Eoin Treacy's view

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

Some of the topics discussed include: China steadying, discussions of the risks posed by negative yields, Wall Street steady but consumer shares still under pressure, gold steady, oil weak, bitcoin testing MA.

I get something else, too. If there is no hope, there is only the present. Things you do today will have no consequences. That, actually, can be a liberating realisation. If there is no tomorrow, then anything is possible, nothing is prohibited.

Violence is its own liberation – an ecstatic orgy of destruction alongside your comrades. It’s not a means but an end in and of itself. But you are not doing it because you are fighting for freedom and democracy, or against tyranny. You only say you are.

Maybe we self-serving old-timers have robbed our children of their future. But they are helping us dig our own graves. It’s not: “If we burn, you burn with us.” It’s: “We are all burning together.”

Well, dear young people, you now have your wish: we can all self-destruct together. It’s the end of Hong Kong as we know it, and many local people are fine with it.

Eoin Treacy's view

Hong Kong is the subject of a major transition. The great Pearl River Delta is the focus on a major industrial hub where Hong Kong has long acted as an interlocutor for international trade. The future as outlined by the central government is that the cities of Shenzhen, Guangzhou, Hong Kong and Macau will form unified trading and financial hub aimed at rivalling the Bay Area in California. For Hong Kong that represents a major change because it is more a marriage of equals at best or at worst it represents the terminal decline of the island economy in preference to the mainland.

In some ways, the Netherlands has one of Europe's most generous retirement systems: at its core, it represents a basic pay-as-you-go state pension as well as employer-run pension scheme which together provide workers with about 80% of their average lifetime wages when they retire. The US and UK have similar systems, but Dutch pension funds are more generous and must use a lower risk-free rate to value their liabilities, forcing them to hold more assets.

Unfortunately, the lower Dutch risk-free rate is not low enough, and as a result about 70 employer-run pension funds with 12.1m members had funding ratios below the statutory minimum at the end of September, according to the Dutch central bank. And here lies the rub: if funds have ratios below the legal minimum for five consecutive years or have no prospect of recovering to a more healthy level, they must cut their payouts. Interest rates have rebounded slightly in recent weeks, but many funds are still facing cuts.

In other words, in making a select handful of European stockholders rich courtesy of NIRP and QE, Mario Draghi is threatening the pensions of hundreds of millions of retired European workers.

So what, if any, is the solution?

Last week, Rabobank reported that the Minister of Social Affairs is supposedly willing to prevent a large part of the pension benefit cuts of 2020, as the government is reportedly willing to lower the minimum coverage ratio from 100% to 90% for one year. This temporary measure can be seen as a pause button, which buys time for:

Pension funds to hopefully recover over the next year. For pension funds, a rise in their risk-free rate term structure which is used to discount their liabilities (EUR 6m swap rates) would be most helpful
Continuing to work out the details of the Pension Reforms announced in June 2019. Unions, employer representatives and the opposition parties were against pension cuts because this would undermine the goals set out in the Pension Reforms.

Eoin Treacy's view

The logical result of negative yields is the holders of these assets eventually take a loss. Since pensions generally run a ladder of maturities in an attempt to match cashflows with liabilities the proverbial buck stops with them as the yield-to-worst loss is priced in.

“While the data are early, we are quite excited about what we are seeing,” he said in a telephone interview. “This is a pretty significant milestone, not just for us as a company but for the entire field. This could be an important landmark in medicine, when we saw the first promise for providing cures for a number of diseases using a gene editing approach.”

The early findings may benefit rival companies also studying medicines based on Crispr technology, as they are the first results from publicly traded companies using the platform. Editas Medicine Inc.’s lead drug will be given to its first patient at the start of next year as a treatment for a form of blindness, while Intellia Therapeutics Inc. is on track to file for its first human trial by mid-year.

Eoin Treacy's view

Gene editing deals in cures rather than treatments. That’s a major challenge for the traditional pharmaceuticals business. Chronic conditions which requite ongoing treatment but have no cure have been massive money spinner for the pharmaceuticals business for decades. Right now, the cost of cures is extraordinarily high because a one-shot solution has to load all of the revenue from a treatment into one bill rather than spacing it out with a chronic condition. However, as the sector moves out of the orphan disease sector and into the mainstream over the next decade the potential for costs to come down is quite compelling.

Eoin Treacy's view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change. I'll change the title to the date of publication of new details so you will know when the information was provided.