Reversal of Fortune
From time to time, readers of the Absolute Return Letter ask for my opinion on this or that and, every now and then, I decide to turn my response into a letter. The last few weeks have been no exception.
Capital Thinking · Issue #768 · View online
“Don’t worry about the world coming to an end today. It’s already tomorrow in Australia.”
-Charles Schulz
V for Vaccine?
Niels Clemen Jensen | The Absolute Return Letter:
From time to time, readers of the Absolute Return Letter ask for my opinion on this or that and, every now and then, I decide to turn my response into a letter. The last few weeks have been no exception.
In early December, the extraordinary rise in the price of Bitcoin drove one of our readers to ask what I think of that investment opportunity, and the trade agreement between the UK and the EU, which was entered into just before Christmas, inspired another reader to ask me if I could provide some more colour on that deal.
Whilst I love those sorts of challenges, in this particular case, I am facing a timing problem.
As you may or may not be aware, the January Absolute Return Letter is always about the issues that I worry most about, as we enter the New Year.
In other words, the earliest I can cover anything else is in the February letter, and we’ll be into March before both of those issues have been covered.
As you can see in Exhibit 1 below, I am not sure my thoughts on Bitcoin should be mothballed that long, and neither should the paper on the Brexit trade agreement, considering how important it is to all of Europe.
Therefore, I have made the executive decision to prepare a research paper on Bitcoin, which will be published on ARP+ later this month.
You can subscribe to ARP+ here. My thoughts on the trade agreement will then form the base of the February Absolute Return Letter.
As far as this month’s letter is concerned, for some odd reason – probably because I forgot to bring my crystal ball back to London when I returned from my Christmas break in Denmark last year – there was no mention of COVID-19 in last year’s January letter. I will try and make up for that this year.
Saxo Bank’s outrageous predictions
As I often do in January, I am also going to start this year with a mention of Saxo Bank’s ten (so-called) Outrageous Predictions for 2021.
Steen Jakobsen, the CIO of Saxo Bank, and his team rarely disappoint, and this year is no exception. In no particular order, the ten predictions for 2021 are as follows:
- Amazon “buys” Cyprus
- Germany bails out France
- Blockchain tech kills fake news
- China’s new digital currency inspires tectonic shift in capital flows
- Revolutionary fusion design catapults humanity into energy abundance
- Universal basic income decimates big cities
- Disruption dividend creates Citizens Technology Fund
- A successful Covid-19 vaccine kills companies
- Sun shines on silver, which sizzles on solar panel demand
- Next-generation tech supercharges frontier and emerging markets
I am not going to go through every single one, but at least a couple of them deserve a mention. If you want to dig deeper, I suggest you go to Saxo Bank’s website which you can find here.
Let’s start with #3. I wholeheartedly agree that the blockchain technology will do tremendous damage to the existing financial infrastructure.
I don’t know about fake news, but blockchain could effectively render commercial banks largely obsolete within the next ten years or so. Online retailers have done immense damage to many brick and mortar retailers more recently, and blockchain may do the same to many commercial banks in the years to come.
The other outrageous prediction I will comment on is #5, mostly because it is not outrageous at all.
A lot has happened on the fusion front in 2020, and I am increasingly convinced that we are no more than 10-15 years away from being able to commercialise this revolutionary technology.
To illustrate how powerful it is, imagine you go home and fill up your bathtub with water. You then take the lithium from two laptop batteries, and you put it all through a fusion reactor.
The outcome? Enough electricity to cover the needs of an average person in the UK for no less than 60 years!
This will reduce the marginal cost of electricity to virtually zero and will have enormous implications on the world as we know it. The main risks are timing and high development costs.
A fusion reactor emits no greenhouse gases, it cannot melt down like a fission reactor can, there are no enriched materials which can be used to develop nuclear bombs, and there are only modest amounts of nuclear waste.
Does it get much better than that?
For those of you keen to get the latest on fusion energy, I suggest you read these articles in Forbes Magazine, Financial Times and Science Alert. I would also recommend part II of our series on Investing in Natural Resources available here on ARP+.
My not-so-outrageous predictions
I am occasionally asked why pandemics don’t feature prominently on our list of risks to worry about, and my answer is always the same.
Niels Clemen Jensen