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

    One Fed official suggested on Friday delaying a December rate hike, the first to do so

    This note by Thomas Franck for CNBC may be of interest to subscribers. Here is a section: 

    St. Louis Federal Reserve President James Bullard reportedly said on Friday that the central bank could consider postponing its widely anticipated December rate hike because of an inverted yield curve.

    “The current level of the policy rate is about right,” Bullard said in a prepared presentation to the Indiana Banker’s Association, according to Reuters.

    Bullard is the first member of the Fed to speak publicly about a delay in December. The Fed president — while not a Federal Open Market Committee voter in 2018 — will be able to participate in rate hike decisions in 2019.

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    The U.S. Just Became a Net Oil Exporter for the First Time in 75 Years

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

    The shift to net exports is the dramatic result of an unprecedented boom in American oil production, with thousands of wells pumping from the Permian region of Texas and New Mexico to the Bakken in North Dakota to the Marcellus in Pennsylvania.

    While the country has been heading in that direction for years, this week’s dramatic shift came as data showed a sharp drop in imports and a jump in exports to a record high. Given the volatility in weekly data, the U.S. will likely remain a small net importer most of the time.

    “We are becoming the dominant energy power in the world,” said Michael Lynch, president of Strategic Energy & Economic Research. “But, because the change is gradual over time, I don’t think it’s going to cause a huge revolution, but you do have to think that OPEC is going to have to take that into account when they think about cutting.”

     

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    Email of the day on Crowd Money, late cycle moves and credit

    As you have repeatedly mentioned in recent audios, we are at a very interesting time in markets. The coming weeks may potentially offer us a guide as to whether markets are pricing in a recession in late 2019/2020 or whether this maybe further delayed by the Fed and the US administration setting a looser policy tone sooner rather than later.

    As David has always urged “don’t fight the Fed”.

    Being away from my desk enjoying the delights of the Caribbean, I have taken the time to re-read your most illuminating book Crowd Money which you published back in 2013 and I read back in 2014 (again in the Sunny Caribbean).

    I have to mention that a good many of your observations have come to pass and my holdings in a number of Autonomies who are also Dividend Aristocrats have been a core holding of my balanced personal portfolio. I have noted with interest the recent late cycle outperformance of these holdings compared to previously sexy growth stocks.

    I would recommend to the collective to take the opportunity to read or re-read Crowd Money at a time when market strategy is in flux.

    You have also made reference to the possibility of GE corporate debt being downgraded to junk. I attach a link to the UK Investment Manager M&G ‘Bond Vigilantes’ website and their comments relating to the US corporate debt market and with specific reference to GE’s strategy to deleverage and preserve their IG status.

    Hope this is of interest.

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    Riding in Waymo One, The Google Spinoff's First Self-Driving Taxi Service

    This article by Andrew Hawkins for the Verge may be of interest to subscribers. Here is a section:

    Over the course of three separate trips in Chandler, the trained drivers in my Waymo vehicles never take control. I’ve ridden in a Waymo vehicle without a human being in the driver’s seat once before, but it was not on public roads. I was fully prepared to experience a fully driverless ride while in Chandler, but, alas, Waymo rejected my request.

    The rides are uneventful, but it is exciting to experience the little flourishes that have been added for ride-hailing customers. The minivans still smell new, or at least recently cleaned. The screen on the back of the driver’s headrest features a large blue “start” button that I could press to initiate the ride. (There’s also a physical button in the headliner of the vehicle that performs the same task.) After pressing the button, a musical chime sounds and a robotic-sounding woman’s voice says, “Here we go.”

    As I said, I’m an experienced Waymo rider — three trips and counting — but this one feels more mature. Before, it felt like you were being driven by your half-blind grandmother, but now, riding feels… mostly normal. The car slows down for speed bumps, accelerates for lane changes, and handles a number of difficult maneuvers like unprotected left turns. And it even surprises me a couple of times, like when it ended up braking too far into the crosswalk at an intersection, and then reversed back a few inches to make room for pedestrians. Of course, it probably shouldn’t have stopped so abruptly in the first place, but it is still comforting to see the car correct its mistakes in real time.

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    France Tops OECD Table as Most Taxed Country

    This article by Paul Hannon for the Wall Street Journal may be of interest to subscribers. Here is a section:

    Economists say such consumption taxes that reduce pollution and other harmful effects are an efficient way for the government to raise revenue. But the planned move sparked the worst riots to hit Paris in decades on Saturday, leaving the city’s shopping and tourist center dotted with burning cars and damaged storefronts. Protesters vandalized the Arc de Triomphe, rattling Mr. Macron’s administration and the country.

    The rise in French tax revenues was in line with a longstanding trend across wealthy countries. The average tax take across the organization’s members edged up to 34.2% of GDP in 2017 from 34% in 2016 and 33.8% in 2000 as governments continued efforts to narrow their budget gaps and limit the rise in their debts that followed the global financial crisis.

    Of the 34 countries for which 2017 figures are available, 19 saw a rise in tax revenues relative to the size of their economy, with Israel reporting the largest increase. Mexico continued to record the lowest tax take at 16.2% of GDP, down from 16.6% in 2016.

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    Email of the day on trillion Dollar valuations and tops

    Do you remember how I asked you in June or July about the prospects of Apple reaching $1 trillion capitalisation and you told a story of a US Customs officer asking you in April who, in you view, would reach $1 trillion first, Apple or Amazon?

    At that time, it struck me since it looked like a bubble signal, a story in the vein of a classic legend of a Wall Street financier and a shoe cleaning boy, asking the former for investment advice ahead of the market crash in October 1929. Truly, it took another six-months for the market and especially Apple to begin to deflate, and before that both it and Amazon had reached $1 trillion mark. And probably Apple stock isn’t a bubble per se, but since October 3 peak it fell 23.9% while Nasdaq Composite, just 10.8%.

    As we all know, it’s almost impossible to catch the ultimate peak or trough in the market, but your customs officer story seems to be another interesting story in behavioural finance and a warning of troubles ahead, isn’t it?

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