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

    Email of the day 2

    On behavioural TA and pharmacology:

    Neither have I had the pleasure of meeting you face to face, but having met Eoin at now 2 chart seminars, and read your comments from time to time as a subscriber, I have a mental picture of the sort of person you might be.

    I find your measured response to financial and political comments and news (in which we drown on occasions) is one of the main reasons I keep coming back. The world does not always make the same sense as say nature, mathematics or physics. Perhaps another reason I have endured here is a growing appreciation of the behavioural aspect of financial analysis, and how well it has been articulated by you and Eoin.

    I was going to side step comment on your recent illness because it is a personal matter and I couldn't think of anything useful to add, except of course to add my best wishes for your recovery. Fatigue following a respiratory infection can be a real problem.

    I enjoyed the anecdote about amoxycillin used for canine RTI and your pun in response. Dry. It reminded me of a series of articles on antibiotic resistance discussed a few months ago by Eoin. We are fortunate to live in an era (end of an era?) in which the majority of common bacterial infections are still sensitive to something (at least where I live). This aspect of pharma has been so successful in the past that they appear to have stopped developing new products. Are we living on credit?

    This section continues in the Subscriber's Area.

    It Does Not Matter Whether the Trump Base Liked His Press Conference

    As media Twitter had a field day with how unhinged President Donald Trump seemed in Thursday's press conference, there was the usual response from the Real America Whisperers that "his base eats this up" and that, to a lot of people, Trump looked like he was winning by dressing down the media.

    All of this is beside the point.

    Like any president, Trump has a large base of people who will always like him and a large base of people who will always hate him. In Trump's case, the latter group may be larger than normal. But neither of these is the groups that will decide his fate.

    Trump's presidency lies in the hands of the Trump-curious: The approximately 15% of Americans who dislike him but tell pollsters they think he might do a good job. A lot of these are people who voted for Trump despite having an unfavorable view of him.

    With these voters on his side, Trump can wield a fearsome coalition that will help him retain Congress in two years and persuade Republicans and Democrats in Congress to bend to his agenda in the meantime. Without them, he is unpopular and ridiculous.

    The Trump-curious do not "eat up" whatever Trump does. They are guardedly optimistic about him (or were, a month ago) and hope that he will deliver positive change in their lives.

    I doubt Thursday's press conference did much to move public feelings about Trump either way. The Trump we saw is one we've seen a lot before. But it also wasn't a brilliant strategy to remind the Trump-curious why they voted for him.

    If Thursday's performance imposed a cost on Trump, it was because it did little to convey the messages that he is busily working to create good-paying jobs for Americans, or that he is breaking the logjams that have made Washington look so dysfunctional to so many, or that he is restoring whatever voters feel is lost in their communities.

    Put another way, the biggest problem is not what he said, but what he didn't say.

    He still has time to deliver on the hopes of the voters who took a chance on him. But the idea (either triumphant or defeatist) that Trump can build the public support he needs simply by attacking the media and playing on his hard-core voter base's resentments is incorrect.

    This section continues in the Subscriber's Area.

    U.S. Spy Agencies, FBI Probing Trump Team Russia Calls, Officials Say

    Here is the opening of this disturbing article from Bloomberg:

    U.S. intelligence agencies and the FBI are conducting multiple investigations to determine the full extent of contacts that President Donald Trump’s advisers and associates had with Russia during and after the 2016 campaign, according to four national security officials with knowledge of the matter.

    Several agencies are conducting the inquiries into Russia’s efforts to meddle in the U.S. election and coordinating as needed, said the officials, who requested anonymity to speak about sensitive matters. The investigations predate the dismissal of retired Lieutenant General Michael Flynn as national security adviser on Monday.

    Trump associates whose activities the agencies are examining include his former campaign chairman Paul Manafort, energy consultant Carter Page, longtime Republican operative Roger Stone and Flynn, two of the officials said. Manafort, in a statement to Bloomberg, said he “never had any connection to Putin or the Russian government -- either directly or indirectly -- before during or after the campaign.”

    The FBI has two parallel ongoing investigations, one official said. A counterintelligence investigation is looking at Russian espionage activities and to what extent, if any, they involve communications with or collusion by U.S. officials. The second, a cybersecurity investigation, is probing the hacking of U.S. political groups and operatives.

    For example, investigators are focusing on a phone call Flynn had in December with Sergey Kislyak, Russia’s ambassador to the U.S., which was intercepted by intelligence agencies and shared with the FBI, the two officials said. The FBI interviewed Flynn about that communication shortly after Trump was inaugurated.

    Leading congressional Republicans have joined calls by Democrats for a deeper look at contacts between Trump’s team and Russian intelligence agents Wednesday, indicating a growing sense of political peril within the party as new reports surfaced of extensive contacts between the two.

    Senate Intelligence Committee staff started collecting information in January on its broader probe of Russia’s alleged interference in last year’s election, according to Democrat Senator Joe Manchin of West Virginia, who sits on the panel. Manchin said Wednesday he expects the committee to begin calling in witnesses starting later this month. Among those he would like to see testify are Flynn, Manafort and former acting Attorney General Sally Yates, who was fired after she refused to defend Trump’s executive order on immigration.

    This section continues in the Subscriber's Area.

    Richest Investors in the World Still Cautious On Equities Amid Populist Surge

    Here is the opening of this topical article from Bloomberg:

    Rich investors are shunning equities because of concerns about the political impact from Donald Trump’s administration and Brexit, according to Christian Nolting, chief investment officer at Deutsche Bank AG’s wealth management unit.

    “People are still cautious; there is still demand for bonds and people are not ready to move into the more risky equity space,” Nolting said in an interview in Dubai. The perception “is that there are a lot of risks out there and a lot of uncertainty.”

    Markets have been reeling from unexpected events including Britain’s vote to leave the European Union and the election of Trump as U.S. president. Populist candidates in the Netherlands, France and Germany are stoking fears of a breakup of the European Union, adding to the political uncertainty. Deutsche Asset Management has cut European holdings in its multiasset funds to the lowest on record due to uncertainty about how elections in Europe will impact markets.

    Currencies are now one of the most important asset classes as investors keep cash on the sidelines or in bonds, Nolting said. “We don’t expect a massive shift from bonds into equities as equities still represent a different risk profile,” he said. Some larger clients will buy stocks if they are hedged but shares are not cheap, according to the CIO.

    This section continues in the Subscriber's Area.

    What if Britain had never joined the EU in the first place?

    Here is the opening and also part of the conclusion of this intriguing column by Philip Johnson for The Telegraph:

    It is March 25, 1957. The place: Rome. Gathered in the Palazzo dei Conservatori on the Capitoline Hill are ministers and officials from seven European nations, there to sign a treaty establishing the European Economic Community. As the meeting ends, the British prime minister Harold Macmillan, appointed just a few weeks earlier, shakes hands with West Germany’s chancellor Konrad Adenauer. A new partnership has been forged, a momentous event for two nations that just 12 years earlier had been at war.

    Except, of course, it didn’t happen. The Treaty of Rome was indeed signed on March 25, 1957; but the UK was not represented at the conference that brought the EEC into being. What if we had been? Would the EU be celebrating its 60th anniversary next month as a united entity or would Britain have pulled out long ago? Or, perhaps, had we been on board from the start it would never have grown into the unwieldy, unaccountable structure that we see today but would have remained the loose-knit trading zone we always wanted. 


    It is arguable that our economy began to recover in the 1980s because of the reforms of the Thatcher government, breaking the power of the trade unions, freeing up the labour market and selling off state assets. As we prepare to leave the EU it is at least worth considering what life might have been like on the outside. For a start we would have saved billions of pounds in net contributions and been free to strike trade deals with the emerging economies of Latin American and south-east Asia. This might have been to our considerable advantage: in the years since we joined the accumulated trade deficit with EU member states is about £500 billion.

    One thing that was supposed to come from membership, but didn’t, was the returns of national self-confidence dented by the end of empire. Being part of a supranational body, especially after the Maastricht treaty forged much closer economic and political ties, diminished our sense of independence. It was intended to, of course; but while other EU countries were content with that, the British never were. So had we stayed out we would probably have had a very good relationship with the EU – certainly better than the one we are likely to end up with when the bruising Brexit negotiations are concluded.

    Counter-factual histories usually try to legitimise the way things are today by implying they could have been a lot worse had matters taken a different course. Yet where our membership of the EU is concerned, the alternative might have been preferable to the reality. There is one other oddity about this: whether in the alternative world or the real one, the Germans always end up on top. Funny that.

    This section continues in the Subscriber's Area.

    Email of the day

    On my medical setback (I’m restricting myself to just one):

    Hi David, I am quite sure you have been inundated with get well messages from so many subscribers already. As I am of a similar age to yourself I would just like to add my own good wishes for a speedy recovery from your chest infection.

    My interest in your site goes right back to the hard copy Chart Analysis days. Unfortunately, I have not met you in person at any of the events you host as I have now spent many retirement years in South Africa. We all I am sure appreciate your unique input and analysis especially to the attention you draw to relevant articles by some outstanding financial journalists. I have been very fortunate with my own health as of now but am aware of the time fuse getting shorter! (For your interest I found that Amoxicillin worked very well on many of my canine patients with bad chests!)

    This section continues in the Subscriber's Area.

    China Steel Mills Hunt for High-Grade Iron Ore to Boost Output

    Here is the opening of this topical article from Reuters:

    Cashed-up Chinese steel mills are chasing top quality iron ore to help increase output and meet Beijing's tougher environmental standards, driving the premium for high-grade ore to its biggest in two years.

    In the latest sign of renewed optimism among China's steel producers as capacity cuts boost steel prices, producers are turning away from cheaper ore with a lower iron content, contributing to growing stockpiles at domestic ports.

    The preference will help boost top miners such as Brazil's Vale and Australia's Rio Tinto and BHP Billiton, whose premium quality ore has been taking market share from China's domestic producers.

    Iron ore with a 61.5-percent ore grade was trading at a premium of 123 yuan ($18.42) a tonne to 58-percent grade at Chinese ports last week, a level last seen in mid-2014, according to data from industry website Mysteel. (tmsnrt.rs/2bwmHqj)

    Chinese steel prices have risen following mill closures and output curbs flowing from an environmental crackdown and Beijing's efforts to tackle a supply gut, buoying mills' profitability. China has promised to slash steel capacity by 45 million tonnes this year.

    "We've had pretty good sales over past few months, as steel mills are profitable again since June," said an iron ore trader in Beijing, who sells 65-percent iron ore.

    "They like to buy higher grade ore as this can help increase steel output, leading to surging premiums."

    A tonne of 61.5 percent ore is currently selling for 445 yuan a tonne at eastern Rizhao port versus 370 yuan for a 58 percent ore.[MYSTL-SIIO-RAYF][MYSTL-IO615-RAF]

    Higher quality ores produce more steel for each tonne that is processed, helping to boost output, and can reduce emissions as less coke is used in the production process.

    Some mills are also using larger volumes of more expensive lump ore to mix with fines to save on the sintering process, which creates a product that can be used in a blast furnace but is a major cause of pollution, traders said.

    In July and August, Tangshan city ordered curbs and some suspensions at sintering and coke plants, which turn coal into a fuel for use in blast furnaces.

    This section continues in the Subscriber's Area.

    Yellen Sees More Rate Hikes Ahead If Economy Stays on Course

    Here is the opening of this apt article from Bloomberg:

    Federal Reserve Chair Janet Yellen said more interest-rate increases will be appropriate if the U.S. economy meets the central bank’s outlook of gradually rising inflation and tightening labor markets.

    “At our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” she told the Senate Banking Committee in prepared remarks Tuesday.

    Yellen’s semiannual report on monetary policy is her first since Donald Trump became president vowing to boost U.S. growth, which could push the Federal Open Market Committee to pick up the pace of rate hikes if such steps fan higher inflation. She reiterated that falling behind on inflation could harm to the economy and possible cut short the expansion.

    “Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession,” she added.

    This section continues in the Subscriber's Area.