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July 30 2021

Commentary by Eoin Treacy

Lucid Motors kicks off market debut with EV factory expansion plans

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

The company is also planning on bringing more of the component production in-house, including major pieces such as the body panel stampings, the spokesman added. These parts were being handled by an external supplier.

The Casa Grande City Council approved the plans to expand the nearly 1 million-square-foot space in March. The first phase of the factory, which cost around $700 million to construct, went up in a record 12 months after breaking ground. Lucid has said that it wants to expand production capacity from around 30,000 vehicles per year to up to 400,000.

Lucid has had a long, sometimes tenuous road to the public market. The company first set its sights on bringing an electric sedan to production as early as 2018, but it quickly hit funding challenges that pushed this timeline further and further back. Lucid received major funding in 2018 with a $1 billion investment from Saudi Arabia’s sovereign wealth fund, which continued to be its largest shareholder throughout Lucid’s merger with special purpose acquisition company Churchill Capital IV Corp.

That merger hit a bit of a hiccup last week when the company failed to garner a sufficient number of votes on a key proposal — likely due to the rise of retail traders and malfunctioning spam filters, executives said in an investor call.

Eoin Treacy's view -

The adage that imitation is the sincerest form of flattery is particularly true for the electric car market. Tesla’s success in both creating a product people want and monopolising the sale of carbon credits, often directly to is competitors, has bred a large number of imitators.



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July 30 2021

Commentary by Eoin Treacy

Why COVID cases are now falling in the UK - and what could happen next

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

This lack of long-term protection against infection means that herd immunity is probably impossible and that the virus will become endemic and continue to circulate in human populations. If this happens and the disease then stabilises, such that case numbers are constant across the population, neither increasing nor decreasing, it will have reached what’s called an “endemic equilibrium”.

So is this what we’re now witnessing? Possibly. One of the basic models of how infectious disease cases change over time is called an SIR model, which looks at how many people are susceptible to a disease, infectious with it or have recovered from it (and so are immune) at any one time.

With this model, cases increase rapidly at the start of an epidemic as lots of people are susceptible, become infected, and go on to infect other susceptible people. But as infections mount, over time fewer people are susceptible and more have recovered. The rate of growth therefore decelerates, the epidemic reaches its peak, and then case numbers decline to an endemic equilibrium point, where they remain roughly stable.

Eoin Treacy's view -

A leaked CDC document has been circulating today with a claim that the Delta variant is as contagious as chickenpox. That news is enough to make anyone worried. The fact that this variant is also more likely to result in acute sickness is doubly worrying. With 110,000 confirmed breakthrough cases in the USA there is a palpable sense of worry that news is about to get worse. Meanwhile, the UK’s number of cases has peaked and is falling quickly. That should act as at least a partial salve to those worries.



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July 28 2021

Commentary by Eoin Treacy

Pfizer Boosts Forecast for Vaccine Sales to $33.5 Billion

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

 

A resurgence of virus infections thanks to the delta variant is likely to mean sustained demand for vaccines around the world. Further, it is widely expected that many people could require booster shoots to bolster the immunity gained in the initial round of immunizations.

Pfizer said in a presentation accompanying its earnings release that emerging real-world data “suggests immunity against infection and symptomatic disease may wane,” underscoring the need for boosters.

The company said regulators will determine “whether, and which, populations to recommend booster,” and that they will likely first focus on those with compromised immune systems and older adults.

Eoin Treacy's view -

The ideal business model for any pharmaceutical company is to develop a treatment for an unmet but dire chronic condition. Diabetes is the perfect example. There is no cure and treatments are both necessary and tend to increase in magnitude as the disease progresses. Each patient represents a growing cashflow for as long as they live following a diagnosis. Viagra was also a blockbuster because it catered to an unmet need but did not cure it. 



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July 26 2021

Commentary by Eoin Treacy

Bitcoin Rises Above $40,000 as Shorts, Amazon Job Ad Fuel Rally

This article by Joanna Ossinger and Vildana Hajric for Bloomberg may be of interest to subscribers. Here is a section:

Bitcoin rose above $40,000 for the first time since June as a flurry of short-covering intensified a rally apparently sparked by speculation over Amazon.com Inc.’s involvement in the crypto industry.

A job posting from the retail giant seeking an executive to develop the company’s “digital currency and blockchain strategy” stirred questions among analysts over whether the move could eventually lead to Amazon accepting Bitcoin as a method of payment.

As the largest digital token gained on the speculation, investors rushing to cover bearish bets fueled the rally, with the coin at one point up more than 17% on Monday to $40,545, its highest since June 15. More than $950 million of crypto shorts were liquidated on Monday, the most since May 19, according to data from Bybt.com.

“The extent of the jump was probably driven by over-leveraged shorts,” said Vijay Ayyar, head of Asia Pacific at crypto exchange Luno in Singapore, while adding the rumors over Amazon likely had a role to play, too.

Eoin Treacy's view -

This weekend produced a bevy of crypto pundits who turned out to lend the ailing market a helping hand. Elon Musk, Cathie Wood and Jack Dorsey all provided arguments for why prices should rise. The CEO of MicroStrategy has also been progressively more vocal about his bullish position. The potential for Amazon to become more active in the sector has already encouraged even more participation. 



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July 23 2021

Commentary by Eoin Treacy

Nike, Adidas Output Snarled as Covid Wave Shuts Asian Factories

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

“It’s going to be worse before it gets better,” with shutdowns and staff disruptions increasing in Asia, said Deborah Elms, executive director of the Singapore-based Asian Trade Centre. “Places like Vietnam that largely avoided locking down cannot maintain an open posture. With vaccinations painfully slow, I assume more shutdowns in factories, with the ripple effects felt elsewhere.”

Trade in goods has been a rare buffer for the Covid-ravaged global economy -- especially for export-heavy Asian countries -- but the latest reports show cracks in this growth pillar. The delta variant-driven surge has hit Southeast Asia especially hard, underscoring the delicate choices for policy makers who are balancing vaccination drives and mobility restrictions while trying to keep their economies afloat.

The manufacturing pain is especially acute in Vietnam, where officials have taken drastic steps to ensure factories can continue operating. In some instances, electronics and tech companies have had workers sleep overnight on-site.

The garment industry, with lower profits and more workers, hasn’t been able to replicate that effort. Feng Tay Enterprise Co., Pou Chen Corp. and Sports Gear Co. are among manufacturers that have suspended some operations in Vietnam.

Eoin Treacy's view -

My 13-year-old informed Mrs. Treacy yesterday last night that they had to go to the Nike store because the shoes she wants for school were sold out online. Her rationale was most people begin shopping for school in August so now was the time to make the purchase. They dutifully made the journey and secured the shoes while witnessing numerous kids making Snapchat videos with their purchases.



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July 23 2021

Commentary by Eoin Treacy

Zomato Soars 80% in Debut of India's New Tech Generation

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

For many others, the potential outweighs the downsides. With almost half its 1.3 billion people accessing the internet via smartphones, a bet on Zomato represents optimism that India’s tech upstarts could go the way of the U.S. or China, particularly as India’s internet infrastructure remains nascent and consumers are just getting used to buying online.

“This is how it is supposed to work. Nine out of 10 will fail,” Goyal, who is barred from commenting in the run-up to the listing, said in an earlier interview. “But the one that thrives will be a spectacular success.”

Fund-Raising Blitz
In previous conversations, Goyal recounted how he first got the idea for an online service when, as a math and computer science student at the Indian Institute of Technology, he was particularly frustrated with a pizza order. His resolve strengthened after he graduated and joined Bain, where he saw colleagues in the company cafeteria skimming the limited menu and talking longingly about food at nearby restaurants.

Goyal and Chaddah started uploading menus of neighborhood cafes and restaurants onto the company intranet, with phone numbers. That was a huge hit with coworkers, driving a weekend venture they christened foodiebay.com. After his wife got a teaching job at Delhi University, Goyal quit to pursue
entrepreneurship full-time, shrugging off the onset of the global financial crisis.

In the India of a decade ago, entrepreneurship was frowned upon and Goyal didn’t tell his parents -- both teachers -- until much later. In the first year, the startup began by listing thousands of restaurants in India’s six biggest cities. Then came an email from entrepreneur-turned-investor Sanjeev Bikhchandani, who invested $1 million through his Info Edge India Ltd.

Eoin Treacy's view -

4G is having the same effect on the Indian economy as it has had everywhere else. The spectrum of online services available has increased significantly which is benefitting the banking, entertainment and nascent social sectors. Food delivery services have sprung up everywhere mobile broadband access becomes available. India is no different.



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July 21 2021

Commentary by Eoin Treacy

ASML's Record Order Levels Show Chipmakers Are Stocking Up

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

Chief Executive Officer Peter Wennink said that trend, which he called “technological sovereignty,” will also boost orders. The company has historically underestimated how quickly the industry would grow in the past 15 years and Wennink said it’s working to boost manufacturing to keep up.

“Clearly we’ve seen in 2021, the reaction of the industry at large, the electronic industry, to the Covid year,” he said, predicting that “the catch up effect that will stretch into 2022.”

ASML is also discussing ways of increasing supply capacity of both its new and older machines, including increasing headcount and floorspace. Longer term, demand will be driven by advanced chips needed to run artificial intelligence and high-powered computing as well as the proliferation of sensors needed for gadgets like connected home appliances.

The shares rose as much as 4.6% to 609.40 euros in Amsterdam. The stock has jumped 51% this year. That compares with a 20% gain on the Stoxx 600 Technology Index.

New technologies that will rely on faster 5G networks in devices from laptops to cars to home appliances will drive 35% growth in the company’s logic business this year, as the less advanced chips that help run sensors in these devices see higher demand, Wennink said.

Eoin Treacy's view -

ASML has a monopoly in the production of chip manufacturing technology. That puts the company in a special position to benefit from increasing demand. With that kind of advantage one might reasonably ask what can go wrong?



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July 21 2021

Commentary by Eoin Treacy

Enel installs 6.1 MWh vanadium redox flow battery in Spain

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

Canada-based vanadium mining company Largo Resources has announced that its U.S.-based unit Largo Clean Energy has signed its first supply agreement for its VCHARGE ± vanadium redox flow battery system, with Enel Green Power Spain, a unit of Italian renewable energy company Enel Green Power, which is itself part of the Enel group. Under the terms of the deal, Largo Clean Energy will provide a five-hour, 6.1 MWh system for a project in Spain whose start-up is scheduled for the third quarter of 2022.

The company's VPURE and VPURE + vanadium products come from one of the three largest vanadium mines in the world, the company's Maracás Menchen mine, located in Brazil. These compounds are used to develop's Largo's  VCHARGE ± vanadium redox flow battery technology.

Largo Clean Energy began, last year, the development of its vanadium redox flow battery (VRFB) technology based on 12 patent families previously owned by U.S. storage specialist VionX Energy, whose assets it acquired for $3.8 million.

Eoin Treacy's view -

Vanadium surged in 2018 on expectations that the world would adopt redox flow batteries for utility-scale energy storage. The uptake was less enthusiastic than many expected and the price of the metal collapsed.



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July 21 2021

Commentary by Eoin Treacy

Bitcoin extends gain after retaking closely watched $30,000 mark

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

Bitcoin, the largest digital currency, rose as much as 5.8% and was holding at about $31,450 as of 7:23 a.m. in New York on Wednesday. Other cryptos advanced too, including Ether and Dogecoin 

Bitcoin extended gains after breaking above the $30,000 mark that some cryptocurrency traders view as a key support level.

The largest digital currency rose as much as 5.8% and was holding at about $31,450 as of 7:23 a.m. in New York on Wednesday. Other cryptos advanced too, including Ether and Dogecoin, while the Bloomberg Galaxy Crypto Index was also in the green.

Eoin Treacy's view -

Bitcoin dropped briefly below $30,000 yesterday and bounced back emphatically today. This is a clear upward dynamic and signals a return of demand in the region of the lows over the last couple of months. That supports the potential for at least a short-term bounce.



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July 20 2021

Commentary by Eoin Treacy

Stock Traders Buy the Dip as Cyclicals Drive Rally

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

“We have a ways to go on the cyclical recovery here,” Levine, head of equities at the firm, said on Bloomberg TV and Radio. The U.S. has exhibited “an exceptionalism in the amount of fiscal policy, the amount of monetary stimulus and also in the way we vaccinated the population. And because of that I actually am very bullish,” she added.

For Bill Callahan, an investment strategist at Schroders, “equities just make sense right now,” and dip buyers will be rewarded as the market continues to grind higher.

On the economic front, data showed U.S. housing starts increased in June by more than forecast, suggesting residential construction is stabilizing despite lingering supply-chain constraints and labor shortages.

Eoin Treacy's view -

The compression in yields makes the argument for investing equities more compelling because it reduces speculation that monetary accommodation is about to be removed.



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July 20 2021

Commentary by Eoin Treacy

Five companies make quarter of world's single use plastics

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

Plastic waste is “a massive problem . . . On this trajectory, we will have more plastics in our ocean by weight than fish by 2050”, said Sander Defruyt, who leads the New Plastics Economy initiative at the Ellen MacArthur Foundation. 

Its root cause was our “throwaway society” — countries must move from a system “based on the extraction of resources to one that is based on the circulation of resources”.

Plastics are made from fossil fuel-based chemicals, and break up into smaller and smaller pieces when they are disposed of, rather than decompose in the way that food does. Although disposable plastic items can often be recycled, many are not and millions of tonnes of plastic waste find their way into the ocean each year. 

As images of plastic-strewn beaches have become familiar sights, governments have started cracking down on the material with plastic bans or taxes.

Last year, England banned single use plastic straws, stirrers and cotton buds, and raised the charge on plastic bags. China outlawed single use bags and cutlery in major cities, and is planning to extend plastic bans in the years to 2025.

In a drive to entice eco conscious shoppers, consumer brands, including coffee chain Starbucks and fast food retailer McDonald’s, have started replacing disposable plastic items with paper alternatives. In April, grocer Morrisons announced it would become the first UK supermarket to completely remove plastic bags from stores.

In its 2020 annual report, Dow said plastics were facing “increased public scrutiny”.

“Local, state, federal and foreign governments have been increasingly proposing — and in some cases approving — bans on certain plastic-based products including single-use plastics,” which could affect demand, it said.

Nevertheless, producers expect global demand for plastics to increase, driven by population growth and an expanding middle class. The pandemic also prompted an increase in the use of disposable items, which have been seen as a way to minimise the virus’ transmission.

Eoin Treacy's view -

The drive towards managing the growing volume of waste products, and the related demand for landfill sites which no wants near their home, means the single use plastics sector is likely to attract significant attention in the expanding global carbon emissions market. That’s particularly true following the massive growth in demand for single use items during the pandemic. I think many people found it ironic that as soon as plastic straws were banned, that the number of used mask litter increased exponentially.



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July 19 2021

Commentary by Eoin Treacy

U.K. Set for Big Reopening as Cases Soar Most in the World

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

But the lifting of curbs came against a fraught backdrop of surging infections and political strife for Johnson. The U.K. added more than 54,000 new cases Saturday, and over 47,600 on Sunday, more than Indonesia, the current pandemic epicenter, according to data compiled by Johns Hopkins University.

The surge in cases weighed on the pound, which fell as much as 0.4% to $1.3707, the lowest since mid-April. Meanwhile, demand for safety boosted U.K. government bonds, with 10-year gilt yields falling two and a half basis points to 0.60%.

The prime minister, meanwhile, is fighting to regain his credibility after a furious backlash forced him and finance minister Rishi Sunak to abandon an initial attempt to avoid their own government’s isolation rules. The pair were told they needed to stay home after meeting Health Secretary Sajid Javid, who tested positive for Covid-19.

The furore — overshadowing what U.K. media have called “Freedom Day” — is a deep irony for Johnson. It graphically demonstrates the perils the premier faces as he tries to break the U.K.’s cycle of lockdowns and revive economic activity while ensuring state-run hospitals are not overwhelmed.

Eoin Treacy's view -

The big question for the UK was whether the trend of new cases would be followed by a trend of new deaths. Without the aid of a high vaccination rate, the death rate could have been expected to surge higher by now. The fact that it has not points to the efficacy of the vaccines administered.



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July 16 2021

Commentary by Eoin Treacy

The Future of Space Is Bigger Than Bezos, Branson or Musk

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

Here are just a few of the less remarked-on recent stories out of the private space industry. First was the stock market debut of a company called Astra Space, which, backed by venture capitalists, built a viable orbital rocket in just a few years. Its goal is to fly satellites into orbit every single day. Shortly after Astra went public at a value of $2.1 billion, satellite maker Planet Labs—which uses hundreds of eyes in the sky to photograph the Earth’s entire landmass daily—announced its plans to do the same, at a value of $2.8 billion. Firefly Aerospace has a rocket on a California pad awaiting clearance to launch. OneWeb and Musk’s SpaceX are both regularly launching satellites meant to blanket the planet in high-speed internet access. Rocket Lab, in the previously spacecraft-free country of New Zealand, is planning missions to the moon and Venus.

The SPAC frenzy has been particularly kind to the private space industry, including some of the companies named above. Easier access to public markets has helped draw billions of dollars from excited investors to an industry once dependent on governments with vague military objectives or expansive views of public works. Partly as a result, the number of satellites orbiting the Earth is projected to rise from about 3,400 to anywhere between 50,000 and 100,000 in the next decade or so—and that’s even if these companies just fulfill the orders they’ve received so far.

It seems likely the estimates will slide a bit, given that those kinds of numbers would require rockets to blast off one after another from bustling private spaceports all over the globe on an extremely frequent basis. But whatever the precise timing, the message will remain unchanged: Private space is here. This month’s space tourism race is just escape-velocity window dressing on a much bigger, more transformative set of changes. The results of these shifts will be unpredictable, except that ego and greed will likely be as present as ever. Nonetheless, the evidence on the non-ground suggests we should consider the possibility that this emerging industry might turn out OK.

Eoin Treacy's view -

The pace of innovation in lift (to space) technology is blisteringly quick. The size of rockets and payloads they carry continue to introduce economies of scale to a sector that has never known them. That’s an incredible change and opens the whole sector to waterfall of new ideas on how to commercialise the space.



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July 16 2021

Commentary by Eoin Treacy

Email of the day on tin

What is your view on the tin chart?  https://uk.investing.com/commodities/tin-streaming-chart

Looking at the LSE the only tin share I can find is AFRITIN MINING who produce in the safe jurisdiction of Namibia. Additionally, they are due to release an estimate on their lithium resources mined as a by-product at the same time.

Eoin Treacy's view -

Thank you for this question which may be of interest to the Collective. This graphic produced by Rio Tinto Ventures goes a long way towards explaining the recent strength in the tin market. Here is also is a section from Avalon Advanced Materials website which talks about the primary uses of the metal: 

Tin is perhaps better known for its historical use in tin cans than in modern technology; however, usage of tin in coating lead, zinc and steel to prevent corrosion (i.e., tin plating) is now the second highest usage of tin worldwide. Tin is primarily used in lead-free solders for electronic circuit boards and microchips – accounting for 50% of global tin consumption.

Tin is expected to increasingly contribute to modern, clean technologies including lithium-ion batteries for autonomous and electric vehicles. For example, battery researchers are developing solid-state batteries utilizing ceramic electrolytes (versus liquid) for improved safety and performance. Silicon is a potentially attractive anode material due to its high potential capacity and abundance in nature. Recent research has shown that adding tin to the silicon-based anode enhances its performance, creating the potential for tin to be a major contributor to the next generation of lithium batteries.

Further, researchers at the Texas Material Institute have demonstrated a tin-aluminium alloy can be produced that is cheaper and double the charge capacity of today’s copper-graphite anodes for lithium-ion batteries.

The greatest growth potential for tin is likely to be found in these and other automotive battery applications. As of 2016, use of tin in lead-acid batteries approached 30 kt and, supported by further growth in vehicles sales and the further substitution of antimony, use of tin in this application is expected to exceed 50 kt by 2027 (Roskill).

Finally, indium-tin-oxide is used as a glass coating due to its electrical conductivity and optical transparency and continues to find application in renewable energy and communications, including flat panel displays, smart windows, thin film photovoltaics (solar panels) and organic light emitting diodes lights.



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July 15 2021

Commentary by Eoin Treacy

On Target July 15th 2021

Thanks to Martin Spring for this edition of his report. Here is a section on the best wartime assets to own.

Conclusion: The best in-country stores of wealth are non-ostentatious property, such as remote farmland or vineyards. Just make sure the mortgages are paid off.
Jewellery and gold are crucial since they can be readily exchanged for daily necessities.

The best out-of-country stores of wealth are equities, jewellery and land. They should be located or stored in safe jurisdictions, protected by geography, rule of law and a strong national defence. The United States, New Zealand, the United Kingdom and Switzerland come to mind.

Don’t be tempted to sell just because news goes from bad to worse. And maintain a well-diversified portfolio of stocks.

Those are the key investing lessons from the Second World War.

Eoin Treacy's view -

There is a Chinese proverb to the effect that the most dangerous thing is for a thief to know who you are. The secret to sustained wealth in a time of global crisis is to become anonymous to anyone with the power to measure your wealth and take it away. That’s never been easy but it is getting harder.



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July 15 2021

Commentary by Eoin Treacy

TSMC Raises Sales Outlook, Affirming Global Chip Kingpin Role

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

TSMC, chipmaker to Apple Inc. and a key partner to many of the world’s biggest carmakers, expects semiconductor supply to remain tight into 2022, Chief Executive Officer C.C. Wei said Thursday. The company will ramp up production of microcontrollers by close to 60% this year, which will help to greatly boost supplies for its automobile clients starting in the current quarter. Executives also for the first time confirmed the company was weighing plans for a fabrication plant in Japan.

Eoin Treacy's view -

The shortage might last until 2022 but it is already turning the corner. One of the biggest sources of inflationary pressures has been in the automotive market. That’s going to improve significantly by the end of the year. It suggests waiting to make a purchase for a few months will likely pay off. That’s another reason the Fed is unwilling to act against current inflationary pressures.



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July 14 2021

Commentary by Eoin Treacy

Moderna's Next Act Is Using mRNA vs. Flu, Zika, HIV and Cancer

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

The speed with which Moderna and its primary mRNA competitor, a partnership between Pfizer Inc. and BioNTech SE, devised their shots has made a major contribution to the fight to end the pandemic. With strong efficacy, steady supply, and no show-stopping safety scares (officials are carefully monitoring rare heart inflammation cases in teenagers and young adults), mRNA shots have become the vaccines of choice, at least in countries that can get them.

But for Moderna Chief Executive Officer Stéphane Bancel, the Covid vaccine is just the beginning. He’s long promised that if mRNA works, it will lead to a giant new industry capable of treating most everything from heart disease to cancer to rare genetic conditions. Moderna has drugs in trials for all three of these categories, and Bancel says his company can also become a dominant vaccine maker, developing shots for emerging viruses such as Nipah and Zika, as well as better-known, hard-to-target pathogens such as HIV.

Eoin Treacy's view -

The speed with which MNRA vaccines were developed is a major development. The capacity to analyse the genetic structure of a virus and devise a potential solution in a matter of days is a technological innovation the market is only beginning to grasp the full implications of.



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July 13 2021

Commentary by Eoin Treacy

Chinese Tech Stocks Jump After Tencent Gets Deal Approval

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

The gauge of the city’s tech stocks had fallen as much as 10% this month after China vowed to increase scrutiny over data collection and overseas listings.

“Regulators are still considering each deal case by case and not rejecting all of them. The sentiment is not that negative now,” said Castor Pang, head of research at Core Pacific Yamaichi. “Any good news will trigger buying on dips in the sector.”

Elsewhere, internet giant Meituan rose 3.4% after Caijing reported Monday that the company re-launched a ride-hailing app after industry leader Didi Chuxing was barred from offering new downloads. Short-video streaming platform Kuaishou Technology jumped 5.7% and Alibaba Group Holding Ltd. gained 4%.

Eoin Treacy's view -

Investors want to own Chinese tech shares because they believe they have the growth runway the USA’s tech behemoths had a few years ago. The temptation comes with a price attached because of China’s “rule by law” instead of “rule of law”. The tenor of regulation has the hallmark of being politically motivated but the trade is the Party may not be quite willing to kill the sector.



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July 12 2021

Commentary by Eoin Treacy

Branson's Space Jaunt Worth $841 Million for Virgin Galactic

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

The suborbital journey kicks off a landmark month for the future of space tourism, with Branson demonstrating Virgin Galactic’s capabilities nine days before Amazon.com Inc. founder Jeff Bezos plans to fly on a rocket made by Blue Origin, his space venture. Both companies envision businesses catering to wealthy tourists willing to pay top dollar for a short period of weightlessness and an unforgettable view of the Earth and heavens.

Virgin Galactic’s test flight demonstrated that such trips -- once the stuff of science fiction -- are becoming increasingly realistic.

While mostly accessible only to a tiny number of super- wealthy customers, they would add a new dimension to a burgeoning industry of private-sector space companies with plans for voyages to the International Space Station and new human outposts.

Branson and his fellow crew members experienced a few minutes of weightlessness as the Unity reached its peak altitude.

“So I looked out the window and the view is just stunning,” operations engineer Colin Bennett said afterward. “It’s very Zen; it’s very kind of peaceful up there as well.” Branson, who founded Virgin Galactic in 2004, said the memories of seeing the Earth from space will stay with him. “I’m never going to be able to do it justice,” he said. “It’s indescribably beautiful.”
 

Eoin Treacy's view -

Yuri Gargarin was shot into space in 1961, so it has taken sixty years to commercialise the technology to the point where commercial jaunts are possible. Reusable rockets are a big part of that. Virgin Galactic is not going as high as rockets. That implies if weightlessness is the end point of consumer demand, then rockets are not required. The variety of solutions, based on just how high a vehicle aims to go is also a reflection of how much technology has progressed over the last sixty years.



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July 09 2021

Commentary by Eoin Treacy

Orocobre June Quarter Output 3,300 Tonnes of Lithium Carbonate

This note covering Orocobre’s production results today may be of interest.  

About 66% of production was battery grade lithium carbonate vs 21% a year earlier.

Sales of Olaroz lithium carbonate were 2,549t at $8,476/t FOB, with pricing up 45% on the March quarter

Inventory has increased due to Covid-19 related transport delays and the requirement to hold additional safety stock in Japan to guarantee delivery into the Prime Planet Energy and Solutions contract

Eoin Treacy's view -

Prime Planet Energy and Solutions is a joint venture between Toyota and Panasonic to produce enough batteries for 500,000 vehicles per annum. The factory is reaching completion in Japan and Orocobre will be supplying the lithium required for the project. 



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July 07 2021

Commentary by Eoin Treacy

Rare Griffon vulture saved with help from a military drone

This is a fascinating video which may be of interest to subscribers.

Eoin Treacy's view -

The short section about 1:30 minutes in highlights how the drones are piloted with virtual reality headsets with a great deal of accuracy.

This kind of accurate control of aircraft is transformational for the aircraft sector and not least as autonomous applications improve. The reality is that it is a lot easier to develop autonomous aircraft than ground vehicles. There are simply fewer obstacles.



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July 06 2021

Commentary by Eoin Treacy

Email of the day - on Ethereum as a crypto panacea:

I value the input you provide Eoin. I however disagree with your comment that cryptos will next be of interest in 2023. Ethereum is a disruptive technology platform with strong network effects which is growing rapidly. In addition, the supply of ETH will diminish by about 85% (a triple halving) when Ethereum transitions from Proof of Work to Proof of Stake (POS), likely in December or early next year. Electricity required to power Ethereum simultaneously goes down by 99.99%. In addition, EIP1559 goes live at the end of this month, which both improves the user experience and burns the bulk of the fees (paid in ETH) - the combination with POS probably results in the number of ETH declining on a consistent basis. Holders of ETH can stake their ETH to own an attractive yield. In short, it is the most compelling opportunity I’ve come across in my decades as a money manager.

I have no strong opinion on Bitcoin. I think its security model is flawed and I doubt it will stand the test of time. I however think the odds favour most crypto assets having a strong run over the next 6 months, perhaps driven by the growing understanding that blockchains are a disruptive new technology that is far more efficient and decentralized than the financial systems of the past.

Eoin Treacy's view -

Thank you for this email and your valuable insight. My contention has been that in order for crypto to succeed it will need to go the way of Encarta and AOL Online. We paid for these services when the internet was still young because they were valuable tools with no real competition. Today they either do not exist or are inconsequential. The internet on the other hand has become part of the economic landscape. 



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July 06 2021

Commentary by Eoin Treacy

SoftBank, Biggest Investor in Didi, Sinks After China Blocks App

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

It’s inevitable to see selling from investors who had been pinning their hopes on Didi,” said Tomoichiro Kubota, a senior market analyst at Matsui Securities Co. in Tokyo. “If it’s deleted from app stores, it’ll be a very difficult situation.”

China’s cyberspace regulator announced the Didi ban on Sunday, just two days after revealing a review of the company. The decision effectively requires the largest app stores in China to strike Didi from their offerings, though the current half-billion existing users can continue to order up rides and other services. Didi said the regulatory move may have “an adverse impact” on its revenue in China.

On Monday, regulators expanded the probes further to target Full Truck Alliance, which runs an Uber-like platform for truck-hailing, as well as Kanzhun Ltd. Full Truck Alliance, backed by Tencent Holdings Ltd. as well as SoftBank, raised $1.6 billion in its U.S. offering last month.

Eoin Treacy's view -

The Vision Fund was bloodied by the failure of WeWork. Since then, Softbank has since been eager to accelerate the pace of IPOs for the companies it invested in. Didi is a big one and there was no way they could risk missing out on a pay day.

Two weeks ago, the Chinese regulator warned Didi not to pursue its IPO. It appears large investors like Softbank and Uber pressured the company to file over the Communist Party centenary celebration to take advantage of a lull in regulatory enforcement. In doing so the company raised $4.4 billion in cash, achieved a valuation in excess of $70 billion and was promptly banned from Chinese app stores.



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July 02 2021

Commentary by Eoin Treacy

Secular Themes Review July 2nd 2021

Eoin Treacy's view -

On November 24th I began a series of reviews of longer-term themes which will be updated on the first Friday of every month going forward. The last was on May 7th. These reviews can be found via the search bar using the term “secular themes review”.

News today that Johnson & Johnson’s vaccine is effective against the delta variant should help to allay fears that the world is about to experience a round of upheaval similar to early 2020.

There is no question that the pandemic has acted as an accelerant. It forced migration and adaption to new conditions in a manner that might otherwise never have happened. Some of those changes will stick, others will fade away.

Everyone seems to think that the pandemic has to mean something and that we will never again get back to normal life. I don’t believe it. The surges back into social activity whenever restrictions are lifted is confirmation that humans are social beings. We crave physical contact and fellow feeling. That’s not going to change, even if we have a better appreciation for it today than since the demise of organised religion.  

As with every other crisis, the liquidity created to deal with the shock will remain in the system for much longer than it is strictly required. Central banks cannot afford to jeopardise the recovery they worked so hard to create. Meanwhile, populations everywhere are impatient for better conditions.



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June 29 2021

Commentary by Eoin Treacy

Deadly Delta Variant Starts to Ripple Through Emerging Markets

This article from Bloomberg may be of interest to subscribers. Here are some soundbites from regional analysts:

"The U.K. has shown that the variant is not such a health challenge if people have been vaccinated. We are concerned that Australasia and the smaller markets in Asean could continue to be impacted. We remain cautious on Asean equities. Watching for any sharp increase in Covid cases in Asean”

Kelvin Wong, an analyst at CMC Markets (Singapore) Pte.: “Tactically, it is likely to be more of a rotation play that may last into the upcoming third quarter where high-quality technology stocks may outperform over cyclicals”

“Hence for Southeast Asian equities that tends to be heavily weighted toward cyclical/financials and the external sector such as tourism are likely to underperform, for example Singapore’s Straits Times Index”

“The major key support to watch on the STI will be at 2,950/2,920 which also coincides with the 200-day moving average”

Alan Richardson, a senior portfolio manager at Samsung Asset Management (HK) Ltd. “It’s a speed bump that could slow the speed of the recovery but doesn’t change the direction to a post-Covid economy. The delta variant should increase the urgency for countries to reach three-quarters immunization”

Paul Mackel, global head of FX research at HSBC Holdings Plc in Hong Kong: Market is watching closely the recent Covid resurgence as it has caused short-term depreciation of some currencies

“But the elephant in the room is whether the dollar has bottomed or not” and “it’s not yet. But if the dollar is indeed getting stronger and the Fed is becoming more hawkish, it could challenge the outlook of some Asian currencies”

Eoin Treacy's view -

There is an incredible variety of perspectives on the merits of vaccination. The primary point I made last year was it doesn’t matter what anyone thinks, global governments have all followed a similar set of policies. Having made the decision to lock down, there has to be a set of requirements which need to be demonstrably met to open back up. Vaccinations are key to that decision making process. Variants introduce some doubt into the equation.



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June 29 2021

Commentary by Eoin Treacy

CVPR 2021 Workshop on Autonomous Vehicles

This video focusing on Tesla’s full self-driving suite may be of interest to subscribers.

Eoin Treacy's view -

Creating a high-definition map, and using lidar to make the driving decision is not a scalable solution. It is ridiculously expensive to rollout that solution to the world. Tesla is going the other way. It is relying on the computer’s ability to do on-the-fly calculations and make decisions. This video goes into quite a lot of detail on the decision to stop installing radar on new vehicles.



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June 28 2021

Commentary by Eoin Treacy

Bitcoin, Currencies, and Bubbles

This whitepaper by Nicolas Taleb may be of interest to subscribers. Here is a section:

The difference between the current bitcoin bubble and past recent ones, such as the dot-com episode spanning the period over 1995-2000, is that shell companies were at least promising some type of future revenue stream. Bitcoin would escape such a valuation approach had it proven to be a medium of exchange or satisfied the condition for a numeraire off of which other goods would be priced. But currently it is not, as we will see next.

Success in Wrong Places
More generally, the fundamental flaw and contradiction at the base of most cryptocurrencies is that, as we saw, the originators, miners, and maintainers of the system currently make their money from the inflation of their currencies rather than just from the volume of underlying transactions in them. Hence the total failure of bitcoin in becoming a currency has been masked by the inflation of the currency value, generating (paper) profits for large enough a number of people to enter the discourse well ahead of its utility.

Comment 2: Success for a currency There is a conflation between success for a "digital currency", which requires some stability and usability, and speculative price appreciation.

Transactions in bitcoin are considerably more expensive than wire transfers or other modes, or ones in other cryptocurrencies, and order of magnitudes slower than standard commercial systems used by credit card companies —anecdotally, while you can instantly buy a cup of coffee with your cell phone, you would need to wait ten minutes if you used bitcoin. Nor can the system outlined above —as per its very structure accommodate a large volume of transactions –something central for an ambitious payment system. To date, twelve years into its life, in spite of the fanfare, with the possible exception of the price tag of Salvadoran permanent residence (3 bitcoins), there are currently no prices fixed in bitcoin, floating in fiat currencies in the economy.

Eoin Treacy's view -

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

Bubbles make fools of everyone. It’s really only a question of whether one is a fool at the beginning, middle or end. It is exceptionally rare, though not unheard of, for someone to spot the beginning of a trend and hold on all the way through and sell right at the end. Even with the best foresight and discipline you also need the luck of the big trend. For the majority, they don’t believe at the beginning and will react violently to doubt at the end. That’s how manias have played out repeatedly throughout human history.



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June 25 2021

Commentary by Eoin Treacy

World's first lab-grown-meat factory opens in Israel

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

The first lab-grown burgers cost more than US$300,000 apiece to produce back in 2013. Bit by bit, however, we're seeing progress in driving these costs down to the point where mainstream outfits like KFC are getting in on the action. Future Meat Technologies says it is the only company to be able to produce cultured chicken breasts for $3.90 a pop and, as it continues to scale up its operations, it expects those costs to fall even further.

"After demonstrating that cultured meat can reach cost parity faster than the market anticipated, this production facility is the real game-changer," says Yaakov Nahmias, founder and chief scientific officer of Future Meat Technologies. "This facility demonstrates our proprietary media rejuvenation technology in scale, allowing us to reach production densities 10-times higher than the industrial standard. Our goal is to make cultured meat affordable for everyone, while ensuring we produce delicious food that is both healthy and sustainable, helping to secure the future of coming generations."

Eoin Treacy's view -

Plant based burger patties, like Beyond Meat, taste nothing like the real thing in my experience. Beyond virtue signalling and the trend towards vegetarianism, I can’t see they will displace demand for meat products. Lab-grown meat on the other hand has all the physical characteristics of animal tissue but is grown from the atomic level to the finished product. That’s a very different prospect.



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June 25 2021

Commentary by Eoin Treacy

China Banks Stockpile Record $1 Trillion of Foreign Exchange

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

Some officials “may see the foreign-exchange liquidity as a feather in China’s cap, and some may worry that the surge is flighty,” said George Magnus, a research associate at Oxford University’s China Centre. “It’s fine when the flows are coming in, but a big problem for financial stability when they try and go the other way.”

For Magnus, the increase in dollar deposits is “random and most likely temporary,” and will slow when other nations recover from the pandemic.

While it lasts though, the situation offers an opportunity for China to implement reforms and loosen its grip over its tightly controlled capital borders.

“China will take the chance of flush dollar liquidity to make its cross-border flows more balanced,” said Becky Liu, head of China macro strategy at Standard Chartered Plc in Hong Kong. “Policy makers in the coming two to three years will keep widening channels for funds to leave the country.”

Eoin Treacy's view -

China’s accumulation of Dollars as a result of the relative strength of the economy during the pandemic should naturally put upward pressure on the currency. The rally over the last year is at least a partial reflection of that. The big question is how do they loosen capital controls while also discouraging capital flight?



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June 24 2021

Commentary by Eoin Treacy

Tilting The Odds In Your Favour

This promotional piece from Baillie Gifford may be of interest to subscribers. Here is a section:

It may come as a surprise to learn that Tel Aviv (Israel), Vilnius (Lithuania), and Tallinn (Estonia) all rank in the top 50 cities in the world in Fintech. You may not yet have heard of many of their leading companies, but I’ll wager you will in the coming decade. Lithuania ranks number one in the world in terms of broadband speed and in the top five countries for Fintech innovation. Investment in the right infrastructure has given that country a head start it is not wasting.

Access to capital and need for less of it in today’s capital-lite, ‘free money’ world means more and more entrepreneurs, the geniuses who will lead the exceptional companies of tomorrow, no longer feel anchored to the US. 20 years ago, fewer than 15 per cent of Chinese students studying abroad felt compelled to return home, filled with ideas but lacking the capital to fund their ambitions. Today closer to 80 per cent see a much more favourable environment in which to put their western education to profitable use domestically.

Adding to the earlier comments on the popularity of the Hong Kong stock market, companies are increasingly eschewing an ADR listing entirely, preferring a Hong Kong local listing, with exchange regulators encouragingly supportive. For the Chinese company of the future, a dual listing may well mean H-shares (HK) and A-shares (mainland China).

In a world obsessed with buybacks (at the wrong time) and cost-cutting (at the wrong time), we look for investment and expansion. Here, the US is no longer the world leader it once was.

Eoin Treacy's view -

There is an exceptional amount of competition for attention in today’s market. The wall of money printed in the last year has refocused attention on relative performance of assets. Interest rates and currency movements play a big part in how well international assets fare versus US assets. That’s particularly relevant for large pools of US capital that have mostly stayed at home over the last decade.



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June 22 2021

Commentary by Eoin Treacy

Billionaire caught in 'world first' crypto bloodbath

Thanks to a subscriber for this article from 9news.au which may be of interest. Here is a section: 

In a blog post four days ago, Iron Finance blamed the start of the avalanche on "some whales" removing liquidity.

"We never thought it would happen, but it just did," the company said.

"We just experienced the world's first large-scale crypto bank run."

It has been a tough few days for cryptocurrencies.

Eoin Treacy's view -

Stable coins, at least partially backed by some national currency, are supposed to be less volatile. That is their primary attraction. The demise of Titan coin highlights how large investors in illiquid markets can have outsized effects. This exact same process has been playing out in Frontier markets for years, it just that everything happens quicker in cryptos.



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June 21 2021

Commentary by Eoin Treacy

Raisi Victory Will Delay Return of Iran's Oil, Analysts Say

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

The election of a conservative cleric as Iran’s president will probably hold up the lifting of U.S. sanctions on the Islamic Republic’s energy exports, said analysts including Sara Vakhshouri, president of SVB Energy International LLC.

“The election of a hard-liner delays the expectation of a rapid return of Iranian oil,” she said.

Eoin Treacy's view -

The absence of Iranian oil from the international market has helped to support prices. It is also worth considering that the absence of 8 million barrels of oil from OPEC+ has been an even bigger tailwind for the price.

The spread between Brent and WTI crude has almost closed. The compression should be encouraging more onshore domestic supply into the market. However, the big question for the sustainability of the oil price rally is when will the supply discipline of OPEC+ end?



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June 21 2021

Commentary by Eoin Treacy

Bitcoin Drops as Hashrate Declines With China Mining Crackdown

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

Cryptocurrencies have been enduring a lull recently. Bitcoin is trading at about half its record high of nearly $65,000 reached in mid-April. The market value of all cryptocurrencies is about $1.45 trillion, as measured by CoinGecko, versus a high around $2.6 trillion last month.

One of the factors cited has been concern about China clamping down on mining amid concerns about energy usage, and in the wake of deadly coal accidents.

The city of Ya’an in the southwestern region of Sichuan has promised the provincial authorities to root out all Bitcoin and Ether mining operations within one year, said a person with knowledge of the situation. According to a report in the Communist Party-backed Global Times, the closure of many Bitcoin mines in the province has resulted in more than 90% of China’s Bitcoin mining capacity being shuttered.

About 65% of the world’s Bitcoin mining took place in China as of April 2020, according to an estimate by the University of Cambridge.

Eoin Treacy's view -

The big question for bitcoin’s rapacious demand for electricity is where do they go now that China’s energy loophole has been closed? In Texas, there is speculation they will set up next to drilling wells and harvest the flared gas.



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June 18 2021

Commentary by Eoin Treacy

"Mosquito smoothies" streamline production of promising malaria vaccine

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

This new process, spearheaded by scientists at Imperial College London, could make the process far more efficient. The method involves the batch processing of whole mosquitoes, which are reduced to a slurry that is then filtered by size, density and electrical charge. This process of making "mosquito smoothies" leaves behind the necessary sporozoite products for vaccination.

“Creating whole-parasites vaccines in large enough volumes and in a timely and cost-effective way has been a major roadblock for advancing malaria vaccinology, unless you can employ an army of skilled mosquito dissectors," says lead researcher Professor Jake Baum, from Imperial College London. "Our new method presents a way to radically cheapen, speed up and improve vaccine production.”

In addition to making the process faster and cheaper, the technique can also make the vaccine more potent. Traditional extraction of sporozoites brings with it contaminants such as unwanted proteins and other debris, which can affect the infectivity of the sporozoites and possibly the immune system response, compromising the efficacy of the whole parasite vaccine. Conversely, the mosquito smoothies result in pure uncontaminated samples.

Eoin Treacy's view -

The promise of a vaccine against malaria is a significant piece of the missing puzzle to economic development in Africa. Malaria is a wasting disease that strikes people in their prime. It reduces productivity and requires other people to care for the invalid, which only compounds the effect. It is one of the biggest taxes on productivity on the continent. If malaria is solved, it frees up resources and productive capacity for significant evolution of human potential.



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June 17 2021

Commentary by Eoin Treacy

Lifting the mask

 This initial article by Edward Snowden for his new letter may be of interest to subscribers. Here is a section:

One history of the Internet — and I'd argue a rather significant one — is the history of the individual's disempowerment, as governments and businesses both sought to monitor and profit from what had fundamentally been a user-to-user or peer-to-peer relationship. The result was the centralization and consolidation of the Internet — the true y2k tragedy. This tragedy unfolded in stages, a gradual infringement of rights: users had to first be made transparent to their internet service providers, and then they were made transparent to the internet services they used, and finally they were made transparent to one another. The intimate linking of users' online personas with their offline legal identity was an iniquitous squandering of liberty and technology that has resulted in today's atmosphere of accountability for the citizen and impunity for the state. Gone were the days of self-reinvention, imagination, and flexibility, and a new era emerged — a new eternal era — where our pasts were held against us. Forever.

Everything we do now lasts forever... The Internet's synonymizing of digital presence and physical existence ensures fidelity to memory, identitarian consistency, and ideological conformity. Be honest: if one of your opinions provokes the hordes on social media, you're less likely to ditch your account and start a new one than you are to apologize and grovel, or dig in and harden yourself ideologically. Neither of those "solutions" is one that fosters change, or intellectual and emotional growth.

The forced identicality of online and offline lives, and the permanency of the Internet's record, augur against forgiveness, and advise against all mercy. Technological omniscence, and the ease of accessibility, promulgate a climate of censorship that in the so-called free world instantiates as self-censorship: people are afraid to speak and so they speak the party's words... or people are afraid to speak and so they speak no words at all...

Even the most ardent practitioners of cancel culture — which I've always read as an imperative: Cancel culture! — must admit that cancellation is a form of surveillance borne of the same technological capacities used to oppress the vulnerable by patriachal, racist, and downright unkind governments the world over. The intents and outcomes might be different — cancelled people are not sent to camps — but the modus is the same: a constant monitoring, and a rush to judgment.

Eoin Treacy's view -

Censorship is not something I thought I would ever write about and yet today we are surrounded by it. It is not so much that the law has changed, but that we find ourselves in a position where speaking one’s mind comes with consequences that can stretch into a lifetime. Most people’s default is to play along to get along so self-censorship is an easy answer. That’s a challenge and it is not easily overcome.

The chasm between tribes who believe in the rightness of their opposite positions is a recipe for continued political polarisation. Politicians continue to contort themselves so they can appeal both to the fringe and the core, so they can win elections.



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June 15 2021

Commentary by Eoin Treacy

Email of the day on cybersecurity

I found your comments on autonomous vehicles today very well written and enlightening, thanks a lot. On a different note, do you think cyber security has a big potential for the next decade. And if so, do you have any suggestions for how to invest in this theme. Any potential companies and/or ETFs would be greatly appreciated. Thanks again for a very nice service.

Eoin Treacy's view -

Thank you for your kind words and I am delighted you are enjoying the service. There has undoubtedly been a bull market in ransomware attacks which has made abundantly clear how inept cyber controls are. The recent hack of Electronic Arts is a case in point. Here is a section from an article on Vice.com:

A representative for the hackers told Motherboard in an online chat that the process started by purchasing stolen cookies being sold online for $10 and using those to gain access to a Slack channel used by EA. Cookies can save the login details of particular users, and potentially let hackers log into services as that person. In this case, the hackers were able to get into EA's Slack using the stolen cookie. (Although not necessarily connected, in February 2020 Motherboard reported that a group of researchers discovered an ex-engineer had left a list of the names of EA Slack channels in a public facing code repository).

"Once inside the chat, we messaged a IT Support members we explain to them we lost our phone at a party last night," the representative said.

The hackers then requested a multifactor authentication token from EA IT support to gain access to EA's corporate network. The representative said this was successful two times.

The bigger the company the greater the threat. The primary challenge for any company is securing access to intellectual property that can be used by a competitor and customer data which carries costs if lost. They are not that worried about everything else.



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June 14 2021

Commentary by Eoin Treacy

China's Amazon for Autonomous Driving Data: Hyperdrive Daily

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

Thanks to e-commerce, the world has gotten used to buying all sorts of daily necessities online. Automakers in China will soon be afforded the same convenience, with the ability to purchase must-have autonomous driving data from a central repository.

For that, credit must go the China Association of Automobile Manufacturers, which has been working on a Vehicle Data Platform with industry players for the past three years. Its launch is expected any day.
China, a pioneer in the promotion of electric cars, is exploring a credible and efficient way of storing, sharing and utilizing data to help automakers speed up their efforts in making autonomous driving a reality. In the intelligent and connected car space, data is as important to vehicles as crude oil is to internal combustion engine cars.

The issue is scale. Thousands upon thousands of terabytes of sensory data must be collected, analyzed and interpreted to produce the technology that ultimately allows cars to navigate roads, highways and obstacles themselves.

Currently, this valuable information is in the hands of individual companies, which are trying their best to use it to “train” the brains of intelligent vehicles as humankind races to that point where we can take our hands off the steering wheel altogether.

Eoin Treacy's view -

Tesla was welcomed into China with open arms. The company’s factory outside Shanghai was built in record time and every effort was made to remove regulatory roadblocks to begin production. Sales naturally followed and the move looked like a success. Then there was an accident and a loud public (orchestrated) outcry, with protestors standing on cars at a media junket. Now, a reservoir of self-driving data is being created and all companies active in the space will be expected to contribute what they have.



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June 11 2021

Commentary by Eoin Treacy

Email of the day - on supply inelasticity in chip supply

Should I prefer longs in the European chip companies including machine manufacturing companies like ASML (almost a monopolist), ASML and Besi and chip producing companies like INFINEON or STM or the US companies like NVDIA, INTEL, AMD, QUALCOMM?

Should we consider the expected weakening usd while comparing? Especially chip machine producing companies should have a very bright future when both the US and Europe want to produce more chips themselves with a shortage of machines and chips for the foreseeable future it is unlikely any price discounts will be given interesting isn't it? kind regards

Looking forward as always to your long-term video have a nice weekend

Eoin Treacy's view -

Thank you for this kind email and I am delighted you are enjoying the videos. Semiconductors have become a nationalist priority as a result of the current shortage, the drought in Taiwan which questions the ability to increase supply, and geopolitical tensions. These factors have highlighted short-term thinking that was behind the migration of domestic European manufacturing to Asia, over the last couple of decades.



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June 11 2021

Commentary by Eoin Treacy

Update: Bitcoin, Crypto and Digital Currencies

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

Eoin Treacy's view -

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

Leverage is a major component in any momentum move. It also tends to trend higher in line with prices as paper gains collateralise additional new position sizes. That inevitably raises the average purchase price and greatly increases the sensitivity of traders to even modest setbacks. The net result is that leverage trends higher but can just as easily evaporate as prices decline.



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June 09 2021

Commentary by Eoin Treacy

Warner-Discovery, French Deal 'Dramatically' Push M&A Up European TV Agenda

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

While European broadcasters are still profitable, “and some very much so,” Godard highlighted, “savvy investors believe this is looking suspiciously like the high earnings of printed newspapers circa 2007, or a Wile E. Coyote run over the edge of the cliff. Broadcasters are capturing a declining share of total video audiences and their capacity to finance attractive content is shrinking as talent is bid up by SVOD operators.”

The analyst then outlined two consolidation options that have emerged in Europe.

“The first path — heralded by Bertelsmann RTL Group — would aim at creating national broadcasters with the content scale to operate compelling online platforms” via domestic acquisitions, Godard said, calling this the “possibly more defensive but also more realistic” option.

The second path is “more ambitious but lacking a credible backer,” he argued. It targets “the never achieved idea of pan-European synergies, leveraging increased international appetite for non-English language content” by merging assets across borders, something that the likes of Italy’s Mediaset and Vivendi have talked about. “But its champion, Italy’s Mediaset, lacks capacity to deliver,” Godard concluded.

“The group is already the biggest broadcaster in Italy and Spain and has built a 24 percent stake in Germany’s ProSieben, with the remaining shareholding fragmented,” he explained. “The problem is, if the cross-border strategy is sound, Mediaset may be its worst possible proponent. Besides bringing in strong leadership to its Spanish division, Mediaset never extracted significant synergies from its two Mediterranean units, despite their cultural affinity.”

Eoin Treacy's view -

National broadcasters survive because they have state backing and a captive audience. The value proposition they represent is tied to continued support from governments because they provide domestic language content. That does not transfer well internationally. This map of the 12 most spoken languages in the world suggest the biggest opportunities are in the Chinese, English, Spanish, Hindu-Urdu and Arabic speaking parts of the world. 



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June 08 2021

Commentary by Eoin Treacy

Colonial Pipeline's Bitcoin Ransom Mostly Recouped by U.S.

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

The action signals U.S. law enforcement’s ability, in some cases at least, to track cryptocurrency, identify digital wallets and seize funds, a potentially powerful tool in combating ransomware attacks in particular. The operation also reveals how quickly hacking operations can be identified by the FBI, which Abbate said has been investigating DarkSide since last year.

The FBI was able to find the Bitcoin by uncovering the digital addresses the hackers used to transfer the funds, according to an eight-page seizure warrant released by the Justice Department on Monday.

Eoin Treacy's view -

Blockchains are public ledgers by design. Treating ransomware as if it is terrorism is a major escalation in the fight against this revenue model. It suggests the ability to transact secretly in bitcoin is about to garner a lot more scrutiny and most particularly from the tax authorities.



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June 08 2021

Commentary by Eoin Treacy

Man Group-Oxford Quants Say Their AI Can Predict Stock Moves

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

Multi-horizon forecast models using statistical analysis have been around for years now, channeling market variables into predictions about how a stock will move over different time periods. The machine-learning techniques introduced in this research will increase the amount of data that can be processed and the potential accuracy of the predictions over longer time periods.

But to make it work, the AI has to be able to process a huge amount of data quickly. The researchers turned to Bristol, England-based Graphcore’s Intelligence Processing Unit, a pizza box-sized chip
designed specifically to handle the demands of an AI program. In the trials, Graphcore’s chip performed about 10-times faster than GPUs.

While the research and the Graphcore chips that make the model possible are the “logical next step” in the high-speed computations that Man Group is interested in, the fund hasn’t committed to rolling it out, Ledford said.

Meanwhile, not every firm would be able to deploy this kind of strategy. “You would not try this model if you did not have access to fast computation,” said Zohren, who worked with Oxford-Man Institute research associate Zihao Zhang on the research.

 

Eoin Treacy's view -

Traders built some of the fastest telecommunications equipment anywhere, to get prices quickly between New York and Chicago. They pioneered colocation and the transition of exchanges into data centres. It is inevitable they will invest heavily in super computers if they believe they can gain an edge in short-term trading.



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June 07 2021

Commentary by Eoin Treacy

The Hot New Vision for Crypto Is Wildly Different From Bitcoin

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

Let’s zoom out for a second. All blockchain-based systems share two basic ideas. The first is that for the first time you can have a thing online that can be probably yours. A coin, a token, an NFT… whatever it is. You have it and control it and no third party has any say. Alice can own something and then send it to Bob. Alice doesn't have it anymore and Charlie can't interfere. The other core idea is that part of achieving this involves a sufficiently decentralized network of computers, such that no individual, company, or government has a say in what goes on.

But this is where the fork in the road emerges. The Bitcoin vision is to create a new form of money outside the authority of any central issuer. The DeFi vision inverts this, and takes the money creation part for granted. After all, you can spend a dollar on the Ethereum network using a USD-backed stablecoin, so why reinvent the wheel? Instead, the DeFi-based vision is to build unstoppable blockchain-based software and services that then do something with this money.

A couple weeks ago, I wrote that Wall Streeters are increasingly getting ETH-pilled and the above is why. There’s a certain concreteness to the value proposition. If a decentralized network of computers can match borrowers and lenders in some powerful and novel way, then the software and the tokens that power it should be valuable. And in general, this vision jibes much more with the Silicon Valley ethos. Trying to create a new form of money? That’s not really a thing you learn about at Stanford. Writing software to disrupt traditional financial services? That they get. Furthermore, Bitcoin frustrates many people in tech because of the community’s move slow and don’t break things approach.

All this being said, all these different factions and visions… they remain something of an inside game. It’s not clear how much your average crypto investor is paying attention to any of these different modes and models. If you look at the coins, you’ll mostly see a high degree of correlation. Either they’re all going up at the same time or down at the same time. This includes Bitcoin and Ethereum and Solana, but also a bunch of other coins that don’t map to a trendy narrative. (For example, Litecoin is still one of the world’s biggest coins despite its founder having peaced out from the project in 2017, and neither has a store-of-value narrative nor a DeFi narrative or anything else really.)

Here’s a chart of Ethereum, Bitcoin, and Litecoin going back to the summer of 2017. You can see, everything just kind of rises and falls at the same time.

The market strongly gives off a vibe of people wanting to get into crypto and then placing their chips on a bunch of different squares without too much thought. Maybe they buy a few that they’ve heard of, maybe they buy a few with a low nominal coin price because it’s fun to have a lot of coins and maybe they buy a few that just seem interesting. That still seems to be how flows work in the space. And as long as this is all the case, we’ll probably still have these generalized boom-bust cycles where coins rise and fall together along with the animal spirits of investors and traders.

Eoin Treacy's view -

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June 07 2021

Commentary by Eoin Treacy

Biogen Alzheimer's Drug Approved in Disease Landmark

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

The FDA said in a statement on Monday that it was allowing the drug on the market because it reduces amyloid, a sticky, harmful protein that clogs the brains of Alzheimer’s patients. Amyloid’s role in Alzheimer’s is debated, but numerous other drugs that target it are being developed by pharmaceutical companies.

Biogen plans to sell the therapy under the brand name Aduhelm. It will cost $56,000 a year, the Cambridge, Massachusetts-based biotechnology company and its Tokyo-based partner, Eisai Co. Ltd., said in a statement.

U.S.-traded shares of Eisai leapt 60% to $118.73.

In an interview, Biogen Chief Executive Officer Michel Vounatsos said that the company had already produced millions of vials of the drug and that it would hit the market within 10 days to two weeks, once the company had done things like printed labels.

Over 900 infusion sites in the U.S. are prepared to administer the drugs, he said.

By giving the treatment a broad label allowing it to be used for a wide swath of Alzheimer’s patients, and not just the very early-stage patients the drug was mostly studied on, “the FDA is basically empowering the physician to make the decision,” who it is most appropriate for, Vounatsos said.

Eoin Treacy's view -

Until today, there has been no treatment for Alzheimer’s. There is an argument about how effective the drug is, and some of the concerns about efficacy are very significant. Nevertheless, many patients will be prescribed it on a “something is better than nothing” basis.



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June 04 2021

Commentary by Eoin Treacy

Secular Themes Review June 4th 2021

Eoin Treacy's view -

On November 24th I began a series of reviews of longer-term themes which will be updated on the first Friday of every month going forward. The last was on May 7th. These reviews can be found via the search bar using the term “Secular Themes Review”.

The pandemic panic is now one year in the rear-view mirror. It seems to have lost its ability to scare us so that begs the question what happens next? That’s the big conundrum

Some still believe that technology will solve all our problems and that the largest companies in the world will continue get even larger. Others believe that the inflation genie has been releases so it is inevitable that bonds will collapse in value. Others believe that we are in for a long grind of subpar growth because the debt is so large, it will sap the will to live out of every speculative asset. Others believe we are in a stock, commodity and property market bubble that could pop at any moment. Still other believe that cryptocurrencies are the solution, though no one is exactly sure what the problem is. So how do we make sense of these divergent views?

Personally, I have a strong feeling of déjà vu. In late 1999 and early 2000 I was selling Optus cable connections door to door in Melbourne. When I tired of backpacking, I went to London and within three weeks had started at Bloomberg. I was amazed at the speed of the Royal Mail. I saw an ad in The Times on a Wednesday for European sales people. I posted my CV that afternoon and had a reply back from Bloomberg delivered the next day. I had an interview on Monday and started on Tuesday. To say they were desperate for sales people is a gross understatement. I was in Belgium, visiting private banks, 10 days later. That was the top of the market and it was evidence of a true mania in the TMT (Telecoms, Media and Technology) sectors.

By the end of the Nasdaq bear market in 2003 the number of Bloomberg terminals being sold to mortgage bankers was surging. I was even offered a job by one. The Dollar was pulling back, there were fears about financial repression, China’s demand for commodities was only beginning, emerging markets were breaking out and gold was completing its base formation. A year later oil broke out.



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June 01 2021

Commentary by Eoin Treacy

U.S. says ransomware attack on meatpacker JBS likely from Russia

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

The company, which has its North American operations headquartered in Greeley, Colorado, controls about 20% of the slaughtering capacity for U.S. cattle and hogs, according to industry estimates.

U.S. beef and pork prices are already rising as China increases imports, animal feed costs rise and slaughterhouses face a dearth of workers.

The cyberattack on JBS could push U.S. beef prices even higher by tightening supplies, said Brad Lyle, chief financial officer for consultancy Partners for Production Agriculture.

Any impact on consumers would depend on how long production is down, said Matthew Wiegand, a risk management consultant and commodity broker at FuturesOne in Nebraska.

"If it lingers for multiple days, you see some food service shortages," Wiegand added.

Two kill and fabrication shifts were canceled at JBS's beef plant in Greeley due to the cyberattack, representatives of the United Food and Commercial Workers International Union Local 7 said in an email. JBS Beef in Cactus, Texas, also said on Facebook it would not run on Tuesday.

JBS Canada said in a Facebook post that shifts had been canceled at its plant in Brooks, Alberta, on Monday and one shift so far had been canceled on Tuesday.

 

Eoin Treacy's view -

Piracy on the high seas is policed by both nation states and international organisations. A zero tolerance policy is taken to any threat to international trade and significant military and diplomatic resources are deployed to contain any threat that appears. Doing the same for cyber pirates is a lot more difficult.



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May 27 2021

Commentary by Eoin Treacy

Advance your thinking on 10 critical themes

Thanks to a subscriber for this report from UBS which may be of interest. Here is a section on new materials:

Eoin Treacy's view -

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

Biodegradable plastic is a major growth theme if costs can be brought in line with existing manufacturing techniques. The modern world is built on hydrocarbons because the chemical sector has been so versatile in developing products from them. The challenge is these types of products last for seemingly interminable lengths of time and find their way into every facet of the global ecosystem. As awareness of the dangers of microplastics increases, demand for degradable alternatives will increase.



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May 24 2021

Commentary by Eoin Treacy

Solar Power's Decade of Falling Costs Is Thrown Into Reverse

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

For the solar industry, the timing couldn’t be worse. Renewable energy finally has a champion in the White House and ambitious climate goals have been announced across Europe and Asia.

At the center of the crisis is polysilicon, an ultra-refined form of silicon, one of the most abundant materials on Earth that’s commonly found in beach sand. As the solar industry geared up to meet an expected surge in demand for modules, makers of polysilicon were unable to keep up. Prices for the purified metalloid have touched $25.88 a kilogram, from $6.19 less than a year ago, according to PVInsights.

Polysilicon prices are expected to remain strong through the end of 2022, according to Roth Capital Partners analysts including Philip Shen. 

And the problem isn’t limited to polysilicon. The solar industry is facing “pervasive upstream supply-chain cost challenges,” panel manufacturer Maxeon Solar Technologies Ltd. said in April.

Eoin Treacy's view -

This is just one more sector facing medium-term supply disruption. The clear conclusion is when we look around the world there is too much money chasing too many goods and services. The big question is how long will it take for this inflationary bias to become anchored in the minds of consumers?



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May 21 2021

Commentary by Eoin Treacy

Email of the day - on type-2 top formation development and completion

Thank you, Eoin, for the service. Your call on BTC topping out was excellent. Could you please explain again the signals for your call? You were discussing inconsistency in trend, I believe. In what period? Also, it would be great to hear (based on your latest audio comment) why do you think BTC is not in a secular bull? Thank you. Kind regards, 

Eoin Treacy's view -

Thank you for your kind email which may be of interest to subscribers. One of the oldest adages from The Chart Seminar is “a consistent trend is a trend in motion”. That means the rhythm of the market will persist until something happens to change it. When a consistent trend becomes inconsistent, it tells us the imbalance between supply and demand has altered. That is a warning sign that trouble may lie ahead.



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May 19 2021

Commentary by Eoin Treacy

Bitcoin Plunge Wipes $500 Billion From Value in Crypto Rout

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

Bitcoin is now down more than 50% from its record of almost $65,000 set in April. Fueling the volatility is Tesla CEO Elon Musk, whose social-media utterances have whipsawed the crypto community. A statement from the People’s Bank of China on Tuesday reiterating that digital tokens can’t be used as a form of payment added to the selloff.

The selloff dominated market chatter on a day when equities also were tumbling and the Federal Reserve was set to release minutes from its latest meeting. #Cryptotrading was trending on Twitter, where critics and fans alike were in a tither over the rout. Critics had warned for weeks that the moves in crypto assets were unsustainable and that any sign of a selloff would lead to a rout.

“This is going to be the first ‘welcome to crypto’ day for a lot of new entrants,” said Stephane Ouellette, chief executive and co-founder of FRNT Financial. “The history of these assets has been littered with aggressive rallies and sickening selloffs.”

Eoin Treacy's view -

The biggest question for the wider investment community is “who are the new entrants to crypto?”. There are two large new groups of investors. Retail investors, flush from US government stimulus checks, bought cryptos in size in the first quarter. Institutional investors, desperate for an “uncorrelated asset” also jumped in and helped fuel the appreciation in value to $1.9 trillion for the entire crypto sector at its peak.



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May 19 2021

Commentary by Eoin Treacy

Aliens Are (Probably) Not Harassing the U.S. Navy

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

Starting in the 1950s, as UFO sightings began proliferating across the U.S., both the Air Force and the CIA tried to conceal their interest in the matter. They did so in part because they feared that the Soviets were trying to sow hysteria and wanted to calm the public, but they also knew that many of the sightings were of top-secret U.S. spy planes. In the end, such deceptions were counterproductive. Nobody believed the denials, the government lost credibility, and the hysteria only grew. An internal CIA review in 1997 found that the agency’s duplicity only added “to a growing sense of public distrust.”

That skepticism is one reason why, in the decades since, garden-variety military incidents and mishaps have repeatedly been transformed into galactic conspiracies believed by a shockingly high percentage of Americans. With trust in the U.S. government once again at a low ebb, misleading the public with regard to UAPs would be a serious mistake.

Eoin Treacy's view -

Media interest in unidentified flying objects is ramping up ahead of the anticipated release of a US government report in June. That report is almost certainly going to reveal a lot more examples of pilots observing phenomena they do not have a ready explanation for. The question is why is the US government so eager to talk about it now?



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May 17 2021

Commentary by Eoin Treacy

Square Halts Bitcoin Purchases After Loss, Financial News Says

This note from Bloomberg may be of interest to subscribers.

Jack Dorsey’s Square is not planning on buying more bitcoin for its corporate treasuries after losing
$20m on a $220m investment in the cryptocurrency last quarter, Financial News reports, citing CFO Amrita Ahuja.

* Bitcoin represents about 5% of Square’s cash on hand
* NOTE: Square Revenue More Than Triples, Driven by Bitcoin Sales
 

Eoin Treacy's view -

Fans of any asset will buy all day, all week and all month as long as they are making money. When they stop making money, they might think about selling, but they first stop buying. That action removes a significant source of demand from the market.



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May 17 2021

Commentary by Eoin Treacy

Email of the day on India's demographics

You say that India has a significant demographic tailwind, taking the consensus view that that is an investment plus; one that is embedded in so many analyses on India. For a challenge to this listen to the Meb Faber interview with Vikram Mansharamani, 50 minutes in for 5 minutes, on his take on India and why in fact the demographics are a head not a tail wind: https://www.youtube.com/watch?v=cM40JZ3NSNk&t=30s

Eoin Treacy's view -

Thank you for this link and the discussion raises a large number of questions. There are two that I think are particularly relevant. The first is on the assumed ubiquity of the bullish India story and the second is the continued dominance of capital over labour.



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May 13 2021

Commentary by Eoin Treacy

Bitcoin Falls Below $50,000 as Musk Calls Energy Use 'Insane'

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

“Surely he would have done his diligence prior to accepting Bitcoin?” said Nic Carter, founding partner at Castle Island Ventures, and a leading voice among defenders of Bitcoin’s energy use. “Very odd and confusing to see this quick reversal.”

Musk’s decision in February to buy $1.5 billion in Bitcoin and plan to accept it as a form of payment has been a major catalyst in the crypto bull market. In the eyes of analysts, it helped add legitimacy to the token and usher in new investors.

Musk’s crypto tweets have often been in jest, and his attention toward Dogecoin brought the joke token into the mainstream. He’s quipped about being the “Dogefather” in the past, and tweeted on Tuesday, “Do you want Tesla to accept Doge?”

Eoin Treacy's view -

The cognitive dissonance of a clean energy visionary also promoting one of the most carbon dependent endeavours has obviously begun to weigh on Elon Musk. It may also be convenient to argue against bitcoin if he is helping to promote alternatives which certainly appears to be the case with Dogecoin.



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May 13 2021

Commentary by Eoin Treacy

Over 700 Barges Stuck in Mississippi River From Bridge Crack

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

“The river is the jugular for the export market in the Midwest for both corn and beans,” said Colin Hulse, a senior risk management consultant at StoneX in Kansas City. “The length of the blockage is important. If they cannot quickly get movement, then it is a big deal. If it slows or restricts movement for a longer period it can be a big deal as well.”

The New Orleans Port Region moved 47% of waterborne agricultural exports in 2017, according to the U.S. Department of Agriculture. The majority of these exports were bulk grains and bulk grain products, such as corn, soybeans, animal feed and rice. The region also supports a significant amount of edible oil exports, such as soybean and corn oils and even attracted 13% of U.S. waterborne frozen poultry exports in 2017.

Eoin Treacy's view -

Cracks in pieces of critical regional infrastructure are not encouraging. It’s another example of how much need for infrastructure replacement there is. The massive infrastructure development in the post World War 2 era boosted economic growth for decades but many countries grew complacent to the need for constant renewal and maintenance. Large numbers of roads, railways, dams, power plants and pipelines are reaching the end of their anticipated lives.



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May 12 2021

Commentary by Eoin Treacy

The Days of Low Treasury Yields Are Numbered

This article by Bill Dudley may be of interest to subscribers. Here is a section:

Today, there’s ample reason to expect a positive term premium to return. For one, the Fed has a new, more patient monetary policy stance. As a result, inflation will be higher and more variable — a risk that must be compensated with higher long-term yields. Also, keeping inflation in check will require a higher peak fed funds rate, reducing the risk that the Fed will again get pinned at the zero lower bound. Beyond that, deficit financing is expanding the supply of government bonds: Treasury debt outstanding has quadrupled since 2007, and the Biden administration is seeking to add several trillion dollars more. Meanwhile, one big source of demand for the bonds is set to dwindle as the Fed phases out its asset purchases, most likely next year.

Putting the pieces together, one can expect a 10-year Treasury yield of at least 3%: The 2.5% floor set by the federal funds rate, plus a term premium of 0.5% or more. But that’s not all. The Fed says it wants inflation to exceed its 2% target for some time, to make up for previous shortfalls. This, in turn, could stoke inflationary fears and lead markets to expect a higher path for future short-term rates. As a result, the 10-year Treasury yield could more than double from the current 1.6%. And if persistent deficit financing prompts concern about growing U.S. debt, the yield could go to 4% or higher.

Anyone who has been in finance for less than a decade has rarely seen 10-year Treasury note yields above 3%. So what’s coming could, for many, be quite a shock. The secular bond bull market that began nearly 40 years ago is finally ending.

Eoin Treacy's view -

US job openings now far exceed the pre-pandemic peak. At the same time credit card balances are declining even as debt loads are increasing. Meanwhile the unemployment rate is holding at 6%.

The conclusion is simple. Households are buying capital goods like houses and cars, that do not require credit cards, because they are flush with cash. Companies are desperate for workers, but unemployed people are in no hurry to take up offers. The reality is the stimulus enacted in the first quarter was overly generous and has created economic disincentives. It exacerbated bottlenecks and enhanced consumer perceptions of rampant inflationary pressures.



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May 11 2021

Commentary by Eoin Treacy

Agronomics to raise GBP50 million to invest in "cultivated meat"

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

The net proceeds of the fundraising will be used to finance further investment into current portfolio companies and projects, investment in new opportunities within the "cultivated meat" sector and development and commercialisation of intellectual property where Agronomics holds an interest.

"Agronomics has expanded rapidly over the past two years, and this financing will further accelerate its growth," said Non-Executive Chair Richard Reed.

"We anticipate it will provide the full funding to support our existing portfolio companies through their next financing rounds, while also giving us sufficient capital to pursue acquisitions of new investments in this exciting field as it enters into what we expect will be a multi-decade growth phase," added Reed.

Eoin Treacy's view -

The renewable energy sector did spectacularly well in the run-up to the oil price and credit availability peaks in 2007. There was a great sales pitch that an energy revolution was underway and renewables would take over. However, at the time the inability of the companies to breakeven was a major headwind. The rationale for owning the sector was heavily influenced by the comparison with oil. When oil prices fell, the sector collapsed.



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May 07 2021

Commentary by Eoin Treacy

Secular Themes Review May 7th 2021

Eoin Treacy's view -

On November 24th I began a series of reviews of longer-term themes which will be updated on the first Friday of every month going forward. The last was on March 5th. These reviews can be found via the search bar using the term “Secular Themes Review”.

After a crash everyone is wary. We all seek to learn lessons from our most recent experience because it is the only way to help us emotionally move past the trauma. Coming out of the pandemic most investors wished they had sold everything at the first sight of virus news in early 2020 and bought everything back again following the crash. Today they are worried that there is another big shock waiting around the corner that will cause a repeat of pandemic panic.

The challenge for investors is less to learn from the most recent mistake but rather to know when to deploy the lessons learned. The best time to be wary about a massive decline is when no one is worried about it. The time to take precautionary action is when it seems like a waste of time and when you are most afraid of giving up on the potential for even better gains. That’s the best time to remember the experience of the crash but the interval of time and the positive reinforcement of experience in an uptrend make it difficult.



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May 06 2021

Commentary by Eoin Treacy

Americas May Lead World's Silver Mined-Supply Recovery

This note from Bloomberg may be of interest to subscribers.

Silver primary supply set to recover in 2021, following Covid-19 operational restrictions suffered last year. 2020 saw the silver mining industry's biggest fall of the last decade, down 6% to 784 million ounce, based on Metals Focus data. Mined-output may rise by 8% year-over-year to 849 million ounces in 2021, based on Metals Focus estimates. We believe the Americas, with a 58% of global supply share, will lead the recovery in 2021, thanks to higher output from Mexico, Peru and Bolivia. Mexico could stay as the world's No. 2 producer, with nearly 200 million ounces, up 12% based on BI's scenario analysis.

Fresnillo kept its crown as world's No. 1 silver producing company in 2020, followed by KGHM, Glencore, Newmont and Codelco. We calculated that these miners combined represented 23% of global mined supply.

Eoin Treacy's view -

Silver is mostly produced as a by-production of other mining activity and the majority of pureplay silver miners now concentrate on gold. Additionally, silver is more of an industrial resource than gold so it tends to elicit interest from many different sources. Those complicated supply and demand fundamentals mean significant new sources of supply or demand are required to meaningfully change the outlook for prices. The loss of photographic film demand was a major hit meanwhile the building boom in solar cells now accounts for 10% of total demand.  



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May 06 2021

Commentary by Eoin Treacy

The Chip Shortage Keeps Getting Worse. Why Can't We Just Make More?

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

Chip plants run 24 hours a day, seven days a week. They do that for one reason: cost. Building an entry-level factory that produces 50,000 wafers per month costs about $15 billion. Most of this is spent on specialized equipment—a market that exceeded $60 billion in sales for the first time in 2020.

Three companies—Intel, Samsung and TSMC—account for most of this investment. Their factories are more advanced and cost over $20 billion each. This year, TSMC will spend as much as $28 billion on new plants and equipment. Compare that to the U.S. government’s attempt to pass a bill supporting domestic chip production. This legislation would offer just $50 billion over five years.

Once you spend all that money building giant facilities, they become obsolete in five years or less. To avoid losing money, chipmakers must generate $3 billion in profit from each plant. But now only the biggest companies, in particular the top three that combined generated $188 billion in revenue last year, can afford to build multiple plants.

Eoin Treacy's view -

Semiconductor factories are largely automated so they were not particularly impacted by the global lockdowns. Demand for their products surged during the lockdowns. Factories running on thin margins and under constant threat from obsolescence do not operate with a lot of spare capacity. That is the primary reason we now have a semiconductor availability issue. The demand curve has accelerated well above the ability of supply to keep up. The increasing dependence of the automotive sector on chips has been building for a while and will contribute to the investment case for more supply. 



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May 04 2021

Commentary by Eoin Treacy

Email of the day on central bank digital currencies:

I have been a subscriber to your service for over 20 years, probably closer to 30 years. I am very satisfied with your service, and am one of your great admirers. I was surprised though how certain you sounded on the future of money and digital currency on Friday's audio. Do you really think that the current monetary system will change drastically and that digital currency will be the main currency in the future? What will be your guess as to how long will it take to have that kind of change? Once again thanks a lot for the excellent service. 

Eoin Treacy's view -

Thank you for your patronage over the decades and this question which may be of interest to the Collective. The world is awash in debt and the total continues to rise. Governments are running wartime-like deficits and spending plans continue to be revised upwards. Nothing has occurred to change the trajectory of policy. Whenever the next crisis occurs central bank balance sheets will multiply in size again.  



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April 30 2021

Commentary by Eoin Treacy

Email of the day on the inevitability of bitcoin's multiplication

Hi, what would be your comment on the following report from these people who were right more frequently than not:
https://panteracapital.com/blockchain-letter/five-orders-of-magnitude/

Eoin Treacy's view -

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

For every million new users, the price of bitcoin rises $200.  It happened every time except for February 2016, when the price was slow to hit.   

The rise in the price has been amazingly constant.  I’ll leave it to some future Avogadro to figure out exactly why.  The important point is:  If this relationship holds, bitcoin will hit $200,000 in 2022.

I realize that sounds like a large caveat – but these relationships have held for a decade.  The compound annual growth rate (CAGR) of bitcoin has been 213% for more than ten years.  $200,000 a year from now would be exactly 213% higher than today.  It would be just normal trend growth.

The best time to buy bitcoin is around a year before the halving of the reward for mining (halvening). The last one was almost a year ago and the next will be in about three years. After the halving of the reward, the limited supply argument is burnished because it becomes twice as expensive to mine new coins so the need for additional resources increases while the value of coins already in existence inflates. That’s exactly what we have seen after every other halving and there is no reason to believe that will not persist.



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April 28 2021

Commentary by Eoin Treacy

Hoisington Quarterly Review and Outlook

Thanks to a subscriber for report from Lacey Hunt which reiterates his long-term view that yields will continue to compress. Here is a section:

Before the pandemic, economic growth was decelerating as confirmed by a decline in world trade in 2019, one of the few yearly declines in the history of this series. While the huge debt financed programs were a response to the pandemic, the end result is that global nonfinancial debt increased to a record 282% of GDP in 2020. The 37% surge of debt relative to GDP was also a record. While this debt may be politically popular and socially necessary, it will weaken growth and inflation after a transitory spurt, which will lead to even more disappointing business conditions than existed prior to the pandemic.

The actual global debt situation may be worse than these numbers indicate because they include China, the world’s second largest economy. Scholarly forensic research indicates that Chinese GDP is overstated by at least 18%. Thus, the official Chinese debt to GDP ratio is suppressing the global numbers. A comparative analysis of money velocity confirms the suspicion about the Chinese figures. Money velocity in China in 2020 was 0.44 versus 1.19 in the U.S. Admittedly money and debt are not identical, but they are opposite sides of the balance sheet and the glaring gap is too much to be ignored.

Eoin Treacy's view -

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

Something that has been troubling me for a while is why has China chosen now as the time to clamp down on Alibaba and Ant Financial’s massive money market fund. The rationale that it was politically motivated and that the firm has become too big and powerful for the comfort of the Communist Party is tempting and probably holds some truth. However, the bigger question is whether the financial system needs to reabsorb the flows and be refortified because the debt overhang is much larger than investors are willing to give credence to?



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April 27 2021

Commentary by Eoin Treacy

New malaria vaccine reports milestone 77 percent efficacy

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

There is still a long road ahead before this new vaccine comes close to large-scale use. A phase 3 trial is commencing now, spanning four African countries and enrolling close to 5,000 children.

However, the importance of developing an effective malaria vaccine cannot be understated. Over 400,000 people still die from malaria every year. Lynsey Bilsand, from vaccine research charity Wellcome, calls this new breakthrough “significant and exciting” in the ongoing battle against this major global health problem.

‘Despite global efforts against malaria, too many lives are still lost to this disease, especially babies and young children,” says Bilsand. “Vaccines could change this. This is an extremely promising result showing high efficacy of a safe, low-cost, scalable vaccine designed to reach the huge numbers of children who are most at risk of the devastating impact of Malaria.”

Eoin Treacy's view -

Malaria represents both a human tragedy and massive tax on productivity in tropical and many sub-tropical areas. The death rate is bad enough but knocking people out of the workforce and making them a burden on their families is one of the primary reasons economic compounding does not result in better outcomes in Africa. It is therefore reasonable to conclude that the introduction of a vaccine would have a massive impact on long-term growth potential for the SubSaharan African region.



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April 23 2021

Commentary by Eoin Treacy

A Chipmaker's Advice to the Auto Industry

This interview with the head of automotive at Global Foundries (ahead of the company’s IPO) may be of interest to subscribers.

Fixing The Chip Crisis
It’s been almost five months since the global chip shortage surfaced as a serious problem for the auto industry. Some experts say it could take a year before automakers emerge from this expensive supply-chain hell.

The consequences will last much longer as the pandemic forces car companies to rethink how they manage their supply chains. Lead times for automotive chips already were lengthening before Covid-19 lockdowns, as the auto industry became a bigger semiconductor customer than ever before. That's because systems that alert drivers when they drift out of a lane and better harness an EV battery require more data processing than yesterday’s power windows and car radios.

I recently spoke with Mike Hogan, the head of automotive at Global Foundries, a chipmaker that has plants in the U.S., Europe, and Asia. Since autos consume just 10% of global chip production, car companies usually buy consumer electronics chips off the shelf. Hogan says that with electrification and autonomy transforming vehicles, automakers have to look more deeply into their supplier networks.

Here are excerpts from our discussion, edited for length and clarity:
Where are we now, is this going to get worse? When will the shortage ease?
The first wave of help [for automakers] is probably a third-quarter thing.

It’s very hard to tell if there’s a shortage hiding behind a worse shortage. Because auto is so diverse, there are so many different kinds of semiconductors that go in there — if the auto guys don’t know what they need, how do they know they don’t need something else that they don’t see yet? That’s the real concern.

So I think it could be very lumpy trying to get out of this. Is that unique to the auto guys — versus someone who makes a smartphone or an iPad?

The folks who make smartphones, they don’t outsource the design to a bunch of people. They tightly control everything that goes in that smartphone. Even to the point where they say, ‘Look, Global Foundries, I want to make sure it’s there, so I’ll prepay for it, I will reserve the capacity. If I don’t take it on the day, you thought I was showing up, it doesn’t go anywhere because we’ve already pre-paid.’
People often talk about how making cars is such a low-margin business, it has to be done this way.

Do you think that’s true?
If you can’t build a $50,000 car and ship it and put all those people to work because you don’t have $15 worth of semiconductors...I think it’s time to shift that and say, ‘No, we’re the auto market, we have very unique needs, we need an architectural approach to building our cars, we don’t need to
buy retail off-the-shelf stuff.’ Then you have the real conversation ahead of time, versus, ‘Hey you don’t know me but I’m out of chips and it’s your fault buddy.’

Is that starting to happen?
There are a lot of good, smart people in auto that have seen this. This is the moment that gives that cohort within those companies the voice to say, ‘This is exactly why we needed to think different.’ I think you’ll see more of this direct relationship between autos and semiconductors.

Can chip factories in the U.S. compete with lower-cost producers in Asia?
We built a factory from the ground up in upstate New York. It cost billions, but there’s over 3,000 people working there. Are those 3,000 people getting paid a little more than the 3,000 people in Korea? Yeah, probably. But if you build enough wafers, it’s still very competitive. Part of this might be tilting some advantage for folks to use the domestic supply that we create, but that’s how it is everywhere in the world.

Eoin Treacy's view -

The global automotive sector is totally reliant on just in time sourcing of materials and components. They don’t hold inventory and are used to squeezing suppliers so they don’t have to. As they stray into the world of technology where there is competition for supply, they will have no choice but to compete. That means investing in additional supply and paying upfront.



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April 23 2021

Commentary by Eoin Treacy

Bitcoin's Big Selloff Was a Long Time Coming

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

Felix Dian, founder of crypto investment fund MVPQ Capital
“Looking at the previous bull cycle (2016/17), there have been quite a few occurrences when Bitcoin loses momentum and dips below the 100-day moving average. This one was overdue.

“We are actually seeing record subscriptions into our fund this month, from institutional family offices, with many willing to use this as an opportunity to add. Ultimately, strong hands buying will meet the lack of available liquid supply of Bitcoin, triggering a squeeze and further down the road a new retail FOMO wave.”

Jeffrey Halley, senior market analyst for Asia Pacific at OANDA
“The threat of regulation, either directly in developed markets or indirectly via the taxman, has always been crypto’s Achilles’s heel.

“Hopefully, we will hear as many ‘experts’ saying this is a sign of Bitcoin becoming a ‘maturing mainstream asset’ if it falls 10% this weekend, as we do when it rises, or a crypto-exchange chooses to IPO. In the meantime, don’t hate me for being bearish Bitcoin in the near term.”

Nikolaos Panitgirtzoglou, strategist at JPMorgan Chase & Co
“Institutional demand has indeed slowed. I’m not sure what could trigger a re-acceleration of institutional demand. You either need a big announcement like Tesla or simply a correction and clearing of retail froth to incentivise institutional investors to re-enter the market.”

Eoin Treacy's view -

With a market cap of more than $1 trillion a lot more active participation is required to fuel the rapid price advances crypto investors are accustomed to. The institutional adoption argument helped bitcoin rally from $4000 to $65000 in less than a year. The big question is where will the next trillion of liquidity come from to spur another doubling?



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April 22 2021

Commentary by Eoin Treacy

Stocks Drop on Biden Plan to Lift Capital-Gain Tax

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

“Sticker shock over some of these tax figures will be hard to shake off for some investors,” Edward Moya, senior market analyst at Oanda Corp, wrote in a note. “Some traders are looking for an excuse to lock in profits and they might choose to use this tax story as their catalyst.”

Eoin Treacy's view -

The rationale is clear. Do you want to sell now and pay 23% or later and pay 43%? Another way of asking that question is do you believe the stock market is going to rally another 36%, imminently, to compensate you for the additional tax you will pay on the higher future figure? That implies an S&P500 level of 5631 versus the current value of 4141.



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April 21 2021

Commentary by Eoin Treacy

Netflix Falls After Pandemic Boom Reverses to Rare Weakness

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

Netflix has been warning for months that growth would slow after customers emerged from their Covid-19 hibernation, but few expected the company to stall so dramatically. The first quarter of 2020 was the strongest in its history, reeling in 15.8 million new customers, and Netflix’s pace was still brisk in the fourth quarter.

“We had those 10 years where we were growing smooth as silk,” Executive Chairman and co-Chief Executive Officer Reed Hastings said on a webcast for investors. “It’s a little wobbly right now.”

Netflix added 3.98 million subscribers in the first quarter, compared with an average analyst estimate of 6.29 million and its own forecast of 6 million. That marked the weakest start of a year since 2013, when Netflix added about 3 million customers. If the company’s forecast for the current quarter holds, it will be the worst three-month stretch for Netflix since the early days of its streaming service.

Netflix blamed a “Covid-19 pull-forward” effect, meaning the pandemic accelerated its growth in 2020 while everyone was stuck at home and needed something to watch. Now that surge is taking a toll on the company’s 2021 results.

“It really boils down to Covid,” Spencer Neumann, the company’s chief financial officer, said on the webcast.

Eoin Treacy's view -

Veteran subscribers will be aware I am not a fan of Netflix. It pioneered streaming but its content is a triumph of quantity over quality. That latter point matters as competition increases and that is particularly true as the established content creators enter the fray.



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April 21 2021

Commentary by Eoin Treacy

Just Like Price of ETH, Ethereum Usage Is Seeing Consistent Growth

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

Much like the price, the network fundamentals are just as bullish, with the hash rate on the network on an uptrend ever since December 2019.

Unique addresses have also been only growing, now past 148.5 million. Daily transactions also hit a new ATH at 1.5 million this week versus 1.35 million on Jan. 4, 2018.

Average gas fees on the network continuously keep above 150 Gwei with several significant upticks along the way, which first gained momentum during DeFi summer, as per Etherscan.

While the high fees on the second-largest network continue to price out the smaller users due to high activity on the platform, it goes without saying people are still using it and paying the fees.

“You pay high fees now because it’s the most useful chain by far. The catalysts coming will be the most obvious in retrospect,” said Kyle Davies, co-founder of Three Arrows Capital.

The consistent growth in usage can further be seen in transactions settled by the Ethereum blockchain, which has reached $1.5 trillion in transactions in Q1 2021.

Eoin Treacy's view -

There has been a deal of interest in the alt-coins as bitcoin’s price has increased. That’s a normal response from investors who are drawn to the promise of quick gains. They look for catch-up potential as the primary asset rises and the cost of participating increases.



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April 19 2021

Commentary by Eoin Treacy

Why Is Bitcoin Tumbling and What Is the Outlook for Prices?

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

As digital assets make further inroads with both retail and institutional investors, regulators across the world are taking a closer interest.

On Friday, the Turkish central bank said it would ban their use as a form of payment from April 30 and would prohibit companies that handle payments and electronic fund transfers from processing transactions involving crypto platforms.

There was also online speculation over the weekend that the U.S. Treasury is poised to crack down on money laundering carried out through digital assets. The Treasury declined to
comment.

Other sources of regulatory pressure include central banks’ plans to create digital currencies such as China’s for the yuan, and the ban of cryptocurrency mining in Inner Mongolia, long an industry favorite because of its cheap power.

“We will see more regulation coming,” Eva Ados, chief investment strategist at asset manager ERShares, said on Bloomberg TV, warning investors to be “very careful.” “We think there is going to be even more volatility going forward.”

* Overexcitement
Any big rally offers potential for the market to get ahead of itself. That’s the view of Galaxy Digital founder and long-time crypto bull Michael Novogratz, who wrote on Twitter he sees the retreat as a healthy correction.

Mike Novogratz @novogratz
With hindsight it was inevitable????????. Markets got too excited around $Coin direct listing. Basis blowing out, coins like $BSV, $XRP and $DOGE pumping. All were signs that the market got too one way. We will be fine in the medium term as institutions coming to the space.
Sent via Twitter for iPhone.

* Idiosyncratic factors
Other things could be adding to the mix. Industry news site CoinDesk reported Saturday that power outages in parts of China had knocked out a significant amount of Bitcoin mining capacity, which reduced the overall processing power of the cryptocurrency’s network.

There’s also the timing.
“Bitcoin goes crazy on weekends because it’s one of the few markets open to trade in,” Kyle Rodda, a Melbourne-based market analyst at IG said. “And it’s lost some buying support.”
 

Eoin Treacy's view -

Direct listings put no limit on the quantity of stock that can be sold directly to the public on the first day of trading. In a normal IPO there is a defined quantity of stock than can be sold and there are lockups for insiders that prevent them from selling immediately. Direct listings don’t have those controls. One way to look at it is direct listings prevent dilution of existing shareholders ownership. Another is they afford insiders the ability to liquidate their positions in one fell swoop. It looks increasingly clear that Coinbase insiders sold $5 billion of shares on the first day of trading. 



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April 19 2021

Commentary by Eoin Treacy

How fintech companies are wrestling with commercial banks in Nigeria

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

Nevertheless, while banks have the customer base and staff numbers to tackle the disruptive potentials of fintech startups, their responses have been quite passive.

Fintech companies like Paystack, PiggyVest, Kuda Bank and others are innovating past traditional institutions by making digital financial services like lending, savings, or investing readily available to people. They have been able to recognize the pain points for users, which have not been addressed by commercial banks.

Other fintech startups have fueled the growth of alternative lenders which offer both higher yields to investors and faster, cheaper, more convenient loans for borrowers compared to traditional banks. Startups like Carbon and Branch offer lower loan rates than commercial banks and this is mostly because fintech companies are not subject to the operational costs involved in running a traditional bank with multiple branches.

In an exclusive interview with Nairametrics, Femi Oshinlaja, the COO of Cassava Fintech, a pan-African Fintech Group that enables digital financial services for Africa’s mobile consumers, explained why digital solutions are fast spreading across the African continent by stating;

“With the growth in smartphone penetration and greater pervasiveness of the internet, we see the convergence of the online channels with more consumers opting to use digital channels to send money home as they see the convenience of doing so from the comfort of their homes and not having to queue to make the transaction in addition to the affordability of the online option.”

Eoin Treacy's view -

Massive populations of young ambitious people represent outsized potential demand for banking and credit services. Since the vast majority of Africans have no experience of the traditional banking relationship, they represent fertile growth for the fintech sector. As a result, Africa is likely to where we see active efforts to introduce a blanket form of digital payments.



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April 16 2021

Commentary by Eoin Treacy

Porsche's Electric Taycan Sales on Course to Eclipse Iconic 911

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

“Established models have supported this excellent result along with the latest additions to our product range, above all the new model variants of the all-electric Taycan,” Porsche sales chief Detlev von Platen said of the brand’s 36% first-quarter surge. “We can look back on a very positive start to the year.”

The Taycan, which Porsche recently flanked with a more spacious version, is a litmus test for the carmaker’s costly shift to electric vehicles. Boosting EV sales with Porsche will be key to maintaining healthy margins as the division is VW group’s biggest profit contributor by far.

Porsche’s total global deliveries rose to 71,986 vehicles in the first quarter, driven mainly by demand in China, its largest market. The compact Macan SUV was the brand’s best-selling model, ahead of the larger Cayenne. Porsche will launch a battery-powered version of the Macan next year that’s underpinned by a new platform for upscale electric cars co-developed with sister brand Audi.

Porsche remains optimistic about business prospects this year even as a global shortage of semiconductor parts disrupts production plans across the industry. Order books “continue to develop very well,” Von Platen said.

Eoin Treacy's view -

Introducing new technology at a high price point before filtering it down to cheaper models in subsequent years has been the go-to model for automakers. Nothing has changed. The positive reception the Taycan has received will fortify the mood at Volkswagen that they have made the correct decision to bet on electric vehicles.



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April 12 2021

Commentary by Eoin Treacy

Impatience

Eoin Treacy's view -

There is one theme that seems to be running through every asset class at present. Perhaps it is because we have been locked up for a year, and literally can’t wait until it is all over, but there is a distinct air of impatience in every circle of life. The pandemic has accelerated the decision-making process for everyone in every facet of our lives.

Mrs. Treacy and I have been discussing moving from Los Angeles for two years but there was never a push big enough to stir us into action. We looked at Las Vegas suburbs in 2019 and toured schools but my eldest daughter was accepted into one of the most prestigious high schools in Los Angeles, so we decided to linger.

The experience of living in Los Angeles during the lockdowns, from schooling to public safety, made us impatient for a change. Like many others we decided to move and have only been delayed by reapplying to schools for our daughters and finding a suitable home.



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April 09 2021

Commentary by Eoin Treacy

Email of the day on COVID-19 as an endemic nuisance

Some interesting points made such as the unlikelihood of attaining herd immunity; the virus becoming endemic in society; no phase 3 China vaccine data published as of yet; and the acknowledgement that if we do have to live with this virus, then the treatments for Covid, once you have the pneumonia, are still not very good.

Eoin Treacy's view -

Thank for this educative podcast transcript which I’m sure will be of interest to the Collective. The simple fact is that 78% of people admitted to hospital for COVID were obese. That suggests the best advice for people is to live an active healthy lifestyle and to minimise sugar consumption. That’s a sound regimen regardless of what else is happening.  



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April 08 2021

Commentary by Eoin Treacy

Email of the day on electric vehicles and reshoring

I came across this article (attached) about a new British company that has recently listed on the Nasdaq. Big questions about whether it can succeed, but it's an interesting take on the possible future of local manufacturing, and not just for vehicles. If successful, it could presumably have an impact on the issues of on-shoring, local community development and not to mention the ESG sector.

 

Eoin Treacy's view -

Thank you for this email and the attached article from the Times. Here is a section:

One reason why the prediction is more convincing this time can be found on an industrial estate in Oxfordshire. Arrival will start producing electric vans at its first small plant outside Bicester soon in what the company believes will be a turning point for global manufacturing. Avinash Rugoobur, the former General Motors executive who is Arrival’s chief strategy officer, says that not only the motor industry will be watching closely. “Many other industries will say: ‘If Arrival can do it in automotive, why can’t we do it in our sector?’ ”

Valued at about $10 billion after its recent flotation on Nasdaq, Arrival has been working for five years on the necessary technology. Denis Sverdlov, its founder, a Russian telecoms tycoon and former government minister, believes that using highly automated small plants can be dramatically cheaper than traditional large factories. A decentralised model also should reduce carbon emissions and deliver big economic benefits to the microfactories’ communities thanks to localised supply chains.

To apply this approach to vehicles has required a fundamental redesign of the products. Arrival makes its bodies from coloured composite materials, doing away with the metal pressing and painting that take up much of a traditional car plant. Although Arrival makes some use of 3D printing, Rugoobur says that “3D printing can be an enabler of decentralised manufacturing, but is not the only way of getting there”.

During the pandemic, many of these techniques were used by British companies to produce personal protection equipment and medical components when supplies from China were interrupted. In addition to fears about the resilience of supplies, companies have been worried about rising wages in China and the rising costs of transport. The Suez Canal snarl up has heightened concerns. At the same time, many western governments have said that they want to build up domestic manufacturing in critical industries, a resolve only strengthened by the vaccine wars.



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April 07 2021

Commentary by Eoin Treacy

Hydrogen could be the future of energy - but there's one big road block

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

The hydrogen embrittlement challenge is a highly complex materials and engineering problem. There are many aspects that still need to be understood before tangible solutions can be proposed.

For example, what are the conditions for hydrogen entry into different metals? Can this be controlled? Is it possible to completely stop hydrogen entry in metals using coatings or other surface treatments? What if these coatings get a scratch? If the hydrogen does get in, under what conditions will it cause failure of the metal? How much hydrogen is too much? How quickly will it accumulate? Can we design new engineering alloys that can better resist hydrogen embrittlement for the global hydrogen economy? If so, will the new alloys be economically feasible?

These questions can only be answered through collaboration between researchers and engineers who have a deep understanding of hydrogen embrittlement.

Eoin Treacy's view -

An economy powered by liquid hydrogen is the end point of all renewable energy arguments. It is the only way that the energy by volume arguments can be overcome. The question is how to do get there from where technological solutions stand today?



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April 07 2021

Commentary by Eoin Treacy

Coinbase Will Be First Major Cryptocurrency Company To Go Public

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

Its first-quarter results passed all of 2020. Coinbase reported revenue of $1.8 billion in the quarter, with net income of approximately $730 million to $800 million, according to the filing. Last year, it brought in $1.3 billion in revenue with a profit of $322 million.

Trading volume topped $335 billion in the quarter. For all of 2020, trading volume was $193 billion.

Total assets on Coinbase's platform increased from $90 billion to $223 billion, a nearly 150% increase.

Its full-year outlook presented a range of possibilities, "given the inherent unpredictability of our business," the company said in its report.

"To state the obvious, our business is hard to forecast," Coinbase Chief Financial Officer Alesia Haas said after the earnings report. That's because it can't predict the prices of Bitcoin and other cryptocurrencies.

About 96% of Coinbase's revenue comes from transaction fees. It has several lines of business in addition to its exchange services. Among them is Coinbase Commerce, which provides online retailers with software that lets them accept cryptocurrency payments.

Eoin Treacy's view -

Unlike many of the IPOs over the last year Coinbase has clear visibility of where it sources revenue and how that is likely to grow over time. It will be one of the few pureplays on the wider cryptocurrency market once it is listed.



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April 01 2021

Commentary by Eoin Treacy

Secular Themes Review April 1st 2021

Eoin Treacy's view -

On November 24th I began a series of reviews of longer-term themes which will be updated on the first Friday of every month going forward. The last was on March 5th. These reviews can be found via the search bar using the term “Secular Themes Review”.

The pandemic has been an accelerant. The full ramifications of what that means are becoming increasingly clear.

The pandemic took trends that have been in evidence for a while and exaggerated them. At the same time, it introduced new challenges which require new solutions.

Corporations operating without the safety net of cash on the balance sheet has been a feature of the markets for decades too. They continue to be bailed out when they get into trouble. There is no evidence that the trend of using all available means to buy back shares has ended. In fact, buybacks are back at pre-pandemic levels. Companies were touting “resiliency” last summer. It appears to have been just talk. Buybacks represent a powerful tailwind for stock markets that were absent for much of 2020 but are now back in force. 



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March 31 2021

Commentary by Eoin Treacy

Voltswagen Is the Perfect Example of German Humor

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

This week Volkswagen AG provided a lesson in just how difficult it is to “be Elon.” VW’s U.S. arm claimed it was changing its corporate name to “Voltswagen,” denied it was an April Fools’ Day joke, then admitted that, um, it was in fact an April Fools’ Day joke gone wrong.  

The German giant has been riding a wave of investor excitement about its electric-car strategy. Thanks in part to some clever social media and marketing, VW seemed to have cracked Musk’s knack for share-price boosting publicity. The more frequently traded VW preference shares are close to a six-year high.

News of the purported name change helped VW’s American depositary receipts — the ones favored by U.S. retail investors — to climb as much as 12.5% on Tuesday. Which is where this cringeworthy incident goes from being a disastrous attempt at humor to something potentially more serious.

I’m not suggesting VW’s gaffe was an attempt to manipulate the stock market and I doubt the U.S. Securities and Exchange Commission would view it like that. It’s a reminder, however, that we now live in the meme-stock age where even bad jokes can add or subtract billions of dollars in market value. It’s a minefield for corporate executives to navigate.

Eoin Treacy's view -

The market liked the Voltswagen idea. That’s going to give Volkswagen’s board something to think about. Tesla prospered because it gained a near monopoly on California’s carbon credits when Karma went bust. That allowed it fund loss making operations and meet payment deadlines while it was building its first battery factory. Many people wonder at Tesla’s business model. Is it a car company, a solar company or a battery company? The most accurate description is it is a regulatory arbitrage company. That’s a consideration every company board should be discussing.



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March 31 2021

Commentary by Eoin Treacy

Deliveroo Sinks 31% After IPO as Funds Shun Gig-Worker Model

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

“It’s not a great endorsement of setting IPOs in the U.K.,” said Neil Campling, analyst at Mirabaud Securities. “You have the combination of poor timing, as many ‘at home’ stocks have been under pressure in recent weeks, and the well-publicized deal ‘strike’ by a number of A-list institutional investors.”

Investors are also souring on the fast-growing companies that benefited during the pandemic. Doordash Inc. has slumped 23% this month, and European rivals Just Eat Takeaway.com NV and Delivery Hero SE have also fallen this year.

“The window for tech-driven IPOs just couldn’t be worse,” said Oliver Scharping, a portfolio manager Bantleon AG. “Deliveroo was trying to keep the window open with brute force.” Among the losers in the IPO will be retail investors, who were given the option to buy shares via Deliveroo’s app. Retail investors will only be able to trade the stock from April 7.

Eoin Treacy's view -

Food delivery is most prevalent in China. The price war between Alibaba’s Ele.me and Meituan Dianping is aggressive and keeps prices low. However, no one is under any illusion that it is profitable. Meanwhile both rely on an army of low paid migrant workers, willing to brave traffic and the elements, to make deliveries. This group have no rights. They also reside outside of the Hukou family registry system, so they are effectively anonymous. 



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March 30 2021

Commentary by Eoin Treacy

Email of the day on where the most leverage resides

After Greensill and Archegos, where next? The GCC of 2008 cleaned up the banks and the Tech Bust of 2000 cleaned up non-earning tech. Leverage always lies hidden somewhere, and rising interest rates usually make the best assassins. But where's the leverage this time? Tech + Leveraged Product Roll Out? Can we put together a list of leveraged companies and sectors that will make the headlines in 2021 and 2022 as 10-year yields breach 2% and beyond? Keep up the excellent work.

Eoin Treacy's view -

Thank you for your kind words and this question which may be of interest to other subscribers. The Global Credit Crisis decapitated the banking sector and many of the tech champions of the 1990s disappeared. Both crashes exposed massive leverage and egregious abuses. The first challenge is to identify the sectors where leverage is concentrated and then what are the potential catalysts to unwind those positions.

The rush of interest in listing via SPACs is an obvious area to begin searching. Many private companies eschewed listing for years because they had no need to seek funds in the public markets. They are now eager to list because their backers want to exit while there is still time. Softbank’s wake-up call with WeWork was the catalyst for much greater interest in IPOs.



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March 30 2021

Commentary by Eoin Treacy

Elliott Management Sends Letter to Board of Directors of AT&T

This letter may be of interest to subscribers. Here is a section:

The purpose of today’s letter is to share our thoughts on how AT&T can improve its business and realize a historic increase in value for its shareholders. Elliott believes that through readily achievable initiatives – increased strategic focus, improved operational efficiency, a formal capital allocation framework, and enhanced leadership and oversight – AT&T can achieve $60+ per share of value by the end of 2021. This represents 65%+ upside to today’s share price – a rare opportunity for any company, let alone one of the world’s largest.

Eoin Treacy's view -

There is increasing appetite for the companies that were left behind in the big 2020 surge. That’s being driven by the expectation for economic revival which will help to repair earnings potential and also by the rotation away from the stocks leveraged investors have been active in.



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March 29 2021

Commentary by Eoin Treacy

A Tiger Cub's Huge Margin Call Means More Pain Ahead

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

A market optimist might brush off Friday’s massive liquidation as a one-off event — a huge stumble by a fabled player now in decline. But this is no time to be optimistic. Hwang is representative of, not distinct from, the rest of the hedge fund crowd. His bets are also their bets. He may have gotten margin calls faster because he was more leveraged. But his positioning is by no means unique — and that commonality is where trouble may lie. 


Take the trades involved. Media companies such as ViacomCBS and Discovery have net exposures that are the “highest level we have seen since 2016,” according to a recent note from the prime brokerage unit at Morgan Stanley, which, alongside Goldman, managed some of the block trades on Friday. Last week, when ViacomCBS was using the steep run-up in its stock to sell new shares and bolster its balance sheet, the pressure on leveraged hedge funds must have been intense. 

Eoin Treacy's view -

Rising yields and companies selling additional shares at rich valuations puts pressure on leveraged trades. It was inevitable that the rotation out of stay-at-home champions, who saw a one-time boost to business, would see a reality check in 2021. Last week’s block trades were an example of that.

Credit Suisse and Nomura took the brunt of selling pressure in the financial sector because of their net exposure. However, exposure has been limited within the broader sector so far.



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March 29 2021

Commentary by Eoin Treacy

March 26 2021

Commentary by Eoin Treacy

Rio Tinto to deploy Heliogen's AI-powered industrial "solar refinery"

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

That temperature can be used to generate steam and turn turbines to produce electricity, or the heat can be stored for later use outside daylight hours. It's also hot enough to be used in cheap hydrogen production – Heliogen's Bill Gross told the Abu Dhabi Sustainability Week 2021 conference in January that a 600 x 600-m (656 x 656-yd) plant could produce around a million kilograms (2.2 million lb) of green hydrogen per year at an impressively low cost around US$1.80 per kilogram (2.2 lb) – lower than the average price of dirty hydrogen today.

Rio Tinto's boron operation, rather fittingly located in Boron, California, currently uses natural gas co-generation and boilers to produce steam for its processes. The Heliogen installation will contribute up to 35,000 lb (15,876 kg) of steam per hour to the plant day and night thanks to energy storage, and Rio Tinto says this has the potential to reduce total plant emissions by about 7 percent – "equivalent to taking more than 5,000 cars off the road," says the company, neatly sidestepping the fact that it's leaving more than 70,000 cars on the road in this metaphor.

This is just a pilot, though; should it prove viable, the company will assess whether to upgrade the facility to more than three times its current production rate, and the state intention here is to pilot the technology with a view to replicating it at other Rio Tinto facilities around the world where there's enough sunlight.

Eoin Treacy's view -

Rio Tinto’s management have displayed impressive foresight in positioning the company as the supplier of materials to drive the development of a carbon free economy. Making headlines for supporting concentrated solar plants in California is another example of sound PR strategy that detracts from the destructive nature of mining.

The company concentrates on iron-ore, copper and aluminium production which has allowed them to make a big play on being the most ESG-aware miner. Pollution is one portion of the ESG gambit the other is mine safety.



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March 26 2021

Commentary by Eoin Treacy

WeWork agrees to $9 billion SPAC deal in new path to go public

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

The company disclosed to prospective investors it had lost about $3.2 billion last year, the Financial Times reported earlier this week. The documents also show that occupancy rates fell to 47% at the end of 2020, down from 72% at the start of the year, before the pandemic hit, according to the newspaper.

In the interview in January, Claure argued the pandemic was helping WeWork. He said the work-from-home situation benefits the company and would continue to do so as people return to the workplace. “This is where WeWork suddenly becomes an incredible value proposition,” he said. “New habits have been developed during this pandemic.”

Mathrani will continue to lead the company after the deal. Vivek Ranadive of BowX and Insight Partners’s Deven Parekh will join the board.

BowX Acquisition Corp. is managed by Ranadive and Murray Rode, both former executives at TIBCO Software and co-founders of venture firm Bow Capital.

Eoin Treacy's view -

How a global work-from-home trend can be positive for a company that offers office space is beyond me. That’s particularly true for start-ups for whom rising yields represent a challenge in raising capital.



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March 26 2021

Commentary by Eoin Treacy

Message Received, Loud & Clear

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

The Bank of Canada is seeing enough progress in the economy that it feels it can begin reducing outdated programs, as well as slowly begin to remove some of the considerable stimulus in the system. There should not be too much impact from the cessation of select market functioning facilities directly. The bigger news today is the strongest signal yet that the Bank is ready to conduct a taper, and begin ‘right sizing’ the QE program. This is also the first time we have been shown what the future sequencing looks like, which is: i) taper to a net-zero purchase profile; ii) enter a reinvestment phase, and; iii) normalize rates. The best trades to take advantage of this are micro in nature, though also put ‘bigger’ macro trades like receiving 2yr-to-4yr forwards versus the U.S. at risk.

Eoin Treacy's view -

As we exit the pandemic the approach being adopted by central banks to the respective challenges in their countries will help to inform us on what to expect from the late starters. Since Canada is about to begin tapering in April how the bond, currency and stock markets perform may offer a foretaste of what a taper will eventually look like in the USA and elsewhere.



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March 24 2021

Commentary by Eoin Treacy

Taiwan Raises Red Alert Over Water, Cuts Chipmakers' Supply

This article by Debby Wu and Cindy Wang for Bloomberg may be of interest to subscribers. Here is a section:

Taiwan stepped up its fight against its worst drought in decades, further reducing water supplies to areas including a key hub of semiconductor manufacturing in the central part of the island in an effort to stop reserves from running dry.

The government issued its first red alert on water supply in six years Wednesday, warning that reservoirs in several parts of central Taiwan are running dangerously low. Authorities will cut the water supply to companies in two major science parks in Taichung by 15%, economics minister Wang Mei-Hua said at a briefing in Taipei.

Water will also be cut to non-industrial users across Taichung and Miaoli County two days a week, Wang said. The measures will come into effect from April 6.

While Taiwan Semiconductor Manufacturing Co. and Micron Technology Inc. both have chip-making operations in Taichung, Wang said the restrictions would not affect their production. TSMC’s headquarters further north in Hsinchu has been spared further restrictions for now.

TSMC says it plans to increase the amount of water it uses from tanker trucks but the new restrictions would not affect operations, according to an emailed statement. A Micron representative in Taiwan declined to comment, saying the company is now in a quiet period.

The relative dry spell is putting pressure on the Hua said government to ensure continued supplies to water-intensive industries, such as its crucial semiconductor manufacturing, at a time when global companies are clamoring for computer chips. A shortage of semiconductors has slowed output at automakers worldwide, prompting TSMC and its peers to run their fabs at close to full capacity to try and keep up with demand.

Taiwan’s usually ample supplies of water have plummeted after a significant drop in rainfall last year. The situation was further exacerbated by the fact that no typhoons made landfall in Taiwan in 2020.

Wang said earlier this month that Taiwan has sufficient water reserves to keep its technology companies operating smoothly until late May, when seasonal rains usually replenish supplies depleted during the drier winter months.

The meteorological situation adds to a new challenge to TSMC just as it’s grappling with competition from Samsung Electronics Co. and Intel Corp., which has unveiled a $20 billion plan to create a foundry business that will make chips for other companies.

Eoin Treacy's view -

The world is swiftly waking up to how dependent the global economy is on Taiwan. Rising geopolitical tensions, a global shortage of chips and water concerns mean there will be concerted efforts to ensure there is significant investment in additional sources of alternative supply.



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March 22 2021

Commentary by Eoin Treacy

Of Cigars, Contrarians, Nerds and Herds

Thanks to Iain Little for this edition of his Global Thematic Diary series. Here is a section:

Attitudes to risk have changed. In one month, investors have relegated Covid 19 and its mutant strains to the side[1]lines. They now obsess over inflation and a shaky bond market. Those who feared an equity bubble in February, spurred on by strident warnings from market opinion formers like Jeremy Grantham and Ray Dalio, have diminished in number and are keeping their heads down.

Anyone following 10 year USD bond prices will not be surprised. The move from 0.5% in August to 1.60% in March, a near tripling, has spooked bond buyers, with a consequent hit to gold, highly priced technology shares and other interest rate sensitive assets. But a more subtle and longer term conclusion may be drawn.

If sentiment is indeed registering such a confident attitude to growth and risk, it is reasonable to assume that investment positions are now largely in place to reflect that view. If so, the next concern of the market will be its nemesis: growth below expectations. Those investors who are now positioning investments excessively on the side of recovery, value or laggard stock sectors like banks may need to think twice before abandoning their long held commitment to healthcare, FMCG, e-commerce and technology. We are positioning client portfolios accordingly.

As Mark Twain once said: “if you find yourself on the side of the majority, it is time to pause and reflect”.

Eoin Treacy's view -

A link to the full note is posted in the Subscriber's Area. The reflation trend is increasingly being priced in and only a robust recovery will satisfy expectations for what it will entail for company earnings. The challenge for markets is the majority of people making English language predictions are sitting in the places with the most advanced vaccination programs.



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March 19 2021

Commentary by Eoin Treacy

March 17 2021

Commentary by Eoin Treacy

BlackRock, Lombard Say Faster Inflation Calls Are Premature

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

“As the dust settles in the wake of today’s FOMC, we will be focusing upon whether any additional back-up in yields is accompanied by a further widening of breakevens,” said Richard McGuire, the head of rates strategy at Rabobank. “If so then this argues that the move higher in rates is sustainable.”

But as long as U.S. yields don’t rise in a chaotic fashion, risk assets including emerging-market and high-yield corporate debt are expected to outperform, according to BlackRock’s Seth. “Rates can drift higher and still remain a positive backdrop for the risk assets, as long as the vulnerability is under control,” he said.

A Bloomberg Barclays index on global credit returns has gained 11% over the past year, compared with a loss of 2% for a gauge tracking Treasuries. BlackRock switched to a neutral duration position in February from underweight. The fund likes notes sold by Chinese real estate companies and the nation’s onshore bonds.

“The lack of correlation with the rest of the global developed markets also provides a diversification benefit,” Seth said of Chinese debt.

Eoin Treacy's view -

The Fed remains wedded to its view nascent inflationary pressures will not last long. There is a logical argument to support the view that the bounce back from the pandemic lows is exaggerated by the base effect and everything will settle down over the course of the next year or two. Since the Fed is willing to wait and see with inflation, it could be two full years before they are willing to draw firm conclusions.



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March 17 2021

Commentary by Eoin Treacy

Tinuiti Acquires Amazon Specialist Ortega Group, Adds Kevin Mayer to Board

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

Ortega will likely be the first in a string of purchases by Tinuiti, which in December became part of private-equity giant New Mountain Capital and is hungry to broaden its capabilities. Tinuiti is in talks to acquire two other companies, said Zach Morrison, its chief executive.

“We set out at the end of last year to find a partner that could take this from a hundred-and-some-million-dollar company to a billion-dollar company,” he said.

Future deals will focus on resources related to working with the “triopoly,” he said, referring to Google, Facebook and Amazon, as well as marketing services around video, digital advertising and first-party data, he said. New board members, like Mr. Mayer, will also bring expertise in those areas, Mr. Morrison said.

Mr. Mayer recently joined sports-streaming company DAZN Group as chairman. He served briefly as chief executive of TikTok and in senior roles at Walt Disney Co. Tinuiti also added Anneka Gupta, president and head of products and platforms at data company LiveRamp, to its board.

Tinuiti, with about 750 staffers, had its strongest growth last year, as businesses sped up their investments in e-commerce and digital marketing to reach consumers in the Covid-19 pandemic, said Mr. Atkinson.

Eoin Treacy's view -

Tinuiti is one of the most successful ad agencies for ecommerce companies. They offer an end-to-end marketing and advertising service with a solid track record of boosting sales right across the Amazon/Shopify/Wal-Mart universe.

They generally require a minimum advertising spend of $25,000 a month to even consider taking on a new client. That suggests a revenue base of at least $1 million in turnover and solid margins to absorb the cost.



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March 17 2021

Commentary by Eoin Treacy

March 16 2021

Commentary by Eoin Treacy

Email of the on solar power, desertification, and profitability

This video is very interesting. It is hard to comprehend the scale of this project.  It is part of China's ''ending poverty'' project.

Whilst the US has been engaged in adventurism in the M-E and elsewhere (right up till today) resulting in heavy losses, both financial and human cost, China has been powering ahead in leaps and bounds, spreading their sphere of influence far and wide. Interesting times.

 

Eoin Treacy's view -

Thank you for this interesting video which is both information and raises some important questions. The point they seek to get across is that solar panel power plants can create clean energy, reverse desertification, and create lucrative income streams for local populations. 

The video at no point discusses the efficiency of the solar panels, the sustainability of using the precious water resource to regularly clean them, the cost/efficiency of power lines to get the electricity to where it is needed or the desire for energy self-sufficiency.



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March 16 2021

Commentary by Eoin Treacy

Big Market Delusion: Electric Vehicles

This article by Rob Arnott for Research Affiliates may be of interest to subscribers. Here is a section: 

From the beginning, the air travel business has been capital intensive and highly competitive. During good times, new airlines emerged and drove down profits. During bad times, many less well-capitalized companies folded. Over the course of the last century, virtually every company in the business either failed or merged into a larger airline, most of which also collapsed.

The simple fact, as Warren Buffett so cleverly stated, is that technology does not translate into great fortunes for investors unless it is associated with barriers to entry that allow a company to earn returns significantly in excess of the cost of capital for an extended period. Of course, Apple, Google, and Facebook are well-known examples of such technological success, but they are the exception rather than the rule. For a host of complicated reasons, these companies have been able to build moats, or barriers to entry, around their businesses. They also benefit from the fact their products can be produced with limited capital investment.

Eoin Treacy's view -

Not every electric vehicle upstart is going to survive but they are currently priced as if they will be the ultimate successors to the global automotive industry. That’s the kind of contradiction bubbles are made of.



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March 15 2021

Commentary by Eoin Treacy

Billionaire investor Mike Novogratz says bitcoin will be like a report card that measures how the government is handling

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

"Bitcoin will literally be like a report card for how citizens think the government is doing managing their finances," the Galaxy Digital CEO said on CNBC's "Squawk Box" after the cryptocurrency hit a record high above $61,000over the weekend.

Novogratz indicated that bitcoin is an inflationary hedge and a digital store of value, rather than regular money, which is why institutions, money managers, and retail investors are piling into the digital asset. If people in the US believe Fed Chair Jerome Powell and Treasury Secretary Janet Yellen can facilitate full employment for the economy while avoiding inflation, they will stop buying bitcoin, he said.

The billionaire further said there has been a "secular shift" from the mindset that bitcoin isn't an asset class, to it now becoming one. "We're in uncharted territories in how much money we're printing and bitcoin is a report card on that," he said.

Eoin Treacy's view -

Bitcoin is the ultimate risk asset. Any delusion that it would be uncorrelated with other assets evaporated as soon as institutional investors began to participate. In that respect I agree with Mike Novogratz, people buy it as a speculative asset. When money is being printed with abandon it is the asset that has increased most in value.



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March 12 2021

Commentary by Eoin Treacy

Treasury Yields Surge to Test Key Level in Sudden Selling Bout

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

The move started in Australia, where bond futures fell heading into the market’s close to put modest pressure on Treasuries. At around the same time, there was a block sale of 10-year ultra bond futures, followed by a buyer of downside put options -- the hedging of which tends to weigh on the market. The three combined to tip 10-year Treasury futures through Thursday’s session low, which unleashed the wave of selling.

As many as 20,000 contracts changed hands in the next five minutes, the largest activity of the day. The speed and severity of the move left many traders perplexed, with volumes in the cash market comparatively modest.

The moves there were most pronounced in the benchmark 10-year tenor, with the yield curve steepening as two-year rates only rose as much as two basis points. European bonds followed Treasuries, with U.K. 10-year yields up five basis points to 0.79%.

Eoin Treacy's view -

Macro traders make money by sniffing out logical inconsistencies and pushing them until they break. George Soros and his ilk pressuring the Pound’s ERM fix is one such notable example so are the small number of traders that correctly called the demise of the subprime markets.

These kinds of contrarian bets are aided by the fact that crowds thrive on contradiction. The biggest bull markets inevitably breed the biggest contradictions because outlandish forecasts are required to justify buying at extraordinary highs.



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March 12 2021

Commentary by Eoin Treacy

Platinum Quarterly

This report from the World Platinum Investment Council may be of interest to subscribers. Here is a section:

In 2020 the platinum market was in a deficit of -932 koz, the largest annual deficit on record albeit below the -1,202 koz deficit forecast in November 2020. This difference was due to Anglo American Platinum Converter Plant (ACP) Phase A being restarted in December 2020, three weeks earlier than expected. However, over the year, as a whole, lower supply due to COVID-19-related mine closures, ACP outages and reduced recycling far outweighed the pandemic-driven fall in demand from the automotive, jewellery and industrial sectors, which fall was partially offset by increased investment demand.

For 2021 the platinum market is forecast to remain in a deficit for the third consecutive year. The modest deficit of -60 koz results from a 17% increase in total supply and a 3% increase in total demand. Interestingly, total supply in 2021 will still be 3% lower than in 2019, with industrial, jewellery and automotive demand levels all above their respective levels in 2019.

Total platinum demand in 2020 was 7,738 koz, 7% (-569 koz) lower than in 2019. Automotive demand reduced by 17% (-474 koz) year-on-year, largely due to lower vehicle sales in the first half of the year, as measures to control the spread of COVID-19 resulted in vehicle factory and showroom closures. However, platinum automotive demand losses were cushioned by the impact of higher metal loadings on catalysts to meet tighter emissions regulations. Jewellery demand was similarly impacted in 2020, with volumes 13% (-279 koz) lower on a full-year basis despite quarter four demand returning to pre-pandemic levels. Industrial demand was 5% (-111 koz) lower, with strong glass sector demand largely compensating for weakness in all other industrial demand segments.

In 2020, weakness in automotive, jewellery and industrial demand was partly offset by strong investment demand, from bars and coins and ETFs, collectively up 24% (+295 koz) year-on-year. Heightened global risk drove investor demand for hard assets such as platinum during the first half of the year, further encouraged by the weak platinum price. Investment demand increased in line with the improving economic outlook in the second half of 2020 and was bolstered by NYMEX futures exchange physical metal stocks, that increased significantly to address the disconnect between the price of platinum futures and platinum. However, as the year progressed bar and coin demand moderated somewhat as the platinum price increased and stock shortages in North America were addressed. ETF holdings increased strongly over the year with growth in North America, Europe and Japan far exceeding declines in South Africa.

Eoin Treacy's view -

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

Platinum is more of an industrial metal than an investment vehicle. The demise of diesel engines resulted in a crash because catalytic converter demand evaporated.

That is exactly what happened to silver when digital cameras eroded demand for photographic film. The price of silver halved between 1989 and 1991 as the first digital cameras arrived on the market. Without that major source of demand, the price drifted in a range for more than a decade. It did not breakout until a new source of demand appeared. It broke out in 2003 as emerging market investment demand heated up and Western investors worried about financial repression in the aftermath of the tech bust.



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March 10 2021

Commentary by Eoin Treacy

In 2018, Diplomats Warned of Risky Coronavirus Experiments in a Wuhan Lab. No One Listened

This article by Josh Rogen appeared in Politico and may be of interest to subscribers. Here is a section:

A little-noticed study was released in early July 2020 by a group of Chinese researchers in Beijing, including several affiliated with the Academy of Military Medical Science. These scientists said they had created a new model for studying SARS-CoV-2 by creating mice with human-like lung characteristics by using the CRISPR gene-editing technology to give the mice lung cells with the human ACE2 receptor — the cell receptor that allowed coronaviruses to so easily infect human lungs.

After consultations with experts, some U.S. officials came to believe this Beijing lab was likely conducting coronavirus experiments on mice fitted with ACE2 receptors well before the coronavirus outbreak—research they hadn’t disclosed and continued not to admit to. In its January 15 statement, the State Department alleged that although the Wuhan Institute of Virology disclosed some of its participation in gain-of-function research, it has not disclosed its work on RaTG13 and “has engaged in classified research, including laboratory animal experiments, on behalf of the Chinese military since at least 2017.” That, by itself, did not help to explain how SARS-CoV-2 originated. But it was clear that officials believed there was a lot of risky coronavirus research going on in Chinese labs that the rest of the world was simply not aware of.

“This was just a peek under a curtain of an entire galaxy of activity, including labs and military labs in Beijing and Wuhan playing around with coronaviruses in ACE2 mice in unsafe labs,” the senior administration official said. “It suggests we are getting a peek at a body of activity that isn’t understood in the West or even has precedent here.”

This pattern of deception and obfuscation, combined with the new revelations about how Chinese labs were handling dangerous coronaviruses in ways their Western counterparts didn’t know about, led some U.S. officials to become increasingly convinced that Chinese authorities were manipulating scientific information to fit their narrative. But there was so little transparency, it was impossible for the U.S. government to prove, one way or the other. “If there was a smoking gun, the CCP [Communist Party of China] buried it along with anyone who would dare speak up about it,” one U.S. official told me. “We’ll probably never be able to prove it one way or the other, which was Beijing’s goal all along.”

Back in 2017, the U.S. diplomats who had visited the lab in Wuhan had foreseen these very events, but nobody had listened and nothing had been done. “We were trying to warn that that lab was a serious danger,” one of the cable writers who had visited the lab told me. “I have to admit, I thought it would be maybe a SARS-like outbreak again. If I knew it would turn out to be the greatest pandemic in human history, I would have made a bigger stink about it.”

Eoin Treacy's view -

China is the wild west for medical research. The moral, ethical and safety considerations that slow down research in much of the developed world are ignored in China. That means if one wants to do research that would be frowned upon at home, you will find a welcome in China. The result is that all manner of experiments with new biomedical technology are taking place, often behind closed doors.



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March 09 2021

Commentary by Eoin Treacy

'Reddit Raider' Favorite GameStop Soars After Latest Cohen Push

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

Monday’s rally came despite short interest being near the lowest level in at least a year. Roughly one-quarter of shares available for trading are currently sold short, according to data compiled by S3 Partners. That compares to a peak of more than 140% in January.

“Shorts will continue to be squeezed out of their positions as GameStop’s stock price continues to trend upwards,” said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

Shorts sellers are down nearly $6 billion in year-to-date mark-to-market losses, including $609 million in Monday’s trading alone, Dusaniwsky said by email.

Eoin Treacy's view -

The rebound of reflation plays and retail investor favourites is partly a response to short-term oversold conditions. It is also because $1.9 trillion is still a lot of money, even after a decade of printing.

$1400 for individuals and each child as well as extended benefits the unemployed means many families will see bumps of several thousand dollars in the nest month.  According to this calculator a family of four with an income of $70,000 per annum would receive a payment of $5,600 or 8% of income. 



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