Most Recent Audio: 27 April 2015

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

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April 27 2015

Commentary by Eoin Treacy

Love em or Hate em, China Stocks Are Red Hot in Options Market

This article by Belinda Cao for Bloomberg may be of interest to subscribers. Here is a section: 

The stock rally has prompted authorities to roll out measures this year that signal an effort to temper gains and prevent another boom-and-bust cycle after a record number of novice investors entered the market. China’s securities regulator started a campaign on Friday to crack down on stock- market manipulation and insider trading, the latest effort to reduce risks.

The China Securities Regulatory Commission will target trading by brokerage employees using non-public information, and market manipulation, including of futures prices, the CSRC said in a Friday statement on its website.

Chinese officials are trying to find a balance between weeding out speculators and encouraging the stock market to play a bigger role in helping companies raise funds as the government reins in credit expansion. The CSRC and central bank Governor Zhou Xiaochuan have endorsed the flow of funds into equities.

Eoin Treacy's view

The speed and size of the breakout on China’s stock market creates a quandary for late comers because of the risk that a consolidation of short-term gains could be outsized relative to what one might be used to, but “normal” relative to the size of the breakout. 

As with any breakout from a long-term range there is a great deal of trepidation among those who were previously bearish because they are now either losing money or at least receiving margin calls on short positions. The response is either to switch sides and become a bull (Hugh Hendry for example) or to double down and become even more bearish. 

The increase in short interest may be a signal that long investors are hedging their exposure, the volatility of the move to date is fertile ground for options strategies and/or that bears are increasing their bets. We will continue to be guided by the price. 

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April 27 2015

Commentary by Eoin Treacy

Audi just created diesel fuel from air and water

This article by Eric Mack for Gizmag highlights the benefits improving solar cell efficiency could potentially have for the wider economy. Here is a section: 

Sunfire claims that analysis shows the properties of the synthetic diesel are superior to fossil fuel, and that its lack of sulphur and fossil-based oil makes it more environmentally friendly. The overall energy efficiency of the fuel creation process using renewable power is around 70 percent, according to Audi.

"The engine runs quieter and fewer pollutants are being created," says Sunfire CTO Christian von Olshausen.

The fuel can be combined with conventional diesel fuel, as is often done with biodiesel fuels already.

The Dresden pilot plant is set to produce about 42 gallons (160 l) of synthetic diesel per day in the coming months, and the two companies say the next step is to build a bigger plant.

"If we get the first sales order, we will be ready to commercialize our technology," von Olshausen says.

Sunfire anticipates that the market price for the synthetic diesel could be between 1 and 1.5 Euros per liter, which would be nearly competitive or a little more expensive than current diesel prices in Europe, but the actual figure will be largely dependent on the price of electricity.

 

Eoin Treacy's view

One of the issues hydrogen fuel cell and similar technologies face is that they are dependent on the availability of cheap electricity to drive the process of separation or combination. The commercial utility of a water-to-diesel project as outlined above will be contingent on the cost of electricity coming down. As such the improving efficiency of solar cells and improvements in battery technology represent a major step forward for such technologies as the cost of electricity would be free from volatility and could conceivably trend lower in real terms over time. 

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April 27 2015

Commentary by Eoin Treacy

Indonesian Stocks Decline Most Since 2013 on Earnings Concerns

This article by Harry Suhartono and Kyoungwha Kim for Bloomberg may be of interest to subscribers. Here is a section: 

“Corporate results from some of the largest Indonesian companies confirmed that the economy is weakening,” said Audrey Goh, Singapore-based investment strategist at Standard Chartered Bank. There’s probably “some negative sentiment” from the planned executions, she said.

President Joko Widodo’s resumption of executions for drug smugglers after a hiatus under his predecessor has increased international focus on Southeast Asia’s largest economy and the world’s fourth-most populous nation. Australia, which has a history of spats with its northern neighbor, has warned the deaths may damage ties and hasn’t ruled out sanctions or diplomatic action.

 

Eoin Treacy's view

Joko Widodo does not have a wide margin of support in parliament so there is the possibility that the resumption of executions for drug smuggling represent an attempt to bolster his strongman credentials as the economy weakens. Commodities continue to represent a major source of income for the Indonesian economy despite the increasing potential for growth in the consumer economy. The fall in oil, tin and coal prices all represent headwinds but the possibility of the country attracting negative attention as a result of executions represents an additional issue.  

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April 27 2015

Commentary by Eoin Treacy