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

    Comparing Risk and Opportunity

    Thanks to a subscriber for this summary by Byron Wein for Blackstone, from his series of discussions with investors. Here is a section:

    There was general agreement that both inflation and productivity were understated. Housing is a big part of the inflation calculation and, for most of the country, housing costs have been rising modestly. The prices of services like healthcare and lifestyle-supporting needs used by everyone, such as haircare and cleaning services, have risen sharply but don’t show up in the numbers. As for productivity, the measurement techniques were developed in the 1950s when the U.S. was more of a manufacturing economy. Now with services and knowledge-based industries so important, the historical measurement approaches, which underestimate the impact of computer software developments, understate productivity improvements. Time spent posting and reading posts on Facebook during working hours, however, detracts from productivity. One technology person pointed out, though, that the video games of today are intensely interactive and represent a learning experience for the kids playing them. This is in sharp contrast to the passive watching of television by previous generations.

    We talked a bit about inequality and agreed the problem was likely to become worse because of globalization and technology. One investor was optimistic, however, because of the positive impact machine learning was making in improving the outlook of disadvantaged Americans and educational opportunities in the emerging markets. Another pointed out that 60% of the jobs held in 1980 don’t exist today and still unemployment is down to 4.3%. On-demand services, such as Uber, are creating jobs, but technology displacing workers is a problem throughout the world.

    Even though there was an apprehensive mood at the lunches few were buying gold as a safeguard. In spite of the strong performance of the Japanese economy this year and the rise in its stock market, the group remained wary of Japan. There was no clear consensus on why the dollar was weak, but a lack of confidence in the new administration in Washington was clearly a factor in spite of strong U.S. growth and a rising stock market. One of the lunches was decidedly bearish. Overall, a vote on market performance between now and year-end showed that 60% believed it would be higher in spite of the caution expressed in the discussion.

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    Campbell Drops After Bleak Outlook Follows Blow From Buffet

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

    Over the past three years, the 10 largest packaged-food companies have seen about $16 billion in revenue evaporate as consumers change how they eat and shop. Shoppers are seeking out more natural and organic food, shifting away from the staples that have dominated supermarket shelves for decades.

    Whole Foods Deal
    Amazon.com Inc.’s deal to buy Whole Foods also has fueled pessimism about packaged-food giants, with analysts predicting that the e-commerce titan will favor private-label products and squeeze the profit margins of its suppliers. In June, when that deal was announced, the 10 largest U.S. food companies lost almost $8 billion in market value combined.

    In a bid to add more natural products, Campbell agreed to buy Pacific Foods of Oregon, a maker of organic soup and broth, for $700 million in June. Campbell also acquired Bolthouse -- a producer of carrots, juices and salad dressings -- for $1.55 billion in 2012. That business, now part of the Campbell Fresh unit, has struggled with poor harvests and a drink recall.


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    Email of the day on cobalt

    Nickel is an important metal in itself for battery technology, but 2/3 of nickel goes into stainless steel, so from this perspective nickel isn't a very highly leveraged play on battery advances. Whilst Cobalt is a by-product of nickel mining, it is my understanding that this is mainly the case from lateritic nickel deposits, and there is a much lower % of cobalt by-product from deep mines. 

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    These Robots Are Using Static Electricity to Make Nikes

    This article by Joshua Brustein may be of interest to subscribers. Here is a section: 

    In the past month, Grabit has begun providing facilities that make Nikes with a handful of upper-assembling machines that can work at 20 times the pace of human workers. By the end of the year, about a dozen of these machines will be operating in China and Mexico. This could be a step forward in Nike’s attempt to change the economics of shoemaking so it can relocate manufacturing closer to the big consumer markets in the U.S. and Europe.

    Pretty much every company that makes physical objects is interested in automation. Robotic arms have been doing much of the labor in car factories for years, and Amazon sponsors an annual contest to get academics to make robots smart enough to pick up objects they’ve never seen before. For Grabit, the partnership with Nike shows its work is catching the eye of the world’s more prominent apparel companies.

    Despite its name, Grabit’s innovation isn’t based on having robots mimic the human-style grabbing motion. Instead, the company implements flat pads of electrodes that, when charged correctly, create an electric field that adheres to nearly any surface. This makes Grabit able to do things robot-hand companies are unlikely ever to conquer, says Greg Miller, Grabit’s chief executive officer. “The things we’re getting pulled into, we’re getting pulled into because they can’t be done another way,” he said.


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    Kenya presidential election cancelled by Supreme Court

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

    Justice Maraga said the election commission had failed "to conduct the presidential election in a manner consistent with the dictates of the constitution".

    He said the commission had committed irregularities "in the transmission of results", adding that the court would provide details in a full judgment within 21 days.

    Dissenting judges said that the Nasa opposition alliance - which had petitioned the Supreme Court - failed to prove claims that the polls had been rigged.

    The election sparked days of sporadic protests, in which at least 28 people were killed. The vote had raised fears of major political violence - as was the case after a disputed poll in 2007.


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    U.S. Jobs Engine Keeps Defying Forecasts for 2017 Slowdown

    This article by Shobhana Chandra may be of interest to subscribers. Here is the relevant section:


    A confluence of reasons helps explain the outperformance, including steady consumer spending; bullish business sentiment on hopes President Donald Trump will cut taxes and boost growth; stabilization in oil prices; and improving export markets. Moreover, weak wage gains suggest employers are adding workers instead of investing in technology, something reflected in sluggish productivity. Recent hiring has been driven by typically low-paying industries such as restaurants, home health-care services and leisure.

    “There is enough supply of labor to keep hiring growing at a fairly robust pace,” said Michael Gapen, Barclays Plc’s chief U.S. economist, who projects payrolls grew 200,000 in August. There’s also still plenty of demand for workers in this “slow but super-durable expansion,” he said.

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    Gasoline Surges as Harvey Traps Gasoline in the South

    This article by Jessica Summers for Bloomberg may be of interest to subscribes. Here is a section: 


    Gasoline extended its longest rally since 2013 as traders assess how quickly key Gulf Coast refineries and pipelines are able to return to service following Harvey.

    Motor-fuel prices jumped as much as 15 percent in New York. Harvey has shuttered about 23 percent of U.S. refining capacity since its first landfall as a Category 4 hurricane on Friday. While refineries in the Port Arthur, Beaumont and Houston areas remain off line, some plants in the Corpus Christi area -- where Harvey first hit -- are working to restart and the Strategic Petroleum Reserve on Thursday approved the release of 1 million barrels of crude to a Gulf Coast refinery.

    Colonial said its Lines 1 and 2 are operating east of Lake Charles and it will be able to bypass any shuttered terminals near Port Arthur, Texas when it resumes shipments Sunday from Houston-area origin points.

    The focus is on how long refineries will take to get back online, according to Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors LLC, in a telephone interview. “This is more of an unleaded gasoline story. The impact on the whole Texas area--the story is still developing.”

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