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

    Trump Backs Away From Conflict With Iran After Harmless Attack

    This article by Josh Wingrove and Jennifer Jacobs may be of interest to subscribers. Here is a section:

    Iran fired more than a dozen guided missiles at two U.S. bases in Iraq in retaliation for the killing of Qassem Soleimani. But a Pentagon analysis of the attack suggested the missiles were aimed at unpopulated parts of the bases, according to people familiar with the matter.

    Satellite imagery of the bases provided by Planet Labs showed damaged aircraft hangers and other structures at the Al Asad airbase in western Iraq following the strike.

    “Iran appears to be standing down,” Trump said. “Which is a good thing for all parties concerned and a very good thing for the world.”

    Iran’s restraint and Trump’s measured remarks in response suggest a path toward easing tensions with Tehran, which surged after Soleimani’s killing in a U.S. drone strike near the Baghdad airport last week.

    Iranian Foreign Minister Javad Zarif said on Twitter earlier Wednesday that the missile attack “concluded” Iran’s retaliation for Soleimani’s killing. Even if Tehran refrains from further direct attacks, it might still seek reprisals through more covert means, such as attacks by proxy militias or in cyberspace.

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    Byron Wien and Joe Zidle Announce the Ten Surprises of 2020

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

    1. The economy disappoints the consensus forecast, but a recession is avoided. Federal Reserve Chair Powell lowers the Fed funds rate to 1%. Without a comprehensive trade deal in hand, President Trump exercises every executive authority he has to stimulate growth and ward off recession. He cuts payroll taxes to put more money in the hands of consumers.

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    Pandora Soars as Investors Get Early Glimpse of Results

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

    The world’s biggest maker of jewelry added roughly a tenth to its market value on Monday after reassuring investors it would reach the upper end of its profit forecast for 2019.

    Shares in Pandora A/S rose as much as 12%, as the Copenhagen-based company released some preliminary figures ahead of its Feb. 4 annual results. It now expects its profit margin for 2019 to be in the higher end of the previously guided range of 26-27%.

    The update was “definitely good news,” said Per Fogh, an analyst at Sydbank. “Many people had expected Pandora to miss that guidance altogether, so a margin in the upper end of the range shows that Pandora has been able to get its costs under control under its turnaround plan.”

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    Email of the day - on gold's fair value

    Thank you for the interesting article about golds "fair" value. I remember many many years ago David once mentioned that somebody he respects mentioned that the fair value of a certain British gold coin is a dinner for two at Claridges in London. Unfortunately, I do not remember which coin it was.

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    Gold's Next Big Bull Market May Be Upon Us

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

    If gold’s implicit prediction is right, it has two implications. The first and most important one is a belief that inflation is at last due to return, after many false alarms. The second is that gold is now settled in a bull market. 

    So, is gold good value? The metal doesn’t throw off any income streams, and has very few industrial uses, so it is very hard to come up with a measure of fair value. But the following chart, using data drawn up by Charlie Morris of Catley, Lakewood and May in London, is a heroic attempt to arrive at one. Morris devised a formula for fair value using the consumer price index and the average of 10- and 30-year inflation expectations. This indicator briefly showed that gold was wildly overpriced during the worst of the 2008 crisis, a phenomenon that may have been driven by the illiquid markets of the time, that created an unrealistic inflation forecast. Exclude this incident, and we see a steady bull market for gold from 2005 to 2011, followed by a steady bear market, where it moved to a discount. In the last two years, it looks as though it may have started another bull market. By Morris’ calculations, gold is now about 11% over fair value. 

    Gold is still far from the confident prediction of runaway inflation that it briefly produced for a few years after the crisis, even though it is buoyed by safe haven demand at present, along with seasonal interest in gold jewelry, notably from China where the lunar new year is almost here, and by resumed interest from central banks.

    On the supply side, gold-mining groups are merging, creating a reasonable hope of avoiding over-supply in the near future. So, if this move in gold prices is confirmed by a move down in real yields, followed even by an increase in inflation, then this could be part of a bull market to match the one from 2005 to 2011. The critical question is whether the gold market proves to be right this time in its forecast of inflation.

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    Iron Ore Set for 'Major Surplus' as Inventories Build, Citi Says

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

    The global iron ore market “is expected to shift into a major surplus with inventories expected to recover to pre-Brumadinho levels by early 2021,” Citigroup Inc. says in note, referring to the Vale SA operation that experienced a dam burst last year.

    “We maintain our directional convictions on iron ore and coking coal, while acknowledging that big price moves might not happen until post-Chinese New Year,” bank says in note, which in part recaps analysis on bulks market issued last month

    “Most market participants agree that iron ore prices will likely drift lower during 2020, with the primary debate being about the timing and extent of any sell-off,” bank says

    “Concerns about 1Q Australian supply-disruption risks and weak Brazilian exports are already reflected in iron ore prices,” it says

    After Lunar New Year, “we see iron ore supply recovering and potential profit-taking by Chinese steel longs,” Citi adds

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    Sony Shocks CES 2020 With Unveiling of Electric Car

    This article by Michael Cogley for the Telegraph may be of interest to subscribers. Here is a section: 

    Tech giant Sony shocked attendees at this year’s CES by unveiling a new electric car.

    The Japanese company, which is best known for its PlayStation games consoles and high-end televisions, revealed the Vision S concept saloon.

    The prototype boasts 33 sensors to monitor inside and outside of the car, as well as an ultra-wide monitor which will be used for entertainment and information purposes.

    Sony chief executive Kenichiro Yoshida said that cars will be redefined as a “new entertainment space”.

    “To deepen our understanding of cars in terms of their design and technologies we gave a shape to our vision,” Mr Yoshida told the tech conference in Las Vegas.

    “This prototype embodies our commitment to the future of mobility and contains an array of Sony technologies.”

    The new concept car also features “360 reality audio”, which Mr Yoshida says will give users an “immersive experience”.

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