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

    The Seven-Year Auto Loan: America's Middle Class Can't Afford Its Cars

    This article by Ben Eisen and Adrienne Roberts for the Wall Street Journal may be of interest to subscribers. Here is a section:

    Just 18% of U.S. households had enough liquid assets to cover the cost of a new car, according to a Wall Street Journal analysis of 2016 data from the Fed’s triennial Survey of Consumer Finances, a proportion that hasn’t changed much in recent years.

    Even a conservative car loan often won’t do it. The median-income U.S. household with a four-year loan, 20% down and a payment under 10% of gross income—a standard budget—could afford a car worth $18,390, excluding taxes, according to an analysis by personal-finance website Bankrate.com.

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    Xi Says China's Rise Unstoppable in Face of Protests, Trade War

    This article by Annie Lee, Peter Martin and James Mayger for Bloomberg may be of interest to subscribers. Here is a section:

    President Xi Jinping declared that no force could stop China’s rise, exuding confidence during a key
    anniversary as he faced unprecedented challenges from protesters in Hong Kong and Donald Trump’s trade war.

    Speaking at the start of grand parade marking 70 years since the founding of the People’s Republic, Xi called for stability in Hong Kong, unity among Chinese ethnic groups, and the “complete unification” of the country. Xi delivered the remarks at the site where late Communist Party patriarch Mao Zedong proclaimed the nation’s founding on Oct. 1, 1949.

    “Today, a socialist China is standing in the east of the world and there is no force that can shake the foundation of this great nation,” Xi told a crowd of carefully vetted guests under smoggy skies in the center of the capital. “No force can stop the Chinese people and the Chinese nation forging ahead.”
    Xi’s rallying cry came before an hours-long pageant showcasing China’s industrial and scientific achievements, including sophisticated weaponry such as DF-17 ballistic missiles believed capable of circumventing U.S. defense systems.

    The closely scripted proceedings sought to reinforce the strength of a party facing multiple threats, from the slowest economic growth in decades to violent unrest in one of Asia’s top financial hubs.

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    Australia Cuts Key Rate as Global Threats, Unemployment Rise

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

    “Forward-looking indicators of labor demand indicate that employment growth is likely to slow from its recent fast rate,” Lowe said. “The economy still has spare capacity and lower interest rates will help make inroads into that.”

    Meanwhile, the clouds gathering offshore are increasingly menacing: Global growth is slowing, dragged down by the protracted U.S.-China trade conflict; financial hub Hong Kong is racked by protests; key trading partners Japan and South Korea are locked in confrontation; Brexit is looming; and to cap it all, President Donald Trump could face impeachment proceedings.

    Against that backdrop, Lowe wants to stoke the local economy hard to try to ensure its resilience. At 0.75%, the cash rate is close to the lower bound that he and Deputy Governor Guy Debelle estimate is around 0.25%-0.5%. Both have previously said they don’t expect to have to turn to bond buying and other alternative measures, as they wait and gauge the success of existing stimulus.

    “The Reserve Bank is likely to cut again early next year,” said Callam Pickering, economist at global jobs site Indeed. “Bank officials are reluctant to discuss quantitative easing but it becomes a real possibility the closer we come to a cash rate of 0%.”

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    Bunging the EU billions of pounds for free shows the toxic ineptitude at the heart of May's Brexit deal

    This article by Robert Rowland (MEP for the Brexit Party) for the Telegraph may be of interest to subscribers. Here is a section:

    If you owned 16.1pc of the European Investment Bank (EIB) would you give it away free to the other wealthy members as you leave the EU? 

    That’s what Philip Hammond, the former chancellor and his team of civil servants have done.
    Hidden in Theresa May’s discredited Withdrawal Treaty, ex-Chancellor Philip Hammond (then also on the Board of Governors of the EIB) gifted it €7.5bn of taxpayer's money for no concessions.  He then accepted a 12-year repayment of €3.5bn with no interest, from a bank making €5bn profits in just the last two years.

    The ultra-Remain ex-chancellor was prepared to leave the UK credit card open over a decade to ensure the EIB can continue to lend on non-commercial terms to the EU 27 at UK taxpayer risk.

    The UK is also treaty-bound for another €36bn of “callable capital”.  This is money we will pay to underpin the EIB if the eurozone collapses. Additional toxic risk exposure comes through the EU Budget which guarantees €500bn of EIB loan note risk that we would be exposed to during any “transition”. It is a truly toxic trick, conjured up by Hammond and his team. 

    But how did this happen?
    Under May’s Withdrawal Treaty, the UK’s initial EIB capital contributions, mostly given in 1973, of €3.5bn – in today’s money roughly €35bn – can be repaid in 12 instalments of around €300m a year. 

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    DRAM Production Growth Could Be Less Than Previously Forecast

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

    When asked about the factors driving Micron's hiking of its calendar 2019 outlook for NAND demand growth -- Micron now expects industry-wide NAND bit demand to grow by a low-to-mid 40s percentage, up from prior guidance for mid-30s growth -- Zinser was quick to note the impact of rising smartphone storage capacities in the wake of healthy price declines.

    And in line with earnings call comments made by CEO Sanjay Mehrotra, Zinser noted that lower NAND prices are lifting solid-state drive capacities and (in what's a negative for hard drive suppliers) attach rates. He indicated the data center is an area where price elasticity is especially boosting NAND demand.

    In addition to hiking its NAND demand guidance, Micron cut its NAND industry supply (output) guidance amid ongoing capital spending cuts, forecasting NAND bit supply will only grow by about 30% this year. For 2020, Micron is guiding for NAND bit demand to grow by a high-20s to low-30s percentage, and for supply growth to be "somewhat below" demand growth.

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    The good news is the same as the bad news: This market looks just like 1998

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

    A yield curve inversion? International weakness triggering a broad manufacturing slowdown? A potentially overconfident consumer and a Federal Reserve caught up in a brief interest-rate cutting cycle, regardless of steady GDP growth? And, of course, an impeachment inquiry.

    Does this sound like a recipe for a strong fourth-quarter rally?

    Well, in 1998, it sure was, says BTIG strategist Julian Emanuel, who points out the similarities between then and now are “too striking” to ignore.

    In our call of the day, he suggests the pent-up caution that’s “bordering on pessimism” due to mounting political tensions at home and abroad could lead to an end-of-year run should outcomes prove more positive than expected.

    “Similar to 1998, where stocks rallied for 18 months (advancing 68%) from the cyclical low to the point of maximum public bullishness, the 3/2000 ‘Tech Bubble Top,’” Emanuel explained in a note, “we expect the current four-month S&P 500 trading range to resolve with new all-time highs as the prospect of higher interest rates... results in fund flows to stocks and the public’s eventual embracing of the ‘most hated bull market of all-time.’”

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    Gold Slumps to an Eight-Week Low as Dollar, U.S. Stocks Rall

    This article by Yvonne Yue Li for Bloomberg may be of interest to subscribers. Here is a section:

    A strengthening dollar and the rally in equities is spoiling the party for gold bulls. Gold futures tumbled to the lowest in almost eight weeks after the Trump administration partially refuted a report that it would target Chinese capital market. Speculation is mounting that Washington issued the statement to encourage Beijing to move closer to signing a deal with Washington, a strategist at R.J. O’Brien & Associates said.

    Monday’s slump trimmed the precious metal’s fourth straight quarterly gain, the longest winning streak in eight years. Bulls are retreating after taking their net-long position in gold to the highest in government data going back to 2006.

    The strength in the greenback “is the biggest headwind for gold right now,” Phil Streible of RJO said by phone from Chicago.
     

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