David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Facebook Usage Among Teens Set to Drop in U.S

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

    “Teens and tweens remaining on Facebook seem to be less engaged –- logging in less frequently and spending less time on the platform,” Orozco said. “At the same time, we now have Facebook-nevers, many children aging into the tween demographic that appear to be overlooking Facebook altogether, yet still engaging with Facebook-owned Instagram.”

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    Demand remains robust for UK manufacturers

    This press release from the CBI may be of interest to subscribers. Here is a section:

     

    The survey of 432 manufacturers found that total order books and export order books were strong in August. The firming in export orders relative to the previous month reflected rising orders in 10 of the 17 manufacturing sub-sectors, led by mechanical engineering and aerospace.

    And 

    “There are further signs that exporters are feeling the benefit from the lower pound in this month’s figures, and output growth is expected to power on over the coming quarter.

    “But after a brief pause last month, expectations for selling prices have rebounded, indicating that the squeeze on consumers is set to persist. We expect CPI (Consumer Price Index) to top out at around 3% towards the end of this year and remain close to that level during 2018, as the effect of the weak pound continues to feed through.”

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    Sorry, Banning 'Killer Robots' Just Isn't Practical

    This article by Igor Zarembow for Wired may be of interest to subscribers. Here is a section: 

     

    Weapons systems that make their own decisions are a very different, and much broader, category. The line between weapons controlled by humans and those that fire autonomously is blurry, and many nations—including the US—have begun the process of crossing it. Moreover, technologies such as robotic aircraft and ground vehicles have proved so useful that armed forces may find giving them more independence—including to kill—irresistible.

    A recent report on artificial intelligence and war commissioned by the Office of the Director of National Intelligence concluded that the technology is set to massively magnify military power. Greg Allen, coauthor of the report and now an adjunct fellow at nonpartisan think tank the Center for New American Security, doesn’t expect the US and other countries to be able to stop themselves from building arsenals of weapons that can decide when to fire. “You are unlikely to achieve a full ban of autonomous weapons,” he says. “The temptation for using them is going to be very intense.”

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    Email of the day on moving averages

    Hope you’re enjoying the warm weather in LA. We’ve had it quite cold here in Western Australia, the ‘sunshine state’.

    Something I wanted to ask you at the last Chart Seminar in Singapore but did not get around to it.

    You are an advocate of the weekly 200 MA(40wk) for gauging trend direction and overbought/oversold situations. Whilst this method appears to work reasonably well on the institutional type stocks, can it be used the same way on the mid to small cap and penny stocks?  I know of some people using 100MA(20wk) for the latter.

    Many thanks in anticipation of an answer.

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    The S&P 500: Just Say No

    Thanks to a subscriber for this report from GMO by Matt Kadnar and James Montier which may be of interest. Here is a section:  

    In absolute terms, the opportunity set is extremely challenging. However, when assets are priced for perfection as they currently are, it takes very little disappointment to lead to significant shifts in the pricing of assets. Hence our advice (and positioning) is to hold significant amounts of dry powder, recalling the immortal advice of Winnie-the-Pooh, “Never underestimate the value of doing nothing” or, if you prefer, remember – when there is nothing to do, do nothing. 

    Markets appear to be governed by complacency at the current juncture. Indeed, looking at the options market, it is possible to imply the expected probability of a significant decline in asset prices. According to the Minneapolis Federal Reserve, the probability of a 25% or greater decline in US equity prices occurring over the next 12 months implied in the options market is only around 10% (see Exhibit 12).

    Now we have no idea what the true likelihood of such an event is, but when faced with the third most expensive US market in history, we would suggest that 10% seems very low. But, one thing we have a high degree of confidence in is that Trustee Smith’s recommendation to concentrate his portfolio into indexed US equites, shun diversification, and sell international equities will ultimately increase the real risk in his portfolio, i.e., losing money, and make it even more difficult to meet the required rate of return. Good luck to you, Trustee Smith. It seems you are going to need it.

     

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    Fortescue Sees Dividend Bonanza as Miners Reward Investors

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

    Fortescue Metals Group Ltd., the fourth- biggest iron ore exporter, tripled its full-year dividend and may lift returns further as top miners reward investors with higher payouts amid a price revival.

    The Perth-based producer declared a total annual dividend of 45 Australian cents a share, compared with 15 cents a year earlier, topping the average 39 cent forecast among 19 analysts surveyed by Bloomberg. Fortescue expects to pay between 50 percent to 80 percent of net profit after tax in dividends in the current fiscal year, the company said Monday when reporting full-year earnings.

    Rio Tinto Group aims to pay a $2 billion interim dividend and increased its share buyback by $1 billion this year on stronger materials prices, while Anglo American Plc last month announced plans to resume dividend payments about six months ahead of schedule. BHP Billiton Ltd. is forecast to raise its full-year payout almost to 88 cents a share when it reports earnings Tuesday, according to the average of 15 analysts’ forecasts.

    “They are making hay while the sun shines, and it’s been a while coming,” said James Wilson, a Perth-based analyst at Argonaut Securities Ltd. “Hard times have driven a lot of innovation, and the miners are now very lean and extremely efficient -- when prices come back, they pop in a big way, and make a lot of money.”

    Iron ore, the top earning material for Fortescue, BHP and Rio, has rebounded since mid-June on strong steel demand in China and weaker-than-expected gains in low-cost supply.

    Fortescue, which cut cash operating costs 17 percent in fiscal 2017, plans to hold annual shipments at the current rate of 170 million tons, the producer said last month. 

     

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    Navigating China's post-congress landscape

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

    Over the past five years, the Chinese leadership’s top priorities have proven extremely consistent, reflecting a consensus on broad goals. The leadership has remained steadfastly focused on strengthening the Communist Party, safeguarding stability, and enhancing China’s regional leadership and global standing. There have been changes to the manner in which Xi has centralized power and the party has headed off domestic and external challenges. But on the top priorities, the party has followed consistent north stars to guide policy.

    To this end, the Chinese leadership will continue to emphasize financial and economic stability and guard against financial shocks. Particularly with the much-anticipated centenary of the founding of the Communist Party in 2021, Beijing will be determined to achieve its goal of becoming a “moderately well-off society,” which in practical terms means doubling per capita income and national gross domestic product from 2010 levels.

    Over the past five years, when confronted with choices between greater control and greater openness to innovation, China’s leaders consistently have opted for the former. Expect economic policies to continue favoring state control and stability, even at the cost of some economic growth. This bias is likely to extend to policies related to the internet and social media, where heightened censorship over the past five years has demonstrated the leadership’s wariness of losing control of information in the digital age.

     

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