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

    Beijing to Judge Every Resident Based on Behavior by End of 2020

    Thanks to a subscriber for this article from Bloomberg news which may be of interest to subscribers. Here is a section:

    China’s plan to judge each of its 1.3 billion people based on their social behavior is moving a step closer to reality, with Beijing set to adopt a lifelong points program by 2021 that assigns personalized ratings for each resident.

    The capital city will pool data from several departments to reward and punish some 22 million citizens based on their actions and reputations by the end of 2020, according to a plan posted on the Beijing municipal government’s website on Monday. Those with better so-called social credit will get “green channel” benefits while those who violate laws will find life more difficult.

    The Beijing project will improve blacklist systems so that those deemed untrustworthy will be “unable to move even a single step,” according to the government’s plan. Xinhua reported on the proposal Tuesday, while the report posted on the municipal government’s website is dated July 18.

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    Email of the day on central bank balances sheets

    On the Morgan Stanley research document, you posted on Monday, there was "the most important chart in the world" as you describe it (QE globally). The "6-month rate of change" scale on LHS caught my attention. Recently, this QE tightening "rate of change" has moved upwards. Is this an early sign that CBs are starting to shy away from their QE tightening? If so, this is bullish for an equity market discounting future tightening. Maybe the tea leaves are not clear, but they must be monitored.

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    Stock Market Is Even Worse Than You Think It Is

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

    The good news is that drops in valuations tend not to last long, especially big ones like the one this year. In a report last week, UBS strategist Keith Parker pointed out that on average the market has returned 16 percent in the year after one in which P/E ratios have dropped significantly. In fact, going back to World War II, there have been only two years in which the market has dropped after a more than 1 percentage point drop in valuations the year before. Parker predicts that the S&P 500 will rise to 3,200, or more than 20 percent, by the end of 2019.

    On top of the valuation drop, he points to a high consumer savings rate, a rebound in companies investing in the U.S. and rising productivity as reasons the market will climb next year. But there are also reasons to believe the traditional rebound won’t materialize this time. First of all, while down, the absolute level of stock market valuations are not that low. For instance, the P/E ratio dropped to 12.8 in late 2008 before the market rebounded the next year. The P/E ended at a lower point than it is now in six of the 10 years in which there were big valuation drops.

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    Natural Gas Climbs as Record Cold Seen Draining U.S. Stockpiles

    This article by Naureen S. Malik for Bloomberg may be of interest to subscribers. Here is a section:

    Gas volatility has soared this month as bulls betting on winter supply constraints clash with bears expecting record production to overwhelm demand for the fuel. Prices soared more than 20 percent on Wednesday before tumbling the most on record the following day. Though output from shale basins is at an all-time high, exports have climbed as domestic consumption rises, leaving stored supplies at a 15-year seasonal low.

    “We haven’t had this kind of weather in a long time where it gets cold right out of the block in November,” said Tom Saal, senior vice president of energy trading at INTL FCStone Financial Inc. in Miami. “That puts the industry on notice that we are going to need a lot of gas this winter. We could see a lot volatility.”

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    The end of the beginning

    This presentation by Benedict Evans on what to expect from technology over the coming decade may be of interest. Here is a section from the summary:

    Close to three quarters of all the adults on earth now have a smartphone, and most of the rest will get one in the next few years. However, the use of this connectivity is still only just beginning. Ecommerce is still only a small fraction of retail spending, and many other areas that will be transformed by software and the internet in the next decade or two have barely been touched. Global retail is perhaps $25 trillion dollars, after all.

    Meanwhile, as companies address more and more of this with software and the internet, they do it in new ways. We began with models that presumed low internet penetration, low speeds, little consumer readiness and little capital. Now all of those are inverted. So, we used to do apartment listings and now Opendoor will buy your home; we used to do restaurant reviews and now you can get a hot meal delivered to your door. Tech is building different kinds of businesses, and so will take different shares of that opportunity, but more importantly change what those industries look like. Tesla isn’t interesting because of what it does to gasoline, but because of what it does to the car. Netflix changes TV, but so does Twitch.

    Finally, as we think about the next decade or two, we have some new fundamental building blocks. The internet began as an open, ‘permissionless’, decentralized network, but then we got (and indeed needed) new centralised networks on top, and so we’ve spent a lot of the past decade talking about search and social. Machine learning and crypto give new and often decentralized, permissionless fundamental layers for looking at meaning, intent and preference, and for attaching value to those.

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    Oil Legend Andy Hall Weighs Crude's Chance of Recovery on OPEC

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

     

    “The balance of risk at this point favors some sort of recovery,” the trader once known as ‘God’ in the industry due to his lucrative trades, said in a phone interview Friday. “It’s quite likely OPEC will come through with some sort of cut in the next month or two.”

    Demand has taken a downturn probably because of a stronger dollar against emerging market currencies, or on concern the trade war between the U.S. and China is beginning to curb economic growth, according to Hall. West Texas Intermediate crude is in a bear market after plunging from a four-year high in October and is trading near $57 a barrel following the biggest gain in U.S. stockpiles in 21 months.

    “When you know you’ve got prices in 2020 and beyond for WTI down below $60 a barrel, almost down to the mid-$50s further along the curve, I think that is essentially at the bottom,” said Hall.

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