David Fuller and Eoin Treacy's Comment of the Day
Category - Autonomies

    3 Myths That Block Progress For The Poor

    The 2014 report from the Bill and Melinda Gates Foundation may be of interest to subscribers. Here is a section: 

    You might think that such striking progress would be widely celebrated, and that people would rush to figure out what is working so well and do more of it. But they’re not, at least not in proportion to the progress. In fact, I’m struck by how few people think the world is improving, and by how many actually think the opposite—that it is getting worse.

    I believe this is partly because many people are in the grip of several myths—mistaken ideas that defy the facts. The most damaging myths are that the poor will remain poor, that efforts to help them are wasted, and that saving lives will only make things worse.

    I understand why people might hold these negative views. This is what they see in the news. Bad news happens in dramatic events that are easy for reporters to cover: Famine suddenly strikes a country, or a dictator takes over someplace. Good news—at least the kind of good news that I have in mind—happens in slow motion. Countries are getting richer, but it’s hard to capture that on video. Health is improving, but there’s no press conference for children who did not die of malaria.

    The belief that the world is getting worse, that we can’t solve extreme poverty and disease, isn’t just mistaken. It is harmful. It can stall progress. It makes efforts to solve these problems seem pointless. It blinds us to the opportunity we have to create a world where almost everyone has a chance to prosper. 

    If people think the best times are in the past, they can get pessimistic and long for a return to the good old days. If they think the best times are in the future, they see things differently. When science historian James Burke wrote about the Renaissance in The Day the Universe Changed, he pointed to one source for many of the advances that happened in that amazing period: the shift from the belief that everything was decaying and getting worse to the realization that people can create and discover and make things better. We need a similar shift today, if we’re going to take full advantage of the opportunity to improve life for everyone.

     

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    Email of the day on the Global Corporate Autonomy Fund

    Thank you very much for getting involved in the new fund of Autonomies. I have been looking for such an instrument for a long time, and I am delighted you got involved in one. I do not know the person who will run it. But I figure, if he is good enough for you to give your name, he is good enough for me to invest. My question is: Is the timing correct now that many markets are over extended? Should I try to wait for the "famous correction" that many of us have been waiting for in the S&P500. I would be grateful for your views.

    Once again thanks a lot.

     

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    Toyota opens fuel cell patents to drive "hydrogen society"

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

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

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

     

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    The Commodity Manual

    Thanks to a subscriber for this report from Morgan Stanley. Here is a section on the cattle market: 

    Cattle on feed data partially vindicates last week’s stampede. Cattle markets locked limit-down early in the week as participants squared positions ahead of Friday’s Cattle on Feed report in the face of weakening slaughter data and concerns over potentially improving seasonal feeder cattle supply. The feeder cattle contract, which has outperformed live cattle by 1100 basis points YTD, lost 4% in the first three days of the week before recovering slightly on Friday. Live cattle faced a similar, though shallower decline, ending the week down less than 1% WoW. Friday’s data largely justified the bearish move, with Dec 1 feedlot inventories rising 1.4% YoY vs consensus expectations of a 1.2% increase. Some may read this report as more bearish for live cattle than for feeders, as an 11.1% decline in marketings YoY (vs consensus expectations of just a 9.8% decline) indicated continued weakness in slaughter demand. Meanwhile placements down 4% YoY (vs consensus predictions of a 3.4% decline) could be read as a sign that feeder supply remains challenged. However, we see the weakness in placements as signaling poor demand from feedlots rather than supply constraints. Average placement weights set a 5+ year high in Nov, signaling that ranchers are still holding back cattle to raise them to higher weights, artificially inflating prices. With high feeder cattle prices keeping feedlot margins under pressure and slaughter demand prospects weakening, feeder cattle prices may need to weaken further relative to live cattle to increase the flow of feeder cattle onto feed as winter reduces grazing options.

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    Entering The Connected Life Era

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

    With all the innovation happening across the software layers mentioned above, and all the new ways to engage with users across these many new device types in the Connected Life era, the next logical question to ask is “what is this all worth to an ecosystem?” Below we attempt to answer that question from the standpoint of software, services and advertising. Importantly, we do not attempt to quantify the hardware opportunity. What we attempt to quantify is once Apple or Google or Xiaomi has a user in its ecosystem, what kind of ARPU is likely to be generated from all the software, services and advertising opportunities.

    As we mentioned above, given how engagement models are changing rapidly in the Connected Life era, we firmly believe the right approach when assessing the monetization potential per user is measured in terms of sessions (not time spent). We further analyze the respective monetization potential for different engagement models (push vs. pull vs. paid) on various devices. Breaking down user sessions based on commercial intent and the ad engagement approach on various devices is important because different engagements and behaviors monetize at different rates. For example – a search on Google for a commercial term carries a very high eCPM, whereas a newsfeed ad on Facebook or Twitter may not carry the same level of user intent. If we extend to ad formats we are likely to see in the Connected Life era like push notifications and card-based offers, displayed on smaller screens, the commercial intent of these engagements is going to fragment further. Lastly, a number of new services are being introduced on mobile devices for the first time, and those subscriptions and in-app-purchases carry very high revenue per session and eCPM equivalent rates. For example, if a user pays $10 per month for a Spotify subscription, and accesses the service three times per day (~100 times per month) each session would amount to around $0.10, or the equivalent of a $100 ad eCPM. 

     

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    MUCH aDO about the MUST Dos

    Thanks to a subscriber for this interesting report focusing on Diageo. Here is a section: 

    We believe there has been a long-standing frustration within Diageo as to the UK investor base being underweight the stock (22% vs. 33% for the peer group, see Figure 13 and Figure 14, page 15) with various iterations of management seeking to address the relative imbalance.

    Since SAB listed, Diageo (with Unilever) has been a significant underperformer relative to the peer group. That underperformance has coincided with Diageo and Unilever’s EPS growth materially underperforming the same peer group. UK investors have been right to be underweight Diageo.
    One clear MUST DO

    Too simplistic, but in order to rectify the relative imbalance of the UK investor weighting Diageo needs to do only one thing: grow its EPS in line with, or ahead of the peer group. Execute that MUST DO (in a sustainable way) and the ‘issue’ of the UK investor base will likely disappear over the long-term. 

    August 2011 targets 
    In August 2011, then CEO Walsh established a set of what we consider excessive targets. Expecting any large FMCG business to grow EPS at double digits over a sustained period is too aggressive in our view as it likely ultimately undermines sustainability; ‘even’ PMI gave up its double digit target in 2014.

     

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    Growth but not as we know it

    Thanks to a subscriber for this interesting report from Deutsche Bank focusing on the IT Services sector. Here is a section: 

    The introduction of digital technologies (social, mobility, analytics and cloud)  heralds the start of a new decadal tech cycle, which could potentially lead to significant changes to the existing revenue streams of the Indian vendors.

    We believe the Indian IT services industry could still report healthy growth rates over the long term. The IT services market is still fairly underpenetrated from an offshore standpoint (see Figure 10 and Figure 11) and we believe vendors need to follow a three-pronged strategy to gain share: 

    1. Deepen existing relationships by achieving strategic vendor status 
    2. Geographic and vertical expansion 
    3. Capability enhancement to address the threat/opportunities from digital technologies

     

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    Email of the day on BMW and Novartis

    Would you kindly add BAMXF to the chart library? Much appreciated. Also, following TCS, I have been on a quest to identify promising looking charts. I'd be interested in you view on the weekly chart of NVS. Thank you

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