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

    Email of the day on the underperformance of the Topix 2nd Section Index

    The de-dollarization in China

    This article by Giancarlo Elia Valori for ModernDiplomacy.eu may be of interest to subscribers. Here is a section:

    As further sanction, the United States has removed Iran from the SWIFT network, the well-known world interbank transfer system, which is also a private company.

    Iran, however, has immediately joined the Chinese CIPS, a recent network, similar to SWIFT, with which it is already fully connected.

    Basically China’s idea is to create an international currency based on the IMF’s Special Drawing Rights and freely expendable on world markets, in lieu of the US dollar, so as to avoid “the dangerous fluctuations stemming from the US currency and the uncertainties on its real value “- just to quote the Governor of the Chinese central bank, Zhou Xiaochuan, who will soon be replaced by Yi Gang.

    In the meantime, Russia and China are acquiring significant amounts of gold.

    In recent years China has bought gold to the tune of at least 1842.6 tons, but the international index could be distorted, as many transactions on the Shanghai Gold Exchange are Over the Counter (OTC) and hence are not reported.

    Again according to official data, so far Russia is supposed to have reached 1857.7 tons.

    Both countries have so far bought 10% of the gold available in the world.

    Meanwhile, Saudi Arabia has already accepted payments in yuan for the oil sold to China, which is its largest customer. This is a turning point. If Saudi Arabia gives in, sooner or later all OPEC countries will follow suit.

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    Netflix Tops Estimates for Quarter, Projects Continued Gains

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

    Netflix Inc. posted its strongest start to a year since the company went public 16 years ago, thanks to strong growth in markets across Latin America and Europe.

    The company added 7.41 million subscribers in the first quarter of the year, according to a company statement Monday, easily topping analysts’ projections of 6.35 million. Netflix now has 125 million paying customers, the most of any online TV network.

    The company, the best-performing stock in the S&P 500 this year, is proving one quarter at a time that investors’ confidence in its online TV service has been justified. Netflix is using its growing subscriber base and deep pockets to poach talent from the biggest program suppliers and build a Hollywood studio for the internet age.

    Shares of Netflix rose as much as 8.3 percent to $333.21 in extended trading after the results were announced. The stock fell 1.2 percent to $307.78 at the close in New York and is up 60 percent this year.

    Netflix said first-quarter profit rose to 64 cents a share, up from 40 cents a year earlier and meeting analysts’ projections of 64 cents. Sales for the quarter grew 40 percent to $3.70 billion, compared with Wall Street projections of $3.69 billion.

     For the current quarter, Netflix is predicting earnings of 79 cents and revenue of $3.93 billion. That compares with analysts’ estimates of 65 cents a share in profit and sales of $3.89 billion.

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    Historical charts of gold

    History is not repeated but it does tend to rhyme. One of the biggest factors behind gold’s advance from the early 2000s was because of a lack on faith in the ability of fiat currencies to hold their value. The growth of markets like China and India then contributed an additional demand driver.

    I am intrigued by the similarity in the saucering base formations gold put in during the early 2000s and what it is doing now. History need not repeat itself but these charts are certainly evidence that this is not the first-time gold has put in a lengthy period of ranging.

    Smaller gold miners like St Barbara, Evolution Mining are outperforming at present as production ramps up and costs are kept under control.

    Chinese fans of banned parody app find each other offline using secret codes

    This article from theVerge.com may be of interest to subscribers. Here is a section:

    Now that a popular parody and meme app in China called “Neihan Duanzi” has been shut down and its social media account on WeChat got deleted, fans of the app are gathering in solidarity offline in subtle protest.

    Drivers are honking at each other in code to indicate that they’re fans, The New York Timesreports. A coded message might be a car honk, followed by a pause, and two more honks.

    This week, while in the US Congress was slowly grilling Facebook CEO Mark Zuckerberg, in China, regulators brought down swift bans on offending news apps and social media apps. On Monday, China banned several big news apps including Jinri Toutiao, owned by Beijing-based Bytedance Technology. Then, the following day, authorities shut down Neihan Duanzi, a platform for users to share parody skits, citing vulgar content on the platform that “triggered strong resentment from internet users.”

    Toutiao’s CEO, Zhang Yiming, issued an apology letter soon after for “publishing a product that collided with core socialist values.” While Toutiao is expected to return online by April 30th, Duanzi has been permanently shut down, according to an April 10th statement from its site. China had previously banned video spoofs and parodies in a March directive, a lot of which appeared on Duanzi.

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    Banks Delivered on Earnings. So What Gives, Investors?

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

    Now interest rates are rising and the money should be rolling in. But the story isn't playing out like the bank executives said it would, and investors are taking notice. The banks don't seem to be getting the benefit from higher interest rates that investors once imagined they would. Yes, interest income rose more than 10 percent in the quarter for JPMorgan and Citigroup, but interest expenses were up in the 50 percent range.

    Investors can point to three reasons for disappointment. The first is loan growth, or rather the lack of it. Low unemployment and a continued rising economy and stock market, especially in an expansion as long as this one, should produce a surge of lending. The tax cut was supposed to amplify that jump. Instead, lending at the largest bank, JPMorgan, rose just 0.2 percent in the first quarter from the previous three months. Wells Fargo's loans dropped by 1 percent, though some of that can be attributed to the bank's particular problems. Citigroup's lending was up 1 percent, but that stemmed largely from a push to expand its credit card business, which hasn't been going so well. In the first quarter, the bank had to increase its provision for losses in it retail-branded cards by 16 percent. Yes, analysts were predicting that lending would be relatively weak, but it was even weaker than many forecast.

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