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

    Ford Leads Truck Boom as U.S. Auto Sales Seen Beating Estimates

    This article by Jamie Butters, Keith Naughton and David Welch for Bloomberg may be of interest to subscribers. Here is a section:

    Ford F-Series deliveries surged 16 percent for their best October since 2004, and the automaker’s total U.S. sales beat analysts’ estimates. Demand also jumped for GM’s Chevrolet Silverado and GMC Sierra, Fiat Chrysler Automobiles NV’s Ram pickup and Nissan Motor Co.’s Titan full-size trucks.

    The strong showing by pickups is a positive indicator both for carmakers’ profits and the U.S. economy. Companies added more workers than forecast to U.S. payrolls last month as employment in the construction industry -- a sector closely tied to truck sales -- climbed to the highest in more than a decade. Automakers also are benefiting from consumers in Texas, the nation’s top truck market, continuing to replace vehicles damaged by Hurricane Harvey.

    “We did see continued hurricane replacement at the beginning of the month,” Michelle Krebs, an analyst at car-shopping website Autotrader, said by phone. “The economic factors are also in trucks’ favor. People are back to work and construction activity is up, which is good for truck sales.”

     

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    Email of the day on low interest rates driving the stock market

    I was listening to a podcast at Epsilon Theory and they were discussing their observation of S&P EBITDA growth being significantly lower than Net Income growth. This would signify that the artificially low interest rates being the prime driver of earnings which poses a scary scenario. I can't seem to find an updated chart. Can you add to the Chart Library? Thank you!

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    BOE Rate Increase May Not Be Enough to Revive Brexit-Vexed Pound

    This article by Charlotte Ryan for Bloomberg which offers a summary of thinking on the Pound heading into the BoE meeting on Thursday. Here it is in full: 

    The Bank of England may increase interest rates this week for the first time in more than a decade, but that won’t be enough to buoy the pound, according to strategists.

    Markets almost fully price in a 25-basis-point increase in the BOE’s key rate on Thursday, meaning investors are ill- prepared for a disappointment. Should Governor Mark Carney and fellow policy makers keep policy on hold, or deliver a one-time hike that merely reverses the emergency cut after the Brexit vote, sterling could add to the last two weeks’ declines, according to Ross Walker, an economist at NatWest Markets.

    The U.K. currency has declined 1.8 percent against the dollar during October as concerns about the lack of progress in Brexit negotiations weighed on investor sentiment. It snapped a two-day decline on Monday, gaining 0.3 percent to $1.3161 as of 9:11 a.m. The yield on 10-year U.K. government bonds fell 1 basis point to 1.34 percent.

    “Sterling needs a hawkish hike in order to rally,” said Walker. “The pound could come under pressure” otherwise, he said.

    While money-market pricing suggests an 89 percent probability that the Monetary Police Committee will tighten on Thursday, banks including Credit Suisse Group AG and Barclays Plc expect a “one-and-done” move. Investors will look to the language of the MPC minutes, vote split and the quarterly Inflation Report to gauge the policy outlook further ahead.

    “I’d prefer to go into the meeting” with a short position on sterling, said Steven Barrow, head of currency strategy in London at Standard Bank. “There is a reasonable enough chance they don’t raise rates. We’ll have to see what comes out from the statement the bank puts out.”

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    The Millennial State of Mind

    Thanks to a subscriber for this report from Bain and Co. which focuses on the luxury goods sector and may be of interest. Here is a section: 

    The luxury industry has entered a “new normal,” characterized by lower growth. To succeed in the next decade, brands will need to refocus on their customers to better anticipate and cater to their needs. The younger generation will be key: New research by Bain & Company and Farfetch estimates that millennials will represent 40% of the global personal luxury goods market by 2025.

    • The characteristics of millennial behavior are already seeping through to older generations - which accounted for 73% of luxury purchases in 2016.

    • This generates a widespread “millennial state of mind” that requires brands to act. It is characterized by three main traits:
    – Uneasiness. Digital interaction with peers is on the rise when choosing to purchase a product.
    – Urgency. “I want it fast and I want it now.” The time to make a purchase is decreasing, with younger customers taking one-third less time than older customers to make decisions.
    – Uniqueness. Consumers now expect brands to align with their personal values and passions.

    • Today, 70% of luxury purchases are influenced by online interactions, which means at least one digital interaction has taken place with the brand or the product before those purchases.
    – 14% of consumers from the ages 18 to 24 complete their first luxury purchase online. – Digital traffic to websites of luxury brands is double the amount of store visits.

    • By 2025, online and monobrand stores will become the two largest channels for luxury sales, each accounting for 25%.

     

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    Bitcoin Futures Could Open Floodgates Into Crypto Markets

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

    Bitcoin is spiking to a record after CME Group Inc. said it’s planning to launch bitcoin futures as the move could open the floodgates of investors who have been standing on the sidelines as bitcoin soared over 500 percent this year.
    The cryptocurrency jumped as much as 5.2 percent to $6,416.39 after the CME said it will start offering trading the derivatives in the fourth quarter. Futures will be settled in cash based on a bitcoin index that CME started calculating in November. 

    The move comes after the Chicago Board Options Exchange said in August it’s exploring bitcoin derivatives opportunities, while the Commodity Futures Trading Commission in July registered cryptocurrency trading platform LedgerX as the first federally regulated cryptocurrency derivatives exchange and clearinghouse.

    With bitcoin futures becoming mainstream, the next logical step seems to be a bitcoin exchange-traded fund, as the Securities and Exchange Commission had cited the lack of derivatives as one of the reasons for rejecting approval of the funds. ETFs and derivatives are likely to make bitcoin trading a lot more palatable for hedge funds and mutual funds, as the instruments will allow them to hedge for the digital asset’s volatility and avoid some of the hassles of investing in bitcoin directly.

     

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    Facebook, Twitter, Google to Tell Congress How Russia Meddled

    This article by Steven T. Dennis, Sarah Frier and Gerrit De Vynck for Bloomberg may be of interest to subscribers. Here is a section:

    Lawmakers are focused on whether there was any overlap between the Trump campaign and the massive Russian effort to flood Americans’ social media feeds with fake news and fake ads.

    Facebook plans to tell lawmakers that 80,000 posts came from 470 fake Russian accounts and that it closed 5.8 million fake accounts from all sources in October 2016 alone. Fake Russian accounts on Facebook’s Instagram posted an additional 120,000 pieces of content, the company will tell lawmakers.

    At the same hearing, Twitter Inc. will say it has suspended 2,752 Russian-linked accounts, far more than it previously disclosed, according to testimony obtained by Bloomberg News. Alphabet Inc.’s Google plans to say the impact on its sites was much smaller, with $4,700 worth of Russian-linked ads, compared to the $100,000 Facebook disclosed.

     

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    Japan is the 'most under-owned stock market on the planet,' and David Rosenberg says buy it

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

    "The one part of the world which looks very good to me right now, a great turnaround story that's under-owned, is Japan. The Nikkei is breaking out," said Rosenberg said Friday on CNBC's "Trading Nation."

    He added: "I think even a child could see that the 30-year secular downtrend has been broken over the course of the past couple of months."

    The Nikkei 225, Japan's benchmark stock index, has soared nearly ten percent over the past three months. It's now up 15-percent so far this year. But it's still about 56 percent way from its all-time high hit in 1990.

    According to Rosenberg, Japan has one of the few markets that isn't trading expensively to its historical price earnings ratio — noting "almost everybody else in the world is." 
     

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