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Comments of the Day
18 December 2020
Video commentary for December 17th 2020
Eoin Treacy’s view
A link to today’s video commentary is posted in the Subscriber’s Area.
Some of the topics discussed include: Dollar extends decline, global markets outperforming as their currencies appreciate. gold firms, silver leading, bitcoin breaks out, China firms,
Chinese EV Makers Trade at High Valuations, Helped by Tesla and National EV Targets
This note from Dow Jones may be of interest to subscribers. Here is a section:
NIO, BYD and Xpeng are examples of Chinese electric-vehicle makers that have surged in value, buttressed by national targets regarding electric vehicles on the road and investors’ search for the next EV titans. The American depositary receipts in these companies have surged this year and the meteoric rises put their valuations in line with large traditional car makers, such as General Motors and Ford Motor. To help cut carbon emissions, China aims for EVs to make up 20% of car sales by 2025, and 50% by 2035. Tesla’s success this year has also fueled investor appetite for the technology. Investors should be aware though that most Chinese upstarts are unprofitable, The Wall Street Journal reported, and they are also selling far fewer vehicles than major automobile groups.
Eoin Treacy’s view
Tesla’s success in attracting capital has set off a global gold rush in copycats seeking to cash in on investor demand for renewable investments. Anything that has a battery in the description is doing well and a lack of income was not seen as a barrier to entry when discount rates are zero and the world is swimming in cash.
The evolution of the SPAC market has been a gateway for a pace of IPOs to rival that of the late 1990s. The number in 2020 alone has exceeded the total for all other years combined. The result is new companies have been popping up on the stock market at a dizzying pace. Advice to pursue growth at all costs, capture market share and not to worry about profits carry heavy reminiscences of the tech bubble in the late 1990s.
Email of the day on cannabis stocks
Hello Eoin What is your opinion on Cannabis stocks? All the best from Switzerland, I enjoy your comments every day with greatest interest
Eoin Treacy’s view
Thanks for you support and kind words. Opium poppies have been central to pain medication for millennia. However, they are uniquely unsuited to chronic pain ailments. The issues that have arisen over the last decade with opioid over prescription and addiction are well understood. Considering the significant anecdotal evidence from cannabis advocates, there is a clear rationale for at least giving the medicinal cannabis a second look. My own experience is cannabis ointment is effective in numbing painful muscles temporarily but it is not a cure. Meanwhile, recreational cannabis is where the speculative interest resides.
China’s Central Bank Going It Alone Spurs an Influx of Capital
This article by Tom Hancock and Enda Curran for Bloomberg may be of interest to subscribers. Here is a section:
One reason it hasn’t leaned on its balance sheet as much as global peers is the PBOC largely handed the task of increasing money supply and lowering interest-rates to state-owned banks. It cut bank reserve-requirements, meaning they had more cash to dole out in loans.
With the economy growing again, policy makers have signaled they want a more sustainable pace of credit expansion. By contrast, the Fed, European Central Bank and Bank of Japan have all announced plans to maintain and step-up stimulus into the next year.
“Advanced economy central banks will try to use negative real interest rates and inflation to erode the real value of their sovereign debt,” said Andrew Sheng, chief adviser to China’s Banking and Insurance Regulatory Commission. “This is why real money flows will go to the economies that show growth, higher productivity” and steady monetary and exchange rate policy, he said.
The difference in yield between Chinese government bonds and U.S. Treasuries is already near record levels, with many market players expecting the gap to widen further next year
Eoin Treacy’s view
The Chinese approach to the pandemic has been to allow companies to issue a lot more debt and to give banks the leeway to facilitate that practice. That has occurred despite the uptick in corporate defaults. That has amounted to an addition CNY5 trillion in debt issuance this year or an increase of about 40% over the peaks of the last four years.
Eoin’s personal portfolio – trading and investment positions increased December 1st
Eoin Treacy’s view
One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change.
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