Comment of the Day
26th April 2023
Eoin Treacy
Apr 27
Video commentary for April 26th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: oil and copper extend drawdowns, gols stable, dollar weak, Wall Street weak as pressure mounts on the banking sector, HK steadies, ASX somewhat overbought, orange juice potentially peaking.
Email of the day on Hong Kong
As a HK subscriber to your excellent service, I like to give a few on the grounds observations. In my view, the reason why LVMH is making the shift is 1) China opened Hainan tax free shopping and Shenzhen also exploring the same makes shopping high end products less unfavorable in the mainland. 2) Chinese tourist since reopening find HK less attractive relatively for tourism than before.
On HK becoming just another Chinese city, on recent trip to UK, found some general public perception of HK over the last few years seriously incorrect, I suppose due to the sensational and misleading journalism on HK from the press in the west. While there are changes in HK in last few years, that it is becoming another Chinese city I think is very much misplaced.
On the HKD peg, from what I heard from current and prior HK central bank chiefs and top officials from PRC, there is no desire or rationale to change the peg for the foreseeable future. Also that HKD in circulation is back by about 5X USD reserve and that the peg is setup unilaterally by HK, risk of interference by US due to geopolitical concern is low.
Eoin Treacy's view
Thank you for this generous and insightful email and your kind words. The efforts underway to boost the international credentials of Shenzhen, Guangzhou, Macau and Hong Kong to create a “Bay Area” innovation hub to rival Silicon Valley were the stated government policy ahead of the pandemic
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Email of the day on combustion risk from EVs
Will they be a conflagration risk?
Eoin Treacy's view
Thank you for this question, which was in reference to the announcement CATL is prototyping a battery capable of powering airplanes. The fire risk from lithium batteries comes from the liquid catalyst. Since solid state batteries do not have a liquid electrolyte they are inherently safer. The new CATL battery is not exactly a solid state battery so it is impossible to know at this stage what the fire risk is.
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Email of the day on why uranium is not doing better.
Dear Eoin, Why do you think the Uranium Miners ETF you have been holding has been disappointing of late? Is it all about "risk-off" and withdrawal of liquidity from the market? What makes you continue to hold? What would make you sell? Thanks! Kind regards,
Eoin Treacy's view
Thank you for this question. I don’t see how the promise of electrifying the economy is possible without a nuclear renaissance. The fact the sector is not performing better suggests the critical mass of support for the industry is not yet mature enough. Significant resources are being ploughed into the small modular reactor sector but the lead times are long and there is not enough urgency to ignite investor interest in the short term. That’s why I believe it is underperforming at present.
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Email of the day on the timing of a gold bull market
Dear Eoin-Hope you are doing well. You often mention in your daily videos that you expect a recession within the next 18 months and that you also expect gold to move considerably higher in a not too distant future. If I am not mistaken in the previous recessions gold went down considerably. I know timing is always very difficult if not impossible, but do you expect gold to break upwards before the recession or after the recession. As always thanks very much for your wonderful service. Best rgds
Eoin Treacy's view
Thank you for this important question. Gold began its bull market in 2000/01 when the Nasdaq was topping but it collapsed in 2008 during the credit crisis as contagion selling forced investors to sell anything they had a profit in. That suggests gold need not collapse during a recession but it will depend on how tight credit conditions become and how heavily positioned investors are in precious metals.
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Email of the day on a range versus a base
When I see/read that Glaxo's shares have been ranging for 20 years, I can't help but be reminded by your service's maxim that, ranges are explosions waiting to happen." After 20 years, one must wonder when and in what direction will we see the explosion?
Eoin Treacy's view
Thank you for this topical question. Glaxo has been a highly innovative company and yet the share has been locked in a lengthy and volatile range for decades. That suggests the innovations that drove the original bull market and funded the M&A activity that created GlaxoSmithKline are priced in.
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