Eoin Treacy's view -
Liked your weekly commentary today especially the summary on Gold. I have made money on gold and I don't wish to chase that market again.
Now you keep talking regulary about innovation and technology. As you are probably aware you are in conflict with the Harvard University Economic academic's view of technology and innovation. They hold we are well past the big innovation gains from technology especially IT technology. In fact these bunch of academics seem to beleive these innovation benefits ended at the turn of the last century i.e. 2000. There message appears to be that the last decade has simply delivered fancy hardware / software toys that have offered business no productivity tools. Mums and dads may like these toys but for business they are just staff time wasters.
I do beleive medical science has much to offer mankind in the future. However that picture is a bit cloudy also. Utilizing any new innovations seems to be determined by price. My son Keith (has a PhD in genetics worked for Merrill Lynch) now works for a medical services company running the cancer treatment businesses. He is some what cautious on medical innovation. He sees government unwilling to embrace new technology unless their is a demonstrated cost saving to the government. As he points out this is not always easy to demonstrate.
We all know US medical Insurance companies are also capping not premiums but the medical services they will offer to their insured patients. We also here in Australia see lots of pressure from government to cap the more expensive medical procedures. This must ultimately slow innovation in medical science. The largest shareholder in the company Keith works for is no other than KKR who own a bit over 50% of the business.
Fridays profit warning from Royal Dutch Shell seems to suggest at least some of the dumb money must now be looking closely at getting out of the "Fracking" business. Let's see if the other big dumb money provider in BHP also throws in the towel on what I see as a very stupid business. I am not environmentalist this is just about a reasonable return on capital.
I listened to a Economist speaking on oil on Bloomberg the other night. He had a cautious view on Oil prices saying its always priced at the marginal producers cost structure I.e the fractures cost as we all know. The dumb money frackers must be getting increasingly sick of this profit-less business. I know Iraq, Iran, Saudi Arabia etc, etc are not going ignore 1,000 years of hating and killing one another. The Libyan oil fields now producing 200,000 to 300,000 barrels a day are not going to revert overnight to again produce 1.8 million barrels a day. Try talking to an oil geologists how hard it is to get an oil well flowing again. This is an extremelly challenging task. Lastly the US embraces Iran nuclear industry and all is forgiven about the Bush Evil Empire statement. Somehow I don't think it's that easy. The oil business is challenging.
You are right the RBA is on the sell side of the AUD. As to the future level of the AUD local economists are very worried. They fear when we shortly become a very large energy exporter the AUD will come under pressure to rise. This will make most other local export industries uneconomic. There was a comment on Bloomberg the other night from a US oil company that said the oil business is now too expensive and costly. That LNG is the go and forget the US, go straight to Australia where it is cheaper and easier. True I am not making this up.
Perhaps we can talk more about these big picture matters at the Sydney conference.
Thank you for this thought provoking email which touches on a number of the issues I anticipate discussing with delegates at the upcoming Chart Seminar and Global Strategy session in Sydney. With only two weeks left before these events please contact Sarah Barnes email@example.com to secure you place.
From what I have read of the Harvard Economics team’s research, they tend to focus on the significant challenge of increasing processor speed as “gates” approach the width of a silicon atom. An acceptance of this limit helps to explain the urgency with which companies are investigating the potential of carbon nanotubes, graphene and other substances for the production of future generations of microchips.
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