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

    ASML Shrugs Off China Chip Curbs Amid Strong Demand Elsewhere

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

    ASML hasn’t been able to sell its most advanced extreme ultraviolet lithography machines to China as the Dutch government refused to give it a license to do so, but the company has been able to sell its other machinery to the country. The Dutch company sees the total indirect impact from the new US measures to be about 5% of its backlog, it said on a call with investors in October. 

    Meanwhile, major governments around the world have come up with subsidies and incentives to expand chip production capacities at home to avoid another round of semiconductor shortages that shaved off hundreds of billions from their economies during the pandemic. 

    Even though the global chip industry is now facing a severe downturn, countries including the US and Japan have not slowed their pace in readying new plants to prepare for the next boom cycle. Taiwan Semiconductor Manufacturing Co. is even considering adding another advanced facility next to a $12 billion dollar plant that’s under construction in the US state of Arizona. 

    Efforts by governments to build chip plants at home have just started and will accelerate, Wennink said Friday. “The drive for technological sovereignty is going to be very important driver for our business going forward.”

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    US Inflation Finally Offers Relief, But There's a Long Way to Go

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

    A cooling in US consumer prices offered cheer to households, investors and Federal Reserve officials, but there’s still a long way before high inflation becomes history. 

    At 7.7%, annual inflation in October was the slowest since January -- before the start of Russia’s war in Ukraine that triggered a worldwide surge in commodities and pump prices. Even more importantly for the Fed, a closely watched measure that excludes food and energy decelerated by more than economists anticipated.

    With slowdowns across categories including food, apparel and used cars, the report suggests that the fastest price increases in decades may finally be starting to ebb in the world’s largest economy. And it probably gives the US central bank enough assurance to moderate its aggressive interest-rate hikes if the trend is sustained.

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    IBM releases Osprey, the world's most powerful quantum computer

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

    As impressive as this year’s updates are, IBM is looking to next year as the real turning point. The company’s roadmap says that next year’s quantum processor, the Condor, will boast a stunning 1,121 qubits. Also on the cards is a modular processor called the Heron, which can stack multiple 133-qubit units together to make more powerful quantum processors.

    And finally, the IBM Quantum System Two will be released towards the end of 2023. This modular system will form the framework of the company’s quantum supercomputers, housing multiple processors with communication links between them. These are all stepping stones on the path towards IBM’s plans of building a quantum system with over 4,000 qubits by 2025.

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    Lucid Stock Is Falling as Reservations for Cars Drop

    This article from Barron’s may be of interest to subscribers. Here it is in full:

    The EV maker Lucid turned in respectable third-quarter earnings and stuck with its forecast for vehicle shipments this year, but the stock is dropping. Reservations are the issue.

    Tuesday evening, Lucid (ticker: LCID) reported a per-share loss of 40 cents from $195 million in sales. Wall Street was looking for a 31-cent loss from $209 million in sales., but earnings and sales don't matter much at this point.

    The company is just ramping up production of its first model, the Lucid Air. Importantly, the company didn't change its full-year guidance for vehicle shipments from the 6,000 to 7,000 cars it told investors to expect back in August. The prior guidance, given in May, was for 12,000 to 14,000 units.

    What seems to be raising investors' eyebrows is that management says Lucid has 34,000 reservations for its vehicles. The number given in August was 37,000.

    Shares were down 3% in after-hours trading.

    Lucid delivered 1,398 vehicles in the third quarter, up from 679 in the second quarter of 2022. Lucid produced 2,282 vehicles in the third quarter, which was more than triple the second-quarter production, according to the company.

    The company also ended the quarter with almost $4 billion in cash.

    Management scheduled a conference call for 5:30 p.m. Eastern time to discuss the results. Investors and analysts will be interested in the reservation number and whatever management has to say about demand for Lucid vehicles.

    Through Tuesday trading, Lucid stock was off more than 60% so far this year, while the S&P 500 and Dow Jones Industrial Average had dropped about 20% and 9%, respectively.

    Lucid stock has been hit harder than most. The cut to the forecast for deliveries didn't help. Rising interest rates, which reduce the current, discounted value of earnings expected to arrive in coming years, are an additional problem.

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    Jeffrey Gundlach with David Rosenberg 10-11-22 Podcast

    This video is a little outdated, particularly with regard to crypto, but it does highlight the fact bond investors finally have a yield they can base a total return strategy on. 

    Bond king Jeffrey Gundlach says any year-end stock market rally is going to be derailed by intense tax-loss selling

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

    So most investors, whether they own stocks or bonds, should have plenty of opportunities to harvest losses between now and the end of the year. And that means there will be more selling pressure ahead.

    "There will be pretty high tax loss selling I would think. I even got a white paper from somebody saying this was the greatest tax loss selling opportunity of a generation. I would say it might be two generations," Gundlach said.

    Tax-loss selling is a tax optimization strategy that investors and financial advisors often take advantage of in taxable accounts heading into year-end. The strategy involves realizing losses by selling out of losing positions, and then buying back those portfolio positions 31 days later to avoid the tax wash-sale rule.

    The strategy allows investors to realize losses that can offset future realized gains, ultimately helping reduce tax liabilities in the long term.

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    The Metals for Your EV Are Stuck in a 30-Mile Traffic Jam

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

    Zambia, too, has ambitious expansion plans. The region could add nearly 1 million tons of annual copper production over the next decade, according to Adam Khan, copper supply analyst at CRU Group, and others are more optimistic still.

    “Copper is the new oil,” Zambian Finance Minister Situmbeko Musokotwane said in an interview. “This is a very good opportunity for us.”

    There’s no doubt that the region’s copper will be needed. To meet the global target of net-zero by 2050, the world may need to double supplies of what S&P Global calls “the metal of electrification.” “The green-energy transition is the biggest purchase order in history for the commodities industry,” said Benedikt Sobotka, chief executive officer of miner Eurasian Resources Group.

    To be sure, logistics are not the only impediment. Corruption is rife, and disputes with governments are common. One of the largest copper and cobalt mines, Tenke Fungurume, hasn’t been allowed to export any material since July because of a dispute between its owner CMOC Group and Congolese state mining company Gecamines.

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    China's Inward Turn

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

    In some ways this represents an important generational change in the way China will interact with the rest of the world. As far as we know, the term “international circulation” originated in 1988 when a government researcher, Wang Jian, made the case that China should adopt an export-led growth strategy, making use of its huge surplus labor to plug the economy into the international manufacturing process. In that sense, the de-emphasis of international circulation is an important historical shift. In a People’s Daily article in November 2020, Vice Premier Liu He set out a number of objectives relating to the DCS including: (1) the priority of upgrading of China’s technological capacity, including an enhancement of China’s supply chain resilience (though referred to in this article as “optimizing the structure of supply”); (2) the need for finance to serve the needs of the real economy; and (3) the promotion of further urbanization. Any mention of external demand comes last

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    Gilead, fueled by latest approval, sees CAR-T sales takes off

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

    Shares of Gilead Sciences ticked up Friday morning after the company’s latest earnings report exceeded Wall Street’s expectations.

    The results were, in part, tied to growing sales from Gilead’s cell therapy business, which consists of the marketed cancer drugs Yescarta and Tecartus. Together, sales from the two drugs totaled $398 million in the third quarter, a nearly 80% increase from the same three-month period a year prior.

    Gilead’s work in cell therapy, catalyzed by the $12 billion acquisition of Kite Pharma in 2017, hasn’t always sat well with investors. Early sales from Yescarta were slower than some had hoped, and Gilead ultimately acknowledged that some assets from the Kite deal were overvalued.

    But in recent months, the company’s cell therapy business has ballooned. Third quarter sales of Tecartus were up 72% year over year, reaching $81 million, while those for Yescarta rose 81% to $317 million. Gilead cited the approval of Yescarta as a “second-line” therapy for a type of hard-to-treat lymphoma, which happened in April, as a main reason for the uptick.

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    Fed's Yield-Curve Barometer Starts Flashing Recession Risk

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

    Inversions of this segment of the Treasury curve typically occur late in Fed tightening cycles as three-month bills track the policy rate while longer-term borrowing costs reflect expectations for economic growth and inflation. While other widely-watched yield curve segments such as the two- to 10-year and five- to 30-year have been deeply inverted for much of this year, the Fed follows this one more closely.

    “We are certainly in territory with the Fed’s official barometer of the yield curve that will raise concerns,” said Gregory Faranello, head of US rates trading and strategy at AmeriVet Securities. “The Fed will definitely watch this, and there is a sense in the bond market that they will soon throttle back the pace of rate hikes and take a step back.”

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