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

    Modi Woos Voters With $13 Billion Largesse Before India Election

    This article by Abhijit Roy Chowdhury, Bibhudatta Pradhan, Shruti Srivastava and Siddhartha Singh for Bloomberg may be of interest to subscribers. Here is a section:

    The government will allocate 750 billion-rupee ($10.6 billion) a year for the cash plan for about 120 million farmers and give taxpayers 185 billion rupees of relief in the year to March 2020, Finance Minister Piyush Goyal said in his budget speech in New Delhi on Friday.

    In the process, the government will widen its fiscal deficit targets for the current financial year and next to 3.4 percent of gross domestic product and borrow more. Bonds and the rupee fell on news of the debt plans, while the tax cuts helped to buoy stocks.

    “Ongoing slippage from the government’s budgeted fiscal deficit targets over the past two years, and our expectation that the government will face challenges meeting its target again this coming fiscal year does not bode well for medium term fiscal consolidation,” said Gene Fang, an associate managing director at Moody’s Investors Service. “We view this continued slippage as credit negative for the sovereign.”

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    Wirecard Shares Drop After New Report on Law Firm's Findings

    This note by Stefan Nicola for Bloomberg may be of interest to subscribers. Here it is in full:

    Wirecard AG shares fell as much as 16 percent Friday after a report that a law firm found evidence
    indicating alleged forgery at the German payment company’s Singapore office.

    An external law firm commissioned by Wirecard found evidence indicating “serious offenses of forgery and/or of falsification of accounts,” the Financial Times wrote Friday, citing the law firm’s report. The Rajah & Tann lawyers identified potential civil and criminal violations in Singapore, Hong Kong, India, Malaysia, and Germany, the newspaper said.

    A Wirecard spokesman denied the report in an emailed statement. Wirecard earlier this week denied claims made in a story by the Financial Times that alleged executive fraud originating at the Singapore office, fueling concerns about the fast-growing company’s business practices that knocked as much as 25 percent off its value on Wednesday.

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    Everything you wanted to know about MMT (but were afraid to ask)

    Thanks to Kevin Muir for this post from his themacrotourist.com blog which is relevant to the current discussion on Fed policy, fiscal policy and political jockeying. Here is a section:

    If I am correct, I suspect we will see many Democrat candidates (perhaps all?) adopt MMT as a tenant of their platform. And here is a crazy thought for you - what if Trump beats them to it?

    I have long argued that eventually we will hit a period where governments will spend and Central Banks will facilitate their deficits. MMT provides academic justification of where we all know we are headed anyway.

    In one of the interviews I watched with Professor Kelton, she said that the idea of deficits being funded with bond issuance is purely a self-imposed limitation. It’s required by law, but in reality, it doesn’t need to be done. The law can be changed. The government could simply spend $100 while only taking in $90 and directly writing cheques against the Federal Reserve to pay for the $10.

    Think about how inflationary this will be! But isn’t that the whole goal?

    I have always chuckled at the idea that governments were powerless to create inflation. If they want to create inflation - they can. There just needs to be the political will. And it looks like that will has finally arrived.

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    Email of the day on gold and UK listed gold miners

    With gold sustaining its position above $1300, and also holding its own against the other major currencies, as you have highlighted in recent audios, can you please comment on the UK listed gold miners and their potential for some improvement p.s. the service has its finger on the market pulse, and the written and audio delivery is spot on.

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    BAT Upgraded to Overweight at Piper; Risks Look Priced In

    This note by Lisa Pham for Bloomberg may be of interest to subscribers. Here it is in full:

    Philip Morris’s patent lawsuit against British American Tobacco in Japan, which is seeking a sales injunction of BAT’s Glo heated tobacco product, is still a risk, but BAT has “several methods of defense” and the earnings impact would probably be modest, Piper Jaffray analyst Michael Lavery writes in a note.

    Risk on possible U.S. menthol cigarette ban looks priced in and Piper doesn’t see any operational impact “for years and years”

    Also notes that consumers can adapt

    Piper doesn’t see any risk to dividend growth, allaying concerns from investors; says BAT’s cash flows don’t seem to be at risk in a way that would hurt the dividend

    Upgraded to overweight from neutral; PT kept at GBP30

    NOTE: BAT shares down 51% in last 12 months vs 19% drop for Imperial Brands, 31% decline for Philip Morris and 35% fall for Altria

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    Iron Ore Market Shudders as Dam Disaster Spurs Supply Concerns

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

    Iron ore investors are attempting to gauge the fallout from the dam burst at one of Vale SA’s mines, amid concerns the disaster will have ramifications beyond the affected operation in Brazil that could tighten the market in the short term and offset weakness from a slowdown in China.

    Futures on the Dalian Commodity Exchange extended gains on Tuesday to head for the highest close in more than a year, after the benchmark price for immediate delivery surged to $78.80 a ton on Monday, the highest level since March. Shares of Australia-based miners rallied, with gains for BHP Group, Rio Tinto Group and Fortescue Metals Group Ltd.

    In Brazil, “it seems likely that there will be an extensive increase in safety tests over the coming weeks and months,” Capital Economics Ltd. said in a note, raising its end of first quarter forecast to $75 a ton. “These tests may highlight other vulnerabilities in the system that could lead to temporary
    cutbacks at one or more mines until the issues are addressed.”

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    Mnuchin Signals Chance to End China Tariff War Ahead of Talks

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

    U.S. Treasury Secretary Steven Mnuchin said that if China presents enough trade concessions to President Donald Trump, there is a chance that the administration may seek to lift all tariffs. “Everything is on the table,” Mnuchin said early Tuesday during an interview on Fox Business News “Mornings With Maria” program. The Treasury chief is set to meet with top Chinese officials in Washington on Wednesday and Thursday alongside U.S. Trade Representative Robert Lighthizer about a month before the U.S. is set to escalate the trade war with China with fresh tariffs.

    Trump and China’s Xi Jinping gave their officials until March 1 to work out a deal on “structural changes” to China’s economic model. If they fail, Trump has promised to raise the tariff rate on $200 billion in Chinese imports to 25 percent from 10 percent. The collapse of talks would dash hopes of a lasting truce that would remove one of the darkest clouds hanging over the world economy.

     

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