David Fuller and Eoin Treacy's Free (Abbreviated)
Comment of the Day

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April 15 2014

Commentary by David Fuller

It is OK to Support Nuclear Power and Still Enjoy a Movie Now and Then

Here is the opening from this somewhat tongue-in-cheek assessment published by Bloomberg:

The nuclear power industry received a springtime Christmas present this week.

The world’s authoritative climate science group Sunday threw its arms around nuclear energy, among others, as a future source for powering economies. The industry’s share of global electricity generation has been falling since 1993.

The report, from the Intergovernmental Panel on Climate Change, emboldens proponents of nuclear energy, who tend to talk it up no matter what the issue is at hand.

David Fuller's view

We cannot afford to ignore the risks of man-made atmospheric pollution.  Fortunately, production and consumption of natural gas is increasing rapidly, and it is the cleanest of fossil fuels.  Solar energy is leading the renewables, becoming much more efficient and flexible than wind power, in addition to its compatibility with populated regions. 

New nuclear is the most productive clean source of power, although plants are currently expensive to build.  Understandably, they are unpopular because nuclear accidents, even if rare, are massively destructive.  Additionally, there is no known solution to the problem of nuclear waste. 

Nevertheless, the world needs nuclear energy and the Intergovernmental Panel on Climate Change has made a sensible contribution to the debate.  Prime Minister Shinzo Abe of Japan will be among the first leaders to take note.  

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April 15 2014

Commentary by David Fuller

Stiglitz Calls High-Speed Trading Front Running, Suggests Tax

Here is the opening and a latter section of this influential article from Bloomberg:

Columbia University Professor and Nobel laureate Joseph Stiglitz said high-frequency trading gives an unfair advantage to a select group of investors and could be taxed as a way to discourage the practice.

High-speed trading “results in sophisticated versions of front running” and “has resulted in an unlevel playing field,” Stiglitz said in a paper to be delivered at the Federal Reserve Bank of Atlanta’s financial markets conference at Stone Mountain,Georgia.

And:

Prohibiting the practice of high-speed trading might “entail considerable complexity,” Stiglitz said. At the same time, “tax policies can be effective in discouraging these activities.”

“Less active markets can not only be safer markets, they can better serve the societal functions that they are intended to serve,” Stiglitz said.

The FBI had already been probing potential criminal activity associated with high-speed trading. On April 4, U.S. Attorney General Eric Holder said the Justice Department is investigating whether the strategy violates insider trading laws. So is New York Attorney General Eric Schneiderman. In a March 31 interview on Bloomberg Television, Schneiderman urged the U.S. Securities and Exchange Commission to speed up its review and quickly issue new regulations.

One criticism of speed traders is that they use sophisticated algorithms to detect the moves of big institutional investors and then jump in front of their large orders. Speed traders can then profit from buying and then quickly selling a stock for a slightly higher price to the bigger, slower investor.

David Fuller's view

Subscribers to this service have been hearing about the threat of high-frequency trading for over five years, including an overall increase in intra-day volatility, scary meltups and meltdowns in seconds, and worst of all, what should be illegal front running which US stock exchange officials shamefully and knowledgeably ignored because of the extra revenue they received.

It took the writer/journalist, Michael Lewis, to expose more fully the damage and costs of HFT.  He deserves every penny that his best selling book is earning.    

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April 15 2014

Commentary by David Fuller

Ukraine Battles Separatists as Russian Troops Are Identified

Here is the opening of this latest report from Bloomberg, using its original title:

Ukraine unleashed an offensive to dislodge militants from cities in theeastern Donetsk region as authorities in the capital Kiev said Russian special forces were identified among the anti-government groups.

From four to 11 militants were killed and two wounded when Ukrainian troops stormed an airfield in Kramatorsk, taking it under control, Russian state television reported. Ukrainian units backed by armored personnel carriers blocked all approaches to the town of Slovyansk, the Russian state news service RIA Novosti said, citing a pro-Russian activist. Elements ofRussia’s 45th Airborne Regiment were spotted in both towns, Ukrainian First Deputy Prime Minister Vitali Yarema said on Channel 5.

The government in Kiev is taking the battle to the restive east of the country after armed pro-Russian activists occupied administrative buildings in cities including Donetsk, a regional center about 100 kilometers (62 miles) from the Russian border. An attempt to head off the mounting insurgency may escalate tensions with Russia, which warned of a potential civil war. NATO says Russia has 40,000 troops massed on Ukraine’s border after its annexation of Crimea last month.

“The aim of these actions is to protect people,” acting President Oleksandr Turchynov said in a statement on his website. “Apart from Russian special forces and terrorists, there’s hundreds of thousands of innocent Ukrainian people deceived by Russian propaganda, and that is why we will take any needed anti-terrorist actions prudently and responsibly.”

David Fuller's view

This article also mentions the prospect of increased sanctions imposed against Russia by the USA and Europe.  Hopefully, this is correct as tough sanctions would increase the pressure on Putin.  However, I am far from convinced that US and European sanctions will be more than tokenism.  If so, the longer-term costs of economic and political inaction will surely be more expensive. 

This additional report from Bloomberg is most welcome: Distortion Is Ukraine’s True Human-Rights Threat, UN Says.

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April 15 2014

Commentary by David Fuller

April 15 2014

Commentary by Eoin Treacy

The Nasdaq-100

Eoin Treacy's view

I compiled this spreadsheet of the Nasdaq-100’s constituents this morning when the Index was down 50 points and flirting with the region of the 200-day MA and the February lows. It reversed the entire decline in the last hour of trading suggesting at least some traders are betting the short-term oversold condition will be at least partially unwound.

 

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April 15 2014

Commentary by Eoin Treacy

Nigeria The No. 1 African economy

Thanks to a subscriber for this interesting report by Oliver Massetti for Deutsche Bank. Here is a section:

Although Nigeria now exceeds South Africa in economic size, it still has a long way to go if it wants to reach a similar level of economic development and sophistication. Nigeria’s GDP per capita is still only around one-third the size of South Africa’s and the World Bank estimates that more than 80% of Nigeria’s population have to make do with less than USD 2 per day (compared to about 30% in South Africa).3 Although in the rebased GDP the size of the agricultural and hydrocarbon sectors declined significantly, primary commodities still play an overly large role in Nigeria’s economy and account for nearly all of its exports. Moreover, the manufacturing sector remains very small compared to other emerging markets.

Nigeria and South Africa still lie far apart also in terms of capital market development. The market capitalisation of the Johannesburg Stock Exchange (JSE) amounted to roughly USD 1 tr at end-2013, and was thus more than 13 times higher than the market capitalisation of the Nigerian Stock Exchange (NSE).

In order to close these gaps in economic development Nigeria has to improve its institutions and business environment. The country lags far behind South Africa in every sub-indicator of the World Governance Indicators (see chart 7). Especially in the “Political stability and absence of violence/terrorism” indicator, Nigeria is one of the worst performing countries in the world. This can be explained by the continuous security threat by the Islamist sect Boko Haram in the north of the country as well as sporadic tensions in the Niger delta. Nigeria also has stark problems in the business environment. In the latest World Bank Ease of Doing Business Report, the country only ranks 147th, far behind South Africa in 41st place.

Eoin Treacy's view

A link to the full report is posted in the Subscriber's Area.

“Governance is Everything” has long been a central pillar in how we assess the prospects for markets. In doing so it is important to recognise that while the absolute level of governance is an important consideration, the trajectory of governance is more important. The most important question we can ask is whether conditions are improving or deteriorating, not how good or bad conditions on the ground are.

When standards of governance are low administrations do not have to do much right in order to see an improvement. The corollary is that the further along the path to development, the greater the challenge to keep up the pace of improving standards of governance. Personally I view the Nigerian central bank governor’s outspoken stance on combatting corruption as an example of how governance is improving albeit from a very low base.

The Nigerian stock market broke out of a three-year base in 2012 and has been ranging mostly below 40,000 since early 2013. It continues to hold a progression of higher reaction lows and a sustained move below 37,000 would be required to question medium-term scope for additional upside. 

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April 15 2014

Commentary by Eoin Treacy

Email of the day on a list of biotech companies:

“Is it possible to request a list of stocks in a particular sector - eg biotech?”

Eoin Treacy's view

Thank you for this question and biotech is certainly topical. I created this video of a click through of the biotech sector of my Favourites which may be of assistance. Unfortunately I forgot about the five minute cut off but only by a couple of words.

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April 15 2014

Commentary by Eoin Treacy

Email of the day on technological innovation

“Thank you for another productive session at the strategy seminar last week. I came across this interesting overview of emerging technologies which touches upon one of the main themes we discussed.

Eoin Treacy's view

Thank you for these infographics which offer a wonderful representation of how technology might develop over the next twenty years. While it would be unreasonable to expect all of these possibilities to reach fruition, the potential for success in at least some of them suggests that productivity growth is more likely than not over the next couple of decades. 

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