Most Recent Audio: 17 February 2017

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

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February 17 2017

Commentary by Eoin Treacy

February 17 2017

Commentary by Eoin Treacy

Beyond The Supercycle How Technology is Reshaping Resources

Thanks to a subscriber for this report from McKinsey which may be of interest. Here is a section:

First came the “fly-up,” the price spike on world markets for oil, gas, and a broad range of natural resources that began in 2003. Then came the abrupt bust, as prices tumbled and global spending on natural resources dropped by half in the course of 2015 alone. Now, even as resource companies and exporting countries pick up the pieces after this commodity “supercycle,” the sector is facing a new wave of disruption.1 Shifts taking place in the way resources are consumed as well as produced—less noticed than the rollercoaster commodity price ride but no less significant—will have major first- and second order effects on both the sector and the global economy. These shifts are the result of technological innovation, including the adoption of robotics, Internet of Things technology, and data analytics, along with macroeconomic trends and changing consumer behavior.

We see three principal effects of this technological revolution:
Consumption of energy will become less intense as people use energy more efficiently thanks to smart thermostats and other energy-saving devices in homes and offices, and the use of analytics and automation to optimize factory usage. Transportation, the largest user of oil, will be especially affected, by more fuel-efficient engines and by the burgeoning use of autonomous and electric vehicles and ride sharing.

Technological advances will continue to bring down the cost of renewable energies such as solar and wind energy, as well as the cost of storing them. This will hand renewables a greater role in the global economy’s energy mix, with significant first- and second-order effects on producers and consumers of fossil fuels.

Resource producers will be able to deploy a range of technologies in their operations, putting mines and wells that were once inaccessible within reach, raising the efficiency of extraction techniques, shifting to predictive maintenance, and using sophisticated data analysis to identify, extract, and manage resources.

Scenarios we have modeled suggest that these developments have the potential to unlock $900 billion to $1.6 trillion in incremental cost savings throughout the global economy in 2035, an amount equivalent to the current GDP of Indonesia or, at the top end, Canada. As a result of lower energy intensity and technological advances that improve efficiency, energy productivity in the global economy could increase by 40 to 70 percent in 2035. We believe these changes will have profound implications not just for companies in the resource sector and for countries that export resources, but also for businesses and consumers everywhere.

 

Eoin Treacy's view

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

The long-term cycles of supply and demand can be boiled down into the simply maxim that high prices encourage consumers to be efficient and suppliers to invest in expansion. Low prices encourage consumers to use more while suppliers are forced to be more efficient. Following a decade long super cycle producers are now much more efficient while consumers are really only beginning to increase demand as economic growth picks up. 

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February 17 2017

Commentary by Eoin Treacy

Email of the day on the VIX

Read on twitter the following "is this too-quiet market the calm before the storm" I am wandering storm or no storm if going long the VIX on the SP500 or a European VIX could be on a risk reward basis a sound trade with the VIX being at a historical low. or could the VIX go even lower to new lows? we also had/have negative interest rates. would appreciate your expert opinion 

Eoin Treacy's view

The VIX is quite depressed right now because Wall Street is rallying so persistently and because that rally is relatively broad based. 
 

 

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February 17 2017

Commentary by Eoin Treacy

Biotechnology rotation

Eoin Treacy's view

The Nasdaq Biotechnology Index is going through a significant rotation. Some of the biggest companies that led on the breakout from the long-term base in 2012 are now trending lower. Gilead Sciences is representative. It was among the best performers on the breakout but peaked in 2015 and has continued to trend lower while many of the other major constituents have spent a year ranging. 

The focus thrown on drug pricing during the US Presidential Election has long lasting repercussions because it has highlighted the practice of raising prices for legacy drugs. That is the exact opposite of what we see in other sectors where competition forces prices lower over time. The Trump administration is now talking about bringing down drug prices and enhancing the ability of Medicare to negotiate bulk prices and allow consumers to buy drugs overseas. These issues represents a significant issue for legacy pharmaceutical companies and established biotech companies without the compensating factor of a promising drug pipeline. It also means demand for M&A is likely to continue to increase. 

 

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February 17 2017

Commentary by Eoin Treacy

The Chart Seminar 2017

Eoin Treacy's view

The Chart Seminar 2017 

We are currently in the planning stages for choosing venues for The Chart Seminar next year. 
Here are the confirmed dates

Singapore April 12th and 13th
London November 16th and 17th

We will provide venue details shortly.

The CFA Institute has once more agreed to co-host the Singapore event and I will also provide certificates for continuous professional development to anyone who wants one. 

I now also have some copies of the Mandarin edition of Crowd Money so please specify which version you would like to receive at the seminar when booking. 

If you are interested in either of these venues or would like to suggest a venue please contact Sarah at sarah@fullertreacymoney.com  I would be more than happy to plan a US based seminar next year if we have the critical mass to make it viable and I will be stopping off in Japan on the way back from the seminar in Singapore if there is any interest for an event in Tokyo.

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non EU residents are not liable for VAT). Subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.

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