David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Email of the day on whether bitcoin is a currency



    Hope you are well. And I hope David is recovering well?

    Just a quick comment on cryptocurrencies.

    I’ve thought about this a lot, and had a small mining setup a few years ago.

    There is a kind of real value in them as they take electricity, cooling, tech knowhow, time and equipment to "mine" them. 

    All those have a value. And it’s a massive community now.

    As bitcoin has evolved, it now costs far more to mine one than 5 years ago due to its formula. The same with other coins.
    In bitcoins case, I see them more of an asset in the cryptocurrency class. 

    I also think everyone should have a bit of one just to find out how they work as they are definitely here to stay in some form. Plus, I feel they will constantly go up like other assets do, bubble or not. 

    More of owning a small amount for fun, not an investment amount though, unless one has time to learn about them more.
    Plus, you can legitimately, buy a lot of stuff with them now, so how do you define a currency?

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    Email of the day on revisionist history

    This article summarizes neatly the blend of politics and revisionist history present in China today, particularly how the Party is trying to introduce a stylized version of Chinese history and culture in order to paper over the "spiritual vacuum" that resulted from the Revolution. Also interesting is the idea that this could give rise to new economic industries and / or cultural products for export (movies, art, tourism, etc.) Most importantly, it hints at the sweeping power and autonomy that Xi Jinping presently enjoys ... well worth the read. 

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    Email of the day on knitting machines

    Thank you for the excellent service and very interesting daily video commentary. Our company, Irelands Eye Knitwear in Dublin operates 15 knitting machines from manufacturer Shima Seiki that you referred to recently. They run 24 hours per day. We are off to Shanghai next month to see latest developments at a large machinery exhibition there. It’s a very interesting time. Many thanks again for an excellent service.

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    Email of the day on necessity is the mother of invention

    You have to give it to the Chinese, they are great advocates of the dictum ‘Where there is a will there is a way’

    How come my ethnic Chinese supervisors never told me of this method to shift concrete when I managed a mine in Malaysia?

    We could have save the company a small fortune. 


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    Gary Cohn's Exit From Team Trump Would Be a Major Blow to Wall Street

    This article by Emily Stewart may be of interest to subscribers. Here is a section: 

    The New York Times reported that Cohn, who is Jewish, was "disgusted" and "deeply upset" by the president's remarks at Trump Tower on Tuesday. Top Trump adviser Steve Bannon also took a swipe at Cohn in a surprising interview with The American Prospect, referring to him as beholden to "Goldman Sachs lobbying."

    Cohn is viewed as a major ally to the business community in the Trump administration and a steadying voice of reason. He is one of the "Big Six" leading the way on tax reform efforts and is also helming the search for the next chairman of the Federal Reserve. Cohn himself is among the top contenders for the spot, alongside current chair Janet Yellen.

    In other words, Cohn dropping Trump would be a big deal.


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    Musings from the Oil Patch August 15th 2017

    Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB. Here is a section: 

    In total, between 2010 and 2040, the EIA expects energy demand to grow by 54.4%.  Liquids fuels are projected to grow over this period by 37.7%, while natural gas growth will soar 78.7%.  In physical terms, natural gas (93 QBtus increase) consumption will grow by nearly a third more than oil’s use (68 QBtus), while coal consumption (34 QBtus) will increase by barely over half of the growth in liquids’ consumption.  Nuclear power increases the least of all the fuels (19 QBtus), but posted one of the largest percentage gains (+67.9%) due to its small base in 2010.  Most interestingly, the Other category, which includes renewables, is predicted to increase consumption by 74 QBtus, or an impressive 128.5% gain.   

    A consideration that should not be overlooked is where this growth is happening.  Exhibit 3 (next page) shows energy consumption divided between the developed countries of the world (OECD) and the developing ones (non-OPEC).  The difference in energy demand growth between these two groups is astounding.  The OECD economies will increase their energy use by 15.8% compared to the 87.5% growth projected for non-OECD economies.  For a domestic exploration and production company, this may seem to be a worthless consideration, but now that the United States has become an oil exporter, the health of the global oil market should be of increased interest to the executives of these E&P companies.   
    What the EIA forecast demonstrates is that the portfolio shifts underway at several major integrated oil companies – BP, Royal Dutch Shell (RDS.A-NYSE) and TOTAL S.A. (TOTF.PA) – from crude oil to natural gas resource exploitation, are founded on the expectation that the world’s energy market has entered a new era that will be dominated by natural gas.

    The quest for cleaner fossil fuels, in response to global pressure to reduce carbon emissions, has focused on increased use of natural gas, which has considerably fewer carbon emissions than either crude oil or coal.  That explains why natural gas was initially embraced by environmentalists as the “bridge fuel” to a cleaner energy mix until renewable fuels could mature sufficiently to become the “carbonless fuel” for the future.  The double-digit price at that time may explain why the environmentalists loved natural gas as it provided a price umbrella over expensive renewables.   


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    Billionaire hedge fund manager Stanley Druckenmiller is betting big on the Chinese consumer

    This article by Katie Kramer for CNBC may be of interest to subscribers. Here is a section:

    Stanley Druckenmiller's Duquesne Capital bought Chinese consumer and tech stocks in the second quarter, according to a filing Monday.

    The billionaire's hedge fund took a stake in Chinese e-commerce giant Alibaba of 710,000 shares, according to a required 13-F filing with the Securities and Exchange Commission Monday. The hedge fund also took a 597,000-share stake in Yum China.

    The firm increased its stake in Alibaba rival JD.com by 721,000 shares to 1.36 million shares, and added 500,000 shares of Chinese travel services company Ctrip for a 1.41 million share stake, the filing showed.

    Duquesne also added 1.3 million shares of Comcast for a stake of nearly 2 million shares, according to the filing.
    In the second quarter, Druckenmiller's fund increased its stake in Microsoft by 1 million shares and added 677,000 shares of Facebook. The fund bought 74,000 more shares of Google parent Alphabet and bought 49,000 more shares of Amazon.com.


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    Why Cryptocurrencies Will Never Be Safe Havens

    Thanks to a subscriber for this article by Mark Spitznagel for the Mises Institute. Here is a section:

    Bitcoins should be regarded as assets, or really equities, not as currencies. They are each little business plans — each perceived to create future value. They are not stores-of-value, but rather volatile expectations on the future success of these business plans. But most ICOs probably don’t have viable business plans; they are truly castles in the sky, relying only on momentum effects among the growing herd of crypto-investors. (The Securities and Exchange Commission is correct in looking at them as equities.) Thus, we should expect their current value to be derived by the same razor-thin equity risk premiums and bubbly growth expectations that we see throughout markets today. And we should expect that value to suffer the same fate as occurs at the end of every speculative bubble. 

    If you wanted to create your own private country with your own currency, no matter how safe you were from outside invaders, you’d be wise to start with some pre-existing store-of-value, such as a foreign currency, gold, or land. Otherwise, why would anyone trade for your new currency? Arbitrarily assigning a store-of-value component to a cryptocurrency, no matter how secure it, is trying to do the same thing (except much easier than starting a new country). And somehow it’s been working.

    Moreover, as competing cryptocurrencies are created, whether for specific applications (such as automating contracts, for instance), these ICOs seem to have the effect of driving up all cryptocurrencies. Clearly, there is the potential for additional cryptocurrencies to bolster the transactional value of each other—perhaps even adding to the fungibility of all cryptocurrencies. But as various cryptocurrencies start competing with each other, they will not be additive in value. The technology, like new innovations, can, in fact, create some value from thin air. But not so any underlying store-of-value component in the cryptocurrencies. As a new cryptocurrency is assigned units of a store-of-value, those units must, by necessity, leave other stores-of-value, whether gold or another cryptocurrency. New depositories of value must siphon off the existing depositories of value. On a global scale, it is very much a zero sum game.


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