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August 30, 2013

August 30, 2013

In past letters, we have provided our analysis on the Canadian and U.S. energy sectors.  In last week’s commentary we focused on energy developments in a third country.  This development may change the way we look at energy — and may take North America one step closer to energy self-sufficiency.  With energy supplies tightening, price increases, and turmoil and uncertainty in the Middle East, this  could be a very exciting opportunity. 

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Without the Rule of Law, Russia’s Economy Languishes

Russia’s route from central planning towards a liberal economic order hasn’t been easy.  As occurred in China during the reforms of Deng Xiaoping, the transition provided an opportunity for the emergence of a corrupt oligarchic elite who acquired state property at fire-sale prices with the collusion of officials.  In the process, ordinary Russians saw their life’s savings wiped out through devaluation, their life expectancy decline dramatically, and population growth plummet.  Symptomatically, Russia still has one of the world’s highest per capita levels of alcohol consumption…

Putin, ever the showman, recently told an audience of CEOs that he would fast-track the release of some businessmen with a new amnesty program.  He hoped they would contribute to the vitality of the Russian economy with “the values of economic freedom and the work and success of entrepreneurs.”  The new program (or public relations gambit?) has released 13 prisoners so far.  Predictably, politically targeted prisoners such as Khodorkovsky are excluded…

Is Russia a good investment destination?


A Road Map for High-Speed Trading

Last week gave us two new market meltdowns to add to the litany of computer-driven mishaps of the past few years.  On Tuesday, Goldman Sachs’ systems generated a slew of unintended options orders, and on Thursday, a glitch put NASDAQ offline for three hours — though apparently traders are becoming so inured to such events that they took it in stride and the market’s modest gains persisted for the day.  It’s one more message underscoring the potential problems that may arise from markets whose volatility and fragility reach new levels when half of all trades are executed by algorithms.

Other memorable recent market tremors caused by computer-driven trading include Knight Capital’s half-billion dollar losses and the brief dive created when news-scanning algorithms picked up on a fake Twitter report that the White House had been bombed.

Coincidentally, the Commodity Futures Trading Commission (CFTC) is preparing to release a draft this week of the road map it will use to attempt to rein in high-speed trading.  Hopefully, the new plan will also herald better coordination between the CFTC and the Securities and Exchange Commission (SEC), which has also been examining ways to mitigate the structural risks posed by high-speed trading…

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Foldable Phones — Coming Soon?

“Graphene opened up a material world we didn’t even know existed.”
— Dr Andre Geim, Nobel-prize Laureate

“Use tape.”  That was the advice of a graduate student to Russian-born scientist Andre Geim in his University of Manchester lab in 2003, when he was trying to figure out how to create an ultra-thin layer of graphite.  Seven years later, Geim and his colleague Konstantin Novoselov won the Nobel Prize for the invention of a new substance, graphene.  Dr Andrea Ferrari, who is leading a graphene research team at Cambridge University, ranks graphene with steel, plastic, and silicon in its revolutionary technological potential.

Graphene applications may ultimately permit the construction of tablet computers or smartphones the thickness of a piece of paper, which can be rolled or folded.

Graphene itself is a honeycomb carbon structure, an atom thick — essentially a two-dimensional substance.  It has extraordinary properties of strength, pliability, and conductivity.  Researchers at Columbia University estimated that it would take the weight of an elephant applied to a point the size of a pencil tip to puncture a graphene sheet just 10 microns thick.

Once skepticism was overcome, the patents for graphene applications have started coming in a tidal wave.  Patent applicants from China, the U.S., and South Korea have sought protection for graphene ideas for a host of applications (see graphic below).  The field is so hot that applicants are even said to be filing patents intended to deceive rivals about the direction of their research.  Apple and Samsung already have brands in the fire.

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Source: Wall Street Journal

What does this mean for the mobile devices?

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Guild Basic Needs IndexTM
Since 2000, the cost of basic, essential needs in our GBNI have risen over 87%, while the consumer prices (CPI) are up less than 39%.

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Track our analysis in these letters and at www.gbni.info.


In this week’s Premium Global Market Commentary available to Gold Subscribers, we feature:

  • Executive Summary

  • Doctors and Drug Marketers — Still a Bad Cocktail

    Recent regulations designed to restrict the ability of drug marketers to influence the prescribing practices of doctors have fallen short of the mark, according to a new study by the University of California, San Diego.

    The study coordinated data on payments to doctors — made public by recent regulations — and the same doctors’ Medicare prescription reimbursements.

  • Guild’s Premium Global Market Summary

    How About the U.S. Stock Market?  How long will the correction last?

Gold Subscribers have full access to all Premium content.  In addition, Gold Subscribers can participate on Guild’s periodic conference calls where participants can ask direct questions to Guild’s portfolio managers and research team.  We will be announcing our conference call date and time in the coming weeks.  Please click the button below to learn about the benefits of Gold Subscription, or contact our office at (310) 826-8600.

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