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

    Email of the day on the outlook for the Pound and the UK

    I can never understand the irrationality of the markets (I know, I can hear David's words, "the markets don't care what you or I think" ringing in my ears!) but surely a decisive separation from the EU, if necessary on WTO terms would eliminate uncertainty and settle the issue for good. The notion of a Brexit with the UK still subservient to the EU's protectionist policies and antidemocratic dogma will fester among the majority of the British public causing it to flare up again repeatedly in the years ahead.

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    CLO Selloff Flashes Warning Sign to Junk Bond Market

    This article from the Wall Street Journal may be of interest to subscribers. Here is a section:

    CLOs resemble the mortgage-backed bonds that imploded in 2008, but very few defaulted in the credit crisis, a key driver of their recent popularity. Prices for their shares and bonds, however, plummeted at the time, and holders who sold out took heavy losses.

    Now some CLO bond prices are falling again. That is because the riskier loans the CLOs own are dropping in value as the companies that borrowed them start running out of cash. CLO bonds rated double-B, which are among the riskiest CLO securities, returned about 10% this year through June. But recent declines, especially last month, erased most of the gains, giving holders a roughly 1% return this year through October.

    That contrasts sharply with high-yield bonds: Many of the same companies to which CLOs lend issue junk bonds, which returned about 12% this year through October, according to data from S&P Global Market Intelligence.

    “If you think that double-B CLOs are giving a warning sign, that says something about high yield,” said David Preston, head of CLO research at Wells Fargo & Co. “It’s hard to see how both markets can be right.”

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    Pound Jumps After Farage Promises Not to Contest Tory Seats

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

    The currency’s focus on politics above all else was once again on show Monday, as the pound barely reacted to U.K. GDP growth, only to move close to 1% on the political developments. Strategists had said a coalition between the Brexit Party and the ruling Conservatives could have been the worst outcome for the pound, as Farage’s lawmakers would likely seek a more distant relationship with the EU and even push for a no-deal Brexit.

    Still, though the news is positive for the U.K. currency, it’s not “a game changer,” according to Rochester. Even if the Conservatives were to keep all of their seats from last time, that would still mean a hung Parliament, and the Brexit Party still plans to stand in seats which were won by the opposition Labour party last time.

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    The next 6 months favor Cyclicals: Financials, Energy, Industrials, Tech, Materials

    Thanks to a subscriber for this chart illustrated report by Barry Bannister for Stifel which may be of interest.

    Electric cars are changing the cost of driving

    This article by Michael J. Coren for Quartz may be of interest to subscribers. Here is a section:

    It’s difficult to know how representative this data is of Teslas overall, given that Tesloop’s fleet is small, but it likely includes a large share of the highest-mileage Teslas on the road—several are nearing 500,000 miles. Finding conventional vehicles to compare is virtually impossible since most fleet cars are typically sold off after 100,000 miles.

    But the implications could be huge. Every year, corporations and rental car companies add more than 12 million vehicles in Europe and North America to their fleets (pdf). Adding EVs to the mix could see those cars lasting five times longer—costing a fraction of conventional cars over the same period—while feeding a massive new stream of used electric cars into the marketplace. Whether the future of fleets is really electric, however, depends on the data. And that’s still in short supply.  

    The promise of EVs
    Most commercial vehicle fleets still run on gasoline and diesel, David Hayward, a fleet expert with Deloitte consulting, said. But EVs are top of mind. “Everyone is excited about it and everyone wants it,” he told Quartz. “But there’s trepidation.” The potential savings are huge. Fleet owners’ biggest expenses after depreciation (44%) are fuel (22%) and maintenance and repairs (11%), according to Deloitte.  EVs could slash those by more than half.

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    Inside Amazon's plan for Alexa to run your entire life

    This article by Karen Hao for the MIT Technology Review may be of interest to subscribers. Here is a section:

    In another scenario, you might ask Alexa through your communal home Echo to send you a notification if your flight is delayed. When it’s time to do so, perhaps you are already driving. Alexa needs to realize (by identifying your voice in your initial request) that you, not a roommate or family member, need the notification—and, based on the last Echo-enabled device you interacted with, that you are now in your car. Therefore, the notification should go to your car rather than your home.

    This level of prediction and reasoning will also need to account for video data as more and more Alexa-compatible products include cameras. Let’s say you’re not home, Prasad muses, and a Girl Scout knocks on your door selling cookies. The Alexa on your Amazon Ring, a camera-equipped doorbell, should register (through video and audio input) who is at your door and why, know that you are not home, send you a note on a nearby Alexa device asking how many cookies you want, and order them on your behalf.

    To make this possible, Prasad’s team is now testing a new software architecture for processing user commands. It involves filtering audio and visual information through many more layers. First Alexa needs to register which skill the user is trying to access among the roughly 100,000 available. Next it will have to understand the command in the context of who the user is, what device that person is using, and where. Finally it will need to refine the response on the basis of the user’s previously expressed preferences.

    “This is what I believe the next few years will be about: reasoning and making it more personal, with more context,” says Prasad. “It’s like bringing everything together to make these massive decisions.”

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    Brazil Coffee Areas Seen Drier than Normal in Next 5 Days

    This note by Manisha Jha for Bloomberg may be of interest. Here it is in full: 

    Drier than average conditions are forecast across the Brazilian coffee region over the next five days, particularly in Cerrado, Marex Spectron said in emailed weather report.

    Regions of southern Espirito Santo, southeast Minas Gerais and southeast Sao Paulo are forecast to be wetter than average
    In the next five days thereafter, the whole Brazilian coffee region is expected to be wetter than average, except for the northern coffee region, which is expected to be slightly drier than normal

    VIETNAM

    Typhoon Nakri is forecast to weaken to a tropical depression before it makes landfall over central or eastern Vietnam between Nov. 10 and 11

    “It is associated with heavy rain and strong, sustained winds”

    There is an anomaly of 10 mm predicted across the Central Highland region over the next five days
    Drier than average conditions expected in the northern coffee areas
    NOTE: Vietnam Coffee Harvest Threatened by Tropical Storm: Maxar

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