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Comments of the Day
25 October 2019
Video commentary for October 24th 2019
Eoin Treacy's view
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: precious metals firming within their respecitve ranges, Dollar steady, commodities testing resistance, oil steady Europe firm, Wall Street quiet, bonds susceptible to additional selling pressure. Amazon earnings disappoint.
Email of the day on Cryptocurrencies and quantum computing from one of Iain Little's clients:
Yep very well thanks, I'd say the Google quantum computing is all FUD, i.e. see here:
Even if quantum came anywhere close to being able to break SHA256's cryptographic hash function, which actually “can’t” happen without a mathematical insight that makes it possible (because it requires too much work or too much luck), then the majority of those running the nodes would just vote for a hard fork by the devs to a stronger format like SHA-3 there would be consequences for old coins that weren't moved but bitcoin would adapt and survive. Also, all current banking, military etc. use this same SHA256 as far as I know so the world would have way more to worry about than bitcoin if it was ever broken.
Here's some more stuff going on if reasons for the current drop in bitcoin's price were needed:
But it could just as easily be normal market volatility, the price is still about double that of the start of the year and bitcoin likes to have these big corrections after making huge and rapid gains.
I'd expect it's a combination of things but still normal market movements and nothing has fundamentally changed that would prevent bitcoin becoming gold2 as it is just better than gold and as people see this it's volatility will decrease as it's market cap increases, I'd imagine.
Though I very much like both asset classes and feel much relieved to have taken so much off the table and into property, art & collectables etc.
Eoin Treacy's view
Thanks for this instructive email. The time for developers to begin to plan for a security upgrade is now. The pace of innovation in quantum computing is not something that can simply be dismissed. It is not a challenge in the short term but it is something that will become a progressively more important consideration the more successful cryptocurrencies become and not least if a true commercial use case is developed.
Pence Criticizes China But Seeks Balance as Trade Talks Continue
This article by Jenny Leonard and Justin Sink for Bloomberg may be of interest to subscribers. Here is a section:
Pence’s speech comes at a crucial time in the U.S.-China relationship as the two countries remain locked in a trade war and jostle for military and commercial dominance in the Pacific. White House officials have debated for weeks how critical Pence should be, underscoring the stakes of his remarks, which come just a day before negotiators talk about progress toward agreeing on a phase one agreement over trade.
The vice president was careful to balance his criticism with an olive branch. Rather than “decoupling” the two countries, the U.S. “seeks engagement with China and China’s engagement with the wider world,” he said. “Despite the great power competition that is underway and America’s growing strength, we want better for China.”
Pence’s most stinging criticism of China was indirect, in remarks targeting Nike Inc. and the NBA.
“Nike promotes itself as a so-called ‘social-justice champion,’ but when it comes to Hong Kong, it prefers checking its social conscience at the door,” Pence said.
He accused the NBA of “siding with the Chinese Communist Party and silencing free speech.” The league apologized after an executive of the Houston Rocketsissued a tweet supportive of Hong Kong protesters, outraging Chinese authorities and many NBA fans in the country.
“The NBA is acting like a wholly owned subsidiary of the authoritarian regime,” Pence said.
Eoin Treacy's view
The reasonably balanced nature of Mike Pence’s speech which was originally slated for June and was expected to be much more explosive is a positive for the trade situation and suggests the USA foreign policy hawks are willing to negotiate. The question of whether a Phase 1 deal will in fact be signed in a few weeks at the Santiago conference remains a source of near-term uncertainty.
Tesla's Surprise Looks Strangely Familiar
This article by Liam Denning for Bloomberg may be of interest to subscribers. Here is a section:
Tesla’s free cash flow, meanwhile, was positive for the second quarter in a row, at $371 million. Again, that is positive. Again, the number was flattered by Tesla underspending on its capex budget. Guidance for the year was $1.5 billion to $2 billion. Based on the low spending in the first half, the mid-point of Tesla’s range implied it spending an average of $610 million in the third and fourth quarters. Capex came in $225 million below that level, equivalent to 61% of the free cash flow. Tesla’s capex continues to come in lower than its depreciation expense, which is striking for a company with such expansive ambitions. The company puts this down to rising efficiency.
There is something ludicrous about the stock of a company already priced at $46 billion, or 422 times the 2020 GAAP earnings forecast, surging because it reported a small net profit rather than a small net loss (the consensus estimate was a negative $234 million). Ditto for a few hundred million of free cash flow largely explained by below-guidance capex. Tesla’s own forecast points to positive profits and free cash flow continuing, but which may suffer “temporary exceptions, particularly around the launch and ramp of new products.”
Eoin Treacy's view
There is no doubt that Tesla is an expensive share but it’s ability to occasionally turn a profit confounds the highly vocal bearish community who point to the company as representing nothing more than a house of cards. At its most basic the company is producing vehicles many people aspire to own which is a positive. The very big question is whether it can continue to do so and make money at the same time.
Eoin's personal portfolio: precious metals long initiated
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. I'll change the title to the date of publication of new details so you will know when the information was provided.