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

    Musings from the Oil Patch August 21st 2018

    Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB. Here is a section:

    Some Mutual Funds Have Avoided the Recent Tech Pain

    This article by Danielle Chemtob for the Wall Street Journal may be of interest to subscribers. Here is a section:

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

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

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    Investment Strategy: "Charts of the Week"

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

    Bitcoin Whale's Bad Trade Leaves Counterparties Holding the Bag

    This article by Benjamin Robertson, Andrea Tan and Yuji Nakamura for Bloomberg may be of interest to subscribers. Here is a section:

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

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

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

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    Email of the day on Facebook and FAANG

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

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    Is Netflix the chink in the Armour of the FAANGs?

    Thanks to Niru Devani for this article, which I’m sure will be of interest to the Collective.

    A long term subscriber to FullerTreacyMoney, Niru began her career in the financial markets 30 years ago as a trainee fund manager. After spending 14 years in the fixed income sector, she moved to managing commodities and global macro funds. Niru now manages both hers and her families' pension funds and other savings. She also likes to trade. She says, ‘My enthusiasm for my profession is even stronger now and I enjoy the fact that I am constantly learning new things.’

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

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

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

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

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    The "Big Bang" of Alzheimer's: Breakthrough study uncovers genesis of the disease

    This article by Rich hardy for New Atlas may be of interest to subscribers. Here is a section:

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

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

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

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

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