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December 18 2020

Commentary by Eoin Treacy

December 18 2020

Commentary by Eoin Treacy

Quadruple Witching Roils Stock Market, Sparking Bursts of Volume

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

Coinciding with the event is Tesla Inc.’s widely-watched inclusion in the S&P 500, a development that alone is estimated to force roughly $80 billion of stock trading. While all the turbulence means headaches for traders, some market watchers view it as the final chance for investors to shuffle big holdings before liquidity thins out into Christmas and the New Year’s holidays.

“Traditionally these are outsized liquidity days, and following the rebalances we expect liquidity to dwindle into year-end,” Wells Fargo & Co. strategist Chris Harvey said. “In other words, Friday is likely the last opportunity to make major portfolio shifts before the 2020 liquidity window closes.”

Quadruple witching typically fuels trading as large derivatives positions roll over. While spikes in volume usually occur around the open and close, providing windows of robust liquidity, large price swings can happen suddenly at any time of the day.

Eoin Treacy's view -

Tesla trades at an historic P/E of more than 1000 and a forward P/E of 297. That’s a racy valuation by any definition. The fact it also has a market cap of $630 billion and will occupy a greater weighting in the S&P500 than Berkshire Hathaway is going to greatly increase the overall valuation of the Index.



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December 18 2020

Commentary by Eoin Treacy

US 'Has Evidence Russia Breached Its Nuclear Networks' in Massive Cyber Attack

This article by Matthew Field for The Telegraph may be of interest to subscribers. Here is a section:

President-elect Joe Biden issued a statement Thursday on “what appears to be a massive cybersecurity breach affecting potentially thousands of victims, including US companies and federal government entities.” “I want to be clear," Mr Biden wrote.

"My administration will make cybersecurity a top priority at every level of government -- and we will make dealing with this breach a top priority from the moment we take office.”

Federal investigators have been combing through networks in recent days to determine what hackers had been able to access and how much damage might have done in one of the most serious cyber attacks on the US government in recent years.

Thomas Bossert, Mr Trump's former homeland security adviser, warned that a Russian cyber attack on the US government could take more than six months to resolve and will require a “staggering effort” to rebuild existing IT systems.

Eoin Treacy's view -

The evolution of cloud computing has resulted in wonder cost savings, productivity enhancements and the ability to work remotely. It has also created additional challenges in securing information and access to databases. 



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December 18 2020

Commentary by Eoin Treacy

Norway Is Seen Leading the Way in Post-Covid Interest Rate Hikes

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

Norway has never cut rates below zero or experimented with quantitative easing, in part because most of its stimulus has been fiscal.

The krone, meanwhile, will end 2020 as the worst performing of the world’s 10 most-traded currencies, in part due to the economy’s reliance on oil. That exchange-rate weakness has helped push inflation above the central bank’s 2% target, with underlying annual consumer prices hitting 2.9% in November.

The central bank signaled that significant uncertainty remains, as the pandemic tightens its grip across Europe.

“The sharp economic downturn and considerable uncertainty surrounding the outlook suggest keeping the policy rate on hold until there are clear signs that economic conditions are normalizing,” Governor Oystein Olsen said in a statement.

Eoin Treacy's view -

Norway is one of the wealthiest countries in the world so it has ample room to support the economy through fiscal measures. As the oil price continues to rebound it will further improve domestic economic conditions and raise the spectre of rising inflation. A stronger currency, particularly when it is coming off a low base helps to keep inflationary pressures in check. That may be the clearest rationale for any country considering raising interest rates. The challenge will be that it will become a magnet for investment flows.



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December 17 2020

Commentary by Eoin Treacy

December 17 2020

Commentary by Eoin Treacy

Chinese EV Makers Trade at High Valuations, Helped by Tesla and National EV Targets

This note from Dow Jones may be of interest to subscribers. Here is a section:

NIO, BYD and Xpeng are examples of Chinese electric-vehicle makers that have surged in value, buttressed by national targets regarding electric vehicles on the road and investors' search for the next EV titans. The American depositary receipts in these companies have surged this year and the meteoric rises put their valuations in line with large traditional car makers, such as General Motors and Ford Motor. To help cut carbon emissions, China aims for EVs to make up 20% of car sales by 2025, and 50% by 2035. Tesla's success this year has also fueled investor appetite for the technology. Investors should be aware though that most Chinese upstarts are unprofitable, The Wall Street Journal reported, and they are also selling far fewer vehicles than major automobile groups.

Eoin Treacy's view -

Tesla’s success in attracting capital has set off a global gold rush in copycats seeking to cash in on investor demand for renewable investments. Anything that has a battery in the description is doing well and a lack of income was not seen as a barrier to entry when discount rates are zero and the world is swimming in cash.

The evolution of the SPAC market has been a gateway for a pace of IPOs to rival that of the late 1990s. The number in 2020 alone has exceeded the total for all other years combined. The result is new companies have been popping up on the stock market at a dizzying pace. Advice to pursue growth at all costs, capture market share and not to worry about profits carry heavy reminiscences of the tech bubble in the late 1990s.



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December 17 2020

Commentary by Eoin Treacy

Email of the day on cannabis stocks

Hello Eoin What is your opinion on Cannabis stocks? All the best from Switzerland, I enjoy your comments every day with greatest interest

Eoin Treacy's view -

Thanks for you support and kind words. Opium poppies have been central to pain medication for millennia. However, they are uniquely unsuited to chronic pain ailments. The issues that have arisen over the last decade with opioid over prescription and addiction are well understood. Considering the significant anecdotal evidence from cannabis advocates, there is a clear rationale for at least giving the medicinal cannabis a second look. My own experience is cannabis ointment is effective in numbing painful muscles temporarily but it is not a cure. Meanwhile, recreational cannabis is where the speculative interest resides.



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December 17 2020

Commentary by Eoin Treacy

China's Central Bank Going It Alone Spurs an Influx of Capital

This article by Tom Hancock and Enda Curran for Bloomberg may be of interest to subscribers. Here is a section:

One reason it hasn’t leaned on its balance sheet as much as global peers is the PBOC largely handed the task of increasing money supply and lowering interest-rates to state-owned banks. It cut bank reserve-requirements, meaning they had more cash to dole out in loans.

With the economy growing again, policy makers have signaled they want a more sustainable pace of credit expansion. By contrast, the Fed, European Central Bank and Bank of Japan have all announced plans to maintain and step-up stimulus into the next year.

“Advanced economy central banks will try to use negative real interest rates and inflation to erode the real value of their sovereign debt,” said Andrew Sheng, chief adviser to China’s Banking and Insurance Regulatory Commission. “This is why real money flows will go to the economies that show growth, higher productivity” and steady monetary and exchange rate policy, he said.

The difference in yield between Chinese government bonds and U.S. Treasuries is already near record levels, with many market players expecting the gap to widen further next year

Eoin Treacy's view -

The Chinese approach to the pandemic has been to allow companies to issue a lot more debt and to give banks the leeway to facilitate that practice. That has occurred despite the uptick in corporate defaults. That has amounted to an addition CNY5 trillion in debt issuance this year or an increase of about 40% over the peaks of the last four years.



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December 17 2020

Commentary by Eoin Treacy

December 16 2020

Commentary by Eoin Treacy

December 16 2020

Commentary by Eoin Treacy

Fed to Maintain Bond Buys Until 'Substantial' Economy Gains Seen

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

The FOMC “expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time,” policy makers said, repeating language from their November statement.

The central bank’s meeting builds on their earlier response to the coronavirus pandemic, in which officials cut interest rates to near zero while unleashing massive bond purchases and a multitude of emergency lending programs.

U.S. central bankers are still far away from their goals, and Powell has repeatedly called on Congress to pass another round of fiscal stimulus to help the economy through the winter as the pandemic continues to rage. The unemployment rate stood at 6.7% in November, while inflation remains below 2%.

Eoin Treacy's view -

There is little chance of additional Fed stimulus while the stock market is within a couple of percent of its all-time high. With the US government agreeing a fiscal stimulus yesterday, that takes some pressure off of the Fed to urgently provide assistance.



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December 16 2020

Commentary by Eoin Treacy

Email of the day on the best day to buy

Would Mr Treacy be able to let us know what day in December is most optimal to buy stocks (at the lowest price)?

Eoin Treacy's view -

Thank you for this question which may be impossible to answer with any true sense of satisfaction. The best time to buy at the lowest prices is after a shake out and if those were predictable, they would be arbitraged out of the market.

I am concerned that no one is asking what is the best day to sell stocks. A large number of high momentum shares have short-term overbought conditions and the stay-at-home mega-caps are underperforming. The timing of investing is one thing but I think a more pressing question is what should one buy. A significant rotation into value and out of mega-caps remains underway.



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December 16 2020

Commentary by Eoin Treacy

Bitcoin Whale Surfaces With $1 Billion and Alan Howard's Backing

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

 

Peters was wary of triggering a spike in the prices of Bitcoin or Ether. He described executing his trades as inconspicuously as possible and finishing all the buying in November before Bitcoin hit $16,000.
Another investor with One River Digital is Ruffer LLP, the U.K. investment firm known for its bets on market volatility.

Ruffer on Tuesday disclosed a 2.5% position in Bitcoin in one of its funds, describing it as “a small but potent insurance policy against the continuing devaluation of the world’s major currencies.”
 

Eoin Treacy's view -

This kind of fund “promotion” falls into the same bracket of market manipulation that Bill Gross and Warren Buffett perform. Buy first then talk loudly to journalists about what a great idea it is to invest in it. It’s highly effective because copycats will always be interested in what the luminaries of the investment world think and are doing with their own money.



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December 16 2020

Commentary by Eoin Treacy

Iron Ore's Towering Rally Set to Roll Into 2021 as Mills Protest

This article by Krystal Chia and James Attwood for Bloomberg may be of interest to subscribers. Here is a section:

Once the biggest iron ore miner in the world, Brazil’s Vale SA fell back to second spot last year after the devastating tailings dam collapse that killed about 270 people and triggered an overhaul of its waste storage facilities.

Vale is still about 100 million tons short of meeting the 400 million tons in output promised prior to the Brumadinho dam disaster. The recovery has been slower than expected, depriving the market of much-needed ore. Like its Australian rivals -- Rio Tinto Group, BHP Group and Fortescue Metals Group Ltd. -- Vale has prioritized value over volume. With current prices above $150 a ton and mining costs as low as $12 a ton, it’s an approach that has reaped rich rewards.

Eoin Treacy's view -

BHP, Rio Tinto and Vale control the vast majority of the iron-ore market. They were very disciplined in refusing to raise production volumes for at least the first half of the commodity bull market. That supply inelasticity was the driver of a significant bull market and only came to a close when high price encouraged competitors into the market. Since then, many of the upstarts have gone bust. Supply might not be as concentrated as it was in the early 2000s but these companies still hold a lot of sway.



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December 15 2020

Commentary by Eoin Treacy

Video commentary for December 15th 2020

December 15 2020

Commentary by Eoin Treacy

Email of the day on third party perspectives on the US/China competition

Very interesting interview for those interested in our regional and international affairs Just ignore the first 3 minutes of the intro in the Malay language if you don't understand Bahasa.

Worth 93 minutes of you time. Download & watch at your leisure.

Kishore Mahbuhani, a Singaporean diplomat, Mahbuhani is brilliant.

Eoin Treacy's view -

Thank you for this video which I agree highlighted a number of interesting themes. The challenge for governments in Asian countries is how to balance the demands for loyalty coming from the world’s superpowers. That’s a particular challenge for those that have historically depended on US support for markets and military protection. They now see their primary growth engine in China while China’s Belt and Road program is the primary source of FDI for many potential projects. 



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December 15 2020

Commentary by Eoin Treacy

Gold Climbs as Stimulus, Fed and Fresh Lockdowns Support Advance

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

 

A bipartisan group of lawmakers delivered details of a $908 billion relief package, splitting it into two
parts in recognition of deep differences over state aid and a liability shield for employers. With Joe Biden now confirmed as president by the Electoral College, leaders in Congress need to find a way to get one or both parts through the House and Senate before the last of the relief provisions from earlier stimulus expire at the end of the year.

Bullion’s path in recent weeks has been dominated by developments on vaccines and prolonged stimulus talks in the U.S., with prices set for the first quarterly loss since 2018. Still, the metal may get some support after the Fed meets Tuesday and Wednesday, with markets expecting fresh guidance on
asset purchases. In addition, the haven may get a boost from fresh anti-virus curbs being rolled out in major economies including Germany and the U.K.

“Prices are looking vulnerable again but should once again be saved by the Fed,” said Edward Moya, senior market analyst at Oanda Corp. “Economic scarring will undoubtedly make it easier for the Fed to continue to provide more accommodation and that could make many traders want to jump back in.”

 

Eoin Treacy's view -

$900 billion is less than what was originally sought but it is still a substantial amount of money. The announcement is also the first concrete evidence of an agreement on additional stimulus since the summer. It vindicates the belief that spending is likely to remain open ended in the coming years as reflation take priority over fiscal responsibility.



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December 15 2020

Commentary by Eoin Treacy

ECB Lifts Ban on Bank Dividend With 15% Payout Cap on Profit -

This article by Nicholas Comfort may be of interest to subscribers. Here is a section: 

Andrea Enria, head of the ECB’s supervisory arm, said in a Bloomberg Television interview that there’s limited visibility on asset quality and that the bank will revisit its decision in September. He also called for moderation on banks’ variable pay.

The cap makes the ECB one of the more hawkish banking watchdogs in Europe. The Bank of England said last week that it will allow lenders to make payouts that don’t exceed 0.2% their risk-weighted assets, or 25% of cumulative quarterly profits over 2019 and 2020 after deducting shareholder distributions.

Eoin Treacy's view -

Europe’s banks are hamstrung by negative interest rates but they still charge fees for just about everything and don’t pay an interest rate. The most significant factor in their favour is the bad debts issue is slowly being eroded. That particularly true on the periphery. 



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December 15 2020

Commentary by Eoin Treacy

Biden Plots Cuba Reset in Rebuke of Trump's Sanctions

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

That strategy includes reducing restrictions on travel, investment and remittances for the island nation that are perceived to disproportionately hurt Americans and ordinary Cubans, said the people, who requested anonymity because the new administration is still coming together. Other measures that target Cuba for human rights abuses would remain in place, the people said.

The prospect of a détente between Washington and Havana rekindles memories of the thaw that Biden helped champion during the Obama administration, when the two nations restored diplomatic ties that had been broken for decades following Fidel Castro’s rise to power.

But the president-elect is returning to an even messier scene: the Cuban economy is suffering its worst crisis since the collapse of the Soviet Union amid fallout from Covid-19 and U.S. sanctions. At the same time, Cuban intelligence officers have helped prop up Nicolas Maduro in Venezuela, allowing his regime to consolidate its grip on power in defiance of demands for free and fair elections.

Eoin Treacy's view -

It looks increasingly likely that outside of the China question, the USA is likely to migrate back to many of the foreign policies championed during the Obama administration. There may also be a quid pro quo in the offing. Perhaps some assistance on the Venezuela question will be provided in return for easing sanctions.



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December 14 2020

Commentary by Eoin Treacy

Video commentary for December 14th 2020

December 14 2020

Commentary by Eoin Treacy

Email of the day on yield to worst versus total return calculations

Dear Eoin. First of all, thank you for all the great work you do! In a recent email there was a quote that mentioned 10-year Treasuries would decline by 2/3 in value if rates go from 1% to 3%. This is not even close to the correct math. A $1000 bond today selling at a 1% semi-annual yield would be worth $828.31 should rates go to 3%. It is true that a 1% bond has greater convexity than a 4% bond but the differences are not nearly as material as the quote suggests. A 4% par bond moving to 6% would trade at $851.23 which is less than a 3% difference to the fall in value for the 1% bond. Hope this helps, (I disclose that I am an actuary :))

Eoin Treacy's view -

Thank you for this email which highlights an important consideration for bond investors. Your raw bond calculations gel with the bond calculators in Bloomberg I used to discuss the issue in the Big Picture Long-Term video.



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December 14 2020

Commentary by Eoin Treacy

Kidney Dialysis Is a Booming Business. Is it Also a Rigged One?

This article by Carrie Arnold for Undark may be of interest to subscribers. Here is a section:

The scheme, according to Wood and other critics, works something like this: Nearly everyone in the U.S. with end-stage renal disease is eligible for coverage by Medicare, even if they are under age 65. The federal program pays a fixed cost of about $240 per treatment. Patients receiving Medicare pay an annual deductible, after which they continue to be responsible for a 20 percent co-payment, or about $48, for each visit.

Patients with private insurance, however — including those with health benefits paid for by their employers — are a different story. Those insurance companies must negotiate payments with for-profit dialysis centers, and research has suggested that the centers have an edge in those negotiations — one they use to jack up prices. One research letter, published last year in the Journal of the American Medical Association, Internal Medicine, found that private insurers paid, on average, over $1,000 per treatment — roughly four times Medicare’s fixed costs.

One possible reason: More than 80 percent of dialysis patients receive their treatments from either DaVita or Fresenius Medical Care, which is headquartered in Germany, giving the two companies upwards of 80 percent of the $24.7 billion American dialysis market — and significant influence over the prices charged to private insurers. What’s more, both are widely known to donate hundreds of millions of dollars to the American Kidney Fund, covering the vast majority of the nonprofit’s budget. That’s a problem, according to Wood. With the help of the American Kidney Fund, after all, more patients are able to stay on private insurance longer, so both companies have an incentive to keep the AKF well-funded. More patients with private insurance means DaVita and Fresenius can bill much higher prices for their dialysis services — and pad their own bottom lines.

According to Wood, for every dollar DaVita or Fresenius donates to the American Kidney Fund, they get roughly $3.50 in return from private insurers. No wonder, then, that the two dialysis giants, which together earned about $2.2 billion in net income in 2019, reportedly donated $247 million to the nonprofit organization in 2018 — roughly 80 percent of the fund’s annual budget that year. (AKF’s own financial documents do not name the companies outright, instead referring to two unnamed corporations. When asked to confirm the identity of these donors, Tamara Ruggiero, a spokesperson for the organization, said the AKF was barred from doing so by rules established by the Inspector General of the Department of Health and Human Services — ironically to “ensure that patients are not unduly influenced in their choice of dialysis providers.”)

Eoin Treacy's view -

This is but one example of how perverse the US healthcare system is. The reality of private health insurance is that there is no competition. The dance between for-profit insures with for-profit providers means that costs are greatly inflated relative to the rest of the world. The existence of vendor financing deals for patients is just another example of how difficult it is to ever reform the system.



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December 14 2020

Commentary by Eoin Treacy

Barnier's Narrow Path: How a Brexit Deal Could Be Done This Week

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

Barnier said that if fishing rights can be settled, then the deal could come this week. But he warned that there’s also a risk the talks could drag on right up to the Dec. 31 deadline, and could eventually end in failure.

France’s junior minister for EU affairs, Clement Beaune, said he doesn’t think the negotiations should go beyond this week because it would leave too little time for dealing with the consequences -- whether that’s ratification or a collapse.

People close to the British team had been talking about a deal as early as Tuesday to give the U.K. Parliament time to ratify the accord before it breaks up for the Christmas vacation. On Monday afternoon, however, an official said there had been no significant progress in recent days despite British efforts to invigorate the process.

What’s the latest mood?

“Obviously, no deal is a possible outcome,” Prime Minister Boris Johnson’s spokesman, Jamie Davies, told reporters on Monday. That marks a step back from Johnson’s warning on Thursday that a no-deal split was a “strong possibility.” But after a moment of optimism on Sunday, both sides are once again talking up the difficulties ahead.

Eoin Treacy's view -

When politicians talk about the possibility of a no-deal it has generally meant they are actively negotiating. When they seem confident of a deal, the market tends to be more willing to support a higher price value for the Pound versus the Euro.



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December 11 2020

Commentary by Eoin Treacy

December 11 2020

Commentary by Eoin Treacy

Sea Fever Off the Cape

This edition of John Authers newsletter for Bloomberg may be of interest to subscribers. Here is a section:

Edwards expected CAPE to be around 10 by now, given the moves in bond yields, and admits he was guilty of a “forecasting error of epic proportions.” But his Ice Age thesis has played out as predicted in Europe, and he has also been correct to predict that stocks would look ever cheaper relative to bonds in the U.S. For now, his judgment is clear: “In my Ice Age view of the world, Robert Shiller is dead wrong. In my view, US equity valuations are a QE-fueled bubble waiting to burst.”

Now the question is whether this is really so different from the Shiller view. His model plainly suggests that stocks will do badly over the next 10 years, and that bonds will do even worse. This was the way Shiller put it in a research piece for Barclays Plc in October, (which can be found on SSRN here):

In summary, investors expect a certain return in equities as compensation for investing in a riskier asset class, and as interest rates have declined, the relative expected return for equities has increased dramatically. We believe this may quantitatively help to explain investors current preference for equities over bonds, and as such the quick recoveries we are observing (with the exception of the UK), whilst still in the midst of a pandemic. In the US in particular, we are once again observing stretched valuations and high CAPE ratios compared to history.

Bond arithmetic may help to show that Edwards and Shiller aren’t as far apart as they appear.

When yields are this low, moving to a higher yield involves serious losses. To get from the current 10-year yield of 1% back to the 3% that 10-year Treasuries were offering as recently as two years ago, the Treasury price would have to drop by two-thirds. (If yields were a more normal 4%, then a two-percentage-point increase would require a fall in the bond price of only one-third.) At this point, bonds offer low income, little upside, and risk of massive downside. 

Maybe it isn’t that big an act of apostasy for someone who remains dubious about the future for stocks to predict that they should still do better than bonds. 

Eoin Treacy's view -

Debt is where the big bubble is inflating. That was true a decade ago and it is truer today. The big question therefore is what would cause this bubble to deflate? We can spend a great deal of time worrying about the CAPE ratio because it is at an historic high level but the fact is that until there is a catalyst to deflate the bubble the status quo will be sustained.



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December 11 2020

Commentary by Eoin Treacy

Disney Shares Hit Record on Forecast of Streaming Surge

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

In a presentation to investors Thursday, the world’s largest entertainment company outlined plans for dozens of new movies and TV shows from those major brands, with an eye toward becoming a streaming behemoth in four years. The company expects its program spending to reach $14 billion to $16 billion annually by then.

Disney+, the entertainment giant’s flagship streaming platform, also is getting a price hike. The U.S. monthly rate will climb $1 to $8 in a move that executives telegraphed earlier this year. In Europe, the price will rise 29% to 9 euros ($11) a month, although there it is getting additional content aimed at adults.

Shares of Disney rose as much as 11% to a record $171 in New York trading Friday. The stock has about doubled since March on the strength of the streaming business.

“The enormous success of Disney+ inspired us to be even more ambitious,” Executive Chairman Bob Iger said at the event. “Our pipeline is much more robust than we initially anticipated,” he said, adding that the Disney+ cadence should soon hit 100 new titles per year.

Eoin Treacy's view -

Disney+ ESPN and Hulu round out Disney’s streaming portfolio. The transmission medium is no longer dependent on cable TV and or satellite connection which affords streaming companies an opportunity to retain more of their earnings. So far, this saving has been passed on to consumers in the form of low subscription fees. However, the route to profitability lies in price rises despite the highly competitive environment.



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December 11 2020

Commentary by Eoin Treacy

Facebook Breakup Would Demolish Zuckerberg's Social Media Empire

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

“Breakups are scary for investors because in some ways they could disrupt the business models,” said Dan Ives, an analyst at Wedbush Securities who called Instagram one of the three best business acquisitions of the past 15 years. Still, Ives thinks the chance of an actual breakup is “slim” without legislative changes from Congress, which he believes are unlikely. “It’s a noisy headline but it doesn’t massively change the situation for Facebook in the near term.”

However remote the prospects, any sign that the FTC is leaning toward a breakup is likely to weigh further on Facebook’s stock. Facebook acquired these promising rival platforms precisely
because it expected the main social network to one day fade, and it wanted to be the company deciding what apps people would turn to next. A breakup would undo most of Zuckerberg’s hedging for
Facebook’s future, just as his immense investments in Instagram and WhatsApp are starting to pay off. Facebook argues that those investments made Instagram and WhatsApp what they are today.

“Our acquisitions of Instagram and WhatsApp have dramatically improved those services and helped them reach many more people,” Zuckerberg wrote in a post to employees on Wednesday. “We compete hard and we compete fairly. I’m proud of that.”

Eoin Treacy's view -

Breaking up Facebook is a monumental challenge which could take years, if it happens at all. However, the constant haranguing of the company by politicians is likely to limit its ability to grow. It will be unable to acquire future up and coming social media platforms to appeal to younger demographics. Musical.ly, which was acquired by TikTok, is an example of how Facebook has already been limited in continuing to buy competitors.



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December 11 2020

Commentary by Eoin Treacy

Wheat Set for Biggest Weekly Gain Since July on Supply Surprise

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

“A 3% increase in global wheat feed demand should add another layer of price support,”Jacquie Holland, an analyst at Farm Futures, said in a note.

On Friday, consultant SovEcon cut its Russian wheat-output estimate 5.2% to 76.8 million tons on adverse weather. Government officials are considering an export tax in addition to a proposal to set a grain-shipment quota for a few months next year, according to an industry group. This week, Putin expressed surprise at sharp price increases for staples including bread and sunflower oil.
 

Eoin Treacy's view -

The pandemic has had an influence on agricultural commodity supply chains. It has also had a meaningful effect on the consumption habits of whole populations. That is all happening against a background of the transition from El Nino to La Nina which has already resulted in a drought in much of Latin America. It also tends to bring much heavier rainfall to eastern Australia.



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December 10 2020

Commentary by Eoin Treacy

Video commentary for December 10th 2020

December 10 2020

Commentary by Eoin Treacy

Email of the day - on the international beauty contest

This article today struck me as being a profound historical perspective on the UK and the EU. It reinforces my view (and yours I think) that the EMs are where the growth will be for the medium-long term. Whether we in the UK will be able to capitalise on this is our question.

Eoin Treacy's view -

Thank you for this emotional article which highlights the frustration many people feel with both the trajectory of European integration and the UK’s membership of the long-term federal project. As David used to say, “the markets are an international beauty contest where we get to be the judges.”



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December 10 2020

Commentary by Eoin Treacy

Chinese Household Debt Surges Through the Pandemic

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

China’s household debt ballooned in the first half of the year, rising by about $380 billion, according to new Bank for International Settlements data. That increase was almost four times as large as the second-place U.S. And it compounds one of China’s biggest economic vulnerabilities.

It has been widely reported that China’s industrial production and exports have helped to power its recovery this year. But the other leg of the recovery is the continued rapid rise of real-estate investment, which is set to outstrip GDP growth again in 2020, as it has in 16 of the past 17 years.

Interest rates this year fell sharply in most countries, but the People’s Bank of China has resisted this trend. That means that whereas borrowers in the U.S. were at least able to refinance real-estate loans, Chinese borrowers are left with largely unchanged debt-servicing costs.

Eoin Treacy's view -

A common sence way of looking at the market is to buy the assets that domestic investors favour. In the USA that’s equities, in Germany it's bonds and in China it is properties. A portfolio made up of that mix would have done rather well over the last few decades.



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December 10 2020

Commentary by Eoin Treacy

SPAC with ties to Biden Cabinet picks sees surge in support from Wall Street after offering "access"

This article by Brian Schwartz may be of interest to subscribers. Here is a section:

A company with ties to at least two people selected by Joe Biden for his Cabinet is seeing a surge in support from Wall Street players after pitching access to investors.

Pine Island Acquisition Corp., a special purpose acquisition company, was first described in September to investors in a prospectus featuring its direct affiliation with the investment firm, Pine Island Capital Partners. The document was filed with the Securities and Exchange Commission as Biden surged in the polls ahead of President Donald Trump.

“We believe that with our access, network and expertise, we are well-suited to take advantage of the current and future opportunities present in the aerospace, defense and government services industries,” the SEC filing said at the time.

Pine Island’s team includes Tony Blinken, Biden’s choice to be secretary of State, and Ret. Gen. Lloyd Austin, his nominee for Defense secretary. Austin was listed on the original SPAC proposal, while Blinken was left off as he took a leave of absence from the firm when he joined the Biden campaign.

Eoin Treacy's view -

It’s not every day that the machinations of influence peddling are made so public. The fact an investment vehicle to take a view on the success of such strategies is easily available is also a new and unsettling development.



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December 09 2020

Commentary by Eoin Treacy

December 09 2020

Commentary by Eoin Treacy

Extracting Growth Alpha in Emerging Markets

This report from Jennison Associates may be of interest to subscribers. Here is a section:

Generally speaking, an investor’s primary motivation for making a portfolio allocation to emerging market equities is the desire to tap into superior structural growth. However, equity market returns rarely correlate tightly to economic growth. There are many attractive secular growth companies in emerging markets—and they exist regardless of the economic growth conditions of their domestic economies. Investors wanting to tap into the powerful long-term benefits of superior structural growth trends can benefit from seeking out highly active strategies. In our experience, a strategy succeeds by continuously seeking out innovative companies with superior growth trajectories. A clear and consistent investment philosophy and repeatable investment process can help to ensure that a portfolio reflects bottom-up decisions that incorporate the superior growth available in EM equities.

The growth opportunity set is bigger than is generally thought. EM companies face challenges and problems different from those of their developed market counterparts, but their distinct circumstances often spur them to innovate and disrupt existing practices. EM companies are moving up the value chain, from export-oriented business models built on low-cost labor and cheap manufacturing to higher-value-added businesses based on technological and scientific innovation. Low recognition of these dynamics by investors and indexes creates an opportunity for growth-minded investors. Add to the mix companies that execute well to exploit a superior economic growth backdrop, and the opportunity set expands.

Eoin Treacy's view -

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

China’s success in developing domestic champions has been truly impressive and they are now among the largest companies in the world by market cap and revenue. Success in expanding internationally has been limited in the technology sector to the Chinese diaspora because the global market tends to be much more competitive than the sheltered environment domestically.



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December 09 2020

Commentary by Eoin Treacy

Email of the day on net central bank selling of gold

You periodically remind us of some of David’s good advice, such as “Don’t fight The Fed”.   The Gold Hub recently reported that central banks around the world were net sellers of gold in Q3. (See attached chart.)  It is easy to see why these institutions want to discourage gold investors.  Are we fighting not only the Fed but every other government in the world?

Eoin Treacy's view -

Thank you for this question. Gold has been in a corrective phase since late August and sentiment has seen a significant reversal. If we remember only a few months ago investors were revelling in the idea that gold was the only asset worth owning. Today there is a lot of questioning about whether it worth owning at all.



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December 09 2020

Commentary by Eoin Treacy

Email of the day - on how we meet in the middle

I have a simple view. There are many political systems that determine how the wealth in a society(economy) is distributed. There is only one economic system that works, and it is called capitalism

And

In an economic system that works there can’t be any ‘working poor’...

Eoin Treacy's view -

Neither of these emails represent the extremes of the current discussion on how rewards should be divided and social inclusion. However societies decide to settle their differences is going to shape the evolution of the financial markets and geopolitics for decades to come.



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December 09 2020

Commentary by Eoin Treacy

Email of the day on vaccines and uptake potential

This article, quite long but worth reading, is by one of my favourite health professionals, Jon Barron.  He is not an anti-vaxxer nor an pro-vaxxer. He provides   a very in-depth  look into the captioned  subject.  If you’re interested in the subject matter, he provides warts and all. You must read the latter part of his article where he suggests using air ionisers to kill airborne viruses. Makes sense to me.

 

Eoin Treacy's view -

Thank you for this informative article by Jon Barron which may be of interest to subscribers. Here were two particularly relevant sections on the side effects of vaccines and the relative risk of fighting an infection unaided:

The CDC reports 1.31 cases of anaphylaxis per million flu shots given and a comparable one or two people in a million will develop GBS. (About 161 million Americans get a flu shot each year.) So, we’re talking approximately 210 cases of anaphylaxis per year in the US, and since anaphylaxis has a fatality rate of between 0.25% and 0.33%, we’re talking about one death every two or three years. As for GBS, a small number of people are permanently impaired, and approximately 3% -5% die.

In other words, somewhere between 4-15 people die every year as a result of getting the flu vaccine, with maybe 300-400 suffering serious injury. Weighed against that is the fact that somewhere around 55,000 people die every year in the US from the flu itself, with most of those deaths occurring in the unvaccinated. Now, to be fair, although complications from flu vaccinations are rare given the number of flu vaccinations administered each year, if you or someone you love is the one who gets injured or dies, then rarity is probably not a mitigating factor in your mind. Incidentally, total compensation paid out over the life of the government’s National Vaccine Injury Compensation Program (NVICP) is about $3.6 billion. That’s a lot of serious side effects. And as I’ve discussed previously, the flu vaccine consistently tops the NVICP’s list of claims made and paid out for injuries and deaths resulting from the side effects of vaccination.3

The bottom line is that the flu vaccine is neither as harmful or ineffective as antivaxxers claim nor as safe or effective as the medical community pronounces. Both sides have lied to you. Unfortunately, this makes any rational discussion about vaccines impossible.

And

Having this kind of reaction to the second dose simply shows that your body is responding the way it should, that the vaccine is working, and that you are building long-term defenses against the virus.

As to any long-term side effects from the COVID vaccines, we will have to wait and see. The bottom line, though, when it comes to safety, is that getting your immunity through vaccination is probably a whole lot less risky than getting your immunity through natural infection (285,000 dead and counting, not to mention several million long haulers). Anyone who likes to gamble will understand where the better odds lie here.

 



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December 08 2020

Commentary by Eoin Treacy

Video commentary for December 8th 2020

December 08 2020

Commentary by Eoin Treacy

ASEAN Macro

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

Eoin Treacy's view -

A l;ink to the full report is posted in the Subscriber's Area. 

Europe and North America are more likely to receive ready access to vaccines developed by western companies in the short term. Meanwhile China is already exporting its vaccine candidate despite the apparent lack of rigour in testing. The first batches of Sinovac’s vaccine arrived in Indonesia today. It remains very likely that within six months there will be a significant oversupply of vaccines. I fully expect the rollout to go much faster than many people expect.



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December 08 2020

Commentary by Eoin Treacy

Email of the day on share dilution

Thanks, Eoin, for your considered response. The point I was trying to get at though is that looking at a stock price chart only can hide all manner of sins. If the share count has doubled, all else equal, the price per share should only be worth half what it was previously. Having said that, I wouldn’t be in the least bit surprised if the Robinhood crowd bid up these names as they search for the last remaining recovery names without due consideration for all of the facts. Though in the short-term markets can be a voting machine, in the long term they are a weighing machine, and ultimately these investors will be found out.

Eoin Treacy's view -

Thank you for coming back on this topic. The most basic principle of price setting is to find the balance point between supply and demand. Supply is a present real-world statistic and demand is always going to be about what the future holds. Therefore, the price reflects both what is known and what is expected about any given instrument.



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December 08 2020

Commentary by Eoin Treacy

Email of the day on government overreach

please just continuing stating what you believe is obvious.

For me this means that in absolute terms and relative to other causes of illness (on a world-wide basis, COVID 19 is only about number 11 of official causes of death) as well as the average age of people dying WITH - NOT necessarily because of COVID-19 but helpful to inflate the otherwise very lowly death statistics -, the "pandemic" is more a matter of a carefully manipulated narrative leading to generalized and well-utilized hysteria which then justifies measures curtailing freedom and dignity of humans and is finally propelling us into a fully "Perfect World" (foreseen by Huxley + Orwell) including Ministries of Truth and other goodies around the globe.

As I almost died of a seriously complicated pneumonia last year involving, among others, various standard Corona viruses, I do have a certain personal perspective on these matters.

Eoin Treacy's view -

Thank you for sharing your personal perspective and congratulations on your recovery. Anyone with any kind of historical sensitivity is likely to share your awareness of the power grab that has taken place this year.



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December 08 2020

Commentary by Eoin Treacy

Email of the day - on mental health

Regarding your comments on the mail about fake news: I would like to point out that your very sound and accurate analysis of the situation this year has helped me tremendously with my investments AND it has helped my mental health a lot. For both of these I am most grateful for your services. please do keep up the good work.

Eoin Treacy's view -

Thank you for your kind words. Mental health is a topic that is personal to all of us but tends to be sensationalised when it is made public. Personally, I have gone through multiple stages of surprise, hope and anger over the last year. That has been as much a reaction to the market as to the ineptitude of the official response in most countries. Many years in the financial business have conditioned me to equate despair in others as a buying opportunity. Despair in myself is usually a sign my position is too large and by opinion was incorrect.



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December 07 2020

Commentary by Eoin Treacy

December 07 2020

Commentary by Eoin Treacy

Email of the day on the risk of dilution

On the weekend review you highlighted Norwegian Cruiselines as one of the deeply impacted stocks along with the likes of Rolls Royce. At what point though should you be considering what has happened balance sheet wise? In their case, at the end of 2019 they had 214mn shares outstanding. At the end of Sept Q that had risen to 271mn (+27%). They have also just issued another 40mn shares to 311mn (+45% on 2019). In addition, they have issued $1.4bn in additional debt as well as convertible notes that can be exchanged for equity at prices lower than today's price. If those notes are converted, another 120mn shares will be issued by 2022, taking the share count to a 431mn, double the 2019 share count. The enterprise value right now is $17.1bn, compared to the Dec 19 enterprise value of $18.5bn. On this basis then, NCLH is within 10% of its pre Covid-high, and so surely, we can't look at the chart and look to the previous trading range for stock price potential. 10% above the current price is roughly $30, rather than the $50 price point the chart might otherwise indicate. The same applies to a host of these sorts of stocks such as Carnival, Royal Caribbean, American Airlines, etc etc.

Eoin Treacy's view -

Thank you for this question which may be of interest to subscribers. There are a large number of companies that have taken on extraordinary quantities of debt this year. That’s true pretty much across the board. Existing shareholders have therefore been heavily diluted.



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December 07 2020

Commentary by Eoin Treacy

Email of the day - on fake news

Great weekend overview of the international investment scene. Thanks.

I am perturbed, though, at your statement in the beginning about US Covid-19 deaths. According to John Hopkins, the US is now experiencing all-time high daily deaths from the virus. Please don't add to the misinformation that has so damaged the US response to the pandemic.

Eoin Treacy's view -

Thank you for this email which raises an important topic of conversation. My best interests are aligned with the best outcomes for the subscribers to this service. This is not a YouTube channel. I’m not chasing likes or telling you what I think you want to hear. I have not identified a demographic I speak to other than people interested in making money.  

We spend nothing on advertising, do not manage money or upsell additional services. The service survives or fails based on the objective facts of whether I am right more often than I am wrong. It’s a terrible business model but it is the best deal for subscribers.

People have become totally irrational about this virus. I’ve spilled enough words on the subject this year and have tried my best to avoid invective. The peak of hysteria was in September we are now coming out the other end of it. Vaccines are being made available this week.

There is clear potential we will be oversupplied by the end of the 2nd quarter. It’s the law of supply and demand in action. Governments have said they will buy whatever supply is produced. The market will respond in kind.

Turning the question of deaths. Here is a screen grab of the WHO’s website on deaths from Sunday night. It is climbing certainly but not at a new high. The CDC’s chart tested the high but did not exceed it.

People have been scared half to death by the threat of an illness. There is massive pent-up demand for all manner of leisure activities as we come blinking out into the light in 2021. The big question is how much of that will be priced in by the time we get there.

The S&P500 continues to hold its breakout to new highs but it has been flattered by the weakness of the US Dollar. The biggest takeaway from 2020 is the coronavirus has had a similar effect on the sentiment of US public officials as 9/11. They are going to do whatever is necessary to reflate the economy. Devaluing the currency to achieve that is the most expedient avenue for success.

I was not willing to admit there was a pandemic risk in the first couple of weeks of January but that changed with the first downward dynamics on the 27th and the contribution of a knowledgeable subscriber was instrumental in my conversion.

Here is a link to my commentary from the day of the low on March 23rd.



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December 07 2020

Commentary by Eoin Treacy

December 07 2020

Commentary by Eoin Treacy

Uranium Stocks Rise on U.S. Defense Bill

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

Uranium stocks outperformed as House and Senate lawmakers revealed a compromise version of the annual National Defense Authorization Act. Meanwhile, industrial metals continued their rally with the global equity markets.

S&P Global reported that the bill effectively provides for the military to continue a policy under President-elect Joe Biden that classifies the domestic supplies of certain minerals such as uranium, graphite and lithium as vital to national security

Eoin Treacy's view -

Ensuring ready demand for North American supply is an important support for the uranium mining sector. Many miners have been producing uranium at a loss because of significant oversupply and the price war Kazatomprom imposed. It’s been years in the making but the big question is whether the excess supply has been worked off.



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December 04 2020

Commentary by Eoin Treacy

December 04 2020

Commentary by Eoin Treacy

Secular Bull Market Investment Candidates Review

Eoin Treacy's view -

On November 24th I posted a review of candidates I believe likely to prosper in the emerging post-pandemic market. It was well received by subscribers so I will post an update on my views on the first Friday of the month going forward. That way subscribers can have an expectation that long-term themes will be covered in a systematic manner and will have a point of reference to look back on.

Media hysteria about the 2nd or 3rd waves has not led to new highs in the number of deaths. The success of biotech companies in deploying vaccines means there is going to be a substantial recovery in the economic activity in 2021 and going forward.

The stay-at-home champions saw their sales growth surge in 2020. It will be impossible to sustain that growth rate in 2021. That’s particularly true for mega-caps. One-way bets on the sector are likely to work less well in the FAANGs going forward.



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December 03 2020

Commentary by Eoin Treacy

Video commentary for December 3rd 2020

December 03 2020

Commentary by Eoin Treacy

Email of the day on political polarization:

I enjoyed getting your summary daily report. I must say, though, that I disagree with your thoughts below:

Quoting Aristotle in this chapter suggests Dalio is more than familiar with Plato’s sequence of political regimes. There has been a tendency among pundits to think of Donald Trump as a tyrant. The conclusion was that his ascendency would lead a transition away from democracy and into disorderly tyranny. Persistent talk of an imminent descent in civil war in various online blogs perpetuates that misreading

More to the point, "those pundits" were positioning a point of view because they realized he was not subject to the conformity that they were not only a part of but also helped direct. They "used' the story line that he was a tyrant when, in fact, he is none of that, rather simply arrogant, loud and not obliged to the protocols of an entrenched system-e.g. an outsider who had no fear of people's opinions of him, therefore dangerous in their eyes. If anything, the current woke/PC movement is actively trying to redefine American values and character.

Keep up the good work!

Eoin Treacy's view -

Thank you for this email and your kind words. I completely agree with your reading of the intentions of pundits to cast the Trump administration as demagogues. However, it is also important to look at the wider top-down picture. Political polarisation is at an all time high.



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December 03 2020

Commentary by Eoin Treacy

Email of the day on the space race

This is an interesting if alarming piece about China and adds weight to your observations about war.

Eoin Treacy's view -

Thank you for this interesting article which may be of interest to subscribers. Here is a section:

In the meantime, though, the distinction between Earth and space has been blurred. Geopolitics used to be Earth-bound, world war was war between continents. Now it isn’t. China is ahead on this. Clausewitz is taught in its military academies and so too is the Prussian argument for a Feldherrenhügel, the mound from which commanders can direct battles. Space is the ultimate “higher ground” from which all strands of a battle can be monitored and directed. That is why the moon is more than a sentimental prize.

A senior Chinese general was quoted in 2016 as saying “the space between the Earth and the moon will be strategically important for the great rejuvenation of the Chinese nation”. The head of the Chinese lunar mission says “if we don’t go there now, even though we are capable of it, then we will be blamed by our descendants. If others go, then they will take over.”

 



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December 03 2020

Commentary by Eoin Treacy

JPMorgan Sees Divergence in S. African Gold, Platinum Stocks

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

Prices of platinum, palladium and other platinum group metals will be supported by demand from China and other major consumers, given an increased push for energy transition, electric vehicles, and reduced emissions. Platinum and its by-product palladium are used in vehicle pollution-control devices.

Platinum companies “are very different now from gold,” Aserkoff said. “They have different drivers from gold, the price of the metals is going to change and the stock prices will behave differently. I don’t think they should be as correlated as they used to be.”

Eoin Treacy's view -

Gold is monetary metal so it tends to attract people who are concerned about the sustainability of a fiat currency system. The other precious metals are also industrial resources. They tend to be held in their own right but they also have industrial utilities. Solar panels are a support for silver prices and catalytic converter demand has been a tailwind for palladium. Platinum has lacked a fundamental driver since the decline of diesel engines. That may now be changing with the evolution of a hydrogen fuel cell market. 



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December 03 2020

Commentary by Eoin Treacy

Email of the day on inflation

With the growing expectation of rising inflation in 2021 what areas of the world markets would you choose to be positioned in if this proves to be the case? I note you only have a few trades on at present. Ae you likely to broaden these in the future?

https://www.bloomberg.com/opinion/articles/2020-12-03/five-reasons-to-worry-about-faster-u-s-inflation

https://twitter.com/Ole_S_Hansen/status/1334476194218205186

Eoin Treacy's view -

Thank you for this question. Governments are going all in on reflation and they are unlikely to stop until they get the inflationary outcome their desire. When above trend inflation is policy rather than a “nice to have” is has to be a more credible option.



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December 02 2020

Commentary by Eoin Treacy

Video commentary for December 2nd 2020

Eoin Treacy's view -

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

Some of the topics discussed include: gold and gold shares continue to rebound, dollar extends decline, yields backing up, yield curve steepening increases pressure on the Fed to intervene but stocks still very firm, oil steady and bitcoin consolidating. 



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December 02 2020

Commentary by Eoin Treacy

The Bull Market Rotates Away From Tech-Driven Mega-Companies

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

At its heart, the rotation is based on the idea that there’s a lot of money in the economy waiting to be spent on things besides video streaming and online shopping. The U.S. personal savings rate was 7.2% at the end of 2019. By April it had surged to 33.7%, and it was still 13.6% in October—almost double where it started the year. Deposits at U.S. commercial banks swelled to almost $16 trillion in November, up from $13.2 trillion at the end of last year. If consumers revert to their pre-pandemic ways, that could set off what Jim Paulsen, chief investment strategist for the Leuthold Group, has called “a growth bomb,” as companies gear up to replace lean inventories.

Fund managers with a value bias say there are still opportunities to take advantage of the change in investors’ tastes. Chris Davis of Davis Funds points to the banks Wells Fargo & Co. and Capital One Financial Corp., whose prices were hammered when lockdowns began in March and still haven’t fully recovered. Davis thinks investors have overlooked how banking regulations enacted after the global financial crisis have made these lenders better able to handle recessions. “When you look at their valuations, the amount of cash they produce, the capital ratios that they have, the reserves they’ve been able to put up—they really have this characteristic of resilience and durability, and yet are priced at this sort of shockingly low level,” he says.

Eoin Treacy's view -

Value has outperformed growth over the last month and yields have been rising. That’s not a coincidence. Value metrics need a discount rate against which to make comparisons while growth sectors tend to do best when interest rates are low.



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December 02 2020

Commentary by Eoin Treacy

Email of the day on what's priced in

Sorry, but what does this mean? "As a result, the share offers a lot of optionality on future innovation."

Eoin Treacy's view -

Thank you for this question and I apologise for being less than clear. Options allow one to gain outsized exposure to an opportunity without having to pay for it upfront. The risk is that the opportunity fails to pan out.



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December 02 2020

Commentary by Eoin Treacy

Chapter 8: The Archetypical Cycle of Internal Order and Disorder

This latest instalment of Ray Dalio’s evolving book may be of interest to subscribers. Here is a section:

One timeless and universal truth that I saw went back as far as I studied history, since before Confucius around 500 BC, is that those societies that draw on the widest range of people and give them responsibilities based on their merits rather than privileges are the most sustainably successful because they find the best talent to do their jobs well, they have diversity of perspectives, and they are perceived as the most fair, which fosters social stability.  

I presume that the current internal orders of countries, like those of the past, will continue to evolve to become something different through the struggles of different classes with each other over how to divide wealth and political power. Because this wealth and power dynamic is very important, it is worth watching closely to discern which classes are gaining and which ones are losing wealth and power (e.g., AI and information technology developers are now evolving to gain it at the expense of those who are being replaced by such technologies) and also to discern the reactions to these shifts that lead the cycles to change.

So, as I see it, everything is changing in classic ways driven by a tried-and-true perpetual-motion machine. This machine has produced, and is producing, different systems, such as communism, fascism, autocracies, democracies, and evolutionary descendants and hybrids of these such as “state capitalism” in China. It will produce new forms of internal orders to divide wealth and allocate political power that will affect our lives greatly, all based on how people choose to be with each other and how human nature enters into how they make their choices. 

Eoin Treacy's view -

Quoting Aristotle in this chapter suggests Dalio is more than familiar with Plato’s sequence of political regimes. There has been a tendency among pundits to think of Donald Trump as a tyrant. The conclusion was that his ascendency would lead a transition away from democracy and into disorderly tyranny. Persistent talk of an imminent descent in civil war in various online blogs perpetuates that misreading.



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December 02 2020

Commentary by Eoin Treacy

Australia Economy Set for Rapid Recovery After Exiting Recession

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

Gross domestic product advanced 3.3% in the three months through September, exceeding estimates, as consumption surged by the most in the 60-year history of the report, the Australian Bureau of Statistics said in Sydney Wednesday. The rebound came after the economy contracted 7% in the second quarter.

The expansion occurred as Victoria state, representing a quarter of the economy, was shuttered to contain a renewed Covid-19 outbreak and before the announcement of the additional fiscal-monetary injection. Reserve Bank chief Philip Lowe has made clear he’s prepared to run the economy hotter than normal, given elevated unemployment and little risk from price pressures.

“The first step was to build the bridge to get us over the pandemic,” Lowe said in parliamentary testimony on Wednesday. “We’re coming down the other side of that, we’re kind of ramping off the bridge and now it’s building the road to recovery.”

Eoin Treacy's view -

Limiting the spread of the pandemic to Victoria, at least until vaccines become widely available, has been a major success for Australia. It also leaves the country in a strong position to accelerate out of the recession with minimal loss of capacity. While the unemployment rate3 has jumped two percent this year, that is a small increase relative to what has been seen in European and North American economies. 



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December 01 2020

Commentary by Eoin Treacy

Video commentary for December 1st 2020

December 01 2020

Commentary by Eoin Treacy

It will change everything: "DeepMind's AI makes gigantic leap in solving protein structures

This article by Ewen Callaway for Nature may be of interest to subscribers. Here is a section:

“It’s a game changer,” says Andrei Lupas, an evolutionary biologist at the Max Planck Institute for Developmental Biology in Tübingen, Germany, who assessed the performance of different teams in CASP. AlphaFold has already helped him find the structure of a protein that has vexed his lab for a decade, and he expects it will alter how he works and the questions he tackles. “This will change medicine. It will change research. It will change bioengineering. It will change everything,” Lupas adds.

In some cases, AlphaFold’s structure predictions were indistinguishable from those determined using ‘gold standard’ experimental methods such as X-ray crystallography and, in recent years, cryo-electron microscopy (cryo-EM). AlphaFold might not obviate the need for these laborious and expensive methods — yet — say scientists, but the AI will make it possible to study living things in new ways.

And

The first iteration of AlphaFold applied the AI method known as deep learning to structural and genetic data to predict the distance between pairs of amino acids in a protein. In a second step that does not invoke AI, AlphaFold uses this information to come up with a ‘consensus’ model of what the protein should look like, says John Jumper at DeepMind, who is leading the project.

The team tried to build on that approach but eventually hit the wall. So, it changed tack, says Jumper, and developed an AI network that incorporated additional information about the physical and geometric constraints that determine how a protein folds. They also set it a more difficult, task: instead of predicting relationships between amino acids, the network predicts the final structure of a target protein sequence. “It’s a more complex system by quite a bit,” Jumper says.

Eoin Treacy's view -

The sheer breadth of what we do not yet know about biology is becoming more apparent all the time. That’s the greatest benefit of advances in technology, it makes answers possible where questions were never considered.



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December 01 2020

Commentary by Eoin Treacy

Traders Rush Out of Treasuries on Optimism About U.S. Stimulus

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

After efforts to prop up the virus-ravaged U.S. economy stalled for months, a group of Democratic and Republican lawmakers revealed a $908 billion stimulus proposal Tuesday. Getting it approved is far from assured. If it does pan out, that could prompt more money to move out of the safety of U.S. debt into stocks, accelerating a shift that began in November when the Dow Jones Industrial Average enjoyed its best month since 1987 amid promising Covid-19 vaccine news.

“Treasury yields are playing catch-up with the enthusiasm in the rest of the market, and it appears the impetus for additional fiscal spending is the catalyst for rising rates today,” said Charles Ripley, an Allianz Investment Management strategist who is based near Minneapolis.

Eoin Treacy's view -

Investors appear to be rapidly reaching the conclusion that we are going to see simultaneous monetary and fiscal stimulus in 2021. That’s at odds with what is normally a feature of the 1st year of the US Presidential cycle. Historically, new governments have attempted to clear out the proverbial Augean stables in the first year of the term before electioneering begins for the mid-terms. 2017 was also an anomaly because of the Trump tax cuts and 2021 is unlikely to see any meaningful attempt at fiscal rectitude.



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December 01 2020

Commentary by Eoin Treacy

Bitcoin's Rally Spurs Wall Street to Question Future of Gold

This article by Eddie Spence and Yvonne Yue Li for Bloomberg may be of interest to subscribers. Here is a section:

“The transparency in Bitcoin is helping drive a lot of interest,” said Lyle Pratt, an independent investor who owns Bitcoin. “Gold is kind of like a blackbox, you have to trust the custodians to tell you about any flows in the market.”

For Plurimi Wealth LLP’s Chief Investment Officer Patrick Armstrong, who allocates 6.5% of his discretionary funds into gold, even if Bitcoin has potentially bigger upside in an inflationary spiral, the risks are just too big. Gold also has a long history as a store of value that Bitcoin can’t match. There’s always the nagging suspicion that another, potentially central-bank backed, digital currency could supplant it.

“If the debasement trade works, it is very possible Bitcoin works better,” he said. “But it is also possible Bitcoin has no value in years to come, while I do not think the same can be said of gold.”

One thing that’s clear is Wall Street is taking Bitcoin seriously in a way that it didn’t in 2017. “I have changed my mind!” wrote Sanford C. Bernstein strategist Inigo Fraser-Jenkins in a report Monday. Bitcoin won’t replace gold, but there’s room for both, he said, especially if the future is one of inflation and extreme debt levels.

“I see it as being complementary,” he said in an interview. “Whatever one’s starting position was before the pandemic in terms of what your gold and crypto allocation should be, I think it should be materially larger now.”

Eoin Treacy's view -

Many institutional investors missed out on the initial run-up in bitcoin prices and they are committed not to miss out on this one. The big inhibition for institutional money has been the question of custody. With so many examples of exchanges being robbed and even of an exchange CEO dying with the encryption key only committed to memory, there are obvious questions about the security of custody services. That issue was addressed when Fidelity began to offer custody services. Now that both Square and PayPal are offering transaction services, the perception of risk has been reduced but not eliminated.   



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December 01 2020

Commentary by Eoin Treacy

Email of the day on top formations

Looking at the chart of Franco Nevada, is that a head and shoulders top formation?

Eoin Treacy's view -

A head and shoulders top formation is an iteration of a ranging, time and size Type-3 top discussed at the Chart Seminar. Tops are more difficult to identify than bottoms because the natural proclivity of prices is to rise once a trend has been established. Therefore, a number of factors need to fall into place to confirm top formation development.



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November 30 2020

Commentary by Eoin Treacy

Video commentary for November 30th 2020

November 30 2020

Commentary by Eoin Treacy

Will globalization survive COVID-19?

This report from UBS may be of interest to subscribers. Here is a section:

Eoin Treacy's view -

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

If reflation is the new buzzword for governments, resilience is what companies are focusing on. Many were caught flat-footed by the pandemic and they will now actively transition to greater diversity of suppliers, holding more inventory and nearshoring manufacturing capacity.



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November 30 2020

Commentary by Eoin Treacy

London 'Thrown to the Lions' as Brexit Finance Deal Unlikely

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

The bloc has already made a land grab for London’s euro swaps clearing business, urging its banks to accelerate a shift to Europe. Deutsche Boerse AG’s Eurex Clearing has built up a 19% share of the business over recent years although it is dwarfed by London’s market share.

In recent weeks, Goldman and JPMorgan Chase & Co. have indicated that between them more than 300 staff will move to continental cities. Goldman is shifting as much as $60 billion in assets to Frankfurt, while JPMorgan is moving about $230 billion to the German city.

Consultancy EY said in a new report Monday that only 10% of big financial services firms are planning to establish or expand operations in the U.K. in the coming year, discouraged by the uncertainties of Brexit and the Covid-19 pandemic. That’s down from 45% in April.

Eoin Treacy's view -

The City of London is the UK’s cash cow and that is particularly true since North Sea oil went into decline. The City employed 360,000 people in banks and contributed £31 billion in taxes in the 2017. In the aftermath of Brexit, both those figures will be smaller but not catastrophically so.



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November 30 2020

Commentary by Eoin Treacy

November 30 2020

Commentary by Eoin Treacy

Bitcoin Is Winning Covid-19 Monetary Revolution

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

Some economists, such as my friend Ken Rogoff, welcome the demise of cash because it will make the management of monetary policy easier and organized crime harder. But it will be a fundamentally different world when all our payments are recorded, centrally stored, and scrutinized by artificial intelligence — regardless of whether it is Amazon’s Jeff Bezos or China’s Xi Jinping who can access our data.

In its early years, Bitcoin suffered reputational damage because it was adopted by criminals and used for illicit transactions. Such nefarious activity has not gone away, as a recent Justice Department report makes clear. Increasingly, however, Bitcoin has an appeal to respectable individuals and institutions who would like at least some part of their economic lives to be sheltered from the gaze of Big Brother.

It is not (as the term “cryptocurrency” misleadingly implies) that Bitcoin is beyond the reach of the law or the taxman. When the Federal Bureau of Investigation busted the online illegal goods market Silk Road in 2013, it showed how readily government agencies can trace the counterparties in suspect Bitcoin transactions. This is precisely because the blockchain is an indelible record of all Bitcoin transactions, complete with senders’ and receivers’ bitcoin addresses.

Eoin Treacy's view -

Bitcoin’s jump to new highs over the weekend is another example of volatility in quiet weekend trading and suggests the downdraft last weekend was an attempt to influence weak holders so sell and to trigger stops.



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November 30 2020

Commentary by Eoin Treacy

November 27 2020

Commentary by Eoin Treacy

November 27 2020

Commentary by Eoin Treacy

Email of the day on the Service

I have been a subscriber for just over 30 years, and in that time, I can't recall many times when a clear and concise analysis of economic and political conditions was as important as it is today. You are doing a wonderful job at keeping the collective informed, allowing us to see a broader picture than our individual biases might otherwise give us. Thanks so much!

And

Congratulations our last subscriber commentary was exceptional. You have done wonders for my confidence and ability to help my clients. Keep up the good work. Best wishes

Eoin Treacy's view -

Thank you both for your kind words and it is enormously gratifying that subscribers find value in the Service. That’s particularly true for veterans who have been with us for decades. Given both the demand and positive response for a reasonably succinct list of thematic investments that cover the prevailing market outlook, I’ll review the list on at least a monthly basis. The first Friday of the month which would coincide with the Big Picture Long-Term audio/video makes sense to me.



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November 27 2020

Commentary by Eoin Treacy

Copper Hits Seven-Year High as Demand Hopes Build

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

The recent surge for metals has been powered by expectations that a coronavirus vaccine deployment next year will ease global economic pain, and mean China isn’t the only region driving demand growth. Dollar weakness has also helped.

The metal is also gaining traction as a bet on hawkish climate policies that will expand copper-rich power networks. China’s rapid economic rebound has driven its imports to record levels this year, helping to offset lower demand in the rest of the world. The country’s latest factory gauge, due
Monday, is expected to show activity in the top copper consumer continuing a steady expansion.

On Friday, data from the Shanghai Futures Exchange showed copper stockpiles in its warehouses falling to the lowest since late 2014.

Eoin Treacy's view -

Japan started out as a low-end manufacturer and progressed into high end manufacturing by developing its automotive sector and later a semiconductor sector. South Korea followed the same path to development and China is now attempting to do the same thing at scale; first with the automotive sector and now with semiconductors.  



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November 27 2020

Commentary by Eoin Treacy

Email of day on gold

What strikes me and many other observers is that Gold is down by 1.5% to 1785 cash (just before Nov. contract expiry date…) but GDX and GDXJ are UP by 0.4% and 0.9%!

Silver is DOWN by 3% (just before Nov. contract expiry date…) while Silver miners SIL is also slightly UP!

As miners normally lead for me the dichotomy between metals and miners is probably due to the bullion banks trying to push down prices for the (RECORD!) deliverable contracts (they are short Gold by about USD 35bn!) and will allow metal prices to rise next week

If so, then this then be in tune with your Nov. 26 turn-around/bottom +- 1-2 trading days for the 10 and 20 day cycles.

Thinking about undoing my residual hedge via JDST before markets close early today….

What is your view on the above?

I much wonder if your bottom-fishing orders for PM’s were triggered today – but I suppose you want to get in at prices closer to 1700 for gold…

Eoin Treacy's view -

Thank you for this question and for pointing out this divergence between gold and gold mining stocks. The proximity of the expiry of gold contracts is relevant not least because of demand for physical metal. It is well within the realm of the possible to think enterprising institutional traders might like to see a lower price ahead of delivery.



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November 27 2020

Commentary by Eoin Treacy

Crypto Boom Shaken as Bitcoin Plunges Along With Other Coins

This article by Eric Lam and Todd White for Bloomberg may be of interest to subscribers. Here is a section:

The sell-off gathered pace late Wednesday after Coinbase Inc. Chief Executive Officer Brian Armstrong tweeted about speculation the U.S. is considering new rules that would undermine anonymity in digital transactions.

“News that the Trump administration may clamp down on crypto might have been a trigger for the drop,” said Antoni Trenchev, managing partner of Nexo in London, which bills itself as the world’s biggest digital-coin lender. “But any asset that rallies 75% in 2 months and 260% from the March lows is allowed to undergo a correction.”

Other coins including XRP tumbled as much as 27%, according to prices compiled by Bloomberg.
After garnering more support from Wall Street money managers and fund providers, the rally in cryptocurrencies had looked over-heated. The fierce retreat could stir yet another debate over their value in diversifying portfolios.

Eoin Treacy's view -

At its peak there was a question whether bitcoin would consolidate like any other asset or would its momentum take it immediately on to new highs. The answer was delivered late Wednesday with a clear downward dynamic which checked momentum. The threat of regulatory intervention in the cryptocurrency market is always a risk unfortunately.



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November 25 2020

Commentary by Eoin Treacy

November 25 2020

Commentary by Eoin Treacy

November 25 2020

Commentary by Eoin Treacy

Inflation Regime Roadmap

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

So there’s plenty to choose from here and all seven are useful to hold in mind when thinking about inflation. For our part, we think an acceleration in inflation could now be driven by a combination of the following – the first two being critical to our case:

Monetarism – expecting persistent deficit financing causing the money stock (M2) to rise relative to GDP. Some would classify this as demand-pull inflation;

Marxism – believing that it will be impossible to re-impose austerity after the Coronavirus is over and that voters will demand rising real wages to control income inequality. Some would classify this as cost-push inflation;

Neoclassical effects – the just in time, Asia-dominated global supply chain is likely to morph into a just in case, home-grown supply chain, causing a large-scale supply-side disruption;

Environmental effects – on the basis the one should never let a good crisis go to waste, it’s likely that G7 governments now use their new-found balance sheet room to accelerate the capital investment required to make their economies ecologically sustainable, which will have the side effect of raising fixed capital costs for private sector firms.

Eoin Treacy's view -

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

Some concern has been expressed this week at the impending expiry of the moratorium on evictions in the USA. This is a useful graphic.

It highlights the fact that many states have 30% delinquency on mortgages/rent. Interestingly, despite the widely held view that New York is on the cusp of being denuded of inhabitants, it is far from the worst in terms of delinquency.



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November 25 2020

Commentary by Eoin Treacy

Email of the day on The Chart Seminar and crypto-proxies

A very interesting commentary Eoin and thank you for all of your wisdom during these very trying times.

I have been watching crypto price action very carefully over the past 8 months and can fully comprehend the attractions as an alternative to fiat money and even gold.

However, like many investors I am very reluctant to purchase into crypto given the lack of regulation and the past references to the dark and unsavoury investors in Bitcoin and other cryptos. I think you expressed similar reservations in last Friday’s video or comment of the day.

I therefore decided upon another way to access this opportunity with improved protections and less smoke and mirrors. I purchased in May shares in Argo Blockchain (ARB.L) a quoted company on the London market. They are Bitcoin miners and as you would imagine there has been a strong correlation between their share price and the Bitcoin price action.

I am mindful to either take some profits or open a trading position if we see acceleration as part of a Santa Claus rally.

Finally, I hope that all the positive vaccination news will enable you to go back on the road with the Chart Seminar later in 2021. It’s been far too many years since I last attended in London and it will be a retirement present to myself to attend the first London date post Covid. Any up to date thoughts on the subject will be much appreciated.

Eoin Treacy's view -

Thank you for your kinds and this email which may be of interest to the Collective. I can confirm I looking forward to getting back on the road with the 52nd year of The Chart Seminar in 2021. To be on the safe side, it will probably be in the second half of the year.

I looked into holding online seminars but we did not have enough interest and the geographical dispersion of potential attendees made it unworkable. I have done online courses for select clients in the past. They do not offer even close to the same experience of working through problems in the market as a personal social setting.



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November 25 2020

Commentary by Eoin Treacy

Australia's 'Paradox of Thrift' Risks Japan-Style Price Weakness

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

The irony of the parsimonious attitude toward pay is governments are throwing around billions of dollars in stimulus programs to support the economy and ratcheting up debt to an extent that makes such restraint almost irrelevant.

To make the new wage guidance more palatable, the federal government scrapped a 2% cap on wage gains, meaning that when businesses are boosting pay, public servants could also enjoy larger gains.

The danger is “a negative feedback loop becomes entrenched: low inflation outcomes lower the public’s inflation expectations, which in turn keeps inflation low,” said Sheard, who hails from Australia. “This in a nutshell is the story of Japan’s two-decade deflation.”

Eoin Treacy's view -

It beggars’ belief that public sector wages can increase faster than the private sectors but such is the power of unions. It seems people often ignore the fact that all public wages are ultimately paid from tax revenues. Everything possible should be done to celebrate the ingenuity of the private sector in order to boost profitability and widen the tax base.



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November 25 2020

Commentary by Eoin Treacy

Murderers, rapists got unemployment money in $1 billion California taxpayer fraud

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

So far, investigations have uncovered more than $400,000 in state benefits paid to death row inmates, and more than $140 million to other incarcerated people in California’s 38 prisons, according to Sacramento County District Attorney Anne Marie Schubert, who helped organize and lead a task force that uncovered the alleged dupery. In total, payments to those ineligible due to incarceration in prisons and jails could total nearly $1 billion, the prosecutors claim.

“The murderers and rapists and human traffickers should not be getting this money,” said Schubert. “It needs to stop.”

Kern County District Attorney Cynthia Zimmer, whose district has five prisons, the most of any county in California, called the scope of the scams shocking. Zimmer said her office had found about $16 million in allegedly fraudulent claims in her county alone.

“I’ve been a prosecutor for 36 years,” she said. “I have never seen fraud of this magnitude.”

Newsom on Tuesday announced a task force to tackle the problem.

“Unemployment fraud across local jails and state and federal prisons is absolutely unacceptable,” the governor said in a statement. “Earlier this year, I launched a strike team to expedite unemployment payments and to minimize abuse of the system. When we saw evidence of fraud in correctional facilities, I directed the Employment Development Department to review its practices and to take immediate actions to prevent fraud and to hold people accountable when fraud is not prevented.”

Eoin Treacy's view -

The USA is one of the most advanced countries in the world but investment in digitising the workings of the bureaucracy are absent. That’s a symptom of the polarisation in the political framework because neither side is willing to risk upsetting their base. The big question is how long that can go on given the size of deficits at both a federal and state level. 



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November 24 2020

Commentary by Eoin Treacy

Video commentary for November 24th 2020

Eoin Treacy's view -

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

Some of the topics covered include: relief at prospect of US smooth transition of power, gold testing MA on increasing global risk appetite, recovery candidates continue to outperform, oil hits new highs, platinum and copper firm, Dollar weak, stock markets outside of megacap tech strong, 



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November 24 2020

Commentary by Eoin Treacy

Email of the day on reflation candidates and whether it is too late

Eoin, the reflation trade seems to be well under way and you have repeatedly viewed commodities (both industrial and soft) to be an attractive investment for a lengthy period of time and at times, you have mentioned a possible investment vehicle. I suggest that you present those ETF/ETC and other funds/shares or a combination which you believe will best cover this area at the present time. I would think that many in the collective will appreciate getting such a list from you.

This also against the background that gold, PMs in general and PM miners seem to have to work off their overbought condition and for the time being, don't seem to be needed as safe havens as worldwide growth is picking up and neither inflation nor systemic risk are perceived as major issues at this time.

Therefore, in my view industrial and soft commodities should be the better investment compared to PMs for some time to come.

And

Dear Eoin, I hope you and the family are well. This "rotation" trade seems to have run quite far and I sense a general frothiness to markets, (apart from gold of course). Would, you go with the crowd here hoping for further gains? Or would you wait for a pull-back, (which today feels like it may never come) and maybe nibble at a few out of favour stocks/themes? Best wishes,

And

Interesting picking up on your views regarding soft commodities.  Some directly investable ideas seem hard to track down related to this theme in the UK market; really appreciate your suggestions as to how to invest in this and am sure others would be interested as well.

In general, the markets seem to be moving very rapidly at present, e.g. Royal Dutch, +5%, Glencore +5% etc, so your guidance about how best to play these trends that you are identifying is hugely helpful in your day to day notes and commentary.  

And

It would be useful to have a list of ETFs to play a number of different themes: 1) COVID recovery candidates like airlines and hospitality, 2) value, 3) small caps, 4) general Asian exposure.

Eoin Treacy's view -

Thank you all for these questions which highlight the emotional difficulty of buying breakouts. When sectors and indices trade out to new highs there is always a temptation to think they may have already gone too far. The big question then is to gauge whether the animating factor behind the breakout has the potential to persist.



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November 24 2020

Commentary by Eoin Treacy

Bitcoin Mania Grips Retail Traders in Flashback to Fall 2017

This article by Claire Ballentine and Edward Robinson for Bloomberg may be of interest to subscribers. Here is a section:

“FOMO is slowly kicking in. We are only just beginning to see some of our retail clients borrowing against their Bitcoin to buy more Bitcoin and that will ultimately propel the rally well into the $20,000s and beyond,” said Antoni Trenchev, co-founder and managing partner of Nexo in London, which bills itself as the world’s biggest crypto lender.

Trading got so intense overnight in XRP that U.S. cryptocurrency exchange Coinbase crashed, according to media reports. That sparked a plunge in the coin after the massive rally took it to a record.

Coinbase’s official status page says that its website is operational, and that an incident on Monday at 10 p.m. has been resolved. A spokesperson from Coinbase said they are looking into Bloomberg News’ request for comment.

While Main Street investors may be dreaming about hitting a jackpot, more seasoned market veterans remain wary about the sudden boom. The crypto world is notoriously opaque, and unlike stocks or bonds, which are rooted in economic and business fundamentals, getting a read on what makes Bitcoin tick can be impossible even for the savviest investors

“Whenever I see mainstream media attention like this, that usually leads to a sell-off,” said Kevin Murcko, the founder and CEO of CoinMetro, an Estonia-based crypto exchange. “The big fish need to lay off risk so they open the floodgates to bring in retail guys to dump on. Not sure this is the case this time around but it seems a bit suspect.”

Eoin Treacy's view -

Back in 2017, legions of college kids went home for Thanksgiving and convinced their parents investing in bitcoin was a good idea. The price jumped from $8000 to over $1900 in the ultimate Santa Claus rally. It then gave up the whole advance by the beginning of February.



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November 24 2020

Commentary by Eoin Treacy

Experimental cancer vaccine passes animal tests, moves to human trials

This article by Rich Haridy for Newatlas.com may be of interest to subscribers. Here is a section:

"We are excited to begin testing of this vaccine in the United States to offer new hope to patients with lung and other cancers,” adds Kaumaya. “Reaching this point where we can transition our findings from the lab to the clinic speaks to the perseverance and dedication of Imugene's clinical and research team – including our research lab staff at Ohio State – to build on the clinical and commercial potential.”

The new research was published in the journal Oncoimmunology and the video below offers a more detailed explanation of how the novel cancer vaccine works.

Eoin Treacy's view -

Cancer vaccines are already very successful in preventing cervical cancers. A shot to prevent some forms of lung cancer would be a gamechanger for many individuals. The question is not if buy when these new technologies reach commercial utility because the profit prize from success is so large.



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November 23 2020

Commentary by Eoin Treacy

Video commentary for November 23rd 2020

November 23 2020

Commentary by Eoin Treacy

Email of the day - on the politicisation of monetary policy

I hope life for you in California is more fun than it is here in England. But let's hope we really are past the low point as far as the virus is concerned. I had thought that would be true for economies too, but this latest move by President Trump (summarised in the article by Ambrose Evans Pritchard) does raise questions. With this move, which asset classes do you think will benefit and which will lose on a 3-6 month timescale?

Best wishes to you and family. 

Eoin Treacy's view -

Thanks for the well wishes and this article which may be of interest to the Collective. All is well with us since the streets were blessedly free of protestors following the election. I guess they got the result they wished for. Here is a section from the article:

He instructed Fed chairman Jerome Powell to return the unused portion of a $454bn (£342bn) account approved by Congress during the market meltdown in March. This seed money gave the Fed $4.5 trillion extra lending power under a policy of 10:1 leverage and had an electrifying effect on market confidence, helping avoid the errors made in 2008.

Krishna Guha from Evercore ISI said the Fed’s market stabilisation policy had been politicised. Congressman Bharat Ramamurti, a member of the House oversight committee on stimulus, called Mr Mnuchin’s move an unjustified and ideological decision by the treasury department.

The Fed retains its monetary policy powers and can purchase further US treasury bonds but that is a blunt tool at this juncture unless it is married to aggressive fiscal expansion, which the Republican Senate has vowed to block.

The Fed is concerned that more QE will chiefly inflate asset prices without doing much to help the real economy, exacerbating social inequality.

Congress stripped the Fed of its discretionary powers under Article 13 after the Lehman crisis. The Fed now needs permission from the treasury to go beyond its normal mandate. This was granted immediately during the panic in late March.



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November 23 2020

Commentary by Eoin Treacy

PayPal and Square's Cash App have scooped up 100% of newly mined bitcoins, report says

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

PayPal and Jack Dorsey's Cash App have bought 100% of newly mined bitcoins as the digital token is seeing a record rally this year, according to Pantera Capital's monthly blockchain newsletter.

After PayPal announced it would allow its users to buy, sell, and hold the digital token, about 300 million active users got instant access to digital currencies.

The US payments firm's crypto-exchange platform, itBit, was recording only moderate volumes until PayPal's announcement.

But once PayPal's service went live, itBit's volumes started exploding within four weeks. PayPal is already buying 70% of the newly mined bitcoins while Cash App has bought about 40%, Pantera said.

Eoin Treacy's view -

If one company is buying all new supply and 60% of existing supply is held off market, the supply inelasticity versus rising demand argument goes into overdrive. The fact that one company can so readily soak up all new supply begs the question what happens when more companies open up crypto trading to their clients? It is also the most likely causal factor behind the jump in alt-coins over the weekend. 



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November 23 2020

Commentary by Eoin Treacy

Email of the day on crypto wallets

Check out the Ledger Nano X hardware wallet. It can hold 100 apps simultaneously. Whereas, please be aware that the ETH app can hold all ERC20 tokens. So just by installing BTC and ETH you can hold keys to many more coins that just BTC and ETH. You will have BTC + all ERC 20 coins.

Eoin Treacy's view -

Thank you for this valuable information which is sure to be of interest to the Collective.



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November 23 2020

Commentary by Eoin Treacy

Email of the day following up on my piece on valuing cryptocurrencies

Thanks Eoin, but that still says nothing about what its value ought to be. With Tech companies there’s a long-term possibility of earnings for which a multiple can be applied or a Sales multiple for which there will be a precedent or relative multiple. There seems to be nothing of the sort for Crypto. So again, I’m left scratching my head as to what price should be paid for these, other than some chart history of where the price has been previously.

Eoin Treacy's view -

The short answer to this question is that it is impossible to value an asset while it is still a fad. It might seem odd to still speak of cryptocurrencies as a fad but they have not yet made the leap to widespread adoption despite significant steps in that direction. When/If real world applications and mass adoption occur, it will be much easier to value. Of course, prices would necessarily be much higher once the value proposition is obvious. My firend Charlie Morris advocates using a network strength metric for value but I don't know how useful that is for trading. 



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November 20 2020

Commentary by Eoin Treacy

November 20 2020

Commentary by Eoin Treacy

The Allure of GameStop's Stores

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

Shankar, director of the Center for Retailing Studies at Texas A&M University. “There were two forks in the road. They could have scaled up online, or they could have moved into adjacent brick-and-mortar businesses. They chose brick-and-mortar, because it was lower risk in the short term,” Shankar said. “It was a missed opportunity and they’re still hurting from that.” 

If GameStop knew what its problem was, why didn’t it do more to address it? Cohen and Shankar both cite internal resistance to change. That may be right, but it's not as easy as turning down the “physical retail” dial and turning up the “digital commerce” one. I’ve spent enough time in GameStops to come to appreciate their strange charms, and I can tell you that the company's unique advantages don’t necessarily translate to the internet.

GameStop locations don’t seem like local bookshops or bike stores, but they bear similarities. Gaming remains enough of a niche interest that GameStop can create a sense of community just by employing people who know about video games and not chasing away the young men who make up a big proportion of their patronage. I’m now a lapsed gamer and wouldn’t exactly describe GameStop locations as pleasant. But there’s a kind of magic in a place completely dedicated to the activity that makes me want to clear my schedule, grab a controller and house a few Jolt colas. Plus the ability to pay for new games with old ones isn't a checkout option that is easily recreated in a mobile app. 

Eoin Treacy's view -

As the world comes out of the pandemic it is worth considering that if a brick and mortar store chain has survived this long, they might have something that is not easily replicable online. GameStop’s trade-in service is an example. So is the fact it is a place ignorant parents can go to ask about the game or apparatus their child has been badgering them to get. I’m increasingly of the opinion that some retail stores will persist because they offer to take cash which is impossible online. 



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November 20 2020

Commentary by Eoin Treacy

Email of the day on bitcoin wallets

Many thanks for your ongoing informative and enlightening observations about the markets. One quick question please regarding holding Cryptocurrencies: do you value the 'vault' function within Coinbase? As I build my positions slowly, I am researching hardware wallets and some of them seem very restricted in terms of the number of coins they will hold. Just wondered your thoughts on the security of the accessible platform-based 'Vault'?

Eoin Treacy's view -

Thanks for this question. Before I answer I want to be very clear in saying I do not believe I am expert in what is the best way to physically transact in cryptocurrencies. All of my activity has been over Coinbase and via spread-bets. 



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November 20 2020

Commentary by Eoin Treacy

Email of the day on valuing cryptocurrencies

With Bitcoin and Ethereum continuing to impress price wise, how do you think about Valuation of these instruments? Though you’re a Technician you clearly have a great understanding of valuation at the same time. With regards to these instruments though I have never read a compelling valuation argument. I couldn’t tell you whether Bitcoin should be worth $500/$5,000 or even $50,000. What framework do you use to determine real value, or can you refer me to something of substance that you might have read?

Eoin Treacy's view -

Thank you for this question. At present cryptocurrencies do not pay dividends so they do not submit readily to traditional dividend discount models. That may change with Ethereum’s transition to a proof of stake model which anticipates making interest payments. At that stage a traditional value model will be possible but whether it is relevant to the price structure is unknowable at present. 



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November 20 2020

Commentary by Eoin Treacy

Email of the day on Worldwide Healthcare Trust

This may be of interest to you and the collective.

https://www.youtube.com/watch?v=2t5VmQ1Wiec

Disclosure: I have shares in Worldwide Healthcare Trust and am considering Biotech Growth Trust.

The second half is Q & A which is also useful. 

My subscription is due for renewal at end-Dec and I shall be renewing.  The comment of the day and especially your daily and weekend audios are priceless for a small investor like myself. It's hard to thank you enough.

Very best wishes

Eoin Treacy's view -

Thank you for this video which I believe will be of interest to subscribers. Thanks also for your long and continued support which is much appreciated.



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November 20 2020

Commentary by Eoin Treacy

November 19 2020

Commentary by Eoin Treacy

November 19 2020

Commentary by Eoin Treacy

The Next Phase of the V

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

#1: A global synchronous recovery: We expect a broad-based recovery, both geographically and sectorally, to take hold from March/April onwards. Driving this synchronous recovery will be a more expansive reopening of economies worldwide and the extraordinary monetary and fiscal support now in place. Global GDP, already at pre-COVID-19 levels (based on seasonally adjusted GDP levels), continues to accelerate and is on track to resume its pre-COVID-19 trajectory by 2Q21. We expect China to return to its pre-COVID-19 path this quarter, and the US to reach it by 4Q21.

#2: EMs boarding the reflation train: After a prolonged period in which EMs have faced a series of cyclical challenges, macro stability is now in check. With the COVID-19 situation improving in a broad range of EMs, their pace of recovery is catching up. EM growth rebounds sharply in 2021, helped by a widening US current account deficit, low US real rates, a weaker dollar, China’s reflationary impulse, and EMs ex China's own accommodative domestic macro policies.

#3: Inflation regime change in the US: We see a very different inflation dynamic taking hold, especially in the US. The COVID-19 shock has accelerated the pace of restructuring, creating a significant divergence between the output and unemployment paths. With policymakers maintaining highly reflationary policies to get back to preCOVID-19 rates of unemployment quickly, wage pressures and inflation will pick up from 2H21. We expect underlying core PCE inflation to rise to 2%Y in 2H21 and to overshoot from 1H22, with the risk that it happens sooner.

Eoin Treacy's view -

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

With millions of people out of work it is easy to form a gloomy picture of economic potential. However, even at a US unemployment rate of 10%, there are still 90% of people with jobs. Moreover, many people who have held onto their employment have boosted savings this year.

When 90% of people come through a crisis in OK shape and a significant minority come out ahead, there is ample scope for a significant bounce back in activity. There is a great deal of pent up demand in the global economy and all that cash on the side lines is fuel for bull markets. The fact monetary and fiscal policy is aimed to improving the outcomes for the remaining 10% suggests loss credit and low rates are here to stay.



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November 19 2020

Commentary by Eoin Treacy

EU Fights to Save Billions in Aid as Lagarde Demands Action

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

Hungarian Prime Minister Viktor Orban says tying “political debates” to financial issues is a form of “blackmail” against countries opposed to migration.

Poland said this week that the provisions are a first step to forcing it to accept EU regulations on gay marriage, abortion, euthanasia and press freedoms. “It’s a means of political, cultural and ultimately economic colonization,” Justice Minister Zbigniew Ziobro said.

Highlighting the gaping divide, Dutch Prime Minister Mark Rutte called the current rule-of-law provisions the “bare minimum.”

German Chancellor Angela Merkel has spoken with EU leaders in recent days, including Orban and Morawiecki. In a sign there’s unlikely to be a quick fix, she described negotiations as “extremely difficult.”

Eoin Treacy's view -

The current challenge for the emerging federal European superstate is how to net off the priorities of socially liberal but fiscally conservative creditors with socially conservative but fiscally liberally debtors.



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November 19 2020

Commentary by Eoin Treacy

A New UN Push Aims to Feed the World's Rabid Hunger for Carbon Credits

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

It’s a tricky proposition, though. Offset programs are notoriously difficult to execute with confidence. REDD+, launched in 2007 to much fanfare among developing nations and UN climate negotiators, but has rarely lived up to its original excitement as developed nations failed to install carbon-pricing policies that succeed in guaranteeing demand. 

Global demand for offsets may outstrip supply by 2025, according to a September analysis by Fitch Ratings. Many companies, including Microsoft Corp, The Walt Disney Co, and Royal Dutch Shell Plc, have already begun either buying or planning to buy offsets. Amazon.com Inc. founder Jeff Bezos this week announced $791 million in funding for 16 environmental groups, including $100 million each to organizations with strong forestry or offsets programs—EDF, World Resources Institute, and World Wildlife Fund.

Navigating the challenges to come may require groups like Emergent to continue to act as market-making entities. Or, if markets get the boost they need from the Green Gigaton Challenge and other initiatives, “we'd be thrilled to turn off the lights, close the door,” Bloomgarden said. “Impact achieved.”

Eoin Treacy's view -

I was part of team that put together a proposal for a group in Alaska who were seeking to raise investment capital for a welfare/education program for their community. They were in line to sell a significant asset but instead were able to hold the asset and sell carbon credits on a stand of forest on the community’s property. That delivered a long-term cashflow, they got to keep their assets and they had no plans to sell or cut the trees in any case.



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