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Found 231 results in Autonomies
December 09 2016

Commentary by Eoin Treacy

Ford leads automakers in patents for 2016

This article by Greg Gardner for Detroit Free Press may be of interest to subscribers. Here is a section:

We are living the innovation mind-set in all parts of our business across the globe,” Nair said in a news release. “Our employees are delivering exciting new technologies for our customers at record levels.

The Dearborn automaker was granted 1,700 more patents in other countries, bringing the total to more than 3,100 patents granted worldwide this year.

One of those patents was granted to engineers Tony Lockwood and Joe Stanek for an invention that equips autonomous vehicles with drones.

The system deploys a drone from an autonomous vehicle to map the surrounding area beyond what vehicle sensors can see. Passengers can control the drone using the car’s infotainment or navigation system.

 

Eoin Treacy's view -

Just about all car companies are exploring the autonomous vehicle market while at the same time they are investing in electric vehicles. After all, software is a lot cheaper to develop than hardware. 
This week Apple also had to lay out for regulators some of what it has planned for the transportation market. Here is a section from a story from USA Today

"The company is investing heavily in the study of machine learning and automation, and is excited about the potential of automated systems in many areas, including transportation," Kenner wrote in the letter of Apple's ambitions.

Kenner said Apple supports a proposal that companies share "de-identified" data from crashes or near-misses to help improve self-driving technology, but warns the policy must take consumers' privacy into account.

"Data sharing should not come at the cost of privacy," said Kenner. "Apple believes that companies should invest the resources necessary to protect individuals’ fundamental right to privacy."

 



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December 02 2016

Commentary by Eoin Treacy

As Schultz Steps Down, Next Starbucks CEO Brings Tech Savvy

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

Starbucks’ digital and technology prowess has put it ahead of its peers, allowing it to serve more customers faster. Same- store sales rose 5 percent in the Americas region in the most recent quarter. Mobile payments accounted for about 25 percent of U.S. transactions in that period.
     
Starbucks built on its tech leadership with an order-ahead feature, which lets customers select and pay for drinks in advance. They then can pick up the beverages at a shop without waiting in line.

Since Johnson became operating chief, Starbucks has rolled out mobile ordering across the U.S. and even tested delivery.

The Seattle-based company also is boosting spending on digital ventures, including taking its app and rewards platform to countries such as China.

Though shares of Starbucks tumbled immediately after the announcement, they recovered some of that ground during extended trading. As of 9:53 a.m. in New York on Friday, the stock was down 2.4 percent to $57.11

Eoin Treacy's view -

Starbucks sells coffee and snacks, technology might ensure the lines are shorter but unless it has ambitions on selling that technology to a wider market the business is unlikely to change much. Losing Schulz as a figurehead is a blow and investors are likely to want to see improving sales if the new CEO is to be given the benefit of the doubt. 



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November 29 2016

Commentary by Eoin Treacy

How Apple Lost China to Two Unknown Local Smartphone Makers

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

“Oppo and Vivo are willing to share their profit with local sales. The reward was an extremely active and loyal nationwide sales network,” said Jin Di, an IDC analyst based in Beijing. While they declined to detail their subsidy program, she estimates the two were the top spenders in the past year. “They’re doing something different -- they do local marketing.”

China had for years driven Apple’s and Samsung’s growth. The U.S. company generated almost $59 billion of sales from the region in fiscal 2015, which was more than double the level just two years earlier. During that time its shares surged more than 60 percent. At its peak, Greater China yielded almost 30 percent of its revenue and Apple was neck-and-neck with Xiaomi for the mantle of market leader as users clamored for the larger iPhone 6 models. Even as the domestic economy began to sputter, Chief Executive Officer Tim Cook spent a good chunk of an earnings call last year talking up the country’s promise, saying Apple’s investing there “for the decades ahead.”

 

Eoin Treacy's view -

Mobile devices is an increasingly competitive market. The speed with which new companies seem to come and go is alarming from an investors’ perspective because no sooner does one seem to have conquered the world than they are being supplanted by an even more revolutionary start up. 



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November 28 2016

Commentary by Eoin Treacy

Holiday Price War Heats Up as Wal-Mart, Target Chase Amazon

This article by Lindsey Rupp and Sarah Very for Bloomberg may be of interest to subscribers. Here is a section: 

“With the lines between traditional brick and mortar and e-commerce continuing to blur, the need to make a big splash during large retail events like Black Friday is significant,” Traci Gregorski, senior vice president of marketing at Market Track, said in an e-mailed statement. “The ease of comparison shopping across channels is creating a situation that puts a definitive advantage in the consumers’ hands.”

Wal-Mart and others also are steering customers toward online deals, rather than just physical stores. While the chain still offers Black Friday specials at its supercenters, the day marks the beginning of a streak of online promotions called “Cyber Week.” Wal-Mart has tripled its e-commerce selection to 23 million products this year, aiming to better compete with Amazon. The world’s largest retailer said in a statement Friday that Thanksgiving was one of its top online-shopping days this year and that about 70 percent of the traffic to its website came from mobile devices.

Target, meanwhile, is offering 15 percent off almost everything in its stores and website for two days: Sunday and Monday. The aggressive discounts come at a cost. When Target slashed prices last holiday season, its profit margin slipped to 27.9 percent from 28.5 percent.

 

Eoin Treacy's view -

Retail is becoming increasingly competitive but online only companies like Amazon have a distinct advantage relative to those maintaining large brick and mortar locations. Nevertheless, the benefit of a large physical location network is brand awareness; meaning companies have to work less hard to create an online shopping footprint. High competition however is likely to ensure margins continue to compress. 



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November 03 2016

Commentary by Eoin Treacy

Facebook Projects Greater Costs, Slowdown in Ad Sales Growth

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

In the third quarter, Facebook increased its monthly active users 4.7 percent from the previous quarter to 1.79 billion, topping analysts’ estimates of 1.76 billion. Daily users rose to 1.18 billion.

Facebook expanded its mobile ads business to Instagram, its photo-sharing application, which has started to contribute to the growth. While the company doesn’t break out sales, Instagram’s advertising revenue is rising faster than for Facebook’s main product, Wehner said in an interview. Still, Facebook’s main app was the bigger contributor to the sales increase, he said.

Even if Facebook’s sales gains start to slow by the middle of next year, Chief Executive Officer Mark Zuckerberg has plenty of other levers he can pull to make money. In addition to Instagram, the company has two chat apps, Messenger and WhatsApp, with more than 1 billion users each. Facebook is testing models for revenue from the properties, such as letting users talk to businesses to book trips or send flowers.

Meanwhile, Zuckerberg is changing the nature of the Facebook app to focus more on video.

“In most social apps today, a text box is still the default way we share,” Zuckerberg said. “Soon, we believe a camera will be the main way that we share.”

Eoin Treacy's view -

Facebook has defied the expectations of many people, myself included, to become a genuinely innovative company that has made smart acquisitions to dominate the social media sector. Like Google/Alphabet, it might do many other things but its financial health is reliant on advertising, so monetising the active young user base of Instagram has to be high on their list of priorities. 



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October 28 2016

Commentary by Eoin Treacy

Chip Makers Cut Deals as Cars Get Smarter

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

Ford Motor Co.,  BMW AG and others have said they would have self-driving cars on the road in the next few years, while Tesla Motors has a semiautonomous system already on the road. Tesla last week began shipping vehicles that include hardware that could one day be empowered by software, which must be validated and approved by regulators, to operate in a fully autonomous mode. Tesla Chief Executive Officer Elon Musk aims to demonstrate fully autonomous cross-country drive by the end of next year.

Analog Devices Inc. cited auto applications as a key motivation in a deal announced in July to buy Linear Technology Corp. in a cash-and-stock deal valued at $14.8 billion. NXP became the top auto chip supplier by striking a deal valued at nearly $12 billion last year to buy Freescale Semiconductor Inc.

But the market for years has been fragmented among many suppliers with different specialties competing on price. Where an iPhone has one central chip to power its computing functions, many parts of cars have long used separate chips—a situation that could become even more complex as car makers add more features for safety and other purposes.

“Those will all require more processing capability and likely will be supplied by different suppliers who are not exactly working together,” said Dave Sullivan, an automotive industry analyst at AutoPacific, in an interview.

The push toward autonomous driving is a countervailing force, requiring more powerful chips and software that can analyze feeds from cameras, radar and other sensors using technologies such as deep learning. Tesla Motors Inc. has moved toward a central computing system, announcing last week it had picked chip maker Nvidia Corp. as part of the self-driving hardware it has vowed to include in all its new vehicles.

 

Eoin Treacy's view -

There is not going to be a single day when someone turns a switch and the global vehicle fleet becomes autonomous. Rather it is going to happen in a piecemeal fashion and regulators will hopefully pay attention to what is happening in other parts of the world to come up with an idea of best practice. 

If we set aside the timeline for when cars are likely to be fully autonomous for a moment, the big question for auto manufacturers is still how to make new cars attractive enough to encourage people to pay up but not so attractive that they will cannibalise next year’s sales. The answer would appear to offer more added extras in the form of electronics and connectivity regardless of whether cars are autonomous. 

 



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October 26 2016

Commentary by Eoin Treacy

Tesla Earnings: The Moment of Truth

This article by Stephen Russolillo for The Wall Street Journal may be of interest to subscribers. Here is a section:

Using generally accepted accounting principles, Tesla is expected to log a loss of 59 cents a share. Since going public in 2010, Tesla only has reported one profitable quarter under this basis. That came in 2013, when the stock surged from the mid-$30s to nearly $200. It has been volatile ever since, currently still trading around $200 with a silly valuation.

Whether or not the quarter is profitable, investors will want to hear about future production, which they are counting on to justify Tesla’s share price. Earlier this month, Tesla reported third-quarter deliveries of its vehicles more than doubled from a year earlier to 24,500. It also reiterated its forecast earlier this month that it would produce 50,000 vehicles in the second half of 2016. And it maintains it will deliver 500,000 cars by 2018, thanks to the Model 3 mass-market sedan.

But Tesla has repeatedly overpromised and underdelivered. In the past five years, Tesla has failed to meet more than 20 of Mr. Musk’s projections, according to an analysis by The Wall Street Journal.

 

Eoin Treacy's view -

This is a big week for earnings with Apple yesterday, Tesla today, Alphabet tomorrow and Amazon on Friday. Tesla makes cars people aspire to own and want to be seen driving. That’s something not many car manufacturers can brag about. However there is nothing easy about starting a car company from scratch even if electrc cars have nearly two thirds fewer parts than conventional vehicles.



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October 26 2016

Commentary by Eoin Treacy

Email of the day on virtual reality and augmented reality

The Gartner curve you posted indicates that Augmented Reality and VR are approaching or in 'payback' phase. If so this ETF could be a good investment vehicle. Purefunds Video Game Technology ETF (GAMR) Can you please add it to the Chart Library. Grateful thanks

Eoin Treacy's view -

Thank you for this suggestion and I agree that the video gaming sector is a growth engine quite apart from the evolution of virtual and augmented reality gaming. The question is no longer about whether people will play games, regardless of gender, age or ethnicity, but rather which will be the most effective platforms to deliver the media. Right now mobile apps are by far the most popular because everyone has a phone. 



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October 13 2016

Commentary by Eoin Treacy

Email of the day on the influence of mega-caps on the performance of the S&P 500:

Given that (apparently) the FANGS account for about 50% of the total gains in the S&P500 over the last 2 years, it would be interesting to see what a chart of the S&P500 minus the FANGS would look like. Does such a chart exist?

My gut feel is that the chart would look more like the Dow Jones Industrial Index

 

Eoin Treacy's view -

Thank you for raising this important question. I don’t have a chart that removes Apple, Alphabet, Microsoft, Amazon and Facebook from the performance of the overall index but I did create this spreadsheet ranking the constituents of the Index by market cap. 



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October 12 2016

Commentary by Eoin Treacy

Baidu is bringing AI chatbots to healthcare

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

The Chinese search engine launched "Melody" on Tuesday, a chatbot that uses artificial intelligence to help doctors care for patients over text.

Baidu (BIDU, Tech30) aims to make medical consults more accessible and help patients determine whether or not they should see a doctor in person.

For instance, if you tell Melody your child is sick, it might ask whether she has a fever or is jaundiced and follow up with additional questions.

Melody integrates with the Baidu Doctor app, which already lets patients ask doctors questions, make appointments and search for health information. Melody asks the patient preliminary questions and pulls data from digitized textbooks, research papers, online forums and other healthcare sources.

The app produces a hypothesis regarding treatment options that a human doctor edits and sends to the patient. The self-learning bot will continue to sponge up information and improve conversation as time goes on.

 

Eoin Treacy's view -

Ray Kurzweil made clear in his talk at the ExMed conference earlier this week that “life begins at a billion impressions” when it comes to artificial intelligence (AI). In other words if you want to teach a computer how to recognise an image you need to feed it a billion examples before it can make the leap to recognition. 



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October 11 2016

Commentary by Eoin Treacy

Email of the day on South Korea

I would like to draw your attention to the 20 year Korean Kospi chart... An explosion waiting to happen ???

Eoin Treacy's view -

Thank you for this question and I displayed a number of long-term charts in the big picture long-term audio / video on Friday. A number of Asian markets are in very long-term ranges and some are testing their long-term highs so I agree it is a good time to ask a question whether they represent explosions waiting to happen now or perhaps later?



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October 07 2016

Commentary by Eoin Treacy

Follow Your Nose

Thanks to a subscriber for this interesting report from Deutsche Bank. Here is a section:

Key Themes to Drive Industry Shift
Minimally Invasive Treatment is Large and Underpenetrated: Balloon sinus dilation (BSD) is a minimally invasive alternative to functional endoscopic sinus surgery (FESS). The procedure was introduced in 2005, but remains underpenetrated (we estimate 20% today). We view penetration increasing to 26% in 2021 lead primarily by continued economic and clinical data.

From the Operating Room to the Physician’s Office: We believe an increasing number of chronic sinusitis procedures will shift from the operating room to the physician’s office setting moving forward. This shift provides benefits to all: patients, physicians, and payors.

DB Survey Supports View of Market Growth and Penetration
We conducted a survey of 30 US based, board certified otolaryngologists. We asked our survey respondents to comment on volume expectations, procedure settings, and market share trends. Our results indicate increased volume across procedure types, a move toward office based procedures, and further penetration of minimally invasive treatment options.

Opportunities for Technologies that Lower Costs and Improve Outcomes
New technologies that further enable minimally invasive procedures and the shift to physician’s office based care are also garnering more attention. Medical supplies and devices companies have taken note with recent launches of more compact navigation systems, steroid eluting stents, and more compact surgical tools and technologies.

 

Eoin Treacy's view -

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

Technology is evolving at a pace that is difficult for many people to keep up. That is the challenge of living in a time where exponential growth in understanding innovation, technology and science are competing and complimenting one another. I’m heading to San Diego this afternoon for Singularity University’s ExMed conference where the primary topic of conversation will be what the future holds for the healthcare sector. I look forward to sharing any insights I gain with you when I get back. 



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October 07 2016

Commentary by Eoin Treacy

Wal-Mart's next move against Amazon: More warehouses, faster shipping

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

The world's largest retailer is now on track to double the number of giant warehouses dedicated to online sales to 10 by the end of 2016, according to Justen Traweek, vice-president of e-commerce supply chain and fulfillment.

That pace is faster than the 8 large warehouses that industry consultants expected Wal-Mart to build by the end of 2017.

At the same time, Wal-Mart in the last year has installed new technology such as automated product sorting and improved item tracking that for the first time puts them on par with Amazon's robot-staffed facilities, according to supply-chain consultants.

"We have doubled our capacity in the last twelve months and that allows us to ship to a majority of the U.S. population in one day," Traweek said.

Wal-Mart is holding its annual investor day on Thursday when, among other topics, it is expected to update on the progress it has made in its e-commerce business.

Wal-Mart, which has about 4,600 stores in the United States and over 6,000 worldwide, has been investing in e-commerce for 15 years, but it still lags far behind Amazon.

"These additions definitely give Wal-Mart the opportunity to compete better than other companies going head-to-head with Amazon," said Steve Osburn, director of supply chain with consultancy Kurt Salmon, referring to the likes of Target (TGT.N) and others. "Having said that, choosing to race with Amazon is different than catching up with them."

 

Eoin Treacy's view -

As the number 1 online venue for shoppers Amazon is the obvious target for aspirational brick and mortar retailers who wish to leverage their own customer bases. Amazon is no longer concentrating on being the cheapest venue, having succeeded in developing a large loyal following of consumers by offering outstanding   quibble free customer service. Wal-Mart on the other hand will have to deal with its caché of appealing to the lower income consumer if it wants to compete with Amazon Prime.



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September 29 2016

Commentary by Eoin Treacy

D-Wave Systems previews 2000-qubit quantum processor

This press release from D-Wave Systems may be of interest to subscribers. Here is a section:

“As the only company to have developed and commercialized a scalable quantum computer, we’re continuing our record of rapid increases in the power of our systems, now up to 2000 qubits.  Our growing user base provides real world experience that helps us design features and capabilities that provide quantifiable benefits,” said Jeremy Hilton, senior vice president, Systems at D-Wave. “A good example of this is giving users the ability to tune the quantum algorithm to improve application performance."

“Our focus is on delivering quantum technology for customers in the real world,” said Vern Brownell, D-Wave’s CEO. “As we scale our processors, we’re adding features and capabilities that give users new ways to solve problems. These new features can enable machine learning applications that we believe are not available on classical systems. We are also developing software tools and training the first generation of quantum programmers, which will push forward the development of practical commercial applications for quantum systems.

Eoin Treacy's view -

D-Wave Systems has received investment from companies like Google and Lockheed Martin as well as NASA but its press releases have tended to trend towards exaggeration. There is considerable debate about the efficacy of the solutions they propose and if one is keeping up with the news there is obviously a chasm between the size of the computers D-Wave claims to be producing and those created by other more conservative companies. 



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September 27 2016

Commentary by Eoin Treacy

Iger's Legacy at Stake in Possible Disney Deal for Twitter

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

The 65-year-old chairman and chief executive officer of Walt Disney Co. is scheduled to retire in June 2018. He’s already achieved a number of milestones, including Disney’s revival of the “Star Wars” film series and the opening in June of the company’s $5.5 billion Shanghai resort. But one issue bedevils him and most other media executives: how to transition to a world where mobile devices, not TV screens, dominate news and entertainment.

The question underscores Disney’s interest in Twitter Inc. The Burbank, California-based company has hired an investment bank to advise on a possible Twitter merger, Bloomberg News reported Monday. A deal would unite the world’s largest entertainment company, the home of ABC, ESPN and Mickey Mouse, with the technology pioneer that created the 140-character tweet. It could let Iger leave knowing he’s given Disney a big presence in digital media and advertising.

“That would be his final stamp on Disney,” said Tim Galpin, a professor of management at Colorado State University and co- author of “The Complete Guide to Mergers and Acquisitions.” “If he could get that behind him, he could walk off with a final major success story.”

Twitter, whose co-founder and CEO Jack Dorsey sits on the Disney board, has already been dipping his toes in live sports, airing National Football League’s night games. That’s a business that Disney, the parent of the leading sports TV network ESPN, knows well and that clearly intrigues Iger

Eoin Treacy's view -

The acquisition and successful reboot of Star Wars coupled with the opening of the Shanghai resort were major successes for Disney. However that does not obscure the fact that the company’s broadcasting and cable divisions represent almost half of revenues and face challenges from interlopers like Netflix, Hulu and YouTube. These challenges have yet to be addressed. 



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September 15 2016

Commentary by Eoin Treacy

U.S. Stocks Rise on Apple Rally as Oil Advances; Bonds Mixed

This article by Oliver Renick and Jeremy Herron for Bloomberg may be of interest to subscribers. Here is a section: 

U.S. stocks rose from a two-month low as Apple Inc. extended a rally, while a rebound in crude boosted shares of energy producers. The selloff in longer-dated bonds eased amid data showing the American economy is on uneven footing.

The S&P 500 Index jumped as Apple pushed its four-day gain past 11 percent. The index slipped toward its 100-day moving average before pushing higher as the level held for a fourth day. Industrial production contracted more than forecast and retail sales unexpectedly slid, sending the odds for a rate increase next week below 20 percent. The dollar was little changed after initially turning lower on the sales data.

Sterling slid after the Bank of England said another rate cut this year is possible. Oil erased gains to fall back below $44 a barrel. 

Equities continued to whipsaw investors after Friday’s rout jolted markets from a two-month torpor and wiped almost $2 trillion in value from stocks amid concern that central banks would deliver smaller doses of stimulus even as the global economy sputters along. Apple’s advance has buttressed U.S. equity indexes, as consumers snapped up the new iPhone model.

 

Eoin Treacy's view -

Apple still has the world’s largest market cap at $620 billion so its underperformance over the last year has represented a drag on the wider market. In fact the drag has been compounded by the impact Apple’s decline in sales growth has had on its suppliers. 



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September 13 2016

Commentary by Eoin Treacy

Dairy Farmers Think Almond Milk Is Bogus But Americans Love It

This article by Leslie Patton and Lydia Mulvany for Bloomberg may be of interest to subscribers. Here is a section:

Almond milk is boosting the nut’s popularity, too. Last year, Americans bought $890 million of the stuff, three times the amount of soy milk’s $286 million, according to IRI. By contrast, consumers bought $9.2 billion of lowfat and skim milk. Retailers have caught on to the trend. Starbucks Corp. is adding almond milk to its lineup of non-milk alternatives, which already includes coconut and soy milk. And as of last month, Dunkin’ Donuts offers it in all its stores.

Milk alternatives have faced scrutiny for not containing very many nuts or natural ingredients. WhiteWave Foods Co.’s Silk brand of almond milk, for example, also contains sugar, salt, gellan gum and sunflower lecithin.

A lawsuit filed last year against Blue Diamond Growers, which supplies Dunkin’ Donuts, said its almond milk contained just 2 percent almonds. Blue Diamond’s U.K. website confirms the product’s almond content. Water and sugar are listed as ingredients before almonds. Alicia Rockwell, a company spokeswoman, declined to comment.

Among the biggest almond-milk sellers are WhiteWave and Blue Diamond, along with retailers like Target Corp. and Aldi Inc. that have private-label brands. Niche companies are also riding the wave, like NüMoo Nut-Milks, which makes an organic, cold-milled chocolate almond milk.

 

Eoin Treacy's view -

Almond milk with its low fat / high protein / low glycemic index credentials tends to tick a lot of boxes for the current trend of health conscious diets. As a result it is boosting demand for the nut amidst what has already been a growth trend in Asian consumption. In a battle of marketing against regular milk it is winning and gaining market share. A clear health scare or drop in Asian demand would likely be required to check that trend. 



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September 12 2016

Commentary by Eoin Treacy

What Samsung's Disastrous Galaxy Note 7 Recall Means for Apple

This article by Chris Nolter for TheStreet may be of interest to subscribers. Here is a section:

The announcement of the iPhone 7 and 7 Plus was "lackluster," in the view of Gartner analyst Tuong Nguyen, who expressed skepticism that the problems with Samsung's flagship smart phone will lead to an outflowing of customers to Apple.

"We've chosen our battlegrounds already," Nguyen said, suggesting that U.S. users are mostly either in the Android an iOS camps. Shifting from one to the other is "at the least annoying" and involves relearning the quirks of a new platform and accounting for apps that have been bought or downloaded.

"I feel it's more likely that the Samsung incident will push people towards other Android makers like LG more so than towards Apple," Nguyen said. Shifts to a new platform could be more pronounced in emerging markets with burgeoning middle classes who may not have been able to afford iPhones before.

 

Eoin Treacy's view -

The app ecosystem of various platforms represents a significant hurdle to moving from an iOS based phone to Android. That represents a major incentive for companies like Apple and Google to encourage as many programmers as possible to develop apps for their respective languages. Google’s announcement in July that it plans to fund education for up to 2 million programmers in India is a direct reflection of that theme.



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September 01 2016

Commentary by Eoin Treacy

IBM's Watson supercomputer creates a movie trailer

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

But perhaps the most beguiling, and subversive, aspect of Watson's trailer was how much it de-emphasised the monstrous nature of the human/nanotech hybrid. The irony of this entire project is that we have a film where a form of AI turns violent and kills humans, but the AI tasked with making the film's trailer ends up playing down that entire facet of the narrative.

Aside from being a fun experiment in computer-generated creativity, this project also proposes a speedy alternative to a generally costly and time-consuming process. The construction of a film trailer is usually an intensive practice taking several weeks to produce, but this trailer took only 24 hours to construct, from Watson "watching" the film to a human editor delivering the final product.

Making a good film trailer is a delicate balance between art and commerce. If anything this experiment still goes to show that a strong human hand is necessary even when producing what many would determine to be a disposable advertisement. Still, I wouldn't mind getting Watson's perspective on a few sci-fi films that vilify artificial intelligence. Maybe there is a Terminator trailer on the cards that sympathizes with Skynet or a view on 2001: A Space Odyssey where HAL 9000 is the film's hero?

 

Eoin Treacy's view -

IBM is in the midst of redeploying its knowhow from a company that delivered hardware to one almost entirely focused on software/computing as a service and Watson represents a big part of that. Meanwhile IBM is also advancing the development of quantum computers where it already has a 5-qubit prototype that it hopes to offer third party access too shortly. 



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August 30 2016

Commentary by Eoin Treacy

How the European Commission calculated 13bn tax bill

This article by Suzanne Lynch for the Irish Times may be of interest to subscribers. Here is a section:

Ms Vestager said on Tuesday that the commission had concluded that the splitting of Apple’s profits between the two parts of the AOE and ASI companies “did not have any factual or economic justification.”

In short, the commission has concluded that Ireland gave illegal state aid to Apple, in breach of EU law.

It will now fall to lawyers for the accused to contest this.

The refrain from Government circles has long been that the EU may not have liked the tax structures that were in place at the time when the Apple deal was struck but that does not mean that they were illegal.

It may be some years before a definitive answer on this question will be reached.

 

Eoin Treacy's view -

The European Commission has raised important issues for Ireland not least because without its sovereign ability to set taxation there is very little reason for such a large number of Silicon Valley’s best and brightest companies to choose the little island in the North Atlantic as their favoured destination for European headquarters. 



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August 30 2016

Commentary by Eoin Treacy

Ports, a Sign of Altered Supply Chains

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

“The running joke going around is that flat is the new growth,” said Jett McCandless, chief executive of transportation-technology startup project44.

Freight volumes are stagnating despite strong consumer spending, which rose for a fourth-straight month in July. The problem for traditional retailers: More of those dollars are being spent online, or on entertainment and services such as health care.

Many retailers are stuck with large amounts of unsold goods as a result, reducing their need to import more merchandise. Even after a year of attempting to slim down inventories, retailers’ ratio of inventories to sales, a measure of excess stocks, touched 1.5 in June, close to a seven-year high, according to the Census Bureau. In their most recent earnings reports, Target and Lowe’s reported inventories up more than 4% over the same period last year.

J.C. Penney is placing “slightly smaller orders…or holding back quite a bit” to reduce inventories, Mike Robbins, J.C. Penney’s executive vice president for supply chain, told investors in June. The company has reduced the size of some orders at the beginning of major shopping seasons by as much as 70%.

The focus on reducing inventories is proving to be a drag on growth because it signals that businesses are spending less, and might be pessimistic about future demand. Inventory drawdowns cut second-quarter growth by 1.26 percentage points, to just 1.1%.

Shipping lines are struggling to plan their routes as order volumes become more difficult to predict, said Niels Erich, spokesman for a group of 15 major shipping lines known as the Transpacific Stabilization Agreement. In the past, carriers could count on the peak summer months to make up for slower winter trade.

 

Eoin Treacy's view -

There is no doubt that the disintermediation which characterises online retail has a deflationary impact on how economic growth is measured because it inhibits the velocity of money. I do not view it as a coincidence that the Velocity of M2 has been contracting since 1997 when the internet began to have an impact on the retail sector. 



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August 30 2016

Commentary by Eoin Treacy

The Frozen Concentrated Orange-Juice Market Has Virtually Disappeared

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

Americans drank less orange juice in 2015 than in any year since Nielsen began collecting data in 2002, as more exotic beverages like tropical smoothies and energy drinks take market share and fewer Americans sit down for breakfast.

When they do drink orange juice, they aren’t drinking it from concentrate.

Frozen concentrated orange juice was invented in Florida in the 1940s, primarily as a way to provide juice for the military, readily storable and easy to ship. But frozen juice has been losing favor for years.

Not-from-concentrate orange juice surpassed the concentrated orange-juice market in the 1980s. Now, the 1.4 million gallons of frozen concentrate that Americans drink each month pales in comparison to the 19.1 million gallons of fresh juice consumed each month, Nielsen said.

Louis Dreyfus Co. is scaling back the one citrus facility in Florida that is devoted entirely to concentrated orange juice. The commodities giant is laying off 59 of the plant’s 94 workers as its sells the operation that packs frozen concentrated orange juice into cans for retail.

 

Eoin Treacy's view -

Changing consumption habits where people are more concerned not only with the taste but the quality of the foods they consume are having wide ranging effects on the commodity markets. To most people frozen orange juice does not taste as good as a freshly squeezed navel or Valencia orange. However since squeezing one’s own oranges is both time consuming and expensive the vast majority of orange juice consumed comes from either concentrate or is pasteurized. 



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August 12 2016

Commentary by Eoin Treacy

Global Equity Strategy Who sells where in 2016

Thanks to a subscriber for this heavyweight 118-page report from HSBC covering the international exposure of major companies on a global basis. Here is a section:

 

European equity markets are by far the most global, more than their economies, and are most exposed to Emerging Markets (EM)

US equity market is the most closed of the Developed Markets (DM), a key ingredient to the US’s relative ‘safer-haven’ status

Japanese overseas revenues have grown sharply in recent years, but are now threatened by yen strength

EM stock markets are the most closed, accounting for the bottom seven countries in our ranking
Economies are not stock markets. DM and EM have similar exports/GDP levels, but DM stock markets are twice as global

Chinese corporates going abroad, but only generate 10% overseas today. Brazil corporates only 20% overseas after commodity slump 

Italy and India have ‘globalized’ the most in recent years

IT is the most global US sector; Healthcare the most global European sector. Utilities and telecom are respectively the most local

Overall overseas revenue contribution has stalled (at 44%) the last three years, as globalization has come under pressure

Looking at indices based on revenue rather than domicile transforms the investment universe: EM much larger, whilst US a lot smaller

 

Eoin Treacy's view -

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

With the growth of the global consumer base we began to pay attention to large international businesses that dominate their respective sectors from about 2011. I developed the list of Autonomies by looking at data similar to that compiled in this report; using it to identify companies that have global businesses. In perusing the report veteran subscribers will no doubt be familiar with many of the names. 



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August 12 2016

Commentary by Eoin Treacy

Macy's is closing another 100 stores

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

Macy's closures come amid a sixth-straight quarterly decline in sales. However, sales fell less than feared and the company said it's "encouraged" by recent sales trends. Wall Street applauded the dramatic store closures, sending the stock surging 17%, its best day since 2008.

Macy's said its new strategy is to concentrate its financial firepower and talent on its best-performing locations. The department store plans to invest in strong stores by highlighting new vendors, increasing the size and quality of its staff and investing in new technology.

"We operate in a fast-changing world, and our company is moving forward decisively to build further on Macy's heritage," Macy's CEO Terry Lundgren said in a statement.

Macy's said the store closures could result in the loss of about $1 billion in sales, even after accounting for shoppers who would go online and to other Macy's locations. The company plans to offset that loss in sales by cutting costs, even beyond shutting down these stores.

It's not clear how many jobs will be impacted by these moves. Macy's told CNNMoney it won't detail layoffs until it finalizes its store closure list.

 

Eoin Treacy's view -

Macys, and a number of other big box retailers, have two problems. They rely on physical locations which tend to have a boring feel and their products are too expensive. Nevertheless they command sizeable, albeit shrinking shares of the consumer market and have impressive real estate holdings which have appreciated considerably since the credit crisis. 



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August 11 2016

Commentary by Eoin Treacy

"Speedfactories" to the US

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

Group executive board member at Adidas Eric Liedtke acknowledges that the firm has been producing goods in Asia "for years," helping it to keep costs down. He explains, however, that a new business model based on the Speedfactories will allow it to "decentralize" production to regional locations – in this case the US.

“We're fueling design at the ground level of creativity in Brooklyn and reinventing manufacturing with the first adidas Speedfactory in Atlanta," says Liedtke. "This allows us to make products for the consumer, with the consumer, where the consumer lives in real time, unleashing unparalleled creativity and endless opportunities for customization in America."

New customization options brought to consumers will include fit, comfort and look. The facilities will also allow Adidas to source materials and produce goods locally, helping to reduce transport emissions.

 

Eoin Treacy's view -

Automation and full customisation are likely to represent an important part of the future of the garment industry and companies like Adidas and Nike are leading the way for sporting goods. For every person that can wear whatever they wish, there must be ten more that find it difficult to find clothing that fits just right. Customisation together with 3-d scanning will fix that issue and, from speaking with some of the people developing robot seamstresses, it could be with us in as soon as 3 years. 



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August 11 2016

Commentary by Eoin Treacy

Alibaba's revenue beats estimates; mobile revenue soars

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

Alibaba's total revenue rose to 32.15 billion yuan, or $4.84 billion, in the quarter ended June 30 from 20.25 billion yuan a year earlier. Analysts on average had expected revenue of 30.17 billion yuan, according to Thomson Reuters I/B/E/S.

Mobile revenue from the company's China commerce retail business increased 119.3 percent to 17.51 billion yuan, while monthly mobile active users increased 39 percent.

"We passed an important milestone this quarter in achieving higher monetization of mobile users than non-mobile users for the first time," Chief Financial Officer Maggie Wu said.

The company said its gross merchandise volume (GMV) - the value of transactions carried out by third-party sellers on the company's platforms - rose 24.4 percent to 837 billion yuan.

Alibaba said in June it would in the future only release GMV figures on an annual basis. The change followed the disclosure that the U.S. Securities and Exchange Commission was looking into the company's accounting practices. 

 

Eoin Treacy's view -

Mobile is quickly becoming the dominant force in internet search, retail and advertising not least because of the heavy focus users of social media have on their handheld devices. That trend is even more pronounced in emerging markets; where many consumers first experience of the internet is via their mobile device. That represents a significant growth trajectory for companies that have dominant positions in the respective social media and mobile advertising markets. 



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August 10 2016

Commentary by Eoin Treacy

Palladium at Year High, Driving Precious Metals on Chinese Cars

This article by Eddie Van Der Walt and Ranjeetha Pakiam for Bloomberg may be of interest to subscribers. Here is a section:

Palladium is up 19 percent in the past month, the best performing commodity. Chinese vehicle sales in July gained the most in 17 months, data showed this week. A weaker dollar since late July has also spurred precious metals.

That “highlighted a generally supportive backdrop to palladium demand, exacerbated by ongoing concerns that output from top producers Russia and South Africa may be under threat,” said Jonathan Butler, a precious metals strategist at Mitsubishi Corp. in London. “We could see a bit of profit taking from here, but the $700 level seems to have been recaptured convincingly.”

 

Eoin Treacy's view -

Chinese car sales coming in well ahead of expectations has been positive for palladium prices due to increased demand for catalytic converters but has also been a contributing factor in the outperformance of the German DAX Index.



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August 09 2016

Commentary by Eoin Treacy

You're About to Find Out How Much Sugar is Added to Your Food

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

The U.S. Food and Drug Administration recently ordered up new nutrition labels for cereal boxes, candy bars, and every other packaged food item in the supermarket.

Soon, they will list not just how much sugar is inside, but whether that sugar was naturally occurring, as in raisins, or added later, as on the flakes that come with them. 

Though this additional information won’t be required until next year, health advocates predicted that such legally mandated disclosure would deliver less-sugary foods in its wake. They were right. 

Four Twizzler strawberry twists have the same sugar content as an apple, but clearly the fruit is a better choice—in no small part because it comes with fiber and Vitamin C. The FDA decision recognized that the source of sugar matters, and that listing “Sugars” alone doesn’t reflect that. The agency decision attempts to outsmart food manufacturers that commonly call added sugar ingredients by other names, such as high fructose corn syrup, agave, and fruit juice. Current-ingredients lists and nutrition-facts panels, the FDA was saying, can be surprisingly deceptive. 

Experts in both health and the food industry predicted that the new labels would lead to reformulated products, with those marketed as “healthy” likely to be the first to get makeovers.

Now that manufacturers would have to show in no uncertain terms how much sugar was being added, they would cut it, just as they did with trans fats when their disclosure became required.

 

Eoin Treacy's view -

This is a welcome development from the Food and Drug Administration not least because the number of ways sugar is defined on ingredient lists is dizzying to say the least. For school lunches my girls had been eating Clif bars until we realised brown rice syrup is the largest ingredient and is essentially 100% glucose. I make my own oatmeal bars now so I know what goes into them and blessedly my kids like them. 



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August 09 2016

Commentary by Eoin Treacy

August 05 2016

Commentary by Eoin Treacy

Bristol-Myers Plummets as Drug Misses Key Lung-Cancer Goal

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

“This is a major surprise -- possibly the biggest clinical surprise of my career,” Evercore ISI analyst Mark Schoenebaum, who recommends holding Bristol-Myers stock, wrote in a note. “Investors had high expectations for this trial.”

The results reflected a risky but potentially lucrative bet by Bristol-Myers, highlighting a difference in strategy with Merck. By designing its study to include patients with lower levels of a key biomarker thought to predict response to the drug, Bristol-Myers was aiming at a far larger market for Opdivo. Merck’s Keytruda trial, meanwhile, focused on a smaller subset with high levels of the biomarker, called PD-L1 -- fewer patients, but a better chance of success.

Opdivo didn’t meet its primary goal of lengthening progression-free survival in patients with previously untreated advanced non-small cell lung cancer, compared with chemotherapy, Bristol-Myers said in a statement. The New York-based company is working on completing an evaluation of the late-stage trial’s results.

Bristol-Myers Chief Executive Officer Giovanni Caforio said the company is now focused on combination therapies, which could potentially create a better outcome for the group of patients that don’t get results on drugs like Opdivo alone.

“We have a very broad development program in lung cancer and we are answering a number of very important questions,”

Caforio said in a phone interview Friday. “The role of monotherapy might be limited to a very small subset of patients in the first-line setting, which makes our program now ideally suited to address the next question, which is: ‘What is the role of combination therapy?”’ That will come from a study that analysts said would likely read out in 2018.

 

Eoin Treacy's view -

As a major Biotechnology company Bristol Myers Squibb benefitted enormously from being in a position to acquire promising research in the aftermath of the TMT bubble in the 1990s. That has led it to develop a broad spectrum product range that is cash flow positive and has allowed the share to hold a progression of higher reaction lows despite the turmoil that has affected the biotech sector from last year. 



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July 22 2016

Commentary by Eoin Treacy

Apple Watch Sales Fall 55% in Second Quarter, IDC Report Says

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

Apple Inc. sold 1.6 million watches in the second quarter of this year, down from 3.6 million units a year earlier, IDC said. Global smartwatch sales fell 32 percent to 3.5 million units.

While Apple held on to its position as the industry leader, with 47 percent of the market, it was the only company in the top five to see a decline. Samsung Electronics Co. saw its market share more than double to 16 percent.

“Consumers have held off on smartwatch purchases since early 2016 in anticipation of a hardware refresh, and improvements in WatchOS are not expected until later this year, effectively stalling existing Apple Watch sales," IDC analyst Jitesh Ubrani wrote in the report. “Apple still maintains a significant lead in the market and unfortunately a decline for Apple leads to a decline in the entire market.”

Apple Watch is the company’s first new hardware product since the iPad’s 2010 debut and is a key part of Chief Executive Officer Tim Cook’s strategy to find new areas of growth as sales of the iPhone slow. Apple is expected to introduce an updated operating system and an Apple Watch 2 this fall, promising new features and better performance.

IDC said despite Apple’s sharp drop it expects growth in 2017, as continued development appeals to a broader market.

“Every vendor faces similar challenges related to fashion and functionality, and though we expect improvements next year, growth in the remainder of 2016 will likely be muted,” said Ubrani.

 

Eoin Treacy's view -

Smart watches can measure steps, constantly record heart rate, display text messages, alert us to incoming calls and act as payment mechanisms when we don’t have our wallets. While each of these functions might have been the preserve of a single company when they were debuted most providers now offer some variation on all of them. That suggests the premium price point commanded by Apple Watch isn’t justified not least as a widely expected reboot of the product is expected later this year. That is likely to at least include enhancements to battery life that might allow for some of the more ambitious health related apps to be introduced.



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July 18 2016

Commentary by Eoin Treacy

Email of the day on the Autonomies

July 18 2016

Commentary by Eoin Treacy

Did Lenovo and Google Tango just hit an AR jackpot with this Pokemon Go phenomenon?

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

Put the two together and you have an amped-up version of Pokémon Go, where the monsters you're chasing know their environments. If people walk in front of the monsters, the people stay in the foreground; if the people walk behind them, the people go in the background. If there's a table in the middle of the room, the monster will walk around it instead of through it, and they'll also move around lampposts, signs or any other obstacles.

You get the idea ...

When Lenovo announced the Phab2 Pro, we thought it was an incredibly bold phone with a somewhat niche focus: things like seeing how a new couch will look in your living room, measuring objects from distance or playing with virtual pets. After Pokémon Go exploded and took over the world this week, though, this phone suddenly has the potential to go from niche to the hottest property around.

Of course this would require developer support from Pokémon Go creators Nintendo and Niantic, Inc. It isn't a stretch to imagine such a partnership, with a common connection: Until last year, Niantic was a company living under the Google umbrella (then known as Niantic Labs), and Google also creates the Tango tech that makes this AR mapping possible inside the Phab2 Pro. Surely the lines of communication have already been open on this, no?

 

Eoin Treacy's view -

Video games are often viewed by parents as the antithesis of a productive use of a child’s time. They sit motionless, while absorbed in whatever is happening onscreen and when doing something else only want to go back to playing the game. The additional sight of young people sitting side by side and texting each other rather than speaking is often something older people have great difficulty understanding. 



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July 11 2016

Commentary by Eoin Treacy

Google Plans to Train 2 Million Indian Developers on Android

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

Google launched a program to train 2 million developers in India for its Android platform as its fires up a race with Apple Inc. for the country’s developers to create innovative mobile apps.

The Android Skilling program will be introduced for free across hundreds of public and private universities and training schools through a specially designed, in-person program this year. The program would also be available through the government’s National Skills Development Corporation of India, the company said in a statement.

India is expected to have the largest developer population with 4 million people by 2018, overtaking the U.S., but only a quarter are building for mobile, said Caesar Sengupta, vice president of product management at Google.

“We believe India is uniquely placed to innovate and shape the internet experience of billions of users who are and will come online on the mobile platform,” he said in the statement.

Google plans to make the curriculum accessible to millions for free to help make India a global leader in mobile development.

 

Eoin Treacy's view -

Silicon Valley technology companies have been vocal in their desire to see more people take up coding as a profession and most particularly with a focus on their own operating systems. Google’s decision to facilitate more people learning how to code apps in Android is a direct attempt to challenge Apple’s dominance of the App market. Considering how much each of us use apps on a daily basis, and the insights they offer into the various facets of our lives, growth among operating system developers like Google, Apple and Microsoft is likely predicated on continued dominance of their niche within the wider technology sector and the high barrier to entry it offers.   



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July 07 2016

Commentary by Eoin Treacy

Danone To Acquire WhiteWave Foods In $10 Billion Milk Merger

This article by Maggie McGrath for Forbes may be of interest to subscribers. Here is a section: 

It’s a match made in milk heaven: Danone, the French dairy giant behind brands like Activa, Oikos and Dannon yogurt, announced Thursday morning that it will buy Silk Soy Milk maker WhiteWave Foods in a deal worth $10 billion.

Danone said Thursday that it will pay $56.25 per share to acquire WhiteWave, a price that marks a 24% premium to WhiteWave’s average closing price ($45.43) over the last 30 days. Including debt and other WhiteWave liabilities, the companies are valuing the deal at $12.5 billion. The deal is expected to close by the end of the year, pending all customary shareholder and regulatory approvals.

The acquisition is expected to be fully financed with debt. Danone said that it has received commitment from its banks for this debt, and that it expects to maintain a “strong” investment grade rating.

While the companies are calling the merger a “perfect match of vision, culture, and business,” the financial benefits are even more compelling: the acquisition will serve to almost double the size of Danone’s U.S. business, taking its North American footprint from 12% of Danone’s overall portfolio to 22%. Danone also said that merging with WhiteWave will make it one of the top 15 food and beverage producers in the U.S.

The companies are projecting $300 million in synergies by 2020, and Danone is saying that the merger will be accretive to its earnings within the first year of the deal’s closing.

 

Eoin Treacy's view -

Danone, despite being listed in France, has been relatively unaffected by the travails that have affected the majority of Eurozone shares this year. It is helped considerably by the fact that the vast majority of its revenue is sourced outside the EU and this acquisition brings its operations improved diversity. The result will be that about a third of revenues will come from the Americas, Asia and Europe respectively. 



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July 06 2016

Commentary by Eoin Treacy

U.S. Stocks Advance Amid Drug Maker Rally as Caution Subsides

This article by Anna-Louise Jackson and Bailey Lipschultz for Bloomberg may be of interest to subscribers. Here is a section: 

“There was a big flight to safety trade earlier and a lot of that has reversed,” said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee. “You’re looking at a market that’s lacking direction right now. The primary driver for concern is what it always is -- a slow growth backdrop. We’re in a no-man’s land before the next Fed meeting and the kick-off of earnings next week.”

American equities shook off declines in global markets, which fell as knock-on effects of Britain’s vote start to materialize. Anxiety has increased over the potential for instability to spread after at least five asset managers froze withdrawals from U.K. real-estate funds following a flurry of redemptions, while data on Wednesday showed German factory orders were unchanged in May, disappointing forecasters who had called for an increase.

Before yesterday’s decline, the S&P 500 capped its strongest weekly rise since November, boosted by assurances that central banks are prepared to loosen monetary policy to limit the fallout from Brexit. The benchmark is trading at 16.6 times estimated earnings, a higher valuation than the MSCI All-Country World Index and above its own three-year average.

 

Eoin Treacy's view -

10-year Treasury yields steadied today in the region of 1.38% amid a deep overextension relative to the trend mean. Some consolidation in this area is looking likely but with absolute levels so low there has been a surge into assets with the prospect for a higher dividend yield or dividend growth.  



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June 24 2016

Commentary by Eoin Treacy

Email of the day on big UK listed international companies with attractive dividends

Thank you so much for taking the time to do the additional audio last night. I appreciated it very much. You did mention that some of the UK autonomies would probably be very attractive. Could you please share with us a few of the companies that you think are specifically attractive besides RD Shell that you mentioned. Thanks again.

Eoin Treacy's view -

Thank you for your kind email and I’m glad you found the additional audio commentary of use. It looks like I was not the only person coming to the conclusion that the UK stock market would benefit from the devaluation of the Pound, at least in nominal terms, and that the foreign profits of major corporations would be inflated by being repatriated. 



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June 16 2016

Commentary by Eoin Treacy

China's Wealthy Switch to Nike and Adidas for Inconspicuous Consumption

This article by Bruce Einhorn may be of interest to subscribers. Here is a section: 

For Beijing resident Alex He, the cost of a trip to the mall can easily top $3,000. He, 29, works in the finance industry and while he doesn't regularly go shopping for clothes, “when I do shop,” he said in an interview, “I buy a lot.”  Recent purchases include several pairs of Adidas shoes that he found at an outlet mall. He also fancies Under Armour shorts and shirts. “I used to buy a lot of luxury brands but in the last year or so I've been purchasing more of the sports brands because they are more comfortable and more fashionable,” said He.

Chinese consumers like He, who want to make statements when they go shopping, are turning more to Western sports brands. President Xi Jinping's multi-year campaign to reduce conspicuous consumption of luxury goods by public officials has hurt sales of Pernod Ricard, Hugo Boss and BMW. Even as sales of luxury fashion, cars and other prestige products suffer, sportswear brands are robust. Nike's Greater China sales are strong, with orders from September to April up between 27 and 35 percent. On June 6, the company announced it will work with the Chinese Ministry of Education to train up to 7,000 physical education teachers. “Today's generation is the least physically active in history and we can help change that,” Nike President and CEO Mark Parker said in a statement.

 

Eoin Treacy's view -

With one of the highest rates of diabetes in the world China is finally warming up to physical fitness. The service oriented nature of providing gyms and personal trainers also gels well with the government’s aim of fostering the domestic economy. The comparatively high cost of Adidas, Nike and Under Armour clothing relative to domestic brands acts as a diversifier between the well-heeled upper middle class and those for whom such outlays are too expensive. 



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June 13 2016

Commentary by Eoin Treacy

Microsoft to Buy LinkedIn in Deal Valued at $26.2 Billion

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

The deal is the largest under the tenure of Microsoft CEO Satya Nadella, who has been reshaping Microsoft since taking over in 2014 to appeal more to business customers with cloud-based services and productivity tools. LinkedIn isn’t an obvious fit in the ongoing restructuring, but gives Microsoft the biggest global social network for professional that’s used by job seekers, recruiters and human resources teams. In a statement, Nadella said the acquisition could drive growth for LinkedIn as well as Microsoft’s Office 365 and Dynamics services.

“Just as we have changed the way the world connects to opportunity, this relationship with Microsoft, and the combination of their cloud and LinkedIn’s network, now gives us a chance to also change the way the world works,” Weiner said in the statement.

 

Eoin Treacy's view -

It is very questionable whether Microsoft will get their money back following such a large outlay on a company like LinkedIn and the valuations on the sector generally are not exactly cheap. With the notable exception of Facebook social media/new economy services companies have been underperforming for quite some time. Today’s announcement of a major takeover in the sector has the potential to revitalise perceptions subject to sound fundamentals. 



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June 13 2016

Commentary by Eoin Treacy

Batteries Storing Power Seen as Big as Rooftop Solar in 12 Years

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

The spread of electric cars is driving up demand for lithium-ion batteries, the main technology for storage devices that are attached to utility grids and rooftop solar units.

That’s allowing manufactures to scale up production and slash costs. BNEF expects the technology to cost $120 a kilowatt-hour by 2030 compared with more than $300 now and $1,000 in 2010.
That would help grid managers solve the intermittency problem that comes with renewables -- wind and solar plants don’t work in calm weather or at night, creating a need for baseload supplies to fill the gaps. Today, that’s done by natural gas and coal plants, but the role could eventually be passed
to power-storage units.

The researcher estimates 35 percent of all light vehicles sold will be electric in 2040, equivalent to 41 million cars.

That’s about 90 times the figure in 2015. Investment in renewables is expected to rise to $7.8 trillion by then, compared with $2.1 trillion going into fossil-fuel generation.

“The battery industry today is driven by consumer products like computers and mobile phones,” said Claire Curry, an analyst at Bloomberg New Energy Finance in New York. “Electric vehicles will be the driver of battery technology change, and that will drive down costs significantly.”

The industry still has a long way to go. About 95 percent of the world’s grid-connected energy storage today is still pumped hydro, according to the U.S. Energy Department. That’s when surplus energy is used to shift large amounts of water uphill to a reservoir so it can be used to produce electricity later at a hydropower plant. The technology only works in areas with specific topographies.

There are several larger-scale battery projects in the works, according to S&P Global. They include a 90-megawatt system in Germany being built by Essen-based STEAG Energy Services GmbH and Edison International’s 100-megawatt facility in Long Beach, California.

“Utility-scale storage is the new emerging market for batteries, kind of where electric vehicles were five years ago,” said Simon Moores, managing director at Benchmark Mineral Intelligence, a battery researcher based in London. “EVs are now coming of age.”

 

Eoin Treacy's view -

Innovation in the chemistry that supports batteries has been a lot more difficult to achieve than the Moore’s law related enhancements that have been commonplace in chip manufacturing and increasingly in solar technologies. Nevertheless as the requirement for storage grows increasingly urgent, the capital expended on R&D is expanding and innovations are being achieved. In the meantime economies of scale through larger manufacturing plants are helping to drive efficiencies. 



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June 07 2016

Commentary by Eoin Treacy

Sushi Robots and Vending-Machine Pizza Will Reinvent the Automat

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

“I get it. But this is not a vending machine, it’s an automated restaurant,” he said. “There are real humans making the burritos. Everything is handmade.”

No, those humans are not super-small and no, they don’t toil in the machines. The burritos are made in kitchens that also supply restaurants, sometimes flash-frozen, and then shipped to the boxes. They’re defrosted before going into the machines. An employee checks the boxes once a day to make sure there’s fresh inventory.

The vending machines harken back to the Automat, a 20th- century fast-food restaurant that featured cubbyholes with food items behind glass doors. Put coins in a slot and the door would open for a gratuity-free snack or meal.

The bright orange Burritoboxes are higher tech. They have a touch screen, mobile-phone charging station and live-chat customer service in case there’s an issue. It takes about 90 seconds to heat a complete meal, including Cinnabon-brand gooey bites for dessert. Customers can watch music videos on the touch screen while waiting.

Unlike Burritoboxes, the pizza machines are unbranded so local pizzerias and packaged-food companies can label and fill the machines with their own pies. Pizzerias in Sarasota, Florida, and Chicago are experimenting with them. Each one holds 108 slices and reheats them in a conveyor oven in about one minute and 40 seconds.

Lynnie Cook, 65, the founder of 24/7 Pizza Box, said he has orders for more than 100 of the $29,920 machines. He expects to sell 2,500 in 2017.

“Our time is getting more precious,” Cook said. “You’re going to have people bringing food to where the businesspeople are working, or just making it more convenient.”

Robotics have made their way into the back of restaurants.

Sushi Station, a conveyor-belt-style sushi restaurant in Elgin, Illinois, has two sushi-roll makers from manufacturer Autec. Add rice paper, press a button, add a filling, and voila. The robot costs $19,000. There’s also a machine that makes perfectly shaped rice for nigiri. The robotics help the restaurant supply the roughly 1,000 rolls it sells each day.

 

Eoin Treacy's view -

On Star Trek everybody just went to the hole in the wall to order whatever they wished from the replicator. Vending machines defrosting burritos and pizzas isn’t quite on that level but the convenience of obtaining snack foods without having to spend time inside the restaurant will have appeal for a broad swathe of the population. 



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May 24 2016

Commentary by Eoin Treacy

Email of the day on secular bull markets

I was just listening to your big picture round-up from last Friday.

You mentioned a point that I have heard a number of variations on over the last year, from Fuller Money ..... and that is that we (I think you are taking of US shares) are near the beginning of a major secular bull market (in US shares).

I think the argument you made in last Friday's big picture round-up went something along the lines of:

That US shares have had a long period (16 years) of ranging after the peak in 2000 ....... and that  this is roughly the length of time that US shares ranged sideways in the period from the late 1960s until 1982 ....... when US share commenced it last major secular bull market.

Like you, I am very happy to acknowledge that I do not know the future.

BUT this is what makes me wary of your view that US share might be near the beginning of a major secular bull market:-

The Shiller cyclically adjusted P/E for US shares is above 25 .... which is an extremely high valuation. I am not aware of any example in history, where there have been good real returns for shares over the following 20 years. Shiller's research would suggest the next 20 year share returns would be more like something closer to 0%pa real.

The historically large debt bubbles in the West (but USA in particular) also warns of bad times ahead for investors. Most debt bubbles are followed by economic depression. I am aware of only 1 debt bubble where this has not occurred, namely Japan post 1989 ...... but the 19 years following 1989, delivered horrible returns for Japanese shares and property.

So you are saying I think, "This time is different".  As you know, these are some of the most dangerous words for investors. For US shares to embark on a major secular bull market, would be truly unique in history - at least from what I have found in my very long-term market research.

Your thoughts please?

 

Eoin Treacy's view -

Thanks for this question which in my opinion is of fundamental importance for investors. As you point out, we believe major breakouts from long-term ranges are generally a signal something has changed in how supply and demand are interacting. Provided the breakout is to the upside, this can lead to a new long-term or secular bull market. The possibility of a new secular bull market on Wall Street has been a persistent topic of conversation at this service since we observed large companies with global businesses (Autonomies) breaking out of long-term bases as early as 2011. We are already four years into a secular bull market. .



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May 23 2016

Commentary by Eoin Treacy

Monsanto Trading Below Bayer Bid Shows Regulatory Risk Concerns

This article by Lydia Mulvany and Simon Casey for Bloomberg may be of interest to subscribers. Here is a section: 

While the combination of Bayer and Monsanto makes sense operationally, it’s not clear yet how regulators will view this or other deals in the industry, said James Govan, a fund manager at Baring Investment Services Ltd. in London, who manages about 60 million pounds ($87 million) of agricultural and food-related stocks, including Monsanto shares. If they focus on the size of overall market share, as opposed to individual product categories, it may be harder for the deals to go through, he said in an interview Monday.

St. Louis-based Monsanto has yet to respond to Bayer’s offer. It’s not unprecedented for a target company to trade at less than an offer before the deal is later completed successfully. The current premium of Bayer’s offer to Monsanto’s share price is the 21st-biggest among 143 live deals tracked by Bloomberg.

Bayer’s offer is probably less than Monsanto’s valuation of itself, as the U.S. company expects significant growth between 2020 and 2025, said Jonas Oxgaard, an analyst with Sanford C.Bernstein & Co. in New York. Oxgaard said he expects an offer of $135 to be more palatable. Even then, he said, Monsanto would be reluctant to agree on a deal.

“Monsanto doesn’t want to be bought,” Oxgaard said by phone. “They have a history of being a standalone company, very focused long term, and they consider themselves the best company in the industry. It rankles a bit to be the best and then be acquired.”

 

Eoin Treacy's view -

Bayer and Monsanto represent two of the world’s largest seed producers and due to regulatory headwinds offer two very different ways of achieving more productive and bug or drought resistant plant strains. Monsanto is the world leader in genetically modified products while Bayer relies on bombarding seeds with radiation to induce mutation. A tie-up between the European and US leaders in seed technology represents a powerful proposition but it is unlikely to come cheap and regulators will undoubtedly have caveats. 



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May 06 2016

Commentary by Eoin Treacy

IBM brings quantum computing to the masses

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

Though not a full-blown quantum computer (the IBM processor comprises just five superconducting qubits) it does represent the latest advances in IBM's quantum architecture that the company claims may one day scale up to create very much larger, more complex quantum processors and eventually lead to the development of a universal quantum computer, which could solve some of the problems that simply can't be solved using classical computers.

"Quantum computers are very different from today's computers, not only in what they look like and are made of, but more importantly in what they can do," says Arvind Krishna, senior vice president and director, IBM Research. "Quantum computing is becoming a reality and it will extend computation far beyond what is imaginable with today's computers. This moment represents the birth of quantum cloud computing. By giving hands-on access to IBM's experimental quantum systems, the IBM Quantum Experience will make it easier for researchers and the scientific community to accelerate innovations in the quantum field, and help discover new applications for this technology."

Housed in the IBM T.J. Watson Research Center in New York, the processor uses five qubits formed by superconducting metals embedded on a silicon chip. As Gizmag reported last year, IBM researchers showed that breakthroughs in detecting quantum errors were possible by bringing superconducting qubits together in a lattice arrangement, and it is this quantum circuit design that is brought to bear in IBM's cloud-connected processor with advanced parity measurement error correction protocols.

Although universal quantum computers do not yet exist, IBM believes that medium-sized quantum processors of 50-100 qubits will be a reality within the next decade. A quantum computer created with just 50 qubits would already be more powerful than any of the world's top 500 supercomputers.

 

Eoin Treacy's view -

As silicon transistors get progressively smaller and draw closer to the absolute limit of one atom thick the race has been on to develop alternatives. So far there is no clear winner but there are a number of potential technologies that could hold the answer. Among these are quantum computing, DNA computing, optical or light based computing and graphene based chips.  



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May 02 2016

Commentary by Eoin Treacy

The Science of Fat: After The Biggest Loser, Their Bodies Fought to Regain Weight

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

Slower metabolisms were not the only reason the contestants regained weight, though. They constantly battled hunger, cravings and binges. The investigators found at least one reason: plummeting levels of leptin. The contestants started out with normal levels of leptin. By the season’s finale, they had almost no leptin at all, which would have made them ravenous all the time. As their weight returned, their leptin levels drifted up again, but only to about half of what they had been when the season began, the researchers found, thus helping to explain their urges to eat.

Leptin is just one of a cluster of hormones that control hunger, and although Dr. Hall and his colleagues did not measure the rest of them, another group of researchers, in a different project, did. In a one-year study funded by Australia’s National Health and Medical Research Council, Dr. Joseph Proietto of the University of Melbourne and his colleagues recruited 50 overweight people who agreed to consume just 550 calories a day for eight or nine weeks.

They lost an average of nearly 30 pounds, but over the next year, the pounds started coming back.

Dr. Proietto and his colleagues looked at leptin and four other hormones that satiate people. Levels of most of them fell in their study subjects. They also looked at a hormone that makes people want to eat. Its level rose.

“What was surprising was what a coordinated effect it is,” Dr. Proietto said.
“The body puts multiple mechanisms in place to get you back to your weight.
The only way to maintain weight loss is to be hungry all the time. We desperately need agents that will suppress hunger and that are safe with long-term use.” 

 

Eoin Treacy's view -

As someone who has seen their weight fluctuate by as much as 15kgs on a number of occasions over the last twenty years I can identify with the difficulty many people have in keeping the weight off. When I saw that my second daughter (age 8) was also having trouble with her weight I read and the whole family implemented the routine outlined in “Ending the Food Fight” by Dr. David Ludwig. She has dropped two dress sizes since then and is a much happier and energetic child as a result. One of the key points he covers in the book is the importance of replacing high calorie foods and carbohydrates with vegetables which tend to inhibit leptin resistance. . 



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April 27 2016

Commentary by Eoin Treacy

The forgotten but enduring emerging markets opportunity

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

As GDP goes, so does consumer products consumption
In these volatile times, the relationship between commodities, currency, pricing and consumption is as pronounced as ever, with inflationary pricing to offset f/x transaction driving bulk of EM growth as benign commodities and modestly improving macro drives modest growth in developed markets. As we discuss in this report, GDP growth is the primary industry consumption driver, with multiples tracking this growth trajectory. For instance, in 2010, when EM growth was solid and commodities high, US and EM-centric CPG companies traded at roughly the same 12% PE premium to the market; by 2015, US centric names jumped to a 40% premium versus 22% for the EM exposed names. With commodity complex still depressed and geopolitical risks omnipresent, we understand the consensus negative views on emerging markets but several stocks in our coverage have substantial leverage to improving trends in these demographically privileged markets.

BRIC by brick
Noting clear cultural, geopolitical and demographic differences across Brazil, Russia, India and China, in addition to myriad other developing markets, the per capita consumption opportunity is significant for branded consumer packaged goods manufacturers. Despite the recent malaise, emerging markets are still growing at least 3x faster than demographically challenged developed markets, with often cited but still powerful dynamics of younger, upwardly mobile populations, urbanization, female workforce participation and shift from agrarian to services jobs supporting sales, margin and cash flow growth for those who have already built the critical infrastructure.

Valuation supports market perform view on group
Group is trading above average relative to the market on historical P/E multiples; and industry DCF, which we use to derive our target prices and assumes 2.5% sales growth and 0.6 pts of margin expansion per year through 2023 (7% WACC, 1.5% TVG) suggests group is about 2% undervalued relative to its cash flow. Downside risks include cost inflation, rising rates, dollar strength, consumption declines and EM slowdown. Upside risks are US recovery, M&A rational pricing, flat commodities and f/x, accelerated restructuring, EM stabilization, and cost savings, and aggressive balance sheet redeployment.

 

Eoin Treacy's view -

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

The Consumer Staples and Consumer Discretionary sectors have been consistent outperformers over the course of the medium-term bull market from the 2009 lows. Part of the reason for this is because they offer exposure to the rise of the global middle class but also because they dominate their respective niches and often have reliable cash flows. 



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April 25 2016

Commentary by Eoin Treacy

For Counterfeit Fighters on Social Media, Fake Profiles Are a Real Ally

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

Globally, sales of fake goods amount to between $250 billion and $600 billion each year, as products made mostly in China are dispersed through brick-and-mortar shops as well as online platforms from the Philippines to the U.S., government and industry groups say.

More than half of counterfeiters now use social media to sell their products, up from about 10% three years ago, estimates Ken Gamble, who tracks fake goods for global brands. Brands now want monitoring of counterfeit sales extended to social media, he said.

Ugg, the maker of sheepskin boots, created anticounterfeiting pageson Facebook and Twitter last year to alert consumers to the growing problem.

“You hear these stories about how they’re being duped and losing their money,” said Graham Thatcher, brand protection associate at Deckers Outdoor Corp., Ugg’s parent company.

Eoin Treacy's view -

Counterfeiting is big business and there is a well-trodden route for getting the goods in question out of China. It’s an issue that will always be with us because demand is steady and the profits than can be made, often in a short period of time, are large. Certainly, China is a major source of counterfeit goods and is unlikely to begin really enforcing patents until it has a vested interest in doing so. However even then, respect for patents is likely to remain spotty. Where counterfeiters becomes a problem for investors is when manufacturers can latch onto a large target to get a high profile win in their efforts to combat the practice. 



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April 22 2016

Commentary by Eoin Treacy

Record VIX Bets Keep Surging Amid Wall Street Mixed Signals

This article by Joseph Ciolli and Inyoung Hwang for Bloomberg may be of interest to subscribers. Here is a section: 

To Rocky Fishmanof Deutsche Bank, the recent lack of equity volatility has convinced some investors that price swings may return. With the volatility on the VIX itself likely to remain high, he recommends investors buy Standard & Poor’s 500 Index put spreads -- a strategy that involves purchasing and selling bearish contracts on the measure simultaneously.

“Investors don’t believe this low-volatility environment will continue,” said Fishman, an equity derivatives strategist at Deutsche Bank. “Seeing how low the VIX is, it’s an opportunity to buy inexpensive S&P 500 options.”

The CBOE VVIX Index has climbed 5 percent this quarter, and its average this year is about 8 percent higher than its historical average, data going back to 2006 show.

There may be another reason that call activity has continued to swell amid the stock rally, according to Deshpande.

Credit investors may be looking to protect recent gains delivered by a 29 percent contraction in the credit spread for investment-grade bonds since Feb. 11. That’s pushed more investors into fixed income trading.

“Credit spreads have rebounded and people are investing in the space again,” Deshpande said. “So they need hedging.”

 

Eoin Treacy's view -

Following the sharp pullback in January many investors woke up to the idea that hedging was a good idea which probably explains subsequent demand for VIX calls despite the fact equities were rallying and volatility measures contracting. The question now however is that while owning VIX hedges was a losing strategy for the last 10 weeks whether that will remain the case over the next 10 weeks. 

The Volatility of the VIX Index (VVIX) has been relatively inert since late January but the lows are rising within its range, albeit modestly. That suggests a move above 100 is looking more likely than no

 



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April 18 2016

Commentary by Eoin Treacy

Morgan Stanley Quarterly Profit Beats Estimates on Cost Cuts

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

First-quarter net income fell 53 percent to $1.13 billion, or 55 cents a share, from $2.39 billion, or $1.18, a year earlier, the New York-based company said Monday in a statement.

Profit surpassed the 47-cent average estimate of 22 analysts surveyed by Bloomberg. The decline in trading revenue was smaller than some analysts predicted.

While Chief Executive Officer James Gorman has been shrinking the fixed-income trading division to emphasize the less-volatile wealth-management business, Morgan Stanley is still exposed to slumping markets that hurt results across Wall Street. The firm follows JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. in lowering expenses to compensate for falling revenue. Goldman Sachs Group Inc., which reports results Tuesday, is embarking on its biggest cost-cutting push in years, people with knowledge of the effort said last week.

“If these markets were to continue as is, our goals will be extremely difficult to achieve, and we would therefore take additional appropriate actions,” Gorman said in a conference call with analysts. The company is reviewing every product and business to “convince ourselves that we need our footprint as it’s currently configured,” he said.

 

Eoin Treacy's view -

The fact the major investment banks are reporting earnings that are lower than last year but above analyst expectations helps to illustrate just how bearish sentiment has been. While the case for significant additional upside might be hard to rationalise there is scope for reversionary rallies across the sector.  



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April 07 2016

Commentary by Eoin Treacy

The World Is Getting Fatter and No One Knows How to Stop It

This article by John Tozzi may be of interest to subscribers. Here is a section: 

Researchers estimate that excess weight caused 3.4 million deaths worldwide in 2010. Being overweight or obese is a risk factor for chronic conditions like cardiovascular disease and diabetes. Those are rising worldwide, too. There were an estimated 422 million adults with diabetes in 2014, a rate of 8.5 percent, compared to 4.7 percent in 1980, according to new estimates published by the World Health Organization April 6.

Diabetes is rising fastest in low- and middle-income countries. It’s most common in the region that includes the Middle East and North Africa, where levels of physical inactivity are high.

The number of people who are overweight or obese is going up pretty much everywhere. The world has made progress against health threats from smoking and malnutrition to malaria and waterborne illnesses. No country has yet reversed the obesity epidemic. “Not only is obesity increasing, but no national success stories have been reported in the past 33 years,” researchers in the Lancet wrote in a 2014 report funded by the Bill & Melinda Gates Foundation.

A United Nations plan published in 2013 calls for halting the rise in diabetes and obesity by 2025. Though the pace of increase has slowed in some places, Lancet researchers recently called the chances of the world meeting that target “virtually zero.”

Eoin Treacy's view -

The vice sector including tobacco, alcohol, gambling, marijuana and pornography exists and thrives because as a species we have poor impulse control and are often slaves to the pleasure centres of our brains. Sugary and fatty foods and drinks target the same parts of the brain and this helps to explain why abstinence, self-control and regular exercise remain a hard sell despite the obvious health benefits.    



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March 07 2016

Commentary by Eoin Treacy

In JPMorgan Fintech Bunker, Coders Are Too Focused for Foosball

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

The bank has overhauled its website -- an unveiling is planned for Wednesday -- to make it easier and more intuitive to use. It consolidates about 300 pages from the old site so a visitor doesn’t have to hunt around to get things done. It also features a newsfeed with articles about personal finance. JPMorgan is slowly adding users to the new platform to gauge their reactions. It expects to add the rest starting this month and later release a new small-business banking website.

Tech competitors such as LendingClub Corp., On Deck Capital Inc. and Wealthfront Inc. threaten to disrupt banks’ relationships with clients by making transactions easier or cheaper. Traditional financial firms are responding by building their own technology in-house, including robo-advisers that give automated investment advice, partnering with the financial technology companies or purchasing them outright. New York-based JPMorgan will spend $3 billion on technology investments this year.

“All the startups, all the fintech guys are pushing very hard because they see opportunity,” said Parsey. “We have to take the banking world up to the same level as the rest of the digital industry. Beyond that, there are exciting ways to innovate how people feel about their finances.”

 

Eoin Treacy's view -

Consumers are no longer willing to take their lunch break or precious after work time to go to the bank, or other such mundane chores that could so easily be accomplished online. That represents a major challenge for companies reliant on bricks and mortar locations to conduct their business. The Millennial generation overtook Baby Boomers as the largest US demographic last year. It will be an increasing priority for companies to aim products directly at this group not least as they enter their prime earning years. 



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March 04 2016

Commentary by Eoin Treacy

Tesla's Getting More Rivals as VW Scandal Clouds Diesel Outlook

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

Volkswagen, meanwhile, has made electric vehicles a linchpin of its plan for recovering from the crisis, accelerating a push to add 20 additional plug-in hybrid and battery-powered cars to its lineup by 2020. That includes the first battery-powered vehicle for the Porsche sports-car brand as well as an electric Audi crossover. And it’s promising new leaps in technology, including ranges of more than 500 kilometers (310 miles) by the end of the decade.

“Charging will only take as long as a coffee break,” instead of hours, Volkswagen CEO Matthias Mueller said in Geneva. “And in the long term, an electric car will cost less than a car with an internal combustion engine.”

Such technology advances will help electric cars eventually. But in the meantime, demand is tepid, with the clean-running vehicles accounting for just 0.68 percent of sales in western Europe, according to Automotive Industry Data Ltd. Much of that demand comes from Norway, where electric cars enjoy generous perks such as tax exemptions and free charging. In Germany, where there are limited benefits, just over 30,000 have been sold to date. Cheap oil prices provide little incentive for consumers to take the leap.

Eoin Treacy's view -

Tesla, more than any other company, has succeeded in making electric vehicles desirable. I personally have very little interest in cars but I have to admit that their marketing is having an effect on me and there is no denying I see a lot more Tesla’s on the road today than a year ago. News last week that Tesla is outselling other luxury cars in the USA is a wake-up call for its German competitors. This lends additional support for the argument that companies need to compete in the electric vehicle sector.  



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February 24 2016

Commentary by Eoin Treacy

Boston Dynamics' Atlas The Next Generation

This video is worth watching because it gives us an idea of just how much progress robotics companies have made. 

Eoin Treacy's view -

The Atlas robot is not production ready but we can see from the above video that it is capable of doing at least some of the work currently done by teamsters. That suggests, a decade from now, when better robots are both cheaper and more intelligent the role to played by humans in labour related jobs will be under even greater stress. Stay in school kids!
 

 



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February 23 2016

Commentary by Eoin Treacy

Inside the New Microsoft, Where Lie Detection Is a Killer App

This article by Dina Bass for Bloomberg may be of interest to subscribers,. Here is a section:

Microsoft truly embraced the technology when it started Bing in an attempt to catch up with Google. Satya Nadella ran engineering and technical strategy for the search division before becoming chief executive officer two years ago and has been sprinkling machine learning like fairy dust on everything his company touches. "Microsoft is now in this place where they have machine learning very deeply embedded," Domingos says. "They’re investing a lot in making machine learning less Wild West."

Like Google and Amazon, which have both used the technology to improve their own products, Microsoft is weaving machine learning into its own operations. This isn't simply about helping the company save money and function better; the more Microsoft uses the technology itself, the easier it is to explain and sell. "Customers are confused," says Joseph Sirosh, lured from Amazon in 2013 to oversee engineering for Microsoft’s machine learning efforts. "Cutting through that noise has been a bit of a challenge. It has been also hard for our own field and sales people to go talk to customers and educate them about all the use cases."

CFO Amy Hood’s finance department has come to rely on algorithms—using them to help forecast sales and how many licenses the company will sell in a given period. "It turns out to be very, very accurate for that application," Sirosh says. "Amy Hood is a big fan of this. She can sleep nicer knowing that a machine learning model predicted her quarter."

 

Eoin Treacy's view -

Major technology companies are investing heavily in machine learning with the aim of answering questions we have not yet learning how to ask. It’s hard to take the ego out of decision making. Strong personalities generally tend to get their way not because what they want is the most appropriate course of action but because they can shout loudest, have the best connections or the most persuasive argument. Machine learning holds out the promise of creating data driven business models with reduced influence of big personalities. We might someday hope that governments adopt the same data driven methods.



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February 09 2016

Commentary by Eoin Treacy

Another Sign of Rough Sledding Ahead: Dividend Cuts Surpass 2008

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

Bespoke suggested that spreads in the high-yield debt market could signal whether more companies will be under pressure to cut or eliminate their dividends.

"Based on the trends of the last decade, when the credit markets are willing to lend, companies have jumped at the opportunity to borrow and increase their payouts," the analysts wrote. "The flipside is what we are seeing now, and when the credit markets start to turn off the spigot, some companies find they don’t have the cashflows to support their payouts."

 

Eoin Treacy's view -

Dividends represent an important component in total return over the long term and with interest rates so low they have been a competitive source of income for yield hungry investors over the last six years. The bond markets dwarf the equity markets in terms of the quantities of money moving around so it makes sense that widening spreads are having an effect on the balance sheets of companies as borrowing costs rise. 



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February 08 2016

Commentary by Eoin Treacy

Alphabet becomes the world's largest listed company

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

ON FEBRUARY 1st, the day that Ted Cruz defeated Donald Trump in the Republican caucus in Iowa, Google’s parent company, Alphabet, won a contest of its own, vaulting past its longtime rival, Apple, to become the most valuable listed company in the world by market capitalisation. Alphabet supporters are chuffed with the firm’s strong quarterly earnings and new corporate structure, announced last August. This was the first time Alphabet has shared more information about the performance of the firm’s “moonshot” projects, such as self-driving cars and Nest smart thermostats. In 2015, these projects (i.e., not including the core advertising business, Google) had an operating loss of around $3.6 billion—a hefty figure but less than some analysts had feared.

Alphabet is now predominantly an advertising firm, but it is selling a story about its ability to change and become more things to more people. Its believers think the firm will turn at least one of its moonshot projects into a significant earner of profits. The firm has a history of adeptly repositioning itself: it purchased Android in 2005 and YouTube in 2006, which helped it profit from the rise of smartphones and online video. It is also a leader in artificial intelligence, an important area of investment for internet firms today, with applications in everything from autonomous cars to photo-recognition, as well as in Google’s original internet-search business.

 

Eoin Treacy's view -

A week might be a long time in politics but it’s even longer in the markets when trades can be fired off in fractions of a second. Alphabet’s market cap has fallen by close to $50 billion over the last week so that Apple is once more the world’s largest company. Amid the headlines proclaiming Google’s rapid ascent there was one statistic that seems to have been overlooked. 



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January 29 2016

Commentary by Eoin Treacy

January 29 2016

Commentary by Eoin Treacy

Microsoft Cloud-Fueled Revival Persists as Azure Sales Jump

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

The gains add to optimism that Chief Executive Officer Nadella can revitalize growth by focusing on Web-based services and productivity applications. More than 70 percent of Fortune 500 companies are now using at least two different Microsoft cloud services, Nadella said on Thursday. His plan to focus on apps for rival platforms is also attracting users, with 340 million downloads of Office apps on Apple Inc.’s iOS and Google’s Android.

While Nadella pushes expansion, Chief Financial Officer Amy Hood is reining in costs.

“They have two things going for them -- one, the belief that Nadella is driving innovation towards the cloud, and No. 2, Amy Hood has had a blowtorch out on expenses," said Brent Thill, an analyst at UBS AG, referring to Microsoft’s chief financial officer. “It’s a totally different vibe coming out of that place that it was three years ago."

 

Eoin Treacy's view -

Governance is everything has been a refrain veteran subscribers will be familiar with. Microsoft offers a powerful example of how a newly energised board can have a transformative effect on earnings and perhaps more importantly perceptions of further potential. 



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January 28 2016

Commentary by Eoin Treacy

The Agony & The Ecstasy

Thanks to a subscriber for this report from JP Morgan Asset Management which may be of interest. Here is a section:

As mentioned in the Health Care section on page 23, while 2000-2001 was the peak distress period for biotech and life science companies, there has been a steady drumbeat since, with over 100 biotech and life science catastrophic loss events since 2002 (see bar chart). We referenced earlier research showing that even when a drug finally gets to Phase 3 trials, the probability of failure can still be as high as 50%. One possible emerging challenge for the biotech industry: patent trolls. For funding and other reasons, some universities are under pressure to monetize their patents by transferring rights to “assertion entities”. As per a 2014 paper from the University of California Hastings College of Law, as these patent sales take place, the risk to biotech and pharmaceutical companies with existing products on the market increases dramatically. Such patents can cover active ingredients of drugs, methods of treatment, screening methods to identify new drugs, manufacturing methods and dosage forms.

In the table, we show some of the more recent catastrophic losses (companies reaching the 70% decline threshold in 2012 or 2013). Biotech companies can experience periods of depressed stock prices as trials fail or have to be rerun, with some surging when/if success eventually occurs, or when they are bought by larger companies. As a result, the table below captures catastrophic loss at a point in time (Spring 2014), and does not represent a final assessment of each firm’s future prospects.

 

Eoin Treacy's view -

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

This is a useful report laying out the argument for a diversified approach to long-term investing while also highlighting just how much leaders outperform. A central part of the thesis we developed following the credit crisis was to rely on leadership and to favour pre-eminent companies within their respective sectors. Part of the reason for this is because capitalism trends towards concentration. This favours large companies that have the wherewithal to acquire emerging technology and the best assets of troubled competitors. As the report details, the majority of shares perform unremarkably while the leaders lead by a considerable margin. That is why we created the Autonomies theme. 



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January 25 2016

Commentary by Eoin Treacy

Email of the day on the Autonomies and the big picture:

By coincidence I did exactly the same exercise as you on Autonomies this week. I also find that the 10 year view is helpful in current market conditions. You put the emphasis on those Autonomies that are doing relatively well in the current market. What about those Autonomies that show much more bearish patterns? Are they in the majority among the overall number of such companies or not?

Eoin Treacy's view -

Thank you for this question sure to be of interest to subscribers. No Index has been immune to selling pressure in what is the largest stock market correction in seven years so it is a reasonable question how many of the Autonomies have bearish patterns. 

On Friday I focused on the 30 or so that are still trading above their respective trend means because following a large drawdown I think it is more useful to attempt to identify leadership not least following a process of mean reversion. I also mentioned that the majority of underperformers are in sectors exposed to the slowdown in China’s economic expansion and deteriorating commodity prices, especially oil. 

 



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January 22 2016

Commentary by Eoin Treacy

Mean reversion and the Autonomies

Eoin Treacy's view -

Yes, breadth has deteriorated, stock market indices have pulled back violently, volatility has been troublesome for most and market commentary has been bordering on apocalyptic. However there are still shares trading above their respective 200-day MAs with all of these negative factors contributing to mean reversion. That would suggest they are marching to a very different beat. 



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January 05 2016

Commentary by Eoin Treacy

The Last Innings

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

While it is hard to gauge the extent to which these three factors have slowed this recovery we believe that they have had some impact. The long-term benefits of information technology will likely more than offset such short-term disruptions to fixed asset investments. Similarly, we think the drag from offshoring to China has run its course as China has become a less competitive exporter.

With respect to the excess capacity from China and the drag on global growth, we believe that China’s ongoing investments in new industries such as airplanes and arms will affect the profitability of other multinational companies, reduce their prospective growth trajectories and indirectly lower growth in fixed asset investments.

Finally, we conclude with some data from the seminal work on financial crises by Carmen Reinhart and Kenneth Rogoff, This Time is Different: Eight Centuries of Financial Folly, which shows that the recoveries from financial crises are systematically more muted.44 What is most relevant in the context of our cautiously optimistic outlook for growth and financial markets is the fact that in the 10-year windows following severe banking crises that Reinhart and Rogoff examined, growth picked up substantially in the second five year period relative to the first. In the post-WWII era, on average, developed economies grew 2.1 percentage points faster in the second five-year period relative to the first five years after the onset of the crisis. Similarly, emerging market economies grew an average 3.2 percentage points faster.

 

Eoin Treacy's view -

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

The news headlines are afire with tales of terrorism, war, environment disaster and human misery and yet the stock market has been rallying for more than six years. There is no doubt geopolitical tensions have increased and the Fed is raising rates, from incredibly low levels, for the first time in almost a decade.so there is some justification for anxiety. However that does not mean all stocks are performing in a similar manner. 



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January 05 2016

Commentary by Eoin Treacy

Gene-Editing Drugmaker Backed by Google, Gates Files for IPO

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

Editas Medicine Inc., the drugmaker whose backers include Bill Gates and Google Ventures, filed to become the first publicly traded company to specialize in a new technology to edit flaws in genes.

The company, which uses a gene-editing technique called Crispr, filed Monday for the IPO with an initial size of $100 million. That’s a placeholder amount used to calculate fees and will probably change.

Gene-editing startups have drawn more than $1 billion in private venture-capital investments since 2013, according to Boston Consulting Group, with investors hopeful that new, more precise DNA-editing capabilities will yield treatments for conditions as diverse as blood diseases, cancers, auto-immune disorders and inherited eye disorders. 

Cambridge, Massachusetts-based Editas has raised $163.3 million from selling preferred stock, its filing said. Venture capital firms Flagship Ventures and Polaris Partners each hold more than 15 percent of the company before the offering. Google Ventures -- the unit of Alphabet Inc. that goes by GV for short -- has also bought private shares, along with Gates and Khosla Ventures.

Rodger Novak, chief executive officer of Basel, Switzerland-based Crispr Therapeutics Ltd., has said he would consider an IPO this year. Both companies have said their first in-human trials won’t start until 2017. Other closely-held gene editing firms include Intellia Therapeutics Inc. and Poseida Therapeutics Inc. Bayer AG and Crispr Therapeutics also started a joint venture in December with a $335 million investment from Bayer.

 

Eoin Treacy's view -

There is still an ongoing emotive debate about the virtues of genetically modified food with North America championing the sector while Europe has taken a much more cautious and often aggressive opposing view. Despite fear of the unknown, which would appear to inspire much of the emotive commentary on genetics, the potential for truly life changing innovation is undiminished. 



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December 31 2015

Commentary by Eoin Treacy

Forget El Nini: La Nina Poised to Storm the Markets

This article by Lucy Cramer for the Wall Street Journal on the 23rd may be of interest to subscribers. Here is a section: 

“The likelihood that the current El Niño peaks soon and turns into a potentially strong La Niña by late 2016 or early 2017 is something that participants in agricultural markets should track closely,” Mr. Norland said.  

And

“El Niño gets all the buzz, but La Niña does not get enough credit,” said David Ubilava, a lecturer at the University of Sydney’s School of Economics, who has written on the correlation between climate anomalies and commodity prices. For example, Canada and the U.S. are more likely to get more droughts in La Niña years than during an El Niño year, which can tighten food supplies and push up prices, Mr. Ubilava said.  

 

Eoin Treacy's view -

With floods across much of the Mid West USA and Europe snowless talk of climate change and its effects on weather is widespread. Crops don’t care if the extremity of the current El Nino is influenced by climate change but we do know that volatile weather makes for volatile pricing. 



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December 29 2015

Commentary by Eoin Treacy

Musings From The Oil Patch December 29th 2015

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

California’s proposed rule that a driverless vehicle must contain a steering wheel and a brake pedal for emergencies, goes against the grain of the technology industry that has been leading the development of these vehicles and cannot imagine a situation where the specified equipment would be necessary. It is akin to the continued existence of the emergency brake, a seldom used feature on a car, or directional signals, which many people seem to consider as unnecessary. The mandated equipment will certainly alter a passenger’s experience from that of a 21st Century, space-age vehicle to merely being a passenger riding in a modern automobile.

And   

Stretching out the transition time to a totally driverless vehicle fleet will also delay some of the anticipated economic and energy benefits envisioned. The world of a complete fleet of autonomous vehicles would allow them to be smaller and lighter, reducing the energy needed to produce them and power them. The absence of accidents would reduce the economic impact of injuries, physical damage and deaths, along with limiting or even ending the need for personal automobile insurance and the costs of accident litigation. If driverless vehicles could operate without human drivers, many families might also eliminate the need for second or third cars by being able to overlap their use of one vehicle, even though it would mean that vehicle would drive considerably more miles per year than the typical family’s current vehicles do. Net-net there should be an energy savings. Lastly, fewer vehicles would mean less need for expanded highways and parking spaces, freeing up urban land for alternative uses. California’s stance on driverless vehicles would seem to be slowing down the shift to our transportation nirvana and actually extending the petroleum age.

 

Eoin Treacy's view -

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

California’s laws on what need to be inside an autonomous vehicle, including a driver for example, are likely to represent a brake on the sector’s progress. However as anyone who actually drives a car knows there is a difference between what the law says and what the experience of driving is. 



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December 21 2015

Commentary by Eoin Treacy

Email of the day on Amazon and its marketplace partners

Does the equation work both ways? Could the shippers cut deals with the manufacturers and in essence back door Amazon by having the superior delivery portion of the transaction? If so what are your thoughts on valuation disparity?

Eoin Treacy's view -

Thank you for this important question and it’s something I’ve also been thinking about given Tesla Motors control of its entire sales process. In addition to the other major initiatives pioneered by the company, its decision to forego the dealership route in favour of selling cars directly is an example of how a manufacturer does not need to rely on bulk sales as it builds scale. 



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December 11 2015

Commentary by Eoin Treacy

Nasdaq leadership #2

Eoin Treacy's view -

On Monday I led off with a piece highlighting the fact seven of the largest companies on the Nasdaq also had among the largest overextensions relative to the respective trend means. With so much of the Index’s weighting already having performed so well and with such narrow breadth it was looking unlikely that a move to new highs could be sustained before those shares went through a process of mean reversion. It’s been an interesting week but I thought it was worth re-highlighting some of those charts today so subscribers could see updated charts.



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December 10 2015

Commentary by Eoin Treacy

Lululemon Or Puma Could Be Answer to VF's Deal Drought

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

VF hasn't publicly announced any deals for four years -- its longest drought ever, according to data compiled by Bloomberg.

It's last big takeover was the $2 billion purchase of boot maker Timberland in 2011, and  it dropped a pursuit of surf brand Billabong in 2013 after the company wanted more than VF thought it was worth.

The dearth of new deals is starting to make itself felt: Analysts are projecting VF's sales will rise just 2.8 percent this year, the smallest gain since 2009.

Part of that slowdown is tied to a broader trend among retailers from which VF hasn't been immune. Cheap, fast-fashion brands such as H&M and Zara are drawing customers away from middle-of-the-road purveyors of basics like jeans and T-shirts, just as they get slapped by the strong dollar. Weaker demand and piled-up inventory forced VF to cut its profit forecast in October, sending the shares into a tailspin. 

VF still has a lot going for it. The company's brand mix is diversified enough to help shield it from downturns in specific categories and a robust supply chain lets it better manage inventory levels in response to changes in demand, says Canaccord analyst Camilo Lyon. All of that should position VF to ride out the retail industry's current hardships. But taking advantage of opportunities to bargain shop for more brands as others struggle would put it in an even better position.

 

Eoin Treacy's view -

Companies like H&M and Inditex have new lines hitting stores every week. As I mentioned on my return from China in November there are shops in major cities with new lines every day. For companies still wedded to the idea they can do a new collection for every season this represents a major wakeup call and there are clear winners and losers. 



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December 08 2015

Commentary by Eoin Treacy

JAB Trio Creates Global Coffee Empire for Billionaire Backers

This article by David de Jong for Bloomberg may be of interest to subscribers. Here is a section:

The Luxembourg-based group, known as JAB, has spent more than $30 billion in the past four years acquiring coffee companies in the U.S. and Europe to challenge global leader Nestle SA. Run by a trio of well-connected executives with decades of experience in food and beverage, JAB has bought assets including D.E Master Blenders 1753 NV, Mondelez International Inc.’s coffee unit and high-end chain Peet’s Coffee & Tea.

“This is part of a much, much bigger strategy. JAB wants to be the Budweiser of the coffee space,” Pablo Zuanic, a Susquehanna Financial Group analyst, said, referring to Anheuser-Busch InBev NV, the world’s biggest brewer. “Just as you’ve seen Bud consolidate beer, they want to consolidate coffee.”

 

Eoin Treacy's view -

Coffee is big business and with approximately 20-25 espressos from a pound of beans it is a high margin business. Little wonder then that the bulk of spending from coffee companies goes in the form of marketing and physical locations. Coffee also represents a growth market since it is considered a bourgeois drink in China and for many exemplifies modern living.  

Another way of thinking about coffee is that consumption tends to trend higher as the pace of everyday life increases. People with busy work, family and social commitments tend to get less sleep either because of time or worry and need a pick-me-up in the morning. As the pace of economic development continues to trend towards urbanisation the pace of life inevitably picks up. That’s good news for coffee producers and helps to explain the race to dominate the market.

 



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December 07 2015

Commentary by Eoin Treacy

December 01 2015

Commentary by Eoin Treacy

Musings From The Oil Patch December 1st 2015

Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB which may be of interest. Here is a section on oil shares:

A final batch of questions focused on how important major oil company dividends were to holding up their share prices? We believe it is an important consideration, but the question of dividends and the major oil companies may actually foreshadow a discussion of their future business models. If a company is stuck in a low-growth industry, which oil certainly is, then spending inordinate sums of money to lift the growth rate may not be worth it. For oil companies, the cost for finding and developing new oil production to boost a company’s output growth rate from 2% to 3% to say 5% to 6%, without the company having any control over the price it receives for the product, should raise questions about their long-term business strategy. Maybe it is better to develop a steady, albeit low, production growth profile while using the surplus cash flow to maintain, and potentially increase, the dividend to shareholders. That might be a way to sustain a company’s stock market valuation and secure stable shareholder support. This strategy implies that capital spending would always be at risk in low commodity price environments, but the strategy could lead to stable employment, which is critical for securing and sustaining the technical talent required in the petroleum business. This strategy, however, wouldn’t work for smaller E&P companies needing capital to grow as their ability to tap the capital markets likely requires that they demonstrate rapid production growth. As we are learning, that strategy can be deadly in a period of low commodity prices. So if major oil companies were to adopt slow-growth production goals while defending and increasing their dividends, their share prices might not decline.

Eoin Treacy's view -

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

Capital Expenditure budgets have evaporated as companies deal with the revised economics of oil and gas development. On the plus side they have already taken significant write downs so any production that comes online as a result of previous investment can be considered already funded. Companies like Exxon Mobil, at a rating of AAA, are considered better credits than many sovereigns and the removal of the burden of capital expenditure leaves them in a better position to sustain their businesses into the medium term.



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November 30 2015

Commentary by Eoin Treacy

Volkswagen Closes In on Fixes for Dirty Diesel Motors in Europe

This article by Birgit Jennen and Christoph Rauwald for Bloomberg may be of interest to subscribers. Here is a section:

The most important next step will be as and when VW will conclude its internal investigations,” Arndt Ellinghorst, a London-based analyst for Evercore ISI, wrote in a note Monday. A program the company set up to encourage whistle-blowers expires Monday, and VW plans to present interim results of its internal inquiry in mid-December.

The carmaker is facing an emissions scandal on three fronts: cheating software it installed in about 11 million cars worldwide; irregular carbon dioxide ratings on about 800,000 vehicles in Europe; and additional questionable emissions software in about 85,000 VW, Audi and Porsche cars with 3.0-liter diesel engines in the U.S. Approval of repairs in Germany, and by extension the rest of Europe, doesn’t guarantee a thumbs-up in the U.S., where regulators first uncovered Volkswagen’s diesel deception.

For the smaller diesels, the German manufacturer has submitted a plan to repair nearly half a million cars to U.S. regulators. A response is due in December. For the bigger diesels, the company plans to alter the questionable software, known as an auxiliary emissions control device, and resubmit it for approval.

 

Eoin Treacy's view -

Volkswagen has sustained a great deal of damage to its reputation as a result of its subterfuge in marketing “clean diesel”. The big question is how they can contain the cost of fixing it and if that can be achieved with introducing an additional filter which does not impact performance that would be very good news. 



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November 13 2015

Commentary by Eoin Treacy

Nordstrom, Macy's Suffer as Americans Skip Trip to the Mall

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

The problem? Department stores aren’t drawing the same foot traffic. Though the job market is improving and the U.S. economy is chugging along, Americans would rather spend their money elsewhere. Nordstrom’s results sent its shares down as much as 22 percent in early trading on Friday, following a similar swoon for Macy’s after it released weak earnings earlier this week.

“It’s kind of bizarre,” said Dorothy Lakner, an analyst at Topeka Capital Markets in New York. “People have money. The economy isn’t bad, but they’re not spending on apparel.”

Nordstrom’s stock tumbled as low as $49.75 in premarket trading in New York. The shares had already slid 20 percent this year through the close of regular trading Thursday.

Cautious Outlook
Even J.C. Penney Inc., which beat sales estimates in the third quarter, is approaching the holiday cautiously. The retailer didn’t raise its annual guidance despite posting a same-store sales gain of 6.4 percent last quarter. That exceeded the 4.5 percent increase analysts expected.

J.C. Penney shares fell as much as 11 percent to $7.82 in early trading on Friday. The company, benefiting from a turnaround plan, had gained 36 percent this year through Thursday.

Retailers and clothing suppliers have struggled to pare down excess inventories, forcing them to rely more on discounts.

Nordstrom’s results reflected softer sales “across channels and merchandise categories,” the Seattle-based company said.

“It’s just a traffic problem," James Nordstrom, president of stores, said on a conference call. “We’ve got less people buying clothes this quarter than we expected.”

Eoin Treacy's view -

Wal-Mart, Macy’s and Nordstrom have come through with earnings that took analysts by surprise and their respective shares have experienced sharp declines as a result. TJX and Ross Stores have also been affected as pessimism about their earnings announcements next week increases.  

These declines are raising big questions. Are retailers suffering because they were overenthusiastic and built up inventory to unsustainable levels? Is it because shoppers are not spending due to insufficient funds or are they choosing to purchase elsewhere? Has online grown to such an extent that shopping at department stores is passé? Are consumers already pricing in the potential impact of a Fed rate hike? Considering how accustomed consumers are to being offered deals are they simply waiting for better prices ahead of the holiday season? 

 



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October 21 2015

Commentary by Eoin Treacy

Email of the day on General Electric

The 10 year weekly chart of General Electric suggests an important break out from a long term range and a move towards the old highs.

Eoin Treacy's view -

General Electric floated the idea of dispensing with its finance arm more than a year ago but confirmed the decision in April with the aim of getting back to its industrial roots. We are now seeing the fruits of that decision. GE represents a dominant player in a number of finance businesses not least aircraft leasing and had become among the world’s largest banks ahead of the financial crisis. It had fallen into a practice where it was making more money from financing the sale of its products than it was from selling them and this left the company exposed to a credit shock which saw the share fall 75% in 2008. 



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October 21 2015

Commentary by Eoin Treacy

Welcome to the future: Three things Back to the Future got right

This article by Darrell M. West and Nick McClellan for the Brookings Institute may be of interest to subscribers. Here is a section: 

Good morning and welcome to the "future." At approximately 4:29 p.m. Hill Valley time on Oct. 21, Doc Brown and Marty McFly arrive at the present day. For many millennials especially, the 1985 film series Back to the Future represented the far-flung fantastical future that many dreamed would come. But how does the Reagan-era vision of a future where we don't need roads compare to our daily lives today?

Sadly, you probably came to work today on the same street you may have trodden as a child back in 1985 without a hover board. But our future is still pretty fantastic, and many of the outlandish futuristic devices you saw in the 1989 film Back to the Future II are closer than you think—or already here. Here are three predictions that the film made that today might actually turn the head of an ‘80s time traveller 

 

Eoin Treacy's view -

Back to the Future was a fun franchise and growing up we all looked forward to owning a hoverboard. Despite Lexus’ rather cool demo product which they seem to have designed just for fun, we are still a long way from flying cars. Drones on the other hand are going from strength to strength as the cost of production continues to decline and GPS is integrated with progressively more products. We don’t have flying cars either but Stanford just releases a video of a DeLorean autonomously turning donuts on a test track which signals where scientists think the future will be.



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October 20 2015

Commentary by Eoin Treacy

Yum! Brands to Split China Division Into Separate Company

This article by Kevin Orland may be of interest to subscribers. Here it is in full:

Yum! Brands Inc., whose restaurants have been selling crispy chicken in Beijing since 1987, plans to split its China business off into a separate publicly traded company following pressure from activist investor Keith Meister.

The new company will be led by Micky Pant, who was named the China unit’s chief executive officer in August, the Louisville, Kentucky-based company said Tuesday in a statement. Greg Creed will continue to lead Yum.

Yum is hiving off the China business after a prolonged sales slump caused by food-safety scandals and increasing competition from local fast-food chains. Meister, a protege of billionaire Carl Icahn, has said the company’s Asian market could be better served with a more focused business and that the move could boost Yum’s value by $7 billion. The company said Tuesday that it is committed to returning "substantial capital" to shareholders in connection with the split.

Yum shares rose 4.2 percent to $74.75 at 7:09 a.m. in early trading in New York. The stock had slid 1.6 percent this year through Monday.

Eoin Treacy's view -

Splitting up the company is a big decision which was probably precipitated by the large profit miss earlier this month. KFC has been enormously successful in China but the question now is whether it has reached capacity. It is certainly ubiquitous in the larger cities so the company’s Chinese growth will depend on incomes rising, for what is a premium product, in tertiary cities particularly in the west. 



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October 20 2015

Commentary by Eoin Treacy

NSA, Apple Chiefs Decode Encryption Views

This discussion highlighted by the Wall Street Journal may be of interest to subscribers. In particular, the second comment by Nathan LaFrance is in my view a good representation of how many consumers feel about the issue. Here is a section: 

Mr. Cook, appearing later, disagreed on the latter point. “I don’t know a way to protect people without encrypting,” he said. “You can’t have a backdoor that’s only for the good guys.”

Apple and federal officials have been at odds for more than a year, since Apple issued a new version of its mobile-operating system that it said safeguards user information, even from law enforcement. But the White House signaled recently that it won’t seek new laws to force tech companies to make products that allow law enforcement to eavesdrop.

 

Eoin Treacy's view -

The USA is finally introducing chip and PIN technology and not before time. My credit card details have been compromised at least four times in the last two years. I’ve now got identity protection from ULCA Health, Anthem, Target, Home Depot but the letter I received yesterday was the one I was most surprised about. Experian, the firm other companies use to check the credit of a customer has been hacked with the loss of untold quantities of client data. In many respects I hope its Chinese government backed hackers since they have little interest in me specifically but after so many incidents one simply has to assume that our most personal data is out there in the public domain. 



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October 14 2015

Commentary by Eoin Treacy

Toyota Maps Out Decline of Conventionally Fueled Cars

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

Yet for now, Toyota is still highly reliant on gasoline- and diesel-powered cars. Last year, around 14% of Toyota’s global sales were hybrid vehicles, including plug-ins. Most of the remaining sales were vehicles powered by gasoline and some diesel, though a detailed breakdown wasn’t available.

Toyota has posted record profits in recent years, partly thanks to growing sales of profitable but gas-guzzling sport-utility vehicles and pickup trucks in the U.S., backed by lower fuel prices.

The vision to eliminate gasoline- and diesel-powered cars was a part of Toyota’s wider green car strategy unveiled Wednesday.

By 2020, Toyota aims to cut carbon-dioxide emissions from new vehicles by more than 22% compared with its 2010 global average. It ultimately hopes to take that to a 90% reduction by 2050, the auto maker said.

To do so, Toyota plans to sell roughly 7 million gas-electric hybrid vehicles world-wide over the next five years, it said. Toyota has sold around 8 million hybrids since it started selling them 18 years ago.

Toyota also plans to sell at least 30,000 fuel-cell vehicles a year world-wide by around 2020, it said.

 

Eoin Treacy's view -

The fallout from Volkswagen’s diesel emissions scandal means other manufacturers, that had not focused on a “clean diesel” marketing campaign, are capitalising on the story by promoting their own innovations.  Toyota has made some big bets on hybrid and fuel cell cars and the debacle of Volkswagen’s fraud enhances the potential that these decisions will succeed in enticing consumers to try a new solution over the medium term. 



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October 09 2015

Commentary by Eoin Treacy

3D-printed Adidas running shoe should fit like a glove

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

The Futurecraft 3D midsole was developed in partnership with 3D printing specialist Materialise. It is designed to provide the cushioning needs of the wearer, matching contours and pressure points of each individual foot. Adidas describes it as a "flexible, fully breathable carbon-copy of the athlete’s own footprint."

Gizmag has requested some additional info from Adidas on the specific materials and processes used to create the Futurecraft 3D, but has yet to receive a response. The sportswear manufacturer does say in a press release, however, that its ultimate aim for the technology is for customers to be able to walk into a store, spend a short time running on a treadmill, then leave the store with a 3D-printed running shoe. 

Eoin Treacy's view -

There is nothing quite like finding a pair of shoes that fits just right. Nike was talking about scanning people’s feet in store and mailing them their shoes a few years ago but nothing has happened on that front just yet. Adidas’s solution would appear more workable because the consumer would be able to walk out of the store holding or wearing the product. It’s still in the future but it does help to exemplify the trend of customisation that physical locations need in order to encourage shoppers to leave their homes. 



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October 07 2015

Commentary by Eoin Treacy

DuPont Breaking In Two After CEO Exit Seen Raising Value 31%

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

DuPont shares surged Tuesday by the most in six years in anticipation that more value will be unlocked. The Wilmington, Delaware-based company said Kullman will be replaced later this month as both CEO and chairman on an interim basis by board member Edward Breen, who oversaw the dismantlement of Tyco International Plc.

Earlier on Monday, Trian Fund Management, the activist investor that argues DuPont would be worth more as two companies, announced it had added to its stake in the company.

In May, Trian co-founder Nelson Peltz led the firm in its proxy fight in a doomed attempt to get three board seats.

"It’s kind of bittersweet, because Trian is vindicated in some respects," said Hank Smith, who helps manage $6.5 billion as chief investment officer at Haverford Financial Services Inc.

in Radnor, Pennsylvania. "If DuPont had embraced Trian earlier on and welcomed Peltz on the board, Ellen Kullman would still be CEO."

 

Eoin Treacy's view -

Speciality chemicals is an amorphous terms used to describe businesses leveraged to everything from agriculture, energy, healthcare, home improvement and anything in between. The drawdown in commodity prices affected at least two of those segments and the difficulties experienced by Latin American countries has been an additional headwind particularly for DuPont. 

One of the original reports on the potential of unconventional gas was written by analysts at Citigroup and titled “Shale Gas: a gamechanger for the chemical sector”. The boom in unconventional oil and gas drilling was a major benefit for chemical companies supplying the “mud” that lubricated the drill bit and keeps the fractures open so oil and gas can flow. The reduction in drilling activity has been an additional headwind and contributed to the relative underperformance of chemical companies. 

 



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September 23 2015

Commentary by Eoin Treacy

VW Chief Winterkorn Steps Down After Emissions Scandal

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

The new CEO’s top priority will be getting to the bottom of a scheme intended to dupe regulators and consumers about emissions of diesel engines installed in 11 million cars worldwide -- more vehicles than VW sells in a year. The automaker set aside 6.5 billion euros ($7.3 billion) on Tuesday to cover potential costs.

VW’s Achilles heel remains the American market. Even before the revelations of the last week, the VW marque was struggling in the U.S., despite investing $1 billion on a new factory in Tennessee to build a stripped-down, cheaper version of the Passat sedan. The brand’s U.S. sales have dropped, in contrast to growth in the overall market, as VW delayed decisions on building sport utility vehicles that would appeal to American consumers. The automaker is also grappling with a slowdown in China, the company’s biggest national market.

Working in the new CEO’s favor is an automaker that for the moment is financially sound. Volkswagen’s automotive division had net liquidity of 21.5 billion euros at the end of June, and posted record profit of 12.7 billion euros in 2014, helped by its strong presence in China and the expansion of the Audi and Porsche nameplates in the lucrative luxury-car segment. VW surpassed Toyota Motor Corp. in the first half to take the top spot in worldwide vehicle sales -- a goal that Winterkorn set early in his tenure to reach in 2018.

 

Eoin Treacy's view -

Unfortunately this is not corporate Germany’s first corruption scandal. Over the last decade there have been a number not least at Siemens, Commerzbank, Deutsche Bank, Man AG, and Infineon among others. Often these have centred on faking expenses and bribery but this may be the first exhibiting outright fraud. These articles from NBS News in 2005, the New York Times in 2008 and the Economist in 2009 may be of interest for historical perspective. Despite these lapses in the standards of governance at large corporations the German stock market has been among the strongest in the region. 

The DAX has paused in the region of the August low but a sustained move below that level would be required to question scope for some additional steadying in this area which would at least allow the oversold condition relative to the trend mean to be unwound. 

As this article points out cheating on emissions isn’t exactly new either. 

 



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September 21 2015

Commentary by Eoin Treacy

How Warner Bros. Battled Its Way to No. 1 in Video Games

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

Burton has another advantage, a base of fans who have snapped up more than 150 million copies of his Lego-themed titles since Lego Stars Wars: The Video Game came out in 2005.
Burton sold U.K.-based TT Games, which he co-founded, to Warner Bros. in 2007. He said 75 percent of Lego video games are purchased by 12-year-olds and up. By including characters from “Ghostbusters” and “Scooby-Doo,” Warner Bros. aims to make Dimensions appeal to older customers.

Warner Bros. Interactive is betting on another common theme in Burton’s Lego games universe, a sense of humor. In Lego Dimensions, Batman whines, “Why do these things always have to be so bright,” as he falls through a portal to another land. A whimpering Homer Simpson, meanwhile, pops up tied to a wrecking ball that players use to knock open a treasure chest.

“For years, you had movie video-game makers trying to copy what was on screen,” said Scott Steinberg, an industry consultant. “That began to work less and less. Consumers are more demanding with their experiences.”

 

Eoin Treacy's view -

Computer games generate more revenue than Hollywood. My daughter was tuning in to the Nintendo World Championships over the weekend and team-based Minecraft games are starting to take off in local cinemas suggesting games are now encroaching on movies’ home turf. The rapid evolution of virtual reality represents a fresh avenue for growth in the sector with just about every firm planning new games. 



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September 21 2015

Commentary by Eoin Treacy

Volkswagen Drops 23% After Admitting Diesel Emissions Cheat

This article by Richard Weiss Naomi Kresge for Bloomberg may be of interest to subscribers. Here is a section

Diesel and VW’s reputation for German engineering were cornerstones of Winterkorn’s effort to catch up in the U.S. market. The violations, which affect nearly half a million vehicles, could result in as much as $18 billion in fines, based on the cost per violation and the number of cars. Criminal prosecution is also possible.

“If this ends up having been structural fraud, the top management in Wolfsburg may have to bear the consequences,” said Sascha Gommel, a Frankfurt-based analyst for Commerzbank AG, whose share rating is under review.

The Wolfsburg, Germany-based company admitted to fitting some of its U.S. diesel vehicles with software that turns on full pollution controls only when the car is undergoing official emissions testing, the EPA said Friday. Affected are diesel versions of the VW Jetta, Golf, Beetle and Passat and the Audi A3.

 

Eoin Treacy's view -

Governance really is Everything and Volkswagen’s management have engaged in scandalous behaviour. With a vote on Friday whether to renew Winterkorn’s contract it is to be hoped the board decide on putting a fresh pair of hands at the helm. 



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September 16 2015

Commentary by Eoin Treacy

AB InBev Approaches SABMiller in Record Industry Combination

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

The two largest brewers have been seen as the end game for global beer mergers. An acquisition of SABMiller, led by CEO Alan Clark, would give AB InBev access to more than $7 billion of revenue in Africa with brands including Castle lager and almost $4 billion of sales in Asia, reducing AB InBev’s dependence on the Americas and Brazil.

With Latin America representing SABMiller’s biggest market, a deal would also broaden AB InBev’s presence in countries such as Colombia, Ecuador and Peru. Its Latin American brands include Cristal and Aguila.

AB InBev’s growth has been based largely around acquisitions since it was formed through a series of purchases by a group of Brazilian businessmen led by Jorge Paulo Lemann. Some analysts have speculated that Lemann’s 3G Capital could help orchestrate a takeover of SABMiller, just as it did when InBev NV bought Anheuser-Busch in 2008.

 

Eoin Treacy's view -

Capitalism trends towards concentration as the strong consume the weak. This has created a situation where groups of companies we might consider oligarchies control substantial footholds in a large number of sectors. A potential tie up between Anheuser-Busch InBev and SAB Miller would represent a further iteration of this trend. 



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September 16 2015

Commentary by Eoin Treacy

As the World Gets Fatter, This Pharma Giant Gets Richer

This article by Makiko Kitamura Albertina Torsoli for Bloomberg may be of interest to subscribers. Here is a section:

After the Tresiba setback, Novo quickly began a heart safety trial demanded by the U.S. Food and Drug Administration. The company submitted a revised application in the U.S. this March -- almost a year ahead of plan. It will know around Oct. 1 whether interim trial results point toward the introduction of Tresiba in the U.S. next year.

Even without that, Soerensen insists Novo has enough products in the pipeline to sustain sales for years. The company in August said it would proceed with late-stage testing of an oral version of a GLP-1 -- until now only available as an injection. And it’s working on an oral insulin, a formidable challenge given the difficulty of regulating absorption through the gut and managing swings in blood glucose. Though even many of Novo’s top researchers doubted the idea of pills to treat diabetes, “I said: ‘Do it anyway! Try it!”’ Soerensen said. 

 

Eoin Treacy's view -

Unfortunately diabetes is a growth sector. It thrives in an environment where people eschew exercise and indulge in sugary, savoury and spicy foods. There have been some encouraging advances in treatment and awareness of the need for lifestyle change helps, but the fact that it is a chronic condition means demand for treatment remains on a growth trajectory. 



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September 02 2015

Commentary by Eoin Treacy

Email of the day on Fanuc and robotics

“I would like to read your comments, if possible, about Fanuc, this leader Japanese company that, although its brilliant prospects it took a dive in the last weeks. Thank you.”

Eoin Treacy's view -

Thank you for this question which others may have an interest in. Industrial automation represents a growth theme dominated by companies supplying robots, software and optics. 

Robots are made from machined parts which is why Fanuc has refused to move manufacturing outside Japan due to the risk of imitation. Nevertheless, the growth of the sector acts as an incentive for other companies to compete not least by taking apart a finished product and reproducing the parts with small changes to avoid litigation. 



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August 27 2015

Commentary by Eoin Treacy

Email of the day on China and market complexion

The following article, seeking to explain China's recent missteps in handling its domestic stock market, is quite interesting: And congratulations on writing some excellent (& cool-headed) analysis this week

Eoin Treacy's view -

Thank you for your kind words and I’m delighted you’re enjoying the commentary. David and I have been working together since the winter of 2003 and I started filling in for him on Comment of the Day in the summers from 2004 when he used to embark on his annual Land’s End to John O’ Groats cycling holidays. Back then you could be reasonably assured of quiet markets during the sleepy summer months but that all changed in the aftermath of the credit crisis when the role of algorithmic traders took centre stage.

Historically, traders use public holidays and vacation periods to initiate counter trend positions in the hope of triggering stops for a quick profit. Computer programs have taken this process to the extreme. The most recent instance was in late July when gold sank to a new low during Asian trading while Japan was on holiday. All too often we now see times most people are on holiday and market liquidity is low fuels volatility and this is particularly true of moves in single stocks. 



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August 26 2015

Commentary by Eoin Treacy

Email of the day on Royal Dutch Shell

Hi Eoin, I love my daily read of your great service.

What is your opinion on Royal Dutch Shell, I am under water by about 30% not counting dividends.

Eoin Treacy's view -

Thank you for this question which is sure to be of interest to other subscribers and I’m delighted you’re enjoying the service. The steep decline in a large number of sectors, particularly energy has left a lot of people in a similar dilemma. My first thought is that with a share yielding 7.71% today it would be rash to ignore the dividend even if the yield was lower when you purchased it. 



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August 24 2015

Commentary by Eoin Treacy

Buy the dip?

Eoin Treacy's view -

In a bull market buying the dips is a winning strategy and is a policy that gains ever more credence as evidence compounds that it generates outsized returns. Investors and traders with orders in the market well below Friday’s close had favourable short-term buying opportunities today, which lent further evidence to the view that buying the dips works. However we also know that at some point buying the dips will not work so the big question is whether this is one of those occasions? 

At The Chart Seminar we define a Type-2 top as a massive reaction against the prevailing uptrend. It often occurs following a loss of momentum or a wedging characteristic but the massive reaction is the defining characteristic. The speed of the decline is unnerving because participants have so little time to react. Many are often left casting around for reasons to explain the move. Those using mental stops are left asking whether it is better to sell at a potential bottom or to wait for a rally. Many people with stale bull positions are less likely to participate in bargain hunting because the impact on their average buy prices would be too much of burden. 

 



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August 13 2015

Commentary by Eoin Treacy

Retail Sales Show Broad Gain as U.S. Consumers Spur Growth

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

Amazon.com Inc. held a Prime Day on July 15 to mark its 20th anniversary, featuring reduced prices on television sets, lawnmowers and other goods. The company said the promotion helped to drive orders surpassing Black Friday, an annual U.S. sales event following the Thanksgiving Day holiday that kicks off the year-end shopping season.

The job market is giving consumers the wherewithal to keep spending. Payrolls grew in July by 215,000 workers following a 231,000 gain in the prior month, and the jobless rate held at a seven-year low of 5.3 percent.

Eoin Treacy's view -

Low energy prices and cheaper imports have acted as an enabler for consumers which has helped Consumer Staples shares retain a position of relative strength. However, that does not negate the fact the retail sector remains intensively competitive particularly between bricks and mortar stores and online platforms. This has forced the former to open e-commerce sites while some youth oriented brands now maintain physical locations so potential customers can try on items but then buy them online. 



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August 10 2015

Commentary by Eoin Treacy

Farm machinery

Eoin Treacy's view -

Against a background where commodity related businesses have been under rather extreme pressure, farm machinery shares have exhibited relative strength. Crops have generally been favourable which has contributed to falling prices and the strength of the US Dollar has contributed to weakness. However as potential that agriculture prices have found at least a near-term low improves, the farm machinery sector may be worth studying in great detail. 



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August 10 2015

Commentary by Eoin Treacy

Buffett Says a Deal for Mondelez Would Be Difficult to Envision

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

Warren Buffett said buying Mondelez International Inc., the maker of Oreo cookies and Ritz crackers, would be difficult for him and his partners at 3G Capital because they’re still working on last month’s purchase of Kraft Foods Group Inc.

“It’s quite unlikely that Kraft Heinz will be doing a big acquisition in the next couple of years,” Buffett said Monday in an interview on CNBC. “We’ve got our work cut out for us for a couple of years.”
H.J. Heinz acquired Kraft last month with the backing of 3G Capital and Buffett’s Berkshire Hathaway Inc.

Activist investor Bill Ackman revealed last week that he has built a 7.5 percent stake in Mondelez valued at $5.6 billion. Shares of Deerfield, Illinois-based Mondelez climbed after the announcement, contributing to a 12 percent gain since July 3.

“Most of the food companies sell at prices that would be very hard for us to make a deal even if we had done all the work needed at Kraft Heinz,” Buffett said.

 

Eoin Treacy's view -

Warren Buffet and 3G Capital paid an all-time high for Heinz in 2013 which was ultimately the correct decision. Capitalism trends towards consolidation as the strong acquire the assets of the weak and become stronger. Nestle, Unilever, Colgate Palmolive, Mondelez and Kraft Heinz represent heavy weights in the global processed foods sectors which continue to benefit from the growth of the global consumer and the desire for quick snack foods as the pace of life accelerates with the demands of a modern economy. 



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August 07 2015

Commentary by Eoin Treacy

Email of the day on companies that rely on Eurozone growth

RiverFront Investments have been telling us that European stocks are interesting investments now that a recovery of the EU economy is happening. Over the last few years you and David have correctly argued in favour of investment in European Autonomies because such a large proportion of their sales takes place outside Europe. If RiverFront is correct, should we not be investing in European firms that do most if not all their business inside Europe? Which European firms correspond to this criterion?

Eoin Treacy's view -

Thank you for a topical question of general interest. Europe has been through an extraordinary period of economic upheaval characterised by unprecedented fiscal austerity that has sapped enthusiasm for bullish future potential. The ECB’s decision to adopt a €1,000,000,000,000 stimulus package in order to boost availability of credit and devalue the Euro represents the same kind of bullish catalyst which the USA enjoyed for much of the last six years. This helps to explain the Euro STOXX Index’s relative strength, at least in nominal terms. 



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August 06 2015

Commentary by Eoin Treacy

Michael Kors Shares Soar After Overseas Sales Fuel Profit Gain

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

Same-store sales fell 5 percent last quarter, excluding currency fluctuations. That was a slightly better performance than the 5.4 percent decline analysts predicted. Michael Kors expects comparable sales to decline by a low-single-digit percentage on that basis in the second quarter.

To help spur demand, the brand has been slashing prices on many of its products. Kors is contending with sluggish mall traffic and a strong dollar, which has reduced tourist spending.

The company also is adding new products in the second half and improving its digital operations.

Sales in the handbag business remain “robust,” though they aren’t growing at the same rates as previous years, executives said on the earnings conference call. Backpacks are getting more popular, and millennial customers in particular prefer smaller bags and cross-body purses, which typically have lower retail values. Watch sales also dragged down the company’s North American same-store sales, the company said.

 

Eoin Treacy's view -

Mid range luxury goods companies have been under pressure to offer more mass market offerings while even the uber-luxurious brands have been offering discounts in Hong Kong in order to spur demand. Michael Kors in particular boosted supply in order to capture market share from Coach, but suffered from the loss of its cache in doing so. Both companies are suffering from interlopers such as Tory Burch. The question now is how much of this is already in the price?



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August 05 2015

Commentary by Eoin Treacy

U.S. Stocks Rise Amid Priceline Results, Weaker ADP Payroll Data

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

The Standard & Poor’s 500 Index rallied 0.9 percent to 2,111.19 at 10:43 a.m. in New York, after slipping 0.7 percent over the previous three sessions. The Dow Jones Industrial Average climbed 91.67 points, or 0.5 percent, to 17,642.36 with its rise partially muted by Disney’s drop. The Nasdaq Composite Index advanced 1.2 percent.

“The market has been under a little bit of pressure looking for a reason to go back up,” said John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York. “The market’s moving in the right direction. A slow, steady recovery is probably a good thing. The single most important factor affecting stock markets is what the Fed is doing.”
 

Eoin Treacy's view -

The fact that two thirds of companies reporting earnings have so far beaten expectations belies the rather extreme single stock volatility that has been evident. Google surged, Biogen collapsed, Amazon surged and Apple surged before giving it all up. An investor in an ETF will have been relatively unaffected by these gyrations but individual investors are being held hostage to earnings announcements. 



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August 03 2015

Commentary by Eoin Treacy

Blue Chip Yielding 5% Beckons Daredevils to Catch Falling Knife

This article by Michael P. Regan for Bloomberg may be of interest to subscribers. Here is a section: 

After reporting its lowest profit since 2009 and cutting in half its plans for buybacks this quarter, Exxon Mobil’s vice president of investor relations Jeffrey J. Woodbury told analysts on a conference call: ‘‘Fundamentally, we’re committed to our shareholders to continue to provide a reliable and growing dividend.”

Said Chevron Corp. chief financial officer Patricia E. Yarrington on her company’s earnings call: “We said we would cover the dividend from free cash flow in 2017. We stand by that commitment.”

Chevron is paying almost 5 percent of its share price in dividends, the most since 1992 and near the highest above 10- year Treasury yields in data going back to 1991. It’s one of 19 energy companies in the S&P 500 with dividend yields above 10- year notes, and in recent weeks it exceeded Verizon Communications Inc. as the highest yielding blue chip in the Dow Jones Industrial Average.

Can’t you almost taste the salt-water taffy, kids? Like others who have addressed the “are we there yet” question in recent months, Martin Adams at Wells Fargo offers a less-than-satisfying answer: not quite yet, kids.

 

Eoin Treacy's view -

The energy sector offers an interesting perspective on the motivations of investors in purchasing shares over the last number of years. Often the size of the buyback program has been a more alluring factor than the dividend. The low interest rate environment has played a role in this preference and helps to throw light on why the security of energy companies’ dividends are receiving less attention than the fact that they will be buying less of their shares. 



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August 03 2015

Commentary by Eoin Treacy

Virtual Reality Is Not Just About Games: Nongaming applications sneak up on an unsuspecting public

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

Imagine a version of Google Maps that doesn’t end at the front door of buildings, or an Instagram consisting of immersive experiences rather than snapshots.

“Immersive 3-D content is the obvious next thing after video,” Facebook CEO Mark Zuckerberg said during a recent earnings call.

All of this is possible because, like the PC and the smartphone, virtual reality isn’t so much a single technology as the happy coincidence of a bunch of related ones. Motion tracking, 3-D capture, ultra-high-resolution displays, fast graphics chips and a deep library of 3-D software developed for games and other applications are coming together at just the right time. Google, Facebook, Sony, HTC, Microsoft and countless smaller competitors have already made public their plans for VR, and given its hiring and patents in the area, it’s likely Apple is working on it too.

VR is a technology that is truly in its infancy, despite decades of work in academia, industry and the military. Rapid progress in frame rates, displays, interfaces and more realistic rendering are already in everyone’s development pipeline.

“Keep in mind, this is just the Atari 2600 of VR,” says Cymatic Bruce, head of developer relations at Altspace VR, as he helps me take off a bulky headset I wore to experiment inside the company’s VR play space.

 

Eoin Treacy's view -

Microsoft’s release of Windows 10 appears to represent a change of focus for the software company since the product is now free but comes with a suite of features aimed at encouraging spending. The purchase of Minecraft last year and bundling an Xbox controller with every Oculus Rift when they are eventually shipped represent additional insights suggesting Microsoft sees its future as a media enabling platform rather than simply a spreadsheet builder and user interface. 



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July 31 2015

Commentary by Eoin Treacy

Diageo Expects Return to Sales Growth After Two-Year Slump

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

The outlook reflects the prospect of stronger growth in selling volumes in the 12 months through June 2016, Chief Executive Officer Ivan Menezes said in a statement Thursday. He forecast “mid-single-digit” organic sales growth in the following financial years and a 1 percentage-point improvement in the operating margin within three years.

The guidance is “conservative and undemanding,” said Eddy Hargreaves, an analyst at Canaccord Genuity in London. “It’s below what we already have in our model and it’s a positive that they have reinstated guidance.”

As he starts his third year as CEO, Menezes has tried to gain more control over his sprawling liquor empire and restore sales growth after a two-year slump. He’s bought out India’s United Spirits Ltd., taken full ownership of Don Julio tequila and dissolved a South African joint venture. Diageo is also shifting to a model focused on purchases by consumers, rather than the amount of bottles it ships to distributors.

 

Eoin Treacy's view -

Premium distillers such as Diageo trended higher in 2010 and 2011 as Chinese demand surged not least on the back of Communist Party cadre largesse. They have subsequently had a more difficult time repeating those growth figures following Xi Jinping’s anti-corruption drive, contraction of the European economy and stagnant North American sales. Diageo is betting that India and Africa will represent its primary growth engines in future but it will take time to generate results large enough to move the needle in terms of earnings growth. 



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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

Email of the day on the Autonomies and valuations

I have been looking at the charts for the global autonomies recently and have a question about your approach. Specifically, how much do you take market valuation (PE ratio) for a share into account when you buy / sell? I have read your book (twice, it is excellent by the way), so I understand your overall approach, but do you ever decide not to buy a share that has a great story / chart, but a very high valuation as well? Salesforce.com is a good example: nice story, nice chart, astronomic PE. Or Nike: nice story, nice chart, pretty high PE. By the way, I ask this question as an unleveraged investor, not a trader. Thanks.

Eoin Treacy's view -

Thank you for a question of general interest and for your kind words. I’m delighted you enjoyed Crowd Money. Valuations are important but the perceptions of those valuations are often more important to a share’s performance. I agree Nike’s historical P/E of 30 is high but its Estimated P/E of 27 suggests revenue growth is expected to continue. Investors also look at additional features such as the steady 16% dividend growth rate and the company’s dominant position as the global leader in the shoe and active wear sector when deciding whether to buy. 



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