Gold vs. Bitcoin

Thanks to a subscriber for this report from Morgan Stanley which may be of interest. Here is a section:

'...so you're a commodity analyst, and you don't track bitcoin? Should I be worried about that?' – bitcoin enthusiast…

Better than gold? So for global money transfers – bitcoin's a good medium. Indeed, for this function, bitcoin's better than gold; probably better than conventional fiat currencies too (i.e. transaction costs). But the popular view that this immature currency is also superior to gold as a hedge against inflation/uncertainty, still needs to be tested.

Eoin Treacy's view

A link to the full report is posted in the Subscriber's Area.

Gold is a store of value because of its immutability, relative scarcity, beauty and global acceptance as a fungible asset. The fact it has history on its side as a store of value ensures there will always be investment interest in the “barbaric relic”.

Japan: Ignore Autos and Electronics to Profit

Thanks to a subscriber for this article by Emma Wall for Morning star may be of interest to subscribers. Here is a section:

With a shrinking working population, Japan has record low levels of unemployment and the economy is poised to receive a boost once this lack of supply filters down to wage growth. But there are equities which can profit from the tight labour market according to Weindling; he invests in recruitment firms that provide permanent and temporary workers.

Suppliers Immune from Domestic Threats

While the population is ageing, Weindling points out that a Japanese company does not need a Japanese customer base to thrive.

“There is no reason why Japan should not continue to make things. Factory automation and robotics are not a threat to Japanese industrials in the way that they are to US companies – they are the solution to a dwindling workforce,” he says. “More automation is a good thing, and the larger industrials will continue to take market share. It is a multi-year, structural shift.”

That does not mean he backs the exporters of old, however. The international names which have long been synonymous with Japan are electronics firms and auto-makers; Toyota, Canon, Mitsubishi and even Sony are no-go areas for Weindling.

“No one buys cameras anymore, so why would I buy Canon,” he says. “We don’t own any of those household names. Their prospects are considerably lessened. Japan’s export market is no longer about cars and electronics, it is about condoms, baby milk, skin cream, medicine. Japan is known across Asia for high-quality products, reliability and high safety standards. These are the companies you want to be invested in.”

Eoin Treacy's view

Japan is an increasingly popular tourist destination for Asian, particularly Chinese, tourists who come with well-defined shopping lists from WeChat personalities that tell them exactly what and what not to purchase. On my family’s visit to Japan in April there were a number of consumer items Mrs. Treacy was very eager to try based on reviews she had seen in Chinese social media.

Zinc Breaks Through $3,000 Barrier as Metals Rally Gathers Pace

This article by Mark Burton and Winnie Zhu for Bloomberg may be of interest to subscribers. Here is a section:

Zinc surged above $3,000 a metric ton amid persistent global deficits, and aluminum climbed as China reined in illegal capacity, adding fresh impetus to the rally even as some investors expressed concerns.

Zinc jumped as much as 2.6 percent to $3,037 a ton on the London Metal Exchange, the highest level since 2007, and traded at $3,029 at 1:20 p.m. in London. Aluminum gained as much as 1.3 percent to $2,075.50 a ton, the highest since November 2014, while nickel, copper and lead all traded higher.

An index of base metals rallied to a two-year high last week amid better-than-expected demand in China and a weakening dollar. The Chinese government is stepping up moves to shut illegal aluminum and steel plants this year, both to cut excess capacity and help to protect the environment.

Efforts to promote economic growth in China ahead of a leadership reshuffle scheduled for later this year are also boosting metals usage in manufacturing and industrial sectors, according to Bernard Dahdah, a metals analyst at Natixis SA in London.

“Earlier this year, a lot of the rally was supply related, but recently we’ve seen demand starting to support as well,” Dahdah said by phone.

Eoin Treacy's view

Synchronised global economic expansion, evident for the first time since the financial crisis, tends to boost demand for basic commodities. This is particularly evident in the industrial resources sector because it went through such a painful rationalization where expansion plans were cancelled, administrative staff fired and expenditures cut to the bone. That has resulted in an industry less inclined to increase supply in response to high prices.

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