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

    Cobalt, Uranium, and The Four Horsemen of Opportunity

    Thanks to a subscriber for this note from Polar Capital LLC which may be of interest. Here is a section:

    In summary, world trade friction is growing.  More countries are beholden to the kindness of others for those commodities in high concentrations from nations that can employ them as weapons of response to adversarial tariffs.  What is that worth per pound of cobalt?  Nothing.  Until it is.  What is it worth that the DRC is a political quagmire and the country is about to be 75% of world production?  Nothing.  Until it is. What is it worth that China dominates cobalt chemical refining for batteries and western auto companies are still generally open on supply?  Nothing.  Until it is.  It is likely that spot prices are about to soften a bit after an ungodly strong, unabated run. We believe that weakness is merely prelude to new highs when the Fall “mating season” begins.  How do we play it?  Besides our relatively small physical positon, we own Cobalt 27 (KBLT CN) because they hold 3,000 metric tons of cobalt metal safely housed in western warehouses, and we believe they will further execute their business plan by acquiring a stream or streams before the end of the year and share that cash flow with shareholders in the form of a dividend.  We think cobalt prices can trade past the old high of $50 in 2008, a period during which battery demand from electric vehicles did not exist.

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    ECB bond buying under scrutiny from Rome

    Thanks to a subscriber for this article from the Financial Times confirming the ECB has reduced purchases of BTPs following the Italian election. Here is a section:

    The central bank purchased a net €3.6bn of Italian government debt under its long-running programme in May, new figures show. Although this is higher than the amount it bought in some recent months, such as March and January, it was smaller as an overall proportion of its net purchases.

    The ECB insisted that the reduced Italian share had nothing to do with political events, and was purely linked to practical issues such as the need for the bank to reinvest in German bonds after a chunk of its holdings matured.

    But the numbers were nonetheless seized on by members of Italy’s new governing parties, who have been arguing for weeks that the eurozone’s central bankers have been putting pressure on them to adopt more conventional economic policies.

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    Milestone immunotherapy treatment cures terminal breast cancer patient

    This article by Rich Haridy for NewAtlas.com may be of interest to subscribers. Here is a section:

    Despite this extraordinary case study it is still very early days for the treatment, with the current clinical trial due to run until at least 2023. After that, a Phase 3 trial will need to broaden the volume of patients treated to verify any positive results,. So, realistically a broad clinical application could be up to a decade away ... And that's assuming everything goes right.

    An early form of adoptive immunotherapy, called CAR-T therapy, exhibited severe side effects across many of its clinical trials, including some deaths. The therapy also displayed some impressively positive response rates, promising at the very least an extra possibility for patients where pre-existing treatments have failed.

    Last year, the first immunotherapy of this kind was approved for use by the FDA. The treatment's approval was undeniably a milestone for this new kind of therapy, but alongside the approval came a striking price tag. Kymriah, for young patients with a type of blood and bone marrow cancer, was initially costed at nearly half a million US dollars per treatment.

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    Email of the day on evidence of immigration in Japan:

    I believe this does rather endorse your view. Also, my father in law a farmer in Shikoku has told me about many Chinese farmers on their Island!

    Different subject, but I heard recently pearl exports this year are up in the region of 100%, your wife has obviously started a major new trend!

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    Cobalt price: Congo production surges

    This article by Frik Els for Mining.com may be of interest to subscribers. Here is a section:

    Supply risks for cobalt are centred on the Democratic Republic of the Congo which is responsible for two-thirds of world output. And the country’s share will only increase over the next five years as Chinese investment in new mines come on stream.

    The central African nation's output of cobalt – as a byproduct of copper production – is already soaring as top producer Glencore's operations in the country ramps up again after a refurbishment period.

    The DRC produced 296,717 tonnes of copper in the first quarter of 2018, up 8.2% over the same period last year, the central bank said in a report on Thursday. Cobalt production in the first quarter of 2018 rose 34.4% to 23,921 tonnes. Global production last year was around 117,000 tonnes.

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    Teens, Social Media & Technology 2018

    This article by Monica Anderson and Jingjing Jiang for the Pew Research center may be of interest to subscribers. Here is a section:

    Until recently, Facebook had dominated the social media landscape among America’s youth – but it is no longer the most popular online platform among teens, according to a new Pew Research Center survey. Today, roughly half (51%) of U.S. teens ages 13 to 17 say they use Facebook, notably lower than the shares who use YouTube, Instagram or Snapchat.

    This shift in teens’ social media use is just one example of how the technology landscape for young people has evolved since the Center’s last survey of teens and technology use in 2014-2015. Most notably, smartphone ownership has become a nearly ubiquitous element of teen life: 95% of teens now report they have a smartphone or access to one. These mobile connections are in turn fueling more-persistent online activities: 45% of teens now say they are online on a near-constant basis.

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    Multiyear Plan for Energy Sector Cybersecurity

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

    Anticipating and reacting to the latest cyber threat is a ceaseless endeavor that requires ever more resources and manpower. This approach to cybersecurity is not efficient, effective, nor sustainable in light of escalating cyber threat capabilities. We must recognize today’s realities: resources are limited, and cyber threats continue to outpace our best defenses. To gain the upper hand, we need to pursue disruptive changes in cyber risk management practices.

    DOE’s cyber strategy is two-fold: strengthen today’s energy delivery systems by working with our partners to address growing threats and promote continuous improvement, and develop game-changing solutions that will create inherently secure, resilient, and self-defending energy systems for tomorrow. 

    Meaningful public-private partnership is foundational to DOE’s strategy. Facing an ever-evolving threat landscape requires a coordinated approach to improving risk management capabilities, information sharing, and incident response. The federal government has also historically funded innovative research, development, and demonstration (RD&D) that cannot be economically justified in private-sector markets. Today, this includes game-changing RD&D that will build cyber resilience into energy systems for tomorrow.

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    Dollar Tantrums, Original Sin

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

    The Original Sin index ranges from zero (“sinless”) to one (“sin-full” or fully dependent on foreign currency debt). We focus on sovereign and corporate bond issuance in ASEAN and India, and track how the index behaved during the Quantitative Easing periods and after the taper tantrums. 

    We detect increases in “original sin” in Indonesia and the Philippines in recent years, but find no visible increase in Thailand, Malaysia or India (see Figures 4 to 9). 

    Indonesia’s original sin index has been steadily rising, with a peak of 0.41 as of May 2018 (see Fig 5). This suggests that Indonesia corporations and the sovereign are borrowing more in foreign currencies in recent years, as the Fed normalizes policy rates. For Philippines, the original sin index rebounded in 2018 to 2009 levels after declining for the past two years (see Fig 7). This suggests that the financial stress is a more recent phenomenon, as investors are more worried about the peso risks (on higher inflation and widening current account deficit). 

    On the other hand, Malaysia and India have seen a decline in their original sin index, suggesting a gradual reduction in their foreign currency exposure in recent years (see Figures 6 & 9). Thailand’s index has been very low since the early 2000s, barely reaching 0.1, reflecting its low interest rates and abundant domestic liquidity, given the massive current account surplus (see Fig 8).

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