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April 18 2019

Commentary by Eoin Treacy

Mapping the Global Migration of Millionaires

Thanks to a subscriber for this article by Nick Routley for Visual Capitalist. Here is a section:

Time-honored locations – such as Switzerland and the Cayman Islands – continue to attract the world’s wealthy, but no country is experiencing HNWI inflows quite like Australia.

The Land Down Under has a number of attributes that make it an attractive destination for migrating millionaires. The country has a robust economy, and is perceived as being a safe place to raise a family. Even better, Australia has no inheritance tax and a lower cost of health care, which can make it an attractive alternative to the U.S.

In 2018, Australia jumped ahead of both Canada and France to become the seventh largest wealth market in the world.

Greece, which was one of the worst performing wealth markets of the last decade, is finally seeing a modest inflow of millionaires again.

Eoin Treacy's view -

People move for all sorts of reasons but chief among them are to either benefit from the tax and economy of the destination country, to find a better place to rear children and escape an overbearing or overtaxing regime.

Personally, I moved to the USA because of its open welcome for people of all races, the weather, the time zone, the attractive tax structure for businesses as well as my belief that Wall Street is in a secular bull market. I’ve since learned the USA is one of the most attractive tax havens for overseas investors.  



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April 18 2019

Commentary by Eoin Treacy

The World's Biggest Electric Vehicle Company Looks Nothing Like Tesla

This article by Matthew Campbell and Ying Tian for Bloomberg may be of interest to subscribers. Here is a section:

In automotive circles, Wang’s predictions of the combustion engine’s imminent demise often meet profound skepticism. Chinese sales of new-energy vehicles, a category comprising plug-in hybrids, pure EVs, and fuel-cell cars, more than tripled from 2015 to 2018, but they still account for only 4.5 percent of the total. The doubters, he argues, underestimate the country’s capacity for reinvention. “The Chinese way is to replace everything at once,” Wang says. “When we switched from black-and-white to color TVs, it took three years. In the West it was 10. Going from feature phones to smartphones took about one year. In Europe it was three. Cars will be the same. It will go very fast.”

Eoin Treacy's view -

China is a massive oil and gas importer but has abundant coal reserves. It therefore has a clear incentive to use less gasoline and natural gas and more coal. Electric vehicles fit squarely into that equation. Since coal is massively polluting nuclear energy is another growth industry in China.




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April 16 2019

Commentary by Eoin Treacy

Video commentary for April 16th 2019

Eoin Treacy's view -

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

Some of the topics discussed include: probablity of consolidation ahead of a breakout, globally oriented consumer companies leading on the upside. gold and bonds ease, oil steady, netflix is at risk of further pullback. semiconductors and resources shares turning ot outperformance,



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April 16 2019

Commentary by Eoin Treacy

Big Companies Thought Insurance Covered a Cyberattack. They May Be Wrong

This article by Adam Satariano and Nicole Perlroth for the New York Times may be of interest to subscribers. Here is a section:

Even with teams working around the clock, it was weeks before Mondelez recovered. Once the lost orders were tallied and the computer equipment was replaced, its financial hit was more than $100 million, according to court documents.

After the ordeal, executives at the company took some solace in knowing that insurance would help cover the costs. Or so they thought.

Mondelez’s insurer, Zurich Insurance, said it would not be sending a reimbursement check. It cited a common, but rarely used, clause in insurance contracts: the “war exclusion,” which protects insurers from being saddled with costs related to damage from war.

Mondelez was deemed collateral damage in a cyberwar.

The 2017 attack was a watershed moment for the insurance industry. Since then, insurers have been applying the war exemption to avoid claims related to digital attacks. In addition to Mondelez, the pharmaceutical giant Merck said insurers had denied claims after the NotPetya attack hit its sales research, sales and manufacturing operations, causing nearly $700 million in damage.

When the United States government assigned responsibility for NotPetya to Russia in 2018, insurers were provided with a justification for refusing to cover the damage. Just as they wouldn’t be liable if a bomb blew up a corporate building during an armed conflict, they claim not to be responsible when a state-backed hack strikes a computer network.

The disputes are playing out in court. In a closely watched legal battle, Mondelez sued Zurich Insurance last year for a breach of contract in an Illinois court, and Merck filed a similar suit in New Jersey in August. Merck sued more than 20 insurers that rejected claims related to the NotPetya attack, including several that cited the war exemption. The two cases could take years to resolve.

Eoin Treacy's view -

The threat from cyber crime is both real and obvious but many investors have been disappointed by the performance of the cybersecurity sector. It makes intuitive sense that with so many hacks, ransomware events and industrial espionage that the sector should be among the best performers internationally.



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April 16 2019

Commentary by Eoin Treacy

Betting on a Soft Landing: The Takeaways From the IMF Meetings

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

The IMF cut its forecast for global expansion to the slowest pace since the financial crisis a decade ago, but played down the risk of recession and predicted growth will pick up in the second half of the year to stabilize at about 3.6 percent in 2020. That would be an improvement over the 3.3. percent pace projected for this year, but below the 3.8 percent of 2017.

U.S. Treasury Secretary Steven Mnuchin stoked optimism by saying he was hopeful the U.S. and China are “close to the final round” of trade talks. U.K. Chancellor of the Exchequer Philip Hammond said the government and main opposition party could strike a Brexit deal within weeks.

Europe’s struggles again emerged as a source of worry, leaving Germany under pressure to ease fiscal policy and the U.K. to arrange its withdrawal from the European Union. Still, European Central Bank President Mario Draghi was cautiously optimistic in arguing the euro-area has shown “remarkable resilience.”

Eoin Treacy's view -

Continued announcements that the trade war is in the final stages of negotiation have resulted in a general sense among investors that this is last year’s story. Despite the fact it is not yet resolved, a successful resolution has been priced in.



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April 16 2019

Commentary by Eoin Treacy

L'Oreal's Asian Sales Just Overtook Europe for the First Time

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

"It’s true that the growth is not broad-based,” RBC analyst James Edwardes Jones said in a note to clients, “but given L’Oreal’s proven ability to identify, stimulate and capitalize on those parts of the business where the most attractive growth is to be had, we struggle to find fault with this.”

The results show luxury’s resilience, as surging demand from Chinese shoppers fueled 14 percent quarterly growth for the division selling brands like Armani, Kiehl’s, and YSL.

Meanwhile, some other manufacturers of products such as automobiles and electronics were hurt by a slowing Chinese economy.

“It’s a real appetite of the young generation in China to go directly to these luxury brands. It’s really positive for us,” Chief Executive Officer Jean-Paul Agon said on a call with analysts. Western Europe showed some signs of improvement and could post a solid year, Agon said, “but nothing that would
compete with what we see in Asia.”

Eoin Treacy's view -

The growth of the global consumer’s appetites for the trappings of modern living is likely to be an upward trajectory for decades to come. The first thing people buy when they have a little more money is soap. That feeds demand for progressively more cosmetics as incomes rise. With economic development peoples’ priorities shift from survival to enjoying life to longevity and the products tailored to those demands increases in price commensurately. 

 



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April 15 2019

Commentary by Eoin Treacy

Video commentary for April 15th 2019

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 consolidating, India and Indonesia steady, Wall Street paused, European periphery leading on the upside, gold pauses, oil due to pause, high yield spreads contract below the trend mean, Treasuries quiet. 



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April 15 2019

Commentary by Eoin Treacy

China Stocks Fall as Better Data Dim Prospects of More Stimulus

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

"The credit data lifted expectations on market liquidity and economic fundamentals," said Wang Jianhui, a Beijing-based analyst with Capital Securities Co. "It provided an excuse for investors who wanted to bottom fish stocks after last week’s correction. But it’s more likely a technical rebound as there hasn’t been any substantial change in fundamentals."

The decline in mainland shares came after some companies issued profit warnings. In Shenzhen, Jiangling Motors Corp. sank by the 10 percent daily limit after it predicted an 84 percent decline in first-quarter net income from a year earlier.

Shandong Chenming Paper Holdings Ltd. slid 8.9 percent after saying its first-quarter profit may plunge 94 percent to 96 percent.

"While the macro numbers suggest a recovering trend, things are still looking weak in the micro segments including corporate profits," said Shen Zhangyang, a Shanghai-based strategist with
Northeast Securities Co.

Eoin Treacy's view -

The catch-22 facing policy makers is if they stimulate too much, they risk a bubble developing but if they don’t do enough, they risk a contraction. That is a clear reflection of the role liquidity has played in the evolution of the bull market over the last decade and how reliant on stimulus it is for continued expansion. They generally err on the side of caution so that is supportive of continued support.



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April 15 2019

Commentary by Eoin Treacy

Glencore's Congo Unit to Start Shipping Some Cobalt Again

This article by Thomas Biesheuvel for Bloomberg may be of interest to subscribers. Here it is in full:

Glencore Plc’s Democratic Republic of Congo unit will restart some cobalt exports after it halted sales last year due to low levels of radioactivity.

About 23 percent -- or 930 tons -- of the cobalt produced at Katanga Mining Ltd.’s Kamoto mine since January complies with regulations on uranium content, the company said in a statement. Katanga is controlled by Glencore and owns 75 percent of Kamoto.

The unit halted sales of cobalt in November after detecting radiation and said that a plant to remove the contamination would be ready this year. The suspension of sales came after prices for the metal used in rechargeable batteries collapsed on growing concerns about oversupply.

Glencore said at the time that it planned to stockpile cobalt supplies until the middle of this year. Kamoto is Glencore’s second-biggest source of the metal in Africa, producing about 11,100 tons last year.

Glencore has a long history of trimming mine supply to match demand, and has criticized rivals for producing too much and depressing prices. The Swiss commodity giant curtailed zinc output at mines in Australia, Peru and Kazakhstan in 2015 when prices languished at six-year lows.

Eoin Treacy's view -

Cobalt plummeted in value last year as substitution concerns, slowing Chinese car demand and a peaceful transition of power in Congo sapped the bubbly enthusiasm that had prevailed ahead of the peak. The relative strength of copper and nickel are additional considerations since cobalt is a by-product of mining those metals.



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April 15 2019

Commentary by Eoin Treacy

The Top Economic Challenges Facing Indonesia Election Winner

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

The current account deficit, which last year widened to almost 3 percent of gross domestic product, remains a key vulnerability for the economy. It makes Indonesia reliant on foreign capital to fund its import needs, inflows that can be volatile as investor sentiment swings.

The deficit was one of the main reasons why Indonesia was targeted in an emerging market sell-off last year, triggered by rising U.S. interest rates and a stronger dollar. The rupiah slumped more than 5 percent against the dollar in 2018, dropping to its lowest levels since the Asian financial crisis two decades prior, as investors pulled out of the nation’s stocks and bonds.

The rupiah has bounced back in 2019, helped in part by the central bank’s swift action in raising interest rates by 175 basis points and the U.S. Federal Reserve’s shift away from policy tightening this year. The current account remains a risk though, and the government has imposed a number of measures to curb imports and spur exports to lower the deficit.

Data on Monday showing a second consecutive monthly trade surplus in March suggests the current account deficit probably narrowed in the first quarter. Economists surveyed by Bloomberg had predicted a $177 million trade deficit in the month.

Eoin Treacy's view -

Any politician from a democratic country, with a population of hundreds of millions, the majority of whom are entering the workforce is unlikely to succeed without at least posing as a pro-growth candidate. Both candidates in Indonesia are running on differing platforms aimed at promoting growth. In India, both the BJP and Congress Parties are showing support for small business and credit growth. In Nigeria’s last election last February, more than a few of those who have been holding office for decades lost their seats as the youthful population demand jobs and less graft. Those are all positive stories for the long-term trend of improving standards of governance in emerging markets.



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April 12 2019

Commentary by Eoin Treacy

April 12 2019

Commentary by Eoin Treacy

Disney Leaps to Record as Investors Cheer Streaming Service

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

For Iger, Disney+ is a bit of a swan song. The company’s longtime steward reiterated Thursday that he expects to step down as CEO at the end of 2021, when his contract expires. During the presentation to investors, Disney gave a peek at how the service will work. It features five tiles devoted to key Disney brands, including Pixar, Marvel, Star Wars and National Geographic. The 4K-resolution content will be available on internet-connected TVs, smartphones, tablets and other devices. The look and feel of Disney+ isn’t radically different from Netflix’s design. But Disney is betting that its devoted fan base will find reason to add another streaming service.

DC Edge
At $6.99, Disney+ also is beating a comic-book rival: AT&T Inc.’s DC Comics introduced a service at $7.99 a month that includes material from characters like Wonder Woman, Batman and Superman.

The new product isn’t Disney’s only streaming platform. It acquired majority control of the Hulu TV service with the $71 billion Fox deal, and it’s now considering whether to expand
that product overseas.

A Hulu price cut, which lowered its entry-level, ad- supported version by 25 percent to $6 a month, helped bring a surge of customers, Disney said. Hulu expects to double its ad
revenue over the next few years.

“Hulu is doing just great,” said Kevin Mayer, chairman of Disney’s direct-to-consumer and international operations. “We are really pleased.”
 
And

“You can figure that we will bundle ESPN+ and Disney+ fairly soon,’’ Iger said.

Eoin Treacy's view -

Netflix demonstrated that it is possible for a content provider to prosper out the umbrella of the distribution networks by availing of the market access provided by broadband, mobile devices and smart TVs. That first mover advantage has allowed it to build the company into a $155 billion market cap but the allure of global market access without having to pay distribution companies ensures competition for viewers is going to be pick up quickly.



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April 12 2019

Commentary by Eoin Treacy

Chevron Buys Anadarko in $33 Billion Bet on Shale Oil, LNG

This article by By Kimberly Yuen, Javier Blas and Kelly Gilblom for Bloomberg may be of interest to subscribers. Here is a section:

"Chevron’s deal for Anadarko escalates the race with Exxon Mobil for the Permian and delivery of synergies and efficiencies will be critical in narrowing or overtaking its peer’s returns." --Fernando Valle, industry analyst, and Jonathan Mardini, associate analyst

The deal may put pressure on Shell to seek assets in the Permian, where the Anglo-Dutch company has said it wants to grow. Oil executives and bankers had in the past speculated that Shell may buy Anadarko because they have adjacent acreage. Shell has in the past several months held talks with Endeavor Energy Resources LP, the largest privately-owned company in the Permian that bankers say might be valued at $10 billion to $15 billion.

Eoin Treacy's view -

Unconventional oil and gas production is more expensive than conventional supply but there is a lot more of it. The challenge for producers is to compress the cost of production as much as possible so that they can be competitive when prices occasionally decline. That is what is driving the desire to get economies of scale through acquisitions.

 



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April 12 2019

Commentary by Eoin Treacy

PBOC Support to Stay Even Amid Credit Upswing

This article by Chang Shu and David Qu from Bloomberg Economics may be of interest to subscribers. Here is a section:

The robust rate of credit expansion this year doesn’t rule out continued monetary easing. We think that’s still needed to help the economy find a solid footing, though the focus should increasingly shift to targeted measures.

Broad-based easing is still needed to provide liquidity to the banking sector so it can sustain the expansion in credit. The need is higher in 1H and we continue to see the possibility of reductions in the reserve requirement ratio, with the first potentially coming as early as in April.

There’s less of a necessity for an interest rate cut, in our view.

Targeted measures are important for channeling funding to sectors in greater need of funding -- small, private firms -- to lower their effective borrowing costs.

Eoin Treacy's view -

The result of the People’s Congress was to declare victory in the containment of the shadow banking sector and to signal a clear willingness to boost credit growth to reinvigorate speculative activity. That has resulted in the stock market popping on the upside, reversing the pattern of deterioration that prevailed for all of 2018.



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April 11 2019

Commentary by Eoin Treacy

April 11 2019

Commentary by Eoin Treacy

Gold and Other Metals Decline on 'Surprise' U.S. Data

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

Most measures of the PPI are a bit stronger than expected, as well as jobless claims,” Tai Wong, head of base and precious metals derivatives trading at BMO Capital Markets, says in phone interview  With the “surprise positive economic data, especially the PPI, if you are thinking that the Fed’s next move is going to be a rate cut, this moves that further away” “It will probably keep the Fed neutral for longer”

Eoin Treacy's view -

The current economic environment represents the sweet spot between when the central banks of the world pause in raising rates and when economic activity continues to expand. Those are exactly the kinds of conditions in which we see cyclical sectors leveraged to the growth of the global economy turn to outperformance. So why were commodities weak today on the back of stronger economic news?



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April 11 2019

Commentary by Eoin Treacy

Made-in-India iPhone X from July 2019

This article by Bharani Vaitheesvaran for ETtech may be of interest to subscribers. Here is a section:

Sustained increase in manufacturing will depend on, among other factors, the continuation of a favourable incentive regime into the next government, the official said. Mails sent to Foxconn and Apple seeking comment remained unanswered.

The company began its India manufacturing journey through another Taiwanese company Wistron, which had started with the iPhone SE from its factory near Bengaluru two years ago and later advanced to iPhone 6S model. Wistron now makes iPhone 7, a sign analysts foresee as a bump-up in local manufacture of multinational technology companies keen on the Indian market. Around 290 million smartphones were assembled in India in 2018 up from 58 million in 2014, according to data from the Indian Cellular and Electronics Association.

"In the short-term, the Differential Duty and the Phased Manufacturing Programme worked as far as import substitution is concerned. Now the challenge is to move from 290 million to 500 million phones and then to one billion by 2025," Pankaj Mohindroo, National president for ICEA, said.

"The National Policy on Electronics, 2019, gives a broad framework, but we will have to put a robust action plan behind it, which will enable exports..."

The ICEA has as its members brands such as Apple, Xiaomi, Vivo, Oppo, and manufacturers such as Flex and Foxconn.

Eoin Treacy's view -

India has the twin advantages of a massive young population and low costs. If we think about how manufacturing generally evolves, it is usually attracted by the presence of a low cost base and regulatory change which incentivises growth. Infrastructure usually comes later but it does need to be built. That is potentially where India is today. It is successfully attracting manufacturers but will need to do what is necessary to ensure they stay.



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April 11 2019

Commentary by Eoin Treacy

Bezos Just Confirmed Amazon's Growth Is Slowing

This article by Shira Ovide and Sarah Halzack for Bloomberg may be of interest to subscribers. Here is a section:

But there’s a dark cloud in Amazon’s figure. The growth of Amazon’s total merchandise sales slowed considerably last year, according to Bloomberg Opinion calculations based on Bezos’s disclosures. This figure is not the first sign than Amazon’s retail juggernaut may have slipped a bit. 

In 2018, Amazon’s nearly $300 billion in GMV was about a 19 percent jump from the prior year. That was notably slower than the rates of increase of 24 percent and 27 percent, respectively, in 2017 and 2016. 

Eoin Treacy's view -

Elizabeth Warren is campaigning on the platform of splitting up Amazon and the more sectors it competes in the louder that call will be. However, while a populist assumption, it is not accurate to state Amazon is going to completely control retail. The shop online and pick-up market for goods is thriving and conventional retailers are outperforming Amazon. 



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April 11 2019

Commentary by Eoin Treacy

Kids Love These YouTube Channels. Who Creates Them Is a Mystery

This article by Yoree Koh and Betsy Morris for the Wall Street Journal may be of interest to subscribers. Here is a section:

Some parents say they find certain YouTube content disturbingly effective in enrapturing young children.

Johanna Peyton, an Austin, Texas, mother of three, said she initially welcomed YouTube as a distraction for her children—until her daughter, then nearly 2 years old, became fascinated with videos of adults and children opening eggs with surprises inside.

“It was disturbing to me that somebody was working so hard on the videos—intricately editing them and using so many eggs. I remember thinking, ‘What was their agenda?’ ” Ms. Peyton said. “It just felt odd that somebody would be doing this.” She no longer allows her kids to watch YouTube.

The CoCoMelon channel joined YouTube on Sept. 1, 2006, according to its “about” page, which says its goal is “to make learning a fun and enjoyable experience for kids by creating beautiful 3D animation, educational lyrics, and infectious, toe-tapping music.”

The business took off last year, when its view count jumped to 1.96 billion views in October 2018 compared with 123 million views a year earlier. It now has 43 million subscribers, according to Social Blade.

Eoin Treacy's view -

My brother and sister have pretty much banned their young children from using YouTube and their smart phones because the content accessible is clearly designed to be addictive. When conventional tv channels dominated programming the advertising aimed at children was regulated and we still yearned for the toys.

In Ireland, the Late Late Toy Show was the highlight the Christmas season when we were growing up but for marketers it was an opportunity to showcase toys and kids outside of the regimented advertising structure. In many ways it represents the forerunner of the boom in dedicated content appealing to babies and young children that pervades YouTube.



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April 10 2019

Commentary by Eoin Treacy

Video commentary for April 10th 2019

Eoin Treacy's view -

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

Some of the topics covered include: Nasdaq-100 Equal Weight Index hitting new highs, Bond yields compress, China firm, Europe steady, MDAX has broken through psychological 25,000, gold and oil steady with resources shares extending adbances. 



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April 10 2019

Commentary by Eoin Treacy

Credit Bubble Dynamics: The Bursting of an Historic Bubble

Thanks to a subscriber for this report by Doug Noland, formerly of Prudent Bear, not at McAlvany. Here is a section:

Eoin Treacy's view -

A link to the full report is posted in the Subcsriber's Area. 

I feel a strong emotional identification with this argument. Surely it makes sense that continued bouts of credit creation will eventually result in the debts coming due and a massive round of defaults resulting in crashes for multiple asset classes? The increasingly vocal concerns about inequality and the rise of populism as a response to that are very real and likely to continue to be a factor that needs to be incorporated in our thinking. The biggest question is how urgent are the warnings?



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April 10 2019

Commentary by Eoin Treacy

Africa's Amazon Set for New York IPO as Online Retail Takes Off

The company, which has headquarters in Berlin and got early funding from German startup incubator Rocket Internet SE, isn’t profitable. Jumia reported a loss for 2018 of about 170 million euros and has warned prospective IPO investors that it has accumulated losses of 862 million euros since its inception and relies on external financing to compensate for negative cash flow.

Still, investors tend to give e-commerce companies leeway because customer growth and market share are seen as more important, according to Seema Shah, a consumer analyst at Bloomberg Intelligence in New York. While the company competes with the likes of Amazon’s Souq.com and Naspers Ltd. In individual markets, Jumia has said it believes it’s the only pan-African e-commerce site.

“If an online retailer develops a name and offers a good consumer experience, people feel safer to use it,” Shah said. For the IPO to be successful, investors will have to see Jumia as “a chance to play in Africa with less risk.”

Eoin Treacy's view -

This map of the median age of world with green denoting the youngest countries highlights the fact that Africa is where the growth of the middle class needs to occur if the theme is to persist over the next few decades. Major population centres like India and Indonesia are already evolving and have years of growth ahead of them but the birth of the consumer is a ground floor opportunity in the majority of Sub Saharan Africa. 



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April 10 2019

Commentary by Eoin Treacy

April 09 2019

Commentary by Eoin Treacy

April 09 2019

Commentary by Eoin Treacy

FAANG's $800 Billion Rally Has Mom and Pop Investors Cashing Out

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

After a three-month rally that’s added more than $800 billion to the value of FAANG stocks, individual investors have decided it’s time to cash out of the high-flying names.

Retail clients at brokerage TD Ameritrade increased their overall exposure to equity markets for a second consecutive month in March, yet they sold shares of Amazon Inc., Facebook Inc., Netflix Inc. and Apple Inc. All four members of the so-called FAANG cohort -- which also includes Google parent Alphabet Inc. -- have gained at least 35 percent since stocks bottomed on Christmas Eve, one-and-a-half times the S&P 500’s return.

“Taking profits isn’t the worst idea in the world,” said Joe “JJ” Kinahan, the chief market strategist at TD Ameritrade, noting clients had been buyers of Amazon for eight straight months while also showing immense interest in Netflix in recent periods. “What it makes me wonder is, they were the momentum stocks, so where do we get our new momentum?”

It’s possible the answer to that question is cannabis companies, according to Kinahan. While clients of Omaha, Nebraska-based TD Ameritrade shunned the FAANG names last month, many were buyers of Aurora Cannabis Inc. and CVS Health Corp., which recently announced that it will begin selling CBD-infused products at more than 800 of its stores. Millennial clients also scooped up shares of Canopy Growth Corp., according to a statement from TD Ameritrade.

Eoin Treacy's view -

The 20% decline in the 3-months from the early October peak was a visceral event for many investors, not just retail buyers. If we had said to anyone thinking about selling before Christmas that all they would have to was wait another three months and the market would be back at the high then at least some people would say that as soon as it gets back to that level I’m selling.  Others, who have sat through medium-term corrections before, will conclude this is nothing more than a pause within an evolving bull market. That argument between bulls and bears in the region of an all-time high contributes to at least a range forming.



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April 09 2019

Commentary by Eoin Treacy

Italy Raises Deficit Target, Risking Fresh Conflict With The EU

This article by Chiara Albanese, John Follain and Lorenzo Totaro for Bloomberg may be of interest to subscribers. Here is a section:

The wider deficit forecast could revive tensions with the Commission after months of wrestling at the end of 2018 which resulted in a promise from Italy to stick to a deficit of 2.04 percent of GDP. With growth lower than expected, the money to keep the promise isn’t forthcoming. Nor is the government keen on measures that would dampen growth, with Finance Minister Giovanni Triastating recently that restrictive fiscal moves would be “absurd.”

Italy stocks extended losses after the report, with the FTSE Mib index down 0.4 percent at 3.00 p.m. in Milan. The spread between Italian and German 10-year bonds widened by 4 basis points.

"The deficit is the most thorny issue for Italy and could spark tensions with the European Union," said Vincenzo Longo, an analyst of IG Markets in Milan. "We are expecting negative growth in the first part of the year and the numbers the government is going to debate seem too optimistic. The government isn’t likely to push the issue however until after the European vote in May."

Eoin Treacy's view -

The fiscal austerity program the EU is abiding by is designed to harmonise government debt to GDP ratios ahead of introducing pan European institutions like a deposit insurance corporation and a federal transfer mechanism. It offers no leeway for subpar economic growth which is what Italy is dealing with at the moment. That represents a significant challenge for the system because it greatly increases the potential for rebellion.



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April 09 2019

Commentary by Eoin Treacy

Israeli elections primer: Final polls and what they mean

This article by Natan Sachs for the Brookings Institute may be of interest to subscribers. Here is a section:

The polls also suggest a great deal of uncertainty: Not only is the pro-Netanyahu advantage modest, but several small parties on both right and left have seen their vote totals hover around the electoral threshold for entrance into the Knesset. If they fail to clear 3.25 percent (nearly 4 seats), their votes would be discarded, potentially upending the equilibrium between the left- and right-wing blocs.

For Netanyahu, this election presents not only a battle for his political life, but possibly a battle for his personal freedom. The Israeli attorney general has decided to indict Netanyahu in three cases, including one charge of bribery, pending a hearing with the prime minister and his lawyers in July. Bibi’s lawyers face the challenge of undoing what months and years of investigations have presented to the attorney general (a Netanyahu appointee). Barring their unlikely success, Netanyahu will need a coalition willing to keep him in power through one of two unpopular avenues. First, he could maintain the support of such a coalition while on trial for serious crimes (he would only have to resign by law if convicted). Or, better yet for Netanyahu, he could form a coalition willing to pass legislation granting the prime minister immunity from prosecution. With all these uncertain factors at play, it is possible that we see another round of elections before too long—maybe even within the year.

Eoin Treacy's view -

36% of the global population is voting this year with Israel and Turkey the most recent examples. And neither is going particularly smoothly. The underlying forces that are fomenting political populism are evident in most countries because the status quo has failed to deliver on rising standards of living, resulting in a much tighter focus on corruption and inequality. In a democracy like Israel, low turnout has exit polls showing either a dead heat of a win for the opposition which risks installing a left-wing government. Meanwhile in Turkey, Erdogan is intent on redoing the mayoral election in Istanbul because he did not like the first result which is a clear threat to the country’s democratic basis.



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April 09 2019

Commentary by Eoin Treacy

Big-Data Infusion for CPI Starts With Apparel

This research note by Jeff Kearns for Bloomberg may be of interest to subscribers. Here is a section: 

The BLS change may add volatility in clothing prices, but the impact on the main index will be relatively small, subtracting maybe 0.1 percentage point from the annual CPI rate, according to Michelle Girard, chief U.S. economist for NatWest Markets Securities and the most accurate CPI forecaster in Bloomberg’s latest ranking.

“While, theoretically, this shift should not introduce a downward or upward bias in the data, we believe that prices captured using actual transactions data are more likely to be biased lower,” Girard wrote in a report. “Transactions data could capture lower price points from a flash sale that a data collector may not have observed.”

Goldman Sachs Group economist Spencer Hill estimates the change could reduce core inflation in March by around 0.05 ppt from the monthly change. Omair Sharif, senior U.S. economist at Societe Generale, also sees a possible drag from apparel. The BLS plans to collect more alternative data directly from companies, an avenue that could ultimately account for almost 32% the index, Konny and her colleagues outlined in a February paper. Examples include scraping fuel prices from the GasBuddy website.

Eoin Treacy's view -

The clear conclusion from the introduction new data sets is the Bureau of Labor Statistics has no interest in developing a measure that does anything other than help to depress the inflation gauge.



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April 08 2019

Commentary by Eoin Treacy

Video commentary for April 8th 2019

Eoin Treacy's view -

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

Some of the topics discussed include: Continued evidence of slowing global economic activity but the market continues to price in the potential for easing and a successful resolution to the trade war. cyclicals like oil, copper, gold, semiconductors and biotech continue to rally. Mexico rallies, Wall Street somewhat overbought and in the region of its October peak.



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April 08 2019

Commentary by Eoin Treacy

Africa's emerging economies to take the lead in consumer market growth

This article by Landry Signé for the Brookings Institute may be of interest to subscribers. Here is a section:

One in five of the world’s consumers will live in Africa by the end of the next decade, and more and more of these people will fall under the category of affluent or middle-class. Growing discretionary incomes will lead to higher demand for high-quality, niche, and foreign-produced goods. Urbanization, such as in Nigeria where eight cities already host populations over 1 million people, promises to increase competition for formal retail centers and the development of efficient production and distribution chains. Rebounding oil prices in Algeria, Angola, Nigeria, and Egypt may contribute to an increased market share for luxury goods. Though, ultra-high net worth individuals(whose net assets exceed $30 million) reside throughout the continent—in South Africa, Egypt, Nigeria, Kenya, Tanzania, Ethiopia, and Morocco. Growth in GDP per capita will lead to greater purchasing power among these classes of the population, and luxury goods retailers should look to the continent for entry points.

Eoin Treacy's view -

Fast moving consumer goods companies need to be where the people are. The countries with the most favourable demographics in the world today are all either in Africa or Asia with India, Indonesia, Nigeria and Ethiopia notable for their high populations. The global birth rate has already peaked which means companies have at best the next thirty years to capitalise on the demographic dividend before the global population starts to contract.



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April 08 2019

Commentary by Eoin Treacy

BJP promises a collateral-free credit & Rs 20k cr seed startup fund in its 2019 manifesto

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

BJP has promised a new scheme to provide collateral-free credit of up to Rs 50 lakh for entrepreneurs in its manifesto for 2019 elections. It said that 50% of the loan amount will be guaranteed towards female entrepreneurs, while 25% will be for male entrepreneurs. 

BJP has also promised to create a seed startup fund of Rs 20,000 crore to back early-stage companies. It's worth noting that Prime Minister Narendra Modi had earlier announced a credit guarantee fund with a corpus of Rs 2,000 crore to provide funding facilities to startups in the country, as part of the Startup India action plan in January 2016. 

The BJP-led government had also announced a Rs 10,000-crore fund of funds managed by the Small Industries Development Bank of India (SIDBI) in 2016. However, according to the Startup India status report, less than 20% of the corpus has been allocated to alternative investment funds as of November 2018, with the total commitment standing at Rs 1,611 crore. The report also noted that around 170 startups have received funding from these investments funds. 

In its manifesto, BJP has envisioned facilitating setting up of at least 50,000 new startups and 500 new incubators and accelerators by 2024. It has also promised to create 100 innovation zones in urban local bodies. 

Eoin Treacy's view -

In every Indian election for the next twenty years there will be tens of millions of people voting for the first time. The one thing young voters need more than anything is support to help secure an income to support their family formation aspirations. Easy access to credit and entrepreneurship in a growth economy are the clearest routes to securing a stable future and they contribute to growth in the wider economy through the multiplier effect of job creation. In addition to these measure India needs infrastructure, particularly ports, roads and better railways.



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April 08 2019

Commentary by Eoin Treacy

How to invest in real estate and pay nothing in capital gains

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

The Tax Cuts and Jobs Act has created a new tax break that dangles the potential of a 0% capital-gains tax on certain investments in economically distressed areas. But you’ll need to wait 10 years to claim it.

These new investments are funds tied to Qualified Opportunity Zones — approximately 8,000 areas around the country, both urban and rural, that local officials have designated as most in need. Qualified investments can be in real estate — commercial property is an early favourite — as well as small manufacturers and service businesses.

Tax breaks on investments in Qualified Opportunity Zone funds or businesses begin kicking in after five and then again after seven years; but the most generous terms — that 0% rate — are for investments held for at least 10 years.

And

If a taxpayer keeps the investment in the QOZ fund for at least 10 years, the appreciated capital gains on the QOZ fund investment becomes tax-free income when the investment is sold or exchanged. The long-deferred capital-gains taxes owed on the investment rolled into the QOZ will still have been paid once Dec. 31, 2026 rolls around, as illustrated in the previous example.

It is only the appreciated value of the QOZ investment that is tax-free, and there is no limit on the amount eligible for this tax break. If the investment in the earlier example was sold for $600,000 after 10 years, no taxes would be owed on $300,000. But deferred capital gains would have been paid on $170,000.

Eoin Treacy's view -

I had heard of this program before but this is the first time I have seen the map of where the qualified opportunity zones are. It represents an interesting way for investors with large potential capital gains liabilities to delay payment while putting the profit to work in a tax efficient manner which could potentially earn enough to absolve the investor of the original capital gains liability.



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April 08 2019

Commentary by Eoin Treacy

Economic Think Tank Says Korea Now in Recession

This article by Choi Hyun-mook and Shin Su-ji for ChosunMedia may be of interest to subscribers. Here is a section:  

The state-run Korea Development Institute on Sunday said Korea is slowly going into recession. The KDI said Sunday that the economy is "in a phase of gradual slowdown" as demand both overseas and at home shrinks.

Until last October, the institute had said Korea's economy was improving.

According to market researcher CEO Score, investment at 855 subsidiaries of Korea's top 60 businesses fell 3.1 percent last year to W98.5 trillion (US$1=W1,139).

Some 35 of them slashed spending last year. Samsung's cutbacks were particularly drastic with 46 subsidiaries reducing investment by 25.7 percent to W28.5 trillion.

Eoin Treacy's view -

South Korea is deeply embedded in the global economy and as a major electronics and vehicle exporter its health is an important barometer for the wider global economy.



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April 05 2019

Commentary by Eoin Treacy

April 05 2019

Commentary by Eoin Treacy

My Diagnosis of Why Capitalism Is Now Not Working Well for the Majority of People

This report by Ray Dalio for Bridgewater is well worth taking the time to read. It highlights in the clearest terms the conditions that have led to the rise of populism and what that means for economic governance going forward. Here is a section:  

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area. 

Capitalism trends towards consolidation as the strong overtake the weak. The list of Autonomies I created seven years ago is smaller now because even the largest companies with the biggest global franchises often merge to become even bigger and to capture even more market share. That’s as true of Dow Chemical as it is of Disney or Saudi Aramco.



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April 05 2019

Commentary by Eoin Treacy

Samsung Profit Drops Most in Four Years as Chip Prices Slump

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

Samsung Electronics Co. reported its worst operating-profit drop in more than four years, buffeted by falling memory-chip prices and slowing smartphone sales.

Operating income fell 60 percent to about 6.2 trillion won ($5.5 billion) in the three months ended March, according to preliminary results released Friday from the Suwon, South Korea-based company. That was the biggest decline since a similar drop in the third quarter of 2014. Analysts surveyed by Bloomberg had expected a 56 percent slump to an average of 6.93 trillion won.

Samsung issued a rare warning last month that its results would be short of estimates, reflecting slower orders from data center owners such as Amazon.com Inc. and handset makers including Apple Inc. That’s pushed down prices for both DRAM and NAND memory and compounded the struggles for the South Korean company as it counts on new devices such as the Galaxy S10 smartphone to help it fight back against increased competition.

“We do expect server DRAM demand to pick up as well as the S10 sales and foldable-phone sales to be better than expected going into the second half.” Daniel Yoo, global strategist at Kiwoom Securities, told Bloomberg TV. “Therefore the earnings pickup should lead the share price going into the future.”

Eoin Treacy's view -

Samsung Electronics trended lower for more than year from its 2017 peak but has perked up over the last three months as the potential for earning growth later in the year is priced in. The company is a bellwether for the electronics industry since it is a major supplier of chips, memory and consumer goods. It’s impressive near 200% advance from early 2016 was a clear sign of improving perception of global growth so it is continued ability to hold the region of the trend mean is an important arbiter of whether the global reflation trade can continue to animate investors’ animal spirits.



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April 05 2019

Commentary by Eoin Treacy

The great Steelmageddon debate

This report by Timna Tanners for BoA Merrill Lynch, dated March 25th which may be of interest to subscribers. Here is a section:

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area. 

There have been a lot of headlines about the surge in iron-ore prices but the chart tells a more nuanced story. Spot prices at Qingdao port have been ranging below $80 since early 2007 and have bounced from the $60 area since the initial rebound in 2016. The price is now trading back above $80 and a sustained move below the trend mean would be required to question recovery potential.



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April 04 2019

Commentary by Eoin Treacy

April 04 2019

Commentary by Eoin Treacy

Musings from the Oil Patch April 3rd 2019

Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB. Here is a section on coal to gas power plant conversions:

With an investment of roughly 50% of the value of an operating coalfired power plant, the benefits of converting to natural gas for fuel can make economic sense, based on our estimates.  However, as every technical article we read discussing fuel conversions pointed out, each project is different and requires an extensive analysis before reaching a conclusion.  We will not bore you with the extended lists of issues to be considered.  Natural gas makes for a cleaner environment and operating facility, and also requires less ongoing maintenance.  Gas plants are also less labor intensive, which may become a greater consideration in the future with a tighter labor market and an aging labor force.  

Given the amount of natural gas resources in the world, it would be nice to say that this conversion option is a panacea for the expensive decarbonization efforts currently being proposed.  A global coal-to-gas conversion effort is not likely, even though we suspect many more switches could (may) be justified.  As the economics of the Joliet conversion highlights, the plant moved from a baseload to peaking status, which could be justified by current energy economics.  We doubt all regions have similar economics that facilitate such a move.  The world will continue to remain dependent on an “all of the above” energy slate for ensuring everyone has access to cost-effective electricity.  

Eoin Treacy's view -

Natural gas prices went negative in Texas over the last couple of days, as a result of a surge in supply from the Permian. A couple of years ago there were negative electricity prices in the same region as a result of all the wind power. These market anomalies help to highlight just how prolific production can be. Meanwhile US oil production is in excess of 12 million barrels a day.



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April 04 2019

Commentary by Eoin Treacy

Production of battery grade cobalt blows up First Cobalt's stock

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

“Producing a battery grade cobalt sulfate is one of our most significant accomplishments as the majority of refined cobalt for the electric vehicle market is produced in Asia. With no cobalt sulfate production in North America today, First Cobalt stands to become the first such producer for the American electric vehicle market," Trent Mell, President & CEO said in the press release.

“Electric vehicle demand in North America will keep growing," Henrik Fisker, First Cobalt director and CEO of electric vehicle manufacturer Fisker Inc., said. "Companies such as Fisker continue to introduce new, affordable EV models to the market. Automakers and battery manufacturers have a responsibility to ensure any materials we use in our batteries are sourced in an ethical way.  The restart of the First Cobalt Refinery is an important step towards producing battery materials in America with a clean record from mine to machine.”

Eoin Treacy's view -

Cobalt has bubbly characteristics by the time it peaked last year. One of the oldest adages in the commodity markets is “the cure for high prices is high prices” and the surge in cobalt prices encouraged new production and a drive towards greater consumption efficiency. The peaceful transition of power in Congo, the world’s largest producer, represented an additional bearish sign and contributed to the crash.



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April 04 2019

Commentary by Eoin Treacy

Fastest Electric Car Chargers Waiting for Batteries to Catch Up

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

“The charging capacities of electric vehicles have doubled in the space of a few years,’’ Wolfsburg, Germany-based Volkswagen said in an email. “We expect that fast-charging in public spaces will become the norm.’’

Tesla, which has more than 12,000 chargers globally, is boosting the speed of its own refueling units to cut time at the pump by as much as half. The upgrade promises to add as much as 75 miles of charge in five minutes -- still lagging the ultra-fast models.

The speed at which current EVs can recharge is limited by such factors as the size of their battery, the voltage the pack can accept and the charger’s current.

While it may be years before battery packs able to handle the power surge from ultra-fast chargers go mainstream, some new EVs -- including Hyundai Motor Co.’s Kona Electric and Jaguar Land Rover Automotive Plc’s I-Pace -- already can recharge faster than previous generations.

Volkswagen’s Porsche brand will introduce its electric Taycan sports car later this year. It’s the first vehicle capable of taking full advantage of the fastest chargers, with a larger battery and the ability to operate at a higher voltage.

“The cars are coming,” said Marty Andrews, CEO of Chargefox Pty, which installed ABB’s fastest units at some Australia charging stations. “The carmakers want ultra-rapid chargers because they want this to be future-proof. This is not a six-month plan, it’s a 10-year plan.”

Eoin Treacy's view -

Refueling infrastructure during the era of internal combustion engines was built out by the oil companies and they still own large parts of the filling station market. What was particularly interesting about Royal Dutch Shell’s announcement last month that it aims to become the world’s largest power producer by 2030, is that this dovetails with the proposed increase in demand from electric vehicles. 
That has little to do with the environmental impact of the move and more to do with protecting a significant portion of its business from terminal decline.



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April 04 2019

Commentary by Eoin Treacy

A Belief in Meritocracy Is Not Only False: It's Bad for You

This article by Clifton Mark for medium.com may be of interest to subscribers. Here is a section:

Perhaps more disturbing, simply holding meritocracy as a value seems to promote discriminatory behavior. The management scholar Emilio Castilla at the Massachusetts Institute of Technology and the sociologist Stephen Benard at Indiana University studied attempts to implement meritocratic practices, such as performance-based compensation in private companies. They foundthat, in companies that explicitly held meritocracy as a core value, managers assigned greater rewards to male employees over female employees with identical performance evaluations. This preference disappeared where meritocracy was not explicitly adopted as a value.

This is surprising because impartiality is the core of meritocracy’s moral appeal. The ‘even playing field’ is intended to avoid unfair inequalities based on gender, race and the like. Yet Castilla and Benard found that, ironically, attempts to implement meritocracy leads to just the kinds of inequalities that it aims to eliminate. They suggest that this ‘paradox of meritocracy’ occurs because explicitly adopting meritocracy as a value convinces subjects of their own moral bona fides. Satisfied that they are just, they become less inclined to examine their own behavior for signs of prejudice.

Meritocracy is a false and not very salutary belief. As with any ideology, part of its draw is that it justifies the status quo, explaining why people belong where they happen to be in the social order. It is a well-established psychological principle that people prefer to believe that the world is just.

However, in addition to legitimation, meritocracy also offers flattery. Where success is determined by merit, each win can be viewed as a reflection of one’s own virtue and worth. Meritocracy is the most self-congratulatory of distribution principles. Its ideological alchemy transmutes property into praise, material inequality into personal superiority. It licenses the rich and powerful to view themselves as productive geniuses. While this effect is most spectacular among the elite, nearly any accomplishment can be viewed through meritocratic eyes. Graduating from high school, artistic success or simply having money can all be seen as evidence of talent and effort. By the same token, worldly failures become signs of personal defects, providing a reason why those at the bottom of the social hierarchy deserve to remain there.

Eoin Treacy's view -

I’m a believer in hard work, commitment and ingenuity but I agree it would be hubristic to discount luck or even serendipity in some of the events that have led to personal success. Nevertheless, to discount meritocracy because it does not provide an egalitarian outcome would be folly. Attempting an equal sharing of rewards is what communist systems do and we know how that works in terms of production, personal creativity and corruption.

Meritocracy might not be perfect but it is certainly better than believing that no matter what you do,you will do nothing to better your circumstances. That would be truly disastrous but it is the risk faced by the political establishment because of the populism which has gestated from the unequal returns created by quantitative easing.



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April 03 2019

Commentary by Eoin Treacy

Video commentary for April 3rd 2019

Eoin Treacy's view -

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

Some of the topics discussed include: commodities rally, supported by a resurgent Chinese market, platinum cheap relative to palladium, bitcoin breaking out, Wall Street pauses in the region of a previous peak, peripheral Europe turning to outperformance, Australian firm.  



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April 03 2019

Commentary by Eoin Treacy

It Takes Just 3 Stickers to Make a Tesla Drive Into Oncoming Traffic

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

Tesla’s Autopilot is a level two system that’s leaning into level three, but it might not have the necessary hardware to make it work. These vehicles use cameras, radar, and ultrasonic sensors to detect lanes and nearby vehicles. The Keen Security researchers reverse-engineered the software Tesla uses to see how easy it would be to fool those sensors. They didn’t need to make any changes to the car’s software — this is not a hack. They simply used three small reflective stickers on the roadway to trick Autopilot into thinking the lane had merged when it hadn’t.

According to the report, Tesla uses a feature called “detect_and_track” to identify lane markers. It uses several factors to avoid incorrect decisions like road shoulder location, lane history, and the distance to various objects. However, the reflective stickers appear to the car like lane markers, directing it to merge. These stickers are almost invisible to drivers, and it would be trivially easy to place them on roadways.

Tesla’s Autopilot system does include emergency braking. So, it’s possible the car could stop itself in the event it swerved into oncoming traffic. However, there’s no guarantee the other cars would stop. Tesla says it is evaluating the report but notes that drivers are supposed to keep their hands on the wheel while Autopilot is engaged.

Eoin Treacy's view -

Here is a link to the original research conducted by Keen Security. Teaching a computer to see, in the way we understand that statement as humans, is an enormously difficult task which is why they route to success has been through teaching computers to react to cues. By fiddling with the cues, the computer can be fooled. That suggests a major rewrite of code for autonomous systems but if the clear fix is to simply tell the computer to take more notice of its environment and the direction of the cars travelling on its periphery.



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April 03 2019

Commentary by Eoin Treacy

CBOE Trashing Bitcoin Futures Signals Crypto Market Bottom

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

Speaking on the “Fast Money” panel, Kelly explained that a unique mixture of factors including shifting fundamentals make it likely that bitcoin is poised to break out of its prolonged bear phase which has lasted more than a year now.

In his words: “I think we could look back on this and say that was the bottom…There’s a couple of things that have gone on since the low in December. We’ve seen the underlying fundamentals improve…I think retail is exhausted. You’re starting to see sellers being exhausted and institutions come in. Fidelity is a catalyst coming up in Q2. I think with all those things combined, we might look back and say ‘You know what, in the $3000’s is a great place to buy bitcoin.’”

Eoin Treacy's view -

The CBoE is removing its bitcoin contract from trading. The introduction of the futures contract introduced leveraged to what was previously an unleveraged market. The price rallied in anticipation of the introduction, but futures were used as a way of hedging exposure and most of the positions taken out were on the short side, which contributed to the crash in classic 1987 crash fashion.



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April 03 2019

Commentary by Eoin Treacy

Palladium Sags as Prices Gyrate on Auto Demand Concern

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

Palladium headed for the first decline in four sessions as U.S. President Donald Trump’s threat to shut down the border with Mexico added to concerns over the outlook for the auto industry, the biggest consumer of the metal.

Analysts said a border closing would rapidly ripple through a U.S. economy in which supply chains are closely integrated with Mexico, especially hitting the carmakers. Volatility in palladium, used in auto catalysts to curb pollution, has surged in the past week as investors assess slowing vehicle sales against the outlook for supply shortfalls that drove prices to record highs last month.

Eoin Treacy's view -

Something that does not get discussion any longer is the fact the platinum is primarily used in diesel catalytic converters but platinum and palladium are equally useful in petrol cars. The question of whether to use one over the other is down to the cost of retooling and the relative abundance of palladium over platinum. This was subject that got some coverage back in the early 2000s but I find it peculiar that is not a topic today.

Here is a section from a report by Johnson Matthey explaining the difference:

The role of platinum in catalytic converters is to oxidise carbon monoxide (CO) and hydrocarbons. Platinum is particularly effective at this under oxygen-excessive conditions, so is often the metal of choice for diesel applications. For petrol-powered vehicles (where there is a balance between reductants and oxidants in the exhaust gas), platinum and palladium can be equally effective, and so the choice is often made on the basis of relative cost. The three-way catalyst used for petrol vehicles must also be able to reduce NOx to nitrogen as well as oxidise CO and hydrocarbons – that is why rhodium is generally used in addition to platinum or palladium.



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April 02 2019

Commentary by Eoin Treacy

Video Commentary for April 2nd 2019

Eoin Treacy's view -

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

Some of the topics discussed include: bitcoin breaks out potentially in sympathy with 5G or the continued recovery in mining stocks, gold stead, silver unwinds intraday decline, oil firm, Wall Street steady, China holds its advance, bonds steady.



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April 02 2019

Commentary by Eoin Treacy

Growing the Pie

Thanks to a subscriber for Howard Marks’ most recent memo. Here is a section:

About 50 years ago, an older friend described for me what he felt made America great.

When the worker in Britain sees the boss drive out of the factory in his Rolls Royce, he says “I’d like to put a bomb under that car” But when the worker in the U.S. sees the boss drive out of the factory in his Cadillac, he says “Someday I’ll own a car like that “.

Today, too few Americans feel they might own that Cadillac. Taken to the logical extreme, that has the potential to bring the American miracle to an end. Thus, business should do all it can to arrest the trend toward stagnant and unequal incomes…not just to be fair or generous, but to assure perpetuation of the system that got us here.

Capitalism is the most dependable route to prosperity. And it has to be responsible capitalism. The solution can’t lie in turning away the Amazons of the world, imposing extra taxes on Cadillacs or otherwise shrinking the pie.

Eoin Treacy's view -

Here here!. However, it is highly unlikely companies are going to accept reduced profit growth and a shareholder backlash unless they have no other choice. That is just not how markets function.



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April 02 2019

Commentary by Eoin Treacy

US and India versus the World

Thanks to a subscriber for this article by Joe Zidle for Blackstone which may be of interest. Here is a section:

Eoin Treacy's view -

A link to the full note is posted in the Subscriber's Area. 

India has both the institutional framework and demographics to support a much larger market economy. What it needs is deregulation, anti-corruption measures and better infrastructure. The challenge, for whatever party wins the election, will be how to employ the millions of new workers entering the economy every year for the next couple of decades. The urgency of that issue is likely to spur rapid economic development.



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April 02 2019

Commentary by Eoin Treacy

The Biggest Saudi Oil Field Is Fading Faster Than Anyone Guessed

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

The new maximum production rate for Ghawar means that the Permian in the U.S., which pumped 4.1 million barrels a day last month according to government data, is already the largest oil production basin. The comparison isn’t exact -- the Saudi field is a conventional reservoir, while the Permian is an unconventional shale formation -- yet it shows the shifting balance of power in the market.

Ghawar is so important for Saudi Arabia because the field has "accounted for more than half of the total cumulative crude oil production in the kingdom," according to the bond prospectus. The country has been pumping since the discovery of the Dammam No. 7 well in 1938.

On top of Ghawar, which was found in 1948 by an American geologist, Saudi Arabia relies heavily on two other mega-fields: Khurais, which was discovered in 1957, and can pump 1.45 million barrels a day, and Safaniyah, found in 1951 and still today the world’s largest offshore oil field with capacity of 1.3 million. In total, Aramco operates 101 oilfields.

Eoin Treacy's view -

A lot of what Saudi Arabia is producing today is heavy oil and coupled with Venezuelan production that has boosted refining capacity for high sulphur blends. That transition is reflective of the changing production profile of the Saudi Arabia’s fields even as it continues to sustain the ability to produce up to 12 million barrels a day.



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April 02 2019

Commentary by Eoin Treacy

Taipei blasts 'provocative' Chinese fighter jet incursion across Taiwan Strait line

This article by Jesse Johnson may be of interest to subscribers. Here is a section:

However, Glaser said that the Chinese “haven’t done so for at least a decade, likely longer.”

“I’ve been told that Chinese jets approach the midline, but then veer off,” she said.

The flight came just after Taiwan President Tsai Ing-wen capped off a tour of several Pacific nations with a visit last week to Hawaii, where she said she had formally submitted new requests to the United States for F-16B fighter jets.

The U.S. has no formal ties with Taiwan but is bound by law to help it defend itself and is the island’s main source of arms. The Pentagon says Washington has sold Taipei more than $15 billion in weaponry since 2010.

China is suspicious of Tsai and her pro-independence Democratic Progressive Party and any push for the island’s formal independence.

Chinese President Xi Jinping said in January that Beijing reserves the right to use force to bring Taiwan under its control, but would strive to achieve peaceful “reunification.”

Beijing has called Taiwan “the most important and sensitive issue in China-U.S. relations” and has bolstered its military presence near the island, sailing its sole operating aircraft carrier through the Taiwan Strait in January and March of last year and holding large-scale “encirclement” exercises and bomber training throughout 2018.

Eoin Treacy's view -

Anything that promotes the notion of Taiwan declaring statehood is being met with progressively more strident efforts by China to stamp it out. Xi Jinping has succeeded in having his doctrine written into the constitution and he is economic plan is to make China the preeminent global economy. However, the crown jewel for any Communist Party leader, something that would ensure he is remembered forever in the annals of history would be to reacquire Taiwan.



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April 01 2019

Commentary by Eoin Treacy

Video commentary for April 1st 2019

Eoin Treacy's view -

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

Some of the topics discussed include: Europe rebounds with China. Wall Street firm, Sovereign bonds trim their rally, Pound firms on soft Brexit speculation, oil firm, resources shares turning to outperformance, Philadelphia semiconductors pressuring its highs. 



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April 01 2019

Commentary by Eoin Treacy

A contrarian view on Europe

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

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area.

Here is a quote from the foreword by Mario Draghi in the ECB’s annual report: “Substantial monetary policy stimulus remains essential to ensure the continued build-up of domestic price pressures over the medium term,” There is virtually no prospect of the ECB raising rates and in fact the balance of probabilities is pointed towards another round of quantitative easing. The main question is how long this is going to take to action.



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April 01 2019

Commentary by Eoin Treacy

Ignore the Brexit scare stories - they have no basis in sound economics

Thanks to a subscriber for this article by Ashoka Mody for The Independent. Here is a section:

As Krugman wrote in a brilliant 1995 essay, “People believe certain stories because everyone important tells them, and people tell those stories because everyone important believes them. Indeed, when a conventional wisdom is at its fullest strength, one’s agreement with that conventional wisdom becomes almost a litmus test of one’s suitability to be taken seriously.”

British leaders must pull themselves out from the spell of storytelling and focus on their urgent responsibilities. At home, they must heed the real message of the Brexit vote: citizens being left behind by globalisation are clamouring for more protection. Prime minister Theresa May seemed briefly to recognise the primacy of that task. But she was sucked quickly into the Brexit negotiations vortex.

On Brexit, British citizens and their leaders must decide what kind of nation they want to live in. The debate must pit the value of sovereignty against the risks to global peace. Such a debate is of the utmost importance for Europe, with its history of horrific wars, especially now when ugly forms of nationalism are gaining alarming numbers of adherents. Unfortunately, instead of dealing head-on with this monumentally important challenge, which must guide the Brexit decision, global leaders are peddling frightening economic scenarios.

The Remain or Leave decision is an opportunity for Britain’s citizens to express and reaffirm their true values. Failure to protect the most vulnerable at home and redirect the Brexit debate to a higher purpose will leave underlying tensions simmering.

Eoin Treacy's view -

The European answer to sticky questions is to just stop talking about them. Europe has adopted multiculturalism and there is a clear racist undercurrent in the “respect” for other cultures which precludes people from active participation in society but that is not talked about. In the same vein, the ambition of creating a European federal union is politically untenable and so there is no champion for the idea. However, every action taken by the EU in its response to the credit crisis points towards the long-standing aim of a federal union.



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April 01 2019

Commentary by Eoin Treacy

Flooding prompts criticism of way Missouri River dams run

This article from ky3.com may be of interest to subscribers. Here is a section:

"I was told point-blank, 'Flood control is not our top priority. It is not. Period.' They were very firm on that point," Hawley said. "I said, 'You've got to be kidding me.'"

Corps officials say they work to balance all the priorities Congress approved when operating the dams, but no single priority outweighs all the others. Their operating model tries to maximize the benefit to several priorities when possible.

Hawley said Congress should consider "serious reform," such as deciding if the Corps should be taken out of the Department of Defense and placed under direction of another agency, such as the Department of Transportation or the Department of the Interior.

The Corps manages the Missouri River's system of dams and locks and decides when and how much water is released from reservoirs into the river. The severe flooding this month in Nebraska, Kansas, Iowa and Missouri has renewed criticism of the Corps' management of the river.

Officials estimate that the flooding caused more than $1 billion of damage to farms in Nebraska and Iowa, destroying stored crops and killing livestock. And the damage total will grow as floodwaters recede and other states assess conditions.

Eoin Treacy's view -

Snow melt flowing directly into rivers because the ground was still mostly flooded, coupled with rain helped exacerbate the flooding. However, it is also worth considering that the predominance of the green movement is setting priorities for river management is an additional cause of the extent of flooding.



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March 29 2019

Commentary by Eoin Treacy

March 29 2019

Commentary by Eoin Treacy

Chinese Stocks Wrap Up Best Quarter Since 2014 With a Huge Rally

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

Friday’s surge in Chinese stocks rounds up a winning quarter for the country’s investors. China’s equities have outrun every other national market in the world in the three-month period. The CSI 300 Index’s 29 percent rally is its best since the end of 2014, when the nation’s equity bubble was forming. Apart from a Taiwanese chipmaker, a Brazilian steel producer and Latin America’s largest utility, all the top 30 performers on MSCI Inc.’s emerging-market benchmark are Chinese companies.

Managing a momentum-driven investor base, where turnover is in the hands of almost 150 million retail traders, has always been a challenge for the government. China’s experienced two massive bubbles in the past decade, with a tight-grip approach to tame the rally backfiring in 2015, drawing the ire of foreign investors. Analysts predict Beijing will be more successful this time in engineering a slow bull market.

“It’s a critical time for the market,” said Liao Zongkui, an analyst at Lianxun Securities Co. “Investors are keeping a close eye on earnings from heavyweight companies. A good results season will be a big confidence boost, and will ensure the stock-market rally can continue.”

Eoin Treacy's view -

Veteran subscribers will be accustomed to our long-time contention that monetary policy beats most other factors most of the time. That’s particularly true on Wall Street and is an even more important factor in the age of extraordinary monetary policy. In China, the state dictates the fate of the market so it is clear that bull markets are state sponsored.



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March 29 2019

Commentary by Eoin Treacy

Erdogan's Real Test Comes Monday When Election Calendar Clears

This article by Cagan Koc and Selcan Hacaoglu for Bloomberg may be of interest to subscribers. Here is a section:

“We’re going to implement structural reforms that will make our economy stronger against such attacks with great speed following the election,” Erdogan said.

The question is if investors will stick around long enough to see if he delivers this time. With Turkey succumbing to its first recession in a decade and unemployment at the highest in nine years, Erdogan will have an uphill battle ahead. It will be far harder to make headway on such key challenges as overhauling the labor market now than during a period when economic growth of 5 percent or more was the norm for Turkey, according to Naz Masraff, director for Europe at Eurasia Group.

Elections Loom
“It’s almost the least likely period to do structural reforms after the elections,” Masraff said. “If Turkey hasn’t managed to do them when growth was higher and the country was doing economically better back in 2011, 2012, it’s really difficult to do it in a downturn.”

Eoin Treacy's view -

Turkey has a great deal of US Dollar denominated debt and with the Lira under pressure that is only going to be a progressively more burdensome obstacle to recovery. While extraordinary measures are underway to support the currency ahead of this weekend’s municipal elections, the broader question is what measures are going to be put in place to repair the economic fabric after the election.



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March 29 2019

Commentary by Eoin Treacy

Zombie Crypto Stocks Resurface as Bitcoin Extends Recent Gains

This article by Tatiana Darie for Bloomberg may be of interest to subscribers. Here it is in full:

Crypto-tied stocks, the former market darlings that quickly languished when the Bitcoin bubble burst, are showing signs of reawakening.

Small firms linked to blockchain and cryptocurrencies are following Bitcoin higher as it extended gains for a second month. The top digital token rose for the fourth consecutive session on Friday, reaching its highest level since late December. The price broke above its 100-day moving average for the first time since August 2018 this week, extending this quarter’s gain to 11 percent after tumbling 45 percent in the previous quarter.

Shares of Marathon Patent Group Inc. and Social Reality Inc. each rose about 6 percent in early trading, while Grayscale Bitcoin Trust BTC and Riot Blockchain Inc. gained about 4 percent.

Other tokens such as Ether and Litecoin also rose on Friday, helping push the Bloomberg Galaxy Crypto Index up as much as 2.1 percent. Despite recent gains, the gauge remains down more than 80 percent from its highs in early 2018.

Eoin Treacy's view -

Most assets get interesting again after an 80-90% decline and so it is with Bitcoin. The price has held a progression higher reaction lows since December and closed above the psychological $4000 level today for the first time since November. As long as the sequence of higher lows is intact, we can conclude a low of medium-term significance has been found.



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March 28 2019

Commentary by Eoin Treacy

Video Commentary for March 28th 2019

Eoin Treacy's view -

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

Some of the topics covered include: predicative power of the yield curve spread, bonds ease, stock steady, Eurozone weak, Brexit drama is an indictment of the political process, palladium peaks, precious metals weak, oil firms from intraday lows, India steady, China consolidating.



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March 28 2019

Commentary by Eoin Treacy

Brexit Stalemate Deepens as U.K. Fails to Agree on a Way Forward

This article by Robert Hutton, Alex Morales and Tim Ross for Bloomberg may be of interest to subscribers. Here is a section:

The U.K. has two weeks to go to the EU with a plan for its next steps or face the prospect of leaving without a deal, something Parliament also opposes. The likeliest outcome is that May will ask for a longer delay to Brexit, but she will have to convince European leaders that Britain is on a path to solving its apparently intractable problems.

Hours after May promised her Conservative members of Parliament on Wednesday that she’d step down if they back her Brexit deal, she still looked short of having the numbers needed to win. It’s already been overwhelmingly defeated twice.

Meanwhile, votes in the House of Commons intended to break the deadlock by finding a consensus also saw every proposal rejected. The pound fell.

May must decide on Thursday if she is going to bring her deal back for another vote and meet the EU’s Friday deadline for getting it passed. The government declared that it was still the only option in play. Yet it too appears to be doomed despite the capitulation of some Brexit hard liners.

Liz Truss, a member of Theresa May’s cabinet, told ITV television that Wednesday’s votes show there are no other “serious options” than the one already negotiated with the EU, and that has “focused minds.”

“There has been a significant shift now of people recognizing the reality of the options,” she said. “What we have seen today is Parliament does not have an option apart from the prime minister’s deal that is really a viable option for the future.”

Eoin Treacy's view -

This chart from Bloomberg highlighting the range of options puts me in mind of Walter Scott’s quote from Marmion “Oh what a tangled web we weave when first we practice to deceive”



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March 28 2019

Commentary by Eoin Treacy

Indian anti-satellite missile test meets with success

This article by NewAtlas may be of interest to subscribers. Here is a section:

Anti-satellite weapons aren't new. Systems capable of destroying orbital spacecraft have been around since the 1960s and include everything from specialized anti-satellite satellites packed with explosives, to repurposed shipborne anti-missile missile systems that can take out space targets without any special modifications.

However, for various technological and diplomatic reasons, very few spacefaring nations have actually developed anti-satellite weapons. Today's test makes India the fourth to do so after the United States, Russia, and China.

The Indian government says that the test was conducted by India's Defence Research and Development Organisation (DRDO) and was fully successful, demonstrating the country's ability to knock out a satellite with a high degree of precision using indigenous technology. The missile was a DRDO Ballistic Missile Defence interceptor developed as part of India's general missile defence program. It operated as expected, but carried no explosive warhead. Instead, it was what is known as a "kinetic kill," where the hypersonic velocity of the interceptor is enough to destroy the target.

Eoin Treacy's view -

The proximity of an Indian general election is a good explanation for the timing of this demonstration as well as the sorties over the Pakistani border. By pandering to the Hindu nationalist wing of the BJP, Modi needs to appear strong and is eager to demonstrate India’s technological prowess as a way of doing that.



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March 28 2019

Commentary by Eoin Treacy

Have Yield Curve Inversions Become More Likely?

Thanks to a subscriber for this note by Renee Haltom, Elaine Wissuchek, and Alexander L. Wolman for the Federal Reserve Bank of Richmond may be of interest to subscribers. Here is a section.

The flip side of the previous point is that if the term premium narrows, yield curve inversions will become more likely even if there is no increased risk of recession. And, indeed, there is reason to believe the term premium has fallen. Recently, the ACM model’s estimates of the term premium have moved persistently lower. The average values since 2006 and 2012 are 0.77 and 0.20, respectively. (See Figure 2).3

Two authors of this Economic Brief (Wissuchek and Wolman) recently evaluated how changes in the term premium affect the likely frequency of yield curve inversions.4 In principle, one could do this by conducting a statistical analysis of historical data to assess the relationship between the level of the term premium and the frequency of yield curve inversions. However, the number of inversions is too small to produce a reliable estimate using this method. Instead, Wissuchek and Wolman’s exercise involved simulating data for the short-term interest rate and then measuring how the frequency of yield curve inversions in the simulated data varies with the behavior of the term premium.

To build intuition for this simulation exercise, Figure 3 illustrates the qualitative relationship that would arise between the frequency of yield curve inversions and the level of the term premium if the term premium were fixed at different levels. For very high values of the term premium, the yield curve would never be inverted because the expected decrease in short-term rates would never be large enough to outweigh the term premium. Conversely, for very low (negative) values of the term premium, the yield curve would always be inverted because the expected increase in short-term rates would never be large enough to outweigh the term premium. And, if the term premium were fixed at zero, then over long periods the yield curve would be inverted roughly half the time. In reality, the term premium is not constant, so the simulation involves looking at how the frequency of yield curve inversion varies as the distribution of the term premium changes.

Eoin Treacy's view -

One of the most predictable outcomes of an inverted yield curve is the discussion about whether it will be a predicative tool on this occasion because so many mitigating factors have arisen since the last inversion to suggest this time is different.

What I find particularly interesting on this occasion is other Fed economists are coming out with alternative measures which support the view we are looking at an impending recession even while they contend the yield curve spread is an imperfect measure.



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March 28 2019

Commentary by Eoin Treacy

Lynas looks to WA, not Wesfarmers, for its Malay solution

This article by Hamish Hastie, Colin Kruger and Darren Gray for the Sydney Morning Herald may be of interest to subscribers. Here is a section:

"These discussions are preliminary in nature and no formal submission for any change has been presented to the EPA," a spokeswoman for the agency said.

The discussions could help solve the problems in Malaysia which threaten the company's future, and made it vulnerable to what analysts and investors described as a low-ball bid from Wesfarmers on Tuesday.

Lynas faces an uncertain future after the Malaysian  government imposed strict new conditions on its billion-dollar Malaysian operation which could force it to shut down in
September.

This includes the permanent removal of a residue with naturally occurring radiation, Water Leached Purification Residue (WLP), from Malaysia.

According to institutional investors, Lynas discussed plans last month to relocate some of its rare earths processing  back to Western Australia. All processing is currently handled
in Malaysia.

Lynas chief executive Amanda Lacaze denied there was any plan to extract and retain the controversial WLP residue in WA - the state where it is mined - but did confirm it planned to expand its processing operations outside of Malaysia.

Eoin Treacy's view -

A great deal of capital was invested in new rare earth metal projects after the price spike caused by China limiting exports in 2010. Lynas is the only one of those that made it to production and refining of heavy rare earth metals.



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March 27 2019

Commentary by Eoin Treacy

Video Commentary for March 27th 2019

March 27 2019

Commentary by Eoin Treacy

Aramco to Buy $69 Billion Sabic Stake in Record Mideast Deal

This article by Matthew Martin, Dinesh Nair, and Archana Narayanan for Bloomberg may be of interest to subscribers. Here it is in full:

Saudi Aramco, the world’s biggest oil producer, will buy a majority stake in local chemical giant Sabic from the kingdom’s sovereign wealth fund for $69.1 billion.

The Middle East’s biggest deal will transfer a big slug of cash into the Public Investment Fund, helping Crown Prince Mohammed bin Salman finance his economic agenda. It also weights Aramco away from its core oil production business, pumping 10 percent of the world’s crude, and more toward the production of fuels and chemicals.

“This transaction is a major step in accelerating Saudi Aramco’s transformative downstream growth strategy of integrated refining and petrochemicals," Amin Nasser, chief executive officer of Aramco, said in the statement.

The deal, first mooted last year, values the Public Investment Fund’s 70 percent stake at 123.4 riyals per share according to a statement. The remaining shares, traded on the Saudi stock market, aren’t part of the transaction.

Eoin Treacy's view -

This merger is a clear signal of Saudi Arabia’s long-term intentions. They know as well as any of us that the USA is going to become a competitor for established energy markets which means they have to produce more value-added products in order to compete with higher cost producers. That is particularly bad news for Canada and Brazil where supply bottlenecks, grades and deep water all represent challenges that are only likely to be overcome by higher prices.



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March 27 2019

Commentary by Eoin Treacy

Frontier Markets

Thanks to a subscriber for Meketa Group’s end of year report which contains some educative data I believe will be of interest to the Collective. Here is a section:

The opportunities that an investment in Frontier Markets offers can be summarized as a growth story at a good price. To get a sense of how the growth expectations within frontier markets compare with growth across the world, we examine the World Bank’s growth expectations for different countries and groups.

The chart above highlights that all but one of the Frontier Market countries have higher growth expectations than the U.S. and other advanced economies. We can also see that many are higher than the world average, which indicates that these economies tend to be a positive influence on the global average.

Frontier Market equity returns since inception have been less efficient when compared to U.S. equity market returns, but have still seen periods of very strong growth.

Closely tied to the growth opportunity in Frontier Markets are the demographics, which have been shown to be a driving factor in GDP growth across many studies. 2 Much of the growth story in these markets is driven by their relative youth.

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area. 

Economic growth is important, particularly for emerging and frontier markets because of the base effect. It is simply easier to go from 50₵ a day to a $1 a day than it is to go from $10 - $20. With small markets liquidity is an issue and therefore one has to have some long-term perspective when participating and also to buy at the right time. One is reminded of the Baron de Rothschild quote “buy when there is blood in the street, even if it is your own”



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March 27 2019

Commentary by Eoin Treacy

Palladium hit by 'Barrage of Selling'

This note by Justina Vasquez for Bloomberg may be of interest to subscribers. Here it is in full:

The rally in the U.S. dollar triggered an investor exodus from precious metals on Wednesday. Spot palladium led declines as mounting concerns over global growth threaten the outlook for demand for the commodity used mostly in auto catalysts. The slump accelerated as the price of the least-liquid asset among its peers broke below the $1,500-an-ounce level, triggering “a barrage of selling,” Miguel Perez-Santalla, a sales and marketing manager at refiner Heraeus Metals New York LLC, said.

Eoin Treacy's view -

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March 26 2019

Commentary by Eoin Treacy

Video Commentary for March 26th 2019

March 26 2019

Commentary by Eoin Treacy

Gold: Ringing the bell

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

Eoin Treacy's view -

A link to the full report is posted in the Subscriber;s Area.

The clearest rationale for a positive view on gold is when we have evidence of negative real interest rates. That is becoming an increasingly likely scenario since global central banks are desperate to stoke inflation and are willing to allow their economies to run hot in order to achieve a self-sustaining cycle. That further supports the argument we are at the top of the interest rate cycle.



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March 26 2019

Commentary by Eoin Treacy

The debate over Modern Monetary Theory

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

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area. 

The discussion about Modern Monetary Theory is inconvenient because it brings into the public eye what governments and central banks have been doing all along. It is very convenient to sport a façade of adherence to the ideal of balanced budgets, spending within your means, low inflation and preservation of purchasing power. However, if we look at the history of government these ideals are rarely realised. Meanwhile, deficit spending, lavish social programs and rising debt ratios are the rule rather than the exception.



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March 26 2019

Commentary by Eoin Treacy

Apple goes all-in on services, with new video, games and news subscription packages

This article by David Neald for NewAtlas may be of interest to subscribers. Here is a section:

Last and definitely not least, Apple unveiled a serious move into video content production, called Apple TV Plus. Dedicated to "the best stories ever told," the service will feature high-profile content from a variety of big names – Steven Spielberg, Jennifer Aniston, Reese Witherspoon and Jason Momoa were some of the stars who appeared on stage.

Again, we don't know how much it's going to cost, but it will involve a monthly fee and it will work across all Apple devices. It's coming to more than 100 countries later this year, and will use downloads rather than streaming. You can think of it as Apple trying to be HBO as well as Apple.

Apple is adding some improvements to the existing TV app as well as launching its own programs, including iTunes movie integration and easier navigation, and it's introducing a separate service called Apple TV Channels at the same time.

The idea is you only pay for the channels you need, and access them all through the one TV app on your Apple devices. HBO, Showtime, and Starz are three of the channels that are going to be available, and live sports and movies get pulled in too (assuming you've subscribed to the necessary channels).

Eoin Treacy's view -

Apple has come up with something to do with its cash and it is going to have to outbid Netflix in order to get the best shows. In the near term it is going to be selling those shows to a smaller audience of Apple product users than the vast number of Android, Microsoft and smart tv users that will be outside its ecosystem. 



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March 25 2019

Commentary by Eoin Treacy

Video commentary for March 25th 2019

Eoin Treacy's view -

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

Some of the topics covered include: yield curve analysis and discussion of what an inverted yield curve represents, Treasury yields continue to contract, gold steady, oil pauses, Wall Street quiet, banks weak, utilities breaking out, Europe and Japan likely to steady, QE4 a real possibility.  



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March 25 2019

Commentary by Eoin Treacy

Beware Misreading Inverting Yield Curve

This article by Mohamed A. El-Erian for Bloomberg may be of interest to subscribers. Here is a section:

“The extraordinary abrupt end to central bank hiking cycle + Fed paranoia of credit event is uber-bullish credit & uber-bearish volatility,” strategists including Michael Hartnett wrote.

While negative yields on paper suggest that investors lose money just by holding the obligations, bond buyers could also be looking at price gains if growth stalls and inflation stays low. But along the way, risk assets may be entering the danger zone.

“We’ve never seen monetary easing so long, so broad, so big,” said Brian Singer, head of dynamic allocation strategies at William Blair, a Chicago-based fund manager that oversees $70 billion overall. “What’s happened after every significant period of accommodation is a reckoning. This time the bubble is lower-rated credit and illiquid private assets.”

Eoin Treacy's view -

There is always an argument about the efficacy of an inverted yield curve as a lead indicator. It was exactly the same back in 2005 when the yield curve first became inverted. There were calls that this occasion is different because of the bull market in commodities, the rise of China and the strength of the housing market all of which proved to be fallacious.



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March 25 2019

Commentary by Eoin Treacy

Lyft Leading Wave of Startups Debuting With Giant Losses

This article by Eliot Brown for the Wall Street Journal may be of interest to subscribers. Here is a section:

“Many of their business models have not been tested fully,” Ilya Strebulaev, a Stanford University business professor who studies late-stage startups, said of the large private companies. “I would not be surprised if many of these companies would not be as successful as investors expect them to be.”

Of the five companies with the largest losses before an IPO, four of them—discount marketplace Groupon Inc., biotech Moderna Inc., social-media company Snap Inc. and communications company Vonage Corp. —have performed poorly on the public markets. A fifth, Viasystems Group Inc., went private years ago at a fraction of its IPO value.

For investors betting on the coming IPOs, the main appeal is rapid growth, which Lyft has made a centerpiece of its push to Wall Street. Its revenue doubled last year to $2.2 billion in what would be the third largest annual revenue of a U.S. startup pre-IPO, behind Facebook Inc. and Google, according to Capital IQ. Both Facebook and Google were profitable before their IPOs.

Lyft hasn’t publicly outlined when it hopes to turn a profit, but company executives and bankers point out that spending on high-cost items like marketing is falling as a percentage of revenue. It is also pushing to reduce insurance costs.

Eoin Treacy's view -

There is nothing that signals late cycle activity quite like a slew of IPOs from companies that have little prospect of turning a profit.



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March 25 2019

Commentary by Eoin Treacy

Investment Strategy: 'Trading Sardines?'

Thanks to a subscriber for this note from Jeffrey Saut who I had the pleasure of meeting at the American Association of Professional Technical Analysts's (AAPTA) conference on Friday. Here is a section:

"When investors hear yield curve inversion, they automatically think 'recession.' That’s because every recession since 1962 has been preceded by an inversion. But, not every inversion has been followed by a recession, so keep that in mind."

Myth number two is that we are into the late part of the business cycle. If that is true why are the late cycle stocks acting so poorly? I have argued that the economic downturn was so severe, and the recovery so muted, that what we have done is elongate the mid-cycle. This implies there is much more time until the mid-cycle ends and the late cycle begins.

Myth number three has it that earnings are going to fall off a cliff. I do not believe it. Certainly earnings momentum has slowed, but earnings continue to look pretty good to me. And, if the earnings estimates for the S&P 500 are anywhere near the mark, the SPX is trading at 16.3x this year’s earnings and 15.5x the 2020 estimate. I think with 2Q19 earnings myth number three will evaporate.

As for Friday’s stock market action, readers of these missives should have found last week’s action as no surprise. I have talked about the negative “polarity flip” that was due to arrive last week for a few weeks. How deep the pullback/pause will be is unknowable, but I have stated I do not think it will be much. It was not only the economic data, and PMIs, that sacked stocks, but as I have repeatedly stated it was also the Mueller Report. The result left the senior index lower by ~460 points and the S&P 500 (SPX/2800.71) resting at the lower end of my support zone of 2800 – 2830.

Eoin Treacy's view -

As a brief aside. I am now the membership chair for the organisation, which is a member of IFTA. If anyone would like to pursue membership, has at least seven years of professional experience using technical analysis, and enjoys a collegiate environment for sharing ideas and methodolgy please reach out. 

The focus of Jeffrey’s Saut’s talk at the conference was to reiterate his view we are in a secular bull market. I felt a lot more comfortable when I went to conferences and was the only person making that call. It is not a majority opinion today but there are definitely more people espousing it.



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March 22 2019

Commentary by Eoin Treacy

March 22 2019

Commentary by Eoin Treacy

Musings from the Oil Patch March 21st 2019

Thanks to subscriber for this edition of Allen Brooks’ ever interesting report. Here is a section:

Eoin Treacy's view -

It stands to reason that by excluding a sector for reasons other than what might be considered strictly financial it increases the potential for that sector to outperform later. By flushing out holders selling for what they perceive as ethical reasons, it returns the price to a value stage where the potential for future outperformance is bolstered.



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March 22 2019

Commentary by Eoin Treacy

What Is the Future of Ecommerce? 10 Insights on the Evolution of an Industry

This article by Aaron Orendorff for Shopify may be of interest to subscribers. Here is a section:

For all its enduring hype — physical versus digital, offline versus on — the old war is over. In fact, it’s always been a lie. Choice, not location, is commerce’s greatest opportunity and its most-looming threat.

In defense of retail’s “apocalypse,” brick-and-mortar losses are mounting; the four-year bankruptcy count now sits at 57 once-landmark chains. Manufacturing market share and in-store sales for consumer packaged goodsare flat or declining. Born-online “microbrands” have devoured the lion’s share of growth. And ecommerce’s gains continue to trounce retail as a whole.

Here’s the uncomfortable twist: brick-and-mortar still dominates online sales by over $20 trillion. And the gap will widen. After a quarter century, ecommerce’s spread is slowing, 80% of 2018’s gains belonged to Amazon, and (in the U.S.) the top five online retailers own 64.7% of sales:

Eoin Treacy's view -

I found this report to be very interesting because it comes from a company whose business model is to supply small and start up sellers with an ecommerce platform and provides a partial counterweight to Amazon’s more than 50% share of the online retail market in the USA.



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March 22 2019

Commentary by Eoin Treacy

Morgan Creek Capital Management

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

Eoin Treacy's view -

 A link to the full report is posted in the Subscriber's Area. 

I spent today at the American Association of Professional Technical Analysts conference which is a forum a I enjoy where market veterans share what works for them. Scott Fullman reported today that he was at a fundamental research conference from Emerald Research a few weeks ago where they opined that only about 10% of trading today is based on pure fundamentals.
 



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March 21 2019

Commentary by Eoin Treacy

Video commentary for March 21st 2019

Eoin Treacy's view -

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

Some of the topics discussed include Fed goes on pause, yield curve spread contracts, bond market pricing in a rate cut, Wall Street rallies on a reduced headwind from liquidity contraction, banks pull back, Dollar rebounds, emerging markets steady, gold eases.  



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March 21 2019

Commentary by Eoin Treacy

Traders' Rate-Cut Bets Shift Goalposts for Fed Playing Catchup

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

Money-market traders have proven skeptical in recent years -- and much of the time rightly so -- about just how much the central bank might be able to push rates back up toward more historically normal levels. Officials on Wednesday scaled back from two to zero the number of rate increases they foresee in 2019.

Futures markets, which were already leaning toward a cut this year, have pushed the probability of easing to about 50 percent. For next year, a cut is fully priced in. The turnaround in Fed expectations in recent months has been accompanied by a rebound in stocks, which tumbled in December amid concern about the economy and the prospect of rate hikes.
 

“The Fed got the signal from markets last year as they were crashing and were pretty much devouring the economy,” said Robert Tipp, chief investment strategist at PGIM Fixed Income, which oversees about $716 billion. “A cut this year is possible. This is a good environment for U.S. fixed income,” and the 10-year yield has room to fall, he said.

Eoin Treacy's view -

The big question after the Fed’s about face on raising rates is, are they moving early enough to avoid an economic contraction? The logic is reasonably straight forward. The Fed would not have announced such a major shift in policy unless they were worried about the economic and market outlook. By going on pause and waiting for additional information they are signaling a willingness to listen to what the market is telling them.



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March 21 2019

Commentary by Eoin Treacy

Powell Aims to Avoid Japan Deflation Trap With Dovish Tilt

This article by Rich Miller and Craig Torres for Bloomberg may be of interest to subscribers. Here is a section:

That’s the type of situation that Japan fell into two decades ago and with which Europe is flirting now. It’s a path that could ultimately lead to a deflationary downturn as households and businesses put off borrowing and spending today because they’re convinced prices will be lower tomorrow, no matter how far the central bank lowers interest rates.

“We are not getting any inflation and the risk is that we find out -- as did Europe and Japan -- that we are stuck and that the central bank isn’t able to raise inflation,” said Mark Spindel, chief investment officer at Potomac River Capital in Washington.

The Fed hasn’t hit 2 percent inflation on a sustained basis since formally adopting that objective in 2012. In December, the personal consumption expenditures price index that the Fed targets rose 1.7 percent from a year earlier.

The extra yield investors demand to hold 10-year Treasuries over two-year notes was 13 basis points, highlighting market conviction that inflation will stay subdued over the next decade.

Eoin Treacy's view -

The Fed has stated in the last week they are willing to let inflation run hot in order to create a self-sustaining trend which suggests we are likely to have an easy monetary environment for the foreseeable future.



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March 21 2019

Commentary by Eoin Treacy

America's Best Weapon in the Opioid Epidemic Just Got Cheaper

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

It’s potentially a really big deal,” said Brendan Saloner, an assistant professor at the Johns Hopkins Bloomberg School of Public Health, who has studied the opioid addiction crisis. Suboxone Film has “a really important role in the overall strategy of combating the overdose crisis,” he said, adding that placing patients on the drug cuts their risk of overdose in half.

For now, the U.S. opioid epidemic shows few signs of abating: annual opioid overdose deaths in the U.S. are expected to climb to 81,700 in 2025, a 147 percent increase from 2015, according to a study last month by the Massachusetts General Hospital Institute of Technology Assessment. The human and financial costs have led states, counties and cities to sue drugmakers and distributors, seeking billions of dollars.

Opioid Crisis
Suboxone Film allows the opioid-based drug buprenorphine to be absorbed through the mouth to help control cravings and stave off withdrawal. When combined with counseling and support services, that type of medically assisted therapy is considered one of the most effective ways to treat opioid addiction. It’s also expensive, especially for uninsured patients.
 

Eoin Treacy's view -

The trend of opioid use remains a worrying development in the USA, where heroin, prescription drugs and fentanyl all represent avenues through which addiction is expanding. The availability of these drugs is an obvious problem which has been exacerbated by over prescribing medications, the war against the Taliban which has boosted heroin production and cheap fentanyl exports via regular mail from China.



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March 20 2019

Commentary by Eoin Treacy

Video commentary for March 20th 2019

Eoin Treacy's view -

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

Some of the topics discussed include: Fed confirms dovish tilt. Dollar pulls back which boosts the outlook for Europe, commodity producers, commodities, energy and gold. US Treasury yields compress, taking the conclusion that the next move in interest rates will be downwards. 



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March 20 2019

Commentary by Eoin Treacy

Fed Sees No 2019 Hike, Plans September End to Asset Drawdown

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

“This was definitely a dovish outcome and even a bit of a surprise,” said Ben Emons, managing director of global macro strategy at Medley Global Advisors in New York. “The Fed took out the entire rate hike scenario for this year.”

Reaction in markets confirmed the dovish interpretation. Stocks pared losses, the dollar turned lower and Treasuries rallied. Traders lifted the odds of the Fed cutting rates. In a separate statement Wednesday, the Fed said it would start slowing the shrinking of its balance sheet in May -- dropping the cap on monthly redemptions of Treasury securities from the current $30 billion to $15 billion -- and halt the drawdown altogether at the end of September. After that, the Fed will likely hold the size of the portfolio “roughly constant for a time,” which will allow reserve balances to gradually decline.

Beginning in October, the Fed will roll its maturing holdings of mortgage-backed securities into Treasuries, using a cap of $20 billion per month. The initial investment in new Treasury maturities will “roughly match the maturity composition of Treasury securities outstanding,” the Fed said. The central bank is still deliberating the longer-run composition of its portfolio and said “limited sales of agency MBS might be warranted in the longer run.”

Eoin Treacy's view -

The Fed has cemented its about turn around with today's statements. That confirms a somewhat bearish tilt in their reasoning since the only way a pause can be justified is if growth figures are downgraded.



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March 20 2019

Commentary by Eoin Treacy

Corporate America = Vapourware?

This article by Bernard Tan may be of interest to subscribers. Here is a section:

Eoin Treacy's view -

A link to this insightful note and a section from it are posted in the Subscriber's Area.

One of the most significant side effects of ultra-low interest rates has been the creation of a clear incentive to take on as much leverage as possible. Whether that is justified as reducing the weighted average cost of capital, providing the funding for buybacks and dividend increases or for improving the veneer of EPS growth, the result is the same. Leverage has increased substantially.



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March 20 2019

Commentary by Eoin Treacy

Italy set to formally endorse China's Belt and Road Initiative

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

Chinese investments have become increasingly contentious in the EU. Diplomats in Brussels and influential western European capitals have long worried the 16+1 grouping of China and central and eastern European states, including 11 EU members, is a Trojan horse to divide the bloc. Beijing has denied this suggestion.  EU member states such as Germany and France have pushed for tougher screening criteria for Chinese investments. They want the bloc to develop a more unified strategy amid rising tensions over the security implications of using Chinese technology from companies such as Huawei, the telecoms group. Other countries including Greece and Portugal, where Chinese groups have invested billions of euros since the financial crisis, have adopted a more lenient approach.

Eoin Treacy's view -

I can’t help but think of the adage “a drowning man will clutch at a straw”. Italy’s populist administration has need of both funds for investing in public works and also a desire to snub the federalist ambitions of Northern European creditors. Meanwhile, China has a clear ambition to draw European countries within its sphere of influence in an effort to cement export markets and to weaken the chances of a concerted effort to blunt its expansionism.



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March 19 2019

Commentary by Eoin Treacy

Video commentary for March 19th 2019

Eoin Treacy's view -

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

Some of the topics discussed include: Semiconductors Index surmounts 1400 again, Wall Street pauses, commodity producer currencies firming except Rand, Mid Caps turn back to outperformance in Europe and UK but not USA, India firm, China pauses, Bonds steady, gold steady.



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March 19 2019

Commentary by Eoin Treacy

Another Swing at the Plate

This updated report from KKR on the 2019 forecast published in January may be of interest to subscribers. Here is a section:

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area. 

The rally that began on boxing Day continues to impress with the S&P500 now trading back above the psychological 2800-point level. This move has now broken the sequence of lower rally highs and increases scope for the Index to consolidate above the trend mean.



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March 19 2019

Commentary by Eoin Treacy

Under "Basel III" Rules, Gold Becomes Money!

Thanks to a subscriber for this article from Zero Hedge which may be of interest. Here is a section:

If banks own and possess gold bullion, they can use that asset as equity and thus this will enable them to print more money. It may be no coincidence that as March 29th has been approaching banks around the world have been buying huge amounts of physical gold and taking delivery. For the first time in 50 years, central banks bought over 640 tons of gold bars last year, almost twice as much as in 2017 and the highest level raised since 1971, when President Nixon closed the gold window and forced the world onto a floating rate 

And

The only way governments can manage the levels of debt that threaten the financial survival of the Western world is to inflate (debase) their currencies. The ability to count gold as a reserve from which banks can create monetary inflation is not only to allow gold to become a reserve on the balance sheet of banks but to have a much, much higher, gold price to build up equity in line with the massive debt in the system.

Eoin Treacy's view -

The Federal Reserve values the gold certificates it holds from the Treasury at $42 an ounce which is the statutory gold price set in 1973. It is unlikely that any change to the way the Bank of International Settlements treats gold will alter that valuation.  



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March 19 2019

Commentary by Eoin Treacy

Alberta Pork Reports A Fourth Confirmed PED Case

This article from High River Online may be of interest to subscribers.

A fourth case of the porcine epidemic diarrhea (PED) virus has been confirmed in Alberta.

Alberta Pork announced the outbreak on Friday, March 15, saying this is the fifth reported case in the province, however one of the reported cases turned out to be a false positive.

The virus has previously been found in Ontario, Manitoba, Quebec and PEI, but was reported for the first time in Alberta back in January.

Earlier this year, Alberta Pork Executive Director, Darcy Fitzgerald, said the disease made its way into the United States from Asia, and was first confirmed in Canada in 2014.

The farm group says hog operations within 60 kilometres of the fourth confirmed case will be notified.

PED affects pigs with no risk to human health. This incident has also not caused any food safety concerns.

For more information on what you can do to protect your farm, visit Alberta Pork's website to view their PED toolbox.

Eoin Treacy's view -

Swine flu has decimated the Chinese herd and new cases are being found all the time. It was reported in Belgium earlier this year and is now in North America. There is no cure so the only recourse is to cull the herd and maintain quarantine but that is very difficult.



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March 19 2019

Commentary by Eoin Treacy

Mental compass: New evidence suggests humans can sense Earth's magnetic field

This article by Michael Irving for NewAtlas may be of interest to subscribers. Here is a section:

Alpha-ERD is a strong neural signature of sensory detection and the resulting attention shift," says Shin Shimojo, co-lead author of the study. "The fact that we see it in response to simple magnetic rotations like we experience when turning or shaking our head is powerful evidence for human magnetoreception. The large individual differences we found are also intriguing with regard to human evolution and the influences of modern life. As for the next step, we ought to try bringing this into conscious awareness."

The team took plenty of steps to ensure that participants weren't sensing other things. The test chambers were shielded from outside electromagnetic signals, and the copper wires that generated the magnetic field were wrapped so they wouldn't produce an audible hum.

Eoin Treacy's view -

Dousing or witching for water and electrical wires has been something people have been doing for generations. The practice offers empirical, though not especially reliable, evidence that humanity has the ability to sense electromagnetic signals. However, it has until now been largely beyond the ability of science to test with any kind of reliability. The clear result of this confirmation is there is scope for a broader range of understanding into what drives human activity or how we are influenced by our environment.



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March 18 2019

Commentary by Eoin Treacy

Video commentary for March 19th 2019

Eoin Treacy's view -

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

Some of the topics discussed include: Teasuries at a short-term resistance ahead of the Fed, China clears the way for outszied credit growth, ASEAN, India and Emerging Markets rally, Europe recovering, Wall Street steady, gold and oil steady,  



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March 18 2019

Commentary by Eoin Treacy

China Wants Its Stock, Bond Markets to Step Up Funding Role

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

“We need to create a strong capital market,” Guo Shuqing, the country’s chief financial regulator, said at the National People’s Congress, China’s top legislative session which wrapped up last week. “We could do more work especially in the capital market -- stock market, bond market -- for direct financing.”

China is trying to transform how it funds its economy after decades of relying on state-run banks that benefit from the implicit backing of the nation’s treasury -- but tend to direct most loans to other government-owned companies. The difficulty that small and private firms have in securing funding was one reason for an explosion of shadow-banking, and the rapid increase in debt and risk that came with it.

Spurred to act by a record $34 trillion debt pile, authorities in recent years have cracked down on risky loans, squeezing businesses that relied on such funding. While leaders including Guo have called on the banks to do more to finance private companies, lenders are grappling with their own concerns about loan quality and default rates. Even so, outstanding banks loans in China have increased by about 27 percent since 2016, while capital-market funding rose by around 15 percent.

“We shouldn’t put all the pressure on banks,” Xu Kuijun, an NPC delegate and vice president at Bank of China Ltd. In Shanghai said in an interview at the sidelines of the gathering. “We have to rely more on direct financing, and capital markets should do more.”

Eoin Treacy's view -

There is nothing says “We are done with tightening” quite like the statement “capital markets should do more”. The dominant policy narrative in China for the last three years has been the need to curtail speculation and most particularly in the shadow banking sector.



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March 18 2019

Commentary by Eoin Treacy

March 18 2019

Commentary by Eoin Treacy

What the Federal Reserve Got Totally Wrong about Inflation and Interest Rate Policy: Getting Real About Rents

Thanks to a subscriber for this report from Cornell research Academy of Development, Law and Economics by Daniel Alpert. Here is a section:

The foregoing factors present perceptional problems especially when met with sizable gains in employment that would normally result in rapid household income growth. It is tempting to see rent and OER increases as only the result of higher levels of demand. But despite recent glimmers of meaningful wage growth (mostly in lower wage, lower hours employment sectors) and the longer term reduction in U-3 unemployment to historically low levels, median U.S. household income in 2018, adjusted for inflation, remained less than 4% higher than it was at the turn of this century, 18 years ago (see Figure 13).

So there is something else going on here. As Figure 5 illustrates, the contribution of rent and OER to core CPI inflation hit a historic high of 81% in the summer of 2017. While such contribution moderated some in 2018, it remains the lion’s share of core inflation and is again increasing in proportion.

This begs another question, what would be the level of core inflation without price growth in rent and OER? There was evidence at the end of Q4 2018 that rents declined nationwide on an annual basis for the first time in more than six years, according to the Zillow Group real estate database9.  Now this data, if the trend continues, will take some time to percolate through to the BLS and BEA data - even longer for it to migrate from rents to OER estimates – but if it persists it will clearly result in materially lower inflation data in 2019. Far lower than the FOMC was banking on to support its monetary policy actions of 2018.

Eoin Treacy's view -

I found this to be a very interesting and educative report not least for its breakdown of the composition of CPI figures. The Fed dot plot which will be released on Wednesday, along with its rate decision, is being eagerly anticipated by investors for some perspective of just how dovish the Committee has become.  



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March 15 2019

Commentary by Eoin Treacy

March 15 2019

Commentary by Eoin Treacy

Wireless Set to Transform Communications/Cloud

Thanks to a subscriber for this report from Oppenheimer, dated June 2018, which is one of the best primers on the evolution of 5G I have seen. Here is a section:

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area. 

5G is what I regard as an enabling technology. It is an investment theme in its own right because it will displace the legacy infrastructure we use today. but it also acts as the framework upon which additional services can be built. Telecom companies are selling the first 5G plans at present and Samsung and others are in the process of rolling out the first dedicated 5G handsets. Additionally, the roll out of products like smart speakers, digital assistants, web-connected doorbell cameras, etc, give us a clue to how the initial phase of the Internet of Things is going to progress.



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March 15 2019

Commentary by Eoin Treacy

Licence for value hunting

Thanks to a subscriber for this note from Amundi Asset Management which may be of interest. Here is a section:

Eoin Treacy's view -

A link to this note and another from Morgan Stanley are posted in the Subscriber's Area.

A European portfolio manager recently remarked to me that India is better covered among analysts he talks to than Europe. That is a clear testament to how much the constant barrage of negative news from Europe on the political, social and economic fronts have damaged sentiment.



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