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

    If you bought $100 of bitcoin 7 years ago, you'd be sitting on $75 million now

    This article from CNBC highlights the current spate of excitement about bitcoin. Here is a section:

    On May 22, 2010, Hanyecz asked a fellow enthusiast on a bitcoin forum to accept 10,000 bitcoin for two Papa John's Pizzas. At the time, Hanyecz believed that the coins he had "mined" on his computer were worth around 0.003 cents each.

    Bitcoin mining involves solving a complex mathematical solution with the miner being rewarded in bitcoin. This is how Hanyecz got his initial coins.

    The cryptocurrency has many doubters as it continues to be associated with criminal activity, but it has still seen a stunning rally. Here are two facts, on Bitcoin Pizza Day, however, that highlight this:

    While being worth $30 at the time, Hanyecz pizzas would now cost $22.5 million at current bitcoin prices.

    If you bought $100 of bitcoin at the 0.003 cent price on May 22, 2010, you'd now be sitting on around $75 million.

    A number of factors have been driving the rally:

    Recently passed legislation in Japan that allows retailers to start accepting bitcoin as a legal currency has boosted trading in yen, which now accounts for over 40 percent of all bitcoin trade

    Political uncertainty globally has driven demand for bitcoin as a safe haven asset

    A debate within the bitcoin community about the future of the underlying technology behind bitcoin known as the blockchain has been taking place. There was fear at one point this could lead to the creation of two separate cryptocurrencies but those worries have largely subsided with an alternative, more palatable option now being put forward. 

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    Macro Morsels on China

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

    Chinese authorities are attempting to delever their excessive levels of DEBT, which is causing a lack of credit at the short end of the curve, which in turn is driving up the cost of borrowing money at the short end.

    Hence , short rates are higher than long rates.

    However, unlike in the West, where an Inverted Yield curve signals trouble to the economy and to equities, having an Inverted Yield Curve is NORMAL in China.

    This Inverted Yield Curve has been the situation for the majority of the last decade.

    The red shaded area shows the times when 3 Month SHIBOR has been above 10 year government yields.

    Currently the 3 Month SHIBOR is at 4.44%, higher than the 10 year at 3.61%

    The AA 5 year rates have moved quite dramatically since last Oct, from a yield of 3.6% to 5.6% now.

    This rise in their cost of debt should be negative for Equities.

    Equities (SHCOMP) have indeed broken their uptrend and will remain an avoid until they can regain the 3200 level. 

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    CAD Software Firm Autodesk Soars On Quarterly Earnings Beat

    This article by Patrick Seitz for Investor’s Business Daily may be of interest to subscribers. Here is a section:

    Analysts were modeling Autodesk to lose 15 cents a share on sales of $488 million.

    Autodesk's annualized recurring revenue rose 18% year over year to $1.74 billion in the first quarter because of strong sales of subscription plans.

    "Broad-based strength across all subscription types and geographies led to another record quarter for total subscription additions and a fantastic start of the new fiscal year," Amar Hanspal, Autodesk co-CEO and chief product officer, said in a statement. "Customers continue to embrace the subscription model, and we're expanding our market opportunity with continued momentum of our cloud-based offerings, such as BIM 360 and Fusion 360."


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    China successfully mines flammable ice from the South Sea

    This article by Cecilia Jamasmie for mining.com may be of interest to subscribers. Here is a section:

    During the mining trial done at a depth of 4,153 feet, engineers extracted each day around 16,000 cubic metres of gas, with methane content of up to 99.5%, Minister of Land and Resources Jiang Daming said.

    The new energy source, while revolutionary, is not exempt of risks. The release of methane into the atmosphere as permafrost melts is regarded for those who believe in climate change as one of the worst potential accelerator mechanisms for it. Methane hydrate is also hard to extract, which makes the cost of producing it high.

    Test drillings have also taken place in the US, Canada and Japan, with the latter announcing earlier this month that it was successful at producing the natural gas on the pacific coast and will continue mining it for around three to four weeks.

    Sources of methane hydrate are so large that the US Department of Energy has estimated the world's total amount could exceed the combined energy content of all other fossil fuels.


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    Bullard Sees Weak Data Contradicting FOMC's Rate-Hike Path

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

    Since March, “longer-term yields have declined, inflation expectations have weakened, and market expectations of the policy rate path have declined,” Bullard said Friday in St. Louis. “This may suggest that the FOMC’s contemplated policy rate path is overly aggressive relative to actual incoming data on U.S. macroeconomic performance.’’

    Fed officials left interest rates unchanged at their meeting earlier this month, indicating that a disappointing start to the year wouldn’t stop them from raising rates twice more in 2017 following a hike in March.

    In their statement, policy makers described as “transitory” a slowdown in first-quarter growth, while emphasizing that inflation was running close to their 2 percent goal and the labor market continued to strengthen.

    Bullard, who does not vote on the FOMC this year, is one of its most dovish officials. In March he projected just one hike in the target range for the federal funds rate until end-2019.
    The median estimate among his colleagues is for two more hikes this year and for the benchmark rate, currently 0.75 percent to 1 percent, to be 3 percent by the end of 2019. His argument is that the U.S. economy has been saddled with persistently low growth, so there is little need to raise rates by much.


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    Macron's Youthful France to Storm Ahead of Ageing Germany

    France is on the cusp of an economic 'golden age'. The country will overtake Germany in the 2020s, emerging as the driving force of a Gallic-led eurozone and the engine of a revived Franco-German axis.

    That is the bold prediction of the German bank Berenberg. It is not as far-fetched as it sounds.

    The theme running through the work of Nobel Economist Robert Shiller is that cultural narratives are a powerful catalyst for financial cycles. They stir the animal spirits of a nation. Societies talk themselves into malaise, and talk themselves out again.

    As narratives go, the Napoleonic ascent of a 39-year-old counter-populist on the ruins of a shattered party system is as close to a 'positive shock' as you are ever likely to see in the realm of political economy.

    This child of the digital age - yet steeped in Nietzsche - is surrounded by a cabinet of youth. His prime minister is barely older. Berlin looks stale, almost fossilized.

    The eternal Wolfgang Schauble still growls at the finance ministry with his budget and trades surpluses, captive of the pre-Keynesian 'household fallacy' in economics. Chancellor Angela Merkel is more flexible. It is not her fault that she rose from the East German Communist youth league, yet her Weltanschauung seems other-worldly as she marches towards a fourth term.

    Germany's Achilles Heel is a 'hive collapse' and the corrosive psychology of ageing. The demographic dividend is turning overnight into deficit as baby boomers retire. The European Commission's Ageing Report (2015) says the working-age cohort will contract by 200,000 a year for the rest of this decade, and by 400,000 annually in the early 2020s.

    The old age dependency ratio will jump from 34pc today, to 39pc in 2020, 52pc in 2030, and 65pc in 2060. By then those deemed 'very elderly' (80 plus) will be 41.5pc of the German people. The population will shrink below 71m.

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    Would You Let Trump Run Your Company?

    In Washington, people struggling to come to terms with all the details of James Comey’s sacking and the claim that Donald Trump asked him to drop the FBI’s investigation into Michael Flynn have reached back to Watergatefor comparison. But in many ways the more appropriate perspective is through a business lens: The immediate issue is whether a boss tried to halt embarrassing revelations about his company; the underlying one is whether he knows how to run it.

    Of course, running a country is not the same as running a company. A president is both more constrained (by Congress, the press, and voters) and less so (chief executive officers, as a rule, can’t bomb their opponents). And Trump is not the first incoming president to have boasted of his corporate experience; remember George W. Bush, the first MBA president? But Bush had also run Texas. No president has tried to claim the mantle of CEO-in-chief as completely as Trump.

    On the campaign trail, he cited his business experience all the time, contrasting his decisiveness, managerial skills, and shrewdness as a negotiator with the amateurish stumbles of Barack Obama and Hillary Clinton (not to mention several generations of U.S. trade representatives). Many of his first supporters knew him only as the archetypal “You’re fired” boss on The Apprentice. He rushed to bring in figures from the corporate world, luring Rex Tillerson from Exxon Mobil Corp. to run the State Department and a string of Wall Streeters. The stock market initially boomed. Trump’s message to business has been simple: Finally you have an executive in charge of the executive branch. “In theory I could run my business perfectly and then run the country perfectly,” he boasted to the New York Times shortly after his election. “There’s never been a case like this.”

    So out of all the ways in which Trump might want to be measured, judging him as a chief executive would seem to be the fairest to him. Forget about ideology, his political agenda, or whether you voted for him; just judge him on whether he has been a competent executive. Would you want to leave him in charge? Or would you be calling an emergency board meeting?

    The Comey fracas is the latest in a long list of apparent transgressions for which a normal CEO might lose his job. In the last week, Trump stood accused of having passed on intelligence secrets to the Russians. Any business chief who invited a competitor into the boardroom and then disclosed sensitive information would be in peril. (Klaus Kleinfeld lost his job at Arconic Inc. merely because he wrote an unauthorized stroppy letter to a truculent shareholder.) Appointing inexperienced relatives to important positions is not normally seen as good corporate governance. Jes Staley is currently in trouble at Barclays Plc just for allegedly protecting a friend. The White House was made aware that Flynn had lied to the vice president on Jan. 26, but he didn’t hand in his resignation to Trump until Feb. 13. Any board would want an explanation for that delay. Finally, any CEO who says something that is manifestly untrue in public or on his résumé is in hot water. Those who refuse to correct themselves quickly and satisfactorily often have to go—as happened to the bosses at Yahoo! Inc. and RadioShack.

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    Email of the day

    On Trump’s crisis:

    You might be right David, you often are. BUT if he threatened to drain the swamp you can be sure there will be many alligators trying to stop him. He's an unusual character for President but I think we need also to read the alternative press because mainstream is certainly gunning for him.

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