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

    Fossil-Fuel Friendly Tax Plan Spares Oil, Not Solar or Tesla

    This article by Alex Nussbaum, Brian Eckhouse and Emma Ockerman for Bloomberg may be of interest to subscribers. Here is a section:

    The House proposal protects three provisions that save explorers billions of dollars annually, while chopping a few others.

    The legislation preserves the use of last-in-first-out accounting rules, also known as LIFO. The rules let companies value crude stockpiles at the price they’re selling for, rather than the original purchase cost. The bill also allows continued deductions of so-called intangible drilling costs and preserves a measure that lets explorers reduce taxable income to reflect the depreciation of reserves.

    All three were thought to be in jeopardy as Republicans searched for offsets to pay for lowering taxes elsewhere.
    Eliminating the drilling and depletion provisions alone would force energy companies to pay about $25 billion in additional taxes between 2016 and 2026, Congress’s Joint Committee on Taxation estimated last year.

    The House bill would also end two smaller breaks for “marginal" oil wells and enhanced oil recovery projects, which involve older oil and gas fields. That would cost drillers about $371 million over ten years, the committee estimated.
    The plan spares “the Holy Grail of E&P tax breaks" by maintaining the intangible drilling costs provision, analysts at Houston investment bank Tudor Pickering Holt & Co. said in a research note Friday. Between that and a plan to cut the corporate rate from 35 percent to 20 percent, the legislation would be “a net positive for oil and gas," they wrote.


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    The World Stands in Line as the iPhone X Goes on Sale

    This photo montage captures the enthusiasm for Apple’s iPhone X. Here is a section: 

    The $1,000 price tag on Apple Inc.’s new iPhone X didn’t deter throngs of enthusiasts around the world who waited—sometimes overnight—in long lines with no guarantee they would walk out of the store with one of the coveted devices.

    Apple briefly became the U.S.’s first $900 billion company on the day the new smartphone went on sale.


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    Breakfast with Dave November 3rd 2017

    Thanks to a subscriber for this report by David Rosenberg at Gluskin Sheff which may be of interest. Here is a section:

    I would have to say that if there is a market that has broken out of a 25-year secular downtrend, and where the economic and political tailwinds are significant, it is in Japan. I get told all the time that Japan’s population is declining, but we are buying companies, not bodies, and the bottom line is that even with this declining population, earnings momentum is on the rise and profit margins in Japan are on an impressive expansion phase, and not nearly priced in, In fact, Japan is one of the few markets globally that is not trading at premium multiples relative to its history and is an under-owned market both globally and locally. 

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    Email of the day on market cap to GDP

    Warren Buffett uses the ratio of the market capitalisation of all listed US equities to US GNP (or is US GDP?), as a measure of the under or overvaluation of listed US equities in an overall sense. Where would such a ratio, and its long-term historical chart, be easily available in the internet? How about showing the chart in the Chart Library? Thanks in advance.

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    The story of Ethiopia's incredible economic rise

    This article from Quartz may be of interest to subscribers. Here is a section:

    In 2000, Ethiopia, the second-most populous country in Africa, was the third-poorest country in the world. Its annual GDP per capita was only about $650. More than 50% of the population lived below the global poverty line, the highest poverty rate in the world.

    What has happened since is miraculous. According to IMF estimates, from 2000 to 2016, Ethiopia was the third-fastest growing country of 10 million or more people in the world, as measured by GDP per capita. The country’s poverty rate fell to 31% by 2011 (the latest year Ethiopia’s poverty level was assessed by the World Bank).

    The outlook for the next five years is bright. In its latest global forecast, the IMF projected that Ethiopian GDP per capita would expand at an annual pace of of 6.2% through 2022—among countries with 10 million or more people, only India and Myanmar are expected to grow faster.

    Any country making such progress would be cause for celebration, but because of its size, swelling population, and the depths of its poverty, Ethiopia’s gains are particularly heartening. By 2050, the UN expects the country to grow to 190 million people, from around 100 million today, making it among the fastest-growing large countries in terms of population, too.


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    Constructive on structural and cyclical growth outlook

    Thanks to a subscriber for this report for Deutsche Bank highlighting some of the achievements India has made in improving governance. Here is a section:


    While the long term structural macro outlook remains unambiguously positive, we think India is also poised for a cyclical upturn in growth, and that the worst of the growth-slowdown, caused by temporary disruption and technical factors related to external trade, is behind us. The economy has already started to stabilize post GST and high frequency indicators are showing a rebound, which should eventually reflect a recovery in July-Sep’17 GDP growth (DB estimate 6.4%). While we expect growth to average around 6.6% during FY18, we are more optimistic about the outlook for FY19 and beyond.

    We also note that growth momentum generally improves in the year prior to the elections (India’s next general elections are to be held in May 2019 or earlier), which is likely to play out in this cycle as well. We think given the various reforms that are operational at this stage and that have been implemented by this government so far, it is reasonable to expect growth to return close to 8.0% by FY20, absent any external shock that could jeopardize this baseline outlook.

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    Bitcoin Surges Past $7,000 to Extend Record Rally

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

    “It is simply remarkable how resilient bitcoin has been in the face of significant negativity,” said Lukman Otunuga, a research analyst at ForexTime, in a Nov. 1 note to clients. “The price action suggests that bulls have a very firm grip.”

    In a blog post this week, Themis warned CME is “caving in” to pressure from clients and placing a seal of approval around a “very risky, unregulated instrument that has a history of fraud and manipulation.” The products planned by CME “remind us of the collateralized debt obligations which were peddled during the financial crisis,” the post said.

    Asked whether he’s concerned about a potential bubble, CME Chief Executive Officer Terry Duffy said on Bloomberg TV on Nov. 1 that the firm’s job is to “manage risk, not decide what the price of a product is.”

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    Alibaba Caps $250 Billion Rally With Accelerating Sales Growth

    This article by Lulu Yilun Chen for Bloomberg may be of interest to subscribers. Here is a section:

    Alibaba Caps $250 Billion Rally With Accelerating Sales Growth – Alibaba’s “new retail” plan carries a simple premise -- to combine its online merchants with a vast swathe of physical stores now divorced from the internet, stripping out layers of profit-sipping middlemen and boosting Alibaba’s e-commerce in the process. Those outlets double as storage and delivery centers.

    But the execution involves a battery of expensive and time-consuming investments: buying into department stores such as Intime, setting up “smart” grocery stores like Hema, investing $15 billion into expanding its delivery network into remote regions, and enlisting some half-a-million mom-and-pop stores that now serve the countryside.

    Alibaba is trying to transform the way retailers large and small manage their inventory based on real-time demand. And drawing more physical customers into its network boosts its own online orders and provides abundant data to target future consumers.

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