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

    Australian dollar soars to two-year high on RBA minutes

    This article by Jens Meyer for the Sydney Morning Herald may be of interest to subscribers. Here is a section: 

    The currency staged a remarkable rally following the release of the RBA's minutes in which the board stuck with its "glass half-full" view of the local economy, repeatedly underlining the "positives" in the outlook. But it also surprised by discussing the level of an appropriate neutral interest rate, which could be seen as a sign the central bank is mulling a rate rise.

    Officials revealed that they now believe a cash rate of 3.5 per cent - well above today's 1.5 per cent - would be a rate level that neither stimulates the economy nor holds it back.

    In reaction, the Aussie dollar jumped more than 1 US cent to as high as US79.04¢, its highest level since May 2015, after rallying 3 per cent last week.


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    Copper price jumps on gangbusters China growth

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

    Copper futures trading on the Comex market in New York jumped on Monday on renewed optimism about economic strength in top commodity consumer China.

    Copper for delivery in September jumped to a high of 2.7375 a pound (just over $6,000 a tonne) in lunchtime trade, up 1.7% on the day to the highest level since end-March. LME copper's 2017 year to date gains in percentage terms are now within shouting distance of 10%.

    Commodity-intensive sectors continue to expand at a faster rate than the broader measure of industrial production

    The economy of China, responsible for nearly half the world's consumption of copper, expanded at an annual rate of 6.9% in the second quarter against expectations of a slight decline and at a quicker pace than Beijing's own target of 6.5% growth for 2017.

    In seasonally-adjusted quarter on quarter terms, growth was even more significant, picking up from 1.3% to 1.7%. If the trend continues, this year would be the first time since 2010 that the Chinese economy grew faster than the year before.

    Industrial production data for June released today also pointed to a significant improvement. Growth in industrial output picked up from 6.5% year on year to 7.6% led by greater electricity and steel production. Bloomberg consensus forecasts pointed to no acceleration for Chinese industrial output.


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    What If Big Oil's Bet on Gas Is Wrong?

    This article by Jack Farchy and Kelly Gilblom for Bloomberg may be of interest to subscribers. Here is a section:

    Driving the shift has been a sharp decline in the cost of building new renewable power –- which, unlike generating electricity from coal or gas, is almost free to run after the initial capital investment has been made.

    “Wind and solar are just getting too cheap, too fast" for gas to play a transitional role, said Seb Henbest, lead author of the BNEF report.

    The consultant estimates that onshore wind and solar power are already competitive with coal and gas in Germany, and that within five years they will be cheaper to build than new coal and gas plants in China, the U.S. and India. By the late 2020s, it will start to even be cheaper to build new onshore wind and solar power than run existing coal and gas plants.

    The trends that are undercutting optimism about the global gas outlook are already playing out in Europe. Natural gas demand remains well below a 2010 peak, as greater energy efficiency, rapid adoption of renewables and resilient coal consumption cut into its market share.

    The IEA does not see European gas demand returning to its 2010 high. In its base case scenario, European gas demand would be at the same level in 2040 as in 2020.


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    Investment Strategy by Jeffrey Saut

    Thanks to a subscriber for this article from Raymond James which may be of interest. Here is a section:

    Since meeting him, Leon and I have exchanged many letters, reports, thoughts, conversations, etc. I received this one from him last week:

    Hi, Jeffrey,
    I calculate a three week moving average of the Bullish sentiment. Currently, it is abnormally low and [that’s] very bullish. Although long retired, many fund managers in Europe, Asia, and North America still call me and seek my view of the market. I can report to you that worldwide, investors are skeptical and fearful. Most are sitting on a mountain of cash. As you know, that is very bullish. My view remains that this great bull market is only in the early stages of the second leg. The first leg was from October 10, 2008 and ended in May, 2015 which was driven by an easy/accommodative monetary policy. The second leg started in February, 2016 which is always the longest and strongest as it is driven by improving economic conditions (due to the monetary stimulation of the past eight years) and accelerating earnings momentum which is what investors are seeing. As you know, since early last year, I’ve been of the view that investors are witnessing the biggest bull market on record and the end is nowhere near in sight. Also, I felt that when this bull market ends, it will be the wildest and wooliest speculative “blow-off” in history. There has never been so much liquidity created as in this cycle. Also, in my 55 years in this business, from a chart standpoint, I have never seen so many humongous bottoms in so many different industries as in this cycle. Many are 15 years and longer. In the 50s, it was mostly in anything electric/electronic and in the 90s, it was mostly high tech. In this cycle, except for the resource sectors, big bottoms are found everywhere. One of technical prerequisites for a long, sustained bull market is that many stocks must trace and break out of long bases. Putting my money where my mouth is, I own a few of the small and micro caps in the Biotech/Health Care area.


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    Mr Grey, Mr Blond and Mr Brexit: battle of the big guns

    This article from The Sunday Times over the weekend may be of interest to subscribers. Here is a section:

    It is a measure of the prime minister’s weakness that the Davis-Johnson rivalry is not even the most serious row tearing the government apart. Last Tuesday’s cabinet meeting — and a second “political cabinet” that followed it — were the most fractious gathering of May’s top team since she took power a year ago last week.

    In both meetings ministers became enraged by the behaviour of Philip Hammond, the chancellor, and what his colleagues regard as his “tin-eared” approach to the election result.

    Since June 8 cabinet ministers have been lobbying for the government to end the 1% cap on increases in public sector pay to placate voters sick of austerity who flocked to Jeremy Corbyn’s Labour Party. His insistence on financial discipline despite a fresh onslaught on Tuesday drew a “collective intake of breath” from other cabinet ministers. He singled out train drivers as “ludicrously overpaid”.

    The chancellor, who has a reputation for condescending to his colleagues, got into hot water when he sought to suggest that newly automated trains would help stamp out strikes because the overpaid men could be replaced by women.


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    Bitcoin Split Risks Increase

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

    As such, we are likely to have at least two bitcoins on August the 1st, but there may be even more. Bitcoiners, therefore, are strongly advised to not transact on that day until the situation becomes more clear.

    Once the chain does split, BitcoinABC will probably be listed in at least one exchange, thus a period of high volatility and perhaps even trading frenzy should be expected as the market passes judgment on the value of the bitcoins.

    Eventually, the dust will likely settle with one coin probably gaining some 80% or so of the current bitcoin value, while the minority coin can continue operating in their own network, free to follow their own roadmap and vision.

    Which one will be which only the free market can tell us sometime next month as bitcoin finally makes a monumental and probably highly historical decision, at least for this space.


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    Sweeping Wildfires Burn Canada's Timber as Lumber Prices Surge

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

    Sweeping wildfires across Canada’s British Columbia are threatening timber supplies and sending lumber prices surging.

    More than 375 fires have swept across the province, burning forests and forcing sawmills to shut down or evacuate. While the impact on supplies is minimal so far, there are concerns that the blazes will continue to spread amid hot, dry conditions, according to Paul Quinn, an analyst at RBC Capital Markets in Vancouver. Lumber futures on Monday jumped by the exchange limit in Chicago to the highest in more than two months.

    “Forests are getting burnt, so that has a supply impact,” Quinn said by telephone. “The worry is they’ll continue to grow and get bigger,” he said, referring to the fires.

    Last week, West Fraser Timber Co. suspended operations at three lumber mills that represent annual production capacity of 800 million board feet of lumber and 270 million square feet of plywood. Norbord Inc., the largest North American producer of oriented strand board used in residential construction, has also suspended production at its mill in 100 Mile House in central B.C.

    On the Chicago Mercantile Exchange, lumber futures for September delivery rose by the $10 trading limit to $387.30 per 1,000 board feet at 11:37 a.m. local time. That’s the highest price for a most-active contract since May 9. Aggregate trading for this time is 44 percent above the 100-day average, according to data compiled by Bloomberg.

    Cash prices for some grades of lumber rose 7 percent last week, Quinn of RBC said. “We’re at the seasonal peak in construction activity, so anything that reduces supply will create some pricing tension,” Mark Wilde, an analyst at BMO Capital Markets in New York, said in an email.


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