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

    Email of the day on batteries and the challenge of commodity supply

    Congrats on your opinion on a larger correction and acting on it with put purchases.

    Last week Double Line presentation  had a chart that showed the performance of equity and the different credit subclasses, Ags., EM, HY, ClOs and so forth. Showed  the large move by equities compare to credit over the same time period. It made me wonder how much further the equity correction can go.

    You often follow interesting companies, you mention EQNR from Norway. have you ever looked a Freyr. It is also Norwegian and is involved in batteries. During  the last days because of a report on its possible growth it had a huge move , but during this correction it may be a good opportunity, let me have your thoughts. Based on your comments  how much the market has already priced in the EVs maybe it is not a good idea.

    The move on copper is not a good signal  

    Trust all is well for you  and your family

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    Email of the day on Apple's ability to outperform

    Many thanks for the latest weekly video, which sets out the bearish case for investment at the moment. In today's FT there is an article about Apple's latest iPhone. The author claims that sales projections for the latest Pro version of the iPhone suggest that the company will earn record -breaking revenues from its sales , which account for 50% of its business. In addition, it suggests that there might be a future monthly package that combines the iPhone, Apple Music and iCloud. Could Apple stand out against the overall bear market?

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    Keep Calm and Carry On?

    This article from Allegra Stratton at Bloomberg may be of interest. Here is a section:

    Traders, analysts and politicians looking for a soothing balm had been surprised on Sunday to hear Kwarteng’s commitment “more is to come.” Sterling dropped further and then, while the UK was sleeping, its currency tumbled in Asian markets — to £1.03 to the dollar, something former Treasury officials I know didn't think they’d ever see.

    And so, even though the pound pared its losses slightly, the Bank of England came under huge pressure to do something. Anything.

    A likely whopping 100 basis-point hike in November was already priced in. By Monday this climbed to 200 basis-points — four times the size of its last hike — and a call for an extraordinary extra session hastily arranged for this week. By lunchtime, there was a rumour of a BOE statement within hours, possibly including a extra bonus rate hike.

    In the end this didn’t materialise and all we got was the emollient tweet featured at the top of this email. Most agree the Bank will raise rates again — hammering household mortgage repayments in a period already billed as the worst winter in living memory (something former minister Jim O’Neill weighed in on today, calling the Budget “naive.”)

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    UK's Biggest Tax Cuts Since 1972 Trigger Crash in Pound, Bonds

    This article from Bloomberg may be of interest to subscriber's. 

    Liz Truss’s new British government delivered the most sweeping tax cuts since 1972, slashing levies on rich households and companies in a bid to boost economic growth in a move that triggered a massive market selloff in UK assets.

    Chancellor of the Exchequer Kwasi Kwarteng announced a series of tax cuts and regulatory reforms that will cost £161 billion over the next five years. That fanned concerns about inflation, already near a 40-year high, and about a spiraling government debt burden. 

    The pound crashed below $1.11 for the first time since 1985, sliding 2% in addition to declines earlier in the week. Borrowing costs on five-year government bonds jumped the most for a single day on record as traders dumped UK assets.

    “It is extremely unusual for a developed market currency to weaken at the same time as yields are rising sharply,” said George Saravelos, global head of foreign exchange research at Deutsche Bank AG. He warned the UK currency is “in danger” and suggested markets were treating it like a developing economy. 

    The package was more ambitious than expected, with a big giveaway for the UK’s wealthiest households and plans to tear up planning rules and reform financial regulations. 

    Kwarteng scrapped the 45% additional rate of income tax, paid by only the richest earners, leaving the top rate at 40%, and cut the basic rate from 20% to 19%. He paid only lip service to concerns about rising public debt, reiterating a pledge to “reduce debt as a percentage of GDP over the medium term.”

    The Conservative administration hopes its program of lower taxes and deregulation will turbo-charge the economy, staving off a recession that the Bank of England says has already begun and shaking the UK out of a decade of weak growth.


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    Brookfield plans 12-16 gigawatts of India renewables over next decade

    This article from the Economic Times may be of interest to subscribers. Here is a section:

    Brookfield is looking to multiply its current 4 GW renewable portfolio by 3 to four times in India within the next decade in generation as well as help corporates make the transition to decarbonise and invest in building large scale supply chain in the country, said a top executive.

    The renewables current assets under management is approximately $1 billion.

    Earlier this year, Brookfield Asset Management announced that it raised a record $15 billion for its inaugural Global Transition Fund. This marks the world's largest private fund dedicated to the net zero transition, signaling that investors are still committed to establishing cleaner portfolios. Brookfield is the single largest sponsor of the fund having deployed $2 billion itself.

    Brookfield deals with state utilities but sees incremental green power demand coming from corporates who are increasingly becoming bulk consumers. For example, as part of its road map to achieve 100 per cent dependence on renewable energy by 2025. Amazon on Wednesday announced its first utility-scale projects in India — three solar farms located in Rajasthan. These include a 210-megawatt (Mw) project to be developed by India-based developer ReNew Power, a 100 Mw project to be developed by local  developer Amp Energy India, and a 110 Mw project to be developed by Brookfield Renewable Partners.

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    Email of the day on attending The Chart Seminar:

    Thanks to what we discussed at the seminar in June, I am feeling comfortable after having applied our conclusions to our investments. I see that you are organising another seminar in London in November. While appreciating the fact that "events are moving rapidly", do you think that it is really necessary for members like me to come to London again?

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    Japan Intervenes to Support Yen for the First Time Since 1998

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

    “The government is concerned about excessive moves in the foreign exchange markets, and we took decisive action just now,” Kanda said late afternoon. “We’re seeing speculative moves behind the current sudden and one-sided moves in the foreign exchange market.”

    The intervention, ordered up by the Ministry of Finance, comes with risks if it fails to scare off speculators. Hedge funds have been adding to bearish bets on the currency, with Goldman Sachs Group Inc. warning it may decline all the way to 155.

    “At best, their action can help to slow the pace of yen depreciation,” said Christopher Wong, a currency strategist at Oversea-Chinese Banking Corp. “The move alone is not likely to alter the underlying trend unless the dollar, US Treasury yields turn lower or the BOJ tweaks its monetary policy.”

    BOJ Governor Haruhiko Kuroda insisted at a briefing in the Tokyo afternoon there were no rate hikes in the works and guidance on future policy would not be change for the time being, even for as long as two or three years in principle. Still, his influence over policy will fade next April when he steps down.

    “Today’s outcome strengthens my view that the chance of policy change is almost zero under Kuroda’s governorship,” said Masamichi Adachi, chief Japan economist at UBS Securities.

    Kuroda’s stance sets him apart from other central banks that had also previously had negative rates, with the European Central Bank and the Swiss National Bank all hiking to deal with surging inflation.

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    Unless Rents Rise, Housing Is Set Up for an Epic Crash

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

    But then the yellow dots happened. Home valuations increased as rates increased, just as in the housing bubble. Perhaps that is turning around now, as housing prices are beginning to decline (typically before we see large price declines we see softening markets — fewer buyers and sellers, longer delays between listing and sales — as have been happening in the last few months) and the Fed is raising rates. But looking at the data so far, it looks like a bubble.

    Maybe you shouldn’t pay much attention to what I think now, since I was exactly wrong two years ago. But I’m still not panicking about a housing crash. I expect valuations to revert to long-term mean because rents will continue to increase rapidly, meaning no dramatic drop in home prices is necessary. I base that on expectations for more legal immigration and legalization of existing undocumented immigrants and lifestyle changes — mainly more working from home — triggered by the pandemic, but not reverting to past practices. 

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