- Is this technology a threat to Tesla?
- The White House is threatening new tariffs, but the Chinese government has bigger problems
- A success story from a new reader
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.
Last night, I read something absolutely heartbreaking in The Wall Street Journal.
On March 25, New York State issued a directive to transfer COVID-19 patients to nursing homes in an effort to keep hospital beds available for what it believed would be a massive wave of COVID-19 illnesses.
Health care professionals put the nursing home directive in place. It stated that patients referred from a hospital couldn’t be denied admission or readmission to a nursing home “based on a confirmed or suspected diagnosis of COVID-19.” Even worse, nursing homes couldn’t require incoming patients to be tested.
The state sent patients infected with COVID-19 into an elderly, frail population… literally the most “at-risk” group for COVID-19, pneumonia, influenza, and so forth. And what happened is heartbreaking.
As of May 12, 5,398 deaths in nursing homes in New York were confirmed or presumed to be due to COVID-19. That is nearly 25% of all deaths in the hardest-hit state in the country.
I don’t know what to say. In what world does that directive make any sense at all?
It is even harder to understand because there were thousands of overflow beds set up in the Javits Center and on the USNS Comfort (a Navy ship).
As I reported, both of these overflow facilities were barely used. Combined, they only reached about 12% capacity. But New York sent COVID-19 patients to nursing homes.
And after the directive was reversed, a New York health official said, “The state has greatly increased testing capacity in a short amount of time and the anticipated strain on the hospital system didn’t happen, making the new health and safety standards possible.”
New York was the hardest-hit state in the country. Many of its problems were of its own making: a lack of preparedness, a low number of ICU beds per its population, and a lack of coordination between nearby hospitals.
In fact, The New York Times wrote yesterday that as Elmhurst hospital was “besieged”… “3,500 beds were free in other New York hospitals, some no more than 20 minutes from Elmhurst.”
Even more unbelievable is a fleet of 26 new ambulances was available to transfer patients. This wasn’t a resource problem. This wasn’t a national problem.
I applaud The Wall Street Journal for such an honest piece of journalism.
For anyone interested, the article is titled, “New York Sent Recovering Coronavirus Patients to Nursing Homes: ‘It Was a Fatal Error.’”
And the article in The New York Times is “One Hospital Was Besieged by the Virus. Nearby Was ‘Plenty of Space.’”
I’ve received several critical pieces of feedback in recent days. Some came from health care professionals and doctors.
Several claimed that I wasn’t a doctor or a scientist, so I was wrong in my analysis.
Sincerely, thank you for the feedback and especially for your time and engagement. I mean that.
I believe that the fact that I am not just one thing – like a cardiovascular surgeon, for example – is my strength, not my weakness, as an analyst.
The diversity of knowledge – from my technology background, engineering studies, international experience (I’ve lived in four countries, traveled to more than 65, and worked in more than 30), graduate work in corporate finance, and roles as an angel investor and adviser – is an asset that enables me to connect the dots and perform my research objectively.
And so far, my early projections about how far and wide COVID-19 has spread and the case fatality rate (as determined by serological testing) have proven to be quite accurate.
I’ll be the first to say that we won’t know the final numbers until COVID-19 has run its course. So we’ll review that in The Bleeding Edge next spring. I predict COVID-19 will be in the rearview window by then.
We’re going to turn to our questions next. But before that, I wanted to remind readers about an investing presentation one of my colleagues is hosting next week.
Longtime readers of financial newsletters may know the name Tom Dyson. Tom is something of a legend in this industry. Like me, Tom recognized the investment potential like bitcoin long before anybody had heard of it. He urged his friends to invest when it was trading for around $124.
He’s gone “all in” on a new investment idea, one that he believes could create generational wealth for investors over the next few years. You’ll have to get all the details from the man himself. He’s sharing the full story on May 20 at 8 p.m. ET. Go right here to learn more.
Now let’s turn to The Bleeding Edge.
If you have a question you’d like answered next week, be sure you submit it right here.
Will hydrogen cars put Tesla out of business?
First up are a few questions about hydrogen-powered cars and what they could mean for Tesla…
Jeff Brown, I’m reading how fuel cells will put Tesla out of business… Can you share some thoughts on that in your Bleeding Edge emails? Thank you.
– William G.
Hello, Jeff. The media is in love with Elon Musk and his lithium battery-powered cars. Does this mean the hydrogen fuel cell is dead, or will it rise from the ashes like a phoenix and make those who saw the opportunities early millionaires? Really enjoy your tech publications, especially The Bleeding Edge.
– Steve G.
Hi, William and Steve. Thanks to both of you for being readers and for your questions.
I know hydrogen-powered vehicles are a popular topic. So it might surprise us to know that hydrogen fuel cells are not “dead.” This is a very real, functioning technology.
But there’s just one problem. These vehicles aren’t very economical today. And hydrogen refueling infrastructure is also very limited. In time, both of these issues can be solved.
Hydrogen fuel cells need to be filled with pure hydrogen at a filling station. But it is far more expensive to produce pure hydrogen compared to gasoline or electricity for a battery-powered vehicle.
According to the National Renewable Energy Laboratory, it costs $4.50 to produce a kilogram of hydrogen, which is the rough equivalent of one gallon of gas.
That means we would see fuel prices well above $5 per kilogram of hydrogen. Compare that to gasoline, which we can purchase for less than $2 a gallon in many places right now.
But there is some interesting new research around hydrogen cars…
For readers who missed it, we wrote about a new technology from my undergraduate alma mater Purdue University on Tuesday.
Without getting into the details, the tech can create hydrogen in real time. The company calls it “Hydrogen on Tap.” This hydrogen could be used to power a vehicle.
So what does this mean for electric car manufacturers like Tesla? Will hydrogen cars put Tesla out of business?
Not at all.
First, hydrogen on tap is a very interesting technology. The system produces hydrogen for a vehicle in real time. The system is still in the early stages of development, but it works.
The downside to the “on tap” system is that it’s very bulky. It takes up a lot of space under the hood. For that reason, it would likely be used in commercial or municipal trucks, not passenger vehicles.
For passenger vehicles, we’ll be filling our hydrogen-powered cars in the future just as we do with gasoline. But to make that happen, we’ll need to figure out how to create hydrogen fuel at or below the cost of gasoline.
And preferably, we need to find a way to do it without burning carbon-based fuels. After all, if our electricity or our hydrogen fuel is produced with natural gas or coal, then we are really driving a car fueled by natural gas or coal.
An electric vehicle (EV) is only as “clean” as the energy production that powers the car.
As for the specific question about Tesla…
Elon Musk made a calculated decision to use lithium-ion batteries for his cars. This was a strategic choice. He did consider hydrogen fuel as an alternative, but hydrogen simply didn’t have the scale of a lithium-ion approach.
After all, lithium-ion battery technology has been around for decades. Supply chains are well established, the technology is well understood, and its scale provides lower costs.
Tesla focused on making some major innovations around its lithium-ion batteries, and it now has the lowest-cost and highest-performance batteries in the EV industry – this has become one of Tesla’s strategic advantages.
Tesla is fundamentally a high-tech company… arguably one of the largest artificial intelligence and software companies in the world.
Its cars are like computers and are “upgraded” several times a year with new features and functionality. And it happens seamlessly… No need to bring the car into a dealership for a software download.
But when there is a breakthrough in hydrogen fuel production and the costs and performance are better than lithium-ion batteries, Tesla could just swap out the batteries for a hydrogen fuel engine.
There is no better company positioned to do that.
Tesla is here to stay.
Thanks for your questions.
China’s manufacturing dominance is coming to an end…
Next up is a question about a potential backlash against China…
Jeff, should we be concerned about an economic backlash against China over this virus? Maybe a global economic backlash?
Do you think that global social ramifications will affect investments like Baidu, Alibaba, and other Chinese companies intertwined with technological advances? I’m interested in your thoughts on this.
– Geoff L.
Hi, Geoff. A good question.
As readers likely know, there’s strong evidence that the Chinese government covered up the scope of the COVID-19 outbreak and downplayed the impact it had on the city of Wuhan.
As a result, the U.S. administration has floated the idea of enacting new tariffs on China in retaliation. The president even said the United States could “cut off the whole relationship.”
The White House hasn’t been shy about enacting tariffs in the past. So it’s certainly possible the administration will follow through on this threat. If that happens, China’s economy would certainly suffer.
But I believe the Chinese government has a bigger problem on its hands…
More tariffs or executive action aren’t necessary for the United States to move away from China. It will happen naturally.
Over the past several decades, many industries – especially manufacturing – have moved toward a centralized model. The goal was to drive down labor costs and boost gross margins. And much of that industry was shipped offshore to China.
But take a look at this… It’s a manufacturing cost competitiveness index at a country level.
The Boston Consulting Group puts together a global manufacturing cost competitiveness index every year that analyzes the cost of manufacturing around the world. It does this country by country, indexed against the U.S. market.
And the results from 2019 are striking.
The cost of manufacturing in China is almost on par with the U.S. Its index range is between 95–97 compared to the U.S., which is indexed at 100.
That means, on average, the advantages of manufacturing in China are less than 5% compared to the cost of manufacturing in the U.S. And the index doesn’t consider factors like supply chain risk, tariffs, intellectual property theft, quality problems, or logistics costs.
What does this mean? It tells us that the competitive advantage of manufacturing in China is not nearly as large as we might think. Very likely, it’s negative.
Industries realize this. And they will move out of China and come back onshore as a result. Manufacturing will return to the United States.
This trend already started more than three years ago because of the trade negotiations and tariffs between the two counties.
How is this all possible? Simple.
Due to advanced manufacturing technologies, America’s productivity has risen far faster than its wages have. And the opposite is true in China. China’s manufacturing wages have risen far faster than its productivity.
Yes, we’re likely going to see a lot of backlash due to everything that has happened. We’ll see more tense trade negotiations, demands for reparations, and more tariffs.
These things will be an accelerant for not just the U.S. but the world to restructure a number of manufacturing bases. The world will move away from centralized manufacturing and bring much of the high-value manufacturing onshore.
Longtime readers know I have been predicting a “renaissance” in American manufacturing. It is happening now.
“I finally feel like I’m getting somewhere financially…”
Let’s conclude with a great piece of feedback that I was happy to see from a reader…
Hi, Mr. Brown, I wanted to send a sincere thank you for all the well-researched information in your Near Future Report and your newsletter. I just started reading several months ago, and I’m shocked at how illiterate I was before about how to invest. Your information is truly a goldmine. I only wish I knew about you years ago.
I saw you on a YouTube interview with Glenn Beck just this year. All the stocks you have recommended have yielded results for precision medicine and all things 5G.
Before you, I was just throwing darts at a wall. I also invested in bitcoin and Litecoin. I finally feel like I’m getting somewhere financially. Thank you again.
– Adriana R.
Hi, Adriana. There is nothing that makes me happier than hearing from subscribers like you who are benefiting from my work. I mean this sincerely when I say that it is a real motivation for me to keep putting in the long hours of research and travel.
As you know, we have a lot to look forward to in The Near Future Report. Many of the trends that we are investing in are hitting an inflection point.
5G networks are going live in city after city. Autonomous vehicles will be on the roads before the year is out. And precision medicine is rewriting everything we know about health care.
And we’re positioned for all of these trends with our portfolio holdings.
And, yes, I’ve been a guest on Glenn Beck’s programs a few times. I always enjoy our conversations. He is so philosophically sound and is just as passionate about his mission as I am about mine.
And what really surprised me is that Glenn is also passionate about technology. He understands the pace of technological change happening right now. For readers who missed my “5G and AI Everywhere” interview with Glenn, feel free to catch it right here.
And I’m always happy to welcome new readers to join me as subscribers to The Near Future Report.
There, I provide actionable investment recommendations that correspond with the trends we follow here in The Bleeding Edge. There is no investment research publication like it in the world. Please go right here to join us.
Have a wonderful weekend. I hope everyone can enjoy some sunshine.
Editor, The Bleeding Edge
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