Juggling Dynamite

The COVID pandemic has terrified the world into a 250 to 300% increase in single-use plastic use, according to estimates from the International Solid Waste Association.

Meanwhile, studies show that COVID lives three times longer on plastic surfaces (including disposable bags and food wrappers) than paper.

An article this week in Corporate Knights reminds us that plastics are the other pandemic threatening our health.  See Curing the plastics pollution pandemic for an excellent update.   A few keys points:

• • Plastics is Canada’s fastest-growing manufacturing sector with much of the $10 billion worth annually focused on making virgin plastic, according to a study commissioned by Environment and Climate Change Canada.
  • Cheaper oil prices have made virgin plastics more profitable and plastics are set to become the largest driver of oil demand.  On this path, the sector’s emissions will reach 1.34 gigatons per year by 2030 –equivalent to the addition of more than 295 new 500-megawatt coal-fired power plants, according to the Center for International Environmental Law.
  • With China stopping its acceptance of international plastics waste in January 2018, the naive and wilfully blind belief that we are recycling our plastic waste was revealed:  eighty-seven percent of Canada’s used plastic is sent to landfill every year. Now, The Associated Press reports that Big Oil is pressuring Africa to accept our plastic waste.
  • The Great Lakes are flooded with an estimated 10,000 tonnes of plastic annually and according to research published last month in Nature, more than 10 times as much plastic debris is hidden beneath the surface of the Atlantic Ocean than we previously thought, including about 200 million tonnes of microplastic particles swirling around.
  • Nanoplastics are turning up in every human organ and tissue sample, as well as those of sea creatures, and are linked to a surge in mental health problems as well as many other illnesses.

Consumers, taxpayers and voters must insist that we use this moment of crisis as an opportunity to rebuild Canada for a sustainable future economically and in health terms.  This requires legislative and regulatory attention on waste bans, pollution penalties and taxes, increased producer responsibility and investment in new systems and technologies.

We are spending a fortune today and adding debt at every level, we might as well get some lasting benefits for the money.

While the largest tech companies have leapt in price, aggregate earnings for NASDAQ 100 companies have fallen 30% year to date.  Before last week’s modest sell-off, the largest five–Apple, Microsoft, Amazon, Facebook and Google (Alphabet)–accounted for a record 23% of the entire S&P 500 index, the highest concentration of the top five on record, even surpassing the 2000 tech top.  The chart on the left shows the market capitalization (price x shares) of the eight largest global companies in August 2020 (bar on right ) versus 2005 (on left).  Seven of the eight are tech names (in blue) compared with one in 2005.

Falling 78% after the March 2000 top, it took 15 years for the NASDAQ index to recover in price, and many of the original companies went bankrupt and left the index long before then.  Most of those who held the shares at peak valuations in 2000 had liquidated in losses before the next tech bubble began in 2015. Those holding today, are likely to see a similar loss cycle in the months and years ahead.

Price indiscriminate buying is the rage today, and those who are doing it with wild abandon appear to be the smartest folks in the room.  This is a hallmark of financial bubbles and this too shall pass.

The clip below makes many prescient observations about the mania in Tesla shares, but they are also applicable to the manic pricing in many other market darlings in 2020.

“Whatever best-case scenario you want to paint for what Tesla’s going to do – whether they’re going to produce 30 million cars within the next 10 years, and get in the insurance business and have the same high margins as Toyota, the most efficient car company with scale of all-time – even if you do believe all that is true, the stock price is still implying that profits are going to be even bigger than that,” Trainer told CNBC’s “Trading Nation” on Thursday…A more realistic valuation, says Trainer, would be far lower than current levels.

“I think around a 10th of what it is is probably appropriate if you look at, you know, kind of a reasonable level of profits,” he said.  Here is a direct video link.

Good update from Wolf Ritcher this week.  Leverage and speculation drive boom and bust.

SoftBank was only a cog in the huge machinery. Here is a direct audio clip.