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

    Brazil Joins Turkey With Stepped-Up Currency Defenses Amid Rout

    This article by Tugce Ozsoy, Julia Leite and Ben Bartenstein for Bloomberg may be of interest to subscribers. Here is a section:

    Turkey and Brazil intensified efforts to protect their currencies from speculative attacks by investors as emerging markets face their biggest test since the 2013 taper tantrum.

    Turkey surprised analysts by tightening monetary policy Thursday for the third time in less than two months, while Brazil’s central bank sold extra foreign-exchange swap contracts for the second time this week, boosting investors’ protection again further declines in the currency. The lira surged and the real briefly pared losses after the actions.

    Thursday’s actions are the latest in a series of efforts to shore up defenses in developing nations as policy makers from Argentina to India try to cope with higher U.S. interest rates, growing budget deficits, accelerating inflation and political instability. Emerging markets haven’t been in this precarious a position since five years ago, when concern the developed world was pulling back on monetary stimulus sparked a rout in stocks and currencies.

    "The failure to act preemptively to address macro imbalances has forced those central banks to take desperate measures to stem the pressure on their currencies," said Delphine Arrighi, a money manager at Old Mutual in London. "The risk is a tightening of financial conditions in EM that could ultimately impact growth negatively."

    Turkey raised its one-week repo rate by 1.25 percentage point to 17.75 percent, a bigger increase than any analyst surveyed by Bloomberg had predicted. The move signaled policy makers trying to clamp down on double-digit inflation are willing to stand up against political pressure to keep borrowing costs low.

    “Is this the start of a new era of Turkish central bank policy -- actually moving ahead of the market? Let’s hope so,”

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    Email of the day on Indian inflation

    Hi Eoin Like most of your subscribers I avidly follow your video commentaries. In yesterday’s broadcast while discussing India I was a little surprised that you did not mention the effects of the Monsoon on the economy which is starting now. Latest predictions are for an above average monsoon which is of course highly significant for food prices and thus for inflation.

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    Email of the day on the first trillion-dollar company:

    Apple market capitalization now is $950 billion and it seems, this time it may be able to hit $1 trillion in the foreseeable future. The stock seems to have broken up out of a six-month range and it has to rise just about 5% to reach $203.45 which will give it $1 trillion capitalization. (Though, Financial Times notes that "pinpointing the moment when Apple will officially become the first trillion-dollar public company is trickier than it may seem, largely because of the company’s mammoth stock buyback programme." $203.45 is based on Apple's latest official share count given in its quarterly filing on April 20.)

    What do you think of this? I also attach recent FT article about Apple business, just in case you find it interesting.

    And thank you once again for your valuable service.

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    Requiem for a construction bubble

    This article by Pete Wargent appeared in Livewire and may be of interest to subscribers. Here is a section:

    Apartment construction to fall sharply
    We have significant evidence to show that new apartment projects are struggling to get finance approved, and therefore total residential construction is expected to slow in H2 2018. Dwellings approved but not yet commenced have already increased to the highest level on record, driven by apartment project approvals

    Apartment default rising
    Liaison with industry contracts indicates that settlement defaults for some of the major developers have increased, particularly in relation to offshore buyers. The resale market is considered healthy enough at this juncture for most developers not to be materially impacted, however there is a strong likelihood that residential construction activity will now fall

    Employment growth to fall
    Construction now directly employs just under 1.2 million persons in Australia, recently capturing a record high in absolute terms and, at 9.6 per cent of employment, the construction sector is at its most bloated in approximately a century4.

    About ¾ of construction jobs are accounted for by the residential sector5. There is significant potential for employment growth to slow sharply over the next 12 months

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    Gold Investing Goes AWOL As Google Searches To 'Buy Gold' Hit 11-Year Low

    Thanks to a subscriber for this article by Adrian Ash which may be of interest. Here is a section:

    The giant SPDR Gold Trust (NYSE Arca: GLD) shrank 4% across May, erasing the previous two months of share issuance growth with the heaviest 1-month outflow since August last year.

    The US Mint meantime reports selling 24,000 ounces of American Eagle gold coins, up sharply from April's 10-year low as dealers re-stocked inventory but still barely half the last 5 years' average for May.

    Here at BullionVault, last month saw the lowest number of new precious-metal investors since May 2014. Down 27.7% from the previous 12-month average, the number of people using our online gold, silver and platinum market for the first time totalled just 57.2% of the last 5 years' average monthly count of new customers.

    Overall, the number of people starting or increasing their gold holdings rose 12.1% from April's 27-month low, but the number of gold sellers on BullionVault rose 22.8% to a 4-month high.

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    Email of the day on managing contango costs

    Based on your very correct predictions, I am enjoying the run on the Nasdaq by owning futures on the Nasdaq 100.   It is time to roll and I notice there is a contango of about 23 on these contracts, giving an annual contango cost of 1.3%.  Small but annoying.

    A very basic question to which I have never been able to find an answer - is there any way to optimize this, for instance by timing the rollover?  I can't find a chart of contangos anywhere.

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