Far East Capital Newsletter
Companies progressing along the journey towards superior battery anodes
12 Feb 2022

In This Issue

Companies progressing along the journey towards superior battery anodes

It was looking like we could start to become optimistic about the market last week as the rebounds in the share prices were positively better than just action and reaction movements. Up until Thursday, the outlook was understood and digested by the markets, but then came the jump in inflation rate from 7% to 7.5% in the USA and bingo! The indices were slapped down. Nevertheless, we saw a good improvement in sentiment over the week as a number of charts broke out of short term downtrends.

Variations in expectations of inflation and interest rates will continue to be the dominant influence on markets, but we should note that real interest rates in the USA, and elsewhere in the world, are negative. Inflation rates in the USA are running ahead of interest rates. Until interest rates catch up, the scenario is favourable to debtors who are paying the lower rates. The inflation will eat into their debt positions, whether private or government. This is a scenario which actually gives governments an incentive to let inflation run for a while, as it will be of material assistance in reducing the level of real indebtedness. However, it is a bit like having a killer dog on the end of a leash. Everything is fine while the dog is focusing on intruders but the danger comes when it turns on its master. It can get out of control.

We describe the quest for the next generation of battery anodes as a journey rather than a race, as the latter implies some desperation to get to the finish line. Nothing is happening that quickly and so far, there is no one company that has it wrapped up, yet many are trying. Judging by the reported progress, being a multi-billion dollar company doesn’t automatically mean a greater chance of success. Junior companies will be more vocally promotional in what they report, but in assessing these companies we need to be aware of what they conveniently don't say just as much as focusing on what they do announce. 

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