The Nasdaq price action seems to indicate that the top reached on March 29th 2022 (+/- the high of February 2nd) is of significance since on the 16th of June the close was below despite the intraday spike and has been trading below for the past couple of days : is it a short or just a consolidation phase after some short term overbought condition before it roars again? Rates are pausing but QT resumed after the regional bank scare and its liquidity injection - which is equivalent to rate hiking - as well as M2 continuing to decline (I am not sure that the surge in velocity of money is offsetting it). Your thoughts are welcomed.

Thank you for this question, which is relevant today because monetary conditions are tightening, but from extraordinarily loose conditions. For example M2 is contracting for the first time on a year over year basis.

However, that is occurring following an historic surge. Valuations were flattered by that surge and the largest companies have not yet seen any evidence of a reality check.

Velocity of Money has turned upwards which is consistent with an inflationary bias as consumers accelerate buying decisions. The figures are reported quarterly with a one quarter lag so the data reported at the end of Q1 looks at Q4 2022. The simplest logic is the Fed has to continue to reduce the volume of cash available as the velocity of money rises. To combat inflation it will have to remove it faster than velocity is rising. 

China’s Contemporary Amperex Technology Co. Ltd., known as CATL, unveiled its strongest battery to date Wednesday, saying that it could one day be used to power electric aircraft.  

The battery, which loads more power into a smaller package, has an energy density of 500 watt-hours per kilogram, CATL’s Chief Scientist Wu Kai said during a presentation at the Shanghai auto show. CATL’s most recent battery, called Qilin, has an energy density of 255 Wh/kg and can power an electric vehicle for 1,000 kilometers (620 miles) on one charge. 

The Technology, which CATL calls a condensed state battery, is potentially a breakthrough that will help electrify sectors wed to fossil fuels because existing batteries are either too heavy or unsafe. Still, questions remain about the materials it will use, its cost and ultimate market impact.
 

CATL has a strong record of leading the way in both scale of manufacturing batteries and innovating on design. The Qilin battery sounded too good to be true when it was announced eighteen months ago but it is going into mass production this year. If China successfully puts a battery in the market with the promised characteristics of a solid state battery it would be a significant technological coup akin to the impact of the iPhone on legacy mobile phone manufacturers. 

“I’d love to really show you what I mean and unveil the next-gen car, but you’re going to have to trust me on that until a later date,” Franz von Holzhausen, Tesla’s design chief, said at the company’s headquarters in Austin, Texas. “We’ll always be delivering exciting, compelling and desirable vehicles, as we always have.”

Tesla shares fell as much as 8.6% as of 8:40 a.m. Thursday in New York, before the start of regular trading. Anticipation of the event contributed to a surge in the stock that added more than $300 billion of market value in two months.

Letdown
Musk, 51, confirmed Tesla will build a new plant in Monterrey, Mexico, in what he said was probably the most significant announcement of the day. The chief executive officer said Tesla will make its next-gen vehicle there, and that the company will hold a grand opening and groundbreaking at an
unspecified date.

When asked when the carmaker will show a prototype and if he could share details about the size, content and performance of the vehicle, Musk responded that Tesla also will hold a “proper sort of product event” at some point, but didn’t say when.

“We’re gonna go as fast as we can,” said Lars Moravy, Tesla’s vice president of vehicle engineering. “We expect that to be a huge-volume product.”
 

I watched most of the Tesla investor day presentation last night and was struck by how much the past tense was used. Everything was about the efficiencies that have already been implemented which is obviously already in the price. There was no Steve Jobs “just one more thing” moment. In fact the biggest takeaway for me was a statement Musk made about the future of battery chemistry. 

China’s Contemporary Amperex Technology, the world’s biggest maker of electric-car batteries, signs a global partnership agreement with Honda Motor, according to an exchange filing to Shenzhen Stock Exchange.

China has worked hard to capture the market for EV batteries and that is now paying dividends. Traditional car companies all now want to be EV companies but are years behind in building their own factories and supply chains. That is most especially true for batteries. China has a dominant position in mining and processing the respective raw materials. The implication is clear, there is no way for car companies to achieve their EV goals without outsourcing at least part of the process to Chinese companies.

Notably, neither scenario assumes that the growth in new capacity—expansions and new mines—speeds up. Absent a major policy shift, however, regulatory, permitting, and legal challenges, combined with long timelines for new mines to come onstream, will continue to dampen the pace of supply increases. This supply-demand gap for copper will pose a significant challenge to the energy transition timeline targeting Net-Zero Emissions by 2050. The challenge will be compounded by increasingly complex geopolitical and country-level operating environments. These include

The strategic rivalry between the United States and China—over a projected period in which China will remain the dominant global supplier of refined copper, while the United States depends on imports for well over half its copper.

Russia’s invasion of Ukraine and its cascading effects on the commodities markets and energy security, which have highlighted the vulnerability of supply chains. “Supply chain resilience” policies aiming to secure reliable supplies of the materials needed for energy transition—and economies in general—are likely to be a central feature of the emerging geopolitics.

A growing tension between energy transition, social license, and ESG objectives that dramatically increase the need for minerals like copper on one hand, while raising the compliance, legal, and operational costs of mining those minerals on the other.

The risk of a significant, structural increase in copper prices as the supply-demand gap increases, with a potentially destabilizing impact on global markets and industry. While structurally higher prices incentivize international investment in new capacity, governments in sourcing countries are likely to seek to capture domestically a rising share of revenues.

The fragmenting of globalization and a resurgence of resource nationalism. The resulting challenge for all actors involved with the energy transition will be to manage often competing and seemingly contradictory priorities. It is clear that Technology and policy innovation will both be critical to reducing the supply-demand gap for copper in order to help enable the net-zero goals

Every major bull market which climaxes in a mania exhibits contradictory arguments. We are fully aware of the earnings don’t matter claims from the 1990s or house prices only go up ahead of the GFC. The difficulties with fulfilment of the renewable energy idealistic dream are a fresh contradiction. It is impossible to double copper production within 13 years. Therefore, there is no possible way the zero carbon ambitions of the green lobby can be realized. 

“This is what one could call pipeline in a pill,” said Bristol’s Chief Medical Officer Samit Hirawat.  

Sotyktu will not carry a black box warning, the US Food and Drug Administration’s strongest communication of potential risks. Analysts were closely watching the safety language in the drug’s label since such warnings have hampered other promising autoimmune drugs. 

The label is “close to the best case scenario,” Citi analyst Andrew Baum wrote in a note to clients. Shares of Ventyx Bioscience, a biotech company pursuing TYK2 drugs, soared as much as 67.14%. 

Bristol will try to unseat Amgen Inc.’s Otezla, a top-selling psoriasis pill that Sotyktu bested in clinical trials. Shares of Amgen fell as much as 4.3%. Convincing health insurers to cover Sotyktu will take time, said Bristol Chief Commercialization Officer Chris Boerner.

It has been a busy few days for the biotech sector with drug approvals making headlines for Bristol Myers Squibb, Regeneron and Clovis Oncology. President Biden’s cancer moonshot speech today was an additional catalyst for interest in the biotech sector. Here is a section from article by NBC: 

"Under Dr. Wegrzyn’s leadership, ARPA-H will support programs and projects that undertake challenges ranging from the molecular to the societal, with the potential to transform entire areas of medicine and health in order to prevent, detect, and treat some of the most complex diseases such as Alzheimer’s, diabetes, and cancer, providing benefits for all Americans," the White House said.

Contemporary Amperex Technology Co. Ltd. unveiled an electric-car battery it said has a range of over 1,000 kilometers (620 miles) on a single charge and is 13% more powerful than one planned by Tesla Inc., a major customer. 

CATL, as the world’s biggest maker of electric-car batteries is known, will start manufacturing the next-generation “Qilin” next year, according to a video the Chinese company streamed online Thursday. The battery charges faster than existing cells, and is safer and more durable, CATL said. 

The Qilin battery, named after a mythical Chinese creature, has an energy density of up to 255 watt-hour per kilogram, Ningde, Fujian-based CATL said. 

“It’s an important advancement for CATL as it keeps them at the forefront on the innovation side,” said Tu Le, managing director of Beijing-based consultancy Sino Auto Insights. “Being the lowest cost provider isn’t enough to command loyalty, there needs to be more to it -- and that seems to be the Qilin battery for CATL.”

CATL’s shares climbed 5.9% in Shenzhen, closing at the highest since Feb. 9. 

The company said Wednesday it raised 45 billion yuan ($6.7 billion) in a private placement of shares, with the proceeds intended for production and upgrade of lithium-ion battery manufacturing in four Chinese cities, as well as research and development.

CATL has experienced a wave of volatility this year, grappling soaring prices of raw materials as well as rumors of trading losses. Its first-quarter net income slid 24% from a year earlier to 1.49 billion yuan. The company hasn’t explained a 1.79 billion yuan derivatives liability, the first such charge since it listed.

The massive run-up in battery metal prices has put significant pressure on companies dependent on buying them to support their businesses. Lithium, copper, cobalt and nickel prices have surged this year as projections for future demand and low available supply created an inelastic trading environment. That created problems for nickel traders which resulted in a short covering price spike and lithium prices also surged to previously unimaginable levels.

Arber and his team, including Dr. Shiran Shapira, developed the drug based on a molecule that the professor has been studying for 25 years called CD24, which is naturally present in the body.

and

Arber noted that another breakthrough element of this treatment is its delivery.

“We are employing exosomes, very small vesicles derived from the membrane of the cells which are responsible for the exchange of information between them,” he said.

“By managing to deliver them exactly where they are needed, we avoid many side effects,” he added.

The team is now ready to launch the last phase of the study.

“As promising as the findings of the first phases of a treatment can be, no one can be sure of anything until results are compared to the ones of patients who receive a placebo,” he said.

Some 155 coronavirus patients will take part in the study. Two-thirds of them will be administered the drug, and one-third a placebo.

The study will be conducted in Israel and it might be also carried out in other places if the number of patients in the country will not suffice.

“We hope to complete it by the end of the year,” Arber said.

If the results are confirmed, he vowed that the treatment can be made available relatively quickly and at a low cost.

“In addition, a success could pave the wave to treat many other diseases,” he concluded.

Many doctors have stated that using wartime phraseology to talk about the efforts to treat the coronavirus are unhelpful. However, there is one important crossover worth considering. Wars tend to result in significant technological acceleration.

Would be very interested in your thoughts for positioning an investment portfolio (retirement monies) at this point in time. It is increasingly difficult for me to envision what could spark a leg up in the US equity markets in the near term. A leg down at some point feels more probable, yet I am not one for market timing. Nevertheless, increased uncertainty and volatility look to be on the menu for an extended period of time as the markets and Fed wrestle with the curtailing of the liquidity which has fueled the market's run. Is simply pruning equity positions and building cash the most reasonable course of action?

The FullerTreacy service is outstanding and all the more valuable at times like these. Thank you for your thoughts.

Thank you for this question and I am delighted you are enjoying the service. I write a long form summary of my views on the first Friday of every month so I will take this topic up again there.

The big question for investors is how long will the steady rise in the stock market persist? It’s easy to be derailed by valuations and predictions of imminent doom. Instead, let’s focus on consistency and money flows.

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

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

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

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

This report is packed full of blue sky thinking and gels with a lot of how I see the path of technological innovation over the next decade. The simple reality is that every innovation in how we communicate has created an industrial revolution. The printing press allowed for the dissemination of information and fostered inquisitiveness. The telegraph made the world smaller and allowed even more communication. The semiconductor created the conditions for instant communication. The internet realised that potential.

Moderna Inc. said its vaccine will protect against two known variants of the Covid-19 virus, but it plans to start human studies of a booster shot for a strain from South Africa that may cause immunity to wane more quickly.

In laboratory tests, Moderna’s vaccine produced antibody protection against the B.1.1.7 strain first identified in the U.K. at levels comparable with older forms of the virus. But against the South Africa variant, known as B.1.351, the neutralizing antibodies produced were six-fold lower, the company said in a statement.

Despite that gap, Moderna’s shot should protect against either strain, according to the company. While the South Africa variant hasn’t been seen in the U.S., the U.K. mutation -- which British officials said last week may be deadlier -- is spreading rapidly among Americans. Both strains are thought to be more transmissible than the original virus.

“We expect that whatever immunity you get over time will wane. The question is will it wane faster if you have lower levels to begin with,” said Tal Zaks, Moderna’s chief medical officer, in an interview.

It’s a game of whack-a-mole as the virus iterates faster than vaccines are currently being produced. The challenge with a global pandemic is no two countries deploy the same response. Even between households the approach to social distancing varies widely. With news today that California has its very own new strain, similar to the UK’s, the drive to speed up both production and rollout of vaccines will become even more urgent. Meanwhile, the Israeli experience with a national rollout offers a test case for how effective, the Pfizer vaccine in particular is.

As a result of the violent rioting in Washington yesterday, by thousands of people under huge stress, a super-spreader event has almost certainly been generated. I note the daily tally of deaths yesterday in the US exceeded 4000. Not good!

I totally agree and it seems like there are super-spreader events going on all the time. Since the UK variant of the virus has been found in an increasingly large number of countries, we have to assume it is much more pervasive than spotty testing highlights. Many countries now test for coronavirus but much fewer do the genetic testing necessary to identify variants. The USA for example doesn’t have a wide tracking system for mutations.

Some lidar suppliers gained Tuesday after Reuters reported that Apple Inc. plans to build a self-driving car for consumers and is tapping outside partners for elements of the system as it develops its own battery Technology.

Apple is approaching companies for some parts, including lidar sensors that provide autonomous cars with a real-time, 3-D view of the world, the report said, citing unidentified people familiar with the matter.

Lidar supplier Luminar Technologies Inc. rose as much as 12% on Tuesday, while Velodyne Lidar Inc. surged 16%. Blank-check firms that are bringing more lidar players to the market also advanced: InterPrivate Acquisition Corp. climbed 17%, while Collective Growth Corp. jumped as much as 24%.

Apple has been working on driverless car Technology since 2014, but pared back its ambitions from a full-fledged vehicle in 2017, Bloomberg News has reported. Since then, Apple has been working on the underlying autonomous system. The company has been deciding whether to attach this system to its own car, or existing vehicles, or to partner with an established carmaker, Bloomberg News reported earlier this month.

Apple enjoys an almost 40% gross margin on its iPhones and tablets. Porsche has about a 47% gross margin on the 911 and Ferrari has a more than 50% gross margin on its cars. Tesla’s is 16.5%. Toyota’s is 18% and Volkswagen’s is 19.5%. No mass market producer has been able to achieve margins on the scale Technology companies are accustomed to.

“It’s a game changer,” says Andrei Lupas, an evolutionary biologist at the Max Planck Institute for Developmental Biology in Tübingen, Germany, who assessed the performance of different teams in CASP. AlphaFold has already helped him find the structure of a protein that has vexed his lab for a decade, and he expects it will alter how he works and the questions he tackles. “This will change medicine. It will change research. It will change bioengineering. It will change everything,” Lupas adds.

In some cases, AlphaFold’s structure predictions were indistinguishable from those determined using ‘gold standard’ experimental methods such as X-ray crystallography and, in recent years, cryo-electron microscopy (cryo-EM). AlphaFold might not obviate the need for these laborious and expensive methods — yet — say scientists, but the AI will make it possible to study living things in new ways.

And

The first iteration of AlphaFold applied the AI method known as deep learning to structural and genetic data to predict the distance between pairs of amino acids in a protein. In a second step that does not invoke AI, AlphaFold uses this information to come up with a ‘consensus’ model of what the protein should look like, says John Jumper at DeepMind, who is leading the project.

The team tried to build on that approach but eventually hit the wall. So, it changed tack, says Jumper, and developed an AI network that incorporated additional information about the physical and geometric constraints that determine how a protein folds. They also set it a more difficult, task: instead of predicting relationships between amino acids, the network predicts the final structure of a target protein sequence. “It’s a more complex system by quite a bit,” Jumper says.

The sheer breadth of what we do not yet know about biology is becoming more apparent all the time. That’s the greatest benefit of advances in Technology, it makes answers possible where questions were never considered.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Are you able to create a Work From Home/Stay at Home index for you/us to track on a regular basis. Today has been another big day for many of these stocks with Shopify for example up another 7% in here today, clearing the $1,000 level, Netflix up 5%, Amazon 4%, Peloton up 4, DocuSign up 4, and Wayfair 11%! Regretfully I’m not involved in any of these as I can’t get my head around valuations. When will this madness stop?”

Thank you for this email which highlights the dilemma of many people on the side-lines of the broad market rebound. There is always a crisis of confidence for anyone who has missed a rebound and is presented with the choice of buying a breakout or waiting for a pullback. That is amplified during accelerations where the fear of missing out is weighed against the fear of sitting through a reversal.

Back in 2003, when the original SARS virus started killing people in Hong Kong at a frightening rate, DeRisi sequenced its genome. But the process was too slow and expensive to be of practical use. “It’s 50,000-fold cheaper now than it was for SARS,” he told me. “What cost me $10,000 to do in 2001 now costs a penny.” And so we might now test for the virus in a way that gives us a picture that you can’t get from more conventional random sampling. Explore how the virus works in one neighborhood and you can apply what you learn to others. “Our state government should be doing this,” said DeRisi. “It should be asking: What are our social relationships and which ones lead to the transmission of disease? That’s what you would do in a rational society.”

The world was caught flatfooted with COVID-19 and many countries are still struggling to get a handle on how best to deal with a wholly new pathogen that seemed to spring out of nowhere. The big difference on this occasion is all historical comparisons are likely to be inaccurate because of the leaps in technological innovation that have taken place since the sequencing of the human genome almost twenty years ago.

The very first patient treated with CTX001 is now at a 15-month follow-up point, and the data suggests the therapy is still efficacious with no long-term complications detected. Nine months on from treatment the first sickle cell disease patient is also displaying promising results, free of any sickle cell-related adverse events.

“In my 25 years of caring for children and young adults facing both sickle cell disease and beta thalassemia, I have seen how these diseases can adversely affect patients’ lives in very significant ways,” says Haydar Frangoul, from the Sarah Cannon Research Institute. “I am encouraged by the preliminary results, which demonstrate, in essence, a functional cure for patients with beta thalassemia and sickle cell disease.”

Genetic diseases shorten lives and represent significant drains of finances for many families. The promise of a cure has long been too much to hope for but we are likely to see sickle cell anaemia, thalassemia, cystic fibrosis and muscular dystrophy eradicated in our lifetimes.

CATL struck a two-year contract in February to supply batteries to Tesla, a major boon for the Chinese company as the U.S. electric-car leader has thus far mainly worked with Japan’s Panasonic Corp. and South Korea’s LG Chem Ltd. The deal followed months of negotiations, with Tesla Chief Executive Officer Elon Musk traveling to Shanghai to meet with Zeng.

The CATL batteries are set to go into Model 3 sedans produced at Tesla’s massive new factory near Shanghai, which started deliveries around the beginning of this year. Batteries are the costliest part of an EV, meaning suppliers of those components have a chance to reap a lion’s share of the industry’s profits.

A battery which does not lose its charging capacity for over one million miles is a significant technological advance for the electric car industry. One of the biggest inhibiting factors, apart from cost, which deterred consumers from buying electric cars was their low resale value. The degradation of the battery over only a couple of years basically made cars worthless. The introduction of the million-mile battery completely changes that calculus. The next obstacles are the recharging network and range on a single charge.

With respect to the second note, and knowing your own preference to stay with the "winners" and cut the "losers", at what point do you look to valuations and question the sky-high prices people are willing to pay for these "winners"? I personally have a tough time chasing stocks that have already run, but for now at least, they just keep going, proving highly frustrating!

Thank you for this question which others may also have an interest in. The best time to buy is following a significant pullback. The next best opportunity is following the first reaction from an important low. The next will be when a breakout to new highs occur.

This is an interesting review of Neil Ferguson's pandemic model.  If true, it obviously raises some interesting questions about UK strategy. But the biggest issue for me is the way it exposes the gulf between Technology specialists and political judgement. Our politicians may be ill-equipped to make good decisions in a world when so much is dependent on good data. 

Thanks for great audios recently - much appreciated.

Thank you for this educative article and I am delighted you are enjoying the service. For the many new subscribers who have joined our ranks over the last month, the daily audio/video and the Big Picture Friday version are the most expedient ways of accessing where my current thinking is residing.

Debate about the efficacy of the lockdowns is predictably ramping up. That’s to be expected. The pressure on businesses, personal finances and cabin fever lend credibility to anyone who wishes to defy quarantine. For example, Mrs. Treacy’s tennis circle have been discussing how to break lockdown orders to go and view the bioluminescence at the local beaches. https://www.ecowatch.com/bioluminescent-waves-california-2645933919.html?rebelltitem=3#rebelltitem3 Cabin fever is clearly taking a toll on everyone. Here is a particularly relevant section from the article:

Conclusions. All papers based on this code should be retracted immediately. Imperial’s modelling efforts should be reset with a new team that isn’t under Professor Ferguson, and which has a commitment to replicable results with published code from day one. 

On a personal level, I’d go further and suggest that all academic epidemiology be defunded. This sort of work is best done by the insurance sector. Insurers employ modellers and data scientists, but also employ managers whose job is to decide whether a model is accurate enough for real world usage and professional software engineers to ensure model software is properly tested, understandable and so on. Academic efforts don’t have these people, and the results speak for themselves.

My identity. Sue Denim isn’t a real person (read it out). I’ve chosen to remain anonymous partly because of the intense fighting that surrounds lockdown, but there’s also a deeper reason. This situation has come about due to rampant credentialism and I’m tired of it. As the widespread dismay by programmers demonstrates, if anyone in SAGE or the Government had shown the code to a working software engineer, they happened to know, alarm bells would have been rung immediately. Instead, the Government is dominated by academics who apparently felt unable to question anything done by a fellow professor. Meanwhile, average citizens like myself are told we should never question “expertise”. Although I’ve proven my Google employment to Toby, this mentality is damaging and needs to end: please, evaluate the claims I’ve made for yourself, or ask a programmer you know and trust to evaluate them for you.

The Trump administration isn’t alone in trying to fast-track a vaccine. One of the world’s most promising vaccine candidates has been developed by a team at Oxford University in London. Last month, scientists at the U.S. National Institutes of Health innoculated six rhesus macaques with the Oxford vaccine and then exposed them to the coronavirus, the New York Times reported.

All six were healthy more than four weeks later, according to the Times. The researchers are currently testing their vaccine in 1,000 patients and plan to expand to stage two and three clinical trials next month involving about 5,000 more people.

The Oxford group told the Times they could have several million doses of their vaccine produced and approved by regulators as early as September.

In the U.S., the Bill & Melinda Gates Foundation has meanwhile shifted much of its research effort to the coronavirus virus.

One of the people familiar with Operation Warp Speed drew a distinction with the Oxford group, describing the U.S. effort as broader in scope. It’s unclear which vaccine candidates would be part of Operation Warp Speed, or whether it would include the Oxford vaccine.

A broadly held assumption is we are going to have a second wave of infections like in 1918 later this year. China’s statement yesterday that they believe it will become seasonal is also feeding the belief that a solution will not be forthcoming in the short term. However, in much the same way that war efforts accelerate the pace of innovation, on a needs-must basis, we are seeing the same thing with the development of treatments for COVID-19.

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

The virus scare has highlighted how susceptible China is to the export market. They have worked extremely hard to get factories back to full capacity but, having succeeded in that objective, they now find there are no orders.

Masahiro Kami, an infectious diseases expert, said he was skeptical that the suspension of some public events would have a significant impact on the spread of the virus. “Commuting on a packed train, for instance, is way worse than taking part in the Tokyo marathon,” he said.

Dr. Kami, who heads a nonprofit organization called the Medical Governance Research Institute, said a media focus on the few cases of serious illness from coronavirus infection in Japan had created a panic over the need to cancel events.

While Japan initially had a handful of cases involving people who had come from Wuhan, the center of the epidemic in China, or had direct contact with someone from Wuhan, a surge of cases in the past week included many whose path of infection wasn’t clear. The cases span from Hokkaido in the north to Okinawa in the far south.

More than 1,000 people disembarked from the Diamond Princess cruise ship between Wednesday and Friday, and they entered Japan without restrictions on their movements. All of those passengers tested negative for the virus, but in some cases people have tested positive after a negative test—including two cases reported Friday in Australia, which sent a flight to Japan to repatriate citizens who had been on the ship.

The coronavirus popping up in unrelated areas in Japan is not exactly good news. Additionally, the lax quarantine imposed on the passengers of the Diamond Princess cruise liner greatly increases the potential for the virus to spread even further. At a minimum the potential is for much tighter measures to contain the spread across Japan and other countries. This is also going to create a headache for Abe’s government.

The coronavirus outbreak in China is already threatening to undermine the global economy. It may soon create a similar shake-up in the drug industry.

I’m not talking about pharmaceutical companies’ attempts to develop a vaccine, but about intellectual property. Chinese researchers have applied for a patent on an antiviral drug candidate called remdesevir owned by Gilead Sciences Inc. The drug is being tested in clinical trials in short order, but the company could eventually be cut out. 

If the patent is granted, it will confirm long-standing drugmaker fears about China’s commitment to IP protection, raising concern about the industry’s future in a crucial market. It also could further erode the already weak incentives for pharma to invest in drugs to combat emerging infectious diseases. The risks of seizing the patent may outweigh any benefit.

The world is racing to help find a cure for the Wuhan virus with both pharmaceutical companies and philanthropists committing significant resources to finding a cure. That’s as much about helping China as it is about helping to contain the infection and creating the potential to be compensated for coming up with a solution.

Gilead Sciences Inc. has so far been silent on plans to diversify its pipeline as investors clamor for a repeat of last year’s biotech deal boom.

The drug developer leads a group of biopharmaceutical companies that Wall Street expects to join in the sector’s acquisition spree. Earlier on Friday, Eli Lilly & Co. snatched up Dermira Inc. and its skin disorder drug for $1.1 billion.

That news comes as investors and management flock to San Francisco for the JPMorgan Healthcare Conference, which kicks off on Monday. The meeting is viewed as the crown jewel of sell-side events and is a hotbed for companies to announce deals and provide product updates.
 

The biotech sector is busy commercialising a range of novel therapies to treat cancers and chronic conditions like diabetes, Alzheimer’s and arthritis. The road to full approval and the scope for failure along the way means it is a high-risk strategy to invest in start-ups. Therefore, the bigger companies wait for some verifiable proof a nascent product works and then investigate buying it. 

Monday’s news continues a trend of large-cap drugmakers snapping up smaller developers in an attempt to refill their depleted pipelines. Even before the Medicines Co. announcement, Basel, Switzerland-based Novartis had announced close to $16 billion of acquisitions since Vas Narasimhan took over as CEO in February 2018, according to data compiled by Bloomberg.

Alnylam Pharmaceuticals Inc., which receives milestone payments tied to Medicines Co.’s heart drug inclisiran as well as royalties on drug sales, jumped 7.6% pre-market Monday. That’s on top of last week’s 16% gain after it won FDA approval for a second drug.

Jefferies’ Yee highlighted that the $9.7 billion price tag implied a higher multiple on potential peak sales of inclisiran than historically has been seen in other biotech deals. On a deal value to peak sales comparison, he said the valuation is similar to Bristol-Myers Squibb Co.’s acquisition of Celgene Corp., which closed last week.

Large pharmaceuticals companies have effectively outsourced research and development to the speculative bioTechnology sector and are prepared to pay up for those that approach commercialisation.

“While the data are early, we are quite excited about what we are seeing,” he said in a telephone interview. “This is a pretty significant milestone, not just for us as a company but for the entire field. This could be an important landmark in medicine, when we saw the first promise for providing cures for a number of diseases using a gene editing approach.”

The early findings may benefit rival companies also studying medicines based on Crispr Technology, as they are the first results from publicly traded companies using the platform. Editas Medicine Inc.’s lead drug will be given to its first patient at the start of next year as a treatment for a form of blindness, while Intellia Therapeutics Inc. is on track to file for its first human trial by mid-year.

Gene editing deals in cures rather than treatments. That’s a major challenge for the traditional pharmaceuticals business. Chronic conditions which requite ongoing treatment but have no cure have been massive money spinner for the pharmaceuticals business for decades. Right now, the cost of cures is extraordinarily high because a one-shot solution has to load all of the revenue from a treatment into one bill rather than spacing it out with a chronic condition. However, as the sector moves out of the orphan disease sector and into the mainstream over the next decade the potential for costs to come down is quite compelling.

If genetic editing wasn’t crazy enough for your reality, a recent breakthrough in CRISPRTechnology has paved the way for editing entire gene networks in a single step.  While this discovery will likely shorten the timeframes required for finding cures for deadly illnesses, it can also bring us closer to threats of bioterrorism.

Scientists at ETH Zurich recently published a new CRISPR technique in Nature Methodsthat removes one of the most significant limitations of the Technology.  Prior to this discovery, the process could only target a single gene for editing.  The ETH scientists now managed to target 25 at once and believe that, theoretically, this method could target hundreds.  Here’s how they describe the process:

An improvement of 25 times in one iteration is a further example of the exponential growth in the bioTechnology sector. The pace with which genetic sequencing prices have collapsed far outpaced that of Moore’s Law and it is looking increasingly likely that genetic editing is following a similar trajectory.

“But if demand growth is not sufficient, the board is prepared to provide additional support by easing monetary policy further,” he said. “Whether or not further monetary easing is needed, it is reasonable to expect an extended period of low interest rates. On current projections, it will be some time before inflation is comfortably back within the target range.”

Lowe’s speech, which made the case for maintaining the RBA’s current policy framework despite prolonged low inflation, was his most explicit that further easing remains on the table. The Reserve Bank cut rates in June and July to a record low of 1% and signaled at the time that it would wait to see how the easing filtered through the economy.

Since then, consumer confidence has actually fallen and the currency has risen -- the latter due to an easing bias among major central banks -- in contrast to RBA’s hopes. Indeed, the Federal Reserve is expected to cut as soon as next week. Westpac Banking Corp. Chief Economist Bill Evans on Wednesday predicted Lowe and co. would cut in October and February to push the cash rate to 0.5%.
 

Australia’s administration is attempting to forestall the decline in domestic property prices by cutting interest rates, embarking on an aggressive fiscal stimulus and implementing direct supports for the property market.

The experimental treatment, which could be launched in the first half of 2019, would be an alternative to Biogen Inc.’s Spinraza, a treatment given in regular doses that patients must take for the rest of their lives. Spinraza costs $750,000 in the U.S. for the first year and $375,000 a year thereafter.

Switzerland-based Novartis is now wrestling with the question of how to price a potential cure. As a number of drugmakers advance into gene therapy in a bid to fix potentially lethal DNA flaws, governments, insurers and other payers are trying to figure out how to pay for the revolutionary treatments meant to be given to patients a single time.

Genetic sequencing, editing and synthetic biology represent some of the most profound innovations for the healthcare sector in generations because they hold out the increasingly likely possibility of delivering cures. That’s terrible news for the conventional pharmaceutical industry which has historically depended on treating the symptoms of chronic conditions.

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

​Leverage is quickly being squeezed out of the “new economy” shares which were among the best performers over the last 18 months. That is certainly going to lead to earnings revisions for the companies like Nvidia, Align Technologies and Netflix.

It also holds out the prospect of a lengthier period of underperformance for the segment of the Technology sector which has been most aggressively bought by investors over the last few years.

The world’s biggest market for electric vehicles wants to get even bigger, so it’s giving automakers what amounts to an ultimatum. Starting in January, all major manufacturers operating in China—from global giants Toyota Motor and General Motors to domestic players BYD and BAIC Motor—have to meet minimum requirements there for producing new-energy vehicles, or NEVs (plug-in hybrids, pure-battery electrics, and fuel-cell autos). A complex government equation requires that a sizable portion of their production or imports must be green in 2019, with escalating goals thereafter.

The regime resembles the cap-and-trade systems being deployed worldwide for carbon emissions: Carmakers that don’t meet the quota themselves can purchase credits from rivals that exceed it. But if they can’t buy enough credits, they face government fines or, in a worst-case scenario, having their assembly lines shut down.

China is the world’s largest market for automobiles so what they decide is permissible within their market is likely to shape the plans of manufacturers for the globe. One of the primary reasons companies have been announcing plans for lots more electric and hybrid vehicles over the coming years is because of the Chinese mandates. That is the primary driver behind the capacity build in the battery sector which needs to ramp up substantially if the demand growth profile is to be reached.

Nasdaq BioTechnology Index encounters resistance in the region of the trend mean and will need to bounce from the above the October low near 3200 to confirm support building is underway.

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.

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.

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.

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.

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.

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:

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.

New Year greetings to you and David and all FT members. About a year ago on the site there was a presentation on the new technological revolution, given by Mr. David Brown. It covered AI, robotics, cyber security, bioTechnology, healthcare and the like. It was all wonderful stuff, but how do I deal in the shares and ETF's mentioned? I'm with Barclays - an ISA and spread betting account - and they have little coverage of these areas.

Happy New Year to you and to everyone in the Collective of subscribers Thanks for this question which is sure to be of interest to other subscribers. This article from the Telegraph dated 2014 explains how to invest in overseas shares through your ISA. Here is a section:

A crucial question: can you put your overseas stocks in your Isa or pension? HM Revenue & Customs' rules forbid foreign currency in an Isa, so you have to use the costlier, sterling conversion approach to buy foreign shares in your Isa, converting back to pounds when you sell. The Isa accounts operated by Hargreaves and TD allow foreign stocks to be held in this way.

Disappointingly, Barclays' systems do not allow any overseas stocks to be held within an Isa.

With self-invested pensions, or Sipps, you can hold and trade in foreign currencies. So you can have part of your Sipp denominated in dollars if your broker (such as TD) offers the facility. Hargreaves Lansdown doesn't offer the service and Barclays, again poor in this respect, doesn't allow any overseas stocks within its pension accounts.

It is always a pleasure to meet subscribers but doubly so when we get to spend two days together discussing the outlook for psychological makeup of the market, where we are in the big cycles and which sectors are leading and which are showing relative strength. I had three big takeaways from last week’s seminar in London.

As anyone who has attended the seminar will know, I do not have examples but offer delegates the opportunity to dictate the direction of the conversation. That ensures the subject matter is relevant to what they are interested in and also highlights the fact that subject matter is applicable to all markets where an imbalance between supply and demand exists. The second benefit of allowing delegates to pick the subject matter is that it is offers a window into what is popular in markets right now and what might be getting overlooked. 

In the team's early experiments with base editing a specific mutation associated with the disease hemochromatosis was successfully fixed. No unwanted off-target effects were identified and the base editor enzyme operated with greater than 50 percent efficiency.

"We are hard at work trying to translate base editing Technology into human therapeutics," Liu says.

The second new CRISPR innovation revealed recently comes from a collaborative team of Broad Institute and MIT scientists. For the first time the team discovered a way to accurately edit RNA base pairs in human cells.

Dubbed "REPAIR" this system also focuses on base editing but this time is targeted at RNA. Unlike permanent changes to DNA, RNA is much more ephemeral and even reversible. The ability to edit RNA in human cells opens up an entirely new world of disease treatments targeting conditions including diabetes and IBD.

"REPAIR can fix mutations without tampering with the genome, and because RNA naturally degrades, it's a potentially reversible fix," explains co-first author David Cox.

 

CRISPR represents a paradigm shift for the genetics industry because it reduces the cost and time required to experiment with how to edit DNA. When I visited the MIT genetics labs a year ago it was clear that what was next to near impossible five years ago is now something doctoral students can achieve with ease on a daily basis.  

"China’s policy makers are likely to tolerate growth to have another leg down to 5 to 6 percent in the next five years, so that they could have bigger room to fix the structural problems and make growth more sustainable," Hu wrote.

That’s in line with earlier messages of tolerance of slower growth in exchange for stable development. Xi told a meeting of the Communist Party’s financial and economic leading group last year that China doesn’t need to meet the objective if doing so creates too much risk, Bloomberg News reported in December.

Xi’s speech, which ran for more than three hours and mapped out a grand strategy for China’s development by 2050 implies "a change in growth and development objectives," said Chen Xingdong, chief China economist at BNP Paribas SA in Beijing.

The party is seeking to share "growth and prosperity for the majority of people through reformation of income distribution," Chen said

 

The larger an economy becomes the more difficult it is to sustain double digit growth rates. China is a perfect example of this and its size is a clear example for why smaller economies like India or the Philippines are currently outpacing its expansion. 

What started off as a clinical off-shoot of molecular biology in the 1970s has moved from a therapeutic concept to a viable therapy to address various rare and not so rare genetic diseases. While the gene therapy field has gone through nearly three decades of ups and downs, in our opinion, we are at the cusp of ushering in a new era of therapies that can address the underlying biology of many inherited disorders.

Two therapies have already been approved for commercialization in Europe, although calling either a commercial success is a stretch. UniQure’s Glybera, the first approved in Europe in 2012, experienced extremely limited usage in the commercial setting and was withdrawn from the market early this year. GlaxoSmithKline’s Strimvelis, approved in 2016 at a price tag of $594,000 euros (about $665,000 USD), is currently treating patients with ADA deficiency, although given the size of the patient population, we see this platform more as a good will gesture as compared to a robust money generating machine.

That said, we view these two products largely as proof of concept therapeutics whereby clinical trials were able to show efficacy and long-term safety, both of which helped clear regulatory hurdles with flying colors. While the pessimist might view the turbulent history of the gene therapy space as more of what’s to come, we view this field as a potential revolution. In short, within the next few years, we expect multiple U.S. approvals of gene therapy products…

 

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

Subscribers will be familiar with my enthusiasm for the immuno-oncology sector which is rapidly approaching commercialisation and has been the focus on enthusiastic M&A activity. Car-T cell reprogramming is an exciting field which has led to considerable success in previously untreatable leukemia and research is now underway to employ similar strategies in solid tumors. 

Kymriah indicated for refractory ALL patients, but other indications are larger. Although Kymriah is only approved in the US to treat the small number of patients with refractory acute lymphoblastic leukaemia (ALL), additional indications such as Diffuse Large B-Cell Lymphoma (DLBCL) represent a significantly larger addressable patient population. Kymriah is the first Chimaeric Antigen Receptor T-cell (CAR-T)-based treatment approved globally. 

Blue-sky scenario not that much of a stretch…Over 100,000 patients die from leukaemias, lymphomas and myelomas (haematological cancers) annually in the US and Europe. They are largely, by definition, refractory to available treatments. In due course, this patient group, or a proportion of it, could be addressed by CAR-T-based treatments. Further, CAR-T-based treatments could potentially be used earlier in the treatment of cancers and potentially in some solid tumours as well. Note that these figure do not include Japan, China, or elsewhere. 

…25% of refractory blood cancers, 2.5% of other cancers.  In our blue-sky scenario for CAR-T treatments, an assumption that 25% of refractory blood cancers and 2.5% of other refractory cancers in the US and EU could be treated with CAR-T therapies in due course (although this would require sizeable manufacturing expansion by all CAR-T manufacturers) would yield peak sales of just under USD26bn. If Novartis garnered 50%, it would generate peak sales of just under USD13bn for Kymriah and other CAR-T therapies versus USD3.3bn that we currently forecast (27,000 patients treated versus 7,200 on our current forecast). In our view, this bluesky scenario is not an unrealistic possibility in terms of patient numbers.

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

Immuno-oncology is the leading growth sector within the healthcare sector because for the first time it holds out the promise of curing cancer. What is so compelling about Novartis’ newly approved drug is that it succeeded in achieving a 90% remission rate for people that failed to respond positively to conventional chemotherapy and other treatments.   

When plans for Neart na Gaoithe started being developed in 2008, Siemens AG’s 3.6 megawatt turbine was the most popular among developers. Now manufacturers are working on machines that could be four times bigger, helping companies like Dong Energy A/S build projects cheaply enough to make money at market prices. The collapse in oil prices has also helped lower offshore wind costs, by making the sea vessels needed to install projects cheaper to hire.

I’ve haven’t seen a satisfactory solution for the problem of wind turbines impact on migratory bird populations regardless of the fact offshore turbines help create artificial reefs for sea life. However, the economies of scale that can be gained from going offshore has altered the wind turbine sector beyond recognition. 

Would you care to comment on the sudden decline in biotech shares over the last few days?  

I have just started following your videos, after being a stickler for the audios all this time.  I must say they add depth.  It's like have a running chart seminar all year round!  I particularly admire the way you can multitask, carrying on a seamless commentary about something else while your fingers are busy looking for the next chart, without long audio pauses while you wait for the screen to catch up

 

Thank you for your kind words and I’m delighted you are enjoying the videos. I’m still getting the hang of recording videos and to my embarrassment there have been more bloopers with regard to the microphone and uploading than I would like so please regard them as a work in progress. 

Hospitals are likely to cry bloody murder over this proposal and argue it will lead to service cuts. You likely won't hear a peep from drugmakers, though. These are very low-margin sales, and pharma firms have complained for years about what they say is abuse of the program and the extension of 340B discounts to patients and hospitals they don't think should be eligible. If the CMS change means more sales go to higher-margin areas of the market, then pharma will profit. This move suggests any future 340B and CMS reforms may be pharma-friendly. And any approach that favors drugmakers over hospitals that serve the poor says a lot about the administration's priorities.  The president's last public attack on drug prices was months ago. Pricing has apparently faded as a policy priority since the campaign. His administration's actions make that even more clear. Changes to 340B were just one reported aspect of a draft executive order on drug pricing that reads more like a pharma wish list than a plan to restrain price growth. 

The election campaign played havoc with emerging biotech stocks in particular as they were singled out by politicians for their high pricing. However, what was lost in the debate is that developing drugs for small numbers of patients is expensive. It is not quite the same thing as hiking prices for long established drugs that are designed to treat common ailments. 

On Thursday, the Food and Drug Administration approved the first next-generation-sequencing-based test, from Thermo Fisher Scientific, that can tell you how different drugs will work for you, based on the genetic makeup of each tumour. And it only takes four days to get back results. In many ways, it represents the leading edge of precision medicine’s maturation from a buzzword in grant applications and investor pitch decks to a real, workable product that can actually improve patient outcomes.

Getting the FDA’s approval took nearly two years and 220,000 pages of data. (That’s like reading Karl Ove Knausgaard’s 6-book autobiographical memoir front to back 61 times in a row. Talk about My Struggle.) But the process has helped clarify the agency’s thinking about how to regulate personalized treatments going forward, opening up doors for tech that's still in the pipeline.

The panel, called Oncomine Dx Target Test, takes a tiny amount of tumor tissue and reports on alterations to 23 different genes. All that information is useful for physicians, but three in particular—ROS1, EGFR, and BRAF—are the most crucial. That’s because those mutations have drugs to match: Precision medicine chemotherapies from Pfizer, Novartis, and AstraZeneca. The test can be performed at any CLIA-certified lab, and it’s already being offered by two of the largest oncology-focused ones.

Getting the FDA to approve that amalgam of tests wasn’t easy. “Putting multiple genes and multiple drugs on the same test; all of these are firsts,” says Joydeep Goswami, Thermo Fisher’s president of clinical next generation sequencing. “That put the Technology under extraordinary scrutiny.” The FDA usually approves one diagnostic for one product or drug—that’s it. But the whole point of precision medicine is to tailor treatments for patients based on their genes, and a bunch of one-off genetic tests aren’t going to deliver on that promise. So a multi-gene, multi-drug panel is kind of a big deal.

 

I have written previously about the rotation into bioTechnology shares because of the overextensions present in other sectors and the potential for base formation completion in the healthcare sector. However the above story represents an additional bullish catalyst for the sector. 

The Nasdaq BioTechnology sector falls squarely into that category. It pulled back sharply from its mid-2015 peak but ranged above 250 for most of 2016 and has spent most of this year-to-date ranging above 300 and has been firming from that level since Friday. 
 

We believe estimated prevalence is the best measure of the overall cancer market’s size. We have estimated future prevalence for 2014-2018 (Tables 3, 6, 9). To arrive at these estimates, we used the 2012 or 2013 estimate and added estimated incidence (Tables 1, 4, 7) and subtracted estimated deaths (Tables 2, 5, 8) for each year. Exceptions included cancers that did not have prevalence data for 2012 or 2013. In cases where 2013 prevalence was not available for US patients, we used the 2009 prevalence estimate for 2013 or the incidence estimate. For these same exceptions outside the United States, we estimated 2012 or 2013 prevalence as a ratio to incidence that was consistent with US data.

Based on prevalence, we estimate the overall market for cancer therapies in the United States is slightly over 14 million patients growing at 7% per year. In Europe, we estimate the overall market is composed of 8 million patients and is growing at 16% per year. In Japan, we estimate the market is nearly 2 million patients and is growing 13% per year. We believe incidence is the best measure of front-line (newly treated) cancer market’s size (Tables 1, 4, 7). Therefore, we conclude the market for front-line therapies in the US is currently 2 million patients and is decreasing at 8% per year. In Europe, we estimate the market for front-line therapies is approximately 3.1 million patients and is growing at 4.5% per year. In Japan, we estimate the market for front-line therapies is currently 680,000 patients and is growing at 2% per year.

We believe the best measure of the market size for second-line and greater (relapsed/refractory) therapies is prevalence less incidence, which should account for all living patients who are not newly diagnosed. Therefore, we conclude the market for relapsed therapies in the US is currently 15 million patients and is growing at 10% per year. In Europe, we estimate the market for relapsed therapies is approximately 10.8 million patients and is growing at 11% per year. In Japan, we estimate the market for relapsed therapies is currently 2.1 million patients and is growing at 8% per year. 

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

Cancer is a blight on humanity. Because it is based on what is in many respects a random mutation of genes, it avoids notice by the body’s immune system. The net result is that there are many different types of cancer but even within individual groups no two are the same. That represents an acute challenge for drug therapies because while the total market is large, individual therapies are required to treat every patient. Therefore personalised medicine is likely to emerge first in cancer treatment which means oncology represents an important market to monitor. 

Thank you for another very well done Friday audio. Your comments on gold were very interesting for me. I wonder if you or the collective have an idea about the possibility of technological innovation that might make gold production cheaper, the way oil production has become cheaper.. Thanks in advance

Thank you for your kind words and I am delighted you are enjoying the new format of videos and audios. Anglogold Ashanti have been pioneering a number of new technologies not least reef boring and thermal spawning. Both are designed to economically extract gold from previously uneconomic regions such as very thin reefs or the supporting walls of old mines. As with any new Technology, development takes time but the company is hopeful about the prospects for future production. This informative section from Anglogold Ashanti’s site may also be of interest. 

Mentor sells software and hardware used to design electronics for the semiconductor, automotive and transportation industries. The company reported a loss of $10 million in the six months ended July 31, compared with profit of $21 million in the same period last year, according to an Aug. 18 regulatory filing. The company forecast revenue of $1.22 billion for the 12 months through January.

Under Kaeser, Siemens has pushed deeper into software applications that are crucial to run its industrial equipment.

At the same time, Siemens is simplifying its sprawling portfolio, and the company announced last week that it wants to list its health-care subsidiary, among the biggest makers in the world of diagnostics and imaging equipment.

In the industrial automation sector there has been a wide gap in performance between the purveyors of hardware and software. A robot is really only a hunk of junk unless it is powered by intelligent software. Perhaps more importantly software and particularly optics companies have been innovating much faster than hardware companies not least because the relative of cost of development is so much smaller. By purchasing Mentor Graphics Siemens is aiming to provide a more holistic solution and therefore harness more of the revenue potential from industrial automation. 

It was a pleasure to spend the weekend and much of today at the ExMed conference in Coronado San Diego not least because there are so many people in attendance both as speakers and attendees who are at the forefront of their respective sectors.

It’s been something of a data overload so it will take some time to process the information and I will need to do some background research to check out the credibility of some of the claims made and what the possible investment implications are.

Here are some of the themes that are evolving:

The bioTechnology sector was the darling of investors while it was trending consistently higher but has been much less trendy recently as some of healthcare’s more aggressive business strategies have become the subject of  political opportunism.  

“The running joke going around is that flat is the new growth,” said Jett McCandless, chief executive of transportation-Technology startup project44.

Freight volumes are stagnating despite strong consumer spending, which rose for a fourth-straight month in July. The problem for traditional retailers: More of those dollars are being spent online, or on entertainment and services such as health care.

Many retailers are stuck with large amounts of unsold goods as a result, reducing their need to import more merchandise. Even after a year of attempting to slim down inventories, retailers’ ratio of inventories to sales, a measure of excess stocks, touched 1.5 in June, close to a seven-year high, according to the Census Bureau. In their most recent earnings reports, Target and Lowe’s reported inventories up more than 4% over the same period last year.

J.C. Penney is placing “slightly smaller orders…or holding back quite a bit” to reduce inventories, Mike Robbins, J.C. Penney’s executive vice president for supply chain, told investors in June. The company has reduced the size of some orders at the beginning of major shopping seasons by as much as 70%.

The focus on reducing inventories is proving to be a drag on growth because it signals that businesses are spending less, and might be pessimistic about future demand. Inventory drawdowns cut second-quarter growth by 1.26 percentage points, to just 1.1%.

Shipping lines are struggling to plan their routes as order volumes become more difficult to predict, said Niels Erich, spokesman for a group of 15 major shipping lines known as the Transpacific Stabilization Agreement. In the past, carriers could count on the peak summer months to make up for slower winter trade.

 

There is no doubt that the disintermediation which characterises online retail has a deflationary impact on how economic growth is measured because it inhibits the velocity of money. I do not view it as a coincidence that the Velocity of M2 has been contracting since 1997 when the internet began to have an impact on the retail sector. 

Now Mylan appears to be learning the same hard lesson this week that Martin Shkreli and Valeant  VRX -0.51%  learned last year: Investors love when pharmaceutical companies raise drug prices—until everybody else gets really upset about it. Shares of Mylan  MYL 1.66%  have dropped more than 11% this week, down more than 5% on Wednesday alone.

And the EpiPen controversy is drawing comments from some high-profile figures, including Hillary Clinton and Martin Shkreli himself, who tweeted that he thought the EpiPen’s price should even be higher. On Wednesday, Clinton said there was no justification for the price hikes. Her comments came shortly after the Senate Committee on Aging asked Mylan to provide information on the reasoning behind what it called the “drastic” price increase of EpiPen, and the American Medical Association “urge[d]” Mylan to “rein in these exorbitant costs.”

The pricing scandal is happening at the worst possible time for Mylan. This is typically the company’s biggest season, driven by EpiPen sales, which peak during back-to-school shopping as parents and schools equip for the coming year.

BioTechnology companies justify the high price of new drugs with the argument that it is the only way to recoup the cost of developing them. Without high prices there would be no incentive to invest in the uncertainty of R&D and lengthy clinical trials. 

“This is a major surprise -- possibly the biggest clinical surprise of my career,” Evercore ISI analyst Mark Schoenebaum, who recommends holding Bristol-Myers stock, wrote in a note. “Investors had high expectations for this trial.”

The results reflected a risky but potentially lucrative bet by Bristol-Myers, highlighting a difference in strategy with Merck. By designing its study to include patients with lower levels of a key biomarker thought to predict response to the drug, Bristol-Myers was aiming at a far larger market for Opdivo. Merck’s Keytruda trial, meanwhile, focused on a smaller subset with high levels of the biomarker, called PD-L1 -- fewer patients, but a better chance of success.

Opdivo didn’t meet its primary goal of lengthening progression-free survival in patients with previously untreated advanced non-small cell lung cancer, compared with chemotherapy, Bristol-Myers said in a statement. The New York-based company is working on completing an evaluation of the late-stage trial’s results.

Bristol-Myers Chief Executive Officer Giovanni Caforio said the company is now focused on combination therapies, which could potentially create a better outcome for the group of patients that don’t get results on drugs like Opdivo alone.

“We have a very broad development program in lung cancer and we are answering a number of very important questions,”

Caforio said in a phone interview Friday. “The role of monotherapy might be limited to a very small subset of patients in the first-line setting, which makes our program now ideally suited to address the next question, which is: ‘What is the role of combination therapy?”’ That will come from a study that analysts said would likely read out in 2018.

 

As a major BioTechnology company Bristol Myers Squibb benefitted enormously from being in a position to acquire promising research in the aftermath of the TMT bubble in the 1990s. That has led it to develop a broad spectrum product range that is cash flow positive and has allowed the share to hold a progression of higher reaction lows despite the turmoil that has affected the biotech sector from last year. 

This sector was the darling of the investment community until about a year ago when Biogen had a disappointing quarter, Valeant’s business model blew  up shortly afterwards and despite the fact it is not a biotech company, the sector was hit by the same selling pressure. When politicians took aim at the high charges of drugs and new treatments, it contributed to additional selling pressure. 

"Our unique material can kill bacteria rapidly and inhibit the development of antibiotic-resistant bacteria," says IBN Group Leader, Dr Yugen Zhang. "Computational chemistry studies supported our experimental findings that the chain-like compound works by attacking the cell membrane. This material is also safe for use because it carries a positive charge that targets the more negatively charged bacteria, without destroying red blood cells."

The team's compound was developed as an alternative to triclosan, a common ingredient in hygiene products like soap and toothpaste which has been shown to aid antibiotic resistance. The team says the new material, which takes the form of a water-soluble white powder, could be a viable replacement in these applications and could be used in alcoholic sprays used for sterilization in homes and hospitals.

"The global threat of drug-resistant bacteria has given rise to the urgent need for new materials that can kill and prevent the growth of harmful bacteria," says IBN Executive Director, Professor Jackie Y. Ying. "Our new antimicrobial material could be used in consumer and personal care products to support good personal hygiene practices and prevent the spread of infectious diseases."

 

If you had to name one black swan event that could derail the trajectory of global growth it is antibiotic resistance. It’s not a challenge to growth right now but there is an inevitability to the problem which gives urgency to the search for a solution. I’m an optimist so I believe a solution will be found but I tend to read every article I see on the subject because the stakes are high and the potential rewards for both companies and society are very large. 

A Few Examples Of How Resilient Individuals Have Already Helped Researchers
Human Knockout Project — Daniel MacArthur started this project out of his lab at Massachusetts General Hospital and the Broad Institute. He’s looking for healthy individuals with so-called loss function variants, genes that do not code for a protein. Researchers routinely “knock-out” the function of a gene in mice when studying what a gene does.

PCSK9 — The gene regulates the level of LDL cholesterol, but researchers found that certain individuals with loss function variants in the gene were protected against high lipid levels. Since the discovery several pharmaceutical companies have used this discovery to develop new therapies for combating high cholesterol.

Alzheimer’s Escapers  — “Escapers” are individuals who have the genetic variants that put them at very high risk for disease, but for whatever reason never develop it. The Washington University School of Medicine is looking at families that are genetically predisposed to
Alzheimer’s Disease looking for individuals who have “escaped” getting the disease for insights into new treatments. 23andMe has also found escapers.

HIV — By identifying rare mutations in the gene CCR5 that provide resistance to HIV infection, researchers hope to find a vaccine against AIDS.

Diabetes — A few years ago researchers discovered that a variant in the gene ZNT8 protects even obese people from diabetes. Since then researchers have been using this as a possible drug target to protect against diabetes.

 

The movement to study healthy people as a way to identify how to treat illness is quickly gaining ground in the Technology community. After all when you go to hospital it is full of sick people but the wider world is full of people who are healthy.  Doesn’t it make sense to find out why some people get sick and others don’t? 

“We have to earn back the credibility,” Pearson said in his first public remarks since returning from a medical leave two weeks ago. “We have to deliver on results. We have to meet or exceed this guidance,” Pearson said during the call. “It’s a bit of a starting over point for me and this company.”

Laval, Quebec-based Valeant is at risk of violating its debt agreements, putting it at the mercy of its creditors, since it will be late filing its annual report. Valeant said it must file its 10-K by March 30 to avoid triggering cross-defaults that would restrict it from being able to further tap its credit line. It won’t be able to meet that deadline and will begin asking lenders next week to amend the credit agreement so that a default is waived.

 

in the lengthy conference call this morning Valeant corrected what they called a typo in the press release which had overstated earnings, they announced they were changing the way they calculated the tax they paid and announced that guidance would be lower. Investors took flight and the share fell 51.80%. 

The Nevada Public Utility Commission voted unanimously in favor of a new solar tariff structure on Tuesday that industry groups say will destroy the Nevada solar market, one of the fastest-growing markets in the country.

The decision increases the fixed service charge for net-metered solar customers, and gradually lowers compensation for net excess solar generation from the retail rate to the wholesale rate for electricity, over the next four years. The changes will take effect on January 1 and will apply retroactively to all net-metered solar customers.

The broad application of the policy sets a precedent for future net-metering and rate-design debates. To date, no other state considering net-metering reforms has proposed to implement changes on pre-existing customers that would take effect right away. Changes are typically grandfathered in over a decade or more.

 

Renewable energy and distributed generation are two of the greatest threats to established utilities in the sun-belt. If people can generate their own electricity at home, sell excess onto the grid at a favourable rate and only take from the base load provider when necessary, they are put in a highly advantageous position relative to the utility. On the other hand utilities are accustomed to a highly regulated market but not to competition. 

My hunch - but I may be wrong - is that electric cars are relatively easy to build... there is not much Technology in an electric engine, no complexity; as for the batteries (which I understand are Panasonic's in the case of Tesla, which assembles them together in very large modules) I understand that the know how is not really in the hands of Tesla or any other producer (even Renault/Nissan stopped developing in house Technology) and therefore someone else did the clever job. 

As a first mover Tesla has very competently built a good product, taking risk only where strictly necessary: luxury brand (low risk) with traditional, long bonnet, probably off the shelf design (low risk), an old chassis for the roadster, well tested batteries. Also, the complexity of electric power train - compared even with a small 1ltr engine - is little: there are fewer (almost none in fact) moving parts, no gear box. No way a new producer could enter the industry with its own internal combustion engines, but the electric car gives this opportunity.  A good demonstration of this is that Tesla's provisions for warranties are in line with those of a mature manufacturer with a well-tested line up of cars... probably Tesla know that there is so little in an electric car that can actually go wrong.

Traditional producers have held off from making a proper move into the sector not to cannibalize their current products and make all R&D and Capex in a probably obsolete Technology completely worthless. After all they can catch up quickly: the difference between a Tesla, and a BMW or Nissan Leaf or 500e is purely the size of the battery, whose development risk is not theirs... On paper, a Leaf may have the range of a Tesla simply by doubling the size of the battery. In the meanwhile, no necessity of taking the risk of killing their current baroque business model, made of V12, V6, boxer, in line 4 or 3 or 2 cylinder hyper complex engines that you have to service all the time and last 300k when of exceptional quality.

Traditional car manufacturers will "tolerate" Tesla as far as it does not build a too strong brand (ludicrous speed is genius by the way: intrinsic of electric engine, easy to do, but presented as cool high tech stuff), then move in and with their economies of scale and less vertically integrated structure quickly catch up... it will be dear, but unavoidable as Tesla made clear it is possible to achieve a usable and fun product with no petrol engine.? VW making its move,? but I guess everyone if working on something. 

What I think could get ugly in this story - from the point of view of Tesla shareholders - is the excessive use of dodgy accounting (there are examples), the glorification of the CEO and its ideas (never good in a plc), just to get hold of capital for a venture that is extraordinarily risky and liable to competitive pressures from corporations much larger and much more sophisticated. How far will the individual Musk go to keep the business going? He is very successful, people love him, Tesla S has been voted best car ever. Difficult to give that up, right?

Did not look at the other businesses of his, with Space X he is against defence and/or state run companies... difficult.

Anyway, just a thought, I may be completely wrong...

 

Thank you for this detailed email and I agree that with valuations as they currently stand Tesla does not have a great deal of margin for error. The company has lost money in every quarter since 2013 but less than analysts estimated which has helped support the massive run-up in prices. 

One of those investments was the 2009 purchase of Cyber Power Group Ltd. for $77.6 million, a company that makes polysilicon, the main raw material in solar cells. Yingli’s founder and Chief Executive Officer Miao Liansheng invested another $270 million to upgrade the plant. The project made more sense then, when the material sold for $400 a kilogram; today, it can be bought for less than $20, said Angelo Zino, an S&P Capital IQ analyst in New York.

Yingli spent aggressively on marketing as well, including sponsoring the World Cup. Its logo was prominent during matches in Brazil last year. “They spent on capacity, they spent quite a bit on marketing,” Sanganeria said. “They took everything to the extreme.”

Suntech and Q-Cells faced similar issues, borrowing to expand capacity and then finding themselves constrained by debt, said Raymond James’ Molchanov. Both struggled to cut manufacturing costs fast enough to keep up with the market. The challenge was exacerbated starting in 2011 when slowing demand in Europe led to a global oversupply of panels and falling prices.

The problem for solar cell manufacturers is that the primary bullish case for solar is that Moore’s law can now be applied because it is a Technology rather than an extractive resource. This means companies relying on producing legacy products, when Technology is advancing rapidly are being left behind and often with high debt loads. 

Neither Avago nor Broadcom has the kind of dominance over individual markets that better-known rivals such as Intel Corp. and Qualcomm Inc. enjoy, and a merger could help address that. In addition to consumer applications, Broadcom supplies the vast majority of chips used in the latest networking switches found in corporate data centers, a fast-growing business that could enhance Avago’s communications-focused revenue stream.

And

Researcher Dealogic estimated before the deal was announced that an acquisition of Broadcom valued at $35 billion would be one of the largest semiconductor takeovers ever, coming amid a burst of deals among such companies. So far this year, there have been more than $26 billion in semiconductor deals announced globally, not including the tie-up between Broadcom and Avago, according to Dealogic. That is more than double the volume in the same period last year and the largest year-to-date total since Dealogic started keeping records in 1995.

With interest rates so low and corporate spreads no longer contracting there has seldom been such an opportune time to borrow money. The flip side is that prices have increased in line with increased activity. Nevertheless demand for chips remains robust as the number of connected devices remains on a secular growth trajectory in line with the Internet of Everything theme.

Broadcom had been confined to an almost 15-year base and it took an acquisition to push it to new recovery highs. This helps to illustrate how focused the bull market has been on a select group of companies. As prices increase it is inevitable investors will look for promising companies that have not yet rallied which may represent catch-up potential.

Avago remains in a reasonably consistent uptrend and while somewhat overextended relative to the 200-day MA at present, a sustained move below $110 would be required to question medium-term scope for additional upside.

The results of this Chart Library Filter of the Nasdaq Composite Index highlight that there are a number of shares with similar long-term base formation completion characteristics. 

SMA Solar Technology AG, a German solar company that’s cutting a third of its staff to reduce costs, rose to a three-week high in Frankfurt after first-quarter sales jumped and losses narrowed.

SMA climbed as much as 5.9 percent to 14.50 euros, the highest intraday level since April 23, after saying sales grew 28 percent to 226 million euros ($254 million) and a loss on earnings before interest and taxes narrowed to 5.4 million euros. Sales were driven by large-scale solar projects in North America, Japan, the U.K. and Australia, it said.

“With the sales generated and the order backlog at the end of the first quarter, we have already achieved more than 60 percent of our sales target for the year,” Chief Executive Officer Pierre-Pascal Urbon said. “The earnings situation developed better than planned, partly due to the reduction of fixed costs already initiated and to exchange rate effects.”

 

Solar cells produce direct current but if you want to it to power your home, heat your water or sell electricity back onto the grid it needs to be inverted into alternating current. Therefore everyone who buys solar cells must also buy an inverter. While SMA Solar is a global leader in manufacturing inverters it is not the cheapest. 

If the storage breakthrough is coming, it seems obvious it would happen in California, which has long led the U.S. in supporting alternative energy. The state has the most demanding fuel-efficiency standards for cars, as well as incentives that have made it the biggest market for solar power in the U.S.

California “is often a lab” for the rest of the country, said Brian Warshay, an analyst at Bloomberg New Energy Finance. It will “continue to be so on the storage front.”

Older methods of trying to store power have existed for decades, including pumped hydropower facilities in which water is sent to higher elevation reservoirs and released through lower turbines to produce electricity when demand is high.

 

Here is a link to Tesla’s website where they highlight some of the key features of the Powerwall battery. Perhaps the most important consideration today is that almost no one has a battery in their home and that in a decade it could be commonplace. I reviewed the residential battery sector on April 23rd. 

As much as smoothing out supply and demand curves for electricity use in the home are interesting, the industrial and utility sectors are just as exciting. 

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

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

Still, arrests of hackers are few and far between.

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

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

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

 

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

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

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

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

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

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

 

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

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

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

Any U.S. traded ways to invest in these service robotic application companies? Which industries are the ripest insofar as labor displacement? The national call for a minimum wage seems an added tailwind.

Thank you for these questions which may be of interest to other subscribers. The disruptive power of technological innovation is hard to predict but we can be assured that there will be some major winners and losers.

If you look at the teamsters website, the self-professed strongest union in America, it is not difficult to see how they will oppose any threat to their working conditions and what an incentive this creates for companies to completely displace them. To this end Amazon has already introduced a robotic retrieval system in its warehouses and we can anticipate this will be ubiquitous before long. 

We hold an optimistic view on the metal casings industry. On the demand side, we are confident about its robust shipment momentum within the next three years due to (a) the design trend toward ultra-slim and lighter form-factor, and larger panel-screens on mobile devices (NBs, smartphones and tablets), (b) Apple’s preference for using metal casings (its adoption rate at 86%, Figure 19) for iPhone, iPad and Macbook products, and (c) the increasing adoption rate from other smartphone and tablet brand vendors. On the supply side, the disciplined procurement of CNC (Computer Numerical Control) machines by major casing suppliers in Asia (hence controlled supply increase) and the higher entry barriers in metal casings manufacturing and surface treatment solution can help ease the Street’s concerns about the industry’s oversupply risks.

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It is easy to become desensitised to photos of long lines of people sleeping outside Apple stores in order to be among the first to own the next new product. However these people represent the loyal customer base that is the envy of every other consumer electronics company. News last week that privately held, discount smart phone manufacturer Xiaomi would be moving to metal cases exemplifies the trend of Apple imitators, not least in the build quality end users have come to expect.

Following on from yesterday’s addition of a section for the US Dividend Champions to the Chart Library, I created a section for the US Dividend Contenders today. Unlike the Dividend Aristocrats which demand 25 years of consecutive increases as well as a market cap and liquidity provision, the Champions and Contenders only look at records of increasing dividends. In the case of the Champions this is at least 25 consecutive years and between 7 and 24 years for the Contenders. 

The US Dividend Contenders represent an interesting universe of companies where banks, utilities, insurance, MLPs and REITS dominate. This list also highlights the increasingly large number of Technology companies that have maintained solid records of dividend increases over the last decade. 

U.S. crude production rose to the highest level in a quarter-century as a shale drilling boom in states such as Texas and North Dakota cut the need for foreign oil and pushed the country closer to energy independence.

The U.S. pumped 8.075 million barrels a day in the week ended Dec. 6, a gain of 0.8 percent, or 64,000 barrels a day, the Energy Information Administration said today. It’s the most since October 1988.

“You can’t swing a cat without hitting a barrel of oil in North America,” saidStephen Schork, president of the Schork Group Inc., an energy consulting firm in Villanova, Pennsylvania. “It’s amazing how quickly things can change.”

U.S. oil output grew 18 percent in the past 12 months, the fastest pace on record, boosting fuel exports and reducing reliance on imports, according to the EIA. The boom will make the country the world’s largest producer by 2015, five years sooner than last year’s forecast, the International Energy Agency in Paris said last month.

 

Remember growing up with all those stories about how we were going to run out of oil, to the point of being impoverished and sitting in the dark?  They persisted right into the 21st Century.  People are still inventing reasons to avoid tapping their natural resources, and paying much higher prices for their energy.  Who benefits from that?

 Technology is everything.  It improves our livelihoods, as most of us know.  We have only begun to see how it can reduce pollution, because that challenge was not sufficiently prioritised previously.