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

    Glencore to double size of $1B share buyback program

    This article by Cecilia Jamasmie for Mining.com which may be of interest. Here is a section: 

    Glencore’s move falls in line with what an increasing number of top miners have been doing lately, that is, handing money back to shareholders. The trend follows a recovery from the commodity rout of 2015-16 and increasing pressure from investors to not buy assets that may never deliver returns.

    Less than a week ago, world’s second largest miner Rio Tinto (ASX, LON:RIO) unveiled a $3.2 billion share buyback following an asset-sale spree. Previously, BHP paid out a record dividend and promised it would give its shareholders most of the $10.5 billion it obtained from the sale of its US shale oil and gas assets.

    Glencore said it has almost completed its first buyback, acquiring $940 million of its own stock after the shares fell to a 14-month low in September as part of a wider commodity sell off.

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    Gold Is Cheap. Inflation Is Coming. You Do the Math

    Thanks to a subscriber for this article from Barron’s which may be of interest. Here is a section:

    Compared with stocks and other financial assets, gold looks inexpensive. More important, inflation is starting to pick up in the U.S. and in much of the world as central banks shrink their enormous balance sheets. And gold has represented a good defense against inflation eroding the value of a stock or bond portfolio. Over time, it has held its value against the dollar. Gold was $20.67 an ounce 100 years ago and that bought a good men’s suit. At $1,200 an ounce, the same is true today.

    “Gold is rare, and it’s hard to rapidly increase the supply of it,” says Keith Trauner, co-portfolio manager of the GoodHaven (ticker: GOODX) mutual fund, which holds Barrick Gold(ABX), a leading mining company. “People have historically viewed it as a hedge against government depreciation of local currency.”

    There are an estimated six billion ounces of gold in the world, worth more than $7 trillion, about 30% of the value of the S&P 500. Annual new mined supply adds less than 2% to the global total.

    “Virtually every government in the world is trying to promote inflation partly because there is so much sovereign debt,” Trauner says. When there is so much debt, he contends, governments have three choices: default, restructure, or inflate the currency. “Politicians, when given the chance, will choose the latter.”

    Naysayers point to higher interest rates as a negative for gold because it increases the allure of holding cash. But gold had one of its best decades during the inflationary 1970s, when rates soared.

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    Farm to Cradle: Nestle Experiments with Tracking Gerber Baby Food on the Blockchain

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

    Food Trust members in the past year or so have tested various segments of the food supply chain, including Walmart’s mango logistics, aiming ultimately for a farm-to-grocery aisle view of how food moves.

    Last fall, Nestlé tested the traceability of its Libby canned pumpkin on Food Trust, learning that tracking a single-ingredient food from a limited number of U.S. growers is relatively simple, Mr. Tyas said.

    The baby food experiments involve multiple ingredients and some cross-border transactions. In one test, Nestlé is working with farmers and processors of apples, sweet potatoes and pumpkin. In another, the partner is a mango provider in Colombia.

    A challenge for Nestlé in adopting the Food Trust blockchain is having to build interfaces to connect its many shipping, trucking, processing and other software systems related to managing its fruits, vegetables and other ingredients to the new technology, Mr. Tyas said.

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    Argentine Bonds Back Where They Began After Wild Day for Traders

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

    For Argentine bond investors, Tuesday has been a wild day. Luis Caputo, who was a trader himself for years at JPMorgan and Deutsche Bank before running an asset manager in Buenos Aires and heading finances for President Mauricio Macri, was liked and respected by the market. Some even joked about the need to build a statue or rename an avenue after him. The Lionel Messi of the administration, according to others.

    So when the “fixer,” who negotiated with hedge fund titan Paul Singer to end a decade-long debt holdout battle, and the guy who convinced emerging-market debt investors to buy into a 100-year bond, resigned as central bank chief, the initial reaction was slight panic.

    Bond yields, which had been tightening for days, swung higher in the immediate aftermath of the news. The idea that a vulnerable economy was about to lose one of its leaders didn’t sit well with investors.

    At least for a little while. In the end, traders calmed down and decided that the new leadership wasn’t so bad: Guido Sandleris is viewed as a technocrat well versed in the ongoing
    talks with the International Monetary Fund.

    Yields have ended up not too far from where they started: To be sure, the peso is down more than 3 percent and it still isn’t clear what additional help Argentina can expect from the IMF. But in the words of Economy Minister Nicolas Dujovne, “the deal is imminent” and Sandleris is “brilliant.”

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    ECB's Draghi Sees Vigorous Pickup in Core Euro-Area Inflation

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

    Mario Draghi said he sees a “relatively vigorous” pickup in underlying euro-area inflation, signaling
    that the European Central Bank is well on track to raise interest rates late next year.

    In testimony to the European Parliament, the ECB president said while headline consumer-price growth will only average around 1.7 percent a year through 2020, still below the goal of just under 2 percent, that stable outlook “conceals a slowing contribution from the non-core components” such as energy and food prices.

    “Underlying inflation is expected to increase further over the coming months as the tightening labor market is pushing up wage growth,” he said in Brussels on Monday. “Domestic price pressures are strengthening and broadening.”

    The euro jumped half a cent on the remark, reaching the highest level since June. It traded at $1.1800 at 3:16 p.m. Frankfurt time. Bunds extended losses and the Stoxx 600 index fell to a session low.

    The ECB will end its bond-buying program in December and expects to keep interest rates at record lows at least through the summer of 2019. Policy makers have acknowledged market expectations for a hike around the final quarter of next year.

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    India Needs to Stop the IL&FS Rot From Spreading: Andy Mukherjee

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

    Infrastructure Leasing & Financial Services Ltd. is a sprawling nonbank institution that used its highly rated paper to chalk up $12.5 billion of debt, which it funneled into the financing of long-term assets like roads, townships and water-treatment plants. Most of these businesses are owned by IL&FS-linked operating companies.

    The opacity masked growing liquidity problems, though only up to a point. Some of the group’s finance companies are now missing repayments on short-term paper, even as the unlisted parent’s owners, including state-run Life Insurance Corp. of India, dawdle over an emergency infusion of funds. 

    The task of highlighting the systemic risks fell to equity markets. Dewan Housing Finance Corp. led the carnage on Friday when its shares fell more than 42 percent. (They were down almost 60 percent at one stage.) Most other shadow lenders, which make retail loans but don’t take deposits, also dropped between 12 percent and 17 percent.

    The bloodbath was sparked by the money market, where a mutual fund sold Dewan’s notes at a yield of 10.75 percent, compared with 8.6 percent for other corporate debt locally rated as AAA.

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    Oil Traders Say $100 Coming as OPEC Strains to Fill Iran Gap

    This article by Javier Blas, Heesu Lee, Alfred Cang and Dan Murtaugh for Bloomberg may be of interest to subscribers. Here is a section:

    Major oil trading houses are predicting the return of $100 crude for the first time since 2014 as OPEC and its allies struggle to compensate for U.S. sanctions on Iran’s exports.

    With Brent crude already jumping to an almost four-year high on Monday, that’s exactly the kind of price surge President Donald Trump has been seeking to prevent by pressuring the Organization of Petroleum Exporting Countries to raise production. Yet the cartel and its allies gave mixed signals at a meeting in Algiers on Sunday, ultimately showing little sign they would heed U.S. demands to rapidly push down crude prices.

    OPEC’s reticence, combined with signs of accelerating supply losses from Iran, created a bullish mood the annual gathering of the Asian oil industry, traders, refiners and bankers in Singapore on Monday.

    “The market does not have the supply response for a potential disappearance of 2 million barrels a day in the fourth quarter,” Mercuria Energy Group Ltd. co-founder Daniel Jaeggi said in a speech at the S&P Global Platts Asia Pacific Petroleum Conference, knows as APPEC. “In my view, that makes it conceivable to see a price spike north of $100 a barrel.”

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    Fish-Oil Heart Medicine Is Rarest of Drug Successes

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

    It’s been easy to doubt Amarin, which has been working on this trial for the better part of a decade. The scientific rationale is there: Omega-3 fatty acids like the one Amarin is testing can reduce high triglycerides, a risk factor for cardiovascular disease. But many previous fish-oil trials have failed. Vascepa’s purity enables a higher dose without raising cholesterol, as other fish oils can. Amarin bet that focusing on high-risk patients with persistently high triglycerides would
    reveal the benefit of that higher dose, and was proven correct.

    Insurers already approve coverage of the drug for use by a small group of patients with very high triglicerides, but there is a strong case to be made to expand coverage more broadly. Cardiovascular disease is the leading cause of death in the U.S., and heart attacks and strokes are incredibly expensive for the health-care system. Preventing them not only saves lives, it saves money.  

    Other drugmakers have tried and failed to make a similar argument with other treatments, most notably so-called PCSK9 inhibitors drugs from Amgen Inc. and Sanofi and Regeneron Pharmaceuticals Inc. These medicines are able to dramatically lower bad cholesterol beyond what older statins can manage, and can significantly reduce cardiovascular events in a high-risk population. But their list price of more than $14,000 at launch has caused insurers to substantially restrict availability.

    Amarin said on a Monday morning conference call that it will revisit its pricing, but right now Vascepa’s list price is about $2,400 a year, much lower than those other drugs. That kind of price, combined with the number of people that could benefit and the size and rigor of the trial, will make aggressive restriction difficult. 

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