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

    Watch CNBC's full interview with Ray Dalio on reforming capitalism

    I found this interview to be particularly illustrative of the resistance to change or to even a willingness to discuss alternatives in the system while there is no urgency to do so.
     

    FAANG's $800 Billion Rally Has Mom and Pop Investors Cashing Out

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

    After a three-month rally that’s added more than $800 billion to the value of FAANG stocks, individual investors have decided it’s time to cash out of the high-flying names.

    Retail clients at brokerage TD Ameritrade increased their overall exposure to equity markets for a second consecutive month in March, yet they sold shares of Amazon Inc., Facebook Inc., Netflix Inc. and Apple Inc. All four members of the so-called FAANG cohort -- which also includes Google parent Alphabet Inc. -- have gained at least 35 percent since stocks bottomed on Christmas Eve, one-and-a-half times the S&P 500’s return.

    “Taking profits isn’t the worst idea in the world,” said Joe “JJ” Kinahan, the chief market strategist at TD Ameritrade, noting clients had been buyers of Amazon for eight straight months while also showing immense interest in Netflix in recent periods. “What it makes me wonder is, they were the momentum stocks, so where do we get our new momentum?”

    It’s possible the answer to that question is cannabis companies, according to Kinahan. While clients of Omaha, Nebraska-based TD Ameritrade shunned the FAANG names last month, many were buyers of Aurora Cannabis Inc. and CVS Health Corp., which recently announced that it will begin selling CBD-infused products at more than 800 of its stores. Millennial clients also scooped up shares of Canopy Growth Corp., according to a statement from TD Ameritrade.

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    Italy Raises Deficit Target, Risking Fresh Conflict With The EU

    This article by Chiara Albanese, John Follain and Lorenzo Totaro for Bloomberg may be of interest to subscribers. Here is a section:

    The wider deficit forecast could revive tensions with the Commission after months of wrestling at the end of 2018 which resulted in a promise from Italy to stick to a deficit of 2.04 percent of GDP. With growth lower than expected, the money to keep the promise isn’t forthcoming. Nor is the government keen on measures that would dampen growth, with Finance Minister Giovanni Triastating recently that restrictive fiscal moves would be “absurd.”

    Italy stocks extended losses after the report, with the FTSE Mib index down 0.4 percent at 3.00 p.m. in Milan. The spread between Italian and German 10-year bonds widened by 4 basis points.

    "The deficit is the most thorny issue for Italy and could spark tensions with the European Union," said Vincenzo Longo, an analyst of IG Markets in Milan. "We are expecting negative growth in the first part of the year and the numbers the government is going to debate seem too optimistic. The government isn’t likely to push the issue however until after the European vote in May."

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    Israeli elections primer: Final polls and what they mean

    This article by Natan Sachs for the Brookings Institute may be of interest to subscribers. Here is a section:

    The polls also suggest a great deal of uncertainty: Not only is the pro-Netanyahu advantage modest, but several small parties on both right and left have seen their vote totals hover around the electoral threshold for entrance into the Knesset. If they fail to clear 3.25 percent (nearly 4 seats), their votes would be discarded, potentially upending the equilibrium between the left- and right-wing blocs.

    For Netanyahu, this election presents not only a battle for his political life, but possibly a battle for his personal freedom. The Israeli attorney general has decided to indict Netanyahu in three cases, including one charge of bribery, pending a hearing with the prime minister and his lawyers in July. Bibi’s lawyers face the challenge of undoing what months and years of investigations have presented to the attorney general (a Netanyahu appointee). Barring their unlikely success, Netanyahu will need a coalition willing to keep him in power through one of two unpopular avenues. First, he could maintain the support of such a coalition while on trial for serious crimes (he would only have to resign by law if convicted). Or, better yet for Netanyahu, he could form a coalition willing to pass legislation granting the prime minister immunity from prosecution. With all these uncertain factors at play, it is possible that we see another round of elections before too long—maybe even within the year.

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    Big-Data Infusion for CPI Starts With Apparel

    This research note by Jeff Kearns for Bloomberg may be of interest to subscribers. Here is a section: 

    The BLS change may add volatility in clothing prices, but the impact on the main index will be relatively small, subtracting maybe 0.1 percentage point from the annual CPI rate, according to Michelle Girard, chief U.S. economist for NatWest Markets Securities and the most accurate CPI forecaster in Bloomberg’s latest ranking.

    “While, theoretically, this shift should not introduce a downward or upward bias in the data, we believe that prices captured using actual transactions data are more likely to be biased lower,” Girard wrote in a report. “Transactions data could capture lower price points from a flash sale that a data collector may not have observed.”

    Goldman Sachs Group economist Spencer Hill estimates the change could reduce core inflation in March by around 0.05 ppt from the monthly change. Omair Sharif, senior U.S. economist at Societe Generale, also sees a possible drag from apparel. The BLS plans to collect more alternative data directly from companies, an avenue that could ultimately account for almost 32% the index, Konny and her colleagues outlined in a February paper. Examples include scraping fuel prices from the GasBuddy website.

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    Africa's emerging economies to take the lead in consumer market growth

    This article by Landry Signé for the Brookings Institute may be of interest to subscribers. Here is a section:

    One in five of the world’s consumers will live in Africa by the end of the next decade, and more and more of these people will fall under the category of affluent or middle-class. Growing discretionary incomes will lead to higher demand for high-quality, niche, and foreign-produced goods. Urbanization, such as in Nigeria where eight cities already host populations over 1 million people, promises to increase competition for formal retail centers and the development of efficient production and distribution chains. Rebounding oil prices in Algeria, Angola, Nigeria, and Egypt may contribute to an increased market share for luxury goods. Though, ultra-high net worth individuals(whose net assets exceed $30 million) reside throughout the continent—in South Africa, Egypt, Nigeria, Kenya, Tanzania, Ethiopia, and Morocco. Growth in GDP per capita will lead to greater purchasing power among these classes of the population, and luxury goods retailers should look to the continent for entry points.

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    BJP promises a collateral-free credit & Rs 20k cr seed startup fund in its 2019 manifesto

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

    BJP has promised a new scheme to provide collateral-free credit of up to Rs 50 lakh for entrepreneurs in its manifesto for 2019 elections. It said that 50% of the loan amount will be guaranteed towards female entrepreneurs, while 25% will be for male entrepreneurs. 

    BJP has also promised to create a seed startup fund of Rs 20,000 crore to back early-stage companies. It's worth noting that Prime Minister Narendra Modi had earlier announced a credit guarantee fund with a corpus of Rs 2,000 crore to provide funding facilities to startups in the country, as part of the Startup India action plan in January 2016. 

    The BJP-led government had also announced a Rs 10,000-crore fund of funds managed by the Small Industries Development Bank of India (SIDBI) in 2016. However, according to the Startup India status report, less than 20% of the corpus has been allocated to alternative investment funds as of November 2018, with the total commitment standing at Rs 1,611 crore. The report also noted that around 170 startups have received funding from these investments funds. 

    In its manifesto, BJP has envisioned facilitating setting up of at least 50,000 new startups and 500 new incubators and accelerators by 2024. It has also promised to create 100 innovation zones in urban local bodies. 

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    How to invest in real estate and pay nothing in capital gains

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

    The Tax Cuts and Jobs Act has created a new tax break that dangles the potential of a 0% capital-gains tax on certain investments in economically distressed areas. But you’ll need to wait 10 years to claim it.

    These new investments are funds tied to Qualified Opportunity Zones — approximately 8,000 areas around the country, both urban and rural, that local officials have designated as most in need. Qualified investments can be in real estate — commercial property is an early favourite — as well as small manufacturers and service businesses.

    Tax breaks on investments in Qualified Opportunity Zone funds or businesses begin kicking in after five and then again after seven years; but the most generous terms — that 0% rate — are for investments held for at least 10 years.

    And

    If a taxpayer keeps the investment in the QOZ fund for at least 10 years, the appreciated capital gains on the QOZ fund investment becomes tax-free income when the investment is sold or exchanged. The long-deferred capital-gains taxes owed on the investment rolled into the QOZ will still have been paid once Dec. 31, 2026 rolls around, as illustrated in the previous example.

    It is only the appreciated value of the QOZ investment that is tax-free, and there is no limit on the amount eligible for this tax break. If the investment in the earlier example was sold for $600,000 after 10 years, no taxes would be owed on $300,000. But deferred capital gains would have been paid on $170,000.

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