Eoin Treacy's view

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: impressive rebound by the Nasdaq-100 from a key area of previous support, Europe firms which increases scope for a reversion to the mean, China remains weak with property leading lower, India steady, oil steady, commodities stable.

Underpinning Meituan’s success is what the company calls “abundant labor supply.” The cost of paying workers for each food order is about $1, or 20 percent of the expense incurred by delivery services in the U.S. An average order takes about 35 minutes, versus more than an hour in America.

For that, China’s urban consumers can thank the army of rural migrants who have crowded into cities in search of work. A deep pool of more than 280 million such workers exists to service the needs of middle-class city dwellers, enabling fast e-commerce and offline-to-online businesses.

But don’t take them for granted. Soon, there may be no cheap labor left in China’s large cities. 

To fight pollution and traffic jams, mega-cities have started to restrict and even kick out migrant workers. Beijing plans to cap its population at 23 million in 2020, only 1.3 million more than its current size. Meanwhile, Shanghai has a target of 25 million by 2035, leaving room for only 800,000 newcomers. Meituan, which is battling Alibaba Group Holding Ltd. for food delivery customers, alone deploys more than half a million of delivery riders daily, over half of whom are based in the four tier-1 cities of Shanghai, Beijing, Shenzhen and Guangzhou.

Eoin Treacy's view

As the author above states it can be pretty cozy to live in China’s major cities. The quality of restaurant food is excellent and deliveries, which are essentially free, means you do not have to wait in line. However, this situation is predicated on cheap labour and even in China that is an exhaustible resource. 

I'm a big fan of your service. I would like to buy soft commodities somehow but not sure what good vehicles there are to do so. I think if I buy futures there are high costs involved? Do you have any ideas? I already own water/fertiliser/agricultural equipment companies. All the best

Eoin Treacy's view

Thank you for this email and I am delighted you are enjoying the service. I agree, investing in futures carries the considerable risk of loss if contangos are not managed; particularly if prices range or trend lower. The ETFS Agriculture ETF is a good example of that phenomenon and has been trending lower since early 2011.

Is a crashing Rupee good or bad for India? Big debates here. Exports more competitive, of course, but how far is these external accounts a driver of Indian growth? Isn't India one giant domestic economy and isn't therefore a stronger Rupee good in the shape of lower oil and energy prices (rural villages) and overall business and consumer confidence? Happy for the community to discuss

Eoin Treacy's view

Thank you for this question which has a number of facets and is likely to be of interest to the Collective. India has a large domestic economy and a large current account deficit. The reason it has such a large and persistent current account deficit is because its export sector is not sufficiently developed to counter balance domestic demand. That contributes to the persistent weakness of the Rupee.

China Galaxy International analyst Tony Li said the U.S.-China trade dispute and a stock-market selloff were weighing on consumer sentiment. “Consumers have turned more cautious and are less willing to spend much on luxury items,” he said.

The holiday slowdown was bigger than expected, and investors should closely watch for any further weakening this year, he added.

Meanwhile, Goldman Sachs said escalating trade tensions, slowing growth and policy uncertainty have weighed on Chinese stocks. In a pessimistic case, if annual growth slows to 6% and the yuan falls a further 5% against the dollar, shares could decline 10% more, the bank said.

Eoin Treacy's view

I was chatting with Mrs. Treacy yesterday about the slowdown in China and she passed along this link to a story from epochtimes.com detailing how recent homebuyers are disgruntled with the steep discounts’ developers are now offering on properties. Here is a section:

On Oct. 2, more than 40 new homeowners in the city of Jingdezhen in Jiangxi Province gathered in protest outside the sales office of a property developer, and angrily shouted complaints such as “refund our money” and “we bought in the evening, and the price dropped in the morning.”

The next day, in Shanghai’s high-end Pudong District, dozens of new homeowners congregated in front of a housing development, carrying signs emblazoned with the slogan “Refund my hard-earned money.” The developer, Country Garden, had lowered prices from 35,000 yuan per square meter ($470 per square foot) to 26,000 yuan overnight.

Eoin Treacy's view

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

Eoin Treacy's view

The next Chart Seminar will be held on 12 and 13 November 2018 at The Army and Navy Club in London.

If you have an interest in attending an online Chart Seminar please contact Sarah and we will arrange times based on the time zones of those who wish to attend.

I am also in initial discussions with a potential partner about organising a New York Seminar.

If you would like to attend or have a suggestion for another venue please feel to reach out to Sarah at sarah@fullertreacymoney.com.  

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non EU residents are not liable for VAT). 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.