• Apple’s Next Consumer Product for Healthcare?

  • EV battery recycling – not as easy as it sounds

  • Another major generative AI round…

Dear Reader,

All eyes were focused this past weekend on the dramatic collapse of Credit Suisse and the Swiss National Bank’s efforts to save it. But arguably something far more significant happened that went almost unnoticed.

At 5 p.m. ET on Sunday evening, the Board of Governors of the Federal Reserve System published an announcement with remarkable brevity. So brief as to suggest that it was of little significance… as I believe was intended.

And yet the opposite was true. What was announced is of extreme importance and tells us just how bad things have become.

The U.S. Federal Reserve has opened U.S. dollar liquidity swap lines on a daily basis with the European Central Bank, the Swiss National Bank, the Bank of Japan, the Bank of England, and the Bank of Canada. These actions – for now – are intended to continue “at least through the end of April.”

Naysayers may suggest that this is no big deal. After all, swap lines prior to the announcement tend to operate on a weekly basis. But that misses the point. It’s not that these operations already exist. It’s that they are urgently needed now on a daily basis, explicitly because the world’s central banks are in crisis mode right now.

Daily U.S. dollar swap lines are only necessary in the event of a liquidity crisis, which is what the world is currently experiencing.

The Federal Reserve doesn’t want to be seen as printing money and sending it to non-U.S. financial institutions and central banks, so it opens the daily U.S. dollar swap lines instead.

Why does it have to do this? If it doesn’t, there could be a disaster if non-U.S. financial institutions all start selling U.S. Treasuries en masse to raise capital in the middle of a crisis.

By opening these daily U.S. dollar swap lines, it enables central banks to give U.S. dollars to financial institutions in exchange for their U.S. Treasuries. Doing so allows financial institutions around the world to stay solvent and liquid amidst rapid outflows of U.S. dollar-based assets. And the worst part is… the central banks can provide U.S. dollars at par value for the U.S. Treasuries – rather than marked to market.

Sound familiar? It should. That’s exactly what is happening in the U.S. with the recently announced Bank Term Funding Program (BTFP) to support the regional banks across the U.S. This is the international equivalent of that.

Why would central banks around the world give out $1,000 for something that is only worth $800, for example? Simple – to avoid the entire house of cards from collapsing.

The Federal Reserve and the central banks listed above are simply removing the duration risk and liquidity crisis, of which they were the primary cause, and will bring those assets onto their balance sheet.

The reality is that central banks can “suffer” the duration risk for as long as they need to. After all, if a central bank suffers a liquidity crisis, it can just print more money. With the Federal Reserve providing all these “loans” (swap lines) on a global level, it avoids a tsunami of forced selling of U.S. Treasuries.

But it’s all just a game, isn’t it? After all, these “quiet” actions announced on a Sunday evening when few are taking notice are just a mask to hide the dark underbelly of what’s really going on.

Apple’s strategic focus on MedTech…

Apple just came out with another interesting patent filing.

Earlier this month we talked about Apple’s breakthrough for blood-glucose monitoring. It involves an optical technology embedded in the Apple Watch. This tech is capable of monitoring blood-glucose levels in real time – no finger pricks or blood samples necessary.

Well, Apple’s new patent reveals another innovation in medical technology (MedTech). This one is around monitoring blood pressure.

Source: USPTO

As we can see from the diagram here, Apple developed a basic device that wraps around the bicep.

This is a lot like standard blood pressure wraps… except there’s one glaring difference. There are no hoses or pumps. Instead, this device syncs with the user’s iPhone to provide blood pressure readings in real time.

Talk about convenient. This is something that we could comfortably wear under our shirt all day if we needed to. It can take blood pressure readings at programmed intervals, and if our blood pressure spiked at any point, this device could trigger an alarm on our phone and alert our healthcare providers. That would prompt us to immediately seek additional care.

Connecting a diagnostic device like this directly to a smartphone application makes it easy to not only monitor, but to transmit all of our blood pressure readings back to our healthcare provider of choice. This kind of solution could result in massive savings in the industry, as some patients who might be considered at risk will not necessarily need to be admitted into a hospital to be monitored in real time.

Having a diagnostic device like this capable of sending back vital statistics at regular intervals could avoid unnecessary hospitalization.

Apple is clearly making a big push into the MedTech space this year. And given how seamless this device is, once approved and commercialized, I expect it will be a major success.

Of course, this begs an important question… Is there a bigger play at work here?

The Apple Watch is now the best-selling watch in history. And it’s only going to see additional adoption with the integration of the blood-sugar monitoring tech we highlighted earlier this month. And now Apple is going to roll out a seamless blood pressure monitor as well.

Put it all together, and I wouldn’t be surprised if Apple is working to integrate its MedTech offerings with one of the major telemedicine providers. This would provide users with immediate access to telehealth services with real time diagnostics enabled by a suite of “Apple Healthcare” consumer electronics products.

This kind of vertical integration by such a powerful consumer brand known for making technology simple and easy to use could be a real breakthrough in the healthcare industry. It’s easy to see how Apple could become a major player in home healthcare with the release of a handful of easy-to-use, functional MedTech products.

Redwood Materials discovers a major challenge…

Redwood Materials just put out a one-year update on its progress. And it’s not good news for the prospects of electric vehicle (EV) battery recycling…

If we remember, Redwood Materials is an electric vehicle (EV) battery recycling company. It was founded by Tesla’s former Chief Technology Officer J.B. Straubel.

When we checked back in on Redwood last month, the company had just received a $2 billion loan from the U.S. Department of Energy (DoE). That will help fund a new recycling plant just outside Reno, Nevada.

So everything appeared to be coming together nicely for Redwood. But the company just put out a progress update… and the results are quite a surprise.

Over the last 12 months, Redwood Materials successfully collected and recycled 1,268 battery packs. Not 1 million EV batteries, not 100,000 EV batteries, just 1,268. This entails extracting the key metals for use in new battery production and then discarding the materials that aren’t salvageable.

Keep in mind, Redwood is the largest EV battery recycler in the world. It’s number one in the industry.

Yet, it was only able to recycle just over 1,200 batteries in the last year. That’s it.

For context, over 1 million EVs have been sold in the U.S. over the last three years. The 1,268 batteries that Redwood recycled represents less than one percent of the EVs on the road.

And Redwood discovered that the entire process of recycling EV batteries is incredibly inefficient.

That’s because these batteries must be shipped by truck to the recycling plant in Nevada. Ironically, this happens via gas-powered trucks.

And the batteries are quite heavy. Just these 1,268 batteries weigh roughly 500,000 pounds. That extra weight means the trucks have to use more fuel than they otherwise would. Which in turn makes shipping these batteries expensive with a large carbon footprint.

And Redwood found that there really aren’t any good incentives in place to entice companies and individuals to recycle their EV batteries. The costs of logistics, transportation, and disposal are discouraging to do so.

This is a real issue. There’s simply not going to be much recycling if it’s not addressed.

And this just goes to support what we discussed last month. Extracting materials from EV battery recycling will barely put a dent in new EV battery production required to meet the current lofty goals many car makers have put out for 2030.

To be fair, the work Redwood Materials is doing is important. I want to see it successful in its mission. I’d much rather see those used batteries recycled than dumped into a landfill. But even if Redwood is successful, it isn’t going to reduce the amount of destructive new mining and exploration for metals required for new battery production in any material way. And it certainly won’t enable the industry to hit its production targets for new EV production and adoption.

And as regular readers know, so far, only Tesla has been early and proactive in building a secure supply chain for EV battery production. This is a massive competitive moat that very few acknowledge.

The bottom line is this – traditional internal combustion engine vehicles aren’t going away any time soon.

All the bold claims we’ve seen about EVs displacing gas-powered vehicles are fantasies. We just don’t have the ability to produce all the batteries we would need for this to happen. And when we look at the entire supply chain, from unearthing these metals to disposing of them, the process is anything but “clean.”

Stability AI – a 4X pop in valuation in just months…

Generative artificial intelligence (AI) has been by far the hottest trend in the tech world this year. And just as I predicted, we continue to see an avalanche of venture capital (VC) pouring into this space.

Last October, we highlighted a company called Stability AI. That’s when it raised over $100 million in VC money at a $1 billion valuation – unicorn status.

If we remember, Stability AI is the company behind Stable Diffusion. This is the text-to-image AI that produces remarkable images based simply on a text prompt. We can tell Stable Diffusion what image we want, and it will create it in seconds.

And get this – Stability AI is already going back to the well. Here we are five months later, and the company is in talks to raise another several hundred million at a $4 billion valuation.

That means the company has 4X’d in value just since October. Nuts. But this shows us just how hot this space is.

OpenAI’s ChatGPT has absolutely opened the flood gates. Suddenly millions of users have experienced just how powerful – and useful – generative AI technology is.

That’s why the VCs are racing to get exposure to these innovative AI startups. We can expect this to continue in the months ahead.

And here’s the thing – this kind of funding will only accelerate how quickly the technology develops. The top generative AIs out there will be far better at the end of this year than they are today.

Regards,

Jeff Brown
Editor, The Bleeding Edge

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