Video commentary for February 5th 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: Tesla pulls back, biotech firming and fertiliser shares improving with cyclicals China steady, Treasuries pause at 1.5%. India firms,
Why Tesla could become world''s first 10 trillion dollar company
This article from The Driven may be of interest. Since it was released yesterday the title has been edited to "Why Tesla could soon become world’s most valuable company"; reflecting a quick moderation of sentiment. Here is a section:
“There’s a lot of growth opportunities from that plant going forward,” Baron said on CNBC. “[Tesla] could be one of the largest companies in the whole world.”
A day earlier, Ark Invest suggested the stock could be worth $US7,000 a share within five years. That equates to a market value of around $US1.5 trillion – making it more valuable than the current top stocks, Apple and Saudi Aramco. (And there’s a lot of Apple in the way Tesla proposes to managed its EV and batteries).
Ark Invest’s reasons for this are worth repeating.
“Based on our updated expectations for electric vehicle (EV) cost declines and demand, as well as our estimates for the potential profitability of robotaxis, our 2024 expected value per share for TSLA is $7,000,” it wrote in a note to investors over the weekend.
This, essentially, is a massive bet on the success of Tesla’s Full Self Driving, and Musk’s dream of potentially turning every Tesla with the appropriate software into a robotaxi, and his own dreams of building a huge fleet of robo-taxis that will revolutionize the way we do road travel.
Stanford University’s Tony Seba has been talking about the arrival of self-driving for a few years now.
Eoin Treacy's view
Analyst estimates for Tesla’s future potential upside have been significantly upgraded over the last couple of weeks. This might be tongue-in-cheek but some analyst expectations are now even above where the price is currently trading. In June there was a consensus the company was going broke and today there are some floating the idea it will be worth more than ten times what Amazon is currently trading at. I think it is safe to say the truth is somewhere in between.
Trump's Farmer Base Will Make More Money Thanks to Trade Deal
This article by Mike Dorning for Bloomberg may be of interest to subscribers. Here is a section:
Still, a last taste of aid is creating a temporary buffer. Payments of the final tranche started in January, contributing to the gains for this year’s profit projection. The USDA forecasts farmers will receive $15 billion in direct government payments in 2020, down from $23.7 billion in 2019 but still above the $11.5 billion received in 2017, before the trade war started.
While the USDA’s estimates take into account the trade pact, they may not reflect the true scope of the impact, according to Carrie Litkowski, a senior economist with the USDA’s Economic Research Service.
The projected gain for income also doesn’t reflect any potential blow-back from the outbreak of the deadly coronavrius in China, the world’s biggest food importer. The health crisis has in recent days called into question whether the Asian nation will meet the purchase targets established in the trade deal.
Eoin Treacy's view
Soybeans has been ranging mostly above 850¢ since 2018 and returned over the last month to test the lower side of its range. This area represents the lower side of the volatile trading pattern which has evolved since the breakout in 2007. Bull markets in commodities are defined by an increase in the marginal cost of production and prior to 2007 the price failed to hold moves above 850c. That suggests we are seeing a long-term example of past resistance offering future support.
China's Drug Patent Grab Makes Coronavirus Scary for Pharma
This article by Max Nisen for Bloomberg may be of interest to subscribers. Here is a section:
The coronavirus outbreak in China is already threatening to undermine the global economy. It may soon create a similar shake-up in the drug industry.
I’m not talking about pharmaceutical companies’ attempts to develop a vaccine, but about intellectual property. Chinese researchers have applied for a patent on an antiviral drug candidate called remdesevir owned by Gilead Sciences Inc. The drug is being tested in clinical trials in short order, but the company could eventually be cut out.
If the patent is granted, it will confirm long-standing drugmaker fears about China’s commitment to IP protection, raising concern about the industry’s future in a crucial market. It also could further erode the already weak incentives for pharma to invest in drugs to combat emerging infectious diseases. The risks of seizing the patent may outweigh any benefit.
Eoin Treacy's view
The world is racing to help find a cure for the Wuhan virus with both pharmaceutical companies and philanthropists committing significant resources to finding a cure. That’s as much about helping China as it is about helping to contain the infection and creating the potential to be compensated for coming up with a solution.