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Forgetting and Investing: Unlikely Allies

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Forgetting and Investing: Unlikely Allies

The Tesla Story

Have you ever walked with purpose into a store, only to forget what you came to buy as soon as you arrived?

People forget. Maybe this is our fallibility, or maybe it is good design. Either way, it is definitely a fact of our lives.

Forgetting Makes You Smarter? 

Recent research shows that maybe forgetting isn’t such a bad thing. Blake Richards and Paul Frankland at the University of Toronto published a paper reviewing current brain research. Their findings show that forgetting may actually benefit healthy brain function and facilitate better decision-making.

How can this be possible?

One way it helps is in avoiding information overload. In our information-based culture, we all suffer from it. Luckily, our brains work constantly to decrease the information we don’t need. Their research showed that, “According to this view, the goal of memory is not the transmission of information through time, per se. Rather, the goal of memory is to optimise decision-making.”

Over time, our memories of specific events and details may fade, but the impressions they made linger. We begin to base our decisions on the generalised feeling we have created about them, instead of factoring in each episode we’ve experienced every time we have to make a choice about them. In many life situations, this saves us time and leads us in the right direction, but it’s a risky way to approach investment strategy.

tesla

Forgetting and Investment Strategy

People have polarised views on Elon Musk and his company Tesla. He is definitely a Marmite celebrity—you either love him or you hate him—either he’s the real-life Iron Man or he’s Doctor Doom. Still, it’s hard to argue with innovation and the companies he’s built have shining media images—often even when they are not performing well.

Over time great accomplishments and sensational actions might stand out, while setbacks and details get lost. If you add to that how people feel about Musk and Tesla, the picture gets murkier. When you realise that Musk is also taking actions to mitigate the bad press his company receives or their failures with good deeds and splashy announcements/appearances, it becomes hard to see the real picture.

March 2018 was not a good month for Tesla. It was the worst month for its shares in seven years, with stock falling 22%. It voluntarily recalled 123,000 of its Model S vehicles due to faulty steering. A driver of one of its Model X vehicles in California was in a fatal crash while using autopilot. Any of these events could be disastrous for a company, but all of them coming in one month would have to make a CEO squirm.

Musk’s response? This tweet:

“…Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt…”

On April Fool’s Day.

What does it add up to when you put all of this information, disinformation and feelings together? Well, if you are wondering whether to invest in Tesla, all of this peripheral data clouds decision-making. What you need are facts. Facts drive solid decision-making.

Augmenting Capabilities

Augmenting your own capabilities through technology is one solution to get a bird’s-eye view of market data and process and analyse the current accredited financial news and see historical data. Sentiment analysis technology also lets you dive down to get a close-up of the real mood at any given moment.

We used our YUKKA’s News & Trend Lab, to map the trajectory of the sentiment about Tesla in March 2018.

On March 20th, sentiment was up at 55%—on the positive side, but not strongly so. By April 2nd, the day after Musk’s April Fool’s Day tweet, sentiment slid to 28%, showing a negative indicator. Tesla dropped almost 30% in that period, and yet, immediately starts trending upward again the next day. Did Tesla’s problems go away? Did the profits suddenly go up? Did the vehicles not need a recall? Was their autopilot system improved? No. What happened was the tweet. What happened was Musk diverting our attention, hoping we’d forget about Tesla’s problems and focus on his public persona.

According to market sentiment, it worked. By the end of April, sentiment had trended back up to just over 40%. People had forgotten the negative news and were increasing their confidence in Tesla. Yet, the sentiment is still only at 40%—a negative indicator. If you were working without this data, you might be tempted to change your investment strategy on Tesla, based on your gut. Unfortunately, that would be a bad decision. On reporting a record loss in first quarter, and no interest from Musk to answer analysts’ questions, Tesla’s sentiment dropped drastically. Between April 30th and May 4th, sentiment went down to the lows again. The following weeks look the same: Bad news about the product are followed by good ones by Elon Musk. You remember the submarine to rescue the boys in Thailand? Or going private with Tesla?

People forget. Machines don’t.

Can you recall what Tesla’s production goals are or what their cash burn is? Probably not. Instead, you recall Musk on the Met Gala red carpet with Grimes or his submarine being offered to help rescue the boys trapped in the Thai cave or his promise to restore pure water to the people of Flint, Michigan.

These media moments should not drive your investment strategy. Data should. Making decisions based on only those events that stand out in our memories might work for daily life, but not for complex systems with massive amounts of information exchange. Our brains are optimised to let go of the small stuff in order to make better decisions. Coupling our brain power with the power of an AI-driven tool that processes, sorts, analyses and displays the data gives us unprecedented power as decision-makers.

As finance professionals, we can’t put our investment strategies on autopilot.

Smart investors use information, not smokescreens, to make their choices. Letting machines handle the information, so you can make the decisions is smart.

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Car sector seeks more UK government support as output tumbles

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Car sector seeks more UK government support as output tumbles 1

LONDON (Reuters) – British finance minister Rishi Sunak should use next week’s budget statement to help boost the car industry’s competitiveness, a trade industry body said on Friday, as production tumbled to its lowest January level since 2009.

Sunak is due to detail how he will further support the economy amid COVID-19 restrictions on March 3.

The Society of Motor Manufacturers and Traders (SMMT) said the furlough scheme that protects jobs should be extended, more support for training was needed and manufacturing investment should be encouraged through reform of the business rates tax.

“Next week’s budget is the chancellor’s (finance minister) opportunity to boost the industry by introducing measures that will support competitiveness, jobs and livelihoods,” SMMT Chief Executive Mike Hawes said.

“We need to secure our medium to long-term future by creating the conditions that will attract battery gigafactory investment and transform the supply chain.”

Output in January fell by 27% year-on-year to 86,052 vehicles, hit by factors including dealership closures during a latest COVID-19 lockdown, international supply chain problems and the change in trading terms with the European Union.

(Reporting by Costas Pitas; Editing by William Schomberg)

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Exclusive: Portugal sees green hydrogen output by end-2022, $12 billion in investment lined up

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Exclusive: Portugal sees green hydrogen output by end-2022, $12 billion in investment lined up 2

By Sergio Goncalves

LISBON (Reuters) – Portugal will start producing green hydrogen by the end of 2022 and already has private investment worth around 10 billion euros ($12 billion) lined up for eight projects that are expected to move forward, Environment Minister Joao Matos Fernandes said.

He told Reuters in a telephone interview there were also several “pre-contracts for the purchase and assembly of electrolysers” to produce the zero-carbon fuel made by electrolysis out of water using renewable wind and solar energy.

Such hydrogen is more expensive to extract than the heavily polluting conventional method of using heat and chemical reactions to release hydrogen from coal or natural gas, known as brown and grey hydrogen respectively.

Hydrogen is now mostly used in the oil refining industry and to produce ammonia fertilisers, but sectors such as steelmaking, transportation and chemicals are beginning to develop large-scale hydrogen applications to gradually replace fossil fuels as countries try to reduce pollution.

The European Commission has mapped out a plan to scale up green hydrogen projects across polluting sectors to meet a net zero emissions goal by 2050 and become a leader in a market analysts expect to be worth $1.2 trillion by that date.

“By the end of 2022, there will certainly be green hydrogen production in Portugal,” Matos Fernandes said. “Green hydrogen will, over time, allow Portugal to completely change its paradigm and become an energy exporting country.”

He said seven groups had submitted applications under Europe’s IPCEI scheme for common-interest projects to make part of a planned export-oriented “hydrogen cluster” near the port of Sines, from where hydrogen could be shipped to Rotterdam. Total investment there is estimated at some 7 billion euros.

A consortium including Portugal’s main utility EDP, oil company Galp, world’s largest wind turbine maker Vestas, among others, is behind one of the projects.

In Estarreja in north Portugal, local firm Bondalti Chemicals aims to invest 2.4 billion euros in a hydrogen plant.

Altogether, these envisage an installed capacity of over 1,000 megawatts (MW).

Matos Fernandes said Portugal was also negotiating with Spain the construction of a pipeline for renewable gases, including hydrogen, from Sines to France, crossing Spain.

LITHIUM PLANS

Spain and Portugal also want to develop an ambitious cross-border lithium project taking advantage of the geographical proximity of their lithium deposits and aiming to cover the entire value chain from mining to refining, cell and battery manufacturing to battery recycling, he said.

Portugal is already a large producer of low-grade lithium mainly for the ceramics industry, but is preparing to make higher-grade metal used in electric car batteries.

A much-awaited licensing tender for lithium-bearing areas that has been delayed by the COVID-19 pandemic should take place by the year-end, Matos Fernandes said.

He promised the tender would address environmental concerns by local communities and there would be no lithium mining “at any cost”.

The minister also said Portugal would use its six-month presidency of the Council of the European Union to finalise a landmark law that would make the bloc’s climate targets irreversible and speed up emissions cuts this decade, expecting it to be approved in the first half of 2021.

(Reporting by Sergio Goncalves; Editing by Andrei Khalip and David Evans)

 

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Under fire in EU, AstraZeneca CEO says ‘hopefully’ will meet vaccine supply goals

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Under fire in EU, AstraZeneca CEO says 'hopefully' will meet vaccine supply goals 3

BRUSSELS (Reuters) – AstraZeneca boss Pascal Soriot said on Thursday he hoped to meet the European Union’s expectations on the number of COVID-19 vaccines the company can deliver to the bloc in the second quarter, after big cuts in the first three months of the year.

The Anglo-Swedish drugmaker has been under fire in the EU for its delayed supplies of shots to the 27-nation bloc, which ordered 300 million doses by the end of June.

“We are working 24/7 to improve delivery and hopefully catch up to the expectations for Q2,” Soriot told EU lawmakers in a public hearing.

Under its contract with the EU, the company has committed to delivering 180 million doses in the second quarter.

Soriot did not mention the 180 million target, but said he was confident the company will be able to increase production in the second quarter using factories outside the EU that had no production problems, including in the United States.

He confirmed the company was trying to get 40 million doses of the COVID-19 vaccine to the EU by the end of March, which is less than half the amount it promised for the quarter in its contract.

The EU, which has fallen far behind the United States and former member Britain in vaccinating its public, has repeatedly urged the firm to deliver more.

Lower-than-expected yields – the amount of vaccine that can be produced from base ingredients – at its factories hurt output in the first three months.

Asked about supplies to Britain, which relies on the same factories used by the EU, Soriot said the former EU member with a population of around 66 million was smaller, and noted that most doses produced in the EU were used to serve the EU which has a population of about 450 million.

Executives from rival drugmakers that have developed or are testing COVID-19 vaccines, including Moderna Inc and CureVac NV were also part of the panel.

But most questions were directed at Soriot amid anger that the company has failed to deliver promised vaccine quantities to the bloc on schedule.

Moderna Chief Executive Officer Stephane Bancel said the company has experienced fluctuations as the U.S. biotech group ramps up output of its COVID-19 vaccine.

He said usually a company would stockpile product ahead of a launch, but it is shipping every dose it makes, leaving it without any spare inventory.

His comments came a day after the company increased its output target for this year and 2022 as it invests in additional manufacturing capacity.

(Reporting by Josephine Mason in London and Francesco Guarascio in Brussels; Editing by Susan Fenton, Bill Berkrot and Keith Weir)

 

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