Nano-Materials and Graphene

Yet again the British have come up with a ground-breaking discovery in the form of Graphene. I say British because it came out of the Nano materials department at Manchester University even though the two people responsible were Russians. Professor Andre Geim and Professor Konstantin Novoselov have been jointly awarded the Nobel Prize for Physics 2010 for their discovery.

Graphene is a two-dimensional material consisting of a single layer of carbon atoms arranged in a honeycomb or chicken wire structure. It is ten times as conductive of electricity as copper and out-performs all other materials as a conductor of heat. It is almost completely transparent and yet so dense that helium cannot pass through it. It is over two hundred times stronger than steel, harder than diamonds and yet it is still totally flexible. It is the coming age of the super material GRAPHENE.

The uses for graphene are endless. All industries will have a use for this material. Its lightness and strength will revolutionise the Aerospace and Automobile industries. Energy storage using grapheme may mean that car batteries will complete their charge in minutes instead of hours. (Bring on the electric car!). Graphene paint used on the roofs of houses will power the home. Computers and mobile phones will become wafer thin and flexible, but the most important use in the future may be in the production of clean water. Graphene’s ability to let nothing pass through it except water makes it the world’s greatest filter. Graphene could easily and cheaply remove salt from seawater, potentially turning the oceans into a vast drinking supply for the world’s thirsty populations.

Will this material be developed only in Britain, with the rewards for its discovery staying for the financial benefit of the British? I don’t think so. The Americans are already using the knowledge from Manchester University to develop grapheme sensors for air and water measurements. Maybe it is only correct to have the great minds from around the world working to develop both the material and commercialisation of it for the future good of mankind. If all of this should come to fruition then it will have a marked effect on many industries and the companies that work in these industries. It will change many countries economies and the fortunes of races around the world and it will occur in our lifetime.

Energy

The world is moving away from the age of Coal, Oil and Nuclear Fission as the source of its energy requirements into the new age of Shale Gas and Renewables such as Wind Power generators and Solar Panels. We are becoming the clean power generation. However there are already “new kids on the block” in the form of Nuclear Fusion, Solar Energy collectors and possibly Tidal Energy. These later sources will give unlimited electrical power to the world and could be available within the next few decades.

The thought of Tidal Energy on tap and harnessed for the United Kingdom is fascinating if fanciful. After all the country has some of the highest tides in the world and provided the Moon stays in place they will continue forever. The idea of damming the Severn and Morecambe Bay estuaries to generate water driven turbine electricity has been voiced for many years but has always been shot down as impractical and environmentally unfriendly. It is said to be cruel to birds, bugs, fish and the Port of Bristol, let alone not having the ability to produce viable and sustainable turbines. New materials and technology have resolved the problems of the production of the turbines, and instead of a shore to shore barrage the latest idea is to construct “socking great” lagoons along the coast. This would leave the main tidal stream to move virtually uninhibited up and down the estuaries. The turbines would run as the tide rose and filled the lagoons and they would also run as the tide fell and the lagoons emptied. We would have twenty four hour a day electricity generation which is more than can be said for Wind and Solar power.

Is it so farfetched to imagine that in not too many years the world could have sufficient electrical power from a mixture of sources to satisfy the needs of its growing population? Plentiful power will allow the cheap production of fertilisers and would also run major desalination plants. The world would have the technical ability to create enough food and drink for everyone. Whether it has the political desire and skills to achieve this nirvana is another question entirely. As a financial investor it will be interesting to see which of the technology funds successfully invest into this arena.

Reduction in the amount of American Q.E

Last week the “Fed” confirmed its previously broadcast policy of reducing its Quantative Easing programme. This was on the assumption that the American economy would continue on its road to recovery. The markets around the world fell on the receipt of this news. Quantative Easing has funded the purchase of Bonds around the world lifting the prices and lowering the yields. If this is now to be reversed then as Bond yields rise then Interest rates may also follow suit bringing pain to borrowers and mortgage holders. This will not be good news in the United Kingdom where many of the population are householders.

Another consequence of reducing the amount of American Quantative Easing could be the strengthening of the value of the dollar and this in turn might lead to a reduction in the price of gold bullion. One would also expect the cost of American exports to rise but the falling costs of energy could well offset this for manufactured goods. Imports of course will become cheaper. It is going to be very interesting to be a spectator watching these events takes their course.

Japan has announced that it intends to continue with its programme of Quantative Easing regardless of the action taken by the Americans. They still intend to continue kick starting their economy by reducing the value of the yen and introducing inflation into the economy. This will be a double bonus for the Japanese manufacturers who are selling into the American market or any market that operates in American dollars. As a consequence the Nikkei will perhaps reverse its recent fall and move back onto its previous upwards trend. It must be worth watching the Saltydog numbers to see what actually takes place.

Investing in China

I feel quite sad about the flack that Anthony Bolton is receiving as a result of his exit from the control of Fidelity China Special Situation Investment Trust. Certainly the fund has gone backwards from its launch, but then during this period so has every other Chinese fund – in the last few years this has been a failing sector. The Shanghai Stock Exchange Composite Index is currently back down at levels not seen since the financial crisis of 2008.

Surely this makes the case for being a Momentum Investor and only holding funds in the best performing sectors. Even the best of managers – and Anthony Bolton is one of the best – cannot make progress in a falling sector.

How long will China remain a difficult sector in which to make investment progress, and will it ever return to the heady days of pre 2008 when it was an investment gold mine? Perhaps China`s economy and stock markets will copy the example of Japan`s after the end of the Second World War. In this case there was enormous growth as money and technology were poured into the economy, but over the years this growth slowed down from the mid teens to a more manageable five or six per cent per year as the economy matured. It was only then that the Japanese stock market really took off and we saw the Nikkei reach the dizzy heights of thirty thousand plus. Of course, as we all are aware, things went wrong after that as property and technology bubbles formed and burst and this, combined with external manufacturing competition, took the Nikkei back down to below nine thousand.

The question is whether the Chinese economy has gone through a similar first stage of rapid growth and is now settling down to a more sustainable level of growth matching demand with home consumption and export sales? If this is true, will we also see a similar dramatic surge in the Chinese stock markets as occurred with the Nikkei?

Only time will tell if this becomes the case and Anthony Bolton will eventually be proved right.

Volatile and uncertain waters

The last few weeks in the financial markets have brought back to my mind an experience from my youth. As a fourteen year old I was fortunate enough (that`s looking back) to go away as an unpaid “decky learner” on the Kingston Garnet, a deep sea fishing boat from Hull. It was at the time of the Icelandic Cod Wars which also added to the excitement. The trips would last around five weeks and of course during that time, especially in winter, the weather could on occasions be foul and dangerous. This was the time of beam trawlers, the stern trawler had not yet been designed. When hauling the nets the boat was beam on to the sea and a big wave coming aboard required agility, commonsense and luck to avoid casualties. I now get to my point. The skipper would address my concerns by saying that if you have taken all the actions within your knowledge to make the boat and crew safe, then you can do no more and the rest is in the hands of the Gods. He believed that we were all just passing time between birth and death and we should make the best use of this allotted span which fortunately is an unknown. His views were probably formed in the war.

So is this so dissimilar from investing in today’s markets? Of course mistakes are unlikely to be life threatening but you still have to bring all your knowledge to bear on your decision making. You want your savings to be as safe as is sensibly possible. The markets can on occasions like now, be as unpredictable as the weather, so if they look stormy and you feel insecure then take action and go into cash or the equivalent. We have the luxury of not having to carry on fishing to secure a livelihood. We can wait for better investment weather.