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

    Week in China, Ant problem

    Thanks to a subscriber for this article focusing on Chinese overseas acquisitions which may be of interest. Here is a section:

    Email of the day on my personal portfolio

    (Un)Steady as She Goes

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

    In weighing the two sets of forces that bear upon our clients’ portfolios, we draw the same conclusion now that we have since November 2013when US equities entered the ninth decile of valuations: that clients should remain fully invested in equities and beta-driven assets despite high valuations. We show why we believe US equities are not yet in bubble territory, and are driven instead by underlying earnings and continued economic growth. We also analyze the current low level of inflation volatility and its impact on equity valuation metrics. Finally, we provide our expected returns for 2018 and the next five years, including our tactical asset allocation recommendations, and dispel the persistent myth of mean reversion in equities and fixed income yield levels. We conclude with our key takeaways.

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    Doubling of U.S. Bond Supply Seen as a Threat to Global Rally

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

    A “dramatic” increase in U.S. bond supply over the next year risks unhinging global markets from their bullish foundations, warns Torsten Slok at Deutsche Bank AG.

    The supply of U.S. government debt will almost double to $1 trillion this year to finance a widening budget deficit as the Federal Reserve whittles down its holdings. Unless new buyers emerge, the overhang could be far-reaching.

    “If demand for U.S. fixed income doesn’t double over the coming years then U.S. long rates will move higher, credit spreads will widen, the dollar will fall, and stocks will likely go down as foreigners move out of depreciating U.S. assets,” the chief international economist at the German lender wrote in a note Tuesday. “And this could happen even in a situation where U.S. economic fundamentals remain solid.”

    Those fears aren’t shared widely on Wall Street, where spreads on corporate bonds have sunk to 2007 lows and bullish indicators abound. The rally in credit appears relentless, retail demand for bonds is insatiable and tax cuts may reduce corporate borrowing.

    Commercial banks, emerging-market reserve managers and pension funds are all set to plug the $1.1 trillion hole in global bond demand left by central banks this year, according to JPMorgan Chase & Co.

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    Email of the day on India and governance

    I'm not sure whether you include 'The Economist' in your regular reading material. If so, you will have noticed that they have recently published several articles critical of India and in particular, critical of the BJP and of Modi. In last week's edition, a lead article plus a 'Briefing' suggested that wealth in India was confined to very few people and to get into the top 1% of earners you only needed an income US$20,000 a year. The articles were critical of infrastructure, of education, of the bureaucracy and of both the pace and direction of reform. They concluded that the Indian economy may be running out of puff and wondered from where it might get its second wind. As a consequence of an Asian-centric background, I have reasonably large weightings in China, India and Japan. I have no intention of reducing exposure to India (nor to China or Japan) but I would be interested in your views on The Economist's assertions particularly given your high regard for Modi and his government. All best.

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    Email of the day on Eurozone underperformance

    It looks to me that European shares are lagging more and more the US and Far east shares. with this euro/usd head storm instead of headwind Europe will follow the USA a little on the way up but I fear will probably follow the USA every step of the way down when this market eventually starts to correct. I fail to see the reasons for this strong euro. could you please give your expert opinion?

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    South African Police Reported to Get Gupta Arrest Warrant

    This article by Paul Vecchiatto for Bloomberg may be of interest to subscribers. Here it is in full:


    South Africa’s Hawks police unit has obtained an arrest warrant for at least one of the members of the politically connected Gupta family, City Press reported.

    The unit is now waiting for prosecutors at the National Prosecuting Authority to sign the warrants so that the arrests can be made, the Johannesburg-based newspaper reported on its website, citing an official at the Hawks it didn’t name. The official couldn’t say which of the three Gupta brothers -- Ajay, Atul or Rajesh -- would face arrest.

    Former Public Protector Thuli Madonsela had ordered an inquiry into allegations that the Guptas may have influenced the appointment of cabinet members in President Jacob Zuma’s administration and received special treatment for a coal business linked to the family and one of the president’s sons.

    This was part of Madonsela’s report about state capture, a term used to describe influence over government appointments and the awarding of state contracts.

    Zuma and the Guptas have denied wrongdoing.

    “We have not applied for an arrest warrant against any member of the Gupta family,” Hawks spokesman Brigadier Hangwani Mulaudzi said by phone from Johannesburg. “We are investigating a number of cases related to the issue of state capture, some of which have passed their stage-one levels, and we are awaiting direction from the National Prosecuting Authority.”

    Ajay Gupta didn’t immediately respond to a phone call and text message seeking comment.

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    On Target January 12th 2018

    Thanks to Martin Spring for this edition of his report which may be of interest to subscribers. Here is a section on supply: