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

    Deutsche Bank Said Near Full Takeup for $8.5 Billion Share Sale

    This article by Ruth David and Steven Arons for Bloomberg may be of interest to subscribers. Here is a section:

    Deutsche Bank AG is poised to receive orders for almost all of the 8 billion euros ($8.5 billion) of stock on offer to investors as the sale draws to a close, according to people familiar with the matter.

    Investors have pledged to buy more than 95 percent of the stock on sale in the rights offer, which ends Thursday, said the people, asking not to be identified because the details aren’t public. About 80 percent of existing investors decided to participate in the capital increase, with some opting to boost their exposure and new investors buying the rest, said one person.

    The shares are trading well above their offer price, a key factor in attracting demand.

    The capital increase -- the bank’s fourth since 2010 -- is the centerpiece in Chief Executive Officer John Cryan’s new turnaround plan, which he announced in early March after Deutsche Bank failed to sell its Postbank unit to bolster capital. The company’s key Qatari shareholders are buying shares to maintain their stake, according to people familiar with the matter. Chinese investor HNA Group Co. has built up its stake to 4.76 percent, and that number may increase, said one person with knowledge of the firm’s strategy.


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    Deflation Danger Over for European Central Bank but Fresh Debt Drama Looms

    The European Central Bank has declared victory over deflation in a watershed shift in policy, clearing the way for an end to negative rates and emergency bond purchases after years of deep economic malaise.

    Triple tail-winds from QE, a cheap euro, and the end of fiscal austerity have all combined with powerful effect, at last lifting the economy out of a low-growth trap, or ‘Lost Decade’ as some economists describe it.

    A blizzard of new figures paint a picture of accelerating growth across the region, with with unemployment falling to an eight-year low of 9.5pc - though it is still twice the level of the Anglo-Saxon and non-euro Nordic states. The eurozone’s jobless rolls have dropped by 1.24 million over the last year.

    “Since the crisis we have had serious concerns about deflationary risks on several occasions in the euro area, but now we can say they have disappeared,” said Peter Praet, the ECB’s chief economist.

    The comments are significant since Mr Praet has long been viewed as an arch-dove on the ECB’s executive council. Analysts at Citigroup say that German-led hawks in Frankfurt appear to be gaining the upper hand in their fight against quantitative easing (QE), raising the risk of a tightening signal over the next two policy meetings.

    Mr Praet said last year’s blast of stimulus by G20 authorities in response to the Chinese currency panic had averted a worldwide downturn and was now feeding through into full-blown recovery.  “This coordinated reaction was very effective,” he told the Spanish newspaper Expansion.

    What is not yet clear is whether the eurozone is entering a virtuous circle - driven by rising investment - or whether the current cyclical recovery is largely a sugar rush that will fade as stimulus is withdrawn.

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    The Equity View: Global Investment Themes

    My thanks to Riverfront Investment Group for this topical publication.  Here is a brief sample:

    Global Technology: We currently prefer non-mega-cap technology globally.  US Technology stocks trade at close to a market multiple, despite the fact that they are forecasted to grow earnings at a faster rate.  In our view, the key positioning strategy in technology is to avoid the mega-caps.  Mega-caps tend to have the least growth and can often carry the greatest expectations.  We prefer an equal-weighted basket of tech stocks.

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    Email of the day on desalination

    Dear Eoin, concerning today's posting on the water situation, I recently visited one of Israel's 5 water desalination plants. Over the last 10 years Israel has totally overcome its historic water shortage problem by desalinating sea water. It has done so in collaboration with Veolia. In addition this new technology is being exported worldwide. Once again we have an example of how human genius is applied to important problems and how new technology is overcoming them. Great to be able to be positive when pessimism reigns around the world.

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    Outside the EU, Britain May be Small but More Perfectly Formed

    Here is the opening and also a latter section of this informative column by Roger Bootle for The Telegraph:

    Now that the process of leaving the EU has formally begun, I have been musing on the links between government and economic performance and the implications for the future of the EU and the UK. We have decided to leave the EU primarily for reasons of governance, that is to say, the desire to “take back control”. Nevertheless, this can potentially have decided economic effects.

    Most Brexiteers do not believe they will be negative. On the contrary. Yet it seems that many European politicians and officials confidently believe that the UK has acted profoundly against its economic self-interest. Sometimes, they even seem to believe that, isolated and impoverished, the UK will barely manage to stay afloat at all. So they see Brexit as a futile but costly political gesture.

    Our Remoaner MPs seem to believe something similar. It is amusing, although also troubling, to hear many of them on the Left, who have spent a lifetime trying to make things more difficult for British business, and whose closest brush with the harsh realities of finance is filling in their own expense forms, bewailing Britain’s fate if we don’t have “full access” to the single market – whatever they think that means.

    But why are both domestic Remoaners and continental opponents of Brexit so pessimistic about our prospects? I think the answer is largely to do with their conception of the government/economy nexus. Many seem genuinely to believe that prosperity flows from the fountain pens of the politicians, officials and diplomats who make laws and sign agreements.


    Over the last 80 years, there have been only six countries in the whole of Europe that have escaped invasion or government by dictatorship – Switzerland, Sweden, Ireland, Malta, Cyprus and the UK. It is striking that the first three of these countries were neutral during the war while the fourth and fifth were part of the British Empire. They weren’t under dictatorship but neither were they normal democracies.

    This history of recent political and national trauma explains why many European countries have been unperturbed by the cession of so much sovereignty to Brussels. Their own political cultures are riddled with the consequences of their troubled past. We stand out as not suffering from this problem.

    As we are about to recover our independence, we now have the opportunity both to breathe new life into our own democracy and, through better governance, to improve the performance of our economy. I don’t see much sign of either of these things developing across the Channel.

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    Graphene-Based Sieve Turns Seawater Into Drinking Water.

    My thanks to a subscriber for this interesting article from BBC News, Science & Environment.  Here is the opening:

    The promising graphene oxide sieve could be highly efficient at filtering salts, and will now be tested against existing desalination membranes.

    It has previously been difficult to manufacture graphene-based barriers on an industrial scale.

    Reporting their results in the journal Nature Nanotechnology, scientists from the University of Manchester, led by Dr Rahul Nair, shows how they solved some of the challenges by using a chemical derivative called graphene oxide.

    Isolated and characterised by a University of Manchester-led team in 2004, graphene comprises a single layer of carbon atoms arranged in a hexagonal lattice. Its unusual properties, such as extraordinary tensile strength and electrical conductivity, have earmarked it as one of the most promising materials for future applications.

    But it has been difficult to produce large quantities of single-layer graphene using existing methods, such as chemical vapour deposition (CVD). Current production routes are also quite costly.

    On the other hand, said Dr Nair, "graphene oxide can be produced by simple oxidation in the lab".

    He told BBC News: "As an ink or solution, we can compose it on a substrate or porous material. Then we can use it as a membrane.

    "In terms of scalability and the cost of the material, graphene oxide has a potential advantage over single-layered graphene."

    Of the single-layer graphene he added: "To make it permeable, you need to drill small holes in the membrane. But if the hole size is larger than one nanometre, the salts go through that hole. You have to make a membrane with a very uniform less-than-one-nanometre hole size to make it useful for desalination. It is a really challenging job."

    Graphene oxide membranes have already proven their worth in sieving out small nanoparticles, organic molecules and even large salts. But until now, they couldn't be used to filter out common salts, which require even smaller sieves.

    Previous work had shown that graphene oxide membranes became slightly swollen when immersed in water, allowing smaller salts to flow through the pores along with water molecules.

    Now, Dr Nair and colleagues demonstrated that placing walls made of epoxy resin (a substance used in coatings and glues) on either side of the graphene oxide membrane was sufficient to stop the expansion.

    Restricting the swelling in this way also allowed the scientists to tune the properties of the membrane, letting through less or more common salt for example.

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    Email of the day

    On the difficulty of enacting Trump’s proposed tax cuts:

    I think you are underestimating the challenges of enacting a tax cut following the failure of the attempted overhaul of Obamacare. The budget savings in that bill were critical for paying for the tax cut. Now the maths only works if a boarder tax is included, and that, I am told, is a non starter in the senate. I have no doubt that Trump will turn his attention to corporate tax cuts, but the politics of that will likely be just as challenging as the ACA.

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