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Fuller Treacy Money- Biden and beyond: many a micro makes a macro


Video commentary for October 29th 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: Euro falls back on ECB assistance, gold eases, oil breaks down, natural gas surges on Hurricane Zeta, Tech earnings are strong supporting the Nasdaq.  

Biden and beyond: many a micro makes a macro

Thanks to Iain Little for this edition of his report. Here is a section on technology

In a zero-interest rate, depression-filled world, growth should be highly valued. Our technology adviser Charles Elliott, whose tech fund is up +45% in 2020, defines a growth stock as one with top line revenue growth exceeding +15% in a zero-interest rate world.

People will continue to “overpay” for +15% growth because – assuming it leads to +20/25% earnings growth – it vaporises a 40x Price Earnings Ratio (PER) down to low double digits in under 5 years. So, the real question for an investor is not “is the company’s PER too high to buy it?” but rather “will the competitive position of this growth company persist for 3-5 years?”

Distributed working, 5G, growing internet diffusion, Internet of Things, augmented reality, electric or hydrogen cell vehicles, ageing populations… these sectors and themes have saved portfolios this year. Such themes are more sustainable change-drivers than either a Biden or a Trump presidency. Since we wrote about the Covid effect of “acceleration” in March, most commentators are running the same tape. “Acceleration” is the watchword.

In our June report we advised against leaving these safer “growth” shores for more cyclical and beaten down “value” sectors like cyclicals, industrials, traditional energy and, the kiss of death, hospitality or airlines. This shift and emphasis won’t last forever.

But it’s got longer to run, at least until central banks achieve their targets of 2% inflation by over-shooting it via a combination of fiscal reflation and Modern Monetary Theory.

Eoin Treacy’s view

The pace of technological innovation is accelerating. It is being driven by big data, much greater availability of computing power via the cloud, and soon 5G. Quantum computing is in its infancy but is progressing at an exponential rate. Artificial intelligence remains on a strong growth footing and benefits from the fact that you only need to teach a computer once. After that it is all copy and paste

Email of the day on trading gold

 you (re-) purchased gold at 1879(as well as silver at 23.70 and platinum at the same time) as a trade as opposed to a medium to long-term investment.

(these PMs today finished slightly below your purchase prices).

At the same time, you have been saying that reaching or overshooting the 200dma on the downside which presently is at about 1780 (another 5% correction for gold from where it is today) could well be possible.

Do you intent to “stay put” in Gold and the other PM’s if such a further decline takes place or rather sell rather quickly and try to enter again at what will hopefully be the new low?

Thank you for your comments which will certainly be of interest for the collective as the mid- to long term long potential of PMs is certainly a high conviction long investment theme of yours.


Eoin Treacy’s view

Thank you for this question and I agree it may be of interest to the Collective. As I see it, the essence of the question is about the nature of uncertainty and the shape of reversions towards the mean.



Email of the day the on Rolls Royce rights issue

RR shares finished the day at 84.54p whilst the newly issued rights finished at 51p.

When adding back the 10/3 of 51p to the share price of 84.54p, the result is 254p which is a very nice gain from the news of your first purchase at 154.75 p you gave the collective early October (your second purchase being adroitly at 105p). Thank you for advising us!


Yesterday you wrote regarding RR  “…The knock-on effect of the rights issue could result in the share falling between 25% and 33% which may be priced into shares over the coming two weeks…”

Three interrelated questions:

1. Do you mean by this that the share price of 84.75 could go down to 57p (-33%) to 64p (-25%) which would be equivalent to the “old share price” coming down from today’s 254p to 170p?

2. What would be the reason for this heavy decline – all endogenous factors should already be priced assuming a efficient pricing…

3. If such a decline is probable would it not make more sense to take good profits and then, if the share really comes down or stays where it is, and the turn-around story still seems valid, buy again a lower or more or less unchanged price?

It seems to me that from a risk-adjusted perspective, this would be the better action.


Dear Mr. Tracey,
Rolls Royce web site states for shareholder living in USA:
” Due to local regulations the rights issue cannot be offered in your country. We will arrange to try and sell your rights to new ordinary shares for you, and you will be sent the profit (after expenses) if it is £5 or more.”
would elaborate on this process for those of us who are not familiar with it.
Many thanks for your great service.


Eoin Treacy’s view

Thank you both for these questions. The share was rebased yesterday and halved as a result of the rights issue. It subsequently rebounded from its lows because many investors were waiting for the uncertainty of the rebasing to pass before initiating long positions. The question now is what happens next.

The Great Reset

This edition of Tim Price’s always enjoyable missive may be of interest to subscribers. Here is a section:

Markets were born free but are now everywhere in chains. Cash deposit rates are now derisory, but with added bail-in risk. Bond yields are likely to remain squashed indefinitely, helped by governmental funny money. So, cash and bonds are largely out of the question. The one market too big for even the world’s central banks collectively to kick around is the currency market. So, we would not be surprised to see some kind of reset develop there. Our way of anticipating that reset is to own precious metals and the shares of sensibly priced mining concerns in “safer” jurisdictions. Because we anticipate an ultimately inflationary outcome due to those aforementioned torrents of funny money, we value claims on the real economy in the form of equity ownership of cash-flow generative businesses run by principled, shareholder-friendly management with an excellent track record of capital allocation, especially when such stocks can be bought at a discount to their inherent worth. And because we frankly have no clue how the Great Suppression will necessarily play out, we hold uncorrelated (systematic trend-following) funds that offer the potential to zig when the markets finally and conclusively zag. Our watchword: if in doubt, diversify.

Not the sort of commentary we would prefer to be sending out into the world. But sometimes spades must be identified as such. On a more positive note, some wisdom from the ages: this too shall pass. It just better gets a bloody move on.

Eoin Treacy’s view

The question for investors is whether the ECB announced additional stimulative action to support the economy or arrest the advance of the Euro. The region’s plan for climbing out of the lockdown-induced recession will be founded on exports. A weaker currency would certainly help and the ECB is delivering.

Eoin’s personal portfolio – new trading position opened October 21st

Eoin Treacy’s view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change.

This is your daily comment from
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