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

    Oil Falls to Two-Month Low as Traders Focus on Record Supplies

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

    Oil has fluctuated above $50 a barrel since the Organization of Petroleum Exporting Countries and other nations started trimming supply on Jan. 1 to reduce a glut. Saudi Arabia and Russia, the architects of the deal, presented a united front on complying with the cuts at the CERAWeek conference Tuesday in Houston. Alongside officials from Iraq and Mexico, they insisted the curbs are working. Managed money boosted wagers that U.S. oil futures would rise to a record last month.

    "There’s a huge amount of speculative length in the market and they’re starting to bail," Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. "OPEC didn’t do a good job at CERA convincing the market that it would roll over the cuts into the second half of the year."


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    Musings from the Oil Patch March 7th 2017

    Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB. Here is a section on solar cells

    A more recent analysis by the Lawrence Berkeley National Laboratory covering 1998 to 2015 shows a different measure of PV cost. (See Exhibit 15 on next page.) The pattern of that decline is interesting. It took 11 years for the price per watt to drop from $12 to $8. Notice how the cost per watt dropped between 1998 and 2000, but then remained flat until 2002, after which it declined for the next three years. Starting in 2005, the cost slowly increased for two years before beginning a slow decline that lasted for two years. In 2009, the pace of decline accelerated until it reached about $4 per watt, or half the 2009 value. The recent decline coincides with China’s entrance into the solar panel manufacturing business and its prompt dumping of surplus output into the U.S. market, driving down panel prices and driving U.S. manufacturers out of business.

    It is difficult to separate how much of the historical price decline came from technological improvements versus that from a misguided investment strategy by China. More importantly, will these price reduction trends continue as in the past and how dependent on technological breakthroughs in material science are lower prices in the future?


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    New Research Could Turn Water Into the Fuel of Tomorrow

    This article from Futurism.com caught my attention and I thought it may be of interest to subscribers. Here is a section:

    “What is particularly significant about this study, which combines experiment and theory, is that in addition to identifying several new compounds for solar fuel applications, we were also able to learn something new about the underlying electronic structure of the materials themselves,” Neaton said in a Caltech press release.

    To discover these new photoanodes, the team combined computational and experimental approaches. A Materials Project database was mined for potentially useful compounds. Hundreds of theoretical calculations were performed using computational resources at the National Energy Research Scientific Computing Center (NERSC), together with software and expertise from the Molecular Foundry. Once the best candidates for photoanode activity were identified, it was time to test those materials in the laboratory.

    The materials were simultaneously tested for anode activity under different conditions using high-throughput experimentation. This was the first time these kinds of experiments had been run this way, according to Gregoire.

    “The key advance made by the team was to combine the best capabilities enabled by theory and supercomputers with novel high throughput experiments to generate scientific knowledge at an unprecedented rate,” Gregoire said in the press release.


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    Treasuries Tumble After ADP Employment Tops Highest Estimates

    This note by Elizabeth Stanton for Bloomberg may be of interest to subscribers. Here it is in full:

    Treasuries slumped, pushing 10-year yields to the highest level since December, after a measure of U.S. private-sector job growth for February exceeded the most optimistic expectations two days before the Labor Department’s monthly employment report.

    Yields were higher by 4-6 basis points at about 9:10 a.m. in New York as the market priced in a faster pace of Fed rate increases following the one already expected next week. The 10- year climbed as much as 6.4 basis points to 2.582 percent, the highest level since Dec. 20.

    Treasury plans to sell $20 billion of the 10-year note in an auction at 1 p.m. The new notes yielded 2.575% in when-issued trading, above 10-year auction stops since July 2014.

    ADP Employment increased 298k in February vs 187k median est. in Bloomberg survey, in which highest est. was 255k; February employment report is forecast to show 190k increase in nonfarm payrolls based on median est., which may rise if economists revise higher based on ADP

    Yields across the curve touched the highest levels this year, led by the 5Y, which climbed 6.2bp to 2.111%

    5s30s yield curve flattened, touching 104.5bp, within 5bp of lowest levels of recent years
    USD OIS pricing upgrades odds of 25bp March hike to 87% (versus 83% Tuesday), while odds of a second 25bp hike in September, based on 5th Fed dated OIS, climbed to 97% from 87%

    IG credit issuance slate also in focus after nearly $40b priced over previous two sessions, weighing on Treasuries; United Health Group joins Wednesday’s slate with $benchmark 10Y and 30Y offering


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    Forget the Border Levy. Here's the Really Big GOP Tax Idea

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

    Currently, when companies borrow money, a large portion of the interest they pay on those loans is tax-deductible. The House plan would eliminate that deduction. Like the border adjustment, this change was proposed by Berkeley economist Alan Auerbach in a famous 2010 paper, “A Modern Corporate Tax.”

    How would companies finance themselves if interest payments weren’t tax deductible? They would take on less debt and issue more stock. That would require some big adjustments, but in the long term it would probably be a good thing for the stability of the economy.


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    Extend and Pretend

    I found this interview with Yanis Varoufakis on Bloomberg interesting not least for the advice he offers to the UK. Here is a partial transcript:

    For former Finance Minister Yanis Varoufakis, the lesson for May is “beware of what I call the euro zone run around.” He predicts British officials will receive conflicting messages from Berlin to Brussels, and that a lot of time will be spent discussing how to structure the negotiations rather than issues such as a free trade deal.

    Varoufakis proposes the U.K. should file Article 50 and then immediately ask to join the European Economic Area, which allows access to the single market in return for free movement of people and some budget contributions. That would give Britain stability and time to assess how to properly engage with the EU, which is “really not interested in a mutually advantageous deal,” he said.

    George Papaconstantinou, who ran Greece’s finance ministry from 2009 to 2011, is more optimistic.
    While he anticipates the EU will adopt a “very hard bargaining” position and seek to safeguard the bloc by refusing to grant too many concessions, he sees Merkel as a political realist.

    “She does look at the end of the day for decisions which are win-win,” he says. “There is an element of realism which the U.K. can hope for.”


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    Million dollar baby! Infant Reliance Jio set to give peers many sleepless nights

    This article by Swati Verma for the Economic Times may be of interest to subscribers. Here is a section:

    The telecom arm of Reliance IndustriesBSE -0.01 %, which debuted in September last year, has already set a benchmark by hitting a subscriber base of 100 million in record 170 days. And with aggressive plans in place, it looks set to raise the bar, giving sleepless nights to the incumbents. 

    The company is heavily banking on building significant data capacity and triggering price elasticity for data demand. 

    At Jio’s first analyst meet last week, the company management indicated that currently about 1b GB/month data is getting consumed on Jio and it will have the capacity to offer about 4b GB data per month by the end of FY17. According to the management, it should be able to cater to 60 per cent of estimated data demand at 6b GB per month by FY21. 


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    Let Us Have a Reforming Budget at Last

    A number of measures have already been announced to come into effect this year, including a 2 percentage-point increase in the insurance premium tax and a cut in corporation tax. The Chancellor may well modify some of these measures.

    He will surely concede some form of compensation for firms severely hit by the resetting of business rates. But, above all, he must keep current government spending under a very tight rein to allow the Government room for manoeuvre later.

    Mind you, all this is going to seem pretty thin gruel. Could we please have some more? In particular, as I said last year, it would be good to have, if not a vision (and “Spreadsheet Phil” apparently doesn’t do “the vision thing”) then at least a glimpse of how the tax system is going to develop.

    In fact, very few Chancellors find themselves able to embrace radical reform of the tax system. Usually, they are too busy grappling with the Government’s deficit to have either the resources or the time.

    This is true now, and whatever energy is left is fully absorbed in preparing Britain for Brexit. Yet reform is badly needed. In so many ways, our current tax system is both irrational and inimical to economic growth.

    Perhaps we can forgive Mr Hammond his first, and last, boring March Budget. But there should not be any more like it. Tax reform and making the most of Brexit are not alternatives. Indeed, as Britain faces its future outside the EU in a turbulent and risky world, one of the best things that a Chancellor can do is to ensure that the tax system does the most to attract and retain businesses in Britain, and encourages new business formation, innovation, investment and work.

    Mr Hammond will not make progress towards these objectives by doing next to nothing, whichever month is graced with his inactivity.

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    Email of the day 1:

    On the subject of time: 

    “Time is the most valuable coin in your life.  You and you alone will determine how that coin will be spent.  Be careful that you do not let other people spend it for you.”

    Carl Sandburg

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