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

    Value Stocks Are in Position to Swamp Growth: Markets Live 2020

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

    * If you’re upbeat about value companies, which are cyclical in nature, then you’re probably optimistic about the global economy. The good news is central bankers are doing everything they can to help the economy get back on track

    * Fidelity’s sector strategist Denise Chisholm favors cyclical stocks now that the Fed and ECB are cutting rates at the same time. “That has happened only about 10% of the time since the ECB’s inception in 1998, and when it has, the U.S. market has surged in the subsequent 12 months. Cyclical stocks have fared especially well under these conditions, outperforming the market 71% of the time.”

    * Even a limited resolution to the U.S.-China trade conflict should help a global economic revival by reducing uncertainty. That should release animal spirits by boosting new orders for
    machinery, industrial supplies and energy. All that would make the case for value stronger than it’s been in years

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    Chevron, Facing Fossil Fuels Glut, Takes $10 Billion Charge

    This article by Christopher M. Matthews and Rebecca Elliott for the Wall Street Journal may be of interest to subscribers. Here is a section:

    “We have to make the tough choices to high-grade our portfolio and invest in the highest-return projects in the world we see ahead of us, and that’s a different world than the one that lies behind us,” Mr. Wirth said.

    Chevron’s shares closed up less than a percentage point at $117.90 prior to the announcement Tuesday. Reaction to the news was muted in after-hours trading.

    The sobering reappraisal by Chevron, one of the world’s largest and best-performing oil companies, is likely to ripple through the oil-and-gas industry, forcing others to publicly reassess the value of their holdings in the face of a global supply glut and growing investor concerns about the long-term future of fossil fuels. Particular pressure is falling on shale producers, especially those focused on natural gas in places like Pennsylvania, which are struggling with historically low U.S. prices caused by oversupply.

    Chevron’s move follows a $5 billion write-down by Spain’s Repsol SA earlier this month and an impairment of $2.6 billion by the U.K.’s BP PLC in October. Industry executives and analysts anticipate that many more oil-and-gas companies will soon write down billions in value to comply with accounting standards because low commodity prices have undermined the economics of many projects.

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    Email of the day on what's next for UK markets:

    UK markets may rise after the election if the Corbyn treat goes away. But wouldn't there be significant differences between indices and companies?

    If the pound rises it hurts profits earned overseas (when converted back into GBP), so the FTSE100 index and many of its companies may do less well than domestically focused companies. The FTSE 250 could out-perform. What's your view?

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    Ramaphosa Cuts Short Trip as Power Crisis Grips South Africa

    This article by Paul Vecchiatto and Liezel Hill for Bloomberg may be of interest to subscribers. Here is a section:

    South African President Cyril Ramaphosa cut short a trip abroad to deal with an escalating crisis at the state power company, which imposed a sixth day of blackouts that threaten to tip the economy into recession.

    The rand declined the most in a month Tuesday as Eskom Holdings SOC Ltd. said there’s a high likelihood of power cuts all week and mining companies including Sibanye Gold Ltd., the world’s biggest platinum producer, temporarily halted operations. Vodacom Group Ltd., the nation’s biggest mobile operator, said the outages are disrupting its service.

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    The Great Moscow Bank Shakedown

    This is an interesting article by Anna Baraulina, Evgenia Pismennaya and Irina Reznik for Bloomberg. Here is a section:

    Cherkalin’s case highlights the economic footprint of the security apparatus forged during Vladimir Putin’s 20 years in power. While it doesn’t show up in official statistics or reports, the reach of the FSB and other law enforcement agencies extends across the business landscape, distorting markets and sapping investment. The vast sums of money at stake go a long way toward explaining why Putin hasn’t followed through on years of pledges to rein in the appetites of his powerful security underlings. “They’ve become one of the key elements of the economy,” says Oleg Vyugin, a former senior official at the Bank of Russia and the Ministry of Finance. “Unfortunately, they’re an element that’s an obstacle to its normal development.”

    For years the banking sector was a gold mine for the security services, combining huge, often-illicit flows of cash with plenty of leeway for officials to either turn the screws or look the other way. The numbers are big even by oil-rich Russian standards. Regulators—including the central bank—say managers stole some 7 trillion rubles ($110 billion) in assets from their banks in the past decade, and the central bank has spent more than 5 trillion rubles on bailouts or to pay off depositors at those that didn’t survive, according to Fitch Ratings. Bankers fleeing the country as their institutions failed have become such a problem that Bank of Russia Governor Elvira Nabiullina asked Putin for the power to stop them at the border. He hasn’t granted it.
     

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