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

    Protests Hammer U.S. Cities Still Recovering From Lockdown

    This article by Amanda Albright, Eric Martin, Elizabeth Campbell and Christopher Palmeri for Bloomberg may be of interest to subscribers. Here is a section:

    Violence erupted in dozens of cities following the death of George Floyd, a black Minneapolis man who died after a white police officer pressed a knee into his neck for more than eight minutes. Some demonstrators broke off to rampage through shopping districts, including Rodeo Drive in Beverly Hills and Michigan Avenue in Chicago, and set fire to police cars and municipal buildings.

    The chaos, amid otherwise peaceful protests, struck as the economy struggles to emerge from its coronavirus-enforced hibernation. After the Covid-19 deaths of more than 104,000 Americans, unprecedented government intervention and massive disruptions to business and everyday life, the scenes of unrest were a bleak contrast to the recent optimism of the markets. A 36% rally in the S&P 500 since March has pushed valuations to the highest in 20 years.

    “I think people are coming to the realization that their jobs may not be coming back or coming back quickly. This is all conflating with the racial tensions and completely boiling over,” said Mark Zandi, chief economist at Moody’s Analytics. “This highlights the depth of despair in America,” he added, citing 20% unemployment and 50 million workers who’ve lost their jobs or had pay cuts.

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    Email of the day - on silver tracking funds

    Thank you for your great service and your prescient commentaries.

    I am interested in a non-leveraged silver fund structured along the lines of the PMGOLD ETF.

    I would very much appreciate your views/suggestions.

    Many thanks. R

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    Hong Kong Stocks Rally After Trump Holds Fire on Retaliation

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

    While the U.S. President Donald Trump’s speech Friday was heated in rhetoric, it lacked specifics around measures that would directly impact the city. He announced the U.S. would begin the process of stripping some of Hong Kong’s privileged trade status without detailing how quickly any changes would take effect and how many exemptions would apply.

    “Trump’s comments gave no immediate measures on Hong Kong and leave room for negotiations with Beijing,” said Castor Pang, head of research at Core Pacific-Yamaichi International. “Trump’s comments have eased investors’ concern about the impact of potential sanctions on the Hong Kong economy.”

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    Japan Inc.'s Cash Stash Grew to 89% of GDP Before Emergency

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

    Corporate retained earnings rose to ¥484 trillion, roughly 89% of the nation’s gross domestic product (GDP) in the three months to the end of March, according to finance ministry data published today.

    The extent to which firms tap into this cash hoard will likely be in the spotlight again as the current crisis unfolds, especially for companies that lay off workers.

    Policymakers have been doubling down on their support for the economy. Since Abe called a national emergency in early April, his government has put together record stimulus packages worth ¥234 trillion or about 43% of GDP. The Bank of Japan’s special measures total ¥75 trillion.

    With Covid-19 threatening jobs and businesses, economy minister Yasutoshi Nishimura in March urged companies to spend their cash savings to cope with the pandemic.

    Japanese firms have taken a more cautious stance on spending their income since the global financial crisis with many of them looking to shore up their finances in case of future economic shocks. This conservative stance has drawn criticism from policymakers, namely finance minister Taro Aso, as not being aggressive enough to boost growth through higher wages and investment.

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    Email of the day on risks versus liquidity

    The trillions of US dollars / Euros / Yens etc. given to us by central banks and governments are like painkillers leading us to feel better than we should feel. The SP500 back at over 3.000 point. Stock markets look one year ahead, right? But aren’t we too optimistic? Consumers in the US are either without a job and or savings or they are saving more than usual, which is a serious headwind. Forty percent of people with a lower income have lost their jobs. As if all those SP500 companies do not need any customers, really? If large companies cut costs there is less income for other smaller companies. This domino effect is just starting, meaning even more people will be without job soon. Maybe I’m too negative, I really hope I’m wrong. Back to the stock market. To avoid a subjective vision on the stock market I’m looking for indices to give me an objective warning signal of a top. There are four indices I selected: ND100, Fang, VIX and AD/DE. I would like to hear your opinion and suggestions about this please. Looking forward to Friday’s big picture video. Have a nice weekend.

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    US Economic Outlook & Implications of Current Policies for Inflation, Gold and Bitcoin

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

    Gold prices are well above their long-term inflation-adjusted averages. Over time gold has barely outperformed inflation with a real return of 1.0% before cost of storage and insurance, compared to 2.7% for 10-year US Treasuries.

    The fascination with gold has existed since the Egyptians first used gold bars as money as early as 4000 BC. The opening paragraph of the late Peter Bernstein’s book, The Power of Gold: The History of an Obsession, captures the sentiment: At the end of the 19th Century, John Ruskin told the story of a man who boarded a ship carrying his entire wealth in a large bag of gold coins. A terrible storm came up a few days into the voyage and the alarm went off to abandon ship. Strapping the bag around his waist, the man went up on deck, jumped overboard, and promptly sank to the bottom of the sea. Asks Ruskin: ‘Now, as he was sinking, had he the gold? Or had the gold him?’

    And

    Even during shorter windows when inflation has been above 6%, gold only outperformed equities between January 1970 and June 1970, and then again between August 1973 and July 1982.

    In other periods, when inflation has been less than 6%, equities have outperformed gold.

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    An Investment Only A Mother Could Love: The Tactical Case

    Thanks to a subscriber for this report by Lucas White and Jeremy Grantham for GMO may be of interest to subscribers. Here is a section: