Gravitas Spark CrowdFunding

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  • The War Of Unintended Consequences…

    The War Of Unintended Consequences…

    I know. The headline should read “LAW” but where’s the law these days? Certainly, it’s nowhere near Washington as the new Trump fund raising “squeeze” is an emailed request for cash donations in exchange for “private national security briefings” straight from the desk of The Don himself. I kid you not. Anyway, let’s get back to the war, or ‘excursion’ per the Orwellian Oval Office. Clearly, things on the Iran war front are not going to plan. My particular favourite summary of the moment is a delicious one from The Economist: “Although Donald Trump claims to have destroyed 100% of Iran’s military capabilities, the remaining 0% is wreaking havoc on the global economy.” Now, the purpose of this article is not to re-hash all the negative first-order global impacts of the war ranging from higher fuel prices, to supply chain disruption, to inflation, to reduced growth….to interest rate hikes. Yuk! None of this helps financial markets or business in the near term but I’m intrigued by some of the second-order possibilities which could emerge from an extended period of uncertainty. I’m thinking of three areas in particular:

    AI Infrastructure: The simple math of a shock to the global economy is that financial flows dramatically shift. Quickly. Extra money will be needed to meet higher energy bills, economic stress etc. That money must come from somewhere else in the system. So, one thing to consider is that the hundreds of billions Saudi Arabia , UAE, and Qatar committed to the funding of AI infrastructure projects might just be needed to rebuild energy infrastructure closer to home. Current estimates of the cost of the attack on Qatar’s Ras Laffan LNG hub is up to $20 billion per annum . And the worst bit, the rebuild could take 5 years – so let’s call that $100 billion. There is a teeny weeny bit of irony here given the US tech broligarchs’ man in the big house (and ballroom) has screwed up royally. Current estimates suggest $4 trillion is needed to build data centres, processing chips, training models, memory chips and storage by 2030. A squeeze on access to that investment capital will favour the biggest balance sheets and cash flows like Google, Microsoft and Amazon. Not for the first time, I worry about OpenAI’s positioning in the middle of all this AI excitement (remember the famous FT graphic) and being attached to more than $1 trillion of AI projects. So might its bankers worry, watching its tiny balance sheet.

    Electric Revolution: There was a theory for years that Saudi Arabia was deliberately keeping the oil price lower in order to delay the electric/renewable revolution. Their thinking apparently was that if energy was cheap it would remove the urgency to seek alternatives to fossil fuels. So, with Asian buyers already paying over $170 per barrel of oil we are beginning to see some interesting developments. In a little more than 2 weeks, Chinese EV player, BYD Co, is seeing its showrooms packed with customers wanting to switch to EV models. From Bloomberg….”At a BYD Co car dealership in Manila’s financial district, demand for the Chinese company’s electric vehicles is so high that Matthew Dominique Poh said he’s seen a month’s worth of orders in just the past two weeks.”  This feels similar to the Covid-19 acceleration of remote working. Also, spare a thought for US auto manufacturers who have scaled back their EV ambitions to keep the Dearest Leader happy and have written off $55 billion of EV projects. Timing is everything they say…..Get ready for some pretty interesting EV headlines in the coming months.

    Defence: Ukraine was the wake-up call when the world’s second most powerful military power turned the Kremlin’s “3 day operation” into a battlefield quagmire which has decimated its stores of equipment and weaponry, incurred more than 1 million of its own military casualties and incredibly has now lasted longer than the Soviet Union’s WW2 conflict with Nazi Germany. Fast forward to today and we are witnessing the world’s most powerful military gain almost total superiority over Iran but now staring down the barrel (!) of a strategic disaster that “nobody ever expected” per the stable genius hurling ketchup against the walls of Mar-a-Lago. The trapping of 20% of the world’s fuel supplies in the Strait of Hormuz and the destruction of critical energy infrastructure in UAE, Saudi Arabia and Qatar has been achieved with drones which cost as little as $20,000 but require the US to quickly run through their stores of $2m missile air defence weapons. Astonishingly, the Pentagon is looking for an additional $200 billion of budget to fund this “excursion”. However, the bigger picture is that military strategy and economics have utterly changed. Drone warfare developed on the battlefields of Ukraine is the scary future. For some it will be opportunity. Check out the IPO this week of the Ukrainian drone software company, Swarmer, on the Nasdaq. The IPO price was $5 per share but by the close of its first day of trading the share price was $55. Just the 950% gain in one day of trading. Oh, and last year Swarmer had generated just $300,000 of revenues. The US military-industrial complex is having its “ChatGPT” moment and will soon embark on a massive drone warfare investment programme.

    Clearly, not all of the above is cheery stuff but it does feel like some ‘leaders’ in business, technology and investment are now facing very different prospects than they planned for just a few short weeks ago. And, there doesn’t seem to be a “TACO” option this time.

  • Things Getting Very Real….

    Things Getting Very Real….

    I know, I know we’re not supposed to throw the “F” word about lightly. But things are getting serious, and expletives aren’t even close to what I’m thinking. I’ll save those for counting freezing Freezbrury water minutes. No…my reluctant F word is  FASCISM. Possibly over-used in recent times….until now. Check out the enormous banner poster of Donald Trump which has just been hung on the outside of the headquarters of the US Justice Department (DOJ). Gobsmacking. The capture of the rule of law in the US is now almost complete. While business leaders are removed, senior foreign government officials resign in disgrace and the 8th in line to the throne of the UK is taken into police custody, Trump’s private legal firm (the DOJ) is desperately trying to deflect and pretend there are no US-based Epstein predators. Deflection tactics from the White House have now moved on to releasing files on Aliens (the non-ICE versions) and UFOs. However, the biggest ‘bread and circus’ deflection show is the 15- day countdown to conflict with Iran.

    I am struck by how complacent current geopolitical risk thinking is right now, and what desperate measures Tehran’s murderous regime might take to strike a blow against the US and its allies in the region including Israel.  Any regime which murders 20,000 of its protesting citizens in a matter of days is capable of awful stuff. So, it concerns me that the emotionally stunted “Admiral Bonespurs” in the Orange House and his War Secretary, “Whiskey Pete”, in the Pentagon will be the key decision makers if US forces take larger casualties than expected. We are into very unpredictable territory now. However, Iran is not the only risk reality creeping up on us.

    The financial markets have been focused on the carnage wrought on software company share prices year-to-date. Valuation destruction has been close to $2 trillion as the latest Wall Street thinking is that AI will blow up software business models. It even has its own event taxonomy – “SaaSpocalypse”. The basic premise is that companies will build their own workflow, HR, process applications etc. in-house with increasingly powerful AI coding tools. Thus, software companies could face growth and competition challenges which in turn impacts valuation/sales multiples framing that growth. In fact, this invasion of artificial digital expertise is in danger of commoditizing software. Ironically, there has been a complete reversal of the valuation hierarchy between hardware and software. In tech terms, things are getting very real. Real stuff like memory chips(DRAM) and logic chips (GPUs) are perceived as supply constrained and ditching their historic ‘commodity-type’ characteristics. The best illustration of this shift in investor perceptions is the stunning statistic that 89% of semiconductor companies’ (real stuff) share prices are flying (trading above 200 day moving average) while precisely ZERO software company (digital bits) share prices are exhibiting any technical strength(evidence of buying). However, we are in danger of focusing on the trading trends of financial markets while missing the bigger AI picture. Technology insiders are becoming more nervous about the power of AI without adequate guardrails…

    It’s difficult to get away from Anthropic’s founder, Dario Amodei, confidently predicting a world where AI systems would be “better than almost all humans at almost everything” within 2 years. Implicit in this forecast is the rapid realisation by the rest of us that AI systems are soon going to be coding their own optimised functions. If you’re thinking Terminator and Skynet you wouldn’t be far wrong and we’ll definitely need more than Arnold this time. As the global geopolitical balance shifts towards lawless autocracy and fascist ‘might over right’, we seem as a species particularly ill-equipped for what’s to come. Amodei himself describes the challenge:

     

    “Humanity is about to be handed almost unimaginable power, and it is deeply unclear whether our social, political, and technological systems possess the maturity to wield it.”

     

    It feels like a moment of AI truth is approaching. If I were to strike an optimistic note, I’d be encouraged reality is beginning to break through to the public consciousness on a number of fronts. This could bring a very welcome return to valuing credibility, data and honesty. Populists beware and feast your eyes on these beauties:

     

    Brexit: The UK’s Office of Budget Responsibility (OBR) has estimated the various costs of Brexit at 6-8% of GDP, £100 billion per year of structural economic losses, 4% productivity loss and 15% lower trade volumes.

    US Manufacturing: All the trade shakedowns, foreign investment ‘promises’ and noise about making America  manufacture again (Oh Mama!) resulted in 2025 manufacturing/factory construction spend actually FALLING by 7%. Oh, and the US has lost 70,000 manufacturing jobs since tariff ‘Liberation Day’ last April.

    US Trade: Just in…. the US trade deficit remained a stubborn $900 billion in 2025. That’s a microscopic 0.2% reduction in the deficit despite all the ‘winning’ and tariff chaos trumpeted by Agent Orange. And now for more breaking ‘winning’ news…. The Supreme Court of the United States has reportedly ruled, in a 6–3 decision, that tariffs imposed by Donald Trump were illegal. The ruling could leave the U.S. facing more than $150 billion in potential tariff refunds.

    That final datapoint of almost zero deficit reduction is just embarrassing. But it gets better. Shockingly, to nobody outside the US, other countries trading with the US are smarter than Howard “Nutlick” and his Commerce Department lackeys. The US trade deficit with Taiwan is now bigger than that with China. The last time that happened was in 1992!! It seems like the rubber is meeting the road for quite a few of these populist distractions. Indeed the final irony, 250 years after the US gained its independence, might be that the epic downfall of a British prince reveals the true colours and deceptions of a ‘King’ in Washington…..

  • Time To Think Different

    Time To Think Different

    I must confess I was very jealous. My son met Mike Bloomberg on his visit to Dublin this week, not me. Bloomberg and his eponymous data/media company have always fascinated me as a former customer, and as a financial markets observer. The Bloomberg business is still the gold standard for data analytics, trading communications and news for circa 350,000 financial market professionals who each pay $27,000 per year for the service. The company has been around since 1982 and it has made Bloomberg the owner incredibly wealthy. Uniquely so, perhaps, because it was done in private. If you check the ranks of the wealthiest people on the planet the top 10 features the usual names like Musk, Arnault, Gates, Zuckerberg, Ballmer and Ellison. However, all those names are attached to publicly listed companies which underpin their wealth. Bloomberg is still a private company, and still 88% owned by its founder.

    Think about a SaaS-type business doing circa $12 billion of revenues a year and 88% of the profits (probably 30% + margins) accruing to one person…..since 1982. Officially, Forbes Magazine ranks Mike Bloomberg in 18th place on the world’s richest list with a $105 billion fortune. I’m guessing it’s WAY more than that. But, the bigger reveal is how a private company was able to create wealth over decades without a fluctuating public share price and short-term institutional shareholders demanding it respond to dotcom revolutions, search engines, mobile internet, big data, cloud-based SaaS, credit crises and AI. Privacy gave Bloomberg time and strategic room to act in a different way to the Wall Street ‘crowd’ and its emotional baggage. Indeed, there were a few other reminders this week of how the “crowd” can miss important truths when analysis is dominated by a volatile public share price and human emotions. Remember Cisco?

    If you invested in Cisco this month 25 years ago you would have caught its peak dotcom bubble valuation before boom turned to bust. This week is the first time in 25 years you could sell those Cisco shares at a profit. Ouch. Patience and time is not just the preserve of investors in private illiquid assets. In fact, lack of liquidity can be an investor’s friend when markets are volatile. Fast forward to today and think about how many people sold stocks and bought oil on the weekend news that the US had bombed Iran’s hidden nuclear facilities. Well, the oil price is 15% off its peak price through the Iran-Israel conflict period (or “12 Day War” as named by the bomber-in-chief and Nobel Peace Prize wannabe) and actually below the trading price before hostilities even began. Oh, and the Nasdaq 100 just hit an all-time-high yesterday. For the faint-hearted, that’s a 36% gain for the largest tech stocks over two months of toddler tariffs, broken bromances, Gaza abandonment, WW3 fears, a Russian drone drubbing of its airforce and Love Island shocks. Rather than dodging a “risk-off” bullet, investors have been rewarded for not selling with strong stock market performances this week. It might not sound rational but there’s a very powerful lesson about the importance of “staying in the market”. For investors in publicly listed assets, there is an option every minute to sell and exit the market. But, there’s a cost.

    A piece of research from JP Morgan, studying the returns of the S&P 500 between 2002 and 2022, shows annualized performance(returns) of 9.4%. That’s pretty good. But…..if you missed the 10 best days your return would almost halve to 5.21%. More strikingly, 7 of those 10 best days happened within two weeks of the 10 WORST days. So, if you opt out during the bad periods of volatility you tend to lose out on the big bounces which have a huge impact on longer term performance. The uncomfortable truth is that the best days and worst days tend to occur within weeks of each other. Further angst for many, is that human emotions take over and investors flee for the exits after market turbulence. However, for investors in private assets that emotional self-destruct button is not available given there is no natural daily exit option. There is also another public market reality which leads to misleading comparisons with private asset investing.

    The accepted wisdom or orthodoxy in finance is that investing in early-stage companies has a high failure rate. The text books would suggest that failure rate is in the 70-90% range. That rightly implies that the vast majority of returns for investors in a portfolio of early-stage risky investments is delivered by a small number of investments. However, what is not mentioned in those texts or in plenty of fund investor information sheets is that portfolios of publicly listed companies have a similar story. A study conducted by Professor Hendrik Bessembinder at the Arizona State University Business School shows that just 4% of companies in the US stock markets have accounted for all of the wealth gains since 1926. Amazingly, the average cumulative return of the 29,078 common stocks listed since 1926 was a hefty 23,000% but….the median stock in that time experienced a cumulative return of NEGATIVE 7.4%. Given that’s a median number, that means more than half of all stocks have experienced negative returns. Fund manager, Bailie Gifford, has done further research on this data to identify the key performance drivers of the small number of genuine wealth creating companies. Interestingly, R&D investment was a critical driver. Now, let’s think private and different.

    Clearly, public and private markets are not so different. It’s better to be in the market ALL the time and only a small number of companies in a portfolio deliver the majority of returns. However, in order to capture that opportunity one needs to build a portfolio. It also looks like R&D is important to create a big enough competitive advantage to grow rapidly. We don’t know how much money Bloomberg invested in its famous desktop terminal over the years to effectively “own” the market but we do know he didn’t have to report profit numbers like Cisco to the market on a quarterly basis. So, if we think differently, how can we act differently?

    Well, you don’t need a Bloomberg terminal to tell you that high net worth investors are increasingly investing in private assets. Global giant private equity house, Blackstone, this week stated their belief that “Europe is in a unique position to capture more investment”. Blackstone themselves are going to invest $500 billion in Europe over the next decade. The other data point worth considering is that JP Morgan reckon the mass affluent investor market has just 2% of their portfolios allocated to alternative/private investments. So, this is not a dotcom/Cisco rush into peak investment cycles. There is real early opportunity in private assets and Spark Private can actually help kick start a portfolio very quickly. This summer Spark Private investors will be able to invest in a selection of up to seven R&D-rich medtechs, a few SaaS/software high-growth options, an exciting AI play and some really interesting infrastructure franchises.

    We now know the phrase “timing is everything” doesn’t work when trading public markets. However, we also know if you’re not in, and you’re not diversified, you can’t win. So, think different and think private. Now is an excellent time to combine private opportunity with portfolio-building deal flow.

    ** For further information on Ostoform, SymPhysis Medical, Social Voice, Digital Gait Labs, Tympany Medical, Liltoda, Array Patch or Quadrant Scientific contact us on www.sparkprivate.com

     

  • Truly A Moron

    Truly A Moron

    We are into the name-calling phase of global trade policy. The “Stable Genius” Party told us to “reject the evidence of your eyes or ears” or even the ten trillion dollars of capital destruction. But, enough is enough. Or, so thinks DOGE-whisperer Elon Musk. The focus of his ire is the White House driver of Donald Trump’s trade tariff policies, Peter Navarro. Now, Peter is an interesting chap. He first came to my attention with a series of books featuring hard line views on China and US trade deficits generally.  He then served in the Trump 1.0 administration of 2016-2020 when his “fringe” economist status acquired an unusual qualification. Well, weird. It turns out the globally reputed economist, Ron Vara, quoted in many of Peter’s books was a fictional figure. Indeed, Ron Vara was not just supportive of Peter’s bonkers economics but also an anagram of his own name. No, seriously.

    So, who’s surprised to read the Navarro tariff calculations are the work of a ChatGPT output which the right-leaning American Enterprise Institute (AEI) think could be out by a factor of four times(400%)? It’s a bit late now but Musk has just described Navarro as “dumber than a sack of bricks” and “truly a moron”.  You’ll note my view that Musk is too late to undo the damage of the Mad Orange King and the Ron Vara school of economics. In fact, it’s not actually my view.  Policy uncertainty paralyses business activity and the scores are coming in fast….

     

    *Larry Fink, CEO of the largest asset manager on the planet, BlackRock Inc, with $10 trillion reasons to care says “Most CEOs I talk to would say we are probably in a recession right now.”

    *Jamie Dimon, CEO of the most valuable bank on the planet, JP Morgan, in his annual letter to shareholders delivered a blunt warning – “The recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession.”

    *Airline share prices are traditionally viewed as early warning signals of trouble ahead. So, when you see Delta, American and United stocks drop 35-45% this year we should pay attention. Larry Fink is anyway – “Airlines and air traffic are a canary in the coal mine. Right now the canary is sick”

     

    Cheery stuff. However, these are US-focused observations. We have been here before and we should remind ourselves that capital markets can be quite effective in taming policy tyranny. Ask Liz Truss. Then check bond markets. Interestingly, if bond markets “believed” recession was imminent then bond yields(rates) would not be rising like they are right now. US 10 year Treasury yields have jumped from 3.87% to 4.52% in the past two trading sessions. This is highly unusual bond behaviour when equity markets are so volatile or declining. In fact, it’s the all-powerful bond market questioning the credibility of US institutions. Hence, you’ll soon be hearing Trump whining about the Fed lowering interest rates but, again, not quite understanding bond markets. Other markets are behaving in a more orthodox manner but could also upset the tariff toddler.

    You might have noticed that Trump has refused the pre-‘Liberation Day’ EU offer of zero tariffs on industrial goods. Trump and his team are now switching focus to “non-tariff trade barriers” and demanding the EU buy $350 billion of energy to balance out trade deficits. The White House is rapidly losing the faith of its fossil-fuel friends who are staring down the barrel of $50 spot prices for oil. Ahead of inauguration, the reversal of Biden’s signature IRA act and decarbonisation/cleantech investment incentives sounded good to the oil barons but they didn’t plan on Trumpolini playing Texas Hold ‘Em with every trading partner in the world …..at the same time. And, don’t forget the Kremlin and its war economy is acutely oil price sensitive too.

    Cryptocurrencies and their broligarch fan boys are also going to be a bit tetchy apart from “car assembler” Musk. Bitcoin is down 17% year-to-date with cryptocurrency ETFs (funds) suffering their third consecutive month of outflows. In fact, the big picture worry for all cryptocurrency evangelists is that on current pricing history evidence Bitcoin appears to have morphed into a tracking instrument for the tech-heavy Nasdaq equity index. It’s supposed to be a currency, as a quick reminder.  Go check the charts and then wonder how long before the broligarchs put pressure on Trump to move the markets into risk-on crypto-friendly mode. We will wait but private markets won’t stand still. In fact, big global structural themes (outside trade) will continue to play out in private. Just this week we spotted these three deals amid all the screaming red ticker-chyrons and panic headlines:

     

    • Faster research: San Francisco-based Rescale provides AI-powered R&D simulation software and has raised $115m from investors including Nvidia.
    • Content generation: Another Californian start-up with Spanish founders, Krea, uses generative AI for image content generation and design. They have just raised $83m from investors including Bain Capital.
    • Payment infrastructure: Juspay, an Indian payment infrastructure start-up has raised $60m from institutions including Kedaara Capital.

     

    Humanity and innovation will keep moving forward irrespective of the headlines. Public markets gyrating violently are the real-time expression of capital flows, fears and policy paralysis but, in private, both in Washington and in private markets we can be far more optimistic. Nothing crystal clear right now but the waters will still be blue ahead…

  • Nightmare On October’s Street….

    Nightmare On October’s Street….

    Hallowe’en has provided its fair share of horror movie classics, but Hollywood does not have exclusive rights to October fears. Wall Street is nervous every year. No pagan myths needed. The historic data shows that financial markets are at their most volatile this month. However, do not confuse volatility with sudden downward moves for stock markets. Yes, two of the worst market crashes in 1929 and 1987, and three of the four 10% + monthly falls for the benchmark Dow Jones Index over the past century all beat Freddy Krueger to the fear punch at the end of the month. However, as a professional risk observer it’s important to know that volatility and risk includes upside moves too. As gold, bitcoin, the German Dax, the S&P 500 and Nvidia hit, or threaten, all-time-highs this week you’d think the volatility this month is only going one way. I’m not so sure. Four things bother me….

    1. US ELECTIONS: Maybe it’s the seasonal pumpkins, but my mood is more orange than blue. Foremost in my mind is that the polling for the US presidential election has increasingly moved into toss-up territory. I’m in danger of going into denial mode (and consistent with earlier articles) when I take comfort from German stock markets(Ukraine) at all-time-highs, bond market stability (inflation) and utilities/ electricity stocks (climate) smoking every sector in the US including technology over the past 3 months. None of these should do well in the event of a Trump regime taking power. Yet, betting markets with real money (Polymarket) are showing Trump a full 12% ahead of Harris in the probability stakes. Of course, this just reflects weight of betting on a Musk mate’s betting platform (and backer of JD Vance) rather than votes. Anyway, it feels like there’s a few things not quite in the price of various US financial assets right now. Here’s a list of US institutions and voting cohorts who could suffer a major crisis of confidence if Trump wins:

     

    • US Federal Reserve – Trump making explicit noises about “control” of interest rate policy.

     

    • US Supreme Court – the ship has sailed on the nation’s highest court swinging violently to the right. But, the five extreme “Justices of the Apocalypse” on the Court will be emboldened to interfere further with federal laws governing female health, the environment, public safety and corporate governance.

     

    • US Media – Trump is talking about taking away licences from national broadcasting networks.

     

    • US Clean Energy sector – the irony of Governor Ron DeSantis banning mention of climate crisis in Florida’s text books won’t be lost on many this week. But, expect Trump to try to undo many of Biden’s signature industrial initiatives in decarbonising the US economy.

     

    • US Department of Justice – senior DOJ officers, the rule of law and 91 felony convictions could be about to ‘go through some things”.

     

    • US Stock Markets – Trump’s plan to apply import tariffs across the board is not just inflationary, but could cause chaos for US manufacturing supply chains.

     

    2.CHINA CYCLE: Trump is pretty clear about being “a dictator on day one” but what about his other autocratic heroes? Well, it looks like the Donald has been in touch reasonably regularly with his Kremlin handler (thanks Bob Woodward) which does not augur well for the defence of Ukraine’s sovereignty. However, we really should be watching China closely. The Beijing administration has launched a massive fiscal stimulus to lift China’s economic activity, with a further $238 billion economic package to be announced this weekend. Chinese stock markets have rocketed by 25% since mid-September and added $3.2 trillion of value to companies listed on the main Shanghai stock exchange. My fear is that this “whatever it takes” move by President Xi fails to alleviate the stresses in the Chinese property market and domestic economy weighed down by an estimated $15 trillion of debt owed (and much of it hidden) in local government financing vehicles (LGFVs).

    Maybe it’s coincidental, but there is a distinctly soggy feel to lots of manufacturing activity data around the world – see September PMI in US, German GDP downgrades etc. So, it’s not just China which needs a boost, and a global cyclical slow down might be the least of our worries. If the Chinese economy continues to stall and Xi becomes worried about his ability to keep power, then the ultimate distraction is war. And, Taiwan is in the crosshairs of that option. Then, note that 90% of the world’s most advanced chips are made in Taiwan and 20% of global goods trade goes through its surrounding waters. Xi might even be watching developments in the Middle-East….

    3.MIDDLE-EAST UNKNOWN: Israel’s Bibi Netanyahu seems quite keen on a permanent state of war, and staying in power. And, possibly out of jail. Sound familiar? Answers on a postcard to Mar-A-Lago. Meanwhile, Lebanon looks like the sixth country or region after Iraq, Yemen, Kurdistan, Syria and Gaza to face mass destruction and population displacement through a combination of rogue leadership and external powers forcing regime change miltarily. Now, we await Israel’s response to recent mass-missile attacks by Iran. The chat is Israel’s critical ally, the US, has asked for restraint. Apparently, Netanyahu might not be in agreement with that approach. Meanwhile, Israeli tanks are firing at UN peacekeeping bases in Lebanon. Bizarrely, these events could be described as fitting previous experiences – it’s Israel’s third invasion of Lebanon, and Iran actually attacked US bases and injured 100 servicemen during the Trump presidency. However, my real fear is that the pace of events is increasing rapidly and could potentially upset the “chaotic equilibrium”. I’m sensing an “unknown unknown” could be on the cards and create a whole new paradigm.

    4.AI CONCENTRATION: Finally, we know AI can’t solve the leadership and power problems above. But, AI itself is inspiring financial markets and business spend. Be careful. A recent Fortune article flagged the dwindling number of contenders in the AI large-language-model (LLM) race. Yes, OpenAI just raised $6.5 billion at a whopping $157 billion valuation for the largest VC raise in history. Elsewhere, the numbers might just be getting too big. Or… should I say costs. Start-up Character.AI has abandoned its attempts to build an LLM to compete with Google, Amazon or Microsoft/OpenAI citing the model training costs as “insanely expensive”. In fact, the Character.AI team and its founder Noam Shazeer have been acquired (kinda) by Google. I say ‘kinda’ because other commentators have been saying this is, in reality, a monster $2.7 billion re-hire of the former Googler, Shazeer. Big bucks. Anyway, if the field of LLM contenders is shrinking, there’s a possibility we end up with concentrated Big Tech 2.0. On that basis, there is a real danger billions will be wasted trying to take on Big Tech in the LLM space. Even for the big wallets there are increasing reports of data limitations for LLMs. In other words, the exponential demand for data to optimise performance is now generating relatively small/linear improvements. Not quite what Moore or other technology scaling laws had in mind. Oh, and the tech sector’s weighting in the S&P 500 hit 42% this month, a record which puts TMT dotcom “bubble” levels of 32% into perspective.

    Perspective indeed, maybe Hallowe’en has spooked my normal optimism. On a slightly more positive front and addressing my biggest current destabilising fear – a Trump win – here’s a few things probably not in the AI training models or the current US polling surveys. Don’t forget pollsters are facing an embarrassing hat-trick of misses, after under-polling Republican votes ahead of the 2016 and 2020 elections.  What are the chances they have over-compensated this time? Here’s a few consoling changes in electoral intentions which could surprise on November 5th:

    Female vote: All actual votes in the last 12 months at a state level have missed the huge turnout of motivated female voters alarmed by the assault on healthcare choices waged by the Supreme Court’s reversal of Roe v Wade. See votes in Kansas, Michigan, Ohio, Montana and Kentucky as good lead indicators of what motivation means.

    White college graduates: Apparently wild fantasies about eating pets, visits to Gaza, Hannibal Lecter and election denial is not a vote getter for non-cult GOP voters.

    Senior vote: Like in the UK election, we can miss the senior votes. Literally. Approximately 12 million Americans have died since Trump lost in 2020. Many will have succumbed to old age. Given the average age of a Fox News viewer is 67, there’s a reasonable chance millions of Fox viewers/MAGA cult voters will miss this vote.

    A slightly morbid end, but there could be a happy ending where the ghoulish baddie disappears as the cops arrive.

    Who needs Freddy!

  • Mr Copper To Sing Again?

    Mr Copper To Sing Again?

    I remember the original ‘Mr. Copper’, Yasuo Hamanaka, being a pretty decent karaoke singer. That’s a story for another day but there’s a risk-aware part of me saying that copper, as in the metal, needs to be sung from those Roppongi rooftops right now. Hamanaka’s claim to trading fame was cornering 5% of the copper market when discovered by US authorities 30 years ago, culminating in jail time for Mr Copper and a top 10 all-time trading loss of almost $3 billion for the mighty Sumitomo Corporation. The scandal dominated global financial headlines for weeks back then but I feel another copper story with big numbers is building. Let’s start with a selection of recent headlines…

     

    Massive copper shortage on the horizon –  The Week 

     

    Copper demand to boom as new technology drives power consumption Trafigura says – Reuters

     

    AI to add 1 million tons to copper demand by 2030 – Data Centre Dynamics

     

    Copper is the “new oil”, and prices could soar 50%   – Fortune

     

    Copper shortage threatens EV transition – DPA Magazine

     

    I think we get the picture. Copper is not just a battery/electric vehicle (EV) story – EVs actually use four times more copper than non-electric autos. Copper is also now a data centre and AI story. However, there’s an even bigger picture. McKinsey estimate the global shift away from fossil fuels to a decarbonised economy will require annual physical infrastructure spend of $9 trillion.  Yep, that’s every year until 2050. Or, the combined market value of Microsoft, Apple and Nvidia in capital expenditure……. every single year for the next 25 years. The critical detail in this decarbonisation move is electrification. Energy supply is one aspect; nuclear, natural or renewable. The transmission and storage of that converted power via electricity is the copper-critical bit. Let’s consider a few more numbers.

    *CRU Group estimate global copper demand to surge by 9.5 million tons in the next decade.

    *S&P Global go bigger – they see global copper demand doubling from current 25 million tons per year to 50 million tons by 2035.

    *For historical context, 700 million tons of copper has been produced over the course of human history. Net-Zero targets for 2050 demands that humanity produces 2x more  than it has ever produced, or 1.4 billion tons (Source: S&P Global).

    *However, the mining industry would like to have a word. Due to chronic underinvestment, planning delays, investment capital scarcity, genuine sustainability concerns, higher interest rates and shiny AI tech excitement the global mining sector is currently projected to increase production by just….. 20%.

    *Oh, and the world hasn’t made a major new copper discovery since 2014. This lack of copper discoveries also means existing mines going deeper, incurring greater costs while the grade (metal per ton of rock) falls alarmingly.

    We have a problem. Arguably, it starts with the investment maths. Consultants, PWC, reckon AI could add $15.7 trillion to the economy by 2030. But…. these technologies and their Big Tech owners require massive amounts of electricity. Both Google and Microsoft consume more electricity than small European countries. So, how about the USA, home of the original Silicon Valley? Right now, US data centre power usage accounts for 22GW, or 4.5% of the nation’s power consumption. However, according to SemiAnalysis research, that figure is projected to reach 100GW, or nearly 20% of nationwide consumption by 2030 due to AI buildout.

    To be absolutely clear, the expansion of grid infrastructure across generation, transmission and distribution is critically dependent on copper and its performance properties. Yet, there appears to be an enormous squeeze on grid capacity coming. That’s not just cheap commentariat opinion. As always, money really talks. So, can you name the electric power company that has outperformed the rocketing AI poster-child Nvidia this year? Well, that would be Vistra Corp which has clocked up a share price gain of 157% compared to Nvidia’s ‘slow-coach’ 121%.

    So, if electric power is spotted as a potential winner by canny investors ahead of a supply squeeze, where does that leave the mining sector and copper? There have been a few clues. For example, BHP Billiton in recent months unsuccessfully tried to buy Anglo-American (and its copper mines) in a massive $50 billion deal. Interestingly, the ultimate fossil fuel kingdom, Saudi Arabia, can also see the electric future. The Saudi mining company, Manara Minerals, is in talks with Pakistan on a potential $1-2 billion purchase of a 15% stake in its Reko Diq copper and gold mines.

    These numbers are big, but, in global terms, are ridiculously small compared to the $15 trillion excitement about AI. The ultimate reality check and irony is that one company, Nvidia, is currently valued at more than $3 trillion. In stark contrast, the entire global mining sector is valued at circa $2 trillion. Clearly, there will be no credible AI roll-out without a functional electricity grid and energy storage infrastructure. How long before tech investors start to scream for more mining and copper production investment?  Probably in less time than it took for Mr Copper’s illegal trading arrangements to be discovered. Meanwhile, we plan to sing the mining story before the screaming……

  • Which Global Themes Are Flying?

    Which Global Themes Are Flying?

    Only one sleep to go until “Sixmas”, or the 6 Nations. Giddy. Another 28 days to go in the “Freezbrury” cold water swim challenge. Not so giddy. Such is the emotional ebb and flow of life but what do we make of the January investment emotional roller-coaster? Dare we say January was a game of three ‘halves’? The early days of the year saw markets puke, only for the next three weeks to see markets roar higher on familiar big tech AI giddiness, interest rate cut hopes and stronger economic numbers out of the US and Asia. Then, more fear. As always, the cost of money (rates) drives all asset markets. So when the Fed said “not so fast” on March rate cut expectations markets had another little tantrum to close out the month. Now, ignore all that trading noise. Let’s stick to longer-term thinking and revisit a few themes we flagged for 2024.

    First, we go big. The “Magnificent 7” big tech names have been driven to new all-time highs on the continuing AI theme with Microsoft hitting a $3 trillion market valuation for the first time, and AI poster-child, Nvidia, adding another 24% to its value in January alone. However, if you’re a Tesla shareholder, you might need access to the Elon Musk drugs cabinet to dull the pain of a January 24% crash in the value of the once biggest EV manufacturer in the world. As we write of potential regime shifts, I am reminded of a mandatory Thursday lunchtime every quarter in the naughties being glued to my desk and screen awaiting Nokia’s latest earnings report from Helsinki. The equivalent global pulse-check these days is one evening every quarter in New York when Microsoft and Google tell us how their cloud(AI) business is doing. This week the update was 30% and 26% cloud revenue growth respectively. Let’s just say theme intact.

    Now, go smaller. Well, not so small. On the Microsoft analyst call, Ireland’s very own An Post received a shout out from Microsoft CEO, Satya Nadella, as an example of a customer using its AI CoPilot Studio. This did prompt some thought about small companies and start-ups using AI. We probably don’t give technology and digitalisation enough credit for empowering founders and scaling up businesses over the past two decades. With a website, e-commerce applications, security/payment apps, and cloud hosting/workflow support, a start-up business no longer had to sink capital into up-front infrastructure costs but, instead, could pay software subscription fees (SaaS) to big tech and go to market quickly. This writer is just wondering could AI be an additional accelerant for start-up businesses? Maybe it’s not just me. Review site, Yelp, recently published data on a record 762,200 new US business openings in 2023, up 20% on 2022. Furthermore, US government data confirms the pandemic-inspired “entrepreneurship boom” is alive and kicking going into 2024.  However, some start-ups do need serious up-front capital….

    Check out our cleantech theme. The initial construction of huge EV battery gigafactories, renewable energy installations and decarbonised manufacturing (see steel, fertiliser, cement etc) requires billions of investment capital dollars. Encouragingly, we are seeing some really big funding deals get over the line. Sweden’s Northvolt announced a $5 billion debt financing round in January and a week later another Swedish name, H2 Green Steel, raised €4.5 billion in debt and equity. And, it’s not just cleantech start-ups being backed by significant banking syndicates. Despite the gloomy macro headlines, it feels like banks are feeling better about life in general. Note the record $188 billion of bond issuance by US companies in January and the index(ETF) which tracks the US Banks sector (XLF) hitting a 2-year high. No wonder Bloomberg was leading with a headline this week “The Credit Market Is Quietly Booming again”.

    Of course, in our earlier 2024 themes article we expected continuing stress in global real estate so it’s not all good news for banks. The slow-moving Chinese train crash of Evergrande finally hit its liquidation wall in the Hong Kong courts but the potentially more significant real estate news came out of Tokyo this week. Aozora bank shares plunged 20% after it revealed a $191 million loss for the year due to write-downs on its loans to the US commercial real estate (CRE) sector.  Meanwhile, back in the US, New York Community Bancorp reported a $185 million charge-off on just two CRE loans and watched its share price crater 38% in a matter of hours.

    Expect more of this but the key global credit swing factor will be China. For now, Beijing’s efforts to stimulate the economy is pushing capital into the wider Asian economy as the Chinese manufacturing engine ramps up activity. Evidence of early policy traction across Asia might be seen in the bellwether South Korean economy and its PMI survey of factory activity showing expansion for the first time in 19 months. Of course, with interest rate cuts firmly expected in 2024, central banks and investor want a “goldilocks” outcome rather than economies running excessively hot. We shall see, but in the area of healthcare it sounds like one form of excess has been whipped. More specifically, we are revisiting our weight-loss and healthcare/biology theme.

    In recent days Danish pharma company, Novo Nordisk, became just the second European company to  pass the $500 billion valuation mark. Its obesity drugs, Ozempic and Wegovy, have revolutionised the prospects of this 100-year old company and can only focus investor minds on further medical opportunities. We have previously highlighted the intersection of biology and technology as a theme so recent news from Cambridge University was intriguing. Scientists in recent weeks have published research on the successful re-programming of microbes to unlock new materials. This could lead to a whole range of innovative products from new drugs to enhanced carbon-absorbing materials. Here were our own thoughts on new materials and speed to discovery from a few weeks ago:

    “However, artificial intelligence(AI), probably the hottest investment theme outside cleantech right now, has just been used in conjunction with supercomputing to discover a brand new material which could reduce lithium usage by up to 70%……Microsoft and Pacific Northwest National Laboratory (PNNL) research teams whittled down 32 million potential material combinations to 18 promising molecular structures within a week. Incredibly, the whole discovery project took 9 months in a screening process that would typically have taken more than 20 years using traditional lab research methods. The new AI-derived material, simply called N2116, should prompt thought as to what’s possible in the world of medicine, agriculture, transport and construction”

    One final thought which is not so much a theme but is a necessity for these themes to accelerate; our investors always ask “where’s the exit?”. The text book response is that investor exits usually happen through a trade sale(M&A), buy-out (Private equity) or listing shares on public markets via IPO. Private equity house, Bain Capital, reckon global M&A activity of $3.2 trillion was down 15% in 2023 to its lowest in a decade. Meanwhile, EY’s global IPO report indicated listing activity was down 33% in value terms compared to 2022, and Goldman Sachs said it was the worst IPO year since 2016. The good news is that many advisory teams in the investment banks are quietly confident of an uptick in IPO pipelines for 2024. Indeed, the expected New York listing of Chinese fast-fashion play, Shein (ask the kids!), with a $90 billion valuation will be an early test of lift-off. The big global themes will still play out but juicy sales and exits would definitely confirm things are really flying. Also, and more importantly, confidence spreading outside the “Magnificent 7” to smaller businesses would be very good news.

     

  • Joe Biden’s Letter To Santa

    Joe Biden’s Letter To Santa

    If Joe Biden were to ask for just ONE thing this Christmas it would have to be a new writer or storyteller. I was reading various geopolitical scribes this week describe the poorly-polling Biden’s problem. According to the middle-ground commentariat, the Biden administration is describing an America with fantastic headline achievements on the economy but which the average American is not feeling on Main Street. Well, go ask the rest of the world. In fact, if Biden’s team were to follow through on their belief that “America is an idea, not a geography” then the solution to their messaging woes is staring right at them. Simply put, The USA has never been in a stronger economic or geopolitical relative position in its entire history. So here goes the report card….

    The latest GDP print for the US shows an economy roaring along at 5% growth rates. That’s the first time in decades the US growth rate has overtaken China and there’s more relative superiority to report. Other large economies at a European or Asian regional level are not seeing that growth and you will only find US-envy among German or UK voters currently enduring stagflation.

    US voters may not know it but international investors have already spotted US relative dominance. US stock markets clocked a stunning 8% monthly gain in a very rocky geopolitical November. The broader S&P 500 index is up almost 20% year-to-date and the tech-heavy Nasdaq indices have rocketed just shy of 50% this year.

    We always write about how the cost of money drives asset prices everywhere. A lower cost of money is good news and the US bond market has indicated a 0.75% drop in interest rates in the last few months. In real life terms that’s the equivalent of the central banks cutting rates by 0.25% three times in 6 weeks. It is US businesses and mortgage holders reaping that benefit, not any Europeans.

    Oil prices are back below $74 per barrel despite a Middle-East war. Of course, you won’t hear any Trump-cult Republican blowhard talk about the fact that US oil production is currently roaring along at 13.2 million barrels per day. Yep, that’s more than any country has ever produced in history. Not great for the climate, but a historic mark for US energy independence. Hold that climate thought….

    On climate and cleantech the US is leading the way in transforming the industrial base of America. The Biden IRA Act is pumping more capex investment into the US economy in this presidential term than in any of the last 3 decades. The nation is at full employment, but to paraphrase Jeff Daniels’ famous monologue in the TV series Newsroom, the average American and all Fox News viewers have “become fearful”. The daily dose of fear on US media is staggering – “deep state”, Qanon conspiracies, baby-snatchers, immigrant hordes storming the borders, lawless cities, race replacement theory, and on and on it goes. No wonder there are more guns owned (350 million) than the number of people living in this fear frenzied nation.

    It is clear that Biden’s story must feature the rest of the world. These are challenging times for the whole world, but somebody needs to tell the average American they are doing better than pretty much everyone else. The US is not perfect but it is definitely leading the planet on multiple opportunity metrics. Even better, the “America as an idea” vision is truly happening; eight of the US’s largest corporations including Microsoft, Adobe, IBM and Google have Indian-born CEOs. Incredibly, of the 700 US ‘unicorn’ start-ups with valuations above $1 billion, 100 of those companies have Indian founders. And, the beauty of nation power without borders is that it can drive activity globally.

    We already have supra-sovereign corporations with billions of customers from Google to Microsoft to Facebook. Others will want to follow from outside the US. We are now reading about China retailer Shein readying for a potential $80 billion IPO. Elsewhere, in the venture capital world Q3 funding activity globally was up 11% at almost $65 billion(Source: CB Insights). And, for those of us in the start-up universe, we are always watching exit activity. So, check out Q3 M&A activity in acquisitions which were valued at more than $100m each; deals in that $100m + category were up 38%. Also, it was interesting to see VC Q3 activity in retail fintech increasing at a 53% clip.

    Back in the US, inflation has been tamed and month-on-month price increases reduced to ZERO %. That will help Biden along with a crippled Russian military, a non-escalation by Iran or Hezbollah over Gaza, and a critical uptick in US consumer confidence. We don’t need Gen AI to write this story, albeit the US controls the 3 largest AI models globally through Microsoft(OpenA)I, Google (Bard) and Amazon (Claude/Anthropic). So, we will put that down as another Biden win too.

    In the interim, I will just wait for that call……or write to Santa myself.

  • China Syndrome: Supply Chain Reaction?

    China Syndrome: Supply Chain Reaction?

    Anyone remember the China Syndrome movie? Showing my age here but that 1979 nuclear disaster thriller starring Jane Fonda and Michael Douglas did spring to mind this week. Yes, we are currently enduring our own global pandemic disaster but it was the developing story of a potential vaccine which prompted the movie tangent and China reference. By now we are all aware of the encouraging efficacy of various vaccines in development by Pfizer, AstraZeneca, Moderna and other pharma players. However, this week we were reminded of the practical obstacles to delivering billions of delicate vaccine doses for the world’s population.

    Forget the logistics of getting the vaccine to the vulnerable. How about just making enough vaccine? Pfizer just told us that the volume of vaccine produced by year end will be half what they originally expected. The unexpected hurdle was the inability of Pfizer’s supply chain to meet the rapid scale up in demand for raw materials in the manufacturing process. This will be resolved but is a potent reminder of the critical role supply chains play in the global economy. Yes, a pandemic vaccine is a crucial story in the near term but merely reflects a sudden spike in demand. However, two other stories in recent weeks have potentially far greater impact on global supply chains in the coming years.

    First, let’s talk semi-conductors. These tiny building blocks for electric circuits are the brains of almost every smart device and data centre on the planet. Now Apple has just launched Mac laptops with new proprietary, M1, chips. We won’t bore you with the technology battles between the chip giants Intel, Samsung, AMD and ARM but, upon further industry reading, one market share number jumped right off the page. It didn’t even feature any of the companies listed earlier. Rather, it was one company and one country.

    Taiwan Semiconductor(TSMC) of the same island nation is the critical company in the supply chain for semiconductors. TSMC is known as a foundry – the manufacturer(not designer) of semiconductors in fabrication plants, or fabs, for almost every major player in the global economy. But here’s the jaw dropper; TSMC has just reached 54% global market share and will probably grow after Intel’s controversial July decision to place a monster 2021 order with TSMC. You might have read that data is the new oil. We are not so sure. The supply of semiconductors appears to be economic power in its purest form. And Taiwan is the new Middle-East. Now think about that and the last 70 years of peace and harmony in the cradle of civilization, if only.

    Then think about current US-China tensions and extreme Sino-sensitivities over Taiwan’s independence. Apple has already asked its manufacturing partner, Foxconn, to shift product assembly from China to Vietnam. The problem for Taiwan is that China leans heavily on the island’s chip manufacturing capacity too but recent Huawei limits/sanctions complicates things. China’s leaders are unlikely to tolerate increased US influence in its back yard, and the worry is that Taiwan is a political challenge to Beijing’s authority in the region.

    Ben Smith at EpsilonTheory.com puts it well – “there is no future where China can both maintain its existential interests and allow the world’s principal supplier of semiconductors to remain outside its direct political control.” Smith goes so far as to say that Taiwan is “the most important country on earth”. This is not exactly music to the ears of supply chain risk managers. What are the chances of a 2023 “chip shock” in the South China Sea fifty years after the 1973 Yom Kippur oil shock? Place your chips now.

    On a less speculative note, there is another massive structural story developing in supply chain management. ESG and sustainabilty risk compliance is gathering momentum. Nasdaq has just announced it will require all companies listed on its exchange to have at least one woman and one diversity/minority representative on company boards, or face delisting. That may feel like a relative slow-burner as Nasdaq is allowing a multi-year transition phase. Elsewhere, the drum beat of ESG, environmental and sustainability compliance grows louder with more immediate pressures.

    BMW has already publicised its efforts to pressure companies in its supply chain to demonstrate high standards of ESG compliance. Furthermore, Covid-19 has focused minds on supply chain vulnerability with a recent HSBC survey in Canada flagging that just 8% of Canadian listed companies(issuers) currently rate their suppliers on ESG.

    The sustainability/ESG revolution might not provide the shock headlines of a potential South China Sea conflict but there will be some high profile corporate casualties on this journey. Indeed, the collapse of Sir Philip Green’s Arcadia retail group this week rightly focused on the huge job losses and the spectacular riches distributed to Green’s family while Arcadia’s pension fund struggled. However, behind the headlines there lies a tale of retail failure largely fueled by strategic short-termism and a glaring miss of sustainability and ESG issues in its supply chain. Now back to China.

    China’s positioning in the global supply chain was estimated at 28% of global manufacturing output back in 2018. Given it’s the only major economy to actually grow in 2020, one can expect that share to move towards almost one third of global activity. Sadly, headlines on Hong Kong, Uighur repression and environmental pollution have also grown. The likelihood of a collision between ESG and Chinese supply chain sustainability compliance is almost inevitable but it might begin with a relatively innocuous headline. Watch carefully.

    All who watched China Syndrome knew it was a fictional “near miss” for the nuclear industry. However, just 12 days after the movie’s release there was a real-life nuclear accident at Three Mile Island, Pennsylvania. Just saying.

  • Gold Glitters, Money Waits ………….

    Gold Glitters, Money Waits ………….

    It wasn’t just the waters of East Cork glistening last week. Gold prices hit $2,000 per ounce for the first time ever too, but the barbarous relic was not the only financial asset glittering on our trading screens. The technology-rich Nasdaq index touched new record highs and Apple marched towards a staggering $2 trillion valuation. Hot stuff. And yet, the nether regions still shrank in the bracing waters of Ballycotton. Should we be mindful of Twain’s aphorism as we observe all this financial glitter? Let’s take a look at a few headlines which tweaked our curiosity.

    • ‘As dollar slides, investors fret about status as world’s reserve currency’ – Reuters

    • ‘Bitcoin rockets above $11,000 to year highs as dollar weakens’ – Business Insider

    • ‘China’s 800 year old paper money pilot project will be ending soon’ – Forbes

    • ‘Turkish lira hits record low in sharp decline’ – Financial Times

    • ‘US Debt Outlook is Downgraded’ – New York Times

    You will note there are no headlines in this selection above referencing stock markets but readers will already know share prices are flying from previous FAANTAM articles written here. Clearly, this is not the case with many commentators writing on record gold prices in recent days. Most have attributed gold’s recent rush to “nervous investors”. Tell that to the Robinhood investors trading an average 4.3 million times daily and chasing the combined valuation of Apple, Amazon, Google and Microsoft to over $6 trillion. For context, that number would place these four companies as the third largest GDP on the planet after China and the US. There is no fear in those expectations. Yes, there are investors investing in gold for safety but, when one views frothy corners of the stock market, perhaps there is a more nuanced interpretation of gold’s return to favour?

    If we return to our selection of headlines you will note they are all very closely linked to currency markets. Currencies are the most basic store of ‘value’. Indeed, gold is often described in similar terms and historically was often used to “back” a currency. However, after the US abandoned the gold standard and the linkage to the dollar in 1971, central banks have since relied upon interest rates to manage the flow of capital in and out of a currency. Now think about those headlines capturing the emergence of digital currencies, China and soaring government debt as a challenge to the position of the US dollar. Of course, human beings are woeful at forecasting the future but this writer is inclined to wonder whether current moves into gold are driven by investors who are curious and seriously asking the following questions about the future of money…

    1. Will a more insular US foreign policy ripping up international treaties on a monthly basis lead to a commensurate deterioration in the status of the US dollar as the financial system’s reserve currency?

    2. Will China-US geopolitical tensions accelerate Chinese moves into digital currencies and drive capital into same from those countries wishing to trade with 20% of the planet’s population?

    3. Will fiscal spending by governments to support economic recovery from the C-19 pandemic lead to debt defaults and devaluations of currencies more influential than those of Turkey, Argentina, Lebanon etc?

    It is too early to answer those questions but one senses, as always, change is on its way. As the most fundamental financial asset, currency markets and their headlines are worth watching closely. Gold prices are the hint of change, not the answers. The big money must wait…..