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September 25 2017

Commentary by Eoin Treacy

Video commentary for September 25th 2017

Eoin Treacy's view -

A link today's full video is posted in the Subscriber's Area. 

Some of the topics discussed include: Lots of political events influencing markets, oil jumps on Kurdistan referendum, Euro down on AfD success, Wall Street pausing ahead of tax reform announcement, New Zealand Dollar weaker on election upset, Yen firmer on Japanese election announcement. Gold steadies and VIX may rallies.



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September 25 2017

Commentary by Eoin Treacy

The Next Financial Crisis

Thanks to a subscriber for this report by Jim Reid for Deutsche Bank. Here is a section: 

Perversely, the current post Bretton Woods system also allows for huge operations/stimulus to overcome any crisis/shock. We also shouldn’t underestimate the positive impact that this can have on nominal asset prices. Cash is arguably a far more dangerous asset in a fiat currency but unstable regime than it is in a more stable less crisis prone one. However, by continually using stimulus to deal with crises and not letting creative destruction take over, you make a subsequent crisis more likely by passing the problem along to some other part of the global financial system, and usually in bigger size. In a fiat currency world, intervention and money creation is the path of least resistance. In a Gold standard world, mining new gold was the only stable way of increasing the money supply.  

We think this leaves the current global economy particularly prone to a cycle of booms, busts, heavy intervention, recovery and the cycle starting again. There is no natural point where a purge of the excesses is forced by a restriction on credit creation.  

So we’re quite confident that there will likely be another financial crisis/shock pretty soon with their frequency continuing to be high until we create a more stable global financial framework.

 

Eoin Treacy's view -

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

When I read this report three of David’s Fullerisms came to mind. “Central banks are serial bubble blowers”. Another is “central banks have killed off more bull markets than all other factors combined”. To round out the triumvirate “Money policy beats most other factors most of the time”. Therefore, monetary policy is critical if we are to have any hope of identifying the difference between medium-term topping activity and a major top. 



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September 25 2017

Commentary by Eoin Treacy

Turkey Warns Iraq Kurds It Can "Close the Valves" on Oil Exports

This article by Onur Ant and Khalid Al-Ansary for Bloomberg may be of interest to subscribers. Here is a section:

The referendum isn’t limited to the three Kurdish governorates, or provinces, of Iraq; people in the disputed, oil-rich area of Kirkuk are also participating in the poll.

Iraq’s central government also condemned the KRG for including Kirkuk in its referendum and has threatened to retaliate.

Turkey and Iran, which also has a population of Kurds, have been among the most outspoken opponents of the referendum and were among the first to act. Iran’s Tasnim news agency reported that Iranian airspace bordering the Kurdish region had been closed at the request of Iraq’s government, and that the Iranian military was conducting exercises in frontier provinces.

The vote was “laying the ground for hot conflict,” Turkey’s Prime Minister Binali Yildirim said Monday. Turkey now considered the Iraqi government the sole counter party in its arrangement over oil exports to Turkey’s Mediterranean coast, he said.

Eoin Treacy's view -

No one in the region wants a sovereign Kurdistan except of course the Kurds themselves. Today’s referendum is a landmark event but the fact it also included Kirkuk is almost certainly going to set the region up for additional disagreement and potentially conflict. Turkey, in particular, is ambivalent to the idea of a sovereign Kurdish state on its border. 



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September 25 2017

Commentary by Eoin Treacy

Merkel wins fourth term but far-right populists make gains

This article by Stefan Wagstyl, Guy chazan and Tobias Buck for the Financial Times. Here is a section: 

AfD supporters were jubilant. Alexander Gauland, a party leader, pledged to “hunt” Ms Merkel in parliament and said: “We will take our people and our country back.”

The Social Democrats, Ms Merkel’s coalition partner, suffered their worst defeat and said they would go into opposition. Martin Schulz, the SPD leader, said it was “a difficult and bitter day for German social democracy”.

Official results published on Monday by the federal returning officer gave Ms Merkel’s CDU/CSU bloc 33 per cent of the vote. The Social Democrats won just 20.5 per cent. The AfD secured 12.6 per cent.

Under Germany’s election system, the parliament will have 709 members compared with 631 during the last session. The AfD is set for 94 seats.

The chancellor, who will remain at the heart of European affairs, benefited from Germany’s strong economy and low unemployment record, as well her role as a cautious global leader in an uncertain world, characterised by crises and surging nationalism, not least in Donald Trump’s White House.

But she lost many votes, especially in the former communist east, to the AfD as Germans protested against her decision to keep its borders open for more than 1m asylum seekers in 2015-16.

 

Eoin Treacy's view -

The illusion Germany has been immune to the rising tide of populism was questioned over the weekend with the surge in support for the AfD. That is going to have a profound effect on the cosy environment of the Bundestag which has been the preserve of the major parties for the last sixty years. It is above all going to create a national platform for the AfD to debate its agenda which will likely elicit a policy response from the established parties to try and blunt it. 



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September 25 2017

Commentary by Eoin Treacy

48th Year of The Chart Seminar

Eoin Treacy's view -

The Chart Seminar 2017 

Our remaining venue for the 48th year of the seminar is:

London November 16th and 17th 

If you are interested or would like to suggest a venue please contact Sarah at [email protected] 

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non EU residents are not liable for VAT). Subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.



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September 22 2017

Commentary by Eoin Treacy

September 22 2017

Commentary by Eoin Treacy

May Makes Commitment on Cash in Bid to Break Brexit Deadlock

This article by Tim Ross , Simon Kennedy , and Ian Wishart for Bloomberg may be of interest to subscribers. Here is a section: 

In delivering her most detailed roadmap yet for the divorce, May gave the clearest indication yet that Britain will pay to smooth its departure from the bloc. Her words were immediately welcomed by the EU’s chief negotiator Michel Barnier.

“The U.K. will honor commitments we have made during the period of our membership,” May said in a much-anticipated speech in the Italian city of Florence. A government official later clarified that meant she was open to discussing financial commitments beyond the scope of the EU budget, and the U.K. would honor its dues more broadly.

She made the promise while also proposing paying money and accepting the EU’s rules for two years after Brexit takes effect in March 2019 in return for a transitional period which mirrors the status quo of tariff-free, regulation-light commerce -- and freedom of movement.

 

Eoin Treacy's view -

The May administration is willing to concede to EU demands that it meet previously agreed obligations to the EU budget and will also uphold just about all the EU’s regulations for at least two years after the exit is completed. The announcement of a willingness to pay was welcomed by the EU. 

“The speech shows a willingness to move forward, as time is of the essence,” Barnier said in an emailed statement on Friday. “We need to reach an agreement by autumn 2018 on the conditions of the United Kingdom’s orderly withdrawal from the European Union.”

 



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September 22 2017

Commentary by Eoin Treacy

Philippine Central Bank Chief Brushes Off Credit Growth Concerns

This article by Karl Lester M. Yap for Bloomberg may be of interest to subscribers. Here it is in full:

Philippine central bank Governor Nestor Espenilla downplayed risks of surging credit growth, saying the trend is consistent with the fast pace of economic expansion.

“From a micro level, loans are being very carefully managed from a risk perspective,” Espenilla said in an interview with Bloomberg TV’s David Ingles and Haidi Lun on Friday. “At the macro level, the 20 percent growth is relatively consistent with the rapid growth of the economy.”

An economic boom accompanied by surging credit growth has fueled speculation that Bangko Sentral ng Pilipinas may raise interest rates as early as the fourth quarter. That would be a divergence from other central banks in Southeast Asia, like Indonesia and Vietnam, that have eased policy this year. The Philippines kept its benchmark interest rate unchanged at a record low of 3 percent on Thursday.

Commercial bank loans have risen quickly this year, with mortgages surging more than 20 percent in June. Bangko Sentral has adopted measures in the past to cool the property sector, including capping the value of real estate that can be used as loan collateral.

Domestic credit to the private sector in the Philippines stood at 45 percent of gross domestic product in 2016, according to data from the World Bank. The ratio exceeded 100 percent in Malaysia, Thailand, and China.

“The Philippines is basically in catch up mode right now,” Espenilla said, referring to the credit expansion.

The Philippine economy is headed for a sixth year of growth exceeding 6 percent, among the world’s fastest. That hasn’t yet translated into an inflation problem, with the central bank maintaining its forecast for this year and next year at 3.2 percent. The bank’s goal is to keep inflation within a range of 2 percent to 4 percent until 2020.

“We are on track with meeting our inflation target which is the main driver for our policy decision,” Espenilla said. “Our assessment is inflation remains firmly under control.”

 

Eoin Treacy's view -

The Philippines has mostly made headlines for the aggressive pace of Rodrigo Duterte’s campaign against drug traffickers and others deemed to be malcontents. However, what has often gone unnoticed is this activity has not arrested the pace of economic growth. 



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September 22 2017

Commentary by Eoin Treacy

France Is Germany's Big Banking Hope? That's Gotta Hurt

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

That makes a merger attractive to buyers with an existing presence in the German market, such as UniCredit, which acquired HypoVereinsbank in 2005, or Deutsche Bank AG, Germany’s largest lender. Commerzbank and Deutsche Bank held discussions last year about a possible merger, before Commerzbank announced its new strategy. After the talks broke down, John Cryan, Deutsche Bank’s CEO, called for consolidation in Europe to help the region’s banks compete.

​The renewed interest in Commerzbank has been catalyzed by the investment of Stephen Feinberg’s Cerberus Capital, which already controls Austrian lender Bawag PSK Bank. Private equity firms such as Cerberus pool money from investors to buy companies, using additional debt to finance the transactions, in the hope of selling them for a profit later.

UniCredit executives have held discussions with German officials about a potential combination with Commerzbank once the lenders’ restructuring is complete, according to a person with knowledge of the talks. The German government would prefer a tie-up with France’s BNP Paribas SA, WirtschaftsWoche reported, citing unidentified insiders.

“UniCredit and Commerzbank have large restructuring plans underway, to be completed in 2019 and 2020 respectively,” Tom Kinmonth, a strategist at ABN Amro wrote in a note. “Either way, the interest and the turnaround in the German lender has brought great performance this year.”

 

Eoin Treacy's view -

I remember the days when I was the Bloomberg account manager for just about all German banks in Luxembourg. That was back when old ladies turned up at the bank to clip coupons on their bonds at the end of the month and when meeting rooms all had money counting machines. In Kirchberg, queues of RVs form in the summer to pick up cash before driving down to the Mediterranean for their summer holidays. 



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September 22 2017

Commentary by Eoin Treacy

Shanghai police turn to facial recognition software to catch misbehaving cyclists

This article from the South China Morning Post may be of interest subscribers. Here is a section: 

On the same day, another e-bike user who had previously been caught twice driving in the opposite bike lane was fined 100 yuan for doing so a third time.

If traffic law breakers do not accept the charges, police will publicly broadcast details of their offence on the surrounding advertising billboards until the culprit hands themselves in.

Shanghai traffic police said that following the success of the pilot, more “electronic police” surveillance units will be set up at major traffic intersections across the city.

 

Eoin Treacy's view -

While in China this summer I was amazed at the improvement in customer service that has come about as a result of the online review system available via many different social media services. The fear of receiving negative reviews has literally changed behaviour beyond recognition in service establishments. 



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September 21 2017

Commentary by Eoin Treacy

September 21 2017

Commentary by Eoin Treacy

Email of the day on maturity extensions

Why does the US not shift its bonds to 20 and 30-year duration, increase inflation to, say, 2% and pay back the money in 20 or 30 years’ effectively free of interest? This would really kick the can down the road and give them many years to sort out the mess.  When I asked this of Americans five years ago, they thought it would cause interest rates to spike if the Fed tried to drastically increase the duration.  I think the last few years have proved that the duration could be increased without causing panic in the markets. 

Eoin Treacy's view -

Thank you for this email and since no one has ever successfully taken trillions of Dollars out circulation before I suspect everyone is asking how this can be done effectively. The Fed went through a maturity extension program between 2011 and 2012 which swapped about 667 billion from short-dated to longer dated securities. Here is a section from the Fed’s 2012 press release on the subject: 

Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. 



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September 21 2017

Commentary by Eoin Treacy

The great nutrient collapse

This fascinating article by Geoff Johnson and Helena Bottemiller Evich for Politico may be of interest to subscribers. Here is a section: 

What he found is that his 2002 theory—or, rather, the strong suspicion he had articulated back then—appeared to be borne out. Across nearly 130 varieties of plants and more than 15,000 samples collected from experiments over the past three decades, the overall concentration of minerals like calcium, magnesium, potassium, zinc and iron had dropped by 8 percent on average. The ratio of carbohydrates to minerals was going up. The plants, like the algae, were becoming junk food.

What that means for humans - whose main food intake is plants - is only just starting to be investigated. Researchers who dive into it will have to surmount obstacles like its low profile and slow pace, and a political environment where the word “climate” is enough to derail a funding conversation. It will also require entirely new bridges to be built in the world of science - a problem that Loladze himself wryly acknowledges in his own research. When his paper was finally published in 2014, Loladze listed his grant rejections in the acknowledgements.

 

Eoin Treacy's view -

Over the last couple of years I’ve been paying a lot more attention to my health and well- being because I intend to be around for a long time and prevention is better than the cure. I have basically replaced my previous intake of processed sugars and carbohydrates with fruits and vegetables. Since carbohydrates are processed into sugars quickly after ingestion nutritional balance is always about choosing where you get the protein, fat, sugars and minerals necessary to lead a healthy lifestyle. 



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September 21 2017

Commentary by Eoin Treacy

Google bets anew on smartphones, pays $1.1 billion for HTC's Pixel division

This article by Jess Macy Yu and Paresh Dave for Reuters may be of interest to subscribers. Here is a section: 

The all-cash deal will see Google gain 2,000 HTC employees, roughly equivalent to one fifth of the Taiwanese firm’s total workforce. It will also acquire a non-exclusive license for HTC’s intellectual property and the two firms agreed to look at other areas of collaboration in the future.

While Google is not acquiring any manufacturing assets, the transaction underscores a ramping up of its ambitions for Android smartphones at a time when consumer and media attention is largely focused on rival Apple Inc (AAPL.O).
“Google has found it necessary to have its own hardware team to help bring innovations to Android devices, making them competitive versus the iPhone series,” said Mia Huang, analyst at research firm TrendForce.

The move is part of a broader and still nascent push into hardware that saw Google hire Rick Osterloh, a former
Motorola executive, to run its hardware division last year. It also comes ahead of new product launches on Oct. 4 that are expected to include two Pixel phones and a Chromebook.

 

Eoin Treacy's view -

I keep a close eye on what my children and their peers use because it is an expedient way of identifying what is going on in the wider world outside of the sanitised environment of the market. At their acting class, last week one of the kids was showing off his new Pixel phone and their school has pretty much ditched iPads in favour of Chromebooks. The reason for that decision was apparently because high schools use laptops and they need to have some familiarity with them before moving up. 



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September 20 2017

Commentary by Eoin Treacy

September 20 2017

Commentary by Eoin Treacy

Fed Asset-Shrinking to Start Next Month; Rate Hike Seen in '17

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

“The labor market has continued to strengthen” and economic activity “has been rising moderately so far this year,” the Fed statement said. The FOMC repeated language saying “near- term risks to the economic outlook appear roughly balanced.”

The decision to leave the target range for the federal funds rate unchanged and begin the balance-sheet runoff in October was unanimous. The Fed reiterated that interest rates are likely to rise at a “gradual” pace, though updated forecasts indicated that officials see the path as less steep than before.

In their new set of projections, Fed officials estimated three quarter-point rate hikes would be appropriate next year -- the same number they saw in June -- based on the median in the so- called dot plot of interest-rate forecasts.

Crisis Action
The Fed's decision to exit from balance-sheet policies comes a decade after the global financial crisis began to tip the economy into a recession at the end of 2007. The reduction in assets will be slow -- just $10 billion a month to start. 

 

Eoin Treacy's view -

The Fed’s balance sheet has been steady at close to $4.5 trillion since early 2015 when the process of tapering quantitative easing ended. The issue facing the Fed is that they want to continue to raise interest rates, but that is going to have a deleterious effect on the Treasury’s finances as bonds mature and are refinanced at higher rates. The answer they are experimenting with is reducing the size of the balance sheet so there are fewer bonds which need to be refinanced. 



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September 20 2017

Commentary by Eoin Treacy

It's Not Just Toys R Us. More Credit Weak Spots Emerge

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

Money managers are grappling with an uptick in operational and balance-sheet challenges late in the business cycle, with debt-laden Toys ‘R’ Us Inc. the latest retailer to file for bankruptcy this week, catching bond markets off guard. Just two weeks ago, credit-default swaps, which allow traders to hedge against losses, were pricing in a low probability of near-term default at about 10 percent based on contracts expiring in June.

"Companies with the weakest fundamentals often show problems first late in a cycle, and the retail sector has many such examples," said Adam Richmond, Morgan Stanley’s chief credit strategist.

"Investors initially treat those issues as idiosyncratic, and then the problems spread, when credit conditions begin to tighten,” he said. “That is how the late cycle can transition to end of cycle."

These risks are hard to see at the index level, with the Bloomberg Barclays U.S. high-yield benchmark up almost 7 percent this year, led by CCC-rated names. Still, the latter has underperformed the broader market over the past two months, suggesting investors are increasingly compelled to price-in deteriorating fundamentals -- reminiscent of a market in its late winter, according to the U.S. lender.

 

Eoin Treacy's view -

“You don’t know who’s been swimming naked until the tide goes out” is one of Warren Buffett’s most memorable sayings. There is no doubt that abundant cheap liquidity has aided a considerable number of what might otherwise have been considered marginal businesses to remain solvent. The big question now is how they are going to refinance debt at equally attractive levels when it comes due over the coming years?



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September 20 2017

Commentary by Eoin Treacy

Proterra Catalyst E2 MAX Sets World Record And Drives 1,101.2 Miles On A Single Charge

This press release contains some impressive statistics and may be of interest to subscribers. Here is a section: 

Today Proterra, the leading innovator in heavy-duty electric transportation, announced it has set a world record for driving the longest distance ever traveled by an electric vehicle on a single charge at the Navistar Proving Grounds in New Carlisle, Indiana. Proterra’s 40-foot Catalyst E2 max traveled 1,101.2 miles this month with 660 kWh of energy storage capacity. For the last three consecutive years, Proterra has demonstrated improved range and battery performance. Last September, Proterra drove 603 miles with 440kWh of energy storage, and in 2015, Proterra drove 258 miles with 257kWh of energy storage on a single charge. This year’s world record range marks exceptional performance improvements over prior years, and underscores Proterra’s commitment to innovation and accelerating the mass adoption of heavy-duty electric vehicles.

“For our heavy-duty electric bus to break the previous world record of 1,013.76 miles — which was set by a light-duty passenger EV 46 times lighter than the Catalyst E2 max — is a major feat,” said Matt Horton, Proterra’s chief commercial officer. “This record achievement is a testament to Proterra’s purpose-built electric bus design, energy-dense batteries and efficient drivetrain.”

Beyond meeting transit agencies’ range requirements, the Catalyst E2 max is poised to make a significant impact on the transit market because of its low operational cost per mile compared to conventional fossil fuel powered buses. According to Bloomberg New Energy Finance, lithium-ion battery prices have dropped by roughly 72 percent since 2010, and the economics for batteries continue to improve. Between li-ion battery cost savings and improving vehicle efficiency, electric vehicles represent the most disruptive mode of transport today.

“Driven by the best cost savings-per-mile, we believe the business case for heavy-duty electric buses is superior to all other applications, and that the transit market will be the first to transition completely to battery-electric powered vehicles,” said Ryan Popple, Proterra CEO. “Early electric bus adopters like our first customer, Foothill Transit, have paved the way for future heavy-duty applications, like motor coaches and commercial trucks. As we see incumbents and more companies enter the heavy-duty EV market, it has become very apparent that the future is all-electric, and the sun is setting on combustion engine technology.”

 

Eoin Treacy's view -

One of the primary arguments often trotted out to combat ambitious forecasts about the future of long haul and large passenger vehicles is the battery would have to be so large and heavy as to make the endeavor untenable. 



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September 20 2017

Commentary by Eoin Treacy

Oil Traders Empty Key Crude Storage Hub as Demand Booms

This article by Rupert Rowling and Javier Blas for Bloomberg may be of interest to subscribers. Here is a section:

Oil traders are emptying one of the world’s largest crude storage facilities, located near the southernmost tip of Africa, as the physical market tightens amid booming demand and OPEC production cuts.

Total SA, Vitol Group and Mercuria Energy Group Ltd. are selling crude they hoarded in Saldanha Bay, South Africa, during the 2015-2016 glut when the market effectively paid traders to store oil, according to people familiar with the matter, who asked not to be named discussing private operations. 

Crude demand is now seasonally outstripping supply, tightening the physical market for some crude varieties to levels not seen in the last two years and encouraging traders to sell their stored oil.

“The market is selling inventories from everywhere,” Mercuria Chief Executive Officer Marco Dunand said in an interview in Geneva.

Although largely unknown outside the oil trading industry, Saldanha Bay is one of the world’s largest crude storage facilities, with the capacity to hold 45 million barrels in just six gigantic, partially-buried concrete tanks. By comparison, Cushing, the better-known U.S. oil storage center in Oklahoma that serves as the pricing point for the West Texas Intermediate oil benchmark, can hold about 75 million barrels in more than 125 tanks.

 

Eoin Treacy's view -

We are in a period of synchronized global economic expansion so that should be generally positive for commodity demand, all other factors being equal. The hurricanes which hit the US and meant that the strategic reserve was tapped means it will need to be refilled while refineries will be running at capacity once they get back on line to make up for lost time.



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September 19 2017

Commentary by Eoin Treacy

September 19 2017

Commentary by Eoin Treacy

Large Cap Tech

Eoin Treacy's view -

Large Cap Tech – The Fed is meeting over the next two days and we may hear something about how balance sheet rationalization. Meanwhile the S&P500 is trading above 2500 and the Nasdaq-100 is trading above 6000 while an increasing number of Asia Pacific markets are breaking on the upside as well. 

The major constituents of these indices from the tech sector, namely Apple, Amazon, Alphabet, Facebook and Microsoft have considerable influence on the ability of these indices to continue to extend their breakouts so I thought it would be instructive to highlight their current chart patterns. 

 



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September 19 2017

Commentary by Eoin Treacy

Markets Are Betting That Japan's Abe Would Win a Snap Election

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

Markets are suggesting that any snap election called by Japanese Prime Minister Shinzo Abe would take advantage of his opponents’ weakness and see him retain power.

A victory would ensure the continuation of Abenomics, the recipe of mega monetary easing, flexible fiscal policy and selective deregulation that’s helped Japan’s economy to its longest sustained expansion since before the global crisis. Abe, who’s expected to decide on the early ballot after returning from a U.S. trip, is capitalizing on growing public support for his management of the North Korean crisis.

 

Eoin Treacy's view -

We learned from Theresa May’s experience that being presumptuous about the ability of politicians to extend their majority can be a dangerous game. Nevertheless, Abe is a seasoned campaigner and one of Japan’s longest serving Prime Ministers. With a fresh mandate, he could help promote further reform. 



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September 19 2017

Commentary by Eoin Treacy

Email of the day on wind farms

In my trip last week across the Texas Panhandle, I observed a continuing explosion in the number of power-generating windmills (picture is from last year's trip). Last year, vast numbers of these were not operating - this year, most are, suggesting that the power lines to major cities (e.g. Dallas-Ft. Worth) are now working and that purchase contracts are now in place. I spoke at length with a friend who farms a dozen or so square miles there about this subject, which he is very knowledgeable about.

Ah, but all is not well. The company that built hundreds of windmills in around 2002 up in the (windy) OK Panhandle has gone bankrupt, and the windmills are being torn down for scrap. Alas, the cost of these reclamation efforts are not fully covered by the original reclamation bonds bought by the now-bankrupt company, meaning either the farmers who own the land or the government (taxpayers) will have to cover the cost. Meanwhile, the productive farmland that was used for these remains unusable and unproductive until they are torn out, including their huge concrete bases. A 15-year life is not what anyone was promised...

When a farmer agrees to allowing windmills to be built on his land, he is effectively giving up on irrigating that land using modern, efficient center-pivot irrigation systems. Dryland wheat yields 1/4 that of irrigated wheat in the best rain years (which are few and far between), and 10% or less in dry years (lots of years). Most now grow at least some corn, and corn is not a dryland crop in these parts. Yes, he could go back to the horribly inefficient and water-wasting row irrigation method, but that has serious long-term aquifer depletion issues, as well as cost of pumping and labor cost increases. The windmills themselves, the power lines, and the access roads all reduce the crop acreage. Annual payments to the farmers make up for some of this, and some farmers do make money on the windmill contracts, but many smart farmers are turning down the offers. 

Despite all this, the building boom continues, and like all booms, will ultimately lead to substantial overcapacity, bankruptcies, finger pointing, and pain. With over 50% of the power generated being consumed by power line losses, it is not clear that such projects will ever create significant profits before government (taxpayer) subsidies are counted.

 

Eoin Treacy's view -

Even in the windiest locales onshore wind has a hard time being economic and the turbines installed 15 years ago bear little resemblance to those being erected today. European manufacturers have been promoting offshore turbines the size of skyscrapers. They are betting on scale to achieve efficiency gains and Denmark’s Dong Energy made headlines a few months ago by winning contracts to install offshore turbines with no subsidies from the German government. Of course, it remains to be seen if it can in fact deliver on its promise. 



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September 18 2017

Commentary by Eoin Treacy

September 18 2017

Commentary by Eoin Treacy

Gold in correction mode

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

Precious metals: Gold has dropped to a 2½-week low of $1,315 per troy ounce this morning amid increased risk appetite among market participants. Gold in euro terms is trading at only around €1,100 per troy ounce. The Dow Jones Industrial Average and S&P 500 indices in the US had both climbed to new record highs on Friday. The rise in stock markets is continuing in the Asian region today. What is more, bond yields in the US have increased significantly of late, which makes gold less attractive as an alternative investment.

Presumably this is also why Friday saw the second consecutive daily outflow from gold ETFs. Portugal’s credit rating was upgraded on Friday evening by the ratings agency S&P, achieving an investment grade rating again for the first time since January 2012. Ireland was also upgraded, this time by the ratings agency Moody’s. Wednesday could see further volatility on the gold market, as this is when the US Federal Reserve meeting will take place.

If the market’s currently low rate hike expectations increase as a result of the meeting, this is likely to weigh on the gold price. According to the CFTC’s statistics, speculative financial investors further expanded their net long positions in gold in the week to 12 September, putting them at 253,500 contracts now. This was already the ninth weekly increase in a row.
The price rise to a 13-month high of just shy of $1,360 was thus driven largely by speculation. Given that the gold price is now trading considerably lower, positions have presumably been squared in the meantime

 

Eoin Treacy's view -

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

We are in a period of synchronised global economic expansion where central banks are only just beginning to turn the corner towards tightening; with the USA’s Federal Reserve in the lead. Commodities no longer share the trending commonality evident at the dawn of the commodity boom in the early 2000s. Industrial resources including palladium are recovering while energy and agricultural prices have been subject to a great deal of volatility. 



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September 18 2017

Commentary by Eoin Treacy

Superpower India to Replace China as Growth Engine

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

``India will account for more than half of the increase in Asia’s workforce in the coming decade, but this isn’t just a story of more workers: these new workers will be much better trained and educated than the existing Indian workforce,’’ said Anis Chakravarty, economist at Deloitte India. ``There will be rising economic potential coming alongside that, thanks to an increased share of women in the workforce, as well as an increased ability and interest in working for longer. The consequences for businesses are huge.’’

While the looming ‘Indian summer’ will last decades, it isn’t the only Asian economy set to surge. Indonesia and the Philippines also have relatively young populations, suggesting they’ll experience similar growth, says Deloitte. But the rise of India isn’t set in stone: if the right frameworks are not in place to sustain and promote growth, the burgeoning population could be faced with unemployment and become ripe for social unrest.

 

Eoin Treacy's view -

India has lots of young people who urgently need work and millions more entering the workforce over the coming decades. Little wonder China is racing to move up the value chain in manufacturing and employing robots to boost productivity. Competition for the moniker of workshop of the world is heating up and India has a fighting chance at providing competitive low-cost labour, with no language barrier, to the world’s manufacturers of low cost goods, many of whom are owned by China. The key to achieving that kind of growth in employment will be heavily dependent on standards of governance improving. 



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September 18 2017

Commentary by Eoin Treacy

China Is Said to Draft Plans for Financial Sector Opening

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

As part of an early package of reforms agreed between the two leaders, Beijing agreed in May to allow U.S.-owned card payment services to begin the process of obtaining local licenses, in a move that would erode the near-monopoly held by China UnionPay Co.

China will open up its insurance market further, mainly by encouraging foreign insurers already operating locally to enter the health, pension and catastrophe insurance sectors, China Insurance Regulatory Commission Vice Chairman Chen Wenhui said earlier this month.

Chinese regulators last year decided to open up the nation’s fund market, allowing investment firms in China to be 100 percent owned by foreign managers. At least a dozen global money managers such as Man Group Plc, Bridgewater Associates and Fidelity International have announced plans since then to start private securities funds. Before the rule change, foreign firms were restricted from running such private funds in China but could take stakes in mutual fund companies and provide advice to onshore funds.

 

Eoin Treacy's view -

The most basic premise of insurance is to pool risk among as wide a grouping as possible to minimise the exposure any one individual takes on. Taken from that perspective the timing of the decision by Chinese officialdom to begin allowing foreign investors access to its capital markets is interesting. 



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September 18 2017

Commentary by Eoin Treacy

Toys R Us hires law firm as it explores possible bankruptcy filing

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

Toys R Us has hired a law firm to help restructure its roughly $400 million in debt due in 2018, a move that could include the marquee toy store filing for bankruptcy protection, sources familiar with the situation said Wednesday.

Addressing the retailer's debt load prior to the crucial holiday season could give its major vendors such as Mattel and Hasbro clarity into the company's long-term viability to help ensure the toymakers continue to stock its shelves throughout the holidays.

Toys R Us has hired restructuring lawyers at Kirkland & Ellis to help address the looming payments, the people said.
Hiring a law firm like Kirkland is not indicative of a bankruptcy filing, and many companies work with law firms to successfully refinance or restructure their debt without filing for protection. 

 

Eoin Treacy's view -

Companies like Toys R US do the majority of their business in the last six weeks of the year so they have to carry a lot of inventory and they have to maintain large stores to cater to the crush around the holidays. That all comes at a cost and is expensive to maintain while online businesses only need to hold the inventory for a short period of time and have no stores. If Toys R US avoids bankruptcy it is going to have to figure out how to leverage its brand name to become a significant online store. 



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September 15 2017

Commentary by Eoin Treacy

September 15 2017

Commentary by Eoin Treacy

September 15 2017

Commentary by Eoin Treacy

Electric Vehicle Boom: ICE-ing The Combustion Engine

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

Many manufacturers undertaking all-solid-state battery R&D Manufacturers that aim to make all-solid-state batteries commercially available in 20202025 include Toyota, Sekisui Chemical, Hitachi Zosen, and Ohara. There have been announcements also from Panasonic, Samsung Electronics, Daimler, Sony, and Hyundai Motor about R&D efforts, but it is not clear when these companies aim to start mass production. BYD says it has set up a research team that is focused on all-solid-state batteries. Bosch, which is the largest auto parts maker, has acquired the all-solid-state battery startup Seeo, while household appliance maker Dyson entered the battery industry with its acquisition of Sakti3. This suggests there are growing expectations for the potential use of all-solid-state batteries not only in automobiles, but also in household appliances. 

Advantages of all-solid-state batteries 
An all-solid-state battery has the potential to offer not only greater energy density, but also greater safety as well as flexibility in terms of operating temperatures. The advantage of these batteries is that they do not contain electrolyte solution, which is flammable and can react to temperature changes. The batteries also do not require separators, which eliminates the risk of damaged separators causing the battery to short-circuit. Moreover, sulfur-based solid electrolytes have the potential to substantially reduce recharging times as they demonstrate greater ion conductivity than electrolyte solution. 

Disadvantages of all-solid-state batteries 
We think the technological hurdles hampering mass production are the main drawback for all-solid-state batteries. Manufacturing all-solid-state batteries will require new production processes including pressing (in the case of sulfur-based batteries) and sintering (oxide-based batteries). In the case of sulfur-based batteries, which appear to be a strong candidate for automobiles, there is a risk that the sulfur-based solid electrolyte will react with moisture to create hydrogen sulfide. Companies are considering ways around this issue, which include housing the battery in a solid case to reduce the risk of it being damaged, or incorporating a hydrogen sulfide gas detector that would raise the alarm early. On the production side, it has been suggested that all-solid-state battery factories should have a super-dry room with a dew point of -100 degrees. There are also concerns that when all-solid-state batteries are used in automobiles, the vehicle’s vibration may reduce interface stability. It would appear that Toyota therefore faces a number of hurdles to overcome if it is to be ready to commercialize such batteries in 2022.   

 

Eoin Treacy's view -

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

Innovations in the energy sector have profound effects on all financial markets by reducing the cost of production and transportation of just about everything. That is why batteries represent the lynchpin for the dawn of a new energy future where electricity becomes a local industry and transportation is no longer dependent on extraction of resources from politically unpalatable regions. 



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September 15 2017

Commentary by Eoin Treacy

Portugal Regains Investment Grade Rating From S&P on Growth

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

Portugal’s credit rating was restored to investment grade by S&P Global Ratings as the country’s economic growth accelerates.

The rating was revised to BBB- from BB+, which was one level below investment grade, S&P said in a statement on Friday.

The outlook is stable. Portugal had been rated junk by S&P since January 2012, when the country was going through a bailout program provided by the European Union and the International Monetary Fund.

“The upgrade reflects our improved forecast for Portugal’s growth during 2017-2020, as well as the solid progress it has made in reducing its budget deficit and the receded risk of a marked deterioration in external financing conditions,” S&P said. The company raised its forecast for the country’s economic growth through 2020 to an average of about 2.2 percent a year. 

Tourism and exports have been boosting the economy, with the Bank of Portugal forecasting growth will accelerate to 2.5 percent this year. The faster growth is helping the country’s minority Socialist government manage the budget deficit, which last year was the narrowest as a percentage of gross domestic product in four decades of Portuguese democracy.

 

Eoin Treacy's view -

It’s been a decade of tough decisions for the Eurozone’s peripheral members but they are slowly but surely returning to growth; helped in no small part by the low borrowing costs the ECB has supplied through its quantitative easing program. 



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September 14 2017

Commentary by Eoin Treacy

September 14 2017

Commentary by Eoin Treacy

Pound Sentiment Is Now the Most Bullish in More Than Three Years

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

Currency traders haven’t been this upbeat on the pound in more than three years. 

The cost of owning one-month call options on sterling relative to puts reached six basis points, the steepest since February 2014, as the Bank of England said the market is underpricing the prospect of rate increases.

The premium on calls shows the market’s conviction that the currency’s more than 3 percent rally against the dollar this month has legs.

The key question on investors’ minds at the moment is: where does the pound go from here? To some extent, the currency’s fortunes against the dollar will be influenced by what the Federal Reserve does, and in this context next week’s FOMC meeting will take on added significance. Witness also that stronger-than-estimated consumer-price inflation data out of the U.S. on Thursday failed to damp bullish sentiment for the pound.

 

Eoin Treacy's view -

The Pound has the clearest signs of base formation completion against the Dollar not least because the Dollar has been so weak since early January. It is now breaking up out of a first step above the type-2 base and a clear downward dynamic would be required to question medium-term scope for some additional upside. 



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September 14 2017

Commentary by Eoin Treacy

Oil Breaches $50 as Worldwide Energy Demand Outlook Brightens

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

Oil topped $50 a barrel for the first time in more than a month amid heightened optimism that a demand resurgence is in the offing.

Futures rose as much as 2.4 percent in New York, extending the longest upswing since July. Two of the most influential organizations in world oil markets -- the International Energy Agency and OPEC -- nudged their demand forecasts higher, signaling continued erosion of a global glut that has weighed on prices.

Oil demand for 2017 will expand by the most in two years, the Paris-based IEA said on Wednesday. That followed OPEC’s increase of its estimate for how much crude buyers will seek from the cartel next year, driven by rising consumption in Europe and China. In the U.S., hurricane-driven refinery outages spurred fuel distributors to pull a record amount of gasoline from storage tanks to cope with shortages last week, government data showed.

“The market is continuing to digest that information and realizing that the rebalancing process is working,” Mark Watkins, a Park City, Utah-based regional investment manager at U.S. Bank Wealth Management, which oversees $142 billion in assets, said by telephone.

 

Eoin Treacy's view -

Saudi Arabia’s decision to sell a part of Aramco with the aim of setting a valuation so they could borrow against the balance led investors to conclude it believes oil prices are in terminal decline. Anecdotal evidence it is planning to delay the IPO has had the opposite effect on sentiment and is contributing to recent strength. 



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September 14 2017

Commentary by Eoin Treacy

Email of the day on China's real estate sector

A friend is telling me that XJP hates the real estate sector. He thinks it is a waste of capital. He wants China's money in infrastructure both domestic and abroad. Above all, in science and engineering. In fact, there appears to be a shortage of engineers in China now - can you believe it? And real estate companies are worried because XJP is cutting off their growth pathways at every turn.  If this is true, my respect for XJP has gone up a big step.

It tallies with this story attached.

Eoin Treacy's view -

China’s economic growth model depends on increasing the size of the services sector and ensuring higher value-added jobs are created to ensure productivity increases in line with labour costs. Creating a domestic microchip sector is a big part of that ambition. However, China’s ambitions are being stymied in Europe and the USA as an increasing number of acquisitions are facing government scrutiny. Here is a section from an article focusing on a Chinese-backed private equity firm’s attempts to take over Lattice Semiconductor and now Imagination Technologies: 

Canyon Bridge, which says it’s based in Silicon Valley with an office in Beijing, is keen to structure a bid to avoid scrutiny from U.S. regulators, said the people, who asked not to be identified because the matter is private. The company’s $1.3 billion purchase of Portland, Oregon-based Lattice Semiconductor Corp., whose programmable logic chips are used in military communications, is being opposed by U.S. national security officials, and President Donald Trump is considering whether to block the deal.



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September 14 2017

Commentary by Eoin Treacy

Truckers Are in No Hurry to Have Their Hours Tracked

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

Some smaller companies that operate just a few trucks and independent drivers are resisting the switch. “I don’t plan on it until the last minute,” said Monte Wiederhold, president of B.L. Reever Transport Inc., a six-truck fleet in Ohio.

He and other smaller fleet operators say allegations of cheating on paper logs are exaggerated and the safety benefits overstated. With drivers paid an average of 40 cents a mile, small operators say the $1,000 cost for an electronic log and the monthly service fees of around $40 per truck to process the data is a financial burden. Small fleets and owner operators account for about half of 1 million heavy-duty trucks for-hire in the U.S.

Acknowledging those concerns, the consortium of state and federal law enforcement agencies overseeing the change said last month that they will fine truckers found without electronic logs starting in December, but won’t force their trucks off the road until April. Fines for log violations are based on state statutes and vary from state to state.

 

Eoin Treacy's view -

On the flight home from Dubai earlier this year I chatted with the owner of a haulage company who stated the introduction of electronic log books was a much more pressing issue for his business than any speculation about impact of autonomous vehicles.



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September 13 2017

Commentary by Eoin Treacy

September 13 2017

Commentary by Eoin Treacy

Musings from the Oil Patch September 12th 2017

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

If a homeowner installs a charging station in his garage, there may not be much impact on the grid.  However, if all his neighbors do the same thing, there could be a problem.  Transformers are necessary to regulate the power flowing into a home, and they usually service multiple homes, generally four at a time.  A problem is that utility companies do not know exactly how much power is being used by a particular home relative to its neighbors until a transformer fails.  Upgrading transformers can be expensive and limited by weight limits for units mounted on power poles.  One estimate suggests moving from a 50KVA pad-mounted transformer serving four homes to a 75KVA unit costs about $3,000.   

For underground power installations, upgrading the transformer units may be easier, but not necessarily less costly.  One study by the Institute of Electrical and Electronics Engineers says that the problem is at the local level.  If multiple Level 2 chargers that fully recharge a car in 2-3 hours, are plugged in at the same time at night, they may prevent transformers from cooling as they are designed.  Sustained excess current will eventually ‘cook’ a transformer’s copper windings, causing a short and blacking out of the homes attached to the device.  This problem was observed from a study of the habits of EV owners in an Austin, Texas suburb.  Over a two-month period, the residents tended to recharge their EVs at the same time – when returning from work – that coincided with air conditioning loads increasing along with the use of other appliances. 

A similar study was conducted in the UK, which conducted an 18month study of resident habits when 100% were using EVs.  The study’s result show that at least a third of the UK’s power grid will need to be upgraded to support an EV sales rate of 40% of new car sales by 2023.  That doesn’t address the load issue if 40% of the entire UK vehicle fleet were plug-in EVs. 

 

Eoin Treacy's view -

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

The rollout of electric vehicles, which is anticipated to ramp up as manufacturing capacity for both batteries and cars comes on line in the next few years, is going to put strain on the electrical grid both from a generating and traffic perspective. While it can be argued how much additional supply with be required, the introduction of charging stations to the residential environment will certainly increase the consumption of electricity at individual homes. 



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September 13 2017

Commentary by Eoin Treacy

After hurricanes, flood of storm-damaged cars heading for market

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

Scafidi expects the number of flood-damaged cars to be greater for Harvey than it was for Hurricane Katrina in 2005, both because of Harvey's bigger footprint and because in the last 12 years more vehicles rely on computer technology and electronics.

"Beneath the surface, water can permanently damage computers that control everything from the gas pedal to steering," said Cliff Wood, chief operating officer at CarMax, a leading used car dealer.

Katrina damaged about 600,000 vehicles, Basso said. Carfax is still working on an estimate for Harvey.

 

Eoin Treacy's view -

It has been my experience that insurance companies are more than willing to write off cars even with little more than superficial damage, so they are likely to have little compunction in writing off flood damaged cars. Even if the estimates of upwards of half a million vehicles being written off are too high, there are still going to be a lot of new cars bought or leased in the next few months as people claim insurance. 



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September 13 2017

Commentary by Eoin Treacy

Yet Again?

Thanks to a subscriber for this memo by Howard Marks at Oaktree which may be of interest. Here is a section on Bitcoin: 

So what’s my real bottom line?

Advocates say if Bitcoin is accepted as described above, you’ll make more than 50 times your money. Thus success doesn’t have to high probably for buying Bitcoin to have a huge expected return. This is called “lottery-ticket thinking”, under which it seems smart to bet on an improbably outcome that offers a huge potential payoff. We saw in in full flower in the dot-com boom in 1999-2000, and I think we’re seeing it in action again today with regard to Bitcoin. Nothing is as seductive as the possibility of vast wealth. 

Several of the “seeds for a boom” that I listed in “There They Go Again…Again” are at work in the Bitcoin surge (a) there is a grain of underlying truth as set out above; (b) there’s the prospect of a virtuous circle: widespread demand will lead to wider acceptance as legal tender, which will lead to widespread demand; and (c) thus this tree may grow to the sky, as there is no obvious limit to this logic. None of these necessarily make Bitcoin a mistake. They merely say elements that contributed to past bubbles can be detected today with regard to Bitcoin. 

Finally, Bitcoin isn’t alone. There are hundreds of digital currencies already – including electric with market capitalisations of over a billion dollars – and no limits on the creation of new ones. So even if digital currencies are here to stay, who knows which one will turn out to be the winner? Hundreds of e-commerce start-ups appreciated rapidly in the tech bubble based on the premise that “the Internet will change the world” It did, but most of the companies ended up worthless. 

 

Eoin Treacy's view -

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

The key advantage government backed currencies have is the high barrier to entry in created new currencies. However, cryptocurrencies do not enjoy that privilege. It is getting progressively easier to mint new tokens and the number is proliferating. That both increases supply, which is symptomatic of market tops but it also saps demand for the established brands because new entrants are expected to perform better.



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September 12 2017

Commentary by Eoin Treacy

September 12 2017

Commentary by Eoin Treacy

Apple Unveils iPhone X With New Display as Rivals Grow

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

Apple Inc. unveiled its most important new iPhone for years to take on growing competition from Samsung Electronics Co., Google and a host of Chinese smartphone makers.

Chief Executive Officer Tim Cook showed off the iPhone X with an edge-to-edge screen during an event at the company’s new $5 billion headquarters in Cupertino, California, on Tuesday. Cook pronounced the name "ten," but it’s written as "X." The device, coming a decade after the original model, is Apple’s first major redesign since 2014 and represents a significant upgrade to the iPhone 7 line.

 

Eoin Treacy's view -

At almost 2 hours the Apple event was a serious time commitment but two things stood out to me apart of course from the price. Animated emojis are something that a lot of people will appreciate but the augmented reality features will also speak directly to the younger generation. 



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September 12 2017

Commentary by Eoin Treacy

U.K. Inflation Jumps More Than Forecast to Match 4-Year High

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

The numbers, as well as intensifying a squeeze on households, may put fresh pressure on Bank of England policy makers, who are grappling with price growth above their 2 percent target. While just two of the nine-member Monetary Policy Committee voted to increase interest rates from a record-low 0.25 percent last month, some economists say a third -- Andy Haldane -- could join them at this week’s meeting.

A 6-3 vote “could prompt a re-appraisal of the potential path of interest rates,” said James Knightley, chief international economist at ING in London. “But we feel that the economic uncertainty brought about by Brexit will lead the committee to hold fire until there is much greater clarity on the U.K.’s post Brexit environment.”

The data on Tuesday from the Office for National Statistics also showed that core inflation accelerated more than economists expected last month, reaching the most since 2011. The pound climbed to a one-year high, jumping 0.9 percent to $1.3281 as of 11:46 a.m. London time.

 

Eoin Treacy's view -

The UK has previously been willing to run inflation hot to allow it to erode the massive quantity of outstanding debt. BoE Governor Carney has clearly stated that the repercussions of the Pound’s decline would stoke inflation and contribute to lower living standards. Whether than means he is willing to raise rates to temper inflation is a big question. 



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September 12 2017

Commentary by Eoin Treacy

Email of the day on Chinese online retailers and online universities

Hello as you are familiar with China, what do you think of JD.com? I was also wondering if you could analyze universities who enable you to do their programs online 

Eoin Treacy's view -

– Thank you for these questions which may also be of interest to the Collective. I reviewed the online retail sector when I was in China in July. It has developed considerably since my last visit two years ago together with online payments, banking and same day delivery services. Here is a link to comment of the Day on July 25th. 



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September 12 2017

Commentary by Eoin Treacy

Email of the day on the ground experience from the Texas panhandle

I had the pleasure of spending several days with a friend who is an executive in a drilling company. He indicated that the recovery had brought a boom in drilling, but that customers were demanding the latest high-tech drilling rigs (faster, more efficient, much bigger pumps, able to drill longer laterals). This requires very large capital investments with uncertain payback times. Older, lower tech rigs are left unused, which creates dramatically lower rig utilization rates for drillers. Unfortunately, the past month has seen a bit of a slowdown, with some new tech rigs coming off of pads with no new contract (meaning the rig goes to the yard and sits, and the crew have no jobs). While this may be a short-term issue, it could alternatively be a sickly-looking canary.

Unlike last year, when vast numbers of pump jacks were idle (indicating the well is not producing at that moment), this year more than 75% of the pump jacks I saw were pumping, and most looked well-maintained. Pump jacks do not normally pump full-time, as they shut down for maintenance, and when their storage tanks are full, etc. A lot of the oil in the area is pumped into tanks and then picked up by trucks. 

The beef, pork, chicken, and nuclear weapon businesses all appeared to be thriving.

Probably needless to say, but the Texas Panhandle is about 700 miles from the flooding.

Eoin Treacy's view -

Thank you for this trip report which I’m sure will be appreciated by subscribers. Relatively low prices, at least compared to a few years ago, put pressure on services businesses to employ the most sophisticated technology which requires fewer people and more capital. That benefits larger companies with the financial heft to prosper while it is likely to have a negative effect on smaller operations. 



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September 11 2017

Commentary by Eoin Treacy

September 11 2017

Commentary by Eoin Treacy

Dollar Advances From 2015 Low Before UN Meeting on North Korea

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

“Markets seem to have headed into the weekend priced for the worst -- a North Korean missile test and maximum financial damage from Irma,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “The dollar seems overdue for a bounce. The dollar should return to 109 to 110 yen early in the week.”

The dollar is also supported by “decent” U.S. economic data momentum and a deal between President Donald Trump and the Democrats suspending the debt ceiling to December, Callow said.

Still, traders said some short-term accounts took long-yen positions after the state-run Korean Central News Agency said Monday morning that the U.S. will pay a "due price" if harsher sanctions were imposed on North Korea at an expected United Nations Security Council meeting.

 

Eoin Treacy's view -

The Dollar has a widening interest rate differential with its largest trading partners, an economy that is expanding, a hot technology sector, full employment and the prospect of reduced supply as the Fed begins to tinker with the size of its balance sheet. 



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September 11 2017

Commentary by Eoin Treacy

September 11 2017

Commentary by Eoin Treacy

Email of the day on the deflationary impact of technology

I have noticed from your recent postings that while you recognize all the great outcomes technology will bring, you also recognize the downside consequences of all the displaced labor. Another effect on labor has been the financialization of our economy. Check out this article (open domain) Thank you for your continued great work!

Eoin Treacy's view -

Thanks for this link may also of interest to subscribers. I found the chart of wages and salaries as a percentage of GDP to be particularly interesting. 

Technology is inherently deflationary which means we can do more with less and each of us can easily come up with examples of how innovations have improved different aspects of our lives. However, the rapid pace of innovation in artificial intelligence, robotics and healthcare while representing truly exciting developments for corporations also mean that millions of jobs are going to be under pressure. 

 



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September 11 2017

Commentary by Eoin Treacy

The Equifax Situation Continues to Worsen

This article by Joel Hruska for ExtremeTech may be of interest to subscribers. Here is a section: 

First, while Equifax is offering a free year of credit monitoring for anyone who wants it, this isn’t a philanthropic gesture. Equifax owns Trusted ID. Furthermore, the ToS associated with the product states that customers who sign up for the service will be billed for it thereafter unless they call the company to cancel the product. Equifax has stripped out other clauses in its ToS that deal with service billing in the last 48 hours, but it left the clauses about automatically renewing the service for those who do not cancel.

And let’s be clear: At least some people are going to feel as if they need this kind of monitoring for longer than 12 months. Equifax leaked both social security numbers and birth dates, meaning identity thieves now have everything they need to launch credit-destroying attacks against much of the US population at any point over the next few decades. Neither your social security number or your birth date are going to change, after all. But wait, there’s more!

Let’s say you want to lock your credit file anyway, even though it’ll only protect you from one-third of potential searches. Equifax requires you to input a 10-digit PIN to request an account unlock. A 10-digit code would typically be difficult to break, if Equifax didn’t auto-generate PIN numbers that corresponded to the date and time you requested the lock. If you locked your credit file on September 10th at 11:45 AM, your PIN number would be 0910171145. That’s September 10 2017, at 11:45 AM. It’s also the kind of security one might expect in a Mel Brooks movie, and it’s a horrifying choice for a company whose own servers were just aggressively penetrated and robbed.

 

Eoin Treacy's view -

Since I moved to the USA three years ago my personal details have been stolen four times. Breaches at Target, Home Depot, Anthem and now Equifax suggest that a significant cross section of the US population’s data is now to be found somewhere on the web. 



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September 08 2017

Commentary by Eoin Treacy

September 08 2017

Commentary by Eoin Treacy

CAR-T therapies a blue-sky scenario

Thanks to a subscriber for this report from HSBC focusing on Novartis which may be of interest. Here is a section:

Kymriah indicated for refractory ALL patients, but other indications are larger. Although Kymriah is only approved in the US to treat the small number of patients with refractory acute lymphoblastic leukaemia (ALL), additional indications such as Diffuse Large B-Cell Lymphoma (DLBCL) represent a significantly larger addressable patient population. Kymriah is the first Chimaeric Antigen Receptor T-cell (CAR-T)-based treatment approved globally. 

Blue-sky scenario not that much of a stretch…Over 100,000 patients die from leukaemias, lymphomas and myelomas (haematological cancers) annually in the US and Europe. They are largely, by definition, refractory to available treatments. In due course, this patient group, or a proportion of it, could be addressed by CAR-T-based treatments. Further, CAR-T-based treatments could potentially be used earlier in the treatment of cancers and potentially in some solid tumours as well. Note that these figure do not include Japan, China, or elsewhere. 

…25% of refractory blood cancers, 2.5% of other cancers.  In our blue-sky scenario for CAR-T treatments, an assumption that 25% of refractory blood cancers and 2.5% of other refractory cancers in the US and EU could be treated with CAR-T therapies in due course (although this would require sizeable manufacturing expansion by all CAR-T manufacturers) would yield peak sales of just under USD26bn. If Novartis garnered 50%, it would generate peak sales of just under USD13bn for Kymriah and other CAR-T therapies versus USD3.3bn that we currently forecast (27,000 patients treated versus 7,200 on our current forecast). In our view, this bluesky scenario is not an unrealistic possibility in terms of patient numbers.

Eoin Treacy's view -

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

Immuno-oncology is the leading growth sector within the healthcare sector because for the first time it holds out the promise of curing cancer. What is so compelling about Novartis’ newly approved drug is that it succeeded in achieving a 90% remission rate for people that failed to respond positively to conventional chemotherapy and other treatments.   



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September 08 2017

Commentary by Eoin Treacy

Email of the day on how to invest in bitcoin:

I was wondering how one invests in bitcoin, is there a future? Thanks and regards

Eoin Treacy's view -

Thank you for this question which may be of interest to other subscribers. The fact is that there is no futures contract on bitcoin. Personally, I use spread-betting services to trade bitcoin, and Ethereum is also available. 



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September 08 2017

Commentary by Eoin Treacy

September 08 2017

Commentary by Eoin Treacy

Hurricane Irma set to squeeze a lot more than just Florida's oranges

This article by Myra Saefong may be of interest to subscribers. Here is a section:

Frozen concentrated orange juice for November delivery OJX7, +2.98% rose 5.3 cents, or 3.8%, to $1.461 a pound in Thursday dealings on the ICE Futures U.S. exchange. It’s up more than 9% so far this week and is poised for the highest settlement since mid-May.

“The damage to the orange crop is twofold: both short term disruption but also, to the extent crops are completely destroyed, it could have a longer term effect since it takes a few years to grow an orange tree to production, thus limiting supply for a longer period,” said Alan Konn, partner and managing director of Price Asset Management.

Cotton prices have also rallied. December cotton CTZ7, +0.23%  settled at nearly 75 cents a pound Tuesday, the highest since mid-June, though prices pulled back Wednesday and Thursday.

Cotton markets are also nervous because Harvey did an as yet uncalculated amount of damage in Texas,” which is the country’s top grower of cotton, said Gilbertie. “And if Irma affects Georgia, the country’s number three producer of cotton, the U.S. cotton industry will be dealt an immensely damaging blow.”

Eoin Treacy's view -

Energy companies will be working day and night to overcome the challenges Hurricane Harvey represented and refining capacity will likely be back online in the relatively near future. If orchards are damaged by a hurricane, debris can be cleared away the trees cared for but one still has to wait lost fruit to grow again. 



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September 08 2017

Commentary by Eoin Treacy

3D Sensing

Thanks to a subscriber for this report from Deutsche Bank focusing on the evolution of augmented reality technology in the upcoming suite of new mobile phones. Here is a section: 

It is a reflection of Apple’s influence on the smartphone market that Apple’s competitors are already lining up copycats to ship in 2018 even before the market reception to Apple’s iPhone 8 has actually been seen. By introducing facial recognition on the iPhone 8 leveraging 3D sensing, Apple is adding extra cost, but it is also enabling bezel minimisation and the fingerprint module to be removed. With the bezel removed, the real estate for adding 3D sensing is extremely small, but it looks like they have achieved an industry first – getting structured light to miniaturise on a smartphone. This is no mean feat and reflects considerable efforts since Apple acquired Primesense in 2013.

Eoin Treacy's view -

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

Virtual Reality relies on headsets and expensive pieces of hardware. Augmented reality works differently by overlaying graphics on the real world. That represents a cheaper solution though not quite as immersive. By being the first company to bring out an augmented reality-enabled phone Apple is breaking new ground which has historically not been its forte but does help to explain why the price of the share has been performing so admirably of late. 



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September 07 2017

Commentary by Eoin Treacy

September 07 2017

Commentary by Eoin Treacy

September 07 2017

Commentary by Eoin Treacy

Ray Dalio's TED Talk on Idea Meritocracy

Thanks to a subscriber for this article from Marketfolly.com containing a link to Ray Dalio’s TED Talk. Here is a section:

He notes, "In order to be an effective investor, one has to bet against the consensus and be right." 

Dalio walks through the biggest mistake he ever made and how it made him ask himself in any future decisions: "How do I know I'm right?"  He gained humility.

The Bridgewater founder also takes us inside a meeting at Bridgewater and shows how they collect data on each person's ideas and believability.  Dalio says they do this because people naively and arrogantly hold opinions in their mind that are wrong.  But if you zoom out and gain perspective, you can see things through everybody's eyes and view things collectively. 

"Collective decision making is so much better than individual decision making if it's done well.  It's been the secret sauce behind our success."

Eoin Treacy's view -

What I found most interesting about this talk was the discussion about the reliability of opinions. It is very difficult to form an unbiased opinion of someone else’s decision-making skill and whether they are objectively right. The conclusion is complicated by the fact that we all possess different strengths and weaknesses which means we are better at making some kinds of decisions that others or that we are more creative in certain fields that others. 



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September 07 2017

Commentary by Eoin Treacy

How a Bird Charity's Battle Against a Wind Farm Backfired

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

When plans for Neart na Gaoithe started being developed in 2008, Siemens AG’s 3.6 megawatt turbine was the most popular among developers. Now manufacturers are working on machines that could be four times bigger, helping companies like Dong Energy A/S build projects cheaply enough to make money at market prices. The collapse in oil prices has also helped lower offshore wind costs, by making the sea vessels needed to install projects cheaper to hire.

Eoin Treacy's view -

I’ve haven’t seen a satisfactory solution for the problem of wind turbines impact on migratory bird populations regardless of the fact offshore turbines help create artificial reefs for sea life. However, the economies of scale that can be gained from going offshore has altered the wind turbine sector beyond recognition. 



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September 06 2017

Commentary by Eoin Treacy

September 06 2017

Commentary by Eoin Treacy

North Korea Q&A Summary

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

The North Korean government fully knows that it cannot afford a war against South Korea, let alone the US as that would spell the end of the KJU regime. The strategy is to blackmail the US and other neighbouring countries into as many concessions as possible through brinksmanship sabre-rattling. The North Korean leadership is calculating that the US (G1), China (G2), Japan (G3) and South Korea (G10) cannot simply go to war over North Korea (G197) as they collectively have too much to lose.

North Korea, on the other hand, has relatively speaking very little to lose from escalation tactics and will continue to threaten the US and South Korea. The calculation also is that Donald Trump needs a symbolic win abroad and that both sides could benefit from a ‘middle ground compromise’, either for real or perceived. That would be most likely in the form of North Korea halting its nuclear programme in exchange for lifted sanctions or direct cash support.  However, North Korea is highly unlikely to give up its nuclear arsenal.

 

Eoin Treacy's view -

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

North Korea exists because China’s self-interest is served by having a series of communist leaning buffer states around its border. That doesn’t mean the two countries necessarily see eye to eye on every topic but it does mean there is what might be described as a symbiotic relationship between them. 



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September 06 2017

Commentary by Eoin Treacy

Investment Gurus Counsel Catching Reform Tailwinds in Latin America

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

“The broad outperformance in Latin America -- particularly Argentina, Mexico, and Brazil -- speaks to the broad reform programs we have seen in each of these countries and the stable backdrop these reforms have provided,” said Kofi Bentsi, a money manager focused on emerging-market corporate bonds at Pimco, the second-largest U.S. fixed-income management firm. He says Argentina and Brazil are likely to continue to outperform. 

Jim Barrineau, the co-head of emerging-markets debt at Schroders in New York, said the region has benefited from a combination of the highest yields among emerging markets and improving economies, especially in Argentina and Brazil, which overcame deep recessions. This backdrop, he says, tends to favor corporate bonds over government securities.

“They are more responsive to changes in economic growth,” said Barrineau, who helps oversee Schroders’ $520 billion in assets. His emerging-market bond fund has outperformed 81 percent of peers this year.

Eoin Treacy's view -

The LME Metals Index has been on a recovery trajectory since January 2016 and has rallied to break a lengthy medium-term downtrend.
The CRB Index, which is skewed by energy prices, has been ranging below 200 since late 2015 but is currently bouncing, having found support in June. 



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September 06 2017

Commentary by Eoin Treacy

September 06 2017

Commentary by Eoin Treacy

Apple's Rain of Cash Washes Away Debt Doubts

This article by Lisa Abramowicz Shira Ovide for Bloomberg may be of interest to subscribers. Here is a section:

Stock investors love it, of course. Why wouldn't they? Apple is the third-biggest dividend payer in the U.S. behind Fannie Mae and Exxon Mobil Corp., which is music to any investor's ears when bonds are paying historically little. And debt investors seem to be just fine with forking their money over to the company; they've eagerly bought up multiple debt offerings from Apple so far this year, with the seventh 2017 bond sale on track to get the company's usual warm reception. 

This raises longer-term risks and threats to the company that aren't highlighted often, if ever.

As long as Apple keeps churning out loads and loads of cash, all this is fine. Apple generates more cash than any other public U.S. company, and it's spending its money both to invest in its business and to return money to stockholders. Apple's spending on research and development has also increased sharply in recent years, as have its capital expenditures on things like manufacturing equipment, computer centers and its retail stores. In short, Apple produces enough cash to do everything a business is supposed to do: reward its owners, support its existing products and plan for the future.

Eoin Treacy's view -

Apple has mastered the art of milking its legions of fans by bringing out new products on a predictable schedule that iterate on previous offerings by being just better enough to justify the outlay.

Additionally, it is among an increasing number of companies that have employed an innovative strategy to bring its money home from overseas by issuing debt so that it can be returned to investors without paying corporate taxes. As the above article highlights, that policy will be fine as long as revenues remain robust. 



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September 05 2017

Commentary by Eoin Treacy

September 05 2017

Commentary by Eoin Treacy

Hurricane Irma Strengthens to a Category 5 Storm

This article by Abigail Morris and Javier Blas for Bloomberg may be of interest to subscribers. Here is a section:

 

Beyond the threat to people and property in the Caribbean, the focus so far is on agriculture with the storm, "being a case of being long orange Juice futures rather than gasoline futures," Jakob said.

Irma will probably cross the northern Leeward Islands Tuesday into Wednesday, according to the NHC, which said it’s still too early to determine what impact it might have on the U.S. Hurricane warnings have been issued for the U.S. and British Virgin Islands, Puerto Rico, Vieques, and Culebra. Tropical-storm-force winds could arrive in the British and U.S. Virgin Islands and Puerto Rico by early Wednesday.

About two-thirds of Florida’s citrus crop is located in the lower two-thirds of the peninsula. Frozen concentrated orange juice futures in New York already rose last week on speculation the storm could strike, though prices are down almost 30 percent since January.

Eoin Treacy's view -

Hurricane Katrina hit New Orleans in 2005. Hurricane Harvey hit Houston in 2017 and in between we have seen some of the quietest storm seasons in years. I think that is worth remembering that when so many stories running right now talk about accelerating climate change. Hurricane Irma has not yet made landfall but at Category 5 it is going to create a lot of damage somewhere. If Irma makes landfall it will be the first time the USA is hit by two such powerful storms in one season.   



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September 05 2017

Commentary by Eoin Treacy

September 05 2017

Commentary by Eoin Treacy

Revisiting Rare Earths: The Ongoing Efforts to Challenge China's Monopoly

This article by Mayuko Yatsu for TheDiplomat.com may be of interest to subscribers. Here is a section:

For instance, Australian companies have been working to open rare earth mines in Australia and Tanzania for producing elements such as neodymium and dysprosium. Likewise, Canada, through collaboration with the national government and industrial associations, seeks to gain up to 20 percent of global rare earth production by 2018.

Japan has also explored non-Chinese suppliers of rare earth metals, reaching co-development agreements with countries like Australia, India, Kazakhstan, and Vietnam. A research group from the University of Tokyo in 2012 even found a significant amount of rare earth minerals around Minami-Torishima, the easternmost island of the country (located in the Western Pacific). In 2016, Japanese auto giant Honda invented an advanced motor which does not require rare earth elements. More recently, in June 2017, Japanese scientists discovered a massive amount of cobalt-rich crusts, which often contain cobalt, nickel, and some rare earth elements. Even if it is very challenging and costly to extract those minerals from the deep sea, Japan will seek to do so in order to boost its long-run natural resource self-sufficiency.

For the United States, re-opening the Mountain Pass mine in California has been a strategic goal. After the shutdown of the mine in 2015 (following the bankruptcy of then-owner Molycorp), several companies expressed interest in purchasing the mine. There has been discussion of the economic and security considerations of the U.S. giving a Chinese-affiliated company some control over the mine, even before the court made its final decision. It is still unclear whether any higher U.S. authority such as Congress will step in to stop the deal, although several experts have address potential risks surrounding the court’s decision.

Eoin Treacy's view -

This article quoting Vladimir Putin caught my attention. Here is a section:

AI development “raises colossal opportunities and threats that are difficult to predict now,” Putin said in a lecture to students, warning that “it would be strongly undesirable if someone wins a monopolist position.”

Future wars will be fought by autonomous drones, Putin suggested, and “when one party’s drones are destroyed by drones of another, it will have no other choice but to surrender.”



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September 05 2017

Commentary by Eoin Treacy

The Times, They Are A-Charging

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

In the near-term, adoption is likely to be constrained by this slightly extended payback, concerns over driving range and thus, charging infrastructure. That said, investors may be surprised at the speed at which infrastructure can be built out (Tesla has constructed 830 SuperCharger locations in 31 countries to date, expected to double in 2017). However, the short driving range (~200 miles) is likely to constrain the market to specific use cases, until battery technology improves/costs decline. We forecast 10% adoption by 2027 within the NAFTA Class 8 market.

The shorter, closed-loop nature of typical medium-duty truck routes should yield faster adoption of electric trucks vs. heavy-duty. Range is not a major concern for medium-duty trucks, given that they tend to drive much shorter routes (well below 200 miles/day), haul less tonnage, and often follow closed-loop networks, allowing for night-time charging. As such, we agree with consensus on this topic – medium-duty adoption of electric vehicles is likely to be much faster than with heavy-duty trucks. We project 15% adoption by 2027 within the NAFTA Class 5-7 market.

OEMs that offer the best payback period/total cost of ownership are likely to win share. Tesla will be a new entrant in the market, which presents risk to existing OEMs in itself (Daimler, Volvo, Navistar, PACCAR) – we believe the company that provides the best combination of average selling price with battery range/cost will win, and Tesla will have many advantages in this regard. Nonetheless, today it seems that all OEMs are developing electric trucks with range in the ~200-mile zone, which shifts the focus to the ASP. At this point, Daimler, MAN/Scania and Tesla appear to be preparing to launch electric truck offerings, so they could potentially have a head start vs. Navistar and PACCAR.

Legacy components suppliers could face significant headwinds. This centers around components that will be phased out in a fully electric world, such as the transmission (Allison Transmission) and engine (Cummins). Note that in conjunction with this report, we have downgraded Allison Transmission (covered by Nicole DeBlase) to Sell (price as of 8/31: $34.54), as we match longer-term electrification concerns with shorter-term earnings headwinds.

Eoin Treacy's view -

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

Intel acquired Mobileye earlier this year to gain access to the autonomous vehicle sector because cars and trucks are going to require a lot more computing power in future regardless of how quickly autonomous features develop. 



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September 04 2017

Commentary by Eoin Treacy

September 04 2017

Commentary by Eoin Treacy

Reminiscences

Thanks to a subscriber for this note from Birinyi Associates which may be of interest. Here is a section:

In truth, the positive arguments are not especially helpful either.  One major investment banking firm wrote: “the bull market is still healthy but the risks for a crash are increasing.”  And “the bull market has ten more years to run” which is not an argument we would like to defend.

In summary, sentiment is negative and even the bullish arguments are muted.  While several firms have slightly upgraded their year-end targets, perhaps the bulls with a capital B might be ourselves, David Tepper (‘nowhere near an overheated market’) and Morgan Stanley (‘Bull market check list remains intact’).

To us the abundance of bears and the lack of strong, positive arguments for a rally is a positive.  We agree that the rally is lengthy and perhaps even boring of late, but it is still a bull market.  For those who argue that it exceeds the average of the last ten rallies we might again mention that last year when we spoke at the Columbia B School we asked one of the professors: if averaging three numbers does not make sense, then how many data points does one need to make a meaningful average?

He said the conventional response is 30. Thus, it is not statistically sound to average ten rallies or declines despite one’s understandable inclination to do so.

Eoin Treacy's view -

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

“A bull market climbs a wall of worry” is about the oldest of all stock market adages and plenty of people are still worried, if the news flow surrounding the uptick in the volatility in early August is any guide. 



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September 04 2017

Commentary by Eoin Treacy

Bitcoin Tumbles as PBOC Declares Initial Coin Offerings Illegal

This article by Lulu Yilun Chen and Justina Lee for Bloomberg may be of interest to subscribers. Here is a section:

China’s central bank said initial coin offerings are illegal and asked all related fundraising activity to be halted immediately, issuing the strongest regulatory challenge so far to the burgeoning market for digital token sales.

The People’s Bank of China said on its website Monday that it had completed investigations into ICOs, and will strictly punish offerings in the future while penalizing legal violations in ones already completed. The regulator said that those who have already raised money must provide refunds, though it didn’t specify how the money would be paid back to investors.

It also said digital token financing and trading platforms are prohibited from doing conversions of coins with fiat currencies. Digital tokens can’t be used as currency on the market and banks are forbidden from offering services to initial coin offerings.

Eoin Treacy's view -

Initial coin offerings (ICOs) have proliferated this year with some using them as a means of circumventing the venture capital and initial public offering route for funding expansion. Meanwhile there have been a slew of fraudulent initial offerings which have offered nothing more than the promise of riches packaged in a glossy prospectus or often little more than a catchy title. 



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September 04 2017

Commentary by Eoin Treacy

Comparing Risk and Opportunity

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

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

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

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

Eoin Treacy's view -

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

What I spend money on every month is going up in price yet official inflation measures tell me there is little inflation. I took a look at my family’s expenditures on a year over year basis at the weekend. My health insurance went up 30% last year, my children’s tuition increased 10%, my car insurance went up 8%, food was relatively unchanged and gasoline was volatile. Meanwhile my mobile phone service got cheaper.



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September 01 2017

Commentary by Eoin Treacy

September 01 2017

Commentary by Eoin Treacy

Campbell Drops After Bleak Outlook Follows Blow From Buffet

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

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

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

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

 

Eoin Treacy's view -

Leaner and fitter isn’t just a maxim for personal health but is increasingly being foisted upon consumer goods companies as the supermarket sector comes under pressures from low cost new entrants willing to compete on razor thin margins. Amazon’s focus on Whole Foods’ own brands coupled with Aldi and Lidl’s low cost own- brand focus represent challenges for other supermarket chains which are inevitably going to be passed on to their suppliers. 



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September 01 2017

Commentary by Eoin Treacy

Email of the day on cobalt

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

Eoin Treacy's view -

Thank you for this educative email, from a subscriber who literally wrote the book on mining economics. I agree that not every nickel company produces cobalt which is why the three large miners I mentioned all specifically state they do produce it. 



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September 01 2017

Commentary by Eoin Treacy

These Robots Are Using Static Electricity to Make Nikes

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

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

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

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

 

Eoin Treacy's view -

Automating the production of clothing and footwear represents a key objective of the textile trade but also poses one of the largest challenges for the labour market in newly industrializing nations they are ever likely to face.



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September 01 2017

Commentary by Eoin Treacy

Kenya presidential election cancelled by Supreme Court

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

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

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

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

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

 

Eoin Treacy's view -

Governance is Everything. The annulment of Kenya’s election is a landmark event but the true measure of a democratic society is whether the opposing parties can agree to another election and accept the result without resorting to what could be cause for a civil war. 

 



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August 31 2017

Commentary by Eoin Treacy

August 31 2017

Commentary by Eoin Treacy

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

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

 

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

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

Eoin Treacy's view -

Declining labor force participation has been a thorn in the side of policy makers for much of the recovery but that should begin to improve as the number of job openings increases and wages edge higher. The upgrading of GDP figures to 3% combined with surprisingly firm Chinese factory gauges point toward the continuation of this period of synchronized global economic expansion. 



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August 31 2017

Commentary by Eoin Treacy

Gasoline Surges as Harvey Traps Gasoline in the South

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

 

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

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

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

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

Eoin Treacy's view -

Today was the last day of trading for the September gasoline contract. Anyone who needed to take delivery and waited till the last minute was forced to pay whatever the market offered today and the contract surged higher. However, with southwest Texas refineries already starting back up and Harvey being downgraded to a tropical storm, the October contract does not have quite the same time pressure as the September. 



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August 31 2017

Commentary by Eoin Treacy

August 31 2017

Commentary by Eoin Treacy

Gordhan Expects Charges as South African Succession Battle Rages

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

The National Prosecuting Authority has been probing the unit in an investigation that Gordhan, opposion parties and civil-society groups say is politically motivated. The former finance minister described the latest moves as an attempt to discredit politicians who oppose Zuma and are fighting against the plunder of state resources in Africa’s most-industrialized economy.

Scandals have shadowed Zuma, 75, during his eight-year presidency, including a finding by the nation’s top court that he broke his oath of office by refusing to repay taxpayer funds spent on his private home.

‘State Capture’

The nation’s graft ombudsman accused him of allowing members of the Gupta family, who are in business with his son, to influence cabinet appointments and the award of state contracts, referred to as “state capture.” Zuma and the Guptas deny wrongdoing.

On Aug. 8 more than two dozen of the ruling African National Congress’s lawmakers backed an opposition motion of no confidence in Zuma in a secret ballot in parliament. While he survived, the party fired Makhosi Khoza as chairwoman of a portfolio committee and wrote to Derek Hanekom, the head of its disciplinary committee, rebuking him for his Twitter postings calling for the president’s removal.

Zuma is due to step down as the ANC’s leader in December, with his ex-wife, Nkosazana Dlamini-Zuma, and Deputy President Cyril Ramaphosa seen as the leading contenders to replace him.

“It’s a massive tussle -- it’s about the future of the ANC as we’ve known it,” Gordhan said. “Either you follow the capture of the ANC,” or change the party’s character and “recapture the state, which has now gotten into the wrong hands. People like ourselves are backing Mr. Ramaphosa, because we believe he has the integrity, to put it bluntly. And secondly, he has the modernity to innovate, to allow new ideas to emerge, understands the economy. ”

Eoin Treacy's view -

In much the same way Winnie Mandela took a dominant position in the ANC, Zuma’ ex-wife is likely to be a formidable opponent not least because of the support she will receive from Jakob Zuma’s tenure.  However, despite the continued deterioration of standards of governance under Zuma the existence of opposition both within and outside the ANC is positive as is the freedom of south Africa’s judiciary. 



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August 31 2017

Commentary by Eoin Treacy

Email of the day on Type-2 endings

In today's video, when listing the usual three types of endings of which there was no sign, you also said "and there is no loss of momentum or development of a wedge" or something similar. Could you elaborate on precisely what you are looking for there? Is this maybe a type 4 ending? 

Eoin Treacy's view -

Thank you for this question which may be of interest to the Collective. The defining characteristic of a Type-2 top is a massive reaction against the prevailing uptrend. However, what comes before that proverbial bolt-from-the-blue often gives us a clue what to expect. This is a subject we cover in detail at The Chart Seminar. 

A Type-1 top is characterised by acceleration. When such a wide overextension is evident relative to a trend mean, the potential for it to be followed by a massive reaction increases so we then get a Type-2 reaction following a Type-1 acceleration. 

Not every market accelerates higher. Sometimes they lose momentum, spending a longer time ranging. A phrase David coined decades ago is that a “lengthier range is seldom a reliable continuation pattern” and this is often the case with Type-2 tops. When the market either spends longer ranging or develops a rising wedge characteristic it suggests the imbalance between supply and demand which animated the bull market has changed. In short, some dissonance appears in rhythm of the trend. These characteristics are not necessary conditions for a massive reaction against the prevailing trend but they happen with sufficient regularity that we need to be alert to what they might portend. 

Let’s look at an example. Cast you mind back to 2007 when the DAX Index had been trending consistently higher since 2003. It lost momentum in July but the progression of higher reaction lows remained intact. The failed upward break in December followed by the massive drawdown in January 2008 concluded the top formation development phase. That did not give us a clue to how much it would subsequently fall but it certainly suggested a medium-term peak was in place. 



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August 30 2017

Commentary by Eoin Treacy

August 30 2017

Commentary by Eoin Treacy

Breakthrough Cancer Therapy for Dire Cases Gets FDA Approval

This article by Michelle Fay Cortez, Anna Edney and James Paton for Bloomberg may be of interest to subscribers. Here is a section: 

“We’ve never seen anything like this before,” said Stephan Grupp, director of the cancer immunotherapy frontier program at Children’s Hospital of Philadelphia, the first medical center to study Kymriah in children. “I believe this therapy may become the new standard of care for this patient population.”

Novartis said that it’s made an agreement with the U.S. government to pay for the drug only when paediatric or young adult patients with the cancer respond to treatment by the end of their first month. That agreement could have implications for other drugmakers developing expensive, specialized treatments, such as one-time therapies meant to cure rare genetic diseases. Novartis said its working on similar agreements with other payers.

Kymriah will carry a boxed warning because of the treatment’s potential to cause deadly side effects, including neurological complications and what’s known as cytokine release syndrome, a systemic reaction triggered by the destruction of the cancer cells. The FDA also approved Roche Holding AG’s Actemra to treat patients with cytokine release syndrome, pointing to research that shows 69 percent of patients suffering from it improved completely after one or two doses.

 

Eoin Treacy's view -

It’s been a busy week for the immuno-oncology sector with Gilead Sciences announcing a bid for Kite Pharmaceuticals over the weekend and Novartis getting the go ahead for its CAR T-cell treatment today. A point I have been making for more than a year is that the first place we are going to see personalised medicine evolve is in the oncology sector. Every cancer is genetically unique and the number of types they can be categorised into is mind boggling. Even with limited tools tailored treatment programs are already the norm so the evolution of better tools not least through re-educating the immune system is a logical progression. 



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August 30 2017

Commentary by Eoin Treacy

Musings from the Oil Patch August 29th 2017

Thanks to a subscriber for this edition of Allen Brook’s ever interesting report for PPHB. Here is a section on lithium and cobalt:

We don’t know the details behind the Morgan Stanley electric vehicle forecast, but we know there are both more and less aggressive forecasts.  We wonder if those forecasters have considered the potential constraints from lithium carbonate supply.  There is a greater issue with cobalt, which accounts for 58% of a battery by weight, more than the lithium in a battery, and consumes 42% of all cobalt output.  The problem is that cobalt supplies are smaller and about 60% comes from the Democratic Republic of Congo, which is controlled by war lords and relies on child labor for mining the ore.  The governments we will have to deal with to meet the demand for rare minerals to meet electric vehicle forecasts present many moral and financial question marks.  In fact, when we were in Tibet earlier this summer, we followed Chinese trucks hauling bags of lithium carbonate from mines to shipping depots.  That supply is likely committed to the Chinese electric vehicle industry, which needs it to meet its anticipated growth outlook.   

As a result of the growing demand for lithium and other rare minerals, their prices are climbing, and in some cases at alarming rates.  Since 2015, lithium prices have quadrupled, while cobalt prices have doubled.  What will rising prices and limited availability mean for the forecasts of ever cheaper batteries?   

 

Eoin Treacy's view -

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

Forecasts for where lithium and cobalt demand is going to be in 2025 are being used to drive investment in new supply today, but it takes years to bring new supply to market. In that window between when demand increases and supply responds there is room for prices to increase meaningfully; in a rerun of the Supply Inelasticity Meets Rising Demand dynamic that animated the commodity bull market from the early 2000s. 



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August 30 2017

Commentary by Eoin Treacy

Artificial intelligence cyber-attacks are coming but what does that mean?

This article by Jason Straub from theconversation.com may be of interest to subscribers. Here is a section: 

AI, however, could help human cybercriminals customize attacks. Spearphishing attacks, for instance, require attackers to have personal information about prospective targets, details like where they bank or what medical insurance company they use. AI systems can help gather, organize and process large databases to connect identifying information, making this type of attack easier and faster to carry out. That reduced workload may drive thieves to launch lots of smaller attacks that go unnoticed for a long period of time – if detected at all – due to their more limited impact.

AI systems could even be used to pull information together from multiple sources to identify people who would be particularly vulnerable to attack. Someone who is hospitalized or in a nursing home, for example, might not notice money missing out of their account until long after the thief has gotten away.

Improved adaptation
AI-enabled attackers will also be much faster to react when they encounter resistance, or when cybersecurity experts fix weaknesses that had previously allowed entry by unauthorized users. The AI may be able to exploit another vulnerability, or start scanning for new ways into the system – without waiting for human instructions.

 

Eoin Treacy's view -

How secure is your password? Do you use some combination of birthdays and family names to make them easily recallable? The digitisation of information that was once only held on paper means it is comparatively easy to now find out personal details for just about anyone on the web. The increasing number of thefts of the data corporations hold about clients only exacerbates the problem. All you need to do is Google someone and you will likely be surprised by what is available online. It is therefore conceivable that an AI could form a picture of your family and correctly guess your password. Wherever possible set up two-factor logins, so you get a text message with a code before you can login and do not have a password that is your name and date of birth or indeed “password1”. Best practice is that you have a separate computer only used for banking and paying bills but never check email or surf the web on it, in addition to two-factor logins. 



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August 30 2017

Commentary by Eoin Treacy

The Fat Tech Dragon

This report by Scott Kennedy for the Center for Strategic & International Studies may be of interest to subscribers. Here is a section:

China’s embrace of intellectual property (IP) is highly positive when contrasted with the country’s original disdain for property rights of any sort and widespread violation of IP rights. However, China’s efforts to develop and obtain more IP is driven heavily by bureaucratic imperatives as opposed to market incentives. Moreover, China may now be a “large” IP country, but it is still a “weak” one. Whether one is discussing licensing and royalties, mergers and acquisitions, or dispute settlement, Chinese patents still have little commercial value. 

China’s commercial success has outstripped its progress in technology innovation. Chinese companies are acquiring greater market share in high tech, particularly in the most commodified segments of sectors. The value-added contribution to manufacturing is growing in absolute terms, and domestic companies are contributing a growing share to China’s high-tech exports. 

Overall, China’s high-tech drive may be characterized as “good-enough innovation.” From a negative perspective, China is investing—and may be wasting—a great deal of human capital and funding, but is still far from a leader in high tech. From a more positive perspective, China is achieving incremental progress by benefiting from its strong capacity in manufacturing, the accumulation and diffusion of tacit knowledge, and the opportunities provided by such a large market. 

Regardless of the level of support they receive from their government, Chinese companies will face growing challenges in their interactions with multinational businesses and in overseas markets. Foreign governments and multinational businesses likewise need to decide how to strategically respond to China’s approach. They could take a firm stand in opposition, try to influence China’s approach at the margins, or go along with the strategy as best they can. In any case, if they are not careful, they could end up under the heavy foot of a fat tech dragon.

 

Eoin Treacy's view -

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

In addition to its race to become a centre for high tech innovation China is also intent on a “China first” policy of making sure it is producing its own semiconductors without having to rely on US, Japanese, Taiwanese and South Korean manufacturers. That raises important questions about M&A activity since so much of it is state sponsored. The reality is that if China gains the technology to produce its own semiconductors it will seek to flood the market with cheap products and that could represent a significant issue for the global tech ecosystem. 



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August 29 2017

Commentary by Eoin Treacy

August 29 2017

Commentary by Eoin Treacy

Time to get serious about Brexit talks, EU tells Britain

This article by Oliver Wright for The Times may be of interest to subscribers. Here is a section:

British and EU diplomats privately acknowledge that a solution to Britain’s exit bill must come in part from a transitional arrangement, which would effectively continue the UK’s budget contributions.

This would cover the gap in the EU’s budget for the two years after Brexit, while allowing Britain to portray the payments as the cost of an implementation period to benefit business, rather than as debts.

Britain pays about £9 billion a year to the EU. Brussels is expected to demand a total net Brexit divorce payment in the region of £40 billion.

 

Eoin Treacy's view -

The EU needs the money the UK contributes to its budget. That’s more important that either the Irish border or the rights of its citizens. For the UK, tariff free access to the single market is at the top of its wish-list. Everything else is secondary. 
If we ignore our emotional attachment to either side in the evolving negotiations and simply think about the actions of both parties from the negotiating tactics they are employing, perhaps we can come up with a better understanding of what is in fact going on. 

 



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August 29 2017

Commentary by Eoin Treacy

Harvey Recharges Offshore as Crippled Houston Counts the Cost

This article by Joe Carroll and Thomas Black for Bloomberg may be of interest to subscribers. Here is a section: 

Gasoline futures in New York extended gains a sixth session Tuesday as more than a million barrels of fuel-making capacity was knocked offline; and natural-gas fields and offshore-drilling rigs shut down. The motor fuel advanced 0.4 percent to $1.7183 a gallon at 5:09 a.m. New York time.

Ports along a 250-mile stretch of Texas coast were closed to tankers. Twenty-two vessels laden with a combined 15.3 million barrels of crude from as far afield as Brazil and Colombia were drifting off the coastline, waiting for the all clear.

Ten of the state’s 25 refineries are shut down, accounting for about half the 6 million barrels per day of capacity, said Christi Craddick, chairman of the three-member Texas Railroad Commission, which regulates the industry. Companies will have to wait for floods to recede before they can evaluate damage, she said.

“Hopefully within the next week to two weeks, we’ll see refineries back online,” Craddick said.  

 

Eoin Treacy's view -

Hurricane Katrina resulted in a surge in natural gas prices because so much supply depended on Gulf of Mexico platforms. The rise of onshore shale supplies has reduced reliance on offshore gas so hurricane Harvey has had little impact on gas prices. On the other hand, gasoline refining is heavily concentrated on the Gulf coast and not least around Houston. Therefore, it is the commodity most likely to be affected by hurricane induced damage. 



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August 29 2017

Commentary by Eoin Treacy

August 29 2017

Commentary by Eoin Treacy

Fitbit aims to topple smartwatch kings with feature-packed Ionic

This article by David Nield for New Atlas may be of interest to subscribers. Here is a section:

Fitbit is having another crack at taking on the likes of Apple, Garmin, and LG with its newly unveiled Ionic smartwatch. The wearable packs in a bunch of tracking sensors, plus some useful extras like mobile payments, to make it the most advanced device yet to appear from the Fitbit stable.

Fitbit is describing the Ionic as the company's "first ever smartwatch," which we find a little confusing as it launched the Fitbit Blaze last year, another device that straps around the wrist to tell the time and monitor various health and fitness metrics. Is that not also what you would describe as a smartwatch?

Perhaps Fitbit just wants us to forget the Blaze ever happened, and whatever the nomenclature, the Ionic looks like being an upgrade in every department. What does distinguish it from its predecessor is support for third-party apps, so developers outside of Fitbit can build their own apps for the device. 

Eoin Treacy's view -

For some people wearing a belt is enough to monitor personal shape and size. I’m not that fortunate and personally having a wrist-mounted fitness tracker twinned with a calorie counting mobile phone app has been a recipe for keeping me on a successful fitness and dietary regime. 

I bought a Fitbit Blaze for Mrs. Treacy because it has the option to change wristbands which was necessary to get around her silicon allergy. It lasted about three weeks before dying. The build quality left a lot to be desired. On the other hand, I have been wearing a Garmin Vivosmart HR all year and it is still going strong. 



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August 25 2017

Commentary by Eoin Treacy

August 25 2017

Commentary by Eoin Treacy

August 25 2017

Commentary by Eoin Treacy

Draghi Says Protectionism Is a Threat to Global Economic Growth

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

The euro extended its gains, as some investors had hoped Draghi would try to talk down the single currency amid fears it’ll undermine the euro-area recovery. The single currency had already climbed to the highest level against the dollar since January 2015, and was up 1 percent at $1.1923 at 3:24 p.m. in New York.

The ECB chief also eschewed any comments that could be seen as prejudging the outcome of the Sept. 7 Governing Council meeting, when policy makers are planning to review their unconventional stimulus policies against the backdrop of strong growth but still-subdued inflation

 

Eoin Treacy's view -

Both Janet Yellen and Mario Draghi avoided talking about interest rates in their speeches choosing instead to focus on regulation. What appears clear is they claim to see no relationship between the lack of evidence of tightness in credit and the extraordinary largesse they have heaped on markets. Saying that regulation has not impacted the availability of credit when one is pouring a torrent of money into the market is somewhat disingenuous at least to my eyes. Surely, we could only possibly draw that conclusion when monetary policy is neutral?



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August 25 2017

Commentary by Eoin Treacy

Macron Tells Poland It's Headed for the 'Margins' of Europe

This article by Mark Deen and Marek Strzelecki for Bloomberg may be of interest to subscribers. Here is section: 

The specific issue being discussed is the use of “detached” or “posted” workers. Those employees typically are brought from low-wage eastern European countries to higher-cost ones such as France or Austria to perform tasks that would be more expensive to hire for locally.

There are an estimated 300,000 such workers in France. For employers, the advantages are obvious. The minimum wage in France is about 1,480 euros ($1,740) a month. In Poland, it’s about 450 euros.

Macron wants to reduce the length of working stays to one year in every two and increase cooperation to ensure that minimum wage and social charges are applied through cooperation between EU governments. He is seeking an agreement on the matter at an EU summit in October and said in Varna that he is confident an accord can be reached by year-end. The decision requires only a qualified majority of EU countries.

 

Eoin Treacy's view -

It is valid to talk about whether it is entirely fair to import workers on low wages from Eastern Europe to compete directly with local workers. However, the much broader question is how Macron is going to deal with France’s militant unions. Raising the question of “posted workers” is but the opening volley in what is likely to be a terse face off. 



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