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

    Email of the day on the Dow/Gold ratio scenarios

    I have been following your Dow/ gold analysis, but while in the long term you are probably right, in the short term there are other interpretations of how the ratio could move, especially if you put the ratio on a log scale 

    I’m attaching another possible and probable path in normal scale, and in log scale. the short term rise could be a pause before the real bottom, it has happened in the past. 

    PS: considering you are a real international traveler and investor, where would you say are the safest banks today?  I think Singapore, but I heard it is getting difficult to open an account there 

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    Citigroup Pays Fine to Settle South African Rand Collusion Probe

    This article by Vernon Wessels and Renee Bonorchis for Bloomberg may be of interest to subscribers. Here it is in full:

    Citigroup Inc. agreed to pay an administrative penalty of 70 million rand ($5.4 million) to settle a South African antitrust investigation that it participated in a cartel to manipulate the value of the rand.

    The figure does not exceed 10 percent of Citigroup’s annual turnover in South Africa and comes after the New York-based lender undertook to cooperate with the Competition Commission and “avail witnesses to assist the prosecution of the other banks that colluded in this matter,” the Pretoria-based commission said in an e-mailed statement on Monday.

    “This settlement was done to encourage speedy settlement and full disclosure to strengthen the evidence for prosecution of the other banks,” Commissioner Tembinkosi Bonakele said in the statement. Barclays Africa Group Ltd. has also agreed to cooperate, people familiar with the matter said last week.

    The commission on Feb. 15 referred a collusion case to the country’s Competition Tribunal for prosecution and identified lenders including Bank of America Merrill Lynch, HSBC Holdings Plc, BNP Paribas SA, Credit Suisse Group AG, JPMorgan Chase & Co. and Nomura International Plc as among those that participated in price fixing and market allocation in the trading of foreign-currency pairs involving the rand.

    Commerzbank AG, Macquarie Group Ltd., Australia & New Zealand Banking Group Ltd., Investec Ltd. and Standard Bank Group Ltd. were also named.

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    Beyond The Supercycle How Technology is Reshaping Resources

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

    First came the “fly-up,” the price spike on world markets for oil, gas, and a broad range of natural resources that began in 2003. Then came the abrupt bust, as prices tumbled and global spending on natural resources dropped by half in the course of 2015 alone. Now, even as resource companies and exporting countries pick up the pieces after this commodity “supercycle,” the sector is facing a new wave of disruption.1 Shifts taking place in the way resources are consumed as well as produced—less noticed than the rollercoaster commodity price ride but no less significant—will have major first- and second order effects on both the sector and the global economy. These shifts are the result of technological innovation, including the adoption of robotics, Internet of Things technology, and data analytics, along with macroeconomic trends and changing consumer behavior.

    We see three principal effects of this technological revolution:
    Consumption of energy will become less intense as people use energy more efficiently thanks to smart thermostats and other energy-saving devices in homes and offices, and the use of analytics and automation to optimize factory usage. Transportation, the largest user of oil, will be especially affected, by more fuel-efficient engines and by the burgeoning use of autonomous and electric vehicles and ride sharing.

    Technological advances will continue to bring down the cost of renewable energies such as solar and wind energy, as well as the cost of storing them. This will hand renewables a greater role in the global economy’s energy mix, with significant first- and second-order effects on producers and consumers of fossil fuels.

    Resource producers will be able to deploy a range of technologies in their operations, putting mines and wells that were once inaccessible within reach, raising the efficiency of extraction techniques, shifting to predictive maintenance, and using sophisticated data analysis to identify, extract, and manage resources.

    Scenarios we have modeled suggest that these developments have the potential to unlock $900 billion to $1.6 trillion in incremental cost savings throughout the global economy in 2035, an amount equivalent to the current GDP of Indonesia or, at the top end, Canada. As a result of lower energy intensity and technological advances that improve efficiency, energy productivity in the global economy could increase by 40 to 70 percent in 2035. We believe these changes will have profound implications not just for companies in the resource sector and for countries that export resources, but also for businesses and consumers everywhere.

     

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    Email of the day on the VIX

    Read on twitter the following "is this too-quiet market the calm before the storm" I am wandering storm or no storm if going long the VIX on the SP500 or a European VIX could be on a risk reward basis a sound trade with the VIX being at a historical low. or could the VIX go even lower to new lows? we also had/have negative interest rates. would appreciate your expert opinion 

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    Hotly Disputed, but No Longer Unthinkable: Could France be Ready for President Le Pen?

    I have used the headline from Ambrose Evans-Pritchard’s article as shown in The Telegraph, in preference to the sensationalist online headline.  Here is the opening: 

    If Marine Le Pen wins France's presidential elections in May, all talk of punishing Britain for the outrage of Brexit will become irrelevant.

    French diplomacy will pirouette overnight under a National Front (FN) leader. The Élysée Palace will seek an Entente Cordiale with the British, offering a bilateral alliance on new foundations.

    It will then be the European Union that faces an existential choice: whether to reinvent itself as a loose federation of nation states, or succumb to galloping disintegration

    "What is the point in punishing a country? It is senseless, unless you think the EU is a prison, and you are condemned if you escape. I want to rebuild our damaged relations with the United Kingdom," she told the Daily Telegraph.

    "A people decides its own destiny. You cannot force a country to do something that is against its own interests, or against the democratic process," she said.

    It is a far cry from the language of President François Hollande, who told Europe that Britain must "pay a price" to deter any other country from toying with temptation.

    Whether she has a chance of winning is hotly-disputed, but it is no longer unthinkable and the consequences are epochal. Bookmakers have lifted the odds to one in three as of February 13, an "alarming" development says Oxford Economics.

    "France is the political heart of Europe, and the moment we leave the euro the whole project collapses," said Ms Le Pen. She leans across the table in her tiny office in the European Parliament with a glint of mischief.

    French pollsters note her imperturbable serenity as the pillars of the French political system crumble around her, and the coronation of ex-premier François Fillon goes horribly awry. "She has established herself as an anchor of stability on the political landscape," says Frédéric Dabi from the polling group Ifop.

    The latest L'Express poll found that she trails Mr Fillon by just 44 to 56 in a run-off election, nearing the margin of error in this ferbrile climate. The tabou of voting for the Front National is not what it was, and Britain's referendum shock has played into her hands.

    "Brexit has been a powerful weapon for us. In the past our adversaries have always been able to say that there is 'no alternative' but now we have had Brexit, and then Trump, and Austria," she said.

    "A whole psychological framework is breaking down. I think 2017 is going to be the year of the grand return of the nation state, the control of borders and currencies," she said.

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    Tillerson Forced to Stay at Sanatorium in German Village for G-20.

    Here is the opening of this report by Bloomberg:

    On his first trip abroad as U.S. secretary of state, Rex Tillerson was forced to stay at a sanitarium in a German village known for its hot springs, 30 minutes from where other world leaders gathered. Diplomatic security agents mingled in the parking lot with elderly people in wheelchairs arriving for spa treatments.

    Tillerson, the former head of Exxon Mobil Corp., was at the sanitarium because Bonn’s hotels were all booked by the time he confirmed his attendance at this week’s Group of 20 meeting. Counterparts including U.K. Foreign Secretary Boris Johnson had to make a trek out to meet him.

    The unusual diplomatic debut continued during an awkward encounter with Russian Foreign Minister Sergei Lavrov. After Lavrov delivered some perfunctory opening remarks alongside Tillerson, U.S. aides quickly ushered reporters from the room. “Why did they shush them out?” Lavrov asked.

    And:

    The curious start to his first foreign trip may demonstrate little more than the adjustment Tillerson is making after years of traveling with a small entourage as chief executive officer of Exxon to being a highly sought-after Cabinet member in President Donald Trump’s administration. Two weeks after winning confirmation, Tillerson has yet to lay out his most urgent foreign policy priorities and hasn’t had a news conference.

    The lack of outreach to the media extends to the State Department briefing room in Washington, where a spokesman’s normally daily question-and-answer exchanges with reporters have yet to resume since Trump took office almost four weeks ago. Tillerson also continues to lack a deputy secretary, who could help manage day-to-day issues at the department.

    The few remarks Tillerson has made reflect the changed circumstances of his new job. In his meeting Thursday with Saudi Foreign Minister Adel al-Jubeir, the two bantered about Tillerson’s flight from the U.S., which arrived late Wednesday night.

    "I’m not used to traveling like that you know,” Tillerson said. “I’m used to getting on at night, spending the night on the plane and then going to work. It’s quite civilized."

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    Email of the day 1

    On a small world:

    David, I sincerely wish you a speedy recovery to full health. I have been a subscriber since I believe 1984 and met you at your second to last Chart Seminar in May 2006 and have truly benefitted from the service. My middle son works for Richard Chandler and is presently with Eoin at the seminar in Dubai. Again my best wishes and thanks.

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    Jim Cramer: You Do Not Want to Be in Retail Stocks

    The stock market has continued to churn out record high after record high, putting together the best record-breaking streak since the early 1990s. 

    While the broader indices have been climbing, retail has been stagnant, with a number of these stocks acting just "dreadful," TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, said on CNBC's "Stop Trading" segment Thursday. 

    Cramer highlighted a recent research report from JPMorgan analyst Matthew Boss. Boss "slashed numbers very big" for Macy's (M), Nordstrom (JWN) and J.C. Penney (JCP), Cramer pointed out. 

    Macy's has been talked about as a takeover target, but with its fundamentals in decline, that may warrant a lower takeover price, Cramer reasoned. Boss's research report lays out a "chilling" situation of the mall, he added. 

    But it's not just the big department stores, either. Stocks like Abercrombie & Fitch (ANF), Gap (GPS) and L Brands (LB) have been impacted, too. These stocks are not the place to invest, Cramer said, explaining that the truth is simple: consumers are staying home, playing video games, ordering deliveries and playing on their iPhone. 

    That's where the money has been flowing, Cramer said, to at-home entertainment, not the mall. 

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