David Einhorn, a prominent critic of Tesla Inc., bashed the carmaker, saying its woes resemble that of Lehman Brothers Holdings Inc. before the bank failed.

“Like Lehman, we think the deception is about to catch up to TSLA,” Greenlight Capital said in a quarterly letter Friday seen by Bloomberg. “Elon Musk’s erratic behavior suggests that he sees it the same way.”

Einhorn pointed to parallels by saying “Lehman threatened short sellers, refused to raise capital (it even bought back stock), and management publicly suggested it would go private” in the months leading up to the bank’s collapse.

Einhorn said in the letter his short position on Tesla was his second biggest winner in the third quarter. Greenlight’s main fund has lost 26 percent this year.

Tesla is a CCC+ rated credit and trades at an eyewatering valuation. It is now one of the top sellers of sedans in the USA but that is likely only because many companies are no longer selling sedans. The biggest redeeming quality the company has is that the battery factory is built and production is underway but that does not surmount the fact the company loses money on every vehicle.

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

Let me first set up the background; I believe we are in a secular bull market that will not peak for at least another decade and potentially twice that. However, it also worth considering that secular bull markets are occasionally punctuated by recessions and medium-term corrections which generally represent buying opportunities. 

The Nasdaq-Biotechnology Index broke out of a long base in 2011 and hit a medium-term peak in 2015. It found a medium-term low in 2016 and has held a choppy uptrend since; with two yearlong ranges one above another. The Index rallied this week to test its recovery high and a clear downward dynamic would be required to check the upward bias.

PlayStation gamers have been frustrated by the lack of cross-platform support for the popular game Fortnite. But now Sony has some good news. Today, the company announced an open beta that will allow for Fortnitecross-platform play between the PlayStation 4 and iOS, Android, the Nintendo Switch, Xbox One, Microsoft Windows and Mac.

The aim of the beta is to test the user experience on this kind of cross-platform play, which is the first time Sony Interactive Entertainment has experimented with this feature. The release makes clear that, if this test goes well, the company may be open to cross-platform play on other games in the future.

Part of the appeal of Fortnite has been the ability to play with other gamers, regardless of the platform you are on. PlayStation users were unable to partake in that aspect of the game. To make matters worse, SIE's restrictive policies ensured that players weren't able to sign into an Epic Games account linked to PSN from their Nintendo Switch.

This is a watershed moment for the computer gaming sector because it highlights that games are more important than platforms. For years consumers have had to choose between Microsoft’s Xbox, Sony’s PS4, Nintendo’s Switch, PC or now mobile with each representing a significant outlay in terms of capital investment.

However, if you only had one of these platforms you were restricted in what games you could play. Even when the games had online group-play features participants had to all have the same hardware and software. Fortnite changed that. It has been such a wildly successful game, built exclusively on a Battle Royale/Lord of Flies group play model that companies have been forced to cave to consumer demand for cross platform solutions.

Nevertheless, during the morning he spent with Forbes outlining how he channels innovation and chooses where to expand, a road map for Amazon's future emerged. Given Amazon's size, it moves both vertically and horizontally, each direction portending a lot more disruption. Even five years ago, Bezos seemed content merely to try to sell everything to everybody, becoming the bane mostly of retailers and wholesalers. But this master innovation artist now has the ultimate palette: any industry he chooses.

For this unconstrained era, the most important word at Amazon is yes. Bezos explains, correctly, the traditional corporate hierarchy: "Let's say a junior executive comes up with a new idea that they want to try. They have to convince their boss, their boss's boss, their boss's boss's boss and so on—any 'no' in that chain can kill the whole idea." That's why nimble startups so easily slaughter hidebound dinosaurs: Even if 19 venture capitalists say no, it just takes a 20th to say yes to get a disruptive idea into business.

Accordingly, Bezos has structured Amazon around what he calls "multiple paths to yes," particularly regarding "two-way doors": decisions that are often based on incremental improvements and can be reversed if they prove unwise. Hundreds of executives can green-light an idea, which employees can shop around internally. "He knows and we know that you can't invent or experiment without some failure," says Jeff Wilke, the long-time Bezos lieutenant who runs Amazon's consumer and retail operations. "Those we sort of celebrate. In fact, we want them to occur all over the place. Jeff doesn't need to review those. I don't need to review those."

The bigger Amazon gets and the more industries it disrupts the greater the potential there is for antitrust advocates to gain traction. Amazon currently accounts for about half of all ecommerce traffic in the USA so it is no exaggeration to state that if you are not selling on Amazon you are leaving half the population untapped. That position lends the company enormous power and the EU is currently investigating how much advantage it gets from knowing product segments its third-party sellers are succeeding in. 

Food manufacturers have been early adopters of new technologies from canning to bread slicers, and vision automation has been used for many years for tasks such as reading bar codes and sorting packaged products. Leaders now are finding the technology valuable because robot eyes outpace the human eye at certain tasks.

For years, Tyson Foods Inc. used sensors to map chicken fillets so they could be cut to the precise specifications required by restaurant customers that need them to cook uniformly. But exposure to the high pressure, high temperature water there kept causing equipment failures.

Now technical improvements, tougher materials and declining prices mean the company can integrate vision technology in facilities including the new $300 million chicken-processing plant in Humboldt, Tenn., said Doug Foreman, who works in technology development at the Springdale, Ark.-based food company. The technology could help optimize the use of each part of the bird, he added.

Robotics, artificial intelligence and computer vision all need to work seamlessly together in order for computers to fulfil the same tasks as humans. Creating systems that work together in such a manner is a time-consuming process but progress has been underway for decades and the breadth of what is now possible has improved considerably.

What sets this partnership apart is that both the miner and the techie claim they can produce lithium carbonate or lithium chloride more rapidly and at a lower cost than others. According to Lilac, this is possible because its system eliminates the need for sprawling evaporation ponds, which are expensive to build, slow to ramp up, and vulnerable to weather fluctuations.

“Even for the world's best lithium reserves in the Atacama desert, conventional evaporation ponds take many years to ramp up and remain vulnerable to weather volatility. Lilac's projects will run at full capacity from year one of commissioning and maintain that output regardless of weather or brine chemistry. We have done benchtop testing in other brines and we saw recoveries over 95% in less than 2 hours versus 9-24 months in evaporation ponds,” the company’s CEO, Dave Snydacker, told MINING.com.

Snydacker explained that the reason why the processes run by his company are so fast is that his engineers have developed ion exchange beads that absorb lithium directly from the brine. Once they do that, the beads are then loaded into ion exchange columns and brine is flowed through such columns. As the brine contacts the beads, the beads absorb the lithium out of the brine. Once the beads are saturated with lithium, the alkali metal is recovered from them as a lithium solution, which is later on processed into battery-grade lithium carbonate or lithium hydroxide using streamlined plant designs.

I described the lithium market as an example of supply inelasticity meets rising demand as early as 2013. What is apparent today, following massive investment in additional supply, is that is no longer true. In fact, as demand for the commodity ramps up technological innovation is contributing to the ability suppliers to more than keep pace.

Today, the FDA is increasingly proactive in bringing drugs to market short of full approval and uses accelerated approval to get new drugs to people suffering from devastating diseases. Since 2003, more than 16 percent (66 of 404) of all new drugs were approved through the Accelerated Approval Program, and it seems to be a more popular option. Between 2003 and 2013, about three drugs were approved each year through this expedited route. But during each of the last three years (through 2016), that number has increased to more than seven drugs per year.

The FDA is candid about its commitment to expedited approval programs — in part to speed up what is often characterized as a notoriously drawn-out and bureaucratic approval process. The agency’s former head, Hamburg, wrote about the FDA’s intention of getting new drugs to people as “quickly” as possible, and the FDA’s new leader, doctor and cancer survivor Scott Gottlieb, bemoans the FDA’s slow-moving approval process. While a fellow at the conservative American Enterprise Institute in 2012, Gottlieb lamented the “increasingly unreasonable hunger for statistical certainty on the part of the FDA.” And at Gottlieb’s confirmation hearing last May, he rejected the idea that speeding up drug approvals would compromise their safety, calling it a “false dichotomy that it all boils down to a choice between speed and safety.”

But the increasing reliance on accelerated approval and other means of expediting drug approval have many critics worried — particularly given that the interests most readily served by fast-track approvals are those of the pharmaceutical industry. David Gortler, an associate professor of pharmacology at Georgetown University and a former FDA medical officer, is one such critic. He fears that the drive to get drugs out faster with weaker scientific evidence is already taking a toll — not just on consumers who are taking drugs that should never have been approved, but also on the agency’s credibility.

Pharmaceutical companies benefitted from the declining burden of proof required before a drug can be marketed as well as the reduction in political scrutiny under the Trump administration.

The pharmaceutical supply chain in the US is convoluted, filled with middlemen and confusing business models. For example, more than three entities are involved in bringing a drug from manufacturer to patient, and each party takes a percentage of 2 the profit along the way.

Amazon has the opportunity to simplify the supply chain and improve the experience/cost matters for patients, payers, and manufacturers. The company has made significant headway into the pharmaceutical distribution space with its ~$1B acquisition of mail-order pharmacy PillPack. With this purchase, Amazon gained a $100M revenue runrate business, a built-out pharmacy supply, and pharmacy licenses in all 50 states.

PillPack is a good fit for Amazon. The company is loved by its customers, claiming an NPS score of 80 compared to the pharmacy average of 26. Customer demand also helped the company re-establish its partnership with pharmacy benefits giant Express Scripts after a public falling out.

Amazon’s march through previously ringfenced sectors remains a powerful disruptive influence that has the potential to streamline supply chains and deliver better value to end customers. At the same time this is going to represent a significant challenge for the middlemen that characterise the healthcare, commercial and industrial sectors today.  

The new networks are expected to enable the steering of driverless cars and doctors to perform complex surgeries remotely. They could power connected appliances in the so-called Internet of Things, and virtual and augmented reality. Towers would beam high-speed internet to devices, reducing reliance on cables and Wi-Fi.

At the Shenzhen headquarters of Huawei Technologies Co., executives and researchers gathered in July to celebrate one of its technologies being named a critical part of 5G. The man who invented it, Turkish scientist Erdal Arikan, was greeted with thunderous applause. The win meant a stream of future royalties and leverage for the company—and it marked a milestone in China’s quest to dominate the technology.

At a Verizon Communications Inc. lab in Bedminster, N.J., recently, computer screens showed engineers how glare-resistant window coatings can interfere with delivering 5G’s superfast internet into homes. A model of a head known as Mrs. Head tested the audio quality of new wireless devices. Verizon began experimenting with 5G in 11 markets last year.

Nearby, in Murray Hill, N.J., Nokia Corp. engineers are testing a 5G-compatible sleeve that factory workers could wear like an arm brace during their shifts to steer drones or monitor their vital signs. The company began its 5G-related research in 2007.

You might remember a great deal of enthusiasm about the internet of things or the internet of everything a few years ago. Everything has gone quiet on that front of late not least because in order to reach commercial utility the billions of connected devices planned to enter service are going to need to be able to connect to the internet on a constant basis and current networks are incapable of handling the load. That means a whole new architecture is required to enable the next iteration of connected devices and 5G is the answer. 

“We see that light at the end of the tunnel, but we’re still kind of in the darkness ourselves,” Citi’s Peng said. Investors need more concrete catalysts before they step in to buy stocks. “So that’s the challenge for money managers.”

“We are looking to be more constructive on Asian equities in the next quarter, if the current correction continues. Valuations will be more attractive and worth a look then,” said Jason Low, senior investment strategist at DBS Bank Holdings Ltd.

“The good news is that valuations are looking more attractive now and technicals are oversold, which suggest that Asian stocks could be poised for a rebound in the next few months,” Jasslyn Yeo global market strategist as JPMorgan Asset Management.

Among the top 18 holdings in the iShares MSCI Emerging Markets ETF, 9 are from China. The addition, first of overseas Chinese companies and Hong Kong listed companies followed by mainland listed shares has represented a significant reweighting of the basket over the last decade. Since so many commodity producers rely on Chinese demand growth for exports the country’s influence is even greater than might initially be apparent.

Apple had completed $200 billion in share buy-backs since 2012. Apple’s cash hoard is so monstrous that six out of the 10 biggest share buy-backs in U.S. history were done by Apple. The $200 billion they’ve bought since 2012 is enough cash to buy all of Verizon, Coca-Cola, or Boeing. Chew on that for a minute.

Now, contemplate this: U.S. companies announced $201.3 billion in stock buybacks and cash takeovers in May 2018 alone. That’s a record monthly amount. Apple represents nearly half of that! Apple recently said it would buy back $100 billion more of its own stock. They didn’t specify when or how long that would take, but that’s about 10% of the market cap, currently at $1 trillion, the first trillion-dollar stock.

The buy-back announcements keep coming:
Broadcom (AVGO) pledged a $12 billion buy-back.
Micron (MU) pledged a $10 billion buy-back.
Facebook (FB) pledged a $9 billion buy-back.
T-Mobile (TMUS) pledged a $7.5 billion buy-back.
Qualcomm (QCOM) just upped the ante on their previous announcement to buy back $8.8 billion. On July 25th, 2018 QCOM said they would buy back $30 billion, more than 30% of the float!

Social media companies led an early pullback on the Nasdaq today as Facebook, Twitter and Alphabet were grilled in Washington. The questions being asked of these companies with regard to how they police their forums and the nature of the advertising being served to consumers/voters is understandably weighing on their performance. It is also leading to headlines along the lines of “technology stocks collapse” which if we look at the Nasdaq is clearly a case of hyperbole.

We listened to Catherine Wood, founder and CEO of ARK Investment Management, LLC, expound to CNBC anchors why her firm was adamantly opposed to Elon Musk’s proposal to take Tesla, Inc. (TSLA-Nasdaq) private.  Her argument was that ARK’s research showed that by 2023 annual electric vehicle (EV) sales would be 17 million units per year worldwide.  Tesla, because of its focus on software, its ability to collect the driving mileage of its vehicle purchasers, and its vision about Mobility-as-a-Service (MaaS), coupled with its ability to create a fleet of four million EV taxis, would be worth nearly $1 trillion, in less than five years, earning shareholders a 17-fold return from the current share price.  

The day following this interview, Mr. Musk announced he was dropping the idea of taking Tesla private.  He stated that he changed his mind because his shareholders told him that they didn’t want him to make such a move.  Was Ms. Wood one of those shareholders Mr. Musk decided to listen to?  He had spent an incredible amount of time and energy since his tweet about privatizing Tesla in preparing for the move, as well as defending himself from a Securities and Exchange Commission (SEC) investigation about possible investment fraud.  That inquiry will not go away as easily as merely changing his mind, and we have yet to hear from the plaintiffs’ attorneys.  

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The emissions cheating scandal and the increasing utility of electric vehicles means established auto manufacturers have to spend very large sums to retool and get electric vehicles to market. Audi announced yesterday it has started production of its electric SUV and Daimler said today that it is going to spend more than €10 billion to develop its electric vehicle fleet.

But a British company that launched in April is already marketing itself as an alternative to human models. Irmaz Models calls itself an “Imagined Reality Modeling Agency.” The company’s website says its designers can “make faces to fit” any marketing campaign. Another advantage: Digital models “never argue, need to eat, throw tantrums or get tired,” the company notes.

“Brands can specify the look they’re exactly after, down to the race, gender and hairstyle,” Philip Jay, a former Playboy photographer who founded Irmaz Models with Irma Zucker, told CNN.

Kelvin Boon, the owner of Boon Models, an agency with branches in New York and the District, said he sifts through a daily stream of modeling portfolios in search of “quality models.” Aspiring models don’t always resemble their photos, he said, and those that do often require training before they’re ready for professional work.

If credible-looking digital models emerge, he said, “it’s going to affect the industry a lot.” Why, he asked, would a brand spend thousand of dollars to hire models and photographers for a single photo shoot when you can hire an artist to create images for far less?

This is a very emotive topic and the headline above is what my daughters refer to as clickbait. People love their heroes so brands will always be on the lookout for someone they think can epitomise their image. However, there is a lot of work that is oriented towards the online market where photos are routinely doctored anyway that is ripe for digitisation. 

Now the government wants to break up the party. The Ministry of Education is leading a plan to curtail the number of online games in the country and limit the amount of time children play games. Parents are supposed to stop their kids from spending more than an hour a day on their electronics for non-educational purposes.

But how? That’s the question for parents everywhere there are game-addicted children. The Education Ministry doesn’t offer specific ideas about techniques for stopping kids from hopping onto a computer or smartphone. Chinese parents seem likely to be just as incapable of regulating game use as parents in other countries.

“Gamers always find a way to spend more time or money than allowed,” says Serkan Toto, founder of Tokyo-based game consultancy Kantan Games Inc.

The ministry offered the game guidelines as part of a broad plan to address the growing incidence of myopia among children.

The push, personally championed by Xi, is aimed primarily at reducing nearsightedness in children and teenagers by at least 0.5 percentage point a year till 2023, according to a statement posted on the ministry’s website.

Still, the move seemed as much an admission of widespread game addiction as an assertion of policy goals. The ministry encouraged parents to send their children outside to play -- without electronics.

Some people will always worry about how much time we spend in front of devices. Whether it is watching TV or listening to music via headphones. Netflix will now ask you after a few hours if you are still watching or have fallen into a catatonic state from binge watching.

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China’s toxic air and rapidly aging population mean it has a higher incidence of cancer than most other countries. At the same time the country has an underdeveloped medical infrastructure, particularly beyond the tier-1 cities. There is every reason to believe China will approach the challenges of its healthcare system by co-opting the success it has had with its digitalisation so telemedicine and artificial intelligence will form part of the diagnostic process. Meanwhile the streamlining of the clinical trial system will ensure a lot more drugs make it to market. The big question for innovative teams will be how they can protect their intellectual property.

“Health problems associated with food and nutrition have become a big issue,” said Kozo Takaoka, head of the company’s business in Japan, in an interview in Tokyo. “Nestle must address that on a global basis and make it our mission for the 21st century.” He said the wellness segment could eventually account for half of Nestle’s sales in Japan.

The investments come with the burgeoning interest in so- called nutraceuticals -- food-derived ingredients that are processed and packaged as medicine or wellness aids -- among consumers that are increasingly skeptical about mass products.

Nestle employs more than a hundred scientists in areas including cell biology, gastrointestinal medicine and genomics at the Nestle Institute of Health Sciences and has been developing tools to analyze and measure people’s nutrient levels.

“Decades in the future, all companies will probably have to be doing it,” said Jon Cox, an analyst at Kepler Cheuvreux. “The industry has probably had a setback as consumers also want natural and less processed products while adding supplements is seen as artificial or creating Frankenstein food.”

Some nutritionists are skeptical that tailored diet plans based around supplements are useful and that they may have more of a psychological effect than a medical one.

“Nestle’s program is designed to personalize diets in ways unlikely to be necessary,” said Marion Nestle, a nutrition professor at New York University who isn’t linked to the KitKat maker. “If we think something will make us healthier, we are likely to feel healthier.”

I had my 23andMe results analysed by DNAFit and their conclusion was that I process carbohydrates rather efficiently so I should eat less of them. They also pointed out something I have noticed myself which is that when I commit to a training regime I progress quickly, but when I stop I go backwards faster than most people.

I also tend to accumulate cholesterol, so I have to be very careful with what kinds of fats I consume if I want to maintain healthy levels i.e. more nuts and avocados with fewer shrimps and chicken thighs.

I have been particularly interested in the range of new products offering genetic profiling of our individual microbiomes but my conclusion is these are still very developmental in the range of insights they can offer. With that as a background I expect I am exactly who Nestle will be targeting their products at when they expand beyond Japan.

There’s one substantial difference between Battle for Azeroth and the trajectory previous expansions have followed, however. In the past, getting into World of Warcraft meant buying the base game and paying a monthly fee. The monthly fee is still in place — WoW hasn’t gone F2P — but the only expansion you need to pay for is the latest one. If you want to play through the base game, up to and through the Legion expansion, it’s just $15 per month.

One possible reason for the change is that Blizzard might be trying to woo players into coming back and trying content they missed without requiring them to pony up a lot of cash up front. Two players recently returned to my guild for this reason — once Battle for Azeroth went live and Legion became free, they signed up to play through the expansions they’d missed and experience the content. Granted, it’s not exactly the same content as it used to be — repeated “stat squishes” to keep player HP and damage under control, combined with repeated tweaks to accelerate the leveling experience, give areas a different feel than they had the first time around, even when you’re ostensibly playing through the same content. In some ways, it’s a much better game — World of Warcraft today is far more respectful of your time than it was 10 years ago — but now that I’m leveling an alt for the first time in many years, there are moments when I miss the older game and its slower but more dangerous pacing. The lack of difficulty spikes makes for fewer teeth-clenching rage spasms, but it also makes the game easier to predict.

The 3.4M sales that Blizzard is claiming set a launch record for BfA were impressive, but not much larger than previous cycles. Both Legion and Warlords of Draenor reportedly sold 3.3 million copies in their first 24 hours. This suggests initial launch sales don’t have much prediction power when it comes to how much of the player base will stick around and for how long — Legion, which was easily WoW’s strongest expansion in years, seemed to do a good job retaining players based on how many old friends I saw show back up and stick around for years, if not the entire expansion. We’ll see if the Battle for Azeroth holds players’ interest the same way.

The free to play model for computer games is challenging legacy subscription model games like World of Warcraft where you paid a steady monthly rate for hours of running around with friends completing various tasks.

Alibaba’s been busy expanding its Hema supermarket chain and now operates 35 of those stores -- a mix of sit-down dining and groceries plus delivery hub. Much cash also is flowing into China’s $1.3 trillion food retail and services industry, where it’s trying to hold its own against delivery giant and super-app Meituan. Alibaba said Thursday it’s teaming with SoftBank to put more than $3 billion into Ele.me. Alibaba now intends to merge Ele.me with Koubei, another unit focused on connecting restaurants to the internet.

Ma is also spearheading an expensive foray into the $4 trillion retail sector. Alibaba acquired a department store chain with 29 stores and 17 shopping malls last year and also bought a slice of China’s largest hypermarket chain. It’s been shelling out on content for its Youku video-streaming service to stay abreast of Tencent and Baidu Inc. And heavy investment in datacenters for its cloud computing arm helped almost double revenue in that division to 4.7 billion yuan.

However, those burgeoning businesses may be helping mask a slowdown in Alibaba’s bread-and-butter business, said Steven Zhu, an analyst with Pacific Epoch.

Customer management revenue -- the lucrative fees it charges for helping merchants with marketing -- grew just 26 percent in the quarter, from 35 percent in the previous three months. That reflects how rivals such as JD.com Inc. and Pinduoduo Inc. are siphoning off Alibaba’s merchants and may affect the bottom line in coming quarters, Zhu said.

“This is probably the slowest growth ever,” he said. “They are swapping high-quality revenue with low-quality revenue.”

Amazon bought a supermarket chain so Alibaba bought a supermarket chain. The USA has Grubhub so Alibaba bought ele.me and is also getting into the broader retail sector through the purchase of a department store chain. There is no denying that these are more conventional businesses than the high growth online expansion that fuelled Alibaba’s initial growth spurt. The fact the company is also talking about primarily focusing on the Chinese domestic market raises questions about its commitment to overseas expansion.

LG Chem, a major South Korean lithium-ion battery manufacturer, is increasing its cell manufacturing capacity to such an extent that it may surpass the entire LIB market in both output and raw material consumption from just three years ago.

Roskill, industry analysts that ran the numbers on LG Chem's planned output, says that South Korean manufacturer plans to increase capacity to 90GWh in 2020 from a previous forecast of 70GWh.

"Assuming 100% of output was to be NMC532, 90GWh would require around 100kt of cathode, containing 40kt nickel, 22kt cobalt, 16kt manganese and 50kt lithium (carbonate equivalent), and 90kt of anode materials which could be 100% graphite," writes Roskill.

"If producing at capacity, LG Chem’s LIB output and raw material consumption would be greater than the entire LIB market in 2015."

LG Chem, South Korea's largest chemical company, is one of the top five LIB manufacturers. It makes batteries for the Ford Focus, Chevrolet Volt and Renault ZOE.

LG Chem has been making deals to ensure it has raw material. This past spring Zhejiang Huayou Cobalt and LG Chem announced they are planning a cathode material facilities with capacity of 40,000tpy and 100,000tpy capacity planned for future. It also signed deals other raw material deals with Nemaska Lithium and Ganfeng Lithium.

While cobalt and lithium prices are currently falling, Roskills says cell manufacturers are locking in supply and ". . . that activity in the sector continues at a rapid pace."

The auto-manufacturers sector remains under stress because of continued issues with revelations about emissions cheating; most recently in Japan. The cost of meeting current emissions standards not to mention the tightening of regulations slated for the next few years represents a significant cost for just about all conventional car manufacturers. The fact the majority of manufacturers are planning on releasing electric vehicles is as much about responding to Tesla’s success as it is about the challenge of meeting regulations that are now going to be enforced.

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Unconventional oil and gas remain gamechangers for the energy sector and that influence continues to unfold for the USA’s primary resource basins as well as opening up new ones like the Utica and Marcellus shales.

The average large-cap mutual fund holds 1.3% of its portfolio in Facebook, 0.2 percentage points less than its benchmark; 2% in Amazon, compared with the benchmark’s 2.4%; and 0.3% in Netflix, versus the benchmark’s 0.5%. The funds are overweight only in Alphabet, by 0.19 percentage points.

Those slim allocations helped shield the funds from the recent losses suffered by Facebook and Netflix that bled over into the broader tech sector and S&P 500. Large-cap growth funds have outperformed the broad stock market index over the past month and year to date, rising 3.9% and 11% over those periods, according to Morningstar. That’s versus gains of 3.3% and 6.6%, respectively, for the S&P 500.

I get the sensation that there is a lot of schadenfreude in the actively managed segment of the market because they sidestepped the recent setbacks in Facebook and Netflix. No mention is being made of how much they underperformed over the last three years because they were so underweight the so-called FANGs.

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Value strategies work best in distressed situations when solid cash generative assets are sold off because of contagion from a market dislocation. That affords patient investors the opportunity to pick up assets at very attractive levels with a view to holding them for the lengthy medium-term. Outside of those periods of market stress it can be slim pickings for value investors.

A massive wrong-way bet on Bitcoin left an unidentified futures trader unable to cover losses, burning counterparties and threatening to dent confidence in one of the world’s largest cryptocurrency venues.

The long position in Bitcoin futures listed on OKEx, a Hong Kong-based exchange, had a notional value of about $416 million, according to an OKEx statement on Friday and data compiled by Bloomberg. OKEx moved to liquidate the position on Tuesday, but the exchange was unable to cover the trader’s shortfall as Bitcoin’s price slumped. Because OKEx has a “socialized clawback” policy for such instances, it will force futures traders with unrealized gains this week to give up about 18 percent of their profits.

While clawbacks are not unprecedented at OKEx, the size of this week’s trading debacle has attracted lots of attention in crypto circles. The episode underscores the risks of operating on lightly regulated virtual currency venues, which often allow high levels of leverage and lack the protections investors have come to expect from traditional stock and bond markets. Crypto platforms have been dogged by everything from outages to hacks to market manipulation over the past few years, a period when spectacular swings in Bitcoin and its ilk attracted hordes of new traders from all over the world.

Margin requirements are an exchanges primary tool in ensuring they are not left making up the shortfall when traders’ positions go awry. These kinds of events mean that the margin requirements for trading cryptocurrency futures are only going to get more onerous. Just as with every other futures traded market that is going to put a dampener on speculation.

Many people are worried that Facebook collapse may have wider implications for not only the tech sector but also by contagion the broader market. What do you make of FB and its future and effect on tech / broader market? This is an important question as you know.,,,tech has been a cycle leader many thanks for your continuing good service

Thank you for this question which as you say is something a lot of people are ruminating on. Leaders tend to lead in both directions has been an adage at this service for decades so Facebook’s large downside weekly key reversal is a significant development. Equally Apple reaching a $1 trillion market cap today is an important development not least because it closed on the high of the day.

This was another highly enjoyable and educative trip to China for the Treacy family. One of the reasons we love visiting Guangzhou is because it is close to the factories Mrs. Treacy deals with but is also the gastronomic capital of China. The city is replete with wonderful dining options and the quality of food on offer is of a high standard. I’ll write a separate review of restaurants on another occasion.

This poster is in just about every public space from railway stations to the tube, to the barriers around building sites in Guangzhou. The first question I asked myself is why it needs to be in English as well as Chinese. Internet searches using English language terms do not return results even if one is using Baidu or other Chinese search engines and the vast majority of the domestic population does not read English. Therefore, the message is meant for a wider audience or the use of English is intended as a form of legitimisation of the ideals expressed.

Netflix fell by 14% in after-hours trading yesterday following their results announcement which were below expectations. The company reported subscriber growth of over 5.1 million, one million below market forecast although the headline earnings per share at 7% beat consensus forecasts. Netflix also warned that it was seeing stiff competition. The Nasdaq 100 index also lost 125 points from the highs made just a couple of days ago.

Of all the FAANG stocks which comprise Facebook, Amazon, Apple, Netflix and Google, Netflix has always looked very similar to the dotcom stocks from the 1998/2000 period. As Eoin has commented on before, it relies on junk-rated debt for funding and the barriers to entry in its market are low. In the last five years, it has been enormously successful and this year alone, it had more than doubled before yesterday’s fall. However, it is burning a lot of cash and Amazon is also trying to steal its market share.  

The FAANGs have dominated the market since the presidential election and the technology sector now forms 25% of the S&P 500 index. Momentum investors and passive funds have significant allocation to the FAANG stocks. For example, there are 145 ETFs that are long of Amazon and 450 ETFs long of this group.

The group has wobbled before and has been on the verge of a correction, the most recent episode being during Facebook’s data privacy problems earlier this earlier. Sceptics have tried to call the end to the ascent of these stocks and of the technology sector in general. But they have defied the bears. We know that the technology sector per se has huge growth potential in the medium and long term. However, Netflix looks very extended relative to the trend mean even after this reaction post its results. More broadly, it has certainly focussed even more attention on the members of this select group.

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

I realise this summary at 4600 words is getting rather lengthy which is why I decided to right another book to more fully explore the issues represented by the rise of populism and what that means for markets and the global economic order. I’ve agreed an August/September deadline so hopefully it will be available this year.

Much modern Alzheimer's research concentrates on a specific protein called amyloid beta, and the clumping of that protein is suspected as being the primary pathological cause of the disease's symptoms. But, after a long series of clinical trial failures in drugs designed to target those amyloid beta plaques, some scientists are turning their research attentions elsewhere.

This new research focuses on a different protein, called tau. These tau proteins have been found to form abnormal clumps in the brain, called neurofibrillary tangles, which can accumulate and kill neurons. Some researchers hypothesize that this is actually the primary causative source of Alzheimer's disease.

Until now it was not known how, or when, these tau proteins began to accumulate into tangles in the brain. It was previously believed that isolated tau proteins didn't have a distinctly harmful shape until they began to aggregate with other tau proteins. But the new research has revealed that a toxic tau protein actually presents itself as misfolded, exposing parts that are usually folded inside, before it begins to aggregate. It is these exposed parts of the protein that enable aggregation, forming the larger toxic tangles.

"We think of this as the 'Big Bang' of tau pathology," says Diamond. "This is a way of peering to the very beginning of the disease process. It moves us backward to a very discreet point where we see the appearance of the first molecular change that leads to neurodegeneration in Alzheimer's."

Alzheimer’s is one of the only major killers that has no form of treatment. It represents a massive tax on the productive capacity of every family afflicted since the burden for care usually falls on the spouse and children before expensive care is called for. The slow but inevitable decline the disease entails means the cost of care rises inexorably often for more than a decade before fatality.

"Our way of competing successfully is to look at all the players, see what they have that we think is great, and if we can incorporate that into our model, we will, but mostly play our game," Galperin said while speaking from Allen & Co.’s Sun Valley conference, and musing about this year’s global soccer championship. "As you know, we’re looking at the World Cup -- we try to play our game and use our advantages and our strengths. We have a great network of sellers, a great brand, we’re investing very heavily, we already have scale."

Shares of MercadoLibre gained as much as 2.2 percent in New York, the most intraday in almost a week.

It’s also betting on brick and mortar investments to improve service. Earlier this year, MercadoLibre announced a partnership for a 38,000-square meter distribution center in the greater Buenos Aires area. In addition, the company, which is providing loans to merchants and payment processing platforms, is working on a digital wallet that offers returns on whatever money is left, Galperin said. Infrastructure -- notoriously poor in Latin America -- is also a priority.

Many commentators have made the point that social media companies require broadband by either mobile or fixed line access to generate income from a market and therefore have an interest in promoting internet access. However, that is equally true of online retail. Wherever ubiquitous internet access is available online retail flourishes, along with its disruptive influence on the conventional retail sector. These maps of the internet’s pervasiveness may be of interest. 

Netflix’s accolades follow a rapid ascent in the television world. After its start two decades ago as a DVD-by-mail operation, the company has become a Hollywood powerhouse, signing popular producers, comedians and actors for original content. The company spends about $8 billion a year on new shows and films, far exceeding HBO and other competitors.

“Netflix has proven to be a welcoming home to A-list talent,” said Bloomberg Intelligence analyst Paul Sweeney. “And they have the checkbook to back it up.”

Other streaming services are getting more Emmy recognition, includingAmazon.com Inc. and Hulu. “The Handmaid’s Tale” contributed to 27 nominations for Hulu, while “The Marvelous Mrs. Maisel” helped Amazon collect 22.

Netflix is another company that has gone for scale ahead of profitability in the hope that it will be able to garner critical mass and market share before its competitors in the legacy sector of cable and theatres sector have time to catch up. So far, the strategy has worked and many people, myself included, have traded their cable/satellite TV for the convenience of Netflix.

There are many reasons why EVs are popular in California.  Continuing to lead national social trends, the large population of wealthy entertainment and technology people love to show off their social awareness credentials, while taking advantage of lucrative financial and other driving benefits by purchasing EVs.  Those benefits are being reduced as EV car manufacturers reach the limits at which federal tax subsidies for EVs are eliminated.  The state has recently decided to double down and boost spending to subsidize EV sales.  What is interesting, however, has been the elimination of the right to drive EVs in High Occupancy Vehicle (HOV) lanes in Southern California with one person, as too many vehicles have slowed lane speed and increased accident risk when EVs are entering and exiting HOV lanes.  When the Toyota Prius lost use of HOV lanes, sales fell the following year.  Prepare for similar shocks.  

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

Tesla will soon or potentially already has achieved 200,000 vehicles in sales which will mean that the $7500 subsidy buyers receive when taking delivery of cars will disappear. That’s a headache for the hundreds of thousands of people waiting to get their model 3s.

Taiwanese government officials and company executives say China is deliberately targeting Taiwan, whose manufacturers make chips for the biggest American companies, including Apple Inc., Nvidia Corp.and Qualcomm Inc. They say China aims both to pressure what it considers a breakaway province and to pursue its goal of reducing its reliance on foreign suppliers.

Technology-theft cases more than doubled to 21 last year from eight in 2013, according to official data. Taiwanese authorities and attorneys say they mostly haven’t indicted Chinese entities believed to be the ultimate beneficiaries, often for political reasons and because they don’t believe they would be able to enforce court judgments on the mainland.

While China manufactures most of the world’s smartphones and computers, it imports almost all the semiconductors needed to provide the logic and memory that run the gadgets. Last year, China paid $260 billion importing chips—60% more than it spent on oil. Chinese leaders want homemade chips to account for 40% of locally produced smartphones by 2025, more than quadruple current levels.

China’s Achille’s heel in a trade war is that it depends on imports of semiconductors to fuel the continued evolution of its higher value-added manufacturing sector. It can put tariffs on soybeans but it still has to import semiconductors and that is not only a business weakness but a geopolitical issue for the country.

In an effort to drastically ramp up production, Tesla employees are now tinkering with the core designs of the Model 3 car and the production process, detailed by a New York Times report (paywall), something that experts say is unprecedented. Executives at Tesla decided that the car didn’t need so many spot welds holding the underbody together, so engineers found 300 “unnecessary” welds and reprogrammed the welding robots cut them from the production process.

Tesla made its 5000 cars a week target but if the company is cutting corners in manufacturing what are the safety implications of that decision going to be for the thousands of people waiting in line for the Model3?

Thank you for your superb service. Can you please advise your views on how vulnerable do you think the pharmacy shares are in the US after Amazon's entry to the field? Thank you in advance.

There are obvious fears that the introduction of Amazon’s business model to the pharmacy sector will have the same effect it had on the big retailers. However, I suspect the most profound effect will be felt among the smaller independent pharmacies that command about half the total US market. Here is a section from an article by bizjournals.com that may be of interest:

There are currently about 22,500 independent pharmacies in the United States, and these pharmacies dispense nearly half of the nation's retail prescription medicines, Norton says.

All told, independent pharmacies are an $81.4 billion marketplace annually. They fill 1.38 billion prescriptions a year — about 201 a day, per pharmacy — and employ 314,000 people on a full- or part-time basis.

Chinese search giant Baidu Inc. has approved a plan to buy back as much as $1 billion of its own shares over the next 12 months, a move that may help prop up its stock as global market volatility grows.

Its board has green-lit a program to use existing cash to buy shares in the open market at prevailing prices, the Beijing- based company said in a statement Wednesday. It will review that program periodically and may adjust its terms and size.

Baidu’s shares are up more than 7 percent this year, just underperforming the Nasdaq Composite’s gain but outstripping larger rival Tencent Holdings Ltd., which is down 7 percent in 2018.

Baidu has a market cap of almost $84 billion with free cash flow last year of $28 billion. A $1 billion buy back program might be a new departure for the company but it is unlikely to be large enough to influence investor interest beyond the sensational headline.

“Many states will pick up on those details and incorporate them into their own regulatory regimes,” said Eric Citron, an attorney who represented South Dakota. He said he expected nearly every state with a sales tax to move legislation or regulations to enforce collections. “Complete compliance will become the norm within the next year or two,” he said.

Amazon originally set up its business model to avoid state sales taxes, limiting its physical presence to a handful of warehouses. But it changed strategy to build more warehouses closer to consumers as it has relied more on its Prime two-day shipping offer—and started charging sales tax on items it sells directly.

Amazon hasn’t collected the taxes for most independent merchants who sell on its platform. About $200 billion in sales originated with independent merchants selling on Amazon world-wide last year, according to Factset analyst estimates, compared with about $116 billion in direct sales by Amazon. The company declined to comment on the ruling.

The cost of compliance is rising in just about every sector. Since the credit crisis the burden of regulatory compliance has been a significant headwind for the banking sector and it has changed the nature of how they do business. The UK’s Retail Distribution Initiative resulted in the cost of doing business rising for financial advisors. The EU’s drive to introduce GDPR has seen some company email lists drop from hundreds of thousands to the tens of thousands. Asking online retailers to monitor how much and how often they sell into each state will increase compliance costs regardless of whether tax is then due.

Moore’s Law basically ended in 2016 and we can already see that the speeds of computer chips have remained stagnant for the last few years. Enhancements have been delivered through longer battery life, more memory and separate drives for booting and storage but the speed of the chips has not moved much.

Moore’s Law basically ended in 2016 and we can already see that the speeds of computer chips have remained stagnant for the last few years. Enhancements have been delivered through longer battery life, more memory and separate drives for booting and storage but the speed of the chips has not moved much.

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

Here is a summary of my view at present:

In the future, Fitbit hopes to leverage Google’s machine learning capabilities to draw even deeper insights from the combined data sets. For instance, machine learning algorithms might be able to see indications in the data that a user is at high risk for a certain disease, then proactively treat them for it.

The Google machine learning is just one of the deliverables in Fitbit’s recently-announced partnership with Google Cloud. The combined Fitbit and Twine Health services and data will be served up to healthcare providers via Google’s cloud and healthcare API. Google could also give Fitbit the scale it needs to integrate with large hospitals and insurers. It’ll also give Fitbit a HIPAA-compliant data repository that can connect with the electronic medical records (EMR) systems used by health providers.

Fitbit did not only fail to pick up on the evolution of smart watches but compromised on the quality of its products when it sought to reduce prices. That is why I personally dumped our family’s Fitbits and decamped for Garmin and Apple.

Shares of the world’s biggest maker of electric-vehicle batteries jumped on their trading debut as investors bet on rising demand for new-energy cars worldwide.

Contemporary Amperex Technology Ltd. rose by the maximum 44 percent to 36.20 yuan at 10:17 a.m. in Shenzhen, China, valuing the company at about $12.3 billion. The manufacturer sold a 10 percent stake at 25.14 yuan a share in its initial public offering on May 30.

Investors are confident that CATL, as the company is known, can fend off rivals including Panasonic Corp. and continue to win orders as automakers move toward electric vehicles. CATL, whose customers include Volkswagen AG, had reduced the size of its IPO by more than half compared with its original ambitions because of declining margins and a cap imposed by Chinese authorities on price-earnings ratios in IPOs.

 

CATL produces more batteries than Tesla and is likely to continue to do so well into the future considering the pace of factory building it has planned. China has every intention of dominating the battery sector both because it is the largest auto market but also because it has a clear aim to become globally competitive in auto exporting. Additionally, as an energy importer it has a clear reason to reduce imports of oil if at all possible. That suggests China will be investing heavily in batteries for the foreseeable future.

 "It seems that a lot of activity has been suppressed," said Marshall Swatt, founder & president of Swatt Exchange, emphasizing that digital token sales are having the same experience. 

Leveraged trading appears to have declined lately, emphasized Mati Greenspan, senior market analyst for social trading platform eToro.

Marius Rupsys, a digital currency trader and investor, offered a slightly different take on the situation.

"Some traders and investors are waiting for clarity from regulators," he asserted.

However, Rupsys described both the statement made by U.S. Securities Exchange Commission (SEC) Chairman Jay Clayton that bitcoin is not a security and the government agency's decision to appoint a crypto czar as "very positive" developments.

The last week has seen volatility in the cryptocurrency markets disappear. The last time the bitcoin market, for example, has been this inert was back in June and July of last year when the price was a third of what it is today; even after the crash from the December peak.

Inmarsat Plc rebuffed a takeover proposal from EchoStar Corp., saying the bid undervalued the British satellite company and its outlook as an independent business.

The “highly preliminary” offer was turned down by the board after discussions with its advisers, Inmarsat said in a statement on Friday. “It very significantly undervalued Inmarsat and its stand-alone prospects. The board remains highly confident in the independent strategy and prospects of Inmarsat.”

EchoStar, founded by billionaire Charlie Ergen, has long been seen as a potential bidder for Inmarsat, along with SoftBank Group Corp.’s OneWeb. A stock slump at the London-based company has put it at the top of analysts’ lists of potential targets for consolidation in the satellite industry, which is becoming increasingly crowded with a rising number of rigs going up to support new services such as in-flight Wi-Fi and transmission of digital photos.

A representative for EchoStar didn’t immediately respond to a request for comment. The statement from Inmarsat followed a 13 percent surge in its shares on Friday, the most in a decade. The stock is still down by more than half over the past two years and has declined 3.4 percent so far in 2018.

The legacy satellite sector has collapsed over the last 18 months. There are two primary reasons for the decline. The first is the success of SpaceX and Blue Origin in deploying resuable rockets to increase the number of satellite launches. The second is the advent of nanosatellites which cost a fraction of what conventional satellites do and fly at much lower orbits.

The pursuit of nuclear fusion is inspired by the collision of atomic nuclei in stars, which fuse together to form helium atoms and release huge amounts of energy in the process. If we can recreate this process we could have an inexhaustible supply of energy on our hands that brings no harmful by-products, such as carbon dioxide emissions or the radioactive waste generated at nuclear fission-based power plants like Fukushima and Chernobyl.

But to do that we need to create Sun-like conditions here on Earth, which calls to mind one requirement first and foremost – incredible amounts of heat. Tokamak Energy hopes to achieve this through what's known as merging compression, where running high currents through two symmetrical magnet coils generates two rings of plasma, or electrically charged gas, around them.

The ITER tokomak being constructed in the south of France is based on technology from the 1970s. It is coming at the problem of containing plasma by building a big containment unit which is costing upwards of $30 billion. Today, much stronger magnetic fields can be attained through the use of superconductors. That means experiments can be much smaller and cost a fraction of the ITER model.

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

The footprint of ecommerce is only likely to expand if for no other reason than it is easy to shop and browse online. That doesn’t mean people will stop going to malls. We are after all a social species but the nature of shopping with definitely change.

The new Westfield mall that opened up the street from me a couple of months ago is focusing on food offerings with Eataly, Ding Tai Fung and Meizhou DongPo as well as upper middle class/luxury brands. That might be a function of its location sandwiched between the affluent neighbourhoods of Beverly Hills and Holmby Hills but equally speaks to the spending habits of Chinese shoppers.  

Despite this extraordinary case study it is still very early days for the treatment, with the current clinical trial due to run until at least 2023. After that, a Phase 3 trial will need to broaden the volume of patients treated to verify any positive results,. So, realistically a broad clinical application could be up to a decade away ... And that's assuming everything goes right.

An early form of adoptive immunotherapy, called CAR-T therapy, exhibited severe side effects across many of its clinical trials, including some deaths. The therapy also displayed some impressively positive response rates, promising at the very least an extra possibility for patients where pre-existing treatments have failed.

Last year, the first immunotherapy of this kind was approved for use by the FDA. The treatment's approval was undeniably a milestone for this new kind of therapy, but alongside the approval came a striking price tag. Kymriah, for young patients with a type of blood and bone marrow cancer, was initially costed at nearly half a million US dollars per treatment.

The progress of immuno-oncology research has resulted in a rapid pace of M&A activity within the biotechnology sector over the last 18 months and nothing has yet happened to change that trajectory.

Supply risks for cobalt are centred on the Democratic Republic of the Congo which is responsible for two-thirds of world output. And the country’s share will only increase over the next five years as Chinese investment in new mines come on stream.

The central African nation's output of cobalt – as a byproduct of copper production – is already soaring as top producer Glencore's operations in the country ramps up again after a refurbishment period.

The DRC produced 296,717 tonnes of copper in the first quarter of 2018, up 8.2% over the same period last year, the central bank said in a report on Thursday. Cobalt production in the first quarter of 2018 rose 34.4% to 23,921 tonnes. Global production last year was around 117,000 tonnes.

The oldest adage from the commodity markets is the cure for high prices is high prices. Cobalt is up 400% already so on the supply side there is real pressure to increase supply. On the demand side consumers are investing heavily in coming up with new chemistries to reduce cobalt intensity.

Chief Executive Officer Marc Benioff has expanded Salesforce’s ambitions beyond software for managing customer relationships, the business that made it an early leader in corporate cloud computing. The company bought MuleSoft Inc. for $6.5 billion -- its largest-ever purchase -- in May to chip away at Oracle Corp. in integration software that connects various systems. That deal, following forays into marketing and e- commerce products, is aimed at turning Salesforce into the top source of internet-based software for companies looking to replace all kinds of traditional programs once hosted in on-site servers.

The acquisitions have bolstered revenue, which Salesforce said climbed 25 percent to $3.01 billion in the fiscal first quarter. The company has promoted its expanding product portfolio to a bevy of new large and foreign clients in a bid to rival Oracle and Microsoft Corp. The result is Salesforce will reach its $20 billion sales goal “faster than imagined,” Benioff said on a conference call. The company has also spent rapidly on its international expansion, pledging to invest $2.2 billion in its French business and $2 billion in its Canadian operations over the next five years.

“We signed several deals, including the largest transaction in the history of the company, and the biggest public-sector deal,” Chief Operating Officer Keith Block said in an interview.

“The revenue for the quarter was over $3 billion. That’s twice the rate of the market. We’re obviously gaining share.” The public-sector customer is the U.S. Department of Agriculture, which uses the company’s Service Cloud to communicate with constituents, Block said on the call.

 I included Salesforce in the original cast of Autonomies because it had the potential to develop as a leader in the cloud computing sector. It was a leap of faith at the time because it did not meet the clear characteristics of an established global leader within its sector. Nevertheless, it was obvious in 2013 when I was writing Crowd Money that cloud computing was going to be a big sector and it was necessary to have some representation. 

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

There is always a new demand led story in any bull market and renewables do represent such an opportunity. However, the success of that new idea is dependent on the conventional sources of demand remaining on a steady trajectory and it is in that regard that doubts tend to be raised about copper.

Beijing could also rip up its unwritten rules on pricing caps to make way for these blockbuster deals, said the sources who have direct knowledge of the matter, adding that Alibaba and Xiaomi were furthest along the CDR planning path.

Selling CDRs equivalent to say about 1 percent of Alibaba’s market capitalization would mean raising $5 billion in Shanghai or Shenzhen, marking what would be China’s largest share sale on the open market since 2009, according to Thomson Reuters data.

While such deals would allow mainland investors to benefit from any further share price rally, the securities regulator is worried they “will take up too much liquidity in the secondary market, which may lead to a drop in the main indices”, one of the sources told Reuters.

The Chinese mainland market is underperforming at present amid concerns about deteriorating standards of governance, trade wars and debt. However, the introduction of new sources of supply is a more pressing issue in the short-term.

Many mainland investors have felt left out by the success of domestic companies on overseas bourses without being given the opportunity to participate. If they get the chance to investor via the mainland market they are likely to take it in preference to other domestic shares.

The Shanghai A-Share Index pulled back from the region of the trend mean today to confirm this year’s downward bias.

Meanwhile Alibaba is testing the upper side of its six-month range.

WhatsApp has largely escaped that notice because it is used more heavily outside the United States, with people in countries like India, Brazil and Indonesia sending a total of 60 billion messages a day. And unlike Facebook and Instagram, where much of the activity is publicly visible online, WhatsApp’s messages are generally hidden because it began as a person-to-person communication tool.

Yet WhatsApp has several features that make it a potential tinderbox for misinformation and misuse. Users can remain anonymous, identified only by a phone number. Groups, which are capped at 256 members, are easy to set up by adding the phone numbers of contacts. People tend to belong to multiple groups, so they often get exposed to the same messages repeatedly. When messages are forwarded, there is no hint of where they originated. And everything is encrypted, making it impossible for law enforcement officials or even WhatsApp to view what’s being said without looking at the phone’s screen.

Govindraj Ethiraj, the founder of Boom and IndiaSpend, two sites that fact-check Indian political and governmental claims, called WhatsApp “insidious” for its role in spreading false information.

“You’re dealing with ghosts,” he said. Boom worked with Facebook during the Karnataka elections to flag fake news appearing on the social network.

There is no getting around the fact that social media is now part of the fabric of everyday life. It is the medium through which many people stay in contact with family, friends and acquaintances. It is also how companies, marketing firms and political parties maintain constant contact and attempt to influence our decisions.

Thanks for your comments which are very interesting, especially your focus on technology and its potential to alter radically the investment landscape.

I have 2 points of my own to make. Using gold as the standard of value for stocks is interesting but I would think valuation metrics are more useful. As you know the Shiller PE, derived by comparing the S&P to the 10-year moving average of real corporate earnings- GAAP (not adjusted)- is at the highest level since the TMT bubble popped in 2000. The ratio of market value (the Wilshire 5000+) to GDP was at all-time highs in January. We have lived through a decade of extraordinary monetary policy (almost zero interest rates and QE), which is now being reversed. I think S&P market value to S&P sales may also be at all-time highs, but I may be wrong about that.

So the starting point is pretty rich. The PE is at 25 times 4 quarter GAAP earnings, implying a 4% earnings yield. The Moody's Baa 20-year bond yield is around 4.6% so the equity premium has been negative the last 5-6 years for the first time since 1961 when the Bloomberg series started. On average equity holders over this period have earned a premium of 1.62% to reward them for investing in the riskier part of the capital structure, but now they must pay for the privilege.

However, this does not address your major point about the enormous earning potential of companies involved in future technology. Now a standard criticism of your point is that competition between businesses will reduce the excess profits to "normal profits". What economists call "consumer surplus" consists of the extra value that is transferred from businesses to consumers for free due to the operation of the competitive market which eliminates excess profits.

This flows from the ideal world of independent competitive enterprises. Anti-trust laws in the USA have been around since 1890 (Sherman Anti-Trust Act) and were designed to cause real world behaviour to better approximate the theoretical. 

What I have found interesting is that Anti-Trust is no longer as big a deal as it was when I was a student. In fact, when Mark Zuckerberg testified he named 5 or 6 tech companies that are competitors of Facebook's. In this list he mentioned WhatsApp and another company (Telegram?) that he has already bought and perhaps one or two others. He also mentioned Skype, which Microsoft has bought. The big tech companies have the where with all to buy smaller rapidly growing companies and maintain tight oligopolies and thus earn outsize profits. I doubt whether many of these purchases would have passed muster from the Department of Justice's Anti-Trust division one or two generations ago.

So the key may be to watch politics and see whether the populists at some point turn their attention to Anti-Trust.

Thank you for this detailed email which has given me much food for thought. As you point out there is a tendency among the producers of widgets to encounter competition which reduces the price to often unprofitable levels. At that point some of the weaker producers go out of business and a process of consolidation unfolds. The competitive Amazon marketplaces is a good example of this where producers of widgets compete on price to gain market share only for many to disappear after a relatively short time to be replaced by lower cost producers.

“The payers recognize that there is a clear and longstanding unmet need in migraine,” said Tony Hooper, executive vice president of global commercial operations at Amgen, on a call with analysts Friday. Hooper said the company is in talks with pharmacy-benefit managers and insurers and “by and large, they are supportive of our price.”

Amgen and partner Novartis AG said that they will launch the drug within one week in the U.S. Hooper said that the company expects patients will take the drug if they have tried and failed on other migraine treatments.

The drug’s lower-than-expected price was met positively by analysts who said they expect it will win broad reimbursement from insurers.

“Overall, we think their pricing strategy fits well into the current reimbursement environment,” said Michael Yee, an analyst with Jefferies wrote in a note. Yee, who has a “buy”

rating on Amgen shares, said the lower price “sends a good message.”

But Baird analyst Brian Skorney said once rival treatments come to market, insurers and drug middlemen may pit drugs against each other to get the lowest possible price.

“If anything it just makes the eventual lowest net price that much lower once there are several on the market,” wrote Skorney, who rates Amgen shares “neutral.”

Drug pricing is now as much a political calculation as it is a business decision. Historically drug companies opened with a high price to try and recoup as much of the cost of development as possible in as short a period of time as possible. This was viable because they believed unmet need represented a potent source of capital that could be unlocked before competition resulted in price drops.

I just returned from a very eye-opening trip to Arizona, visiting Scottsdale (in the Sonoran desert) and the mountains of Northwestern Arizona. We flew into Phoenix and drove a lot. We saw zero Teslas. I'm told there are a few around Phoenix. But with the poor performance of electric vehicles in both cold and hot environments, it probably should not be shocking.

Going to Arizona from California is like going from lala land, where the majority of people are drinking weird kool-aid, to the real world, where people work for a living, dislike taxes, and are really concerned about the massive influx of Californians who are oddly leaving their dream state.

Electric car enthusiasts here in CA get the pleasure of paying $0.38/kwh for their electricity, FAR above the advertised $0.12/kwh, thanks to tiered billing and some of the highest real electric rates in the nation. When an electric car is parked in every driveway, neighborhood power distribution systems will be grossly overloaded (recharging typically starts after 6pm and finishes before 8am, compressing the "average" load on power networks). So, these systems will have to be replaced at taxpayer or ratepayer expense, with lower income people getting no benefits but definitely sharing substantially in the costs.

All this means that one of the highest tax states in the Union will become far higher taxed, both in direct taxes and indirect taxes like state mandated burdens on electricity ratepayers. Meanwhile gas taxes remain some of the highest in the nation, and will only go higher, putting yet more burden on the lower income folks. 

Meanwhile, the exodus of retirees naturally accelerates.

Thank you for this illuminated article. Filling up in California right now is definitely resulting in sticker shock with premium at $3.67 at Costco and testing $4 on the westside of LA. Electric vehicles have come a long way in terms of both efficiency and range but still have a long way to go in order to fully displace the internal combustion engine. Thanks also for the educative report from Continental Economics which I’m sure will be appreciated by subscribers. Here is a section:

Revenue from Value Added Services, which includes online games and messaging, rose 34 percent to 46.9 billion yuan. The company has however been leery of barraging its users with ads - on Wednesday, it declared it had raised the maximum number of ads that customers see on WeChat Moments, a function similar to Facebook’s newsfeed, to just two a day from one previously.

“The results were good even without the one-time gains, but the gains made it even better,” said Bhavtosh Vajpayee, a Hong Kong-based research analyst at Bernstein.

But overall costs surged 51 percent. Tencent executives have signaled a willingness to sacrifice margins in favor of longer term growth in new businesses, though that would depend on growing and engaging a massive user base now primarily confined to China.

Profit was also helped by one-time gains of almost 7.6 billion yuan from its investments in arenas like video and news.

“The reason why analysts had been modeling down was because they did mention about subsidies on payments and also continued investments in content costs,” Citigroup Global Markets’s Head of Pan-Asia Internet Research Alicia Yap told Bloomberg Television. “All these years of investments in digital content, for example music and video, actually started to show some leverage” this quarter.

Tencent is a heavy weight in the Hong Kong, any Chinese equity index as well as the MSCI Emerging Markets Index. It needed a good earnings report to signal to investors that the company’s best growth days are not already behind it.
 

The rude crude rally has not gone unnoticed by the gasoline market where there is the potential for gasoline prices to spike this summer with prices at a four-year high amid record demand (prices).  So far such price increases have not bled into the inflation figures, but the truckers are seeing the pinch.  To wit (as reprised by David Lutz): Trucking companies increased leverage is applying added pressure to cargo costs as accelerating economic growth bolsters transportation demand and exacerbates driver scarcity.  With first-quarter trucking spot rates up 27 percent from a year earlier, according to Bloomberg Intelligence, freight expenses are crimping profits at companies.

To us, the creeping inflation, and marginally higher interest rates, suggests the economy is going to strengthen in the back half of 2018.  Certainly that is what the stock market is telegraphing as earnings continue to ramp-up.  As we write, the D-J Industrial Average has made it eight consecutive winning sessions, leaving the equity market very overbought in the short term.  Also worth consideration is that the Industrials rarely make it more than nine straight sessions in any one direction.  Consequently, there could be a pause in the upward onslaught or even an attempt to pull stocks back.  However, we think the S&P 500 (SPX/2730.13) should be well supported at the 2670-2685 level and that should contain any decline barring unexpected news.  Also waxing bullishly is the TD Ameritrade Investors Movement Index, which is back down to its 2015-2016 levels.  That means investors are not very optimistic currently and, therefore, not buying stocks.  Further, there was over $8 billion of money flows into prime money market funds last week.  These are not the kind of metrics one sees at stock market tops.  However, it’s May option expiration week, which has been bearish for the last nine years, and with stocks stretched for the aforementioned reason, look for some kind of pause/pullback that does not get very far.

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

As I spoke about in last night’s video/audio there is a risk of some consolidation following the impressive rally over the last couple of weeks.

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

Here is a summary of my view at present:

The outlook for electric car adoption is a central theme in the outlook for lithium miners and other suppliers of the growing battery market. Going from 0.8% in 2017 to 7.5% in 2025 is not far of a 10X growth rate and while ambitious is realizable. There are massive construction projects underway, particularly in Asia to build out production capacity of batteries.

The big question surrounding automation has long been whether robots would compete with workers or help them. Initially, workers feared robots would destroy jobs across the economy. Scholarly research and real-life experience has eased that concern, although some types of workers and industries are ending up on the losing side.

Today, the question is more precise: In which industries does automation help both employer and employee?

The companies that may have cracked the code are those that can assign repetitive, precise tasks to robots, freeing human workers to undertake creative, problem-solving duties that machines aren’t very good at. That’s particularly relevant for manufacturing, the food sector and service sectors such as billing, where timetable spreadsheets can be automated, freeing up workers to do higher-value tasks.

With demand for Bosch-built steering controls high, the company has used automation to increase its output, leading it to hire more people to perform the type of checks Mr. Rösch conducts.

“We looked for 20,000 new hires last year,” a mix of new positions and replacement staff, said Stefan Assmann, one of the company’s chief engineers, to join Bosch’s total 400,000 employees. Bosch factories world-wide now make use of 140 robotic arms, up from zero in 2011. “We can’t see robots having a negative impact on our workforce,” Mr. Assmann said.

If robotics and automation are helping to improve productivity and leading to expanded employment then there must be another reason why factories have been closing and people losing their jobs. The answer is pretty simple when we hear of workers having to train their replacements from overseas before they are fired.

A six-minute walk through an office and lab facility is chronicled in the video, and Boston Dynamics reports that before this recorded autonomous run, the robot was guided along the route manually by a human so a map of the space could be constructed. The video highlights SpotMini's obstacle avoidance systems and navigation map as it moves through the space, so it’s not entirely clear how much autonomy the robot has regarding its overall route, but it can clearly dynamically respond to obstacles in the space.

As with other subdued Boston Dynamics video reveals, not much more detail is offered outside of the actual footage. The company was acquired by Japanese company SoftBank from Google parent company Alphabet for an undisclosed sum in 2017.

These videos of Boston Dynamics impressive robots are always visually astounding but they seldom show the human operator with the remote control running around behind the robot. The big success for Boston Dynamics is that it has demonstrated that it is possible to develop a robot that can navigate the human environment with relative ease and grace. That is already a huge achievement.

A NEW ERA FOR THE ALUMINUM INDUSTRY

There’s a new, revolutionary way to make aluminum. It eliminates all direct greenhouse gases. And it produces pure oxygen.

 The technology can create more aluminum in the same size smelting cell as the traditional process. And it can be installed in new facilities or retrofitted for existing ones.

What I think will surprise many people is that a test facility has been running at Alcoa’s Pittsburgh test facility since 2009 so this is not some far-off pipe dream but it already has a proof of concept and is primed for commercialization. The first commercially oriented industrial project is expected to begin producing aluminium in 2024.

Why did China have such a big impact? In their 2016 study, economists Justin Pierce and Peter Schott argue that China’s accession to the WTO in 2001—set in motion by president Bill Clinton—sparked a sharp drop in US manufacturing employment. That’s because when China joined the WTO, it extinguished the risk that the US might retaliate against the Chinese government’s mercantilist currency and protectionist industrial policies by raising tariffs. International companies that set up shop in China therefore enjoyed the benefits of cheap labor, as well as a huge competitive edge from the Chinese government’s artificial cheapening of the yuan.

The resulting appreciation of the dollar hurt US exporters—in particular, manufacturers. A 2017 study on the dollar’s appreciation in the early 2000s by economist Douglas Campbell found that the dollar strengthened sharply, in real terms, compared to low-wage trading partners including China. The subsequent increase in foreign imports and diminished demand for American exports resulted in a loss of around 1.5 million manufacturing jobs between 1995 and 2008.

There are also observable signs that automation wasn’t to blame. Consider the shuttering of some 78,000 manufacturing plants between 2000 and 2014, a 22% drop. This is odd given that robots, like humans, have to work somewhere. Then there’s the fact that there simply aren’t that many robots in US factories, compared with other advanced economies.

I recommend taking the time to read this article. It represents the best elucidation of the growing skepticism towards the benefits of globalization I have read yet and I suspect we are going to hear a lot more about what developed countries have lost from globalization going forward.

“You will have, for the first time, cars speaking together and it’s important for them to speak the same language,” said Christoph Voigt, head of R&D connectivity for Audi. As chairman of 5GAA, a trade group supporting automotive 5G, Mr. Voigt petitioned federal regulators to avoid “directly or indirectly pick[ing] technology winners and losers” because he is confident 5G will become the de facto standard on its own merits.

Even as Volkswagen AG is aligning its premium Audi brand with 5G in the U.S. and China, it is hedging its bets by deploying a version of DSRC on VW branded vehicles in Europe starting next year. A representative for VW said the German auto maker currently has no plans to introduce that technology to its lineup in the U.S. market.

The Trump administration, pointing to the expected proliferation of 5G, this year blocked the takeover of U.S. chip maker Qualcomm Inc. by Singapore-based Broadcom Ltd. on national-security grounds. Qualcomm is negotiating chip supply contracts with at least half a dozen auto makers for coming models.

Industry experts say 5G smartphones will debut next year and the first cars with 5G modems will appear as soon as 2020. That is about twice as fast as the transition for current 4G technology, which was introduced for smartphones in 2011 but didn’t show up in cars until GM integrated it into its latest version of OnStar remote communications in 2014.

There is an active discussion going on now between the car companies that wish to pioneer 5G connectivity and those which are putting short-range communications chips in cars. In essence it is a war between a chip led technological revolution or a router led evolution.

Here are some of the other important variables mentioned in the Berg paper, based on the analysis of data collected by a German e-commerce company that sells furniture as it processed 270,399 purchases. (It ships the furniture first and gets paid later, so defaults are observable;  the annualized default rate is around 3 percent, roughly in line with the statistics for consumer loans issued by German banks and comparable with U.S. rates).

Those who order from mobile phones are three times as likely to default as those who order from desktops.  A customer who arrives at a shopping site from a comparison engine is twice as likely to default as one who clicks on a search engine ad.

A customer who uses her name in her email address is 30 percent less likely to default than one who doesn’t. But it’s better if the email address is linked to a paid internet or cable package than if it’s from a free service, especially an outdated one like hotmail.com or yahoo.com. And it’s better if the address contains no numbers.

Those who shop between noon and 6 p.m. are half as likely to default as midnight to 6 a.m. buyers. Businesses can also expect more trouble from those who make an error when typing in their email address or put in their name and address in all lowercase letters.

These findings seem intuitive. People with regular habits and better self-control are relatively more reliable than those who lack those qualities. People who pay for services (and expensive devices) are likely more affluent than people who don’t. According to the Berg paper, the model based on these parameters -- the most rudimentary data we provide to any site on which we have to register -- is slightly more predictive of default than the German equivalent of a FICO score. A model that uses both the digital footprint and the credit score is even more predictive.

There are, however, multiple problems with this kind of modeling, even apart from the widespread worry that black-box scoring algorithms could end up making decisions on the basis of race, gender or other equally sensitive variables.

Consider this hypothetical case: I’ve paid out two mortgages and never defaulted on a loan. But not only do I own a cheap Android device, I also give e- commerce sites a free email address with numbers in it, so they don’t spam my main address. Making matters worse, I often make purchases late at night because I’m too busy to surf shopping sites during the working day. I’m a fat-fingered typist. And I use shopping comparison sites to find the best price. This pretty much rings all the default bells in the Berg model; I’m clearly not the only person with a high credit rating who does: The Berg paper says the model’s results are weakly correlated with credit scores.

Big Data is going to be used to make decisions on our credit scores. I think it is a given considering the pace with which artificial intelligence systems are being implemented in large data sets. It doesn’t have to be an either/or situation particularly because there is a statistical difference between loose correlations and hard correlations.

Tesla Inc. may have some bad news for those betting on cobalt to continue its record-breaking rally, and good news for nickel bulls.

While the weight of its Model 3 is on par with gasoline- powered counterparts, its battery cells are of the highest energy density used in any electric vehicle, the Palo Alto, California-based company said Wednesday in a letter to shareholders.

“We have achieved this by significantly reducing cobalt content per battery pack while increasing nickel content and still maintaining superior thermal stability,” Tesla said.

Cobalt prices have more than tripled in the past couple of years as companies like Tesla strive to bring electric vehicles into the mainstream car market, and with supply largely dependent on a few mines in the politically volatile Democratic Republic of Congo. Nickel, which has gained about 50 percent in the same span, is far more widely available.

Tesla says the cobalt content in its nickel-cobalt-aluminum cathode chemistry is already lower than next-generation cathodes that will be made by other cell producers with a nickel- manganese-cobalt ratio of 8:1:1.

In the last six months I have seen estimates for when the 8:1:1 ratios of nickel : manganese : cobalt would be achieved in commercial batteries that ranged from 5 to 10 years from now. Tesla has these batteries in the limited number of Model 3 cars it is putting out today. That is a testament to exponential pace of technological innovation because it represents another powerful enhancement to energy density.

Not so fast, say critics. The negative trends affecting the economy reflect deep social problems that resist change. “Rising educational attainment during the 20th century was an important source of productivity growth,” writes Gordon, “but the pace of that increase slowed markedly after 1980.” The truth is that we’ve been trying to improve schools for decades with, at best, modest success.

Or take the drain of prime-age men from the job market. The main problem, argues Gordon, “reflects in large part the loss of stable middle-income employment opportunities.” The result has been fewer marriages, more drug use and more suicides, writes Gordon. None of this is easily altered. Among 20 advanced countries, the United States has the second-lowest labor-force participation rate of prime-age men. Only Italy is lower.

We seem to have entered a new economic era — one defined more by the limits on our economic power than by its promises. The explosion of new technologies seems to have fooled us into thinking that a burst of innovation will magically restore our economic vitality. On the evidence, this is a mirage.

I use YouTube when I want a refresher on how to wire a plug or replace a bulb in my car’s headlight. Unfortunately, my children live on YouTube, it’s a substitute for TV but they also post videos of their own. However, it is hard to justify endless videos of cats or people falling over as being beneficial to the economy beyond being a distraction. If that is your measure of technological innovation then you really should get out more.

Cancer costs the global economy about $1 trillion a year. Even today that is still a lot of money. By comparison the global economy spends about $6 trillion on energy a year.

Here’s how it works. Lightweight sensors embedded in workers’ hats or helmets wirelessly transmit the wearer’s brainwave data to a computer — it probably works a bit like an electroencephalogram (EEG), as MIT Tech Review notes. Then, artificial intelligence (AI) algorithms scan the data, looking for outliers that could indicate anxiety or rage.

Some organizations use the sensors during routine work, while others embed them in virtual reality (VR) headsets to monitor workers’ emotions during training exercises.

We don’t know exactly how many workers have been subjected to this surveillance system, but the SCMP article does say the technology is being deployed “on an unprecedented scale” in China.

At least a dozen Chinese factories and businesses are using the emotional surveillance system to monitor workers, according to the SCMP report. Manufacturing company Hangzhou Zhongheng Electric uses it to keep tabs on production line workers, while State Grid Zhejiang Electric Power monitors workers as they help the company provide power to the Zhejiang province. The nation’s military, public transportation companies, and various state-owned businesses use it, too.

It turns out George Orwell was not imaginative enough when he came up with the premise for 1984. I have to admit my favourite book of all time is the Master and Margarita because it so expertly challenges the mores of one society with what are held out to the reader as objective facts quite beyond the lexicon of many of the characters. 

Partly because of the stepped-up pace, Nokia said Thursday it now expects industrywide declines in equipment sales to carriers to come in less than feared. Nokia said those sales should fall just 1% to 3% in 2018. In February, Nokia predicted a 2% to 4% drop.

Meanwhile, Ericsson shares have risen 20% since it reported last week that its losses narrowed sharply. Investors see a turnaround effort—involving cutting jobs and divesting itself of businesses that aren’t related to selling telecom equipment—taking hold. Ericsson also sees 5G momentum rising in the U.S.

Chief Executive Borje Ekholm said carriers in North America are “investing heavily…in order to be early on 5G.

In much the same way that batteries, gene editing and the microchip are enabling technologies, 5G has the potential to deliver the connectivity speeds that will power the next wave of connected devices. Everything from the billions of sensors predicted by the Internet of Things to autonomous vehicles will depend on fast, seamless internet connectivity while mobile. That is going to require a completely new infrastructure development push to get the networks built before the reality of these expected innovations can be realised.

In your 10/April long-term themes review, you said: "So, the big question many people have is if we accept the bullish hypothesis how do we justify the second half of this bull market based on valuations where they are today? ..... However, the answer is also going to have to include inflation. "

My thoughts, not in any particular order:

If we look at Robert Shiller's research ~1870-now, on the US share market, his studies show that historically, extreme valuations in the US share market (as assessed by cyclically adjusted P/E ratio) have always been followed by poor average real return over the following 10-20 years."
You point to inflation as to how a secular bull market (in nominal terms implied) can now occur for the US share market (by implications I think you are reflecting on the US share market) over say the next 10-15 years (say).  You use the experience of Argentina and Venezuela as justification for your argument - where from memory, there was hyperinflation in the periods to which you refer.

First, I do not think you are suggesting hyperinflation for the USA .... mismatch 1.
For Argentina and Venezuela, I think their currencies also crashed. I do not think you are suggesting the US dollar is going to crash. Possible mismatch 2.
Rather than a comparison with Venezuela and Argentina, perhaps a better analogy is to the period in the USA following the late 1960s, when US share markets where at quite high valuations (though not nearly as expensive as now on a CAPE basis). Following the peak valuations of the late 1960s, the US share market went sideways (with some large dips) over the next 16 years or so.

In summary, I am not sure that your argument is particularly robust.  Yes, the technological revolution is a critically important new phase which will have a huge impact over the next 10 and 20 years..... and there may well be a secular bull market in that sector ... but does that really mean that the technology sector by itself will take the whole S&P500 with it in a secular bull market for the next 10 or 20 years?

Your thoughts?

Thank you for this question which gave me plenty of room for thought. My first reflection is that one of the benefits of this service is the Socratic dialectical method unfolds in real time as these big topics offer endless room for discussion and revision. I spent a good deal of time talking about long-term cycles in the Big Picture Video on the 27th which you may find of interest. 

The data is a fresh rebuttal to those who warned that hundreds of billions of dollars of tax relief will head directly to the stock market and be harvested by shareholders already fattened by a nine-year bull market. While buybacks indeed got a boost from the windfall, companies increased the rate at which they unleash cash for building factories and upgrading equipment, a strategy that’s preferred by investors for the benefit of future growth.

Corporate buybacks, while increasingly a key pillar of the second-longest bull market on record, are constantly drawing criticism from politicians and money managers as being short-sighted. By their line of logic, companies take advantage of low interest rates to borrow money and buy back shares as a quick way to boost per-share earnings. In doing so, they’re forgoing investment opportunities that may benefit long-term growth.

In the past year, shares of companies with the highest layouts on repurchases and dividends relative to market value are trailing those that spend most on capital expense by almost 5 percentage points, according to data compiled by Goldman Sachs Group Inc. and Bloomberg.

Capital expenditure is an interesting topic considering how much the complexion of industrial base has changed over the last decade. Warehouses have replaced retail space, robots are replacing workers and the cloud is replacing office space. Therefore, when we think about what companies are going to be spending their tax windfall on it is probably going to be on warehouses, robots and servers.

“There is a legitimate concern on the side of battery manufacturers about long-term availability of supply,” said Daniel Jimenez, an SQM vice president who recently estimated that the industry will require a capital investment of $10 billion to $12 billion in the next decade to meet demand.

The green light to mine vastly more lithium, combined with pending changes in its ownership structure, has suddenly put SQM in the sights of several global mining companies, including London-based giant Rio Tinto Group. Among the most aggressive bidders is China’s Tianqi Lithium Corp., which has offered to buy SQM shares at a 20 percent premium, Eduardo Bitran, the former head of government development agency Corfo, said earlier this year.

“Tianqi owning the stake would be another step towards overall Chinese consolidation of the lithium industry,” Chris Berry, a New York-based energy-metals analyst and founder of House Mountain Partners LLC., said in an email.

SQM’s growth projections have been among the chief catalysts in the decline of lithium miners over the last few months. The big question is how quickly demand picks up over the next decade to absorb additional supply. Lithium was a supply inelasticity meets rising demand market from 2013 but really only garnered interest in the last couple of years as the shares turned to outperformance. Supply is now increasing so we are likely to see more volatility in the respective shares. This story further highlights China's intention to be the dominant force in the electric car sector. 

An immunotherapy treatment — one that boosts the immune system — has improved survival in people newly diagnosed with the most common form of lung cancer (advanced non–small-cell lung cancer), according to an open-access study published in the New England Journal of Medicine.

The study results were presented last Monday, April 16, at the annual American Association for Cancer Research conference in Chicago.

Cutting the risk of dying in half. The new study, led by thoracic medical oncologist Leena Gandhi, MD, PhD, associate professor of medicine and director of the thoracic medical oncology program at NYU’s Perlmutter Cancer Center, shows that treating lung cancer by a combination of immunotherapy with Merck’s Keytruda (aka pembrolizumab) and chemotherapy is more effective than chemotherapy alone, according to a statement by NYU Langone Health.

It is easy to forget during a period of market turbulence that the capital markets cycle and the technology cycle are not the same thing. The former affects the price of securities but the latter represents the basis for long-term value.

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

Bitcoin crashed in no uncertain terms in the first quarter of this year; losing about 70% of its value. As the first and largest of the cryptocurrencies it represented the epicentre of risk during the crash and therefore is also likely to be the most likely to form a lengthy base formation.

Hello Eoin, Whatever age you happen to be, it is always salutary to lose a parent. A constant pillar in one's life has gone and no more questions can be asked. It brings into relief one's own fragility and mortality in a way that few, if any, other deaths will do. I hope your mother's passing was a comfortable one. My condolences to you and your family.

While it is probably improper to revert immediately to business, I am sure you will want to re-immerse yourself in the observation and interpretation of markets without delay. On this basis, I have a question:

Given that we believe we are heading for monetary contraction, a rise in interest rates and accelerating inflation how should we be positioning portfolios? Banks and resources should be well bid for the time being and Japan should benefit from inflation.

But how about India, China and the other economies of North and South East Asia? What sectors and markets are best avoided? At what point does one accumulate cash? Gold is much talked about as an inflation hedge but that will be a shooting star - it might soar in the near future but it will then weaken once more. It is to be regarded as a hedge or a trade, not as an investment - at least that's my view.

In my own portfolio, I've trimmed China and India, reduced or eliminated high flying 'big-tech' stocks (but not touched PCT), increased my Japan weighting and increased cash. I'm probably underweight gold. I plan to accumulate more cash but at this stage, I've no idea what holdings I shall reduce or sell over the coming months. Providing one is not losing money, investment is fun but over the next two or three years, I suspect there will be plenty of opportunities to lose money which we should try to avoid. It's a tough time for you and you have plenty on your plate but if you care to comment on these musings it would be much appreciated. All best.

Thank you for your condolences. The outpouring of warmth and compassion from subscribers has been enormously gratifying for my whole family and I. My mother’s passing leaves a hole in the wider family, since she was the matriarch in no uncertain terms, but it has also encouraged us all to work harder at communicating.

This is a detailed question and there is no one simple answer. I’ll attempt to more fully explore these issues over the course of the next few days and weeks but here are some of my current thoughts.

What are your current views on lithium and lithium miners?

I continue to enjoy your tour de force reporting and analysis. Nothing stops you, not even airline travel. Amazing.

Thanks for this question which I’m sure will be of interest to other subscribers. It’s been a busy few weeks, what with an enjoyable and educative trip to Japan last week and the upcoming flight to Melbourne for The Chart Seminar and another conference next week, where I’m looking forward to chatting with Marc Faber.

Sometimes I look back with a sense of yearning on the days when David could still take a month off in August to cycle from Land’s End to John O’Groats and back again. In fact, part of the reason he brought me onboard in 2003 was to ensure the service could move to a seamless daily publication schedule.

I’m beginning to think about how to arrange taking a holiday over the summer. David used to invite guest writers to contribute copy to the site when he was away and I would like to do the same thing while I am away for perhaps two weeks in July or August. If any subscribers are interested in submitting an article during that time please let me know and I would be happy to discuss the conditions under which that might be appropriate.

Now let’s turn to lithium miners.

New FCC rules could entice small satellite operators, such as Planet Labs Inc. and Pumpkin Inc., to expand the use of their devices and attract more customers and investors. They could also prompt other industries to consider using less-expensive satellites to comb the planet for profit-boosting opportunities—from insurers busting fraudsters to farmers tracking crop changes.

The interest in small satellites—which can range in size from postage stamp to small refrigerator—has grown rapidly in recent years. There were 335 small satellites launched in 2017, six times the total in 2012, according to a 2018 report from consultancy Bryce Space and Technology. Small satellites typically hitch a ride on rockets with other items, and their stints in space are short.

“More satellites mean more regulatory reviews. Hence the problem: our current regulations weren’t designed with these smaller satellites in mind,” FCC Chairman Ajit Pai wrote in a March 26 blog post.

The agency’s proposal also raises the question of space junk, a term that refers to millions of used fragments of rockets and satellites that crowd earth orbits. Loosening rules to allow more satellites, even small ones, could heighten such concerns.

The FCC, in its deliberations, will address “limiting orbital debris,” Pai said in the blog.

The measure is “reflecting the state of the industry—it’s changing,” Lisa Ruth Rand, a technology historian who researches space debris, told Bloomberg Law.

Regulators should keep in mind that extremely small satellites—too small for tracking technology to detect—can endanger other satellites and cause crashes, Rand said. “Hopefully these regulations will acknowledge the fact that, very literally, the landscape of outer space is changing,” she said.

The evolution of nanosatellite technology represents a significant enabler for data accumulation, monitoring, under developed countries to skip whole stages of development and for global technology companies to gain access to markets they are currently blocked from.

“Human society is facing a major choice to open or close, to go forward or backward,” Xi told hundreds of investors gathered on the resort island of Hainan, in a speech that didn’t mention Trump’s name. “In today’s world, the trend of peace and cooperation is moving forward and the Cold War mentality and zero-sum-game thinking are outdated.”

Trade talks between the world’s biggest economies broke down last week after the Trump administration demanded that China take steps to curtail support for high-technology industries, a person familiar with the situation said. The conciliatory tone of Xi’s speech helped bring risk appetite back to Asian markets as shares from Sydney to Hong Kong rose alongside oil and metals and Treasuries extended declines with gold and the yen.

As soon as Mrs. Treacy’s old school friends have children she gets a friends request on WeChat. They begin planning at birth to send their child abroad to be educated. Only last week she was approached to be a guardian for one child about to enter high school and to help arrange a scouting trip for another family whose son is now five.

Now here's a thought from your friendly local software expert: Microsoft Windows has approximately 50 million lines of code and 1 defect per 2,000 lines of production code (as reported by Sogeti Labs). Industry production code is often reported to have 15-50 defects per 1,000 lines of code (Kloc). My head says Windows therefore has 25,000 defects. Not all defects can be tested out. Not all defects get "seen", because they are in rarely-executed code. Not all "seen" defects cause the blue screen of death, of course. But some do. ("The blue screen of death" is when a computer freezes up completely - on Windows machines, a blue screen is displayed with basic information intended to help an expert determine what went wrong.)

According to The Visual Capitalist, the autonomous control software in a self-driving car has about 100 million lines of code (and growing), so if a self-driving car has the same software quality as Windows, it should only have about 50,000 defects. Not all defects get "seen", because they are in rarely-executed code. Not all "seen" defects cause the blue screen of death, of course. But some do.

Oh, but but but the pointy-hair guy (the non software engineer) proclaims loudly, surely Tesla does a much better job of testing than Microsoft (with a LOT less engineers than Microsoft, maybe just to mention). And of course the other companies building similar software will also do a much better job of testing. Wow, maybe 10x better. So that self-driving car which will be hurtling you down the crowded freeway at 75 mph should only have 5,000 defects. (If you believe you can get 10x better testing results without spending a lot more than 10x the $, I have a really cool virtual bridge to sell you.) Not all defects get "seen", because they are in rarely-executed code. Not all "seen" defects cause the blue screen of death, of course. But some do...

Microsoft actually does a good job of testing. 10x better quality is really hard, and doing it with less resources, maybe not so doable. The space shuttle is the only large piece of production code that I know of where defect density was driven to near-zero - it cost many thousands of dollars per line to get that result, and the system was only 400,000 lines of code.

Hop in, let's let the car take us for a spin.

Thank you for this account which highlights the enormity of the challenge in getting self- driving cars on the road. There appears to be a “you can’t make an omelette without breaking some eggs” attitude surrounding the sector right now. However, with the number of fatalities mounting from both Tesla’s semi-autonomous features and now Uber’s killing of a pedestrian the focus of attention is likely to be turned towards the safety of these products.

President Donald Trump renewed his long- running assault on Amazon.com Inc. with an early morning tweet Thursday. But what measures can he actually take against the online retail giant?

He could push for probes of consumer protection, privacy and antitrust issues. He could also step up his support for allowing states to collect sales tax on third-party purchases from Amazon, or seek to have the Postal Service charge more to deliver packages. And he could thwart Amazon’s aspirations to win a multibillion dollar Pentagon contract for cloud services.

Even with those powers, Trump’s ability to act has limits. Inquiries by the Justice Department or the Federal Trade Commission could take years and bear a high burden of proof. The FTC and other enforcement agencies guard their independence, as does the board of governors of the Postal Service. Changes to the tax law would require cooperation from Congress, which just passed a tax overhaul and may have limited appetite to reopen negotiations.

The feud pits the world’s most powerful man against one of the world’s biggest corporations -- a global titan with $684 billion in market capitalization and more than half a million employees. At stake is its reputation, revenue and, potentially, ability to continue to disrupt markets as it reshapes retailing.

Capitalism trends towards consolidation, as the strong eventually consume the weak and further dominate their respective sectors. That has created a comparatively small number of companies that we refer to as Autonomies which are truly global in scale and exert considerable sway both over their national indices but the global sectors in which they reside.

There were also losers:

U.S. labor groups, it turns out, were right to be suspicious of China’s arrival in the global market. Taken together with a shift toward more capital—intensive production, the result was stagnant wage growth. Between 2001 and 2016, real income for the bottom 20% of U.S. households didn’t rise at all, and wages for the middle 20% managed only a 4% increase.

Mercantilist policies in China (combined with an irresponsible approach to financial regulation and mortgage lending in the U.S.) resulted in a buildup of major global imbalances. China’s current account surplus ballooned to 9.9% of GDP in 2007 from 1.3% in 2001. U.S. current account deficit peaked at 5.8% of GDP in 2006. The recycling of China’s surplus back into U.S. Treasuries kept U.S. borrowing costs too low for too long, an important background condition for the real estate bubble and financial crisis.

For foreign policy hawks, the strategic benefits were outweighed by the costs. China didn’t democratize, in fact it doubled down on its single—party model. Worse still from Washington’s point of view, China’s rise means it now jostles with the U.S. for global influence, and on straight—line projections may overtake in terms of economic size in the next decade.

Taken in the context of the total trade between China and the USA and indeed the USA and everywhere else, the total amount announced as tariffs is comparatively small but the knock-on effect to sentiment has been severe and quick.

Electric cars may be cheaper than their petroleum counterparts by 2025 if the cost of lithium-ion batteries continues to fall.

Some models will cost the same as combustion engines as soon as 2024 and become cheaper the following year, according to a report by Bloomberg New Energy Finance. For that to happen, battery pack prices need to fall even as demand for the metals that go into the units continues to rise, the London-based researcher said on Thursday.

The clamor to roll out electric vehicles has grown louder as countries and companies race to clean up smog in their cities and hit ambitious climate goals set by the Paris Agreement. U.K. lawmakers started an inquiry into the market in September, probing the necessary infrastructure and trying to determine whether to bring forward the 2040 deadline to end the sale of gasoline and diesel cars.

Tesla has one major undeniable achievement to its name. It made electric cars sexy. Before Elon Musk delivered his roadster, electric vehicles were a hard sell, plagued by perceptions of inconvenience. However, in little more than a decade, they have become so desirable that just about every car company is planning on investing billions in manufacturing capacity.

But at the same time, there’s been a spike in sales to China of precision metal working machines and equipment for making chips from firms like Japan’s Yaskawa Electric Corp. With a Chinese state-backed fund gearing up to pour as much as $31.5 billion into homegrown semiconductor manufacturing, there’s potential for trade flows to start to shift.

China’s ambitions, set out in its sweeping Made in China 2025 plan, go much further than semiconductors and would see its technical prowess advance in a host of areas, ranging from bio- medicine and artificial intelligence to new-energy vehicles and aircraft. The challenge to Japan, Korea and Taiwan also applies to European exporters like Germany, and comes on top of the risks to global trade from the Trump administration’s embrace of tariffs.

"The bits of the global supply chain that are currently the preserve of Korea, Japan, Taiwan, the U.S., and Germany, are the bits of the supply chain that China has a decade-long industrial strategy to move into," said Tom Orlik, Bloomberg’s chief Asia economist. He said it’s only a matter of time before many components for electronic products are made domestically and the country is on track to become a car exporter. Eventually, it will be selling airplanes, said Orlik.

China is moving up the value chain in just about all industries. It’s policies in achieving that goal are openly mercantilist. It has unabashedly supported domestic industry by whatever means necessary, closed off the mainland market to global competitors, engaged in industrial espionage on a grand scale and none of these actions are without precedent.

A link to the full report and section from it are posted in the Subscriber's Area.

This is a very measured report which I think is underplaying the short-term volatility tariffs are likely to provoke. Bilateral trade between the USA and China is substantial and US companies have invested considerable resources in developing customer bases in China. They are far from immune from Chinese retaliatory measures which over the course of the medium-term will likely be ironed out but probably not before there is some pain felt on both sides.

Tencent’s business revolves largely around its vast social networks WeChat and QQ, the twin platforms through which more than a billion people consume games, news and online entertainment while paying for a plethora of real-world services. Chief Executive Officer Ma Huateng is now angling to grab a larger slice of an advertising pie dominated by Alibaba Group Holding Ltd., while investing in new areas such as financial, retail and computing services.

“Tencent needs to invest in new business, it would help the company build a better ecosystem infrastructure to support growth, but it will hurt margins in the short term,” said Benjamin Wu, an analyst at Shanghai-based consultancy Pacific Epoch.

Analysts at Credit Suisse Group AG and Citigroup Inc. lowered their earnings estimates for Tencent after the results.

Tencent’s quarterly profit included gains in the quarter of 7.9 billion-yuan thanks mainly to the initial public offerings of Sea Ltd., Sogou Inc. and Yixin Group Ltd. Those are just three of the 600 companies the company has invested in.

I don’t know a Chinese person, either by birth or heritage, that does not use WeChat. That fact alone means it is going to be more expensive to gain new customers.

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

Here is a brief summary of my view at present.

We expect the magnitude of workforce change in the 2020s to match that of the automation of agriculture from 1900 to 1940. However, the transition of farm workers into the industrial sector was spread out over four decades. In the case of the automation of manufacturing, the impact was over a shorter time period (roughly 20 years), but the share of labor force in manufacturing jobs was relatively small in the US. Investment in automation is likely to proceed moderately faster than agricultural automation or manufacturing automation unless other forces act to impede its progress, and it will affect a larger percentage of the total workforce.

The tension between the push to offset slowing labor force growth with automation and the pull to slow automation's rollout to prevent massive disruption will play out over the next 10 to 20 years. But once the first companies begin deploying new forms of automation, others are likely to follow suit rapidly to stay competitive.

The base-case scenario
Based on the magnitude and speed of change, our base-case scenario could result in about 2.5 million jobs per year lost or not created because of automation. Previous transformations provide an interesting comparison. The automation of agriculture transformed national economies and disrupted labor markets, culminating in the Great Depression. But if that event occurred today, scaled to the current population and labor force, it would displace 1.2 million workers per year. The rate of reabsorption from the automation of agriculture was about 700,000 workers a year.

Technology is disruptive and inherently deflationary. The rise of the robot represents a significant secular theme and for the millions of workers who are going to be affected their only resource is likely to be at the ballot box.

Politicians on both sides of the Atlantic are calling on Chief Executive Officer Mark Zuckerberg to appear before lawmakers to explain how U.K.-based Cambridge Analytica, the data-analysis firm that helped Donald Trump win the U.S. presidency, was able to harvest the personal information.

Facebook has already testified about how its platform was used by Russian propagandists ahead of the 2016 election, but the company never put Zuckerberg himself in the spotlight with government leaders. The pressure may also foreshadow tougher regulation for the social network.

U.S. Senators Amy Klobuchar, a Democrat from Minnesota and John Kennedy, a Republican from Louisiana, have called on the chairman of the Judiciary Committee to bring in technology company CEOs, including from Twitter Inc. and Alphabet Inc.’s Google, for public questioning.

The status quo was shaken by the election of Donald Trump and the rise of populist causes right across Europe and parts of Asia. Whether this is as a result of Russian propaganda or demographic/personality profiling is missing the point. A deep vein of discontent has been tapped by emotional rhetoric which is a symptom of political change regardless of the avenue through which it is delivered. That is contributing to polarity in political views which is likely to intensify until a new reform agenda has been implemented and it could take a decade of political disfunction to achieve it.

Prominent commodities research house Wood Mackenzie this week released a report on battery materials that forecasts a decline in the price of cobalt and lithium this year which would turn into a rout from 2019 onwards.

Woodmac is not lowballing demand growth for lithium and the authors expect demand to grow from 233 kilotonnes (kt) in 2017 to 330kt of lithium carbonate equivalent in 2020 and 405kt in 2022, but:

… the supply response is under way. Yet it will take some time for this new capacity to materialise as battery-grade chemicals. As such, we expect relatively high price levels to be maintained over 2018. However, for 2019 and beyond, supply will start to outpace demand more aggressively and price levels will decline in turn.

According to Woodmac data, spot lithium carbonate prices on the domestic market in China are already down 6% from December levels to around $24,500 a tonne while international market prices have remained robust rising to $16,000 at the end of February.

Lithium and cobalt represent the freshest iterations of the supply inelasticity meets rising demand condition that contributes to the cyclicality of mining ventures. Batteries are now big business and with Volkswagen saying this week that it is willing to outspend Tesla on batteries by the early 2020s the demand portion of the market is well affirmed.

Volkswagen AG secured 20 billion euros ($25 billion) in battery supplies to underpin an aggressive push into electric cars in the coming years, ramping up pressure on Tesla Inc. as it struggles with production issues for the mainstream Model 3.

The world’s largest carmaker will equip 16 factories to produce electric vehicles by the end of 2022, compared with three currently, Volkswagen said Tuesday in Berlin. The German manufacturer’s plans to build as many as 3 million of the cars a year by 2025 is backstopped by deals with suppliers including Samsung SDI Co., LG Chem Ltd. and Contemporary Amperex Technology Ltd. for batteries in Europe and China.

With the powerpack deliveries secured for its two biggest markets, a deal for North America will follow shortly, Volkswagen said. In total, the Wolfsburg-based automaker has said it plans to purchase about 50 billion euros in batteries as part of its electric-car push, which includes three new models in 2018 with dozens more following. 

Volkswagen needs a new strategy if it is going to get past the diesel scandal, so embracing batteries whether for all-electric or hybrid vehicles is a solution. By committing to such a large purchase of batteries it will overtake Tesla as the largest consumer and this announcement helps to backstop demand for the world’s largest battery producers as well as the miners that produce the requisite metals.

Links to both articles are posted in the Subscriber's Area.

China was making headlines today because Xi Jinping’s bid to remain in power following the end of his official term was rubber stamped by the People’s Congress today. It has been a key object of Xi’s to do everything possible to ensure China sits on a level playing field with the USA on the international stage. Modernisation of the military, greater surveillance of the domestic population, strengthening the nation’s censorship of the internet, the Belt and Road infrastructure program, dominating international engagement with African countries, spending on research and development and infiltration of university campuses in the OECD are all part of that plan.

Bond traders have to contend with both larger auction sizes and a condensed schedule when the U.S. Treasury sells $28 billion of three-year notes and $21 billion of 10-year notes on March 12. To JPMorgan Chase & Co. strategists, that combination signals a weak reception. Last month’s offerings, the first since 2009 to increase in size, priced at yields higher than the market was indicating heading into the sales. The 3- and 10-year auctions are usually spaced out over two days, but when they came on the same day in December, yields also missed higher.

Bull markets don’t often end because demand evaporates. They usually end because the surge in prices encourages supply into the market and that eventually overwhelms demand. There is no shortage of new supply, in fact the USA’s decision to double its deficit is the latest in a long line of issuers who have been locking in low rates. The fact that one of the biggest buyers, the Fed, is now a net seller, should be giving investors pause when thinking about the value represented by bonds at close to 3%.

Autodesk continues to show steady progress in shifting to a subscription model, which has boosted its recurring sales. Subscriber additions continued to be aided by its discounting and other promotions for converting legacy license users to subscription offerings. The company has bundled its products to boost annual recurring revenue (ARR) and average revenue per subscriber (ARPS). While upsell of subscription products to its maintenance subscribers is aiding sales momentum, new cloud products are unlikely to be a growth driver in the near term.

Subscription business models have been growing in popularity among technology companies since Adobe first explored the concept about five years ago. Historically technology has been a highly cyclical business with each new iteration of the product or software resulting in a surge in sales which subsequently led to declines as sales growth tapered off while support costs rose. The cycle would be repeated with each new product offering and this also put a lot of pressure on companies to come up with a new iteration that was measurably better than the last to justify the additional outlay.

You mention lead indicators, could you explain those you prefer?

At FullerTreacyMoney we look at two different types of lead indicator. The first is what one might think of as individual to the animating theme behind a trend, the others are broad market indicators.

Van Dijk sees investment in e-commerce businesses as helping to reduce a valuation gap with Naspers’s stake in Chinese Internet giant Tencent Holdings Ltd., which is worth more than the company as a whole. E-commerce units, which include online food delivery in India and educational software in the U.S., have the highest potential for an initial public offering, Het Financieele Dagblad cited the CEO as saying. He didn’t set a timeline.

If Naspers decides to list its ecommerce ventures in Amsterdam the question of whether that will include its 30% stake in Tencent is going to have a major influence on the market since it almost certainly represent a powerful new high growth addition to the Euro STOXX 50. 

At the same time, Walmart Chief Executive Officer Doug McMillon is trying to convert the company’s brick-and-mortar shoppers into online customers, who spend almost twice as much overall and seek out higher-priced items.

At Walmart’s e-commerce unit, sales rose 23 percent last quarter. That’s less than half the pace of previous periods. The Bentonville, Arkansas-based company had been getting a tailwind from its acquisition of Jet.com, an online upstart that it bought in 2016. Still, the company maintained its full-year forecast for online sales growth of about 40 percent.

The company needs to widen its e-commerce base, especially among younger and professional demographics, said Neil Saunders, managing director of research firm GlobalData Retail.

Wal-Mart is spending a lot of money on its ecommerce platform but the cold reality is that its backend is antiquated compared to that offered by Amazon, eBay or Etsy. Maybe it is focusing on selling its own products over those of third party sellers but if that is the case one has to question why it has been marketing to Amazon sellers so aggressively. 
 

And that is the likely fate of conventional retail. Like the railroad, there’s an extraordinarily surfeit of retail space built with little consideration of what the market will actually sustain; recent declines in the retail revenue per square foot in brick-and-mortar stores suggests that things are getting worse, fast. And like the railroad, there’s a new way of doing business on the block, except that instead of changing how we move people and goods, online retailing promises a new way of delivering them to the end consumer. 

If the per capita retail footprint declined as much as the railroads did, it would fall all the way down to 2.82 square feet per capita. That’s a lot of empty malls and defunct big box stores, but retail won’t disappear any more than the railroads have gone extinct.

In fact, in 2014, the inflation-adjusted revenue that railroads earn per mile of track is 2.7 times what it was a century ago. More startling still, the so-called “ton miles” of freight carried on the nation’s railroads (a ton mile is one ton of freight carried one mile) has tripled since 1960, even as the total size of the operational railroad system has declined dramatically.

That points to the likely future of conventional retail: a drastic reduction in the per capita footprint, with the remaining stores capable of earning far more money per square foot. It’s not the brightest of futures. But it’s also not the end of the world.

Near where I live in Los Angeles, a large mall is close to shutting since it’s primary tenants, Macys and Nordstrom, have decamped to the newly refurbished Westfield mall in Century City near Beverly Hills. The two malls are about a mile apart but until a couple of years ago Macys seems to have been comfortable with the idea of having two large stores within close proximity of one another. In between the two malls the only businesses that have survived are universally service oriented. So, what is going to be done with all the empty commercial space sitting on valuable pieces of real estate?

The apparel industry—unlike cars or electronics—seemed protected. Fabrics are notoriously difficult to work with, meaning nimble human hands are often better than machines. There was plenty of labor in Bangladesh, Cambodia and China, reducing the urgency to automate.

But labor costs have been climbing, even in developing countries. And technology is becoming so advanced that machines can increasingly handle difficult tasks such as manipulating pliable fabrics, stitching pockets and attaching belt loops to pants.

All that is upending the economics of the apparel industry, which long served as the first rung on the economic ladder for poorer countries, especially in Asia. A 2016 International Labor Organization study predicted some Asian nations could lose more than 80% of their garment, textile and apparel manufacturing jobs as automation spreads.

“I worry about developing countries—they are in the bull's-eye of this automation revolution” as robots master repetitive tasks once dominated by poor nations, said Erik Brynjolfsson, director of the MIT Initiative on the Digital Economy. Most jobs of the future require significant skills training—and that is where more-developed nations thrive, he said. 

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

The textile sector has for generations represented the first rung on the road to economic development. That is probably still the case since there are still plenty of low cost, high population areas, not least in Africa.

However, while in previous generations a country could rely on the textile sector for job growth for decades, technological innovation now demands much faster progression up the value chain as well as the fostering of a domestic market. 

Cisco is one of the richest companies in the technology industry. It has more than $70 billion in cash, most of which was earned overseas and parked there. The company will now bring back some of that money and devote an additional $25 billion to buying back stock. Cisco took a charge of $11.1 billion related to new tax laws, leading to a net loss of $1.78 a share in the second quarter. Excluding some items, it reported a profit of 63 cents a share, beating analysts’ estimates for 59 cents.

Sales rose for the first time in eight quarters to $11.9 billion in the three months ended Jan. 27, also coming in ahead of estimates.

Robbins is seeking to restore the growth that once made Cisco the biggest company in technology. It’s a challenge amid a fundamental change in the networking industry that’s forcing Cisco to acquire new skills and adapt its business model. The technology of networks is increasingly shifting to software control and security of data flow and away from fixed-purpose hardware. At the same time, some of the largest buyers of gear -- owners of data centers such as Amazon.com Inc.’s Amazon Web Services and Microsoft Corp.’s Azure -- are increasingly designing their own hardware forcing Cisco to come up with new, cheaper and more flexible products that might interest them.

A $25 billion buyback program is enough to move the needle for the majority of shares and Cisco extended the breakout from its more than decade long base formation. 

content machine, dominating the majority of phones worldwide. Now “what’s on your mind?”

Four hundred hours of video are uploaded to YouTube every minute, which means that Google has more video content than any other entity on earth. It also controls the operating system on two billion Android devices. But AT&T needs to divest Adult Swim?

Perhaps Trump is right that the merger of AT&T and Time Warner is unreasonable, but if so, then we should have broken up the Four ten years ago. Each of the Four, after all, wields a harmful monopolistic power that leverages market dominance to restrain trade. But where is the Department of Justice? Where are the furious Trump tweets? Convinced that the guys on the other side of the door are Christlike innovators, come to save humanity with technology, we’ve allowed our government to fall asleep at the wheel.

Capitalism trends towards concentration as the large and strong consume the weak. Despite claims to the contrary, it in the interests of company executives to ensure the company they work for comes out on top by whatever means necessary. It is rare in the extreme that fines levied, after the fact, match the benefit from ensuring a competitor’s demise. Therefore, large companies, that dominate their respective niches, tend to persist for as long as they retain the hunger to dominate.