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

    The Great Rotation May Finally Be at Hand

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

    George Pearce’s, a macro strategist with Bespoke Investment Group LLC, said: “Higher risk-adjusted returns for stocks should draw inflows, and we know from our work that Americans are relatively unexposed to the market.”

    Companies have been the main buyer of U.S. equities since the post-crisis low, while households and institutions have divested, according to Credit Suisse. The outperformance of bonds since the financial crisis, risk aversion and regulations unfriendly to equities have helped create a preference for fixed income.

    Global bond funds -- which include government and high-yield obligations -- have seen $1.3 trillion of net inflows since 2009, while stocks have taken in less than half of that at $600 billion, according to Jefferies Group LLC, citing EPFR Global data, which reflect holdings among mutual and exchange-traded funds. 

    In the first half of the year, bond funds took in $204 billion while stocks saw $167 billion of inflows. A $107 billion injection into fixed-income in the second quarter was the highest on record going back to 2002, Jefferies said. This happened despite fears of higher global yields.

    This section continues in the Subscriber's Area.

    China's Got a Huge Artificial Intelligence Plan

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

    "The positive economic ripples could be pretty substantial," said Kevin Lau, a senior economist at Standard Chartered Bank in Hong Kong. “The simple fact that China is embracing AI and having explicit targets for its development over the next decade is certainly positive for the continued upgrading of the manufacturing sector and overall economic transformation."

    Chinese AI-related stocks advanced Friday. CSG Smart Science & Technology Co. climbed as much as 9.3 percent in Shenzhen before closing 3.1 percent higher, while intelligent management software developer Mesnac Co. surged 9.8 percent after hitting the 10 percent daily limit in earlier trading.

    AI will have a significant influence on society and the international community, according to an opinion piece by East China University of Political Science and Law professor Gao Qiqi published Wednesday in the People’s Daily, the flagship newspaper of the Communist Party.

    PwC found that the world’s second-biggest economy stands to gain more than any other from AI because of the high proportion of output derived from manufacturing.

    This section continues in the Subscriber's Area.

    Another Golden Age for Corporate Technology

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

    Even consumer companies are trying to make businesses foot at least some of their bills. Instacart is figuring out ways to make money from large food brands such as Red Bull, and not only from consumers reluctant to pay delivery fees. Airbnb and Uber want more bookings from people traveling on the corporate dime.

    Some of this strategy is about squeezing revenue from as many sources as possible. But it also highlights the limits of tech products and services just for individuals. We the people are penny-pinching jerks. Businesses watch their bottom lines, too, but they are often willing to pay for software and gadgets that give them an edge.

    That's why Intel, Oracle, International Business Machines and the early internet were built on sales to governments, spies, big corporations and others that wanted cutting-edge stuff and had the budgets to support its development. It feels a little like that again now. I think I'll stream some Pink Floyd.


    This section continues in the Subscriber's Area.

    Market Know-How

    Thanks to a subscriber for this report from Goldman Sachs Asset Management which may be of interest. Here is a section:

    Bitcoin Soars as Upgrade Backers Hoist Beers to Armistice

    This article by Yuji Nakamura and Lulu Yilun Chen for Bloomberg may be of interest to subscribers. Here is a section:

    SegWit2x is essentially a compromise between two main competing camps. One proposed a direct approach, seeking to increase the block size. The other, a group of developers known collectively as Core, pushed for a long-term solution by moving some data outside of the main network, a scheme called SegWit that had been resisted by miners because it also could diminish their influence. In the end, the miners agreed to adopt SegWit, but also increase the block size to 2 megabytes.

    The upgrade isn’t final. The BIP91 lock-in has a grace period of about two days, during which miners will prepare to activate the software. It will then take about two weeks for SegWit to be fully adopted. Developers still warn about potential hacker attacks that could disrupt the process.

    Then, three months from now, the community will face another challenge when some of the world’s biggest miners move to adopt the second phase of the proposal, the doubling of the block size. Still, many in the community agrees that the hard part is over, with prices seen stabilizing and strengthening.

    “We do believe it will continue, now that we’ve gotten over this hump,” said Ryan Rabaglia, head trader at digital-trading company Octagon Strategy in Hong Kong.


    This section continues in the Subscriber's Area.

    Letter to the Editor of the New York Times from Sunrun's CEO

    I thought this letter by Lynn Jurich may be of interest to subscribers. Here it is in full:

    “After Rapid Growth, Rooftop Solar Programs Dim Under Pressure From Utility Lobbyists” (news article, July 9) got it right that traditional utilities are fighting to undercut competition and customer choice by targeting state solar policies, “particularly net metering, which credits solar customers for the electricity they generate but do not use and send back to the grid.”

    Rooftop solar growth, however, is inevitable. More than one million consumers across the country are already powering their homes with rooftop solar. By 2022, residential solar capacity will more than triple, according to GTM Research estimates.

    The utility lobby is intentionally distracting regulators from focusing on the real threat to affordable energy: billions of dollars of grid expansion proposals with virtually guaranteed profits and requests to subsidize nuclear plants. Rooftop solar competition forces utilities to control their costs.

    Policy leaders who dig into the facts know that rooftop solar, plus home batteries for solar storage, will modernize our grid, provide more affordable clean power to everyone and create more American jobs.


    This section continues in the Subscriber's Area.

    Euro Climbs as Draghi Cites Autumn Decision on Bond Purchases

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

    The common currency broke through $1.16 after Draghi said at a press conference that the euro’s recent re-pricing has received “some attention” without specifically saying he was concerned about its strength. Bonds rose, led by Italy, which has been a key beneficiary of the bank’s asset-buying.
    “Draghi had a chance to talk the euro down and he didn’t,”

    Athanasios Vamvakidis, a strategist at Bank of America Merrill Lynch, said in emailed comments.
    The euro advanced 1 percent to $1.1635 as of 4:00 p.m. in London, after reaching $1.1658, the highest since August 2015.

    The currency has advanced more than 10 percent this year, partly on speculation that a tapering of bond purchases is drawing closer.

    The euro earlier declined as the Governing Council repeated that it expects borrowing costs to stay at present levels for an extended period of time and that it is prepared to increase the size or duration of the asset-purchase program should the economy take a turn for the worse.

    Spanish and Italian bonds outperformed, with yields falling around seven basis points, as they won a summer respite from any ECB discussion on curbing bond-buying. The ECB has favored buying Italian securities in recent months as it combats a shortage in the euro region’s sovereign debt.
    “Draghi seemed to try and downplay the anticipation for September and suggested they may try to drag this decision out,”

    Richard Kelly, Toronto-Dominion’s head of global strategy in London, said in emailed comments. “He also made pretty clear that there is little appetite for any significant tapering at this stage.”


    This section continues in the Subscriber's Area.