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April 17 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the current brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  

We have three seats left for anyone else tempted to join this timely and lively seminar on Monday evening.  To book your place: Email [email protected]



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April 16 2015

Commentary by David Fuller

Artificial Intelligence and the Fridge

Here is the opening from an amusing, edgy article by Maija Palmer for the FT Connected Business section:

Could an internet-connected thing — a smart fridge, a thermostat or a home-help robot — become a millionaire? This is not as ridiculous a question as it may seem.

If we do indeed move toward a world in which devices are connected to the internet and performing mundane chores, it is likely that many of them will be connected to some kind of bank account.
For maximum efficiency, the smart fridge that orders your milk should also be able to also handle the payments to the supermarket. You may not hook the fridge directly to a current account — worried perhaps a software glitch might cause the fridge to accidentally put you in debt by ordering £20,000 worth of dairy products in a single day. But you might set up a pre-paid account with a set amount of milk money that the fridge can access.

David Fuller's view -

The article is an imaginative journey towards the trouble we can get into if we devolve too much responsibility to machines.  The simple solution – go out and buy your own milk. 

There are excellent links in the article and also in the ‘More’ column to its left.



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April 16 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the current brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  

We have five seats left for anyone else tempted to join this timely and lively seminar on Monday evening.



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April 15 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the current brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 14 2015

Commentary by David Fuller

The $5 Billion Race to Build a Better Battery

My thanks to a subscriber for this informative article from Bloomberg Business.  Here is the opening:

Professor Donald Sadoway remembers chuckling at an e-mail in August 2009 from a woman claiming to representBill Gates. The world’s richest man had taken Sadoway’s Introduction to Solid State Chemistry online, the message explained. Gates wondered if he could meet the guy teaching the popular MIT course the next time the billionaire was in the Boston area, Bloomberg Markets magazine will report in its May issue.  “I thought it was a student prank,” says Sadoway, who’s spent more than a decade melting metals in search of a cheap, long-life battery that might wean the world off dirty energy. He’d almost forgotten the note when Gates’s assistant wrote again to plead for a response.

A month later, Gates and Sadoway were swapping ideas on curbing climate change in the chemist’s second-story office on the Massachusetts Institute of Technology campus. They discussed progress on batteries to help solar and wind compete with fossil fuels. Gates said to call when Sadoway was ready to start a company. “He agreed to be an angel investor,” Sadoway says. “It would have been tough without that support.”

Sadoway is ready. He and a handful of scientists with young companies and big backers say they have a shot at solving a vexing problem: how to store and deliver power around the clock so sustainable energies can become viable alternatives to fossil fuels.  How these storage projects are allowing utility power customers to defect from the grid is one of the topics for debate this week at the Bloomberg New Energy Finance conference in New York. Today’s nickel-cadmium and lithium-ion offerings aren’t up to the task. They can’t run a home for more than a few hours or most cars for more than 100 miles (160 kilometers). At about $400 per kilowatt-hour, they’re double the price analysts say will unleash widespread green power. “Developing a storage system beyond lithium-ion is critical to unlocking the value of electric vehicles and renewable energy,” says Andrew Chung, a partner at Menlo Park, California–based venture capital firm Khosla Ventures.

The timing for inventors—and investors—may finally be right. Wind turbines accounted for 45 percent of new U.S. power production last year, while solar made up 34 percent of fresh capacity worldwide. Storing this energy when the sun isn’t shining or a breeze isn’t blowing has remained an expensive hurdle. Battery believers say that’s changing. They’ve invested more than $5 billion in the past decade, racing to get technologies to market. They’re betting new batteries can hold enough clean energy to run a car, home, or campus; store power from wind or solar farms; and make dirty electricity grids greener by replacing generators and reducing the need for more fossil fuel plants. This market for storage capacity will increase almost 10-fold in three years to 2,400 megawatts, equal to six natural gas turbines, Navigant Consulting says.

David Fuller's view -

Energy storage is the missing link for renewables such as solar, so these developments are encouraging and will be a welcome boost for the sector.

Just think – up until about a decade ago numerous gloomy forecasters told us that we faced a frightening, dark and interminable period of economic decline because of energy shortages.  Today, energy prices are lower due to an abundance of supply from not only fossil fuels but more importantly, increasingly viable renewables led by solar.  We can thank Technology for this favourable situation.  



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April 14 2015

Commentary by David Fuller

Army of Robots to Invade Amazon Warehouses

My thanks to a subscriber for this article from CNN Money.  Here is the opening:

CEO Jeff Bezos told investors at a shareholder meeting Wednesday that he expects to increase significantly the number of robots used to fulfil customer orders.

There are currently about 1,000 robot workers on Amazon floors. The increase won't change the number of actual people employed, an Amazon spokeswoman said.

The robots are made by Kiva Systems, a company Amazon bought for $775 million two years ago.

They are tied into a complex grid that requires months of planning and testing. But once the system is in place, it can save time and cut down on fulfilment costs.

David Fuller's view -

You have probably heard the quip: Future warehouses and factories will only have two living inhabitants – a man and a dog.  The man will feed the dog and the dog will ensure that the man does not touch any of the machinery.  



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April 14 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the current brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 13 2015

Commentary by David Fuller

Iran Deal Can Open the Way to Trade and Peace

The notion of a Western rapprochement with Tehran has been in play since mid-2013, when Hassan Rouhani replaced Mahmoud Ahmedinejad as president. At a stroke, instead of a firebrand religious hardliner, Iran was represented by a seemingly moderate cleric, English-speaking and with a doctorate in law from a British university.

Within months of taking office, Rouhani was at Davos, Alpine hob-nobbing with the best of them, doing his bit to charm the Western and West-leaning global elite.

“Our country has never sought, nor seeks, anything other than peaceful Technology,” he opined in early 2014, securing not only the start of this latest thaw in Iranian-US relations, but also an interim agreement to access much-needed foreign exchange reserves. “Iran is open for business,” Rouhani has said, at a string of international summits since, using a near identical text each time.

“Come and visit us and see the investment opportunities for yourselves.” Over the last 18 months, the Iranian president has consistently argued that his country, “within the next three decades, could become a top-10 global economy”. Funnily enough, he is right.

In 2012, the year before Rouhani took office, Iranian GDP shrank by over 5pc, the economy gripped by sanctions and enduring its worst financial crisis for at least two decades. Since then, growth has returned, in part because sanctions have slightly eased. Independent Western analysts now estimate 2014 GDP at around $450bn (£304bn), placing Iran comfortably among the world’s 30 largest economies – ahead of both Austria and Taiwan.

But this country is still massively under-achieving. Along with its natural commodities, Iran also boasts a highly-skilled, near-universally literate population, with a vigorous median age of just 28. Its numerous universities, while far from gender-friendly, have long-produced a steady stream of well-qualified scientists and engineers.

In the mid-1950s, real per capita GDP was just four-fifths that of Turkey, Iran’s ancient rival. Over the 20 years that followed, free trade and economic dynamism meant growth was strong, with GDP per head soaring to more than two-and-a-half times that of Turkey.

Then came Ayatollah Khomeini’s 1979 revolution, with its theocratic clampdown on enterprise, which sent the economy spiralling downward.

As such, Iran missed the emerging markets revolution that, from the 1980s onwards, ignited the rapid expansion of economies like China, India and Turkey.

Iranians are now, once again, much poorer than their Turkish neighbours. Rouhani has pledged to reverse that, stating repeatedly that he wants to “join the rest of the global economy”, positioning Iran as, potentially “the most exciting emerging market on earth”.

David Fuller's view -

Using history as our guide, we know that it can take just one key leader to either make or break a country’s fortunes for many years.  This is especially true in non-democratic societies where there is no orderly mechanism for removing the unreliable.

President Hassan Rouhani of Iran is an interesting case in point, who replaced the deeply unpopular and aggressively hostile Mahmoud Ahmedinejad in mid-2013.  A smiling, English speaking and apparently mild mannered cleric with a law degree from a British University, he has been a likely candidate for negotiations, although he is not the Supreme Leader.  That is 75 year old Ali Khamenei, who succeeded Ruhollah Khomeini in 1989. 

This item continues in the Subscribers’ Area.



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April 13 2015

Commentary by David Fuller

April 13 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

David Fuller's view -

Here is the current brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 10 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 09 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 08 2015

Commentary by David Fuller

Global Thematic Investors: The Bezzle: End Times for the Cycle?

My thanks to Iain Little for a timely caution in this latest issue.  Here is the opening:

From JK Galbraith's "The Great Crash 1929", the most urbane economics lesson in How The Cycle Ends:

"To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in - or more precisely not in - the country's business and banks. This inventory - it should perhaps be called the bezzle - amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, here are always many people who need more". 

The worst nightmare of a fund manager, worse than the ignominy of under-performance, is to fall victim of The Bezzle. (Poker-players call such folk the "Patsy" or "Chump"). In a long career, I have observed copious chumps, a fair few Patsies and a great many Bezzles. Think Japan in 1990, Technology after 2000, gold in 1980. Each debacle, each End of Cycle, left many "bezzlees" -my term- bereft of what they had assumed to be unassailable fortunes. Each debacle emerged over time from modest, facile infancy to titanic, arrogant imperiousness. Most surprisingly of all, each debacle was, with the infallible eye of retrospect, entirely predictable. 

So when an asset class starts to exhibit early signs of The Bezzle, one worries about Cycle End. 

David Fuller's view -

I am sure Iain Little will touch on areas of potential liquidity problems for investors when he speaks at the Markets Now on 20th April, in addition to his comments on the performance of various investment trusts of general interest.  

Iain Little's Fund Manager's Diary is posted in the Subscribers' Area.



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April 08 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations.  



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April 07 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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April 02 2015

Commentary by David Fuller

India Leaning Toward Japanese Bullet Train Tech

NEW DELHI -- Japan's shinkansen bullet train Technology is the leading candidate for a planned 500km railway linking the western city of Mumbai and the state of Gujarat to the north, the first step in India's extensive high-speed rail project.

The Indian and Japanese governments initiated a joint feasibility study in late 2013, and a final report is to be released in July 2015.

The Japan International Cooperation Agency, which is participating in the study, told participants at a Feb. 28 high-speed rail seminar in New Delhi that the report will likely recommend that Japan's bullet train Technology is the most appropriate option.

A top official in India's Ministry of Railways told The Nikkei that Japan's Technology is the world's best and that India hopes to work on this project with Japan.

The Japanese contingent at the seminar included Issei Kitagawa, state vice-minister of transport; Yuji Fukasawa, executive vice president at East Japan Railway, which hopes to win orders for the project as part of a consortium of Japanese companies; Tadaharu Ohashi, a counselor at Kawasaki Heavy Industries; and top Hitachi officials.

David Fuller's view -

Japan and India are natural allies, not least because of their differences. 

Japan is a high-tech nation with a small population, while India has over a billion people with a wide range of skills and a rapidly growing middleclass.

Both countries can only benefit from a closer relationship. 



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April 02 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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April 01 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 31 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 30 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 30 2015

Commentary by Eoin Treacy

Global Top Picks 1Q 2015

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

We are raising our year-end targets for continental European and Japanese Equities. 
Since the beginning of the year, both markets have risen by 19% and 12% respectively, bringing levels close to our previous targets. From current levels our new forecasts imply a 13% total return for continental European markets, 9% for Japanese markets and 6% for global stock markets through to the end of 2015. 

Earnings are everything: Our expectations for further upside stem from an acceleration in earnings. However, with valuations only in line with historical norms and the equity risk premium still high, investors do not appear to be pricing in a surge in earnings.

Overweigh continental Europe: The long-awaited recovery in European earnings finally seems to be here – earnings revisions are positive for the first time since 2011. While we admit that the overweight Europe view is no longer anti-consensus, we believe that better earnings momentum is likely to remain supportive of further outperformance. 

Overweight Japan:  Japanese earnings revisions are faring best globally. Japanese corporates are increasing shareholder payouts too, and international participation in the really thus far seems low. 

Underweight US: US earnings reversions are faring worst for the first time in five years. We recommend a still counter-consensus underweight stance here. 

Prefer cyclicals to defensives: While the gap between the performance of cyclical sectors and economic indicators has corrected a little bit, we believe that there is more to go. We are overweight financials, consumer discretionary, industrials, materials and Technology. We are underweight staples, healthcare and telecoms. 

 

Eoin Treacy's view -

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

In preparing my talk for the MTA Symposium last week I created this chart of the MSCI World Ex-US relative to the S&P 500 in log scale. It represents a powerful illustration of just how much the USA has outperformed over the last five years when the world is rebased to US Dollars. 

The fact that the ratio is now back to test the 2001 low, is finding support and that this is occurring against a background where the world ex-US is engaging in massive monetary easing suggests the rest of the world has potential to outperform in real terms. 

 



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March 27 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 26 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 25 2015

Commentary by David Fuller

The Weekly View: As the Cycle Turns: Buying Mid-Stage Cyclicals and Neutralizing Defensives

I am not sure what happened to the usual contributors to this timely Letter but this edition is led by Doug Sandler, Chief Equity Officer.  Here is the opening:

We continue to believe that we are in the middle innings (5th or 6th inning) of an equity bull market in the US, and we do not currently see the next bear market on the horizon.  Equity valuations remain “fair” according to our Price Matters discipline, and global accommodation has raised the likelihood that the current bull market could go into extended innings.  We are also encouraged by the fact that earnings expectations for US companies have been significantly reduced recently as analysts have quickly incorporated worst-case scenarios for crude oil and currencies into their financial models.  We expect that these rushed estimate reductions will prove overly pessimistic and too one-sided in nature, failing to consider the many positive economic implications of cheap gasoline and a strong dollar.

Wit that macro outlook in mind, we wanted to highlight some of the changes we have been making recently in the domestic equity portion of the RiverFront portfolios.

David Fuller's view -

If the Fed intervened, commencing on March 13th, as I have been saying, then the US Dollar Index headwind has certainly been checked.  Moreover, it could easily range sideways to somewhat lower for a considerable time.  If so, that will help the price of WTI crude oil move a little higher, as it is priced in US Dollars.  These two factors would lend support to the optimistic view from RiverFront.

Over the longer term, I maintain that the US Dollar will move higher in a likely secular uptrend led by the USA’s Technology lead and near energy independence.  

The Weekly View is posted in the Subscribers’ Area.



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March 25 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 

 


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March 24 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 

 



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March 24 2015

Commentary by Eoin Treacy

The Tricorder, An All-In-One Diagnostic Device, Draws Nigh

Thanks to a subscriber for this article from readwrite.com concentrating on the Qualcomm sponsored Tricorder X-Prize. Here is a section: 

“We’re pretty confident that the majority of the 10 finalist teams will actually be able to deliver,” senior director Grant Company said. “Some may merge, and some may fall out, just because they can’t pull it together. And that just reinforces how big of a challenge this really is. It’s because the goals are very high.”

The winning “tricorder”—and its competitors—likely have a long FDA approval process ahead of them, which means their consumer release could be years away. But when they do arrive, they will be able to diagnose problems like stroke, anemia and tuberculosis—tasks that have always been reserved for doctors.

Diagnosis: Home Diagnosis
Such devices will arrive at an interesting time in medical history. With the emergence of mobile phones and wearable devices, home diagnostics are poised to explode.

Company said the Apple Watch and affiliated software development, will be a welcome boost for the space.

“I think it’s a good first step, and a useful barometer of what the public’s appetite is for this type of Technology,” Company said. “There’s going to be a need of collection and analysis, and these types of tools are going to be absolutely critical. If the masses are able to start building capabilities, using these research kits, it’s the first step toward adoption.”

 

Eoin Treacy's view -

I grew up watching Star Trek The Next Generation with my father and brothers and I suspect a number of people engaged in developing new technologies such as a tricorder are of a similar vintage. 

This article by Anna McCollister-Slipp highlights how the vast majority of the health system is geared towards acute care when chronic conditions represent a major challenge. It is this latter group that will be helped most by a more cohesive data acquisition and interpretation strategy. This is likely to be pioneered by new technologies such as tricorders and wearables. 

 

 



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March 23 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 23 2015

Commentary by Eoin Treacy

Jen-Hsun Huang Kicks Off NVIDIA 2015 GPU Technology Conference

This 2-hour webcast from Nvidia where Jen Hsun Huang and Elon Musk converse may be of interest to subscribers. Here is a section: 

“We’ll take autonomous cars for granted in a very short period of time,” Elon says.

JHH asks about government policies, saying he’d love to work on email while driving to work, quickly adding that he’d like to do so without breaking the law. What does the government need to do?

Elon notes that it will be several years after self-driving becomes possible that government will allow it. They want a car to be not as safe as a person driving but significantly safer.

“When it comes to public safety, there’s an argument for being quite cautious before there’s a change. I don’t think it’s the case right now that there’s a full autonomous system that regulators aren’t approving. But there could be next year.”

“I don’t think it’s the case right now that there’s a full autonomous system that regulators aren’t approving,” Tesla Motors CEO Elon Musk. “But there could be next year.”

Elon adds that the first thing we try to do is establish a hardware platform so we can do continuous updates to the software. A lot of that will happen later this year. I have an announcement on Thursday, and I don’t want to get ahead of that.

He deflects Jen-Hsun’s kidding effort to ask if he want to share that news, “There’s going to be a call on Thursday on what’s going to be in our next version for anyone that’s interested, that’s all”

 

Eoin Treacy's view -

Anyone who has ever played a pc game will be familiar with the positive difference an Nvidia graphics card can have on the experience. As the company’s CEO goes on to explain in the above webcast they now do a lot more than that. This section from an Nvidia blog highlights the importance of GPU processors in speeding up computations as well as highlighting their origin in gaming: 

The GPU’s advanced capabilities were originally used primarily for 3D game rendering. But now those capabilities are being harnessed more broadly to accelerate computational workloads in areas such as financial modeling, cutting-edge scientific research and oil and gas exploration.

In a recent BusinessWeek article, Insight64 principal analyst Nathan Brookwood described the unique capabilities of the GPU this way: “GPUs are optimized for taking huge batches of data and performing the same operation over and over very quickly, unlike PC microprocessors, which tend to skip all over the place.”

Architecturally, the CPU is composed of only few cores with lots of cache memory that can handle a few software threads at a time. In contrast, a GPU is composed of hundreds of cores that can handle thousands of threads simultaneously. The ability of a GPU with 100+ cores to process thousands of threads can accelerate some software by 100x over a CPU alone. What’s more, the GPU achieves this acceleration while being more power-and cost-efficient than a CPU.

 



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March 20 2015

Commentary by David Fuller

Shale Producers Have Found Another Lifeline: Shareholders

Here is the opening of this interesting report from Bloomberg:

(Bloomberg) -- U.S. oil producers are issuing new shares of stock at the fastest pace in more than a decade, looking to investors for a cash lifeline to pay down debt and keep drilling as crude prices continue to sink.

Tapping equity markets has become the best option for companies such as Dallas-based RSP Permian Inc., which announced March 17 it’s seeking to raise as much as $232 million by selling additional shares. Calgary-based Encana Corp. and Noble Energy Inc. of Houston also have issued shares in the past two months to reduce debt.

That brings funds raised in the first three months of the year to about $8 billion, more than 10 times the total in the same period last year. As the continued slide in oil prices further crimps cash flows, banks are pressuring these companies to shore up their capital and reduce debt to lower servicing costs and provide wiggle room.

“There aren’t really any better alternatives right now,” Chad Mabry, an analyst at MLV & Co. LLC in Houston, said in a telephone interview.

A growing acceptance that low prices will persist has convinced producers to turn to equity markets while they still can, he said. “They’re preparing for the worst.”

Few saw issuing new stock as an attractive option when the oil market first started crashing late last year because it would dilute the value of stock held by existing shareholders at a time when their holdings already were hurt by falling prices.

As recently as December and January, many producers assumed there would be little interest in pouring more money into the sector, and that funding from debt or equity wouldn’t materialize, said Rob Santangelo, co-head of equity capital markets Americas for Credit Suisse Group AG.

That began to change in February when prices seemed to stabilize and frozen credit and equity markets opened up. The $8 billion in stock issued in the first three months of 2015 is the highest of any quarter in more than a decade. If the pace continues, sales of new equity would surpass the total of 2008 and 2009 combined, the last time oil prices crashed, according to data compiled by Bloomberg.

The surge in equity offerings, even with the dilution of existing shareholders, now is widely considered the lesser of evils versus expensive borrowing or asset sales at reduced prices, said Troy Eckard, whose Eckard Global LLC owns stakes in more than 260 North Dakota shale wells.

David Fuller's view -

This is the flexibility of the capitalist system.  For relatively new oil companies formed as the shale boom took off a few years ago, the ability to issue shares today provides a considerable lifeline now that they need it.  This will disappoint countries which are primarily oil producers because the majority of private sector shale oil firms are not about to disappear as quickly as many sprang to life. Some will merge and all will rely on Technology to increase their efficiency.  Shale drillers are here to stay, for so long as we need crude oil.  



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March 20 2015

Commentary by David Fuller

The Markets Now

On Monday 20th April at the East India Club, 16 St. James’s Square, London, SW1Y 4LH

 
David Fuller's view -

Here is the new brochure.  Guest speaker David Pinniger’s subject could not be more topical.  Iain Little suggested David Pinniger as a guest speaker and contributed this comment:

“I met David Pinniger at a recent investment forum here in Zurich.  I found that, despite David’s impressive academic and professional credentials, he was also able to communicate a complex subject –bioTechnology - in a way that non-scientists like me could understand.  So he would be a logical “next step” after David Brown’s bravura presentation on The Third Industrial Revolution at the last Markets Now.”

Iain Little and I are looking forward to a lively evening with subscribers and their friends, including at the Club’s spacious American Bar following presentations. 



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March 19 2015

Commentary by Eoin Treacy

Radical new high-speed liquid technology could bring 3D printing into mainstream manufacturing

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

The Technology, called Continuous Liquid Interface Production (CLIP), manipulates light and oxygen to fuse objects in liquid media. It works by projecting beams of light through an oxygen-permeable window into a liquid resin to rapidly transform 3D models into physical objects.

Working in tandem, UV light, which triggers photo polymerization, interacts with oxygen, which inhibits the reaction, to control the solidification of the resin, creating commercially viable objects that can have feature sizes below 20 microns, or less than one-quarter of the width of a piece of paper. This is the first 3D-printing process that uses tunable photochemistry instead of the layer-by-layer approach that has defined the Technology for decades.

Faster, stronger, predictable
CLIP enables a very wide range of materials to be used to make 3D parts with novel properties, including elastomers, silicones, nylon-like materials, ceramics and biodegradable materials, and could allow for synthesizing novel materials that can advance research in materials science.
Conventionally made 3D printed parts are notorious for having mechanical properties that vary depending on the direction the parts were printed because of the layer-by-layer approach. Much more like injection-molded parts, CLIP produces consistent and predictable mechanical properties, smooth on the outside and solid on the inside, the company says.

“By rethinking the whole approach to 3D printing, and the chemistry and physics behind the process, we have developed a new Technology that can create parts radically faster than traditional technologies by essentially ‘growing’ them in a pool of liquid,” said Joseph M. DeSimone, professor of chemistry at University of North Carolina-Chapel Hill and of chemical engineering at North Carolina State and CEO of Carbon3D, who co-invented the method.

 

Eoin Treacy's view -

It’s not difficult to get excited when you look at the pace of technological innovation. The above invention has been featured on CNBC with someone attempting to print an AR-15 which shows the negative connotations of the development. Setting that example aside, this represents an important step towards having a practical tool in one’s home but there are more important considerations from an investment perspective. 



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March 17 2015

Commentary by David Fuller

Beyond China: The Future of the Global Natural Resources Economy

My thanks to a subscriber for this blockbuster report from Citi. Here is part of the introductory summary:

The structure of global economic growth is once again undergoing a fundamental transition, shifting away from the prevailing model of China as the world’s factory and advanced economies as the drivers of consumer demand. In its place, a more heterogeneous, multipolar framework is emerging with both manufacturing and final consumption more broadly spread across the globe.

Whereas the Commodities Supercycle was characterized by rapid, synchronized global demand growth centered on the rise of China, we expect the coming decade to feature slower, more geographically diverse, less synchronized demand growth. The drivers of natural resources demand are spreading across the globe in new ways. For oil, demand growth should increasingly come from the Middle East. For coal, the same is true of India. Only in base metals does China’s predominance look to remain unchallenged. As a result, the traditional practice of analyzing commodities demand based on the US, China and Europe will become less relevant as the drivers of incremental demand come increasingly from the “Emerging 5”: India, ASEAN, the Middle East, Latin America and Africa.

However, no large emerging market is likely to rise up to the point where China has now come to a landing. The most cited potential successors, India and Brazil, are based on democratic institutions unlikely to provide the consensus required to sustain high fixed asset investment levels. Japan and Europe could do this from the 1950s through the 1970s due to the imperative of post-WWII reconstruction. The “Asian tigers” also succeeded, but under what were initially authoritarian systems.

David Fuller's view -

I particularly agree with the first and last paragraph of this opening summary by Citi’s distinguished team of commodity analysts. 

I discussed part of this subject on 9th March, in response to my opening article by Andrew Critchlow of The Telegraph: Miners Pray the Commodities Collapse Has Hit Rock-Bottom.  

Taking a somewhat longer-term view than Citi above, here is my initial reply from the 9th:

Mining has always been the most cyclical of industries.  Nevertheless, this cycle has been longer for two main reasons: 1) The 2008 credit crisis has lengthened the global economic slowdown; 2) Accelerating technological innovation has made mining much more efficient. 

Consequently, the closest parallel for mining is with the oil and natural gas extraction industries.  However, they will learn more from mining because its bear market started earlier.  Fifteen to twenty years ago, and earlier still, the main fear was that the world was running out of these resources.  What we have learned is that Technology can locate additional resources much more easily and enable us to extract them far more efficiently.  There is also a third factor in addition to the two mentioned in the paragraph above: 3) Technology has created new materials which will reduce demand for industrial resources.

Demand for crude oil and eventually natural gas will decline in decades ahead, as the efficiency with which solar energy is produced continues to increase.  Similarly, demand for industrial metals will decline as they are replaced by graphene, ceramics and plastics. 

This item continues in the Subscribers’ Area, where the Citi report is also posted.



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March 16 2015

Commentary by David Fuller

These Tiny Bubbles May Save the Planet

My thanks to a subscriber for this informative article from Bloomberg and the video is also worth watching:

There are two ways to cut down on our greenhouse-gas emissions: Reduce the amount we make or limit how much of what we make actually gets into the atmosphere.

It’s the second solution that researchers at the Lawrence Livermore National Laboratory want to tackle with cute caviar-sized bubbles that can absorb carbon dioxide.

The polymer bubbles are filled with the entirely pedestrian ingredient of baking soda, long known to absorb carbon dioxide, but it’s the bubbles themselves that are the breakthrough. They’re permeable, which means that CO2 gets trapped and absorbed by the baking soda solution inside them. In theory, you could affix the bubbles to the inside of a power plant smokestack and trap the CO2 before it is released into the atmosphere.

They’re also reusable. The CO2 can be released again by heating the bubbles in a sealed container. The released CO2 can be kept in tanks or safely pumped back underground while the bubbles can go back into the smokestack and start their world-saving job all over again.

Bloomberg’s profile of Lawrence Livermore’s carbon-capturing Technology is the latest installment of The Spark, which looks at innovators finding solutions to seemingly unsolvable problems.

David Fuller's view -

Climate change will remain controversial, unless something really bad happens, which we obviously do not want.  We have a responsibility to look after our plant, and it is reassuring to see how many intelligent people are working on sensible policies to reduce pollution.  Technology has most of the big answers to environmental problems, and a more prosperous, better educated global population will help the cause.    



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March 16 2015

Commentary by Eoin Treacy

Email of the day on China muddling through

The following extracts from an article by Professor James Laurenceson, deputy director of the Australia-China Relations Institute at the University of Technology, Sydney should help subscribers have confidence in China investments.

“With China now having the world’s largest economy in terms of purchasing power, we should be cheering them on.

The World Bank says that between 1980 and 2011, the number of people living in poverty in China fell by 753 million. That’s nearly two and a half times the population of the US, and an outcome unparalleled in history.

The World Trade Organization says that China’s share of world’s goods exports has risen from 1.2 percent in 1983 to 12.1 percent in 2013. It’s now the world’s largest trader.

The Boston Consulting Group found that when utilities and other costs are added to sharply rising wages, manufacturing costs in China are now only four percent less than in the US.

To boost productivity, privatisation isn’t crucial; competition is the way that China’s government is currently muddling through reforming the financial sector.

In 2015, yes, China will muddle through. And it will do so again next year.” 

 

Eoin Treacy's view -

Thank you for this interesting article and the topical excerpts: Muddling through can also be described as being willing to both make mistakes and being committed to learning from them. If learning that competition is to be fostered is an abiding success, then the recent crackdown on corruption might also be viewed in that light. 

Some interpret the recent tightening of controls on the media and freedom of speech as well as selective punishment for moral and financial transgressions to be a retrograde step in terms of standards of governance. Others view it as a necessary process to improve the efficiency of the state owned sector not least versus their privately owned competitors. 

 



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March 13 2015

Commentary by Eoin Treacy

This Chemistry 3D Printer Can Synthesize Molecules From Scratch

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

Burke's machine simplifies the complex process of synthesizing chemical into a series of generalizable steps. Whether you're trying to form a ring of carbon atoms or strip away hydrogen atoms, each step requires a dose of starting chemicals, which Burke separates into distinct building blocks. Think of them as simple groups of chemical compounds like O2 or CO2 that snap together.

To perform each step, the machine connects a building block and then induces a chemical reaction and washes away the reaction's byproducts—slowly building each molecule from the ground up. The building blocks are snapped together like LEGOs, allowing the chemicals to mix and a reaction to take place.

Using this process, Burke showed that his machine could manufacture thousands of different chemicals in 14 distinct classes of small molecules, including known medicines to several molecules used in LEDs and solar cells. The amount of time each molecule's synthesis requires is a matter of hours, depending on how many steps are involved.

To answer the question of why such a cool Technology is only now becoming available, Burke says the hard part was figuring out the new cleanup method that happens after each chemical reaction. (Some of the information is proprietary, but Burke says he and his colleagues found a universal way to isolate out the molecules they want to keep when washing away the byproducts.)

 

Eoin Treacy's view -

R&D is expensive which is why corporations are very picky about what they fund and why it is often the division that gets axed first during a rationalisation. Reducing the cost of building compounds can only be good news for the biotech, nanotech and chemical sectors because it will help reduce the time between when an idea germinates and when it can be tested in practice.

Taking this a step further, companies have been busy increasing the speed with which they can sequence genomes and have been reducing the cost. The corollary is that as we learn more about genetics, the ability to build proteins and compounds from scratch means that tailored solutions become much more realisable. 3-D printers are already printing copies of organs such as bladders and even kidneys. Totally customisable solutions appear to be where the medical sector is heading in the coming decades. Nevertheless, a good deal of this good news is already in the price. 

 



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March 12 2015

Commentary by Eoin Treacy

Tesla Hackers Show an Energy Revolution Closer Than Once Thought

This article by Matthew Campbell, Tim Loh and Mark Chediak for Bloomberg may be of interest to subscribers. Here is a section:  

Consider the crash effort at the Joint Center for Energy Storage Research in suburban Chicago. Within five years, researchers want to create one or more battery types that can “store at least five times more energy than today’s batteries at one-fifth the cost,” according to George Crabtree, an agreeable silver-haired scientist who runs the U.S. Energy Department-backed battery-research skunk works.

Harvard University, the Massachusetts Institute of Technology, leading-edge Technology companies like Elon Musk’s Tesla Motors Inc. and scads of startups are getting into the act. Some are seeking to double the capacity and dramatically cut the costs of the lithium-ion battery, the standard in iPhones and electric vehicles. Others are working on mega-scale battery systems using novel chemistries that could cheaply store enough energy to help power entire cities.

Battery entrepreneurs have begun to even talk like revolutionaries. “The ability for a battery company to change the dynamics of the world is what has got us excited,” says Bill Watkins, chief executive officer of Imergy Power Systems Inc., a Fremont, California, startup working on utility-scale batteries. “We can actually make a big difference here. I call it democratizing energy.”

As the former CEO of Seagate Technology Plc, the Silicon Valley digital storage maker, Watkins can speak from experience about tectonic Technology shifts. In 1980, a Seagate five- megabyte hard drive that rendered floppy disks obsolete was a $1,500 PC add on. These days, drives holding two terabytes of data -- equivalent to two million megabytes --  can be had for a retail price of under $200.

What’s primarily driving the battery revolution is the phenomenal growth of rooftop and other forms of solar energy and an awakening by renewable energy advocates that storage is the lagging piece of the transformative puzzle. Solar now powers the equivalent of 3.5 million American homes and accounted for 34 percent of all newly installed electricity capacity last year.

Wind supplies enough electricity for the equivalent of about 14.7 million U.S. homes, about the same as 52 coal-powered generating plants, according to the Wind Energy Foundation.
An exponential breakthrough in battery capacity and cost would bulldoze the limitations to adopting renewable energy on a massive scale, be a potent weapon to fight climate change by lowering carbon emissions and potentially bring billions of dollars in profits, never mind fame, to the winners. The knock on renewables is that while fossil fuels keep the power on all the time, solar fades when the sun doesn’t shine and wind power fizzles when the wind doesn’t blow – unless you have a way to store the excess for when you need it.

“What’s holding back solar and wind isn’t their availability but the fact that the Technology to generate renewable energy has lept far ahead of the capacity to store and deploy it round the clock as needed,” says Crabtree of the Joint Center project, which is run out of the federal Argonne National Laboratory.

Prophesies of energy revolutions always come with caveats, of course, and some researchers note that an exponential breakthrough in battery storage and cost has been forecast for more than a decade and still hasn’t arrived. “Of all these other battery technologies people promote, how many of them are real?” says Jeff Dahn, a professor at Dalhousie University in Nova Scotia who continues to plug away at making stronger and cheaper lithium-ion batteries. “All that remains to be seen.”

 

Eoin Treacy's view -

When we first started writing about the massive investments in battery Technology as early as 2010 there was a great deal of enthusiasm about how batteries were going to make the case for renewable energy more compelling than ever. However, the difficulty of innovating in the chemical sector and the lead time in bringing new methodologies to market was underestimated. 



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March 11 2015

Commentary by David Fuller

China Said to Plan Overhaul of $3 Trillion Industrial Machine

Here is the opening of this interesting article from Bloomberg:

(Bloomberg) -- China is preparing to overhaul its bloated and inefficient state-run companies to bolster an economy forecast to grow at the slowest pace in more than two decades, according to people familiar with the matter.

The proposal would include consolidation and reduce the government’s role in state-owned enterprises by stripping ownership stakes from the agency that regulates them, the people said. The plan, which could be released as soon as this month, calls for bundling the companies by industry and handing their control to state asset-management firms, the people said, asking not to be identified because the talks were private.

The shake-up is poised to affect thousands of companies, including some of the world’s largest, such as China National Petroleum Corp. and China Mobile Communications Corp. The country’s state companies are perceived to be so rife with corruption and poorly run that Sanford C. Bernstein & Co. estimates that they trade at discounts totaling $2 trillion.

And:

“Putting SOEs under the supervision of asset-management companies that will focus on improving the efficiency of investment would be a major step towards putting China on a more sustainable growth path,” said Arthur Kroeber, the Beijing-based research chief for Gavekal Dragonomics.

The government is pushing Chinese companies in key industries, including communications and power generation, to expand overseas, a plan outlined by Li March 5 in his report to the annual legislative session. The ongoing merger of the state’s two biggest train-equipment makers and the Technology ministry’s “Made in China 2025” plan to remake the manufacturing industry are part of the broader plan.

The overhaul comes as state-run companies increasingly find themselves the target of President Xi Jinping’s nationwide corruption crackdown, leading to the downfall of more than 70 executives last year, according to Xinhua. The changes would affect some of the same 26 major firms named as inspection targets last month by Wang Qishan, China’s anti-graft chief.

David Fuller's view -

Corruption is usually the biggest problem in command economies.  China’s top leaders, seldom lacking in confidence, believe they can achieve the same economic dominance the country enjoyed before the 20th century.  Consequently, President Xi Jinping has grasped the nettle of corruption.  It will not be easy but this is a sensible and necessary decision on behalf of China, which remains one of the world’s fastest growing economies.   

This item continues in the Subscriber’s Area.



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March 11 2015

Commentary by David Fuller

March 10 2015

Commentary by David Fuller

March 09 2015

Commentary by David Fuller

March 06 2015

Commentary by David Fuller

March 06 2015

Commentary by Eoin Treacy

Email of the day on cyber security and the Internet of Everything

I worked on disc firmware in the early 70s and then continued with computer security consulting to the usual agencies with the usual clearances.

Your correspondent (Ed. on May 4th) seems to have been stimulated to make comment as a result of an FT article. Having been interviewed about security by the FT in the mid-80s, I soon learnt that any statement made to a journalist was likely to be mangled to the point of incoherence. 

I wouldn't expect to find insight on finance in a security journal so reacting to a story about security in the finance section of a newspaper without checking the story and the details sets the scene for confusion and misrepresentation.

The "former R&D executive" misses the point of the exploit completely and sets up a strawman about the chain of integrity. The whole point of the attack vector in this case is that no spyware "has to be designed in" .

No-one has made any claim of secret implementations of spyware across "multiple US companies". The "spyware" is not "designed in" as the attack vector uses firmware update capability to introduce the trojan. 

This is not new and even in the 70s and 80s we were advising our clients on threats from any updateable firmware whether in drives or in peripherals such as laser printers.

What is new is that someone has published details and it is not surprising that an individual or company needs to be outside the UK and the US to risk publication even of well-understood techniques in this area.

Kaspersky's researchers seem to find aspects of this "sophisticated" but that is probably because their origins are in anti-virus scanning rather than general computer security or high integrity systems.

Even interested hobbyists and hackers have shown how to reverse engineer and modify the firmware of standard off-the-shelf hard drives without any expensive equipment, documentation of the chips or source code of any kind.

Regarding  a "very senior executive in the computer security business"; well, I have been one of those and found many others with that description to be completely clueless technically.

As for the advice to use some named anti-virus products, if you check in the deeper parts of the security world, you will find those are referred to as "Silent Partners of the NSA". As a junior engineer who ordered the very first encryption chips to be imported into the UK in the late 70s, I quickly learnt that others had a great interest in my activities and was soon required to inform our friends in Cheltenham of my progress on a regular basis. 

I have added two relevant attachments and if you take a few seconds to glance at the sentences that I've highlighted in yellow, you will get some insight beyond the misrepresentations of the FT and Reuters.

There are a few "journalists" who can comment more sensibly in the area and some publish at Technology site Ars Technica.

This is a short overview of how a hobbyist can put a backdoor on a hard drive.

Dan Goodin has a degree in English and a Masters in journalism but covers aspects of security in a readable manner.

His overview of the Kaspersky/NSA story is here

Hope this clarifies the picture.

Eoin Treacy's view -

Thank you for taking the time to share your experience of what is an important sector. I am constantly impressed by the breadth of knowledge exhibited by our subscribers and your combined generosity in sharing it. This is perhaps the Service’s greatest strength and thank you all for contributing to our Empowerment Through Knowledge theme. Polite informative comments are always welcome. 

The original Kaspersky report and the additional annotated report, focusing on how to gain access to a hard drive via a “back door”, are well worth reading as you say. Thanks also for the additional links to the above news items.  

The explanation of how Kaspersky was able to develop sink holes for returned information by securing expired web addressed that had been used by the Equation Group is fascinating. While we might conclude this was an error on behalf of the group, another interpretation is that the addresses were simply no longer required and that the group has moved onto something else. When it comes to the defence sector it is reasonable to conclude that whatever is now public is already outdated compared to what is in development or non-public. 

Regardless of how one feels about Edward Snowdon’s actions there is no doubt that the information coming from his disclosures is having an effect. It has forced some to work harder to conceal operations and has been a benefit to those wishing to use the existence of well-funded hacking groups to further their own geopolitical aims. 

 



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March 05 2015

Commentary by David Fuller

The Third Industrial Revolution: Internet, Energy and a New Financial System

Here is the conclusion of this fascinating interview with Dr David Brown by Goncalo de Vasconcelos for Forbes:

de Vasconcelos: So what will the Third Industrial Revolution impact the most?

Brown: Eventually everything, but the early movers have been USA-led computing, IT, internet companies and social media sites, which have grown to global behemoths faster than ever in history. These in turn have driven bioTechnology as the genome at last begins to impact. Both went through a hype phase in the 1990s, then a bust, then the real winners emerged. That is a typical pattern over the initial 15-20 years of a breakthrough Technology. Solar power has been driven mainly by Germany and more recently China, though the USA is catching up fast. Current solar systems have only 10-20% efficiency in sunlight capture but new materials will take this into the 50-100% range very soon now. And battery storage Technology is advancing rapidly.  Additive manufacturing (aka 3D printing) will replace our old material and energy-wasteful methods. Robotics is beginning to spread out of factories with Japan, Germany and China leading the charge, though expect the USA to catch up and contribute to innovation. NanoTechnology will mature in the 2020s. The Internet-of-Things is a few years away, and it will probably drive the next phase of healthcare advances, but needs more stable internet, better security and cheaper components before it can take off. And machine learning /AI will be a game-changer for humanity, beginning to impact within the next decade. The new finance is now appearing through Africa-led mPesa, followed by Google GOOGL +0.55%-wallet and Apple-pay etc. The US internet giants are registering as banks, they have very cheap infrastructure and billion-size customer bases and are likely to challenge patriarchs of the current financial system. There is much innovation in finance in the UK too. We see positive deflation all over the world as a result of these lower-cost and more-efficient solutions to human needs.

de Vasconcelos: So where are we in the Third Industrial Revolution?

Brown: Industrial revolutions take decades to play out. We have barely started in this one. Remember that the first and second Industrial Revolutions involved only Western Europe and its off-shoots, whereas this one is truly global. And online education is available to everyone for the first time ever. OECD projections indicate the world will become about 10 times wealthier during this century, and these advances certainly support their case. Exciting times!

David Fuller's view -

David Brown is assessing the current economic outlook in the context of two previous industrial revolutions.  Moreover, the panoply above is certainly no less exciting or revolutionary than anything else that has occurred throughout human history, and it is occurring at a much more rapid pace.  

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March 05 2015

Commentary by David Fuller

How the Internet of Things Is More Like the Industrial Revolution Than the Digital Revolution

Philadelphia’s Centennial Exposition of 1876 was America’s first World’s Fair, and was ostensibly held to mark the nation’s 100th birthday. But it heralded the future as much as it celebrated the past, showcasing the country’s strongest suit: Technology.

The centerpiece of the Expo was a gigantic Corliss engine, the apotheosis of 40 years of steam Technology. Thirty percent more efficient than standard steam engines of the day, it powered virtually every industrial exhibit at the exposition via a maze of belts, pulleys, and shafts. Visitors were stunned that the gigantic apparatus was supervised by a single attendant, who spent much of his time reading newspapers.

“This exposition was attended by 10 million people at a time when travel was slow and difficult, and it changed the world,” observes Jim Stogdill, general manager of Radar at O’Reilly Media, and general manager of O’Reilly’s upcoming Internet-of-Things-related conference, Solid.

“Think of a farm boy from Kansas looking at that Corliss engine, seeing what it could do, thinking of what was possible,” Stogdill continues. “When he left the exposition, he was a different person. He understood what the Technology he saw meant to his own work and life.”

The 1876 exposition didn’t mark the beginning of the Industrial Revolution, says Stogdill. Rather, it signaled its fruition, its point of critical mass. It was the nexus where everything — advanced steam Technology, mass production, railroads, telegraphy — merged.

“It foreshadowed the near future, when the Industrial Revolution led to the rapid transformation of society, culturally as well as economically. More than 10,000 patents followed the exposition, and it accelerated the global adoption of the ‘American System of Manufacture.’ The world was never the same after that.”

In terms of the Internet of Things, we have reached that same point of critical mass. In fact, the present moment is more similar to 1876 than to more recent digital disruptions, Stogdill argues. “It’s not just the sheer physicality of this stuff,” he says. “It is also the breadth and speed of the change bearing down on us.”

While the Internet changed everything, says Stogdill, “its changes came in waves, with scientists and alpha geeks affected first, followed by the early adopters who clamored to try it. It wasn’t until the Internet was ubiquitous that every Kansas farm boy went online. That 1876 Kansas farm boy may not have foreseen every innovation the Industrial Revolution would bring, but he knew — whether he liked it or not — that his world was changing.”

As the Internet subsumes physical objects, the rate of change is accelerating, observes Stogdill. “Today, stable wireless platforms, standardized software interface components and cheap, widely available sensors have made the connection of virtually every device — from coffee pots to cars — not only possible; they have made it certain.”

David Fuller's view -

At the risk of sounding pedantic, I do not think we have actually reached the point of critical mass in terms of the Internet of Things, as mentioned above.  It has not quite happened yet, although we can envisage it. 

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March 05 2015

Commentary by Eoin Treacy

Top 10 Emerging Technologies of 2015

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

Neuromorphic Technology
Computer chips that mimic the human brain

Even today's best supercomputers cannot rival the sophistication of the human brain. Computers are linear, moving data back and forth between memory chips and a central processor over a high-speed backbone. The brain, on the other hand, is fully interconnected, with logic and memory intimately cross-linked at billions of times the density and diversity of that found in a modern computer. Neuromorphic chips aim to process information in a fundamentally different way from traditional hardware, mimicking the brain's architecture to deliver a huge increase in a computer's thinking and responding power.

Miniaturization has delivered massive increases in conventional computing power over the years, but the bottleneck of shifting data continuously between stored memory and central processors uses large amounts of energy and creates unwanted heat, limiting further improvements. In contrast, neuromorphic chips can be more energy efficient and powerful, combining data-storage and data-processing components into the same interconnected modules. In this sense, the system copies the networked neurons that, in their billions, make up the human brain.

Neuromorphic Technology will be the next stage in powerful computing, enabling vastly more rapid processing of data and a better capacity for machine learning. IBM's million-neuron TrueNorth chip, revealed in prototype in August 2014, has a power efficiency for certain tasks that is hundreds of times superior to a conventional CPU (central processing unit), and more comparable for the first time to the human cortex. With vastly more computing power available for far less energy and volume, neuromorphic chips should allow more intelligent small-scale machines to drive the next stage in miniaturization and artificial intelligence.

Potential applications include: drones better able to process and respond to visual cues, much more powerful and intelligent cameras and smartphones, and data-crunching on a scale that may help unlock the secrets of financial markets or climate forecasting. Computers will be able to anticipate and learn, rather than merely respond in preprogrammed ways.

Eoin Treacy's view -

IBM was a major contributor to the above article and as a result it mentions a number of areas where the company has a competitive advantage. We have all marvelled at the ability of its Watson program to compete against humans in real life tests of mental agility and at the company’s continued ability to develop cutting edge Technology. However there has been a gap between development and delivery that has resulted in a lacklustre performance.



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March 03 2015

Commentary by David Fuller

Google Invents an AI System That Plays Video Games on Its Own

Here is the opening of this interesting article from Google:

Google has created the computer equivalent of a teenager: an artificial-intelligence system that spends all of its time playing—and mastering—video games. The company introduced the new development in machine-learning Technology on Wednesday, describing it as "the first significant rung of the ladder" to building intelligent AI that can figure out how to do things on its own.

The research project, built by a London startup called DeepMind Technologies that Google acquired last year, exposed computers running general AI software to retro Atari games. The machines were shown 49 games on the Atari 2600, the home console beloved by all ’80s babies, and were told to play them, without any direction about how to do so.

When the computers passed a level or racked up a high score, they were automatically rewarded with the digital equivalent of a dog treat. Google's AI system surpassed the performance of expert humans in 29 games, and outperformed the best-known algorithmic methods for completing games in 43 instances. Some games, like Ms. Pac-Man, can't be easily beaten with a mathematical formula. In others, like Video Pinball, the AI crushed human players with a system that was more than 20 times better than a professional human game tester.

The goal of the experiment wasn't to try to find a better way to cheat at video games. The principles of being given a task and finding the best solution can be applied to real-life scenarios in the future. The system, at its base, should be able to look at the world, navigate around it, and take actions accordingly. One day, Google's self-driving cars could learn how to drive based on experience, rather than needing to be taught, says Demis Hassabis, a co-founder of DeepMind and vice president of engineering at Google. This research marks the "first time anyone has built a single learning system that can learn directly from experience and manage a wide range of challenging tasks," he says.

David Fuller's view -

When IBM’s Deep Blue computer finally beat World Chess Champion Gary Kasparov in a six-game contest in 1997, it was being programmed between games by computer specialists, some of whom were also chess champions.  Today, Google’s AI System learns on its own, and I would love to know how many games of chess it would have to play to develop the standard of a grandmaster. 



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March 02 2015

Commentary by Eoin Treacy

Gemalto Does Not Know What It Does Not Know

This article by Jeremy Scahill for The Intercept may be of interest to subscribers. Here is a section: 

The documents published by The Intercept relate to hacks done in 2010 and 2011. The idea that spy agencies are no longer targeting the company — and its competitors — with more sophisticated intrusions, according to Soghoian, is ridiculous. “Gemalto is as much of an interesting target in 2015 as they were in 2010. Gemalto’s security team may want to keep looking, not just for GCHQ and NSA, but also, for the Chinese, Russians and Israelis too,” he said.

Green, the Johns Hopkins cryptographer, says this hack should be “a wake-up call that manufacturers are considered valuable targets by intelligence agencies. There’s a lot of effort in here to minimize and deny the impact of some old attacks, but who cares about old attacks? What I would like to see is some indication that they’re taking this seriously going forward, that they’re hardening their systems and closing any loopholes — because loopholes clearly existed. That would make me enormously more confident than this response.”

Green says that the Gemalto hack evidences a disturbing trend that is on the rise: the targeting of innocent employees of tech firms and the companies themselves. (The same tactic was used by GCHQ in its attack on Belgian telecommunications company Belgacom.)

“Once upon a time we might have believed that corporations like this were not considered valid targets for intelligence agencies, that GCHQ would not go after system administrators and corporations in allied nations. All of those assumptions are out the window, so now we’re in this new environment, where everyone is a valid target,” he says. “In computer security, we talk about ‘threat models,’ which is a way to determine who your adversary is, and what their capabilities are. This news means everyone has to change their threat model.”

 

Eoin Treacy's view -

This has been a very active few weeks in terms of news flow from the cyber security sector. First we learn from Kaspersky that the firmware of our computers may be infected by an NSA Trojan and there is next to nothing that can be done about it. The story of the Gemalto breach broke last week and opens up the potential that all of our phone calls can be hacked without the least bit of trouble. I’m in awe at the ability of state sponsored operators’ ability to get the information they want but unsettled that we are all so exposed when online. Imagine then how the Chinese feel about these breaches. 



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February 27 2015

Commentary by David Fuller

Forget Secular Stagnation: America Shows Why the Pessimists Are Wrong

My thanks to a subscriber for this enlightened article by Graham Turner for City A.M.  Here is the opening:

The US economic recovery is gathering momentum. January’s impressive labour market report showed that the US is in the midst of a long, sustainable upswing that could surpass any other business cycle in the post-1945 era. QE has proved to be a powerful monetary policy tool in the US. Low short- and long-term interest rates have set the stage for an investment boom that will drive a virtuous cycle of supply-led growth and low inflation.

Some commentators nevertheless claim that the US economy is operating a long way below “trend”. They have invoked the concept of secular stagnation to describe an economic recovery that remains too weak. A lack of demand, slow productivity growth and an ageing population have combined to squeeze wages for many workers. It is not just the low paid that are suffering: many in the middle class are falling behind too.

Contrary to the assertions of these pessimists, however, “productive” investment – notably in information Technology – is rising strongly in the US. Higher investment is leading to more jobs. According to the Bureau of Labor Statistics, vacancies in professional and business services soared to a record 1.03m in December last year – an increase of 51.2 per cent over a year earlier. In total, US businesses created 3.04m jobs in 2014. The increase in private non-farm employment was the biggest for any year since 1997. The unemployment rate edged up to 5.7 per cent in January, but it has consistently fallen faster than the Fed – and most other economists – forecast. The jobless rate could well dip below 4 per cent over the course of this economic cycle.

The strong rise in investment has been concentrated in information Technology. Spending on software is running at record levels in real terms and as a share of GDP. Firms are committing greater sums to research & development (R&D). Record profits are being recycled into higher share buybacks, but the increase in R&D also suggests that they are being used to drive up the potential growth path of the US economy.

None of this should be a surprise. The US has led the world in Technology since the internet boom of the late 1990s, and the dip in Technology spending following the credit crunch of 2008 was very short-lived. This partly reflects the limited reliance on bank funding for many companies operating in the Technology sector.

Critics cite the relatively slow growth of real GDP and the low rise in productivity to support their case for secular stagnation. Unemployment may have fallen, but economic growth in the US has not been above 3 per cent in any year since the recovery began.

David Fuller's view -

This view is very much in line with what Fuller Treacy Money has been discussing over the last five years.  In fact, I would go further and say that the USA has held a Technology lead for over a century.  Moreover, the USA’s rate of technological innovation began to accelerate approximately 25 years ago, at a time when it was fashionable to say that America risked becoming uncompetitive.  More importantly, this rate of advancement is clearly exponential.

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February 27 2015

Commentary by Eoin Treacy

Forget secular stagnation: America shows why the pessimists are wrong

Thanks to a subscriber for this article by Graham turner for City A.M. which may be of interest. Here is a section:  

Contrary to the assertions of these pessimists, however, “productive” investment – notably in information Technology – is rising strongly in the US. Higher investment is leading to more jobs. According to the Bureau of Labor Statistics, vacancies in professional and business services soared to a record 1.03m in December last year – an increase of 51.2 per cent over a year earlier. In total, US businesses created 3.04m jobs in 2014. The increase in private non-farm employment was the biggest for any year since 1997. The unemployment rate edged up to 5.7 per cent in January, but it has consistently fallen faster than the Fed – and most other economists – forecast. The jobless rate could well dip below 4 per cent over the course of this economic cycle.

The strong rise in investment has been concentrated in information Technology. Spending on software is running at record levels in real terms and as a share of GDP. Firms are committing greater sums to research & development (R&D). Record profits are being recycled into higher share buybacks, but the increase in R&D also suggests that they are being used to drive up the potential growth path of the US economy.

None of this should be a surprise. The US has led the world in Technology since the internet boom of the late 1990s, and the dip in Technology spending following the credit crunch of 2008 was very short-lived. This partly reflects the limited reliance on bank funding for many companies operating in the Technology sector.

Critics cite the relatively slow growth of real GDP and the low rise in productivity to support their case for secular stagnation. Unemployment may have fallen, but economic growth in the US has not been above 3 per cent in any year since the recovery began.

 

Eoin Treacy's view -

One of the central topics at The Chart Seminar is that expectations for future potential decrease within a range. The simple reason is that we tend to base our assumptions on evidence and when the body of past evidence is based on a range we tend to predict that the situation will persist. As a result our actions become more conservative and patience deteriorates. This contributes to the formation of vacuums of supply above and demand below the congestion area which are the conditions that allow a breakout to occur. In Crowd Money I devoted a chapter to the discussion of how price affects sentiment and vice versa and how this contributes to the development of long-term cycles.  



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February 26 2015

Commentary by David Fuller

What Clever Robots Mean for Jobs

My thanks to a subscriber for this informative article from The Wall Street Journal.  Here is a brief section:

But recent advances—everything from driverless cars to computers that can read human facial expressions—have pushed experts like Mr. Brynjolfsson to look anew at the changes automation will bring to the labor force as robots wiggle their way into higher reaches of the workplace.

They wonder if automation Technology is near a tipping point, when machines finally master traits that have kept human workers irreplaceable.

“It’s gotten easier to substitute machines for many kinds of labor. We should be able to have a lot more wealth with less labor,” Mr. Brynjolfsson said. “But it could happen that there are people who want to work but can’t.”

In the Australian Outback, for example, mining giant Rio Tinto uses self-driving trucks and drills that need no human operators at iron ore mines. Automated trains will soon carry the ore to a port 300 miles away.

The Port of Los Angeles is installing equipment that could cut in half the number of longshoremen needed in a workplace already highly automated.

Computers do legal research, write stock reports and news stories, as well as translate conversations; at car dealers, they generate online advertising; and, at banks, they churn out government-required documents to flag potential money laundering—all jobs done by human workers a short time ago.

Microsoft co-founder Bill Gates , speaking in Washington last year, said automation threatens all manner of workers, from drivers to waiters to nurses. “I don’t think people have that in their mental model,” he said.

Gartner Inc., the Technology research firm, has predicted a third of all jobs will be lost to automation within a decade. And within two decades, economists at Oxford University forecast nearly half of the current jobs will be performed with machine Technology.

David Fuller's view -

This is progress.  Rapidly developing robotic machines are wonderful and any time humans are replaced by machines, productivity increases.  The biggest beneficiaries are the increasingly automated companies.  The next biggest beneficiaries are shareholders who invest in these firms.

The biggest losers are people who find themselves out of work, for no fault of their own, because they have been replaced by machines which can work around the clock, seven days a week if required.  The second biggest losers are governments which find that they are collecting fewer and smaller payroll taxes, and are also having to subsidise the unemployed. 

Luddite, anti-robotics demonstrations are pointless.  There is no turning back the clock on progress.  Instead, individuals, families, schools and universities, job counsellors and governments need to think creatively about new jobs which will still require people.  They will, but I have long said that the accelerating rate of technological innovation ensures that jobs are being replaced more rapidly than they can be created at present.     

(See also Eoin’s comments below on this subject.)



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February 26 2015

Commentary by David Fuller

3D Printer Creates Jet Engine in World First

My thanks to a subscriber for this remarkable story from The Independent.  Here is the opening:

Australian engineers have created the world’s first 3D-printed jet engines.

The work of engineers and researchers at Amaero Engineering and Monash University, located on the outskirts of Melbourne, could lead to cheaper, lighter and more fuel efficient engines.

“The project is a spectacular proof of concept that’s leading to significant contracts with aerospace companies,” Amaero's business development manager Ben Batagol told the Guardian.

Researchers worked for two years to create two revolutionary jet engines after a challenge by French aerospace giant Safran.

"They gave us an old engine, we pulled it apart and then part by part we've been manufacturing it for them," Mr Batagol told theSydney Morning Herald.

Although the first took almost 12 months to complete, the second was finished in only three months.

Of the two created, one has been delivered to the aerospace company in France, and the other is on display at the Avalon Airshow in Australia.

A third engine, focused on using lighter weight materials, is now being planned by the team.

"3D printing allows us to make very complex parts, that we have trouble casting on machining right now, in a very quick fashion," Mr Batagol explained.

The engines were created using a high-powered laser, fusing powdered nickel, titanium or aluminium into the shapes of objects layer by layer.

David Fuller's view -

3D printing is another extraordinarily useful development of almost unlimited potential in our rapidly developing world.     



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February 26 2015

Commentary by Eoin Treacy

Tesla gearing up for release of batteries for the home

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

As the company’s first foray into selling directly to the home energy storage market, the batteries are expected to get plenty of attention just by virtue of the attached Tesla label. And it should be an improvement from the home batteries Tesla has been quietly supplying to its sister company, the solar panel maker SolarCity, located up the road from Tesla in San Mateo, California. Those batteries are currently available in select markets within California, and only through SolarCity. The new batteries would be more widely available.

Tesla would face plenty of competition for their batteries, with names like Bosch, GE and Samsung involved. Honda has unveiled a demonstration smart home that features a rechargeable home battery, along with an electric vehicle, solar panels and geothermal heat pump, and is driven by an energy management system.

Researchers from both Harvard and MIT have developed flow batteries for renewable energy storage, while Bloom Energy’s fuel cell boxes act as a power source as well as an energy storage device.

One area where Tesla might stand out is in cost. Tesla assembles its battery packs from battery cells provided by Panasonic, and is about to do it on a massive scale as soon as 2016 at its gigafactory currently under construction in Nevada. Such an economy of scale – producing 50 gigawatt-hours of battery capacity each year – is expected to push the company’s car battery costs down by 30 percent. Based on the same Technology, Tesla's home battery costs should come down as well.

 

Eoin Treacy's view -

The same efficiency gains observed in how Moore’s Law is applied to semiconductors can also be seen in solar Technology. This has changed how companies perceive the growth of the domestic energy production sector. This requires a much more flexible electric grid and a utility sector that will have to evolve if it is to avoid obsolescence. As the potential to cut one’s personal expenses through the application of Technology develop, homebuilders will be happy to see that the benefits of owning a new home equipped with the wide range of modern gadgetry is becoming increasingly convincing. 



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February 25 2015

Commentary by David Fuller

The Markets Now

Our probable date for the next seminar is Monday 20th April, and we should have confirmation later this week.  

February 24 2015

Commentary by David Fuller

Email of the day 1

On our latest Markets Now Seminar:

“Thank you for last night’s presentations. Much enjoyed and much appreciated. David Brown is an enthusiast with a powerful message! Isn’t it interesting how the historical significance of what we’re going through is seldom discussed in the noisy portals of the media world.

“How to play it as an investment theme will be a fascinating challenge. It made me just a little concerned when Dr Brown suggested that ‘it is so easy to make money right now’ in the internet space – the price trends are spectacular, but would we be the greater fools to get involved right now? Like you, I’m waiting for a miss-step!

“And I agree with you and Iain on your assessment of Europe. There are many, many sceptical and cashed up investors around at the moment.

“Lots of thanks again and I look forward to the next session.”

David Fuller's view -

Many thanks for these thoughtful comments.  David Brown is certainly a ‘hands on’ expert in the unbelievably exciting field of Technology, which makes his views all the more relevant and exciting.  He spoke for over two hours, including questions, and it was riveting - by far the most interesting and informative Technology presentation that I have attended.  

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February 24 2015

Commentary by Eoin Treacy

Postal Savings Bank of China chases Pre-IPO investors

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

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [email protected] to buy additional rights. http://www.ft.com/cms/s/0/5ccec596-b947-11e4-a8d0-00144feab7de.html#ixzz3SdAcm0uo

Postal Savings Bank is a fixture in rural China, where its network scoops up deposits from rural households. It has as much as $800bn in deposits, and puts its money into Chinese government bonds and the interbank market as well as lending to small and medium-sized enterprises and agricultural households.

Its branch network of about 40,000 is larger than more widely known state-owned banks, such as Industrial and Commercial Bank of China.

“It is a true and pure savings bank,” said the head of one Chinese investment fund that is considering buying a stake. “Its ability to collect deposits is very, very strong and because it doesn’t have a huge loan book, the overall risk is very, very low. But to turn it into a new retail bank may be way too difficult.”

Among the more interesting possible investors is Ant Financial, an affiliate of Alibaba, the US-listed ecommerce group. Alibaba already has a partnership with the International Finance Corporation, the private sector arm of the World Bank, to offer micro finance services in China. It could use the Postal Saving’s Bank’s cheap funding as a way to extend its financial muscle in the country.

 

Eoin Treacy's view -

Alibaba has been perhaps the most proactive of the globally significant Technology companies in pursuing a dominant role in the financial services sector. Its Ali Pay service has allowed it to circumvent rules the major banks have to follow in terms of the deposit rates they can pay. This is achieved by leveraging the popularity of its online properties to attract customers. It is arguable whether tying up with a retail branch network is the most effective use of capital when the payments sector is increasingly online.  



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February 23 2015

Commentary by Eoin Treacy

The India Report

Thanks to Deepak Lalwani for this edition of his weekly report which may be of interest to subscribers. Here is a section: 

PM Modi’s “Make in India” initiative was endorsed by a global manufacturing giant. General Electric of the US inaugurated its 67-acre plant in Chakan, near the western city of Poona (which is close to Bombay). The new $ 200m manufacturing facility will be an export hub, with plans to send half of its output to the company’s global factories. The new plant is GE’s first multi-purpose manufacturing facility in India and will produce a range of products, including aviation, rail and diesel engines. The company hopes to win increased domestic orders also.

The National Association of Software and Services Companies (NASSCOM) expects India’s $ 150 bn IT outsourcing sector to see export revenue growth of 12-14% in the next fiscal year which starts on 1 April 2015. This compares with an estimated increase of 12% in the current fiscal year which will end on 31 March. The sector’s exports in 2015/16 are expected to touch $ 112 bn, according to NASSCOM. The sector is worth $ 150 bn in total after adding revenue generated from the domestic market. Future growth in the sector will be influenced by increasing demand from global companies for new high value services such as digital Technology, mobile applications and cloud computing, according to NASSCOM. However, the export-driven outsourcing industry must focus on building a large pool of skilled workforce to avail of opportunities in the emerging high-end services segment, according to NASSCOM’s Chairman. R. Chandrasekaran. A shortage of qualified engineers to tap this segment poses a risk to the growth prospects of India’s showpiece IT sector. It accounts for about 10% of India’s GDP and employs roughly 3.5 m people who are mainly in the country. As much as 75% of outsourcing IT exports are to the US and Europe.

 

Eoin Treacy's view -

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

India has long relied on its domestic consumer base to insulate the economy from global issues that have tended to take a toll on export-oriented nations. However if India is to achieve its development goals, not least mobilising its massive young population in order to provide hundreds of millions of people a better wage, it has little choice but to foster a major manufacturing sector. Plans are in the works to achieve this long-term goal by attracting FDI with a proactive attitude, better terms of trade and improving infrastructure. Provided these plans are followed through on and will be supported by successive administrations there is every chance India can achieve its development potential. 



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February 20 2015

Commentary by David Fuller

Dan Loeb Plot to Pry Open Japan Secretive Robot Maker

(Bloomberg) -- One of Japan’s most reclusive companies, Fanuc Corp. has spent decades building a wall of secrecy around its ultra-profitable industrial-robotics business.

Outsiders are rarely allowed at its complex on the slopes of Mount Fuji, where an army of yellow robots work 24/7 making more robots in windowless yellow factories. Business is often done by fax to keep computer viruses out and Technology in. E-mail is mostly banned. There’s no investor relations department and no conference calls with analysts. The founding Inaba family has the $46-billion company under a tight grip.

This is the latest target of Daniel Loeb, the activist investor and founder of New York-based hedge fund Third Point LLC. Loeb earlier waged a high-profile campaign in Japan against Sony Corp., which ended in October with mixed results. Last week, Loeb disclosed in a letter to shareholders that he also bought a stake in Fanuc and was agitating for change.

“This company is so incredibly innovative and forward looking in terms of its operational culture,” Loeb, 53, said Thursday in a telephone interview. “From a capital allocation standpoint, not so much.”

With operating profit margins topping 40 percent, Fanuc makes 25 percent more income per employee than Goldman Sachs Group Inc., according to Loeb. He also compared the robot manufacturer to Apple Inc. in its tight focus on a small lineup of technologically superior products. Still, Loeb said, the debt-free company would be worth “significantly” more if it bought its own shares back, using some of the $8.5 billion in cash sitting idle on its balance sheet.

“They could afford to do all of it,” Loeb said.

David Fuller's view -

With big operating profit margins, no debt and great clients, Fanuc (historic & weekly) is interesting to say the least.  I have been following Fanuc for decades, and actually had a family holding in the share during the 1990s.  I held it for three or four years, as I recall and it went nowhere.

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February 19 2015

Commentary by David Fuller

Robot Makers Turn to Technology Industry as Next World to Conquer

My thanks to David Brown, our guest speaker at Monday’s Markets Now Seminar at The East India Club, for two additional reports in this section.  Here is a brief sample:

Robot executives paid close attention when Chia Day, a softly spoken senior vicepresident

at Foxconn, visited the Automatica trade show in Munich last week.

Mr Day has been given the task of fulfilling the Taiwanese contract manufacturer’s

dramatic vision of building a 1m-strong robot army to transform the productivity of

its labour-intensive electronics factories, which serve clients including Apple.

He is therefore an important potential customer for robot makers Fanuc and Yaskawa of Japan,

Switzerland’s ABB and Germany’s Kuka, which aim to tap markets beyond the automotive sector – for decades the foundation of the industry.

“Today there are 6m people working in the 3c [computer, communication and consumer electronic]

industry; that’s a market that has a relatively low degree of automation today. We see huge potential, comparable maybe to automotive 40 years ago,” says Till Reuter, chief executive of Kuka.

The four big industrial robots makers are easy to tell apart on the trade show floor: Kuka’s machines are orange, ABB’s graphite white, Fanuc’s yellow and Yaskawa’s are blue and white.

For years these four companies have dominated the market, controlling more than 60 per cent of industrial robot sales. But now their competitive environment is in flux.

New Chinese entrants such as Siasun and Estun are driving down the cost of robots, obliging some incumbents to lower prices too.

Google and Amazon’s recent robot company acquisitions signalled that Silicon Valley is preparing to barge into the market, and newcomers Universal Robots and Rethink Robotics have won plaudits for their lightweight, collaborative robots.

“We see Google, Universal and Rethink as a clear confirmation of the robotic trend, and they will help us open more markets,” Mr Reuter told analysts in March.

David Fuller's view -

Robotics suppliers are now in an era of explosive long-term growth.  Inevitably, this will lead to a steady increase in competition but demand, including upgrades, will almost certainly exceed supply for a very long time.  Moreover, what can replace increasingly useful robots, other than even smarter robots?

See also: In Need of Disruptive Future, Dr Jacques Bughin for McKinsey Global Institute.

Both reports are posted in the Subscribers' Area.



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February 19 2015

Commentary by Eoin Treacy

Technology at Work - Stock Beneficiaries on the Advance of Automation

This is a really great report from Citi focusing on the beneficiaries of automation and the increasing pace of technological innovation. I recommend downloading it now even if you plan to revisit it later. Here is a section: 

The Pace of Technological Change
Firstly, the pace of technological change has accelerated and now risks outpacing labour’s ability to adapt. It took 119 years for the spindle to diffuse outside Europe. By contrast the Internet spread across the globe in only seven years. Technology, connectivity and globalization have accelerated the rate of change in innovation. In 1980 one billion people were integrated into the global economy compared to 6 billion today. In 2011, when Facebook analysed their users, they found on average there were only 4.7 degrees of separation between any two users anywhere in the world. Crowd sourcing and crowd funding have also helped spur innovation. Start up speed and costs have also been aided by the advent of cloud computing where costs have been falling at c.50% every three years since 2006. The ability to collect and analyse data now often happens in real time, allowing firms to adjust offerings dynamically. The impacts on innovation are being seen across multiple industries, from newspapers to taxis, music to TV cord cutting and peer-to-peer lending to mobile payments. The GPS report shows a significant amount of innovation and change is happening in the fields of automation and robotics.

The Scope of Technological Change
Secondly, the scope of Technology change is increasing. A big data revolution, increased connectivity and machine learning algorithm improvements mean that more occupations are at risk of being substituted by Technology, including tasks once thought quintessentially human such as navigating a car or deciphering handwriting. Carl Benedict Frey and Michael Osborne's study predicts 47% of US jobs are at risk of computerisation. With the caveat that measurement problems exist when comparing countries, further studies of jobs at risk outside the US have found 35% of UK jobs and 54% of EU jobs are at risk. By US industry, employment in agricultural, management and education are estimated to have a low risk of computerisation, while those most at risk include real estate (67%), transport & warehousing (75%), and accommodation & food services (87%). 

A significant part of the GPS report shows these changes are happening now. In financial services, which has an estimated higher than average 54% of US jobs at risk, we are seeing several examples of technological substitution: asset management continues to migrate from active to passive or ETF funds; new Exchange Traded Managed Funds could bring automation to the financial service distribution process; electronic trading has swept through markets such as equities, with a 50% reduction in trading headcount over the past 10 years, and could expand to other products; algorithms are being used in both high frequency trading and retail asset allocation; digital banking is reducing bank branches and staff levels; cash is also being substituted by mobile payments or digital money, where contactless payments can be over 10x quicker than cash or chip and pin payments, reducing both human time and errors.

 

Eoin Treacy's view -

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

The pace of technological innovation is such that change is happening faster than most people are comfortable with. One of the reason’s my wife and I picked the school we did for our kids is because they have a heavy focus on Technology and our kids will be learning to program Python from age 10. 

Perhaps the most underappreciated benefit of the internet is in its role of connecting likeminded individuals who can help each other further innovative research. This means that as computing power becomes faster and more available that there is no logical limit to the extent of innovation. There will be winners and losers. Obviously non skilled workers are at risk while mass employers may benefit from innovation. 

 



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February 19 2015

Commentary by Eoin Treacy

Leslie and Mark's Old/New Idea

This article by Josh Freed for the Brookings Institute is a balanced exposition of the state of the global nuclear sector and may be of interest to subscribers:

There are American political leaders in both parties who talk about having an “all of the above” energy policy, implying that they want to build everything, all at once. But they don’t mean it, at least not really. In this country, we don’t need all of the above—virtually every American has access to electric power. We don’t want it—we have largely stopped building coal as well as nuclear plants, even though we could. And we don’t underwrite it—the public is generally opposed to the government being in the business of energy research, development, and demonstration (aka, RD&D).

In China, when they talk of “all of the above,” they do mean it. With hundreds of millions of Chinese living without electricity and a billion more demanding ever-increasing amounts of power, China is funding, building, and running every power project that they possibly can. This includes the nuclear sector, where they have about 29 big new light water reactors under construction. China is particularly keen on finding non-emitting forms of electricity, both to address climate change and, more urgently for them, to help slow the emissions of the conventional pollutants that are choking their cities in smog and literally killing their citizens.

Since (for better or for worse) China isn’t hung up on safety regulation, and there is zero threat of legal challenge to nuclear projects, plans can be realized much more quickly than in the West. That means that there are not only dozens of light water reactor plants going up in China, but also a lot of work on experimental reactors with advanced nuclear designs—like those being developed by General Atomic and TerraPower.

Eoin Treacy's view -

There are exciting things happening in the nuclear sector at present as Technology catches up with the early aspirations of the industry in the decade following World War II. However, while computer modelling and mathematical work is relatively cheap, building test reactors and overcoming the necessary regulatory hurdles is expensive and beyond the scope of the even the best funded start up. 

The reality is that with cheap oil and gas the USA just does not have the incentive to drive the next stage of nuclear research. China and India need the Technology. The pace with which they are polluting their cities is unsustainable and represents a growing headwind to the development of the services and knowledge based economies that will further their development goals. As a result they have a great incentive to explore any Technology that can deliver a semblance of energy independence. 

 



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February 18 2015

Commentary by David Fuller

Disruptive Technologies: Advances That Will Transform Life, Business, and the Global Economy

My thanks to a subscriber for this terrific report from McKinsey Global Institute.  Here is a brief portion of the Executive summary:

Today, we see many rapidly evolving, potentially transformative technologies on the horizon—spanning information technologies, biological sciences, material science, energy, and other fields. The McKinsey Global Institute set out to identify which of these technologies could have massive, economically disruptive impact between now and 2025. We also sought to understand how these technologies could change our world and how leaders of businesses and other institutions should respond. Our goal is not to predict the future, but rather to use a structured analysis to sort through the technologies with the potential to transform and disrupt in the next decade or two, and to assess potential impact based on what we can know today, and put these promising technologies in a useful perspective. We offer this work as a guide for leaders to anticipate the coming opportunities and changes.

IDENTIFYING THE TECHNOLOGIES THAT MATTER

The noise about the next big thing can make it difficult to identify which technologies truly matter. Here we attempt to sort through the many claims to identify the technologies that have the greatest potential to drive substantial economic impact and disruption by 2025 and to identify which potential impacts leaders should know about. Important technologies can come in any field or emerge from any scientific discipline, but they share four characteristics: high rate of Technology change, broad potential scope of impact, large economic value that could be affected, and substantial potential for disruptive economic impact. Many technologies have the potential to meet these criteria eventually, but leaders need to focus on technologies with potential impact that is near enough at hand to be meaningfully anticipated and prepared for. Therefore, we focused on technologies that we believe have significant potential to drive economic impact and disruption by 2025.

David Fuller's view -

This report is posted in the Subscribers' Area.

McKinsey’s Report is an excellent primer for anyone interested in knowing more about Technology. It is also a good introduction to David Brown’s presentation: The Third Industrial Revolution.  I have seen it and cannot wait to hear the discussion next Monday.   



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February 18 2015

Commentary by David Fuller

Robots Mean Business: A Conversation With Rodney Brooks

Here is a brief sample from a conversation with the CTO of Rethink Robotics, also forwarded by David Brown, prior to his presentation at Markets Now next Monday:

Sensors and common sense

Over the last 50 years, robots have been identified with industrial robots that have been in factories, mostly automobile factories, where the robots are going through a series of motions again and again, repeatedly, very accurately. But they’re really operating the same way they did when they first were introduced in 1961, when computation was incredibly expensive and sensors were very expensive.

In the last 10 years, we’ve had 50 years of Moore’s law, getting the amount of computation we can have in an embedded, lost-cost system so that we can do real-time sensing and real-time 3-D sensing. We also have enough understanding on human–computer interaction and then robot–computer interaction to start building robots that can really interact with people so that an ordinary person—who doesn’t have to know how to program—can interact with a robot and get it to do something useful.

The first industrial robots had to be shown a trajectory and follow a trajectory, and that’s how the vast majority of industrial robots are still programmed: follow a trajectory accurately. That’s your hammer. So now you have to restructure all your nails so that hammer can hit those nails.

In the new robots, in the new style of robots, there’s a lot of built-in software, a lot of commonsense knowledge that’s just built in. The robot knows—if it doesn’t have anything in its hand, it can’t put it down. So now you don’t have to have error-recovery code put in by the user. We let an ordinary factory worker get the robot to do complex tasks. They don’t have to know anything about programming, they don’t have to know about quaternions or six-dimensional vectors; doesn’t come into it. They’re showing it the objects and what to do with the objects, and the robot is making the inferences.

When a factory worker wants the robot to do something new, they come up to the robot, they grab its arm. They move its arm over an object. There’s a camera there. They show it the object. The robot learns what the object looks like by moving around. They may bring it down, they may press the button to close the fingers. The robot infers, “Oh, I’m supposed to pick something up here.” And if, by the way, the object was moving when it went down, the robot would infer, “Oh, this is a conveyer belt. I know about conveyer belts. I need to match my arm speed to that.”

So they just show the robot the things that it’s got to deal with, where to pick them up, where to put them, when to hold them in front of a scanner, say. And the robot patches everything together and then is able to do the task by itself. 

David Fuller's view -

Note the opening of the second paragraph above:

In the last 10 years, we’ve had 50 years of Moore’s law, getting the amount of computation we can have in an embedded, lost-cost system so that we can do real-time sensing and real-time 3-D sensing.

This is the accelerated rate of technological innovation that I have been talking about for a number of years.  We have seen a previously unimaginable acceleration in Technology over the last ten years.  The rate of innovation should be much faster over the next decade.

This item continues in the Subscribers’ Area, where the article is also posted. 



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February 18 2015

Commentary by Eoin Treacy

Gilead Pill Can Stop HIV. So Why Does Almost Nobody Take It?

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

Truvada, Gilead’s HIV drug, has been approved since 2004 for people with the virus. In 2012, use was expanded to people without HIV as a way of preventing transmission -- a practice called PrEP, or pre-exposure prophylaxis. Taken daily, it can prevent infections 92 percent of the time, meaning it could drastically reduce new infections in sexually active gay men, among the U.S.’s highest-risk communities.

Thanks to its use in HIV patients, Truvada’s been a financial success, bringing Gilead $1.79 billion in the U.S last year. Yet out of 3.3 U.S. million prescriptions from January 2012 to March 2014, only 3,200 were for prevention.

There are many reasons: Gilead says PrEP isn’t a moneymaker, so the drugmaker doesn’t pitch the medicine to many of the primary care doctors who see healthy, HIV-negative gay men most likely to benefit from Truvada. Patients and advocates say doctors often don’t know about the medicine, and some insurance plans leave patients with copays as high as $1,300, making use by the healthy less affordable.

The result is thousands of people who could significantly lower their HIV risk, yet don’t. Some 50,000 Americans are diagnosed with HIV each year, with the highest rates among young gay males, according to the U.S. Centers for Disease Control and Prevention.

Yet in November, Gilead said that 42 percent of PrEP prescriptions written through March 2014 were for women, and only 7.4 percent were for men younger than 25.

 

Eoin Treacy's view -

The list of caveats that come with this description of Truvada’s characteristics should give anyone pause. However the people it is aimed at helping do not have the best record of adopting a cautious lifestyle when it comes to the trade-off between pleasure and well-being, not least because many are young men. 

Taking a step back, the commercialisation of such a drug requires a very long lead time. This explains why after the fizz of the Tech Bubble it took so long for the promises of innovation to come to fruition. One of the reasons that bioTechnology is such a booming sector today is that a number of important products have reached the commercialisation stage. 



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February 18 2015

Commentary by Eoin Treacy

Portland to generate electricity within its own water pipes

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

LucidPipe simply replaces a stretch of existing gravity-fed conventional pipeline, that's used for transporting potable water. As the water flows through, it spins four 42-inch (107-cm) turbines, each one of which is hooked up to a generator on the outside of the pipe. The presence of the turbines reportedly doesn't slow the water's flow rate significantly, so there's virtually no impact on pipeline efficiency.

The 200-kW Portland system was privately financed by Harbourton Alternative Energy, and its installation was completed late last December. It's now undergoing reliability and efficiency testing, which includes checking that its sensors and smart control system are working properly. It's scheduled to begin full capacity power generation by March.

Eoin Treacy's view -

This represents an innovative idea but is just one example of how technological innovation is enhancing productivity. LucidPipe is privately held but the video on their homepage is worth watching just for the sheer simplicity of the concept and the benefit that accretes to the user of the Technology



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February 16 2015

Commentary by Eoin Treacy

Hacked vs. Hackers: Game On

This article by Nicole Perlroth for the New York Times may be of interest to subscribers. Here is a section: 

While much progress is being made, security experts bemoan that there is still little to prevent hackers from breaking in in the first place.

In May, the F.B.I. led a crackdown on digital crime that resulted in 90 arrests, and Robert Anderson, one of the F.B.I.’s top officers on such cases, said the agency planned to take a more aggressive stance. “There is a philosophy change. If you are going to attack Americans, we are going to hold you accountable,” he said at a cybersecurity meeting in Washington.

Still, arrests of hackers are few and far between.

“If you look at an attacker’s expected benefit and expected risk, the equation is pretty good for them,” said Howard Shrobe, a computer scientist at the Massachusetts Institute of Technology. “Nothing is going to change until we can get their expected net gain close to zero or — God willing — in the negative.”

Until last year, Dr. Shrobe was a manager at the Defense Advanced Research Projects Agency, known as Darpa, overseeing the agency’s Clean Slate program, a multiproject “Do Over” for the computer security industry. The program included two separate but related projects. Their premise was to reconsider computing from the ground up and design new computer systems that are much harder to break into and that recover quickly when they have been breached.

“ ‘Patch and pray’ is not a strategic answer,” Dr. Shrobe said. “If that’s all you do, you’re going to drown.”

 

Eoin Treacy's view -

The first experience many of the world’s emerging consumers will have of banking will be online. Many emerging markets do not have the retail branch network we are accustomed to in the West and the cost of building one versus installing an online system means they may never exist. As banking, retail, wholesale, entertainment, groceries and other parts of our lives move further online and become increasingly mobile, the need to protect our personal data is a growing imperative. 

At last week’s talk to potential investors in the FP WM Global Corporate Autonomies Fund, it was a pleasure to meet up again with David Brown. He took me through a brief summary of the presentation he will be giving at the Markets Now event on the 23rd. Quite simply if I were in London on the 23rd I wouldn’t miss this talk. It will offer a unique perspective on the evolution of the Third Industrial Revolution, where we are in the cycle, and what to expect next. Here is a link to his bio

 



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February 16 2015

Commentary by Eoin Treacy

Email of the day on the possibility of an online strategy session

Here's to fine warm weather for you and best of luck to your team for the ICC World Cup.

I know you have mentioned to let you know of any interest in conducting a Chart Seminar in Sydney.  I am happy to attend if one is arranged.  I would, however be very interested if another Global Strategy session was arranged.  The last one was very valuable and just the comments on India were enough to pay for the cost of the session many times over.  I'm not too big on Technology but I'm sure the Sydney crowd would even be keen to interact with Eoin through Skype  - if that was the only way it could be arranged for this year.

Just my two penny's worth.

 

Eoin Treacy's view -

Thanks for your thoughts, well wishes and good luck to Australia in in the ICC World Cup. It does not look like we will be holding a seminar in Australia this year but we will look into online class platforms for anyone who might be interested in a Global Strategy Session which would be framed to cover some of the major evolving themes likely to interest subscribers over the next 12 months. 



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February 11 2015

Commentary by David Fuller

What Apple Just Did in Solar Is a Really Big Deal

Here is the opening of this topical article from Bloomberg:

It was a year ago this week that Apple Chief Executive Officer Tim Cook responded to a climate-change heckler at the company's annual shareholder meeting with an impassioned rebuttal in which he famously told investors who care only about profits to "get out of the stock."

Now Cook is putting his prodigious sums of money where his mouth is, proclaiming the “biggest, boldest and most ambitious project ever,” an $850 million agreement to buy solar power from First Solar, the biggest U.S. developer of solar farms. The deal will supply enough electricity to power all of Apple’s California stores, offices, headquarters and a data center, Cook said Tuesday at the Goldman Sachs Technology conference in San Francisco.

It’s the biggest-ever solar procurement deal for a company that isn't a utility, and it nearly triples Apple’s stake in solar, according to an analysis by Bloomberg New Energy Finance (BNEF). “The investment amount is enormous,” said Michel Di Capua, head of North American research at BNEF. “This is a really big deal.”

David Fuller's view -

Iconic Apple can only increase US and also global interest in solar power.  It remains far more flexible and adaptable in terms of instillations than any other source of electricity.  It also has more scope for lower costs because solar benefits more from technological progress than any other source of power.



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February 09 2015

Commentary by Eoin Treacy

Google Is Developing Its Own Uber Competitor

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

Google has made no secret of its ambitions to revolutionize transportation with autonomous vehicles. Chief Executive Officer Larry Page is said to be personally fascinated by the challenge of making cities operate more efficiently. The company recently said the driverless car Technology in development within its Google X research labis from two to five years from being ready for widespread use. At the Detroit auto show last month, Chris Urmson, the Google executive in charge of the project, articulated one possible scenario in which autonomous vehicles are patrolling neighborhoods to pick up and drop off passengers. “We're thinking a lot about how in the long-term, this might become useful in people's lives, and there are a lot of ways we can imagine this going,” Urmson said in a conference call with reporters on Jan. 14. “One is in the direction of the shared vehicle. The Technology would be such that you can call up the vehicle and tell it where to go and then have it take you there.”

Those comments, according to the person familiar with deliberations of the Uber's board, have left executives at Uber deeply concerned—for good reason. Google is a deep-pocketed, technically sophisticated competitor, and Uber’s dependence on the search giant goes far beyond capital. Uber’s smartphone applications for drivers and riders are based on Google Maps, which gives Google a fire hose of data about transportation patterns within cities. Uber would be crippled if it lost access to the industry-leading mapping application, and alternatives— such as AOL's MapQuest, Apple Maps, and a host of regional players—are widely seen as inferior.

Eoin Treacy's view -

As the pace of technological innovation accelerates the potential for driverless cars to revolutionise the transport sector is non-trivial. Before engaging in speculation about just how much of a game changer this might be it is worth considering that the Technology is still unproven, important questions about culpability in an accident have yet to be finalised and adoption rates will be key to the success of the venture.

Google’s Waze app is quickly gaining widespread adoption in Los Angeles where daily rush hour traffic lends an incentive to forge a less congested route. The app acquires individual data for each mobile phone’s location, speed, origin and destination, plots it against neighbouring vehicles running the app and calculates the best route. It is not too difficult to imagine that a future iteration will power the programming of a Google driverless car. If adoption rates for driverless cars approach 90%+ the question of whether seat belts, traffic lights and speed limits will be brought into play and the potential for considerable efficiencies will be opened up.  



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February 06 2015

Commentary by David Fuller

Why Were We So Surprised?

My thanks to a subscriber for this fascinating article by Jeremy Grantham for the GMO Quarterly Letter.  Here is a brief sample:

The New Oil Balance

Lower oil prices and much reduced capex will guarantee that oil from fracking will start decreasing this year and that the supply of traditional oil will be less than it would have been. Indeed, at recent prices very few, if any, new drilling programs will be started, and a mere three years later at current prices, 80% or so of Bakken production would be history. But right now we have a substantial excess of production, and oil demand is notoriously inelastic to price in the short term – people will not be leaping into their cars to celebrate lower gas prices. But with time they may drive an extra 1-2% percent here and elsewhere and the excess will slowly clear: possibly by mid-year and almost certainly by the end of next year. After supply and demand come into balance, the price initially is likely to rise slowly, held in check by the increasing amounts of U.S. fracking oil that can be profitably produced at each new higher price level. It is this rapid response rate that will make the frackers the key marginal suppliers. This is a sensitive and, I believe, unknowable equation as to precise timing, but this phase will likely end only when fracking production, even at much higher prices, tops out, as it most likely will in the next five years. After that, I believe the equation will revert to the relatively more stable and more knowable one of the 2011 to 2013 era, in which the price of oil will be the full cost of finding and developing incremental traditional oil, which by then is likely to be over $100 a barrel. (In the interest of full disclosure I personally have been and will continue to be a moderate buyer of oil futures six to eight years out, for reasons that should be clear from the above. It should also be clear that such a bet can lose easily enough.)

David Fuller's view -

I have long held Jeremy Grantham in high regard.  Therefore, when feeling a temptation to disagree with him, my survival instinct tells me to lie down until I can think of something else to write about.

However, to widen the discussion and give subscribers more to think about, I will throw caution to the wind.  There are two important points in Jeremy Grantham’s paragraph above, with which I disagree:

1) He believes that US fracking production, even at much higher global oil prices, would most likely top out in the next five years.  No one knows for certain, of course, as this is a fledgling Technology relative to most conventional oil production.  However, he must be assuming that only a small portion of oil in known shale deposits can be commercially recovered.  Twenty years ago, 2014’s US shale oil production would have been regarded as a pipe dream.  Moreover, natural gas from most conventional oil wells at that time was flared off.  The march of Technology in search of profits is relentless.  The one certainty is that fracking Technology will become more rather than less efficient in the years ahead. 

This item continues in the Subscribers’ Area.



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February 05 2015

Commentary by Eoin Treacy

Pfizer to Buy Hospira for $16 Billion

This article by Jonathan D.Rockoff may be of interest to subscribers. Here is a section:

Hospira is among the leading companies selling injectable drugs and biosimilars. In fact, Hospira is one of the first U.S. drug makers selling biosimilars in Europe and Australia. Hospira, of Lake Forest, Ill., had $4.4 billion in revenue last year, according to Pfizer.

The deal would give Pfizer, which has been trying to build up its own businesses in those areas, the opportunity to expand and take leading positions in fast-growing markets, according to Mr. Read. “The puzzle pieces come together in a very nice way,” he said in an interview.

Pfizer estimates the global marketplace for generic sterile injectables is estimated to be $70 billion in 2020, while the marketplace for biosimilars is estimated to be about $20 billion by that time. Pfizer had $49.6 billion in sales last year.

Pfizer will add Hospira, which is based in Lake Forest, Ill., to its global established pharma business, which includes generic products as well as growth opportunities such as biosimilars and injectables. The business had $25.15 billion in revenue last year.

 

Eoin Treacy's view -

The healthcare sector represents powerfully inspiring trends which can be split down into three main themes. These are innovation, availability and elder care. Let’s focus for the moment on the first two.  

To an extent the pharmaceuticals sector has ceded the role of innovation to bioTechnology companies. The trade-off is that they save money on expensive but uncertain R&D, but pay up for success stories through M&A activity. As the global middle class expands, per capita income improves and demand for length-of-life enhancing knowhow increases. This creates demand for highly expensive innovative solutions and large pharmaceutical companies have the marketing heft to sell them globally. Additionally, demand for generic alternatives to some of their previous bestsellers is on a similarly powerful growth trajectory. Rather than limiting supply and keeping prices high behind a patent wall, the generic strategy is to “pile um high, sell um cheap”. 

 



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February 05 2015

Commentary by Eoin Treacy

American Advanced Industries What They Are, Where They Are, and Why They Matter

I watched a series of panel discussions this morning at the Brookings Institute featuring the CEOs of Siemens, Alcoa, Stanley Black & Decker and Paccar among others. While I do not know if these talks were recorded and will available for viewing later I thought subscribers might be interested in the associated report. Here is a section

In short, the advanced industries sector—defined by its deep investment in R&D and STEM workers—encompasses the nation’s highest-value economic activity. As such, these industries are the country’s best shot at innovative, inclusive, and sustainable growth.

But there is a problem. The future competitiveness of the U.S. advanced industries sector is uncertain. Competitor nations are accelerating their investments in research and development (R&D), STEM workers, and strong regional Technology ecosystems just as the U.S. commitment weakens. As a result, recent decades have seen large-scale losses of manufacturing jobs and a growing trade deficit even in advanced Technology products. At the same time, the national government remains locked in partisan paralysis when it should be providing a platform for renewal. Going forward, a new alignment of states, cities, and metropolitan areas—and regional networks of public, private, and civic institutions—is going to be needed to transcend Washington’s paralysis and make advanced industry competitiveness a top priority.

And so, at a moment of uncertainty about the sources of U.S. economic renewal, this report urges the nation to double down on the advanced industries sector as one component of future prosperity. The report first explains what the advanced industries are and why they matter. It then explores the size, nature, and geography of the advanced industries sector, with particular attention to its distribution across U.S. metropolitan areas. It describes both the strength of the sector in the United States and a number of challenges that are undercutting its international competitiveness. Finally, the report suggests several priority areas for private- and public-sector work to promote the sector’s growth. 

Ultimately, the main point is simple: A competitive and growing advanced industries sector is prerequisite any future broadly shared prosperity. The nation should place a high priority on revitalizing them. 

 

Eoin Treacy's view -

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

While the above paragraphs sound a cautionary note, listening to the CEOs of major engineering companies can’t but fill one with enthusiasm about the pace of innovation and the beneficial effect this will have on consumers and not just in the USA. 

There is little doubt that education needs to focus on encouraging students into more highly skilled jobs. Just about all unskilled manufacturing that could be sent to cheaper labour markets has been. Manufacturing in the 21st century is increasingly about working in conjunction with robots and advanced pieces of machinery and software. This is not new, people have been talking about the need for enhanced technical schooling for a long time but the number of jobs available in these sectors now means that there is a clear progression for graduates to comparatively high paying jobs. 

 



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February 02 2015

Commentary by Eoin Treacy

New Rules in China Upset Western Tech Companies

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

The groups, which include the U.S. Chamber of Commerce, called for “urgent discussion and dialogue” about what they said was a “growing trend” toward policies that cite cybersecurity in requiring companies to use only Technology products and services that are developed and controlled by Chinese companies.

The letter is the latest salvo in an intensifying tit-for-tat between China and the United States over online security and Technology policy. While the United States has accused Chinese military personnel of hacking and stealing from American companies, China has pointed to recent disclosures of United States snooping in foreign countries as a reason to get rid of American Technology as quickly as possible.

Although it is unclear to what extent the new rules result from security concerns, and to what extent they are cover for building up the Chinese tech industry, the Chinese regulations go far beyond measures taken by most other countries, lending some credibility to industry claims that they are protectionist. Beijing also has long used the Internet to keep tabs on its citizens and ensure the Communist Party’s hold on power.

Chinese companies must also follow the new regulations, though they will find it easier since for most, their core customers are in China.

 

Eoin Treacy's view -

China has unabashed ambitions of becoming a global economic and military superpower large enough to rival the USA. However if it is to close the technological gap with the USA it will have to invest a great deal of money, time and effort into technological development. Investment in science is already impressive but the commercialisation of ideas takes time. 

Like other emerging countries that have come before it, China has copied what it could not develop itself. Insisting companies that wish to do business in China to sign Technology sharing agreements and engaging in corporate espionage are both aimed at achieving the goal of rapidly narrowing technological gaps.

Forcing government agencies and state owned companies to buy from Chinese vendors almost certainly sets the country on course for discourse with the WTO. However by the time a judgement is reached much of the transition will probably have been completed.  The majority of China’s leading Technology companies have sought listings in either Hong Kong or the USA which creates a challenge when judging the performance of the sector. 

 



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January 30 2015

Commentary by David Fuller

Seven Reasons Cheap Oil Cannot Stop Renewables Now

Here is the opening of this interesting, somewhat controversial article from Bloomberg:

Oil prices have fallen by more than half since July. Just five years ago, such a plunge in fossil fuels would have put the renewable-energy industry on bankruptcy watch. Today: Meh.

Here are seven reasons why humanity’s transition to cleaner energy won’t be sidetracked by cheap oil.

1. The Sun Doesn't Compete With Oil

Oil is for cars; renewables are for electricity. The two don’t really compete. Oil is just too expensive to power the grid, even with prices well below $50 a barrel.

Instead, solar competes with coal, natural gas, hydro, and nuclear power. Solar, the newest to the mix, makes up less than 1 percent of the electricity market today but will be the world’s biggest single source by 2050, according to the International Energy Agency. Demand is so strong that the biggest limit to installations this year may be the availability of panels

“You couldn’t kill solar now if you wanted to,” says Jenny Chase, the lead solar analyst with Bloomberg New Energy Finance in London.

David Fuller's view -

This is a good article, even if it does lose its focus, in my opinion, in the last two paragraphs.  It also contains some helpful graphics.

In particular, look at the third point.  Here is a key sentence on solar: “It’s a Technology, not a fuel.”  This is certainly true and solar is fast on its way to becoming the dominant Technology in the energy field.  



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January 30 2015

Commentary by Eoin Treacy

Alibaba Finance Affiliate Valuation to Yield 12 Billionaires

This article by Zijing Wu and Sterling Wong for Bloomberg may be of interest to subscribers. Here is a section: 

A higher valuation for Alibaba Group Holding Ltd.’s finance affiliate ahead of a stock sale will yield 12 new billionaires, including the e-commerce giant’s Chief Executive Officer Jonathan Lu and Chief Risk Officer Shao Xiaofeng.

Zhejiang Ant Small & Micro Financial Services Group Co., which owns payments processor Alipay, is valued at about $50 billion, according to people familiar with the matter. Ant Financial is weighing a private placement before going public in 2016, and details of the planned fundraising aren’t finalized, said the people, who asked not to be identified because the discussions are private.

Alibaba’s own record-setting IPO in September briefly made Chairman Jack Ma Asia’s richest person. He has a $26.3 billion fortune as of yesterday, according to the Bloomberg Billionaires Index. The dozen billionaires from the payment processor’s bigger valuation include Alibaba’s Chief Operating Officer Daniel Zhang and Chief People Officer Lucy Peng.

“It’s got formidable room for growth,” said Cyrus Mewawalla, managing director of London-based CM Research Ltd.

“As Alibaba expands in global markets, so could Alipay. If Technology companies do well, then their owners become billionaires.”

 

Eoin Treacy's view -

Alibaba has three main business units. The wholesale “China to the rest of the world” arm that bears the company’s name, Tmall which allows third party companies to market their goods to Chinese consumers and its finance arm offering outsized deposit rates and the ability to pay for goods on the company’s various sites. The first two were part of last year’s IPO and it is looking increasingly likely that the finance arm is now being prepped for sale. 



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January 29 2015

Commentary by David Fuller

Deepak Lalwani: India Report

My thanks to the author for his informative letter, and here is a section:

What do India and the US bring to the table and why do they both wish to form a strategic partnership? For the US, India's size, location, fast growing economy and being the world's largest democracy offers much potential. Especially when Europe is facing economic, political and monetary problems, the Middle East faces continual challenges of embracing democracy and a rising China's military and territorial claims are causing concern. The US views India as a huge market and a potential counterweight in Asia to an increasingly more assertive China. But the US has been frustrated with the slow pace of New Delhi's economic reforms, inability to slash bureaucracy and make doing business in India much easier and a reluctance to support Washington in international affairs. The US is keen to expand ties in business, defence, civil nuclear contracts and counter-terrorism. For India, as it moves away from Soviet legacy institutions under Modi, the US represents a huge business market, a major source of badly needed investments into India to lift economic growth and a global superpower that could help with a permanent seat on the UN Security Council.

Obama's visit ended on a very upbeat note for both countries. The markets should view the trip as being very fruitful. The two leaders announced plans to unlock billions of dollars in nuclear trade and to deepen defence and counter-terrorism ties and knowledge. Of particular importance was an agreement on two issues that has stopped US companies from setting up nuclear reactors in India and had become a major irritant in bilateral relations. A 10-year framework for defence ties and deals on co-operation for the production of drone aircraft and equipment for C-130 transport planes was agreed. A $4bn US investment to expand trade and business with India was announced. Other deals ranged from financing initiatives to help India use renewable energy to lower carbon intensity. An Obama-Modi hotline - India's first at leadership level- was agreed. Overall, a very positive path. The crucial part will be if the untapped potential of a US-India strategic partnership can be unlocked. If so, it will be a huge win-win for both countries.

David Fuller's view -

These are important points, with which I strongly agree.  No other country has the potential to contribute more to India’s future GDP growth than the USA.  America has a strong ally in Japan but another one would be very useful.  Technology projects between the US and India would be fruitful for both countries.  Additionally, if the US can hasten India’s economic development, it could be an increasingly powerful ally, with an unlimited and increasingly skilled labour force. 

Now if only the US played cricket…

The India Report is posted in the Subscribers' Area, with an additional comment.



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January 26 2015

Commentary by David Fuller

Draghi Plays Chess in Economy Class After Journey to QE

One of the final passengers to board an Alitalia flight from Frankfurt to Rome last Thursday evening had a heavy day behind him.

Taking a window seat, he removed his jacket, unflipped an Ipad and began a game of chess -- something he’d been doing in one form or another for most of the past year. Mario Draghi, hours after pushing through the biggest decision in Europe’s monetary history with a trillion-euro pledge to fight economic decline, was flying home in economy class.

The journey for the 67-year-old president of the European Central Bank took him across a 19-nation currency bloc that has been sliding toward deflation. Yet in the nine months since he warned such a scenario could only be fought off with quantitative easing, he’s needed all his guile and experience to make it happen.

“Like it or not, he’s the savior of last resort in Europe,” said Gene Sperling, who directed the U.S. National Economic Councils in both the Clinton and Obama administrations. “His whatever-it-takes approach has been very important for confidence in an otherwise disconcerting economic environment.”

The route to QE arguably started on a spring day in Amsterdam last April at an event to mark the 200th anniversary of the Dutch central bank. The audience at the Hermitage Museum included two central-bank chiefs who would later take opposing sides in the QE debate -- Klaas Knot of the Netherlands and Luc Coene ofBelgium.

Draghi delivered a candid description of how the ECB would respond to three “contingencies.” One was a “worsening of the medium-term outlook for inflation” caused by weaker demand or a “positive supply shock,” and he said the response would be clear: broad-based asset purchases.

So it turned out. Gross domestic product came almost to a standstill in the second quarter of 2014, and a glut of oil prompted the start of a precipitous plunge in prices in June.

How the ECB president embarked on a campaign to persuade the Governing Council the time for QE had arrived was told to Bloomberg reporters in recent months by multiple people familiar with the discussions who asked not to be identified.

On Aug. 22, Draghi unexpectedly raised the pressure for QE at an annual gathering of global policy makers in Jackson Hole, Wyoming. He didn’t stay long -- conferring with Federal Reserve Vice Chair Stanley Fischer, his former tutor at Massachusetts Institute of Technology, speaking and then leaving -- but the impact was lasting.

David Fuller's view -

After an important event such as Mario Draghi’s €60bn per month QE programme until at least the end of September 2016, announced late last week, there is a tendency to think that this was always likely to happen.  The article above gives us a few insights into how difficult it was too get this programme past Germany. 

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January 23 2015

Commentary by David Fuller

January 20 2015

Commentary by Eoin Treacy

The Global Corporate Autonomies Fund

Eoin Treacy's view -

Veteran subscribers will be familiar with the focus we have put on the types of companies David first referred to as Autonomies over four years ago. We came up with the designation in order to reflect the potential of truly global companies as some powerfully bullish factors converge.

Perhaps the most important of these is that governance is generally improving on a global basis. Some would argue the opposite with Russia deteriorating, ISIS running rampant in Iraq, Ebola posing a threat in West Africa and Europe still struggling with deflation. However that would be to miss the point that capitalism has gone global which is allowing more people than ever before to lift themselves out of poverty and into the middle classes. The major population centres of the world primarily in Asia and increasingly in Africa have abandoned the ideology of communism and billions of people are being provided with the tools, knowhow and infrastructure to multiply their productive capacity. This is a secular theme and the demand cycle this is unleashing represents a powerfully bullish force for equity markets over the long term.

The Technology, Healthcare and Energy sectors have the capacity to change how we live our lives. Innovation in any one of these has the potential to fuel a major bull market but right now we are presented with accelerating innovation in all three. This is important for two reasons. The first is that the world’s most advanced economies have potential to enhance their productive capacity. The second is that because capital is now global, these products, services, methods and skills can be disseminated rapidly so that more people than ever before can benefit. For emerging economies this represents a shortcut to development since they can sidestep a number of developmental stages as innovative solutions are embraced.

Energy deserves special mention because it touches each of our lives in a very real way every day. Unconventional oil and gas represent game changers for the energy sector and are already delivering on lower energy prices in real terms. One of the oldest adages from the commodity markets is that “the cure of high prices is high prices”. The high oil price environment ignited interest in developing new more efficient energy sources. The entry of shale oil and gas is a partial solution. The application of Moore’s law to solar cell development has even more potential to displace fossil fuels and maintain a low energy price structure. The evolution of nuclear Technology shows similar promise.

These represent major themes and consumers are likely to be among the greatest beneficiaries. The companies providing new products and services will benefit but their customers will be benefit even more. This is one of the primary reasons we started looking at big multinational companies. What really sharpened our focus was the fact so many were breaking out to new all-time highs when the wider market was still getting off its knees. Truly global companies that dominate their respective niche have proven track records of generating brand loyalty, opening up new markets and they have the scale to achieve success whether others might flounder. Many of the Autonomies have strong balance sheets and have been around long enough to have lengthy records of dividend increases. However we did not make dividends a defining characteristic because that would exclude a significant number of the companies delivering the innovation upon which productivity growth potential relies.

I used the Autonomies in the latter half of Crowd Money to show base formation completion and as a template for how a number of themes can coalesce to drive a major bull market. A subscriber, Chris Moore at WM Capital Management in the UK, approached me last year at The Chart Seminar asking if there was a fund that he might invest in for his clients that represented these themes. There were some global funds and some dividend funds but none that we could describe as representing the Autonomies. He asked if I would like to start one and I concluded that it would be better to be part of the fund than have someone else do it so I agreed.

The fund will be equally weighted, rebalanced quarterly and will hold the 100 Autonomies with the most attractive chart patterns. Veteran subscribers will be familiar with our frequent commentary on the high costs of fund management so I made competitive fees a condition of my participation. The fund will have a management fee of 0.55%.

It will launch in March and I will be giving a talk at the East India Club on February 10th to talk about The Big Picture and the Autonomies from 6:30pm. If you would like to attend or would like some additional information relating to the Global Corporate Autonomy Fund please contact Chris Moore at [email protected]   

Here is a link to the fund brochure: http://www.wmcapitalmanagement.com/images/The%20Global%20Autonomy%20Fund.pdf



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January 19 2015

Commentary by David Fuller

Roger Bootle: Forget Devaluation, it is More Domestic Demand We Need

Here is the opening and also the last paragraph of this interesting column from The Telegraph:

Not only has UK inflation fallen to 0.5pc, but it now looks likely that the rate will shortly turn negative. This has given rise to a heated debate about the distinction between “good” and “bad” deflation. I am reminded of when doctors started talking about the difference between good and bad cholesterol. At that point, I thought the game was up.

With regard to deflation, the good/bad distinction is useful – but only up to a point. If aggregate demand is weak and that forces firms to cut prices and pay, then deflation is a sign of the economy’s weakness. That is the bad variety. By contrast, if a fall in import prices causes inflation to turn negative, this provides a boost to real incomes without implying anything adverse about the state of the domestic economy. This is good deflation.

In practice, this distinction can be a bit blurred, because it may well be that the fall in import prices is itself due to weak aggregate demand in the world. This is surely partly true today. In that case, what may be good deflation for an oil-importing country like the UK, is still bad deflation for the world as a whole.

But once you move on from the origins of falling prices to think about the consequences, this distinction between good and bad deflation loses all force. The current situation mirrors what happened in the opposite direction in the 1970s. When oil prices first shot up in 1973-74, this implied a reduction in real incomes and living standards for oil-consuming countries.

If people accepted this, then there was no reason for the rise in prices to cause continuing inflation. But they didn’t accept it. Workers pushed for higher wages to compensate them for higher prices, and firms raised prices faster in order to compensate them for higher wage costs. This became a wage/price spiral. Strikingly, the position was utterly different when UK inflation was well above the 2pc target two to five years ago. Wage inflation did not respond.

And:

What the eurozone – and the world – needs is not a burst of competitive devaluations, but much faster growth of domestic demand. In Europe, that prospect remains as elusive as ever.

David Fuller's view -

I maintain that the slump in oil prices is initially due to increased supply, thanks to Technology.  However, traditional oil producers also increased production as prices fell, in an effort to reduce revenue losses.  The net effect for oil importing countries is positive deflation, which will help GDP growth over the medium to longer term. 

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January 16 2015

Commentary by Eoin Treacy

Israel Sows Cyber Hub in Desert to Make Beersheba Bloom

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

“No other region in the world has a perfect storm like Israel in general, and Beersheba specifically,” said Yoav Tzruya, partner in JVP Cyberlabs in Beersheba.

JVP’s Technology-development center in Jerusalem spawned companies such as the cloud-encryption firm Navajo, which was bought by Salesforce.com Inc. in 2011. The venture firm went as far as South Korea seeking a second location before settling on Beersheba. Key reasons included the government and military investment in the region, Tzruya said.

As the region gears up to become an anti-hacking center, an Internet security-focused high school is in the works, as is a second hospital and more residential neighborhoods amid expectations that the Negev population will jump from today’s , about 610,000, to about a million by 2020.}

“Economic development, if it works well, is sort of like being a fan of the football team,” said Erel Margalit, a Labor lawmaker, head of the lobby for the Negev and founder of JVP. “It unites everyone in a big message of growth.”

 

Eoin Treacy's view -

Israel doesn’t have the regulatory framework precluding companies from taking proactive measures against hackers. In tandem with the close ties its Technology sector has with the military the potential to build a world class cyber security centre of excellence is credible. 
One of the challenges for the Israeli market is that the country’s most significant cyber security firms are not listed in Israel. 



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January 09 2015

Commentary by David Fuller

How OPEC Weaponized the Price of Oil Against U.S. Drillers

Here are several paragraphs from Bloomberg’s report:

If there ever was doubt about the strategy of the Organization of Petroleum Exporting Countries, its wealthiest members are putting that issue to rest.

Representatives of Saudi Arabia, the United Arab Emirates and Kuwait stressed a dozen times in the past six weeks that the group won’t curb output to halt the biggest drop in crude since 2008. Qatar’s estimate for the global oversupply is among the biggest of any producing country. These countries actually want -- and are achieving -- further price declines as part of an attempt to hasten cutbacks by U.S. shale drillers, according to Barclays Plc and Commerzbank AG.

U.S. crude production totaled 9.13 million barrels a day last week, up about 1 million barrels from a year ago and 49,000 from the OPEC meeting in November. Horizontal drilling and hydraulic fracturing in underground shale rock have boosted output by 66 percent over the past five years. Exports, still limited by law, reached a record 502,000 barrels a day in November, according to the Energy Information Administration.

The four Middle East OPEC members are counting on combined reserve assets estimated by the International Monetary Fund at $826.4 billion to withstand the plunge in prices. Petroleum represents 63 percent of their exports. At least 10 calls and several e-mails to the oil ministries of all four countries on Jan. 7 and yesterday weren’t answered.

OPEC won’t reverse course even if oil prices fall as low as $20 a barrel or non-OPEC countries offer to help with production cuts, Saudi Arabian Oil Minister Ali Al-Naimi said in an interview with the Middle East Economic Survey on Dec. 21. The kingdom may even bolster output if non-OPEC nations do so, he said. The global oversupply is 2 million barrels a day, or 6.7 percent of OPEC output, Qatar estimates.

It wouldn’t be the first time U.S. drillers are caught up in an OPEC battle for market share. In 1986, Saudi Arabia opened its taps and sparked a four-month, 67 percent plunge that left oil just above $10 a barrel. The U.S. industry collapsed, triggering almost a quarter-century of production declines, and the Saudis regained their leading role in the world’s oil market.

 

David Fuller's view -

OPEC’s four leading Sunni states of Saudi Arabia, the United Arab Emirates, Kuwait and Qatar are going for the jugular in this oil price war.  Their main target is the USA, not least as hydraulic fracturing (fracking) is one of the main factors undermining the Saudi-led OPEC control of oil prices, not least as many other countries could and probably will utilise fracking Technology in future years.  Sunni countries are also hoping to weaken the growing potential alliance between Shia dominated Iran and Iraq.  Russia is another target, not least as it remains a very big oil producer and has previously used a navel base in Syria’s Mediterranean port of Tartus.  This has been significantly scaled back for security reasons during Syria’s bitter conflict but Putin is still a supporter of Bashar al-Assad.

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January 09 2015

Commentary by Eoin Treacy

Email of the day on generation IV nuclear reactors

Here are some exciting news on collaboration between a US nuclear lab and privately held Terrestrial Energy, which seems to have the most advanced molten salt nuclear reactor concept available. This is encouraging news for those of us eagerly awaiting commercialization of new nuclear!

Fyi and disclosure I am invested in Terrestrial Energy.

 

Eoin Treacy's view -

Following on from the above piece, there is no denying that the molten salt reactors currently considered generation IV Technology hold a great deal of promise as does the fusion solution touted as possible by Lockheed Martin and others. However, considering the lead time to commercialisation it will be the decade beyond 2020 where some of these promises are fulfilled. 

These advances help to enhance further the future of abundant energy we envisage as the most probably result of a decade of high pricing. 

 



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January 08 2015

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

 
David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note: There are a few seats left.  Fuller Treacy Money subscribers can still join at the £50 rate, and bring a guest for the same amount.  The early-booking rate has now expired for non-subscribers.

 


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January 08 2015

Commentary by Eoin Treacy

Toyota opens fuel cell patents to drive "hydrogen society"

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

Toyota hopes to help jumpstart this future hydrogen society by sharing its intellectual property. This week's announcement represents the first time that it's sharing patents free of charge. The automaker helped to grow the gas-electric hybrid market in a similar manner, but those licensed technologies didn't come free.

"At Toyota, we believe that when good ideas are shared, great things can happen," said Bob Carter, senior VP of automotive operations at Toyota Motor Sales, USA Inc. "The first generation hydrogen fuel cell vehicles, launched between 2015 and 2020, will be critical, requiring a concerted effort and unconventional collaboration between automakers, government regulators, academia and energy providers. By eliminating traditional corporate boundaries, we can speed the development of new technologies and move into the future of mobility more quickly, effectively and economically."

 

Eoin Treacy's view -

I wonder if falling oil prices had any impact on Toyota’s decision to open its patent portfolio for hydrogen-fuelled vehicles to the masses? After all one of the most compelling reasons for considering alternative fuel vehicles was the high cost of gasoline. The Technology has come a long way in the last twenty years and governments are now more amenable to emission free technologies because of environmental concerns. However the total cost of ownership is likely to continue to be the primary arbiter for the majority of car buyers. 



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January 07 2015

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

 
David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note: There are a few seats left.  Fuller Treacy Money subscribers can still join at the £50 rate, and bring a guest for the same amount.  The early-booking rate has now expired for non-subscribers.



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January 07 2015

Commentary by Eoin Treacy

US Equity Strategy The 2015 Playbook

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

Healthcare and Technology – Contrarian to be market-weight? While we are currently market-weight both, a lot of investors we spoke with recently are overweight at least one (or both of these groups). For healthcare, our assessment is that our call there was probably our best sector-level call in the last four years. We were overweight 2011-through December 1st of 2014, nearly four years, on a thesis that there would be a R&D pipeline re-rating in bioTechnology and pharmaceuticals and that the medical distribution businesses would benefit from volumes and were growth at a reasonable price. Both played out, and our view is reducing the overweight in now prudent. We still hold a 4% position in MCK, and a 2% one in CAH, and select pharma and biotech, and we don’t view healthcare as a short, but valuations are now at ten-year highs on price-to-forward earnings in absolute terms, even if they remain compelling against other defensives like consumer staples.

For Technology, we struggle to implement a discipline where we want to own stocks that are recommended by our fundamental analysts and screen well in our disciplined strategies. Today, there is one Technology stock, HPQ, that screens in the top quintile in both our 24-month model, BEST, and our 3-month alpha model, MOST, that is recommended by a fundamental analyst at Morgan Stanley. Hard to get 20% weight in Technology!

Utilities: While we appreciate that this sector is very idiosyncratic, and we wouldn’t be surprised if the 10-year yield went lower in the next few months (we have not studied this like the US equity market multiple but wouldn’t be at all surprised if this was also un-forecastable in short horizons), we just can’t recommend a sector that is the most expensive vs. its own history it has ever been and trades at a premium to the overall market. Given the S&P500 benchmark weight is only 3%, we don’t think the bet is that significant either way, but midcap value investors have to make up their minds to avoid valuation if they want to own even the benchweight in this group.

 

Eoin Treacy's view -

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

All 9 of the major SPDR S&P sector indices can be found in the USA indices section of the Chart Library (at the bottom of the third column). It’s worth clicking through them because what quickly becomes apparent is that while energy and materials have lost consistency the rest are still trending reasonably consistently. 

Healthcare, Technology and utilities have been among the best performing stock market sectors over the last 12 months. They share a common characteristic of generally strong balance sheets and improving consumer finances. 

 



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January 06 2015

Commentary by David Fuller

Cheap Oil Is Rich Opportunity for Asia

Across Asia, the lowest crude prices since 2009 are an almost unmitigated boon. Already, they've given Indonesia and Malaysia room to curb budget-busting fuel subsidies (although Malaysia, an energy exporter, will suffer from a drop in oil revenues). In Japan, the Philippines, Singapore, South Korea, Taiwan and Thailand, sliding energy costs stand to boost disposable incomes, household demand and corporate profits. Economist Glenn Maguire at Australia & New Zealand Banking Group thinks this "confidence multiplier" will lead to higher-than-expected growth. The drop in oil prices so far could add as much as 1 percentage point to global output. "We think this will be the defining, constructive dynamic that underpins Asian growth in 2015 and most probably 2016," Maguire says.

As India's Modi prepares to unveil his first full budget in February, he could hardly ask for a fairer tailwind. In the short run, says Peter Redward, principal at Redward Associates, oil trends will lead to a "massive improvement" in India's current account deficit, repair the government's balance sheet and restrain inflation, which should allow the central bank to cut rates.

Whether the pickup in growth can be sustained will depend on how bold Modi chooses to be next year. The Indian prime minister wisely slashed diesel subsidies when oil prices dropped, easing the hit consumers felt at the pump. But that was the easy part; it’ll be tougher to cut subsidies on liquefied petroleum gas and kerosene, which millions of Indians use for cooking. Together with diesel, subsidies for those two fuels cost the government $11 billion in the last fiscal year. Likewise, Modi will have to spend considerable political capital to abandon discounts on fertilizer. Without such cuts, it'll be difficult to free up space for more productive fiscal spending on infrastructure, education and health care. 

Nor can Modi afford to delay supply-side reforms. In addition to lower fuel bills, 2015 will feature a light election calendar: Only two of India’s 29 states will hold contests. This could well be the prime minister's best chance to push through politically difficult measures, such as allowing foreigners to hold majority stakes in key domestic sectors.

David Fuller's view -

Modi is ambitious, experienced and far more economically savvy than the head of government in most other countries, developed or undeveloped.  He also has an overall majority and a responsible central banker, so I do not think he needs our advice on how to run India’s economy. 

All politicians need an element of luck, and considerably lower oil prices are a huge benefit for all countries which import most of their energy.  Luck has favoured them, although today’s prices for crude oil are in reality, a triumph for US Technology.  Modi would also benefit considerably from a good monsoon, which he did not get in 2014.  However, this is in the hands of the weather gods.   

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January 06 2015

Commentary by David Fuller

Email of the day 1

On the third industrial revolution:

“I fully agree with your sense that the Third Industrial Revolution has a long way to run. I give presentations on this topic around the world. Analysis of the 1st and 2nd Industrial Revolutions shows they spanned 3-5 decades and involved not only a new communication system but new financial systems and new energy sources too. The 1st Industrial Revolution from 1780-1830 involved synergy between the new energy source (coal), the new communication system (coal-powered printing presses leading to mass newspapers and mass education for the first time ever, and the new financial system (the London stock market. The 2nd Industrial Revolution from 1880-1920 was driven by oil then electricity as the new power sources, the telegraph then telephone as the new communication system, and the Limited liability company as the financial breakthrough. Our present-day 3rd Industrial Revolution began with the Internet in the mid-1990s, and that part is progressing nicely. But the new energy source (solar) is only just getting going, and we await a new financial system! When all three are in place and well-developed decades from now the world will be a very different place. Though I doubt the economics profession will have progressed quite so much!”

David Fuller's view -

Thanks for your informative email on a favourite subject, and your droll concluding sentence was also appreciated. 

Perhaps I lack imagination (or have too much of it) or hope to see too much more in my lifetime, but I think this ‘Industrial Revolution’, which I refer to as a visibly accelerating rate of technological innovation, has no natural end.  It includes the internet of everything, achieved with miniaturisation, plus new manmade resources such as graphene which will vastly improve the efficiency of many products, from solar energy panels to infrastructure construction.  I believe that within the lifetime of middle-aged people we will also see new nuclear in various different forms and possibly also the holy grail of commercial nuclear fusion.  I also think we are only approaching the foothills of what will be an accelerating rate of development in artificial intelligence. Sentimentally, I hope that Stephen Hawking’s recent prediction on AI does not come true, although his conclusion was certainly logical. 

Lastly, I hope those of us in the London area and attending Markets Now on 12th January (see below) will question speakers’ views, not least Charles Elliott on his choices for performance among Technology shares.      



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January 06 2015

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note: There are a few seats left.  Fuller Treacy Money subscribers can still join at the £50 rate, and bring a guest for the same amount.  The early-booking rate has now expired for non-subscribers.



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January 05 2015

Commentary by David Fuller

Summers and Mankiw of Harvard Square Off in Debate Over Stagnation

Here is the opening of this interesting column from Bloomberg, but please do not read it if you are standing near a ledge:

Secular stagnation hung over the annual meeting of more than 5,000 economists from around the world this past weekend -- as a description of the economy and not as comment on the liveliness of the cocktail parties.

Support for the thesis that the industrial world is mired in a prolonged period of slow or no growth was dimmed, though not banished, by the recent strength of the U.S. economy.

A standing-room only crowd packed a hotel ballroom on Jan. 3 to hear two leading proponents of the proposal, Professors Lawrence Summers of Harvard University and Robert Gordon of Northwestern University in Evanston, Illinois, defend their views.

“Just because we have 5 percent growth doesn’t mean we are out of the woods,” Summers, a former Treasury secretary and senior White House official, told the American Economic Association meeting in Boston, alluding to the U.S. economy’s pace of expansion in the third quarter.

He rattled off a variety of reasons for caution. Among them: the risk of financial bubbles, the difficulties the Federal Reserve may face in raising interest rates back to more normal levels, and continued excess capacity in Japan and Europe.

Summers also compared the euro area’s situation today with that of Japan in the late 1990s, before it slipped into a deflationary funk, and warned that the U.S. could be in for an extended period of a “dismal growth rate below 1-1/2 percent.”

Fellow Harvard professor Greg Mankiw took issue with that gloomy prognosis as far as the U.S. is concerned. In particular, he highlighted the improving labor market, where unemployment is at a six-year low and wages have begun to rise.

“We are returning to normalcy,” said Mankiw, who is also chairman of the economics department at Harvard in Cambridge, Massachusetts and a former chief White House economist.

There is “growing evidence of socioeconomic decay” as the U.S. economy struggles, Gordon said, pointing to the rise in the prison population and “the enormous increase in the number of children born outside of wedlock.”

“The fruits of the third industrial revolution” in information Technology “may be coming to an end,” said Gordon, who is a member of the economic panel that dates the start and finish of U.S. recessions.

David Fuller's view -

Good grief!  No offence to my charming economist subscribers, but 5000 other economists at the same meeting sounds like the equivalent of a biblical plague.  No wonder most stock markets were in swift retreat today.  An undertakers’ convention would have been a knees-up in comparison.   

Noting the last sentence of the article portion that I reproduced above, I wonder what evidence Mr Gordon cited for his claim that “the fruits of the third industrial revolution’ in information Technology ‘may be coming to an end”?  

This item continues in the Subscribers’ Area.



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January 05 2015

Commentary by David Fuller

Email of the day 2

More on French nuclear power stations:

“The Government, which was in coalition with the Greens, decided to increase the % of "green" energies to reduce the French dependence (they should say independence) on nuclear electricity. To please the Greens, during the Presidential electoral campaign in 2012, Hollande promised to close Fessenheim (the oldest French nuclear plant). Since the departure of the remaining green ministers earlier this year, there are still talks of closing it down but other talks of lengthening its life (from what I read I doubt it since it would be very costly). In France, there is one nuclear plant under construction using a new Technology  (EPR -Evolutionary Pressurized Reactors- a 3rd generation of PWR -Pressurized Water Reactor) in Flammanville; the second one has been suspended by EDF following Fukushima; in 2013 EDF announced that current demand did not warrant launching its construction. The first one under construction is in Finland and is a kind of financial disaster for Areva being 5 years behind schedule(!) so far and will probably increase to 9 years, due to design and construction problems (I understand the construction of this new generation is rather complex - I guess these are "normal" glitches for new babies).

“The French nuclear lobby is very powerful in France (even the communists are pro-nuclear) and I do not see how France could achieve 50% nuclear electricity by 2025 from 75% currently. The French nuclear plants are getting rather old and will need to be replaced: my guess is that most will be replaced but for any unforeseeable event.

“France badly needs nuclear electricity to balance (a bit) its energy trade deficit. According to Areva, the nuclear industry represents EUR 6 billion of annual exports, employs 125,000 workers (410,000 in indirect and induced employment is added) plus several EUR billions of electricity exports. Finally, electricity is cheaper in France than Germany, one of the few competitive advantages of France.

“I have been very bearish on the French economy and I do not see any fundamental improvement. How long will the Germans tolerate France always signing agreements and never abiding by them? Time is running really short, and we are in an environment of artificially low interest rates which, when going up again, will really hurt the French budget (today, interest payments are higher than the income tax...). The mood in France is really bad (when talking to family and friends). I wrote an article a couple of years ago where I explained that it was France and not Italy that was the sick man of Europe, and I believe that the "chance" of an EU breakdown more possible than ever.”

David Fuller's view -

Thank you so much for this very detailed and informative summary.  The haunting question I ask myself: How much more prosperous might France and indeed most other European countries be today, without the Euro and the vast, often undemocratic and very expensive Brussels regime?  



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January 05 2015

Commentary by David Fuller

Email of the day 3

On the Markets Now:

“Happy New Year to you, and I trust that you had a relaxing and enjoyable holiday season. I have registered for the 12th January, so shall look forward to another evening of lively discussion!

“In the last Markets Now, we spoke in the bar about some suggestions to add further value to these sessions. I made the comment about further identifying sectors and companies that could perform based on the theme of the evening, and you asked me to email you with the suggestion. Apologies that it's taken me this long to respond, as my work and family leave me little spare time.

“To encourage further interactivity, perhaps attendees could make suggestions (in advance, or on the evening) of companies, funds, bonds, or other that they follow, invest, or are familiar with in these sectors.  Of key themes that would also benefit everyone to different companies. 

“Using the topic of Technology, due to it's sheer breadth, this could be segmented into areas of key interest that Fuller Treacy has been commenting on, such as: 

  • Cloud Computing
  • Security (which has become even more poignant with the increasing prevalence of ransomware)
  • Robotics
  • IOT [Ed: Internet Of Things?]
  • Fracking
  • Nuclear
  • 3D Printing
  • Nano

“As Eoin already periodically reviews some of these sectors, and companies, these additional suggestions from attendees would further enlighten through knowledge other areas of potential investment opportunity that would benefit the community. 

“While likely too late now for the 12th January, a possible suggestion for the future, to which I'm happy to contribute.” 

David Fuller's view -

Thank you for your interest and for also following up on our discussion during the East India Club bar session following the last Markets Now meeting. 

Personally, I welcome input from you and any of our other interested and often very knowledgeable subscribers at these seminars.  I think this is best handled on an informal basis, since people attend to hear the speakers and ask questions or otherwise comment, if they wish to do so.  I enjoy meeting subscribers and their friends or colleagues.  These sessions also stretch me, in a constructive way, and I enjoy learning from other speakers and also our extremely experienced delegates. 

You have obviously thought a lot about Technology, which could not be a more important and fascinating field, in my opinion.  I hope you will actively participate in questioning guest speaker, Charles Elliott, not least on the Technology sectors and shares that he feels will be most important over the next five or ten years.    



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January 05 2015

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note: There are a few seats left.  Fuller Treacy Money subscribers can still join at the £50 rate, and bring a guest for the same amount.  The early-booking rate has now expired for non-subscribers.



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January 02 2015

Commentary by David Fuller

Sushi Apocalypse Is Not Nigh

Here is the opening of this topical article from Bloomberg:

Jiro Ono, 89, widely considered the world's greatest sushi chef, has some dire news for aficionados of raw fish: The delicacy's best days may be behind us. 

"The future is so bad," the owner of the three Michelin star-rated restaurant Sukiyabashi Jiro, who was the subject of the 2011 documentary "Jiro Dreams of Sushi," told CQ in December. "Even now I can't get the ingredients that I really want. I have a negative view of the future. It is getting harder to find fish of a decent quality."

The reason is overfishing, particularly of the endangered bluefin tuna, a sushi staple. With 90 percent of the world's fisheries deemed either maxed out or overexploited, we may be, as one conservationist put it, in the era of "peak wild fish." 

Whether the ocean apocalypse that Ono foresees comes to pass will depend on conservation efforts and international accords with spotty records of preventing overfishing. Yet fish aren't about to disappear from stores or restaurant menus. There just may be fewer wild fish hunted and hauled out of the seas. Farmed fish will pick up the slack.

As the oceanographer Jacques Cousteau said:

“We must plant the sea and herd its animals using the sea as farmers instead of hunter. That is what civilization is all about -- farming replacing hunting.”

By some measures, this transformation is well under way: almost as much fish is produced via aquaculture as is caught at sea, according to a recent report by the UN's Food and Agriculture Organization. For certain species of fish and seafood, almost all that is consumed is farm-raised. For example, about 90 percent of all shrimp eaten in the U.S. is farmed, as is almost all European sea bass, some times sold in the U.S. as branzino.

David Fuller's view -

I think the remarkable Jack Cousteau summarised the problem perfectly in those two brief sentences above. 

The long-term solution is certainly not in more efficient fishing, which only has the capacity to increase yield temporarily before wiping out remaining supplies of wild fish. 

I am a regular consumer of farmed salmon, which cannot compare with the wild variety for flavour when used as sushi.  However, I have certainly developed a taste for it when lightly steamed, and recommend it.    



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January 02 2015

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.



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January 02 2015

Commentary by Eoin Treacy

Email of the day on technological innovation and drug resistance

Solving the problem of drug resistant bacteria may be closer than you think.  Journalist Brendan O’Neill recently reported: 

“Ninja particles are as cool as they sound. As part of the explosion of research into nano¬medicine — the implanting of infinitesimal machines or microbes into the body to attack disease — researchers have developed synthetic molecules that mimic our immune systems. It’s hoped these man-made molecules will soon be sent into the human body to attach themselves to certain microbes and cause them to rupture — “as if they’d been hit by an explosive shuriken (ninja star)”. These ninjas could prove deadly against antibiotic-resistant bugs and in bodies whose immune systems are rejecting newly transplanted organs.  (A Hollywood fantasy in the 1980s — Dennis Quaid being shrunk and sent into a human body in Innerspace — is becoming reality.)”

The above is more evidence of the importance of Technology as a driver of equity markets.  It is listed as #7 out of 10 significant technological developments in 2014.  The full article is at:  

 

Eoin Treacy's view -

Thank you for this email highlighting the fact that we live in an age of accelerating technological innovation. The pace of advances means that obsolescence is also increasing but there is an additional consideration. This is that it takes time to bring a lab discovery to market, not least because of issues with increasing scale as well as capital and regulatory constraints. It is reasonable to believe that we are rapidly entering an age of personalised medicine where the claims made by bioTechnology analysts in the 1990s are being realised. However, this could take a decade or more to roll out and will come at a cost. 



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December 31 2014

Commentary by David Fuller

Russians Are Organizing Against Putin Using FireChat Messaging App

Here is the opening of this interesting article from Bloomberg:

Anti-government protesters in Russia followed along on Twitter as opposition leader Alexey Navalny live-tweeted hishouse-arrest violation today. But the real action was on FireChat, where Navalny and his supporters organized protests and exchanged unfiltered communication.

Open Garden, the San Francisco startup that makes FireChat, says activity from Russia has been spiking since yesterday, when Navalny urged his followers to download the free app. FireChat was the top-trending search on Apple’s App Store in Russia today. Downloads in the country began to increase on Dec. 20 after Facebook blocked a page promoting an opposition rally, under pressure from the government’s communications regulator, according to Open Garden.

FireChat, which lets users create chat rooms and communicate anonymously, has become popular among protesters around the world. Aside from anonymity, the app offers an advantage to those in politically unstable regions because it works even when Internet service is down. FireChat uses a Technology available on newer smartphones, called mesh networking, that facilitates wireless communication directly between devices. It uses a combination of Bluetooth and Wi-Fi signals to connect with phones running the app. Iraqis flocked to FireChat in June after unrest prompted an Internet shutdown, and protesters in Taiwan and Hong Kong used the app when wireless networks failed.

As President Vladimir Putin faces increasing dissent during Russia's worst economic crisis since 2009, he’s tightened his grip on the flow of information online. Navalny, an adept social networker, condemned his accelerated trial as a government attempt to silence him. He announced his arrest today to his 16,000 followers on FireChat, where his account has been verified by Open Garden. (Navalny has 868,000 followers on Twitter, where is profile is also verified.)

David Fuller's view -

If he survives Putin and his apparatchiks, Alexey Navalny would make a worthy successor.  



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December 31 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

We live in fascinating times which I look forward to discussing with you. Here is the brochure for this opening session of 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note – The Early Registration rate of £50 expires after 31st December.

 

Happy New Year!



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December 30 2014

Commentary by David Fuller

The Markets Now

Monday January 12th, 5:30pm to 8:30pm, at East India Club, 16 St. James Square,LondonSW1Y 4LH

David Fuller's view -

Here is the brochure.  I am looking forward to this opening session for 2015.  There are certainly plenty of opportunities in the markets, in addition to some inevitable risks which we all hope to avoid.  We have an interesting new guest speaker - Charles Elliott - who will talk about the exciting field of Technology in which we all have an interest.  Our November session at the East India Club was a sell-out, attracting plenty of knowledgeable delegates who contributed to a lively session.  I expect the same in January and hope you will come along with any guests who would benefit, and do not hesitate to participate in the discussion of prospects and risks for 2015.  If you have the time, please also join us for a drink and further chats at the Club’s cash bar after 8:30pm.

Good news - Bruce Albrecht will also be able to give a short presentation at this seminar.

Please note – The Early Registration rate of £50 expires after 31st December.



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