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22 November 2017

A Sideways Look at Batteries....

I’m sure most readers will have seen one of those frequently reproduced photographs of hopeful putative miners wearily scaling the Chilkoot Pass in the 1890s on their way to find their fortune in the Klondike goldfields. Hundreds upon hundreds putting one tired, cold foot in front of the other, weighed down by by their shovels, picks, pans, tents and everything else necessary to survive (and prosper - only for some…) in the frozen wastes beyond the mountain. Triumph of hope over expectation? Probably, but then some of them did find gold; most didn’t. 

But those who looked at the opportunity a little more laterally had a better chance of success. They were the entrepreneurs who sold the picks and shovels to the miners on their way up, the madams who ran the brothels (and possibly the rest of the staff in them - history is mostly silent on that one) and the purveyors of provisions. They were the ones who saw a different slant to the whole affair, and realised that you don’t necessarily have to be at the sharp end of something in order to profit, that an understanding of the market may point in other, less obvious high-profile directions.

We’ve all read and written a lot about the burgeoning battery business, largely allied to the growing demand for electric and - in the next stage - driverless vehicles. But how to monetise one’s understanding of what is happening? Well, Tesla equity is a simple way in, hoping that it will mirror the performance of General Motors stock in the 1920s. But remember, William Crapo Durant - the man who founded GM - ended his life running a bowling alley (which, incidentally, he correctly predicted would become a mainstay of American life: just not in his lifetime), and the stock has been a bit of a yo-yo over the years. Or one could buy a lithium mine; probably a bit difficult for most investors. Or, stepping a little to one side, perhaps focus on the growing demand for a charging network - that should be fairly solid.

But it occurs to me that there is a far more ‘lateral thinking’ way to go here. Electric vehicles are here (I would say, to stay); the next logical step is likely to be the emergence as a realistic technology of driverless vehicles (which will also have implications on car ownership and therefore numbers), so what industries may benefit from that?

Well, I think one could look at the drink and entertainment business. The legal and (quite correct) social unacceptability of drink driving has over the last twenty or thirty years (I’m speaking of the UK, here, but I suspect the same is replicated across most of the world) had a seriously damaging impact on the hospitality trade as rural pubs and restaurants have had to tailor their businesses to declining numbers and consumption. Now, I’m not for a moment suggesting that the advent of driverless cars should encourage a rampant increase in the consumption of alcohol; neither, though, am I going to make a moralistic point about this. This is purely an economic argument; if the driverless car takes the strain, so to speak, there is a strong possibility that that will feed through to the drinks business. The rural landlord is perhaps the successor to the man who stood at the bottom of the Chilkoot and sold shovels. 

A well as Tesla, Glencore and Rio, perhaps we should be looking at Diageo, Pernod-Ricard and Wetherspoons equity.  





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