Monday 17/04/23

1. In MACRO NEWS, we look at the effect of strikes on the UK economy, BT’s war games simulating a Taiwan invasion, G7 minister promises on fossil fuels and the vulnerability of US LNG projects
2. In FINANCIALS NEWS, the Bank of England looks at an overhaul of the deposit guarantee scheme and we see why this is important
3. In TECH NEWS, Musk is planning on a ChatGPT competitor, the European parliament takes a closer look at AI, Monzo warns against candidates using ChatGPT in applications, smart cars reveal all and Roblox makes progress
4. In INDIVIDUAL COMPANY NEWS, Merck buys Prometheus Biosciences and GM ditches Apple CarPlay
5. AND FINALLY, I bring you a family dance…

So we look at the effect of strikes on the economy, how BT is carrying out wargames, what G7 ministers have agreed on re fossil fuels and the issues that the US boom in LNG is facing…

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:

Wave of UK strikes points to longer-term workforce crisis (Financial Times, Delphine Strauss and Valentina Romei) is an interesting article that takes a look at what effects the strikes are having – and will have – on the economy. In the short-term, the hit is likely to be negligible to the economy (although the strikes were thought to be a factor in why the UK’s GDP flatlined in February) but the longer-term effect is likely to be a recruitment and retention crisis that is likely to adversely affect the NHS and the teaching profession. The consensus view of economists seems to be that public sector wage rises will not lead to the rise in inflation that Chancellor Hunt is warning about.

BT holds China-Taiwan war game to stress test supply chains (Financial Times, Oliver Telling, Anna Gross and Cheng Ting-Fang) shows that BT engaged in two days of “war games” last year – after Nancy Pelosi visited – to see how it would fare in the event of an invasion of Taiwan by the Chinese. The procurement part of the business was tested to see how its supply chains would hold up. Given that a US government paper said that Taiwanese chipmakers accounted for over 60% of the world’s contract chipmaking capacity, it is clear that an invasion would have a major impact. It is interesting to note that the company that assisted with BT’s simulation, Prism, said that an increasing number of corporate

clients have been asking to undergo such simulations when governments are usually their bread and butter. * SO WHAT? * The electronics, automotive and telecoms industries are all expected to be vulnerable in the event of an invasion given how pervasive semiconductors are in modern day life. Rhodium Group, an economics and policy research firm, reckons that the impact of an invasion could be wide-reaching and jeopardise over $2tn in economic activity even without taking reactive sanctions into account. No wonder everyone is racing to get their own capacity! However, the problem is that it takes a number of years to build the capacity. However, I’d say that the danger window for Taiwan will be the next two to three years in particular as countries like the US will still be ramping up manufacturing capability.

In G7 ministers agree to speed up phaseout of fossil fuels (Financial Times, Kana Inagaki, David Sheppard and Andy Bounds) we see that the G7 countries have promised to accelerate the transition from fossil fuels to renewable energy. Japan had been a bit wobbly on some of the promises – but agreed in the end – and everyone agreed to reduce Russia’s influence on nuclear energy sector supply chains.

Then in Rising costs and competition threaten US boom in LNG projects (Financial Times, Myles McCormick) we see that new LNG projects in the US are facing hurdles in the form of competition for long-term contracts and rising costs. Interest in major projects in the US Gulf Coast has soared since the Ukraine war as interested parties look to alternative supplies. When the dust settles, all of the projects will boost US capacity by around 70% when they all come online by 2027, making them the world’s biggest supplier of LNG as they overtake Australia and Qatar. * SO WHAT? * FWIW, I think it’ll be interesting to see how OPEC+ reacts to all these shalers going online as they killed the oil price a few years back to snuff out American competition from shale – and it worked pretty well. Will they try and do it again, I wonder? I would imagine that they won’t try in the short term as Russia needs the money, but maybe further out they might try it again…

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!

UK deposit reform edges closer…

Bank of England considers major reform of deposit guarantee scheme (Financial Times, Stephen Morris, Patrick Jenkins and Chris Giles) follows on from what I was saying last week about the Bank of England and Jeremy Hunt airing the idea. Regulators are now concerned that the current £85,000 limit will only cover about two-thirds of deposits and that customers sometimes have to wait over a week to regain access to their money, potentially undermining customer confidence. * SO WHAT? * Given the massive difference between guarantees that we saw in the UK and US in the wake of the SVB crisis, a review was bound to happen. Certainly an uplift in the amount of protection offered would help sentiment at the very least, I would have thought!

Deposit insurance is key to the confidence trick of banking (Financial Times, Patrick Jenkins) emphasises the need for solid deposit guarantee schemes because confidence is the key to a stable banking system. Depositors need to be confident that banks will pay out when they are called upon even though we all know that they don’t just shove all of our money in some vault gathering dust. Deposit insurance schemes are generally financed by banks putting money into a centralised pot and the US scheme has the biggest pot. It is thought that the Bank of England will move towards this model (it sounds like we currently have a kind of ad hoc “whip-round” from participating banks, which explains why it can take time to get money out under the current system) to enable rapid deposit withdrawals and now seems to be an opportune time to make the requisite changes to ensure that there aren’t any future bank runs.

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!

Musk goes AI, the European parliament takes a closer look at AI, Monzo bans ChatGPT use and we see what your car says about you while Roblox makes progress…

Elon Musk reportedly planning to launch AI rival to ChatGPT maker (The Guardian, Miranda Bryant) shows that Elon Musk is thought to be planning to launch an AI company, which is interesting given that he has been vocal about his opposition to AI. Rumours have been gaining momentum as he has apparently employed engineers from leading AI labs like DeepMind and sourced thousands of high-spec GPU processors. I’ll be interested to see what he has to say about this himself as to whether this is true or not!

European parliament prepares tough measures over use of AI (Financial Times, Javier Espinoza and Ian Johnston) shows that the Europeans are now looking at implementing strict guidelines over how AI can be used, joining the US and China in doing something about AI’s exponential (and currently unchecked) growth. MEPs are apparently close to agreeing a list of proposals that will become part of Europe’s Artificial Intelligence Act which is designed to reform the use of AI. Some of the measures may include forcing AI developers to say if copyright material is being used to train their models and making them responsible for any misuse of AI programmes rather than lumping it all on users. Discussions are due to conclude next week, so we’ll have to wait until them to see what measures will actually come into being.

Don’t use ChatGPT to apply for our jobs, Monzo warns candidates (Daily Telegraph, Simon Foy) shows that the fintech is banning the use of ChatGPT in job applications to stop cheating as a new disclaimer seems to have appeared in recent job ads. Someone at Monzo said that this was a pre-emptive move rather than a reaction to a particular increase in candidates using it on applications. * SO WHAT? * Given that more people are using AI in more situations, this is an unsurprising development! Interestingly, US-based online recruitment website Resume Builder said that almost 50% of respondents to a recent survey said that they’d been helped by ChatGPT with their CVs and cover letters and 70% of those who had used it said that they had got an improved response rate from employers. Although there is palpable concern about it, I have to say that in many cases I don’t see how anyone will be able

to tell so at the moment it seems that a lot of it will be on trust.

What data from your smart car is revealing about you (The Guardian, Gareth Corfield) is a really interesting article that highlights the kind of info that your car can reveal about you! A Reuters investigation revealed that Tesla cars have been filming owners over a number of years and the latest figures from the SMMT show that the best selling cars all have the latest in infotainment and telematics which can gather all sorts of data! * SO WHAT? * The danger here is that your data could be sold to the highest bidder and the information could be used to make products and services that you’ll be induced to buy. Ford’s latest Mach-E Blue Cruise system has cameras to monitor drivers to ensure they are alert at the wheel, but of course other equipment in the car can record data. The information could also be invaluable to the police and insurance companies – but surely it could be used for blackmail as well! At the moment, it seems that there’s not much being done about ensuring the privacy of the data and the automotive industry appears to be being rather defensive on this. Surely this sort of thing should also be covered in any future data usage legislation, no?

Then in Roblox makes real progress from its virtual worlds (The Times, Callum Jones) we see that the online gaming platform continues to gain in popularity while the metaverse continues to fall short of the hype. User numbers increased by 22% versus the year before and although its user base is young, they are getting older. Apparently, its fastest growing age group is between 18 and 24! Its success depends on its gamer community – who play the games – and its creator community who builds them. * SO WHAT? * FWIW, I think that immersive worlds aren’t the problem – it’s how they are accessed that can be the bottleneck. I think that the major problem with the metaverse is that access necessitates expensive headsets for the full experience (this does remind me of one of the main reasons why 3D TVs didn’t really take off – to watch them, each person had to have special shutter glasses that cost over £100 a pair!) whereas Roblox is accessible to all. Funnily enough, though, I also think that the “Roblox generation” may well be the ones to take the metaverse to new heights when they get older as they will be more attuned to the attractions of a virtual world. In the meantime, though, we’ve got to be patient with floating avatars on weird bodies 🤣.

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!

Merck makes a big acquisition and GM ditches Apple CarPlay…

In a quick scoot around some of today’s other interesting stories, Merck buys Prometheus Biosciences for almost $11bn (Financial Times, Jamie Smyth) shows that the pharma company has made an all-cash bid for Prometheus – a biotech that specialises in diseases caused by abnormal activity of the body’s immune system e.g. ulcerative colitis – as part of wider efforts to improve its pipeline and boost its position in immunology as Merck faces the patent loss of its best-selling cancer drug. It offered $200 per share, which is a massive 75% premium to Friday’s closing price. Has the M&A seal been broken?? Maybe this is something for investment bankers to take heart from after a very dry period…

GM Ditches Apple CarPlay on EVs as Fight for Your Car’s Screen Intensifies (Wall Street Journal, Mike Colias) shows that GM is ditching Apple CarPlay and Android Auto on many of its new EVs in favour of new software for its multimedia display, which they say has better functionality. Neither Tesla nor Rivian offer Apple CarPlay or Android Auto at the moment. * SO WHAT? * I think that this is a ridiculous idea and is a MASSIVE step backwards. Auto companies are generally pretty rubbish at developing their own infotainment systems and I really think they should stick to their knitting and let the operating system specialists concentrate on what THEY are good at! Clearly the auto makers want to hang on to their piece of the pie and I suspect they probably want to get some of that lovely recurring income by making owners subscribe to expensive updates. The problem is that the more car choices people have the less likely they are to go with a car that forces you to use its own operating system for things like nav and music.

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…

There were slim pickings today on the “alternative story” front, so I thought I’d go for this family dance instead to lighten the mood! Happy Monday!