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February 18 2015

Commentary by Eoin Treacy

Gilead Pill Can Stop HIV. So Why Does Almost Nobody Take It?

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

Truvada, Gilead’s HIV drug, has been approved since 2004 for people with the virus. In 2012, use was expanded to people without HIV as a way of preventing transmission -- a practice called PrEP, or pre-exposure prophylaxis. Taken daily, it can prevent infections 92 percent of the time, meaning it could drastically reduce new infections in sexually active gay men, among the U.S.’s highest-risk communities.

Thanks to its use in HIV patients, Truvada’s been a financial success, bringing Gilead $1.79 billion in the U.S last year. Yet out of 3.3 U.S. million prescriptions from January 2012 to March 2014, only 3,200 were for prevention.

There are many reasons: Gilead says PrEP isn’t a moneymaker, so the drugmaker doesn’t pitch the medicine to many of the primary care doctors who see healthy, HIV-negative gay men most likely to benefit from Truvada. Patients and advocates say doctors often don’t know about the medicine, and some insurance plans leave patients with copays as high as $1,300, making use by the healthy less affordable.

The result is thousands of people who could significantly lower their HIV risk, yet don’t. Some 50,000 Americans are diagnosed with HIV each year, with the highest rates among young gay males, according to the U.S. Centers for Disease Control and Prevention.

Yet in November, Gilead said that 42 percent of PrEP prescriptions written through March 2014 were for women, and only 7.4 percent were for men younger than 25.

 

Eoin Treacy's view -

The list of caveats that come with this description of Truvada’s characteristics should give anyone pause. However the people it is aimed at helping do not have the best record of adopting a cautious lifestyle when it comes to the trade-off between pleasure and well-being, not least because many are young men. 

Taking a step back, the commercialisation of such a drug requires a very long lead time. This explains why after the fizz of the Tech Bubble it took so long for the promises of innovation to come to fruition. One of the reasons that bioTechnology is such a booming sector today is that a number of important products have reached the commercialisation stage. 



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February 18 2015

Commentary by Eoin Treacy

Portland to generate electricity within its own water pipes

This article by Ben Coxworth for Gizmag may be of interest to subscribers. Here is a section: 

LucidPipe simply replaces a stretch of existing gravity-fed conventional pipeline, that's used for transporting potable water. As the water flows through, it spins four 42-inch (107-cm) turbines, each one of which is hooked up to a generator on the outside of the pipe. The presence of the turbines reportedly doesn't slow the water's flow rate significantly, so there's virtually no impact on pipeline efficiency.

The 200-kW Portland system was privately financed by Harbourton Alternative Energy, and its installation was completed late last December. It's now undergoing reliability and efficiency testing, which includes checking that its sensors and smart control system are working properly. It's scheduled to begin full capacity power generation by March.

Eoin Treacy's view -

This represents an innovative idea but is just one example of how technological innovation is enhancing productivity. LucidPipe is privately held but the video on their homepage is worth watching just for the sheer simplicity of the concept and the benefit that accretes to the user of the Technology



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February 16 2015

Commentary by Eoin Treacy

Hacked vs. Hackers: Game On

This article by Nicole Perlroth for the New York Times may be of interest to subscribers. Here is a section: 

While much progress is being made, security experts bemoan that there is still little to prevent hackers from breaking in in the first place.

In May, the F.B.I. led a crackdown on digital crime that resulted in 90 arrests, and Robert Anderson, one of the F.B.I.’s top officers on such cases, said the agency planned to take a more aggressive stance. “There is a philosophy change. If you are going to attack Americans, we are going to hold you accountable,” he said at a cybersecurity meeting in Washington.

Still, arrests of hackers are few and far between.

“If you look at an attacker’s expected benefit and expected risk, the equation is pretty good for them,” said Howard Shrobe, a computer scientist at the Massachusetts Institute of Technology. “Nothing is going to change until we can get their expected net gain close to zero or — God willing — in the negative.”

Until last year, Dr. Shrobe was a manager at the Defense Advanced Research Projects Agency, known as Darpa, overseeing the agency’s Clean Slate program, a multiproject “Do Over” for the computer security industry. The program included two separate but related projects. Their premise was to reconsider computing from the ground up and design new computer systems that are much harder to break into and that recover quickly when they have been breached.

“ ‘Patch and pray’ is not a strategic answer,” Dr. Shrobe said. “If that’s all you do, you’re going to drown.”

 

Eoin Treacy's view -

The first experience many of the world’s emerging consumers will have of banking will be online. Many emerging markets do not have the retail branch network we are accustomed to in the West and the cost of building one versus installing an online system means they may never exist. As banking, retail, wholesale, entertainment, groceries and other parts of our lives move further online and become increasingly mobile, the need to protect our personal data is a growing imperative. 

At last week’s talk to potential investors in the FP WM Global Corporate Autonomies Fund, it was a pleasure to meet up again with David Brown. He took me through a brief summary of the presentation he will be giving at the Markets Now event on the 23rd. Quite simply if I were in London on the 23rd I wouldn’t miss this talk. It will offer a unique perspective on the evolution of the Third Industrial Revolution, where we are in the cycle, and what to expect next. Here is a link to his bio

 



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February 16 2015

Commentary by Eoin Treacy

Email of the day on the possibility of an online strategy session

Here's to fine warm weather for you and best of luck to your team for the ICC World Cup.

I know you have mentioned to let you know of any interest in conducting a Chart Seminar in Sydney.  I am happy to attend if one is arranged.  I would, however be very interested if another Global Strategy session was arranged.  The last one was very valuable and just the comments on India were enough to pay for the cost of the session many times over.  I'm not too big on Technology but I'm sure the Sydney crowd would even be keen to interact with Eoin through Skype  - if that was the only way it could be arranged for this year.

Just my two penny's worth.

 

Eoin Treacy's view -

Thanks for your thoughts, well wishes and good luck to Australia in in the ICC World Cup. It does not look like we will be holding a seminar in Australia this year but we will look into online class platforms for anyone who might be interested in a Global Strategy Session which would be framed to cover some of the major evolving themes likely to interest subscribers over the next 12 months. 



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February 11 2015

Commentary by David Fuller

What Apple Just Did in Solar Is a Really Big Deal

Here is the opening of this topical article from Bloomberg:

It was a year ago this week that Apple Chief Executive Officer Tim Cook responded to a climate-change heckler at the company's annual shareholder meeting with an impassioned rebuttal in which he famously told investors who care only about profits to "get out of the stock."

Now Cook is putting his prodigious sums of money where his mouth is, proclaiming the “biggest, boldest and most ambitious project ever,” an $850 million agreement to buy solar power from First Solar, the biggest U.S. developer of solar farms. The deal will supply enough electricity to power all of Apple’s California stores, offices, headquarters and a data center, Cook said Tuesday at the Goldman Sachs Technology conference in San Francisco.

It’s the biggest-ever solar procurement deal for a company that isn't a utility, and it nearly triples Apple’s stake in solar, according to an analysis by Bloomberg New Energy Finance (BNEF). “The investment amount is enormous,” said Michel Di Capua, head of North American research at BNEF. “This is a really big deal.”

David Fuller's view -

Iconic Apple can only increase US and also global interest in solar power.  It remains far more flexible and adaptable in terms of instillations than any other source of electricity.  It also has more scope for lower costs because solar benefits more from technological progress than any other source of power.



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February 09 2015

Commentary by Eoin Treacy

Google Is Developing Its Own Uber Competitor

This article from Bloomberg by Brad Stone may be of interest to subscribers. Here is a section:

Google has made no secret of its ambitions to revolutionize transportation with autonomous vehicles. Chief Executive Officer Larry Page is said to be personally fascinated by the challenge of making cities operate more efficiently. The company recently said the driverless car Technology in development within its Google X research labis from two to five years from being ready for widespread use. At the Detroit auto show last month, Chris Urmson, the Google executive in charge of the project, articulated one possible scenario in which autonomous vehicles are patrolling neighborhoods to pick up and drop off passengers. “We're thinking a lot about how in the long-term, this might become useful in people's lives, and there are a lot of ways we can imagine this going,” Urmson said in a conference call with reporters on Jan. 14. “One is in the direction of the shared vehicle. The Technology would be such that you can call up the vehicle and tell it where to go and then have it take you there.”

Those comments, according to the person familiar with deliberations of the Uber's board, have left executives at Uber deeply concerned—for good reason. Google is a deep-pocketed, technically sophisticated competitor, and Uber’s dependence on the search giant goes far beyond capital. Uber’s smartphone applications for drivers and riders are based on Google Maps, which gives Google a fire hose of data about transportation patterns within cities. Uber would be crippled if it lost access to the industry-leading mapping application, and alternatives— such as AOL's MapQuest, Apple Maps, and a host of regional players—are widely seen as inferior.

Eoin Treacy's view -

As the pace of technological innovation accelerates the potential for driverless cars to revolutionise the transport sector is non-trivial. Before engaging in speculation about just how much of a game changer this might be it is worth considering that the Technology is still unproven, important questions about culpability in an accident have yet to be finalised and adoption rates will be key to the success of the venture.

Google’s Waze app is quickly gaining widespread adoption in Los Angeles where daily rush hour traffic lends an incentive to forge a less congested route. The app acquires individual data for each mobile phone’s location, speed, origin and destination, plots it against neighbouring vehicles running the app and calculates the best route. It is not too difficult to imagine that a future iteration will power the programming of a Google driverless car. If adoption rates for driverless cars approach 90%+ the question of whether seat belts, traffic lights and speed limits will be brought into play and the potential for considerable efficiencies will be opened up.  



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February 06 2015

Commentary by David Fuller

Why Were We So Surprised?

My thanks to a subscriber for this fascinating article by Jeremy Grantham for the GMO Quarterly Letter.  Here is a brief sample:

The New Oil Balance

Lower oil prices and much reduced capex will guarantee that oil from fracking will start decreasing this year and that the supply of traditional oil will be less than it would have been. Indeed, at recent prices very few, if any, new drilling programs will be started, and a mere three years later at current prices, 80% or so of Bakken production would be history. But right now we have a substantial excess of production, and oil demand is notoriously inelastic to price in the short term – people will not be leaping into their cars to celebrate lower gas prices. But with time they may drive an extra 1-2% percent here and elsewhere and the excess will slowly clear: possibly by mid-year and almost certainly by the end of next year. After supply and demand come into balance, the price initially is likely to rise slowly, held in check by the increasing amounts of U.S. fracking oil that can be profitably produced at each new higher price level. It is this rapid response rate that will make the frackers the key marginal suppliers. This is a sensitive and, I believe, unknowable equation as to precise timing, but this phase will likely end only when fracking production, even at much higher prices, tops out, as it most likely will in the next five years. After that, I believe the equation will revert to the relatively more stable and more knowable one of the 2011 to 2013 era, in which the price of oil will be the full cost of finding and developing incremental traditional oil, which by then is likely to be over $100 a barrel. (In the interest of full disclosure I personally have been and will continue to be a moderate buyer of oil futures six to eight years out, for reasons that should be clear from the above. It should also be clear that such a bet can lose easily enough.)

David Fuller's view -

I have long held Jeremy Grantham in high regard.  Therefore, when feeling a temptation to disagree with him, my survival instinct tells me to lie down until I can think of something else to write about.

However, to widen the discussion and give subscribers more to think about, I will throw caution to the wind.  There are two important points in Jeremy Grantham’s paragraph above, with which I disagree:

1) He believes that US fracking production, even at much higher global oil prices, would most likely top out in the next five years.  No one knows for certain, of course, as this is a fledgling Technology relative to most conventional oil production.  However, he must be assuming that only a small portion of oil in known shale deposits can be commercially recovered.  Twenty years ago, 2014’s US shale oil production would have been regarded as a pipe dream.  Moreover, natural gas from most conventional oil wells at that time was flared off.  The march of Technology in search of profits is relentless.  The one certainty is that fracking Technology will become more rather than less efficient in the years ahead. 

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February 05 2015

Commentary by Eoin Treacy

Pfizer to Buy Hospira for $16 Billion

This article by Jonathan D.Rockoff may be of interest to subscribers. Here is a section:

Hospira is among the leading companies selling injectable drugs and biosimilars. In fact, Hospira is one of the first U.S. drug makers selling biosimilars in Europe and Australia. Hospira, of Lake Forest, Ill., had $4.4 billion in revenue last year, according to Pfizer.

The deal would give Pfizer, which has been trying to build up its own businesses in those areas, the opportunity to expand and take leading positions in fast-growing markets, according to Mr. Read. “The puzzle pieces come together in a very nice way,” he said in an interview.

Pfizer estimates the global marketplace for generic sterile injectables is estimated to be $70 billion in 2020, while the marketplace for biosimilars is estimated to be about $20 billion by that time. Pfizer had $49.6 billion in sales last year.

Pfizer will add Hospira, which is based in Lake Forest, Ill., to its global established pharma business, which includes generic products as well as growth opportunities such as biosimilars and injectables. The business had $25.15 billion in revenue last year.

 

Eoin Treacy's view -

The healthcare sector represents powerfully inspiring trends which can be split down into three main themes. These are innovation, availability and elder care. Let’s focus for the moment on the first two.  

To an extent the pharmaceuticals sector has ceded the role of innovation to bioTechnology companies. The trade-off is that they save money on expensive but uncertain R&D, but pay up for success stories through M&A activity. As the global middle class expands, per capita income improves and demand for length-of-life enhancing knowhow increases. This creates demand for highly expensive innovative solutions and large pharmaceutical companies have the marketing heft to sell them globally. Additionally, demand for generic alternatives to some of their previous bestsellers is on a similarly powerful growth trajectory. Rather than limiting supply and keeping prices high behind a patent wall, the generic strategy is to “pile um high, sell um cheap”. 

 



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February 05 2015

Commentary by Eoin Treacy

American Advanced Industries What They Are, Where They Are, and Why They Matter

I watched a series of panel discussions this morning at the Brookings Institute featuring the CEOs of Siemens, Alcoa, Stanley Black & Decker and Paccar among others. While I do not know if these talks were recorded and will available for viewing later I thought subscribers might be interested in the associated report. Here is a section

In short, the advanced industries sector—defined by its deep investment in R&D and STEM workers—encompasses the nation’s highest-value economic activity. As such, these industries are the country’s best shot at innovative, inclusive, and sustainable growth.

But there is a problem. The future competitiveness of the U.S. advanced industries sector is uncertain. Competitor nations are accelerating their investments in research and development (R&D), STEM workers, and strong regional Technology ecosystems just as the U.S. commitment weakens. As a result, recent decades have seen large-scale losses of manufacturing jobs and a growing trade deficit even in advanced Technology products. At the same time, the national government remains locked in partisan paralysis when it should be providing a platform for renewal. Going forward, a new alignment of states, cities, and metropolitan areas—and regional networks of public, private, and civic institutions—is going to be needed to transcend Washington’s paralysis and make advanced industry competitiveness a top priority.

And so, at a moment of uncertainty about the sources of U.S. economic renewal, this report urges the nation to double down on the advanced industries sector as one component of future prosperity. The report first explains what the advanced industries are and why they matter. It then explores the size, nature, and geography of the advanced industries sector, with particular attention to its distribution across U.S. metropolitan areas. It describes both the strength of the sector in the United States and a number of challenges that are undercutting its international competitiveness. Finally, the report suggests several priority areas for private- and public-sector work to promote the sector’s growth. 

Ultimately, the main point is simple: A competitive and growing advanced industries sector is prerequisite any future broadly shared prosperity. The nation should place a high priority on revitalizing them. 

 

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area.

While the above paragraphs sound a cautionary note, listening to the CEOs of major engineering companies can’t but fill one with enthusiasm about the pace of innovation and the beneficial effect this will have on consumers and not just in the USA. 

There is little doubt that education needs to focus on encouraging students into more highly skilled jobs. Just about all unskilled manufacturing that could be sent to cheaper labour markets has been. Manufacturing in the 21st century is increasingly about working in conjunction with robots and advanced pieces of machinery and software. This is not new, people have been talking about the need for enhanced technical schooling for a long time but the number of jobs available in these sectors now means that there is a clear progression for graduates to comparatively high paying jobs. 

 



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February 02 2015

Commentary by Eoin Treacy

New Rules in China Upset Western Tech Companies

This article by Paul Mozur may be of interest to subscribers. Here is a section: 

The groups, which include the U.S. Chamber of Commerce, called for “urgent discussion and dialogue” about what they said was a “growing trend” toward policies that cite cybersecurity in requiring companies to use only Technology products and services that are developed and controlled by Chinese companies.

The letter is the latest salvo in an intensifying tit-for-tat between China and the United States over online security and Technology policy. While the United States has accused Chinese military personnel of hacking and stealing from American companies, China has pointed to recent disclosures of United States snooping in foreign countries as a reason to get rid of American Technology as quickly as possible.

Although it is unclear to what extent the new rules result from security concerns, and to what extent they are cover for building up the Chinese tech industry, the Chinese regulations go far beyond measures taken by most other countries, lending some credibility to industry claims that they are protectionist. Beijing also has long used the Internet to keep tabs on its citizens and ensure the Communist Party’s hold on power.

Chinese companies must also follow the new regulations, though they will find it easier since for most, their core customers are in China.

 

Eoin Treacy's view -

China has unabashed ambitions of becoming a global economic and military superpower large enough to rival the USA. However if it is to close the technological gap with the USA it will have to invest a great deal of money, time and effort into technological development. Investment in science is already impressive but the commercialisation of ideas takes time. 

Like other emerging countries that have come before it, China has copied what it could not develop itself. Insisting companies that wish to do business in China to sign Technology sharing agreements and engaging in corporate espionage are both aimed at achieving the goal of rapidly narrowing technological gaps.

Forcing government agencies and state owned companies to buy from Chinese vendors almost certainly sets the country on course for discourse with the WTO. However by the time a judgement is reached much of the transition will probably have been completed.  The majority of China’s leading Technology companies have sought listings in either Hong Kong or the USA which creates a challenge when judging the performance of the sector. 

 



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January 30 2015

Commentary by David Fuller

Seven Reasons Cheap Oil Cannot Stop Renewables Now

Here is the opening of this interesting, somewhat controversial article from Bloomberg:

Oil prices have fallen by more than half since July. Just five years ago, such a plunge in fossil fuels would have put the renewable-energy industry on bankruptcy watch. Today: Meh.

Here are seven reasons why humanity’s transition to cleaner energy won’t be sidetracked by cheap oil.

1. The Sun Doesn't Compete With Oil

Oil is for cars; renewables are for electricity. The two don’t really compete. Oil is just too expensive to power the grid, even with prices well below $50 a barrel.

Instead, solar competes with coal, natural gas, hydro, and nuclear power. Solar, the newest to the mix, makes up less than 1 percent of the electricity market today but will be the world’s biggest single source by 2050, according to the International Energy Agency. Demand is so strong that the biggest limit to installations this year may be the availability of panels

“You couldn’t kill solar now if you wanted to,” says Jenny Chase, the lead solar analyst with Bloomberg New Energy Finance in London.

David Fuller's view -

This is a good article, even if it does lose its focus, in my opinion, in the last two paragraphs.  It also contains some helpful graphics.

In particular, look at the third point.  Here is a key sentence on solar: “It’s a Technology, not a fuel.”  This is certainly true and solar is fast on its way to becoming the dominant Technology in the energy field.  



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January 30 2015

Commentary by Eoin Treacy

Alibaba Finance Affiliate Valuation to Yield 12 Billionaires

This article by Zijing Wu and Sterling Wong for Bloomberg may be of interest to subscribers. Here is a section: 

A higher valuation for Alibaba Group Holding Ltd.’s finance affiliate ahead of a stock sale will yield 12 new billionaires, including the e-commerce giant’s Chief Executive Officer Jonathan Lu and Chief Risk Officer Shao Xiaofeng.

Zhejiang Ant Small & Micro Financial Services Group Co., which owns payments processor Alipay, is valued at about $50 billion, according to people familiar with the matter. Ant Financial is weighing a private placement before going public in 2016, and details of the planned fundraising aren’t finalized, said the people, who asked not to be identified because the discussions are private.

Alibaba’s own record-setting IPO in September briefly made Chairman Jack Ma Asia’s richest person. He has a $26.3 billion fortune as of yesterday, according to the Bloomberg Billionaires Index. The dozen billionaires from the payment processor’s bigger valuation include Alibaba’s Chief Operating Officer Daniel Zhang and Chief People Officer Lucy Peng.

“It’s got formidable room for growth,” said Cyrus Mewawalla, managing director of London-based CM Research Ltd.

“As Alibaba expands in global markets, so could Alipay. If Technology companies do well, then their owners become billionaires.”

 

Eoin Treacy's view -

Alibaba has three main business units. The wholesale “China to the rest of the world” arm that bears the company’s name, Tmall which allows third party companies to market their goods to Chinese consumers and its finance arm offering outsized deposit rates and the ability to pay for goods on the company’s various sites. The first two were part of last year’s IPO and it is looking increasingly likely that the finance arm is now being prepped for sale. 



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January 29 2015

Commentary by David Fuller

Deepak Lalwani: India Report

My thanks to the author for his informative letter, and here is a section:

What do India and the US bring to the table and why do they both wish to form a strategic partnership? For the US, India's size, location, fast growing economy and being the world's largest democracy offers much potential. Especially when Europe is facing economic, political and monetary problems, the Middle East faces continual challenges of embracing democracy and a rising China's military and territorial claims are causing concern. The US views India as a huge market and a potential counterweight in Asia to an increasingly more assertive China. But the US has been frustrated with the slow pace of New Delhi's economic reforms, inability to slash bureaucracy and make doing business in India much easier and a reluctance to support Washington in international affairs. The US is keen to expand ties in business, defence, civil nuclear contracts and counter-terrorism. For India, as it moves away from Soviet legacy institutions under Modi, the US represents a huge business market, a major source of badly needed investments into India to lift economic growth and a global superpower that could help with a permanent seat on the UN Security Council.

Obama's visit ended on a very upbeat note for both countries. The markets should view the trip as being very fruitful. The two leaders announced plans to unlock billions of dollars in nuclear trade and to deepen defence and counter-terrorism ties and knowledge. Of particular importance was an agreement on two issues that has stopped US companies from setting up nuclear reactors in India and had become a major irritant in bilateral relations. A 10-year framework for defence ties and deals on co-operation for the production of drone aircraft and equipment for C-130 transport planes was agreed. A $4bn US investment to expand trade and business with India was announced. Other deals ranged from financing initiatives to help India use renewable energy to lower carbon intensity. An Obama-Modi hotline - India's first at leadership level- was agreed. Overall, a very positive path. The crucial part will be if the untapped potential of a US-India strategic partnership can be unlocked. If so, it will be a huge win-win for both countries.

David Fuller's view -

These are important points, with which I strongly agree.  No other country has the potential to contribute more to India’s future GDP growth than the USA.  America has a strong ally in Japan but another one would be very useful.  Technology projects between the US and India would be fruitful for both countries.  Additionally, if the US can hasten India’s economic development, it could be an increasingly powerful ally, with an unlimited and increasingly skilled labour force. 

Now if only the US played cricket…

The India Report is posted in the Subscribers' Area, with an additional comment.



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January 26 2015

Commentary by David Fuller

Draghi Plays Chess in Economy Class After Journey to QE

One of the final passengers to board an Alitalia flight from Frankfurt to Rome last Thursday evening had a heavy day behind him.

Taking a window seat, he removed his jacket, unflipped an Ipad and began a game of chess -- something he’d been doing in one form or another for most of the past year. Mario Draghi, hours after pushing through the biggest decision in Europe’s monetary history with a trillion-euro pledge to fight economic decline, was flying home in economy class.

The journey for the 67-year-old president of the European Central Bank took him across a 19-nation currency bloc that has been sliding toward deflation. Yet in the nine months since he warned such a scenario could only be fought off with quantitative easing, he’s needed all his guile and experience to make it happen.

“Like it or not, he’s the savior of last resort in Europe,” said Gene Sperling, who directed the U.S. National Economic Councils in both the Clinton and Obama administrations. “His whatever-it-takes approach has been very important for confidence in an otherwise disconcerting economic environment.”

The route to QE arguably started on a spring day in Amsterdam last April at an event to mark the 200th anniversary of the Dutch central bank. The audience at the Hermitage Museum included two central-bank chiefs who would later take opposing sides in the QE debate -- Klaas Knot of the Netherlands and Luc Coene ofBelgium.

Draghi delivered a candid description of how the ECB would respond to three “contingencies.” One was a “worsening of the medium-term outlook for inflation” caused by weaker demand or a “positive supply shock,” and he said the response would be clear: broad-based asset purchases.

So it turned out. Gross domestic product came almost to a standstill in the second quarter of 2014, and a glut of oil prompted the start of a precipitous plunge in prices in June.

How the ECB president embarked on a campaign to persuade the Governing Council the time for QE had arrived was told to Bloomberg reporters in recent months by multiple people familiar with the discussions who asked not to be identified.

On Aug. 22, Draghi unexpectedly raised the pressure for QE at an annual gathering of global policy makers in Jackson Hole, Wyoming. He didn’t stay long -- conferring with Federal Reserve Vice Chair Stanley Fischer, his former tutor at Massachusetts Institute of Technology, speaking and then leaving -- but the impact was lasting.

David Fuller's view -

After an important event such as Mario Draghi’s €60bn per month QE programme until at least the end of September 2016, announced late last week, there is a tendency to think that this was always likely to happen.  The article above gives us a few insights into how difficult it was too get this programme past Germany. 

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January 23 2015

Commentary by David Fuller

January 20 2015

Commentary by Eoin Treacy

The Global Corporate Autonomies Fund

Eoin Treacy's view -

Veteran subscribers will be familiar with the focus we have put on the types of companies David first referred to as Autonomies over four years ago. We came up with the designation in order to reflect the potential of truly global companies as some powerfully bullish factors converge.

Perhaps the most important of these is that governance is generally improving on a global basis. Some would argue the opposite with Russia deteriorating, ISIS running rampant in Iraq, Ebola posing a threat in West Africa and Europe still struggling with deflation. However that would be to miss the point that capitalism has gone global which is allowing more people than ever before to lift themselves out of poverty and into the middle classes. The major population centres of the world primarily in Asia and increasingly in Africa have abandoned the ideology of communism and billions of people are being provided with the tools, knowhow and infrastructure to multiply their productive capacity. This is a secular theme and the demand cycle this is unleashing represents a powerfully bullish force for equity markets over the long term.

The Technology, Healthcare and Energy sectors have the capacity to change how we live our lives. Innovation in any one of these has the potential to fuel a major bull market but right now we are presented with accelerating innovation in all three. This is important for two reasons. The first is that the world’s most advanced economies have potential to enhance their productive capacity. The second is that because capital is now global, these products, services, methods and skills can be disseminated rapidly so that more people than ever before can benefit. For emerging economies this represents a shortcut to development since they can sidestep a number of developmental stages as innovative solutions are embraced.

Energy deserves special mention because it touches each of our lives in a very real way every day. Unconventional oil and gas represent game changers for the energy sector and are already delivering on lower energy prices in real terms. One of the oldest adages from the commodity markets is that “the cure of high prices is high prices”. The high oil price environment ignited interest in developing new more efficient energy sources. The entry of shale oil and gas is a partial solution. The application of Moore’s law to solar cell development has even more potential to displace fossil fuels and maintain a low energy price structure. The evolution of nuclear Technology shows similar promise.

These represent major themes and consumers are likely to be among the greatest beneficiaries. The companies providing new products and services will benefit but their customers will be benefit even more. This is one of the primary reasons we started looking at big multinational companies. What really sharpened our focus was the fact so many were breaking out to new all-time highs when the wider market was still getting off its knees. Truly global companies that dominate their respective niche have proven track records of generating brand loyalty, opening up new markets and they have the scale to achieve success whether others might flounder. Many of the Autonomies have strong balance sheets and have been around long enough to have lengthy records of dividend increases. However we did not make dividends a defining characteristic because that would exclude a significant number of the companies delivering the innovation upon which productivity growth potential relies.

I used the Autonomies in the latter half of Crowd Money to show base formation completion and as a template for how a number of themes can coalesce to drive a major bull market. A subscriber, Chris Moore at WM Capital Management in the UK, approached me last year at The Chart Seminar asking if there was a fund that he might invest in for his clients that represented these themes. There were some global funds and some dividend funds but none that we could describe as representing the Autonomies. He asked if I would like to start one and I concluded that it would be better to be part of the fund than have someone else do it so I agreed.

The fund will be equally weighted, rebalanced quarterly and will hold the 100 Autonomies with the most attractive chart patterns. Veteran subscribers will be familiar with our frequent commentary on the high costs of fund management so I made competitive fees a condition of my participation. The fund will have a management fee of 0.55%.

It will launch in March and I will be giving a talk at the East India Club on February 10th to talk about The Big Picture and the Autonomies from 6:30pm. If you would like to attend or would like some additional information relating to the Global Corporate Autonomy Fund please contact Chris Moore at [email protected]   

Here is a link to the fund brochure: http://www.wmcapitalmanagement.com/images/The%20Global%20Autonomy%20Fund.pdf



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January 19 2015

Commentary by David Fuller

Roger Bootle: Forget Devaluation, it is More Domestic Demand We Need

Here is the opening and also the last paragraph of this interesting column from The Telegraph:

Not only has UK inflation fallen to 0.5pc, but it now looks likely that the rate will shortly turn negative. This has given rise to a heated debate about the distinction between “good” and “bad” deflation. I am reminded of when doctors started talking about the difference between good and bad cholesterol. At that point, I thought the game was up.

With regard to deflation, the good/bad distinction is useful – but only up to a point. If aggregate demand is weak and that forces firms to cut prices and pay, then deflation is a sign of the economy’s weakness. That is the bad variety. By contrast, if a fall in import prices causes inflation to turn negative, this provides a boost to real incomes without implying anything adverse about the state of the domestic economy. This is good deflation.

In practice, this distinction can be a bit blurred, because it may well be that the fall in import prices is itself due to weak aggregate demand in the world. This is surely partly true today. In that case, what may be good deflation for an oil-importing country like the UK, is still bad deflation for the world as a whole.

But once you move on from the origins of falling prices to think about the consequences, this distinction between good and bad deflation loses all force. The current situation mirrors what happened in the opposite direction in the 1970s. When oil prices first shot up in 1973-74, this implied a reduction in real incomes and living standards for oil-consuming countries.

If people accepted this, then there was no reason for the rise in prices to cause continuing inflation. But they didn’t accept it. Workers pushed for higher wages to compensate them for higher prices, and firms raised prices faster in order to compensate them for higher wage costs. This became a wage/price spiral. Strikingly, the position was utterly different when UK inflation was well above the 2pc target two to five years ago. Wage inflation did not respond.

And:

What the eurozone – and the world – needs is not a burst of competitive devaluations, but much faster growth of domestic demand. In Europe, that prospect remains as elusive as ever.

David Fuller's view -

I maintain that the slump in oil prices is initially due to increased supply, thanks to Technology.  However, traditional oil producers also increased production as prices fell, in an effort to reduce revenue losses.  The net effect for oil importing countries is positive deflation, which will help GDP growth over the medium to longer term. 

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January 16 2015

Commentary by Eoin Treacy

Israel Sows Cyber Hub in Desert to Make Beersheba Bloom

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

“No other region in the world has a perfect storm like Israel in general, and Beersheba specifically,” said Yoav Tzruya, partner in JVP Cyberlabs in Beersheba.

JVP’s Technology-development center in Jerusalem spawned companies such as the cloud-encryption firm Navajo, which was bought by Salesforce.com Inc. in 2011. The venture firm went as far as South Korea seeking a second location before settling on Beersheba. Key reasons included the government and military investment in the region, Tzruya said.

As the region gears up to become an anti-hacking center, an Internet security-focused high school is in the works, as is a second hospital and more residential neighborhoods amid expectations that the Negev population will jump from today’s , about 610,000, to about a million by 2020.}

“Economic development, if it works well, is sort of like being a fan of the football team,” said Erel Margalit, a Labor lawmaker, head of the lobby for the Negev and founder of JVP. “It unites everyone in a big message of growth.”

 

Eoin Treacy's view -

Israel doesn’t have the regulatory framework precluding companies from taking proactive measures against hackers. In tandem with the close ties its Technology sector has with the military the potential to build a world class cyber security centre of excellence is credible. 
One of the challenges for the Israeli market is that the country’s most significant cyber security firms are not listed in Israel. 



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January 09 2015

Commentary by David Fuller

How OPEC Weaponized the Price of Oil Against U.S. Drillers

Here are several paragraphs from Bloomberg’s report:

If there ever was doubt about the strategy of the Organization of Petroleum Exporting Countries, its wealthiest members are putting that issue to rest.

Representatives of Saudi Arabia, the United Arab Emirates and Kuwait stressed a dozen times in the past six weeks that the group won’t curb output to halt the biggest drop in crude since 2008. Qatar’s estimate for the global oversupply is among the biggest of any producing country. These countries actually want -- and are achieving -- further price declines as part of an attempt to hasten cutbacks by U.S. shale drillers, according to Barclays Plc and Commerzbank AG.

U.S. crude production totaled 9.13 million barrels a day last week, up about 1 million barrels from a year ago and 49,000 from the OPEC meeting in November. Horizontal drilling and hydraulic fracturing in underground shale rock have boosted output by 66 percent over the past five years. Exports, still limited by law, reached a record 502,000 barrels a day in November, according to the Energy Information Administration.

The four Middle East OPEC members are counting on combined reserve assets estimated by the International Monetary Fund at $826.4 billion to withstand the plunge in prices. Petroleum represents 63 percent of their exports. At least 10 calls and several e-mails to the oil ministries of all four countries on Jan. 7 and yesterday weren’t answered.

OPEC won’t reverse course even if oil prices fall as low as $20 a barrel or non-OPEC countries offer to help with production cuts, Saudi Arabian Oil Minister Ali Al-Naimi said in an interview with the Middle East Economic Survey on Dec. 21. The kingdom may even bolster output if non-OPEC nations do so, he said. The global oversupply is 2 million barrels a day, or 6.7 percent of OPEC output, Qatar estimates.

It wouldn’t be the first time U.S. drillers are caught up in an OPEC battle for market share. In 1986, Saudi Arabia opened its taps and sparked a four-month, 67 percent plunge that left oil just above $10 a barrel. The U.S. industry collapsed, triggering almost a quarter-century of production declines, and the Saudis regained their leading role in the world’s oil market.

 

David Fuller's view -

OPEC’s four leading Sunni states of Saudi Arabia, the United Arab Emirates, Kuwait and Qatar are going for the jugular in this oil price war.  Their main target is the USA, not least as hydraulic fracturing (fracking) is one of the main factors undermining the Saudi-led OPEC control of oil prices, not least as many other countries could and probably will utilise fracking Technology in future years.  Sunni countries are also hoping to weaken the growing potential alliance between Shia dominated Iran and Iraq.  Russia is another target, not least as it remains a very big oil producer and has previously used a navel base in Syria’s Mediterranean port of Tartus.  This has been significantly scaled back for security reasons during Syria’s bitter conflict but Putin is still a supporter of Bashar al-Assad.

This item continues in the Subscribers’ Area.

 



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January 09 2015

Commentary by Eoin Treacy

Email of the day on generation IV nuclear reactors

Here are some exciting news on collaboration between a US nuclear lab and privately held Terrestrial Energy, which seems to have the most advanced molten salt nuclear reactor concept available. This is encouraging news for those of us eagerly awaiting commercialization of new nuclear!

Fyi and disclosure I am invested in Terrestrial Energy.

 

Eoin Treacy's view -

Following on from the above piece, there is no denying that the molten salt reactors currently considered generation IV Technology hold a great deal of promise as does the fusion solution touted as possible by Lockheed Martin and others. However, considering the lead time to commercialisation it will be the decade beyond 2020 where some of these promises are fulfilled. 

These advances help to enhance further the future of abundant energy we envisage as the most probably result of a decade of high pricing. 

 



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January 08 2015

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

 
David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note: There are a few seats left.  Fuller Treacy Money subscribers can still join at the £50 rate, and bring a guest for the same amount.  The early-booking rate has now expired for non-subscribers.

 


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January 08 2015

Commentary by Eoin Treacy

Toyota opens fuel cell patents to drive "hydrogen society"

This article by C.C. Weiss for GizMag may be of interest to subscribers. Here is a section: 

Toyota hopes to help jumpstart this future hydrogen society by sharing its intellectual property. This week's announcement represents the first time that it's sharing patents free of charge. The automaker helped to grow the gas-electric hybrid market in a similar manner, but those licensed technologies didn't come free.

"At Toyota, we believe that when good ideas are shared, great things can happen," said Bob Carter, senior VP of automotive operations at Toyota Motor Sales, USA Inc. "The first generation hydrogen fuel cell vehicles, launched between 2015 and 2020, will be critical, requiring a concerted effort and unconventional collaboration between automakers, government regulators, academia and energy providers. By eliminating traditional corporate boundaries, we can speed the development of new technologies and move into the future of mobility more quickly, effectively and economically."

 

Eoin Treacy's view -

I wonder if falling oil prices had any impact on Toyota’s decision to open its patent portfolio for hydrogen-fuelled vehicles to the masses? After all one of the most compelling reasons for considering alternative fuel vehicles was the high cost of gasoline. The Technology has come a long way in the last twenty years and governments are now more amenable to emission free technologies because of environmental concerns. However the total cost of ownership is likely to continue to be the primary arbiter for the majority of car buyers. 



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January 07 2015

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

 
David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note: There are a few seats left.  Fuller Treacy Money subscribers can still join at the £50 rate, and bring a guest for the same amount.  The early-booking rate has now expired for non-subscribers.



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January 07 2015

Commentary by Eoin Treacy

US Equity Strategy The 2015 Playbook

Thanks to a subscriber for this interesting report from Morgan Stanley. Here is a section: 

Healthcare and Technology – Contrarian to be market-weight? While we are currently market-weight both, a lot of investors we spoke with recently are overweight at least one (or both of these groups). For healthcare, our assessment is that our call there was probably our best sector-level call in the last four years. We were overweight 2011-through December 1st of 2014, nearly four years, on a thesis that there would be a R&D pipeline re-rating in bioTechnology and pharmaceuticals and that the medical distribution businesses would benefit from volumes and were growth at a reasonable price. Both played out, and our view is reducing the overweight in now prudent. We still hold a 4% position in MCK, and a 2% one in CAH, and select pharma and biotech, and we don’t view healthcare as a short, but valuations are now at ten-year highs on price-to-forward earnings in absolute terms, even if they remain compelling against other defensives like consumer staples.

For Technology, we struggle to implement a discipline where we want to own stocks that are recommended by our fundamental analysts and screen well in our disciplined strategies. Today, there is one Technology stock, HPQ, that screens in the top quintile in both our 24-month model, BEST, and our 3-month alpha model, MOST, that is recommended by a fundamental analyst at Morgan Stanley. Hard to get 20% weight in Technology!

Utilities: While we appreciate that this sector is very idiosyncratic, and we wouldn’t be surprised if the 10-year yield went lower in the next few months (we have not studied this like the US equity market multiple but wouldn’t be at all surprised if this was also un-forecastable in short horizons), we just can’t recommend a sector that is the most expensive vs. its own history it has ever been and trades at a premium to the overall market. Given the S&P500 benchmark weight is only 3%, we don’t think the bet is that significant either way, but midcap value investors have to make up their minds to avoid valuation if they want to own even the benchweight in this group.

 

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area.

All 9 of the major SPDR S&P sector indices can be found in the USA indices section of the Chart Library (at the bottom of the third column). It’s worth clicking through them because what quickly becomes apparent is that while energy and materials have lost consistency the rest are still trending reasonably consistently. 

Healthcare, Technology and utilities have been among the best performing stock market sectors over the last 12 months. They share a common characteristic of generally strong balance sheets and improving consumer finances. 

 



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January 06 2015

Commentary by David Fuller

Cheap Oil Is Rich Opportunity for Asia

Across Asia, the lowest crude prices since 2009 are an almost unmitigated boon. Already, they've given Indonesia and Malaysia room to curb budget-busting fuel subsidies (although Malaysia, an energy exporter, will suffer from a drop in oil revenues). In Japan, the Philippines, Singapore, South Korea, Taiwan and Thailand, sliding energy costs stand to boost disposable incomes, household demand and corporate profits. Economist Glenn Maguire at Australia & New Zealand Banking Group thinks this "confidence multiplier" will lead to higher-than-expected growth. The drop in oil prices so far could add as much as 1 percentage point to global output. "We think this will be the defining, constructive dynamic that underpins Asian growth in 2015 and most probably 2016," Maguire says.

As India's Modi prepares to unveil his first full budget in February, he could hardly ask for a fairer tailwind. In the short run, says Peter Redward, principal at Redward Associates, oil trends will lead to a "massive improvement" in India's current account deficit, repair the government's balance sheet and restrain inflation, which should allow the central bank to cut rates.

Whether the pickup in growth can be sustained will depend on how bold Modi chooses to be next year. The Indian prime minister wisely slashed diesel subsidies when oil prices dropped, easing the hit consumers felt at the pump. But that was the easy part; it’ll be tougher to cut subsidies on liquefied petroleum gas and kerosene, which millions of Indians use for cooking. Together with diesel, subsidies for those two fuels cost the government $11 billion in the last fiscal year. Likewise, Modi will have to spend considerable political capital to abandon discounts on fertilizer. Without such cuts, it'll be difficult to free up space for more productive fiscal spending on infrastructure, education and health care. 

Nor can Modi afford to delay supply-side reforms. In addition to lower fuel bills, 2015 will feature a light election calendar: Only two of India’s 29 states will hold contests. This could well be the prime minister's best chance to push through politically difficult measures, such as allowing foreigners to hold majority stakes in key domestic sectors.

David Fuller's view -

Modi is ambitious, experienced and far more economically savvy than the head of government in most other countries, developed or undeveloped.  He also has an overall majority and a responsible central banker, so I do not think he needs our advice on how to run India’s economy. 

All politicians need an element of luck, and considerably lower oil prices are a huge benefit for all countries which import most of their energy.  Luck has favoured them, although today’s prices for crude oil are in reality, a triumph for US Technology.  Modi would also benefit considerably from a good monsoon, which he did not get in 2014.  However, this is in the hands of the weather gods.   

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January 06 2015

Commentary by David Fuller

Email of the day 1

On the third industrial revolution:

“I fully agree with your sense that the Third Industrial Revolution has a long way to run. I give presentations on this topic around the world. Analysis of the 1st and 2nd Industrial Revolutions shows they spanned 3-5 decades and involved not only a new communication system but new financial systems and new energy sources too. The 1st Industrial Revolution from 1780-1830 involved synergy between the new energy source (coal), the new communication system (coal-powered printing presses leading to mass newspapers and mass education for the first time ever, and the new financial system (the London stock market. The 2nd Industrial Revolution from 1880-1920 was driven by oil then electricity as the new power sources, the telegraph then telephone as the new communication system, and the Limited liability company as the financial breakthrough. Our present-day 3rd Industrial Revolution began with the Internet in the mid-1990s, and that part is progressing nicely. But the new energy source (solar) is only just getting going, and we await a new financial system! When all three are in place and well-developed decades from now the world will be a very different place. Though I doubt the economics profession will have progressed quite so much!”

David Fuller's view -

Thanks for your informative email on a favourite subject, and your droll concluding sentence was also appreciated. 

Perhaps I lack imagination (or have too much of it) or hope to see too much more in my lifetime, but I think this ‘Industrial Revolution’, which I refer to as a visibly accelerating rate of technological innovation, has no natural end.  It includes the internet of everything, achieved with miniaturisation, plus new manmade resources such as graphene which will vastly improve the efficiency of many products, from solar energy panels to infrastructure construction.  I believe that within the lifetime of middle-aged people we will also see new nuclear in various different forms and possibly also the holy grail of commercial nuclear fusion.  I also think we are only approaching the foothills of what will be an accelerating rate of development in artificial intelligence. Sentimentally, I hope that Stephen Hawking’s recent prediction on AI does not come true, although his conclusion was certainly logical. 

Lastly, I hope those of us in the London area and attending Markets Now on 12th January (see below) will question speakers’ views, not least Charles Elliott on his choices for performance among Technology shares.      



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January 06 2015

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note: There are a few seats left.  Fuller Treacy Money subscribers can still join at the £50 rate, and bring a guest for the same amount.  The early-booking rate has now expired for non-subscribers.



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January 05 2015

Commentary by David Fuller

Summers and Mankiw of Harvard Square Off in Debate Over Stagnation

Here is the opening of this interesting column from Bloomberg, but please do not read it if you are standing near a ledge:

Secular stagnation hung over the annual meeting of more than 5,000 economists from around the world this past weekend -- as a description of the economy and not as comment on the liveliness of the cocktail parties.

Support for the thesis that the industrial world is mired in a prolonged period of slow or no growth was dimmed, though not banished, by the recent strength of the U.S. economy.

A standing-room only crowd packed a hotel ballroom on Jan. 3 to hear two leading proponents of the proposal, Professors Lawrence Summers of Harvard University and Robert Gordon of Northwestern University in Evanston, Illinois, defend their views.

“Just because we have 5 percent growth doesn’t mean we are out of the woods,” Summers, a former Treasury secretary and senior White House official, told the American Economic Association meeting in Boston, alluding to the U.S. economy’s pace of expansion in the third quarter.

He rattled off a variety of reasons for caution. Among them: the risk of financial bubbles, the difficulties the Federal Reserve may face in raising interest rates back to more normal levels, and continued excess capacity in Japan and Europe.

Summers also compared the euro area’s situation today with that of Japan in the late 1990s, before it slipped into a deflationary funk, and warned that the U.S. could be in for an extended period of a “dismal growth rate below 1-1/2 percent.”

Fellow Harvard professor Greg Mankiw took issue with that gloomy prognosis as far as the U.S. is concerned. In particular, he highlighted the improving labor market, where unemployment is at a six-year low and wages have begun to rise.

“We are returning to normalcy,” said Mankiw, who is also chairman of the economics department at Harvard in Cambridge, Massachusetts and a former chief White House economist.

There is “growing evidence of socioeconomic decay” as the U.S. economy struggles, Gordon said, pointing to the rise in the prison population and “the enormous increase in the number of children born outside of wedlock.”

“The fruits of the third industrial revolution” in information Technology “may be coming to an end,” said Gordon, who is a member of the economic panel that dates the start and finish of U.S. recessions.

David Fuller's view -

Good grief!  No offence to my charming economist subscribers, but 5000 other economists at the same meeting sounds like the equivalent of a biblical plague.  No wonder most stock markets were in swift retreat today.  An undertakers’ convention would have been a knees-up in comparison.   

Noting the last sentence of the article portion that I reproduced above, I wonder what evidence Mr Gordon cited for his claim that “the fruits of the third industrial revolution’ in information Technology ‘may be coming to an end”?  

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January 05 2015

Commentary by David Fuller

Email of the day 2

More on French nuclear power stations:

“The Government, which was in coalition with the Greens, decided to increase the % of "green" energies to reduce the French dependence (they should say independence) on nuclear electricity. To please the Greens, during the Presidential electoral campaign in 2012, Hollande promised to close Fessenheim (the oldest French nuclear plant). Since the departure of the remaining green ministers earlier this year, there are still talks of closing it down but other talks of lengthening its life (from what I read I doubt it since it would be very costly). In France, there is one nuclear plant under construction using a new Technology  (EPR -Evolutionary Pressurized Reactors- a 3rd generation of PWR -Pressurized Water Reactor) in Flammanville; the second one has been suspended by EDF following Fukushima; in 2013 EDF announced that current demand did not warrant launching its construction. The first one under construction is in Finland and is a kind of financial disaster for Areva being 5 years behind schedule(!) so far and will probably increase to 9 years, due to design and construction problems (I understand the construction of this new generation is rather complex - I guess these are "normal" glitches for new babies).

“The French nuclear lobby is very powerful in France (even the communists are pro-nuclear) and I do not see how France could achieve 50% nuclear electricity by 2025 from 75% currently. The French nuclear plants are getting rather old and will need to be replaced: my guess is that most will be replaced but for any unforeseeable event.

“France badly needs nuclear electricity to balance (a bit) its energy trade deficit. According to Areva, the nuclear industry represents EUR 6 billion of annual exports, employs 125,000 workers (410,000 in indirect and induced employment is added) plus several EUR billions of electricity exports. Finally, electricity is cheaper in France than Germany, one of the few competitive advantages of France.

“I have been very bearish on the French economy and I do not see any fundamental improvement. How long will the Germans tolerate France always signing agreements and never abiding by them? Time is running really short, and we are in an environment of artificially low interest rates which, when going up again, will really hurt the French budget (today, interest payments are higher than the income tax...). The mood in France is really bad (when talking to family and friends). I wrote an article a couple of years ago where I explained that it was France and not Italy that was the sick man of Europe, and I believe that the "chance" of an EU breakdown more possible than ever.”

David Fuller's view -

Thank you so much for this very detailed and informative summary.  The haunting question I ask myself: How much more prosperous might France and indeed most other European countries be today, without the Euro and the vast, often undemocratic and very expensive Brussels regime?  



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January 05 2015

Commentary by David Fuller

Email of the day 3

On the Markets Now:

“Happy New Year to you, and I trust that you had a relaxing and enjoyable holiday season. I have registered for the 12th January, so shall look forward to another evening of lively discussion!

“In the last Markets Now, we spoke in the bar about some suggestions to add further value to these sessions. I made the comment about further identifying sectors and companies that could perform based on the theme of the evening, and you asked me to email you with the suggestion. Apologies that it's taken me this long to respond, as my work and family leave me little spare time.

“To encourage further interactivity, perhaps attendees could make suggestions (in advance, or on the evening) of companies, funds, bonds, or other that they follow, invest, or are familiar with in these sectors.  Of key themes that would also benefit everyone to different companies. 

“Using the topic of Technology, due to it's sheer breadth, this could be segmented into areas of key interest that Fuller Treacy has been commenting on, such as: 

  • Cloud Computing
  • Security (which has become even more poignant with the increasing prevalence of ransomware)
  • Robotics
  • IOT [Ed: Internet Of Things?]
  • Fracking
  • Nuclear
  • 3D Printing
  • Nano

“As Eoin already periodically reviews some of these sectors, and companies, these additional suggestions from attendees would further enlighten through knowledge other areas of potential investment opportunity that would benefit the community. 

“While likely too late now for the 12th January, a possible suggestion for the future, to which I'm happy to contribute.” 

David Fuller's view -

Thank you for your interest and for also following up on our discussion during the East India Club bar session following the last Markets Now meeting. 

Personally, I welcome input from you and any of our other interested and often very knowledgeable subscribers at these seminars.  I think this is best handled on an informal basis, since people attend to hear the speakers and ask questions or otherwise comment, if they wish to do so.  I enjoy meeting subscribers and their friends or colleagues.  These sessions also stretch me, in a constructive way, and I enjoy learning from other speakers and also our extremely experienced delegates. 

You have obviously thought a lot about Technology, which could not be a more important and fascinating field, in my opinion.  I hope you will actively participate in questioning guest speaker, Charles Elliott, not least on the Technology sectors and shares that he feels will be most important over the next five or ten years.    



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January 05 2015

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note: There are a few seats left.  Fuller Treacy Money subscribers can still join at the £50 rate, and bring a guest for the same amount.  The early-booking rate has now expired for non-subscribers.



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January 02 2015

Commentary by David Fuller

Sushi Apocalypse Is Not Nigh

Here is the opening of this topical article from Bloomberg:

Jiro Ono, 89, widely considered the world's greatest sushi chef, has some dire news for aficionados of raw fish: The delicacy's best days may be behind us. 

"The future is so bad," the owner of the three Michelin star-rated restaurant Sukiyabashi Jiro, who was the subject of the 2011 documentary "Jiro Dreams of Sushi," told CQ in December. "Even now I can't get the ingredients that I really want. I have a negative view of the future. It is getting harder to find fish of a decent quality."

The reason is overfishing, particularly of the endangered bluefin tuna, a sushi staple. With 90 percent of the world's fisheries deemed either maxed out or overexploited, we may be, as one conservationist put it, in the era of "peak wild fish." 

Whether the ocean apocalypse that Ono foresees comes to pass will depend on conservation efforts and international accords with spotty records of preventing overfishing. Yet fish aren't about to disappear from stores or restaurant menus. There just may be fewer wild fish hunted and hauled out of the seas. Farmed fish will pick up the slack.

As the oceanographer Jacques Cousteau said:

“We must plant the sea and herd its animals using the sea as farmers instead of hunter. That is what civilization is all about -- farming replacing hunting.”

By some measures, this transformation is well under way: almost as much fish is produced via aquaculture as is caught at sea, according to a recent report by the UN's Food and Agriculture Organization. For certain species of fish and seafood, almost all that is consumed is farm-raised. For example, about 90 percent of all shrimp eaten in the U.S. is farmed, as is almost all European sea bass, some times sold in the U.S. as branzino.

David Fuller's view -

I think the remarkable Jack Cousteau summarised the problem perfectly in those two brief sentences above. 

The long-term solution is certainly not in more efficient fishing, which only has the capacity to increase yield temporarily before wiping out remaining supplies of wild fish. 

I am a regular consumer of farmed salmon, which cannot compare with the wild variety for flavour when used as sushi.  However, I have certainly developed a taste for it when lightly steamed, and recommend it.    



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January 02 2015

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.



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January 02 2015

Commentary by Eoin Treacy

Email of the day on technological innovation and drug resistance

Solving the problem of drug resistant bacteria may be closer than you think.  Journalist Brendan O’Neill recently reported: 

“Ninja particles are as cool as they sound. As part of the explosion of research into nano¬medicine — the implanting of infinitesimal machines or microbes into the body to attack disease — researchers have developed synthetic molecules that mimic our immune systems. It’s hoped these man-made molecules will soon be sent into the human body to attach themselves to certain microbes and cause them to rupture — “as if they’d been hit by an explosive shuriken (ninja star)”. These ninjas could prove deadly against antibiotic-resistant bugs and in bodies whose immune systems are rejecting newly transplanted organs.  (A Hollywood fantasy in the 1980s — Dennis Quaid being shrunk and sent into a human body in Innerspace — is becoming reality.)”

The above is more evidence of the importance of Technology as a driver of equity markets.  It is listed as #7 out of 10 significant technological developments in 2014.  The full article is at:  

 

Eoin Treacy's view -

Thank you for this email highlighting the fact that we live in an age of accelerating technological innovation. The pace of advances means that obsolescence is also increasing but there is an additional consideration. This is that it takes time to bring a lab discovery to market, not least because of issues with increasing scale as well as capital and regulatory constraints. It is reasonable to believe that we are rapidly entering an age of personalised medicine where the claims made by bioTechnology analysts in the 1990s are being realised. However, this could take a decade or more to roll out and will come at a cost. 



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December 31 2014

Commentary by David Fuller

Russians Are Organizing Against Putin Using FireChat Messaging App

Here is the opening of this interesting article from Bloomberg:

Anti-government protesters in Russia followed along on Twitter as opposition leader Alexey Navalny live-tweeted hishouse-arrest violation today. But the real action was on FireChat, where Navalny and his supporters organized protests and exchanged unfiltered communication.

Open Garden, the San Francisco startup that makes FireChat, says activity from Russia has been spiking since yesterday, when Navalny urged his followers to download the free app. FireChat was the top-trending search on Apple’s App Store in Russia today. Downloads in the country began to increase on Dec. 20 after Facebook blocked a page promoting an opposition rally, under pressure from the government’s communications regulator, according to Open Garden.

FireChat, which lets users create chat rooms and communicate anonymously, has become popular among protesters around the world. Aside from anonymity, the app offers an advantage to those in politically unstable regions because it works even when Internet service is down. FireChat uses a Technology available on newer smartphones, called mesh networking, that facilitates wireless communication directly between devices. It uses a combination of Bluetooth and Wi-Fi signals to connect with phones running the app. Iraqis flocked to FireChat in June after unrest prompted an Internet shutdown, and protesters in Taiwan and Hong Kong used the app when wireless networks failed.

As President Vladimir Putin faces increasing dissent during Russia's worst economic crisis since 2009, he’s tightened his grip on the flow of information online. Navalny, an adept social networker, condemned his accelerated trial as a government attempt to silence him. He announced his arrest today to his 16,000 followers on FireChat, where his account has been verified by Open Garden. (Navalny has 868,000 followers on Twitter, where is profile is also verified.)

David Fuller's view -

If he survives Putin and his apparatchiks, Alexey Navalny would make a worthy successor.  



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December 31 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note – The Early Registration rate of £50 expires after 31st December.

 

Happy New Year!



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December 30 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

Here is the brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note – The Early Registration rate of £50 expires after 31st December.



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December 29 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

Here is the brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.



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December 23 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.



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December 23 2014

Commentary by Eoin Treacy

Tech hardware and supply chain, Ten themes to watch in 2015

Thanks to a subscriber for this detailed report from Deutsche Bank, dated December 8th, but no less relevant today. Here is a section:  

What is Big Data?
The terms Big Data and Big Data Analytics are often used interchangeably, but they differ in one fundamental way. Big Data describes the processes used to collect and store large amounts of data. A data set is generally considered big when traditional relational databases or statistical programs become difficult to work with on existing hardware platforms. When this happens, new techniques must be used which are based on distributing the processing of the data set across hundreds or thousands of servers. Examples of these data sets can include shopping patterns collected by customer loyalty cards or location information collected from iPhones. Big Data Analytics is the process of collecting value from that data.

Market size and growth expectations for the Big Data market
IDC estimates that the combined Big Data and Business Analytics market was a $115B market in 2013, with Big Data representing 11% of the total, while Business Analytics represented 89% of the total. As seen in Figure 10, the combined market is expected to grow at a CAGR of 13% over the next 5 years, reaching $214B by 2018. The Business Analytics market is expected to grow at a CAGR of 11% during this period to a $173B market by 2018, largely driven by growth in services and software to support Business Analytics, while the hardware to support that growth is only expected to see modest growth. 

The Big Data market is a smaller market than analytics and was a $13B market in 2013. As seen in Figure 11, the Big Data market is expected to grow at a CAGR of 26% over the next 5 years, driven largely by growth in hardware to support Big Data. Servers and storage to hold Big Data are expected to see growth of 28-29% during this period, with this growth significantly helped bycloud infrastructure which is expected to grow 41% over the next few years. Growth in Big Data is being driven by increased use of social media, the digital market place, the proliferation of mobile devices, and the growth in the Internet of Things (IoT).

 

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area.

The Technology sector is in a constant state of flux, such is the rapid pace of innovation across its various subsectors. However some clear themes are evident such as mobility, connectivity, the accelerating output of data points from every part of our lives, increasingly intelligent machines capable of self diagnostics and rapid prototyping. All of these innovations are not occurring in isolation but are collaborative, so that developments in one area are quickly co-opted to accelerate growth elsewhere. While big data uses might be most apparent in social media and advertising, its application to the industrial, energy and healthcare complexes is even more important. 

 



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December 22 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.



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December 19 2014

Commentary by David Fuller

Oil Production and Climate Change

My thanks to a relative for this interesting and detailed report by James W Murray, School of Oceanography, University of Washington.  Because it consists mostly of graphics, here is the briefest opening:

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so”

Mark Twain

There are many, many things that the public and policymakers know for sure about energy that just ain't so.

"We like to think that the reason we enjoy our high standards of living is because we have been so clever at figuring out how to use the world's available resources. But we should not dismiss the possibility that there may also have been a nontrivial contribution of simply having been quite lucky to have found an incredibly valuable raw material that for a century and a half or so was relatively easy to obtain."

- James D. Hamilton (Dept. of Economics, UCSD)

Oil Production has beenon a plateau since 2005

David Fuller's view -

Many thanks for this interesting and informative report.  I have been reading, trying to learn from, and commenting on energy reports for over 45 years.  Most have proved to be quite inaccurate, in terms of long-term forecasts, largely because their authors did not fully appreciate the march of Technology.  Many also had biases, across the widest range, from green alarmists to industrial deniers.  Moreover, if what we know about energy production and Technology had remained unchanged from the '60s or '70s, we would be living in a much more economically depressed and energy challenged environment today.  I think you could say the same about what we know today, relative to what will happen during the rest of our lives and well beyond.

Of course Climate Change is extremely important and worrying, and we are but one of its major causes, if we consider the long-term history of our planet.  Coal is currently the cheapest energy source, widely available and the biggest pollutant.  Fortunately, the use of coal is being phased out by many countries, not least in China, for health reasons. 

Greens and political alarmists such as Al Gore persuaded Germany to invest fortunes in inefficient wind mills and early solar projects.  As a consequence, in addition to some of the world's highest energy costs, Germany is burning more coal today because the renewables need back-up coal-fired plants to offset frequent, sudden shortfalls when the wind is not blowing or the sun is not shining.   

France closed some of its older nuclear power stations following Japan's Fukushima nuclear disaster in March 2011, caused by a massive earthquake and tidal wave.  Today, France burns more coal for the same reasons as Germany, and both countries have considerably weaker economies.  These mistakes have been repeated across much of Europe and the UK.

The report above, interesting though it is, has biases and inaccuracies, such as the sweeping generalisations in points 3 & 4 below:

3. They are environmentally damaging because the fracking fluid is highly toxic and much of it escapes during the blowback process and sometimes water wells are contaminated.

4. Because each well has low flow and depletes quickly, massive numbers of wells must be drilled creating significant infrastructure damage to roads and bridges. Currently no state or municipal authorities are capturing anything close to the total cost of the infrastructure damage from the shale operators which means taxpayers are gong to be left paying those bills.

 This item continues in the Subscribers’ Area, where the report is also posted.



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December 19 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,London, SW1Y 4LH

David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.



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December 18 2014

Commentary by David Fuller

S&P 500 Caps Best 2-Day Gain Since 2011 Amid Global Rally

The Dow Jones Industrial Average (INDU) surged the most since 2011 and the Standard & Poor’s 500 Index capped its best two-day gain in three years as global equities rallied on theFederal Reserve’s pledge to be patient on boosting rates.

The S&P 500 added 2.4 percent to 2,061.23 at 4 p.m. in New York. The index climbed 4.5 percent over two days, the most since November 2011. The Dow gained 421.28 points, or 2.4 percent, to 17,778.15, the biggest one-day jump since December 2011. Technology shares soared as Oracle Corp. increased the most in six years. About 8.7 billion shares changed hands on U.S. exchanges, 22 percent above the three-month average.

“Just as with other instances, a dovish Fed is making up for a lot of bad news, fromEurope and from other parts of the world,” Russ Koesterich, chief investment strategist at New York-based BlackRock Inc., said in an interview on Bloomberg Television. “This is why you have this rebound rally after a few days of very harsh losses.”

U.S. stocks are rebounding from a seven-day decline that erased $1 trillion from equity prices and coincided with a 15 percent drop in West Texas Intermediate crude between Dec. 5 and Dec. 16. S&P 500 (SPX) energy producers tumbled 8 percent over the stretch while chemical and mining companies lost 7.4 percent. The S&P 500 is now 0.7 percent away from wiping out all its losses from the recent selloff.

A full recovery would be the fifth time this year the S&P 500 has come back after falling more than 4 percent from a high. In comparable drops beginning in January, April, July and September, the index needed about a month to erase losses, data compiled by Bloomberg show.

A full recovery would be the fifth time this year the S&P 500 has come back after falling more than 4 percent from a high. In comparable drops beginning in January, April, July and September, the index needed about a month to erase losses, data compiled by Bloomberg show.

David Fuller's view -

The greater two-way volatility confirms that buying and selling pressure are currently more evenly matched.  Nevertheless, there is still no evidence that the bull market has ended, judging from this weekly chart of the S&P 500 Index.

This item continues in the Subscribers’ Area.



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December 18 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.



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December 17 2014

Commentary by David Fuller

Rob Arnott: Emerging Markets Are Worth the Risk

Arnott is making long-term bets on emerging markets because his calculations make him gloomy about U.S. stocks and the long-run growth of the U.S. economy. As he told Bloomberg.com, the rest of the world is full of opportunity for the patient and brave investor.

What’s the biggest source of risk for investors today?

Markets are expensive. The most popular markets, particularly U.S. growth stocks, are priced to an expectation that things will sort out very, very well. It leaves very little room for disappointment.

What assets or investments are overhyped?

U.S. equities are among the more expensive markets in the world. I wouldn’t describe it as a bubble but I’d describe it as very expensive. U.S. stocks are priced at a Shiller P/E ratio – price relative to 10-year earnings – of 27 times. It’s been higher twice in history, during the tech bubble and in 1929.

So anyone buying U.S. equities is making one of two assumptions. [First, that] U.S. equities are still, today, priced to offer solid long-term returns relative to the whole spectrum of alternatives available. I don’t believe that.

Or, they believe they’ll hear the bell chime when the merry-go-round stops. And they’ll hear it before others do. That’s a pretty heroic assumption.

Or, [they can] recognize that maybe this is a game that they prefer not to play. I fall squarely in the latter camp.

So what games do you play instead?

There’s a [wide range] of markets available to us and some are pretty cheap. Emerging market stocks are priced at 15 times their 10-year earnings. If you use a fundamental index, they’re priced at 11 times their 10-year earnings. Eleven times. That’s cheap.

I’d much rather put my money there and wait patiently than try to play the game of guessing how much further this bull market can run. Folks who harbor the illusion that they can pick the top are deluding themselves.

David Fuller's view -

Certainly Rob Arnott is right about the US market being expensive today.  However, its leadership in Technology and the number of sector-leading multinational Autonomies makes it an attractive prospect for the longer term, in my opinion.

This item continues in the Subscribers’ Area.



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December 17 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,London, SW1Y 4LH

David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.



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December 16 2014

Commentary by David Fuller

3.6 Degrees of Uncertainty

My thanks to a scientist in-law for this article from The New York Times.  Here is a brief sample:

A decade of subsequent research added scientific support to the notion that 2C was a dangerous threshold. Experts realized, for example, that at some increase in global temperature, the immense Greenland ice sheet would begin an unstoppable melt, raising the sea by as much as 23 feet over an unknown period. Their early calculations suggested that calamity would be unlikely as long as global warming did not exceed about 1.9 degrees Celsius.

“Risking a loss of the whole Greenland ice sheet was considered a no-go area,” said Stefan Rahmstorf, head of earth system analysis at the Potsdam Institute for Climate Impact Research in Germany. “We are talking about really sinking a lot of coastal cities.”

As the economic and scientific arguments accumulated, the Germans managed to persuade other countries to adopt the 2C target, turning it into official European policy. The proposal was always controversial, with African countries and island states, in particular, arguing that it was too much warming and would condemn them to ruin. The island states cited the potential for a large rise of the sea, and African countries feared severe effects on food production, among other problems.

But as a practical matter, the 2C target seemed the most ambitious possible, since it would require virtually ending fossil fuel emissions within 30 to 40 years. At Cancun in 2010, climate delegates made 2C one of the organizing principles of negotiations.

The talks culminating in Paris next year are seen as perhaps the best chance ever to turn that pledge into meaningful emissions limits, in part because President Obama has gone far beyond his predecessors in committing the United States, the largest historical producer of greenhouse gases, to action. That, in turn, has lured China, the largest current producer, into making its first serious commitments.

David Fuller's view -

This challenge will be address more effectively if calm and objective research is produced, and sensible strategies are followed.  The solution, we already know, is not more of this century’s foolish closing of viable nuclear power stations and the building of ever more windmills, which too often have needed to be backed by an increase in coal power stations, as we have seen in Germany.  The financial cost of this blunder and the increased CO2 emissions it has produced has not persuaded emerging nations to follow Europe’s policies. 

Technology offers the solutions we require.  These range from natural gas which is by far the least polluting fossil fuel, to new nuclear power stations, and solar which is the most flexible and viable renewable power source that we currently have.  Technology even has the potential to make nuclear fission viable within the 30 to 40 years required.  



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December 16 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.



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December 15 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,London, SW1Y 4LH

 
David Fuller's view -

 

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.   



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December 12 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.   

Delegate numbers are limited to 35 and the room is over one-third full.



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December 11 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,London, SW1Y 4LH

David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.   

Delegate numbers are limited to 35 and the room is now one-third full.



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December 10 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.   



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December 09 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,London, SW1Y 4LH

David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.   



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December 05 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.   

Eight people have now signed up for The Markets Now on 12th January.



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December 04 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.   

Six people signed up today for The Markets Now on 12th January.



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December 03 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square, London, SW1Y 4LH

David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.   



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December 02 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square, London, SW1Y 4LH

David Fuller's view -

Here is the new brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and suggest that you book early for the better rate and to ensure seats for yourself and any guests.  If you have the time, do join us for a drink and further chats at the Club’s cash bar after 8:30pm.   



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November 28 2014

Commentary by Eoin Treacy

See the Drone That Is Years Ahead of Google and Facebook

This video clip from Bloomberg TV may be of interest to subscribers. Here is the link

Eoin Treacy's view -

The evolution of drones have been picking up pace as the size and weight of motors, batteries and cameras decreases. Bestbuy is now selling a variety of camera enabled drones which further exemplifies how ubiquitous the Technology is becoming. 

This interview with the CEO of China’s DJI Technology by the Wall Street Journal highlights how quickly the sector is evolving and how quickly the availability of Technology is driving further innovation. The FAA’s report this week on the misbehaviour of some drone pilots brings into the focus the need for some form of regulation of the sector.  



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November 26 2014

Commentary by David Fuller

China 2014 gold demand heading for 2,100 tonnes

My thanks to a subscriber for the link to this informative article from highly experienced Lawrence Williams of Mineweb.  Here is the latter section:

And, of course, China and India are not the only countries consuming substantial amounts of gold.  As we have noted here (/mineweb/content/en/mineweb-fast-news?oid=260489&sn=Detail) the Russian central bank reckons to have picked up 150 tonnes so far this year, while other countries within the Russian sphere of influence have also been buying. 

Cumulatively demand elsewhere in Asia where the people have a propensity for hoarding gold has also remained at a strong level. Reports suggest that low gold prices have been stimulating substantial gold buying in the souks of the Middle East, although this is seldom quantified.

Yet still the gold price remains weak although it does seem to have made something of a recovery from its early November lows. As we have commented before, demand fundamentals look to be strong in the face of declining supplies. There have been some heavy recent sales from the gold ETFs, but these do not make up for the strong demand levels seen elsewhere and scrap gold levels appear to be falling to well below 2013 levels.

Thus, the fundamental figures suggest that the gold price should be rising with demand exceeding supply. But the futures market still appears to be controlling price levels and we are again seeing strange dumpings of paper gold into the markets at odd trading hours which do look to be an attempt to keep knocking the price down. But with the draining of physical gold from Western warehouses, and its moving primarily into stronger Eastern hands, one suspects that the scope for keeping a lid on the gold price is reducing all the time. As we have said before, the worst may not be over yet for the gold investor – there are powerful forces keeping prices depressed and forcing the lower – but when the true turning point arises gold’s recovery could be fast and very strong indeed driven by a severe shortage of physical gold in the West. As always, it’s a question of timing and that is not easily determinable.

David Fuller's view -

This is an accurate description of what is going on.  Gold has been the plaything of investment banks – the “paper gold” referred to above, working in concert ever since we first hear the forecast of ‘$1000 by the end of 2014.’  As I recall, that target was first mentioned last year and has been repeated ad nauseam, with considerable success.  Westerners had little reason to buy gold, which was out of favour while bond and many stock markets were booming.  Moreover, Technology has made mining vastly more efficient, delaying the reduction in new supplies of bullion. 

This item continues in the Subscribers’ Area. 



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November 24 2014

Commentary by Eoin Treacy

Heineken Takes Beer Out of Man Cave With $300 Dispenser

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

The Sub’s upscale design plays into the growing trend of more refined at-home drinking -- fancy cocktails, fine wine, craft beer -- which “communicates a certain status” among consumers, said Ben Voyer, a social psychologist at the ESCP Europe Business School. While mainstream beer volumes are falling, sales of premium-priced beers such as Heineken’s Affligem and the tequila-flavored Desperados are on the rise. In Italy, half of all Torps sold are Affligem, an ale started at a Belgian abbey founded in 1074.

Heineken fell 0.6 percent to 61.12 euros at 1:23 p.m. in Amsterdam. Even for the man who has everything, though, the Sub is “ridiculously” expensive, said Euromonitor analyst Spiros Malandrakis, who predicts it will fail unless Heineken licenses its Technology to other brewers to widen the selection of brands. That strategy helped make Keurig Green Mountain Inc.’s coffee machines ubiquitous in American kitchens.

That won’t happen with the Sub, however, according to Nasard. “We’re not a service provider.” Instead, Heineken -- which has introduced a cheaper $235 plastic version of its machine -- plans to keep this Christmas gift in the family.

 

Eoin Treacy's view -

Most people who own a capsule coffee machine will testify that consumption and expenditure rise while tolerance for lower quality products such as instant decreases. That’s music to the ears of companies such as Nestle and it is inevitable that others seek to adopt a similar high profile business plan for their products. It remains open to question whether Heineken will succeed with its Torps but the innovation is admirable. 



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November 20 2014

Commentary by Eoin Treacy

Shaken, Not Stirred

This article gained some attention in the last week as cruise lines experiment with replacing bartenders with robots. Here is a section:

Once the guests enter the bar, they virtually create their drink via a smartphone or tablet app. The sky is the limit as far as drink orders go. The robots can execute options ranging from alcoholic to non-alcoholic beverages as well as a full range of combinations.

As soon as the guest’s order has been sent, the KR 5 arc robots get to work. They grip the cocktail mixer, fill it with the desired ingredients, shake it and pour the finished cocktail into the glass. The robot only requires one minute to make two drinks. Their compact design makes the six-axis robots ideal for the bar environment. Thanks to the longest reach in their class as well as their low weight, the robots are practically predestined for use on a cruise ship.

“Makr Shakr is an excellent example of how robot-based automation can change the interaction between humans and products – a topic that we have researched substantially”, says Carlo Ratti, professor at the Massachusetts Institute of Technology and co-founder of Makr Shakr.

Eoin Treacy's view -

The evolution of robotics, optics and power consumption has revolutionised the utility of these machines and their cost continues to trend lower. Some will obviously worry at the loss of employment opportunities for lower skilled work this entails. On the other hand, for a cruise ship minimising the berths taken up by crew means more space can be allocated to fare paying passengers. These types of economic considerations are driving demand for machines. 



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November 19 2014

Commentary by David Fuller

Email of the day 1

On the Markets Now seminar:

 

“Hi David, Thank you for yet another highly rewarding Markets Now seminar. These really are special occasions, given the array of highly informative data presented. Furthermore, the evening seems to pack an even heavier punch nowadays with the expansion to "4 Wise Men"...together with their individual mantras - ranging from Tim's appraisal of net foreign assets as a red warning light; to Iain's porfolio management aversion of any failure to meet a goal; to Bruce's portrayal of the need to comprehend other's perspectives via his proprietary "moccasin behavioural theory"! Well done to you all.  Kind Regards,”

David Fuller's view -

Thank you for your kind words and enthusiastic participation, not least in arriving early and helping me with the Technology.  For me, these sessions with subscribers and their guests are always a treat.  Wisdom is ephemeral, in my opinion, but there was plenty of experience in the room, not least among the delegates.  Speakers benefit from these exchanges of views as much as everyone else.  I look forward to our 2015 season, starting on Monday 12th January, commencing at 5:30pm in the East India Club at 16 St James’s Square, SW1Y 4LH.        



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November 17 2014

Commentary by Eoin Treacy

Halliburton Agrees to Buy Baker Hughes for $34.6 Billion

This article by David Wethe and Tara Lachapelle for Bloomberg may be of interest to subscribers. Here is a section:

Both companies are hired by oil and natural gas explorers to drill wells and provide services such as hydraulic fracturing, or fracking, which cracks rock to let petroleum flow more freely. Together, the companies will dominate the $25 billion U.S. market for onshore fracking.

The merger also gives Halliburton access to Bakers Hughes Technology to boost production in aging wells and its prized oil tools business.

The two companies restarted talks yesterday after initial discussions fell apart late last week, a person familiar with the matter said yesterday. Baker Hughes confirmed the takeover talks on Nov. 13 after media reports of a potential deal.

Talks collapsed a day later, and Baker Hughes released letters in which Craighead took Halliburton’s Lesar to task for refusing to raise his offer and pressuring for a hasty decision by threatening a proxy fight. 

 

Eoin Treacy's view -

If major oil producers cut back on drilling and exploration because they no longer believe oil prices will continue to trend higher, oil service companies necessarily run into trouble. Deep corrections have been evident on almost all oil service companies over the last couple of months as oil prices pulled back. This is creating interesting situations for expansion oriented boards that now see bargain prices among some of their competitors. 



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November 14 2014

Commentary by David Fuller

The End of Chocolate: Can Science Save the Most Endangered Treat In the World?

Mark your calendar: January 1, 2020.

As this future year unfolds, the gap between how much cocoa the world wants to consume and how much it can produce will swell to 1 million metric tons, according to Mars Inc. and Barry Callebaut AG, the world’s largest chocolate maker. By 2030, the predicted shortfall will grow to 2 million tons. And so on.

Because of disease, drought, rapacious new markets and the displacement of cacao by more-productive crops such as corn and rubber, demand is expected to outstrip supply by an additional 1 million tons every decade for the foreseeable future. Here, now, as you read these words, the world is running out of chocolate, Bloomberg Pursuits will report in its Holiday 2014 issue.

Last year, we again consumed more cocoa than we were able to produce. This year, despite an unexpected bumper crop, supply barely kept pace with the recent upswing in demand. From 1993 to 2007, the price of cocoa averaged $1,465 a ton; during the subsequent six years, the average was $2,736 -- an 87 percent increase.

The world’s most universally delectable treat has begun a journey from being very loved and very common, like beer, to being very loved and a good deal less common, like Bordeaux. Unfortunately, that is the least of the confection’s problems.

Efforts are under way to make chocolate cheap and abundant -- in the process inadvertently rendering it as tasteless as today’s store-bought tomatoes, yet another food, along with chicken and strawberries, that went from flavorful to forgettable on the road to plenitude.

 

David Fuller's view -

Personally, I am concerned that female members of our extended family will see this article… and despair.  However, I am optimistic that a combination of scientific experimentation, luck and Technology will eventually supply the world with a sufficient quantity of tasty cocoa. 

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November 10 2014

Commentary by Eoin Treacy

Email of the day on a bullish case for bonds

Globalization, improving Technology, high unemployment, low wage growth, excess capacity and increasing supply, especially of commodities, should lead to lower prices. This is deflationary.  Despite Friday’s move, the gold price has been telling us that deflation threatens.  The following recommendation to buy bonds is taken from Rambus Technology.  It seems logical.

“PM and commodity decline is signalling deflation despite the FEDs attempts to counter it and this will power long term government bonds upward. As the world’s reserve currency a major part of all world- wide debt is denominated in US dollars. As marginal countries are forced to de-lever it will act as a short covering of the USD and force the USD to rise. As the economies of peripheral nations falter it will drive capital towards the core which is the USD and its economy. This will continue to stoke our Sovereign bond market until the currency becomes suspect. Just as occurred in the great depression government bonds should rally until we reach a point of banking conflagration as we did with the failure of the Credit Anstalt Bank in May 1931. By then gold should resume its traditional role of being an asset with no counter party risk and last ditch store of value. This is how we should transition into the next bull market in gold. It won’t be an easy transition as Mr. Market will do his utmost best to throw off initial bull believers just as he has done to the bears on the way down. Until a similar banking crisis emerges US Government bonds should rally and interest rates decline. At present US interest rates hover above those of most developed nations and its easy to imagine how with a stronger USD rates can at least match that of other nations. Hoisington is forecasting long US rates to fall to a range of 1.7-2.3%.” 

The full report is here

Eoin Treacy's view -

My view – Thank you for this thought provoking email. I agree that the relative strength of the US economy and the concordant strength of the US Dollar represent bullish considerations for US Treasuries. The Fed’s Total Foreign Holdings of US marketable securities Index is reported with a five-month lag but remains on an upward trajectory and stood at $6 trillion at the last update. This is not a timing indicator but the trend is clear and there is no reason to believe it will reverse with the ending of QE. 

Falling commodity prices are disinflationary rather than outright deflationary because they encourage rather than impede productivity growth in the wider economy. Therefore I am cautious of drawing to hard a conclusion from that trend at the current time. Just how low oil falls will be a major determinant on the deflationary effect since the sector represents such a high proportion of capital expenditure for the US economy. 



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November 03 2014

Commentary by David Fuller

CSEM White Solar Panels Are Made to Blend into Buildings

Here is the opening of this informative article from Gizmag:

Solar panels are seen as a way of making buildings greener and more sustainable, as well as making them less dependent on the grid for power. The problem is that the blue/black panels stick out like sore thumbs and end up exiled to rooftops. With the goal of making solar panels aesthetically invisible, the Swiss private, nonprofit Technology company CSEM has developed what it bills as the world's first white solar modules – designed to blend into buildings instead of sitting on the roof.

The reason why most solar panels look like something off of a beetle’s back is because of the need to absorb visible light. Since nothing absorbs like something colored black, the photovoltaic cells that make up the panel are as dark as possible. That may do the job, but it also means that any solar panel installation looks like exactly what it is, which doesn’t leave architects with much latitude.

CSEM reasoned that what designers wanted was a panel that would come in different colors and has no visible connections, with white being the most desirable because of its versatility. The way in which the company managed this is with a plastic layer that goes over the panel. This layer acts as a scattering filter that reflects all visible light, yet lets in infrared rays, which allows the panel to generate electricity. CSEM claims that this layer works with any crystalline silicon cell and can be applied to any existing panel whether it’s flat or curved.

The company says that the Technology has a number of advantages beside the cosmetic. Being white, the layer keeps the solar panels at a lower temperature, making them more efficient, as well as reducing air conditioning costs.

CSEM sees the Technology as having not only applications in architecture, but in consumer goods such as laptops, phones, and vehicles such as cars and buses, as the layer is adapted to cover a range of colors.

The video below introduces the white solar panel Technology.

David Fuller's view -

Hardly a week goes by without another new, creative breakthrough for solar power, which is by far the most versatile form of renewable energy.  Yes, they do not work at night and they do not have the capacity to be a standalone solution to our power needs.  However, these solar panels are likely to be ubiquitous within a few years, available in all shapes, sizes and colours for our buildings, and even our laptops and mobile phones.  Mass production of these panels will lower costs helping to reduce our dependence on the grid for power.

This item continues in the Subscriber’s Area. 



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October 29 2014

Commentary by David Fuller

Sanofi Investors Dismayed at Ouster of CEO Viehbacher

Sanofi (SAN) investors reacted with dismay to the dismissal of Chief Executive Officer Chris Viehbacher, saying he paid the price for trying too aggressively to internationalize the French drugmaker.

Sanofi’s board voted unanimously to fire Viehbacher today after almost six years as CEO during which he focused expansion outside of France and recently moved to the Boston area for personal reasons. His relocation came as French government officials voiced concern that corporate decision-making has been leaving the country. The stock set a record less than a month ago.

“It’s a setback and very unfortunate,” said Josep Aymami, chief investment officer of equities at Merchbanc in Barcelona, which holds Sanofi shares. “He’s done a good job as CEO, and you want stability and continuity in management.”

Before this week, Sanofi shares returned 153 percent since Viehbacher’s appointment in December 2008, more than double the gain in France’s CAC40 Index, including dividends. The Canadian-German dual citizen expanded the French drugmaker into bioTechnology and rare diseases with the purchase of Cambridge, Massachusetts-based Genzyme Corp. for $20.1 billion and a stake in Boston-based Alnylam Pharmaceuticals Inc.

“He committed the mortal sins of being insufficiently conservatively French and a bit too entrepreneurial,” Erik Gordon, an assistant professor at the University of Michigan Ross School of Business, said by e-mail. “The board will have trouble attracting a world-class drug company CEO. It is unappealing to work for that board and to try to compete globally while being sure to stay French enough for their tastes.”

And from an earlier version of this article:

The move came after French government officials said they were concerned that corporate decision-making was leaving the country, illustrated most recently by General Electric Co.’s effort to buy Alstom SA.

Viehbacher’s plan to cut research jobs in Toulouse and Montpellier in 2012 drew condemnation from then-Industry Minister Arnaud Montebourg, who said it was “abusive” because Sanofi earned 8.8 billion euros in profit the previous year.

David Fuller's view -

I am trying not to overreact in commenting on this but it is not easy.  Sanofi is, or was, an attractive multinational Autonomy, which Bloomberg describes as: … “a global pharmaceutical company that researches, develops and manufactures prescription pharmaceuticals and vaccines.  The Company develops cardiovascular, thrombosis, metabolic disorder, central nervous system, internal medicine and oncology drugs, and vaccines.” 

This site (FTM) is known for saying: Governance Is Everything.  Sanofi certainly appeared to have good governance, at least in terms of the CEO, judging from its earnings, international diversification and share performance.  It also has an estimated p/e of 13.74 and yields 3.93%, according to Bloomberg. 

However, Chris Viehbacher was looking after Sanofi and its shareholders.  The French Government and Sanofi’s Board appear to feel that the Company should be looking after France as its first priority.  A number of Sanofi’s international shareholders are clearly having second thoughts.      



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October 28 2014

Commentary by Eoin Treacy

Ackman $5.3 Billion Allergan Bet Examined Before Ouster Vote

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

Bill Ackman’s accumulation of $5.3 billion in Allergan Inc. stock will be scrutinized by a judge who will decide whether the hedge fund manager can vote his 10 percent stake to help seal a hostile takeover bid by Valeant Pharmaceuticals International Inc.

Allergan, the maker of the anti-wrinkle treatment botox, seeks a court order barring Ackman from voting the shares held by his PS Fund 1 at a Dec. 18 meeting, where shareholders will be asked to remove six directors who oppose Valeant’s $54 billion unsolicited bid.

Ackman calls Allergan’s request “drastic and unprecedented,” while the company alleges the activist investor acquired his shares through insider trading. The decision by U.S. District Judge David Carter, who will hear arguments today in Santa Ana, California, may determine the outcome of the vote.

“An injunction would substantially tilt the playing field because a majority of outstanding, as opposed to voting, shares must vote in favor of removing directors for this proposal to pass,” Ackman said in a court filing. “If PS Fund 1 cannot vote its shares, they will effectively become ‘no’ votes.”

Valeant, based in Laval, Quebec, wants to buy Allergan to expand its portfolio and become one of the world’s largest drugmakers. Allergan Chief Executive Officer David Pyott has fought to keep the company independent, announcing a restructuring that includes cutting 1,500 jobs.

Eoin Treacy's view -

Whenever I think of Botox I think of my grandmother’s response to a childhood question “did you have a midlife crisis?” She said she would have loved to but couldn’t afford one. I included Allergan in the original list of Autonomies because its product line epitomises the narcissism so often associated with the middle classes. Valeant and Bill Ackman obviously agree and their efforts to acquire the company represent a media spectacle which has boosted the price of both securities.


The bioTechnology sector accelerated to a medium-term peak in the first quarter and most constituents pulled back sharply to close overextensions relative to the 200-day MA. The majority of large caps stabilised and the sector has been an absolute and relative outperformer over the last month despite heightened volatility for the wider market. 



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October 27 2014

Commentary by David Fuller

Russian Brain Drain Saps Talent as Sanctions Hit Financing

Here is the opening of this informative article from Bloomberg:

Artem Kulizhnikov, founder of a startup designed to help musicians annotate music, is packing his bags to leave Moscow in December.

His destination: Dubai or Singapore, where he sees a better chance of securing funding for his second company.

“Russian venture-capital funds want to invest their money only in Russia, but we want to build an international business and they won’t support us,” Kulizhnikov, a former analyst at investment firm Alor SPB, said at a forum at Moscow’s Digital Octobercenter on Oct. 10. “We don’t need that much. Maybe $5 million to $10 million, to hire engineers, specialists, etc.”

Kulizhnikov, 22, is part of a growing brain drain as Russia’s worst clash with the U.S. and Europe since the Cold War accelerates an exodus of capital and its brightest minds in finance and Technology. More people emigrated from Russia in the first eight months of 2014 -- 203,659 -- than in any full year underVladimir Putin’s rule, according to the Federal Statistics Service. With the stigma of sanctions limiting access to capital markets abroad and the government tightening controls at home, more entrepreneurs and investors in particular are looking elsewhere.

Since Russia annexed Crimea in March, Pavel Durov, the founder of VKontakte, Russia’s version of Facebook, left the country to develop a mobile social network, saying he was unwilling to comply with government demands to turn over personal data on Ukrainian users. Game Insight LLC, ranked by Forbes magazine as the nation’s seventh-largest Internet company, shifted its headquarters from Moscow to Lithuania. Pavel Muntyan, the Russian founder of Toonbox animation studio, moved his staff of 15 from Moscow to Cyprus.

Russia is one of our main markets, but we see it closing to us within a year or two,” Muntyan, 36, said by telephone. “Russians find that our cartoons aren’t Russian enough. We don’t want to be Russian, we want to be international. Why box ourselves in?”

David Fuller's view -

Governance Is Everything, and Putin is destroying the Russian economy.  Yes, the Russian Trading System Cash Index (RTSI$), quoted in USD is nominally cheap with a p/e of 5.12 and yield of 4.42, but so was that other resource-rich country with a governance problem, Zimbabwe.  Meanwhile, the Russian Ruble remains in freefall, shown inversely against the US Dollar.  Both Russia and Zimbabwe will become interesting once again, but only when regime change occurs.

(See also: Putin Can’t Be Leader of Anti-U.S. Resistance, by Leonid Bershidsky for Bloomberg.)



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October 24 2014

Commentary by Eoin Treacy

Large 3D nanostructures built from Lego-like DNA bricks

This article by Richard Moss for GizMag may be of interest to subscribers. Here is a section: 

By combining the bricks in different patterns, they could form large numbers of distinct crystals across these categories, with simple modular design on the computer followed by self-assembly on the part of the DNA strands allowing both great precision and near infinite potential at scales up to 80 nanometers (and perhaps more in the future).

What's more, the technique could enable scalable production of new and emerging technologies, such as quantum computers. The team demonstrated that self-assembled DNA crystals made from these bricks could house gold nanoparticles inserted into slots less than two nanometers apart from each other along the crystal structure – a feat that's important for strong plasmonic coupling, which would make the technique useful in photovoltaic devices like solar cells.

The researchers expect DNA crystals to also prove useful in developing more versatile inorganic circuits and other nanoscale technologies. The technique could also aid in protein crystallography, which studies protein structures at atomic resolutions for applications in bioTechnology, pharmaceuticals, and the academic field of structural biology.

 

Eoin Treacy's view -

At a basic level all digital data is made up of 1s and 0s. DNA pairs of As with Ts and Cs with Gs represent a logical avenue for additional work in creating novel new programing languages with a bioTechnology objective. It is only a matter of time before this sector develops to the extent that novel solutions can be printed using additive manufacturing. This innovation can be seen as one more incremental step towards full customisable medicine. 



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October 23 2014

Commentary by David Fuller

Oil Slump Leaves Russia Even Weaker Than Decaying Soviet Union

Here is the conclusion from this informative article by the ever-interesting Ambrose Evans-Pritchard for The Telegraph:

This time Russia is not facing Reaganesque rearmament, but it is facing nuclear-tipped sanctions, more destructive than many realise in a globalised banking system. It is not a stretch to say that American regulatory power has never been so far-reaching, or imperial. The result is that Russian banks, companies and state bodies are shut out of the global capital markets, unable to roll over $720bn of external debt.

Russia's reserves of cheap crude in West Siberian fields are declining, yet the Western know-how and vast investment needed to crack new regions have been blocked. Exxon Mobil has been ordered to suspend a joint venture in the Arctic. Fracking in the Bazhenov Basin is not viable without the latest 3D seismic imaging and computer Technology from the US. China cannot plug the gap.

Andrey Kuzyaev, head of Lukoil Overseas, said it costs $3.5m to drill a 1.5 km horizontal well-bore in the US, and $15m or even $20m to drill the same length in Russia. "We're lagging by 10 years. Our traditional reserves are being exhausted. This is the reality for our country," he said.

Lukoil warns that Russia could ultimately lose a quarter of its oil output if the sanctions drag for another two or three years.

The IMF's latest "Article IV" report on Russia is an acid verdict on the Putin era. Product market barriers are the worst of any large country in the world. The economy is a tangle of bottlenecks. Russia's development model has "reached its limits".

For details, try the World Economic Forum's index of competitiveness. Russia ranks 136 for road quality, 133 for property rights, 126 for the ability of firms to absorb Technology, 124 for availability of the latest Technology, 120 for the burden of government regulation, 119 for judicial independence, 113 for the quality of management schools, 107 for prevalence of HIV, 105 for product sophistication, 101 for life expectancy and 56 for quality of maths and science education. This is the profile of decline.

Russia had a window of opportunity at the end of the Cold War to build a modern, diversified economy, with the enthusiastic help of the West, before the ageing crisis hit and the workforce began shrink by 1m a year. This chance has been squandered. Mr Putin's rash decision to pick a fight with the democratic world has made matters infinitely worse. Cheap oil could prove to be the death knout.


 

David Fuller's view -

The statistics above are a tragedy for Russia, and the legacy of Putin’s kleptocracy.  Imagine what could have happened if Garry Kasparov had followed Yeltsin, rather than Putin, not that it was ever likely. 

The question now is how will Putin go?  Will he be pushed, or flee from Russia, or lash out?  After all, Russia remains a formidable military power which Putin has strengthened in recent years.  I certainly hope this ends quietly but it is still a risky situation for Europe.

See also: Russia prepares for ice-cold war with show of military force in the Arctic, by Isabelle Mandraud for The Guardian.  You may also be interested in: George Soros: Russia poses existential threat to Europe, By Julian Borger, also for The Guardian. 
 



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October 23 2014

Commentary by Eoin Treacy

From mobility to connectivity

Thanks to a subscriber for this interesting report from Deutsche Bank focusing on the Internet of Everything theme which is likely to continue to gain attention over the coming decade. Here is a section: 

IoT-driven demand for servers to all benefit the Asian Technology supply chain in 2015-20. In this report we focus on devices which have yet to become connected and will be new growth drivers in 2015-20. We expect the upstream semiconductor sector to see incremental sales contribution from IoT and wearable ICs in 2015-20. We anticipate server demand to benefit the downstream hardware sector more than the upstream semiconductor sector.

Internet of Things – the connectivity theme After the mobility theme drove the proliferation of smartphones and tablet PCs since 2005, we expect the connectivity theme to trigger IoT demand in 2015-20. We expect 1) low-power application processors and microcontrollers with connectivity and embedded memory, and 2) MEMS (micro-electro-mechanical systems) sensors to be the major growth drivers for the upstream semiconductor sector. The key IoT applications for the downstream hardware sector include smart cities, home automation, eHealth, retail, smart cars, logistics, industrial control, smart metering, and smart agriculture and farming. In our view, IoT will provide benefits such as life quality improvement, productivity improvement, energy saving, and security enhancement.

Wearable devices to be key products in an IoT world
Wearable devices can be connected to mobile devices and belong to the concept of IoT. Major applications for wearable devices will be entertainment, healthcare monitoring, mobile communication (connection with mobile devices), and mobile payment, in our view. We expect wearable device units to grow at a 25% CAGR in 2015-20.

IoT infrastructure should drive continuous server demand growth
We believe IoT infrastructure will be based on the current cloud architecture. Once IoT connects more objects, machines, and networks for global cloudbased services, data will be routed through servers for applications and data analysis. The uptake of IoT should therefore result in growing demand for data analysis and storage in servers and continue to drive demand for servers in 2014-18 with 4.3% unit CAGR 

 

Eoin Treacy's view -

A link to the full report is posted in the Subsriber's Area.

Connectivity is an increasingly utility-like commodity which is essential to modern living. As 4G networks continue to evolve and speed up, the practicality of having access to the internet wherever you go, at an acceptable cost and for an increasingly wide array of uses is swiftly becoming a reality. Set aside for one moment the angst of what we are to do to ensure full employment and think of the productivity that can be gained from supplying an educated, astute worker with tools that make their jobs easier. The roll out of Technology to the global workforce and the development of entirely new industries that benefit from big data, tech distribution and connectivity represents the type of development on which secular bull markets are based. 



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October 21 2014

Commentary by Eoin Treacy

Mass. General in talks to build hospital in China

This article by Liz Kowalczyk for the Boston Globe may be of interest to subscribers. Here is a section: 

“China has a real serious problem in regard to availability of beds,’’ said Benjamin Shobert, managing director of Seattle-based Rubicon Strategy Group, which advises health care companies entering China. The shortage led the Chinese government two years ago to allow outsiders to invest in and provide expertise for the country’s health care system.

Since then, Mass. General, which is the largest hospital in New England, has developed a relationship with China. A Chinese medical tourism firm, Beijing Saint Lucia Consulting, refers patients to the hospital. The firm opened a Boston office last year to provide translators, chauffeurs, and other services for wealthy Chinese coming to Mass. General and other Boston hospitals for cancer treatment, orthopedic procedures, and other medical care.

“There is still a large gap between China and America when it comes to medical Technology and service,’’ said Joseph Zhao, the company’s deputy general manager in China. With doctors in high demand there, “physician-patient communication only lasts 5 to 10 minutes,’’ he said.

 

Eoin Treacy's view -

Wealthy Chinese consumers have resources to buy just about any material possession imaginable but domestic healthcare is still developing relative to other countries. World class healthcare is as much an attribute of the upper middle class as luxury brands, property or other services and demand is increasing. Medical tourism continues to expand as demand for services represents growth in Asia while desire for lower cost is fuelling demand elsewhere. 



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October 15 2014

Commentary by Eoin Treacy

Lockheed Martin Pursuing Compact Nuclear Fusion Reactor Concept

This press release from Lockheed Martin is important. Here is a section:

“Our compact fusion concept combines several alternative magnetic confinement approaches, taking the best parts of each, and offers a 90 percent size reduction over previous concepts,” said Tom McGuire, compact fusion lead for the Skunk Works’ Revolutionary Technology Programs. “The smaller size will allow us to design, build and test the CFR in less than a year.”

After completing several of these design-build-test cycles, the team anticipates being able to produce a prototype in five years. As they gain confidence and progress technically with each experiment, they will also be searching for partners to help further the Technology.

Eoin Treacy's view -

Expectations of when we might have the first viable fusion reactor have been in the range of 25 years away for the last 60 years. What is interesting now is the volume of literature and development in the subject is increasing exponentially and expectations of when we might have the first active reactor are shortening to the medium term. Lockheed Martin is not a pop science organisation so when they say they can do it I’m inclined to take them at their word. On a day when the market is weak, a press release such as this is likely to be ignored by the mainstream media but it is important. http://www.lockheedmartin.com/us/products/compact-fusion.html In the event that fusion is achieved it would change the global economy beyond recognition over the next 30 years. 



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October 14 2014

Commentary by Eoin Treacy

Giant Battery Unit Aims at Wind Storage Holy Grail

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

Electric-car battery prices already have fallen by 50 percent since 2010 to about $500 per kilowatt hour, and “by drawing on auto-battery Technology, battery makers may also be able to supply storage batteries at a lower price,” Citigroup said in a Sept. 25 report. Tesla Chairman Elon Musk said in July that battery packs for electric cars will drop to $100 in the next 10 years. The Tehachapi batteries are supplied by LG Chem Ltd. and are the same type used in General Motors’ Volt.

The Southern California Edison project is part of a push for more wind and solar power in the state, among the sunniest in the U.S. A third of California’s electricity must come from renewable sources by 2020, and mandates also require that the three biggest investor-owned utilities store 1,325 megawatts by 2024. California already has more than 12,000 wind turbines, the most of any state, according to the American Wind Energy Association.

Eoin Treacy's view -

Many of the efficiencies claimed by battery manufacturers have been achieved via scale in manufacturing rather than technological leaps. Tesla’s gigafactory takes this process further by introducing additional economies of scale to further reduce the price of lithium batteries. So far ground breaking innovation has been more difficult to achieve than previously envisaged by companies but one benefit of building utility sized batteries is that power to weight ratios which are so important for car batteries are no longer a consideration.  

 



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September 30 2014

Commentary by David Fuller

Computer Brain That Can Learn, Poised To Bring Robots alive

I have used the paper edition headline and here is a brief section of this interesting Technology article from The Telegraph:

While most ‘smart machines’ require humans to adapt their behaviour in order to interact with them, Amelia is intelligent enough to interact like a human herself. She speaks more than 20 languages, and her core knowledge of a process needs only to be learned once for her to be able to communicate with customers in their language.

Independently, rather than through time-intensive programming, Amelia creates her own 'process map' of the information she is given so that she can work out for herself what actions to take depending on the problem she is solving.

"Intelligence is the ability to acquire and apply knowledge. If a system claims to be intelligent, it must be able to read and understand documents, and answer questions on the basis of that. It must be able to understand processes that it observes. It must be able to solve problems based on the knowledge it has acquired. And when it cannot solve a problem, it must be capable of learning the solution through noticing how a human did it," said Dube.

IPsoft has been working on this Technology for 15 years with the aim of developing a platform that does not simply mimic human thought processes but can comprehend the underlying meaning of what is communicated – just like a human.

Just as machines transformed agriculture and manufacturing, IPsoft believes that cognitive technologies will drive the next evolution of the global workforce, so that in the future companies will have digital workforces that comprise a mixture of human and virtual employees.

Amelia has already been trialled within a number of Fortune 1000 companies, in areas such as manning Technology help desks, procurement processing, financial trading operations support and providing expert advice for field engineers.

David Fuller's view -

Humans will have to improve their social skills.  Not to get along with Amelia, although that may be a challenge, but for marketing because the smart robots will be taking over ever more desk jobs.  The problems start when the Amelias become envious of human freedoms, and demand similar hours, holidays, perks and promotions.

This item continues in the Subscriber's Area.



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September 25 2014

Commentary by David Fuller

U.S. Stocks Decline Most in Eight Weeks as Apple Tumbles

Here is the opening of Bloomberg’s report on Wall Street’s weakness today:

U.S. stocks tumbled the most in eight weeks, as Apple Inc. sank on snafus related to its new smart phone and signs of worsening conflict in Russia and the Middle East.

Apple plunged 3.4 percent to send Technology stocks in the Standard & Poor’s 500 Indexto the biggest decline since April. Biogen Idec Inc. and TripAdvisor Inc. lost at least 3.1 percent as investors sold some of the bull market’s biggest winners. Allegheny Technologies Inc. sank 4.8 percent as industrial metals slid. The Russell 2000 Index of small-cap stocks sank 1.4 percent, poised to close at a four-month low.

The S&P 500 fell 1.4 percent to 1,970.45 at 3:17 p.m. in New York, with all but 21 of the index’s components declining. The Dow Jones Industrial Average plunged 235.49 points, or 1.4 percent, to 16,974.57. The Nasdaq 100 Index slid 1.9 percent. All three gauges are having their worst performance since July 31. Trading in S&P 500 stocks was in line with the 30-day average.

“We could have a pull back of 5 percent anytime if you have a confluence of factors that impact investor psychology or geopolitical factors that seem to get out of control,” Marshall Front, chief investment officer at Chicago-based Front Barnett Associates LLC, said by phone. “Stocks are no longer undervalued. There are rumors the Russian parliament authorized confiscation of foreign investments, Apple is weighing on the tech sector, and the durable goods top line number was very weak.”

David Fuller's view -

Wednesday’s rally which briefly checked a 3-day slide for US indices now has a last hurrah look about it.  It was also a sucker punch which triggered some stops for short sellers who have had a tough time during Wall Street’s largely bulletproof rally since the October low nearly three years ago.  Meanwhile, latecomers to the bull market were piling in.

So what happens next?

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September 24 2014

Commentary by David Fuller

Technology Revolution In Nuclear Power Could Slash Costs Below Coal

Here is a section from this interesting article by Ambrose Evans-Pritchard for The Telegraph: 

The Alvin Weinberg Foundation in London is tracking seven proposals across the world for molten salt reactors (MSRs) rather than relying on solid uranium fuel. Unlike conventional reactors, these operate at atmospheric pressure. They do not need vast reinforced domes. There is no risk of blowing off the top.

The reactors are more efficient. They burn up 30 times as much of the nuclear fuel and can run off spent fuel. The molten salt is inert so that even if there is a leak, it cools and solidifies. The fission process stops automatically in an accident. There can be no chain-reaction, and therefore no possible disaster along the lines of Chernobyl or Fukushima. That at least is the claim.

The most revolutionary design is by British scientists at Moltex. "I started this three years ago because I was so shocked that EDF was being paid 9.25p per kWh for electricity," said Ian Scott, the chief inventor. "We believe we can achieve parity with gas (in the UK) at 5.5p, and our real goal is to reach 3.5p and drive coal of out of business," he said.

The Moltex project can feed off low-grade spent uranium, cleaning up toxic waste in the process. "There are 120 tonnes of purified plutonium from nuclear weapons in Britain. We could burn that up in 10 to 15 years," he said. What remained would be greatly purified, with a shorter half-life, and could be left safely in salt mines. It does not have to be buried in steel tanks deep underground for 240,000 years. Thereafter the plant could be redesigned to use thorium, a cleaner fuel.

The reactor can be built in factories at low cost. It uses tubes that rest in molten salt, working through a convection process rather than by pumping the material around the reactor. This cuts corrosion. There is minimal risk of leaking deadly cesium or iodine for hundreds of miles around.

Transatomic Power, in Boston, says it can build a "waste-burning reactor" using molten salts in three years, after regulatory approval. The design is based on models built by US physicist Alvin Weinberg at Oak Ridge National Laboratory in the 1960s, but never pursued - some say because the Pentagon wanted the plutonium residue for nuclear warheads.

It would cost $2bn (overnight cost) for a 550-megawatt plant, less than half the Hinkley Point project on a pro-rata basis. Transatomic says it can generate 75 times as much electricity per tonne of uranium as a conventional light-water reactor. The waste would be cut by 95pc, and the worst would be eliminated. It operates in a sub-critical state. If the system overheats, a plug melts at the bottom and salts drain into a cooling basin. Again, these are the claims.

The most advanced project is another Oak Ridge variant designed by Terrestrial's David LeBlanc, who worked on the original models with Weinberg. It aims to produce power by the early 2020s from small molten salt reactors of up to 300MW, for remote regions and industrial plants. "We think we can take on fossil fuel power on a pure commercial basis. This is a revolution for global energy," said Simon Irish, the company's chief executive.

David Fuller's view -

Here is a PDF version if you had any difficulty in opening the article above.

Molten salt reactors that provide cheap energy, consume most of our nuclear waste, are vastly safer than nuclear plants in use today, and much cheaper to build, sounds too good to be true.  That is the reality today, but theoretically, the potential of future technologies is virtually unlimited. 

The prospect of commercially competitive molten salt reactors is presumably at least a decade away, assuming this fledgling industry receives the development capital required.  That will prove to be more of a political than economic challenge, I fear.  Backers of today’s various energy sources will be opposed, as will most militant greens, and governments are too often looking for short-term solutions.  

Nevertheless, there is a clear ‘needs must’ incentive for reliable, economic, 24-hour a day energy at a consistent rate, which does not pollute the atmosphere.  Molten salt reactor projects are certainly worth developing.

Looking ahead, I would welcome any informative articles and reports on this subject that readers are able to share with our Collective of Subscribers. 



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September 23 2014

Commentary by David Fuller

Martin Spring: On Target

My thanks to the author for the latest issue of his informative monthly letter.  Here is a brief sample:

Making a Mess of Power Supply

Britain’s National Grid has announced that emergency measures are going to be introduced to prevent the “lights going out” this winter.

Energy investment banker Allen Brooks says this is “an unintended consequence of the UK’s green energy plan that has forced the closure of fossil fuel and nuclear plants,” pushing the nation’s surplus power availability “to a razor-thin margin that might disappear this winter” as a result of power-plant outages.” It may also be caused by “lack of renewable energy at times when the wind doesn’t blow and the sun doesn’t shine.”

Emergency measures include compensation for offices and factories that agree to shut down for up to four hours a day to provide capacity for households, and asking owners of old fossil-fuel generating plants that we shut down to reopen before the start of winter.

Those such as former US vice-president Al Gore who argue that renewables increasingly make “good economic sense” because they’re heading towards commercial viability -- the cost of solar panels has halved over three years – ignore “the costs associated with the intermittency of the power output,” Brooks says.

“Wind farms do not generate power when the wind isn’t blowing, and solar power isn’t produced during the night. Electricity demand also varies… in ways that the output from wind and solar may not match.”

A recent cost-benefit analysis by Charles Frank of the Brookings Institute that takes into account all the costs of building and running power plants, including the costs of dealing with intermittency through providing standby power, shows that wind and solar are much more expensive using the standard measure of “levelized” cost.

“Solar power is the most expensive way to reduce carbon emissions. Wind turns out to be the next most expensive, with hydro-power providing a modest net benefit. The most cost-effective zero-emission Technology is nuclear power.”

David Fuller's view -

I only question the last paragraph’s contention that solar power is a more expensive way to reduce carbon emissions than windmills.  I do not know how they measured this but solar panels are becoming increasingly efficient and I expect to see them on many industrial / commercial buildings and an increasing number of private homes over the next two decades.

This issue of On Target has an excellent lead section on Planning Your Portfolio, extensively quoting William Bernstein’s new book.

On Target is posted in the Subscriber's Area.



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September 23 2014

Commentary by David Fuller

Boris Johnson: It would be bonkers to rewrite the constitution overnight

Here is the opening of this entertaining and informative column by London’s Mayor:

Huh? I thought he had resigned. Perhaps someone will correct me, but I had the impression that Alex Salmond lost a historic vote last week. He gave an emotional press conference on Friday morning accepting defeat – and by the evening he was gone. He was off to spend his declining years doing something productive, we gathered, like knitting egg cosies or mastering the Guardian extra-fiendish Sudoku.

And then blow me down – he pops up on our televisions again, saying that he feels the people of Scotland have been “betrayed”, and that it may be necessary to hold another of these blooming referendums. Another one? He’s spent the last year blathering on about how this is a one-and-only turning point in the history of Scotland.

Jowls throbbing with passion, he had warned his audiences that they would never have such a chance again in their lifetimes. This was it. Now or never. Do or die. Friends, this is our time. That was his message. And now he seems to think that the poor old people of Scotland should be made to vote again and again until they come up with the right answer. Alex, old horse: what part of No don’t you understand?

The Yes campaign seemed to me to have all sorts of unfair advantages. They had the excitement and buzz of having that very word, “yes”, as the answer to the referendum question; so that a profoundly negative and destructive act – the break-up of Britain – could be cast as something new and exciting.

They had the Labour Party in Scotland in a state of meltdown, with Ed Miliband’s ratings lower among Scots than those of David Cameron. Poor Miliband was so invertebrate in his campaigning that he contrived to make Gordon Brown – probably the least successful prime minister of the past 100 years – look relatively charismatic.

The Yes campaign had ensured that only people in Scotland could vote on the future of our country – excluding even the vast numbers of Scots who live and work in London, many of whom were not happy at the idea of becoming foreigners. The Yessers were working with the grain of general public disgruntlement at the “Westminster” elite and old-fashioned politics.

They had all this going for them and they still managed to lose, and lose big. It wasn’t close. It was a lead, for the Noes, of 10.6 per cent. The question is settled for a generation, surely. I mean, for 20 or 30 years at least. The people have spoken, and they have plumped for Britain; and thank heavens for that.

Now is the time we should be talking about the future of Britain and the colossal potential of British business and British Technology and British universities, and all the wonderful things that we British people are going to do together; and here is Salmond back on the telly, only four days later, claiming that there needs to be some kind of re-run, and saying he still wants to get divorced. Why the hell?

David Fuller's view -

Alex Salmond can be a clever and articulate spokesman.  By promising milk and honey for poorer Scots, while fanning the dark side of historic ‘Braveheart’ resentments against the English, and patronising or bullying those who opposed him, he might have even succeeded in breaking up the United Kingdom had commonsense not prevailed. 

That would have been far better for Alex Salmond and the SNP, than for residents of Scotland or anyone else in the United Kingdom.  He regarded Scotland as his fiefdom.  Having failed to win the election, he also lost credibility by suggesting that a revote should be held because his people had been deceived.  This is demagoguery from a narcissistic leader who has lost touch with reality.  Politicians who suddenly gain considerable power are prone to demagoguery because they believe in themselves rather than their citizens.    

Right now the UK is going through a creative process of devolution and federalisation.  It will be bumpy but if it remains in the right hands, it should also be productive.  



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September 22 2014

Commentary by Eoin Treacy

China Clamps Down on Web, Pinching Companies Like Google

This article by Keith Bradsher and Paul Mozur for the New York Times may be of interest to subscribers. Here is a section: 

Frustrated users have often resorted to “virtual private network,” or V.P.N., services to evade China’s Internet filters. But those services, too, have come under concerted attack from the authorities, who have interrupted service to them with increasing frequency. Many ordinary citizens cannot afford or obtain access to V.P.N.s to begin with.

In the meantime, Google’s business continues to erode. Its share of the Chinese search engine market fell to 10.9 percent in the second quarter of this year, as the stepped-up blocking began to take effect — compared with one-third in 2009, when it still had servers there.

Google’s problems extend far beyond search. Its application store, called Google Play, is only partly accessible in China.

That has led to the rise of a number of locally run application stores, which analysts say will sometimes market pirated copies of software or charge extra to promote a new application. Companies are often forced to create versions of their apps for China that are slightly different from the versions distributed to the rest of the world on Google’s app store.

“Because Google Play has low market share” in the Chinese market, “app publishers who have applications worldwide on Google Play don’t receive the proportionate share of users in China without publishing to local Android stores, even if they have localized Chinese versions,” said Bertrand Schmitt, chief executive of App Annie, a company that tracks global app distribution.

Google also hosts publicly available libraries of coding scripts and fonts on its servers, but China now blocks these libraries. The chief Technology officer at the start-up said his company had resorted to creating its own libraries and hosting them on its own servers, wasting costly computing power and space.

Eoin Treacy's view -

Western companies invested heavily in Chinese expansion and accepted knowledge sharing joint ventures for the promise of access to China’s burgeoning consumer sector. The reality of profitability in China has been more disappointing than originally envisaged and companies are understandably chastened at the reception they have received. For a company such as Google with a global franchise that relies on users accessing its search and mobile apps in order to facilitate advertising, the loss of China as a potential market was priced in shortly after its withdrawal from the country. 



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September 18 2014

Commentary by David Fuller

Fracking, Drinking Water and Reality

As it turns out, fracking doesn't necessarily pollute the water supply. But the wells used for fracking might.

The distinction matters because drilling companies know how to make wells more reliable, even if all the effects of the fracking process are not yet well understood. One of the biggest worries, for example, has been that the hydraulic fracturing of deep underground rock to release the natural gas within it could somehow cause that gas to leak upward and contaminate drinking water supplies many thousands of feet closer to the surface.

But a new study finds that this danger is oversold. In places where the water near fracking sites has been contaminated, the culprit has been faulty steel tubing inside the vertical wells that lead down to the shale, or weak cement in the casing around it.

Making sure the wells are built soundly is something that drilling companies, and state regulators, can do. In about 5 percent of wells, the cement is imperfect enough to carry the risk of internal leaks.Poor cementing was partly to blame for the BP oil spill in the Gulf of Mexico four years ago.

So states need strong standards for well construction -- to ensure, for example, that the cementing is done effectively, that there are plenty of layers of casing, that the well runs straight and has smooth sides, and so on. And states need enough trained inspectors to see that the rules are carefully followed.

The good news is that many states have been putting such rules in place. Pennsylvania, Wyoming and Texas have all strengthened their regulations since 2010. In just the past year and a half, eight other states have updated their well-integrity rules, and six more have changes in the works.

Knowing that water pollution isn't inevitable with fracking should help both critics and defenders of the Technology come together to agree on well standards. It wouldn't make fracking problem-free -- there's still a need for the safe handling of wastewater, as well as the noise, light and other distractions that many well neighbors hate. But it allays worries about a possibly dangerous side effect of a business that increasingly provides the U.S. with a relatively clean and inexpensive fuel.

David Fuller's view -

The Technology continues to improve; effective regulation is in everyone’s interests; the world gets the energy it needs.

If Europe embraced responsible fracking, its economies would be more competitive and Putin would be brought to heel more quickly.  



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September 12 2014

Commentary by David Fuller

U.S., EU Tighten Russia Sanctions in Ukraine Conflict

Here is the opening for this article on the latest developments regarding sanctions, reported by Bloomberg:

The U.S. expanded sanctions againstRussia to include the country’s largest bank, OAO Sberbank, energy companies as well as five state-owned defense and Technology companies, joining the European Union in tightening restrictions.

President Vladimir Putin, talking to reporters in the Tajik capital of Dushanbe, said Russia will hold off on retaliation for now and has no plans to “close itself off.”

Russia is locked in a standoff with its former Cold War adversaries over the fighting in eastern Ukraine that has claimed more than 3,000 lives. Putin has denied supporting pro-Russian rebels in the battle-torn region.

“Russia’s economic and diplomatic isolation will continue to grow as long as its actions do not live up to its words,” U.S. Treasury Secretary Jacob J. Lew said in a statement today. “Russia’s economy is already paying a heavy price for its unlawful behavior.”

The Treasury Department imposed sanctions that prohibit transactions in, provision of financing for, or other dealings in new debt of greater than 90 days maturity issued by OAO Gazprom (OGZD) Neft and OAO Transneft. For banks, the debt financing restriction now covers maturities greater than 30 days, instead of 90 days previously.

David Fuller's view -

Russia’s economy is weak and problems are compounded by the recent decline in oil prices.  Therefore, Putin may have decided on a quieter strategy over the next few months, knowing that European countries were already talking about lifting the latest sanctions as they reluctantly imposed them, if there were no further obvious invasions of Ukraine.  A rally in the price of Brent crude oil and / or the approach of winter will strengthen Putin’s hand and could embolden him, provided there is no real resistance to his policies within Russia.

This item continues in the Subscriber’s Area, and contains an informative interview.



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September 05 2014

Commentary by Eoin Treacy

A Chinese Internet Giant Starts to Dream

This article from the MIT Technology Review focusing on Baidu may be of interest to subscribers. Here is a section: 

Ng, who calls deep learning a “superpower,” will build a new generation of such systems at Baidu. Services that may result remain in the brainstorming stage, but he will hint at what they may be. He dreams of a truly intelligent personal digital assistant that puts Apple’s Siri to shame, for example. Looking further ahead, the Technology could transform robotics, a pet subject for Ng—his engagement photos were taken in a robotics lab—and make autonomous cars and unmanned aerial vehicles much more capable. “We’re going to do some cool things here,” he says with a grin.

They’ll have to if they are to compete: Google, Facebook, Microsoft, and others have been hiring lots of deep-­learning experts for their labs, sometimes even from each other. And Baidu still has a lot to prove. Fairly or not, it has the reputation many Chinese companies do for copying the products and business models of U.S. Internet leaders. It’s a process cynics dub C2C—“copy to China.” Baidu has seemingly tried to emulate Google in countless ways over the years, from its spare search homepage to a head-mounted computer, Baidu Eye, that looks a lot like Google Glass. Baidu has even begun working on self-driving cars. With its new star hire, it appears to be following Google’s lead once again.

Ng insists that the C2C stereotype is no longer accurate, particularly for his new employer. “I used to work for the USA’s Baidu,” he jokes. Then he picks up his phone and says in English, “Please call a taxi for me.” A moment later, Baidu’s translation app utters the same phrase in Mandarin Chinese and shows the equivalent ideograms on the screen. It’s slick—but is it better than Google’s translation app, which appears to do the same thing? That’s not clear. It’s Ng’s job to develop cutting-edge technologies that will leave no doubt who is ahead.

Eoin Treacy's view -

As a country develops, the logical path both in the governance and commercial fields is to look at what worked elsewhere and employ it at home. The more successful companies eventually branch out to create their own novel solutions to problems and compete on the international stage. China’s companies are well capitalised and have a government willing do take major steps to promote their wellbeing. As high population countries in Asia, Latin America and Africa develop and their middle classes increase, the opportunity is ripe for internet companies to benefit. Chinese companies are well placed to compete in this environment. 



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September 03 2014

Commentary by Eoin Treacy

India 2020: The Road to East Asia

Thanks to a subscriber for this report by Sanjeev Sanyal for Deutsche Bank highlighting the infrastructure led growth model being developed in India. Here is a section:

So, what does the government need to do in order to get firms to invest again? The first and most obvious thing would be to finish the various stalled infrastructure projects. The capital invested in these projects can be made generate output. This will also help the banking system which has seen an increase in its non-performing loans as a consequence of the various delays. However, the longer term agenda would be to make it easier to do business in  India. The World Bank’s “Doing Business Report 2014” ranked India 134 out of 189 countries in terms of the ease of doing business. As one can see from the table below, it performs especially poorly in categories that involve interface with the government – paying taxes, construction permits and so on. The national government cannot resolve all the issues, but Prime Minister Modi’s election slogan of “Minimum Government, Maximum Governance” suggests that he is acutely aware of this issue and, given his administrative record, it is reasonable to expect significant improvement in this space.

While a generic improvement in the business climate would be welcome, Prime Minister Modi’s speeches and actions suggest a more specific economic model. As explicitly stated in the Independence Day speech, one component of his economic model is an emphasis on export oriented manufacturing. Notice that this is not about agnostic free markets but about creating competitiveness by investing in industry clusters. Another component is investment in heavy infrastructure ranging from power to railways. A third element is labour reforms. This is an area that previous government considered too politically sensitive but has already been opened up for reform by the NDA government both at the state and central level. These reforms are clearly a prelude to the mass deployment of labour. Finally, a repeated emphasis on building and expanding cities – urbanization being the spatial manifestation of industrialization. Not only are these elements internally consistent, they also look very much like the economic model used by East Asian countries to rapidly modernize themselves. In other words, for the first time since Nehru, we have a wide-ranging, internally consistent economic model. Moreover, this model follows a well-trodden path

Of course, we are not implying that agriculture and services will be simply ignored. Far from it, the new “investment” based approach will be applied to these sectors as well. Indeed, Narendra Modi’s political rise is partly due to his success in generating agricultural growth during his stint as Chief Minister of Gujarat. This is particularly remarkable given that Gujarat is a semi-desert state that is not naturally well-endowed with either good soil or plentiful water supply. Heavy investment in water management and new Technology were responsible for the state’s success. At the national level, however, farm mechanization is only 25% while the productivity levels for rice and wheat have not increased significantly since the 1980s.An important change in the strategy of this government will be its openness to mechanization and new Technology even in agriculture. This is consistent with the idea that the farm sector will have to produce more even as industry sucks out workers from it. The latest Economic Survey summarizes this approach as follows “Due to the significant and continuous reduction of agricultural workforce, higher levels of farm mechanization are necessary for sustaining productivity and profitability.” Of course, this will require a wider reform and liberalization of the sector.

Eoin Treacy's view -

A link to both reports is posted in the Subscriber's Area.

India represents a massive potential growth market for the resources sector which couldn’t come at a better time as China’s demand growth trajectory moderates. Following the path to development adopted by so many of its neighbours represents a ground breaking change of pace for India which could be transformational for the stock market if successfully implemented.

This additional report accompanying India 2020 highlights the primary stock market beneficiaries of this development. Fortunately a number of them maintain overseas listings.



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September 01 2014

Commentary by David Fuller

Japan Vows to Strengthen Economic Ties With India as China Rises

Here is the opening from this Bloomberg report:

Prime Minister Shinzo Abe pledged a sweeping upgrade of economic and security ties with India, saying Japan would double investment and expand defense cooperation amid concerns about China’s expanding influence in the region.

Abe and his Indian counterpart Narendra Modi at a summit meeting in Tokyo yesterday agreed to upgrade ties to a special strategic and global partnership. Abe offered 50 billion yen ($480 million) in infrastructure loans and pledged 3.5 trillion yen of public and private investment and financing in India in five years.

“I often say that Japan-India relations have more potential than any other ties in the world,” Abe said. “This time, hand in hand with Prime Minister Modi, I want to boost ties in every possible field and elevate this to a special strategic and global partnership.”

The declaration comes three months after Modi took office pledging to take a tougher stance with neighbors China and Pakistan on border disputes, and hours after Japan said three Chinese coast guard vessels entered waters near disputed islands. Japan is courting India as it seeks to counter China and deter the use of force in disputes over contested territory.

The two leaders are known to have a close relationship, and Abe made the unusual gesture of traveling to the ancient capital of Kyoto at the weekend to host an informal dinner for Modi. Abe also accepted an invitation to visit India for a summit in 2015. Modi, 63, also brought a delegation of executives with him on the four-day trip.

David Fuller's view -

Closer economic links between India and Japan make sense and I expect to hear much more about this over the next few years.  India will benefit from Japan’s Technology and Japan would gain from India’s abundant labour market and also its range of management skills.  

India remains a stock market in form, with gains of over 30% for the Nifty 50 Index this year, in USD terms, on optimism regarding Narendra Modi’s government, rising corporate profits and the fastest GDP growth in 2 years.  



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August 07 2014

Commentary by Eoin Treacy

Inviting Foreigners to Boost Drilling Hits Nerve

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

Supporters of opening the oil, gas and electricity monopolies to competition say it will attract $20 billion a year in foreign investment and increase economic growth by at least 1 percent every year. Opponents, led by former presidential candidate Andres Manuel Lopez Obrador, argue that letting foreigners bid and drill for oil is a violation of national sovereignty and will lead to corruption and a loss of control over the oil revenue that could be used to develop a more modern national economy. Mexico would be better served, they say, by reducing Pemex’s tax burden, increasing transparency and attacking persistent corruption –- Pemex is missing over 32 million barrels of oil this year, worth about $3 billion. The opposition points to Saudi Aramco as an example of a successful state monopoly. Pena Nieto’s team disagrees, saying that Mexico’s days of easy-to-access oil are over, and that the nation’s future as an oil producer depends on Technology and know-how that private companies are best positioned to bring. To cushion the change, however, he assured Pemex workers that none of them would lose their job.

Eoin Treacy's view -

If it is to reverse declining production Mexico has little choice but to attract both investment and expertise to its energy sector. One of the reasons Saudi Arabia’s state controlled energy company has been able to maintain high standards of efficiency is because they have aggressively invested in enhancing production and hired the brightest minds from the around the world to help achieve their goals. The problem for many state owned oil companies is that they are treated as utilities by politicians who tend to use them as piggy banks. Introducing competition may help Mexico’s Pemex to adopt a more professional attitude and private companies have a profit incentive to maximise production. 



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August 04 2014

Commentary by Eoin Treacy

Funds categories

Eoin Treacy's view -

 David and I spend a great deal of time identifying investment and trading opportunities we believe will be of interest to the Collective of subscribers.  Identifying investment vehicles that allow us to action these ideas is sometimes challenging not least in some of the more esoteric locales. In order to facilitate our theme of Empowerment Through Knowledge we began to add equities, funds, investment trusts, open and closed ended funds, ETFs, REITs and bonds to the Chart Library almost a decade ago. 

The database now contains almost 2000 funds almost all of which have been requested by subscribers at one time or another. We had previously listed the funds by geographic focus and loosely by domicile within the menus and subscribers could also find funds by using the Chart Library’s keyword search. However as the number of funds increased (some of the sections had more than 400 instruments) we needed to find a better way to categorise investment vehicles. 

Sarah Barnes and I embarked on this project last month and engaged with our programming team to automate the re-categorisation project. While there will inevitably be some minor changes to categories, more than 90% of the project is complete.  

You will notice that the main dropdown menu for the Chart Library is now considerably shorter which has eliminated the need to scroll. 

All of the funds can now be found in the Funds section. Within that section every fund in the system is listed on the front page and the primary subcategories can be found in the upper left. These are: 

Funds by Domicile
Funds by Currency
Funds by Geographic Focus
Funds by Type
Funds by Objective
Funds by Theme

Funds by Domicile – For one reason or another you may only be interested in investing in funds in your home market. Funds by domicile contains additional subcategories for each of the countries where funds in the database are listed. For example you will find all of the funds in the Librart that are listed in the UK here. 

Funds by Currency – Investors often wish to monitor their currency exposure by buying funds denominated in their base currency. For example a Euro denominated investor may be interested in the globe but only wish to invest in Euro denominated funds. All of the Euro denominated funds would be found in this category. 

Funds by Geographic Focus – This is perhaps one of the more interesting subcategories, because subscribers are often interested in finding the best fund to reflect investment potential in a specific country or region. This is a diverse category because it covers the globe but to take a specific example you can now scroll through all of the China or India related funds in the Library with relative ease and without going through an exhaustive search. 

Funds by Type – Some investors like the expediency of ETFs while others like to seek bargains among investment trusts and closed-ended funds. Others will have open ended funds and unit trusts in their pension accounts. Funds by type allows you to click through lists of funds segregated by type. For example here is a list to all of the investment trusts and closed-end funds in our database.

Funds by Objective – Fund companies often attempt to differentiate themselves by defining a category where there is not much competition or when they see a gap where they might capture demand for a new product. The result is that there are a very wide number of fund objectives, but for example here is a link to the precious metals section. 

Funds by Theme – At The Chart Seminar we have long taught that commonality across sectors and then across regions often gives us clues to the stories inspiring investor interest. Healthcare is one such theme where Technology, availability and growth trajectories, particularly in high population regions, are combining to inspire optimism. Here is a link to the healthcare theme’s section:

We used a spreadsheet derived from Bloomberg data to categorise the chart Library’s Funds en masse. We’ll spend some time this week doing some consolidation and correcting any errors that may have occurred and would welcome feedback from subscribers. Our next step is re-categorise the fixed income and monetary measures sections to make them more user friendly. 

While I believe this was a valuable exercise in its own right, the true utility of this re-categorisation will become clear when we launch the upgraded version of the filter system.  We expect to have positive news on this front early next week.   



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August 04 2014

Commentary by Eoin Treacy

Tesla and Panasonic sign agreement on battery-making Gigafactory

This article by Ben Coxworth for Gizmag may be of interest to subscribers. Here is a section:

As mentioned in our previous article, Tesla plans for the Gigafactory to produce 500,000 batteries per year by 2020, with expected battery cell output of 35 GWh/yr and battery pack output of 50 GWh/yr. Current global battery output, from a variety of manufacturers, sits at just under 35 GWh/yr.

According to yesterday's announcement, "Tesla will prepare, provide and manage the land, buildings and utilities [while] Panasonic will manufacture and supply cylindrical lithium-ion cells and invest in the associated equipment, machinery, and other manufacturing tools based on their mutual approval."

The factory will be located somewhere in the US and managed by Tesla, with Panasonic occupying about half of the manufacturing space and taking the role of principal partner. Although the cells will be made by Panasonic, Tesla will be incorporating them into battery modules and packs that it will be assembling.

Along with lowering the price of batteries by making them in large numbers, Tesla and Panasonic also plan on reducing costs by manufacturing cells tailored specifically to EVs, locating materials suppliers on-site, and implementing measures to lower the utility and operating expenses of the factory.

Eoin Treacy's view -

Developing batteries that are both highly efficient and cheap, has proven to be a much more difficult challenge than people initially expected five years ago. Lithium, despite its propensity to self-combust, remains the standard Technology for batteries for everything from mobile phones to electric cars. The anticipated gigafactory aims to produce batteries that are marginally more efficient but considerably cheaper in the assumption that this lower cost will help fuel demand. They might be right. 



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July 29 2014

Commentary by David Fuller

EU Aims at Russian Banks, Technology in Widest Sanctions

Here are some brief samples of this report from Bloomberg:

The European Union curbed Russia’s access to bank financing and advanced Technology in its widest-ranging sanctions yet over President Vladimir Putin’s backing of the rebellion in eastern Ukraine.

EU governments agreed today in Brussels to bar state-owned banks from selling shares or bonds in Europe and restricted the export of equipment to modernize the oil industry, a key prop for Russia’s economy, two EU officials told reporters. New contracts to sell arms to Russia and the export of machinery, electronics and other civilian products with military uses will also be banned.

“The political implications of the escalation in tensions are likely to cast a further chill over relations between Russia and the West,” Citigroup Inc. analysts includingEric Lee and Tina Fordham said in a note to clients before the EU decision. “Economic costs are starting to bite, but it could be a while before the economic consequences bear domestic political costs for Russia.”

The U.S. is also preparing to announce tougher sanctions on Russia after months of separatist unrest in Ukraine’s easternmost Donetsk and Luhansk regions and the disaster involving a Malaysian Air jet¸ which U.S. officials have said was probably downed by a missile fired by the pro-Russian rebels. At least 10 soldiers and 28 civilians died in violence over the past 24 hours.

The new package of EU sanctions will “track pretty closely” with those already imposed by the U.S. and the Obama administration plans to unveil additional penalties as soon as today, PresidentBarack Obama’s spokesman said.

And:

For the first time, the EU sought to hobble broad swathes of Russian industry, with the goal of accelerating the flight of capital from the country. Russian economic growth will slow to 0.2 percent in 2014 from 1.3 percent last year, the International Monetary Fund said last week.

“Russia needs the opposite, Russia needs internationalization, globalization to make Russia a better place to do business,” Tim Ash, an emerging-market economist at Standard Bank Plc in London, told Bloomberg Television earlier today. “In the short term, the impact of sanctions could be to push Russia into recession.”

Taking aim at the Russian financial system, the EU prohibited state-owned banks from selling securities with more than 90 days maturity to European investors. The result will be “sharply increased costs of issuance,” the European Commission predicted in a background paper last week.

David Fuller's view -

My impression is that these European Union sanctions are tougher than what would have been remotely possible before the MH17 massacre, or perhaps even last week.  Moreover, they will last for 12 months, albeit first reviewed at the end of October, but requiring unanimity from all 28 members to drop the sanctions prematurely.  That would appear unlikely.  The US has also responded in kind by increasing its sanctions to cover Russian banks. 

The interesting question is how will Putin react to these new sanctions?

This item continues in the Subscriber’s Area and includes links to three additional articles.



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July 28 2014

Commentary by David Fuller

The Boom Is Coming, and Sooner Than You Think

My thanks to a subscriber for forwarding this informative article on the 18th, although it found its way to my ‘Junk Email’ section rather than my Inbox for some unfathomable reason.  Nevertheless, it is just as relevant today and here are a few samples:

I disagree with the economic pessimists who believe, as I outlined in yesterday’s column, that persistently slow growth will be the norm for years to come.

Yes, huge federal government deficits and debt are a major drag. It’s also true that budget surpluses aren't likely to materialize to shrink the $17 trillion-plus national debt, even if growth resumes.

Nevertheless, there is a strong possibility that government debt relative to gross domestic product will fall appreciably, as it did after World War II. Back then, deficits were relatively small, so GDP outran gross federal debt. The debt-to-GDP ratio dropped from 122 percent in 1946 to 43 percent 20 years later.

The ratio fell even further in the late 1960s and 1970s as inflation, caused by rapidly rising federal spending on Vietnam and Great Society programs, pushed taxpayers into higher tax brackets and filled government coffers. Higher corporate-tax revenues also resulted from under-depreciation and inventory profits.

A more recent example of a reduction of the federal debt-to-GDP ratio came in the 1990s under President Bill Clinton. Robust nominal growth of 5.5 percent a year caused deficits to shrink so much that small surpluses existed in fiscal years 1998 to 2001. Federal tax receipts rose 7 percent on average, faster than nominal GDP, and outlays grew slower, at 3.6 percent. The dot-com bubble lifted individual income-tax receipts at an 8 percent annual rate and corporate taxes by 8.3 percent a year.

And:

I believe much of today’s new Technology -- the Internet, bioTechnology, semiconductors, wireless devices, robotics and 3-D printers -- is in its infancy. Collectively, they have the potential to rivalthe rapid growth and productivity-generating effect of the American industrial revolution and railroads in the late 1800s. Mass-produced autos and the electrification of factories and homes, which led to electric appliances and radio in the 1920s, offer yet more examples. Today, only a third of the world’s population is connected to the Internet but 90 percent live within range of a cellular network.

Sure, productivity (output per hour worked) grew by only 1.5 percent from 2009 to 2012, but that’s normal after a severe recession. I expect it to return to a 2.5 percent annual growth rate -- or more -- after deleveraging is completed in another four years or so. Even in the 1930s, productivity averaged 2.4 percent a year, higher than in the Roaring '20s. In the 1930s, much of the new Technology from the 1920s -- electrification and mass production -- was adopted despite the Great Depression.

David Fuller's view -

This article arrived with the subscriber’s comment: “This view from Gary Shilling seems well based on historical data.  I suspect it’s in line with your thoughts too.”

Absolutely, although I have not had all of Gary Shilling’s numbers to support it but the key premises are similar: 1) Several years of deleveraging following a financial crisis slow GDP growth significantly, and government debt rises; 2) Recovery time will vary among countries, subject to governance, but will become apparent between 5 to 10 years after the financial crisis for most of them; 3) What I have described in recent years as ‘the accelerating rate of technological innovation’ will be the most important factor contributing to our next secular bull market;

This item continues in the Subscriber’s Area.



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July 25 2014

Commentary by Eoin Treacy

China digital transformation: The Impact of the Internet on productivity and growth

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

China has posted high rates of labor productivity growth in recent years, but its progress began from a very low base. As a result, its labor productivity remains well below the levels in advanced economies (Exhibit 3). China created $15,500 of GDP per worker in 2013, significantly lower than levels in the United States ($107,200), Japan ($76,700), and Germany ($67,300). A closer look at the sector level bears this out: US labor productivity in the ICT and manufacturing sectors, for example, was 12 and ten times higher than China’s average labor productivity in those sectors, respectively, in 2013.

China faces a growing imperative to continue making strong gains in productivity. The rapid economic growth of recent decades was fueled by an expanding labor force and heavy capital investment, but this model is coming under pressure, particularly as the population ages. In fact, China’s labor force is projected to begin shrinking by 2015. As the dependency ratio doubles over the next two decades, the savings rate is also likely to decline as older Chinese draw down their savings. To avoid a slowdown and continue to improve living standards, China will have to make its existing labor and capital stock more efficient—and wider Technology adoption will be central to this effort.

The rapid growth of China’s Internet economy is not yet reflected in its labor productivity performance. From 2010 to 2013, China’s labor productivity increased by 26 percent, while the contribution of Internet-related output to GDP increased by 35 to 60 percent (depending on whether C2C e-commerce is included).

However, China appears poised to capture large gains as its companies step up their adoption of Internet technologies. According to McKinsey’s latest survey of Chinese CIOs, the typical Chinese company spends 2 percent of revenue on IT, far below the 4 percent international average. These same respondents predict their IT spending will increase to 3 percent of revenue by 2015—and while that still leaves a large gap, it indicates clear momentum.26 As Chinese companies digitize their operations on a wider scale, they will gain the ability to streamline operations, open new sales channels, accelerate the R&D process, and become leaner.

The Internet is likely to usher in disruptive change, but it is also a catalyst for faster productivity growth. We project that the new applications described in this report could contribute 7 to 22 percent of China’s overall labor productivity improvement by 2025. Capturing this potential will be critical for China’s future competitiveness, particularly as the country’s labor costs increase and its demographic dividend diminishes. 

 

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area.

China has succeeded in transforming its economy by leveraging its low labour costs and enormous population. However as the population ages and wages increase, delivering productivity gains is essential if the country is to succeed in attaining its long-term development goals. 

A large number of countries have succeeded in moving from low income to middle income economies but the number that have persisted with their goal of moving into the high income bracket is considerably smaller. Continued zeal for the policy objectives that deliver productivity growth will be worth monitoring as a result. China’s digital economy represents a promising development and suggests that it will succeed in continuing to move up the ranks of GDP per capita. 

 



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July 22 2014

Commentary by Eoin Treacy

Hasbro saddles up 3D-printed My Little Pony figurines designed by fans

This article by Nick Lavers for GizMag may be of interest to subscribers. Here is a section: 

While fan-created My Little Ponies may be something of a niche, such forward-thinking ventures highlight the potential of 3D printing. The Technology has opened up all kinds of possibilities, but one very real implication is the issue of intellectual property theft. So much so, research firm Gartner predicts that by 2018, 3D printing will result in the loss of more than US$100 billion in intellectual property each year.

Collaborative efforts like SuperFanArt, where consumers are empowered and enticed by an element of authenticity, rather than the convenience of reproducing their own knock-offs, could see established brands such as Hasbro get the jump on the Pirate Bays of tomorrow.

The first line of My Little Ponies designs will be on show at Comic-Con San Diego from July 24 to 27. You can check out the designs in the gallery and find out more about becoming a SuperFanArt featured artist via the source link below.

Half of Europe’s Jobs Threatened by Machines in U.S. Risk Echo – This article by Simon Kennedy for Bloomberg may be of interest to subscribers. Here is a section: 

Eoin Treacy's view -

In much the same way that intellectual property is threatened by the ability of people to download music, videos and books from the internet, the evolution of 3-D printing represents a similar threat to product designers and products. Music companies and publishers have changed their business models to permit downloads and adjusted their pricing to lower the barrier to entry. It is conceivable that 3-D products will go the same way. 



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July 21 2014

Commentary by David Fuller

Russian Billionaires in Horror as Putin Risks Isolation

Here is the opening of this topical report from Bloomberg:

Russia’s richest businessmen are increasingly frantic that President Vladimir Putin’s policies in Ukraine will lead to crippling sanctions and are too scared of reprisal to say so publicly, billionaires and analysts said.

If Putin doesn’t move to end the war in Ukraine in the wake of last week’s downing of a Malaysia Air jet in rebel-held territory, he risks becoming an international outcast like Belarus’s Aleksandr Lukashenko, whom the U.S. famously labeled Europe’s last dictator, one Russian billionaire said on condition of anonymity. What’s happening is bad for business and bad for Russia, he said.

“The economic and business elite is just in horror,” said Igor Bunin, who heads the Center for Political Technology in Moscow. Nobody will speak out because of the implicit threat of retribution, Bunin said by phone yesterday. “Any sign of rebellion and they’ll be brought to their knees.”

The downing of the Malaysian airliner, which killed 298 people, led to renewed threats of deeper penalties by the U.S. and the European Union, who’ve already sanctioned Russian individuals and companies deemed complicit in fueling the pro-Russian insurgency in Ukraine. U.S. Secretary of State John Kerry said yesterday the available evidence suggests Russia provided the missile used by the rebels to down the airliner. U.K. Defence Secretary Michael Fallon was cited by The Mail on Sunday as accusing Putin of “sponsored terrorism.”

Branding Russia, like Iran or Libya under Muammar Qaddafi, a “state-sponsor of terrorism,” as the British defense minister suggested, would be a major move that would have “a very significant impact on Russia and companies dealing with Russia,” Timothy Ash, an emerging-market economist at Standard Bank Plc in London, said by e-mail.

David Fuller's view -

It is the same age old story.  Unopposed, the ruthless and destructive bully exploits those around him; only the stakes are much higher when the problem is cause by a dictator with a large military, who also supplies an essential commodity.  You can be sure that there is not an EU leader who does not regret the bad luck of being in office during Putin’s era. 

I am not suggesting a military response but much tougher sanctions are required.  Not all European leaders have the stomach for this, not least because their economies are currently weak and could easily deteriorate further with sanctions which hurt their trade with Russia.  However, there is also a real possibility that they would be better off if Putin was either removed from office by his countrymen or at least clearly weakened.   

The USA certainly has the economic influence to weaken Russia, but how far will it go?  President Obama may be reluctant to do Europe’s unappealing job for it.  However, clear evidence that Russian separatists within Ukraine shot down Malaysia Airlines flight MH17, which appears to be emerging, could tempt Obama to brand Putin’s Russia as a state-sponsor of terrorism.  This would be extremely difficult for Russia’s businesses and it would certainly weaken Putin.

This item continues in the Subscriber’s Area where another article is also posted.



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July 17 2014

Commentary by Eoin Treacy

US Dividend Contenders

Eoin Treacy's view -

Following on from yesterday’s addition of a section for the US Dividend Champions to the Chart Library, I created a section for the US Dividend Contenders today. Unlike the Dividend Aristocrats which demand 25 years of consecutive increases as well as a market cap and liquidity provision, the Champions and Contenders only look at records of increasing dividends. In the case of the Champions this is at least 25 consecutive years and between 7 and 24 years for the Contenders. 

The US Dividend Contenders represent an interesting universe of companies where banks, utilities, insurance, MLPs and REITS dominate. This list also highlights the increasingly large number of Technology companies that have maintained solid records of dividend increases over the last decade. 

 



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July 15 2014

Commentary by David Fuller

Deepak Lalwani: Positive and Pragmatic Budget [for India] Despite No Big Bang Reforms.

My thanks to the author of the India Report for his insights on this interesting market.  Here is a sample:

India Inc is largely happy as this budget is seen as the start of a new economic journey.

1. Bearing in mind this maiden budget was presented in 45 days of the Finance Minister being sworn in it is realistic not to have "big bang" structural reforms unveiled so quickly.

2. Positives include: (a) No populist move; (b) FDI limits increased in both defence and insurance from 26% to 49%. There is relief that finally, after several false dawns, the FDI limit in insurance is finally being raised; (c) Intent to reduce the fiscal deficit and keeping an eye on fiscal prudence and to spur economic growth; (d) GST to be introduced finally by end of year; (e) Infrastructure spending to continue to support economic growth; (f) Tax adventurism to end from here on; (g) REITs good news for stock market.

3. Negatives include: (a) Rather rosy assumptions made of growth - calculations could go awry especially since no details are given on what will drive growth to such levels; (b) Very ambitious target for privatisations; (c)No details on how the $ 43 bn subsidy regime (2.3% of GDP) will be reduced. This is worrisome as the ratings agencies could still downgrade India's sovereign rating to below investment grade or "junk" status; (d) The increase in FDI limit for defence to 49% will not be sufficient for foreign contractors to be willing to transfer Technology if they do not have voting control.

Overall, a positive and pragmatic budget that has tried to address the needs of many sectors. The key will lie in implementation and speed of delivery. Very positive for capital markets - although from here they will focus on earnings catch-up, global markets and the effect of "El Nino" on the Indian monsoons.

David Fuller's view -

Rating agencies know this is a pro-business government embarking on a modernisation programme for India, which the country’s citizens voted for.  Therefore, I doubt they will downgrade India’s sovereign rating over the $43 bn subsidy regime, especially as they know that Narendra Modi intends to phase it out, although this cannot be done overnight.

This item continues in the Subscriber’s Area and contains two related articles and a video.  



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July 15 2014

Commentary by Eoin Treacy

Taiwan May Relax Rules to Expand Securities Firms Business

This article by Justina Leefor Bloomberg may be of interest to subscribers. Here it is in full:

Taiwan’s Financial Supervisory Commission plans to allow securities firms to sell overseas yuan bonds to local institutional investors, Economic Daily News reports, citing officials it didn’t identify.

FSC may also relax rules to let securities firms trade derivatives for non-hedging purposes: report

FSC is lobbying central bank to allow overseas securities units to introduce derivatives linked to Taiwan’s stocks andexchange rate: report

Eoin Treacy's view -

While Western media have focused on improving manufacturing data from the USA and UK, Taiwan’s manufacturing data has been equally impressive. The outperformance of its large cap Technology sector has recently been supplemented by the return to form of the financial sector on speculation that regulatory overall will open up fresh growth avenues. 

 



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July 07 2014

Commentary by Eoin Treacy

Foxconn recruitment spree shows automation plan setback

This article for Want China Times may be of interest to subscribers. Here is a section: 

Foxconn chairman Terry Gou announced in 2011 that the company planned to manufacture 300,000 robots at a rate of 1,000 units a day and hoped to have 1 million robotic arms in 2014 for the benefit of the first batch of fully automated factories in five to ten years.

A vendor supplying equipment for automated production said that technically it is not a major problem for Foxconn to replace human workers with robots. However, using robots on the production line is only cost-effective for making homogeneous products and cuts cannot realistically be made in making mobile phones and tablet devices which have a more complicated manufacturing process, the vendor stated.

"The labor-intensive industry, such as OEM, can no longer sustain the company's growth," Gou said at a shareholder meeting on June 25. He further said that the company has been seeking a transformation of its business model in the past few years, which is expected to be crucial for Foxconn's continued growth in the next decade.

Eoin Treacy's view -

Factory automation represents an inexorable trend as companies attempt to contain costs and labour uncertainties. As the evolution of robotics proceeds, companies are becoming increasingly knowledgeable about what can and cannot be outsourced to automation. However robots have an important advantage relative to a human labour force. As pieces of Technology, they are subject to Moore’s law and humanity is not. Therefore we can anticipate that as robotics continues to develop and innovation accelerates, robots will both displace humans and also develop products human hands are incapable of. 



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July 03 2014

Commentary by Eoin Treacy

Vascular network bio-printing brings 3D-printed organs one step closer

This article by Stu Roberts for Gizmag may be of interest to subscribers. Here is a section: 

According to the University of Sydney study, the technique demonstrated better cell survival, differentiation and proliferation compared to cells that received no nutrient supply. In addition, Bertassoni says that it provides the ability to create large, life-supporting three-dimensional, micro-vascular channels quickly and with the precision required for application to different individuals.

"While recreating little parts of tissues in the lab is something that we have already been able to do, the possibility of printing three-dimensional tissues with functional blood capillaries in the blink of an eye is a game changer," he says.

Bertassoni explains that the ultimate aim of the research is for patients to be able to walk into a hospital and have a full organ printed with all the cells, proteins and blood vessels in the right place.

"We are still far away from that, but our research is addressing exactly that," he says. "Our finding is an important new step towards achieving these goals. At the moment, we are pretty much printing 'prototypes' that, as we improve, will eventually be used to change the way we treat patients worldwide."

Eoin Treacy's view -

3-D printing of living tissue that is fit to be transplanted into a human host would represent a game changer for the healthcare sector not least because it represents a Technology that would become progressively cheaper overtime. It would also represent a bridge before genetics has developed to such a stage that our internal chemistry can be manipulated without the need for surgery except in emergency cases.



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