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

    May Makes Commitment on Cash in Bid to Break Brexit Deadlock

    This article by Tim Ross , Simon Kennedy , and Ian Wishart for Bloomberg may be of interest to subscribers. Here is a section: 

    In delivering her most detailed roadmap yet for the divorce, May gave the clearest indication yet that Britain will pay to smooth its departure from the bloc. Her words were immediately welcomed by the EU’s chief negotiator Michel Barnier.

    “The U.K. will honor commitments we have made during the period of our membership,” May said in a much-anticipated speech in the Italian city of Florence. A government official later clarified that meant she was open to discussing financial commitments beyond the scope of the EU budget, and the U.K. would honor its dues more broadly.

    She made the promise while also proposing paying money and accepting the EU’s rules for two years after Brexit takes effect in March 2019 in return for a transitional period which mirrors the status quo of tariff-free, regulation-light commerce -- and freedom of movement.

     

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    Philippine Central Bank Chief Brushes Off Credit Growth Concerns

    This article by Karl Lester M. Yap for Bloomberg may be of interest to subscribers. Here it is in full:

    Philippine central bank Governor Nestor Espenilla downplayed risks of surging credit growth, saying the trend is consistent with the fast pace of economic expansion.

    “From a micro level, loans are being very carefully managed from a risk perspective,” Espenilla said in an interview with Bloomberg TV’s David Ingles and Haidi Lun on Friday. “At the macro level, the 20 percent growth is relatively consistent with the rapid growth of the economy.”

    An economic boom accompanied by surging credit growth has fueled speculation that Bangko Sentral ng Pilipinas may raise interest rates as early as the fourth quarter. That would be a divergence from other central banks in Southeast Asia, like Indonesia and Vietnam, that have eased policy this year. The Philippines kept its benchmark interest rate unchanged at a record low of 3 percent on Thursday.

    Commercial bank loans have risen quickly this year, with mortgages surging more than 20 percent in June. Bangko Sentral has adopted measures in the past to cool the property sector, including capping the value of real estate that can be used as loan collateral.

    Domestic credit to the private sector in the Philippines stood at 45 percent of gross domestic product in 2016, according to data from the World Bank. The ratio exceeded 100 percent in Malaysia, Thailand, and China.

    “The Philippines is basically in catch up mode right now,” Espenilla said, referring to the credit expansion.

    The Philippine economy is headed for a sixth year of growth exceeding 6 percent, among the world’s fastest. That hasn’t yet translated into an inflation problem, with the central bank maintaining its forecast for this year and next year at 3.2 percent. The bank’s goal is to keep inflation within a range of 2 percent to 4 percent until 2020.

    “We are on track with meeting our inflation target which is the main driver for our policy decision,” Espenilla said. “Our assessment is inflation remains firmly under control.”

     

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    France Is Germany's Big Banking Hope? That's Gotta Hurt

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

    That makes a merger attractive to buyers with an existing presence in the German market, such as UniCredit, which acquired HypoVereinsbank in 2005, or Deutsche Bank AG, Germany’s largest lender. Commerzbank and Deutsche Bank held discussions last year about a possible merger, before Commerzbank announced its new strategy. After the talks broke down, John Cryan, Deutsche Bank’s CEO, called for consolidation in Europe to help the region’s banks compete.

    ​The renewed interest in Commerzbank has been catalyzed by the investment of Stephen Feinberg’s Cerberus Capital, which already controls Austrian lender Bawag PSK Bank. Private equity firms such as Cerberus pool money from investors to buy companies, using additional debt to finance the transactions, in the hope of selling them for a profit later.

    UniCredit executives have held discussions with German officials about a potential combination with Commerzbank once the lenders’ restructuring is complete, according to a person with knowledge of the talks. The German government would prefer a tie-up with France’s BNP Paribas SA, WirtschaftsWoche reported, citing unidentified insiders.

    “UniCredit and Commerzbank have large restructuring plans underway, to be completed in 2019 and 2020 respectively,” Tom Kinmonth, a strategist at ABN Amro wrote in a note. “Either way, the interest and the turnaround in the German lender has brought great performance this year.”

     

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    Shanghai police turn to facial recognition software to catch misbehaving cyclists

    This article from the South China Morning Post may be of interest subscribers. Here is a section: 

    On the same day, another e-bike user who had previously been caught twice driving in the opposite bike lane was fined 100 yuan for doing so a third time.

    If traffic law breakers do not accept the charges, police will publicly broadcast details of their offence on the surrounding advertising billboards until the culprit hands themselves in.

    Shanghai traffic police said that following the success of the pilot, more “electronic police” surveillance units will be set up at major traffic intersections across the city.

     

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    Email of the day on maturity extensions

    Why does the US not shift its bonds to 20 and 30-year duration, increase inflation to, say, 2% and pay back the money in 20 or 30 years’ effectively free of interest? This would really kick the can down the road and give them many years to sort out the mess.  When I asked this of Americans five years ago, they thought it would cause interest rates to spike if the Fed tried to drastically increase the duration.  I think the last few years have proved that the duration could be increased without causing panic in the markets. 

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    The great nutrient collapse

    This fascinating article by Geoff Johnson and Helena Bottemiller Evich for Politico may be of interest to subscribers. Here is a section: 

    What he found is that his 2002 theory—or, rather, the strong suspicion he had articulated back then—appeared to be borne out. Across nearly 130 varieties of plants and more than 15,000 samples collected from experiments over the past three decades, the overall concentration of minerals like calcium, magnesium, potassium, zinc and iron had dropped by 8 percent on average. The ratio of carbohydrates to minerals was going up. The plants, like the algae, were becoming junk food.

    What that means for humans - whose main food intake is plants - is only just starting to be investigated. Researchers who dive into it will have to surmount obstacles like its low profile and slow pace, and a political environment where the word “climate” is enough to derail a funding conversation. It will also require entirely new bridges to be built in the world of science - a problem that Loladze himself wryly acknowledges in his own research. When his paper was finally published in 2014, Loladze listed his grant rejections in the acknowledgements.

     

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    Google bets anew on smartphones, pays $1.1 billion for HTC's Pixel division

    This article by Jess Macy Yu and Paresh Dave for Reuters may be of interest to subscribers. Here is a section: 

    The all-cash deal will see Google gain 2,000 HTC employees, roughly equivalent to one fifth of the Taiwanese firm’s total workforce. It will also acquire a non-exclusive license for HTC’s intellectual property and the two firms agreed to look at other areas of collaboration in the future.

    While Google is not acquiring any manufacturing assets, the transaction underscores a ramping up of its ambitions for Android smartphones at a time when consumer and media attention is largely focused on rival Apple Inc (AAPL.O).
    “Google has found it necessary to have its own hardware team to help bring innovations to Android devices, making them competitive versus the iPhone series,” said Mia Huang, analyst at research firm TrendForce.

    The move is part of a broader and still nascent push into hardware that saw Google hire Rick Osterloh, a former
    Motorola executive, to run its hardware division last year. It also comes ahead of new product launches on Oct. 4 that are expected to include two Pixel phones and a Chromebook.

     

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