Clearly, the crypto space has gone a bit bonkers. I opened a Ziglu account back in Q3 of last year and invested some play money, mainly in Bitcoin 9or fractions thereof), as well a smattering of Ethereum and Lite coin. I haven’t tended to look at the account but yesterday noticed that I had trebled my money in a few months. Crazy. Naturally, I sold a third of my holdings – my original investment – and I suppose I’ll just sit tight now, waiting for the inevitable crash!
On the theme of crypto, one of the few institutional-grade fund managers operating in this space is the TCM Momentum Tracker Fund which told investors that it was up 35.9% (estimated) in December, bringing the net Year-To-Date performance to +234.0%. As you’d imagine, they are still bullish and I thought the following comments were thought-provoking…
“ Bitcoin (currently 69% of the total market cap) has now well-and-truly passed the initial retail speculative stage, to test the hypothesis that BTC is a store of value and a new “digital gold” – a Golden Era for BTC. From here, we see the market taking aim at $50k / BTC, then $100k, $250k and $500k. When it gets there, it will be worth $9.5T – $10T, putting it on par with today’s value of the total amount of mined gold in the world. The risk is, in fact, that this happens faster than people have predicted, i.e. within 5-10 years. When/if BTC achieves this, it will go on to the next phase: Reserve Asset status.”
I’m not quite asoptimistic as these guys but maybe they are right? Who knows?
Their note to investors did also contain one other story that I had missed somehow. Apparently, Scott Minerd, CIO of fund manager Guggenheim Partners, with more than $230 billion under management, told Bloomberg TV hosts in December that his firm’s fundamental analysis shows that bitcoin should be worth USD400,000. His conclusion is based on the asset’s scarcity and its relative value to gold as a percentage of gross domestic product. He also revealed that Guggenheim had started allocating to bitcoin when it was trading at around $10,000.
A trifecta of interesting charts today from Charlie Robertson, the chief economist at Renaissance Capital. The first is the good news bit of the story. It shows that the UK is making a good start on the vaccine front – as is the US – but the Middle East seems to have stolen a march on us – that said, they are all small, cohesive countries with small populations.
The next chart is familiar to UK based readers. It shows how our Third Wave has crashed into the nation’s hospitals.
But the third chart is the most worrying. Africa boosters have long argued that the continent might escape the worst of this horrid virus but the chart below for Nigeria makes deeply depressing reading. One wonders whether the huge back and forth flow of people between London and Nigeria has kicked off the spread of the new variant of the virus. Let’s hope not.
I’ll finish today on one of my favorite themes, grid-scale battery storage. For full disclosure, I am a non-exec on the UK’s largest grid connected outfit, Gresham House Energy Storage, so I have a vested interest in this space.
In my blog yesterday I mentioned Arbrook’s US fund and their purchase of Walt Disney shares. The same monthly report also noted that they have a big position in NextEra, the utility business that is now worth more than ExxonMobil. This US business is big in the local wind and solar space and will almost certainly be a big beneficiary of the Biden administration’s Green push. But Arbrook also reports that NextEra is pushing into batteries.
“NextEra has told us that it uses lithium-ion batteries for its storage and has benefitted from the consistent reduction over time in their cost . In December it was announced that the 3rd quarter of 2020 saw an incredible 476 MW of storage installed in the US which was up 500% on the previous year6. To put this into context, we consider this to be equivalent to the output of a medium-large natural gas combined-cycle power plant – in just one quarter. “
This underlines one of my constantly repeated investment theses – we are only at the beginning of the battery storage revolution. It is still not too late to jump on board this particular (electric powered) bandwagon and on that subject it’s worth dwelling on the investment case for a business called Livent.
Global X runs a very big US ETF which invests in this segment and in a recent report they talked in a little more detail about this major player.
“Livent, which was spun out of FMC Corporation in 2018, is a Philadelphia-based company with a lithium history that dates back to the 1940s. Compared to the other large Western players, namely Albemarle and SQM, which own and operate some non-lithium businesses, Livent is a pure-play company focused only on lithium.
Livent operates one of the lowest-cost lithium mineral deposits in the world, the Salar del Hombre Muerto in Argentina. The company’s operations sit at the low end of the global cost curve to produce lithium carbonate. Yet, the company’s strategy is to focus on lithium hydroxide. As such, it is important to note that brine-based raw materials like these require a two-step process to get to lithium hydroxide: a conversion into lithium carbonate first and then a conversion into lithium hydroxide. This extra step adds costs, but the all-in cost structure for lithium hydroxide, which we estimate to be about $5,800, remains below today’s depressed lithium prices.
The growing prevalence of nickel-rich batteries, which require lithium hydroxide, supports Livent’s business strategy. The company estimates nickel-rich batteries should increase their market share from about 25% today to 75% by the end of the decade.
Livent is known for its relationship with Tesla, being one of its main lithium hydroxide suppliers. In November, the company announced the extension of a multi-year supply agreement with Tesla through 2021, with a commitment to deliver greater volumes than in 2020.14 Management also indicated that they are working to extend their partnership for 2022 and beyond.
In addition, Livent recently announced a 50/50 joint venture with private equity firm Pallinghurst Resources to buy Canada’s lithium projects previously managed by Nemaska Lithium. Pallinghurst, through Quebec Lithium Partners, is expected to own 50% of New Nemaska Lithium. Given that arrangement, Livent is expected to see 25% of the potential economic benefits of New Nemaska Lithium.15 The Canadian location can help Livent meet the growing demand of battery grade lithium from North American and Europe.”
You can find out more about the Global X US battery ETF here – https://www.globalxetfs.com/funds/lit/
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