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January 21 2022

Commentary by Eoin Treacy

January 21 2022

Commentary by Eoin Treacy

Email of the day on salesmanship

I’ve always marvelled at the salesmanship of Friedland since I saw him in Tokyo quite a few years ago. But there is one better. Andrew Forrest. He may not have Friedland’s savoir faire or finesse but I’m inclined to back him in a two-horse race (there are no other starters).

Btw I’m one of no doubt many who concur with the positive emails you receive recently.

Eoin Treacy's view -

Thank you for your kind words and this email which may be of interest to the Collective. Both of the mining sector’s most successful salesmen are promoting visions of the future that assume the energy transition is inevitable. They take different approaches in how best to profit from it.  



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January 21 2022

Commentary by Eoin Treacy

Brazil Stocks Buck S&P 500 Losses, Set for Second Weekly Gain

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

An opinion poll released by Poder360 showed leftist former President Luiz Inacio Lula da Silva has 42% of voter intentions for the October presidential election, versus 28% for incumbent Bolsonaro and 8% for former judge Sergio Moro

Lula has been hinting at alliances with centrist parties, but it’s still unclear for investors what his economic program would look like and whether any kind of fiscal adjustments would be conducted

President Jair Bolsonaro has discussed with lawmakers a bill aimed at reducing fuel and electricity prices, O Globo reported, citing unnamed sources

Eoin Treacy's view -

Brazil’s short-term interest rates have risen from 2% to 9.25% since March 2021. The fact that still represents a negative real interest rate highlights just how inflation has been. Investors appear to be giving the benefit of the doubt to the argument inflationary pressures are close to peaking as the Real bounces.



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January 20 2022

Commentary by Eoin Treacy

Video commentary for January 20th 2022

Eoin Treacy's view -

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

Some of the topics discussed include: silver cheap relative to dogecoin, Wall Street remains weak, Chinese shares rebound, Dollar and Renminbi steady, oil downside key reversal, medium-term correction more likely than end of the bull market. No chance of rates rising four times this year. 



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January 20 2022

Commentary by Eoin Treacy

Logical inconsistencies

Eoin Treacy's view -

There are times in the market when a comparison between two assets classes serves to highlight a disparity that has become so wide that it inspires a sense of wonder, confusion and questioning

In December 2020 there was a news headline to the effect that Tesla’s market cap was greater than that of the next 9 largest car companies combined. There are two ways of thinking about that statistic. The first is enthusiasm for Tesla shares was running at fever pitch. The second was that the other auto companies were cheap by comparison.



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January 20 2022

Commentary by Eoin Treacy

Email of the day on Dow Theory for the 21st century

Hope you and the family are well Eoin, no doubt your children are pretty grown up now, although probably still on the payroll.

I know David would have been fascinated with the ‘Capitulation Indicator’, that forms part of a ‘Dow Theory Buy Signal’, so I attach my 2-page note on that indicator also. It dovetails well with the ‘Dynamic’ move at the ned of a bear markets that he looked for. I was sorry to hear of his passing, way too early in life.

Feel free to share both of the above attachments, if you deem them of interest to your own subscriber base.

Eoin Treacy's view -

Thank you for generously sharing your two research reports. My girls (13&15) are certainly still on the payroll and continue to demand higher wages ????. I agree David would have appreciated the data on capitulations in the stock market over the last 80 years. His identification of acceleration as always being a trend ending is perhaps one of the most useful of observations as well as dynamic moves representing points of interest for the investment crowd to denote change.



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January 20 2022

Commentary by Eoin Treacy

China Stocks Rally With Tech, Property in Lead Amid Easing Bets

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

The Hang Seng Tech Index jumped 4.5%, with Meituan and Tencent Holdings among those leading gains. The gauge has started 2022 with an advance after losing about a third of its value last year amid Beijing’s clampdown on tech companies. 

The rally followed clarification from China’s internet regulator late Wednesday that it’s not asking to approve all investments or fundraising by big tech companies, denying an earlier media report.  

A Bloomberg Intelligence gauge of Chinese real estate developers advanced 3.6%, following reports that the government may ease access to some funds. The sector’s gains came even as Thursday’s cut in the five-year loan prime rate left some market watchers disappointed.    

Shares of Country Garden Services Holdings Co. and Sunac China Holdings Ltd. surged more than 10% each. The unwinding of some short positions also likely aided the rally in property stocks, traders said.  

Agile Group, Shimao Group and Guangzhou R&F have about 20% of their free-float shares sold short, among the highest in the MSCI Asia Pacific Index, according to data from IHS Markit. 

Eoin Treacy's view -

Chinese New Year is on February 1st and will be followed by a week-long holiday for mainland markets. At the same time the winter Olympics begins on the 4th which will focus the sporting media’s attention on Beijing. The central bank is making sure its messaging is clear ahead of the shutdown. That’s also aimed at instilling some confidence in investors that the squeeze on private property developers will be limited to that sector.



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January 20 2022

Commentary by Eoin Treacy

January 19 2022

Commentary by Eoin Treacy

January 19 2022

Commentary by Eoin Treacy

Barrick Gold Meets Output Guidance in 2021

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

Barrick Gold Corp. said Wednesday that it has met its production targets for 2021.

The Canadian mining giant said preliminary gold production for the full year was of 4.44 million troy ounces, within its target range of 4.4 million to 4.7 million.

Barrick said the Africa and Middle East, Latin America and Asia Pacific regions performed particularly well, at the upper end of their regional gold guidance ranges.

Preliminary copper production reached 415 million pounds for the year, toward the lower end of Barrick's target range of between 410 million and 460 million pounds.

In the fourth quarter, the company said it sold about 1.23 million ounces of gold and 113 million pounds of copper, with average market prices reaching $1,795 an ounce of gold and $4.40 a pound of copper.

Barrick is scheduled to release its fourth-quarter and full-year results on Feb. 16.

Eoin Treacy's view -

Investors are not expressing a great deal of faith in gold miners. Most related stocks have experienced significant corrections over the last year, despite the fact gold prices are only 11.5 % below the all-time peak. At current prices most miners are enjoying close to record margins and that is despite the relative strength of oil. It would appear to be only a matter of time before investors reassess the sector’s prospects.



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January 19 2022

Commentary by Eoin Treacy

Biggest Bitcoin Fund Sinks Toward 30% Discount in Crypto Selloff

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

One of the biggest casualties of the cryptocurrency selloff is the Grayscale Bitcoin Trust. 
The $27 billion fund (ticker GBTC) has plunged nearly 17% so far in 2022, outpacing Bitcoin’s nearly 9% decline. As a result, GBTC’s price closed 26.5% below the value of the Bitcoin it holds on Tuesday, widening GBTC’s so-called discount to record levels, according to Bloomberg data.

It’s a dynamic that’s plagued GBTC for months. The trust doesn’t allow for share redemptions in the same manner as an exchange-traded fund, meaning that the supply of shares can’t be created and destroyed with shifting demand. Grayscale Investment LLC applied to the Securities and Exchange Commission in October to convert GBTC into an ETF -- which is expected to quickly repair the discount -- but regulators have yet to approve a physically-backed Bitcoin fund.

“GBTC keeps breaking hearts as the discount widens,” Brent Donnelly, president of Spectra Markets, wrote in a report. “GBTC is basically a binary bet on a physical ETF at this point. Tempting but tempting the way value traps can be tempting.”

GBTC first fell into a discount last February as the number of shares outstanding skyrocketed, after years of trading at a premium to Bitcoin. However, the launch of Bitcoin ETFs in Canada and the first U.S. derivatives-backed Bitcoin ETFs eroded GBTC’s competitive advantage. Grayscale’s parent company,
Digital Currency Group, has sought to repair the discount by buying back GBTC shares.

GBTC’s price has dislocated from Bitcoin to an even greater degree than the ProShares Bitcoin Strategy ETF (BITO), which is vulnerable to tracking errors given that it holds futures contracts. While Bitcoin rallied 1.6% on Tuesday, BITO and GBTC fell 3.3% and 6.4%, respectively. 

Eoin Treacy's view -

The Grayscale bitcoin closed end fund was the only avenue for institutions to buy bitcoin for years. That’s not longer true. Several ETFs are now available so the relative value discussion is now possible. That’s weighing the fund because of its high fees. It has an expense ratio of 2%. By comparison, the ProShares Bitcoin Strategy ETF has an expense ratio of 0.95% so it has attracted funds quickly and not least because it is also open to retail investors.



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January 19 2022

Commentary by Eoin Treacy

Evolving top formations

Eoin Treacy's view -

The swift run-up in government bond yields is curtailing risk appetite. More importantly it reintroduces the discount rate in the calculation of fundamental value. When money is both free and available in vast quantities, the discount rate on future cashflows goes to infinity. At that point, the most fanciful valuations are accepted as realisable because the time allowed to fulfill the goal is infinite. Higher rates reintroduce a time value of money argument and forces valuations down. That has resulted in a significant correct for many liquidity-dependent sectors.  



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January 18 2022

Commentary by Eoin Treacy

Video commentary for January 18th 2022

Eoin Treacy's view -

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

Some of the topics discussed include: bonds yields continue to march higher, innovation/biotech breaks lower, bank earnings disappoint, resources and dividend aristocrats outperform, gold stable, silver firm, oil breaks out. Signfiicant uncertainty about the trajectory of Fed policy. 



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January 18 2022

Commentary by Eoin Treacy

Commodities Boom Sends Industry Titan Glencore to Decade High

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

Commodities giant Glencore Plc hit the highest in almost a decade, driven by rallies in everything from metals to coal and optimism for a years-long supercycle.

The world’s biggest commodity trader surpassed its 2018 intraday peak on Tuesday, valuing the Swiss company at about $74 billion. Like its mining rivals, Glencore has benefited from massive global stimulus measures that have stoked demand for raw materials, and has also been a big winner from an energy crunch that sent coal prices to a record high. 

A Bloomberg gauge of spot commodities has doubled since early in the pandemic -- reaching an all-time high in October -- as government measures to bolster economies underpinned demand while supply curbs further tightened metals markets. At the same time, a green revolution is boosting long-term prospects for metals including cobalt and nickel for products like batteries.

Glencore is expected to deliver record profits and a bumper dividend when it reports earnings in February. And as the boom draws more investors into commodities, many analysts forecast prices to remain high. Goldman Sachs Group Inc. said that a commodities supercycle has the potential to last for a decade.

Eoin Treacy's view -

The London Metals Index is testing the 2007 and 2011 highs. Those were bumper years for mining profits so this year is likely to be no different. The challenge for investors is those peaks also represented major climaxes ahead of a rapid tightening of monetary conditions and slowing global growth. The question is whether this time is different?



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January 18 2022

Commentary by Eoin Treacy

Email of the day on biotech

I enjoyed your feedback from your Saudi Arabia Conference. Question: could you please give me your opinion on Moderna and Biotech, do you see potential? I made good profit, then bought these stocks again and sit now on a position down 45%. Take the loss and run? thank you for your attention.

Eoin Treacy's view -

Thank you for this question which others may have an interest in. The biotech sector has just seen the promise of MRNA technology vindicated in real time. That ensures there is a strong pipeline of potential products that will create value for years to come. There are trials underway for universal covid vaccines, solutions to the common cold, an HIV and a malaria vaccine to name a few.



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January 18 2022

Commentary by Eoin Treacy

Microsoft to Buy Activision Blizzard in $69 Billion Gaming Deal

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

Microsoft Corp. said it’s buying Activision Blizzard Inc. in a $68.7 billion deal, uniting two of the biggest forces in video games.

In its largest purchase ever, Microsoft will pay $95 a share in cash for one of the U.S.’s biggest gaming publishers, known for titles like Call of Duty and World of Warcraft but which is also grappling with a cultural upheaval over its treatment of women. Activision Chief Executive Officer Bobby Kotick will continue to serve in that role, Microsoft said. Once the deal closes, the Activision Blizzard business will report to Phil Spencer, who heads Microsoft Gaming.

Adding Activision’s stable of popular titles will help Microsoft expand its own offerings for the Xbox console and better compete with rival Sony Corp.’s PlayStation. Activision has a long history with the Xbox. The publisher’s largest franchise, Call of Duty, became successful largely due to Microsoft’s innovative online platform Xbox Live, which allows players to connect for multiplayer matches. Most of Activision’s games are published on Xbox consoles.

“This acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse,” Microsoft said in a statement Tuesday.

One of the industry’s most legendary publishers, Activision has been mired in controversy for months amid several lawsuits over allegations of gender discrimination and harassment. Kotick, who has led the company for three decades, has been under pressure from employees to resign. The scandal has taken a toll on a company already struggling to adapt to the end of a pandemic-fueled video game boom. In November, Activision delayed two of its most anticipated games and gave a sales forecast for the fourth quarter that fell short of Wall Street’s expectations, sending the shares plunging. 

Eoin Treacy's view -

Activision’s culture of ignoring and covering up sexual harassment has been the central factor in the share losing so much of its value over the last 12 months. It poisoned the brand from the perspective of female gamers. News yesterday that a large number of executives were fired was probably a condition set by Microsoft for the purchase. They will certainly wish to begin the merger with a clean slate.



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January 17 2022

Commentary by Eoin Treacy

January 17 2022

Commentary by Eoin Treacy

Email of the day on an expected copper supply surplus

Thanks for your insightful reports from the meeting in Saudi Arabia. Amazing to have taken part in presentations by so many important CEOs.

I was particularly interested in your story of the mining companies salivating at the thought of all the coming increased demand for copper.  Yet a number of reports I have seen recently predict that the copper price will actually fall in 2022.  For example:

https://www.indexbox.io/blog/copper-prices-to-slump-in-2022-on-rising-supply/
https://www.spglobal.com/platts/en/market-insights/latest-news/metals/120721-feature-copper-market-to-be-well-supplied-in-2022

How can I reconcile these views in your opinion?

Thanks for keeping the videos going despite time changes and jetlag. It is particularly impressive that you manage to keep the audio completely intelligible, even if one isn't watching the video at the same time.  That makes it possible to listen to it while for instance having breakfast, which is my habit.

Eoin Treacy's view -

Thank you for your kind email and this topical question. I’ve seen these same kinds of reports anticipating a surplus this year and next. Ultimately, it is going to be a question about how many of the policies committed to at COP26 and other forums will in fact be acted upon.



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January 17 2022

Commentary by Eoin Treacy

Selling Out

Thanks to a subscriber for this latest memo from Howard Marks which concentrates on selling. Here is a section:

Many people have remarked on the wonders of compounding. For example, Albert Einstein reportedly called compound interest “the eighth wonder of the world.” If $1 could be invested today at the historic compound return of 10.5% per year, it would grow to $147 in 50 years. One might argue that economic growth will be slower in the years ahead than it was in the past, or that bargain stocks were easier to find in previous periods than they are today. Nevertheless, even if it compounds at just 7%, $1 invested today will grow to over $29 in 50 years. Thus, someone entering adulthood today is practically guaranteed to be well fixed by the time they retire if they merely start investing promptly and avoid tampering with the process by trading.

I like the way Bill Miller, one of the great investors of our time, put it in his 3Q 2021 Market Letter:

In the post-war period the US stock market has gone up in around 70% of the years . . . Odds much less favorable than that have made casino owners very rich, yet most investors try to guess the 30% of the time stocks decline, or even worse spend time trying to surf, to no avail, the quarterly up and down waves in the market. Most of the returns in stocks are concentrated in sharp bursts beginning in periods of great pessimism or fear, as we saw most recently in the 2020 pandemic decline. We believe time, not timing, is the key to building wealth in the stock market. (October 18, 2021. Emphasis added)

What are the “sharp bursts” Miller talks about? On April 11, 2019, The Motley Fool cited data from JP Morgan Asset Management’s 2019 Retirement Guide showing that in the 20-year period between 1999 and 2018, the annual return on the S&P 500 was 5.6%, but your return would only have been 2.0% if you had sat out the 10 best days (or roughly 0.4% of the trading days), and you wouldn’t have made any money at all if you had missed the 20 best days. In the past, returns have often been similarly concentrated in a small number of days. Nevertheless, overactive investors continue to jump in and out of the market, incurring transactions costs and capital gains taxes and running the risk of missing those “sharp bursts.”

As mentioned earlier, investors often engage in selling because they believe a decline is imminent and they have the ability to avoid it. The truth, however, is that buying or holding – even at elevated prices – and experiencing a decline is in itself far from fatal. Usually, every market high is followed by a higher one and, after all, only the long-term return matters. Reducing market exposure through ill-conceived selling – and thus failing to participate fully in the markets’ positive long-term trend – is a cardinal sin in investing. That’s even more true of selling without reason things that have fallen, turning negative fluctuations into permanent losses and missing out on the miracle of long-term compounding.

Eoin Treacy's view -

The arguments against selling become progressively more compelling the longer prices move up and to the right. It would have been a mistake to sell everything in January 2020 when news of the coronavirus was breaking unless you were equally committed to buying it all back at the first sign of bottoming in March. That visceral experience has acted as a learning experience for many investors who will have resolved never to sell. That is most particularly evident in the crypto markets where faith in the bullish hypothesis has been rewarded time and again.



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January 17 2022

Commentary by Eoin Treacy

China Cuts Interest Rate as Growth Risks Worsen With Omicron

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

“Consumption remains the weakest link in China’s growth story at the moment and that will by and large continue for much of this year,” said Louis Kuijs, head of Asia economics at Oxford Economics. “We think Beijing has a bottom line of around 5%. As is the case at the moment, if growth is weaker than that, they’d feel strongly motivated to pursue more policy easing.”

Economists expect more policy action from the PBOC in coming months. Goldman Sachs Group Inc. said there’s a possibility the central bank will allow banks to lower the five-year loan prime rate, a reference for mortgages, on Thursday. The one-year rate was already cut in December. Economists at Australia & New Zealand Banking Group and BNP Paribas see the likelihood of further reductions in the reserve requirement ratio for banks.   

Eoin Treacy's view -

The big question for liquidity dependent stocks is where the next big source of liquidity is going to come from. The US government is struggling to get additional spending measures passed. The Fed expects to be done with QE tapering in a couple of months and both Europe and Japan are not significantly increasing their programs. The potential for China to do more to support flagging growth is one of the few realistic possibilities for ample additional liquidity in the near term.



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January 14 2022

Commentary by Eoin Treacy

January 14 2022

Commentary by Eoin Treacy

The Future Minerals Summit

Eoin Treacy's view -

It was a pleasure to visit Saudi Arabia for the first, of what I believe will be many occasions, this week. I’d like to express my thanks to the government for their hospitality.

I feel like I am a well-travelled individual. I’ve lived in a half a dozen countries, visited many more and travelled to the far reaches of the world in search of the best diving destinations. It’s not often I have my preconceptions confounded. That’s what happened in Riyadh this week.

I had not expected to see so many young people given responsibility in organizing a globally significant event. I also had not expected to see so many young women in positions of responsibility. I had not expected to see women working in shopping malls either. On Friday night, the highway was jammed at 1am on the way to airport.

Many of the young people I spoke with were articulate, and enthusiastic about the future. They had been educated at universities both at home and abroad. Saudi Arabia is a conservative country, but the young generation are bursting with the enthusiasm and ambition of a population who sees the potential to achieve a better life. I was left with a feeling of optimism about the country and its prospects.

David often spoke of his first trips to Singapore where the young women were given responsibility, were forthright in their opinions and were power dressers. History does not repeat itself. Saudi Arabia is already a wealthy country but the reformation of civil society is not a fantasy. It was absolutely refreshing.

Many countries have large young populations. That creates both opportunities and challenges. The great benefit of the demographic dividend is you get the creative vigour of youth that creates value and growth. The challenge is doing whatever is necessary to capture the productive capacity of each individual to maximise the long-term benefits to the economy. To enact the reforms necessary to achieve those goals takes a great deal of courage. That’s what the 2030 vision of development is about. It's a leap of faith.  



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January 13 2022

Commentary by Eoin Treacy

Video commentary for January 13th 2022

January 13 2022

Commentary by Eoin Treacy

Ivanhoe Mines and geophysics

Eoin Treacy's view -

Robert Friedland delivered a speech at the Future Metals Forum today which caused something of a stir. The graphics detailing copper demand growth in an electrification and simple growth scenario were impressive and not least because his conclusion is the mining industry is in no position to deliver the quantity of supply required to reach anything approaching decarbonisation goals.



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January 13 2022

Commentary by Eoin Treacy

Email of the day on gold from David Brown

Lucky you having a business trip. I'm looking forward to commencing again soon.

Your comment yesterday about losing a subscriber around the issue of gold was sad. My thinking is much the same as yours on gold, and I have been using baby steps, just as you have, into a leveraged position which is in the money now and should be a big winner when gold eventually takes off. Gold held stronger than I expected and I have only half the position I want so far.

I've attached an analysis I did several years ago. One can be cynical about cycles but the fact is this analysis predicted the top in 2020 with only 3 months leeway. The cycle says the real breakout (above $2000) happens in 2023 followed by a 5 year up-leg. I am expecting more sideways ranging and maybe more chance to add to my position at a good price.

Enjoy your trip. It seems a luxury to many of us who are still stuck at home.

 

Eoin Treacy's view -

Thank for your kind email. My first business trip in more than two years has been a pleasure and I’ll write a report of this visit to Saudi Arabia for tomorrow’s commentary. Thanks also for this analysis which highlights the fact that gold is quite capable of ranging for years at a time. It is equally true that it tends to put in its gains in short bursts of explosive energy. 



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January 13 2022

Commentary by Eoin Treacy

Bitcoin Trades Add to El Salvador Sovereign Risk, Moody's Says

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

El Salvador’s Bitcoin trades are adding risk to a sovereign credit outlook that was already weak and reflecting a growing chance of default, according to Moody’s Investors Service. 

The government’s Bitcoin holdings “certainly add to the risk portfolio”, Moody’s analyst Jaime Reusche said Wednesday in a phone interview.  

Trading Bitcoin “is quite risky, particularly for a government that has been struggling with liquidity pressures in the past,” he said.

President Nayib Bukele has said he buys the cryptocurrency using his phone, though the government doesn’t publish data on its holdings. Bukele bought some coins ahead of El Salvador’s adoption of Bitcoin as legal tender in September, and sometimes took advantage of price drops to buy more in the following months, based on what he has said in posts on Twitter.  

El Salvador’s current ownership of an estimated 1,391 Bitcoins isn’t large enough to pose a major threat to the government’s ability to meet its obligations, but the risk will increase if the government buys more of the cryptocurrency, Reusche said.  

“If it gets much higher, then that represents an even greater risk to repayment capacity and the fiscal profile of the issuer.” 

 

Eoin Treacy's view -

A weak sovereign taking a big bet on cryptocurrency is irresponsible. It exposes the country’s finances to existential risk in the event bitcoin crashes. That’s not something El Salvadorans should have to deal with. It’s directly comparable to the foolhardy interest rate policies being deployed in Turkey to the determinant of the Lira.



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January 12 2022

Commentary by Eoin Treacy

January 12 2022

Commentary by Eoin Treacy

'Sudden Stopâ' Hammers Emerging-Market Investments Beyond China

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

Fresh investments are disappearing from emerging markets that aren’t China as coronavirus variants threaten to derail recoveries. 

Foreign investors pulled $9.6 billion from developing-nation bonds outside China in December, the most outflows since March 2020 when the initial shock of the pandemic tore through markets, according to the Institute of International Finance.

“We see non-China EM in a de facto sudden stop,” economist Jonathan Fortun wrote in a Tuesday report. “The latest Omicron variant, an acceleration of Fed tapering, and stronger dollar carry additional risks for an already stressed EM flows picture going forward.”

Fortun says the split between China and other emerging markets comes down to investors betting that the world’s second-biggest economy will rebound faster than the rest.

China stocks attracted $12.5 billion in December, and its debt lured $10.1 billion, according to estimated non-resident portfolio flow data from the IIF. Emerging-market equities outside China brought in just $3.8 billion, IIF data show. 

Eoin Treacy's view -

There is a real danger in reading too much into fund flow data that is a month old. The narrative can change in a matter of hours in this environment. The strong Dollar, supported by the expectation of tapering interest rate hikes and balance sheet run off, was the dominant theme for the last few months. It also assumes loose talk about multiple rate hikes can in fact be put into place.



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January 12 2022

Commentary by Eoin Treacy

Partygate Fuels U.K. Tories Growing Alarm About Boris Johnson

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

But it is the reaction of his own Tories that will be of most concern to the prime minister. One Conservative member of Parliament privately described the mood among colleagues as sulfurous, while predicting the premier will survive because he’s prepared to brazen it out. Another, though, said the scandal will ultimately mean the end of the road for Johnson.

It’s a significant moment of peril at the worst possible time for Johnson, who had hoped to begin 2022 with a reset after a turbulent end to last year when support for the Conservatives plummeted in the polls.

A string of allegations about other rule-breaking gatherings in Westminster -- dubbed “partygate” by the U.K. media -- was compounded by a damaging loss in a special election and widespread criticism over how he had funded the refurbishment of his Downing Street flat.

Eoin Treacy's view -

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January 12 2022

Commentary by Eoin Treacy

Block's Afterpay bid wins final approval from Spanish central bank

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

The deal caps off an incredible run by the Nick Molnar and Anthony Eisen founded group since it listed on the ASX in 2016 following an initial public offering where it raised $25 million at $1 a share.

But that share price is a long way off the implied $126.21 share price of Afterpay when the deal was announced by Block, then known as Square, in early August. Square’s shares have also fallen in value since the tie-up was revealed, dropping from $US247.26 in early August to $US148.43 in Monday’s trading session in the US.

The fall in Afterpay and Square’s share price has also altered the valuation of the all-scrip deal which now sits at about $24 billion.

Afterpay and other buy now, pay later groups have copped a battering in recent months as investors grow concerned about regulatory intervention in Australia and in the US. Technology groups, especially those with modest profits compared to their sky-high valuations, have also taken a hit in the past month amid growing concerns the US Federal Reserve will raise interest rates.

Eoin Treacy's view -

Buy-now-pay-later experienced phenomenal growth during the pandemic, with many young people getting their first experience of credit through the companies. The sector took a leaf out of social media’s playbook and pitched its offering to waves of late teens and young people who would not normally have such spending power.



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January 12 2022

Commentary by Eoin Treacy

Email of the day on the service:

I became a subscriber in 2011 and maintained my subscription for five years.  During that time I became immersed in David's and Eoin's investment and charting philosophies.  I used them to my great benefit and continue to use them today.  I attended two chart seminars.  I read Eoin's book.  Putting all of that together I reached my own conclusion about the investment situation globally.  Without all of that information I may as well have been guessing.

In 2016 I postponed my subscription not because of a qualitative shortfall from the service but because I felt I was able to build on what had been taught without further input.  The fruits of the first five years continue to pay dividends to this day.

Two months ago I renewed my subscription.  I was stunned at how Eoin had enhanced the value of the service with his daily audio/video reports.  They provide broad and succinct information necessary for all investment professionals you cannot get from CNBC or anywhere else.  I'm glad I did, especially since we may well be shifting from one investment epoch to a new one. 

It's up to the subscriber to take the bits of information presented and make them work to the style of investing of their choosing.  I don't hold Eoin or anyone accountable for the success or failure of any investment call.  That responsibility lies with each of us.  I will say that having someone point out the relevance of a company, an industry, a currency, or a market is invaluable - if we put it all together to make thoughtful decisions. 

Anyone can stay or leave and that's fine.  Having someone help quarterback the overall investment landscape as Eoin does in this day and age is critical.  There are way too many eyeballs and and ears listening to too few voices these days which is why you have severe overcrowding in things like FANGMAN.  For those that want to feel in good company they can tune into and invest along with Cramer.  For those who think broader they can use a boutique like FullerTreacy and do something better in the long run.

Eoin Treacy's view -

Thank you for your kind words and this insightful analysis for which I am both flattered and grateful.



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January 11 2022

Commentary by Eoin Treacy

Video commentary for January 11th 2021

Eoin Treacy's view -

A link to today's video commentary is posted in the Subcsriber's Area. 

Some of the topics discussed include: breadth improving somewhat, Dollar eases on Fed less hawkish tone, Gold and oil firm, Wall Street continues to rebound, emerging markets primed for outperformance if the Dollar continues to roll over. 



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January 11 2022

Commentary by Eoin Treacy

Gold and subscriptions

Eoin Treacy's view -

I lost a subscriber today. In our business losing a subscriber is not unusual. Every loss is mourned while gaining a subscriber is always celebrated. Hopefully the latter outweighs the former and, more often than not, it does. Above all we have always prized the dedication of the people who stick with us through thick and thin. For that I simply wish to say thank you.

We have an enormous wealth of experience within the Fuller Treacy Money Subscriber collective. If any of our seasoned investors would like to introduce some younger potential subscribers we would be happy to offer them free trials.

Most successful newsletters have calculated how long a subscriber remains a customer. Then they attempt to maximise revenue from that person by upselling into sequentially more expensive products; while they have the person’s attention. Ultimately, they seek to sell a lifetime subscription. We’ve never done that for better or worse. You get everything in one product: video, audio, commentary, my personal trading details for one price.

I had an email today from a soon to be former subscriber expressing frustration at the fact I do not provide enough analysis and provide too much commentary. He also expressed frustration at the sideways trend in gold. I said in yesterday’s copy that the renewed bull trend in gold will be confirmed by a move above $1850. Until then we are still in a range. I am positioned to benefit from a breakout, and based on my original entry points, my breakeven is $1800. Nothing I say or do will cause a breakout to occur sooner than the market is ready to support it.  



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January 11 2022

Commentary by Eoin Treacy

PMIs and Earnings Will Ultimately Determine the End of the Correction

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

January 11 2022

Commentary by Eoin Treacy

Nickel Hits Seven-Year High as Hunt for Battery Metals Heats Up

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

Nickel rallied to the highest in more than seven years as surging sales of electric vehicles leave carmakers racing to lock in supplies of the critical battery metal. 

Prices of the metal jumped as much as 3.4% to $21,500 a ton, the highest since May 2014, as Tesla Inc. moved to secure future supplies from Talon Metals Corp. That added fresh impetus to a rally built on surging sales of electric vehicles, which has also pushed other battery metals including lithium and cobalt sharply higher. 

In other major investments in the battery sector, chemicals maker LG Chem also said Tuesday it will spend 500 billion won ($420 million) by 2025 to build a battery materials plant, while BHP Group on Monday said it will pay $100 million to take a stake in an early-stage nickel project in Tanzania.  

While the race to secure future supplies is heating up, there are also growing signs of limited spot availability on the London Metal Exchange. Inventories tracked by the bourse fell for a 50th consecutive day on Tuesday, in the longest run of declines since 2000. 

“We have so many stories all pointing in the same direction,” Michael Widmer, head of metals research at Bank of America, said by phone from London. “People do realize that there is potentially a tightness in supply going on, and that is taking prices ultimately higher.”

Nickel prices traded 2.8% higher at 12 p.m. local time on the London Metal Exchange, reaching $21,375 a ton. Copper, aluminum and tin all gained.

 

Eoin Treacy's view -

Nickel contributes to battery energy density but also to combustibility. Tesla may be securing additional nickel supplies and BHP is investing in new production in Tanzania but Tesla is also now selling lithium/iron/phosphate batteries in the USA which are less energy dense but do not need nickel or cobalt.



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January 10 2022

Commentary by Eoin Treacy

Video commentary for January 10th 2022

January 10 2022

Commentary by Eoin Treacy

JPMorgan Guide to the Markets Q122

Thanks to a subscriber for this chartbook from JPMorgan. I thought this long-term chart of inflation and how it is breaking out of a long-term base formation to be particularly interesting. 

The link to the chartbook is in the Subscriber's Area.

Eoin Treacy's view -

The massive boom in demand for demand for consumer electronics during the pandemic and the commitment of companies to the just in time manufacturing model represented a perfect storm for inflationary pressures. Suddenly the absence of small cheap but necessary components disrupted the ability of companies to meet orders in a timely manner. That ignited even more demand because it encouraged precautionary spending.

 



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January 10 2022

Commentary by Eoin Treacy

China in Mass Testing Blitz After Reporting First Community Spread of Omicron

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

China saw its first omicron cases in the community, igniting a mass testing blitz in the northern city of Tianjin as the country strives to maintain its zero-tolerance approach to Covid in the face of more transmissible variants.

The two cases in the port city were confirmed as being omicron by the Chinese Center for Disease Control and Prevention, after its local branch completed the genome sequencing, CCTV reported. The infections were from the same transmission chain but officials have yet to establish if the strain is the same as imported omicron cases reported earlier in Tianjin, according to the report. 

China’s commitment to its Covid Zero policy has seen it restrict movements and implement mass testing and other measures in cities spread across the country. Further outbreaks raise the risk of new lockdown measures that could disrupt production and shipping in an economy already battling weak consumption and a property market slump.

The two cases in the port city were confirmed as being omicron by the Chinese Center for Disease Control and Prevention, after its local branch completed the genome sequencing, CCTV reported. The infections were from the same transmission chain but officials have yet to establish if the strain is the same as imported omicron cases reported earlier in Tianjin, according to the report. 

China’s commitment to its Covid Zero policy has seen it restrict movements and implement mass testing and other measures in cities spread across the country. Further outbreaks raise the risk of new lockdown measures that could disrupt production and shipping in an economy already battling weak consumption and a property market slump.

The two cases in the port city were confirmed as being omicron by the Chinese Center for Disease Control and Prevention, after its local branch completed the genome sequencing, CCTV reported. The infections were from the same transmission chain but officials have yet to establish if the strain is the same as imported omicron cases reported earlier in Tianjin, according to the report. 

China’s commitment to its Covid Zero policy has seen it restrict movements and implement mass testing and other measures in cities spread across the country. Further outbreaks raise the risk of new lockdown measures that could disrupt production and shipping in an economy already battling weak consumption and a property market slump.

The two cases in the port city were confirmed as being omicron by the Chinese Center for Disease Control and Prevention, after its local branch completed the genome sequencing, CCTV reported. The infections were from the same transmission chain but officials have yet to establish if the strain is the same as imported omicron cases reported earlier in Tianjin, according to the report. 

China’s commitment to its Covid Zero policy has seen it restrict movements and implement mass testing and other measures in cities spread across the country. Further outbreaks raise the risk of new lockdown measures that could disrupt production and shipping in an economy already battling weak consumption and a property market slump.

The two cases in the port city were confirmed as being omicron by the Chinese Center for Disease Control and Prevention, after its local branch completed the genome sequencing, CCTV reported. The infections were from the same transmission chain but officials have yet to establish if the strain is the same as imported omicron cases reported earlier in Tianjin, according to the report. 

China’s commitment to its Covid Zero policy has seen it restrict movements and implement mass testing and other measures in cities spread across the country. Further outbreaks raise the risk of new lockdown measures that could disrupt production and shipping in an economy already battling weak consumption and a property market slump.
 

Eoin Treacy's view -

Before Christmas I regarded China as a wild card. They have been able to sustain manufacturing because community spread of the virus was minimal. That’s all going to change in 2022. The omicron variant might be milder but the Chinese population is virgin territory for the virus, the number of hospitalisations is likely to increase substantially driven by sheer weight of numbers.



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January 10 2022

Commentary by Eoin Treacy

This Weeks Travel Plans

I have accepted the gracious invitation of the Saudi Arabian government to attend the Future Metals Summit January 11th - 13th.

It seems like the omicron variant is going through the Dallas population like a proverbial dose of salts. Subject to getting a negative result to a PCR test, I’ll be leaving Sunday night and arriving extremely early on Tuesday morning local time.

I expect to be updating most days, but Thursday will be the most challenging because I will be flying home very early and on the plane all day.

January 07 2022

Commentary by Eoin Treacy

January 07 2022

Commentary by Eoin Treacy

European Gas Falls After Netherlands Says It May Boost Output

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

European natural gas erased earlier gains, after the Netherlands said it may boost production at its biggest field this year.

The announcement halted a rally that’s seen prices jump about 30% this week, topping 100 euros a megawatt-hour earlier Friday. It brings some relief to a market where benchmark contracts are still almost three times higher than they were just six months ago, with Russia continuing to limit flows to Europe.

Output from the Dutch Groningen field may total 7.6 billion cubic meters in the 12 months through September, up from an earlier forecast of 3.9 billion cubic meters, according to data from grid operator Gasunie. The deposit is still due to be shut down later this year, after decades of extraction triggered earthquakes. Separately, booked capacity for Norwegian gas to Europe rose for a second day.

Benchmark European gas futures declined 6.4% to 90.285 euros a megawatt-hour by 3:33 p.m. in Amsterdam, after earlier climbing as much as 6.7%. The equivalent U.K. contract for February was down 6.5% at 220 pence a therm.

Extra supply would be welcome news for the region, where prices had rebounded this week after easing in late December. The recent price surge has been underpinned by a lack of sufficient supply from Russia, whose Yamal-Europe pipeline has been flowing in a reverse direction for more than two weeks -- sending gas east instead of west. Russian flows via a key route through Ukraine also remain low.

Europe is drawing on depleted gas storage, raising concerns of a repeat of the current supply crunch next winter, consultant Inspired Energy said in a research note.

The continent has sought increased shipments of liquefied natural gas to ease the pressure. Regasified LNG entering the grid from European import terminals has jumped during the first week of January, network data show.

Eoin Treacy's view -

Europe is scrabbling for gas supplies and is praying for a mild winter. That has boosted the appeal of the region for LNG shipments. It is also forcing efforts to temporarily boost supply; like the Dutch announcement today. The high price of energy in central Asia was the catalyst for protests in Kazakhstan and that’s for a country which is a major energy exporter.



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January 07 2022

Commentary by Eoin Treacy

Mike Novogratz Sees Bitcoin Finding Bottom at $38,000-$40,000

This article from Bloomberg may be of interest.

Bitcoin could slide even lower before finding support, according to crypto billionaire Mike Novogratz.
The chief executive officer and founder of Galaxy Digital Holdings told CNBC that the digital asset could find a bottom at the $38,000-$40,000 level. That prediction is more bearish than just a few weeks ago, when he said Bitcoin could hold at about $42,000.

Novogratz now says he’s waiting a little longer to buy crypto. Bitcoin prices -- which have slumped more than 35% from a record high in early November -- were at about $42,900 at 11:25 a.m. in New York.

‘Goes to Hell’
Novogratz told CNBC that crypto’s latest move down has been on low volume, adding that there is a “tremendous amount of institutional demand on the sidelines.” He himself hasn’t lost his enthusiasm for digital assets -- he got a tattoo inspired by the coin Terra ($LUNA) just a few days ago, after having gotten a Bitcoin one in December 2020.

Mike Novogratz  @novogratz
 
I’m officially a Lunatic!!! Thanks @stablekwon And thank you my friends at Smith Street Tattoos.
Sent via Twitter for iPhone.

The market’s going to be volatile over the next few weeks, but he isn’t nervous in the medium term about the cryptocurrency, Novogratz told CNBC. Part of the bullish story around Bitcoin was the debasement of fiat currencies, and as the U.S. Federal Reserve becomes hawkish, “some of it comes off,” the long-time crypto bull said.

Additionally, Bitcoin is still correlated to the Nasdaq which has come off from the highest levels, Novogratz said. Minutes from the Fed’s December meeting showed officials’ increasing preference for a faster path of rate hikes and a shrinking of the bank’s $8.8 trillion balance sheet. Speculation about tighter monetary policy has taken the shine off risk assets like crypto and richly valued technology stocks in recent days, dragging down the Nasdaq 100 index.

Eoin Treacy's view -

Bitcoin is a risk asset. The reason people buy it is because they want quick returns. There are lots of other arguments about its position as a store of value or the value of its network and the future of digital payments. All those arguments can be weighed on their individual merits, but it does not escape the fact that almost everyone I talk to is primarily interested in making quick money.



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January 07 2022

Commentary by Eoin Treacy

India on Track to Post World-Beating Growth as Spending Revives

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

“We do have pockets of revenge demand coming in spurts but consumption still needs some hand-holding,” said Shubhada Rao, founder at QuantEco Research in Mumbai, who reckons that the impact of India’s ongoing third virus wave may have been factored in these estimates. “We are looking at 7.5% growth next year.”

Digging Deeper

Gross value added, a key input of GDP that strips out the impact of taxes on products, is seen increasing 8.6%. Manufacturing output is estimated to rise 12.5%, while mining sector is seen expanding 14.3%. Agriculture, which provided some cushion to the economy last year, is projected to grow 3.9%
Gross fixed capital formation, a proxy for investment, is forecast to increase 15%, whereas government spending is seen increasing 7.6%. The ministry sees a 6.9% jump in consumption as pent-up demand drove sales
The growth numbers, which benefit from last year’s sharp contraction, will serve as a key input to Finance Minister Nirmala Sitharaman’s annual federal budget, due to be presented next month
India’s growth is seen moderating to 8.5% next year, according to a forecast by the International Monetary Fund released in October

Eoin Treacy's view -

Everyone is dealing with inflationary pressures at present but countries like India have the potential to grow faster for longer than developed markets. That’s the primary appeal of emerging markets enjoying their demographic dividend. The productive capacity of hundreds of millions of young people in their prime, striving for better living conditions and aided by technology is a powerful secular bull market theme. Even in an inflationary environment, positive real growth is possible.



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January 07 2022

Commentary by Eoin Treacy

Next Week's Travel Plans

I have accepted the gracious invitation of the Saudi Arabian government to attend the Future Metals Summit January 11th - 13th.

It seems like the omicron variant is going through the Dallas population like a proverbial dose of salts. Subject to getting a negative result to a PCR test, I’ll be leaving Sunday night and arriving extremely early on Tuesday morning local time.

I expect to be updating most days, but Thursday will be the most challenging because I will be flying home very early and on the plane all day.

January 07 2022

Commentary by Eoin Treacy

The Chart Seminar 2022

With global vaccination rates rising, the prospect of anti-COVID pills on the horizon and the promise of travel restrictions being dropped, it is time to start thinking about venues for The Chart Seminar in 2022.

Please drop [email protected] a line if you would be interested in attending an event next year, as well as your preferred location. 

At present I am looking at a late May date for a London seminar and I am open to other times and locations subject to demand.

January 07 2022

Commentary by Eoin Treacy

January 06 2022

Commentary by Eoin Treacy

January 06 2022

Commentary by Eoin Treacy

The Fed Minutes That Shook the World

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

Why such angst? There’s a lot in the minutes, with much useful information for students of the economy and monetary policy. You can find the full version here. For those less interested in such studies, the passage of three sentences that accounted for more or less all of the market reaction read as follows:

it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated. Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve’s balance sheet relatively soon after beginning to raise the federal funds rate. Some participants judged that a less accommodative future stance of policy would likely be warranted and that the Committee should convey a strong commitment to address elevated inflation pressures.

This commits the central bank to nothing, but the notion that there were hawks on the committee who thought that the Fed should reduce the size of its balance sheet (in other words, start to sell off its huge bond holdings in a move that, all else being equal, should raise yields) came as an unpleasant surprise. Those words are there for a reason. The Fed thought it a good idea to plant a reminder of hawkish intent just as markets were ramping up again after the New Year break, and it seems to have worked.

Eoin Treacy's view -

The Fed Minutes were the catalyst for the sell-off in bonds yesterday which contributed to the weakness in the growth sector. I suspect talk of being more aggressive in quantitative tightening than the 2018/19 period was the primary reason investors took fright.



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January 06 2022

Commentary by Eoin Treacy

Crackdown Deepens as Russian Troops Arrive

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

Kazakhstan’s top uranium miner, Kazatomprom, said supplies of the radioactive metal used for nuclear fuel haven’t been disrupted by the unrest and work at all company units has continued. Kazakhstan produces more than 40% of the world’s uranium; prices for the metal jumped.

“We are fulfilling all our obligations easily, there are no problems with uranium shipments and we will meet all delivery deadlines,” Kazatomprom Chief Commercial Officer Askar Batyrbayev said in a phone interview.

Russian Foreign Ministry Says Unrest ‘Inspired From Outside’ (1:51 p.m.)
The unrest in Kazakhstan is “an attempt inspired from outside to violently undermine the security and integrity of the state with the use of organized and trained armed units,” Russia’s Foreign Ministry said on Thursday in a statement.

The ministry didn’t offer further details on who was meant by outside forces. A senior Russian legislator, Konstantin Kosachyov, blamed terrorist groups from Afghanistan and the Middle East, without providing evidence.

Eoin Treacy's view -

The Arab Spring began as a series of popular protests in Tunisia, in response to the rising cost of bread. Eventually, the popular movement toppled Egypt’s government and created strife everywhere in the region. It appears likely Russia and its satellites have learned the lesson. Allowing protest movements’, a toehold can have a disastrous impact on the ability of a regime to retain control. China’s efforts to control all public discourse are also informed by the results of the Arab Spring.



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January 06 2022

Commentary by Eoin Treacy

China Seen Delaying Property Tax Trials Until Market Improves

This article from Bloomberg may be of interest. Here it is in full:

China’s property tax could be another casualty of the slump in the housing market, with analysts expecting the government to hold off on expanding trials of the levy because of a real estate-led economic slowdown.

In October last year, China’s parliament authorized the limited property tax in Shanghai and Chongqing be expanded to more cities, with some analysts forecasting that it could begin by the end of 2021. However, the rapid deterioration of the real-estate sector and the lack of any detailed implementation plan from the State Council is fanning speculation that the government is waiting for a market uptick before it starts the tax. 

“Now may not be an appropriate time to launch the trials as the economy and the real-estate market are both under pressure,” said Liu Jianwen, a Peking University professor who is also the legal adviser to the Finance Ministry and legislative adviser to the standing committee of the National People’s Congress. 

Although the nation’s top leaders are “very cautious” about it now, the trial won’t be shelved for a long time as officials are “very determined” to start it, Liu said last week.

China has been talking about rolling out a nationwide property tax to regulate the market and control soaring prices for over a decade, since before the trial began in Shanghai and Chongqing in 2011. Nothing has happened so far, likely due to opposition from home owners and developers who are afraid the levy would push prices lower. 

Authorities returned to the land tax idea last year amid a broad effort led by President Xi Jinping to promote “common prosperity.” According to an October statement from the nation’s parliament, the tax is designed to guide rational property buying and will target all kinds of residential and non-residential properties in the trial areas except rural housing.

However, the rapid slowdown of the industry after the government’s crackdown on risky lending and other factors such as the announcement of the tax plan have now made it harder to actually start charging the levy. The government’s fine-tuning of some property curbs and support for mortgages haven’t been enough to halt the slide, according to analysts.

“These are just marginal policy easing and the regulatory tone of stabilizing home prices, land prices and market expectations is clear,” Bloomberg Intelligence analysts Kristy Hung and Lisa Zhou said last week. “It may be a better time to launch the property tax trials when the market is calm.”

One sign of a recovery in sentiment would be a halt to the decline in sales that began in July, Hung and Zhou said. Some analysts expect that could happen this year. 

“The real estate market is expected to see signs of recovery in the first half of this year,” according to Xu Xiaole, chief market analyst at Beike Research Institute. “Transaction volumes will likely bottom out in the first quarter and home prices may stop falling in the second quarter.”

Eoin Treacy's view -

Another Chinese property developer, Shimao, filed for bankruptcy today and big questions are being asked about Guangzhou R&F’s sustainability as a going concern. Yuzhou yields on 2026 maturities are up to 65% so the long interval between thought and action by the Chinese authorities continues to take a toll on the privately-held portion of the property developer market.



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January 06 2022

Commentary by Eoin Treacy

January 06 2022

Commentary by Eoin Treacy

The Chart Seminar 2022

Eoin Treacy's view -

With global vaccination rates rising, the prospect of anti-COVID pills on the horizon and the promise of travel restrictions being dropped, it is time to start thinking about venues for The Chart Seminar in 2022. Please drop [email protected] a line if you would be interested in attending an event next year, as well as your preferred location. At present the two locations with greatest demand are London and Dubai. 



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January 05 2022

Commentary by Eoin Treacy

January 05 2022

Commentary by Eoin Treacy

Morgan Stanley and Wells Fargo Say Great Stock Rotation Has Legs

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

“If we do see real yields improve, it’s going to be a much more difficult environment for tech,” Christopher Harvey, head of equity strategy at Wells Fargo said. “Especially for ‘growth at any price’ stocks. The place where you should see this is your high, high growth and your high-multiple stocks.”

Wells Fargo strategists see more bad news in store for tech and expensive growth stocks this year with room for real rates to rise another 25 to 50 basis points. 

Rising real rates are seen as an optimistic signal about the state of the economy, even if they send a gloomy one about stocks that were the big winners of pandemic lockdowns. The flipside is cyclical stocks such as big banks, industrial and transport firms are in line for gains. 

Tech stocks -- often prized for their long-term prospects -- have become especially sensitive to bond swings as higher rates mean their future profits are worth less at present.

“What struck me about yesterday’s selloff that was so important was that the bulk of the price action occurred in real yields, not in breakevens,” BMO Capital Markets strategist Ian Lyngen said Tuesday on Bloomberg TV. “So this is a growth story and not an inflation one at this point.”

Eoin Treacy's view -

David and I created the Autonomies group of companies back in 2012/13. At the time we were thinking about how the market would evolve post the Global Financial Crisis.

It appeared obvious that globalisation, the rise of the global consumer, the shale revolution and abundant liquidity would spur a secular bull market. We believed the best positioned to profit would be big global companies with truly international businesses, with the heft to expand into growth markets.

We focused in on those that dominate their respective niches in compiling the list. We were both also concerned that inflationary pressures would play an increasing role in the decision-making process of global investors. While not focusing on dividends, we opined that betting on strong balance sheets and pricing power would be a sufficient hedge against any inflationary pressures that arose. That also allowed me to include the large technology companies which were leading the market higher.



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January 05 2022

Commentary by Eoin Treacy

Byron Wien and Joe Zidle Announce the Ten Surprises of 2022

Here is a link to this year’s 10 potential surprises from Blackstone. Here is a section:

6.The price of gold rallies by 20% to a new record high. Despite strong growth in the US, investors seek the perceived safety and inflation hedge of gold amidst rising prices and volatility. Gold reclaims its title as a haven for newly minted billionaires, even as cryptocurrencies continue to gain market share.

7.While the major oil-producing countries conclude that high oil prices are speeding up the implementation of alternative energy programs and allowing US shale producers to become profitable again, these countries can’t increase production enough to meet demand. The price of West Texas crude confounds forward curves and analyst forecasts when it rises above $100 per barrel.

Eoin Treacy's view -

One of the big lessons from The Chart Seminar is “ranges are explosions waiting to happen”. The longer a range persists for the lower expectations for future potential become. Even so the range stores up potential for a breakout like a spring under compression. A breakout unleashes waves of new buying and price continue to rise until a new balance is found with sellers.



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January 05 2022

Commentary by Eoin Treacy

The China Upswing

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

Eoin Treacy's view -

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

Capital is both global and mobile. China demurred from opening the monetary and fiscal spigot during the early portion of the pandemic. It didn’t need to. Demand for its exports took off and it was possible to keep factories open because of the country’s strict quarantine regime. Using a period of outsized growth in its balance of trade to tighten up on overleverage in the property sector was a sound countercyclical policy.



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January 04 2022

Commentary by Eoin Treacy

Video commentary for January 4th 2022

Eoin Treacy's view -

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

Some of the topics discussed include: 5-year yields surge eases towards the close, that helped the Nasdaq rebound, Semiconductors pared an early decline, gold and Dollar steady, Yen weak, Nikkei steady, India firm, China stable, FTSE-100 breaks out. 



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January 04 2022

Commentary by Eoin Treacy

U.S. Five-Year Yield Highest Since February 2020 in Bond Selloff

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

Treasury yields rose a second day, with five-year rates hitting the highest since before the pandemic took hold in the U.S., amid increasing conviction that the Federal Reserve will raise rates at least three times beginning in May.

The five-year Treasury note’s yield climbed as much as 3.8 basis points to 1.392%, the highest since Feb. 20, 2020, while 30-year yields bumped up toward their 200-day moving average.

Yields across the curve are rising for a second straight day, after Monday’s selloff lifted the 10-year note’s yield by nearly 12 basis points in its worst start to a year since 2009. The two-year yield topped 0.80% for the first time since March 2020.

That move rippled through markets from Australia to the U.K., where bond trading resumed after a holiday on Monday. Australian 10-year yields jumped as much as 15 basis points to 1.82%, the highest since Nov. 26. Yields on the same U.K. tenor surged as much as 10 basis points to 1.07%, the highest since Nov. 3.

Eoin Treacy's view -

At 1.38% the 5-year yield has fully unwound the pandemic panic compression of early 2020.  In that time total debt outstanding has increased by $5.7 trillion or 24.6%. That’s an eyewatering figure.  Why the market did not flip out about it is a question which flummoxed investors in 2021.



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January 04 2022

Commentary by Eoin Treacy

Chipmakers See Rare Sustained Growth in Bid to End Boom-Bust Era

Semiconductor revenue is poised to top half a trillion dollars in 2022 for the first time ever. 

But chipmakers are pursuing another milestone that may be even more ambitious given their famously boom-and-bust past: sustained growth. If estimates hold, 2022 could be the first time in decades that the industry posts a third straight year of sales increases. 

Sales are jumping as computer chips spread to every part of consumers’ lives, becoming essential components of products from cars to smart devices to clothing. Surging demand during the pandemic also resulted in a shortage that is only now beginning to ebb; customers are still snapping up semiconductors as fast as the chipmakers can roll them off production lines.

The continued growth would mark a turning point for a chip market locked in a vicious cycle for nearly its entire history. Demand surges; chips fill up warehouses and supply chains, creating a glut; then sales crash. It has happened again and again, to the point that investors take the situation for granted.

Now, chipmakers like Intel Corp. and Micron Technology Inc. argue it’s different this time around. And they may be right. Chips are used in so many products these days, rather than being concentrated in computers and mobile devices, that the risk of a glut is lower. 

A global chip shortage and supply-chain snags also make it less likely that semiconductor companies are facing a crash anytime soon. Most industry executives have cautioned that the shortage won’t ease until the second half of this year, with some products continuing to be delayed by the scarcity of parts into 2023. While the industry may never be able to escape its roller-coaster nature, the current demand boom may last until 2025. 

Even though the chip industry is now less reliant on computers and smartphones for sales, those remain its biggest growth drivers. The much-touted automotive sector is a relatively small market -- but climbing -- on course to provide about 10% of industry sales.

If there are years of growth ahead, the chip industry will need to expand capacity. That could be a slog. Factories cost billions of dollars and take years to bring online. On the plus side, the tight supply will make it all the easier for chips to avoid another crash.

Eoin Treacy's view -

Turning a cyclical business into a noncyclical business is extraordinarily difficult. It’s been possible for software companies like Microsoft and Adobe because they have streamlined their production cycle and have nonfungible products consumers can’t do without. Media attention focuses on the semiconductor sector’s newest technology but most production is commoditised; relying on high volume and thin margins. I don’t see how that can avoid cyclicality. Many businesses overordered during the pandemic so they will not need to sustain that pace of order growth.



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January 04 2022

Commentary by Eoin Treacy

Bitcoin: All the Volatility But Less Upside Than Ether

This note from Bloomberg’s macro blog may be of interest to subscribers. Here is a section:

Yesterday, Apple became the first $3 trillion company after rising some 40% in the past year. Meanwhile Bitcoin rose just 38% in that same time frame, but with a lot more volatility. That puts Bitcoin -- the granddaddy of the crypto market -- in an uncomfortable position. It offers all the volatility downside risks of cryptocurrencies but smaller returns than its peers.

Gains in this latest Bitcoin halving cycle have been much reduced. The pace of Bitcoin issuance declines by half every four years in what is known as a “halving”. And that increased scarcity is a large part of the cryptocurrency’s appeal. But, as my colleague Joe Weisenthal just pointed out, Bitcoin has appreciated about 250% in this past cycle, whereas in the 2013 to 2017 halving the gains were 1600% and a gargantuan 2,000,000% in the first halving cycle from 2009 to 2003. And in 2021, the rise in Ether, the second most-valuable cryptocurrency, far outpaced Bitcoin, buoyed by its use in decentralized finance and the NFT market.

So Bitcoin is a very volatile asset, with two drawdowns over 30% in 2021 alone, while still underperforming even Apple, the world’s largest company and one of the most liquid equity securities.

On the other hand, if you’re looking for big returns, you’re not looking at Bitcoin either. Not only did Ether outperform Bitcoin by a large margin but the ‘altcoin’ Binance Coin, the next largest cryptocurrency, outperformed both with a 1300% gain.

And now Ether is worth $455 million to Bitcoin’s market cap just shy of $900 million. Maybe 2022 will be the year Bitcoin loses its crown as the largest cryptocurrency.

Eoin Treacy's view -

$3 trillion is a still a lot of money, even in today’s world where that number is thrown around with abandon. A few years ago, it was possible to make the argument Apple was a value stock. That’s harder to say today with a price to sales ratio of 8, up from 3 in early 2019.



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December 31 2021

Commentary by Eoin Treacy

December 31 2021

Commentary by Eoin Treacy

December 31 2021

Commentary by Eoin Treacy

U.S.-Listed Chinese Stocks Post Biggest One-Day Surge Since 2008

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

The Nasdaq Golden Dragon China Index rallied 9.4%, its largest climb since 2008. Electric-vehicle maker Nio Inc. and Tencent Music Entertainment Group were among some of the best performers Thursday, climbing 15% each. Alibaba Group Holding rose 9.7%, while Tal Education Group advanced 15%.

“It’s finally time to buy Chinese equities,” Vital Knowledge analyst Adam Crisafulli wrote in a research note. The Nasdaq Golden Dragon China Index is back at levels that have acted as solid support going back over the last several years, he said.

U.S.-listed Chinese stocks have experienced a brutal selloff in 2021 as regulators in Beijing mounted a sweeping crackdown on the nation’s companies. That rout erased more than $1 trillion in value since February as authorities in the U.S. and China continued to put pressure on the firms. Despite Thursday’s rally, the group is still down about 42% this year and about 57% lower from its February peak.

Eoin Treacy's view -

The Golden Dragon China Index had a dismal 2021. It was dragged lower by fears of nationalisation of China’s champion companies, the equivalent of a seismic event in the regulatory environment and the threat of shares needing to delist from US exchanges. That all occurred against a troubling backdrop of deteriorating sentiment that the trade war will ever end.



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December 31 2021

Commentary by Eoin Treacy

Unloved and Uninteresting, Gold Heads for Worst Year Since 2015

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

One key factor has been a lack of interest from financial investors, who are crucial to driving gold’s rallies. Holdings in exchange-traded funds have dropped almost 9% through the year, while hedge funds trading Comex futures have kept their bullion bets muted.
 
While the prospect of monetary tightening hurt gold’s appeal, prices were supported by strong demand from Asian jewelry consumers and central bank buying.

The opposing drivers have left bullion hovering almost magnetically around the $1,800-an-ounce mark. While that’s a historically high price, it will be disappointing to those who enjoyed the surge to a record in 2020.

However, the equilibrium between dip buyers and sellers may not hold for long. More gains in the dollar could spell misery. On the other hand, signs of persistent, runaway inflation could finally provide the spark needed for a sustainable gold rally.
 
BlackRock Inc.’s Evy Hambro said earlier this month that gold could climb in 2022, driven by a combination of real interest rates, U.S. dollar performance and demand for haven assets. However, analysts at JPMorgan Chase & Co. see gold coming under more pressure as the global economic recovery continues, forecasting an average price of $1,520 an ounce in the fourth quarter.
 
On the last day of 2021, gold edged up 0.3% to $1,820 an ounce by 1:04 p.m. in London. Silver also gained, while platinum and palladium declined. The Bloomberg Dollar Spot Index weakened.

Eoin Treacy's view -

In a market accustomed to instant gratification, gold has been conspicuously quiet. 2021 delivered meme stocks with no earnings or prospects, yet they soared to unimaginable levels. We’ve also seen grainy jpegs achieve prices comparable to those of the great masters. It was also a year when the FANGMANT shares persisted in gaining market share which supported the dominance of Wall Street in currency adjusted terms.



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December 31 2021

Commentary by Eoin Treacy

Our Market and Economic Observations Heading into 2022

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

Equity team co-heads Atul Narayan and Erin Miles on other equity markets catching up with the US: Looking ahead, it feels that things are primed for the equity markets that have lagged the US (China, Japan, the UK, Europe, etc.) to catch up. There are several factors at play. First, COVID has been a material relative support to US equities from all channels—favorable sector tilt, less virus economic impact, more support from falling rates (versus, say, Japan, where yields are pegged), and compressing risk premiums, given safe-haven appeal for US equities, especially the FAANMGs. We would expect the COVID impact to gradually fade in the coming year and this to be a relative support for the markets outside the US.

Second, China is showing early signs of moving toward easing after a year when the structural goals (deleveraging, rebalancing, common prosperity, etc.) were prioritized. This again will be a bigger relative support for economies like Japan, Europe, and EMs that are a lot more exposed to China. Finally, if you look back over the last 100 years, it’s almost always been the case that the winners of a given decade end up being laggards in the next one because of the degree of exuberance (and pessimism) that gets priced in following the winning (and losing) stretch. Given how stretched the relative positioning and pricing is today (for logical reasons), we expect the US versus rest of world diff to finally start to revert after a decade-long off-the-charts performance. The main things we are watching closely are the evolution of COVID globally, China’s policy stance, and the retail flows in the US, which were the biggest support for US equities over the past year and a half.  

Eoin Treacy's view -

Based on valuations alone, there is a strong risk-adjusted argument for favouring ex-US assets. I also find the argument that a recovery for China’s economy would have a more positive effect on the Ex-US basket to be reasonable. However, momentum remains a tailwind for Wall Street which has been supported by the relative strength of the Dollar all year.



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December 31 2021

Commentary by Eoin Treacy

December 30 2021

Commentary by Eoin Treacy

December 30 2021

Commentary by Eoin Treacy

China's Water Shortage Is Scary for Its Neighbors

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

Yet China’s natural abundance is a thing of the past. As Michael Beckley and I argue in our forthcoming book, “The Danger Zone,” Beijing has blown through many of its resources. A decade ago, China became the world’s largest importer of agricultural goods. Its arable land has been shrinking due to degradation and overuse. Breakneck development has also made China the world’s largest energy importer: It buys three-quarters of its oil abroad at a time when America has become a net energy exporter.

China’s water situation is particularly grim. As Gopal Reddy notes, China possesses 20% of the world’s population but only 7% of its fresh water. Entire regions, especially in the north, suffer from water scarcity worse than that found in a parched Middle East.

Thousands of rivers have disappeared, while industrialization and pollution have spoiled much of the water that remains. By some estimates, 80% to 90% of China’s groundwater and half of its river water is too dirty to drink; more than half of its groundwater and one-quarter of its river water cannot even be used for industry or farming.

This is an expensive problem. China is forced to divert water from comparatively wet regions to the drought-plagued north; experts assess that the country loses well over $100 billion annually as a result of water scarcity. Shortages and unsustainable agriculture are causing the desertification of large chunks of land. Water-related energy shortfalls have become common across the country.

The government has promoted rationing and improvements in water efficiency, but nothing sufficient to arrest the problem. This month, Chinese authorities announced that Guangzhou and Shenzhen — two major cities in the relatively water-rich Pearl River Delta — will face severe drought well into next year.

The economic and political implications are troubling. By making growth cost more, China’s resource problems have joined an array of other challenges — demographic decline, an increasingly stifling political climate, the stalling or reversal of many key economic reforms — to cause a slowdown that was having pronounced effects even before Covid struck. China’s social compact will be tested as dwindling resources intensify distributional fights.
 

Eoin Treacy's view -

China, India and neighbouring countries are some of the most densely populated areas of the world. As living standards improve resource consumption tends to rise. That is particularly true for water as sanitation and agricultural demand increases. It is reasonable to expect that resource competition will increase significantly over coming decades and it could easily become a source of conflict if droughts were to become more commonplace or agricultural yields are affected.



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December 30 2021

Commentary by Eoin Treacy

China merges 3 rare earths miners to strengthen dominance of sector

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

The move is the latest step by Beijing to consolidate an industry often buffeted by wild price swings that cause headaches for end users. The merger will reduce competitive pressure in the industry by shrinking the number of Chinese rare earths producers from six to four.

The Chinese government has used the same strategy in other industries, including rail transport and shipping lines, to prevent rival groups from undercutting each other when bidding for lucrative overseas contracts.

“We can’t let market force determine how much rare earths should cost given their strategic importance,” said one person close to Ganzhou Rare Earth who asked not to be identified. “We need to keep prices stable so end users could control costs and move up the value chain.”

The Chinese government also wants to strengthen the industry as the US and other large importers of rare earths mined or refined in China seek to develop alternative supply sources, such as large mines in California and Australia.

Daan de Jonge of consultants CRU Group said the merger would see the pricing power of key rare earths, such as dysprosium and terbium, consolidated in the hands of one “super group”.
“Given that the majority of rare earths investment outside of China has centred on light rare earths, it is likely that prices and access for the historically volatile heavy rare earths will be de facto controlled by this group until new capacity can come online, which may take several years,” he said.

Eoin Treacy's view -

Moving up the value chain in manufacturing is a national priority for China. Almost every industry where the country wishes to play a leading role, whether renewable infrastructure, electronics or weapons requires rare earth metals. The result is China is consuming more of its supply of these refined products than ever before which necessarily means there is less to export.



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December 30 2021

Commentary by Eoin Treacy

Once Stellar Green Stocks Fell Even More Than Airlines in 2021

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

After dropping by nearly a third this year, Vestas Wind Systems has warned that more pain lies ahead, amid surging commodity prices and supply-chain bottlenecks that disrupted production. But the cost of raw materials is not the only reason blamed for the lackluster returns. 

In a way, green stocks are paying the price of past success, as a rally in 2019 and 2020 catapulted their valuations into the stratosphere. Now, much of the good news on government pledges to pivot their economies toward a low-carbon model is already priced in. 

Even after this year’s share price plunge, Siemens Gamesa trades at 52 times its expected earnings for next year, and Vestas at 45 times. That compares to 15.7 times for the Stoxx 600. 

While equity strategists from BlackRock Inc. to Goldman Sachs Group Inc. and Societe Generale have said that decarbonization presents unprecedented opportunities to investors, near term headwinds remain. 

Valuations for “green stocks are still elevated,” Bloomberg Intelligence strategists Tim Craighead and Laurent Douillet said in a note. “Lower sales expectations and higher steel prices pressure wind-turbine profits.”

Eoin Treacy's view -

Devon Energy and Marathon Oil are the top two best performing stocks on the S&P500 this year. Sentiment towards the energy sector has improved considerably among the investment community this year because of this performance.



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December 29 2021

Commentary by Eoin Treacy

Video commentary for December 29th 2021

Eoin Treacy's view -

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

Some of the topics discussed include: Turkish Lira slides, South African rand weak but stock market firm, Yen weak, Japanese stocks firm, Wall Street stable but yields are rising, gold rebounds from intraday lows, bitcoin and ethereum weak. 



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December 29 2021

Commentary by Eoin Treacy

Consumer Price Inflation in Japan: A 2022 Black Swan

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

A genuine inflation scare in Japan is hard to envisage, but that’s why it’s a real black swan risk -- a very low probability outcome with large repercussions. In contrast to the rest of the world, Japan has spent 2021 again vainly fighting consumer price deflation.

The immediate news peg is that Japanese industrial production this morning printed the largest month-on-month gain ever seen in data going back more than 43 years. Absolutely smashing expectations at 7.2% vs 4.8% forecast, which gives some idea of how much economists and markets might be underestimating the evolving story in Japan.

We also got the news that broker Daiwa Securities Group Inc. is preparing to raise base salaries for the first time in four years “because the prices of gasoline, food and other items closely linked to everyday life are clearly increasing,” said Chief Executive Officer Seiji Nakata in an interview with Bloomberg. This comes as the government is further pressuring companies to increase wages.

But the key point is that basic input costs are increasing -- Japan is a major energy importer amid a European energy crisis that is having global ramifications. Japan is seeing the fastest producer price inflation in more than 40 years, at 9% y/y, in a dynamic that economists, in aggregate, have underestimated for the past 12 months in a row.

Into this world of rising input prices and rising wages, we have record Japanese fiscal stimulus and extremely easy monetary policy.

Japan 2022 CPI is forecast at 0.7%, according to consensus forecasts on Bloomberg. But economists have proved spectacularly poor at anticipating inflation in 2021. Japan has a government debt pile that is ~250% of GDP -- a crazy burden which is easy to fund cheaply when no one fears any inflation threat ever. But it will result in an immense amount of losses for the largely domestic holders IF yields ever start a sustainable climb.

Eoin Treacy's view -

Rising commodity costs are putting upward pressure on inflationary expectations everywhere. Since Japan has been among the most aggressive in pursuing simultaneous monetary and fiscal stimulus, it is reasonable to expect that inflationary pressures will build.



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December 29 2021

Commentary by Eoin Treacy

Investors Stick With Bitcoin ETFs Despite Crypto's Recent Slump

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

Bitcoin is on pace for its worst monthly performance since May, but exchange-traded fund investors are still plowing money toward products that track the cryptocurrency’s futures.

The ProShares Bitcoin Strategy ETF (ticker BITO) has taken in more than $40 million so far in December, its third straight monthly infusion, according to data compiled by Bloomberg. Similarly, investors have added $6.5 million to the Valkyrie Bitcoin Strategy ETF (BTF) since the end of November, also its third consecutive month of inflows.

That comes amid a crypto downturn that’s seen Bitcoin lose 17% during the last month of the year, putting it on pace for its worst performance since May when it shed 35%. Other cryptocurrencies have lost ground too as investors pull away from some of the riskiest corners of the market. 

Both BITO and BTF launched in October, the first two Bitcoin-futures funds to trade in the U.S. Both had banner starts, with ProShares’s product in particular seeing massive amounts of investor interest. Still, the recent inflows for both funds pale in comparison to what each saw upon their debuts. 

Eoin Treacy's view -

As I mentioned in the Subscriber’s video before Christmas, it was quite likely bitcoin would experience volatility during the interlude between Christmas and New Year. Traders have historically used periods of low liquidity to try and pressure shorts. Yesterday’s downward dynamic was a good example of that.



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December 29 2021

Commentary by Eoin Treacy

James Webb Space Telescope rockets into history

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

The new mirror is as revolutionary as the spacecraft that carries it. Instead of being in a single piece, it is made of 18 gold-plated beryllium hexagonal mirror segments measuring 1.32 m (4 ft). These are controlled by hundreds of actuators that allow the telescope to adjust its own optics. This is extremely important because the JWST will be over a million miles away. The Hubble mission's early days were marred by a design flaw that required astronauts to visit the telescope several times to make repairs and adjustments, but this won't be an option for the JWST – it has to be as self-reliant as possible.

Unlike the Hubble, which sees in visible and ultraviolet light, the JWST looks in the infrared range. This will allow it to see further into the past than any previous instrument by seeking out objects at the edges of the universe, which date back to near the beginning of time and are receding from us so fast that their light has shifted into the infrared band.

With this capability, the 6,500 kg (14,300 lb) Webb will look at how the first galaxies formed in the early universe, study star formation, learn more about how galaxies evolve, and focus on exoplanets in other solar systems to seek out evidence of potential life.

Unfortunately, this super vision requires the JWST to operate at temperatures below -223.2 °C (-369.7 °F), which is difficult to achieve in the full glare of the Sun. To do this, the telescope is equipped with a sun shield about the size of a tennis court that is made of five layers of thin sheets of a polyimide film called Kapton that are coated with aluminum. This material is stable across a wide range of temperatures and insulates the telescope, allowing the spacecraft to be hotter than boiling water on one side, but colder than liquid oxygen on the other.

Eoin Treacy's view -

The James Webb telescope made headlines over Christmas because it is the most ambitious international space project to be launched in quite some time. It will not be the last. There are at least five more telescopes due for launch in the next decade. That virtually ensures we will “see” alien life before we ever come face to face with aliens. No wonder NASA is consulting with theologians



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December 23 2021

Commentary by Eoin Treacy

December 23 2021

Commentary by Eoin Treacy

December 23 2021

Commentary by Eoin Treacy

Why the Bezzle Matters to the Economy

This article by Michael Pettis for the Carnegie Endowment for International Peace may be of interest to subscribers. Here is a section:

First, the bezzle represents recorded or perceived wealth that does not exist as real wealth (productive capacity), and as such it boosts collective recorded wealth above real economic wealth. This discrepancy gooses GDP growth in at least three ways. One way this happens is that bezzle creates a temporary wealth effect that boosts consumption and investment spending to a level higher than where either normally would have been. A second way is when part of this false wealth shows up either as higher income or higher profits for the entity that benefits from the boost in recorded wealth. A third way is when rising market values collateralize increases in borrowing that are then used either to raise prices further or to increase spending. It is not a coincidence that GDP growth rates are always higher than expected in periods during which a great deal of bezzle is being created.

Second, the reverse is true when the bezzle is directly or indirectly recognized and amortized, as it must eventually be. One or more sectors of the economy (households, businesses, local governments, farmers, or banks) must absorb the loss. As they do, the wealth effect reverses, their lower earnings or profits are reflected in lower-than-expected GDP figures, and they are forced to pay down the debt. Just as it is not simply a coincidence that bezzle is created mainly during economic booms, nor is it a coincidence that it tends to be recognized during economic downturns or financial crises.

Third, bezzle creation seems to be systemic. There are periods, in other words, when it seems that the operation of the financial system errs toward creating bezzle, and these times always seem to be followed by periods in which the bezzle is automatically wrung out of the system.

Fourth, as Galbraith especially pointed out, the bezzle has a self-reinforcing impact on growth in either direction. When it is being created, the illusion of wealth tends to reinforce growth and encourage the creation of more bezzle. When it is being amortized, it tends to inflict additional costs of financial distress on the economy, especially to the extent that it was financed by debt.

Eoin Treacy's view -

I find discussion of the bezzle in valuations a useful way of thinking about how the wealth effect is produced and eventually reverses. The Japanese property bubble or China’s property/infrastructure bubble both fit neatly into those terms with the boom and bust of property markets making relatable backdrops for discussion.



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December 23 2021

Commentary by Eoin Treacy

The Stock Market Is Suffering From Bad Breadth

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

The problem for money managers is that when the returns of the market are being driven by a handful of stocks, they must own those stocks or risk underperforming the market, which creates continuous demand for those stocks that are leading the market higher no matter what their prices. And it was clear during the small correction late last month that so-called market neutral players had been using Apple, Microsoft and Nvidia as a hedge, because as the market declined, those stocks actually rose, as hedges were unwound.

There have been episodes of declining breadth in the past, and those usually presage large corrections or bear markets. The Nifty 50 episode in the 1960s is one example. But even in the dot-com bubble, breadth declined steadily until March of 2000, at which point there was only one stock standing: Cisco Systems Inc. When Cisco broke on an earnings report, that was it for the dot-com bubble.

Eoin Treacy's view -

This talk of declining breadth has been pervasive over the last month and has led to a great deal of hand wringing among market participants. At least part of the reason for that has been the significant underperformance of the “innovation” stocks relative to the mega-caps. These were sold on the basis of being the next big thing a year ago and have significantly underperformed in 2021.



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December 23 2021

Commentary by Eoin Treacy

Three Sinovac Doses Fail to Protect Against Omicron in Study

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

While much is still unknown about how Sinovac’s shot holds up to omicron -- including how T cells, the immune system’s weapon against virus-infected cells, will respond -- the initial results are a blow to those who have received CoronaVac. There have been more than 2.3 billion doses of the shot produced and shipped out, mostly in China and the developing world. 

With omicron seen to be about 70 times more transmissible than the delta variant, the prospect of having to roll out different boosters or even re-vaccinate with a more omicron-specific vaccine will set back the world’s efforts to exit the pandemic.

Eoin Treacy's view -

Evidence has been emerging for months that the primary Chinese made vaccines are ineffective against variants like Delta or Omicron. This article from Reuters focuses on China’s lockdown of Xi’an but highlights that none of the 200 cases found to date are from the Omicron variant. That suggests it is only a matter of time before the newer variant arrives despite the already strict measures to contain the threat already in place.



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December 23 2021

Commentary by Eoin Treacy

European Gas Plunges 20% as Rally Lures Flotilla of U.S. LNG

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

European natural gas prices plunged more than 20% on Thursday as this year’s stellar rally attracted a flotilla of U.S. cargoes.

At least 10 vessels are heading to Europe, according to ship-tracking data compiled by Bloomberg. Another 20 ships appear to be crossing the Atlantic, but are yet to declare their final destinations. U.S. cargoes of liquefied natural gas will help offset lower flows from Russia, Europe’s top supplier.

Gas prices in Europe have surged more than sixfold this year as Russia curbed supplies just as pandemic-hit economies reopened, boosting demand. Delayed maintenance work and power-plant outages also contributed to the rally. Prices in Europe are 13 times higher than in the U.S. and the market is also trading at a rare premium to Asia, making the continent a prime destination for LNG.

 

Eoin Treacy's view -

Today’s move in European gas was exacerbated by forecasts for mild weather. Large numbers of cargoes will need to be delivered to improve the low reserves condition currently present in Europe. The market remains at the mercy of the weather so we can anticipate a great deal of volatility over the coming months. Today’s downward dynamic suggests at least a near-term peak.



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December 22 2021

Commentary by Eoin Treacy

Video commentary for December 22nd 2021

Eoin Treacy's view -

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

Some of the topics discussed include: ethereum holds $4000, Dollar eases, gold rebounds, oil firm, industrial metals continue to rebound, Euro steadies, FANGMAN + Tesla shares rebound and extend outperformance relative to the wider market. Bond yields pause. 



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December 22 2021

Commentary by Eoin Treacy

Europe's Power Crunch Shuts Down Factories as Prices Hit Record

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

Electricite de France SA said last week it will halt four reactors accounting for 10% of the nation’s nuclear capacity, straining power grids already faced with the prospect of a spell of cold weather. At the beginning of January, almost 30% of France’s nuclear capacity will be offline, increasing the country’s reliance on gas, coal and even oil.

“If we have a very, very cold day, it could be problematic, especially if we have to import and our neighbors have problems as well,” said Paris-based Anne-Sophie Corbeau, a research scholar at the Center on Global Energy Policy at Columbia University. “This is the domino effect we need to fear. But electricity will be expensive, there’s going to be a cost to pay.”

German power for next year jumped to a high of 335 euros a megawatt-hour, following a 25% rally on Tuesday, before slipping back. The French equivalent rose as much as 2.5% to record of 408 euros. Prices gained amid thin holiday trading even as gas declines. There was also speculation some traders may be closing short positions due to rising capital requirements from exchanges.

“The strength in the French market has been the main engine -- aside from gas prices -- of strength in neighboring markets, including Germany, in recent days,” said Glenn Rickson, head of European power analysis at S&P Global Platts.

“I also suspect that any big moves ahead of the run-up to Christmas have as much to do with the thinness of the market and traders needing to close short positions ahead of shutting down for the holidays as anything else.”

Soaring gas and power prices have already forced European utility giants from RWE AG to Uniper SE to boost liquidity requirements. Many smaller suppliers didn’t have the same option, with more than 20 going out of business in the U.K. alone.

Eoin Treacy's view -

Half of the UK’s energy traders/providers have gone out of business since the spike in natural gas prices began. The survivors will be the best capitalised companies that can ride out this volatility. They will also benefit in future from capturing market share during this tumultuous period. 



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December 22 2021

Commentary by Eoin Treacy

Musk Says He Has Sold Enough Stock to Unwind 10% of His Stake

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

Elon Musk has disposed of enough shares to reach a target of reducing his stake in Tesla Inc. by 10%, the head of the electric-car leader said in an interview. 

“I sold stock that should roughly make my total Tesla share sale roughly 10%,” he told satirical website Babylon Bee. 

Musk has been offloading Tesla stock since asking his Twitter followers in November whether he should sell some of his stake. The move is part of a plan to generate cash to cover an estimated tax bill of more than $10 billion on stock options Musk is due to exercise.

Eoin Treacy's view -

Elon Musk’s personal holding of Tesla shares represents a significant source of supply. His sales soaked up a lot of demand over the last six weeks and contributed to an almost complete unwinding of the overbought condition relative to the trend mean.



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December 22 2021

Commentary by Eoin Treacy

Email of the day on the tin supply deficit

You have mentioned Afritin Mining as a tin miner to watch. Michael Rawlinson is new board member and believes it could become a billion $ company.

AfriTin NED - Michael Rawlinson Introduction - YouTube

Michael Rawlinson's CV in mining is impressive

Michael Rawlinson has over 25 years experience in mining finance as research analyst, corporate financier, investor and non executive Director. He as the Global Co-Head of Mining and Metals at Barclays investment bank between 2013 and 2017 having joined from the boutique investment bank, Liberum Capital, a business he helped found in 2007. Prior to that he was a Partner at Cazenove and MD at JP Morgan Cazenove.

He is currently Chairman of Balkan mining development company Adriatic Metals plc, a Senior Independent Non-Executive Director at precious metals producer Hochschild Mining and Independent Non-Executive Director at African mining services provider Capital Limited.

I am no expert but this looks like a large flag forming since April and we have now reached the apex of the triangle on the FM weekly chart.

Eoin Treacy's view -

Thank you for this information which may be of interest to the Collective. Indonesia is the primary producer of tin and they are considering a ban on exports of concentrate. The market was already in a chronic deficit and that announcement two weeks ago raised fears tin would be in even shorter supply. The inability of primary producers to increase output and the ongoing difficulties countries like Myanmar and Indonesia are having with COVID have contributed to the squeeze. 



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December 21 2021

Commentary by Eoin Treacy

Video commentary for December 21st 2021

Eoin Treacy's view -

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

Some of the topics discussed include: Santa Claus rally beginning on enthusiasm about future fiscal support, China property developers steady, India tests the trend mean, oil steadies, European natural gas surges to new highs, bond yield steady, dollar stable. 



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December 21 2021

Commentary by Eoin Treacy

'We have got a problem here': Low morale and redistricting hand Democrats a growing retirement issue

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

So far, 23 members of the House Democratic Caucus have announced they will not seek reelection. While it is common for the party in control to see a series of high-profile retirements ahead of a difficult midterm cycle, the sentiment inside the caucus is that even more departures are likely. A combination of political winds tilting toward Republicans, redistricting boxing some members out of easier races and an overall low morale among House members could lead to even more retirements in the coming months.

"We have got a problem here," retiring Rep. Cheri Bustos said of the general morale inside the House. "There are way too many people serving as members of Congress right now who I not only don't look up to, I have zero respect for. And I'm saddened to have to say that."

Bustos, who was first elected in 2012 and represents western Illinois, announced she was retiring earlier in the year and told CNN that she was looking for "a new chapter in her life." But it's clear that the current standing of Congress loomed over the decision. Bustos said that while she believes some Democrats aren't "team players" -- she did not name names -- the bulk of her concerns are with Republicans, and the prospect of turning over power to the GOP in 2022 is disturbing for all Democrats in Congress.

"When you've only got a three- or four-vote majority and you see people who are in tough districts announcing that they're not running for reelection, yeah, everybody worries about what's ahead," said Bustos, the former chair of House Democrats' campaign arm.

Eoin Treacy's view -

If the party in power can’t get key pieces of legislation across the line, it creates the perception of ineptitude. With mid-term elections less than a year away, the Democratic administration should begin to feel some urgency in January with a view to passing at least part of their ambitious goals.



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December 21 2021

Commentary by Eoin Treacy

How Erdogan's Plan to Halt the Lira's Fall Is Meant to Work

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

3. What does it mean for inflation and public finances?
Potentially, the Treasury takes on foreign-currency risk of 3.3 trillion liras ($265 billion) now deposited in retail banking accounts. If the lira depreciates beyond deposit rates, that would impose a burden on the budget. If the central bank prints money to make up the difference, then inflation would spike. 

4. Does this plan address the crux of the problem?
While the worst may be over for the lira for now, with some confidence restored among retail depositors, “until interest rates provide a credible anchor against inflation, the lira will tend to be volatile and subject to downward pressure,” said Todd Schubert, head of fixed-income research at Bank of Singapore Ltd. Much will also depend on whether depositors believe the policy can actually be implemented, according to Brendan McKenna, a currency strategist at Wells Fargo in New York. “Right now, Turkish institutions don’t have a ton of credibility, so there may be challenges getting lira depositors on board,” McKenna said. 

Eoin Treacy's view -

A commitment to ensure retail depositors are made whole regardless of currency volatility is an attractive offer and was behind the massive short covering rally in the Turkish Lira yesterday. A grand gesture was necessary because the central bank intervention earlier this month did not gain traction and the Lira’s accelerated decline persisted.



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December 21 2021

Commentary by Eoin Treacy

India's Banking Revolution Has Started Without the Banks

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

That needs to change. The NITI discussion paper on digital banks argues that the funding cost of India’s top nonbank consumer lender last year was more than 7%, while it was less than 4% for a well-capitalized bank. Why not license internet-only banks to take advantage of low-cost deposits, too, especially if they can use technology to fill $400 billion in unmet credit needs of small business owners? 
 

If banks keep squatting on their entitlements, customers will up and leave. Walmart Inc.’s PhonePe app moves 47% of online money in India, while homegrown Paytm has a 10% share. Alphabet Inc.’s Google Pay, which controls 37% of the market, is using its search expertise to influence customers’ choice of bank deposits. HDFC Bank and its bigger state-owned rival State Bank of India still have a stranglehold on savings. So, they’re the top remitters by default in phone payments. However, when it comes to receiving money, the leader is Paytm Payments Bank. It’s a narrow bank with a limit on deposits per customer. It can neither make loans, nor issue credit cards, though it has finally got access to the central bank’s emergency liquidity window.

Not allowed to function as a proper bank, Paytm hawks credit for others. Last quarter, third-party loans disbursed by the unprofitable fintech jumped six-fold from a year earlier. Still, the Paytm stock is languishing 27% below its recent initial public offering price. Instead of earning fees by creating $1 billion in yearly credit opportunities for partners like HDFC Bank, the app may be more valuable as a digital bank, lending on its own.  

A licensing regime that has fallen behind technological innovation has caused a regulatory vacuum. An RBI working group estimates the number of illegal digital lending apps in India at 600. Many of them “are collecting users’ entire phone contacts, media, gallery, etc.” and using that information “to harass borrowers and their contacts,” the group said.

Eoin Treacy's view -

India’s much vaunted unicorn IPO has followed the trajectory of most recent new issues and quickly unwound the post launch euphoria. Nevertheless, India’s online financial sector is a high growth market and should eventually help to streamline the provision of credit to businesses and consumers to help fuel growth.



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December 21 2021

Commentary by Eoin Treacy

Chinese Developer Stocks Jump Most in a Month

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

Developers on mainland and Hong Kong bourses have diverged in recent weeks, with typically stronger firms listed in Shanghai and Shenzhen outperforming. A move by authorities encouraging lenders to fund acquisitions of projects held by distressed developers may benefit larger, often state-owned firms most. A Bloomberg Intelligence gauge of Chinese property companies mostly traded in Hong Kong closed on Monday near a five-year low before rising 3.4% on Tuesday.

Eoin Treacy's view -

The most likely scenario is many of the private property developers are going to be taken over by state-owned companies. Since that is the most likely result, the state-owned sector will be the primary beneficiary of the rationalisation of the property developers’ sector. 



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December 20 2021

Commentary by Eoin Treacy

Video commentary for December 20th 2021

Eoin Treacy's view -

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

Some of the topics discussed include: stocks markets gap lower but rebound towards the close, oil firms following steep inital selloff, so does bitcoin, gold and bonds ease, Turkey rebounds, Chile sells off. omicron variant is a wild card for China, Hong Kong very oversold. 



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December 20 2021

Commentary by Eoin Treacy

China cuts benchmark loan rate for first time in almost 2 years amid mounting economic pressures

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

Last week, an influential Chinese think tank said China should lower interest rates and boost infrastructure investment to ensure the economy will grow by at least 5 per cent next year.

China’s year-on-year economic growth is expected to drop below 4 per cent in the fourth quarter of 2021, way down from a 18.3 per cent rise in the first quarter.

The fast decline has fuelled concerns of an economic hard landing, triggering calls for more supportive measures.

“We expect a further 45 basis point of cuts to the one-year LPR during 2022. Just as important is what happens to quantitative controls on credit, including on borrowing by local governments. Early signs are these will be relaxed, but not greatly,” added Williams.

“The overall impression, including from [Monday’s] announcement, is that policy is being eased but not dramatically.”

Eoin Treacy's view -

Capital is both global and mobile. It flows to the most attractive assets and helps to create bull markets. From the beginning of the pandemic until now, there has been nothing to worry about in terms of the supply of capital and liquidity. The big question for 2022 is where will the liquidity come from to continue to support bull markets.



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December 20 2021

Commentary by Eoin Treacy

Equinor Wants the World's Last Drop of Oil to Come from Norway

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

Equinor’s Johan Sverdrup oil field is already fully electrified. It started production two years ago and is expected to operate for more than 50 years. The process of extracting the crude emits 0.67 kilograms (1.5 pounds) of carbon dioxide per barrel, compared with the company average of 9 kilograms. The global average is 18 to 19 kilograms.

Yet Norway isn’t the only country with this idea. Saudi Arabia, leader of the Organization of Petroleum Exporting Countries, also says it wants to pump the world’s last barrel. The carbon intensity of the kingdom’s crude matches that of Equinor, at 9 kilograms a barrel, according to Oslo-based consultant Rystad Energy A/S.

There’s also the question of whether it will remain politically possiblefor Norway to remain as a major exporter of carbon-based fuels even as it implements its own emissions reductions, and strives for leadership in areas such as electric cars. Its neighbor the U.K. is already facing stiff opposition to new oil and gas developments on climate grounds, contributing to the shelving of the Cambo field earlier this month. 

Eoin Treacy's view -

Conventional oil wells tend to have lengthy production profiles but even these eventually peak and need to be replaced. For unconventional wells the requirement for fresh drilling is much more urgent because of the steep initial production profile and early peak. The major oil companies are attempting to evolve in an environment where they are going to be judged on their carbon emissions. That’s expensive but ultimately favours the lowest cost producers like Equinor and the GCC.



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December 20 2021

Commentary by Eoin Treacy

Bitcoin Chartbook 2022 Is This Halving Cycle Over?

Thanks to a subscriber for this report from Incrementum. Here is a section:

1.Due to its unusual investment characteristics in terms of performance, correlation and volatility, Bitcoin (and selected altcoins) can serve as useful supplement within a diversified portfolio.

2.Gold and Bitcoin are non-inflatable and as such profit from monetary inflation. Together they shine even brighter due to a superior risk/return profile. We are convinced that an increasing number of investors will treat Gold and Bitcoin as parts of one non-inflatable asset class.

3. Most altcoins are not here to stay. However, some projects have the potential to serve as market disruptors and substantially change aspects in our lives. Conceptionally, we consider (most) altcoins more like venture capital investments, whereas Bitcoin to us is digital Gold.

4. Various indicators are signaling a bullish environment for Bitcoin. However, the most relevant model to monitor is the S2F model by PlanB. In this regard, it is our opinion that the current halving cycle is not over yet. Our base scenario is a delayed peak in this cycle. If this assumption is correct, we could see the Bitcoin price pushing above USD 100,000 in the coming months.

Eoin Treacy's view -

As a trend persists, the evidence from past performance swells to make the bullish case more convincing. This is doubly true for bitcoin because despite its history of significant drawdowns no one who has held the asset for four years has sustained a loss regardless of the price they paid. That’s only possible because the trend has been so strong and the breakouts, when they come, have been among the most explosive of any asset ever.



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December 17 2021

Commentary by Eoin Treacy

December 17 2021

Commentary by Eoin Treacy

Almost Daily Grant's December 15th 2021

Thanks to a subscriber for this edition of Jim Grant’s free letter. Here is a section:

“For somebody who wants to hedge their borrowing costs, it leaves a lot to be desired. It’s a great product as long as credit spreads remain static. The time it really falls apart is in a crisis.”  

The problem: Unlike traditional Libor, which is compiled by a survey of unsecured bank borrowing costs and represents embedded credit risk, SOFR is based on the overnight cost of borrowing cash collateralized by Treasury securities and is thus highly influenced by monetary policy.  In other words, SOFR can be expected to fall in times of market turbulence, as the Federal Reserve typically reacts to such spasms by reducing the benchmark Fed Funds rate. 

Indeed, while Libor raced higher as markets convulsed in the winter of 2020, SOFR declined in tandem with Fed rate cuts in response to the tumult. “When there is stress on the financial system, that’s when it’s going to really fall short,” Wilson cautioned to Bloomberg. “We need to make sure that your hedging products, especially, work during [those] periods.” Despite the decidedly mixed results seen in the March 2020 crucible, regulators have “decided they want everyone to use SOFR,” he marveled. “I can’t explain it.”

 

Eoin Treacy's view -

We are on a long and winding road towards greater central bank and government control of markets. Substituting a market-based rate for a central bank dictated rate is one more step on the road to outright financial repression, as in the 1930s definition of that term.



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December 17 2021

Commentary by Eoin Treacy

Turkey Stock Rout Triggers Circuit Breakers Twice in an Hour

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

Turkey halted trades on all listed stocks after sharp declines triggered a market-wide circuit breaker,
with the lira extending declines to a record low.

Trading of equities, equity derivatives and debt repo transactions were automatically halted twice within an hour after the Borsa Istanbul 100 index fell as much as 7%. The index was earlier up more than 5.6% before sinking as a central bank intervention on the currency market failed to stem the lira’s decline. The currency has come under pressure after the central bank cut its benchmark repo rate by a percentage point to 14% on Thursday, despite inflation accelerating to over 21%.

The central bank’s easing cycle since September saw the key rate fall by 5 percentage points, prompting a rush to buy dollars among corporates and retail investors.  President Recep Tayyip Erdogan has advocated for cuts in borrowing costs, arguing that lower rates will eventually free Turkey’s economy from a reliance on short-term foreign inflows. The policy pivot and the ensuing market turmoil prompted complaints from industrialists, who say the current volatility is hurting companies. 

Eoin Treacy's view -

Less than two weeks ago the central bank intervened to support the currency. In normal circumstances that would begin to re-instill confidence. By cutting rates and bowing to political will, the central bank today demonstrated it is not able to do what is necessary to avoid a currency and debt crisis.



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December 17 2021

Commentary by Eoin Treacy

Cultivated meat: Out of the lab, into the frying pan

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

Cultivated meat has the potential to not just match but surpass the taste and texture of conventional meat, as well as to introduce novel products. If consumers take to these products, the market for cultivated meat could reach $25 billion by 2030 (Exhibit 3). Currently, the world primarily eats the meat of animals that are the easiest to farm industrially, but cultivated meat won’t face those constraints. Instead, the industry could select cell lines from specific animals with the best traits, such as Wagyu beef or wild salmon, and replicate them at the same cost as, say, beef patties or tilapia.

Cultivated meat can also go one step further and select cell lines from animals that are not widely eaten because of their low meat content, long growing time, or lack of availability. For example, ostrich meat, a product that has challenged many ranchers, could be cultivated and become a trendy low-fat, red-meat alternative. There could even be room for highly creative product innovation: the industry’s imaginative take on dodo poultry could make a better nugget than chicken, or a burger made of what research chefs think mammoth might have tasted like could be a mouthwatering new concept.

While most start-ups are focusing first on more popular species and breeds, Eat Just’s GOOD Meat and the company Orbillion Bio are exploring Wagyu, and the company Vow is working to explore more exotic options, such as kangaroo and alpaca.

In the nearer term, companies may choose to focus on a single area and mix plant protein and other flavors into their products to achieve the desired taste and texture. Eat Just’s chicken product sold in Singapore, for example, is more than 70 percent cultivated cells, with a small amount of plant protein added in for structure, while Future Meat in Israel mixes cultivated fat with plant protein. It’s too early to tell if blended options are merely an interim fix or if they present a sufficiently compelling option for long-term adoption.

Eoin Treacy's view -

At a dinner party a few years ago a successful restauranteur held forth on what was required to be successful in the business. She said one had to realise there are only three products groups; Fat, sugar, and salt. You need the correct blend of each to ensure consumers keep coming back. At the same time, if you want to make money, the food had better be salty because then people drink more alcohol which is where margins are widest. That basic rationale is why fast-food outlets focus on all three groups. They keep people coming back for more.



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December 17 2021

Commentary by Eoin Treacy

December 16 2021

Commentary by Eoin Treacy

Video commentary for December 16th 2021

December 16 2021

Commentary by Eoin Treacy

Stocks Under Pressure as Megacap Tech Sells Off

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

A rout in some of the world’s biggest technology companies dragged down the broader equity market, outweighing gains in companies that stand to benefit the most from an economic rebound.

The S&P 500 fell after earlier climbing on bets that central banks can move toward tighter policies to fight inflation without derailing the economy. The Nasdaq 100 tumbled, led by losses in giants like Apple Inc. and Tesla Inc. Commodity, financial and industrial shares rose. European equities jumped as the region’s policy makers unveiled a gradual pullback of pandemic stimulus, while the pound gained as the Bank of England unexpectedly raised rates. Bitcoin slumped.

Central banks are weighing measures to fight price pressures while balancing risks to growth amid coronavirus challenges. European Central Bank President Christine Lagarde unveiled forecasts showing a strong economic rebound along with an outlook for faster inflation. The Federal Reserve said Wednesday it will accelerate the pace at which it tapers bond purchases, and projected rate hikes through 2024.

Eoin Treacy's view -

This is a very whippy environment for trading. No sooner do we see a rebound than most of its is given up. This is attributable to the divergence between central bank pronouncements about their expected rate hikes and what the market believes is possible. Short-dated bond yields contracted today to reflect the expectation that if the Fed were in fact to raise rates three times, there will be economic consequences.



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