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November 27 2020

Commentary by Eoin Treacy

Crypto Boom Shaken as Bitcoin Plunges Along With Other Coins

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

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

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

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

Eoin Treacy's view -

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



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November 24 2020

Commentary by Eoin Treacy

Bitcoin Mania Grips Retail Traders in Flashback to Fall 2017

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

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

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

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

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

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

Eoin Treacy's view -

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



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November 24 2020

Commentary by Eoin Treacy

Experimental cancer vaccine passes animal tests, moves to human trials

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

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

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

Eoin Treacy's view -

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



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November 23 2020

Commentary by Eoin Treacy

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

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

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

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

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

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

Eoin Treacy's view -

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



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November 23 2020

Commentary by Eoin Treacy

Email of the day on crypto wallets

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

Eoin Treacy's view -

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



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November 19 2020

Commentary by Eoin Treacy

Rocketing Bitcoin Stakes Claim as Pandemic Refuge for Brave

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

“Bitcoin seems to be the hedge of choice against the U.S. dollar debasement that is looming, either through more Federal Reserve quantitative easing, higher government debt or a steepening yield curve -- or all three,” Jeffrey Halley, a senior market analyst with Oanda Asia Pacific Pte, wrote in an email.

Bitcoin’s investor base is also widening as more institutions make the jump into the asset class. Purchases or endorsements from the likes of Square Inc., Paul Tudor Jones and Stan Druckenmiller add to the mix. But its volatility -- including a furious run toward $20,000 in December 2017 followed by a bust -- make arguments for the cryptocurrency as a store of value contentious.

Fear of missing out “is well and truly in play here, and the fact that so many big hitters are publicly declaring their positions is clearly helping,” Chris Weston, head of research at Pepperstone Financial Pty, wrote in a Nov. 18 note. “I don’t see this move as a mania or grossly over-loved just yet.”

Eoin Treacy's view -

The bitcoin price is back testing its peaks which begs the question whether it is about to break on the upside in a rerun of the 2017 mania. The one big difference between bitcoin and other assets is it is completely borderless. All anyone needs is an internet connection to buy. That equates to a very wide investor base for what is a tight market.



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November 17 2020

Commentary by Eoin Treacy

Amazon Expands Push Into Health Care With Online Pharmacy

This article by Angelica LaVito and Matt Day for Bloomberg may be of interest to subscribers. Here is a section:

Analysts have long expected Amazon to dive deeper into health care in a bet the company can bring its digital real estate and logistical prowess to bear on a roughly $4 trillion industry in the U.S. with a reputation for inefficiency. The company rattled drug retailers with its PillPack acquisition, but Amazon has been slow to integrate the online pharmacy startup into its offerings.

The announcement Tuesday marks the first time that shoppers can order prescription drugs directly on Amazon. Previously, they were redirected to PillPack’s website. An integrated pharmacy removes one of the few gaps in Amazon’s offerings compared with major big box and grocery rivals, some of whom have long filled shoppers’ prescriptions in the same stores where they sold flat-screen televisions or cans of soup.

The discounts are a clear play for people who pay for their medications with cash, whether they are uninsured or are looking to save money. Strong demand for transparency and better deals have helped fuel the rise of discount card programs like GoodRx Holdings Inc. Amazon will display both the price when using insurance and the price without. Infusing transparency into a system that has been frustratingly opaque for consumers could alter the supply chain.

“We designed Amazon Pharmacy to put customers first – bringing Amazon’s customer obsession to an industry that can be inconvenient and confusing,” said TJ Parker, vice president of Amazon Pharmacy and co-founder of PillPack.

Eoin Treacy's view -

Waiting for 15 or 20 minutes while a prescription is filled must be one of the biggest nuisances of the retail experience. Being forced to walk around aisles of products one has no interest in begs the question, “how long does it take to select a product from a shelf and put it in a bag?

The challenge for pharmacists is they spend much more time ensuring the veracity of a doctor’s instructions than they do filling them out. Yet, that is only small part of their business. The bulk of volume is focused on repeat custom and it is this business Amazon is targeting. Chronic conditions are where the money is in selling pharmaceuticals, Renewable prescriptions do not need to be verified all that often and cashflows are received on a subscription basis. That’s the kind of service Amazon excels at.



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November 17 2020

Commentary by Eoin Treacy

Batteries of the Future Are Weightless and Invisible

This article by Daniel Oberhaus for Wired.com may be of interest to subscribers. Here is a section:

Unlike the carbon-fiber and lithium-ion sheets being developed by Asp and Greenhalgh, Kotov and his students created a zinc-air structural battery for their automatons. This cell chemistry is able to store much more energy than conventional Li-ion cells. It consists of a zinc anode, a carbon cloth cathode, and a semi-rigid electrolyte made from polymer-based nanofibers that is nanoengineered to mimic cartilage. The energy carriers in this type of battery are hydroxide ions that are produced when oxygen from the air interacts with the zinc.

While structural batteries for vehicles are highly rigid, the cell developed by Kotov’s team is meant to be pliable to cope with the movements of the robots. They’re also incredibly energy-dense. As Kotov and his team detailed in a paper published earlier this year, their structural batteries have 72 times the energy capacity of a conventional lithium-ion cell of the same volume. For now, their batteries are being used to power robotic toys and small drones as a proof of concept. But Kotov says he expects they’ll be used in midsize robots as well as larger hobby drones in the not-so-distant future. “Drones and medium-size robots need to have new solutions for energy storage,” Kotov says. “I can guarantee you that structural batteries will be a part of that.”

The battery has always been an addendum, a limiting factor, and a parasite. Today it’s vanishing before our eyes, melting into the fabric of our electrified world. In the future, everything will be a battery, and stand-alone energy storage will seem as quaint as landline telephones and portable CD players. It’s a disappearing act worthy of a great magician: Now you see it—and soon you won’t.

Eoin Treacy's view -

Dematerialisation is the process through which many of the locations and products we have previously physically interacted with have disappeared onto the internet. The disappearance first of the record player and then the record store is a clear example of that trend.



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November 17 2020

Commentary by Eoin Treacy

Email of the day on Tesla's prospects

I remember a few years ago that you wrote in one of your articles that Tesla could well go broke! It could yet happen but they seem to have found a firmer footing since then for the time being. 

Could their joining the S&P Index be an early warning of trouble ahead for the market generally as this Bloomberg report suggests?

https://www.bloomberg.com/opinion/articles/2020-11-17/will-the-stock-bubble-burst-as-soon-as-tesla-joins-the-s-p-500?sref=O3zvoUBa

Eoin Treacy's view -

Thank you for this question. I’ve written a lot about Tesla over the last decade. It’s a highly leveraged company so there is always a risk it will not be able to achieve its goals. At its current valuation it cannot afford to disappoint. If we listen to Elon Musk, the company was about a month from bankruptcy during the ramp up of Model 3 production but it successfully pulled through. 



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November 16 2020

Commentary by Eoin Treacy

7 Misconceptions About Bitcoin

Thanks to a subscriber for this well-argued article by Lyn Alden which may be of interest. Here is a section:

The question then becomes whether that energy associated with Bitcoin is put to good use. Does Bitcoin justify its energy usage? Does it add enough value?

So far, the market says it does and I agree. A decentralized digital monetary system, separate from any sovereign entity, with a rules-based monetary policy and inherent scarcity, gives people around the world a choice, which some of them use to store value in, and/or use to transmit that value to others.

Those of us in developed markets that haven’t experienced rapid inflation for decades may not see the need for it, but countless people in emerging markets have experienced many instances of severe inflation in their lifetimes, tend to get the concept more quickly.

Furthermore, a significant portion of the energy that Bitcoin uses, could otherwise be wasted. Bitcoin miners seek out the absolute cheapest sources of electricity in the world, which usually means energy that was developed for one reason or another, but that doesn’t currently have sufficient demand, and would therefore be wasted.

Eoin Treacy's view -

The energy to utility argument for bitcoin makes intuitive sense and willingness of investors to continue to support the asset class is a testament to the belief people have that there is intrinsic value in the network.



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November 13 2020

Commentary by Eoin Treacy

Quant Shock That 'Never Could Happen' Hits Wall Street Models

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

 

As money managers rushed to price in stronger economic growth, factor investors who dissect stocks by how much they’ve risen or fallen saw this strategy, known as momentum, crash on Monday like never before. Equities more sensitive to the economic cycle like value and small-cap names skyrocketed.

So while the S&P 500 is just shy of its record high, it’s been a wild week for quants even by the standards of this wild year, with many enduring violent moves rather than capitalizing on the risk-on mood.

All this recalls long-standing worries that freakish cross-asset gyrations are getting more common thanks to cheap money and investor crowding.

Quigley’s estimate for the odds of this week’s shock is in part tongue-in-cheek, based on a rule of thumb for a normal distribution of statistical data. Asset moves are not known to reliably obey this convention that says 98% of all data points occur within three standard deviations of the mean.

But even with the knowledge that market prices are more prone to outlier moves, a rotation of the magnitude seen this week was still a shock to risk models.

Eoin Treacy's view -

Quantitative strategies are designed to take advantage of relative small moves between asset classes that take place every day. They make money be sizing their positions according to the “normal” volatility in the ratios they monitor. 98% efficiency means that on any given day there is a 2% chance of a volatility event leading to unexpected losses. That’s acceptable for the vast majority of investors provided the incidence of outsized events remains low. The reason the credit crisis killed off so many fixed income macro strategies is because the dispersion in the returns broke out and stayed that way for a prolonged period.



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November 11 2020

Commentary by Eoin Treacy

Email of the day on investing in Ethereum

As you are an investor in Ethereum (it also comprises 35% of our fund), I've attached my recent Fact Sheet comments fyi :

Ethereum announced on 4 November (after a lengthy period of research, development and extensive testing) the imminent launch of the first phase of the major ETH2 upgrade. Ethereum, like Bitcoin, currently uses Proof Of Work (POW) to secure its blockchain while ETH2 will use Proof Of Stake (POS). POS requires that sufficient quantities of ETH are deposited on the blockchain and that these depositors also run a validator/node to process transactions and reach consensus on their validity.

Depositors/validators are rewarded for the risk they take and the service they perform by receiving additional ETH (the total quantity of ETH issued is determined by a sliding scale depending on the total amount staked). Should depositors act with malign intent they stand to lose their ETH, while tardy maintenance or excessive downtime will result in depositors/validators being penalised. Should the minimum threshold of 524288 ETH and 16384 validators be reached on 24 November, the ETH2 Beacon chain will go live on 1 December (if not then 7 days after the thresholds are reached). Running a validator is not without its technical challenges, and any ETH staked cannot be withdrawn until the current ETH1 chain becomes a shard of the ETH2 chain. That could take anything from one to two years from now. We are potentially keen to stake some of our ETH, but are proceeding cautiously and would likely use a third party to run the validators on our behalf.

Vitalik Buterin, the founder of Ethereum, recently posted a blog post https://vitalik.ca/general/2020/11/06/pos2020.html on why the new POS will be more decentralised, more secure and far more resistant to attack than the current POW used by ETH and Bitcoin. It is worth remembering that the majority of Bitcoin’s mining is in China – and ANT Financial’s IPO travails demonstrate yet again the extent that power is centralised in China. The next priorities for Ethereum are to release Sharding on ETH2 (which will increase the potential transactions per second to 100k) sometime in the next year as well as Ethereum Improvement Proposal (EIP) 1559 which will substantially improve Ethereum’s fee model – including burning the bulk of the fees generated on the system. EIP1559 will likely have the effect of reducing Ethereum’s net issuance (after ETH1 becomes a shard of ETH2) to negative.

On a one to two year horizon, Ethereum therefore offers the following advantages relative to Bitcoin :1) greater security and resistance to attack, 2) more decentralised (an average consumer laptop can run many nodes easily vs the large server farms needed to mine Bitcoin ), 3) lower inflation/issuance, 4) vastly higher scalability (100k transactions per second vs 7), 5) full programmability from inception (while Bitcoin’s programmability is limited), 6) the ability to earn a yield on your ETH through staking (which will become very easy in time and with no lockups), 7) the centre of the DEFI (Decentralised Finance) ecosystem, which it is already, and 8) use vastly less electricity (Bitcoin’s POW uses as much as say New Zealand).

I am however also very bullish on Bitcoin….the bull case of which is becoming increasingly well known (for example https://winklevosscapital.com/the-case-for-500k-bitcoin/). The Ethereum bull market has barely started in my opinion.

I can send the full Fact Sheet if you are interested.

Eoin Treacy's view -

Thank you for this detailed email which summarised a great deal of information relating to the evolution of the Ethereum network. I agree that the transition to the proof stake rather than proof of work model is a significant catalyst for investor interest. I’m sure subscribers would be gratified to see your fact sheet.



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November 09 2020

Commentary by Eoin Treacy

Pfizer Soars After Vaccine Prevents 90% of Covid Cases in Study

This article by Robert Langreth, Naomi Kresge and Riley Griffin for Bloomberg may be of interest to subscribers. Here is a section:
 

However, the strong reading from the first large-scale trial to post efficacy results bodes well for other experimental vaccines, in particular one being developed by Moderna Inc. that uses similar technology. Its big trial could generate efficacy and safety results in weeks. If that study succeeds as well, there could be two vaccines available in the U.S. by around year-end.

Pfizer expects to get two months of safety follow-up data, a key metric required by U.S. regulators before an emergency authorization is granted, in the third week in November. If those findings raise no problems, Pfizer could apply for an authorization in the U.S. this month. A rolling review is in process in Europe.

So far, the trial’s data monitoring committee has identified no serious safety concerns, Pfizer and BioNTech said.

Leading the Race
The positive preliminary data mean the U.S. pharma giant and its German partner are on track to be first with a vaccine, after signing advance deals with governments worldwide for hundreds of thousands of doses. The companies have said they should be able to produce 1.3 billion doses -- enough to vaccinate 650 million people -- by the end of 2021. About 50 million doses are expected to be available in 2020.

“It shows that Covid-19 can be controlled,” BioNTech Chief Executive Officer Ugur Sahin said in an interview. “At the end of the day, it’s really a victory of science.”

Eoin Treacy's view -

This news is the foundation of the argument for removing social distancing guidelines by the end of the second quarter at the latest.

It no longer matters whether one agrees with wearing a mask, practising social distancing, vacating offices, opening or closing schools or the potential for overloading the healthcare system. The question of whether this was necessary or not is now irrelevant. The introduction of vaccines will render the argument mute.



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November 09 2020

Commentary by Eoin Treacy

Welcome back America!

Thanks to a subscriber for this article by James Breiding. Here is a section:

Resolution requires concerted and consistent effort over a long period of time. It took 25 years to reform Finland’s primary education system before it topped the league in PISA scores. Singapore achieves superior health care outcomes at 25% of the cost of the US and 40% of Europe thanks to a system which gives consumers “skin in the game”.  It’s now thirty years in the making. Denmark’s commitment to wind power dates back to the 1970’s when the benefits were egregiously uneconomic. More than half of its energy is now from renewable sources. Ontario Teachers’ Pension Plan has evolved over thirty years since Lamoureux convinced Canada’s labor unions that the fund needs to attract and pay the best people from Goldman Sachs and Blackrock to work for them, rather than paying them fees.  Ontario Teachers’ has had an annualized total-return of 10% since reforms were made in 1990, and retirees’ pensions are fully funded with 100% inflation protection provided on all pensions.

It may be far-fetched to think that small, successful, experimental nations can fill this vacuum of leadership, but the world is begging for consistent leadership and a positive example, so an opportunity presents itself to step up.  

Eoin Treacy's view -

There is a good reason small countries tend to succeed in niche areas, and are often more successful than larger countries on specific metrics. They have to. Israel, South Korea or Switzerland have spent lifetimes grappling with the uncertainty of geopolitics. They understand the reality that if they don’t succeed on their own no one is going to help them.

Ireland is small rainy island on the tip of Europe, without a commitment to education and active courting of FDI, coupled with low corporate taxes and light regulation it would be a very dreary place indeed.



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November 09 2020

Commentary by Eoin Treacy

Video Game Prices Are Going Up for the First Time in 15 Years

This article by Olga Kharif and Takashi Mochizuki for Bloomberg may be of interest to subscribers. Here is a section:

Sony executives have been deliberating over a price increase for some time, said people familiar with the discussions. A spokeswoman for Sony said the company is selling titles at launch for as little as $50 and the “biggest games" for $70. She said the higher price is “reflective of the growing development resources needed for these ambitious games.”

Game companies argue prices haven’t kept pace with the cost of other media like a movie ticket, Netflix or cable television, said Yoshio Osaki, the head of IDG Consulting Inc., which works with most major publishers. Since 2005, the cost to develop a game has tripled or quadrupled, he said.

“Not all publishers will launch next-gen games at $70,” Osaki wrote in an email. “However, we do anticipate that a growing percentage of games will launch at $70, but not all at once and not uniformly across every publisher or every game franchise.”

Capcom Co., the Japanese publisher of Resident Evil and Street Fighter, won’t release software for the new systems until next year. But like other companies, Capcom said it’s taking a “title-by-title” approach. “We believe game software’s price should be determined by how much money consumers are willing to pay for the quality, not by how much money we spend to make that game,” said Kenkichi Nomura, the chief financial officer.

Eoin Treacy's view -

This discussion of what the cost of computer game should be is missing a significant evolution of the market which has been going on for the last decade. Freemium is the biggest trend in the market where players have access to the game for free and pay of add-ons to speed up their progress or enhance the look of their online profile. 



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November 05 2020

Commentary by Eoin Treacy

Gold Surges on Dollar, Stimulus Hopes With Election Outcome Near

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

Strong performances across most commodities with stocks sharply higher and the dollar lower is “in the realization that the combination of a Biden win and senate majority by the Republicans may remove a great deal of policy uncertainty,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said in a note.

Eoin Treacy's view -

The big question for many individuals at present is how do we insulate ourselves from the trend of massive and continued monetary and fiscal stimulus? The purchasing power of fiat currencies continues to fall and that is helping to inflate the prices of all assets. The answer is increasingly to lock down ownership of physical assets in limited supply now, before the price goes up any further.



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November 04 2020

Commentary by Eoin Treacy

Renewable Energy Falls as U.S. Green Ambitions Dim

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

With votes still being counted in key battleground states, it’s unclear if the the U.S. will more aggressively shift toward green energy, as Democratic candidate Joe Biden has pledged -- or if President Donald Trump will get four more years to promote fossil fuels.

While investors may be spooked by the uncertainty, its unlikely a second Trump term will significantly thwart the growth of wind and solar power. Demand for clean power has increased throughout the Republican’s presidency, thanks to state-level policies, corporations pushing to go green and a growing appetite for environmental, social and governance, or ESG, investments.

Eoin Treacy's view -

With a Republican controlled Senate a green new deal is unlikely to be approved. However, that has not stopped the sector from prospering for more than a year. The determination of both Europe and China to pursue anything that can enhance potential for energy independence and fewer emissions will be unaffected by the US Presidential election.



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November 04 2020

Commentary by Eoin Treacy

Biogen Shares Surge After FDA Publishes Alzheimer's Documents

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

The Cambridge, Massachusetts-based company presented data from two trials at a conference in December. One trial showed the drug may slow the progression of the disease, while the other found no effect. Researchers questioned the positive results because not all participants completed the trial before it was stopped.

Aducanumab targets amyloid plaque that builds up in the brains of Alzheimer’s patients. Brain scans showed the drug removed the plaque, but whether that had any benefit is unclear. While the plaque is found in the brains of Alzheimer’s patients, scientists don’t know what role it plays in the disease.

More than 40% of patients who took high doses of aducanumab developed brain swelling or hemorrhages. Most didn’t develop symptoms but the side effects were seen on brain scans.

Eoin Treacy's view -

The number of people with Alzheimer’s is likely to trend higher over the coming decade as the large number of baby boomers progress in age. There has never been an effective treatment for the ailment. That pretty much means that every patient will be prescribed the drug when it is approved on the basis that something is better than nothing. It is very rare to see a product meet the hurdle of a large unmet need and expanding potential market.



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November 03 2020

Commentary by Eoin Treacy

How Discord (somewhat accidentally) invented the future of the internet

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

One user, who goes by Vind on Discord, was among Discord's earliest cohort of users. He and his Battlefield 4-playing friends ditched TeamSpeak for the app, right as they were also starting to do more than just talk about Battlefield. "We were moving away from being purely about the game to being more about a general community." Discord let them set up different channels for different conversations, keep some order in the chaos, and jump in and out as they wanted. But Vind said one feature particularly stood out: "Being able to just jump on an empty voice chat, basically telling people, 'Hey, I'm here, do you want to join and talk?'"

Almost everyone I talked to picked that same example to explain why Discord just feels different from other apps. Voice chatting in Discord isn't like setting up a call, it doesn't involve dialing or sharing a link and password or anything at all formal. Every channel has a dedicated space for voice chat, and anyone who drops in is immediately connected and talking. The better metaphor than calling is walking into a room and plopping down on the sofa: You're simply saying, I'm here, what's up?

Eoin Treacy's view -

The evolution of chatrooms for gamers into a real-world phenomenon for business is not going to occur without some bumps on the road. However, the quality of calls and ease of use is so much better than Zoom or RingCentral that it is hard to imagine these companies will hold onto their dominant market positions indefinitely.



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October 30 2020

Commentary by Eoin Treacy

China's Fifth Plenum: Reading the Initial Tea Leaves

This article from the Center for Strategic & International Studies may be of interest to subscribers. Here is a section:

As expected, the plenum declared that China had met the critical political goal of becoming a “moderately prosperous society” in 2020. By the end of the year, China’s GDP is expected to reach nearly 100 trillion yuan (RMB)—equivalent to $14.3 trillion—a figure higher than the plan’s forecast of RMB 92.7 trillion, which makes China’s economy in nominal terms about 66.7 percent the size of that of the United States in 2019 ($21.4 trillion), up from 40.6 percent the size of the United States in 2010. China reportedly lifted 55.75 million people out of poverty and created 60 million jobs in urban areas over the past half-decade. By the end of 2020, there will be basic medical insurance coverage for 1.3 billion and basic pension support for nearly 1 billion citizens.

Looking ahead, the plenum emphasized that the 14th Five-Year Plan will build on the 13th Five-Year Plan’s principles of innovation, regional coordination, green development, international openness, and social equity. That said, there was a distinct emphasis on strengthening the domestic economy. There was no mention of a growth rate target; instead, the country will focus on improving quality and raising productivity. The plan will highlight China’s need to gain technological independence; become a powerhouse in manufacturing, cyber, and the digital economy; and raise China’s international competitiveness. At the same time, China will need to expand domestic consumption as a share of the economy, which will be dependent on raising wages, building a more complete social safety net, and expanding economic opportunities in rural China.

Eoin Treacy's view -

The middle-income trap has been escaped by only a handful of countries. South Korea, Singapore and Taiwan spring to mind. They have mustered the wherewithal to evolve their governance structure to become more efficient and successfully transitioned to high-end manufacturing and services. Relatively small populations relative to the scale of their exports has been a significant aid in achieving those goals.



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October 27 2020

Commentary by Eoin Treacy

Email of the day - on solar/wind power to generate hydrogen

The Australian government just approved fast tracking the Asian Renewable Energy Hub (asianrehub.com) proposed to be built in the Pilbara. It will generate green hydrogen from water using solar and wind energy that can produce clean ammonia to power ships, generate power and be used as a feed-stock for industrial processes. They say it will be the world's biggest power station at 26,000MW, covering 6500 square kilometers of land. It will start exporting in 2028.

Eoin Treacy's view -

Thank you for this informative email. Among the challenges faced by renewables is the distance of the primary locations wind and solar are available from the primary consumption markets. The only way to bridge that gap is to transport the energy produced to where it is needed. Producing green hydrogen and ammonia is a solution to that challenge and both are valued added commodities with a ready evolving market.



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October 27 2020

Commentary by Eoin Treacy

JPMorgan Sees Cryptocurrency Commercialization As Bitcoin Rises

This article by Bill Peters for Investors Business Daily may be of interest to subscribers. Here is a section:

JPMorgan Chase's digital currency is in commercial use for the first time, and the bank has built a new business around the technology underpinning the coin. That follows a Bitcoin price surge over this month.

JPM Coin — a cryptocurrency JPMorgan launched last year — "is being used commercially for the first time this week" by a big technology client, which the bank did not identify, CNBC reported on Tuesday. The client is using the cryptocurrency for cross-border payments.

The bank has also created a new segment devoted to cryptocurrencies and blockchain, the record-keeping technology that enables cryptocurrency transactions. That segment is called Onyx.

JPMorgan hopes blockchain could reduce errors and rejections in cross-border payments if banks are able to verify account information was accurate and regulatory compliance, CNBC said. Such payments can slow down as they pass through the global banking system.

Takis Georgakopoulos, JPMorgan's global head of wholesale payments, told CNBC he believes the world is "shifting to a period of commercialization" of blockchain and cryptocurrency.

Eoin Treacy's view -

Banks issuing their own currency was relatively commonplace until the last few decades and the UK still has some vestiges of the practice. The ability of anyone with sufficient skill to create their own cryptocurrency is a testament to how early we are in the digital money cycle. As it matures and governments take a significant interest the range of what is possible is likely to coalesce around government sponsored digital currencies.



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October 27 2020

Commentary by Eoin Treacy

Rolls-Royce Gets Investor Nod for $2.6 Billion Equity Sale

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

The package is aimed at seeing Rolls-Royce through to 2022, when the company expects to resume sufficient cash generation alongside a gradual recovery in demand for air travel. Chief Executive Officer Warren East has also said the company could sell assets as it repositions for the future.

“We didn’t want to put the business and our shareholders’ interests at risk by gambling on the situation next year so that’s why we chose to go with this package now,” the CEO said at an investor meeting.

Even with funding secured, Rolls-Royce still faces an uphill road to recovery. The twin-aisle planes the company supplies are predicted to take until at least 2025 to recover to pre-pandemic levels and the group has announced plans to cut 9,000 jobs.

Eoin Treacy's view -

The 10 per 3 rights issue is due to close at November 11th and will ensure Rolls Royce has sufficient capital to see it through the next couple of years come what may. It’s a worst-case scenario funding raise and will take place against a background of low interest rates and high liquidity.



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October 23 2020

Commentary by Eoin Treacy

Email of the day on buying Ethereum

Hello Eoin It seems to be difficult to invest in Ethereum here in Europe/Switzerland. first, there are very few providers and second, the liquidity is miserable. I want to invest appr US $ 200K, can you guide me where to go? 

Eoin Treacy's view -

Thank you for this question. Average daily volume of Ethereum is in order of about $7 billion so I suspect the markets you are looking at are not especially deep. The most expedient method to buy most cryptocurrencies is through a reputable exchange. Coinbase is the largest to the best of my knowledge. 



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October 22 2020

Commentary by Eoin Treacy

The Race to Hydrogen Goes Beyond Brexit With Italy-U.K. Deal

This article by Chiara Albanese and Alberto Brambilla for Bloomberg may be of interest to subscribers. Here is a section:

Italy’s Snam SpA will brush aside Brexit and invest 33 million euros ($39 million) in ITM Power Plc, which produces electrolyzers, a crucial component in the hydrogen technology.

The investment is part of a 150-million pound ($197 million) capital increase by ITM. The accord is part of Snam’s expansion in the technology after the European Union put hydrogen at the heart of its measures to cut greenhouse gases and become climate neutral by 2050. Hydrogen, if made with renewables, could replace coal, oil, and eventually natural gas, and help eliminate about a third of emissions from industries like steel and cement by mid-century, according to BloombergNEF.

“The hydrogen sector is like the internet before the dot com boom,” Marco Alvera, chief executive officer of Snam, said in an interview. “What matters now is to unlock potential technology and to find the right positioning.”

Eoin Treacy's view -

The EU is going to spend €2 trillion on a green new deal. China is at least talking about going carbon neutral within the next thirty years. That’s a lot of money chasing an energy transition.



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October 21 2020

Commentary by Eoin Treacy

Bitcoin Surges to Highest Since July 2019 After PayPal Embrace

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

Bitcoin surged to the highest level since July 2019 after PayPal Holdings Inc. announced it will allow
customers to use cryptocurrencies.

The largest digital coin increased as much as 4.9% to $12,488 Wednesday, surpassing the previous high for the year of $12,473 set in August. Gains among so-called alt coins were even larger, with Litecoin jumping more than 11% and Bitcoin Cash surging 8%.

PayPal customers can use select cryptocurrencies including Bitcoin, Ether, Bitcoin Cash and Litecoin on the platform. Mike Novogratz, who runs Galaxy Investment Partners, on Twitter called it “the biggest news of the year in crypto,” adding that banks will embark on a race to service digital currencies.

“We have crossed the rubicon,” he said. The news sparked an exuberant response from crypto fans who pointed to a string of recent announcements that suggest wider acceptance by old-school financial mainstays. Two public companies -- Square Inc. and MicroStrategy Inc. -- said recently that they invested in Bitcoin. And Fidelity Investments announced in August that it’s launching its first Bitcoin fund, adding its establishment name and star power to the often-maligned asset class.

Eoin Treacy's view -

The most recent bitcoin halvening was completed in May. That means the reward for solving the algorithm halved which doubled the difficulty of mining the next one. Since the genesis of the cryptocurrency, halvenings have resulted in investors appreciating the limited supply argument and the increasing difficult of creating new bitcoins as time progresses.



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October 21 2020

Commentary by Eoin Treacy

AirbnBaller

Thanks to a subscriber for this article from SeekingAlpha by Scott Galloway. Here is a section:

Airbnb is also a better value than hotels, offering more space but with less Covid (no check-in, elevators, or common areas) at a lower cost. A crisis is a terrible thing to waste, and Covid afforded the CEO the cloud cover to cut costs and refocus on the core business. In May Airbnb laid off a quarter of its staff (1,900 employees). CEO Chesky managed to pull a Bezos and was seen as a hero for his empathetic approach to layoffs (generous severance, extended healthcare, and a website of Airbnb employees who were laid off to help them find new leads). Firing people, sending out private pics — tomato/tomahto. Chesky and co-founders relinquished their salaries, cut pay in half for executives, and slashed nearly $1 billion in marketing expenses. The firm is in fighting shape.

The reduced cost structure and market recovery mean the path to profitability has become bigger, better lit, and shorter. There are rumors the firm will accelerate into/through profitability in 2021. The story here won’t be one of distant, but burgeoning, profits.

The story stock of 2020, where the narrative rode shotgun as the numbers sat quietly in the backseat, was Tesla. Airbnb will not electrify the world, but it will host it and reshape the resources required to let people tap into a basic instinct: to explore with others. What Airbnb lacks in story (unlikely Mr. Chesky can land two Brooklyn studio apartments on dual barges concurrently), it makes up in performance. There is no better vision than performance.

Eoin Treacy's view -

I had the pleasure of virtually attending a talk by Scott Galloway last week. He’s an engaging speaker and his topic at the time was how personal priorities shape purchasing decisions. He had a lot to say about equality of opportunity in college admissions. His main point was admissions, as they are currently structured in the USA, are tantamount to a caste system. I imagine his classes at NYU are well-attended.



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October 20 2020

Commentary by Eoin Treacy

Belt up for the coming 'Global Super Cycle' and a $100 trillion World by 2023

Thanks to a subscriber for this note from EM Capital Advisors. Here is a section:

The Emerging Market (EM) share of world output in the last 20 years doubled from 19% to 38% with the EM world growing at about double the rate of the Developed world (DM). This kept the total world growth at a 3-3.5% range over the last decade despite every region in the world growing a little slower than in the previous decade.

The implications of the swings in the global deflator and the FX on businesses and global incomes was much larger than most imagined which is visible in Fig 1 above. It breaks down the nominal world output and its components showing that the world in real terms grew at a pretty even rate of 3-3.5% through most of the last twenty years, with the swing in the ‘Deflator+FX component’ creating the big booms or bust feel in the world.

We are entering another such ‘Supercycle’ which was born about a quarter ago. Our definition of a supercycle is nominal World Output growing at 8-10% for a few years lifting most boats globally. Our view on the components of this global Supercycle are essentially building in a few key assumptions –

1. The World growth in real terms continues in the 3% +/- 1% range after normalizing to pre Covid levels in real terms by 2022. This is line with the IMF and many other estimates.

2. We expect the Global deflator to stay elevated in the 2-4% range for the next few years driven by stimulative fiscal and monetary policy by most large world economies. This would be aided by a weaker US$ and concurrent to it.

3. The US$ weakens 3-4% per annum for the next few years with rising deficits, with the Chinese Yuan doing the heavy lifting on the other side. The Yuan weakness in the previous few years had prevented this from playing out earlier. This paves the way for a strong Asian and EM FX basket which together account for about half of the world output. This is in a way similar to what happened in 2003-2005.

Eoin Treacy's view -

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

Thanks for this interesting missive which may be of value to subscribers. Here is an additional note from the sender:



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October 20 2020

Commentary by Eoin Treacy

Twitter, Responsibility, and Accountability

This article by Ben Thompson for his Stratechery blog may be of interest to subscribers. Here is a section: 

The lack of a punchline applies to many of the Facebook controversies since then: the United Kingdom’s Information Commissioner’s Office determined that the only scandal about Cambridge Analytica was the degree to which they oversold their capabilities;

 the afore-linked report from the Columbia Journalism Review highlighted how infinitesimal the scale of Russian interference on the platform was, and research shows that “fake news” makes up a fraction of American’s media diet; more recent research about voting fraud argued:

Contrary to the focus of most contemporary work on disinformation, our findings suggest that this highly effective disinformation campaign, with potentially profound effects for both participation in and the legitimacy of the 2020 election, was an elite-driven, mass-media led process. Social media played only a secondary and supportive role.

Eoin Treacy's view -

The power of the editor is at the root of the argument about which media venue carries the most weight in the cacophony of voices seeking attention at major turning points in politics and markets. Social media is a morass with so many voices competing for attention that no one account carries the weight of an established oracle of knowledge. That is where the strength of the winners in the mass media world prosper. They are still seen as the destination for truth. That is particularly true when they run a story taking a contrary angle to what they normally write.



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October 20 2020

Commentary by Eoin Treacy

Netflix 3Q Streaming Paid Net Change Misses Est

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

Sees growth reverting back to levels similar to pre-COVID as the world recovers, and sees paid net adds likely to be down year over year in 1h 2021 as compared to the big spike in paid net adds in 1h 2020
Sees 2021 free cash flow be -$1 billion to break-even
As productions increasingly restart, we expect Q4’20 FCF to be slightly negative and therefore, for the full year 2020, we forecast FCF to be approximately $2 billion, up from our prior expectation of break-even to positive
With $8.4 billion in cash on our balance sheet at the end of the quarter plus our $750m credit facility which is undrawn, our need for external financing is diminishing

Eoin Treacy's view -

Netflix is running a capital-intensive model that is entirely dependent on growth. It got a significant boost in subscriptions from the pandemic but in an increasingly crowded competitive space the ability to continue to sustain growth has to be questionable.



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October 16 2020

Commentary by Eoin Treacy

TSMC's Dominance Highlighted in One Single Number

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

But things started changing last year, coinciding with some important shifts in both the industry and the global political economy. Once neck-and-neck with Samsung Electronics Co., TSMC has now pulled ahead at the leading edge, while Intel Corp., formerly the world’s most-advanced chipmaker, has fallen further behind. The Hsinchu-based company now commands around 54% of the chip foundry market, according to researcher TrendForce.

At the same time, the rollout of 5G mobile technology and artificial intelligence ran smack into the tech Cold War (which includes the U.S. effectively banning TSMC from selling to China’s champion, Huawei Technologies Co.). This meant that the queue of companies wanting the best chip manufacturing in the world — such as Apple Inc., Qualcomm Inc. and Huawei — kept growing, while the supply of foundries able to meet their needs faces continued congestion.

This seems to have emboldened management to keep raising prices. Clients appear undeterred. Chips are generally the most important item in a device — be it a flashy new iPhone or high-end server — and the higher cost is far outweighed by the greater power and efficiency that superior components provide. 

I’ve warned before that TSMC ought to be careful. Regulators, clients and governments may worry that the company is becoming too powerful. Signs that it’s leveraging its power to raise prices could add those to concerns.

Right now, though, everybody still needs TSMC. That’s a nice position to be in, while it lasts.

Eoin Treacy's view -

With the release of Apple’s 5g phone today, demand for enabled devices will likely ramp higher. In a digitally connected work place where remote working plays an important role, the removal of lag is a significant development that does not get enough attention. It transforms the real-time ability of remote control of all manner of devices. Whether that is remote surgery, esports or industrial diagnostics, all are now further enhanced with the evolution of 5G.



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October 14 2020

Commentary by Eoin Treacy

NIO, BYD Shares Hit Record on Wall Street Vote of Confidence

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

Chinese electric carmaker NIO Inc. received confidence votes from at least two Wall Street analysts on Wednesday, after JPMorgan and Citi both upgraded their ratings on the stock.

While JPMorgan’s action was based on the expectation that the use of new-energy vehicles in China will quadruple by 2025 from last year’s levels, Citi pointed to multiple factors, including a very strong order backlog during the country’s Golden Week national holiday, an increase in NIO’s market share and a drop in battery costs.

JPMorgan analyst Nick Lai expects the penetration of new- energy vehicles in China to accelerate, jumping to 20% of the market by 2025 from less than 5% in 2019. Shifting customer preferences will help drive the trend, along with an expected drop in the cost of electric-car and battery production, the
analyst wrote in a note.
 

Eoin Treacy's view -

300 miles of ranges appears to be good enough for most investors. Whether that is the case for consumers is another question entirely. The practicality of daily life means 300 miles is probably enough 99% of the time but it also depends on ready access to charging facilities.



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October 09 2020

Commentary by Eoin Treacy

Waymo is opening its fully driverless service to the general public in Phoenix

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

Beginning today, October 8, we’re excited to open up our fully driverless offering to Waymo One riders. Members of the public service can now take friends and family along on their rides and share their experience with the world. We’ll start with those who are already a part of Waymo One and, over the next several weeks, welcome more people directly into the service through our app (available on Google Play and the App Store). In the near term, 100% of our rides will be fully driverless. We expect our new fully driverless service to be very popular, and we’re thankful to our riders for their patience as we ramp up availability to serve demand. Later this year, after we've finished adding in-vehicle barriers between the front row and the rear passenger cabin for in-vehicle hygiene and safety, we'll also be re-introducing rides with a trained vehicle operator, which will add capacity and allow us to serve a larger geographical area.

We’ve achieved this milestone with the thought and care that our riders expect from us. We’ve enhanced our health and safety policies and procedures throughout our fully-owned fleet, sought the feedback of our team, partners, riders, as well as federal, local, and state authorities, all while continuing to advance the Waymo Driver’s capabilities.

To our entire community: thank you for being a part of this important journey. And to all the Waymonauts who’ve worked so hard getting us here: thanks for your dedication to our mission. Together, we’re building a safe and more accessible future with every autonomous mile we drive.

Eoin Treacy's view -

Waymo’s approach to autonomous driving is piecemeal. They appear confident to drive around a 5x10 mile area in one of Phoenix’s suburbs. However, they are not confident enough to extend range beyond that well mapped area without a safety driver. That suggests this is another step on the way to full autonomy.



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October 08 2020

Commentary by Eoin Treacy

Tesla Lithium Foray Is Sign of Robust Demand, Top Producer Says

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

Rather than a threat to existing producers, Tesla Inc.’s push into lithium mining is a sign of future demand strength, according to the largest producer of the key ingredient in batteries for electric vehicles.

“They’re kicking the industry in the pants,” Eric Norris, head of lithium at Albemarle Corp., said in an interview. “The market interpreted it as a strong signal of value erosion, but I view it differently. It’s a sign of what needs to come to drive the vision they have for 2030.”

Tesla’s foray into mining is at the center of the carmaker’s plan to cut battery costs and deliver on a promise to bring a $25,000 electric vehicle to market. Elon Musk told investors last month that Tesla has secured access to 10,000 acres of lithium-rich clay deposits in Nevada and planned to use a new, “very sustainable way” of extracting the metal. That news helped send lithium-producer shares tumbling, with Albemarle falling 16%, the the most on record.

Eoin Treacy's view -

Tesla has set an ambitious target of compressing battery manufacturing costs faster than any of its competitors. That means sourcing materials cheaply, redesigning the bed of the vehicles and taking over responsibility for manufacturing its own cells. It’s a couple of year project and represents the same kind of scale and expense as building the original Gigafactory did.



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October 07 2020

Commentary by Eoin Treacy

High Conviction Calls Amid Cross Currents

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

Eoin Treacy's view -

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

The fourth quarter is going to bring two strong sales events for Amazon. Prime Day usually occurs in July but was delayed because of the pandemic. It will now take place on the 13th. That might just kick off the beginning of the holiday season. Considering the extent of excess savings this year is likely to deliver a bumper holiday season for Amazon’s retail operation.



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October 07 2020

Commentary by Eoin Treacy

Email of the day on my investments

Hi Eoin, could you please state what your APPROXIMATE price objective is for XXX to know whether you see this more as an opportunistic trade or more of fundamental return to e.g., the 200dma? Thank you

Eoin Treacy's view -

Thank you for this question. I view my trades as opportunistic and my investments as holdings in a long-term portfolio. 



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October 06 2020

Commentary by Eoin Treacy

U.S. Boosts Crude Sales to China, Forcing Saudis to Find Other Markets

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

Earlier this year, China agreed to buy U.S. crude as part of a broader deal meant to ease rising trade tensions between the two world powers. The Trump administration agreed to cut some tariffs on Chinese goods in exchange for purchases of American farm, energy and manufacturing exports. ~

China's buying so far is a long way from fulfilling commitments made in that deal, and to some extent it is simply restoring crude flows that were cut off amid the earlier U.S.-China trade tensions. As part of a deal, Beijing agreed in January to buy $52.4 billion worth of oil and liquefied-natural-gas from the U.S. by the end of 2021. The buying was delayed by the outbreak of the Covid-19 pandemic, but has ratcheted up more recently.

“The Chinese had to catch up," said Petro-Logistics Chief Executive Daniel Gerber. That is now upending traditional oil-trade routes world-wide and further depressing some prices. Global prices have been hammered by falling demand caused by the pandemic.

Amid the new U.S. shipments to China, Saudi Arabia recently cut prices for its crude for buyers in Asia, a move that could make that oil more attractive to other regional buyers. It is also now resorting to storing unsold oil at home and overseas, including at depots in Egypt, Singapore and China. Saudi Arabia's domestic crude-oil inventories rose 7% to 81 million barrels in the two weeks to Sept. 20, a level not seen since June, said Paris-based commodities-analysis company Kayrros.

Eoin Treacy's view -

China has a significant energy deficit and that is not about to change in the next few years. In fact, assuming continued economic recovery it may widen significantly. At the other end of the spectrum the USA, Russia and Saudi Arabia has large quantities of oil and gas available for export. That pretty much ensures competition for end markets will remain active and explains why Russia and the USA remain at odds on a wide number of issues. 



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October 06 2020

Commentary by Eoin Treacy

Compact Nuclear Fusion Reactor Is "Very Likely to Work", Studies Suggest

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

Scientists developing a compact version of a nuclear fusion reactor have shown in a series of research papers that it should work, renewing hopes that the long-elusive goal of mimicking the way the sun produces energy might be achieved and eventually contribute to the fight against climate change.

Construction of a reactor, called Sparc, which is being developed by researchers at the Massachusetts Institute of Technology and a spinoff company, Commonwealth Fusion Systems, is expected to begin next spring and take three or four years, the researchers and company officials said.

Although many significant challenges remain, the company said construction would be followed by testing and, if successful, building of a power plant that could use fusion energy to generate electricity, beginning in the next decade.

Eoin Treacy's view -

It’s impossible to know whether the SPARC design will work but a couple of points are worth considering. The first is they are holding to their estimate of having a prototype up and running by 2024. That at least is a positive. The second is the team behind the project only set the company up because they lost their funding at the old MIT tokomak project. Academics have no incentive to set or exceed deadlines. Commercial enterprises do.



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October 05 2020

Commentary by Eoin Treacy

Regeneron Gets the 'Ultimate Validation' After Trump's Treatment

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

Regeneron Pharmaceuticals Inc. climbed the most in almost seven months on Monday after U.S. President Donald Trump received the biotech company’s antibody cocktail to treat Covid-19.

President Trump’s treatment was the “ultimate validation” for Regeneron, according to SVB Leerink analyst Geoffrey Porges. Like Regeneron, Eli Lilly & Co. and AbCellera Biologics Inc. are developing an antibody therapy, not only as a treatment for the virus but also as a preventative.

When used as a prophylactic, these products could be considered a passive vaccine as opposed to the active shots most people think of as a vaccine, Bloomberg Intelligence’s Sam Fazeli said last week. AstraZeneca Plc, as well as GlaxoSmithKline Plc and partner Vir Biotechnology Inc. are testing similar therapies.

Eoin Treacy's view -

The primary reason for the lockdowns in March was because there was no effective treatment for the virus. Considering the speed with which it was spreading there was a clear risk hospitals would be inundated with patients. As news headlines are filled with talk of second waves, we really should be looking at the response from a first principles basis.



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September 30 2020

Commentary by Eoin Treacy

After underperforming the stock market for years, alternative energy is red hot

This article by Debbie Carlson for Market Watch may be of interest to subscribers. Here is a section:

Energy-market watchers say what makes today different than 10 years ago, when interest in clean tech also was hot, is that these power sources are now economically viable as subsidies fall away.

Peter McNally, global lead for industrials, materials and energy at research firm Third Bridge, says aggressive investment by utilities in renewable energy has lowered the cost of clean tech and showed it was viable at scale. Just as utilities invested in natural gas 20 years ago at the expense of coal, they are now doing the same with alternative energy.

"Clean-tech businesses are starting to stand on their own, and I think they got a big boost from the utilities," he says.

Eoin Treacy's view -

Even though Joe Biden disavowed support for the green new deal in last night’s debate, that did nothing to hamper enthusiasm for the sector today. Part of the reason for that is its success is less dependent on political whim than it was a decade ago.



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September 29 2020

Commentary by Eoin Treacy

Email of the day on palladium's outperformance

Dear Eoin, many thanks for the excellent commentary on these "interesting times"! is there a reason why Palladium seems to be trading better than Gold or Silver at the moment? Many thanks, A

Eoin Treacy's view -

Thank you for this question which may be of interest to the Collective. Palladium is mostly produced as a byproduct of nickel and platinum mining. That means Russia and South Africa are the primary producers.



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September 25 2020

Commentary by Eoin Treacy

September 23 2020

Commentary by Eoin Treacy

Fed Officials Warn of Economic Risks in New Plea for Fiscal Help

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

Federal Reserve policy makers on Wednesday highlighted the importance of fiscal stimulus for an economic recovery that recently has outperformed forecasts. Chairman Jerome Powell continued to wave the fiscal flag carefully at a congressional hearing -- amid a political stalemate over a new package -- saying that more support was likely to be necessary. Others were more full-throated, with Cleveland Fed President Loretta Mester saying it was very much needed given the “deep hole” the economy is climbing out of.

Chicago Fed President Charles Evans expressed concern the stimulus he penciled in won’t be forthcoming, while Boston Fed President Eric Rosengren suggested it’ll take another wave of infections to prompt action, and likely not until next year.

Declines in the stock market, until recently attributed to a reversal of excessive tech-share gains, have increasingly been attributed in part to worries about the recovery and the need for more stimulus. The S&P 500 Index was down 1.7% as of 2:22 p.m. in New York, the fifth drop in six days.

“The most difficult part of the recovery is still ahead of us,” Rosengren said in remarks Wednesday, saying he was more pessimistic than his colleagues over how many Americans will return to work over the next 15 months.

Eoin Treacy's view -

The impending bitter dispute between the Democrats and Republicans about the latter’s determination to approve a new supreme court justice before the election has pretty much shelved any hope of additional stimulus before the election. Add to that the real potential that an election result may not be immediately available and the timeline for when an additional fiscal stimulus will be agreed gets pushed further out.



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September 23 2020

Commentary by Eoin Treacy

Tesla unveils battery puzzle pieces of smart material science, design, and manufacturing innovation

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

“Over the last few years, Tesla has been making a lot of moves related to batteries.

We are talking about buying companies like Maxwell and Hibar, and applying for patents on new technology, like a tabless battery cell and a cell to pack design.

While all these moves were mostly evaluated on their own merits, it wasn’t clear how all those things would fit together.

That’s exactly what Tesla demonstrated at its Battery Day.

Tesla explained how they have made major improvements in five key aspects of batteries:

Cell design, specifically form factor.
Battery cell factory design with manufacturing innovations
New anode materials
New cathode materials
New battery pack design

And then, by combining all these things together, Tesla achieves a battery cost breakthrough with a 56% reduction in cost per kWh:

What is most impressive is how all those innovations work together. Each result in an incremental improvement to battery technology, but if you combine them together, you get breakthrough-level performance and cost:

Eoin Treacy's view -

Tesla has the ambition to become a truly globally significant car company. The much-hyped battery day supplied a long list of potential solutions to achieve that goal. The challenge is what is being suggested is complicated to begin with and that is before the manufacturing headaches have been fully appreciated. Above all else building out cell manufacturing capacity to the scale suggested is going to be expensive.



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September 17 2020

Commentary by Eoin Treacy

Australia Unemployment Drops as Half of Jobs Lost Recovered

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

The data’s strength was surprising because the period spanned Melbourne’s shift to Stage 4 restrictions and a curfew to contain a rapidly spreading outbreak, as well as nervousness in neighboring New South Wales that it was headed down the same path. The labor market’s ability to absorb this weakness and maintain its recovery is testament to the government’s signature JobKeeper employment subsidy -- that will extend into 2021 -- and central bank stimulus.

Self-employed workers drove the monthly jobs increase. As part-time jobs returned at twice the pace of full-time, the ubiquitous food delivery services, with its riders pedaling the streets of Australia’s cities, are expected to be responsible for much of this rise.

“The upshot is that the unemployment rate is now unlikely to climb to 8.5% over the coming months as we had anticipated, let alone the 10% predicted by the RBA and the Treasury,” said Marcel Thieliant, senior economist for Australia at Capital Economics. “Indeed, with restrictions in Victoria set to be loosened toward year-end, employment should continue to rise.”

The Reserve Bank of Australia, which has kept its benchmark interest rate near zero since March, when it began buying government bonds to ensure the yield on three-year remained around 0.25%, had predicted the jobless rate would climb to around 10% later this year.

Eoin Treacy's view -

Australia has successfully contained the coronavirus outbreak in Melbourne but the whole economy benefits from the monetary and fiscal stimulus to aid Victoria. With the RBA’s cash target rate at 0.25% Australia’s higher growth sectors that can benefit from access to abundant liquidity should continue to prosper.



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September 16 2020

Commentary by Eoin Treacy

12 frightful slides before Halloween: Stocks boil and bubble, investors toil and trouble

Thanks to a subscriber for this report from Stifel which contains a number of insightful charts and may be of interest. Here is a section:

Eoin Treacy's view -

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

The long-term charts contained in this report are helpful from the perspective of an investor either looking to monitor the potential for a bubble to evolve in the tech sector or the potential for cycles to rebound from depressed levels as a global recovery takes hold.



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September 15 2020

Commentary by Eoin Treacy

Industrials Conference: Strategy Sector Views + Analyst Stock Picks

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

Eoin Treacy's view -

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

Media commentary continues to focus on the number of new cases of COVID-19 but that is an irrelevant figure. The numbers of hospitalisations and deaths and the fear that healthcare systems would be overrun was the reason for locking down economies. The reality today is even in countries where the number of cases is increasing, the hospitalization rate has not increased because most newly infected people are younger. Obviously, there are risks that younger people will infect older people but that is a manageable risk compared to the financial stress of total cessation of economic activity.



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September 15 2020

Commentary by Eoin Treacy

Gilead and Merck's Billion Dollar Bets Face Tests as Ink Dries

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

The European Society for Medical Oncology meeting, which begins this week, will be headlined by results from Immunomedics Inc. -- which Gilead is buying for about $21 billion; and Seattle Genetics Inc., which drew more than $1 billion dollars in an investment and partnership from Merck.

The meeting will offer investors a peek into the blockbuster hopes for Immunomedics’ lead cancer drug and provide Merck holders added details on the effectiveness of a cancer drug the company has signed on to help bring it to patients.

Eoin Treacy's view -

Innovation in the healthcare sector has long been outsourced to biotechnology companies. Experimentation tends to be resource hungry and it is difficult to predict what will eventually become a commercial product. The answer has been to allow early stage investors take the start-up risk with the promise of the best solutions being eventually bought out at a substantial premium. That model ensures a robust pace of M&A activity work.



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September 14 2020

Commentary by Eoin Treacy

ARM: UK-based chip designer sold to US firm Nvidia

This article by Leo Kelion for the BBC may be of interest to subscribers. Here is a section:  

But experts say one risk Nvidia faces is that the takeover could encourage ARM's wider client list to shift focus to a rival type of chip technology, which lags behind in terms of adoption but has the benefit of not being controlled by one company.

"ARM is facing growing competition from RISC-V, an open-source architecture," wrote CCS Insight's Geoff Blaber in a recent research note.

"If its partners believed that ARM's integrity and independence was compromised, it would accelerate the growth of RISC-V and in the process devalue ARM."

Mr Blaber also suggested regulators might block the deal.

"This process will take months if not years with a high chance of failure," he told the BBC.

Mr Huang has said that he expects it to take more than a year to "educate" regulators and answer all their questions, but said he had "every confidence" they would ultimately approve the investment.

Eoin Treacy's view -

The big question is just how much trouble is the Vision Fund in? ARM Holdings was deemed to be central to Softbank’s ambitions of carving out of a dominant position in future technological innovation. The sale of this key asset signals trouble.



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September 11 2020

Commentary by Eoin Treacy

A Legion of Day Traders Is Taking Over Korea's Stock Market

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

Known for their love of risk, individual investors appear to be changing the contours of South Korea’s broader market. They are the force behind the benchmark Kospi index’s 64% rebound from its March low -- the strongest performance in Asia in that period -- having bought a net 25.6 trillion won ($21.6
billion) worth of stocks since then even as foreign funds and institutional investors sold. In the U.S., the Robinhood craze means that retail investors now account for roughly 20% of equity trading, up from 15% historically, according to Bloomberg Intelligence analysis.

“Retail investors appear to be seeking short-term profits after hearing their next-door neighbors earned lots of money from stocks after the March selloff,” said You Seung-Min, chief strategist at Samsung Securities Co.

The activity of Korean short-term traders in September hasn’t been limited to typical darlings like preferred stocks or shares of healthcare firms. They have also dominated trading in blue-chip companies like Samsung Electronic Co., about 81% of value traded this month through Sept. 8, and SK Hynix Inc.,
almost 76%.

“Unlike previously, they are trading large-cap stocks as well because they believe some large-size firms may be able to make a huge profit amid the spread of the Covid-19,” You said.

Eoin Treacy's view -

The South Korea and Taiwanese markets are heavily oriented towards technology companies which has made them a natural destination for traders playing the stay-at-home momentum trade. South Korean retail traders were also highly active in the cryptocurrency markets in 2017. That experience may have emboldened them to be more aggressive in pursuing gains during this momentum move.



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September 09 2020

Commentary by Eoin Treacy

Traders Are Getting Smarter About the Vaccine Race

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

It's not clear how big a deal this particular pause is. Trial halts aren’t uncommon or a sure sign of a significant problem. Health care news publication Stat reported Wednesday that the participant received the vaccine and not a placebo, but it's possible that the volunteer’s illness — reported to be a spine condition called transverse myelitis — is unrelated to the shot. They may have already had the condition, or this could simply prove to be a singular outlier. The range of possible outcomes includes everything from a quick restart to a longer delay that could create concern about vaccines that use similar technology, including an effort from Johnson & Johnson and Russia's already approved shot. With just one event, the former seems more likely than the latter, especially given the latest news from the FT on the trial’s possible quick resumption.

The pause may slow enrollment in AstraZeneca's trial if it restarts, and may affect other efforts. It may also incline companies and regulators to wait for a bit more safety data before approval. That's not such a bad thing if it builds confidence in the eventual result. Still, halting to track down an answer is the responsible move for volunteers, the company, and the vaccine race.

It’s clear that the world must proceed carefully in developing shots intended for millions. While approved vaccines are very safe and companies working on Covid-19 candidates have reported few red flags in small early tests, the human immune system is complicated and unusual reactions do occur. Only large-scale trials on a diverse population can determine whether a particular shot is safe for general use and differentiate outliers from deal-breakers. Big tests are especially crucial in a pandemic scenario with less time for early research.

Eoin Treacy's view -

There are over 150 candidates for COVID-19 vaccines and we only need one to work. This is a massive proof of concept exercise for genetic solutions. The reason it usually takes years to come up with a vaccine is because of the process of using dead virus or growing weakened samples.



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September 09 2020

Commentary by Eoin Treacy

Email of the day - on investment trusts investing in private equity

I don't know if it would help your subscriber who asked about private equity, but I wondered if he was aware that some investment trusts in the UK offer some exposure. For example, Scottish Mortgage has about 20% of its assets in unlisted companies. 

There are probably others. Consult the Investment Trust handbook.

(I should say I own shares in Scottish Mortgage)

Eoin Treacy's view -

Thank you for this suggestion which I’m sure will be appreciated by other subscribers. I have also reached out to Jonathan Davis, one of the authors of the Investment Trust Handbook, and I will revert with whatever response he provides.



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September 08 2020

Commentary by Eoin Treacy

Email of the day - on private equity growth opportunities

Recently Mr. Treacy mentioned that most of the growth and yield opportunities are currently in the Private Equity. I would appreciate Mr Treacy's view on UK tax efficient Venture Capital Trusts. I am considering them as they provide exposure to early stage companies and provide tax efficient investment. Does Mr. Treacy deem this a good vehicle or would he suggest any other investment instruments?

Eoin Treacy's view -

- Thank you for this email which may be of interest to subscribers. There are plenty of growth opportunities in the regular stock market. The success of the recent IPO market is a testament to that phenomenon.

However, there is a clear trend among institutional investors towards stuffing portfolios with “alternatives”. It’s an incredibly broad sector including everything from seed capital for new companies to timberland, real estate and gold.



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September 04 2020

Commentary by Eoin Treacy

Tenth Annual Energy Paper

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

We expect some of the “base” decline from existing shale wells to be replaced by new wells; the harder question is by how much. Operating and development costs have declined, well productivity has improved and there are large sunk costs in Appalachia (i.e., lease agreement options) that may compel many producers to keep drilling irrespective of lifecycle economics. Furthermore, if the onshore shale boom fades, we might see a revival of US offshore oil & gas production in the Gulf of Mexico. US oil production is also very sensitive to price: $55-$65 oil prices could add 1-3 mm bpd to US production when compared with JP Morgan’s $40 base case WTI price forecast. Even so, the US may now be close to peak oil and natural gas production and peak energy independence given financial pressures on the shale industry, and environmental pressures discussed next.

Eoin Treacy's view -

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

This report is laden with interesting graphics and statistics which highlight the challenges of developing renewable as well conventional and unconventional energy solutions. The correlation between renewable stocks and oil prices broke down late last year. That was a meaningful event and suggested the market has moved on from thinking of renewables solely in terms of cost competition with oil. That implies an alternative set of metrics is now be used to value the sector.



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September 03 2020

Commentary by Eoin Treacy

Stupid 'Rich' Skew in Apple, Greed Breaks Things

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

Jan $180 Strike Calls costs $4
Jan $80 Strike Puts costs $1

*Both options are $50 out of the money, approx data, BUT it is nearly 3x more expensive to buy upside risk in AAPL equity. Downside protection normally costs more than upside risk participation, NOT today. What does this mean? One large buyer has made a colossal splash in the market and the scent of greed has drawn thousands of other market participants into the dangerous game. Several clients in our institutional chat on Bloomberg have cited SoftBank as the original size buyer. We have NO IDEA if this is true, just that highly credible clients have made this reference several times over the last week. It’s a high-stakes game of musical chairs, the ultimate greater fool theory moment. The colossal call buyer has thrown meat in the water and drawn in the sharks, but unfortunately thousands of Robinhood minnows at the same time. When the large players’ exit, the little guy and gal will be left holding the bag.

Apple closed near $130, while the cost of speculative upside calls is weighted heavily against the buyer. Someone must have reached out to Buffett today because he can make a fortune in selling $AAPL upside calls.

Eoin Treacy's view -

Options volume has spiked higher over the last few months to hit multi-year highs. Options offer significant leverage to both the upside the downside and are among the primary vehicles for traders to take on outsized positions relative to their capital. The significant rebound in stay-at-home shares has resulted in an impressive momentum move which is not taking at least a breather. 



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September 01 2020

Commentary by Eoin Treacy

Rolls-Royce Disposal Raises Questions Over Balance Sheet

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

Rolls-Royce's GBP2 billion disposal announcement is materially more than what the market had in mind, and may imply a lower need for fresh equity to repair its balance sheet, Credit Suisse says. This raises questions as to whether the company was waiting for things to improve before a rights issue or taking the risk of seeing things get worse, the Swiss bank says. The lack of visibility on the balance sheet rebuild, persistent volatility in forecasts and the unattractiveness of the underlying investment case mean the stock remains unappealing for many investors, CS says. The bank has an underperform rating on the stock, and lowers the target price to 200 pence, from 210 pence. Shares are down 9% at 219.40 pence.   

Eoin Treacy's view -

As a major plane engine supplier Rolls Royce has been significantly negatively impacted by the Boeing 737 Max debacle. As if that were not enough the collapse in air traffic and cancellation of orders for new planes has been a double blow. The share is down more than 80% since early 2019 and made a new low today.



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August 28 2020

Commentary by Eoin Treacy

Wind Turbine Behemoth Plans for Future by Getting Into Hydrogen

This article by William Mathis and Laura Millan Lombrana for Bloomberg may be of interest to subscribers. Here is a section:

It could be a compelling model. Danish utility Orsted A/S is already exploring a number of hydrogen projects for its wind farms and Royal Dutch Shell Plc plans to produce the gas from a park it’s going to build off the Dutch coast. Making and selling hydrogen could provide a new source of revenue for wind projects that would offset the risk in the sometimes volatile electricity market.

No one before has used wind power alone, without a grid connection, to produce hydrogen, Nauen said. It’s a project that will provide insight that could be crucial to scaling up the technology to much larger turbines and wind farms both on land and at sea.

Earlier this year, Siemens Gamesa announced plans to build a 14-megawatt offshore turbine with a rotor diameter of 222 meters (728 feet), a few meters larger than the previous record.

The company expects to conduct testing at the hydrogen pilot from October to December and then start hydrogen production in January. A Danish hydrogen fuel company called Everfuel will distribute the gas for vehicles including taxis and buses to use in Copenhagen.

European governments aim to spend billions of dollars to help nurture domestic industries to produce hydrogen. The funding could help scale production and bring down costs.

Eoin Treacy's view -

Europe and Japan’s legacy automotive sector has been developing hydrogen fuel cells for decades with little to show for the investment. There was never a catalyst to spur the change from reliable internal combustion engines. The clean diesel scandal and competition from battery-driven alternatives has forced these companies to do something; anything. They don’t have experience with battery innovation but they have been developing hydrogen for a long time.



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August 26 2020

Commentary by Eoin Treacy

Facebook Hits Record as Analysts See Opportunity From Shop

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

Facebook analysts were positive after the social-media company added a new shopping section, called Facebook Shop, to its main app, seeing strong e-commerce growth potential.

JMP Securities (market outperform, PT $305)

There are “multiple catalysts” for Facebook, and e-commerce “can be a significant opportunity”
There is “a clear line of sight to monetizing Shop”
While advertising should remain Facebook’s focus, the growth in e-commerce means Facebook “can generate greater product discovery” for small and mid-sized businesses relative to other channels

Stifel (buy, PT $290)

The accelerated roll-out of the service “suggests the benefits to growth could be evident as early as 2021,” and Facebook waiving selling fees in 2020 “could accelerate the adoption of these tools”
Over the long term, Facebook’s e-commerce opportunity “should come more from increased adoption of digital ads” by small and mid-sized businesses than transaction fees

Shares up as much as 2.86%, the stock has nearly doubled off a March low, and it is trading at a record

Eoin Treacy's view -

Companies like Alibaba and Tencent were quick to introduce payment platforms into their social media and ecommerce products. The impending IPO of Ant Financial represents the consumer finance crown jewel of Jack Ma’s empire. It is a revenue engine that was successful because it afforded Chinese consumer the opportunity to earn daily interest at rates which were significantly higher than from banks. That’s the kind of regulatory two-step Silicon Valley start-ups have been performing for years and, so far, the Chinese government has been willing to look the other way.



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August 26 2020

Commentary by Eoin Treacy

Email of the day on electric vehicles.

I really love your audio comments every day and I think they are very useful. Commenting on the EV mania that is on lately...I don't understand why people are so crazy about tesla enc... at the moment the batteries don't last for a long time and when an EV car catches fire, this fire is unstoppable, a safety problem where nobody ever talks about. On top of that, the power grid of older city centers are not equipped to charge an EV... so where is the point in buying one?

Eoin Treacy's view -

Thank you for this email and I am delighted you are enjoying the audios. The charging question is a big one in cities. I called around yesterday to get quotes to install a charging station. They ranged from $700 to $985 before labour. The majority of US houses run on 110 volts and an EV needs 220V to charge in a timely manner. That requires an additional breaker at the fuse box and running cables to where you wish to charge the vehicle. Besides the cost, that is not an option for people who live in apartments. It would require a big expensive communal decision to install chargers in an apartment building.



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August 26 2020

Commentary by Eoin Treacy

Email of the day on a layman's description of nuclear batteries.

I suddenly seem to be bombarding you with communications, after years in the wilderness.    Don't worry, this will only be a brief interlude, I am sure.

   I just wanted to comment on the extract on "nano-diamond self-charging batteries" that you publish today.

I read Loz Blain's whole article, and it seems a very important development indeed.   But in keeping with all articles on technology for the "layman", the story doesn't start at the beginning, but begins a bit down the down the road, and soon focusses on the applications alone.    This applies even more to your extract.

I feel that this patronises the reader unnecessarily.    The average reader should be able to understand a brief well-structured explanation that starts from the beginning.   (This objection applies even more to articles on Covid-19 -- but that is another story.   In that case, I don't believe any politicians, or even some of their scientific advisers, have any real grasp of the subject.)

Re. the batteries, we have to start from the energy source.   There are only 3 (or maybe 4) energy sources:-    Radiation (sunlight), Chemical energy (in fossil fuels, wood etc.) and Nuclear energy (stored in the nuclei of all atoms, and released from the unstable ones).    The 4th source would be Gravitational (hydro-electric power, tidal, possibly wave).
 

The source in nano-diamond is nuclear, but the products (nitrogen gas) are harmless, and the beta radiation is contained (or so they claim).    The beta radiation (carrying the nuclear energy as kinetic energy) then transfers its energy to electrons, and creates the voltage.

The prefix nano is jargon which could be avoided - it simply means "using minute quantities of material", or possibly "operating with minute quantities of material at a time (i.e. on a very small scale), within a larger structure".    (This is what is happening in living things, and thus in the cells of our bodies, 24/7.     Man has only just caught up with this technology, in a rudimentary manner.)
 

"Self-charging" is superfluous and confusing.     I suppose it means that electricity is being continually formed from the nuclear energy store.    But this is equally true of a conventional battery;  the energy in that case is chemical, and there is far less than in the carbon-14 nuclei in nano-diamond batteries.

The carbon-14 is nuclear waste - from the used graphite (graphite is a form of carbon) "moderator" blocks from the cores of nuclear power stations, of which there is a huge store apparently.

Well it seems to me that if just 10 or so lines from what I have given above were used, that would be understandable to the average reader, and give them a good working knowledge.     (You may be interested to know, or probably already suspected, that I tutor A level physics and chemistry.   My great passion is communicating these matters clearly.   Granted, it is a great help if the reader has some facility in handling spatial ideas, but that applies to so many technical areas.)

Eoin Treacy's view -

Thank you for this informative explanation which I’m sure will be of interest to the Collective. I’m sure your students benefit greatly from the clarity your provide.



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August 25 2020

Commentary by Eoin Treacy

Nano-diamond self-charging batteries could disrupt energy as we know it

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

And it can scale up to electric vehicle sizes and beyond, offering superb power density in a battery pack that is projected to last as long as 90 years in that application – something that could be pulled out of your old car and put into a new one. If part of a cell fails, the active nano diamond part can be recycled into another cell, and once they reach the end of their lifespan – which could be up to 28,000 years for a low-powered sensor that might, for example, be used on a satellite – they leave nothing but "harmless by-products."

In the words of Dr. John Shawe-Taylor, UNESCO Chair and University College London Professor: “NDB has the potential to solve the major global issue of carbon emissions in one stroke without the expensive infrastructure
projects, energy transportation costs, or negative environmental impacts associated with alternate solutions such as carbon capture at fossil fuel power stations, hydroelectric plants, turbines, or nuclear power stations. Their technology’s ability to deliver energy over very long periods of time without the need for recharging, refueling, or servicing puts them in an ideal position to tackle the world’s energy requirements through a distributed solution with close to zero environmental impact and energy transportation costs.”

Indeed, the NDB battery offers an outstanding 24-hour energy proposition for off-grid living, and the NDB team is adamant that it wishes to devote a percentage of its time to providing it to needy remote communities as a charity service with the support of some of the company's business customers.

Should the company chew right through the world's full supply of carbon-14 nuclear waste – a prospect that would take some extremely serious volume – NDB says it can create its own carbon-14 raw material simply and cost-effectively.

Eoin Treacy's view -

I don’t know if the promises being made by this start-up are realisable in the two-year timeframe they anticipate. However, we do need to pay attention to these kind of technological advances because of the productivity enhancement potential they represent. Secular bull markets are driven by productivity growth. Therefore, anything that has the potential to allow us to do more with less has to be given due consideration because of the growth opportunities they offer.



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August 24 2020

Commentary by Eoin Treacy

Tesla resale values

This graphic from Bloomberg may be of interest to subscribers:


It’s early, but there are signs Tesla Inc.’s Model 3 could be as exceptional in the used market as it has been in the new-car world. The sedan has sold at volumes no other electric vehicle has come close to reaching, turning Tesla into the most valuable auto company in the world. Car-shopping websites still have small sample sizes to work with, yet so far, the Model 3s are retaining much more of their value than their small luxury-vehicle peers and they’re selling quickly once owners list them for sale -- on average just 29.3 days from March through June -- according to iSeeCars.com.

Eoin Treacy's view -

I took a test drive of a Model 3 and a Model Y on Saturday. It’s a pleasant experience. The acceleration, as reported, leaves every petrol driven car in the dust. For that reason, Tesla makes a big point of differentiating it product offering based on 0-60 times. I can’t fathom how anyone can really tell the difference between 3 and 4 seconds to 60 miles an hour in a city like Los Angeles where speeds of 30 miles an hour are the norm outside of the lockdowns.



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August 21 2020

Commentary by Eoin Treacy

Email of the day - on risk appetites and the value of a subscription.

I am a pre-subscriber (financial constraints, exacerbated since Covid-19, make it impossible for me to become a full subscriber, I'm afraid, so I may not qualify for a reply. But David did reply to me on more than one occasion;  he was always so kind, and is greatly missed).

I remember your being on the panel at a money show in the conference centre in Westminster Square (I forget the name - possible Westminster Conference Centre) - it must have been about 2009 because I remember asking a question as to whether there were any "good" banks left that might be worth investing in.
  
Anyhow, in response to a question from another attendee about companies drilling for water in Australia, (or possibly into wind power or solar or even lithium miners (if it wasn't too early) - I forget exactly which), I remember you replying that you never favoured chasing these early-stage stories, and in general you have been proved right since.   

I still tend to class hydrogen fuel and battery power for vehicles in the same category, but perhaps you feel that times have changed sufficiently now?    Since I am only a pre-subscriber, and not able to read the full article, I appreciate that you may have said more on this there, or in previous Comments of the Day.
    
It seems to me that since hydrogen when mixed with oxygen is a very explosive mix (although this could also be said to a lesser extent of petrol vapour, I suppose), it would only take one careless mistake or faulty construction to cause a serious explosion.   But perhaps the design features are so tight that this would be impossible.   

At least I would trust an electric vehicle more than a self-driving one! In fact, I am a bit nervous by nature. I would never trust a Toyota now, after that stuck accelerator pedal caused a fatality. What the last minutes of those poor occupants were like I cannot face thinking about.

Whether it is possible to reply to this or not, many thanks Eoin for the comments that I am able to read daily. They give a very sane and reassuring perspective, especially in these difficult times.

Eoin Treacy's view -

David always saw value in conducting a public discourse with subscribers because it helped to educate us as much as the Collective. It also ensures we are covering topics of interest. I agree and one of the things I enjoy most is attempting to provide satisfactory answers to subscriber’ queries. However, as someone who has been familiar with the Service for at least 11 years, might I suggest you at least take a trial subscription?

If that is too much of a financial constraint it may be time to reassess your investment/trading ambitions. Investing involves a degree of risk. If you are uncomfortable with driving a Prius because of a fault corrected more than a decade ago, it might be time to conclude investing is not for you.

The response to this email continues in the Subscriber's Area. 



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August 20 2020

Commentary by Eoin Treacy

Fed Blog Says Debt Buying Aided Market Without Moral-Hazard Risk

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

The unprecedented speed and scale of the Federal Reserve’s buying of Treasuries and mortgage debt to aid a severely impaired bond market has accomplished that without raising the specter of moral hazard, Federal Reserve Bank of New York researchers wrote in a note.

Pandemic-sparked volatility in March caused liquidity in the world’s biggest bond market to plunge to its worst since the 2008 financial crisis. The Fed responded with purchases of Treasuries and mortgage securities that peaked at more than $100 billion a day combined.
It’s still soaking up about $80 billion of Treasuries and at least $40 billion of mortgage securities a month, and some bond veterans warn that the central bank’s involvement in the market could potentially be encouraging risky behavior, such as excessive borrowing. But a post Thursday in the New York Fed’s Liberty Street blog argued against that.

“The magnitude of the Desk’s purchase program in 2020 ‘to support the smooth functioning’ of the Treasury and agency MBS markets marked those purchases as highly unusual,” wrote Kenneth Garbade, a senior vice president in the New York Fed’s Research and Statistics Group, and Frank Keane, a senior policy advisor.

But they also say that the tool has been used before and “the infrequency of Federal Reserve intervention suggests that relying on the Fed on those rare occasions when markets are in extremis has not materially exacerbated moral hazard.”

Eoin Treacy's view -

Reading over the Fed minutes feels like an episode of the Twilight Zone. This quote in particular is relevant. “many participants judged that yield caps and targets were not warranted in the current environment but should remain an option.”. It doesn’t have to engage in yield curve control because the market is already behaving like it is a fact.



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August 20 2020

Commentary by Eoin Treacy

Ballard Power Gets Stock Upgrade as Hydrogen Vehicles Gain Steam

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

Ballard Power, one of Canada’s best-performing stocks this year, just got an analyst upgrade as
governments and vehicle manufacturers around the world push for the development of battery and hydrogen vehicles. BLDP fell as much as 9.5% intraday Thursday in Toronto.

* Stock raised to outperform from sector perform, PT increased to C$20 from C$18 by National Bank of Canada analyst Rupert Merer

* Ballard is in discussions with potential partners in Europe and could form a joint venture with a top-tier supplier; China could have a detailed hydrogen plan come soon, targeting one million hydrogen vehicles by 2030

* Merer sees a number of positive catalysts this year and the stock is still well priced compared with its peers

* Ballard is up more than 110% this year, making it the fourth best performing Canadian stock, vs the S&P/TSX Composite Index’s 2.7% decline

* NOTE: July 29, Fuel-Cell Firm Stages Comeback 20 Years Later With Help of China

Eoin Treacy's view -

I’ve created a reasonably complete list of companies from all over the world focusing on the hydrogen/fuel cell sector in the Chart Library.

Weichai Power has been extremely active in buying up rights to use and commercialise fuel cell technology developed in Europe and North America over the last few decades. The sector has never gotten off the ground because it was not economically feasible and there was not real incentive to try it out. That is now changing.

Some of the factors combining to support the trend include:  



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August 19 2020

Commentary by Eoin Treacy

Email of the day on investing in 5G

good morning Eoin I enjoy every morning your briefing - thanks! could you guide me to an ETF which invests in the most promising companies benefitting from 5 G technology development? thanks, and greetings from Switzerland.

Eoin Treacy's view -

Thank you for this question which may be of interest to subscribers. With an infrastructure build on the scale of what is necessary to get up and running with 5G the first moves were the infrastructure companies. South Korea was first to launch a nationwide network and China followed last year. Europe and the USA are lagging significantly. Latin America and Africa are even farther behind.



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August 18 2020

Commentary by Eoin Treacy

Accelerating AI Adoption in Bio-Pharma through Collaboration

This whitepaper from Insead may be of interest to subscribers. Here is a section:

In these trying times, we have seen many examples of digital technology and innovation flling in the gap. Among these, telemedicine and chatbots have been very helpful for frst-line triage and early-stage diagnosis. China’s AliHealth and JD Health both expanded their telemedicine services for distant consultation and preliminary diagnostics with physicians to prevent the spread of the virus. They also launched diferent versions of their chatbots (a basic form of AI) to disseminate COVID-19 related medical information, health recommendations as well as Q&As.

In the US, the CDC used Microsoft’s healthcare chatbot service to create a coronavirus symptom checker and Whatsapp (owned by Facebook) launched the WHO Health Alert to share critical information to millions of users worldwide. In India, Facebook also used its helpdesk bot to share news and answer user questions relating to the pandemic.

Closer to home, it was encouraging to see smaller European startups launch similar initiatives, such as the French startup Clevy which is among Early Metrics’ highly rated companies and has created Covid-bot.fr.

These speedy developments in response to the pandemic were a testament to the real value brought by these technologies and to the reactivity of young innovative companies. We hope they will inspire future considerations for public healthcare systems to welcome innovation from both tech giants and emerging innovators.

Eoin Treacy's view -

Crises force changes in behaviour. I know our family had never used telemedicine before the crisis. However, it was certainly helpful on a least two occasions over the seven months when we had questions that would normally have required a doctor’s visit. The fact the service is included in the price of our health insurance was also a bonus.



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August 18 2020

Commentary by Eoin Treacy

GM Shares Soar on Electric-Vehicle Spin-Off Speculation

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

GM does plan to sell more than 20 EV models around 2023. That business could be spun off for $20 billion and eventually be worth as much as $100 billion, Deutsche Bank’s Rosner said. GM’s core business selling gasoline-powered sport utility vehicles and pickup trucks is generating cash but viewed as being in long-term decline and is less exciting to investors than the company’s electric-car plans, he wrote.

Despite the share gains this week, the Detroit-based automaker’s stock is down about 17% so far this year while all-electric rival Tesla Inc.’s value is eight times that of GM. By spinning off its EV business, GM could get the kind of momentum enjoyed by Tesla and a handful of startups that have lured capital despite their having no vehicles on the market.

Battery-powered cars have caught the imagination of investors in recent weeks, sending shares of Tesla to successive record levels and boosting the value of electric startups such as Nikola Inc., Fisker Inc. and Lordstown Motors Corp., all of which took a fast track chasing public listings after being acquired by special purpose acquisition companies.

Eoin Treacy's view -

The entire automotive supply chain has concluded there is no future in internal combustion engines. Not only are battery costs coming down and efficiency improving but the regulatory environment continues to squeeze traditional manufacturers.



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August 17 2020

Commentary by Eoin Treacy

Black silicon photodetector hits record-breaking 132% efficiency

This article by Michael Irving for NewAtlas may be of interest to subscribers.

Together, these advances made for a device with 130-percent external quantum efficiency. The team even had these results independently verified by the German National Metrology Institute, Physikalisch-Technische Bundesanstalt (PTB).

The researchers say that this record efficiency could improve the performance of basically any photodetector, including solar cells and other light sensors, and that the new detectors are already being manufactured for commercial use.

Eoin Treacy's view -

The efficiency of solar cells has been improving steadily for the last forty years. The capital poured into the renewables sector following the collapse in interest rates a decade ago, has been the catalyst to greatly enhance the speed with which efficiency gains are being delivered.



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August 14 2020

Commentary by Eoin Treacy

BioMarin Transformative Gene Therapy Turns Goldman More Bullish

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

A deeper dive into the cost-effectiveness of BioMarin’s Roctavian, which is on track to become the first
approved gene therapy for Hemophilia A, and physician awareness left Goldman’s Salveen Richter more bullish on the prospects for the “transformative” therapy. * #

Boosts already Street-high PT to $218 from $172, as research suggests a two- to three-times larger prevalence pool than previously estimated

** Sees average gross price of $2m-$3m as cost-effective compared to prophylactic factor therapy or Roche’s Hemlibra

* “Majority of physicians plan to prescribe the drug upon approval to ~30% of their eligible patients and see utility across all severity levels”

* Expects rapid adoption with an industry specialist highlighting that recent announcements by various payors for coverage of gene therapies bodes well for Roctavian

* A decision from FDA is due Aug. 21 * BMRN shares are up 63% in the past year compared to a 30% gain for the Nasdaq Biotech Index

* NOTE: Aug. 4, BioMarin Second Quarter Loss Per Share Wider Than Estimates
 

Eoin Treacy's view -

The big difference between genetic solutions and pharmaceuticals is they provide solutions rather than treatments. Healthcare cashflows have been utility-like because of the predictable progression of a disease and the requirement for long-term chronic treatment. That ensured that every new patient represented a reasonably predictable set of cashflows with a well-defined time horizon.



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August 14 2020

Commentary by Eoin Treacy

Platinum Quarterly Presentation Q1 2020

This report carries a great deal of relevant information for the platinum market. Here is a section:

Automotive demand down only 17% (-132 koz) YoY despite a 24% fall in Q1 light global vehicle sales

Tightening global emissions standards, driving higher pgm loadings, partially counters lower auto sales/production

W. Europe diesel share decline slowed on increased diesel sales

Diesel vehicles still key for automakers to avoid or reduce heavy CO2 fines

German diesel car market share continued to recover (Q1’20 average 35%, up 1.3% over 2019 average)

Eoin Treacy's view -

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

It’s easy to think that diesel is a dead fuel but sales still continue. The damage to consumer confidence may, however, be impossible to overcome. That is creating a new market for transportation alternatives. 



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August 12 2020

Commentary by Eoin Treacy

Email of the day - on returning customers

Dear Eoin and team, I would like to thank you very much for the big difference you have made to my confidence in advising my clients, since I re-joined the service. If only I could find a way of explaining the benefit to my professional contacts! All the very best

Eoin Treacy's view -

Thank you for your kind words and welcome back. The one thing I would highlight for prospective subscribers is that in the evolving global tapestry of events, some big picture perspective is likely to be beneficial.



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August 11 2020

Commentary by Eoin Treacy

Moderna Wants to Transform the Body Into a Vaccine-Making Machine

This article by Robert Langreth and Naomi Kresge for Bloomberg may be of interest to subscribers. Here is a section:

The excitement around mRNA goes beyond the pandemic. Proponents hope it can become a wide-ranging platform that will lead to vaccines for other difficult-to-treat infections, as well as customized cancer shots and even heart disease treatments. “It’s a big moment for mRNA therapeutics in general, because now it’s a household word and everybody knows about it,” says Derrick Rossi, a stem cell biologist who was a co-founder of Moderna in 2010 but is no longer affiliated with the company. “For Moderna, it’s the first time on the global stage.”

Interest in using genetic material to turn the body’s cells into vaccine factories dates to a series of experiments in the early 1990s. In 1993 researchers at Merck & Co. injected lab mice with loops of DNA that contained instructions for influenza proteins. To the surprise of the scientists, the mice generated an immune response that protected against the flu. The concept, so elegant it seemed almost too simple to be true, produced a surge of excitement among vaccine experts.

But though DNA vaccines worked in animals, they weren’t successful in initial human trials. It was difficult to get sufficient amounts of DNA into human cells, and when scientists overcame that, the vaccines turned out to be less potent than needed. (They were tried on the most challenging diseases, including HIV.) Over the years research into DNA vaccines has continued, but none has made it to market for humans. Inovio Pharmaceuticals Inc., a dark horse in the Covid-19 vaccine race, is testing a DNA-based approach. It uses a hand-held device to zap the skin with electric pulses after an injection, opening up holes in cell membranes to allow in more DNA.

A few lonely scientists pursued mRNA therapies for years. In 2005, University of Pennsylvania researchers Katalin Kariko and Drew Weissman found that a slight modification to the mRNA molecule could reduce the immune reaction, making it much more amenable for use in drugs or vaccines. (Since then, scientists have found ways to reduce mRNA’s other vulnerability inside the body, protecting it from enzymes by encapsulating it in lipid nanoparticles.)

Eoin Treacy's view -

The world is betting big on new technology providing solutions to an intractable problem in record time. So far, results are positive and there is reason to be hopeful a treatment effective enough to improve consumer confidence will be available in the near-term.



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August 10 2020

Commentary by Eoin Treacy

Time for Thinking

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

The first is that many investors have underestimated the impact of low rates on valuations.  In short, what should the stock market yield?  Not its dividend yield, but its earnings yield: the ratio of earnings to price (that is, p/e inverted).  Simplistically, when Treasurys yield less than 1% and you add in the traditional equity premium, perhaps the earnings yield should be 4%.  That yield of 4/100 suggests a p/e ratio (the inverse) of 100/4, or 25.  Thus the S&P 500 shouldn’t trade at its traditional 16 times earnings, but roughly 50% higher.

Even that, it’s said, understates the case, because it ignores the fact that companies’ earnings grow, while bond interest doesn’t.  Thus the demanded return on stocks shouldn’t be (bond yield + equity premium) as suggested above, but rather (bond yield + equity premium - growth).  If the earnings on the S&P 500 will grow to eternity at 2% per year, for example, the right earnings yield isn’t 4%, but 2% (for a p/e ratio of 50).  And, mathematically, for a company whose growth rate exceeds the sum of the bond yield and the equity premium, the right p/e ratio is infinity.  On that basis, stocks may have a long way to go.

Eoin Treacy's view -

The removal of the discount rate, as a basis for valuing cashflows has an outsized effect on all income producing assets. That implies the persistent threat of deflation which allowed long-bond yields to compress to historically low levels globally will persist indefinitely.



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August 10 2020

Commentary by Eoin Treacy

Navy's solar power satellite hardware to be tested in orbit

This article by Sandra Erwin for Spacenews.com may be of interest to subscribers. Here is a section:

The 12-inch square tile module will test whether power can be harvested from its solar panel and transform the energy to a radio frequency microwave. The experiment has been in the works for more than a decade.

The module converts sunlight for microwave power transmission. Depuma said engineers decided to not use optical power transmission because a lot of energy would be lost through clouds and atmosphere.

The Naval Research Laboratory said the results of the experiment could drive the design of a dedicated spacecraft to test the transmission of energy back to Earth. The Pentagon is interested in this technology to provide energy to remote installations like forward operating bases and disaster response areas.

Researchers believe that a space solar system traveling above the atmosphere would catch far more energy than it would be possible on the ground due to the abundant and unimpeded sunlight in space.

One of the concerns is the thermal performance of the hardware. “It’s kind of a tricky problem to have something that’s in direct sunlight all the time and maintain the temperature of the electronics,” said Jaffe.

Solar power satellites could provide energy anywhere in the world, he said. “So a really important component of these kind of satellites would be a device that can convert the sunlight into microwaves or some other form of electromagnetic energy that’s suitable for sending to Earth. Now is the time to test it in space and see how it performs.”

Eoin Treacy's view -

Development of SpaceX’s BFR is progressing much quicker than most people gave the company credit for. The delivery of the vehicle to active commercial service will greatly reduce the cost of lifting major payloads to space.



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August 07 2020

Commentary by Eoin Treacy

Biogen Soars After Alzheimer's Drug Gets Priority FDA Review

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

Aducanumab, a so-called monoclonal antibody designed to target amyloid plaque in the brain, has been one of the most closely watched drugs in development for years. Biogen at one point halted research on it after getting disappointing results, only to revive the drug in a reversal that surprised scientists and investors and raised the hopes of patients and families.

The drug and the stop-start study process have been viewed skeptically by some. Data presented in December at the Clinical Trials on Alzheimer’s Disease conference in San Diego showed conflicting findings, with one trial suggesting the drug could be the first-ever to slow the progression of Alzheimer’s. But a second, essentially identical trial showed no effect on the disease at all.

Alzheimer’s is a progressive disease that most commonly arises in people over age 60. It robs patients of their memories and their minds, causing impaired speech and thought. More than 5 million Americans are living with the disease, according to the most recent data from the U.S. Centers for Disease Control and Prevention, and more than 14 million are expected to suffer from it by 2060.

With no medications currently available to slow the progression of the disease, demand for a therapy like aducanumab would be substantial. The next focus for investors will be a meeting of outside
advisers to review the results generated by Biogen. Stifel analyst Paul Matteis said the briefing documents released prior to the panel are expected to be “a bigger determinant than usual
in dictating how panelists eventually vote” and called the panel the highlight of 2020 and 2021 for health-care investors.

Eoin Treacy's view -

Completely unmet medical need represents growth potential that does not turn up all that often. Alzheimer’s is only going to become a more pressing burden on healthcare systems as the baby boomer generation continues to age and live longer than any generation that has come before. The first product to market will have access to virgin growth potential which is why there is such clear focus on the efficacy of Biogen/Eisai’s potential treatment.



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August 05 2020

Commentary by Eoin Treacy

Lightweight-banking via messaging services are getting Gen Z buzz

This article by Mike Butcher for techcrunch.com may be of interest to subscribers. Here is a section:

They are not alone. Other players in the “banking services via a messaging” space include Kotak Mahindra Bank in India (on WhatsApp) and ICICI in WhatsApp (India). However, neither of these can do actual provisioning of the card and addition to Apple Pay and Google Pay in the messengers, which is what Zelf can do.

With Zelf, users get an account and a virtual card via their Facebook Messenger, WhatsApp, Viber and Telegram accounts. For offline and online purchases Zelf supports Apple Pay and Google Pay. This lightweight onboarding means card issuance takes less than 30 seconds via a Passport or national ID. Users then get a virtual Mastercard debit card available in their favorite messenger app. Operating inside the EU’s “Single Euro Payments Area” means it’s pretty easy for the startup to scale its offering to other countries.

Eoin Treacy's view -

One of the biggest advantages emerging markets have is they are afforded the opportunity to skip whole stages of development. This is because technology is immediately available to them without having to develop it themselves. China has been able to progress meaningfully because of its adoption of technological knowhow and the introduction of India’s 4G network offers India the same opportunity to evolve the entertainment, communication, banking and ecommerce sectors.



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August 03 2020

Commentary by Eoin Treacy

The Baupost Group Letter

Thanks to a subscriber for this letter by Seth Klarman and team. Here is a section focusing on appetite for risk:

Fed policy has been magnificently successful in achieving its objectives not only of lifting securities prices but also of altering investor behavior. The Fed wanted to influence buyers of securities to be bolder in their pursuit of return. The head of a major pension fund recently authored a piece describing how the fund had responded to lofty markets and low yields on safe debt instruments. Their reaction was not to lower the fund’s currently aggressive 7% risk-adjusted return objective to a more realistic threshold, but instead to direct more assets into “lower volatility” private investments while leveraging the portfolio. Private investments, of course, have the same underlying risk and inherent volatility as public investments – though because they are not publicly traded, their intermittent and privately determined appraisals may make them appear to be less volatile. And as for the choice to leverage up, we can only note that leverage is a double-edged sword that enhances returns in good times while sinking them in down markets. If markets falter, this fund will have not solved its problems but rather have multiplied them.  

Eoin Treacy's view -

Pension funds, life insurance companies and other firms with predictable future outlays are in a difficult position. If they do not take on additional risk, they will certainly not be able to meet their obligations. Alternatively, if they do take on additional risks, they might be able to reach their goals. However, that chance at success comes with the implied understanding that the alternative is financial oblivion.



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August 03 2020

Commentary by Eoin Treacy

NZ to trial world-first commercial long range, wireless power transmission

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

Emrod currently has a working prototype of its device, but will build another for Powerco, with plans to deliver by October, then spend several months in lab testing before moving to a field trial. The prototype device will be capable of delivering "only a few kilowatts" of power, but can easily be scaled up. "We can use the exact same technology to transmit 100 times more power over much longer distances," said Emrod founder and serial entrepreneur Greg Kushnir. "Wireless systems using Emrod technology can transmit any amount of power current wired solutions transmit."

The system uses a transmitting antenna, a series of relays and a receiving rectenna (a rectifying antenna capable of converting microwave energy into electricity). Each of these components appear in these images to simply look like big ol' squares on poles. Its beams use the non-ionizing Industrial, Scientific and Medical band of the radio spectrum, including frequencies commonly used in Wi-Fi and Bluetooth.

Unlike Tesla's globally-accessible free power dream, the power here is beamed directly between specific points, with no radiation around the beam, and a "low power laser safety curtain" immediately shuts down power transmission before any object, like a bird, drone, power thief or helicopter, can touch the main beam. There will be no difficulties this time working out where to place the meter.

Eoin Treacy's view -

The potential for wireless power transmission is a significant potential gamechanger for the energy sector because it represents an elegant solution to the question of how to connect very remote generating locations to points of consumption. While still in its infancy this is exactly the kind of technology that would benefit from venture funding and could succeed in boosting productivity.



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July 31 2020

Commentary by Eoin Treacy

'An absolute necessity' Why this expert says China desperately needs a digital currency

This article by Veta Chan for Fortune.com may be of interest to subscribers. Here is a section:

How will data be used by central banks and how will the central bank reassure people about the privacy of their data?

The data you are going to collect, there are two sides to it. On one side, the data that they're going to collect, given they are going to be able to engage the complete economic activity of a country in realtime, that data will be recorded on a blockchain-type network, distributed ledger, we don't know exactly. So the government will have access to all of that. On the [other] hand, it will enable the central bank to do their job more effectively. Because rather than having a lag in economic data, they're monitoring all the spending, the transactions, money supply, inflation implications, all in realtime... Tracking where people go in the world, because CBDC will be available to Chinese as they do business in other countries. It's almost a sort of a way to track an individual. So there are big alarming questions that need to be properly considered when it comes to privacy and anonymity.

The technology is there to enforce anonymity, but it's a question of are they going to implement it? Is that something that they're going to build into their currency? Time will only tell if different central banks come up with their versions of digital currency, as they say there is no one-size-fits-all, they're all going to be different and likely to reflect the values and culture of their citizens. Are we just going to accept that all governments get to have this data like we've kind of accepted with tech giants like Facebook? No one has really done anything about it.

Eoin Treacy's view -

A classic blockchain is a public ledger. There is a clear record of all transactions, but not who participated in them.

It would be comparatively easy for a state to create a digital currency that attaches identity to the ledger.

That will allow governments to track every transaction in even greater detail than they do already.



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July 30 2020

Commentary by Eoin Treacy

Confessions of a California Covid Nurse

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

Unfortunately, the vast majority of the tests were done at the big new Optum site, or inside local hospitals, and processed by Quest Diagnostics and LabCorp. Five months into the pandemic, the two giant private testing companies were taking more than a week to send back results. “If I look at Optum I always ask, ‘What am I going to do with this, because the result is eight to 10 days old?’” said Erica. “Your ability to contain is over.” By the time she got a hold of people to inform them that they had Covid-19, they no longer had Covid-19. There was no point in isolating them.

Eoin Treacy's view -

I think the rest of the world must be bemused at the resistance many Americans have to cooperating with public health officials, wearing masks and social distancing. As far as I can see there are a couple of reasons that simply are not getting discussed.

When I was tested in early May it took 11 days to get the results. That’s frankly ridiculous and timelines have not improved. I was feeling flu symptoms for about 24 hours and I quarantined myself away from my family for two days but it was a 24-hour bug so maintaining distance when you feel fine is difficult. In the end my results were negative. However, if I was positive, I would probably have passed it one to multiple people before I got my results. That pretty much means that testing is futile and everyone who has been tested knows it.



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July 29 2020

Commentary by Eoin Treacy

Zuckerberg Goes Off-Script; Blasts Apple and Google in Testimony

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

During today’s testimony before a Congressional antitrust panel, Mark Zuckerberg went off-script a little bit -- at least the script we expected -- pointing out how Facebook Inc. lags behind a number of competitors, including Alphabet Inc., Amazon.com Inc. and Apple Inc.

Zuckerberg isn’t hesitating to use some sharp elbows, pointing out that Amazon is the fastest-growing advertising platform and Google is the biggest.

“In many areas, we are behind our competitors,” Zuckerberg said. “The most popular messaging service in the U.S. is iMessage. The fastest growing app is TikTok. The most popular app for video is YouTube. The fastest growing ads platform is Amazon. The largest ads platform is Google. And for every dollar spent on advertising in the U.S., less than ten cents is spent with us.”

This is why the executives likely preferred to appear at once -- it allows them to spread the burden. The antitrust case against Google and Facebook is far stronger than the one against Apple, for instance.

Eoin Treacy's view -

The five largest tech companies in the USA have dominant positions in the social/ecommerce/cloud computing sectors. They may compete with one another but the barriers to entry are so large that it is largely beyond the scope for smaller companies to compete. In fact the only way for established businesses to reach consumers in any other these sectors is to use the products and services provided by the big five.



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July 28 2020

Commentary by Eoin Treacy

Once-Unpopular Carbon Credits Emerge as One of the World's Best Investments

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

“It’s attracting hedge-fund speculators,” said Norbert Rücker, head of economics at Swiss private bank Julius Baer. “With this move, carbon has really come back to life this year and it’s attracted a lot of interest—we have clients reaching out to us asking about it.”

The resurgence in carbon-credit prices began in mid-2017 when EU policy makers agreed to sharply reduce the number of available credits. That has pushed up prices and allowed the carbon market to help fulfill its purpose of punishing excess polluters. With the market set up to constrict credit supply, prices should rise further still, analysts say.

Eoin Treacy's view -

The success of Tesla, in gaming the carbon credit system to its advantage, has woken the rest of the globe up to the possibilities government sponsored markets hold.



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July 27 2020

Commentary by Eoin Treacy

Everything You Need to Know About Ethereum 2.0

This article by Christine Kim for CoinDesk may be of interest to subscribers. Here is a section:

The culmination of over five years of research and development, Ethereum 2.0 is a highly ambitious upgrade.

Never before has the cryptocurrency industry seen a blockchain of the same size and value as Ethereum attempt to transition all users, as well as assets, to an entirely new decentralized network while keeping all operations on the old network active and running. 

It will likely take many years for the Ethereum 2.0 upgrade – in all its complexity – to be complete. However, developer commentary featured in this report suggests the biggest hurdle (and perhaps most important milestone) in the Ethereum 2.0 roadmap is its initial launch.

Eoin Treacy's view -

The breakout to new recovery highs by Ethereum last week and bitcoin this week suggest a return to demand dominance following a multi-month hiatus. The coincident surge in precious metals suggests this is more about the demand for a hedge against the debasement of fiat currencies than the range of impending innovations in the cryptocurrency sector.



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July 24 2020

Commentary by Eoin Treacy

Email of the day - on cryptocurrencies

Please refresh my memory about your stance on Bitcoin & Crypto Currencies. Regarding Bitcoin, one of the best hedge fund managers, Mark Yusko loves it an suggests it likely reaches $100K within the next 12-18 months, and much higher going forward. AVI GILBURT, the Elliott Waver says if you want to be safe, wait until it breaks out above 10,000. Warm Regards

Eoin Treacy's view -

Thank you for this question which may be of interest to subscribers. Bitcoin’s halvening, when the reward for mining a new coin halves about once every four years, passed off without a hitch in May. In the past, these events have resulted in investors refocusing on the limited supply argument and prices have rallied meaningfully both ahead and after the halvening.



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July 23 2020

Commentary by Eoin Treacy

Tech's Perfect Profit Record Fails to Impress Spoiled Bulls

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

For a view of just how high the bar is set for technology stocks, consider this: Every single one of their earnings reports this season has topped forecasts. Yet the sector has recently gone from being 2020’s best performer to one of its biggest laggards.

Not that beloved tech companies have crumbled. Since the reporting season began July 14, the S&P 500 technology sector is up 0.7% while the Nasdaq 100 is virtually unchanged. But both have trailed the broader S&P 500 over the period, and tech’s performance is the second-worst of S&P’s 11 main sector groups.

That’s a change from earlier in 2020 -- a year in which megacaps and tech firms have been viewed as coronavirus havens because of their strong balance sheets, healthy profit pictures and the fact that some have actually benefited from the stay-at-home economy. Still, with the tech-heavy Nasdaq 100 up 22% this year, investors want proof that those stocks are worth the high prices they’re fetching.

“On the positive side, there are so many reasons why tech should be okay,” said Gene Goldman, chief investment officer at Cetera Financial Group. “But on the negative side, it’s just valuations and earnings. It’s a high bar that companies are going to have to beat.”

Eoin Treacy's view -

Stay-At-Home stocks have been the clear winners from the lockdowns. The concentrated number of winners coupled with a surge in liquidity and punters eager to participate resulted massive outperformance over the last few months. 



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July 23 2020

Commentary by Eoin Treacy

Tesla's $200 Billion Question Remains Unanswered

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

And yet the earnings call — where Musk has in the past ranted about “fascist” virus lockdowns and attacked analysts for asking “boring, bonehead” questions — was a bit of a snooze. It even featured a long discussion about insurance and Musk’s appreciation for the actuarial profession.

In the current economic environment, such steadiness is an achievement. Most car companies will probably suffer huge losses because of the recent closures of factories and showrooms, even if things won’t be quite as bad as feared initially. By contrast, Tesla reported $104 million of net income in the April to June period, bringing its total profit over the past four quarters to $368 million.

Still, these are modest amounts for a company that’s valued at an inexplicable 800 times trailing earnings, giving it a $295 billion market capitalization. 

The profits are also more than accounted for by $1 billion of regulatory credits that Tesla sold to other carmakers during the 12 months to June, including $428 million in the latest quarter. It’s only able to earn this income because rivals haven’t gotten their act together yet on building enough electric vehicles and have to buy credits from Musk’s company to satisfy emissions regulators. Tesla acknowledges this good fortune won’t last forever.

Eoin Treacy's view -

Without clear support from green regulations the company would be incapable of generating a profit. That effectively means Tesla’s competitors are being forced to fund its expansion. It’s an odd situation which runs contrary to the basic conditions of capitalism, but it is the reality provided by the market. It’s part of Elon Musk’s genius that he realised that fact before everyone else.



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July 22 2020

Commentary by Eoin Treacy

The Big Cycle of the United States and the Dollar, Part 2

This latest chapter of Ray Dalio’s book includes a number of interesting titbits to chew over. Here is a section:

The US dollar accounts for over 50% of reserves held and has unwaveringly remained the primary reserve currency since 1945, especially after it replaced gold as the most-held reserve asset after there was a move to a fiat monetary system.  European currencies have remained steady at 20-25% since the late 1970s, the yen and sterling are around 5%, and the Chinese RMB is only 2%, which is far below its share of world trade and world economic size, for reasons we will delve into in the Chinese section of this book.  As has been the case with the Dutch guilder and the British pound, the status of the US dollar has significantly lagged and is significantly greater than other measures of its power.

That means that if the US dollar were to lose its reserve status and significantly depreciate in value it would have a devastating effect on the finances of those countries holding those reserves as well as private-sector holders of dollar-debt assets.  Who would be the winners?  Those with dollar-debt liabilities and those with non-dollar assets would be the big winners.  In the concluding chapter, “The Future,” we will explore what such a shift might look like. 

Eoin Treacy's view -

The massive increase in the supply of currency since the end of the quantitative tightening regime last year is a headwind for the US Dollar. The fact the monetary and fiscal assistance programs deployed by the USA are much larger than in other countries is certainly a near-term headwind for the Dollar but the big question is whether this is a secular change?



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July 21 2020

Commentary by Eoin Treacy

Hong Kong Bourse Soars on Ant's Dual Listing With Shanghai

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

Ant Group is seeking a valuation of more than $200 billion as it goes public, and could raise more than Saudi Aramco’s record $29 billion if market conditions are favorable, according to a person familiar with the matter. The Hong Kong portion could raise about $10 billion, according to people familiar with the matter, which would make it the sixth-largest initial public offering in the city.

The listing is a boost to exchanges in Hong Kong and Shanghai, while dealing a blow to U.S. bourses as more Chinese firms look to raise money closer to home amid rising U.S.-China tensions. Hong Kong-listed Semiconductor Manufacturing International Corp. raised $7.5 billion from a Shanghai share sale in July, while Chinese internet firms JD.com Inc. and NetEase Inc. added secondary listings in Hong Kong this year.

Ant’s IPO is also a major lift for the city of Hong Kong, which is facing mounting challenges from a sharp recession, political turmoil from year-long protests and a new national security law that has prompted concerns about an exodus from the financial hub.

“Ant Group’s listing in Hong Kong will be a vote of confidence in the city,” according to Bruce Pang, head of macro research at China Renaissance Securities Hong Kong.

Eoin Treacy's view -

Western media has been filled with coverage of the negative ramifications of the Hong Kong security law and with good reason. The reality on the ground is that personal freedoms are being curtailed and that represents a significant decision point for many companies. If China’s approach to gaining tighter control of Hong Kong might be considered in terms of carrot and stick leverage, then the security law is the stick and listing of some of the country’s most prized companies on the domestic Hong Kong market is the carrot.



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July 20 2020

Commentary by Eoin Treacy

Out to pasture!

This is potentially Edward Ballsdon’s final post for his Grey Fire Horse blog and may be of interest to subscribers. Here is a section:

Recently there has been discussion about yield curve control (YCC), and whether the FED will introduce a new policy on managing interest rates. Do not be fooled - this is a rather large red herring, as the debt is now too large in the US (as it is in most major economies) to raise rates without the increased interest cost having a debilitating effect on annual government budget figures.

There is no longer $ 1trn of outstanding US federal Bills - in June the outstanding amount surpassed $ 5trn. If rates rise from 0.2% to 2%, the ANNUAL interest cost just on that segment of the outstanding $19trn debt would rise from ~$ 8.5bn to ~$ 102bn. Naturally you would also need to also factor in the impact of higher interest rate costs on leveraged households and corporates.

This is the red herring - the size of the debt will force monetary policy. To think that the central bank can raise rates means ignoring the consequence from the debt stock. And this is the root of my lower for longer view, which is obviously influenced from years of studying Japan, and which is now almost completely priced in to rates markets. Remember that the YCC in Japan led to a severe reduction of the BOJ buying of JGBs - it just did not have to.

Eoin Treacy's view -

The Japanification of the developed world represents a massive challenge for investors in search of yield. 90% of all sovereign bonds have yields below 1% and the total of bonds with negative yields is back at $14 trillion and climbing.



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July 17 2020

Commentary by Eoin Treacy

Chapter 4: The Big Cycle of the United States and the Dollar, Part 1

This is the most recent instalment of Ray Dalio’s book on big cycles. Here is a section:

Like Germany, Japan was also hit exceptionally hard by the depression and became more autocratic in response to it.  Japan was especially vulnerable to the depression because, as an island nation without adequate natural resources, it relied on exports for income to import necessities.  When its exports fell by around 50% between 1929 and 1931, it was economically devastated.  In 1931, the depression in Japan was so severe that the country went broke—i.e., it was forced to draw down its gold reserves, abandon the gold standard, and float its currency, which depreciated it so greatly that Japan ran out of buying power.  These terrible conditions and large wealth gaps led to fighting between the left and the right.  In 1932 that led to a massive upsurge in right-wing nationalism and militarism to forcefully restore order and bring back economic stability.  To that end, Japan’s military took control and pursued military options to get Japan the resources it needed by taking them away from other countries.  Japan invaded Manchuria in 1931 and later expanded through China and Asia to obtain natural resources (e.g., oil, iron, coal, and rubber) and human resources (i.e., slave labor).  As in the German case, it could be argued that this path of military aggression to get needed resources was the best path for the Japanese because relying on classic trading and economic practices wouldn’t have gotten them what they needed.   

Shifting to more autocratic, populist, and nationalist leaders and policies during times of extreme economic stress is typical, as people want strong leadership to bring order to the chaos and to deal strongly with the outside enemy.  In 1934, there was severe famine in parts of Japan, causing even more political turbulence and reinforcing the right-wing, militaristic, nationalistic, and expansionistic movement.  

In the years that followed, this movement in Japan, like that in Germany, became increasingly strong with its top-down fascist command economy, building a military-industrial complex with the military mobilized to protect its existing bases in East Asia and northern China and its expansion into other territories.  As was also the case in Germany, during this time, while most Japanese companies remained outside government ownership, their production was controlled by the government.

Eoin Treacy's view -

It makes sense that no one would enter a war under the assumption they are going to lose more than they gain. Therefore, it is reasonable to conclude the increasing competition between China and the USA will not result in a war until one side clearly believes they can win. Nuclear weapons obviously complicate the calculus.



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July 17 2020

Commentary by Eoin Treacy

Asymptomatic Spread Has Become Oddly Controversial

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

“What we found,” she says, “was actually similar to what WHO said.” Asymptomatic people can transmit the disease to others — the risk is not zero. The so-called attack rate, which measures the fraction of contacts infected was, in high-risk settings, less than 1% for asymptomatic cases versus 75% for those showing symptoms. Among members of the same household, the attack rate was 15% for symptomatic cases and 2% for asymptomatic ones. She and colleagues published their conclusions as a response to the Annals of Internal Medicine article.

“As a clinician, this really bothers me because we really have to get this right,” she says.  That means getting a better handle on the range of symptoms — including the inability to smell, which happens in as many as 60% of mild cases. It means making sure people recognize these symptoms, stay home, and ideally, allow contact tracers to stop chains of transmission.

A paper published last week in the Proceedings of the National Academy of Sciences conclude that isolating sick people isn’t enough, and that’s true. But tracing their contacts and isolating them seems a better option than giving up in defeat.

Many countries from Japan to Ethiopia have been successfully stopping chains of transmission this way. Ultimately, science can’t tell people what to do. There should be a political side to deciding how to balance risk of death and quality of life, health hardship and economic hardship. Those are value judgements. But politicizing the science ensures the public will suffer the worst of both.

Eoin Treacy's view -

How COVID-19 is contracted and containing the spread are two separate but related topics. I go to the post office every day. I wear a mask and wash my hands with sanitiser as soon as I get back to the car. The people working in the post office wear masks and gloves and none of them have gotten sick. We are also not seeing large numbers of grocer store workers collapsing from infections. Therefore, it is reasonable to assume that even for people who are in high risk professions, who are indoors all day and constantly deal with the public, the spread has been contained.



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July 16 2020

Commentary by Eoin Treacy

U.K. Says Russians Seek to Steal Virus Vaccine Research

This article by Kitty Donaldson, Ryan Gallagher and Chris Strohm for Bloomberg may be of interest to subscribers. Here is a section:

In a dramatic statement on Thursday, Britain’s National Cyber Security Centre (NCSC) said vaccine and therapeutic sectors in multiple countries have been targeted by a group known as APT29, which it said is “almost certainly” part of Russian state intelligence. Security agencies in the U.S. and Canada later issued their own statements backing up the findings.

“It is completely unacceptable that the Russian intelligence services are targeting those working to combat the coronavirus pandemic,” British Foreign Secretary Dominic Raab said. “While others pursue their selfish interests with reckless behavior, the U.K. and its allies are getting on with the hard work of finding a vaccine and protecting global health.”

The intelligence bombshell came at a delicate time in geopolitics with a combative U.S. election looming in November and the pandemic plunging the world economy into recession. Coronavirus has launched a global race for a vaccine, in which researchers in the U.K. have made progress recently.

Eoin Treacy's view -

The geopolitical dividend of being the country that develops a viable solution for the coronavirus first is obvious. That is regardless of the fact that most countries and companies have clearly stated they are willing to do everything possible to made a vaccine widely available.



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July 14 2020

Commentary by Eoin Treacy

Global Macro Outlook: Virus curve flattening, markets stabilizing, slow recovery

Thanks to a subscriber for this report from Deutsch Bank by Torsten Slok. It is loaded with thought provoking charts which may be of interest.

Eoin Treacy's view -

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

I found the chart comparing the Swedish and US COVID-19 infection rate to be particularly interesting. It suggests that anything less than total adherence to social distancing, effective testing and contact tracing is ineffectual. That’s a challenge because while some Asian countries have been able to implement these types of protocols swiftly, not least because of their prior experience with SARS, it seems beyond the ability of most countries to do. With cases in Hong Kong and Australia rising it is looking increasingly likely this is going to be a long hard slog until a vaccine is widely available.



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July 14 2020

Commentary by Eoin Treacy

Ten Thousand Day Traders an Hour Are Buying Tesla Shares

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

The frenzy in interest means that as of the end of Monday’s trading session, there are now roughly 457,000 users on the Robinhood app that hold shares of the company in some form. That makes it the 10th-most popular stock on the platform, ahead of even Amazon.com Inc., which is held by 358,000 users.

It isn’t at all clear that day traders are the main driver for the nosebleed rally in Tesla shares over the past few weeks. Indeed, there are myriad other possibilities, from the potential reveal of a new battery technology, to short covering, to conjecture over the possibility for the stock’s addition to the S&P 500 Index.

Eoin Treacy's view -

The rise of the day trader is another late cycle signal that we are now in the speculative excess phase of the bull market. When regular people make more money from trading than from their regular jobs it is an anomaly that does not last indefinitely.



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July 13 2020

Commentary by Eoin Treacy

Party Like It's 2020, Not 1999

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

Eoin Treacy's view -

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

Rather than compare the pace of the current advance with what we saw in 1999, I think it is more appropriate to highlight the COVID-19 fear mongering to what went on ahead of Y2K. Back in 1999 there was palpable fear all computers, everywhere, would stop working on January 1st 2000. That catalysed spending decisions in corporations globally to frontload technology upgrade decisions into 1999. Y2K effectively pulled forward sales from 2000. 2001 and 2002 and tech sales looked like they would go on forever.



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July 13 2020

Commentary by Eoin Treacy

The Thucydides Trap and the Rise and Fall of Great Powers

Thanks to a subscriber for this report from Geopolitical Futures by Jacak Partosiak which may be of interest. Here is a section:

Political scientist Joseph Nye believes that the key trigger in the Thucydides trap is an excessive reaction to the fear of losing one’s power status and prospects for future development. In the case of Washington and Beijing, the relative decline of America’s power and the rapid rise of China’s power destabilizes their relationship and makes it difficult to manage. Gen. Martin Dempsey, then-chairman of the Joint Chiefs of Staff of the U.S. Armed Forces, even admitted in May 2012 that his primary task was to ensure that the United States did not fall into the Thucydides trap.

As a result of the slow but noticeable erosion of the U.S. position in the Western Pacific, it is highly conceivable that a scenario could emerge in which the current hegemon is tempted to conduct a strategic counteroffensive in response to an incident, even a trivial one, in the South China Sea or East China Sea, believing falsely that it has the edge over its inferior rival. This would trigger a modern Thucydides trap.

An in-depth reading of Thucydides’ work reveals a second trap, even more complex and dangerous than the first. Thucydides clearly warned that neither Sparta nor Athens wanted war. But their allies and vassal states managed to convince them that war was inevitable anyway, which meant that both city-states would need to gain a decisive advantage at an early stage of the escalating confrontation. Thus, they decided to enter the war after being urged to do so by their vassal states.

Eoin Treacy's view -

The discussions of the Great Game between China and the USA and many interlinkages across the global economy has been fodder for analysts for much of the last five years. I believe a much greater intensification of the competition between the USA and China is likely. Arguably it is already underway. However, for outright war to take place a number of additional conditions would need to be met.



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July 10 2020

Commentary by Eoin Treacy

Skai revises targets for its liquid-hydrogen, long-range eVTOL

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

One challenge for anyone who wants to work with liquid hydrogen is that you need to keep it extremely cold to keep it in its liquid state. At atmospheric pressure levels, we're talking just 20.28 kelvins above absolute zero (−252.87 °C, or −423.17 °F).

That temperature can rise a little if you're willing to pressurize as well as cool (using a cryogenic system running between 250 and 700 bar of pressure), but Gunter says that's not part of Skai's plans, as "even a moderately pressurized system has significant weight penalties."

So, super-cooling it'll be, and while that entails extra energy losses in the liquefaction stage, the cooling equipment, the conversion back into gas for use in the fuel cell and in boil-off in the tank itself, the net result will still be a much longer range aircraft than anyone dealing with gaseous hydrogen – or certainly lithium batteries – will be able to deliver.

It'll be interesting to see how Skai gets the job done, as really you've got to look to NASA and other space programs to find liquid hydrogen being used in serious volumes.

"The good thing in all of this," says Gunter, "is the notable developments that occur in this space on an increasing basis. The efficiencies we’ve seen in fuel cells and the same the industry is seeing regarding H2 production all point to increasing effectiveness of any form of H2 as a future focused solution."

"There's a number of naysayers about what we're doing with hydrogen," says Hanvey, "but we believe we've gone from the question to the possible, and it's now the probable. We know we can fly with hydrogen, and the question is just how quickly we can get it to the market. And based on our experience, we think we can get there a lot quicker than perhaps the market will give us credit for."

Eoin Treacy's view -

Hydrogen’s energy density is orders of magnitude greater than any other fuel currently used in the global economy. The only reason we don’t already use it is because of the technological difficulty of containing what is a highly combustible material. The whole world knows about the Hindenburg accident 83 year ago, which put an end to transatlantic zeppelin travel. It did to the hydrogen industry what the Fukushima accident did to nuclear.



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July 09 2020

Commentary by Eoin Treacy

Email of the day on China's ascendency:

Your excellent piece today focusing on the China question arrived at the same time as an interesting counter-narrative to the "China-supreme argument". From the Telegraph. If correct, China's is not going to have it all its own way. Here is a section:

"The Huawei saga has exposed just much the country still lags, a surprise to some who have bought into the media narrative of Chinese hi-tech ascendancy. China is not yet capable of making the advanced semiconductor chips used for telecommunications or for FGPA circuits that can be programmed.

Nor has it mastered the electronic design automation needed for circuit design. It lacks the critical raw material needed to sustain its ambitions for global dominance of G5 mobile and the coming “internet of things”.

The Centre for Strategic and International Studies estimates that China has yet to crack the materials science that goes into the latest microscopic chips, despite hurling money at the challenge in successive programmes, the latest one commanding more than $20bn. Its high-end chip industry is ten years behind, but in ten years the infrastructure of global cyber dominance will already be in place.  

In short, the US controls the world’s semiconductor ecosystem, working tightly with Japan, Korea, and Taiwan. All Washington had to do in late May was to flick its fingers and Taiwan’s TCMS instantly cut off chip supplies to Huawei, dooming the company’s G5 global quest at a stroke."

Eoin Treacy's view -

Thank you for your kind words and this article which I’m sure will be of interest to the Collective. The significant investment China is making in its domestic semiconductor industry will need to be long-term and ongoing in nature to achieve the level of sophistication currently available to other countries. By some accounts they have sunk $20 billion into the project so far and it may take recurring investments of at least that much to develop the tools required to achieve technological superiority over coming decades.



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July 08 2020

Commentary by Eoin Treacy

China Has Already Declared Cold War on the U.S

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

Yet the book that has done the most to educate me about how China views America and the world today is, as I said, not a political text, but a work of science fiction. "The Dark Forest" was Liu Cixin’s 2008 sequel to the hugely successful "Three-Body Problem." It would be hard to overstate Liu’s influence in contemporary China: He is revered by the Shenzhen and Hangzhou tech companies, and was officially endorsed as one of the faces of 21st-century Chinese creativity by none other than … Wang Huning.

"The Dark Forest," which continues the story of the invasion of Earth by the ruthless and technologically superior Trisolarans, introduces Liu’s three axioms of “cosmic sociology.”

First, “Survival is the primary need of civilization.” Second, “Civilization continuously grows and expands, but the total matter in the universe remains constant.” Third, “chains of suspicion” and the risk of a “technological explosion” in another civilization mean that in space there can only be the law of the jungle. In the words of the book’s hero, Luo Ji: The universe is a dark forest. Every civilization is an armed hunter stalking through the trees like a ghost … trying to tread without sound … The hunter has to be careful, because everywhere in the forest are stealthy hunters like him. If he finds other life — another hunter, an angel or a demon, a delicate infant or a tottering old man, a fairy or a demigod — there’s only one thing he can do: open fire and eliminate them.

In this forest, hell is other people … any life that exposes its own existence will be swiftly wiped out. Kissinger is often thought of (in my view, wrongly) as the supreme American exponent of Realpolitik. But this is something much harsher than realism. This is intergalactic Darwinism.

Of course, you may say, it’s just sci-fi. Yes, but "The Dark Forest" gives us an insight into something we think too little about: how Xi’s China thinks. It’s not up to us whether or not we have a Cold War with China, if China has already declared Cold War on us. 

Eoin Treacy's view -

The Three Body Problem is an excellent read and The Dark Forest follows on well from where it left off. The third book in the series, Death’s End, was too meandering for me and I did not finish reading it. For a non-Chinese reader, the names can be a bit of an obstacle but the story is compelling.



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