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 18 July, 2014

October 17 2014

Commentary by David Fuller

China PBOC Said to Plan $32.7 Billion Bank Injection

Here is a brief section of this informative article from Bloomberg:

Central bank Governor Zhou Xiaochuan said this month that the PBOC will stick to prudent monetary policy to ensure reasonable growth in money and credit. China will conduct liquidity operations as needed and push forward with market-based interest-rate reforms, he said.

A major purpose of the injections “is to boost confidence in the financial markets, especially the A-shares listed in Shanghai,” Ting Lu, Bank of America Corp.’s head of Greater China, said in a note to clients yesterday. In order to ensure a smooth start to a much-anticipated trading link between Hong Kong and Shanghai, authorities “will have to deliver a stable A-share market,” he wrote.

Subdued inflation figures released this week give the bank more room to further ease monetary policy. The PBOC cut the interest rate it pays lenders for 14-dayrepurchase agreements for the second time in a month this week.

David Fuller's view

China may not be for everyone but it remains an interest stock market.

This item continues in the Subscriber’s Area.

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by David Fuller

Email of the day 1

On when to buy:

“We were struck by your caution in y'days audio about re-entering equities now after back broken on 200 DMAs Clients may benefit by dollar averaging perhaps???...50 now 50  later??  Grateful for your views”

David Fuller's view

Over the last two years, investors in the US and many of the other better performing stock markets have been conditioned to buy on setbacks towards the 200-day moving averages.

This item continues in the Subscriber’s Area. 

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by David Fuller

Tim Price: Ten problems, or just one?

My thanks to the author for his ever interesting letter published by PFP Wealth Management.  Here is the opening quote:

 “Sir, The next financial apocalypse is imminent. I know this to be true because the House & Home section in FT Weekend is now assuming the epic proportions last seen before the great crash. Twenty-four pages chock full of adverts for mansions and wicker tea-trays for $1,000. You’re all mad.

Sell everything and run for your lives.”

- Letter to the FT from Matt Long, Seilh, France, 3rd October 2014.

 

 

David Fuller's view

I am delighted to say that Tim Price will be the guest speaker at our next Markets Now event in London on 10 November.  

Tim Price's Letter is posted in the Subscriber's Area.

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by David Fuller

Emails of the day 2

In response to the email I answered at some length on Thursday:

“Your question appears to be straightforward but as always there is far more information required in order for a full response can be given. 

“The big question is whether you are of an age where you will continue to accumulate and will do so for many a year or whether you are approaching the time when you de-accumulate? 

“Furthermore if you are approaching de-accumulation will it be your intention to secure a guaranteed income or to finance expenditure in retirement from an income stream generated from the pension fund?

“As always there are more questions than answers but there is much merit for those pension investors who are getting closer to retirement to remain longer term investors in dividend aristocrats and autonomies as have been advocated by David and Eoin over many years here on FTM.”

David Fuller's view

Thank you for these important points.

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by David Fuller

Email of the day 3

Also in response to the email I answered at some length on Thursday:

“Anyone who would move to cash at this point should have their head examined.”

David Fuller's view

We need to manage our investment funds on a medium to longer-term basis but given a sensibly diversified portfolio, I think we are more likely to see a secular bull market over the next 20 years, than another period such as 2000 to 2008.  

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by David Fuller

The Markets Now

Monday 10th November, 5:30 to 8:30pm

David Fuller's view

Here is the latest brochure, and I am pleased to say that we have a new guest speaker who will be familiar to many subscribers: Tim Price of PFP Wealth Management.  So, if you are going to be anywhere near London on Monday November 10th, why not join us for a lively discussion of interesting markets?  Once again, this meeting will be held at the East India Club, 16 St. James Square, London SW1Y 4LH.  After the presentations, you are welcome to join us for a drink in the Club’s American Bar.

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by Eoin Treacy

Deflation fears are overdone

Thanks to a subscriber for this report from Deutsche Bank which may be of interest. Here is a section: 

Overview:  Over the last three months, inflation has fallen significantly, rekindling fears of deflation. Moreover, the fact that energy prices have collapsed—in part because of a stronger dollar—has caused the breakeven inflation rate to roll over. In turn, financial markets have pushed out the timing of Fed tightening and substantially reduced expectations for the terminal fed funds rate. Our analysis shows that core inflation is likely to trend higher over time, led by higher services prices. Goods prices have been soft, but there is little evidence to suggest they are likely to turn sharply lower. Finally, the dollar needs to appreciate significantly further to have any noticeable impact on core inflation. 

Lower energy prices will not sink capex:  Financial market participants are fretting the impact of falling energy prices on capital expenditures within the energy sector. In our view, these fears are overblown as oil- and gas-related investment is only about 10% of total nonresidential investment in equipment and structures, which is where business spending is captured in the GDP accounts. In total, business investment accounts for roughly 9% of real GDP. Hence, while energy-related capital spending could slow if oil prices remain depressed for a significant period of time, this may be worth only a tenth or two on inflation-adjusted output growth, which is not very much. In fact, as we recently highlighted, the positive effects from a boost to consumer spending should more than outweigh any negative impact from lower capital expenditures.

 

Eoin Treacy's view

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

There is the world of difference between deflationary and disinflationary action. In many respects the fall in oil prices is a major benefit for economies not least in terms of transport, heating/cooling and industry. If this translates into lower headline inflation it can be viewed as a positive for anyone with a medium to longer-term perspective. However for a central bank dedicated to fostering inflation in order to incrementally debase the value of outstanding debt it is not seen in such rosy terms. 

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by Eoin Treacy

Goldman Sees No Crude Glut as Price Slump Deemed Excessive

This article by Ben Sharples for Bloomberg may be of interest to subscribers. Here is a section: 

Oil’s collapse into a bear market is excessive because there’s no oversupply to justify the selloff, according to Goldman Sachs Group Inc.

The bank is “near-term constructive about prices” after they fell too much, too soon, analysts including Jeffrey Currie, the head of commodities research in New York, wrote in a report e-mailed today. While expectations of a glut have driven down crude, the risk of a near-term shortage may increase as forward prices of benchmarks including West Texas Intermediate and Dubai crude discourage stockpiling, it said.

Oil futures slumped to the lowest in four years in London amid the highest U.S. output in almost 30 years and weakening global demand growth. Members of the Organization of Petroleum Exporting Countries are responding by cutting prices, prompting speculation that they will compete for market share rather than reduce production.

“The ‘supply glut’ is not yet here today, it exists in expectations,” the Goldman analysts wrote. “Prices have likely overshot to the downside.”

 

Eoin Treacy's view

West Texas Intermediate posted an upside key day reversal yesterday and held the advance today. Following such an accelerated decline there is scope for some steadying but market participants will continue to watch Saudi Arabia for signs of a change to their policy of pricing out competitors from their major growth markets. 

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by Eoin Treacy

Ebola and iron ore price put London Mining on life support

This article by Lawrence Williams for Mineweb may be of interest to subscribers. Here is a section: 

But London Mining was already on the downward path before the ebola outbreak struck its host country and exacerbated the situation, although no-one at the mine site appears to have fallen victim to the disease. Mining and upgrading 31% tenor iron ore to compete with those like Rio Tinto, Vale and BHP who can dig the stuff out of the ground at around 60% just became less and less economic as iron ore prices slumped. The company’s share price on London’s AIM market fell from comfortably over £4 in April 2011, down to around 4 pence and now trading is suspended. 

The company had been trying to find an investor to plug a financing gap which meant it had been running out of money to maintain operations. Indeed only a week ago the company’s CEO, Graeme Hossie commented that there was little or no value remaining in the company’s shares.

Now it is down to the PwC administrators to try and salvage something from the wreckage.  According to an announcement confirming the appointment of administrators, Russel Downs, joint administrator and PwC partner said "The collapse in iron ore prices and the resulting impacts on this business have been very dramatic and our focus is to ensure that a buyer is found for the Marampa Mine operations given it is such an important part of the Sierra Leone economy. We are liaising with key stakeholders and asking for a short window of forbearance as we look to conclude a transaction." 

 

Eoin Treacy's view

This is exactly the kind of news the major iron-ore miners were looking for when they decided to flood the market with supply in order to overcome competition from higher cost producers. Cliffs Natural Resources announcing a $6 billion write down today on its iron-ore assets is an additional sign that their strategy is having the desired effect. They will now be waiting for similar news from Chinese iron-ore miners before attempting to stabilise the market. 

Despite the fact that the ebola scare has little to do with London Mining’s demise, the emotionality of the debate on how best to deal with the disease represents an additional impediment to securing an additional line of credit. 

This article from the Wall Street Journal, kindly forwarded by a subscriber, highlights how political correctness appears to be overcoming common sense in terms of the USA’s response to containing the disease in West Africa. I’ve even seen news commentary to the effect that it is racist to suggest a travel ban from the countries most badly affected. As this article from The Economist highlights, the disease has nothing to do with race and everything to do with limiting new exposures. 

 

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by Eoin Treacy

Insight in 140 Words October 17th 2014

Thanks to a subscriber for this edition of Deutsche Bank’s weekly missive. Here is a section: 

Pound and property - For the first time since January 2011 this week more surveyors said London house prices had fallen than risen over the past three months. Given foreigners account for half the property transactions in prime London expect gloomy dinner parties from Singapore and Moscow to Sao Paulo and Mumbai. But how does this affect Britain? Data from Savills - an estate agent - show that in 2012 overseas buyers poured in £7bn of equity into prime London housing. That alone helped finance 12 per cent of the UK's current account deficit and partly explains the strength in sterling despite a yawning trade deficit. So if London property is a big UK export, falling house prices could be a terms of trade shock with implications for the pound. At least overseas dinner parties could then drown their sorrows in cheaper imports of Single Malt.

Eoin Treacy's view

The fiull note is posted in the Subscriber's Area. 

The Pound failed to hold the breakout to new five-year highs ahead of the Scottish Independence referendum and has since stabilised near $1.60. However a break in the short-term progression of lower rally highs, currently near $1.62, will be required to suggest a return to demand dominance beyond the short-term. 

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by Eoin Treacy

Weekend Reading October 17th 2014

Eoin Treacy's view

Fed: “Central Bank Macroeconomic Forecasting during the Global Financial Crisis: The European Central Bank and Federal Reserve Bank of New York Experiences” 

This paper documents macroeconomic forecasting during the global financial crisis by two key central banks: the European Central Bank and the Federal Reserve Bank of New York. The paper is the result of a collaborative effort between the two institutions, allowing us to study the time stamped forecasts as they were made throughout the crisis. The analysis does not focus exclusively on point forecast performance. It also examines density forecasts, as well as methodological contributions, including how financial market data could have been incorporated into the forecasting process. 

This section continues in the Subscriber's Area. Back to top
October 17 2014

Commentary by Eoin Treacy

The Chart Seminar

Eoin Treacy's view

I am delighted to announce that we have a new venue for the Chart Seminar in London.

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