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

    Where to Invest $10,000 Right Now

    Here is the introduction to this interesting article from Bloomberg, featuring five experts: Barry Ritholtz, Sarah Ketterer, Mark Mobius, Rob Arnott, and Francis Kinniry: 

    Successful investors take risks. The trick is to take smart ones, in a diversified portfolio.

    Here’s how.

    First, make sure you’re covered on the financial basics. Then start scouting out powerful places to invest any excess cash that's making you next to nothing in a savings account. With the holidays and perhaps a raise or bonus on the horizon, it’s a good time to make that money work for you and your retirement.

    To help, we asked five leading investors to share their best ideas on where to invest $10,000 right now. (It makes sense for smaller sums, too.) We first quizzed them back in June, when we also asked exchange-traded-fund analyst Eric Balchunas of Bloomberg Intelligence to choose ETFs that came closest to the strategies and themes they highlighted. Some of the experts also run mutual funds that employ their strategies.

    Among their summer favorites were out-of-favor emerging markets, and many ETFs tracking those markets have seen double-digit gains. How did our panel of experts do last quarter, exactly? Very well, thank you. Check out the results that follow each new entry below. For comparison, the Standard & Poor’s 500-stock index was up 3.3 percent from June 30 to Sept. 30.

    So is it too late to get into emerging markets now? Is China still promising or just too messy? We’ll let the panel answer, and share its new ideas, ranging from opportunities in floating-rate bank loans to consumer-related stocks in China.

    You can toggle between last quarter’s and this quarter’s advice with a quick click, or just check out the panel’s advice for the here and now. Either way, as we emphasized in June’s “Where to Invest $10,000 Right Now” and above, take a look at these financial musts first.

    Then see if you can profit from our experts’ latest ideas.

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    Federal Reserve Vice Chairman Stanley Fischer Says Fiscal Policy Could Help Fight Low Growth

    Here is the opening of this topical article from Bloomberg:

    Federal Reserve Vice Chairman Stanley Fischer said government policies could partly counteract the impact of lower productivity and an aging population that are holding back the U.S. economy and weighing on interest rates.

    “Some combination of more encouragement for private investment, improved public infrastructure, better education, and more effective regulation is likely to promote faster growth of productivity and living standards,” Fischer said in the text of a speech Monday to the Economic Club of New York. Such policies could also “reduce the probability that the economy and, particularly, the central bank will in the future have to contend with the effective lower bound” for interest rates.

    Fischer said an increase in government spending by 1 percent of gross domestic product would lead to a rise in the equilibrium level of interest rates -- the rate that neither stimulates nor holds back the economy -- by 0.5 percentage point, according to Fed research. An equivalent tax cut would lift the equilibrium rate by 0.4 percentage point.

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    What OPEC Oil U-Turn Missed: Peak Demand Keeps Getting Closer

    Here is the opening of this interesting article from Bloomberg:

    OPEC’s decision last month to reverse its policy of unfettered production and cut oil output to boost prices may be at odds with the industry’s most important long-term trend: demand for what they produce could start falling within 15 years.

    If rapid improvements continue in renewable energy, electric vehicles and other disruptive technologies, petroleum consumption will peak in 2030 and decline thereafter, according to a report from the World Energy Council. As the globe’s largest producers gather in London this week for the Oil and Money conference, they might want to check their assumption that the market will grow for decades to come.

    The plunging cost of renewable energy -- with solar-module costs falling 50 percent since 2009 -- is already upending the business model of utilities. Disruption could spread to the oil industry as electric vehicles become more economic than gasoline or diesel cars, potentially displacing millions of barrels of daily fuel use by the late 2020s. Projections for decades of demand growth that underpin investments in oil projects could be misplaced.

    “The longer-term outlook, beyond 10 years, is certainly less rosy,” said Alex Blein, London-based energy-portfolio manager at Amundi, which holds more than $1 trillion of assets. “Given the advances in battery technology, by 2030 carbon-powered vehicles will be the exception rather than the norm. This will inevitably impact on oil demand.”

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    Is the Deepwater Dead?

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

    Marky Mark-ing to market cost and efficiency gains: More competitive than you think
    Contrary to popular belief, the US onshore isn’t the only sector seeing meaningful cost deflation and/or efficiency gains. While the ~60% reduction in DW rig rates has grabbed headlines, broad improvements, including drill-days (-30%-40%), steel costs (-30%), and various SURF/topsides costs (-10%-30%) have reduced total project costs by 30%-40%, in our view. And given the lag in response time, excess capacity and a moderate pick-up in activity, we expect cost and efficiency gains to be more durable than in the US onshore.

    But not all barrels are created equal. Only high quality resource can compete While all deepwater tends to get lumped together, the range of economics across projects is diverse (sub $30/bbl-$80+/bbl breakevens), with only high quality resource set to compete. We examine various drivers of project economics, many poorly understood, including fiscal terms, resource size, resource density, and proximity to infrastructure, and potential impact. We see high quality, pre-FID deepwater projects breaking even at roughly $40-$50/bbl.

    Meaningful challenges remain
    Though more competitive than the market believes, meaningful challenges will continue to drive an increasing share of discretionary capital to US shale, including: geologic risk, project execution risk, geopolitical risk, and capital inflexibility. Adjustments to development strategies and scope can mitigate some risk, and large, diverse IOC budgets will invest across the spectrum, but failure to revolve would demand a higher rate of return, with an increase to 15% required IRR (vs. 10%) increasing average breakevens by $7.5/bbl.

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    Your money market fund has changed

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

    All of that changed in September 2008, when Lehman Brothers filed for bankruptcy. The Reserve Primary Fund, a large money market fund, held Lehman bonds.

    In turn, institutional investors pulled billions of dollars from the fund, knocking its share price from the supposedly steady $1 to 97 cents on Sept. 16, 2008. It had "broken the buck."

    That crisis spurred new rules from the SEC, aimed at protecting smaller investors from large redemptions.

    Two key reforms came about: One would require so-called prime institutional money market funds (generally used by large investors) to have a floating net asset value rather than a fixed $1 share price.

    The other creates liquidity fees and "redemption gates," which are temporary halts on withdrawals to certain money market funds.

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    Email of the day on South Africa

    The South African courts are for the most part independent, competent and play a key role in holding the worst excesses of Zuma and his cronies in check - and hopefully ultimately ensuring they go to jail. The National Prosecuting Authority and the Hawks (part of the police) are 'captured' by Zuma and merely do his bidding - mostly to keep him out of jail (there are 786 charges of fraud, corruption and racketeering against him) and to torment people like Gordhan who seek to limit the thieving and waste. SA does not really have single party rule either - the moderate opposition DA now runs Johannesburg, Pretoria, Cape Town (and the Western Cape provincial government) and Port Elizabeth. The ANC secured only 53.9% of the overall vote in the recent municipal elections, much of that from the rural areas.

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    Google and 3D Printing Buildings

    This article by Katie Armstrong from 3D Printing Industry dated May 3rd may be of interest to subscribers. Here it is in full:

    3D printed buildings are the way of the future! At least that’s what Eric Schmidt, executive chairman of Google’s parent company, Alphabet, says.

    Imagine you could walk onto an empty block of land one day, and have a house built on it a few days later. Sounds like science fiction, doesn’t it? What if I told you it was already happening?
    A recent conference in Los Angeles saw Schmidt predict the technologies that would be game changers. The Milken Institute’s Global Conference, which brings together leaders from diverse sectors and industries around the world, explores solutions to today’s most pressing challenges in financial markets, industry sectors, health, government and education. Schmidt talked about synthetic meat made from plants, VR, self-driving cars, and 3D printing for buildings.

    Schmidt points out that constructing buildings, both residential and commercial, is time consuming, energy intensive, and costly. He said that construction represented 5% of the economy, but that homes and buildings built in an industrial environment could be cheaper, more efficient and built on 100% recyclable material.

    This isn’t the first time Schmidt has sung the praises of 3D printing technology and its potential applications. Back in 2013 he predicted the rise in the use of 3D printing, and he wasn’t wrong.
    The implications of 3D printed houses and infrastructure are incredible. Instead of a home taking months to build, it could take just days. A company in China claimed to have built 10 houses in under 24 hours in 2014, with all their materials coming from recycled waste materials.

    With the UN estimating that three billion people will need housing by 2030, large scale 3D printers are being suggested as a solution to this. They could be the solution to cheap, reliable housing which would replace slums in developing countries.


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    Hydrogen Heating a Step Closer as Government Adviser Backs UK Trials

    Radical plans to use hydrogen to heat UK homes and businesses have moved a step closer after the Government’s official climate advisers said the plan was “technically feasible” and called for major trials to be undertaken.

    In a report, the Committee on Climate Change identified using hydrogen in place of natural gas in the UK’s existing gas grid as one of the two “main options” for greening Britain’s heating supplies.

    It said the second was the use of heat pumps, which use a reverse refrigeration process to draw heat from the air, ground or a water source.

    The Government must decide by 2025 what role hydrogen will play in order to implement its chosen plan in time to hit its 2050 climate targets, Matthew Bell, the CCC chief executive, said.

    About 80pc of UK homes are currently heated using natural gas from the grid, which produces carbon dioxide when burnt.

    The CCC estimates that if the UK is to comply with the Climate Change Act, which requires greenhouse gas emissions to be slashed to 20pc of their 1990 levels by 2050, the majority of homes and almost all businesses will need to cease burning natural gas.

    However, the CCC said the UK’s attempts at green heating so far had “been unsuccessful” and called for the Government to devise “a proper strategy”.

    This including doubling the rate of installation of heat pumps this parliament in homes that are not on the gas grid, many of which use heating oil, as well as conducting the “sizeable trials of hydrogen for heating”.

    “The main options for the decarbonisation of buildings on the gas grid in the 2030s and 2040s are heat pumps and low-carbon hydrogen,” the CCC said in a report.

    In addition, the UK could also use some district heating networks in urban areas, taking heat from a central source through insulated pipes to homes and businesses.

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