David Fuller and Eoin Treacy's Free (Abbreviated)
Comment of the Day

The more detailed Subscriber's Comment of the Day becomes available for public access after 4 months.

Click HERE to see the most recent free Subscriber's Comment from 20 June, 2014

September 19 2014

Commentary by David Fuller

Beautiful, bouncing Britain reborn! Boris Johnson verdict on the Scottish referendum

Here is a sample from the article:

Mr Johnson said that now the referendum is over, Westminster has to "make good" the promises made to Scotland for devolution, however he admitted that it "wouldn't be easy".

He added that devolution should also apply to England: "If there are any more devolved powers for Scotland, that has to be done in tandem with devolution for England as well.

"You can't have a situation in which Scottish MPs can sit in Parliament and vote on stuff that does not affect their constituents - that is absolutely outrageous."

When it came to his fellow No campaigners, Mr Johnson held nothing back, declaring Labour leader Ed Miliband "feeble".

"It is a general comment on the feebleness of Ed Miliband that they [the Labour party] had to summon Gordon Brown to the colours. And he was the hero of the hour.

David Fuller's view

Many subscribers, not least those from Great Britain, will be as relieved as I am that this service will not be required to comment on the market implications of a break-up in the 307-year old United Kingdom.  We will certainly see more devolution, in a progressive, if somewhat politically turbulent, move towards a more federalist system.  I think that is not only inevitable but also a positive decentralisation of power and responsibility, more likely to promote than impede GDP growth over the longer term.

Re Boris Johnson, I suspect he is a future Prime Minister, preferably eventually following David Cameron.

See also: Queen says ‘an enduring love of Scotland’ will help United Kingdom come together after referendum result

This section continues in the Subscriber's Area. Back to top
September 19 2014

Commentary by David Fuller

Seven ways in which the Scotland No vote will affect the UK economy and markets

Here is a section from this interesting column by Allister Heath for The Telegraph:

2. The government has been saved, at least for now; the immediate constitutional crisis has been avoided. But investors and markets will now start to think about the May 2015 General Election in earnest, and focus on the fact that all of the polls show that Labour is on course for victory. But the massive change announced by David Cameron this morning is that he also wants the English and others to be given the same powers as Scotland - ie English votes for English laws. Left-wing Scottish MPs will no longer be able to decide on English matters, just in the same way that English MPs can no longer decide on Scottish matters. This is a constitutional revolution - and it means that even a Labour takeover of the House of Commons could still mean Tories in charge in England, preventing some of the worst UK-wide anti-business excesses. The devil will be in the detail, however.

3. In the long-run, the chances of a Brexit - a UK exit from the EU - are now higher than they were, though not as high as if Scotland had voted Yes. It is clear that campaigners can make huge headway even if the establishment is against them. Expect the Out campaign to use a similar strategy to that embraced by Salmond - though with actual facts and genuine arguments this time, rather than bluff, bluster and denial.

David Fuller's view

Further inward investment will be encouraged by certainty that the UK will remain intact, and probably for far longer than another generation.  This could benefit all regions although the main developments would logically be in England.  The City’s financial position is secure and very likely to become even more important.  Uncompetitive taxes or regulations from Brussels would all but ensure the UK’s exit from the EU.  

This section continues in the Subscriber's Area. Back to top
September 19 2014

Commentary by David Fuller

The Weekly View: Keeping The Fed At Bay

My thanks to Rod Smyth, Bill Ryder and Ken Liu of RiverFront for their excellent timing letter.  Here is a brief sample:

Even with a strengthening economic environment, we don’t see any inflation trouble ahead.  This is partly because of falling energy prices, which makes up about 10% of the consumer price index.  Other major global commodities, such as iron ore, corn, and rubber, have had big price declines and continue to trend lower.  We also credit US dollar strength in recent weeks for putting the lid on commodity prices in general.  A stronger dollar also helps lower import costs, which is another way to keep inflation under control.  Thus, one of the beneficial side effects of stronger economic growth and rising expectations of monetary tightening is to boost the currency (and its purchasing power) while actually lowering inflation expectations.

David Fuller's view

The USA’s virtual energy self-sufficiency puts it in a much stronger position to cope with a firming currency, in a competitive global environment, as the economy gradually recovers. 

This item continues in the Subscriber’s Area, where The Weekly View is also posted.

This section continues in the Subscriber's Area. Back to top
September 19 2014

Commentary by David Fuller

Martin Murenbeeld: bearish and bullish factors for gold

My thanks to a subscriber for this informative report from Mineweb.  

In a keynote address to the Denver Gold Forum this week, Dundee Capital Markets Chief Economist Martin Murenbeeld outlined bearish and bullish factors for gold for 2014-2015.

Murenbeeld highlighted five bearish factors that will generate headwinds for gold in 2014-2015 including: The Fed must inevitably tighten policy; the U.S. dollar will remain firm; the world economy is sluggish; equity markets will continue to draw investment interest from gold; and investors still have gold for sale.

Bullish factors for gold during the same time period include the fact that the gold ETF supply is down dramatically, signifying that last year’s “orgy of ETF sales” won’t be repeated in 2014-2015.

Murenbeeld also predicted that Asia physical demand will continue to expand. However, he suggested that the world is not yet experiencing a gold supply pressure. While China has driven gold demand, he asserts that India’s growing middle class may soon be in the driver’s seat.

Nevertheless, Murenbeeld also theorizes that China wants more gold to back its quest to make the Yuan the most-used global currency.

He told his audience of mining professionals, institutional investors and mining analysts that he doesn’t see any change in central banks continuing to buy gold.

The obligations of meeting government entitlement programs for a huge population of baby boomers “are killing western economies” through piling up massive global debt, which is a big factor for gold, Murenbeeld suggested.

That massive debt will impact Germany, Japan, Italy and the United States. “Only German will really reduce its debt/GDP ratio in 2014,” he advised.

Murenbeeld counseled that the answer to global debt is likely reflation, when countries devalue their currencies, print more money, and force their citizens to keep their investments at home.

Other bullish factors for gold cited by Murenbeeld are commodity cycles, geopolitical events and the fact that gold is not expensive to acquire.

David Fuller's view

  

This section continues in the Subscriber's Area. Back to top
September 19 2014

Commentary by David Fuller

The Markets Now

Held at London’s distinguished East India Club

 

David Fuller's view

I am pleased to announce that our next evening seminar, commencing at 6:30pm, will be held on Monday 6th October, appropriately in the Rugby Room.  Here is the new brochure.  I hope more subscribers and their friends / associates will come along to enjoy and participate in this informal and interactive discussion of global markets.  These are followed by further conversation in the East India Club’s American Bar.  

This section continues in the Subscriber's Area. Back to top
September 19 2014

Commentary by Eoin Treacy

Despite the Excitement, There is Reason to Think Twice on Alibaba

This article from the New York Times may be of interest to subscribers. Here is a section: 

At $68 a share, Alibaba’s market capitalization is about $168 billion. It’s hard to find a United States company that’s directly comparable, but Professor Greenwald said eBay comes the closest. Like Alibaba, it has an auction site that benefits from a powerful network effect, it offers a vast e-commerce site and it has a pay system, PayPal. (While Alibaba spun off its payment system, Alipay, Alibaba will get a share of the proceeds from any sale or public offering of Alipay.) EBay’s market capitalization is about $65 billion.

Of course, eBay doesn’t dominate e-commerce in the United States to the degree that Alibaba does in China. But is it reasonable to assume such dominance will persist as the Chinese market matures? No one company dominates e-commerce in the United States or in Europe, and none are as large as old-economy Walmart. China may now be underserved by national brick-and-mortar chains, but that could change. Professor Greenwald said he believed that Alibaba deserved a premium to eBay — perhaps twice eBay’s market capitalization. “But three times? That’s really pushing it,” he said.

Eoin Treacy's view

The ticker symbol, BABA, means father in Mandarin and this was certainly the mother and father of all IPOs. The share price briefly testing the $100 area today, up from the $68 agreed at the close of the offer stage. Some of the early investors in the company were able to liquidate positions early and others will have had an opportunity to sell today so it is questionable where the additional demand will come from to push prices much above today’s high in the short term.

Meanwhile this additional article from the New York Times highlights the entrepreneurial ecosystem developing in picturesque Hangzhou. The start-ups spawned by former Alibaba employees suggests the number of companies that will be seeking to IPO is likely to increase in the coming years. It remains to be seen if Alibaba’s former employees will have the same effect on Hangzhou as HP’s had on Silicon Valley. 

This section continues in the Subscriber's Area. Back to top
September 19 2014

Commentary by Eoin Treacy

Gold Falls on Equity Rally as Silver Slumps to Four-Year Low

This article by Debarati Roy and Nicholas Larkin for Bloomberg may be of interest to subscribers. Here is a section:

Holdings in exchange-traded funds backed by gold slumped to a five-year low as price volatility plunged to the lowest since 2010. The metal has dropped 13 percent from this year’s high as theU.S. economy gained traction amid prospects for rising interest rates and muted inflation.

“We are seeing a rush for equities,” Tom Winmill, who helps manage about $220 million of assets in Walpole, New Hampshire, for Midas Funds, said in a telephone interview. “Many investors don’t see the need for a safe haven as the dollar has gained strength.”

Eoin Treacy's view

There has been understandable speculation about where the money would come from to fund the Alibaba IPO and the conspicuous declines in precious metal markets, coinciding with the shares launch, represent a tempting candidate. However, the recent strength of the Dollar, improving governance in India where desire of a safe haven is easing and slower Chinese economic growth are all also factors in the recent weakness of precious metals. 

This section continues in the Subscriber's Area. Back to top
September 19 2014

Commentary by Eoin Treacy

Robust demand and disciplined supply for metal casings

Thanks to a subscriber for this report from Deutsche Bank focusing on the metal casings sector for hand held devices. Here is a section:  

We hold an optimistic view on the metal casings industry. On the demand side, we are confident about its robust shipment momentum within the next three years due to (a) the design trend toward ultra-slim and lighter form-factor, and larger panel-screens on mobile devices (NBs, smartphones and tablets), (b) Apple’s preference for using metal casings (its adoption rate at 86%, Figure 19) for iPhone, iPad and Macbook products, and (c) the increasing adoption rate from other smartphone and tablet brand vendors. On the supply side, the disciplined procurement of CNC (Computer Numerical Control) machines by major casing suppliers in Asia (hence controlled supply increase) and the higher entry barriers in metal casings manufacturing and surface treatment solution can help ease the Street’s concerns about the industry’s oversupply risks.

Eoin Treacy's view

A link to the full report is posted in the Subscriber's Area.

It is easy to become desensitised to photos of long lines of people sleeping outside Apple stores in order to be among the first to own the next new product. However these people represent the loyal customer base that is the envy of every other consumer electronics company. News last week that privately held, discount smart phone manufacturer Xiaomi would be moving to metal cases exemplifies the trend of Apple imitators, not least in the build quality end users have come to expect.

This section continues in the Subscriber's Area. Back to top
September 19 2014

Commentary by Eoin Treacy

Ebola: US sends 3,000 troops to W.Africa to 'turn tide'

This article by Stephen Collinson for AFP may be of interest to subscribers. Here is a section: 

It comes as alarm grows that the worst-ever Ebola epidemic which spread through Liberia, Sierra Leone and Guinea before reaching Nigeria, is out of control. A separate strain of the disease has appeared in the Democratic Republic of Congo.

Most of the US effort, which will draw heavily on its military medical corps, will be concentrated in impoverished Liberia -- the worst hit nation -- with plans to build 17 Ebola treatment centres with 100 beds in each.

China is also sending more medics to neighbouring Sierra Leone to help boost laboratory testing for the virus, raising the total number of Chinese medical experts there to 174, the UN said Tuesday.

The World Health Organization (WHO) said Tuesday it was reconvening its emergency committee in Geneva which declared the outbreak an international health emergency in August, to consider further measures to limit its spread.

Eoin Treacy's view

While the prospect of Ebola becoming a serious issue in Europe or the USA is extremely unlikely, it is certainly disruptive in West Africa where there are 4,985 confirmed cases, including 2,461 deaths. In countries with large populations this is not very many but the virulence of the disease ensures that without quick intervention these numbers will multiply quickly. AIDS, TB and malaria do not have the associated fear factor that can affect productivity as workers take precautions in order to avoid exposure.

 

This section continues in the Subscriber's Area. Back to top
September 19 2014

Commentary by Eoin Treacy

The Chart Seminar

Eoin Treacy's view

I am delighted to announce that we now have our venues secured for the Chart Seminar in both Chicago and London later this year.

September 29th and 30th will find me presenting The Chart Seminar at The University Club of Chicago. Established in 1887 by university graduates who wanted a special place where they could enjoy intellectual pursuits, the University Club of Chicago will provide the perfect collegiate atmosphere for The Chart Seminar.

November 13th and 14th brings me to London and the rarefied East India Club. Founded in the middle of the 19th century, its original members were 'the servants of the East India Company and Commissioned Officers of Her Majesty's Army and Navy' returning from far flung lands.  As our London seminar always attracts delegates from around the world, it seems a fitting venue to conduct The Chart Seminar.

To book your place, please contact Sarah Barnes at sarah@fullertreacymoney.com

The full rate for The Chart Seminar is £950 + VAT. (Please note US, Australian and Asian delegates, as non EU residents are not liable for VAT). The early booking rate of £875 for non-subscribers expires two months ahead of the event start date. Subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.

Private Seminars and Partnering Opportunities
We are also available to conduct private seminars and occasionally agree to speaking engagements at investment conferences and professional societies. 

2014 marks a number of changes in how we organise the Chart Seminar.  In order to facilitate more venues we are open to partnering with other groups to market the event. If your organisation would like to arrange a seminar either internally or for your clients please do not hesitate to contact us.

 

This section continues in the Subscriber's Area. Back to top
September 19 2014

Commentary by Eoin Treacy

September 19 2014

Commentary by Eoin Treacy

52nd Annual Contrary Opinion Forum

Eoin Treacy's view

It has been my pleasure to accept an invitation to return to the Basin Harbor Club in Vermont to speak at the 52nd Annual Contrary Opinion Forum hosted by Fraser Asset Management between October 1st and 3rd. The Forum’s convivial atmosphere is something Mrs.Treacy and I look forward to not least because it gives us an opportunity to meet so many subscribers.  

This section continues in the Subscriber's Area. Back to top