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May 03 2023

Commentary by Eoin Treacy

Stocks Drop as Powell Signals No Fed Cuts For Now

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

Instead, the FOMC will take into account various factors “in determining the extent to which additional policy firming may be appropriate.”

“That’s a meaningful change that we’re no longer saying that we anticipate” further increases, Chair Jerome Powell said at a press conference after the decision, when asked whether the statement is a signal that officials are prepared to pause rate increases in June. “So we’ll be driven by incoming data, meeting by meeting, and we’ll approach that question at the June meeting.”

The increase lifted the Fed’s benchmark federal funds rate to a target range of 5% to 5.25%, the highest level since 2007, up from nearly zero early last year. The vote was unanimous, and Powell said support for the 25 basis-point rate increase was “very strong across the board.”

Whether that rate will prove to be high enough to bring inflation back to the Fed’s 2% target will be an “ongoing assessment” based on incoming data, Powell said, adding later that Fed officials’ outlook for inflation does not support rate cuts.

Eoin Treacy's view -

The Fed Funds Rate is now at the same level it was between 2006 and early 2008. The big takeaway from today’s press conference was they have no intention of cutting even if they are potentially pausing with the hiking program.

Powell appeared bemused that unemployment had not already jumped higher. That’s based on historical precedence when rates have gone up some quickly and other forms of credit have tightened. He continues to express hope a recession will be avoided but the reality is the longer high rates are sustained, the more likely a recession becomes. 



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May 03 2023

Commentary by Eoin Treacy

4 dangers that most worry AI pioneer Geoffrey Hinton

This article from Associated Press may be of interest. Here is a section: 

Researchers have long noted that artificial neural networks take much more time to absorb and apply new knowledge than people do, since training them requires tremendous amounts of both energy and data. That's no longer the case, Hinton argues, noting that systems like GPT-4 can learn new things very quickly once properly trained by researchers. That's not unlike the way a trained professional physicist can wrap her brain around new experimental findings much more quickly than a typical high school science student could.

That leads Hinton to the conclusion that AI systems might already be outsmarting us. Not only can AI systems learn things faster, he notes, they can also share copies of their knowledge with each other almost instantly.

“It’s a completely different form of intelligence,” he told the publication. “A new and better form of intelligence.”

Eoin Treacy's view -

I attended Hinton’s presentation at the EmTech Digital conference today. He expressed a great deal of caution about the evolution of AI while also saying that the reasoning capability necessary for outright competition with human thought is not yet in place. He is worried about the fact that when one model learns, every model can transfer the knowledge instantly and therefore the rate of improvement can only accelerate. Taken to a logical conclusion, the ability of AI models will eventually exceed the ability of the human mind. 



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May 03 2023

Commentary by Eoin Treacy

Scientists Warn on Climate as Australia Unlocks Giant Gas Region

This article from Bloomberg may be of interest. Here is a section: 

Scientists warned about the potential climate impact of shale gas production in Australia’s Northern Territory as the region — which had previously banned fracking — confirmed it will allow developers to seek approvals for projects.

The territory aims to exploit a sub-basin estimated to hold about 100 times Australia’s existing natural gas production after implementing a series of recommendations made when it lifted curbs on hydraulic fracturing in 2018.

“Our highly prospective onshore gas resources will support our energy security during the transition to renewables — and will improve living standards for all Territorians,” the region’s Chief Minister Natasha Fyles said in a statement. 

Development of onshore gas projects in the region — twice the size of Texas and with a population of less than 250,000 — has been a hugely contentious issue in Australia for years, pitting climate campaigners against resources companies that argue new local production is required to meet domestic energy demand. 

Prime Minister Anthony Albanese’s national government, which took office last year, has legislated more stringent emissions reduction targets, though also backs the role of gas in the nation’s energy mix, vowing to protect consumers from supply shortfalls.

Industry estimates suggest that the flagship Beetaloo Sub-basin alone could hold about 500 trillion cubic feet of gas, according to the Northern Territory government — more than three times annual global consumption and a quarter more than all proved US shale gas reserves. It’s part of an even larger basin called McArthur. 
 

Eoin Treacy's view -

Natural gas is a pollutant. There is no argument with that. However there is no point talking about emissions with blinkers on. The impact of natural gas emissions from combined cycle power plants is a fraction of what is being emitted by coal fired plants. The hard reality is if the developed world bends over backwards to achieve carbon neutrality, the growth in emissions from the developing world will mean it is all for nothing. 



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May 02 2023

Commentary by Eoin Treacy

Video commentary for May 2nd 2023

Eoin Treacy's view -

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: AI winners and losers, techology versus interest rate cycles, oil and copper weak, Treasuries and gold firm, Wall Street pares losses in late trade but recession risks rising as banks break lower. 



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May 02 2023

Commentary by Eoin Treacy

Chegg Sinks 48% as ChatGPT Threatens Growth Outlook

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

Chegg Inc. tumbles as much as 48%, its biggest drop since November 2021, after the online educational services company warned that ChatGPT was threatening growth of its homework-help services, making it one of the first companies to highlight generative AI’s negative impact on business. Jefferies cut the recommendation on the stock to hold from buy, saying the AI overhang is starting to impact fundamentals. 

Eoin Treacy's view -

I’m attending the MIT Technology Review Emerging EMTech Digital conference at present. There have been some very interesting and educative presentations. The consensus is generative AI models are an innovation on the scale of the steam engine.

With that as a background, the law of jungle is clearly in effect. Microsoft is in full move “fast and break things” mode. Other companies are playing catch up and some are trying to be measured in how they consider ethics and bias. There is a widespread acceptance that the sector would not exist without Meta’s decision several years ago to open source its data. 



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May 02 2023

Commentary by Eoin Treacy

US Vacancies Fall, Layoffs Jump in Sign of Softer Job Market

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

Vacancies at US employers fell in March by more than forecast and layoffs jumped, indicating softening demand for workers.

The number of available positions decreased for a third-straight month to 9.59 million from nearly 10 million a month earlier, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Tuesday. That was the lowest in nearly two years and fell short of the median estimate in a Bloomberg survey of economists.

The data point to a gradual moderation in labor demand, which should eventually bring the job market into better balance and alleviate upward pressure on wages. While some companies — notably in technology and finance — have cut employees, the labor market as a whole remains resilient and has been a stalwart between the US and recession.

Eoin Treacy's view -

We are a year into the hiking cycle, so it is reasonable to see some evidence of economic slowdown around now. The stress in the banking sector is mostly focused on the convexity of bond portfolios. Loan loss provisions have not been factored in yet but that is only going to make the situation worse. JPMorgan has a big balance sheet, but it can’t buy every bank. 



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May 02 2023

Commentary by Eoin Treacy

Oil Tumbles as Low Trading Volumes Make for an "Investor Desert"

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

“The market is an investor desert,” said Scott Shelton, an energy specialist at ICAP. “The fundamental information that generates predictable price action doesn’t exist.”

Adding to the bearish sentiment, vacancies at US employers fell to an almost two-year low in March, a fresh sign of a softening labor market. Activity in China’s export-tilted manufacturing sector missed estimates in April, a possible sign of a recession among customers in the US and Europe. And Iranian Oil Minister Javad Owji said the country has increased output to more than 3 million barrels a day, providing additional supplies to the market.

“It’s going to take some evidence in the physical market on the tightening we see in our balances before we see any more positive or committed trading activity,” Emily Ashford, an energy analyst at Standard Chartered Bank, said by phone. 

Eoin Treacy's view -

OPEC+ have been proactive in attempting to curtail supply to meet declining demand. There are big outstanding questions about how sustainable that policy is against a background of competing priorities inside the cartel and economic weakness among the biggest customers. Keeping supply and demand in balance is only going to become more difficult. 



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April 28 2023

Commentary by Eoin Treacy

April 28 2023

Commentary by Eoin Treacy

April 28 2023

Commentary by Eoin Treacy

BOJ's Ueda Gains Flexibility After Scrapping Guidance on Rates

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

The central bank also called for a long-term review of its policies and issued new price forecasts that show inflation below 2% again in the fiscal year ending March 2026. 

The decision to keep stimulus in place in pursuit of stronger inflation keeps the BOJ in a very different place to its price-fighting global peers for now. 

While the wave of policy tightening around the world to weaken inflation appears close to peaking, the Federal Reserve still looks set to push up borrowing costs further when it meets next week.

That possibility still seems a long way off for the BOJ, given a reiterated commitment in Friday’s statement to continue easing with yield curve control.  Still, Ueda later clarified that policy could be changed including a normalization during the review process.

“We’re not starting the review with the aim of normalizing,” Ueda said. “But it’s not zero chance we begin normalizing during the review period.”

For now, the risk of a premature tightening move stopping the BOJ from achieving its price target is greater than the cost of a delayed move, he said.

 

Eoin Treacy's view -

The message from the BoJ is clear. They are not going to begin normalising policy until they are certain deflationary forces have been banished. That could entail waiting until inflation returns to trend internationally so they have a benchmark to compare against. 



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April 28 2023

Commentary by Eoin Treacy

First Republic Plunges Anew Amid Elusive Search for Rescue Plan

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

US officials are coordinating talks to rescue First Republic, with the Federal Deposit Insurance Corp., the Treasury Department and Federal Reserve orchestrating meetings about throwing a lifeline, Reuters reported, citing unidentified people. 

But some of the biggest US banks, which have already contributed $30 billion in deposits to prop up First Republic, have balked at getting more involved and potentially throwing good money after bad, Bloomberg News reported. 

The focus has shifted to a US takeover, according to CNBC. For its part, First Republic has acknowledged it’s engaged in discussions with multiple parties about strategic options.

Eoin Treacy's view -

It is very likely today is First Republic’s last day of active trading. Trading was halted on several occasions today as the stock plunged anew. By the end of the weekend a deal will have been completed for a large bank like JPMorgan to take it over. 



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April 28 2023

Commentary by Eoin Treacy

Mexico Surprises With Above-Forecast Growth on Export Surge

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

“This is a solid report, showing a resilient economy on the back of supportive remittances, rising exports, and improving labor conditions,” said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. “We expect economic activity to be more resilient than in previous cycles.”

The economy’s accelerating growth gives some pause to economists who’ve predicted that the country is headed for a contraction later in the year, due to the expected downturn in the US, Mexico’s biggest trading partner. Part of the surprise is the boost from the domestic market, which has contributed especially to the revival of the services sector, after it plunged earlier during the pandemic.

The Mexican peso erased earlier losses and strengthened as much as 0.3% after the first quarter release.

Eoin Treacy's view -

Mexico is likely to be one of the primary beneficiaries of the reorientation of supply chains as geopolitical tensions between the OECD and China intensify. The prospect of exporting LNG to Europe and the potential for domestic lithium to be used for battery manufacturing and exports is a key reason for optimism about the potential for economic growth. 



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April 27 2023

Commentary by Eoin Treacy

Video commentary for April 27th 2023

April 27 2023

Commentary by Eoin Treacy

US Economic Growth Slows to 1.1% While Inflation Accelerates

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

The outlook depends largely on the resiliency of the job market. Low unemployment and persistent wage gains have so far allowed consumers to weather high inflation and keep spending.

The personal consumption expenditures price index grew at an 4.2% annualized pace in the January to March period. Excluding food and energy, the index rose 4.9%, faster than forecast and the most in a year. March data will be released Friday. Services inflation remained hot while prices of non-durable goods accelerated.

The inflation and consumer spending figures likely keep the Fed on track to raise interest rates by a quarter percentage point next week. First Republic Bank’s continuing struggles, however, do raise the possibility that the central bank could pause.

Eoin Treacy's view -

Consumer demand surged in the early part of the first quarter and eased back in the later part of the quarter. At the same time economic growth eased and inflation increased. 



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April 27 2023

Commentary by Eoin Treacy

McDonald's Has a Secret Weapon to Take Down Burger King, Wendy's

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

During the call the chain's chief financial officer, Ian Borden, explained just how well that has worked.

"MyMcDonald's Rewards is yet another example of how we've tapped into our marketing engine to deploy our loyalty platform throughout the system," the executive said.

"Now in 50 markets, loyalty is building even stronger relationships with our customers, and the results continue to shine. In our top six markets, digital sales now represent almost 40% of systemwide sales, or nearly $7.5 billion, growth of more than 30% over the last year."

McDonald's' digital-membership numbers are particularly strong when you compare them with Starbucks, the company generally considered the pioneer of app-based loyalty rewards programs and mobile order and pay.

Starbucks, which reports only U.S. loyalty program members, ended its most-recent quarter with more than 30 million active rewards members.

Across its top six markets, McDonald's has an even bigger membership base.

Eoin Treacy's view -

Anything that gives consumers the impression they are saving money is going to be a benefit in an inflationary period. The reliability of fast-food revenue and the constancy of dividend growth is supporting their shares. 



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April 27 2023

Commentary by Eoin Treacy

Wall Street Is Getting a New Fear Gauge as 0DTE Mutes VIX

This article from Bloomberg may be of interest. Here is a section: 

Cboe Global Markets Inc., the Chicago-based exchange operator behind the VIX, has announced that a new one-day version of its flagship volatility index is poised to launch. The Cboe 1-Day Volatility Index (ticker VIX1D) is scheduled to start Monday, according to a notice on Cboe’s website. 

If it succeeds in capturing the sentiment embedded in in 0DTE options, it could mark a significant moment for investors and traders across the spectrum.

“This makes sense because so much of the volume has moved to shorter tenors,” said Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets. “I’ve been joking that the VIX is going through a mid-life crisis, being replaced by someone younger (shorter dates).”

There is already some evidence that nearer-term options have been flashing more stress than the VIX. Cboe offers a nine-day version of the gauge (VIX9D), which has regularly traded at higher levels than the VIX this year. 

Eoin Treacy's view -

The jump in demand for zero day options has been a major factor in the surge in intraday trading activity this year. That’s resulted in the 90-day VIX calculation not reflecting the volatility of where the majority of volume is traded. The new 1-day VIX and 9-day VIX measures are aimed at remedying that disparity. 



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April 26 2023

Commentary by Eoin Treacy

Video commentary for April 26th 2023

April 26 2023

Commentary by Eoin Treacy

Email of the day on Hong Kong

As a HK subscriber to your excellent service, I like to give a few on the grounds observations. In my view, the reason why LVMH is making the shift is 1) China opened Hainan tax free shopping and Shenzhen also exploring the same makes shopping high end products less unfavorable in the mainland. 2) Chinese tourist since reopening find HK less attractive relatively for tourism than before.

On HK becoming just another Chinese city, on recent trip to UK, found some general public perception of HK over the last few years seriously incorrect, I suppose due to the sensational and misleading journalism on HK from the press in the west. While there are changes in HK in last few years, that it is becoming another Chinese city I think is very much misplaced.

On the HKD peg, from what I heard from current and prior HK central bank chiefs and top officials from PRC, there is no desire or rationale to change the peg for the foreseeable future. Also that HKD in circulation is back by about 5X USD reserve and that the peg is setup unilaterally by HK, risk of interference by US due to geopolitical concern is low.

Eoin Treacy's view -

Thank you for this generous and insightful email and your kind words. The efforts underway to boost the international credentials of Shenzhen, Guangzhou, Macau and Hong Kong to create a “Bay Area” innovation hub to rival Silicon Valley were the stated government policy ahead of the pandemic 



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April 26 2023

Commentary by Eoin Treacy

Email of the day on combustion risk from EVs

Will they be a conflagration risk?

Eoin Treacy's view -

Thank you for this question, which was in reference to the announcement CATL is prototyping a battery capable of powering airplanes. The fire risk from lithium batteries comes from the liquid catalyst. Since solid state batteries do not have a liquid electrolyte they are inherently safer. The new CATL battery is not exactly a solid state battery so it is impossible to know at this stage what the fire risk is. 



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April 26 2023

Commentary by Eoin Treacy

Email of the day on why uranium is not doing better.

Dear Eoin, Why do you think the Uranium Miners ETF you have been holding has been disappointing of late? Is it all about "risk-off" and withdrawal of liquidity from the market? What makes you continue to hold? What would make you sell? Thanks! Kind regards, 

Eoin Treacy's view -

Thank you for this question. I don’t see how the promise of electrifying the economy is possible without a nuclear renaissance. The fact the sector is not performing better suggests the critical mass of support for the industry is not yet mature enough. Significant resources are being ploughed into the small modular reactor sector but the lead times are long and there is not enough urgency to ignite investor interest in the short term. That’s why I believe it is underperforming at present. 



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April 26 2023

Commentary by Eoin Treacy

Email of the day on the timing of a gold bull market

Dear Eoin-Hope you are doing well. You often mention in your daily videos that you expect a recession within the next 18 months and that you also expect gold to move considerably higher in a not too distant future. If I am not mistaken in the previous recessions gold went down considerably. I know timing is always very difficult if not impossible, but do you expect gold to break upwards before the recession or after the recession. As always thanks very much for your wonderful service. Best rgds

Eoin Treacy's view -

Thank you for this important question. Gold began its bull market in 2000/01 when the Nasdaq was topping but it collapsed in 2008 during the credit crisis as contagion selling forced investors to sell anything they had a profit in. That suggests gold need not collapse during a recession but it will depend on how tight credit conditions become and how heavily positioned investors are in precious metals. 



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April 26 2023

Commentary by Eoin Treacy

Email of the day on a range versus a base

When I see/read that Glaxo's shares have been ranging for 20 years, I can't help but be reminded by your service's maxim that, ranges are explosions waiting to happen." After 20 years, one must wonder when and in what direction will we see the explosion?

Eoin Treacy's view -

Thank you for this topical question. Glaxo has been a highly innovative company and yet the share has been locked in a lengthy and volatile range for decades. That suggests the innovations that drove the original bull market and funded the M&A activity that created GlaxoSmithKline are priced in.



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April 25 2023

Commentary by Eoin Treacy

April 25 2023

Commentary by Eoin Treacy

April 25 2023

Commentary by Eoin Treacy

The Fed's next move

Thanks to a subscriber for this report from UBS which may be of interest. Here is a section:  

Aggregate hours worked in the private sector declined in February and declined again in March. Last week we walked through why we estimate the labor market has come back into alignment over the course of the last year. We also note that for all the talk of labor hoarding, filings of initial claims for unemployment insurance over the last four weeks have run higher than all of 2019 and most of 2018. Layoff announcements have been running above the post-GFC pace. Clearly some employers are laying off.

In our economic baseline, we assume the labor market carves out a peak this summer, and we pencilled in the July employment report as the time we expect the first negative payroll print. We'll see. However, our empirical models are moving that way. In the recent compendium (on page 17 at this link) , a leading indicator model developed by UBS's Pierre Lafourcade noted that a rising share were in contraction (defined as having passed a cyclical peak), and the same for a broader set of employment indicators that reflect labor market conditions.

"Historically, once roughly 50% of all series contract, payrolls go negative (which is intuitive), but it's the leading indicator bucket that tells you when that is likely to happen (it shoots up from 40% to 80% of series contracting in just a few months). The upshot is that while private non-farm employment is still growing, an increasing share of the underlying dynamics is turning sour," he wrote in the compendium in late March.

Eoin Treacy's view -

The big question for all investors is the rationale for raising rates. The answer to that question will inform the decision on how much they will cut rates during a downturn and how long rates will stay down before tightening resumes.

I see four scenarios: 



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April 25 2023

Commentary by Eoin Treacy

China' Politburo Likely to Shift Focus From Stimulus to Reforms

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

With China’s economic recovery well on track, top leaders will likely turn their policy focus now to boosting business confidence, increasing jobs and strengthening the property market without adding extra stimulus.

And

The People’s Bank of China has already signaled it will begin dialing back the pandemic stimulus used to funnel loans to small businesses in recent years. Local governments are also saddled with record amounts of debt, reducing their capacity to increase fiscal support.

“The People’s Bank of China could switch to a wait-and-see mode once the economy is back on track, and prepare for policy normalization,” said Yu Xiangrong, chief China economist of Citigroup Inc. 

Eoin Treacy's view -

The one thing investors are paying attention to is China’s willingness to inject liquidity into the economy. Capital is both global and mobile and China’s willingness to flood the market with liquidity after the credit crisis helped to re-float the global economy. This time around China is more interested in keeping inflationary pressures contained and avoiding reflating the housing bubble. That suggest much more targeting economic support.



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April 25 2023

Commentary by Eoin Treacy

The Big Plan to Help Developing Nations Go Green Is Foundering

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

Climate finance is likely to be a focus of December’s COP28 meeting in the United Arab Emirates, with the oil-exporting host saying it will address ways to fund the energy transition in poorer countries that simultaneously need to expand access to electricity. That adds pressure on industrialized nations and oil producers to step up. 

While Vietnam’s $15.5 billion and Indonesia’s $20 billion planned JETP agreements are at an earlier stage, they’re also much bigger and potentially more complex. A smaller deal envisaged with Senegal is complicated by its plan to start producing gas.

“We could have done an amazing, amazing model right here in South Africa,” said Tasneem Essop, executive director of Climate Action Network International, which represents over 1,900 climate-focused organizations in more than 130 countries. But “we got embroiled in the politics of it all.”

Eoin Treacy's view -

Coal might be dirty, but it is cheap, reliable, many countries have domestic supplies, plants can rapidly be constructed and last for decades. That’s hard to compete with. The unspoken drawback of forcing developing countries to abandon coal is higher electricity usage is a major contributor to higher standards of living.



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April 24 2023

Commentary by Eoin Treacy

April 24 2023

Commentary by Eoin Treacy

Tech Surge Sends Valuations to Extremes, but Traders Don't Care

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

Tech stocks in the S&P 500 are trading at almost 25 times prospective earnings. To justify such a multiple, the Fed would need to cut rates by at least 300 basis points, data compiled by Bloomberg Intelligence show. That’s more than five times what the swaps market is pricing in for rate cuts this year. 

“Traders are betting on a big about-face in the Fed’s interest-rate policy, but there is no certainty as to whether, and when, this will happen,” said Quincy Krosby, chief global strategist at LPL Financial. “Longer-term, the sector’s growth prospects are attractive, but not at the current valuations.” 

A bleak earnings outlook for tech companies supports the skepticism. Analysts expect a 15% slump in the sector’s first-quarter profits — the third-largest decline among the S&P 500’s 11 industry groups, data compiled by Bloomberg Intelligence show.

Eoin Treacy's view -

The most fervent hope of investors is we are going back to the good old days of permanently low interest rates, where the There Is No Alternative (TINA) market persists indefinitely. The challenge is that inflationary pressures are still conspicuously firm. If the Fed cuts rates by 300 basis points, which I believe is likely, that will be in response to a significant growth shock. Technology earnings are unlikely to be immune to that kind of development.



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April 24 2023

Commentary by Eoin Treacy

Italy Rethinks Its Close China Ties as US Backs Stronger Break

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

“Italy is stuck between a rock and a hard place, and what to do with the cooperation pact is a real diplomatic conundrum for Meloni,” Francesca Ghiretti, an analyst at the Mercator Institute for China Studies research firm, said in an interview.

“Renewing it would send a very difficult message to Washington, but not renewing it would put a strain in relations with China.”

With US-China relations deteriorating, Beijing is looking to prevent Europe from following Washington, particularly on measures like export controls of key technologies. The EU is struggling to balance a desire to engage with China on trade and investment with resisting economic coercion.

Eoin Treacy's view -

Memoranda of Understanding (MOUs) are not worth the paper they are written on. More often than not, they are an opportunity for politicians to stand around congratulating one another and make for good headlines. Concrete efforts to follow through on these photo opps is a lot more difficult. That’s exactly where Italy’s MoU on the Belt and Road Initiative sits. It is about to expire but nothing has been done to further it since it was signed. Nevertheless, refusing to re-sign is a PR mess.



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April 24 2023

Commentary by Eoin Treacy

Haleon is feeling in rude health after the flu season

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

Haleon was demerged last July in the largest London stock market listing in more than a decade. It is the first listed company to be focused purely on consumer health and its product portfolio spans oral and respiratory health, digestive health, pain relief and vitamins, minerals and supplements.

In an update, it said that sales within its respiratory health unit had jumped by 39 per cent to £510 million in the first quarter to March 31. Oral health sales rose by 9.4 per cent to £811 million, pain relief sales increased by 14 per cent to £724 million and sales of digestive health and other products climbed by 11.9 per cent to £536 million. Only its sales of vitamins, minerals and supplements were flat, at £405 million, leaving total revenue for the quarter up 13.7 per cent at £2.99 billion.

Haleon said the pressure on its vitamins, minerals and supplements unit was “largely” because of a strong quarter for its Emergen-C supplement brand during the coronavirus wave in early 2022. Sales had risen at a double-digit pace in Europe, the Middle East and Asia, Latin America and Asia Pacific, it said. Trading in the Asia Pacific region had been boosted “by strength in China, particularly in pain relief as lockdowns ended, combined with elevated Covid-19 and cold and flu incidence”.

Eoin Treacy's view -

Several years ago a delegate at The Chart Seminar recounted how his family had the rights to import and sell several large international brands in Peru. He said it was clear from the pattern of sales that the commodity boom was ending in 2011. He also said that during the years when the Dollar was weak, demand for premium imported brands surged.



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April 21 2023

Commentary by Eoin Treacy

April 21 2023

Commentary by Eoin Treacy

Biden to hike payments for good-credit homebuyers to subsidize high-risk mortgages

This article from The Washington Times may be of interest to subscribers. Here is a section: 

Mortgage industry specialists say homebuyers with credit scores of 680 or higher will pay, for example, about $40 per month more on a home loan of $400,000. Homebuyers who make down payments of 15% to 20% will get socked with the largest fees.

The new fees will apply only to Americans buying houses or refinancing after May 1.

Lenders and real estate agents say the changes will frustrate homebuyers with high credit scores and homeowners seeking to refinance because the rule punishes them for their relatively strong financial positions.

“The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well,” Ian Wright, a senior loan officer at Bay Equity Home Loans in the San Francisco Bay Area, told The Washington Times in an email message. “It overcomplicates things for consumers during a process that can already feel overwhelming with the amount of paperwork, jargon, etc. Confusing the borrower is never a good thing.”

Eoin Treacy's view -

When I first saw this news item, I thought it was a joke. However, it does appear to be true that people with better credit will be penalised for doing better in life.

There is a significant subset of the investment community that believes governments will engage in massive building programs to revitalise infrastructure. Forgive me for scepticism. The “vision thing” is sadly lacking in most countries. 



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April 21 2023

Commentary by Eoin Treacy

Top 25 Psychiatric Medications for 2020

This article from psychcentral.com may be of interest. Here is a section: 

Psychiatric medications are a crucial part of treatment for many mental health conditions, helping to ease symptoms and boost mental well-being. But there are some more commonly prescribed.

Mental health conditions are complex. Just one medication will help in some cases. Other times, you might try a few different medications before finding the right one or even need more than one medication.

Psychiatric medications are an important part of many people’s treatment plans, including therapy and other strategies. While they can’t cure your mental health condition, they can help manage your symptoms.

Eoin Treacy's view -

The pharmaceutical industry thrives on chronic conditions. That’s why some of the most successful companies cater to diabetes or why Viagra was such a big hit. The pandemic has seen an explosion in the number of people seeking mental health solutions. It is now much more socially acceptable to talk about mental health and to a certain extent is faddish on social media. That suggests a growth market. I took the list of medications in the above article and traced down the parent companies. 



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April 21 2023

Commentary by Eoin Treacy

LVMH Is Shifting Out of Hong Kong as Chinese Shoppers Stay Home

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

LVMH is shifting resources out of Hong Kong, reflecting waning interest in what used to be Asia’s premium shopping hub as mainland Chinese consumers switch to shopping at home.

The top global luxury conglomerate wants to focus more of its investment in burgeoning metropolises such as Shanghai, Chengdu, Guangzhou and Shenzhen as Hong Kong loses its relevance in the Greater China region, according to people familiar with the matter, who asked not to be identified discussing private deliberations. 

To that end, it’s already moved the regional headquarters of some brands, including the group’s local head office, to Shanghai, and relocated some senior executives to the mainland, the people said.

Eoin Treacy's view -

The question Hong Kong has to answer is why? The gateway to China rationale is wearing thin as the mainland deals easily with most of its counterparties and expertise is migrating to other cities. The fear of Hong Kong becoming “just” another Chinese city was at the centre of concern about the security law a couple of years ago and the reality is now coming to fruition. Greater geopolitical tension between China and the developed world is not good news for Hong Kong exceptionalism. 



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April 20 2023

Commentary by Eoin Treacy

April 20 2023

Commentary by Eoin Treacy

Video commentary for April 20th 2023

April 20 2023

Commentary by Eoin Treacy

CATL Says New Super Strong Battery May Power Electric Flight

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

China’s Contemporary Amperex Technology Co. Ltd., known as CATL, unveiled its strongest battery to date Wednesday, saying that it could one day be used to power electric aircraft.  

The battery, which loads more power into a smaller package, has an energy density of 500 watt-hours per kilogram, CATL’s Chief Scientist Wu Kai said during a presentation at the Shanghai auto show. CATL’s most recent battery, called Qilin, has an energy density of 255 Wh/kg and can power an electric vehicle for 1,000 kilometers (620 miles) on one charge. 

The technology, which CATL calls a condensed state battery, is potentially a breakthrough that will help electrify sectors wed to fossil fuels because existing batteries are either too heavy or unsafe. Still, questions remain about the materials it will use, its cost and ultimate market impact.
 

Eoin Treacy's view -

CATL has a strong record of leading the way in both scale of manufacturing batteries and innovating on design. The Qilin battery sounded too good to be true when it was announced eighteen months ago but it is going into mass production this year. If China successfully puts a battery in the market with the promised characteristics of a solid state battery it would be a significant technological coup akin to the impact of the iPhone on legacy mobile phone manufacturers. 



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April 20 2023

Commentary by Eoin Treacy

India Needs More Than a Bigger Population to Top China's Economy

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

Over the period to 2040, India will likely add 270 million people to its urban population, according to the International Energy Authority.

The shift is already on display in India’s megacities. Shiny new apartment buildings dot the capital Delhi as the newly wealthy ramp up realty investments. A top developer recently sold $1 billion of luxury homes in three days in Gurugram, one of Delhi’s satellite cities.

But public services are still poor — India’s Supreme Court has even warned that air traffic controllers might be forced to steer planes around the massive garbage dumps on Delhi’s outskirts if they get any bigger. 

Eoin Treacy's view -

Even small improvements in the quality of infrastructure can have a meaningful impact on productivity when the size of the Indian population is taken into account. One of the primary measures of success on that front will be the balance of trade. Since early 2021, the trade deficit has expanded from $100 to $283 billion. The only way that is going to change is if India begins to export finished products in serious volume. 



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April 20 2023

Commentary by Eoin Treacy

'The World Changed 12 months ago'

Thanks to a subscriber for this summary of an interview with Zoltan Pozar. Here is a section: 

Rearming, Reshoring, Energy transition.
Taken in combination examples of these would be:
• Building factories for batteries, Chips, subsidizing energy transitions,
• Military expansion in Japan, Europe etc, inventory mgt increases. Onshoring of factories etc
• All of these amounts are government money. It will be matched by company money as well

This will cause Two Outcomes
1. Commodity prices will remain high from constrained supply and increased expenditures
2. We are at the beginning of a domestic infrastructure investment renaissance

Notable: ‘The investment portion will be quite powerful, perhaps to the point of us not even having a recession’
The 3 Gov’t themes will push counter the recessionary forces that undoubtedly accompany rate hike regimes. Consumption will get crushed. But investment will grow.

All these things are being done with a sense of urgency as (economic) national security and sovereignty is a big factor in each.. we need to do it yesterday

Eoin Treacy's view -

The above paragraphs argue against the old commodity adage “the cure for high prices is high prices”. I think there is another way of thinking about it that. Nothing has changed to alter the underlying relationship of the commodity markets but perhaps prices are not yet high enough to cure themselves. 



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April 19 2023

Commentary by Eoin Treacy

April 19 2023

Commentary by Eoin Treacy

The Age of Energy Insecurity

Thanks to a subscriber for this article from Foreign Affairs. Here is a section:

Even with redoubled efforts to produce more clean energy at home, the United States and others will still depend on China for critical minerals and other clean energy components and technologies for years to come, creating vulnerabilities to Chinese-induced shocks. For instance, in recent months, China has suggested that it may restrict the export of solar energy technologies, materials, and know-how as a response to restrictions that Washington imposed last year on the export of high-end semiconductors and machinery to China. If Beijing were to follow through on this threat or curtail the export of critical minerals or advanced batteries to major economies (just as it cut off rare earth supplies to Japan in the early 2010s), large segments of the clean energy economy could suffer setbacks.

Traditional energy heavyweights are also recalibrating their positions in response to the changing geopolitical landscape in ways that increase energy security risks. Saudi Arabia, for instance, now sees its global stance differently than it did in the decades that followed the famous “oil for security” bargain struck by U.S. President Franklin Roosevelt and Saudi King Abdulaziz ibn Saud on Valentine’s Day in 1945. Riyadh is now far less concerned with accommodating Washington’s requests, overt or implied, to supply oil markets in ways consistent with U.S. interests. In the face of a perceived or real decrease in U.S. strategic commitment to the Middle East, Riyadh has concluded it must tend to other relationships—especially its links to China, the single largest customer for its oil. The kingdom’s acceptance of China as a guarantor of the recent Iranian-Saudi rapprochement bolsters Beijing’s role in the region and its global status. Relations with Moscow have also become particularly important to Saudi Arabia. Regardless of the invasion of Ukraine, the Saudi government believes that Russia remains an essential economic partner and collaborator in managing oil-market volatility. It will therefore be extremely reluctant to take positions that pit the Saudi leadership against Putin.

Eoin Treacy's view -

A war is underway in the energy markets. Suppliers are intent on sustaining high prices and eco-warriors fervently hope high prices will wean the world from its addiction. Consumers are caught in the middle and have little in the way of choice as they face increasing regulatory and infrastructure costs.  



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April 19 2023

Commentary by Eoin Treacy

Re-Emerging Equities

Thanks to a subscriber for this report from AQR which may be of interest. Here is a section: 

However, lower risk in emerging markets isn’t just a China story. Fundamentals have also improved more broadly. Over the past 20 years, per capita GDP in emerging markets has roughly doubled as a share of developed markets (Exhibit 5, left side). Measures of external vulnerabilities have also improved from their periods of peak fragility in the 1980s and 1990s. Current account balances in emerging markets are now positive in aggregate, and measures of external debt sustainability (e.g., external debt as a percentage of exports) look much healthier (Exhibit 5, right side).

Bottom line: there are many reasons to believe that the relatively attractive valuations found in emerging markets represent a 5-10 year opportunity. In other words, the current expected premium is likely due to these markets being relatively underpriced, as opposed to representing compensation for assuming meaningfully greater portfolio risk.

Eoin Treacy's view -

The technology sector is a bet on the future and as such it is a long duration asset. When rates are low and credit is abundant, the penalty for taking long-term bets declines and the allure of those assets is boosted. Cashflows, valuations and sustainability are only truly relevant when there is a discount rate to compare them to. Another way of thinking about it is expected returns tend to fall when bond yields are high. In order to surmount the hurdle rate of money market funds, fundamentals and valuations matter. 



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April 19 2023

Commentary by Eoin Treacy

Perseus Maintains 2H Gold Production Forecast

This note from Bloomberg may be of interest. Here is a section: 

Perseus reaffirmed its gold production forecast for the second half-year.

SECOND HALF FORECAST
Still sees gold production 230,000 to 260,000 oz
Still sees all-in sustaining costs/oz $1,000 to $1,200

YEAR FORECAST|
Still sees gold production 498,370 to 528,370 oz
Still sees all-in sustaining costs/oz $1,000 to $1,100

THIRD QUARTER RESULTS
Gold production 130,275 oz, -0.5% q/q
All-in sustaining costs/oz $971, -1.2% q/q
Gold sales volume 135,111 oz, -33% q/q

COMMENTARY AND CONTEXT
Perseus’s strong operating performance is forecast to continue in the June quarter with both gold production and cost guidance for 1H and FY expected to be achieved strong quarterly cashflows further strengthened Perseus’s financial position with available cash and bullion of $471 million, zero debt, net cash and bullion balance increased by $66 million at quarter end
Development activities continued at Meyas Sand Gold Project with confirmatory and sterilisation drilling, Front-End Engineering and Design and site preparation, ahead of a possible FID during 2H 2023
Organic growth activities including Mineral Resource drill outs and feasibility studies for MSGP and Yaouré’s CMA Underground Project progressed on schedule; Results due in Sept. qtr

Eoin Treacy's view -

The team at Perseus are betting Sudan’s welcome for foreign investment will persist despite the threat of internal conflict. That was driven by the desire to acquire a promising asset at a discounted price. It’s a challenge every miner faces. New supplies of key resources are most often now found in politically unstable parts of the world. 



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April 18 2023

Commentary by Eoin Treacy

Video commentary for April 18th 2023

April 18 2023

Commentary by Eoin Treacy

Lessons from Silicon Valley Bank

Thanks to a subscriber for this memo from Howard Marks which may be of interest. Here is a section: 

Total U.S. bank assets exceed $23 trillion.  Banks collectively are the biggest real estate lenders, and while we only have rough ranges for the data, they’re estimated to hold about 40% of the $4.5 trillion of CRE mortgages outstanding, or around $1.8 trillion at face value.  Based on these estimates, CRE loans represent approximately 8-9% of the average bank’s assets, a percentage that is significant but not overwhelming.  (Total exposure to CRE may be higher, however, as any investments in commercial mortgage-backed securities have to be considered in addition to banks’ holdings of direct CRE loans.) 

However, CRE loans aren’t spread evenly among banks: Some banks concentrate on parts of the country where real estate markets were “hotter” and thus could see bigger percentage declines; some loaned against lower-quality properties, which is where the biggest problems are likely to show up; some provided mortgages at higher loan-to-value ratios; and some have a higher percentage of their assets in CRE loans.  To this latter point, a recent report from Bank of America indicates that average CRE loan exposure is just 4.5% of total assets at banks with more than $250 billion of assets, while it’s 11.4% at banks with less than $250 billion of assets. 

Since banks are so highly levered, with collective equity capital of just $2.2 trillion (roughly 9% of total assets), the estimated amount the average bank has in CRE loans is equal to approximately 100% of its capital.  Thus, losses on CRE mortgages in the average loan book could wipe out an equivalent percentage of the average bank’s capital, leaving the bank undercapitalized.  As the BofA report notes, the average large bank has 50% of its risk-based capital in CRE loans, while for smaller banks that figure is 167%.

Eoin Treacy's view -

The exposure of smaller banks to both the rise in long-dated yields and the looming restructuring of commercial property leases raises important questions for depositors. The most pressing is why take the risk? 



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April 18 2023

Commentary by Eoin Treacy

EU Hydrogen Quotas Raise Global Demand For Green Molecules

This article from Bloomberg may be of interest. Here is a section: 

European Union (EU) lawmakers have agreed on the world’s first binding quotas for using renewable hydrogen (H2) and derived fuels. The March 30, 2023 rules will create significant demand for renewable H2, mandating existing industrial hydrogen users replace at least 42% of their demand with renewable H2. They also mandate at least 1% of transport energy to be H2-based.

Member states should ensure 42% of existing industrial H2 demand is renewable by 2030, rising to 60% by 2035. The industry quota targets companies such as fertilizer and methanol producers, but excludes refineries, which are covered under the transport mandate. Member states will be legally required to adopt this agreement as national law and the European Court of Justice will determine penalties for states that fail to comply.

In transport, fuel suppliers need to replace 5.5% of final energy demand with H2 or advanced biofuels, with a minimum target of 1% for H2-based fuels by 2030. BNEF expects the hydrogen share to be closer to the minimum goal as meeting the combined target using H2 alone would require extensive use of the molecule in road transport. Advanced biofuels had already reached a 2.1% share in transport by 2021.

Eoin Treacy's view -

The EU remains committed to the zero carbon emissions quest and is pioneering the development of markets in alternative energy. High carbon emission prices are one half of the strategy and subsidies for wind, solar, biomass and hydrogen are the other half. 



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April 18 2023

Commentary by Eoin Treacy

Rains Seen Hurting Start of Coffee Harvest

This article from Bloomberg may be of interest. Here is a section: 

Heavy rains are expected in both arabica and robusta producing areas this week, Climatempo meteorologist Nadiara Pereira says in a Tuesday report.

Increased rainfall and lower temperatures over robusta areas in Espirito Santo and southern Bahia may delay the final maturation phase of crops.

Heavy rains are expected for arabica areas in Sao Paulo and Triangulo Mineiro through Wednesday

Temperatures will fall in arabica region of southern Minas Gerais by the end of the week, though the risk of frost is low.

Rains could knock fruits off trees and in extreme cases cause them to ferment on the ground, HedgePoint analyst Natália Gandolphi says in report.

That would reduce uniformity of the beans and decrease quality of the crop for both varieties.

Eoin Treacy's view -

Brazil’s weather has been more volatile than usual over the last few years. With an El Nino on the brink of being confirmed there is a strong likelihood that drought is likely to be a more pressing fear later this year than excess moisture. 



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April 18 2023

Commentary by Eoin Treacy

April 17 2023

Commentary by Eoin Treacy

April 17 2023

Commentary by Eoin Treacy

ChatGPT Can Decode Fed Speak, Predict Stock Moves From Headlines

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

To Marinov, while there’s no surprise machines can now read almost as well as people, ChatGPT can potentially speed up the whole process. 

When Man AHL was first building the models, the quant hedge fund was manually labeling each sentence as positive or negative for an asset to give the machines a blueprint for interpreting the language. The London-based firm then turned the whole process into a game that ranked participants and calculated how much they agreed on each sentence, so that all employees could get involved. 

The two new papers suggest ChatGPT can pull off similar tasks without even being specifically trained. The Fed research showed that this so-called zero-shot learning already exceeds prior technologies, but fine-tuning it based on some specific examples made it even better. 

“Previously you had to label the data yourself,” said Marinov, who also previously co-founded a NLP startup. “Now you could complement that with designing the right prompt for ChatGPT.” 

Eoin Treacy's view -

Needing to label every individual clause in a run-on sentence was a big limiting factor for early AI. That’s equally true of the labelling of photos required to teach computers to identify items. Now that labelling is no longer required the use of AI will experience a step change in usage which is what has been priced into related stocks over the last few months. 



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April 17 2023

Commentary by Eoin Treacy

Email of the day on the Dollar and income

Dear Eoin, Does your bearish view on the US dollar imply that investors whose income and expenditure are in currencies other than the US dollar should note be holding any assets denominated in these dollars? Regards A

Eoin Treacy's view -

Thank you for this question which may be of interest to the Collective. I don’t believe absolutes are helpful when thinking about a reserve currency. A major bear market in a currency could mean it loses 50% of its value over a decade. That would boost the fortunes of exporters and potentially also raise interest rates to attractive levels. That suggests some stocks would do very well while the broader market would struggle to compensate a foreign investor relative to opportunities elsewhere. 



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April 17 2023

Commentary by Eoin Treacy

Is FedNow a CBDC?

This article from the CATO Institute may be of interest to subscribers. Here is a section: 

What is FedNow?
FedNow is an instant payments system—a sort of update to Fedwire and the Automated Clearinghouse (ACH). Individuals will not have direct access to FedNow, but they will have access to faster payments so long as their bank or credit union opts into the FedNow network. Although creating FedNow was not necessary to achieve faster payments, one big difference with FedNow will be that payments will no longer be held up on weekends, holidays, or after traditional business hours.
FedNow is Not a CBDC
Astute eyes will likely recognize that FedNow does vaguely resemble a wholesale CBDC. Where a wholesale CBDC would be restricted to financial institutions for use during interbank settlement, FedNow would also be restricted to financial institutions. The difference, however, lies in their design. Where a CBDC is a currency, FedNow is a payment rail. If we think of dollars and cents as water, then FedNow is the plumbing that gets those dollars and cents where they need to go. In contrast, a CBDC would involve replacing the water itself in this analogy.

Under the current system, interbank settlement is performed on the Federal Reserve’s payment rails, thus ultimately affecting retail banking customers’ settlement times. It’s for this reason that Federal Reserve Governor Michelle Bowman said, “My expectation is that FedNow addresses the issues that some have raised about the need for a CBDC.” This statement should not be misunderstood to say that FedNow will take CBDCs off the table, but it does show that the Federal Reserve itself sees FedNow and CBDCs as distinctly different.

Eoin Treacy's view -

There are many ways the Fed could speed up payments and transactions across the economy. Afterall, the USA is still somewhere cheques are commonplace. However, I think the reason they chose to use the FedNow protocol is to blunt the thrust of the digital currency movement. 



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April 14 2023

Commentary by Eoin Treacy

April 14 2023

Commentary by Eoin Treacy

Financial repression and funding a green revolution

Thanks to a subscriber for this transcript of an interview with Russell Napier. Here is a section: 

So that’s where we are at the minute. I think they’re rushing round trying to do something piece-by-piece. I suspect that in the last-, since the blowout of gilt yields, I see a moving hand here, rather than someone playing whack-a-mole. I see a government, increasingly, that they’re somewhere in there, whether it’s in the treasury of somewhere else, that realises the direction of travel has to be financial repression. So, I think the best example of that in the UK is, I don’t know if he’s passed it yet, but Rishi Sunak was looked for the power to overhaul all our financial regulators to push that power into the hands of the prime minister. The question is why? As chancellor of the exchequer, this is not a power that he sought.

So, I think people are beginning to realise that, yes, you can go round and whack-a-mole, so it’s happening anyway, but there could come a time where we have to something more aggressive. For me, it’s pretty obvious what that aggressive is, which is forcing savings institutions to buy government bonds. That’s the core of a financial repression. We haven’t taken that giant leap yet, but I think since the crisis in the gilt market, there is evidence I think, that someone realises that that is where we might end up and they’re preparing to have to take that leap. To stress this is not a UK problem, it’s the entire developed world and actually, Japan might have to go first in terms of that major jump.

Eoin Treacy's view -

Inflation running well above the prevailing interest rate for a prolonged period will improve government debt to GDP ratios. The caveat is the total debt cannot simultaneously continue to accelerate higher. That’s the route to hyperinflation. Therefore financial repression works by changing the weightings of where credit is created and pushes the burden from the public sector back onto the private sector. 



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April 14 2023

Commentary by Eoin Treacy

Bond Markets Brace for Billion Dollar Question From Japan

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

Market watchers are bracing for volatility, should Japanese investors increase their sales of foreign securities and bring some of that cash home. Dai-ichi Life Holdings Inc., a life insurer with one of Japan’s largest institutional portfolios, said last month that it’s shifting more money to domestic bonds from US Treasuries and other foreign securities.

Some strategists expect the insurers to stay focused on domestic bonds, particularly longer-dated ones, with hedging costs for foreign investment still at elevated levels. Others see the potential for the overseas outflows to reverse, with the Federal Reserve expected to moderate the pace of its rate hikes and new BOJ governor Kazuo Ueda seen eventually tweaking policy.

Mizuho Securities Co. Chief Desk Strategist Shoki Omori expects life insurers to stay focused on domestic debt partly because they need to hold an additional ¥35 trillion of long-maturity Japanese government bonds to meet asset-liability management requirements by April 2025, when a new solvency regime will be implemented. In addition, controlling currency risk is too expensive now.

“They will continue to be cautious on overseas bonds as they see high grade bonds including sovereigns such as Treasuries being too rich on both a hedged and unhedged basis,” Tokyo-based Omori said. “Hedging costs are too high at around 5% and the dollar-yen is too high to go outright at current levels.”

Eoin Treacy's view -

Holding Treasuries was no party for investors over the last couple of years. That was doubly troublesome for Japanese investors when the Dollar peaked last year. 

The iShares Core 7-10 Year Treasury bond JPY Hedged ETF lost half its value and is still trending lower. Everyone is aware that the higher yields go, the better the long-term outlook is for returns when rates eventually do peak. However until that happens there is a risk yields will continue to rise.



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April 14 2023

Commentary by Eoin Treacy

Twitter Could Soon Enable Trading Stocks, Bitcoin As Elon Musk Reportedly Inks eToro Partnership

This news release may be of interest. Here it is in full: 

Twitter has reportedly announced a new partnership with eToro that will enable users to view market charts and trade stocks and cryptocurrencies.

What Happened: According to CNBC, the move is part of Elon Musk‘s plan to transform Twitter into a super-app that allows users to access multiple services in one place.

With the eToro partnership, Twitter’s “cashtags” will expand to cover a more extensive range of instruments and asset classes, according to an eToro spokesperson, CNBC quoted.

Currently, Twitter cashtags show major cryptocurrencies such as Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH) and Dogecoin (CRYPTO: DOGE). This was in partnership with Robinhood.

Users will also be able to click a “view on eToro” button that takes them directly to eToro’s site, where they can buy and sell assets on the platform. EToro uses TradingView as its market data partner.

Eoin Treacy's view -

Elon Musk’s first fortune was built on the sale of PayPal which was one of the original online payments mechanisms. He is apparently looking to repeat that success by turning Twitter into a payments platform. 



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April 14 2023

Commentary by Eoin Treacy

April 13 2023

Commentary by Eoin Treacy

Video commentary for April 13th 2023

Eoin Treacy's view -

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics covered include: necessary conditions for a bull market in gold, sequence of events inside a gold bull market, gold up, dollar weak, stocks steady, luxury goods overbought but still firm, copper steadies, bonds yields climb. 



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April 13 2023

Commentary by Eoin Treacy

Gold Climbs Toward a Record as Producer Prices Drop Unexpectedly

This article from Bloomberg may be of interest. Here is a section: 

“While the strong labour market trends and sticky core services inflation suggest a 25bp hike at the May FOMC, markets are increasingly looking toward the end of the hiking cycle, with cut timing also top of mind,” said Ryan McKay, a commodity strategist at TD Securities. 

Eoin Treacy's view -

Core CPI ex-Shelter peaked in September and continues to trend lower; albeit at a slower pace than it advanced. That suggests there is still some way to go in putting the inflation genie back in the lamp. It might seem presumptuous at present but deflationary pressures will eventually prevail because of the long and variable lags from rising rates, negative money supply and quantitative tightening.
That’s one of the reasons gold is pushing out to new highs. The potential is growth will moderate faster than inflation and that will force the Fed to ease up. It suggests a higher inflation rate will be tolerated for longer because the alternative would be both deep deflation and high unemployment. 



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April 13 2023

Commentary by Eoin Treacy

Buffett Praises BYD and TSMC After Selling Shares of Both Firms

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

Warren Buffett called electric-car maker BYD Company Ltd. “extraordinary” and said chip manufacturer Taiwan Semiconductor Manufacturing Co. is a “fabulous enterprise.” That hasn’t stopped him from selling shares of both firms.

“We’ll find things to do with the money that I’ll feel better about,” the Berkshire Hathaway Inc. chairman and chief executive officer said of BYD in an interview with CNBC in Tokyo Wednesday. He said Berkshire wasn’t in a hurry to reduce that stake after recently trimming its holdings of BYD H shares to 10.9% from 11.13%, according to a filing this week.

The billionaire investor took credit for Berkshire’s investment in TSMC amid speculation that one of his investing deputies picked the stock. He said the decision to reduce its stake in the business by 86% in the fourth quarter — which could have fetched $3.7 billion assuming the shares were sold at the average price over the period — resulted from concerns over geopolitical tensions between China and Taiwan, conditions he described as being outside of the company’s control.

“I re-evaluated that part of it,” Buffett said. “I didn’t re-evaluate the business, the management, or anything of the sort.”

Eoin Treacy's view -

Warren Buffett has tended to be an investor in the USA and a trader internationally. There are two obvious reasons for choosing to sell out of both BYD and TSMC. The first is valuation. The second is politics. 



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April 13 2023

Commentary by Eoin Treacy

LVMH's Value Nears $500 Billion, Enters World's Top 10

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

LVMH, Europe’s largest company by market value, has now made it to the world’s top 10.

A first-quarter sales beat sparked a 5% increase in the share price Thursday, giving the luxury powerhouse a 29% rally for the year. That, along with a gain in the euro against the dollar, lifted LVMH’s market capitalization to $486 billion, briefly ranking it as the world’s 10th-biggest company. Should it reach $500 billion, it would become the first European company to achieve that milestone.

Eoin Treacy's view -

Luxury goods represent an interesting paradox which must be among the marketing profession’s greatest triumphs. They have created an aura of desirability, mystique and aspiration for items that are not in limited supply. Of course, companies like Hermes ensure their most desirable bags are very hard to purchase, but the entire sector rides on the coattails of that limited supply argument. 



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April 12 2023

Commentary by Eoin Treacy

Video commentary for April 12th 2023

Eoin Treacy's view -

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: China stock rotation continues to new state champions, luxury goods bounds on China reopening, Fed close to peak of the hiking cycle, Nasdaq-100 eases, commodities firm on weaker Dollar, oll breaks higher, gold steady. 



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April 12 2023

Commentary by Eoin Treacy

UK Mortgage Pain Is Only Getting Started as Fixed Deals End

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

To be sure, homeowners remortgaging on a fixed-rate deal are likely to benefit from a lower loan-to-value ratio than when they first secured a mortgage. That’s because UK house prices have grown by more than 11% since March 2021, according to Nationwide Building Society, and households have paid off a chunk of capital over the last two years.

Crucially, high-LTV lending makes up only a small fraction of UK mortgages, with 90% or higher LTV deals accounting for about 5% of all new home loans in the last quarter of 2022, BOE data shows. And even those borrowers who took out a 90% LTV in September 2021 are likely to see higher costs cushioned by stronger wage growth, according to Iwona Hovenko, an analyst covering European real estate for Bloomberg Intelligence.

“Homeowners who took mortgages at 90% LTV in 2021 could now see it drop to 75%,” she said. What’s more, “the extra post-tax pay after just two years could more-or-less offset the cash increase in monthly mortgage repayments.”

Eoin Treacy's view -

When inflation is running at 10% and wages are growing at 6.5% the cost of everything is rising quicker than wages. The jump in mortgage rates, as fixes roll off, represents a significant hit to household finances which will curtail the ability to spend on other items. That’s the primary reason the Bank of England has not been more aggressive in raising rates. 



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April 12 2023

Commentary by Eoin Treacy

Visualizing the World's Plummeting Fertility Rate

This article from Visual Capitalist may be of interest. Here is a section: 

The African country of Niger currently has the highest fertility rate, at 6.9, which means on average, a woman in Niger will have seven children in her lifetime.

With the exception of Afghanistan (14th), all of the top 30 countries are found on the African continent. In fact, it’s estimated that Africa will add 2.5 billion new people by 2100, while most continents will actually flatline in terms of population growth.

At the bottom of the rankings, the country with the lowest fertility rate is South Korea, at 0.84.

Interestingly, many of the current most populous countries of the world—including China, India, and the U.S.—are all below replacement levels of fertility, with parts of Europe and North America having had persistently low fertility levels since the 1970s.

Eoin Treacy's view -

I’m from a relatively large family. I had five siblings. I remember my mother saying “after the third, the older ones look after the younger ones” That confirms the existence of a child care efficiency ratio implied in larger families.

That’s lost when families are smaller and older generations are dispersed. In fact, the fewer children a family has the higher the cost because hopes for the future are poured into enhancing that child’s competitive edge. That can involve paying for tutors, sports, music, schools, better neighbourhoods etc. 



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April 12 2023

Commentary by Eoin Treacy

In India, Big Capex Bet on Manufacturing to Lift Growth

This note from Bloomberg Economics may be of interest. Here is a section: 

Investment is set to power a pickup in India's growth in the year ahead. An increase in public capital expenditure and incentives aimed at expanding manufacturing capacity are set to spark a private-investment cycle. The Reserve Bank's hold in April after a series of rate hikes to fight inflation also signals a shift to supporting growth.

Investment is set to power a pickup in India’s growth in the year ahead. An increase in public capital expenditure and incentives aimed at expanding manufacturing capacity are set to spark a private-investment cycle. The Reserve Bank’s hold in April after a series of rate hikes to fight inflation also signals a shift to supporting growth.

We forecast the expansion in GDP to accelerate to 5.9% year on year in the first quarter of 2024 from an estimated 5.0% in 1Q23.

On a full-year basis, growth will be distorted by pandemic effects — a low base contributed to a surge to 7.1% in fiscal 2023. Coming off the high comparison, growth is poised to slow to 6% in fiscal 2024.

Inflation is likely to slide to 5.3% on average in fiscal 2024 from 6.7% in fiscal 2023, due to lower commodity prices, lagged impacts of the RBI’s rate hikes, and base effects.

We see the RBI keeping its repo rate on hold at 6.5% through the end of 2023, avoiding over-tightening that could damage the economy. As consumer prices cool, we expect it to ease in 1Q24 to add support for the recovery.

Eoin Treacy's view -

India’s politicians have to create friendly conditions for employment growth over the next decades if some semblance of civility is to be sustained. Modi’s administration has played up nationalistic fervour by feeding into sectarianism. That’s not great for standards of governance which means there will need to be more focus on how well develop goals are executed. 



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April 11 2023

Commentary by Eoin Treacy

Video commentary for April 11th 2023

April 11 2023

Commentary by Eoin Treacy

Pioneer Natural Resources stock jumps after WSJ report of merger talks with Exxon Mobil

This article from MarketWatch may be of interest. Here it is in full:

Shares of Pioneer Natural Resources Co. powered up 6.4% toward an eight-week high, to pace the S&P 500's premarket gainers, after the Wall Street Journal reported that the fracking company has held preliminary talks with Exxon Mobil Corp. over a possible acquisition. Exxon's stock fell 0.9% while futures for the S&P 500 shed 0.5%. ahead of Monday's open. Citing people familiar with the matter, the WSJ report published Friday said the discussions have been informal, but with Exxon flush with cash after recording record profits in 2022, the oil giant has been exploring options. Pioneer Natural's stock has lost 8.9% year to date through Thursday, while Exxon shares have tacked on 4.3% and the S&P 500 has gained 6.9%.

Eoin Treacy's view -

The pace of M&A activity is heating up in the resources sector. Exxon Mobil’s proposed merger with Pioneer suggests the shale oil and gas sector is maturing. The days of the wildcat land grab are over. The resources are well understood and the unique attributes of unconventional supply allow production to be dialled up and down as needed. That is an attractive add on for a global major. 



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April 11 2023

Commentary by Eoin Treacy

Bitcoin, Not Ether, Builds Crypto Market Dominance Ahead of Ethereum's Shanghai Upgrade

This article from Coindesk may be of interest. Here is a section: 

Ether's dominance rate remains stagnant between 19% and 20%. That compares with a rise to 21% from 14% in the weeks before a software upgrade last September known as the Merge. That technological overhaul replaced Ethereum's at-the-time energy-intensive proof-of-work mechanism of verifying transactions with a proof-of-stake system and set the stage for Shanghai. Staking involves depositing coins in the blockchain to boost the network's security and verify transactions in return for rewards.

Investor caution in pricing ether ahead of Shanghai stems from several factors, including concerns tokens unlocked after the upgrade will flood the market and regulatory issues.

"The Shanghai upgrade will unlock over 18 million ether staked since late 2020. The market is worried that the unlocking may bring about a sell-off, causing uncertainty in the market," Griffin Ardern, a volatility trader at crypto asset-management firm Blofin, told CoinDesk.

Eoin Treacy's view -

Ethereum has been lagging bitcoin for the last couple of months as traders price in the risk of additional supply coming back onto the market. However, that does not explain why bitcoin is breaking out to new recovery highs. 



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April 11 2023

Commentary by Eoin Treacy

Blackstone Raises More Than $30 Billion for Property Fund

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

Blackstone Inc. has closed on its largest global property drawdown fund, targeting opportunistic deals across sectors such as rental housing, hospitality and data centers. 

The company secured $30.4 billion of total capital commitments for the fund, called Blackstone Real Estate Partners X, according to a statement Tuesday. Blackstone’s latest fund is the largest of that type, according to PitchBook data going back to 2002.

The real estate market has come under pressure over the past year due to a pullback across commercial-property lending, as borrowing costs skyrocketed. At the same time, the stocks of public real estate investment trusts have also suffered amid the uncertainty in the market and increasing concerns about certain property types such as offices. 

“Pullback with all forms of capital will create opportunities,” said Kathleen McCarthy, global co-head of Blackstone Real Estate. “We can use our capital and expertise to capitalize on the moment for our investors.”

Blackstone’s latest fundraising helps cement the private equity firm’s status as a powerhouse in the real estate market. Blackstone’s real estate business, which started in 1991, now has $326 billion of investor capital under management.

Eoin Treacy's view -

The vintage of property funds is likely to be a major conversation piece over the next few years. Those that closed on purchases between 2019 and 2022 in commercial real estate paid top prices and will be sitting on implied and real losses for years. They are in much the same position as investors that bought bonds with negative yields. 



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April 07 2023

Commentary by Eoin Treacy

April 07 2023

Commentary by Eoin Treacy

April 07 2023

Commentary by Eoin Treacy

Why a BRICS currency is a flawed idea

This article by Paul McNamara for the FT may be of interest. Here is a section: 

China’s dominance is underlined further by the fact that it is a key trade partner for the commodity exporters, which have industrial cycles that clearly track the ebb and flow of the Chinese credit cycle. And after the attack on Ukraine, China’s financial influence over isolated Russia has risen further.

It is obvious but Chinese strategic interests are not especially aligned with those of the other countries. One of China’s priorities is finding somewhere to park its external surpluses beyond the reach of the US Office of Foreign Assets Control and finding stores of value other than US Treasuries. While none of the other four Brics members can provide liquid assets, they can provide investment opportunities especially in raw materials. As with the Belt and Road Initiative, Chinese authorities prefer to have control in such matters.

Russia and the gulf energy exporters prefer to accumulate “rainy day” sovereign wealth funds away from the US. However, the alternative to the US is not a diversified group of growing countries, but essentially one country — China — with a vast thirst for energy and other raw materials.

So not only are there practical challenges in a common Brics currency. In seeking one to challenge US hegemony in foreign exchange, the non-Chinese members of countries of the group may just increase their dependence on Beijing.

Eoin Treacy's view -

During the Global Financial Crisis of 2008, the US took the decision to debase the currency in service to avoiding a depression. Money supply exploded and purchasing power of the dollar collapsed as asset prices leaped higher. Like any major event, there are both positive and negative outcomes. An even more severe economic decline was avoided. The downside was political populism has gained a foothold in many countries and the USA’s creditors became suspicious that they are no longer willing to take the hard decisions necessary to support the value of the currency. 



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April 07 2023

Commentary by Eoin Treacy

Kuroda Departs Leaving $11.7 Trillion Experiment to Successor

This article from Bloomberg may be of interest. Here is a section: 

“Kuroda will be recognized as having been an outstanding central bank governor who has been quite innovative,” former International Monetary Fund chief economist Kenneth Rogoff said. “The BOJ under Kuroda has forcefully adopted more or less every idea there is for raising inflation expectations, but until recently, to no avail.”

At Kuroda’s last Group of 20 meeting in Bengaluru, India, in late February, central bankers and finance ministers from across the globe rose to their feet to applaud the ever-smiling governor. European Central Bank President Christine Lagarde was one of the first to clap, according to people familiar with the matter.

“Haruhiko Kuroda is a master of his trade. He steered the monetary policy of Japan through challenging times. These are big shoes to fill for any successor – and times are certainly not getting any easier,” said Swiss National Bank President Thomas Jordan. “It was always a pleasure to have in-depth discussions with him over dinner, ranging from culture to economics to politics.”

Eoin Treacy's view -

I don’t think there is nearly enough of questioning whether it was possible for Japan to create inflation when the global economy was in a disinflationary trend for decades. Japan is a highly open, developed economy. The money created by the Bank of Japan did not stay at home but was invested abroad in an aggressive manner. That leakage did not create the upward pressure on wages to break the deflationary trend. Against a background of demographic contraction and the related lack of credit demand it was likely impossible to create an inflationary trend. 



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April 06 2023

Commentary by Eoin Treacy

India May Not Allow More Sugar Exports This Year: Food Secretary

This note from Bloomberg may be of interest. Here it is in full 

India may not approve additional sugar exports in the year ending September, Food Secretary Sanjeev Chopra said at a briefing Thursday.

Country’s sugar production is likely to be 200,000 to 400,000 tons lower than target this year

NOTE: India has already permitted 6m tons of exports this year, with potential for another 1m tons if production meets govt estimate

That looks unlikely now; an industry group said Wednesday that India’s October-March sugar output fell 3.3% y/y

Chopra said impact of unseasonable rains on wheat harvest will be marginal

Govt will likely meet its target of procuring 34.15m tons of wheat from the new crop

Eoin Treacy's view -

India curtailing exports is bumping up against rising demand from China as consumer activity picks up and eating out becomes ubiquitous once more. That’s putting upward pressure on the price. Brazil’s harvest is now underway but it will need to be a bumper crop to mitigate the steep backwardation right across the futures curve. 



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April 05 2023

Commentary by Eoin Treacy

Video commentary for April 5th 2023

Eoin Treacy's view -

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: bond yields compress but partially rebound towards the close, the 3-month yield still prices in potential for one more hike, stocks also partially rebound, dollar steady, gold and oil pause, soft commodities break higher stoking stagflation fears. 



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April 05 2023

Commentary by Eoin Treacy

US Service Gauge Falls More Than Expected as Demand Moderates

This article from Bloomberg may be of interest. Here is a section: 

The group’s index of new orders at service providers dropped more than 10 points to a three-month low of 52.2. While still consistent with expansion, the scale of the drop suggests a significant slowing in the pace of bookings growth. The business activity measure, which mirrors the ISM’s factory production index, slipped to 55.4.

“There has been a pullback in the rate of growth for the services sector, attributed mainly to a cooling off in the new orders growth rate, an employment environment that varies by industry and continued improvements in capacity and logistics,” Anthony Nieves, chair of the ISM Services Business Survey Committee, said in a statement.

Eoin Treacy's view -

The pandemic shutdown represented a massive dislocation which pulled the pendulum of demand into sharply negative territory. Massive fiscal and monetary stimulus was implemented to revive. That ensured when demand recovered, it swung to an extreme level in the opposite direction. Like any pendulum there are several swings to less extreme amplitudes, before it settles back to equilibrium. 



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April 05 2023

Commentary by Eoin Treacy

Just How Dangerous Are India's Generic Drugs? Very

This article for Bloomberg may be of interest. Here is a section: 

It shouldn’t have taken more deaths for Prime Minister Narendra Modi’s administration to act. The red flags have been there for years. What’s lacking is political will, and transparency. The FDA publishes different reviews of new drug applications on its website, along with detailed notes. The European Medical Agency gives similarly expansive information. There is no such openness in India.

As Thakur explained to me, the pharmaceutical industry is India’s manufacturing success story, providing a major source of foreign exchange and soft power. Any criticism is seen through the lens of nationalism, he said, and framed as defaming the industry. So why does contamination with such deadly substances occur so regularly? “The simple answer is that Indian pharmaceutical companies quite often fail to test either the raw materials or the final formulation before shipping it to market,” Thakur said.

India relies on the weak oversight of developing countries that make up the bulk of its exports — that’s how it can continue to push substandard and often deadly medicines there. As a paper on the Gambia poisonings published in March by the CDC noted, “inadequate regulatory structures make the sale of medications from international markets an especially high-risk activity in low-resource settings.” But what about countries with supposedly strong regulatory systems, like the US? This latest scare should prompt further reform of the FDA’s overseas inspections regime.

In the absence of a global framework for pharmaceutical safety, what can be done to make the generic drugs that consumers around the world have come to rely on safer and effective? For a start, the WHO’s prequalification program, which facilitates the purchase of billions of dollars’ worth of medicines through international agencies such as Unicef, must be overhauled. Then there’s the question of holding these companies to account for the harm they cause inside and outside India via legal avenues and victim’s compensation.

Eoin Treacy's view -

Any headline where children are dying is a headwind to public confidence in any company’s products. There is absolutely no doubt tighter safety controls are highly desirable and movement on that front would greatly improve outcomes. However, it is also true that having a friendly domestic regulator, in what is a low margin, high volume business, is also highly desirable from a business perspective. There is also a significant difference between the largest, most successful companies, and smaller less well capitalized businesses. 



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April 05 2023

Commentary by Eoin Treacy

China Says Willing to Help Airbus Deepen Presence in Nation

This note may be of interest. 

China is willing to maintain close communication with Airbus and help it deepen its China presence, Zheng Shanjie, head of the National Development and Reform Commission, told Airbus Chief Executive Guillaume Faury during a meeting in Beijing, according to an NDRC statement.

China will provide broad opportunities for Airbus and other multinational companies to develop in the country: Zheng.

Separately, Civil Aviation Administration of China chief Song Zhiyong also met with Faury in Beijing, according to a statement.

They exchanged in-depth views on Airbus’ business development in China and strengthening cooperation in aviation safety, airworthiness certification, green development, digital transformation.

Eoin Treacy's view -

Vladimir Putin incorrectly concluded European countries could be bullied into submission. They should really have paid attention to China, who long ago concluded it was much easier to buy European cooperation. It remains to be seen how much longer that policy will be successful.  



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April 04 2023

Commentary by Eoin Treacy

April 04 2023

Commentary by Eoin Treacy

Treasuries Reach Day's Highs After JOLTS Job Openings Slumps

This article from Bloomberg may be of interest. 

Treasury 10-year note futures spike to fresh session highs after February JOLTS job openings declined more than estimated with January revised lower. At the same time February factory orders missed estimates for headline and ex-transport readings. 

US 10-year yields flip to richer on the day into the move as 10-year futures top at 115-28, with around 60k 10-year note contracts changing hands over 3-minute period

Belly- and front-end-led gains steepen 2s10s, 5s30s spreads onto session wides, higher by 7bp and 4bp on the day

Fed-dated OIS for May meeting drops to around 15bp of additional hikes priced, giving up around 5bp of hike premium in the aftermath of the data

Eoin Treacy's view -

Job openings are down two million in the last 15 months. It is arguable how much predicative power the jobs openings have primarily because it is a relatively new data series and there are questions about how the number reflects conditions on the ground. However, there is no dispute a top is in place and the number is trending lower. It stands to reason that job openings should be a lead indicator for decisions on firing workers since it should be a lead indicator. Afterall most firms stop hiring before they fire workers. 



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April 04 2023

Commentary by Eoin Treacy

Jamie Dimon says the banking crisis is not over and will cause 'repercussions for years to come'

This article from CNBC may be of interest. Here is a section: 

"The recent failures of Silicon Valley Bank (SVB) in the United States and Credit Suisse in Europe, and the related stress in the banking system, underscore that simply satisfying regulatory requirements is not sufficient. Risks are abundant, and managing those risks requires constant and vigilant scrutiny as the world evolves," Dimon wrote. 

The JPMorgan CEO instead called for more forward-looking regulation. He pointed out that the held-to-maturity bonds that have become problems for many banks are actually highly rated government debt that scores well under current rules, and that recent stress tests did not game out a rapid rise in interest rates. 

"This is not to absolve bank management – it's just to make clear that this wasn't the finest hour for many players. All of these colliding factors became critically important when the marketplace, rating agencies and depositors focused on them," Dimon wrote.

He said that regulation should be "less academic, more collaborative" and that policymakers should be more wary of potentially pushing some financial services to nonbanks and so-called shadow banks. 

Eoin Treacy's view -

Too often financial sector regulation focuses on placating retail investors who lost money in a crash. However, that does not negate the fact that commercial banking is a different business than investment banking. One is conservative and the other is based on risk taking. Merging them supplies the risk takers with a large base for leverage. That has allowed banks to balloon in size over the last twenty years. There is no appetite to reverse the process so tighter scrutiny of leverage mismatches need to be implemented and not least because government bonds were never risk free.



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April 04 2023

Commentary by Eoin Treacy

Stolen Range Rovers Are Tip of Alarming Iceberg

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

The US’s largest car insurer, State Farm Mutual Automobile Insurance Co., reported a $13.4 billion (!) underwriting loss last year, the largest shortfall in its 100-year history; Allstate Corp.’s auto-insurance underwriting loss was $3 billion, while Berkshire Hathaway Inc.’s Geico car-insurance unit lost $1.9 billion.

In the UK, Direct Line Insurance Group Plc’s chief executive departed in January after mounting losses at the motor division forced it to scrap its dividend. The stock has declined more than 50% in the past year.

These woeful results have shaken confidence in the industry’s purported ability to assess risk and forecast accurately. Insurers are belatedly hiking premiums, though often not as quickly as they’d like. Customers who drive Range Rovers and other vehicles prized by thieves, may struggle to get coverage at all.

Soaring used-car prices are the proximate cause of insurers’ woes – a textbook example of how supply chain upheaval can cascade through the economy. Historically, vehicles were a depreciating asset, but suddenly the cost of replacing a stolen or damaged vehicle was far more than insurers had calculated.

Eoin Treacy's view -

The insurance sector is not in the habit of sustaining losses on underwriting so premiums are most assuredly going up. That’s true of every area of the insurance business and not only automotive rates. Everything from commercial, to health to cyber rates are rising.

This news struck me as interesting because it follows hot on the heels of Piguet Ademar’s issuing a replacement guarantee on any high end watches bought over the last couple of years. The threat of theft has growth so high it is impacting sales of their timepieces. 



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April 03 2023

Commentary by Eoin Treacy

April 03 2023

Commentary by Eoin Treacy

Biden Has Limited Options to Respond to OPEC+'s Oil Cut

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

4: Export Curbs
Other levers the Biden administration has at its disposal include limiting the export of gasoline and diesel. The White House considered that option last year as a potential means to tame pump prices, which reached an all-time high in June, but it never pulled the trigger. Analysts said moving ahead with the curbs could backfire and actually lead to higher prices in some parts of the US.

“If we go into the summer with gasoline at $4 a gallon, I would think they would also revive consideration of product export restrictions,” said Bob McNally, president of consultant Rapidan Energy Group and a former White House official. “If this leads to an overtightening of the oil markets — as they say in the Navy, stand by for heavy rolls.”

Requiring oil companies to store more fuel in inside the US — mandatory stockpile requirements that were considered last year in response to previously low fuel inventories — is an option that could return to the table as well if gasoline prices remain high, McNally said.

Eoin Treacy's view -

OPEC+ needs high energy prices to come close to balancing their budgets. The last thing they want is the profound volatility of the last few years where oil prices have swung from lows near -$40 to highs near $130. The fact the USA is energy independent and no longer a big buyer from OPEC+ means it is a competitor in supply and therefore unable to dictate terms to the group. 



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April 03 2023

Commentary by Eoin Treacy

April 03 2023

Commentary by Eoin Treacy

Tesla Shares Drop After Price Cuts Barely Boost Deliveries

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

After Tesla cut prices of its top-selling Model Y by as much as 20% and discounted its most expensive vehicles by tens of thousands of dollars, Musk said in late January that orders were running at almost twice the rate of production. The figures reported Sunday indicate there was a slowdown later in the quarter, as the company ended up making almost 18,000 more cars than it sold.

“Continued excess production over deliveries will keep the debate going on price elasticity versus general demand weakness,” Philippe Houchois, a Jefferies analyst with a buy rating on Tesla stock, said in a note.

Eoin Treacy's view -

If you cut prices and sales don’t jump there are only two options. Either you have the wrong price or the wrong product. I bought a new car a year ago. I test drove a Model Y and Model 3 and decided to go with another SUV instead. The price points were about the same after added extras and the subsidies did not apply because of income limitations. That seems like a major issue for Tesla. They are attempting to compete with luxury brands on quality alone. That is a hard sell against brands with decades of reliability and customer relationships.



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April 03 2023

Commentary by Eoin Treacy

Glencore Will Likely Sweeten $23 Billion Teck Bid, Analysts Say

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

Glencore faces a tight deadline to sweeten its proposal. Teck’s plan to separate its coal business and wind down the dual-class share structure will go to a shareholder vote on April 26. Glencore Chief Executive Officer Gary Nagle told investors in a Monday conference call that its proposal can’t be implemented if Teck’s shareholders approve that plan.

Eoin Treacy's view -

Teck Resources’ plan is to spin off its coal assets from its copper production. That would allow it to meet many of its carbon mitigation goals in one fell swoop. The reason Glencore wants to buy the company is Teck has some of the best potential for copper production growth among the mid-sized miners. Additionally, Glencore is much more comfortable than most with holding coal assets. 



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March 31 2023

Commentary by Eoin Treacy

March 31 2023

Commentary by Eoin Treacy

Brazil Takes Steps to Transact in Yuan as China Ties Grow

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

The announcement came during a Brazil-China business forum in Beijing on Wednesday in which government officials and company executives from both sides discussed trade and investment opportunities. Much of Brazil’s agricultural and mineral products are shipped to the Asian nation.

Brazilian President Luiz Inacio Lula da Silva was due to be in China for an official state visit this week, but was forced to postpone after he was hospitalized with pneumonia.  

China and Brazil also agreed to settle trade in their own currencies, without the need of an intermediary currency like the US dollar, according to a statement from the Brazilian Trade and Investment Promotion Agency. The expectation is to reduce the costs of commercial transactions with the direct exchange between Brazilian reais and yuan.

Tatiana Rosito, Brazil’s Secretary of International Affairs at the Finance Ministry, says the goal is to boost liquidity of the Chinese currency, giving options to investors and traders.

“It’s not a game changer in relation to the impact on short-term trade, but it has the potential to expand transactions and familiarize agents” with transactions in yuan, she said in a telephone interview.

Eoin Treacy's view -

The entire global financial sector is built on trust. It is logical for countries trading with one another to accept their respective currencies in exchange for goods and services. The reason it is not commonplace is because currencies are volatile and bilateral relationships have no fallback if one of the party’s proves unreliable. 



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March 31 2023

Commentary by Eoin Treacy

LVMH, Hermes Climb to Record Highs as Luxury Lifts Europe Again

This article from Bloomberg may be of interest to subscribers. Here isa section: 

LVMH shares rise to a record high, contributing most to gains in the French and European indexes on Friday as analysts upgrade their estimates for the French luxury behemoth. Peer Hermes International also hits an all-time peak.

Eoin Treacy's view -

News that foot traffic is ramping up in Macau is clearly positive news for the luxury goods sector as Chinese consumers hit the shops after a lengthy hiatus. 



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March 31 2023

Commentary by Eoin Treacy

EU Looks at Carbon Market, Agriculture in 2040 Climate Plan

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

The measures are part of the 27-nation region’s plan to cut emissions by at least 55% from 1990 levels by 2030 and reach net zero by 2050. 

The EU wants to be a global leader in the green shift, an increasingly challenging objective after US President Joe Biden’s landmark climate package and competition from China in low-carbon technologies and critical materials. At the same time, the bloc is grappling with an unprecedented energy crisis triggered by a cut in gas supply from Russia following the war in Ukraine.

“It is now more important than ever for the EU to get and stay on track to climate neutrality and resilience, providing a positive example to galvanize global action and to work with our partners worldwide to develop the solutions needed for all to transition to climate neutrality,” the commission said. 

The EU indicated an emissions cut of 75% to 80% would follow the average trajectory between 2030 and climate neutrality in 2050. Lowering pollution by more than 90% would signify “a very high ambition, close to reaching climate neutrality already in 2040,” the commission said. 

The commission signaled it is considering various options on the evolution of the EU Emissions Trading System, the bloc’s flagship carbon cap-and-trade program. They included an extension to cover new sectors, potential inclusion of all fossil-fuel uses and accounting for carbon capture technologies.

It also said removing carbon dioxide from the environment is indispensable and sought views on how to tackle emissions from agriculture, including putting a carbon price on greenhouse gases from the sector. 

Eoin Treacy's view -

The EU is an energy importer and its reliance on imports has been emphasised following Russia’s invasion of Ukraine. That has also removed the partial salve of being able to pay for energy in their own currency so the EU is now even more committed to curtailing imports to the greatest extent possible. 



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March 31 2023

Commentary by Eoin Treacy

March 30 2023

Commentary by Eoin Treacy

March 30 2023

Commentary by Eoin Treacy

MBA Chart of the Week: Estimated Total Commercial Mortgage Maturities

This article from US REO Partners may be of interest. Here is a section: 

This year’s survey, however, collected information on $400 billion of bank-held commercial and multifamily mortgages—23 percent of the outstanding universe. Using this year’s survey results, for the first time we are expanding our loan maturity analysis to include an estimate of the maturity profile of all commercial and multifamily mortgages—including the more than $1.7 trillion on bank balance sheets.

The analysis estimates that of approximately $4.4 trillion of outstanding commercial/multifamily mortgages, $728 billion (16%) matures in 2023 with another $659 billion (15%) maturing in 2024. Hotels/motels see the largest share maturing in 2023 (34%) followed by office (25%). Multifamily is the property type with the smallest share of outstanding mortgage maturing this year (9%).

Among capital sources, 26 percent of the outstanding balance of loans held by credit companies and other investor-driven lenders will mature this year, as will 23 percent of the balances held by depositories and 22 percent held in CMBS. Only 7 percent of life company loans and 2 percent of GSE/FHA loans come due this year.

Eoin Treacy's view -

The high yield corporate sector used the pandemic to refinance. The maturity of that part of the debt market is now a lot closer to the end of the decade. Commercial real estate did not have that opportunity because vacancy rates were so high, no one was willing to throw money at them. 



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March 30 2023

Commentary by Eoin Treacy

Brazil's New Fiscal Plan Is Cautiously Welcomed by Markets

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

“The broad ideas are orthodox and the government does agree with the idea of stabilizing debt,” said Katrina Butt, a senior economist at AllianceBernstein LP. “Still, there are some unanswered questions and the government seems to bank on economic growth to be able to achieve the targets, given an increase in the tax burden doesn’t look feasible at this moment.”

The proposal is crucial for President Luiz Inacio Lula da Silva to win over investors, who have been worried about the health of public finances since the leftist leader obtained congressional authorization to boost outlays, bypassing current spending rules that will be replaced by the new fiscal framework. Since then, concerns about swelling debts have helped to fuel inflation expectations keeping, in turn, borrowing costs high.

Eoin Treacy's view -

Brazil was very early in raising rates and now has some of the highest real rates of any country. That begs the question, what will be required for rates to begin coming back down? The fiscal agreement announced today is a step toward placating hawks at the central bank who are reluctant to ease up while the government is talking about major giveaways. 



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March 30 2023

Commentary by Eoin Treacy

Email of the day on the Autonomies fund

Hi, I don't understand when you say that you are "reweighting" the Autonomies portfolio.

Is this an investment fund managed by you?

Thanks in advance.

Eoin Treacy's view -

Thank you for this question which may be of interest to the Collective. Chris Moore at WM Capital Management approached me following the publication of Crowd Money and asked if I would be interested in setting up a fund. It was launched in 2015. He is listed as the fund manager but I do the stock selection.

Here is a link to the FT’s information page for the fund. The basic premise is to hold 100 of the 169 Autonomies on an equal weighted basis. Reweights are every quarter. Favour is given to oversold positions relative to the MA and overbought positions are downsized at the reweighting. 



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March 29 2023

Commentary by Eoin Treacy

Video commentary for March 29th 2023

Eoin Treacy's view -

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: soft commodities breaking higher, dollar steadies, oil eases at first area of potential resistance, stocks firm, bonds ease. markets pricing in potential central banks will settle for a partial victory over inflation. 



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March 29 2023

Commentary by Eoin Treacy

Autonomies reweight

Eoin Treacy's view -

I am reweighting the Autonomies portfolio as we are approaching the end of the quarter. It’s a tumultuous three months with banks and several retailers experiencing steep selling pressure. Meanwhile several luxury goods companies are at new highs. Technology companies have staged impressive rebounds and commodity stocks are very steady. The biggest surprise for me is how varied the performance of the financial sector is. That clearly suggests there will be big winners and losers from the unfolding market environment. 



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March 29 2023

Commentary by Eoin Treacy

Rivian Tops Tesla Gains In Premarket Trading: What's Powering EV Stock Higher?

This newswire item may be of interest. Here is a section: 

Kelley Blue Book sales data gathered from the state Registry of Motor vehicle showed registrations of 8,145 Rivian vehicles in the first quarter, analyst Chris Pierce said, citing information from Cox Auto’s first-quarter 2023 “Industry Insight Calls.” This compares to the consensus estimate of 7,167 vehicles, he added.

The analyst also noted that first-quarter used vehicle data showed that fewer used Rivian vehicles were on sale relative to Lucid Motor Group (NASDAQ:LCID) and Ford Motor Co.’s (NYSE:F) Lightning EV pickup truck, which is a direct competition to Rivian’s R1T pickup truck.

Eoin Treacy's view -

Rivian has a market cap of $13 billion and had $11.5 billion in cash at the end of last year. The improvement in sales suggests the run rate on its loss is unlikely to accelerate which supports the view it will not go bust this year. That gives the share some optionality to the view it might well survive if production can successfully be ramped up.   



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