Dear PGM Capital Blog readers,
In this weekend's blog edition, we want to elaborate on the increasing usage of graphene in modern high technology equipment and the best way to invest in it.
WHAT IS GRAPHENE?
On October 5, 2010, The Royal Swedish Academy of Sciences decided to award the Nobel Prize in Physics for 2010 to Andre Geim and Konstantin Novoselov, both researchers at the University of Manchester, UK, for their groundbreaking experiments regarding the two-dimensional material "graphene".
Graphene is pure carbon in the form of a very thin, nearly transparent sheet, one atom thick.
Some important characteristics of Graphene:
- It is remarkably strong VERY strong, considering its very low weight it is 200 times stronger than steel as stiff as diamond, and also flexible and even stretchable.
- It conducts heat and electricity with great efficiency (faster at room temperature than any other known material)
- It charges and discharges 100x to 1000x faster than traditional batteries.
Researchers started to study Graphene in 2004, and since then they have found dozens of potential applications and exciting properties of this wonder material. Graphene is set to revolutionize a lot of industries, including sensors, batteries, conductors, displays, electronics, energy generation, medicine and more.
See below video for more details:
THE GRAPHENE TECHNOLOGICAL REVOLUTION:
The commercialization of graphene is just in its infancy, but already dozens of new companies have been established to develop graphene based material, graphene production processes and other related activities.
Graphene's unique properties are valuable in many different industries and applications such as:
- Energy Storage:
Graphene may hold the key to an energy storage revolution. Researchers have developed highly porous graphene-based super capacitors that they, "can fully charge in just 16 seconds and have repeated this some 10,000 times without a significant reduction in capacitance." Imagine charging your smartphone or tablet in just 30 seconds, or your electric car in a few minutes.
- Flexible Screens:
Graphene is transparent (it transmits up to 97.7% of light), and it also has low electrical resistance and is flexible. Therefore, it's a good candidate for flexible electronics and screens.
Graphene behaves strangely around water. Water can pass through it, but almost nothing else can. Graphene is also much stronger and less brittle than aluminum-oxide (currently used in sub-100nm filtration applications). This makes it a good candidate for water filtration systems, desalination systems, and efficient and economically more viable biofuel creation.
- Medical Applications/Sensors:
Offering a large surface area, high electrical conductivity, thinness and strength, graphene would make a good candidate for the development of fast and efficient bio-electric sensory devices, with the ability to monitor such things as glucose levels, hemoglobin levels, cholesterol and even DNA sequencing.
- Photovoltaics/Solar cells:
Graphene offering very low levels of light absorption (at around 2.7% of white light) whilst also offering high electron mobility means that graphene can be used as an alternative to silicon in the manufacture of photovoltaic cells.
- Material Composites:
Graphene is strong, stiff and very light. It could eventually replace steel and carbon composites in everything from aircraft to cars to body armor for the military. It is actually already being used in tennis rackets today.
Graphene's unique structure and "extremely mobile electrons could allow graphene transistors to process data at very high rates, with some devices already clocking in at more than 400 gigahertz — many times faster than comparable silicon devices." Alternatively, graphene photodetectors could also "allow computer chips to communicate with light rather than comparatively sluggish, energy-wasting electrons — an advance that would cut power consumption and allow computers to handle data more efficiently.
INVESTING IN GRAPHENE:
Investing in a pure-play graphene company is not easy, as almost all of these companies are currently privately held.
Making graphene, gram for gram, is one of the most expensive materials on Earth: one micrometer-sized flake made, can cost more than US$1,000.00
However, as mass production increases, there is potential for a 70% to 80% price drop, making graphene production much more economical. Chemical vapor deposition (CVD), for example, has brought the cost down to about US$100,000 per square meter.
Estimates suggest that the graphene market will be $149.1 million by 2020.
The European Union has created a flagship program for graphene, allocating about U$1.3 billion to spend on the development of graphene over the next 10 years.
WHO IS USING GRAPHENE:
Every tech company with an eye on the future and other industries ranging from medical to defense as well are currently in the race for being the first one being able to produce cost efficient equipments, gadgets or instrumentation, in which graphene is being used. In tech the biggest players are Samsung, which owns 38 graphene patents (and this figure is expanding), and Apple and Google. You thought the smartphone patent wars were annoying? Just wait until the graphene patent wars begin.
Professor Hong Byung Hee at Seoul National University, created a technique--and owns the patent for--mass-producing graphene-based displays, the primary area of interest for tech companies. The fact that Hee has figured out how to turn graphene into displays and owns the patent on it makes him the most popular guy in the world as far as the tech giants are concerned.
The reason you don’t have a graphene smartphone right now is because the material still has some challenges to be worked out. Namely it’s difficult to manufacture on a large scale. So right now they can make a lot of small batches of perfect graphene displays or large batches of, well, crappy ones.
But Samsung has recently said it has had a breakthrough in producing graphene in larger batches and other researchers are working on different approaches around the world.
PGM CAPITAL COMMENTS:
Graphene, although it might be the next wonder material, faces hurdles. It is still far too expensive for mass markets, it doesn’t lend itself to be used in some computer-chip circuitry and scientists are still trying to find better ways to turn it into usable forms.
One factor holding graphene back is cost. Some vendors are selling a layer of graphene on copper foil for about US$60 a square inch.
Its price has to drop to around one dollar per square inch for high-end electronic applications such as fast transistors, and for less than 10 cents per square inch for touch-screen displays.
Graphene is undeniably exciting, and has the potential to transform a number to clean-tech industries. The timeline for that transformation, however, is likely to be slower than investors bidding up graphene-related stocks today.
For those of you who want to invest in graphene, we advise you to carefully research and select a basket of the best graphene producers and an even more careful selection of companies that are making early efforts at application of the material.
Based on the above, we believe that best way to play graphene right now, is by investing in conglomerates that will profit most, when they integrate graphene in their current products or launch new products using graphene.
We currently have No position in any graphene producing company or stocks of any company mentioned in this article.
Until next week.
Dear PGM Capital Blog readers,
In this weekend's blog edition, we want to discuss with you why the US-Dollar has been rising since mid May of this year, despite the fact that the long-term health of the world reserve currency is still as precarious as it ever was and the fact that the national debt is currently over 108 percent of its Gross Domestic Product.
THE USA NATIONAL DEBT:
The Outstanding USA Public Debt on Saturday November 1, 2014 at 5:00 PM GMT was:
On top of this, the US National debt is rising with approx. 2.5 billion US-Dollar a day, which means that before the end of this year, the USA will have a national debt of over 18 trillion US-Dollars.
THE USD INDEX:
The US Dollar Index (USDX) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies.
It is a weighted geometric mean of the dollar's value compared only with a "basket" of 6 other major currencies which are:
- Euro (EUR), 57.6% weight
- Japanese yen (JPY) 13.6% weight
- Pound sterling (GBP), 11.9% weight
- Canadian dollar (CAD), 9.1% weight
- Swedish krona (SEK), 4.2% weight
- Swiss franc (CHF) 3.6% weight
USDX started in March 1973, soon after the dismantling of the Bretton Woods system. At its start, the value of the US Dollar Index was 100.000. It has since traded as high as 164.720 in February 1985, and as low as 70.698 on March 16, 2008.
As can be seen from below chart, the U.S. Dollar Index, is up 8.6% this year.
But this is more an indication that traders are bearish on other currencies, as opposed to bullish on the dollar.
The index is comprised of various currencies, each assigned a certain weight that goes into determining the index's final figure. The bulk of the calculation comes from the Euro, which makes up 57.6% of the index, followed by the Japanese yen at a 13.6% weight, and the British pound sterling, which comprises 11.9%.
Together, these three currencies represent 83.1% of the index and explain why the main dollar index has been performing as well as it has this year.
THE POUND STERLING:
As can be seen from below chart, the GBP/USD ratio has been on the way down for a few months now, dropping from US$1.72 to to close on Friday, October 31st on its lowest on the year of US$1.5995.
European economic policymakers and central bankers are losing their appetite for wide-scale austerity measures and instead are more explicitly advocating inflationary monetary policies to jump start the region's stagnating economy.
Plagued by an elevated unemployment of 11.5% and troubling indicators signaling disinflation, the austerity calls are being hushed by much louder cries for stimulus.
Due to this at the end of their meeting of September 4th 2014, the ECB announced starting September 10:
- The interest rate on the main refinancing operations of the Eurosystem will be decreased by 10 basis points to 0.05%
- The interest rate on the marginal lending facility will be decreased by 10 basis points to 0.30%.
- The interest rate on the deposit facility will be decreased by 10 basis points to -0.20%.
On top of this they announced to buy non-financial asset-backed securities to the tune of 500 billion euros over three years.
This will all contribute to a weakening of the euro, and already has helped to prop the dollar up.
As a consequence of this the Euro depreciated against the USD from US$ 1.393 in March of this year to US$ 1.2526 at the close of the trading day of Friday, October 31, 2014, as can be seen from below chart.
"ABENOMICS" WEAKENS THE JAPANESE YEN:
"Abenomics" is made up of three main elements called "arrows" that include monetary easing, flexible fiscal policy, and structural reform. Since its inception in 2012, the Yen has fallen more than 23% as can be seen from below chart.
The first two arrows are the main culprits behind the yen's plunge.
If this isn't enough, on Friday October 31, in a tight vote, the Bank of Japan backed an 80 trillion yen (U$720 billion) target for expanding the monetary base (a measure of the amount of money held by the central bank and in the economy). That's up from a previous target of 60 trillion to 70 trillion yen.
This was a major unexpected move by Haruhiko Kuroda, the Bank of Japan's governor, and a big new chapter in the country's "Abenomics" experiment, named after Prime Minister Shinzo Abe.
The Dollar and Yen are reacting pretty much as one would expect, too, for which the Dollar went up 2.23% against the Yen to close the week of and trading day of October 31 at 112.3150 its highest level since 2008.
Due to this the USD Index went up on Friday, October 31, 2014, with US$ 0.75 or 0.87%, to close at US$ 86.92 its highest level since mid 2010 as can be seen from below chart.
PGM CAPITAL COMMENTS:
Since mid May of this year the US-Dollar Index has been risen with almost 9%, which is a huge move for any currency to make in such a short period. Due to this the dollar might be on a fragile footing at the moment and likely can't sustain this rise.
The threats for the US-Dollar going forward are more likely than most people think. A stronger US$ hurts the already fragile US exports and also the consolidated earnings from USA multinationals, when they convert their earnings abroad in a higher US-Dollar exchange rate.
Even more troubling are the threats to the US-Dollar hegemony from China and Russia. The two countries are settling more international transactions in their own currencies, effectively bypassing the dollar altogether.
As a consequence of a rising US-Dollar, the price of Crude Oil, Gold and other precious metals, which are measured in US$, received a haircut.
Due to this, China as the biggest holder of US treasuries securities but also Russia, might see the current high and unsustainable USD-Index as a good momentum to SELL (some of) their US treasuries holdings in order to buy Gold at depressed price.
These cues could signal that two major economic powers are weaning themselves off the dollar, further threatening the U.S. dollar's value in international markets
Right now, there's little doubt that their respective QE-programs and subsequent weakening Euro, Japanese Yen and British pound currently are providing tail wind to the Dollar. But on the other hand, based on its balance of payment, country debt - which most probably will reach 18 trillion US-Dollar by mid December 2014 - we can conclude that the value of the US-dollar currently is overstated, is in a bubble and that it is not IF but WHEN, the market will see this and send the US-Dollar into a correction to a more realistic value.
The other aspect of the trade of the US-Dollar is Gold, which is down due to the increasing US-Dollar.
As can be seen from below chart, the Chinese have used the lower Gold price to increase their demand for the yellow metal.
Above chart shows the latest weekly withdrawals figure from the Shanghai Gold Exchange (SGE) in the week of October 20, which hit 59.7 tonnes, making the total Chinese gold demand – so far this year – over 1,600 tonnes. And if the big weekly withdrawal figures continue for the rest of the year, Chinese demand is again on the way to the 2,000 tonnes mark.
But the biggest support for Gold last week came from former FED Chairman Mr. Alan Greenspan, who, according to Wall Street Journal reporter Michael S. Derby said
"Gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments."
We believe that Mr. Greenspan's statement cannot be seen as a short-term statement but that he was clearly looking forward.
Based on the above we are currently adding Gold and other precious metals to our personal portfolio and at the same time we are shorting the USA Markets and the US-Dollar in order to profit from the (coming) correction in US-Equities and the US-Dollar.
Before following any investing advice, always consider your investment horizon and risk tolerance and financial situation and be aware that stock prices don't move in a straight line.
Until next week.