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

    'Wake 'n Bake,' Plunging Stocks Greet Canada's Legal Pot Debut

    This article by Kristine Owram, Doug Alexander and Jen Skerritt for Bloomberg may be of interest to subscribers. Here is a section:

    “The eyes of the world are on Canada and Canadians should feel very proud, because people have been fighting for decades to make this moment a reality,” said Brendan Kennedy, chief executive officer of Tilray Inc., the largest cannabis company by market value.

    After running up dramatic gains in the lead-up to legalization, cannabis shares failed to join the party Wednesday. Aurora Cannabis Inc. had slumped as much as 15 percent by 10:17 a.m. in Toronto for the worst drop since February, before paring losses. Canopy Growth Corp. was down 3.4 percent at 1:15 p.m. and Tilray Inc., the world’s largest pot company by market value, fell 6 percent.

    Medical marijuana has been legal in Canada since 2001 but it’s only been about four years since the first cannabis companies began to list on Canadian exchanges. In that short time, about 140 pot companies have gone public in Canada, with a combined market value of more than C$60 billion ($48 billion).

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    Chew on This. Cheap China Food Deliveries Won't Last

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

    Underpinning Meituan’s success is what the company calls “abundant labor supply.” The cost of paying workers for each food order is about $1, or 20 percent of the expense incurred by delivery services in the U.S. An average order takes about 35 minutes, versus more than an hour in America.

    For that, China’s urban consumers can thank the army of rural migrants who have crowded into cities in search of work. A deep pool of more than 280 million such workers exists to service the needs of middle-class city dwellers, enabling fast e-commerce and offline-to-online businesses.

    But don’t take them for granted. Soon, there may be no cheap labor left in China’s large cities. 

    To fight pollution and traffic jams, mega-cities have started to restrict and even kick out migrant workers. Beijing plans to cap its population at 23 million in 2020, only 1.3 million more than its current size. Meanwhile, Shanghai has a target of 25 million by 2035, leaving room for only 800,000 newcomers. Meituan, which is battling Alibaba Group Holding Ltd. for food delivery customers, alone deploys more than half a million of delivery riders daily, over half of whom are based in the four tier-1 cities of Shanghai, Beijing, Shenzhen and Guangzhou.

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    Email of the day on investing in soft commodities

    I'm a big fan of your service. I would like to buy soft commodities somehow but not sure what good vehicles there are to do so. I think if I buy futures there are high costs involved? Do you have any ideas? I already own water/fertiliser/agricultural equipment companies. All the best

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    Email of the day on the effects of a weaker Rupee

    Is a crashing Rupee good or bad for India? Big debates here. Exports more competitive, of course, but how far is these external accounts a driver of Indian growth? Isn't India one giant domestic economy and isn't therefore a stronger Rupee good in the shape of lower oil and energy prices (rural villages) and overall business and consumer confidence? Happy for the community to discuss

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    Tumbling Car and House Sales Pose Fresh Challenge to Chinese Markets

    This article by Joanne Chiu for the Wall Street Journal may be of interest to subscribers. Here is a section:

    China Galaxy International analyst Tony Li said the U.S.-China trade dispute and a stock-market selloff were weighing on consumer sentiment. “Consumers have turned more cautious and are less willing to spend much on luxury items,” he said.

    The holiday slowdown was bigger than expected, and investors should closely watch for any further weakening this year, he added.

    Meanwhile, Goldman Sachs said escalating trade tensions, slowing growth and policy uncertainty have weighed on Chinese stocks. In a pessimistic case, if annual growth slows to 6% and the yuan falls a further 5% against the dollar, shares could decline 10% more, the bank said.

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    The next recession

    This article from the Economist may be of interest to subscribers. Here is a section:

    Yet this is where the bad news comes in. As our special report this week sets out, the rich world in particular is ill-prepared to deal with even a mild recession. That is partly because the policy arsenal is still depleted from fighting the last downturn. In the past half-century, the Fed has typically cut interest rates by five or so percentage points in a downturn. Today it has less than half that room before it reaches zero; the euro zone and Japan have no room at all.

    Policymakers have other options, of course. Central banks could use the now-familiar policy of quantitative easing (QE), the purchase of securities with newly created central-bank reserves. The efficacy of QE is debated, but if that does not work, they could try more radical, untested approaches, such as giving money directly to individuals. Governments can boost spending, too. Even countries with large debt burdens can benefit from fiscal stimulus during recessions.

    The question is whether using these weapons is politically acceptable. Central banks will enter the next recession with balance-sheets that are already swollen by historical standards—the Fed’s is worth 20% of GDP. Opponents of QE say that it distorts markets and inflates asset bubbles, among other things. No matter that these views are largely misguided; fresh bouts of QE would attract even closer scrutiny than last time. The constraints are particularly tight in the euro zone, where the ECB is limited to buying 33% of any country’s public debt.

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    Plenty of Oil, Just Not in the Right Places

    This article by spencer Jakab for the Wall Street Journal may be of interest. Here is a section:

    The market isn’t tight everywhere, though. As evidenced by prices, there are localized gluts and producers who would gladly put more supply on the market if logistics would oblige. U.S. benchmark crude futures, priced at Cushing, Okla., are $9.00 a barrel below Brent and cash prices in the prolific Permian Basin are even cheaper. A lack of pipeline capacity is to blame.

    None of that holds a candle to western Canada at the moment. Western Canada Select crude cash prices are now $46 a barrel below Brent. Pipeline and rail capacity already was stretched and, according to JBC Energy, a gas pipeline incident in the Pacific Northwest has worsened the situation significantly. Refineries in the region have had to scale back operations and thus crude purchases.

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    Email of the day on the sustainability of electric vehicle batteries

    I find little information published about the lifespan of a battery pack. Today’s IC engines easily last for 10 years or 150,000 mi., frequently longer. I've seen no comparable information for battery packs or what the rate of decline in charge acceptance is over time. If that lifespan is considerably less than that of an IC engine, that price difference would have to be significant to be economic.

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