO WHAT? * I think that this is particularly interesting because there has been a concerted effort by Apple to replace third-party chips with its own versions. It has managed to replace Intel’s chips in its laptops and desktops over the last couple of years but it has struggled to make its own cellular modem chips, which are currently supplied by Qualcomm.

Meanwhile, Facebook Parent Meta Agrees to Sell Giphy for $53 Million on Regulator’s Order (Wall Street Journal, Colin Kellaher) shows that Meta Platforms is selling Giphy to Shutterstock for $53m in net cash after the UK’s CMA forced it to sell the business that it acquired in 2020 for $315m. The CMA originally ordered Meta to sell Giphy back in 2021, reasoning that the acquisition “would significantly reduce competition in two markets”. * SO WHAT? * Well it got sold! TBH, Giphy is the go-to for many and

Shutterstock appears to have snapped up a very good bargain when you consider what Meta originally paid for it. Given what Shutterstock does, I think this is a very good strategic acquisition as they complement each other well, being largely visual platforms.

AI start-up Anthropic raises $450m from Google and Spark Capital (Financial Times, George Hammond) shows that AI start-up Anthropic has managed to attract a decent chunk of change to fund an alternative to ChatGPT. The money will go towards “AI research and products that put safety at the frontier”, which sounds suitably woolly for an aspiring AI company 🤣. * SO WHAT? * Everyone wants to jump on the AI fun bus – and the fact of the matter is that a LOT of money will be poured in while a LOT of companies will fail (and, ultimately, consolidate). Nothing is a given when you’re at the cutting edge of a technology and we are in the very early stages of a major leap forward.

Then in China fears Japan’s chipmaking curbs go further than US restrictions (Financial Times, Qianer Liu, Kana Inagaki and Anna Gross) we see that China is concerned that US-prompted Japanese restrictions on exports of key chipmaking equipment will actually affect lower-grade silicon production as well, going further than they had originally imagined. China’s Semiconductor Industry Association is now calling for the government to retaliate, particularly as similar restrictions from other governments could follow.

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!

Food prices come in for big criticism and SSP does well while Hilton and Marriott chase the same customer category…

UK food price inflation at third-highest level since 2008 (The Guardian, Joanna Partridge) cites the latest Kantar data which shows that UK food price inflation is at its third-highest level since the financial crisis (17.2%) as it came in just short of April’s figure (17.3%). * SO WHAT? * Supermarkets are being accused of “greedflation” – and Supermarkets deserve to be a populist lightning rod (Daily Telegraph, Ben Marlow) highlights the fact that the CMA will be taking a look at whether competition failures in the grocery sector are fuelling higher food prices. Although many shoppers are turning to own-brands to save money, recent research showed that these prices were being jacked up even faster than branded goods! And while more shoppers continue to flock to Aldi and Lidl to cut grocery bills (sales over the past month were up by 24% and 23.2% respectively), Kantar’s latest figures showed that there was a little bump up in spending before the Coronation. Sales of sparkling wine were up by 129% and of still wine by 33%. It is worth noting that despite the perception that supermarkets are ripping off customers, even the CMA hasn’t found overwhelming evidence to show that the concerns about competition are justified as supermarket profits have fallen since the pandemic and profit margins have remained largely static. Still, it’s worth the CMA having a look!

Meanwhile, in leisure, Catering group’s sales take off at American airports (The Times, Dominic Walsh) shows that SSP, the owner of brands including Upper Crust and Caffè Ritazza, announced a

strong set of results – so strong, in fact, that the company actually raised its full-year guidance to the top end of the range thanks to a particularly good performance in its North American business. It said that revenues from its North America business was now at a whopping 124% of pre-Covid levels! It certainly is benefiting from growing numbers of travellers since all the lockdowns!

Talking of travellers, Hilton, Marriott Square Off in Extended-Stay Battle (Wall Street Journal, Kate King) shows that America’s two biggest hotel operators are launching rival long-stay brands for guests seeking stays of 20 nights or longer at reasonable rates. Hilton’s brand (“Project H3”) will have rooms that feature a full kitchen and have facilities including gyms, laundry and a small market stocked with snacks and toiletries. Hyatt’s “Hyatt Studios” is in development at the moment and will be at a higher price point than Hilton and Marriott’s offerings. * SO WHAT? * The new brands are meant to meet new needs of customers and their working patterns (more people going on “workations”, for instance!) as the “extended stay” segment is getting increasingly popular! The types of people who stay in such places include those who work on projects for longer periods (e.g. construction crews and business consultants on secondment), those relocating for new jobs, home renovations or divorce. The plan is for stays to be more reasonable price-wise with the Marriott expecting to charge around $80 per night and Hilton to charge about $100 versus the average room cost of $149 a night with the understanding that there will be fewer amenities like less frequent housekeeping and more limited food service options. I think that this is an interesting phenomenon that is perhaps taking the game back to the likes of Airbnb and I wonder whether it could catch on in the UK…

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!

Tesla looks at England as a gigafactory contender, Netflix cracks down and Cazoo’s problems drag on…

In a quick scoot around some of today’s other interesting stories, Tesla to consider building gigafactory in England, says Musk (Daily Telegraph, Matt Oliver and Adam Mawardi) shows that Elon Musk said that he will “strongly consider” building Tesla’s next gigafactory in England and indicated that he will be looking at potential locations towards the end of the year. What a turnaround that would be for the UK’s EV manufacturing industry!!!

Then in Netflix Cracks Down on Password Sharing (Wall Street Journal, Sarah Krouse and Joseph Pisani) we see that the streaming giant is going to follow through on its threats as it started to send out e-mails to users in the US and over 100 countries yesterday saying that only one household can watch Netflix per account. Users will soon start to see prompts the next

time they log in. It will be interesting to see what the drop-off rate is going to be like and how much this boosts the company’s profitability! It may also see an uptick in its ad-supported service…

Meanwhile, I thought I’d include Cazoo steers into trouble on stock market (The Times, Callum Jones) as it is an interesting tale of woe for what was, at one point, a real disruptor in the used car market. Cazoo listed in New York via a SPAC in August 2021 but since its $200+ peak share price, it is now bumping along at around $1.20 giving it a current market cap of $46.2m versus the heady $7bn it was at on flotation. The company still aims to be profitable by the end of this year, though. * SO WHAT? * Basically, the company grew too fast and was caught in the middle of investors moving from favouring growth stocks to favouring companies that prioritised profits. Cazoo is now doing so badly that if the current state of affairs continues, the New York Stock Exchange could decide to delist it. This is most definitely a cautionary tale and another example of why SPAC listings are so tricky.

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 bring you a very annoying puzzle here. Can you do it?? Once you see how you’ll be trying it on your friends – I guarantee!