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July 29 2015

Commentary by David Fuller

Submarine Killers: India $61 Billion Warning to China

Here is the opening of this informative article from Bloomberg:

In a dock opening onto the Hooghly River near central Kolkata, one of India’s most lethal new weapons is going through a final outfit.

The Kadmatt is a submarine killer, bristling with Technology to sniff out and destroy underwater predators. It’s the second of four warships in India’s first dedicated anti-submarine force -- a key part of plans to spend at least $61 billion on expanding the navy’s size by about half in 12 years.

The build-up is mostly aimed at deterring China from establishing a foothold in the Indian Ocean. It also serves another goal: Transforming India’s warship-building industry into an exporting force that can supply the region, including U.S. partners in Asia wary of China’s increased assertiveness.

“India’s naval build-up is certainly occurring in the context of India moving towards a greater alignment with U.S. and its allies to balance China,” said David Brewster, a specialist in Indo-Pacific security at the Australian National University in Canberra. “India wants to be able to demonstrate that Beijing’s activities in South Asia do not come without a cost, and Delhi is also able to play in China’s neighborhood.”

China showed its growing naval prowess when it deployed a nuclear-powered submarine to patrol the Indian Ocean for the first time last year, while a diesel-powered one docked twice in Sri Lanka. India says another Chinese submarine docked in May and July in Pakistan, which is reportedly looking to buy eight submarines in what would be China’s biggest arms export deal.

The U.S.’s Seventh Fleet has patrolled Asia’s waters since World War II and is backing India’s naval expansion. On a January visit to New Delhi, President Barack Obama pledged to explore ways of sharing aircraft carrier Technology. The two countries also flagged the need to safeguard maritime security in the South China Sea, where neither has territorial claims.

David Fuller's view -

There has been considerable concern over Communist China’s rapid military expansion during the last decade, not least concerning its maritime and island claims within the South China Sea.  These claims are clearly not based on international maritime agreements, including the United Nations Convention on the Law of the Sea.  Consequently, in the South China Sea alone, China is in dispute with Brunei, Taiwan, Malaysia the Philippines and Vietnam, and proceeding on a might is right basis.  

These countries would like to see the United States remain a presence in the region.  The US, in turn, has a strong alliance with Japan, and now increasing also with India, which it sees as potentially the fastest growing regional power.  India, which also has a longstanding boarder dispute with China, will almost certainly receive at least technological assistance from the US in developing its navy.  This will help India’s economy to grow, as it aims to export naval equipment to allies within the Asia Pacific region and beyond. 

Clearly, as the Asia Pacific region develops there will be a considerable increase in military strength, led by India and Japan, mainly in response to China.  This is not without some risk, and thus it always was.  However, a balance of power, which, incidentally Europe does not really have with NATO, is also a restraint on territorial ambitions.  



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July 28 2015

Commentary by Eoin Treacy

Minimum Wage Wars

Thanks to a subscriber for this article by Sydney Williams at Monness, Crespi, Hardt & Co., Inc which may be of interest. Here is a section:

 

The numbers suggest that a large percentage of minimum wage jobs are the teen-age children of middle class and upper-income families. Many of the rest are starter jobs – the kind we all remember when first we went to work. Estimates are that an increase in the minimum wage to $15 per hour will cost 500,000 jobs. I suspect it may be more.

Technology has already replaced many service-sector jobs. In some restaurants, one can order on I-Pads. Technology has replaced many secretarial jobs. The internet has made it easier to form a corporation and it has reduced the time for research. Travel agents have become an endangered species. The President has suggested that the servicing of smaller 401K and IRA accounts should be automated. Three weeks ago, when my wife was recovering from a fall, robots delivered medicines to her hospital floor. Technology will continue to replace jobs. It is one reason why STEM jobs have been the best paying for recent college graduates. David Brooks wrote recently in the New York Times: “If you raise the price on a worker, employers will hire fewer and you’ll end up hurting the people you meant to help.”

When New York Governor Andrew Cuomo signaled his support for the higher minimum wage, he disingenuously said: “You cannot live and support a family of four on $18,000 a year in the state of New York.” (The State of New York’s minimum wage is $8.75 per hour.) His statement was purely political, as were similar endorsements from Hillary Clinton, Bernie Sanders and Martin O’Malley. There are few families of four dependent on a sole provider making the minimum wage. Those jobs, as I wrote, are mostly held by the young – teenagers or young people starting a career. It is jobs, not raising the minimum wage that will help the poor. Raising the minimum wage will not narrow the income gap. It will cost jobs and force some businesses to close. It is not the panacea it is claimed and it detracts from the real task – job creation.

 

Eoin Treacy's view -

I went to visit a sewing factory in the San Fernando Valley a few weeks ago. They have 15 workers and specialise in sewing which is still almost all done by hand. This is true of the industry globally. The garment industry is people intensive and wages are about $10 an hour which is above the minimum wage but less than the $15 that will need to be paid in Los Angeles County from 2018. The company survives by doing small runs for singers and YouTube stars who need the work done fast and have high margins. Los Angeles has a large garment district and there are a lot of factories. 



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July 27 2015

Commentary by David Fuller

Martin Spring: On Target: A European Success Story

My thanks to this knowledgeable and highly experienced author for his perspective on the global financial scene.  This issue opens with a good look at Denmark, an outstanding performer among European stock markets.  Here is the beginning of a topical section: Why Global Economic Growth Is Sluggish

There’s bullish talk about a coming pick-up in global economic growth, but for the moment, the signals are negative. Trends in the global economy look increasingly ominous.

Global trade is sluggish. In the first four months of the year, it rose only 2 per cent in volume terms, fell 12 per cent in dollar terms, year-on-year. Exports of Asian countries that are particularly sensitive indicators are looking awful.

Investment in expanding productive capacity is weak. The gap between new orders and stocks held by manufacturers is the poorest in three years.

Inflation is trending downwards in the US, Europe, China and Japan, with the rise in consumer prices in purchasing-power terms down over the past two years from 3 per cent to 1.2 per cent.

The OECD – the think-tank of mature economies – has cut its forecast for growth this year from 3.7 per cent to 3.1. The US is only expected to grow 1.1 per cent according to the Atlanta Fed’s latest GDP Now model. Europe and Japan are forecast to deliver minimal growth, while the most dynamic constituent of the world economy, China, is losing momentum.

Of course, there are some positive factors to counter the gloom. The fall in oil prices, by improving users‟ spending power, is adding 0.25 percentage points to economic growth. Central banks show no sign of retreating from their extreme money and credit creation policies to stimulate growth. In the US unemployment continues to fall, wage gains have started to gain traction, the housing market is looking better.

David Fuller's view -

This is an interesting section and Martin Spring gives plenty of reasons why he still thinks global GDP growth will remain weak for many more years.  He could be right and obviously no one knows for sure.  I have repeatedly said in recent months that if may take two or three more years before we see a clear improvement in global growth.  Fortunately, the more enlightened governments and central bankers understand the challenge.  They are also addressing it, from the USA to India and obviously many more countries. 

They are also doing so in an environment of globalisation and accelerating technological innovation.  These changes are not without significant challenges, but the long-term benefits are likely to be far greater.  We already see this in so many areas, from the development of increasingly influential corporate Autonomies, to lower energy costs, and previously unimaginable developments in bioTechnology.  This is not just a limited or theoretical net gain for mankind.  Look at the increasing growth in the world’s middle classes over the last decade and counting.         

Martin Spring's On Target is posted in the Subscriber's Area.



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July 27 2015

Commentary by David Fuller

Giant Air-Sucking Machines Could Be the Solution to Carbon Dioxide Problem

Here is the opening of this article from Business Insider’s Tech section

This company wants to solve global warming using giant fans.

Canadian company Carbon Engineering is building machines that suck carbon dioxide out of the air by pulling it through a fluid, where it can either be discarded or recycled to be used as fuel.

Trees do the same thing, but the fan machines would ideally be built in areas where you couldn't plant trees, such as deserts, Popular Science reported.

Technologies have already been developed for capturing carbon dioxide from smokestacks before it reaches and pollutes the atmosphere, for example. But Carbon Engineering plans to do it by capturing CO2 that's already in the air, like emissions from cars, trucks, and planes.

David Fuller's view -

I am glad that people are addressing the challenge but this project sounds noisy, cumbersome and with too many moving parts to be efficient.  



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July 24 2015

Commentary by Eoin Treacy

Email of the day on valuations

Many a book has been written on the back of the stats that show that buying low P/E, low P/B companies is far, far more rewarding in the long run than buying the expensive stocks regardless of the potential for growth. As you say it is a judgement call and of course momentum can go on for longer than you can remain bearish to serially misquote Keynes! But Jeremy Grantham is fond of saying value managers are never wrong just early! I'd rather wait for those opportunities which are hard to find right now unless you go looking in unusual places like Vietnam and Burma!

Eoin Treacy's view -

Thank you for sharing your experience and for this email of general interest. Thanks also for the related article. Here is a section:

As you can see, every time the market fell to a P/E ratio of between zero and 7x, you would have made, on average and after inflation, 11% a year, every year for a decade The small print, of course, is every time the market was at those levels, there was something so scary, so apocalyptic, so death-of-equities going on, you would have had to force yourself to buy in but, if you did, you saw a fantastic real return.

Whenever you paid a higher price, however, you would have seen a correspondingly worse return and here is the killer – whatever helped you to justify paying a higher price was irrelevant. Better business? Stronger economic environment? Higher growth? World-changing new Technology? It did not matter. What is more, it did not matter even if it turned out you were 100% right about the outcome.

Is it better to enter following a market crash rather than when you are six years into an uptrend? Yes. Is it the only time you should buy? No. The whole point of looking at trends and consistency is so that you can get the rhythm of the market, identify when the best time to participate is, manage the position and identify topping activity which is not something cyclically adjusted P/Es offer. Above all else we have to cultivate the ability to deal with the market as it is rather than how we would like it to be. 



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July 24 2015

Commentary by Eoin Treacy

The Bacterial Origins of the CRISPR Genome-Editing Revolution

This report by Erik J Sontheimer and Rodolphe Barrangou may be of interest to subscribers. Here is a section: 

Like most of the tools that enable modern life science research, the recent genome-editing revolution has its biological roots in the world of bacteria and archaea. Clustered, regularly interspaced, short palindromic repeats (CRISPR) loci are found in the genomes of many bacteria and most archaea, and underlie an adaptive immune system that protects the host cell against invasive nucleic acids such as viral genomes. In recent years, engineered versions of these systems have enabled efficient DNA targeting in living cells from dozens of species (including humans and other eukaryotes), and the exploitation of the resulting endogenous DNA repair pathways has provided a route to fast, easy, and affordable genome editing. In only three years after RNA-guided DNA cleavage was first harnessed, the ability to edit genomes via simple, userdefined RNA sequences has already revolutionized nearly all areas of biological science. CRISPR-based technologies are now poised to similarly revolutionize many facets of clinical medicine, and even promise to advance the long-term goal of directly editing genomic sequences of patients with inherited disease. In this review, we describe the biological and mechanistic basis for these remarkable immune systems, and how their engineered derivatives are revolutionizing basic and clinical research.

Eoin Treacy's view -

BioTechnology represents a truly exiting story and has real potential to greatly enhance quality of life for millions if not billions of people over the coming decades. However related stocks are somewhat overbought at the present time and potential for mean reversion is looking more likely than not.  



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July 23 2015

Commentary by Eoin Treacy

New Japanese hotel has robot staff and no room keys

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

Robots are deployed at the front desk to help guests check-in and out. According to the Henn-na Hotel, it's possible to hold a conversation with the "warm" and "friendly" robots while they get on with their work. Alternatively, self-service check-in and check-out eliminates the need to go to the front desk or to wait in line.

There are porter robots employed to carry luggage to and from rooms, and cleaning robots employed to keep the hotel spotless of their own accord. There is also a robot employed in the cloak room. Objects up to the size of small bags can be handed over and the robot will put them away in secure lockers. When the belongings are needed, the robot will locate them in the correct locker and hand them back to the guest.

 

Eoin Treacy's view -

This Huffington Post article from more than a year ago highlights how Technology that already exists can be combined to displace waiting staff at restaurants. Today’s news that New York has voted to increase fast food wages to $15 following Los Angeles’ decision to raise its minimum wage to $15 earlier this year will only accelerate the incentive for technological integration 



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July 22 2015

Commentary by Eoin Treacy

Hackers Show They Can Take Control of Moving Jeep Cherokee

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

The two hackers, Charlie Miller, a Twitter employee based in St. Louis, and Chris Valasek, a director at the security firm IOActive, demonstrated in an article and video published in Technology magazine Wired their ability to wirelessly access a vehicle’s systems. The researchers, who have been probing vulnerabilities in connected automobiles for years, previously could only take over a car by hacking from a laptop connected by cable to a moving vehicle.

Mr. Miller defended releasing the information, arguing he is improving auto safety by drawing attention to the issue. “We both want the same thing, to keep drivers safe from a cyberattack,” said Mr. Miller, who used to work on hacking tools for the NSA. “All I can do is point out flaws in their vehicles, get other researchers working on this issue and make suggestions.”

 

Eoin Treacy's view -

A link to the full article is posted in the Subscribers' Area.

The lesson here is that not only is every internet connected device susceptible to outside interference but that interested parties have the capability to achieve their goals with relative ease. Cybersecurity remains a growth industry not least as our homes become progressively more connected and as the online economy grows and potentially overtakes the physical economy in the coming decades. 



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July 21 2015

Commentary by David Fuller

Apple: A Weird, One-Sided Relationship with Australia

Lost in the collective freak-out over Apple's quarterly results this morning is the fact that the tech giant's cash stash is now above $US200 billion ($270 billion). And some of that is thought to be invested in Australian assets. How much? We don't know for sure.

Wall Street wasn't particularly thrilled with Apple's quarterly results on Wednesday morning. Shares dived by nearly 9 per cent - losing around $US62 billion dollars from its market value in a matter of minutes - after sales of iPhones underwhelmed and the impact of the much-heralded new Apple Watchfailed to move the needle. Apple is still growing (revenue was up 45 per cent, year on year) at rates most companies would die for, but investors are incredibly fickle beasts when it comes to results from the world's biggest company. 

The tech colossus added another US$9 billion to its vast position in cash and short-term investments, bringing it to $203 billion - more than the foreign reserves of countries like Germany, the UK, France, Canada and yes, Australia. 

Since Australia has one of the highest iPhone penetration rates in the world, it's reasonable to assume it generated some of that money in the last quarter (and all those quarters before) by selling devices on these shores. 

Yet, as reporting by the likes of The Australian Financial Review's Neil Chenowethhas shown, Apple doesn't pay much tax on its sales here, using notoriously complex schemes to shifts its profits to lower taxing jurisdictions. Apple doesn't repatriate profits generated outside the US into its home country due to steep taxes, but its cash is managed by a secretive offshoot in the Nevada desert called Braeburn Capital. It's not unreasonable to think Braeburn has invested some of that cash into Australian government debt (which carries a triple A rating and offers higher interest rates than other countries do). The company didn't immediately respond to our enquiries on this issue. 

Apple also quite possibly owns debt issued by Australian banks. A recent report by Bloomberg said representatives from all of Australia's big four banks, heavily reliant on overseas funding to write loans domestically, had sent representatives to visit Braeburn. 

If so, this would mean Australians aren't just buying iPhones and other devices, they're also effectively paying Apple interest. In return we get...great products. It's pretty clear who's getting the best out of this relationship, and it's not Australia.

Not that this is going to change anything when it comes to Apple's products, of course.  They're so incredibly good, it's practically a given that Australians will continue to feverishly buy them. 

 

David Fuller's view -

This five-year weekly chart of Apple shows trading during Wall Street’s official market open hours, as the results were reported after Tuesday’s close.  However, I can tell you that iconic Apple is trading over $10 lower, uncomfortably close to retesting prior support near $120.

This item continues in the Subscriber’s Area. 



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July 20 2015

Commentary by Eoin Treacy

Make way for the Sun

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

India has made an exceptional commitment to solar energy by raising its 2022 target five-fold to 100GW and its Renewable Energy target to 175GW. The government has announced an unprecedented policy push and states are providing the necessary infrastructure. Annual investments in solar could surpass investment in coal by 2019-20, with USD 35bn committed by global players. For local IPPs, solar has to be an inherent part of their expansion strategy, as RE obligations become strictly enforceable and cost of coal power increases. NTPC, Adani and RPWR are ahead in this development cycle which  adds 10-15% to our current valuations. NTPC is our top pick.

We raise our solar power forecast by 240%
Global majors have committed USD 35bn+ to the Indian solar sector. By 2020, annual solar power capacity additions and investments could surpass those in coal power projects. We are raising our solar power forecasts by 240% to 34GW by 2020. This is on the back of strong commissioning (4.5GW), even stronger pipeline - under construction (~5.1GW), and new projects (~15GW). By then, renewables could account for a significant 20% of power capacities in India, per our forecast. Private sector interest is decisively moving towards solar from coal power, and we foresee numerous opportunities of fund-raising, yield co-structuring and M&A activity.

RE can reach 20% of capacity but we see challenges to higher penetration
(1) Transmission constraints and integration of diurnal power into the grid are risks, without peak-load management capability. Solar absorption in Rajasthan could see challenges like wind in Tamil Nadu, given policy target of 25GW solar vs. peak-demand of 11GW. (2) A further risk is the enforcement of RE purchase obligations (RPOs) given weak finances of state distribution cos, and hence large-scale absorption of solar could be a concern (INR 170bn additional burden by 2020E). (3) Other issues include financing, land acquisition, limited domestic manufacturing, and returns/reliability of baseline data. 

Impact on the thermal power producers 
Solar could have a significant impact on day power rates, given that generation peaks between 9am and 6pm. In turn, this could reduce the coal requirement by ~8% or 70mnt by 2020E, largely impacting the highest cost of power, i.e., imported coal – leading to large savings (~USD 17bn/pa).

Eoin Treacy's view -

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

India has highly favourably demographics but if that dividend is to be realised the country needs to embark on a long-term policy of industrialisation. Narendra Modi’s government understands what has to be done and is gradually making the changes needed to unlock India’s considerable development potential. 

On its path to industrialisation China built huge numbers of coal fired power stations which facilitated growth but poisoned the air. It is now faced with an environment challenge that is proving expensive to correct. India has the potential to  partially circumvent at least these challenges by taking advantage of improvements in Technology that were not available to China when it began to industrialise. 

 



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July 17 2015

Commentary by Eoin Treacy

Silicon Valley Does Not Believe U.S. Productivity Is Down

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

“I’m always reluctant to point a finger at failure in measurement because it feels like you’re making excuses, ” says Marco Annunziata, chief economist for General Electric Co. One explanation for the paradox of low productivity in a time of technical advances may be the uneven way innovation spreads, he says. Some firms gobble up new Technology while others don’t, so productivity growth could be lagging because many U.S. companies are laggards.

American business since the recession has, in fact, been stingy about investing in new equipment.
It may also be harder for companies to charge higher prices for innovated product lines, Preston McAfee, Microsoft Corp.’s chief economist says. For instance, when UPS started using new GPS Technology to speed package deliveries, it couldn’t charge more for the improvement in service because FedEx and other carriers could easily match them.

“Maybe our mysterious productivity gain is in the form of less inflation than we deserve,” Mr. McAfee says.

Back at Google, Mr. Varian admits that slow and uneven adoption of new Technology puzzles him. “If you go to Europe,” he says of restaurants there, “all the servers have hand-held devices for ordering, payment.” But the Technology has yet to spread across the U.S., even though it would make a slice of the economy more productive.

 

Eoin Treacy's view -

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

Productivity is the kind of subject that gets economists animated with some saying they see none over the last decade and that in fact there is no prospect of it getting better while others believe we are on the cusp of meaningful improvement. At this service we fall squarely into the latter camp. 



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July 14 2015

Commentary by Eoin Treacy

Mexico Battles Bad Timing in 1st Sale of Oil Fields Since 1930s

This article by Adam Williams and Juan Pablo Spinetto for Bloomberg may be of interest to subscribers. Here is a section: 

Mexico waited 77 years to invite foreign oil producers back into its borders. That was one year too many.

The move to lure tens of billions of dollars from the likes of Exxon Mobil Corp. will be put to the test for the first time at an oilfield auction on Wednesday. With oil prices down by about half since last year, five of 38 potential bidders including Glencore Plc, Noble Energy Inc. and even Mexico’s state-owned oil producer have pulled out.

President Enrique Pena Nieto moved to end the state monopoly after poor drilling infrastructure and Technology failed to reverse a decade-long production decline that reduced government revenue. To lure investments now, Mexico will probably get a much smaller share of profits than it would have a year ago.

“They shaped expectations at a $100-per-barrel market and we are way off that now,” Wilbur Matthews, chief executive officer of San Antonio-based Vaquero Global Investment, which oversees more than $100 million of assets including oil-producer bonds, said by phone July 10.

 

Eoin Treacy's view -

Favourable geology doesn’t just stop at the border between Texas and Mexico. Officials must have been looking on with envy as the shale boom took off in the US south west. Mexico’s state owned oil company dealt with declining output. Today’s news of Iran reaching an agreement to end sanctions and increase oil exports is another reason for Mexico to ramp production. The country will not get the same price they were hoping for from producing unconventional supplies and boosting offshore but it has little choice but to develop these reserves if the hole in its budget is to be repaired. 



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July 13 2015

Commentary by Eoin Treacy

Email of the day on oil prices and Canadian producers

I'm looking for your view again on the Canadian energy sector.  I obviously am aware of the effect Technology has had on the shale boom etc...I do disagree with most assertions that there is a flood of supply in oil at these price levels.  Anyway, aside from that- how do we go into this massive global GDP growth phase and not require an abundance of resources of all kinds?  Technology has brought on supply but they require much higher prices to break even.  Help me reconcile how we have this huge growth backdrop and yet the market is pricing in disaster levels in Canada?  Is the energy sector forever dead or is this a tremendous buying opportunity?   Thanks as always. Hope you and your family are well.

Eoin Treacy's view -

Thank you for a question sure to be of interest to the Collective. My family are all in rude health thank you. The oil sector has a lot of moving parts so let’s try to pick it apart. 

Saudi Arabia is pumping oil like it is going out of fashion and in a sense it is. The evolution of solar in particular, but also other renewables, batteries, electric cars, hydrogen fuel cells and the migration of work onto the cloud mean that oil now has challengers both as a transport fuel and for heating. 

 



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July 07 2015

Commentary by Eoin Treacy

Refracking Is the Hot New Craze Sweeping Across Shale Oil Fields

This article by Dan Murtaugh, Lynn Doan and Bradley Olson for Bloomberg may be of interest to subscribers. Here is a section:

A study by Bloomberg Intelligence of about 80 wells that were originally tapped in North Dakota’s Bakken formation in 2008 or 2009 and then refracked again years later shows a clear pickup in output. The wells on average produced more than 30 percent more oil in the month after the refrack than they did after the original completion, according to analysts William Foiles and Peter Pulikkan.

While these kinds of increases are important to traditional drillers, they’re crucial in the shale industry, where output can start falling within days of a well being tapped. Companies such as EOG Resources Inc., the largest shale oil producer, have long acknowledged that they generally are recovering just a small fraction of the oil and gas in place in the biggest and most prolific reservoirs.

“We’ve seen big changes in completion Technology, and it looks like that’s only going to continue,” said R.T. Dukes, an upstream analyst at Wood Mackenzie in Houston. He estimates that there are about 100,000 horizontal wells that could be restimulated. “At that point, it becomes significant.”

 

Eoin Treacy's view -

A subscriber contributed an informative email last week highlighting how the array of terms associated with hydraulic fracturing can be useful when playing scrabble but I got to thinking about the potential for Technology to increase well output as a result. Refracking is not without risk, but the economics of the process when a well has already been drilled are compelling particularly when development budgets have been slashed due to low prices. 



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July 03 2015

Commentary by Eoin Treacy

Platinum into the next decade

Thanks to a subscriber for this detailed report offering a nuanced view on the platinum market which may be of interest. Here is a section: 

The world still needs more platinum despite the fall in Autocat loadings
The rise in electric vehicles (EV’s with very low or no PGM’s) will reduce the average vehicle platinum loading and contribute to lower demand growth than we have seen historically. Importantly however, under what we consider reasonable (2.6% CAGR) vehicle demand growth, we still forecast growth in gross Autocat demand. A modest increase in fuel cell vehicles (with high platinum loadings) is likely to offset some of the platinum demand destruction from EV’s. Furthermore a “catch-up” in emission standards in the emerging markets such as India and China should also offset the general trend in declining loadings. We outline our forecasts for platinum. Under our base case, we forecast that an additional 1.5Moz will be required by 2030.

The Auto sector is nearly self sufficient due to recycling.
We forecast a continuation in the trend of the increasing metal units being returned to the market over the next fifteen years. The three major Autocat producers (BASF, Johnson Matthey and Umicore) are all adding recycling refining capacity, specifically targeting recycled material. Furthermore, the tranches of Autocats being returned to the market over the next few years all have higher PGM loadings, especially in platinum. We forecast Autocat platinum volumes to double by 2030, which equates to a CAGR of 4%. 

However, the CAGR between 2014 and 2021 is likely to be closer to 8%.
We estimate that the Autocat industry will be a net supplier to the market up until 2020, whilst the additional new ounces required by 2025 will be negligible. By 2030, the additional requirement should be 300koz, equivalent to a large platinum mine, or a two mid-sized mines. The net result is that Platinum demand (post recycling) growth should be slower over the next fifteen years, compared to the historical trend. We estimate a CAGR of 1.1% versus the trend (1975 – 2014) of 2.2%.

Enough replacement ounces from the existing supply base until 2021
The amount of new platinum ounces required from the Southern African mining industry is limited, especially over the next seven years. The existing fleet of development and replacement projects should be sufficient to offset the endemic grade decline and mine depletion (see Figure 6). Furthermore, these projects have favourable economics relative to the current production base, as most projects have also sunk significant capex, lowering the return requirement as a result.

 

Eoin Treacy's view -

The automotive sector is in a process of evolution with China mandating greater use of electric vehicles and tighter emission control while Tesla represents the cool side of the sector. Toyota, Linde, among others, and the platinum miners are championing the build out of hydrogen fuel cells. Both represent corollaries to innovation of solar and wind Technology that is making distributed electricity production possible. Sergio Marchionne at Fiat is arguing for fabless manufacturing in the automotive sector which has the potential to act as an additional catalyst for the sector. 



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July 02 2015

Commentary by Eoin Treacy

German Wind-to-Hydrogen Plant Takes Car-Fuel Battle to Tesla

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

Still, hydrogen-fuelled cars have two main advantages over their battery-powered rivals, said Salim Morsy, a New-York based analyst for Bloomberg New Energy Finance.

“They are faster to refuel and have much longer ranges than electric ones,” the analyst said. “It can take just five minutes to refuel a hydrogen car for a range of 400 miles, compared to up to a seven hour charge for an electric vehicle to travel just 200 miles.”

Linde says Energiepark Mainz could help put an end to the criticism that hydrogen fuel cells are only marginally more environmentally friendly than traditional combustion vehicles, and allow the gas to be extracted anywhere there’s wind and water. BMW AG is also starting tests of a vehicle powered by hydrogen this month.

 

Eoin Treacy's view -

In 1874 Jules Verne hypothesised in the Mysterious Island “water will one day be employed as fuel, that hydrogen and oxygen of which it is constituted will be used”. It’s been a long time coming and we are not there yet but producing hydrogen cheaply and cleanly represents a major breakthrough in the potential for it to be reused as a transport fuel. Toyota putting the Mirai into production represents a major bet that the Technology has reached commercial utility.   



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June 30 2015

Commentary by Eoin Treacy

Musings from the Oil Patch June 30th 2015

Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB. Here is a section on Canadian oil supply:

The significance of the oil sands on global oil supply cannot be ignored. Over the past five years, oil sands output has grown by 1.1 mmb/d, fully one-fifth of the total oil production growth for North America. The impact of lower oil prices on the oil sands cannot be missed. Early in 2014, Western Canada Select, a heavy oil price market, was selling at $86 a barrel. By the end of March, that marker was trading below $30 a barrel. This is when, according to oil industry consultant Rystad Energy, new oil sands projects require a price of $100 a barrel in order to breakeven. What’s been the impact of the price decline on the Canadian oil industry?

In February, Royal Dutch Shell (RDS.A-NYSE) withdrew its application to build a new 200,000 barrels per day (b/d) mine at Pierre River, north of Fort McMurray. In May, the company announced it would delay for several years a new 80,000 b/d in situ oil sands project at Carmon Creek near Peace River. The significance of these projects is highlighted when one realizes that Shell currently operates 225,000 b/d of oil sands production. Other projects are being delayed as companies plan to bring much smaller in situ projects into production at a delayed pace in order to manage their cash flow and capital investment requirements.

A June 16th report from Ernst & Young LLP projects a 30% decline in Canadian oil sands spending, bringing this year’s investment to $23 billion, down from an expected $33 billion. The result of this spending decline and the announcements by several producers to stop or delay new oil sands mines and in situ projects means total oil production will be 17% lower by 2030 compared to the target output in the 2014 forecast provided by the Canadian Association of Petroleum Producers (CAPP).

In addition to cutting new investment, oil sands producers are looking at ways to cut their operating costs to help improve their breakeven prices. Suncor Energy (SU-NYSE), a significant oil sands producer, has said it plans to replace 800 dump truck drivers with automated trucks at its oil sands mines. That move, which is a huge boost for autonomous vehicle Technology, is projected to save the company C$200,000 per driver.

 

Eoin Treacy's view -

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

Decisions to postpone or cancel spending on new projects has long-term consequences for oil supply growth forecasts not least when this situation is not limited to Alberta. Oil and gas companies are cutting expenditure wherever they can in order to remain profitable in what could be a persistently low price environment, at least relative to the levels that prevailed until a year ago. 



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June 29 2015

Commentary by Eoin Treacy

Fintech reloaded Traditional banks as digital ecosystems

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

Isolated solutions are often only implemented in a fragmented fashion from division to division. Innovation processes are still being driven forward laboriously using an outdated silo approach. Furthermore, many banks' command of the global “language of the internet” is still deficient. The banks will not achieve resounding success using such methods. Digital change requires far-reaching structural reforms that extend beyond all internal and external bank processes and systems.

The new market players from the non-bank sector, by contrast, have an almost perfect understanding of the language of the internet. First and foremost it is the scarcely regulated digital ecosystems, but there are also many fintechs that are using their platforms and ingenious “walled garden” strategies to dominate markets across a range of sectors. Their recipe for success is based on the harmonious interplay between implemented hardware and software. Via the optimum interlinking and utilisation of compatible and interoperable standards/technologies we – the platform-spoiled consumers – are courted with attractive products and services conveniently, globally and from a single source. 

Traditional banks could do this, too, however. This now provides the opportunity to swiftly learn and adopt the strengths and particularly the monetarisation strategies (walled gardens) of the successful digital ecosystems.

There are many benefits to be gained by banks that transform themselves into platform-based, digital banking ecosystems. Apart from easy access to numerous personalised products and services, including those of external providers, as well as a more secure IT environment, the customer can also make interactive contributions on the financial platform in a variety of useful networks. Furthermore, the banking ecosystem offers a flexible corporate architecture that will in future enable as-yet-unimagined technologies to be docked onto one's own infrastructure in a timely fashion and at an acceptable cost.

 

Eoin Treacy's view -

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

Fintech (finance Technology) is rapidly advancing as the evolution of the block chain, demand for enhanced online services and the economies of scale represented by services delivered online coalesce to drive the sector’s growth.  



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June 26 2015

Commentary by Eoin Treacy

Chinese Stock Plunge Leaves State Media Speechless

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

In a front-page commentary on Tuesday, the China Securities Journal said the nation’s “liquidity bull market” was “taking a break.” Future gains would be “slow” and driven by government efforts to reform state-owned companies, the paper said, echoing an earlier article by the state-run Securities Times.

The takeaway is that authorities are trying to discourage speculative bets on the highest-flying stocks, Yan said. Instead, the government wants to steer money toward state-run companies, which tend to trade at lower valuations.

The message appears to be sinking in. Margin debt, a favorite tool of speculators, has dropped for four straight days on the Shanghai Stock Exchange. Technology shares, which almost doubled this year, lagged behind the broader market this week. Government-run utilities, meanwhile, posted some of the biggest gains.

 

Eoin Treacy's view -

If the chatter on Mrs.Treacy’s Wechat network is anything to go by, speculators have been heading for the door in droves in response to this week’s drawdown. That would be in line with reports of margin debt contracting. 

The Chinext Index of Shenzhen listed growth companies has a P/E of 98. 79 of its 100 constituents were down the daily limit of 10% today. Trading was halted on 11 more. The Index was the primary destination of speculative flows over the last six months and is now rapidly unwinding its overbought condition following an accelerated advance. 

 



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June 23 2015

Commentary by David Fuller

Greece 93 Percent Certain to Keep Euro This Year, Betfair Says

Here is the opening of this topical article from Bloomberg:

Gamblers increasingly see Greece staying in the euro region amid optimism a deal can be sealed to keep aid flowing to Athens.

Betfair Group Plc put the odds of Greece not leaving the currency bloc this year at 1/14, meaning a successful 14-pound bet ($22) wins one pound, compared with 1/5 on Monday. Those odds imply a 93 percent chance Greece will keep the euro, Betfair said.

“Punters have clearly made up their mind that Greece will stay in the euro zone, for the remainder of this year at least,” said Naomi Totten, a spokeswoman for the London-based betting company.

 
Betting markets can provide clues to the direction of events. So certain was Betfair of the outcome of the Scottish referendum last year, it paid out on voters rejecting independence two days before the ballot, even after polls suggesting a tight contest had sent the pound tumbling.
David Fuller's view -

Markets began to discount an agreement enabling Greece to stay within the Eurozone on Monday.  This will please equity bulls and anyone who wishes the Euro region well, including the USA’s government.  The US Federal Reserve will feel that a major international uncertainty, which would have most likely caused it to delay further that first interest rate increase, has been removed.  However, it will view today’s rise in the Dollar Index with dismay.  The Fed could intervene once again, although at best this is a policy only used when the currency has changed sufficiently rapidly to impede the economy, as we saw with 1Q’s GDP figures, including a slowdown in corporate profit growth.  Moreover, Janet Yellen will know that there are good reasons to expect the US Dollar to strengthen further over the long term, not least because of America’s Technology lead.  The Fed wants to raise rates gradually but it does not want this to boost the Dollar.  Therefore it could hope that this may be a case of ‘buy the rumour, sell the news.’  However, if the Dollar continues to rally towards it March-April highs, it could try to jawbone it lower and/or sell it aggressively should it approach 100 once again.

This item continues in the Subscriber’s Area.



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June 23 2015

Commentary by Eoin Treacy

The Way Humans Get Electricity Is About to Change Forever

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

The price of solar power will continue to fall, until it becomes the cheapest form of power in a rapidly expanding number of national markets. By 2026, utility-scale solar will be competitive for the majority of the world, according to BNEF. The lifetime cost of a photovoltaic solar-power plant will drop by almost half over the next 25 years, even as the prices of fossil fuels creep higher.

Solar power will eventually get so cheap that it will outcompete new fossil-fuel plants and even start to supplant some existing coal and gas plants, potentially stranding billions in fossil-fuel infrastructure. The industrial age was built on coal. The next 25 years will be the end of its dominance.  

2. Solar Billions Become Solar Trillions
With solar power so cheap, investments will surge. Expect $3.7 trillion in solar investments between now and 2040, according to BNEF. Solar alone will account for more than a third of new power capacity worldwide. Here's how that looks on a chart, with solar appropriately dressed in yellow and fossil fuels in pernicious gray:  

3. The Revolution Will Be Decentralized 
The biggest solar revolution will take place on rooftops. High electricity prices and cheap residential battery storage will make small-scale rooftop solar ever more attractive, driving a 17-fold increase in installations. By 2040, rooftop solar will be cheaper than electricity from the grid in every major economy, and almost 13 percent of electricity worldwide will be generated from small-scale solar systems.

 

Eoin Treacy's view -

The pace of technological innovation in solar is rapid and the argument that Moore’s law is applicable is gaining ground as the sector attached increasing research and development spending. The difficulties reported in getting the Ivanpah concentrated solar facility, in the Mojave Desert, up to peak performance is a setback suggesting the time required to deliver new technologies might be longer than some are currently envisaging. Here is a section from a Huffington Post piece dated November 17th: 

"During startup we have experienced ... equipment challenges, typical with any new Technology, combined with irregular weather patterns," NRG spokesman Jeff Holland said in a statement. "We are confident that Ivanpah's long-term generation projections will meet expectations."

The Technology used at Ivanpah is different than the familiar photovoltaic panels commonly used for rooftop solar installations. The plant's solar-thermal system — sometimes called concentrated-solar thermal — relies on nearly 350,000 computer-controlled mirrors at the site, each the size of a garage door. 

 



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June 22 2015

Commentary by Eoin Treacy

June 19 2015

Commentary by Eoin Treacy

The State Of U.S. Listed China Based Companies Going Private

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

We believe part of the motivation for management teams to welcome going private deals is the belief by many investors that the China "A" share stock market may see a sharp correction within the next several months.

The Chinese "A" share stock market contains exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange, where shares of China mainland-based companies are listed. "A" shares are generally only available for purchase by China mainland citizens.~

Thus, ChinaHyrbid management teams and private equity firms may be scurrying to take advantage of the huge valuation gap between ChinaHyrbids and "A" share companies – before the "A" share market corrects – by going private and then eventually re-IPOing in China at much higher valuation multiples.

For example, the Chinex Price Index (SHE: 399006), which is the index that includes small cap growth companies in the China A share market, has an average P/E of 115 as of June 18, 2015. However, the non-binding go private price of QIHU of $77.00 is only 22 times of the analyst estimated EPS in 2015.

 

Eoin Treacy's view -

The Chinese government views the internet as just another organ of the Party’s apparatus like roads or TV stations. The challenge they have is that private sector entrepreneurs who have spearheaded the development of the Chinese Technology sector have lower participation rates in the Party than other sectors. An effort has been underway to recruit more people from the Technology sector into the administration. Wishing to see more companies take out listings on the mainland rather than decamping to the USA, Singapore or Hong Kong can be seen in these terms. It also helps explain the rationale behind the sweeteners currently on offer for returning companies. 



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June 19 2015

Commentary by Eoin Treacy

The Fintech 2.0 Paper: rebooting financial serv

Thanks to a subscriber for this report which originated at Santander InnoVentures. Here is a section: 

In contrast to today’s transaction networks, distributed ledgers eliminate the need for central authorities to certify ownership and clear transactions. Distributed ledgers can be open, verifying anonymous actors in the network, or they can be closed and require actors in the network to be already identified. The best known existing use for the distributed ledger is the cryptocurrency Bitcoin. 

Distributed ledger Technology has several attractive features: 
Transactions can be made to be irrevocable, and clearing and settlement can be programmed to be near-instantaneous, allowing distributed ledger operators to increase the accuracy of trade data and reduce settlement risk. 

Systems operate on a peer-to-peer basis and transactions are near-certain to be correctly executed, allowing distributed ledger operators to eliminate supervision and IT infrastructure, and their associated costs. 

Each transaction in the ledger is openly verified by a community of networked users rather than by a central authority, making the distributed ledger tamper-resistant; and each transaction is automatically administered in such a way as to render the transaction history difficult to reverse. 
Almost any intangible document or asset can be expressed in code which can be programmed into or referenced by a distributed ledger.

A publicly accessible historical record of all transactions is created, enabling effective monitoring and auditing by participants, supervisors and regulators. 

Commercial banks, central banks, stock exchanges and major Technology providers, such as IBM and Samsung, are all exploring the potential uses of distributed ledgers. Fintechs, such as Ripple, Ethereum, Eris Industries10 and HyperLedger, are also developing new ways to exchange data and assets enabled by the Technology. It is only a matter of time before distributed ledgers become a trusted alternative for managing large volumes of transactions.

 

Eoin Treacy's view -

Contracts, transactions, records of ownership and trade can all be streamlined through the development of blockchain Technology. In an environment where internet security is an increasingly pressing issue, there is little doubt that this is a sector which will become a major part of global legal and financial infrastructures over the next decade. 



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June 18 2015

Commentary by David Fuller

Email of the day 1

On my Markets Now presentation:

David, in my 15 years as a subscriber I have developed great respect for you. Over this period of time I have spent gobs of money on news letters, services etc. And I have become what I believe to be a pretty successful money manager in my own right. Fuller Treacy Money is the only outside research / commentary I still use all these years later. I'll argue any day of the week that Dennis Gartman should be a plumber and you should be on CNBC (or Eoin). 

That all being said, this is a bell you have rung more often than I can remember. I will ask you the same thing I have asked you every other time, "what are you seeing on the charts that tells you this?"  It's not possible that you are caught up in the day to day media driven noise. You must be seeing something I'm not because there is nothing in the rates charts that shows this to be true.  Even with this huge well advertised move in the long end, we are at no higher yields than multiple bottoms last year. 

I'm not saying it's not true, and that this is the bell for the downward break, but the charts don't reflect that. We are firmly in support. If support is broken, than yes, I'll be selling rates. But as far as I'm concerned this looks like the same buying opportunity we had last year. 

I'll respect you just as much either way :+)

David Fuller's view -

Many thanks for your long interest in our service and the informative reports which you also provide.

Thanks also for a good question of general interest.  I think subscribers pay us to anticipate, sensibly, rather than just point out confirmation of trend reversals, which on this 10-year T-Bond chart would probably require a sustained break above 3% to 4% over the potentially lengthy medium term. 

So why the earlier warnings which did not work out?  I think we saw clear evidence of base development between May 2003 and up until June 2007, characterised by a steep decline followed by higher reaction lows.  However, that recovery quickly unravelled with the onset of the severe credit crisis recession, which broke the rising lows on the yield chart, and QE helped to drive yields to record or near-record lows. 

The percentage volatility increase that we have been seeing on this historic semi-log chart above is a bottoming characteristic.  It is also an approximate upside down mirror image of the topping activity shown between February 1980 and June 1984. 

At this point I have to ask, are we likely to see a repeat of the 2008 credit crisis or just an interminably long slump, à la Japan?  Theoretically, anything is possible but I doubt it, not least because the Fed threw an enormous amount of QE at the economy to prevent destructive deflation.  Instead, we have mostly positive deflation coming from Technology.  Over six years since the credit crisis recession, I am now looking for further evidence of economic recovery.  More importantly, so is the Fed.



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June 16 2015

Commentary by Eoin Treacy

Musings From the Oil Patch June 15th 2015

Thanks to a subscriber for this report by Allen Brooks for PPHB. Here is a section: 

While Dr. Larsen believes the suburbs are not going away, he points out that they are not like the suburbs in the 1950s. Both parents are often working and school activities are no longer at the schools but miles away at soccer fields and violin teachers. As a result, there will be opportunities for different transportation solutions. Dr. Larsen pointed to Mercedes' Boost business, where minivans drive children after school, but rather than school buses they drive them door-to-door. Parents can track their children with smart phone apps and the minivans have both a driver and a concierge on board. The driver cannot leave the minivan but the concierge can walk children to the door or their after-school activity. In his view, Americans will not give up their own cars. “Americans like to do everything in cars.” He pointed out that Americans eat in cars, drink in cars, have entertainment in cars, change clothes and have sex in cars. People often sleep in their cars and spend a lot of time waiting for their children. As Dr. Larsen points out, “Driving is really the distracting thing we do in cars.”

While it would appear that little has changed about the desire, need and use of automobiles, what has changed is the inside of the vehicle. “Screens have become more important,” said Dr. Larsen. You can tell how old a car is by its screen, or absence. Leased vehicles may be refurbished more often in order to make them appear newer. Therefore, it is likely there will be fewer new models but more new screen updates. Computer controls within vehicles will become smarter and more intrusive. You won’t be able to enter long addresses into navigation systems while you are driving, but only when you are stopped. After a vehicle has stopped, seat controls will allow you to put your seat back further, letting you work, sleep or watch television from the driver’s seat. The issue will become balancing personalization versus privacy. Sensors in smart phones and vehicles will allow insurers to monitor how you drive and whether you are using your phone while driving. As the nation develops “pay as you drive” car businesses or fuel taxing, Dr. Larsen suggests there are legal issues needing to be resolved, suggesting that the pace of these Technology transitions may not be as quick as assumed, then on the other hand they could happen faster.

 

Eoin Treacy's view -

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

Regardless of how one feels about the potential for autonomous vehicles, electric cars or even hydrogen fuel cells, consumers expect to see more technological gadgetry in their new cars, not least internet connectivity. Auto manufacturers have introduced a lot more added extras over the years with on-board self-diagnostic equipment now ubiquitous. It is reasonable to assume consumer expectations will only become more demanding as reliance on mobile interactivity becomes further ingrained in societal norms. 



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June 15 2015

Commentary by Eoin Treacy

Facebook's Oculus unveils final Rift headset, new controller

This article by Troy Wolverton for San Jose Mercury News may be of interest to subscribers. Here is a section: 

Company officials said the Rift headset will come with a stand-alone sensor that will sit on users' desks. That sensor will track users' head movements as they are wearing the device and their hands when they use the Touch sensors.

But the company held off on announcing many of the details that will be crucial to its success. Oculus has not yet said precisely how much the Rift will cost, which retailers will carry it, when exactly it will be hit store shelves, or how many games will be available when it launches.
Oculus officials said they plan to release more information about the device at the company's Connect conference in September.

The number and diversity of games available for the Rift could be a big potential trouble spot. Oculus only demonstrated three games at the event Thursday, none of which represents a blockbuster title like "Halo" or "Call of Duty." Although one of the games shown is being produced by Insomniac Games, the makers of the "Resistance" series of games, Oculus did not show off any games from any of the major game companies, like Electronic Arts or Activision.

The success of new game systems is frequently determined by the number and range of games available for them. Fledgling systems can often suffer from a chicken-and-egg type scenario: consumers won't buy them until more games are available, while developers won't create games for them until a significant number of units are in consumers' hands.

 

Eoin Treacy's view -

There is a wide range of potential applications for virtual reality devices from entertainment to exercise and shopping. This is an emerging Technology which has been evolving for a long time but is only now reaching commercial scale. 

Three years ago Bloomingdales installed Facecake’s virtual dressing room and Swivel Technology which has not yet gained widespread traction.   The virtual reality retail application pioneered by Context Solutions still has a long way to go if it is to represent an interactive product.  This article by Heather Somerville also from the San Jose Mercury News site dated 2012 is useful for context. 



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June 11 2015

Commentary by Eoin Treacy

The virtual reality revolution, if it's coming at all, starts tomorrow

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

Perhaps game consoles (appropriately) will be the most likely role models for VR platforms. As a child in the 80s, my first experiences with the Atari and NES kindled a wide-eyed sense of wonder that's harder to replicate as an adult. Though those same games only give me slight glimmers of that feeling today, VR rekindles that childlike sense more than any form of entertainment since (certainly more than today's cinematic AAA video games or fads like 3D movies ever did).

Gaming spent many years as a "kids' product," but as that first generation of child gamers grew up – and realized there was no reason for them to leave their hobby behind – it blew up as a lucrative industry that now knows no generational boundaries (well, almost no boundaries – gaming demographics do still lean more towards younger adults than older ones).

Perhaps, like gaming, VR will start with the most wide-eyed of users, and only gradually erode the stigmas and unfamiliarity that keeps the rest of the world from joining the party.

So what do we think? Well, in our eyes, any Technology that can rekindle, and perhaps surpass, the pure joy and awe of playing Super Mario Bros. or Mike Tyson's Punch-Out for the first time – only 30 years later – has a great shot at widespread success. Whether it's in a year or a decade, it may simply be a matter of a) getting VR to a consumer-ready, high-quality stage and then b) getting enough people to try it. That first step began years ago, but the second step starts tomorrow.

Eoin Treacy's view -

As a child of the ‘80s and a watcher of Star Trek the Next Generation in the ‘90s I was one of those who was excited about the impending wide scale release of virtual reality Technology that did not happen. It takes a long time for new Technology to advance enough for it to become a major new consumer product. NASA was one of the primary early developers of the Technology in the 1980s. They envisaged virtual reality as a way for astronauts to control robots remotely in order to reduce the risk to human operatives. The results of DARPA’s robotics competition earlier this week highlight how much robotics Technology has improved but also how far it still has to go. 



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June 08 2015

Commentary by Eoin Treacy

From cars to power grids: battery technology from Daimler is accelerating the transition to renewable energy generation

This article from Daimler highlights its entry into the domestic and commercial energy storage sectors. Here is a section:

Daimler is entering into business in the field of stationary energy storage plants with its one hundred percent subsidiary Deutsche ACCUmotive. The first industrial-scale lithium-ion unit is already on the grid and is being operated by the partner companies The Mobility House AG and GETEC Energie AG. For business with private customers in the area of energy storage in Germany, Daimler AG is planning to collaborate with EnBW AG. Daimler is also aiming to enter into cooperation with other sales and distribution partners both in Germany and at international level. "Mercedes-Benz energy storages provide the best confirmation that lithium-ion batteries Made in Germany have a viable future," says Harald Kröger, Head of Development Electrics/Electronics & E-Drive Mercedes-Benz Cars. "With our comprehensive battery expertise at Deutsche ACCUmotive we are accelerating the transition to sustainable energy generation both on the road and in the field of power supply for companies and private households. The Technology that has proven its worth over millions of kilometres covered in the most adverse conditions, such as extreme heat and cold, also offers the best credentials for stationary use. We have been gathering initial experience in this field since 2012."

Eoin Treacy's view -

Daimler was in the news last month for its introduction of driverless haulage vehicles to Nevada following the state’s legislation on autonomous vehicles. The company’s entry into the domestic and commercial energy storage sectors is equally ground breaking and suggests it has ambitions of being a pioneer in the future of transportation and energy storage. 



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June 02 2015

Commentary by Eoin Treacy

Platinum sector faces Kodak moment in fuel cell technology

This article by Clara Denina & Silvia Antonioli for Mineweb may be of interest to subscribers. Here is a section: 

The world’s three largest platinum producers Anglo American Platinum (Amplats), Impala Platinum and Lonmin are all investing in projects related to fuel cell technologies, which generate electricity that can power vehicles by combining hydrogen and oxygen over a platinum catalyst.

But analysts doubt fuel cell vehicles will rival the growth of their electric counterparts, mostly because battery recharging stations are less costly and already more widespread than hydrogen refuelling stations.

“As out of the two new technologies only fuel cells use platinum, I guess the miners think they have no choice,” Macquarie analyst Matthew Turner said. “But people are buying electric cars…and that’s not the case for fuel cells.”

Amplats, which has invested about $35 million in the last five years in companies developing new uses for platinum, mostly through fuel cell Technology, is mindful of the stakes.

“I don’t want Anglo American Platinum, or any of our partners or customers to be a Kodak,” Amplats Chief Executive Chris Griffith said last week, referring to the once mighty photography pioneer that was slow to transition to digital photography.

 

Eoin Treacy's view -

Platinum miners are not the only companies making big bets on hydrogen fuel cells. Toyota’s decision to release its Mirai fuel cell vehicle later this year and to open its patents to developers highlights their efforts to pioneer new technologies. After all it was Toyota’s Prius that was the first mass market hybrid vehicle. 

Nevertheless, electric cars are gaining increasing traction as solar cell efficiency increases. There is also the potential for wind turbines to be smaller and less noisy. With the advent of home batteries the outlook for electric vehicles is looking even more promising. 



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June 01 2015

Commentary by Eoin Treacy

High Prices for Drugs Attacked at Meeting

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

Dr. Saltz said the combination regimen’s benefit was “truly, truly remarkable for a disease that five years ago we thought was virtually untreatable.” But he said that combining the drugs would cost around $295,000 a patient over nearly one year, which he called unsustainable. If all U.S. patients with metastatic cancer took drugs priced at $295,000 a year, it would cost $174 billion to treat them all for just one year, Dr. Saltz said.

“The unsustainably high prices of cancer drugs is a big problem, and it’s our problem,” Dr. Saltz said, calling on industry, physicians and insurers to work together with government to address the issue.

Dr. Saltz’s estimate of the combination’s cost was based on the average wholesale price of each drug individually and the average weight of a U.S. adult. Opdivo and Yervoy are already approved individually to treat melanoma patients, but not in combination with each other.

Eoin Treacy's view -

BioTechnology companies have in many respects taken over the risk of developing new therapies and medicines from the more established pharmaceutical companies. As a result their products have tended to be more expensive when first released as companies try to make the best commercial utility of their patents before they expire. Nevertheless, is it is seldom good for business when doctors make public comments on the expense of products not least by highlighting the conflict of interest in they receiving a commission for prescribing them. 



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May 27 2015

Commentary by Eoin Treacy

Email of the day on how to make best use of the Service

I am trialing your service. You speak in the daily service about your and David's favourite views. Could you tell me where I can find these and also could you recommend how I can get the best understanding of value from your site. Many thanks.

Eoin Treacy's view -

Thank you for taking the time to trial our service. FullerTreacyMoney is content rich so we understand that it may be overwhelming for new subscribers to figure out how best to use what we offer.

Every day we post a number of articles in Comment of the Day which we believe are of interest either in themselves or because they related to major issues or investment themes. We record a daily audio commentary to put what happened that day in context and to point our short-term movements in the market. As someone just getting acquainted with the Service I would suggest listening to one of the Friday Audios. This is when we put forward our longer-term outlook for the various different asset classes and would be the most accessible way of figuring out where we stand on various topics.   

I would also suggest playing around with the Chart Library. Add instruments you are interested in to your Favourites so you can monitor your portfolio and watch list. Our comprehensive globally oriented Chart Library is updated daily with close to 15000 stocks, bonds, indices, funds, currencies and commodities.

We also tell you exactly what we are doing with our own money both from a trading and investment perspective as it happens.

We spend a great deal of time identifying investment themes and have a strong record of being early. If you click on the Investment themes tab in the main menu (located in the middle of the black bar) you will be presented with two different category searches. Every article we write is categorised by whether it falls into one of our major themes (Energy, Technology, Precious Metals/Commodities, Autonomies, China, India, Japan etc.) as well as into individual “Tags”.

For example if you are interested in the broad China sector. The vast majority of the articles we write relating to the topic can be found under the China tab. If you are interested in an individual subject or company such as Citic Securities you can search the Tags for the name of the company or subject. You can also browse the Tags by clicking on one of the letters on the Investment Themes page.  

 



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May 20 2015

Commentary by David Fuller

Good News America: Saudi Vies for Great Satan Status in Iran

My thanks to a subscriber for this informative article by Roula Khalaf for The Financial Times.  Here is the opening:

It’s not quite the Great Satan — at least, not yet. But it’s an enemy that the Iranian regime and the people can unite against

Now that Iran’s Islamic government is close to a nuclear deal with the US and other world powers, the traditional “death to America” slogan is losing its lustre but the loathing of Saudi Arabia is gaining appeal.

Though this is happening by accident more than design, driven by a stand-off in Yemen between Iranian and Saudi proxies, it is blissfully convenient for Iran’s rulers.

Iranians never learnt to hate America despite their leaders’ best efforts to whip up resentment. It certainly won’t grow easier to convince them of devious American plots if a nuclear accord is signed.

When it comes to Saudi Arabia, however, Shia Iranians are happy to bash their Sunni neighbour. Persian-Arab enmity goes back centuries; Iranian-American hostility is only a few decades old. “People in Iran love Americans, and Saudi Arabia is the one country that everyone hates,” one political analyst tells me. “If it’s not the Great Satan it’s only because it’s not that important.”

Indeed, in my own meetings in Iran, there are sometimes awkward moments: someone casually drops a disparaging remark about Arabs then realises I come from Lebanon and reassures me Iranians love the Lebanese but less so Gulf countries. In Lebanon, of course, Iran has Hizbollah, its most prized proxy.

I heard Saudi leaders denounced as “immature children” who bomb fellow Muslims in Yemen and join hands with jihadi terrorists in Syria and Iraq. It’s impossible to convince anyone that the Islamic State of Iraq and the Levant (Isis), which threatens the Saudi regime possibly even more than it threatens Iran, is not a Saudi creation. The notion that Saudi Arabia should reject an Iranian role in the affairs of other Arab states also meets with incredulity. A common language (Arabic) doesn’t give one country the right to claim authority over another, say Iranian officials.

David Fuller's view -

Thanks to Technology, the USA no longer has the same vital interests in the Middle East, although it would understandably like to prevent the region’s wars and terrorism from spreading westward.  If ongoing Sunni-Shia conflicts threaten the Middle East’s oil production, the USA can quickly ramp up its shale oil output, avoiding a repeat of recessions caused by earlier energy crises.  

Many other countries could do the same.  If they follow the USA’s energy policies, from shale oil and gas to solar-led renewables, in 20 to 30 years time the Middle will have the luxury of consuming all of its own oil and gas.

The FT article is posted in the Subscribers' Area.    



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May 19 2015

Commentary by David Fuller

Vortex bladeless turbines wobble to generate energy

My thanks to a subscriber for this fascinating article from Gizmag.  Here is the opening:

Looking somewhat like a giant reed gently swaying in the wind, the new Vortex bladeless wind-driven generator prototype produces electricity with very few moving parts, on a very small footprint, and in almost complete silence. Designed to reduce the visual and aural impact of traditional spinning-blade turbines, this new device takes advantage of the power contained in swirling vortices of air.

Many opponents of spinning wind turbines point to their supposed danger to birds and other flying animals, as well as their rather noisy operation and – particularly in commercial installations – their enormous size. Though these may well be excuses by those who prefer to stay with older electricity generating technologies that they know and trust, standard wind-driven turbines do have these issues and this tends to hold back their universal acceptance and use.

This is where the creators of the Vortex bladeless believe that their device has the advantage. A relatively compact unit, it relies on the oscillation of its reed-like mast in reaction to air vortices to move a series of magnets located in the joint near its base to generate electricity.

Though obviously not as efficient as a high-speed, directly wind-driven turbine, this is offset by the fact that the Vortex has fewer moving parts and is, according to the creators, up to 80 percent more cost effective to maintain. Coupled to the notion that it supposedly has a greater than 50 percent manufacturing cost advantage and a 40 percent reduction in its carbon footprint compared to standard wind turbines, the system also seems to offer direct economic advantages.

We've explored a number of bladeless wind-turbines before – the Solar Aero turbine being one (though, by definition, not really bladeless as it merely covered the spinning blades with a housing) and the Saphonianbeing another. The latter being more of a true bladeless "turbine," it still required hydraulic actuation of pistons to generate electricity, so its efficiency was probably not all that great (and, to be perfectly frank, it was not strictly a turbine either as it had no spinning parts).

The Vortex, on the other hand, is purported to take advantage of the swirling motion of wind and not direct force like the aforementioned units. This means that it can generate energy from the repeating pattern of vortices (known as the Kármán vortex street), which are generated as the air separates to pass by a blunt body, such as the Vortex structure itself.

This also means that groups of Vortex units can be huddled closer together as the disruption of air movement in the wind stream is nowhere near as critical as it is when positioning standard, blade-driven wind turbines. This will also help ameliorate the inherent efficiencies in each unit as they can be grouped much closer together than their standard turbine counterparts and, therefore, potentially generate more power per square meter.

David Fuller's view -

For years I have ranted about contemporary windmills and wind farms, because of their expense, maintenance costs, inefficiencies, noise, ecological damage to birds and other wildlife, and visual blight on the landscape.  In contrast, the vortex bladeless turbines are a vast improvement. 

What never ceases to amaze me, although I comment on it all the time, is the incredible inventiveness of people all over the world, in response to a needs-must requirement to protect ourselves and our planet from potential calamities such as manmade global warming and ‘peak oil’.  In fact, only a decade ago it was still fashionable to assume that the cost of crude oil would continue to rise remorselessly, ruining our economies in the process.  Today, thanks to Technology, ever higher oil prices are only an OPEC pipedream. 

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May 19 2015

Commentary by Eoin Treacy

Musings From the Oil Patch May 19th 2015

Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report. Here is a section: 

It is possible that what is happening in China with respect to EVs and hybrid vehicles is a precursor of how America’s vehicle sales and distribution models will work. In response to air pollution and vehicle congestion in major cities, China has begun a strategic initiative to build EVs and is encouraging foreign manufacturers and their partners to join the effort. China expects as many as 40 new EV models go on sale in the country this year, triple the number of new EV models available two years ago. As described in an article in Business Week, Toyota Motors (TM-NYSE) will only market an EV in China as it is committed to hydrogen-powered vehicles as a better alternative to EVs elsewhere. In fact, its dedication to hydrogen-powered vehicles is why Toyota ended its all-electric Rav4 EV crossover partnership with Tesla Motors, Inc. (TSLA-Nasdaq).

China has new emission guidelines that call for a 28% improvement in average per vehicle fuel consumption by 2020, something that likely requires manufacturers to embrace plug-in EVs. Since China controls the permitting of new manufacturing facilities, automakers are almost forced to embrace EVs if they want to have plants capable of manufacturing new vehicles. According to an analyst with A.T. Kearney in Shanghai, China, all the new EV models coming to market may enable the industry to get 1-2 million EVs and other new energy vehicles on the country’s roads by 2020. That achievement, however, will still fall well short of the government’s target of five million EVs being on the road.

While China may be the model, the Technology still is short of delivering a reasonably-priced EV with a traveling range similar to that of an ICE vehicle, or roughly 200 miles on a single charge. There is also the issue with fast charging of EVs, as drivers will measure charging times against the length of time they must spend at the gas pump filling up their ICE vehicle. Environmental concerns are an important consideration for EVs, but they were largely bought by people more interested in impressing their neighbors with their statement about environmental concern than their economics. The fact these clean-fuel vehicles are now being traded in for conventionally-fueled vehicles at an accelerating rate suggests that economics are clearly trumping environmental considerations. Whether this is a good thing or not remains to be seen, but the fact it is happening tells us how powerful the pocketbook is for consumer purchasing decisions. It also tells us that auto manufacturers need to address the shortcomings of EVs and hybrids if they want them to become a competitive auto market segment. Then again, those manufacturers may just elect to let the draconian U.S. fuel-efficiency standards force consumers to buy these less desirable vehicles.

 

Eoin Treacy's view -

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

As the world’s largest car market, China’s regulatory structure will make waves around the world. If China is insisting on electric vehicles in order to contain pollution then car manufacturers will have little choice but to build them. 

An additional thought with regard to range anxiety: A large number of people, at least in Southern California lease they vehicles. In order to get the best price for the vehicle at the end of the lease, mileage has to be kept low. This means that many people rent a car for long trips and use their own car for commuting. I wonder if it is conceivable that the same model will expand beyond SoCal with the advent of electric vehicles which may or may not have overcome their range issues within the next decade. 

 



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May 15 2015

Commentary by Eoin Treacy

For More Than Just Gold Bugs BitGold Platform Makes Debut

Thanks to a subscriber for this interesting report from Dundee Capital Markets. Here is a section: 

Deposit/Redeeming Funds: Users have the option to deposit funds to six different global vaults administered by BRINKS – Toronto, London, Zurich, Dubai, Hong Kong and Singapore. After choosing the vault location users have five deposits/redemption methods available through 106 global reference currencies: 1) Direct Bank Deposit – INTERAC, SEPA,; 2) Bank Transfer – SWIFT, Wire; 3) Credit/Debit Cards – VISA, MasterCard, China UnionPay; 4) Virtual Currencies – Bitcoin (Ripple coming soon); 5) Cash via BitGold ATM Machine. Once funds are deposited, gold is acquired within 1% of the official spot rate and “allocated” to that particular customer through the company’s patent pending AURUM system. We believe most customers are likely to wire cash direct to a bank account. Using debit or credit cards to deposit cash becomes an acquisition cost for the company as merchant fees would be greater than the 1% deposit fee charged. 

BitGold is not a deposit taking institution – BitGold does not take deposits or hold user funds in any way – the company simply offers a platform to acquire, store and transact with gold. Therefore it has no liability or indebtedness to a customer. 

Storing Gold: Gold is fully insured (by Lloyds of London) and stored for free at any six global vaults (costs BitGold 0.12% pa). The gold is vaulted under the customer’s names and allocated storage within a separate within a separate legal entity. There is little counterparty risk as AURUM only buys/sells gold through the London Bullion Market (LBMA) and/or COMEX meaning each gold bar has verifiable chain of custody, beginning with the refiner and assayer. There is no maximum amount of gold that can be purchased and the minimum amount is 0.001g or about $0.05. 

 

Eoin Treacy's view -

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

Making retail transactions with gold has long been an ambition of hard money advocates but it has been unrealisable until now. AuEx Ventures rebranded itself with the catchy moniker BitGold earlier this year and there is no denying that the premise of the company will appeal to a certain demographic. However while BitGold is willing to accept Bitcoin in return for gold, that would appear to be the only link between the two. More broadly it highlights how Technology is enhancing the methods with which we can transact and how various items can represent value. 



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May 15 2015

Commentary by Eoin Treacy

SMA Solar Jumps in Frankfurt as U.S., Japan Sales Narrow Losses

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

SMA Solar Technology AG, a German solar company that’s cutting a third of its staff to reduce costs, rose to a three-week high in Frankfurt after first-quarter sales jumped and losses narrowed.

SMA climbed as much as 5.9 percent to 14.50 euros, the highest intraday level since April 23, after saying sales grew 28 percent to 226 million euros ($254 million) and a loss on earnings before interest and taxes narrowed to 5.4 million euros. Sales were driven by large-scale solar projects in North America, Japan, the U.K. and Australia, it said.

“With the sales generated and the order backlog at the end of the first quarter, we have already achieved more than 60 percent of our sales target for the year,” Chief Executive Officer Pierre-Pascal Urbon said. “The earnings situation developed better than planned, partly due to the reduction of fixed costs already initiated and to exchange rate effects.”

 

Eoin Treacy's view -

Solar cells produce direct current but if you want to it to power your home, heat your water or sell electricity back onto the grid it needs to be inverted into alternating current. Therefore everyone who buys solar cells must also buy an inverter. While SMA Solar is a global leader in manufacturing inverters it is not the cheapest. 



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May 14 2015

Commentary by David Fuller

These 10 Pieces of Art Just Sold for Almost $800 Million

Here is the opening of this informative article from Bloomberg:

The art market is on such a tear even the insiders are scratching their heads. Since New York’s spring sales started last week, at least $2.1 billion of art has been sold at Christie’s and Sotheby’s, with the top 10 lots accounting for almost $800 million.

Christie’s said collectors from 35 countries were bidding at its May 11 sale while Sotheby’s said clients from more than 40 countries were out in force the next evening. They jockeyed for Impressionist, modern, postwar and contemporary art.

“There’s a lot of money out there and people are chasing great works,” said Mera Rubell, who, along with her husband, Don, runs a private museum in Miami showcasing their collection. “Now the young artists are selling for millions.”

That means bargain hunters will be sorely disappointed: Picasso and Monet may be at record highs, but prices for living (if not quite young) artists are nipping at their heels. The 60-year-old Christopher Wool’s canvas spelling “Riot” in chunky black letters sold for $29.9 million — the same price paid for a 1948 Picasso portrait of his lover Francoise Gilot.

Records were smashed. In just 11 minutes, bidding for a Picasso surged from $100 million to $160 million before settling at $179.4 million, the most expensive work ever purchased at auction. The value of the work increased by 462 percent.

David Fuller's view -

These astonishing art prices tell us several things.  1) What we already knew is that leading stock markets have done very well.  2) Liquidity is abundant.  3) The deflation that we are experiencing is mostly positive and created by Technology.  4) Confidence among wealth creators is very high.  5) The global economy is much more likely to expand than contract. 

What could go wrong?

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May 14 2015

Commentary by Eoin Treacy

Google reveals lessons learned (and accident count) from self-driving car program

This article by Francis X Govers III for Gizmag may be of interest to subscribers. Here is a section: 

Urmson's statements came in the form of a post on Backchannel, which followed an Associated Press report revealing the accident count in the wake of a new California law requiring Google and others to report accidents involving its self-driving cars to the state. Google reported three accidents between May 2014 and May 2015, while Delphi, which has its own version of a self-driving car, an Audi SQ5, reported its vehicle was struck while waiting to turn at an intersection and not under autonomous control.

In his post, Urmson details that the Google Cars were rear-ended seven times by other cars, side swiped twice, and hit once by a car running a stop sign, with the majority of the accidents occurring on city streets rather than highways. The 1.7 million miles (2.7 million km) the cars are reported to have traveled combines the distance traveled autonomously and under manual control.

Eoin Treacy's view -

The more data that is recovered from self-driving cars, the more confidence we can have that they are approaching commercial utility. Last week’s announcement that Nevada is pressing ahead with legalising autonomous vehicles is a major step forward for companies like Daimler and Google pioneering the rollout of this Technology



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May 11 2015

Commentary by Eoin Treacy

The rise of electricity storage Something for everybody

This article by John P. Banks for the Brookings Institute may be of interest to subscribers. Here is a section: 

In sum, there is great potential for storage both in front of the meter and on the customer side of the meter. Costs need to come down, but the longer-term trajectory indicates that this will happen, and policies and regulations to incentivize storage need to continue to be implemented to spur the creation of markets. The DOE's QER is a step in the right direction, calling for the establishment of a framework and strategy for storage and flexibility. 

In the near-term, it is likely that most of the market development and storage capacity deployed will be at the grid-scale in competitive markets such as PJM, but the SCE procurement certainly highlights the impact of supporting policy and regulation in spurring competitively procured PPA-type arrangements. In addition, California's investor owned utilities have initiated the first round of storage auctions in response to the state's mandate, with final project selection and submission to the California Public Utilities Commission for approval this coming fall.  

In the longer-term, solar-plus-storage could become increasingly economic on the customer side. Indeed, as Hamilton of the Electricity Storage Association described, the three biggest storage markets in the residential sector are California, Arizona, and Hawaii and what they all have in common is lots of solar. But beyond selected markets, residential-scale storage systems such as Tesla's PowerPack won't likely lead to mass defection from the grid in the next five to 10 years. The important point, however, is that Tesla's announcements and all the other recent news is exciting because it shows the progress and potential of a Technology with multiple applications and benefits across the grid, providing something for everybody.

 

Eoin Treacy's view -

In my review of utility grade energy storage companies last week, I highlighted that the sector has been in existence for a number of years but it is Tesla's high profile into the sector that has ignited media interest. We are still in the very early stages of this evolution and it is likely to persist into the lengthy medium term. 



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May 08 2015

Commentary by Eoin Treacy

Daimler Freightliner keeps on truckin with driverless evolution

This article by Robert Wright may be of interest to subscribers. Here is a section:

But when the vast truck is on the public road, a message on the dashboard tells Mr Urban that a program called “Highway Pilot” is ready to take over. After pushing a button on the steering wheel, the truck steers, accelerates and brakes without the intervention of Mr Urban, an engineer at Freightliner’s headquarters.

Germany’s Daimler, Freightliner’s parent, has hailed the Inspiration — which was granted permission on Tuesday to operate on Nevada’s roads — as the first autonomous truck licensed to operate on public streets.

But while the state’s decision is significant, the step looks more evolutionary than revolutionary. Daimler portrays the Inspiration as the next step from vehicles that warn drivers when they are leaving their lane and control braking if too close to the vehicle in front.

 

Eoin Treacy's view -

Increasingly stringent regulations on the amount of time a driver can remain behind the wheel before taking a break and the constant drive to improve fuel efficiency represent powerful cross currents in the haulage sector. While the roll out of autonomous personal vehicles might be exciting, the use of this Technology in the commercial sector is even more revolutionary. 

Mining companies and large farms were the first to use autonomous vehicles. However it is a major leap to move from an uninhabited area to the highway where people’s lives are at stake. None of the proposed technological innovations would be possible without the combination of advances witnessed in the global positioning, computing, big data, robotics, sensory and wi-fi sectors.



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May 08 2015

Commentary by Eoin Treacy

SEC Urges Advisers to Draw Up and Implement Cybersecurity Plans

Thanks to a subscriber for this article from the SEC by Steven Maimes. Here is a section:

The Division has identified the cybersecurity of registered investment companies (“funds”) and registered investment advisers (“advisers”) as an important issue. Both funds and advisers increasingly use Technology to conduct their business activities and need to protect confidential and sensitive information related to these activities from third parties, including information concerning fund investors and advisory clients. This guidance update highlights the importance of the issue and discusses a number of measures that funds and advisers may wish to consider when addressing cybersecurity risks. Because of the rapidly changing nature of cyber threats, the Division will continue to focus on cybersecurity and monitor events in this area.

Cyber-attacks on a wide range of financial services firms highlight the need for firms to review their cybersecurity measures. Discussions concerning cybersecurity with fund boards and senior management at advisers during the course of the Division’s senior level engagement and monitoring efforts also stressed this need, as did input from the Office of Compliance Inspections and Examinations’ review of adviser cybersecurity practices.

In addition, the Cybersecurity Roundtable hosted by the Commission last spring highlighted the importance of cybersecurity and the issues and challenges it raises for the financial services sector.
In the staff’s view, there are a number of measures that funds and advisers may wish to consider in addressing cybersecurity risk, including the following, to the extent they are relevant:

 

Eoin Treacy's view -

The fact that the financial advisor sector is susceptible to cyber criminals is a further iteration of the trend where any company that holds potentially privileged information with regard to their clients is under threat. At FullerTreacyMoney we do not hold credit card details on file which removes the potential for hacking. Additionally we use the most up to date Technology available to secure our database. As a web-based business we regard this as the equivalent of investing in a safe and alarm system for a jewellery store. I suspect that the majority of companies making financial consulting services available to customers do not have the same protections. This continues to represent a growth sector for security firms. 



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April 29 2015

Commentary by David Fuller

The Weekly View: Bull In A China Shop Or A Bubble About To Pop?

My thanks to RiverFront Investment Group for their ever-interesting letter, written this week by Chris Konstantinos and Adam Grossman.  Here is a brief sample:

RIVERFRONT BOTTOM LINE: While certain parts of the Chinese market (small caps and “new China” Technology, in particular) are exhibiting classic signs of bubble behavior, we believe the H-share dominated MSCI China Index is still reasonably valued and likely to remain in a bull market trend for the foreseeable future.  Furthermore, we believe the factors driving Chinese markets may also benefit tertiary markets related to China, including Hong Kong and perhaps Taiwan and Singapore.  Thus, while we remain underweight on emerging market stocks in general, in our growth portfolios we have an overweight position in Emerging Asia (including China) relative to Latin America and Eastern Europe/Africa.

David Fuller's view -

I suspect subscribers are up-to-date on China given the coverage it has received in this service in recent months.  Nevertheless, The Weekly View provides a good overall summary for anyone less familiar with this increasingly important market.   

The Weekly View is posted in the Subscribers' Area.



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April 29 2015

Commentary by David Fuller

Apple Says EU Irish Tax Probe Could Lead to Material Costs

Here is the opening of an informative article on this iconic share, reported by Bloomberg:

Apple Inc. has raised a flag about the potential cost if the company is required to pay past taxes to Ireland as part of a European Commission investigation that started last year.

While Apple hasn’t been able to estimate the amount, it could be “material,” the Cupertino, California-based Technology company said Tuesday in a filing with the U.S. Securities and Exchange Commission. It had said in January that such an action could “adversely” affect its cash flows and financial condition.

The European Commission last year said it was looking into whether Ireland improperly gave Apple’s two subsidiaries state aid. In September, the commission said Irish tax authorities failed to conform to international guidelines when they “reverse engineered” an agreement with Apple to determine the company’s bills. The findings were preliminary.

“The company believes the European Commission’s assertions are without merit,” Apple said in the filing. “If the European Commission were to conclude against Ireland, the European Commission could require Ireland to recover from the company past taxes covering a period of up to 10 years reflective of the disallowed state aid.”

The European Commission’s review of state aid can take more than a year and decisions can be challenged at the European Court of Justice in Luxembourg.

Apple “did not receive selective treatment and was taxed fully in accordance with the law,” the Irish Finance Ministry has said.

Over a four-year period, Apple shifted $74 billion in profits to an Irish entity that had no “tax residence” anywhere in the world, and thus owed minimal income taxes to any country, the U.S. Senate Permanent Subcommittee on Investigations found in 2013. Apple finished the most recent quarter with $194 billion in cash and securities. More than $171 billion of that was held outside the U.S., according to Apple.

David Fuller's view -

Not to be too cynical but the EU needs money and Apple has a stash.  In fact, most governments are short of cash, including the US mentioned in the last paragraph above, and Apple is not the first Autonomy to be challenged by tax authorities.  

This latest warning from Apple (daily & weekly) is almost certainly responsible for the share’s wobble over the last two days, after its run-up to new highs.  Moreover, the share had a downside key day reversal on Tuesday.  

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April 28 2015

Commentary by Eoin Treacy

Takeaways from RSA 2015; Next Generation Threats Putting Jet Fuel in the Cybersecurity Engine for 2015/2016

Thanks to a subscriber for this note from FBR Capital Markets which may be of interest to subscribers. Here is a section: 

This week, we attended the RSA Conference 2015 in San Francisco where hundreds of cybersecurity vendors (and tens of thousands of attendees) were present, with the core focus being the next generation threat environment. Coupled with data points in the field in recent months and solid 1Q earnings results so far, our conversations at the RSA conference this week have left us incrementally positive on the next-generation cybersecurity space as a whole. Security vendors of all shapes and sizes are seeing massive demand in the field, given a sense of urgency at the enterprise to upgrade legacy systems in order to protect against network vulnerabilities and avoid the reputational damage of becoming another high-profile attack (e.g., Anthem, Sony, JPMorgan, etc.). To this point, we picked up data points indicating a likely discernible step-up in cybersecurity budgets and potential deal sizes, as our conversations with key enterprise and government IT decision makers (CIOs, etc.) indicate they plan to increase security spending by an estimated ~28% in 2015. One CISO from a large Fortune 100 financial organization told us, "I came here to RSA with double the security budget I had last year to figure out how we can finally protect our network and cloud infrastructure. Our CEO wants me to call him tonight with an update." With enterprise and government customers seeing a massive uptick in threats, malware, and attacks on networks, we are seeing a clear changing of the mindset. Many CIOs have focused significantly more resources toward this "epidemic," as one IT product manager from Europe told us. Overall, we come away from the RSA Conference increasingly confident in the advanced security software space, as we believe next-generation cybersecurity spending is "white hot" as the spotlight on these technologies appears to be accelerating focus on protecting the enterprise/cloud/ big data and leading CIOs to spend in this high-priority area.

Eoin Treacy's view -

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

When the President of the United States’ personal email is hacked we can conclude the situation is serious. This follows high profile events that cost companies fortunes as well damage to their reputations and hackers even averted the opening of a movie. It is reasonable to assume that companies will be boosting their defences. 

The government and corporations will need to increase spending to help avoid the threats that exist today. However these threats are constantly evolving so the growth of the security sector represents a major development theme within the Technology sector. 



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April 27 2015

Commentary by Eoin Treacy

Audi just created diesel fuel from air and water

This article by Eric Mack for Gizmag highlights the benefits improving solar cell efficiency could potentially have for the wider economy. Here is a section: 

Sunfire claims that analysis shows the properties of the synthetic diesel are superior to fossil fuel, and that its lack of sulphur and fossil-based oil makes it more environmentally friendly. The overall energy efficiency of the fuel creation process using renewable power is around 70 percent, according to Audi.

"The engine runs quieter and fewer pollutants are being created," says Sunfire CTO Christian von Olshausen.

The fuel can be combined with conventional diesel fuel, as is often done with biodiesel fuels already.

The Dresden pilot plant is set to produce about 42 gallons (160 l) of synthetic diesel per day in the coming months, and the two companies say the next step is to build a bigger plant.

"If we get the first sales order, we will be ready to commercialize our Technology," von Olshausen says.

Sunfire anticipates that the market price for the synthetic diesel could be between 1 and 1.5 Euros per liter, which would be nearly competitive or a little more expensive than current diesel prices in Europe, but the actual figure will be largely dependent on the price of electricity.

 

Eoin Treacy's view -

One of the issues hydrogen fuel cell and similar technologies face is that they are dependent on the availability of cheap electricity to drive the process of separation or combination. The commercial utility of a water-to-diesel project as outlined above will be contingent on the cost of electricity coming down. As such the improving efficiency of solar cells and improvements in battery Technology represent a major step forward for such technologies as the cost of electricity would be free from volatility and could conceivably trend lower in real terms over time. 



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April 24 2015

Commentary by David Fuller

April 24 2015

Commentary by Eoin Treacy

Amazon, Microsoft Profit From Cloud as Nasdaq Reaches Record

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

Minutes after the Nasdaq Composite closed at a record, three of the biggest bellwethers in Technology reminded the market precisely why investors are so bullish on companies that do business through the Web.

Amazon.com Inc. for the first time broke out sales from its division that sells computing power and software via the Internet, reporting a 49 percent jump last quarter. Microsoft Corp. posted profit that topped analysts’ estimates, also underscoring healthy demand for software delivered through the cloud. Google Inc. benefited from rising volume of online ads.

The numbers are a testament not only to the endurance of the Internet as a conduit of commerce and information, but also to the ways it has revolutionized how the world’s biggest corporations operate. All three companies have been at the heart of these changes since the Web’s inception as a business tool, and are now vying for a bigger slice of the still-fledgling market for cloud computing.

Google is seeking to extend its lead in online search and advertising, Amazon is spending billions of dollars to expand in e-commerce and data centers, and Microsoft is building on its dominance of the business-software market.

“We are innings one or two of the cloud,” said Kim Forrest, an analyst at Fort Pitt Capital Group Inc., which oversees about $1.8 billion in Pittsburgh.

 

Eoin Treacy's view -

This is a big day for the Nasdaq. Back in 2003 no one anticipated the Index would surmount its bubble peak in little more than a decade. Of course the relative weightings of the Index have changed almost beyond recognition in that time but above all else, the Nasdaq’s performance is a testament to how successful the USA is at creating companies that fill market niches we never knew existed. 



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April 24 2015

Commentary by Eoin Treacy

Interactive biotechnology learning and design using games and remote-control labs

This article from Kurzweil Accelerating Intelligence may be of interest to subscribers. Here is a section:

The team also constructed a probiotic biology cloud lab using BPUs capable of carrying out remote-controlled experiments to stimulate biological materials, such as cells, and measure the biological responses. Students and scientists can send instructions to a robotic lab and get back experimental results.

The team constructed this BPU by using LEGO Mindstorms to create a liquid-handling robot. This robot traveled over a flatbed photo scanner. The scanner held petri dishes containing the slime mold Physarum, which eats oatmeal.

The researchers incorporated the BPU as a lab component in a graduate level theory class. Using remote-control interfaces on their smartphones, students ordered the robot to drop oatmeal onto specific petri dishes. The software allowed them to choose different droplet patterns.

The scanner recorded how the Physarum followed each trail of oatmeal dots by “sniffing out” chemotaxis cues in the petri dishes. (Chemotaxis refers to how microorganisms respond to chemical stimuli in their environments.)

The team built three BPUs, each holding six petri dishes. All three units were housed in a server rack typically found in a cloud computer site. “Our prototype BPUs supported 18 users and allowed us to assess the scalability of cloud labs,” said Zahid Hossain, the Stanford doctoral student who worked with Riedel-Kruse on this third project.  “I want to see advanced BPUs supporting many different types of experiments and thousands of different users.”

“The obvious next application is online education at scale that includes true biology experiments, also opening new opportunities for learning-research. And cloud labs can change how we work as scientists.” Riedel-Kruse said.

 

Eoin Treacy's view -

Open source computing has been around for years and has been a wonderful enabler for the app market not least because there are so many independent programmers who have the wherewithal to deliver products based on their pet projects. Creating an open source environment for the biology/ biomechanics/nanotech space should have a similar enabling effect and is a further example of the accelerating pace of technological innovation. 



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April 23 2015

Commentary by David Fuller

Oil Slump May Deepen as US Shale Fights OPEC to a Standstill

The US shale industry has failed to crack as expected. North Sea oil drillers and high-cost producers off the coast of Africa are in dire straits, but America's "flexi-frackers" remain largely unruffled.

One starts to glimpse the extraordinary possibility that the US oil industry could be the last one standing in a long and bitter price war for global market share, or may at least emerge as an energy superpower with greater political staying-power than Opec.

It is 10 months since the global crude market buckled, turning into a full-blown rout in November when Saudi Arabia abandoned its role as the oil world's "Federal Reserve" and opted instead to drive out competitors.

If the purpose was to choke the US "tight oil" industry before it becomes an existential threat - and to choke solar power in the process - it risks going badly awry, though perhaps they had no choice. "There was a strong expectation that the US system would crash. It hasn't," said Atul Arya, from IHS.

"The freight train of North American tight oil has just kept on coming. This is a classic price discovery exercise," said Rex Tillerson, head of Exxon Mobil, the big brother of the Western oil industry.

Mr Tillerson said shale producers are more agile than critics expected, which means that the price war will go on. "This is going to last for a while," he said, warning that any rallies are likely to prove false dawns.

The US "rig count" - suddenly the most-watched indicator in global energy - has fallen from 1,608 in October to 747 last week. Yet output has to continued to rise, stabilizing only over the past five weeks.

David Fuller's view -

There is no doubt that US fracking is a very adaptable business and the combination of Technology and experience is making the industry much more efficient.  Nevertheless, today’s higher production will wane at current prices, as the yield from shale formations inevitably declines rapidly, necessitating additional drilling slightly further along the shale formation.  Companies will be less willing to continue drilling with WTI crude in the $50s region, especially as their hedged prices at higher levels begin to expire in 2016.  Additionally, plenty of oil industry workers have been laid off this year and it will take a little longer to get them back if the price of oil does rise.

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April 23 2015

Commentary by Eoin Treacy

Tesla Wants to Power Wal-Mart

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

Jackson Family Wines, based in Santa Rosa, has a new partnership with Tesla involving battery storage and several vehicle charging stations, according to the February issue of Wine Business Monthly. The winery declined to comment.

Mack Wycoff, Wal-Mart’s senior manager for renewable energy and emissions, said the company is intrigued by energy storage. “Instead of pulling electricity from the grid, you discharge it from the battery,” he said. “Ideally you know when your period of peak demand is, and you discharge it then.”

Mike Martin, Cargill’s director of communications, declined to provide details about how the company plans to use Tesla batteries at the Fresno plant. The 200,000-square-foot facility, one of the largest of its type in California, produces nearly 400 million pounds of beef each year.

Janet Dixon is director of facilities at the Temecula Valley Unified School District in southern California, which plans to install solar panels at 20 of its 28 schools this summer. Dixon said that SolarCity is the solar provider, and five of the facilities will have Tesla batteries.

“We spend roughly $3 million a year on electricity, and most of that is lighting and air conditioning,” said Dixon. “We are going solar to reduce our overall costs and the battery storage should help us manage our peak demand.”

Eoin Treacy's view -

Tesla trades on aggressive multiples. Since its car sales are a fraction of even the smallest auto manufacturer, it will be quite some time before the company will compete on that front even if one assumes that large numbers of people will be driving electric vehicles 10 years from now. Batteries are a much bigger story for Tesla which is why they are investing so much capital in building a “gigafactory” which they anticipate will deliver the economies of scale necessary to drive down the cost of their products.

At the present moment almost no one has a battery in their home. As solar Technology improves and the prospect of containing volatility on energy spending becomes a realistic possibility demand is likely to increase. At the present moment the solar cells companies like SolarCity are installing in homes are not particularly efficient. However, as the efficiency rates of laboratory tested products reach commercialisation the energy generation capacity of one’s home will rapidly improve. Therefore the efficiency of solar and the potential demand landscape for home batteries are linked. 



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April 22 2015

Commentary by Eoin Treacy

Meet the Silicon Valley companies that top the list of cybersecurity innovators

Thanks to a subscriber for this article from Silicon Valley Business Journal. Here is a section: 

The Cybersecurity Ventures second-quarter report lists Milpitas-based cybersecurity and malware protection business FireEye as the No. 1 hottest cybersecurity company. AlienVault and Norse of San Mateo also topped the list. Silicon Valley companies Splunk, Beyond Security, Palo Alto Networks, Intel Security Group, Caspira and Proofpoint also ranked in the top 30.
Cybersecurity Ventures, founded in 1999 and based in Menlo Park, is a research and market intelligence firm.

“FireEye is continuing to grow its global customer base and employee headcount, while getting kudos for its Technology platform and product lineup, alliance partner integration, channel program, service and support from the entire cybersecurity community,” said Steve Morgan, CEO of Cybersecurity Ventures and editor-in-chief of the Cybersecurity 500, in a statement. “FireEye is a leader in IT and cloud security, and it's added to that by becoming a top brand in the burgeoning mobile security sector.”

 

Eoin Treacy's view -

As banking, retail, insurance and entertainment move increasingly online, credit card companies have been some of the greatest beneficiaries because they insure purchases against fraud. Nevertheless, identity theft is the fastest growing crime in the USA, not least because chip and PIN Technology is so underused and because Trojans can reside on one’s computer for lengthy periods without detection. 

As cyber threats become more sophisticated the requirement for greater security measures remains a growth industry and one which is increasingly competitive. This is creating demand both for software and hardware solutions. 

The list of the sector’s most significant companies in the above article highlights just how many are still privately held. Clicking through the constituents of the cyber security section of the Chart Library there are clear winners and losers.   

 



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April 21 2015

Commentary by David Fuller

Giants Suddenly Look Like Dinosaurs as India Retail Evolution Leaps Over A Step

My thanks to a subscriber for this article from The Times.  Here is the opening:

There was a time a few years back when telecoms chiefs rubbed their hands at India’s ability to leapfrog fixed landline connections with a jump straight to mobile phones. Now online retailers are doing the same, with India set to bypass the western bricks-and-mortar retail model altogether.

This is not a surprise. India is perfect e-commerce territory. Think of its expertise in IT, which has prompted a flood of online retailers. Then there is that oh-so-cheap Indian labour, making the cost of delivering products door-to-door lucratively low. Then there are India’s consumers, well used to taking delivery of goods at home for a nominal fee — a service offered by many local grocery stores.

In contrast, the cost and complexity of acquiring large plots of land and associated permits makes western-style superstore retail a la Walmart or Ikea excruciatingly slow and expensive. Three years after Delhi threw open the doors to foreign retailers such as Tesco, none has seriously taken the plunge into the nation’s $500 billion retail market, 90 per cent of which is still controlled by roadside shacks and shops.

Even the dismal state of India’s roads and transport infrastructure offer a big edge for e-commerce. Why spend hours dodging cows, rubbish and potholes on India’s congested roads trying to reach an out-of-town superstore when you can shop in air-conditioned comfort from your own home or office?

As well as lower prices, adding to the attraction of online retail is the fact that many Indian e-retailers provide same-day delivery, while customers can opt for paying cash on their doorstep.

So, while Tesco and Walmart grind their teeth in frustration as they puzzle over how to tackle India, the country’s e-commerce market is exploding, propelled by rapid growth in internet access. India reported a 53 per cent growth in online transactions last year. The country’s e-commerce market is expected to hit $16 billion this year, up from $4.4 billion in 2010.

Such figures are attracting huge investments from Amazon and homegrown rivals such as Flipkart and Snapdeal. Between January and March, investors poured more than $1 billion into e-commerce and Technology investments. And that growth is being driven by smartphones, with more than 235 million of India’s 300 million web users accessing the net via their phones.

David Fuller's view -

Once again, Technology makes the difference, enabling India to have first world e-commerce, despite third world infrastructure.  Of course India also needs to redevelop its infrastructure, which this fast growing economy led by capable Narendra Modi intends to do, but it takes time and money. 

This item continues in the Subscribers’ Area.



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April 17 2015

Commentary by David Fuller

April 17 2015

Commentary by David Fuller

Global Temperature Records Just Got Crushed Again

It just keeps getting hotter.

March was the hottest month on record, and the past three months were the warmest start to a year on record, according to new data released by the National Oceanic and Atmospheric Administration. It's a continuation of trends that made 2014 the most blistering year for the surface of the planet, in to records going back to 1880. 

The animation below shows the Earth’s warming climate, recorded in monthly measurements from land and sea over more than 135 years. Temperatures are displayed in degrees above or below the 20th-century average. Thirteen of the 14 hottest years are in the 21st century, and 2015 is on track to break the heat record again. 

David Fuller's view -

Technology remains the best path to a successful solution.



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April 17 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the current brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  

We have three seats left for anyone else tempted to join this timely and lively seminar on Monday evening.  To book your place: Email [email protected]



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April 16 2015

Commentary by David Fuller

Artificial Intelligence and the Fridge

Here is the opening from an amusing, edgy article by Maija Palmer for the FT Connected Business section:

Could an internet-connected thing — a smart fridge, a thermostat or a home-help robot — become a millionaire? This is not as ridiculous a question as it may seem.

If we do indeed move toward a world in which devices are connected to the internet and performing mundane chores, it is likely that many of them will be connected to some kind of bank account.
For maximum efficiency, the smart fridge that orders your milk should also be able to also handle the payments to the supermarket. You may not hook the fridge directly to a current account — worried perhaps a software glitch might cause the fridge to accidentally put you in debt by ordering £20,000 worth of dairy products in a single day. But you might set up a pre-paid account with a set amount of milk money that the fridge can access.

David Fuller's view -

The article is an imaginative journey towards the trouble we can get into if we devolve too much responsibility to machines.  The simple solution – go out and buy your own milk. 

There are excellent links in the article and also in the ‘More’ column to its left.



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April 16 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the current brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  

We have five seats left for anyone else tempted to join this timely and lively seminar on Monday evening.



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April 15 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the current brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 14 2015

Commentary by David Fuller

The $5 Billion Race to Build a Better Battery

My thanks to a subscriber for this informative article from Bloomberg Business.  Here is the opening:

Professor Donald Sadoway remembers chuckling at an e-mail in August 2009 from a woman claiming to representBill Gates. The world’s richest man had taken Sadoway’s Introduction to Solid State Chemistry online, the message explained. Gates wondered if he could meet the guy teaching the popular MIT course the next time the billionaire was in the Boston area, Bloomberg Markets magazine will report in its May issue.  “I thought it was a student prank,” says Sadoway, who’s spent more than a decade melting metals in search of a cheap, long-life battery that might wean the world off dirty energy. He’d almost forgotten the note when Gates’s assistant wrote again to plead for a response.

A month later, Gates and Sadoway were swapping ideas on curbing climate change in the chemist’s second-story office on the Massachusetts Institute of Technology campus. They discussed progress on batteries to help solar and wind compete with fossil fuels. Gates said to call when Sadoway was ready to start a company. “He agreed to be an angel investor,” Sadoway says. “It would have been tough without that support.”

Sadoway is ready. He and a handful of scientists with young companies and big backers say they have a shot at solving a vexing problem: how to store and deliver power around the clock so sustainable energies can become viable alternatives to fossil fuels.  How these storage projects are allowing utility power customers to defect from the grid is one of the topics for debate this week at the Bloomberg New Energy Finance conference in New York. Today’s nickel-cadmium and lithium-ion offerings aren’t up to the task. They can’t run a home for more than a few hours or most cars for more than 100 miles (160 kilometers). At about $400 per kilowatt-hour, they’re double the price analysts say will unleash widespread green power. “Developing a storage system beyond lithium-ion is critical to unlocking the value of electric vehicles and renewable energy,” says Andrew Chung, a partner at Menlo Park, California–based venture capital firm Khosla Ventures.

The timing for inventors—and investors—may finally be right. Wind turbines accounted for 45 percent of new U.S. power production last year, while solar made up 34 percent of fresh capacity worldwide. Storing this energy when the sun isn’t shining or a breeze isn’t blowing has remained an expensive hurdle. Battery believers say that’s changing. They’ve invested more than $5 billion in the past decade, racing to get technologies to market. They’re betting new batteries can hold enough clean energy to run a car, home, or campus; store power from wind or solar farms; and make dirty electricity grids greener by replacing generators and reducing the need for more fossil fuel plants. This market for storage capacity will increase almost 10-fold in three years to 2,400 megawatts, equal to six natural gas turbines, Navigant Consulting says.

David Fuller's view -

Energy storage is the missing link for renewables such as solar, so these developments are encouraging and will be a welcome boost for the sector.

Just think – up until about a decade ago numerous gloomy forecasters told us that we faced a frightening, dark and interminable period of economic decline because of energy shortages.  Today, energy prices are lower due to an abundance of supply from not only fossil fuels but more importantly, increasingly viable renewables led by solar.  We can thank Technology for this favourable situation.  



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April 14 2015

Commentary by David Fuller

Army of Robots to Invade Amazon Warehouses

My thanks to a subscriber for this article from CNN Money.  Here is the opening:

CEO Jeff Bezos told investors at a shareholder meeting Wednesday that he expects to increase significantly the number of robots used to fulfil customer orders.

There are currently about 1,000 robot workers on Amazon floors. The increase won't change the number of actual people employed, an Amazon spokeswoman said.

The robots are made by Kiva Systems, a company Amazon bought for $775 million two years ago.

They are tied into a complex grid that requires months of planning and testing. But once the system is in place, it can save time and cut down on fulfilment costs.

David Fuller's view -

You have probably heard the quip: Future warehouses and factories will only have two living inhabitants – a man and a dog.  The man will feed the dog and the dog will ensure that the man does not touch any of the machinery.  



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April 14 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the current brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 13 2015

Commentary by David Fuller

Iran Deal Can Open the Way to Trade and Peace

The notion of a Western rapprochement with Tehran has been in play since mid-2013, when Hassan Rouhani replaced Mahmoud Ahmedinejad as president. At a stroke, instead of a firebrand religious hardliner, Iran was represented by a seemingly moderate cleric, English-speaking and with a doctorate in law from a British university.

Within months of taking office, Rouhani was at Davos, Alpine hob-nobbing with the best of them, doing his bit to charm the Western and West-leaning global elite.

“Our country has never sought, nor seeks, anything other than peaceful Technology,” he opined in early 2014, securing not only the start of this latest thaw in Iranian-US relations, but also an interim agreement to access much-needed foreign exchange reserves. “Iran is open for business,” Rouhani has said, at a string of international summits since, using a near identical text each time.

“Come and visit us and see the investment opportunities for yourselves.” Over the last 18 months, the Iranian president has consistently argued that his country, “within the next three decades, could become a top-10 global economy”. Funnily enough, he is right.

In 2012, the year before Rouhani took office, Iranian GDP shrank by over 5pc, the economy gripped by sanctions and enduring its worst financial crisis for at least two decades. Since then, growth has returned, in part because sanctions have slightly eased. Independent Western analysts now estimate 2014 GDP at around $450bn (£304bn), placing Iran comfortably among the world’s 30 largest economies – ahead of both Austria and Taiwan.

But this country is still massively under-achieving. Along with its natural commodities, Iran also boasts a highly-skilled, near-universally literate population, with a vigorous median age of just 28. Its numerous universities, while far from gender-friendly, have long-produced a steady stream of well-qualified scientists and engineers.

In the mid-1950s, real per capita GDP was just four-fifths that of Turkey, Iran’s ancient rival. Over the 20 years that followed, free trade and economic dynamism meant growth was strong, with GDP per head soaring to more than two-and-a-half times that of Turkey.

Then came Ayatollah Khomeini’s 1979 revolution, with its theocratic clampdown on enterprise, which sent the economy spiralling downward.

As such, Iran missed the emerging markets revolution that, from the 1980s onwards, ignited the rapid expansion of economies like China, India and Turkey.

Iranians are now, once again, much poorer than their Turkish neighbours. Rouhani has pledged to reverse that, stating repeatedly that he wants to “join the rest of the global economy”, positioning Iran as, potentially “the most exciting emerging market on earth”.

David Fuller's view -

Using history as our guide, we know that it can take just one key leader to either make or break a country’s fortunes for many years.  This is especially true in non-democratic societies where there is no orderly mechanism for removing the unreliable.

President Hassan Rouhani of Iran is an interesting case in point, who replaced the deeply unpopular and aggressively hostile Mahmoud Ahmedinejad in mid-2013.  A smiling, English speaking and apparently mild mannered cleric with a law degree from a British University, he has been a likely candidate for negotiations, although he is not the Supreme Leader.  That is 75 year old Ali Khamenei, who succeeded Ruhollah Khomeini in 1989. 

This item continues in the Subscribers’ Area.



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April 13 2015

Commentary by David Fuller

April 13 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

David Fuller's view -

Here is the current brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 10 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 09 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 08 2015

Commentary by David Fuller

Global Thematic Investors: The Bezzle: End Times for the Cycle?

My thanks to Iain Little for a timely caution in this latest issue.  Here is the opening:

From JK Galbraith's "The Great Crash 1929", the most urbane economics lesson in How The Cycle Ends:

"To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in - or more precisely not in - the country's business and banks. This inventory - it should perhaps be called the bezzle - amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, here are always many people who need more". 

The worst nightmare of a fund manager, worse than the ignominy of under-performance, is to fall victim of The Bezzle. (Poker-players call such folk the "Patsy" or "Chump"). In a long career, I have observed copious chumps, a fair few Patsies and a great many Bezzles. Think Japan in 1990, Technology after 2000, gold in 1980. Each debacle, each End of Cycle, left many "bezzlees" -my term- bereft of what they had assumed to be unassailable fortunes. Each debacle emerged over time from modest, facile infancy to titanic, arrogant imperiousness. Most surprisingly of all, each debacle was, with the infallible eye of retrospect, entirely predictable. 

So when an asset class starts to exhibit early signs of The Bezzle, one worries about Cycle End. 

David Fuller's view -

I am sure Iain Little will touch on areas of potential liquidity problems for investors when he speaks at the Markets Now on 20th April, in addition to his comments on the performance of various investment trusts of general interest.  

Iain Little's Fund Manager's Diary is posted in the Subscribers' Area.



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April 08 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 07 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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April 02 2015

Commentary by David Fuller

India Leaning Toward Japanese Bullet Train Tech

NEW DELHI -- Japan's shinkansen bullet train Technology is the leading candidate for a planned 500km railway linking the western city of Mumbai and the state of Gujarat to the north, the first step in India's extensive high-speed rail project.

The Indian and Japanese governments initiated a joint feasibility study in late 2013, and a final report is to be released in July 2015.

The Japan International Cooperation Agency, which is participating in the study, told participants at a Feb. 28 high-speed rail seminar in New Delhi that the report will likely recommend that Japan's bullet train Technology is the most appropriate option.

A top official in India's Ministry of Railways told The Nikkei that Japan's Technology is the world's best and that India hopes to work on this project with Japan.

The Japanese contingent at the seminar included Issei Kitagawa, state vice-minister of transport; Yuji Fukasawa, executive vice president at East Japan Railway, which hopes to win orders for the project as part of a consortium of Japanese companies; Tadaharu Ohashi, a counselor at Kawasaki Heavy Industries; and top Hitachi officials.

David Fuller's view -

Japan and India are natural allies, not least because of their differences. 

Japan is a high-tech nation with a small population, while India has over a billion people with a wide range of skills and a rapidly growing middleclass.

Both countries can only benefit from a closer relationship. 



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April 02 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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April 01 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 31 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 30 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 30 2015

Commentary by Eoin Treacy

Global Top Picks 1Q 2015

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

We are raising our year-end targets for continental European and Japanese Equities. 
Since the beginning of the year, both markets have risen by 19% and 12% respectively, bringing levels close to our previous targets. From current levels our new forecasts imply a 13% total return for continental European markets, 9% for Japanese markets and 6% for global stock markets through to the end of 2015. 

Earnings are everything: Our expectations for further upside stem from an acceleration in earnings. However, with valuations only in line with historical norms and the equity risk premium still high, investors do not appear to be pricing in a surge in earnings.

Overweigh continental Europe: The long-awaited recovery in European earnings finally seems to be here – earnings revisions are positive for the first time since 2011. While we admit that the overweight Europe view is no longer anti-consensus, we believe that better earnings momentum is likely to remain supportive of further outperformance. 

Overweight Japan:  Japanese earnings revisions are faring best globally. Japanese corporates are increasing shareholder payouts too, and international participation in the really thus far seems low. 

Underweight US: US earnings reversions are faring worst for the first time in five years. We recommend a still counter-consensus underweight stance here. 

Prefer cyclicals to defensives: While the gap between the performance of cyclical sectors and economic indicators has corrected a little bit, we believe that there is more to go. We are overweight financials, consumer discretionary, industrials, materials and Technology. We are underweight staples, healthcare and telecoms. 

 

Eoin Treacy's view -

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

In preparing my talk for the MTA Symposium last week I created this chart of the MSCI World Ex-US relative to the S&P 500 in log scale. It represents a powerful illustration of just how much the USA has outperformed over the last five years when the world is rebased to US Dollars. 

The fact that the ratio is now back to test the 2001 low, is finding support and that this is occurring against a background where the world ex-US is engaging in massive monetary easing suggests the rest of the world has potential to outperform in real terms. 

 



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March 27 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 26 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 25 2015

Commentary by David Fuller

The Weekly View: As the Cycle Turns: Buying Mid-Stage Cyclicals and Neutralizing Defensives

I am not sure what happened to the usual contributors to this timely Letter but this edition is led by Doug Sandler, Chief Equity Officer.  Here is the opening:

We continue to believe that we are in the middle innings (5th or 6th inning) of an equity bull market in the US, and we do not currently see the next bear market on the horizon.  Equity valuations remain “fair” according to our Price Matters discipline, and global accommodation has raised the likelihood that the current bull market could go into extended innings.  We are also encouraged by the fact that earnings expectations for US companies have been significantly reduced recently as analysts have quickly incorporated worst-case scenarios for crude oil and currencies into their financial models.  We expect that these rushed estimate reductions will prove overly pessimistic and too one-sided in nature, failing to consider the many positive economic implications of cheap gasoline and a strong dollar.

Wit that macro outlook in mind, we wanted to highlight some of the changes we have been making recently in the domestic equity portion of the RiverFront portfolios.

David Fuller's view -

If the Fed intervened, commencing on March 13th, as I have been saying, then the US Dollar Index headwind has certainly been checked.  Moreover, it could easily range sideways to somewhat lower for a considerable time.  If so, that will help the price of WTI crude oil move a little higher, as it is priced in US Dollars.  These two factors would lend support to the optimistic view from RiverFront.

Over the longer term, I maintain that the US Dollar will move higher in a likely secular uptrend led by the USA’s Technology lead and near energy independence.  

The Weekly View is posted in the Subscribers’ Area.



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March 25 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 

 


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March 24 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 

 



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March 24 2015

Commentary by Eoin Treacy

The Tricorder, An All-In-One Diagnostic Device, Draws Nigh

Thanks to a subscriber for this article from readwrite.com concentrating on the Qualcomm sponsored Tricorder X-Prize. Here is a section: 

“We’re pretty confident that the majority of the 10 finalist teams will actually be able to deliver,” senior director Grant Company said. “Some may merge, and some may fall out, just because they can’t pull it together. And that just reinforces how big of a challenge this really is. It’s because the goals are very high.”

The winning “tricorder”—and its competitors—likely have a long FDA approval process ahead of them, which means their consumer release could be years away. But when they do arrive, they will be able to diagnose problems like stroke, anemia and tuberculosis—tasks that have always been reserved for doctors.

Diagnosis: Home Diagnosis
Such devices will arrive at an interesting time in medical history. With the emergence of mobile phones and wearable devices, home diagnostics are poised to explode.

Company said the Apple Watch and affiliated software development, will be a welcome boost for the space.

“I think it’s a good first step, and a useful barometer of what the public’s appetite is for this type of Technology,” Company said. “There’s going to be a need of collection and analysis, and these types of tools are going to be absolutely critical. If the masses are able to start building capabilities, using these research kits, it’s the first step toward adoption.”

 

Eoin Treacy's view -

I grew up watching Star Trek The Next Generation with my father and brothers and I suspect a number of people engaged in developing new technologies such as a tricorder are of a similar vintage. 

This article by Anna McCollister-Slipp highlights how the vast majority of the health system is geared towards acute care when chronic conditions represent a major challenge. It is this latter group that will be helped most by a more cohesive data acquisition and interpretation strategy. This is likely to be pioneered by new technologies such as tricorders and wearables. 

 

 



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March 23 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 23 2015

Commentary by Eoin Treacy

Jen-Hsun Huang Kicks Off NVIDIA 2015 GPU Technology Conference

This 2-hour webcast from Nvidia where Jen Hsun Huang and Elon Musk converse may be of interest to subscribers. Here is a section: 

“We’ll take autonomous cars for granted in a very short period of time,” Elon says.

JHH asks about government policies, saying he’d love to work on email while driving to work, quickly adding that he’d like to do so without breaking the law. What does the government need to do?

Elon notes that it will be several years after self-driving becomes possible that government will allow it. They want a car to be not as safe as a person driving but significantly safer.

“When it comes to public safety, there’s an argument for being quite cautious before there’s a change. I don’t think it’s the case right now that there’s a full autonomous system that regulators aren’t approving. But there could be next year.”

“I don’t think it’s the case right now that there’s a full autonomous system that regulators aren’t approving,” Tesla Motors CEO Elon Musk. “But there could be next year.”

Elon adds that the first thing we try to do is establish a hardware platform so we can do continuous updates to the software. A lot of that will happen later this year. I have an announcement on Thursday, and I don’t want to get ahead of that.

He deflects Jen-Hsun’s kidding effort to ask if he want to share that news, “There’s going to be a call on Thursday on what’s going to be in our next version for anyone that’s interested, that’s all”

 

Eoin Treacy's view -

Anyone who has ever played a pc game will be familiar with the positive difference an Nvidia graphics card can have on the experience. As the company’s CEO goes on to explain in the above webcast they now do a lot more than that. This section from an Nvidia blog highlights the importance of GPU processors in speeding up computations as well as highlighting their origin in gaming: 

The GPU’s advanced capabilities were originally used primarily for 3D game rendering. But now those capabilities are being harnessed more broadly to accelerate computational workloads in areas such as financial modeling, cutting-edge scientific research and oil and gas exploration.

In a recent BusinessWeek article, Insight64 principal analyst Nathan Brookwood described the unique capabilities of the GPU this way: “GPUs are optimized for taking huge batches of data and performing the same operation over and over very quickly, unlike PC microprocessors, which tend to skip all over the place.”

Architecturally, the CPU is composed of only few cores with lots of cache memory that can handle a few software threads at a time. In contrast, a GPU is composed of hundreds of cores that can handle thousands of threads simultaneously. The ability of a GPU with 100+ cores to process thousands of threads can accelerate some software by 100x over a CPU alone. What’s more, the GPU achieves this acceleration while being more power-and cost-efficient than a CPU.

 



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March 20 2015

Commentary by David Fuller

Shale Producers Have Found Another Lifeline: Shareholders

Here is the opening of this interesting report from Bloomberg:

(Bloomberg) -- U.S. oil producers are issuing new shares of stock at the fastest pace in more than a decade, looking to investors for a cash lifeline to pay down debt and keep drilling as crude prices continue to sink.

Tapping equity markets has become the best option for companies such as Dallas-based RSP Permian Inc., which announced March 17 it’s seeking to raise as much as $232 million by selling additional shares. Calgary-based Encana Corp. and Noble Energy Inc. of Houston also have issued shares in the past two months to reduce debt.

That brings funds raised in the first three months of the year to about $8 billion, more than 10 times the total in the same period last year. As the continued slide in oil prices further crimps cash flows, banks are pressuring these companies to shore up their capital and reduce debt to lower servicing costs and provide wiggle room.

“There aren’t really any better alternatives right now,” Chad Mabry, an analyst at MLV & Co. LLC in Houston, said in a telephone interview.

A growing acceptance that low prices will persist has convinced producers to turn to equity markets while they still can, he said. “They’re preparing for the worst.”

Few saw issuing new stock as an attractive option when the oil market first started crashing late last year because it would dilute the value of stock held by existing shareholders at a time when their holdings already were hurt by falling prices.

As recently as December and January, many producers assumed there would be little interest in pouring more money into the sector, and that funding from debt or equity wouldn’t materialize, said Rob Santangelo, co-head of equity capital markets Americas for Credit Suisse Group AG.

That began to change in February when prices seemed to stabilize and frozen credit and equity markets opened up. The $8 billion in stock issued in the first three months of 2015 is the highest of any quarter in more than a decade. If the pace continues, sales of new equity would surpass the total of 2008 and 2009 combined, the last time oil prices crashed, according to data compiled by Bloomberg.

The surge in equity offerings, even with the dilution of existing shareholders, now is widely considered the lesser of evils versus expensive borrowing or asset sales at reduced prices, said Troy Eckard, whose Eckard Global LLC owns stakes in more than 260 North Dakota shale wells.

David Fuller's view -

This is the flexibility of the capitalist system.  For relatively new oil companies formed as the shale boom took off a few years ago, the ability to issue shares today provides a considerable lifeline now that they need it.  This will disappoint countries which are primarily oil producers because the majority of private sector shale oil firms are not about to disappear as quickly as many sprang to life. Some will merge and all will rely on Technology to increase their efficiency.  Shale drillers are here to stay, for so long as we need crude oil.  



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March 20 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 19 2015

Commentary by Eoin Treacy

Radical new high-speed liquid technology could bring 3D printing into mainstream manufacturing

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

The Technology, called Continuous Liquid Interface Production (CLIP), manipulates light and oxygen to fuse objects in liquid media. It works by projecting beams of light through an oxygen-permeable window into a liquid resin to rapidly transform 3D models into physical objects.

Working in tandem, UV light, which triggers photo polymerization, interacts with oxygen, which inhibits the reaction, to control the solidification of the resin, creating commercially viable objects that can have feature sizes below 20 microns, or less than one-quarter of the width of a piece of paper. This is the first 3D-printing process that uses tunable photochemistry instead of the layer-by-layer approach that has defined the Technology for decades.

Faster, stronger, predictable
CLIP enables a very wide range of materials to be used to make 3D parts with novel properties, including elastomers, silicones, nylon-like materials, ceramics and biodegradable materials, and could allow for synthesizing novel materials that can advance research in materials science.
Conventionally made 3D printed parts are notorious for having mechanical properties that vary depending on the direction the parts were printed because of the layer-by-layer approach. Much more like injection-molded parts, CLIP produces consistent and predictable mechanical properties, smooth on the outside and solid on the inside, the company says.

“By rethinking the whole approach to 3D printing, and the chemistry and physics behind the process, we have developed a new Technology that can create parts radically faster than traditional technologies by essentially ‘growing’ them in a pool of liquid,” said Joseph M. DeSimone, professor of chemistry at University of North Carolina-Chapel Hill and of chemical engineering at North Carolina State and CEO of Carbon3D, who co-invented the method.

 

Eoin Treacy's view -

It’s not difficult to get excited when you look at the pace of technological innovation. The above invention has been featured on CNBC with someone attempting to print an AR-15 which shows the negative connotations of the development. Setting that example aside, this represents an important step towards having a practical tool in one’s home but there are more important considerations from an investment perspective. 



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March 17 2015

Commentary by David Fuller

Beyond China: The Future of the Global Natural Resources Economy

My thanks to a subscriber for this blockbuster report from Citi. Here is part of the introductory summary:

The structure of global economic growth is once again undergoing a fundamental transition, shifting away from the prevailing model of China as the world’s factory and advanced economies as the drivers of consumer demand. In its place, a more heterogeneous, multipolar framework is emerging with both manufacturing and final consumption more broadly spread across the globe.

Whereas the Commodities Supercycle was characterized by rapid, synchronized global demand growth centered on the rise of China, we expect the coming decade to feature slower, more geographically diverse, less synchronized demand growth. The drivers of natural resources demand are spreading across the globe in new ways. For oil, demand growth should increasingly come from the Middle East. For coal, the same is true of India. Only in base metals does China’s predominance look to remain unchallenged. As a result, the traditional practice of analyzing commodities demand based on the US, China and Europe will become less relevant as the drivers of incremental demand come increasingly from the “Emerging 5”: India, ASEAN, the Middle East, Latin America and Africa.

However, no large emerging market is likely to rise up to the point where China has now come to a landing. The most cited potential successors, India and Brazil, are based on democratic institutions unlikely to provide the consensus required to sustain high fixed asset investment levels. Japan and Europe could do this from the 1950s through the 1970s due to the imperative of post-WWII reconstruction. The “Asian tigers” also succeeded, but under what were initially authoritarian systems.

David Fuller's view -

I particularly agree with the first and last paragraph of this opening summary by Citi’s distinguished team of commodity analysts. 

I discussed part of this subject on 9th March, in response to my opening article by Andrew Critchlow of The Telegraph: Miners Pray the Commodities Collapse Has Hit Rock-Bottom.  

Taking a somewhat longer-term view than Citi above, here is my initial reply from the 9th:

Mining has always been the most cyclical of industries.  Nevertheless, this cycle has been longer for two main reasons: 1) The 2008 credit crisis has lengthened the global economic slowdown; 2) Accelerating technological innovation has made mining much more efficient. 

Consequently, the closest parallel for mining is with the oil and natural gas extraction industries.  However, they will learn more from mining because its bear market started earlier.  Fifteen to twenty years ago, and earlier still, the main fear was that the world was running out of these resources.  What we have learned is that Technology can locate additional resources much more easily and enable us to extract them far more efficiently.  There is also a third factor in addition to the two mentioned in the paragraph above: 3) Technology has created new materials which will reduce demand for industrial resources.

Demand for crude oil and eventually natural gas will decline in decades ahead, as the efficiency with which solar energy is produced continues to increase.  Similarly, demand for industrial metals will decline as they are replaced by graphene, ceramics and plastics. 

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



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March 16 2015

Commentary by David Fuller

These Tiny Bubbles May Save the Planet

My thanks to a subscriber for this informative article from Bloomberg and the video is also worth watching:

There are two ways to cut down on our greenhouse-gas emissions: Reduce the amount we make or limit how much of what we make actually gets into the atmosphere.

It’s the second solution that researchers at the Lawrence Livermore National Laboratory want to tackle with cute caviar-sized bubbles that can absorb carbon dioxide.

The polymer bubbles are filled with the entirely pedestrian ingredient of baking soda, long known to absorb carbon dioxide, but it’s the bubbles themselves that are the breakthrough. They’re permeable, which means that CO2 gets trapped and absorbed by the baking soda solution inside them. In theory, you could affix the bubbles to the inside of a power plant smokestack and trap the CO2 before it is released into the atmosphere.

They’re also reusable. The CO2 can be released again by heating the bubbles in a sealed container. The released CO2 can be kept in tanks or safely pumped back underground while the bubbles can go back into the smokestack and start their world-saving job all over again.

Bloomberg’s profile of Lawrence Livermore’s carbon-capturing Technology is the latest installment of The Spark, which looks at innovators finding solutions to seemingly unsolvable problems.

David Fuller's view -

Climate change will remain controversial, unless something really bad happens, which we obviously do not want.  We have a responsibility to look after our plant, and it is reassuring to see how many intelligent people are working on sensible policies to reduce pollution.  Technology has most of the big answers to environmental problems, and a more prosperous, better educated global population will help the cause.    



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March 16 2015

Commentary by Eoin Treacy

Email of the day on China muddling through

The following extracts from an article by Professor James Laurenceson, deputy director of the Australia-China Relations Institute at the University of Technology, Sydney should help subscribers have confidence in China investments.

“With China now having the world’s largest economy in terms of purchasing power, we should be cheering them on.

The World Bank says that between 1980 and 2011, the number of people living in poverty in China fell by 753 million. That’s nearly two and a half times the population of the US, and an outcome unparalleled in history.

The World Trade Organization says that China’s share of world’s goods exports has risen from 1.2 percent in 1983 to 12.1 percent in 2013. It’s now the world’s largest trader.

The Boston Consulting Group found that when utilities and other costs are added to sharply rising wages, manufacturing costs in China are now only four percent less than in the US.

To boost productivity, privatisation isn’t crucial; competition is the way that China’s government is currently muddling through reforming the financial sector.

In 2015, yes, China will muddle through. And it will do so again next year.” 

 

Eoin Treacy's view -

Thank you for this interesting article and the topical excerpts: Muddling through can also be described as being willing to both make mistakes and being committed to learning from them. If learning that competition is to be fostered is an abiding success, then the recent crackdown on corruption might also be viewed in that light. 

Some interpret the recent tightening of controls on the media and freedom of speech as well as selective punishment for moral and financial transgressions to be a retrograde step in terms of standards of governance. Others view it as a necessary process to improve the efficiency of the state owned sector not least versus their privately owned competitors. 

 



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March 13 2015

Commentary by Eoin Treacy

This Chemistry 3D Printer Can Synthesize Molecules From Scratch

This article from popularmechanics.com may be of interest to subscribers. Here is a section: 

Burke's machine simplifies the complex process of synthesizing chemical into a series of generalizable steps. Whether you're trying to form a ring of carbon atoms or strip away hydrogen atoms, each step requires a dose of starting chemicals, which Burke separates into distinct building blocks. Think of them as simple groups of chemical compounds like O2 or CO2 that snap together.

To perform each step, the machine connects a building block and then induces a chemical reaction and washes away the reaction's byproducts—slowly building each molecule from the ground up. The building blocks are snapped together like LEGOs, allowing the chemicals to mix and a reaction to take place.

Using this process, Burke showed that his machine could manufacture thousands of different chemicals in 14 distinct classes of small molecules, including known medicines to several molecules used in LEDs and solar cells. The amount of time each molecule's synthesis requires is a matter of hours, depending on how many steps are involved.

To answer the question of why such a cool Technology is only now becoming available, Burke says the hard part was figuring out the new cleanup method that happens after each chemical reaction. (Some of the information is proprietary, but Burke says he and his colleagues found a universal way to isolate out the molecules they want to keep when washing away the byproducts.)

 

Eoin Treacy's view -

R&D is expensive which is why corporations are very picky about what they fund and why it is often the division that gets axed first during a rationalisation. Reducing the cost of building compounds can only be good news for the biotech, nanotech and chemical sectors because it will help reduce the time between when an idea germinates and when it can be tested in practice.

Taking this a step further, companies have been busy increasing the speed with which they can sequence genomes and have been reducing the cost. The corollary is that as we learn more about genetics, the ability to build proteins and compounds from scratch means that tailored solutions become much more realisable. 3-D printers are already printing copies of organs such as bladders and even kidneys. Totally customisable solutions appear to be where the medical sector is heading in the coming decades. Nevertheless, a good deal of this good news is already in the price. 

 



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March 12 2015

Commentary by Eoin Treacy

Tesla Hackers Show an Energy Revolution Closer Than Once Thought

This article by Matthew Campbell, Tim Loh and Mark Chediak for Bloomberg may be of interest to subscribers. Here is a section:  

Consider the crash effort at the Joint Center for Energy Storage Research in suburban Chicago. Within five years, researchers want to create one or more battery types that can “store at least five times more energy than today’s batteries at one-fifth the cost,” according to George Crabtree, an agreeable silver-haired scientist who runs the U.S. Energy Department-backed battery-research skunk works.

Harvard University, the Massachusetts Institute of Technology, leading-edge Technology companies like Elon Musk’s Tesla Motors Inc. and scads of startups are getting into the act. Some are seeking to double the capacity and dramatically cut the costs of the lithium-ion battery, the standard in iPhones and electric vehicles. Others are working on mega-scale battery systems using novel chemistries that could cheaply store enough energy to help power entire cities.

Battery entrepreneurs have begun to even talk like revolutionaries. “The ability for a battery company to change the dynamics of the world is what has got us excited,” says Bill Watkins, chief executive officer of Imergy Power Systems Inc., a Fremont, California, startup working on utility-scale batteries. “We can actually make a big difference here. I call it democratizing energy.”

As the former CEO of Seagate Technology Plc, the Silicon Valley digital storage maker, Watkins can speak from experience about tectonic Technology shifts. In 1980, a Seagate five- megabyte hard drive that rendered floppy disks obsolete was a $1,500 PC add on. These days, drives holding two terabytes of data -- equivalent to two million megabytes --  can be had for a retail price of under $200.

What’s primarily driving the battery revolution is the phenomenal growth of rooftop and other forms of solar energy and an awakening by renewable energy advocates that storage is the lagging piece of the transformative puzzle. Solar now powers the equivalent of 3.5 million American homes and accounted for 34 percent of all newly installed electricity capacity last year.

Wind supplies enough electricity for the equivalent of about 14.7 million U.S. homes, about the same as 52 coal-powered generating plants, according to the Wind Energy Foundation.
An exponential breakthrough in battery capacity and cost would bulldoze the limitations to adopting renewable energy on a massive scale, be a potent weapon to fight climate change by lowering carbon emissions and potentially bring billions of dollars in profits, never mind fame, to the winners. The knock on renewables is that while fossil fuels keep the power on all the time, solar fades when the sun doesn’t shine and wind power fizzles when the wind doesn’t blow – unless you have a way to store the excess for when you need it.

“What’s holding back solar and wind isn’t their availability but the fact that the Technology to generate renewable energy has lept far ahead of the capacity to store and deploy it round the clock as needed,” says Crabtree of the Joint Center project, which is run out of the federal Argonne National Laboratory.

Prophesies of energy revolutions always come with caveats, of course, and some researchers note that an exponential breakthrough in battery storage and cost has been forecast for more than a decade and still hasn’t arrived. “Of all these other battery technologies people promote, how many of them are real?” says Jeff Dahn, a professor at Dalhousie University in Nova Scotia who continues to plug away at making stronger and cheaper lithium-ion batteries. “All that remains to be seen.”

 

Eoin Treacy's view -

When we first started writing about the massive investments in battery Technology as early as 2010 there was a great deal of enthusiasm about how batteries were going to make the case for renewable energy more compelling than ever. However, the difficulty of innovating in the chemical sector and the lead time in bringing new methodologies to market was underestimated. 



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March 11 2015

Commentary by David Fuller

China Said to Plan Overhaul of $3 Trillion Industrial Machine

Here is the opening of this interesting article from Bloomberg:

(Bloomberg) -- China is preparing to overhaul its bloated and inefficient state-run companies to bolster an economy forecast to grow at the slowest pace in more than two decades, according to people familiar with the matter.

The proposal would include consolidation and reduce the government’s role in state-owned enterprises by stripping ownership stakes from the agency that regulates them, the people said. The plan, which could be released as soon as this month, calls for bundling the companies by industry and handing their control to state asset-management firms, the people said, asking not to be identified because the talks were private.

The shake-up is poised to affect thousands of companies, including some of the world’s largest, such as China National Petroleum Corp. and China Mobile Communications Corp. The country’s state companies are perceived to be so rife with corruption and poorly run that Sanford C. Bernstein & Co. estimates that they trade at discounts totaling $2 trillion.

And:

“Putting SOEs under the supervision of asset-management companies that will focus on improving the efficiency of investment would be a major step towards putting China on a more sustainable growth path,” said Arthur Kroeber, the Beijing-based research chief for Gavekal Dragonomics.

The government is pushing Chinese companies in key industries, including communications and power generation, to expand overseas, a plan outlined by Li March 5 in his report to the annual legislative session. The ongoing merger of the state’s two biggest train-equipment makers and the Technology ministry’s “Made in China 2025” plan to remake the manufacturing industry are part of the broader plan.

The overhaul comes as state-run companies increasingly find themselves the target of President Xi Jinping’s nationwide corruption crackdown, leading to the downfall of more than 70 executives last year, according to Xinhua. The changes would affect some of the same 26 major firms named as inspection targets last month by Wang Qishan, China’s anti-graft chief.

David Fuller's view -

Corruption is usually the biggest problem in command economies.  China’s top leaders, seldom lacking in confidence, believe they can achieve the same economic dominance the country enjoyed before the 20th century.  Consequently, President Xi Jinping has grasped the nettle of corruption.  It will not be easy but this is a sensible and necessary decision on behalf of China, which remains one of the world’s fastest growing economies.   

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March 11 2015

Commentary by David Fuller

March 10 2015

Commentary by David Fuller

March 09 2015

Commentary by David Fuller

March 06 2015

Commentary by David Fuller

March 06 2015

Commentary by Eoin Treacy

Email of the day on cyber security and the Internet of Everything

I worked on disc firmware in the early 70s and then continued with computer security consulting to the usual agencies with the usual clearances.

Your correspondent (Ed. on May 4th) seems to have been stimulated to make comment as a result of an FT article. Having been interviewed about security by the FT in the mid-80s, I soon learnt that any statement made to a journalist was likely to be mangled to the point of incoherence. 

I wouldn't expect to find insight on finance in a security journal so reacting to a story about security in the finance section of a newspaper without checking the story and the details sets the scene for confusion and misrepresentation.

The "former R&D executive" misses the point of the exploit completely and sets up a strawman about the chain of integrity. The whole point of the attack vector in this case is that no spyware "has to be designed in" .

No-one has made any claim of secret implementations of spyware across "multiple US companies". The "spyware" is not "designed in" as the attack vector uses firmware update capability to introduce the trojan. 

This is not new and even in the 70s and 80s we were advising our clients on threats from any updateable firmware whether in drives or in peripherals such as laser printers.

What is new is that someone has published details and it is not surprising that an individual or company needs to be outside the UK and the US to risk publication even of well-understood techniques in this area.

Kaspersky's researchers seem to find aspects of this "sophisticated" but that is probably because their origins are in anti-virus scanning rather than general computer security or high integrity systems.

Even interested hobbyists and hackers have shown how to reverse engineer and modify the firmware of standard off-the-shelf hard drives without any expensive equipment, documentation of the chips or source code of any kind.

Regarding  a "very senior executive in the computer security business"; well, I have been one of those and found many others with that description to be completely clueless technically.

As for the advice to use some named anti-virus products, if you check in the deeper parts of the security world, you will find those are referred to as "Silent Partners of the NSA". As a junior engineer who ordered the very first encryption chips to be imported into the UK in the late 70s, I quickly learnt that others had a great interest in my activities and was soon required to inform our friends in Cheltenham of my progress on a regular basis. 

I have added two relevant attachments and if you take a few seconds to glance at the sentences that I've highlighted in yellow, you will get some insight beyond the misrepresentations of the FT and Reuters.

There are a few "journalists" who can comment more sensibly in the area and some publish at Technology site Ars Technica.

This is a short overview of how a hobbyist can put a backdoor on a hard drive.

Dan Goodin has a degree in English and a Masters in journalism but covers aspects of security in a readable manner.

His overview of the Kaspersky/NSA story is here

Hope this clarifies the picture.

Eoin Treacy's view -

Thank you for taking the time to share your experience of what is an important sector. I am constantly impressed by the breadth of knowledge exhibited by our subscribers and your combined generosity in sharing it. This is perhaps the Service’s greatest strength and thank you all for contributing to our Empowerment Through Knowledge theme. Polite informative comments are always welcome. 

The original Kaspersky report and the additional annotated report, focusing on how to gain access to a hard drive via a “back door”, are well worth reading as you say. Thanks also for the additional links to the above news items.  

The explanation of how Kaspersky was able to develop sink holes for returned information by securing expired web addressed that had been used by the Equation Group is fascinating. While we might conclude this was an error on behalf of the group, another interpretation is that the addresses were simply no longer required and that the group has moved onto something else. When it comes to the defence sector it is reasonable to conclude that whatever is now public is already outdated compared to what is in development or non-public. 

Regardless of how one feels about Edward Snowdon’s actions there is no doubt that the information coming from his disclosures is having an effect. It has forced some to work harder to conceal operations and has been a benefit to those wishing to use the existence of well-funded hacking groups to further their own geopolitical aims. 

 



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March 05 2015

Commentary by David Fuller

The Third Industrial Revolution: Internet, Energy and a New Financial System

Here is the conclusion of this fascinating interview with Dr David Brown by Goncalo de Vasconcelos for Forbes:

de Vasconcelos: So what will the Third Industrial Revolution impact the most?

Brown: Eventually everything, but the early movers have been USA-led computing, IT, internet companies and social media sites, which have grown to global behemoths faster than ever in history. These in turn have driven bioTechnology as the genome at last begins to impact. Both went through a hype phase in the 1990s, then a bust, then the real winners emerged. That is a typical pattern over the initial 15-20 years of a breakthrough Technology. Solar power has been driven mainly by Germany and more recently China, though the USA is catching up fast. Current solar systems have only 10-20% efficiency in sunlight capture but new materials will take this into the 50-100% range very soon now. And battery storage Technology is advancing rapidly.  Additive manufacturing (aka 3D printing) will replace our old material and energy-wasteful methods. Robotics is beginning to spread out of factories with Japan, Germany and China leading the charge, though expect the USA to catch up and contribute to innovation. NanoTechnology will mature in the 2020s. The Internet-of-Things is a few years away, and it will probably drive the next phase of healthcare advances, but needs more stable internet, better security and cheaper components before it can take off. And machine learning /AI will be a game-changer for humanity, beginning to impact within the next decade. The new finance is now appearing through Africa-led mPesa, followed by Google GOOGL +0.55%-wallet and Apple-pay etc. The US internet giants are registering as banks, they have very cheap infrastructure and billion-size customer bases and are likely to challenge patriarchs of the current financial system. There is much innovation in finance in the UK too. We see positive deflation all over the world as a result of these lower-cost and more-efficient solutions to human needs.

de Vasconcelos: So where are we in the Third Industrial Revolution?

Brown: Industrial revolutions take decades to play out. We have barely started in this one. Remember that the first and second Industrial Revolutions involved only Western Europe and its off-shoots, whereas this one is truly global. And online education is available to everyone for the first time ever. OECD projections indicate the world will become about 10 times wealthier during this century, and these advances certainly support their case. Exciting times!

David Fuller's view -

David Brown is assessing the current economic outlook in the context of two previous industrial revolutions.  Moreover, the panoply above is certainly no less exciting or revolutionary than anything else that has occurred throughout human history, and it is occurring at a much more rapid pace.  

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March 05 2015

Commentary by David Fuller

How the Internet of Things Is More Like the Industrial Revolution Than the Digital Revolution

Philadelphia’s Centennial Exposition of 1876 was America’s first World’s Fair, and was ostensibly held to mark the nation’s 100th birthday. But it heralded the future as much as it celebrated the past, showcasing the country’s strongest suit: Technology.

The centerpiece of the Expo was a gigantic Corliss engine, the apotheosis of 40 years of steam Technology. Thirty percent more efficient than standard steam engines of the day, it powered virtually every industrial exhibit at the exposition via a maze of belts, pulleys, and shafts. Visitors were stunned that the gigantic apparatus was supervised by a single attendant, who spent much of his time reading newspapers.

“This exposition was attended by 10 million people at a time when travel was slow and difficult, and it changed the world,” observes Jim Stogdill, general manager of Radar at O’Reilly Media, and general manager of O’Reilly’s upcoming Internet-of-Things-related conference, Solid.

“Think of a farm boy from Kansas looking at that Corliss engine, seeing what it could do, thinking of what was possible,” Stogdill continues. “When he left the exposition, he was a different person. He understood what the Technology he saw meant to his own work and life.”

The 1876 exposition didn’t mark the beginning of the Industrial Revolution, says Stogdill. Rather, it signaled its fruition, its point of critical mass. It was the nexus where everything — advanced steam Technology, mass production, railroads, telegraphy — merged.

“It foreshadowed the near future, when the Industrial Revolution led to the rapid transformation of society, culturally as well as economically. More than 10,000 patents followed the exposition, and it accelerated the global adoption of the ‘American System of Manufacture.’ The world was never the same after that.”

In terms of the Internet of Things, we have reached that same point of critical mass. In fact, the present moment is more similar to 1876 than to more recent digital disruptions, Stogdill argues. “It’s not just the sheer physicality of this stuff,” he says. “It is also the breadth and speed of the change bearing down on us.”

While the Internet changed everything, says Stogdill, “its changes came in waves, with scientists and alpha geeks affected first, followed by the early adopters who clamored to try it. It wasn’t until the Internet was ubiquitous that every Kansas farm boy went online. That 1876 Kansas farm boy may not have foreseen every innovation the Industrial Revolution would bring, but he knew — whether he liked it or not — that his world was changing.”

As the Internet subsumes physical objects, the rate of change is accelerating, observes Stogdill. “Today, stable wireless platforms, standardized software interface components and cheap, widely available sensors have made the connection of virtually every device — from coffee pots to cars — not only possible; they have made it certain.”

David Fuller's view -

At the risk of sounding pedantic, I do not think we have actually reached the point of critical mass in terms of the Internet of Things, as mentioned above.  It has not quite happened yet, although we can envisage it. 

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