Comment of the Day
Big Picture Long-Term Video September 30th 2022
A link to this week's Big Picture Long-Term video is posted in the Subscriber's Area.
CIOs Waiting for Cloud Investments to Pay Off
This article from the Wall Street Journal may be of interest. Here is a section:
Roughly 67% of 1,000 senior technology leaders at U.S. firms across industries said they are still waiting for cloud investments to pay off, KPMG said Thursday in its annual technology survey. Why the wait? Blame insufficient skills among tech teams, added requirements, and a misalignment on expected outcomes, says Barry Brunsman, a principal in KPMG’s CIO Advisory group.
Tech leaders take note. Diane Comer, chief information and technology officer at Kaiser Permanente, said that when the healthcare provider is working on a new initiative, it will price it out and compare an on-premises solution against one in the cloud. “You really do need to not just take it for granted that cloud is where you should head,” she said.
Eoin Treacy's view - Companies boost their valuations by making claims about the size of the total addressable market (TAM) in their corporate presentations. The logic is simple enough. We might only make a couple of hundred million today, but the size of the market is so much larger, that we can grow quickly to capture sizeable market share.
This section continues in the Subscriber's Area.
Message From Stock Market Is Clear: Fed Put Is Getting Closer
This article from Bloomberg, focusing on the options market, may be of interest. Here it is in full:
The price of deeper out-of-the-money insurance in equities is falling, implying lower demand for crash insurance. This suggests the market believes the Fed put is getting closer.
A conundrum all year has the been the relatively low level of the VIX despite equity markets being in a bear market. The VIX has been low relative to implied volatility, relative to longer-term volatility, and remains low compared to cross-asset volatility. Most notably, though, the VIX has been low -- and continues to fall -- versus at-the-money volatility.
This is due to the price of further out-of-the-money put options falling by more than options that are less out of the money. We can see this by looking the difference in volatility between 80% and 90% out-of-the-money put options and see it has been falling.
As the VIX is a weighted average of all S&P options with approximately 1-month to expiry and that have a non-zero bid, the lower price of these deeper out-of-the-money options is keeping the VIX lower relative to at-the-money volatility than it otherwise would be.
Puts have still been in demand though. The put/call volume ratio has been rising, showing that investors are buying more puts relative to calls. But the put/call price ratio has been falling, showing that investors have been paying relatively less for those puts.
Investors have therefore not been paying up as much for crash insurance, and buying puts that are less out of the money. The Fed is now well into its hiking cycle, and the market is inferring it believes the Fed put is getting nearer.
Certainly, current oversold conditions suggest a short-term bounce is at hand. But while excess liquidity remains depressed, it will be hard for the market to make new highs. The Fed put may be closer, but that does not mean the bear market is over.
Eoin Treacy's view - No two crises are the same and yet the temptation to think “this time is different” has been proved wrong on so many occasions that the term is a cautionary tale. The Bank of England intervened to support the domestic pension system this week. Several schemes required £100 million in additional capital each and others were looking at closing. The central bank had no choice but to wade in and provide some stability. The ramifications of this move raise more questions than answers.
This section continues in the Subscriber's Area.
Illumina Unveils DNA Sequencing Machine Delivering a $200 Genome
This article from Bloomberg may be of interest to subscribers. Here is a section:
Many consumers have been introduced to their DNA through relatively low-cost tests like those marketed by 23andMe Holding Co. that analyze small snippets of the genome for clues to disease risk and ancestry. Whole-genome sequencing can provide a far clearer, more accurate view of patients’ genetic makeup that doctors can use to precisely identify some diseases, including certain forms of cancer and heart disease. However, the price of performing the tests, along with their interpretation, has been a barrier for many patients that companies have been trying to bridge.
More efficient machinery and materials reduce customer cost to sequencing one genome, or the complete set of genetic material, Illumina said, adding that costs would range from less than $200 per genome, with discounts for bulk use, to $240 for a higher-quality analysis. Slashing the price of reading DNA could allow the practice to move into the mainstream, where it might be used to better tailor medications or treatments to people or have other health benefits.
“This will be a huge force in terms of significantly increasing accessibility to genomics in a number of ways,” deSouza said in an interview ahead of the announcement. “It will democratize access to genomics by allowing sequencing to be offered to hospitals and researchers at much lower prices.”
Eoin Treacy's view - Illumina is a highly cyclical business. They are the clear leader in developing machines for genetic sequencing. Every few years they bring out a new machine that delivers more efficient and cheaper sequencing. That kickstarts an upscaling cycle among its customers which boosts sales over the next 18 months.
This section continues in the Subscriber's Area.
Speaking Engagements - World Money Show October 2022
I have agreed to speak at The World Money Show in Orlando on October 30th.
The Chart Seminar London November 21st and 22nd 2022
We are living through fast moving markets so the next venue for The Chart Seminar will be November 21st and 22nd this year in London.
In the meantime, if you have any questions, would like to attend, or have a suggestion for another venue please feel to reach out to Sarah at sarah@fullertreacymoney.com.
The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non-EU residents are not liable for VAT). Annual subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.
Eoin's personal portfolio: precious metals loss taken September 23rd 2022