Most Recent Audio: 15 June 2021

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

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June 15 2021

Commentary by Eoin Treacy

June 15 2021

Commentary by Eoin Treacy

Copper's Supercharged Rally Creaks on Signs of Softer Demand

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

“We’re at a point where a lot of the cyclical tailwinds, if they haven’t blown themselves out, are past their peak,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, said by phone. “That fear that things are just going to go higher and higher and higher -- that’s come out of the market now.”

Copper has been one of the standout performers in a year-long rally seen across commodities markets as a surge in demand coincided with bottlenecks that have wreaked havoc on global supply chains. The key questions for investors across asset classes are whether the rally would prove transitory, and whether the inflationary impact on consumers would prove short-lived.

 

Eoin Treacy's view

China wants lower commodity prices because of the upward trend of prices at the factory gate. They have a lot more ability to manipulate copper prices because they have such large stockpiles. That's not quite the same for metallurgical coal or iron ore.

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June 15 2021

Commentary by Eoin Treacy

Zombies Are on the March in Post-Covid Markets

This article by John Authers may be of interest to subscribers. Here is a section:

Recessions are supposed to lead to more bankruptcies, and make it harder for companies to borrow. Rises in debt outstanding, all else equal, should increase the risk of bankruptcies down the line. So what has happened in the last 12 months virtually surpasses understanding. French bankruptcies had steadily declined since the brief recession caused by the sovereign debt crisis, while companies took advantage of the dirt-cheap credit that had been engineered to save the euro to refinance and take on more leverage. When the crisis hit, they were then able to borrow far more, while bankruptcies tumbled.

Logic might dictate that an increase in bankruptcies lies ahead. This should mean that debt investors demand a higher yield to compensate them for the greater risk of defaults. In the U.S., this is exactly what has not happened. The spread between the yield on “high-yield” bonds (which might need to be renamed) over five-year Treasury bonds hasn’t been this low since the summer of 2007. And we know what happened after that:

Eoin Treacy's view

Interest expense is seldom the reason for companies to get into trouble. It’s when large portions of a company’s debt approaches maturity and needs to be refinanced that the potential for trouble increases.

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June 15 2021

Commentary by Eoin Treacy

Email of the day on cybersecurity

I found your comments on autonomous vehicles today very well written and enlightening, thanks a lot. On a different note, do you think cyber security has a big potential for the next decade. And if so, do you have any suggestions for how to invest in this theme. Any potential companies and/or ETFs would be greatly appreciated. Thanks again for a very nice service.

Eoin Treacy's view

Thank you for your kind words and I am delighted you are enjoying the service. There has undoubtedly been a bull market in ransomware attacks which has made abundantly clear how inept cyber controls are. The recent hack of Electronic Arts is a case in point. Here is a section from an article on Vice.com:

A representative for the hackers told Motherboard in an online chat that the process started by purchasing stolen cookies being sold online for $10 and using those to gain access to a Slack channel used by EA. Cookies can save the login details of particular users, and potentially let hackers log into services as that person. In this case, the hackers were able to get into EA's Slack using the stolen cookie. (Although not necessarily connected, in February 2020 Motherboard reported that a group of researchers discovered an ex-engineer had left a list of the names of EA Slack channels in a public facing code repository).

"Once inside the chat, we messaged a IT Support members we explain to them we lost our phone at a party last night," the representative said.

The hackers then requested a multifactor authentication token from EA IT support to gain access to EA's corporate network. The representative said this was successful two times.

The bigger the company the greater the threat. The primary challenge for any company is securing access to intellectual property that can be used by a competitor and customer data which carries costs if lost. They are not that worried about everything else.

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June 15 2021

Commentary by Eoin Treacy

June 15 2021

Commentary by Eoin Treacy