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February 18 2019

Commentary by Eoin Treacy

Germany Bans New Wirecard Short Sales in Unprecedented Move

This article by Nicholas Comfort and Karin Matussek for Bloomberg may be of interest to subscribers. Here is a section:

Germany’s financial regulator took the unprecedented step of temporarily banning short sales of Wirecard AG shares following reports of suspicious accounting practices, while prosecutors in Munich expanded their investigation to include a Financial Times journalist.

Investors globally are immediately prohibited from taking new short positions or increasing existing ones through April 18, according to watchdog BaFin. That’s the first time it has banned short-selling on a single stock and harks back to the financial crisis, when the regulator prohibited naked short sales on 11 financial firms.

The short-selling ban was coordinated with Munich prosecutors, who have already launched a probe over potential market manipulation in Wirecard shares. In a statement Monday, the prosecutor said it was investigating a complaint by an investor against an FT journalist.

Eoin Treacy's view -

Wirecard was the best performing company on the DAX last year and is one of Europe’s only technology success stories. Its fall from grace has been particularly swift but the move to ban shorting on an individual share is disingenuous. Rather than protect the perception of the German economy it is going to raise questions among foreign investors about their ability to express a view through investing in the region generally. 



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February 15 2019

Commentary by Eoin Treacy

February 15 2019

Commentary by Eoin Treacy

Earnings Recession Is Here

Thanks to a subscriber for this report by Michael Wilson for Morgan Stanley. Here is a section:

Eoin Treacy's view -

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

Is the trade war the primary reason behind lower expectations for earnings in 2019? That’s a big question for the wider market because if the USA and China can come to an accord that will improve confidence which will allow companies to begin to make plans on a sounder footing than they have today. However, there are other important factors that are worth considering.



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February 15 2019

Commentary by Eoin Treacy

Email of the day on gold miner mergers

Thank you for your efforts in providing this valuable information and analysis of the markets to the collective. With the expectation of increasing M&A activities in the gold miners, what would you look for as candidates for take overs can you provide some suggestions.

Eoin Treacy's view -

Thank you for your kind words and this email which raises a question I have also been pondering. When we think about where the tide of M&A activity is heading in the gold mining sector, we can look at potential acquirers and their motivations for why they are buying. We can then look at what they might be interested in buying and whether there is likely to be competition for that asset.



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February 15 2019

Commentary by Eoin Treacy

ECB Moves Closer to Global Dovish Shift as Coeure Mulls Loans

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

The European Central Bank took a step closer to injecting fresh stimulus into the weakening euro-area economy as one of its top policy makers said discussions are under way on offering banks new long-term loans.

The comments by Benoit Coeure, the ECB Executive Board member in charge of markets, provided the strongest signal yet that euro-area policy makers are considering another round of funding. He also echoed ECB President Mario Draghi that there must be a monetary policy case for such action.

Central banks around the world are following the Federal Reserve in reining in plans to tighten monetary policy. The ECB itself has already changed its language to warn of downside risks to the outlook, while India’s central bank unexpectedly cut interest rates last week and easing inflation bolstered bets that more reductions could be on the cards.

With the euro-area outlook deteriorating, the ECB is expected to cut its economic growth forecasts at its next meeting in March. That gathering is also at the center of speculation about new loans, known as TLTROS.

Eoin Treacy's view -

With Mario Draghi exiting his position as head of the ECB later this year, a policy hawk is very unlikely to replace him. There is no way the ECB can return to anything approximating normal monetary policy against a background where the banking sector is hobbled by a legacy of Japan-style bad loans which will take years to come to terms with.



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February 14 2019

Commentary by Eoin Treacy

Video commentary for February 14th 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: Coca Cola pulls back, Bond rally, oil breaks out of its short-term range, gold steadies, emerging market currencies encounter resistance in the region fo the trend mean. Europe steady in the region of the trend mean. India's oversold banks rebound, China steady, Mexico at risk of further deterioration. 



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February 14 2019

Commentary by Eoin Treacy

For This Top Gold Miner, Joining M&A Rush Is A Last Resort

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

Newcrest Mining Ltd. could jump aboard the multi-billion dollar, deal-making rush that’s reshaping the top ranks of the gold sector -- but only if it has to.

The No. 3 gold producer by market value has set a deadline for the end of 2020 to increase its exposure to five so-called tier-one assets, meaning that it’s hunting for a project or mine to add to a roster of four mainstay operations and investments in Australia, Papua New Guinea and Ecuador.

Mergers and acquisitions are ranked as a “final pathway” to growth behind exploration work and partnerships with smaller companies on early-stage projects, Chief Executive Officer Sandeep Biswas said Thursday on an earnings call with analysts.

“We don’t need to do M&A, we are in the enviable position of owning two of the world’s premier long-life gold assets.”

Eoin Treacy's view -

New long-life, high grade gold assets are like unicorns. You just don’t see them very often. That is why the major gold miners have been so active in M&A recently. On top of that mines are wasting assets so miners have a proclivity for shopping for replacements. It seems inevitable Newcrest will deal at some stage but if they continue to wait, they will likely end up paying more for attractive assets later.



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February 14 2019

Commentary by Eoin Treacy

Yes Bank Soars Most in 14 Years on RBI Assessment of Bad Loans

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

Yes Bank Ltd. rose the most in fourteen years after an audit by India’s banking regulator found no undisclosed bad debt for the last financial year.

The lender’s shares surged as much as 30 percent, the most since July 2005, before trading 20 percent higher at 203.65 rupees as of 9:43 a.m. in Mumbai. The gains pared the past year’s losses to 36 percent.

The green-light on its asset quality assessment for the 12 months that ended March 2018 comes as a relief for Yes Bank as it emerges from a leadership crisis that had helped halve its share price. India’s central bank twice rejected the lender’s request to extend founder and former CEO Rana Kapoor’s tenure after saying the bank repeatedly under-reported bad loans. Kapoor’s successor Ravneet Singh Gill, who has been heading Deutsche Bank’s India franchise, will take over from March 1.

Eoin Treacy's view -

Yes Bank collapsed in September because the RBI intervened to oust Kapoor following concerns about weak governance and issues with asset qualification. I’ve also heard that one of the reasons Kapoor has been singled out is because of the way in which his personal holding in the company was structured through trusts against which he had been borrowing money. That represented an additional governance risk to the bank.



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February 14 2019

Commentary by Eoin Treacy

Bond Market Shows Traders Putting Mexico on the Edge of Junk

This article by Aline Oyamada, Justin Villamil, and Aviel Brown for Bloomberg may be of interest to subscribers. Here is a section: 

Mexico has promised a capital injection of $1.25 billion to Pemex, while Lopez Obrador has floated a plan for $3.5 billion in tax breaks over the next six years. Not only did the measures fail to assuage market fears, they stoked concern that the government hasn’t grasped the extent of Pemex’s problems. Others worried that further capital injections could erode Mexico’s fiscal position.

“There’s risk of contamination as there’s basically one pocket of money,” said Shamaila Khan, the director of emerging-market debt at AllianceBernstein in New York. “To the extent Pemex support comes at the expense of fiscal performance, that is going to impact sovereign ratings.”

Eoin Treacy's view -

The biggest challenge for Mexico is it now has a left leaning populist administration. One of AMLO’s first acts as President was to cancel reforms at Pemex that would have allowed foreign investors access to the nation’s oil. That sent the wrong kind of message to the market because it eroded confidence in the administration’s commitment to meeting its debt obligations let along balancing the budget.



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February 13 2019

Commentary by Eoin Treacy

Video commentary for February 13th 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: Wall Street testing potential resistance, Euro pulls back and Europe is reliant on how China plays out. Shanghai A-Shares bounced with H-Shares leading, South African Rand weak, gold weak, oil firm, coffee breaking down. Treasuries continue to ease.



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February 13 2019

Commentary by Eoin Treacy

RBNZ Remains On Hold And The Kiwi Strengthen

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

As was widely expected, RBNZ remained on hold at +1.75%, yet may have sounded less dovish than expected. Despite the bank being cautious, its forecasts include the official cash rate remaining at +1.75% for 2019 and implied a rate hike in 2020. The bank also expects the core inflation rate to gradually rise to 2% yoy mid-point which necessitates a continued supportive monetary policy. Analysts pointed out that the bank seems to have time at its side, albeit they expect that as the year progresses growth could undershoot the bank’s projections causing for a more dovish stance. Governor Orr in his press conference stated that the chances of a future rate cut have not increased.

Eoin Treacy's view -

Island nations generally tend to have higher interest rates because of the cost of imports, exports and isolation push up inflation. At 1.75% New Zealand’s rates are unusually low from a long-term perspective reflecting the need for a stimulus following the Christchurch earthquakes and the competitive forces of devaluation where just about every other developed economy in the world is running low interest rates.



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February 13 2019

Commentary by Eoin Treacy

Worst Korean Jobs Figures in Nine Years Undermine Moon's Agenda

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

 

South Korea’s jobless rate hit the highest level in nine years, adding to evidence that President Moon Jae-in’s minimum wage hikes are doing more to harm employment growth than they are to raise incomes.

The seasonally-adjusted unemployment rate reached 4.4 percent in January, the worst figure since January 2010, when it was 4.7 percent. The median forecast of economists was for 3.8 percent. Meanwhile, jobs growth slowed to 19,000, down from 34,000 jobs in December.

Moon’s administration hiked the minimum wage by 11 percent this year, following a 16 percent increase last year.

Eoin Treacy's view -

South Korea is the world’s 11th largest economy so it does not tend to be factored in when analysts talk about synchronised global economic expansion. However, it is often a lead indicator for the global economy because of the nation’s focus on exports like cars and consumer electronics and its proximity to China. South Korea’s slowdown in late 2017 presaged the global slowdown concerns that animated markets for much of 2018.



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February 13 2019

Commentary by Eoin Treacy

A record 7 million Americans have stopped paying their car loans, and even economists are surprised

This article by Tanza Loudenback for Business Insider may be of interest to subscribers. Here is a section:

The delinquency figure represents a new high in the auto-loan market — more than 1 million more people are behind on auto-loan payments now than at the end of 2010. More people have auto loans now than in 2010, so while the overall rate of delinquency is down, the total number of people who have fallen at least 90 days behind their payments is higher.

The Fed has been tracking the auto-loan industry for more than five years, the economists said in the blog post, and it's not the first time the group has sounded the alarm. In 2017, a quarterly report from the Fed highlighted the near doubling of the rate of delinquencies in subprime auto loans originated by auto-finance companies since 2011, Business Insider's Matt Turner reported.

Turner also reported at the time that Wall Street was expressing concern over the subprime-auto-loan market as well. Meanwhile, Business Insider's Lauren Lyons Cole reported that Americans borrowed more money to buy cars than to attend college between 2016 and 2017.

Eoin Treacy's view -

There are a couple of points that immediately come to mind on reading this article. The first is that the delinquency rate for auto loans is definitely climbing and number of auto loans outstanding has increased substantially.



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February 12 2019

Commentary by Eoin Treacy

Video commentary for January 12th 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: fears continue to abate on the trade and government shutdown fronts, Wall street firm, Amazon rebounds, Euro rebounds, Europe and China steady, H-Shares firming, oil tests the upper side of its range,  



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February 12 2019

Commentary by Eoin Treacy

Trump Open to Letting March 1 Deadline for China Tariffs Slide

This article by Saleha Mohsin and Margaret Talev for Bloomberg maty be of interest to subscribers. Here is a section:

President Donald Trump said he is open to letting a March 1 deadline to raise tariffs on Chinese products pass without penalty if the two sides are near an agreement, sending a conciliatory signal as talks to resolve a trade war between countries continue.

“If we’re close to a deal where we think we can make a real deal and it’s going to get done, I could see myself letting that slide for a little while,” Trump said to reporters during a cabinet meeting on Tuesday. “But generally speaking I’m not inclined” to delay raising tariffs, he added.

Negotiators from the world’s two largest economies began their latest round of talks this week ahead of the March 1 deadline for additional U.S. tariffs on Chinese goods. Trump has threatened to more than double the rate of tariffs on $200 billion in Chinese imports.

Eoin Treacy's view -

It would really be bad form to introduce new tariffs while productive discussions are still ongoing so it is quite likely the March 1st deadline will be exceeded. That does not guarantee a deal will be struck but it is in the interests of both parties to make some form of agreement. What is almost certain is there will be an agreement to hold further talks.



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February 12 2019

Commentary by Eoin Treacy

Overheard Aide Says May to Offer Deadline Delay

This note from Bloomberg by Alex Morales, Tim Ross, Ian Wishart and Robert Hutton may be of interest to subscribers. Here is a section:

The U.K.’s chief Brexit negotiator Olly Robbins was overheard by an ITV news reporter in a Brussels bar talking about strategy. According to the broadcaster, he said the plan is to delay the vote on the divorce deal until the final week of March, and then give Parliament a choice between a revised version of May’s deal and a very long extension of Article 50 talks.

The goal would be to scare Brexit supporters into line. A government spokesman said: “We don’t propose to comment on alleged remarks from a private conversation. The government’s focus is on securing the improvements Parliament needs to pass a deal so we leave the EU on March 29.”

Eoin Treacy's view -

Regardless of how we might personally feel about the Brexit saga, the reality is a comparatively small number of politicians are willing to support a clean break from the EU. Moreover, they are outweighed by those who will accept any deal if it avoids that particular outcome. As the manoeuvring between the Conservatives and Labour persists that imbalance is likely to be the deciding factor in the UK seeking to delay Article 50. It also increases the potential any eventual deal with the EU will be membership in all but name.



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February 12 2019

Commentary by Eoin Treacy

The Weak Spot in the Oil Market That Traders Are Missing

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

Faltering demand in Germany has preceded weak industrial data, which raised fears of a continued slowdown in Europe’s largest economy. Industrial production dropped for the fourth straight month in December, and Germany’s economy contracted in the third quarter of 2018 for the first time since 2015.

Standard Chartered analysts warn that the weakness could spread to other parts of Europe, further undermining demand for oil.

German demand makes up a minor fraction of the world’s oil consumption; the country was the 10th largest oil consumer in 2016, accounting for 2% of the global total, according to the U.S. Energy Information Administration. Since China made up 13% of oil consumption as of 2016, a drop in Chinese demand growth would likely have a comparatively larger impact.

Additionally, signs of slowing demand in other parts of Europe haven’t materialized, Mr. Horsnell noted.

Eoin Treacy's view -

Saudi Arabia continues to cut back on supply which buoyed the market today. However, the reasons for this move are not only to support prices but also in response to the slowdown in the global economy which is being led by Europe and China.



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February 12 2019

Commentary by Eoin Treacy

Our 2019 Annual Letter

Bill and Melinda Gates’ annual letter is a tonic for anyone doubting the progress people can make to help people when they want to. Here is a section:

Melinda: When economists describe the conditions under which countries prosper, one of the factors they stress is “human capital,” which is another way of saying that the future depends on young people’s access to high-quality health and education services. Health and education are the twin engines of economic growth.

If sub-Saharan Africa commits to investing in its young people, the region could double its share of the global labor force by 2050, unlocking a better life for hundreds of millions of people.

Girls’ education, especially, is among the most powerful forces on the planet. Educated girls are healthier. They are wealthier. (If all girls received 12 years of high-quality education, women’s lifetime earnings would increase by as much as $30 trillion, which is bigger than the entire U.S. economy.) And their families benefit, too. The more education a woman has, the better equipped she is to raise healthy children. In fact, UNESCO estimates that if all women in low- and middle-income countries finished secondary school, child mortality in those countries would fall by about half.

Eoin Treacy's view -

The central themes to this letter and the foundation generally are innovation can solve most of our problems and educating girls educates future families. That is a return on investment anyone can understand.



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February 11 2019

Commentary by Eoin Treacy

Video commentary for February 11th 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: Dollar firm, bonds ease, stock markets steady, gold pauses, discussion of Chinese easing, the outlook for inflation and the need for a higher reaction low before concluding the corrective phase has ended.  



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February 11 2019

Commentary by Eoin Treacy

Swiss Franc Slumps in Mini 'Flash Crash' as Japan Curse Strikes

This article by Michael G. Wilson and Ruth Carson for Bloomberg may be of interest to subscribers. Here is a section: 

The Swiss franc swooned almost 1 percent at the start of Asian trade Monday as thin liquidity caused by a Japan holiday led to a mini recurrence of the “flash crash” that roiled FX markets early last month.

The Swissie slid from 1.0004 per dollar around 7 a.m. in Tokyo to as weak as 1.0096, the lowest since November, within a matter of minutes before almost as suddenly reversing the move to trade 0.2% stronger on the day. The round trip created a trading range for Monday of almost 110 pips, about double this year’s daily average of 56.

The move was a smaller cousin of the whiplash that saw the yen jump almost 8 percent against the Australian dollar early on Jan. 3, when Japanese markets were nearing the end of a week-long New Year holiday break. A spokesman at the Swiss National Bank declined to comment on the franc’s drop on Monday.

“Lack of liquidity is a common factor in these events,” said Rodrigo Catril, a senior foreign-exchange strategist at National Australia Bank Ltd. in Sydney. “Traders and strategists now have Japan holiday calendars printed in a big font at their desk!"

Eoin Treacy's view -

Currency markets are generally very liquid so when we witness two major moves in the space of a month, both tied to illiquidity around Asian trading that tells us there is a lot of money chasing a very specific type of trade. Generally speaking it is only through the use of algorithms that these inefficiencies can be spotted and by now everyone knows to watch Yen crosses during Japanese holidays.



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February 11 2019

Commentary by Eoin Treacy

Trump Has China Where He Needs It

This article by J. Kyle Bass and Daniel Babich may be of interest to subscribers. Here is a section:

“Water keeps the boat afloat but can also sink it” is a Chinese proverb that neatly summarizes the nation’s current economic predicament. The debt that has hydrated the Chinese financial system for the past 10 years is now drowning it.

During the darkest days of the financial crisis in 2008, China launched a 4 trillion renminbi ($593 billion in today’s dollars) infrastructure plan that was accurately described as pulling the global economy out of recession. This infrastructure stimulus plan never ceased, and by 2017 the 4 trillion of spending ballooned to 14 trillion, according to China’s National Bureau of Statistics.
 
At first, China benefited from the economic reforms of the 1990s, its ascension into the World Trade Organization and the resultant inflow of foreign investment by Western companies. By 2009, the previous decade of strong growth meant wages and price levels had risen such that China was no longer a low-cost manufacturer. This made it implausible that exports could drive economic growth. Therefore, China’s central bank printed money to fund a gargantuan stimulus program. 

History tells us that growth that is funded by excessively rapid credit and money creation can lead to a variety of asset bubbles and to financial, credit and currency crises. A broad measure based on data from the People’s Bank of China and other agencies that includes both bank assets and shadow banking assets such as wealth management products, trust beneficiary rights and trust loans, places China’s total credit at $48 trillion, about 3.7 times its gross domestic product. That compares with $24 trillion for the U.S. despite China having an economy that is 37 percent smaller. China’s decade of rapid credit creation and investment spending has led to soaring property values, despite high vacancy, and low wage levels. These led to tepid export growth and a stagnating economy as the export industry lost competitiveness.

Eoin Treacy's view -

China has a mountain of debt that is concentrated in the regional banking sector and municipal governments. In attempting to wean the economy off of reliance on stimulus they have closed off successive avenues of credit ranging from interbank loans, P2P lending/shadow banking, US Dollar denominated debt. That withdrawal of credit has been one of the primary contributing factors in the underperformance of Chinese assets over the last 18 months.



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February 11 2019

Commentary by Eoin Treacy

Fear of Filing? Some Taxpayers Finding Tax Bills, Not Refunds

This article by Ben Steverman and Laura Davison for Bloomberg may be of interest to subscribers. Here is a section: 

“Most people don’t know how much they pay in taxes,” said Bob Kerr, who leads the National Association of Enrolled Agents, a trade group for tax preparers. “But the refund is the wrong
metric to measure it.”

Right or wrong, the drop in expected refunds is creating fear and anger in accountants’ waiting rooms. “Every single person” who walks in is dreading how much they’re going to owe the IRS, said CPA Gail Rosen, who heads the Martinsville, New Jersey, office of WilkinGuttenplan. “They come in and they worry.”

But telling people they paid fewer taxes throughout the year doesn’t help the sticker shock felt by filers who’ve become accustomed to getting a check, not writing one. Only about 5 percent of taxpayers -- about 7.8 million people -- are expected to pay more under the new law. But about 5 million, according to the Government Accountability Office, will find their typical tax refund replaced by a tax liability. “A lot of people are going to be surprised,” Rosen said.

Eoin Treacy's view -

Every politician knows that when it comes to policy, perception is often much more important than substance. If people had been asked whether they would prefer more money every month in lieu of receiving a chunky refund cheque they might not be nursing a surprise now. The reality is many people are likely coming out better off. However, if they had been using the refund as a saving mechanism, instead of saving monthly from their paycheques, this situation is going to feel like a tax hike.



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February 10 2019

Commentary by Eoin Treacy

February 07 2019

Commentary by Eoin Treacy

Video commentary for February 7th 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: High yield spreads have unwound their overextension relative to the trend mean. Treasuries traders are more interested in pricing in a recesssion than the looming wall of new supply, S&P500 pauses, Germany weak, oil and commodity weak but gold steady, Australia surges following strong financials results. 

Some of the topics discussed include: High yield spreads have unwound their overextension relative to the trend mean. Treasuries traders are more interested in pricing in a recesssion than the looming wall of new supply, S&P500 pauses, Germany weak, oil and commodity weak but gold steady, Australia surges following strong financials results. 

 



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February 07 2019

Commentary by Eoin Treacy

Please note - There will no commentary on Friday

I will be travelling to the UK today for David’s funeral service. That may mean the Comment of the Day and Subscriber’s audio and video will be posted at an irregular time on Thursday. There will be no commentary on Friday as I will be on the road all day, but I will attempt to record the Big Picture video at some point over the weekend.

February 07 2019

Commentary by Eoin Treacy

Musings From The Oil Patch February 5th 2019

Thanks to a subscriber for this particularly detailed edition of Allen Brooks’ report for PPHB. Here is a section oil related equities:

Eoin Treacy's view -

A link to the full report and a section from it are posted in the Subscriber's Area. 

There is a mismatch between the statements from many politicians that the future of energy is in renewables and the statements from industry insiders that confirm the profit margins from these businesses are nowhere near those of conventional fossil fuels. That virtually ensures the continued success of renewables is dependent on subsidies and/or priority offtake agreements to justify the considerable expense in building these operations.



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February 07 2019

Commentary by Eoin Treacy

India's New Central Bank Head Delivers 'Election Cut' for Modi

This article by Anirban Nag, Rahul Satija and Vrishti Beniwal for Bloomberg may be of interest to subscribers. Here is a section:

India’s new central bank chief delivered an unexpected interest rate cut, providing Prime Minister Narendra Modi with the kind of stimulus he needs to stoke economic growth in an election year.

In a sharp reversal from October, when the Reserve Bank of India took rate cuts off the table, Governor Shaktikanta Das -- who took office in December -- opened the door to more policy easing and brought growth back into the Monetary Policy Committee’s focus. That was a departure from his predecessor Urjit Patel, whose singular aim was to meet the RBI’s 4 percent inflation mandate.

Eoin Treacy's view -

Narendra Modi was the first in what has become a long line of upstart political populists which have achieved some outstanding electoral results over the last five years. Buying elections is about the most effective strategy used by politicians everywhere and India is no different. In fact, one of the primary reasons for appointing a new central banker was to ensure compliance with the wishes of the ruling party to ease heading into the election.



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February 07 2019

Commentary by Eoin Treacy

Thorburn Quits as National Australia Bank CEO After Inquiry Lashing

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

The yearlong inquiry uncovered a litany of wrongdoing across the industry, from charging dead people fees to advisers pushing customers into bad investments to meet bonus targets. National Australia staff accepted cash bribes to approve fraudulent mortgages and misled the regulator over a fees-for-no-service scandal.

“I acknowledge that the bank has sustained damage as a result of its past practices and comments in the Royal Commission’s final report,” said Thorburn, who will leave Feb. 28. “I recognize there is a desire for change.”

His replacement will have to restore customer trust in the lender and steer it through a tougher landscape of falling earnings, a sinking housing market and rising funding and compliance costs. The nation’s big-four banks also face more muscular regulators intent on punishing wrongdoers in court.

In further fallout from the inquiry, National Australia said it will delay the planned IPO of its MLC wealth management unit as fee income and commissions come under pressure.

Eoin Treacy's view -

David used to say he would not invest in banks on moral grounds. That is a clear reflection on the rather nefarious reputation of the industry to fall victim to its worst impulses to generate profits. Nevertheless, banks are important sources of credit for the economy; in every country. When they are under pressure either from reputational, regulatory or market risk their ability to create credit is inhibited and that represents a challenge for the market. The integral part they play in supplying credit also contributes to their knack of avoiding hefty fines.



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February 07 2019

Commentary by Eoin Treacy

David Fuller died on Tuesday, January 15th 2019

Thank you to everyone has written in. All your messages have been passed on to David's family and we would like to extend our deepest thanks for the upwelling of sympathy and well wishes the Collective have offered. I will continue to renew this post until February 8th. 

Eoin Treacy's view -

David Fuller died on Tuesday, January 15th.

It is with the deepest regret I inform you David passed away on the 15th at his home in Devon surrounded by family, which is where he wanted to be. He is survived by his wife Graham, and his two daughters, Grayson and Laurel.

He had been battling a heart condition for the last several years. Unfortunately, the muscle was too weak to operate on, so he had been balancing medications in an effort to keep swelling under control and succumbed on the night of Tuesday the 15th. The delay in releasing this information publicly was in an effort to give the family and I time to begin to process the loss and to have some details of when the funeral might be.

Here are those details: 

Celebrating David Fuller's life

Graham, Grayson and Laurel warmly invite you to remember & celebrate David with us at his funeral service on Friday 8 February. 

Service at 2.30pm at Rowan Chapel, North Devon Crematorium, Old Torrington Road, Barnstaple, Devon EX31 3NW.  Parking on site.

https://www.northdevon.gov.uk/media/377527/site-map-2016.pdf

Gathering from 4pm at Har-Leigh, Rectory Rise, Petrockstowe, Devon EX20 3HQ. (Please avoid parking at the house or on the road - we have use of the car park a few hundred yards further into the village, at Baxter Hall, The Village, Petrockstowe, Devon EX20 3HJ, opposite the Laurel’s Inn and adjoining the playground.)

In lieu of flowers it is requested that anyone who wishes to, makes a donation to the London Philharmonic Orchestra, which David loved, attended and supported for many years. Contact Rosie Morden on 020 7840 4212. 

Please feel free to wear whatever you feel most comfortable in, whether smart or casual, sombre or colourful. 

RSVP to Grayson please, ideally before Monday 3 February, confirming numbers. We look forward to welcoming you to the service and the gathering at the house afterwards.  Please don’t hesitate to get in touch if you have any questions about transport, accommodation or anything else. 

Details will also follow about the memorial service to be held for David in London later in the year.  

If you knew David personally and wish to attend the funeral then of course you are welcome. If you would like to contact the family just drop Sarah a line and she will forward it along.

The family, old friends and I are very eager to organize a memorial service which we envisage will take place in conjunction with the dates of one of our London venues for The Chart Seminar. 2019 will be the 50th anniversary of The Chart Seminar and I think it would be fitting to time the memorial to occur around that time, since Behavioural Technical Analysis is the timeless legacy David is leaving to the world. 

Anyone who knew David will be familiar with how committed he was to a fit and healthy lifestyle. Unfortunately, he was dealt a poor hand genetically, but it was his lifelong fitness regime which likely allowed him to persist for as long as he did.

It’s all the more ironic because he had a giant heart, with room in it for everyone he met, and it was that trait which I personally found most inspiring from our years of working together. David was always willing to give anyone the benefit of the doubt and gave many successful financial professionals their first leg-up in the industry, most particularly, at his original company Chart Analysis. 

I’m certainly one of those David championed and I owe everything I have achieved to his kind and encouraging tutelage.

In speaking with people over the last couple of weeks one sentiment came through above all others, that life might not be eternal but his legacy is. David was a pioneer in the field of behavioural analysis and was among the most noted proponents of point and figure charting. Cutting through the jargon, messiness and, often, intentional complication he travelled the world teaching financial professionals the merits of looking at markets from a behavioural perspective. That idea was iconoclastic 50 years ago but it is widely accepted as common sense today.

David’s chief insight into the rhyme and rhythm of trends probably originated from his great love of the arts. More than a few subscribers looked forward to his reviews of the London Philharmonic and the Royal Opera’s performances but it was also that regard for music which helped inspire the exploration of the consistency of trends and how that reflects the crowd.

The one thing I believe everyone who ever met David would have been impressed by was his infectious optimism. He believed in the best in people and the ability of humanity to continue to progress despite the obstacles we put in our own way. Even that is a contrarian view in the financial industry today, where we are assailed with negativity and the view the future will be worse than the past. That optimism, however, was not blind, but tempered by the belief in sustaining power of improving standards of governance. His clear belief in the ability of emerging markets to in fact emerge formed the basis for his long-time optimism on the potential for Asia to develop while never forgetting that “Governance is Everything”. 

I’m reminded of his self-styled Fullerisms which are the soundbites that encapsulated his thinking over the years. His exhortation to “pose as the judge at an international beauty contest” and to “adopt the perspective of the naturalist” are among the most memorable. The simple conclusion that a consistent trend is the most reliable continuation pattern so one should scour the world for the best trends is the rationale behind a global strategy service. Remember “a consistent trend is a trend in motion”.

The view that “markets are manmade resources for us to harvest when the timing is right” was a fringe opinion back when David was starting out and arguably still is today in many segments of the market.

David had no time for theory, he was only concerned with objective facts and believed everything valuable to know about an instrument was right there on the chart, if only we allow ourselves to see it. His ‘mistakes people make with charts’ lesson was aimed at trying to foster the ability to see what is in fact there. His exhortation that “we need to adopt the humility to accept the reality provided by the market” is an appeal to develop the emotional intelligence necessary to know ourselves. That also reminds me of another thing he used to say which “behavioural analysis of markets is not academically difficult, but it is emotionally subtle”.

David’s willingness to go against popular opinion and to air views that were truly iconoclastic is a clear example of his rare ability to be absorbed by the markets, while simultaneously sustaining a big picture perspective. That commitment to rely on the evidence provided by the charts rather than to be ruled by emotions led to some of his best calls and was a constant feature of his commentary.  

David had more than a few ways of highlighting the importance of monetary policy ranging from “Central banks are serial bubble blowers” to “the Fed has killed off more bull markets than all other factors combined”, “bull markets don’t die of old age; they are assassinated by central banks” and “monetary policy beats most other factors most of the time”. A related but opposite sentiment is “happiness in the markets is having the trend and the central bank on your side”.

The thing I miss most is our daily discussions and our shared passion for the markets and everything they represent about the prospects for improvements in the standards of living for billions of people. It is hard to express the Greek term philia satisfactorily in English but the fellow feeling we experienced for one another is not something one hopes to replace and its absence represents a void.

David led by example. He had a deep regard for our subscribers and felt a keen responsibility for their welfare. He spent long hours in the evening perfecting his written copy because for him nothing less than his best work was acceptable. He turned down numerous opportunities to manage money over the years because he believed taking responsibility for other people’s money was too onerous a burden to accept. Instead he took the revolutionary step to tell people exactly what he was doing with his own money, warts and all, so they could draw their own conclusions about to do with their money. That is still not a popular strategy in the market today.

This Service was a vocation for David and it was his fondest wish that it persist without him. It’s as much a vocation for me as it was for David and I look forward to taking it onward for the next generations.



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February 06 2019

Commentary by Eoin Treacy

Video commentary for February 6th 2019

February 06 2019

Commentary by Eoin Treacy

Announcing: Sewbots as a Service

This press release from Softwear may be of interest to subscribers. Here is a section:

SEWBOTS-as-a-Service creates immediate ROI benefits while enabling scale across retailer, brand, and manufacturer.  For a monthly fee starting at $5,000 per month per robot, a factory can add annual production capacity of up to 1M units (product dependent). This enables a manufacturer to bring on a Sewbot for just over $55/shift (based on 7 days a week and 3 shifts a day).

SEWBOTS-as-a-Service is focused on bringing scale to basic sewn good production within the country of destination (a local supply chain).  This focus allows manufacturers to move current seamstresses to premium products while creating a more reactive, reliable and sustainable textile ecosystem.

Eoin Treacy's view -

One million units probably refers to the production of pillow cases rather than t-shirts so let’s estimate that a machine can produce a garment one can actually wear at a rate of 300,000 units per year. That’s 20 cents per garment, which is still high compared to what be achieved internationally. However, it is ideal for short runs and on demand applications. It also reduces the time to customer and the requirement for a global logistics network.  



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February 06 2019

Commentary by Eoin Treacy

Email of the day on lithium battery components

Following up to your recent post on Nickel strength, this article highlights the potential for major upcoming demand in the industrial metal and is potential good news for the related Sherritt & Norilsk shares noted in your post. 

Eoin Treacy's view -

Thank you for this email which may be of interest to subscribers. Here is a section from the article:

“This means the supply of lithium, cobalt, nickel and manganese to produce the cathode for these cells, alongside graphite to produce battery anodes, needs to rapidly evolve for the 21st century," Moores testified.

Moores presented a chart based on the assumption that all of these megafactories are built and run at 100% capacity utilization.

"Under this scenario, lithium demand will increase by over eight times, graphite anode by over seven times, nickel by a massive 19 times, and cobalt demand will rise four-fold, which takes into account the industry trend of reducing cobalt usage in a battery," Moores testified.



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February 06 2019

Commentary by Eoin Treacy

Iron Ore Rises Near Two-Year High as Vale Disruption Spreads

This article by Jake Lloyd-Smith and Lynn Thomasson for Bloomberg may be of interest to subscribers. Here is a section:

As Vale’s troubles spread, analysts have said iron ore could keep heading higher and drive up costs for steelmakers. Commonwealth Bank of Australia predicted prices could rise above $100, adding that the move would be temporary if Vale successfully challenged the court order.

“Iron ore prices are likely to continue trending higher, as production is clearly being impacted above and beyond just the roughly 8 million tons per year from the Feijao mine, where the tragedy first occurred,” Jeremy Sussman, an analyst with Clarksons Platou Securities, said in an email.
Shares of other iron ore producers have rallied in response to higher iron ore prices. For example, Rio Tinto Group is on a 10-day streak of gains, with the shares up 15 percent this year.  Ferrexpo Plc has notched a 26 percent advance since the Vale dam breach.
 

Eoin Treacy's view -

The chances are that the damage done to Brazilian supply is temporary in nature and Vale will get back to close to full production at is other mining facilities relatively quickly. The broader point, however, is that the market is relatively tight following a quiet couple of years since the early 2016 rally.

 



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February 05 2019

Commentary by Eoin Treacy

Video commentary for February 5th 2019

February 05 2019

Commentary by Eoin Treacy

Morning Tack February 5th 2019

Eoin Treacy's view -

A link to the full report and a section from it are posted in the Subscriber's Area. 

Since the dawn of the first industrial revolution 250 years ago there has been a clear correlation between the energy intensity of economies and economic growth. That is certainly still true in many emerging markets. However, when we look at highly developed economies like the USA and parts of Europe the energy intensity of the economy is declining, but data intensity is rising.



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February 05 2019

Commentary by Eoin Treacy

How Bezos Lost Out to Billionaire Ambani in Poll-Bound India

This article by P R Sanjai and Saritha Rai for Bloomberg may be of interest to subscribers. Here is a section:

Modi’s Bharatiya Janata Party is still licking its wounds after being trounced in three key recent state polls and a year ago fighting an unexpectedly close contest in Gujarat -- Modi’s home state. Among small businesses, which are a traditional support base, the government’s popularity has been eroded by 2016’s surprise cash ban and the subsequent chaotic roll out of a new sales tax.

The rules now bar Amazon and Flipkart Online Services Pvt. Ltd. from owning inventory, and require them to treat all vendors equally, throttling discounts and exclusives -- a huge advantage to homegrown companies including Ambani’s new venture. His Reliance Industries Ltd., which owns India’s largest retail chain and third-biggest telecom network, has the potential to evolve into a local version of Amazon or Alibaba Group Holding Ltd., UBS AG said last month.

“Whether serendipitous or not, India’s tightened regulatory regime for online retailers is a huge win for Reliance with its new retail ambitions,” said Sanchit Vir Gogia, chief executive officer of consultancy Greyhound Research. “This could be a field leveler for them.”
 

Eoin Treacy's view -

Under Mukesh Ambani, Reliance industries has morphed from a focus on oil refining to become India’s primary provider of broadband, a major retail force and is now embarking on becoming the online retailer of choice for India’s burgeoning young community.

The failure of his brother, Anil Ambani’s Reliance Communications to gain traction following a bad bet on fibre optics looks likely to further concentrate control of the broadband network in Reliance Industries’ hands.



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February 05 2019

Commentary by Eoin Treacy

Email of the day on Modern Monetary Theory

Thank you for mentioning MMT in the service

The most of us agree that applied MMT not necessarily leads to more growth (especially because in the reality part of the government spending is wasted in less than transparent submission processes, bureaucracy and corruption, hence it does not flow 100% into the economy process) but to more debt for future generations

However, it gives a useful framework for investors to better understand our modern world of FIAT currencies. A world in which classic economical doctrine and orthodoxy as I (we) learnt at university (pure monetarism, Fisher Theory and Schumpeterist “creative destruction”) fails to explain the modern world and the political influence

As you point out populism gels perfectly with MMT. And as long as populism is on the rise, we should maybe devote more time to understand MMT and try to profit as investors.

Interesting are the aspects related to the effect of interest rate hikes by the FED which MMT claims are inflationary and not disinflationary because hikes add income to the private sector that holds the government securities. In the same way they claim QT add interest bearing securities to the economy (via the banking system) and are also not disinflationary.

Also interesting is the stress on government spending as a source of Aggregate Demand and not just on the Debt with which this demand is financed. So national debt is the “private sector” asset.

I don’t know if I am a correct but from the perspective of an investor MMT is insofar useful as it opens a new perspective and try to explain markets behavior by looking at what is happening.

For example, from an MMT perspective we should continue have a strong economy as long as government spending is on the rise (i.e. the corporate sector profits and equities are a buy), the USD should weaken the more debt is added and the more the FED tries to stem inflation by hiking rates and engaging in QT (latter is counterintuitive) because it adds income to the system. Likewise, Bonds are a sell because of rising inflation while gold and hard assets are a buy.

Actually, if we look at reality and at countries that control their own currency that involve in profligate fiscal policies, they all tend to have depreciating currencies, high interest rates and a rising national debt. To me Turkey, Argentina, Venezuela come to mind first. However even the US under Trump is moving in this direction. Hence the USD bearishness (the US have still a big advantage though i.e. that they are reserve currency)

On the other end countries with a tight fiscal discipline, that apply QE and ZIRP or NIRP tend to have deflationary economies, zero or negative yields and strong currencies. Examples are Switzerland and the EU (where the leading countries impose deflationary austerity and real deflation on the weakest Union members). Indeed, notwithstanding all the problems in some members of the EU, the EUR has been extremely resilient over the years.

What do you think?

Eoin Treacy's view -

Thank you for this wide ranging and thought-provoking email. I agree with most of the points you make although I believe the reason for the Euro’s stability has to do with a lack of supply rather than inherent strength in the domestic Eurozone economy. The biggest issue right now is there is a clear trend towards profligate spending, fiscal stimulus, deficit spending or however you might wish to describe it. Modern Monetary Theory is the academic rationale for this spending which is being latched onto by politicians. In ages past this was referred to as devaluing the currency to point where it causes a rebellion from the bond market. 



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February 04 2019

Commentary by Eoin Treacy

Video commentary for February 4th 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: FANG stocks steadying, nickel firm, commodity currencies and industrial resources at important points of potenital resistance, gold and oil steady, Dollar steady particularly against the Yen, European bank underperformance hampers the Euro.. 



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February 04 2019

Commentary by Eoin Treacy

Alphabet 4Q Operating Margin Down YOY; Shares Fall

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

Alphabet 4Q operating margin +21% compared to +24% YOY.

4Q revenue ex-TAC $31.84 billion, estimate $31.33 billion (range $30.35 billion to $31.81 billion) (Bloomberg data)
4Q paid clicks on Google properties +66%
4Q cost-per-click on Google properties -29%
4Q EPS $12.77
4Q operating income $8.20 billion
4Q capital expenditure $7.08 billion, estimate $5.66 billion (range $4.74 billion to $6.33 billion) (BD)
4Q Google advertising revenue $32.64 billion
4Q Google properties revenues $27.02 billion
4Q Google other revenue $6.49 billion
4Q Other Bets revenue $154 million
4Q other bets operating loss $1.33 billion
Shares down 3.5% post-market

Eoin Treacy's view -

When one of the most consistent trends in the world becomes inconsistent, we have no choice but to sit up and pay attention. In the run-up from 2009 Alphabet/Google never pulled back by more than $100. The reactions were all of different durations but the staircase step sequence uptrend was undeniable. Additionally, it paused continually at big round numbers like $600, $800, $1000 and $1200. Investors had come to expect a $100 pullback to be followed by a $200 rally. That sequence ended in 2018 when it pulled back first by $200 and then by $300. That represented a significant loss of consistency for what had been among the most consistent trends in the world.



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February 04 2019

Commentary by Eoin Treacy

Nickel Extends '19 Surge as Supply Concerns Mount

This note from Bloomberg may eb of interest to subscribers. Here is a section:

Nickel prices rose Friday, extending gains from the best January in more than two decades, amid signs stockpiles would decline further. A robust U.S. jobs report eclipsed weak Chinese economic data to bolster the industrial-metal demand outlook.

Nickel holdings in Shanghai Futures Exchange warehouses fell for a fifth week to the lowest since June 2015, according to data from the bourse. Nickel prices climbed this week amid speculation a fatal dam disaster at one of Vale SA’s Brazilian iron-ore operations could have a ripple effect on other metals supplied by the miner. U.S. stocks climbed Friday morning on the better-than-expected jobs report and signs of progress in trade talks.

Eoin Treacy's view -

Nickel was the best performing industrial metal until the middle of last year when it succumbed to global growth fears and the wider malaise in the industrial metals complex. It subsequently gave up the majority of its advance before finding support in December with the wider stock market.



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February 04 2019

Commentary by Eoin Treacy

Foxconn Says It Will Move Forward With Wisconsin Plant After Conversation with Trump

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

On Wednesday, a top aide to Mr. Gou said high labor and production costs in the U.S. would make it difficult for Foxconn to compete with rivals if it manufactured LCD displays in Wisconsin. Louis Woo, a special assistant to Mr. Gou, said Wednesday that roughly three-quarters of Foxconn’s Wisconsin jobs would be in research, development and design, instead of manufacturing.

The back and forth came after the Taiwanese contract manufacturer fell short of a job-creation target in Wisconsin last year to obtain tax credits, amid a tight U.S. labor market. The Wall Street Journal reported in November that Foxconn considering bringing in engineers from China to Wisconsin as it struggled to find personnel locally.

Wisconsin state lawmakers lauded Foxconn’s announcement Friday. “We want to thank President Trump for his commitment to Wisconsin workers—our state has an ally in the White House,” said state Assembly Speaker Robin Vos and state Senate Majority Leader Scott Fitzgerald, both Republicans.

Eoin Treacy's view -

The performance of the share epitomises just how exposed the company is to the deteriorating relationship between the USA and China, hence the willingness to persist with building its factory in Wisconsin.  



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February 01 2019

Commentary by Eoin Treacy

February 01 2019

Commentary by Eoin Treacy

China Meets Foreign Investors' Demands With Latest Rule Changes

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

China’s authorities have given international investors an early Spring Festival gift: ready access to almost all areas of the country’s capital markets.

Proposed changes announced late Thursday as part of a slew of new regulations include letting offshore funds trade more types of futures and options. Just days before the biggest holiday in the Chinese calendar, regulators also had something for domestic investors, including scrapping an automatic margin call threshold, allowing more types of collateral for certain loans and lowering capital requirements for riskier assets.

The measures targeting overseas firms will greatly expand the scope of the Qualified Foreign Institutional Investor program, one of the key channels into China, highlighting the authorities’ determination to open up their financial system and meet demands from international institutions for broader access.

The moves will give foreigners the same range of investment options as local players, said Yang Hai, an analyst at Kaiyuan Securities Co.

“Institutions looking to hedge and even short-sell Chinese stocks are likely to enter the market in future,” as a result of the changes, said Yang. “I think it has something to do with the China-U.S. trade negotiations, but it’s also about the financial opening promise.”

Eoin Treacy's view -

China is willing to open up its financial system to overseas investment but not its technology, communications, online retail or other sectors. There is a clear reason for that delineation. The risks to China’s economy reside within the financial system. The most basic premise of insurance is to pool risk. By giving overseas investors access to the financial system the risk from overleverage is shared and therefore the risk attached to the domestic market is reduced. The same rationale does not apply to other sectors which is why opening up continues to remain slow.



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February 01 2019

Commentary by Eoin Treacy

Modi Woos Voters With $13 Billion Largesse Before India Election

This article by Abhijit Roy Chowdhury, Bibhudatta Pradhan, Shruti Srivastava and Siddhartha Singh for Bloomberg may be of interest to subscribers. Here is a section:

The government will allocate 750 billion-rupee ($10.6 billion) a year for the cash plan for about 120 million farmers and give taxpayers 185 billion rupees of relief in the year to March 2020, Finance Minister Piyush Goyal said in his budget speech in New Delhi on Friday.

In the process, the government will widen its fiscal deficit targets for the current financial year and next to 3.4 percent of gross domestic product and borrow more. Bonds and the rupee fell on news of the debt plans, while the tax cuts helped to buoy stocks.

“Ongoing slippage from the government’s budgeted fiscal deficit targets over the past two years, and our expectation that the government will face challenges meeting its target again this coming fiscal year does not bode well for medium term fiscal consolidation,” said Gene Fang, an associate managing director at Moody’s Investors Service. “We view this continued slippage as credit negative for the sovereign.”

Eoin Treacy's view -

Narendra Modi made history by getting an outright majority for the BJP at the last election and was the first person from a low caste to become Prime Minister. The big challenge heading into the election this year will how to hold onto those gains. The answer so far has been to emphasise Hindu nationalism and to boost spending. It was inevitable Modi would try to buy the election and the budget is the clearest signal how much he is willing to spend.



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February 01 2019

Commentary by Eoin Treacy

Wirecard Shares Drop After New Report on Law Firm's Findings

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

Wirecard AG shares fell as much as 16 percent Friday after a report that a law firm found evidence
indicating alleged forgery at the German payment company’s Singapore office.

An external law firm commissioned by Wirecard found evidence indicating “serious offenses of forgery and/or of falsification of accounts,” the Financial Times wrote Friday, citing the law firm’s report. The Rajah & Tann lawyers identified potential civil and criminal violations in Singapore, Hong Kong, India, Malaysia, and Germany, the newspaper said.

A Wirecard spokesman denied the report in an emailed statement. Wirecard earlier this week denied claims made in a story by the Financial Times that alleged executive fraud originating at the Singapore office, fueling concerns about the fast-growing company’s business practices that knocked as much as 25 percent off its value on Wednesday.

Eoin Treacy's view -

Wirecard has been one of Europe’s few true technology success stories over the last few years so it is quite disappointing that it has succumbed to a worrying trend of German corporate malfeasance. This is the latest in a long line of governance problems at some of Germany’s largest companies and puts another dent in the country’s façade of corporate excellence.



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January 31 2019

Commentary by Eoin Treacy

Video commentary for January 31st 2019

January 31 2019

Commentary by Eoin Treacy

Everything you wanted to know about MMT (but were afraid to ask)

Thanks to Kevin Muir for this post from his themacrotourist.com blog which is relevant to the current discussion on Fed policy, fiscal policy and political jockeying. Here is a section:

If I am correct, I suspect we will see many Democrat candidates (perhaps all?) adopt MMT as a tenant of their platform. And here is a crazy thought for you - what if Trump beats them to it?

I have long argued that eventually we will hit a period where governments will spend and Central Banks will facilitate their deficits. MMT provides academic justification of where we all know we are headed anyway.

In one of the interviews I watched with Professor Kelton, she said that the idea of deficits being funded with bond issuance is purely a self-imposed limitation. It’s required by law, but in reality, it doesn’t need to be done. The law can be changed. The government could simply spend $100 while only taking in $90 and directly writing cheques against the Federal Reserve to pay for the $10.

Think about how inflationary this will be! But isn’t that the whole goal?

I have always chuckled at the idea that governments were powerless to create inflation. If they want to create inflation - they can. There just needs to be the political will. And it looks like that will has finally arrived.

Eoin Treacy's view -

Left-wing politicians in the USA are jockeying for who can announce the largest tax on the “super-rich”. Last week the media were discussing an upper band of 70%, today Bernie Sanders is suggesting a 77% tax and the re-imposition of a heavy estate tax on fortunes over $3.5million. Meanwhile more and more politicians are adopting President Trump’s mantra that deficits don’t matter.



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January 31 2019

Commentary by Eoin Treacy

Email of the day on gold and UK listed gold miners

With gold sustaining its position above $1300, and also holding its own against the other major currencies, as you have highlighted in recent audios, can you please comment on the UK listed gold miners and their potential for some improvement p.s. the service has its finger on the market pulse, and the written and audio delivery is spot on.

Eoin Treacy's view -

Thank you for your kind words and this email which I believe will be of interest to subscribers. Barrick Gold acquired Randgold Resources recently so that removes one of the more attractive gold miners from the universe of UK listed miners. Of course, the UK is one of the most active markets for resources shares so there are plenty of others to choose from.



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January 31 2019

Commentary by Eoin Treacy

BAT Upgraded to Overweight at Piper; Risks Look Priced In

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

Philip Morris’s patent lawsuit against British American Tobacco in Japan, which is seeking a sales injunction of BAT’s Glo heated tobacco product, is still a risk, but BAT has “several methods of defense” and the earnings impact would probably be modest, Piper Jaffray analyst Michael Lavery writes in a note.

Risk on possible U.S. menthol cigarette ban looks priced in and Piper doesn’t see any operational impact “for years and years”

Also notes that consumers can adapt

Piper doesn’t see any risk to dividend growth, allaying concerns from investors; says BAT’s cash flows don’t seem to be at risk in a way that would hurt the dividend

Upgraded to overweight from neutral; PT kept at GBP30

NOTE: BAT shares down 51% in last 12 months vs 19% drop for Imperial Brands, 31% decline for Philip Morris and 35% fall for Altria

Eoin Treacy's view -

The tobacco sector is not for everyone but it is inherently defensive considering they are selling an addictive product and therefore have reliable cashflows. The performance of defensive sectors is something that is important to monitor in the latter stages of a cyclical bull market because they typically tend to be depressed by disinterest when growth stocks are outperforming but turn to outperformance when investors start to value security.



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January 30 2019

Commentary by Eoin Treacy

January 29 2019

Commentary by Eoin Treacy

Video commentary for January 29th 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: gold and precious metals resurgent, S&P500 pausing in anticipation of trade war and monetary policy news, industrial metal miners turning to ourperformance, Treasuries and investment grade bonds are rallying. oil prices firm, ASEAN pauses, 



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January 29 2019

Commentary by Eoin Treacy

Iron Ore Market Shudders as Dam Disaster Spurs Supply Concerns

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

Iron ore investors are attempting to gauge the fallout from the dam burst at one of Vale SA’s mines, amid concerns the disaster will have ramifications beyond the affected operation in Brazil that could tighten the market in the short term and offset weakness from a slowdown in China.

Futures on the Dalian Commodity Exchange extended gains on Tuesday to head for the highest close in more than a year, after the benchmark price for immediate delivery surged to $78.80 a ton on Monday, the highest level since March. Shares of Australia-based miners rallied, with gains for BHP Group, Rio Tinto Group and Fortescue Metals Group Ltd.

In Brazil, “it seems likely that there will be an extensive increase in safety tests over the coming weeks and months,” Capital Economics Ltd. said in a note, raising its end of first quarter forecast to $75 a ton. “These tests may highlight other vulnerabilities in the system that could lead to temporary
cutbacks at one or more mines until the issues are addressed.”

Eoin Treacy's view -

This is not the first time a dam breach has impacted Brazilian supply and led to loss of life. In fact, BHP and Vale have only just reached a settlement with the communities affected by the Samarco accident in 2015. 



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January 29 2019

Commentary by Eoin Treacy

Mnuchin Signals Chance to End China Tariff War Ahead of Talks

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

U.S. Treasury Secretary Steven Mnuchin said that if China presents enough trade concessions to President Donald Trump, there is a chance that the administration may seek to lift all tariffs. “Everything is on the table,” Mnuchin said early Tuesday during an interview on Fox Business News “Mornings With Maria” program. The Treasury chief is set to meet with top Chinese officials in Washington on Wednesday and Thursday alongside U.S. Trade Representative Robert Lighthizer about a month before the U.S. is set to escalate the trade war with China with fresh tariffs.

Trump and China’s Xi Jinping gave their officials until March 1 to work out a deal on “structural changes” to China’s economic model. If they fail, Trump has promised to raise the tariff rate on $200 billion in Chinese imports to 25 percent from 10 percent. The collapse of talks would dash hopes of a lasting truce that would remove one of the darkest clouds hanging over the world economy.

 

Eoin Treacy's view -

Considering what is at stake in terms of economic growth for both China and the USA and the impact a deterioration in relations would have on an already edgy stock market, at least a commitment to continue talking is likely. It would be unreasonable to raise tariffs further while that is ongoing.



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January 29 2019

Commentary by Eoin Treacy

Gold: 32 trading days and counting

Thanks to a subscriber for this report which highlights increasing speculative interest in gold and growing competition to become the biggest bull. Here is a section:

Eoin Treacy's view -

A link to the full report and a section from it are posted in the Subscriber's Area. 

There are lots of reasons to own gold but one I think is more relevant than others right now. The governments of the world are getting ready to spend their way out of trouble and historically that has meant debasing their currencies. Gold cannot simply be lent into existence and is therefore a supply inelasticity asset compared to the rapacious appetite for debasement the world’s governments represent.



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January 28 2019

Commentary by Eoin Treacy

Video commentary for January 28th 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 still trending down and pressuring NVidia, Is the market so steady because we now have evidence of a Powell Put? Gold steady, Wall Street rebounds off its low, Dollar eases, China quiet, Brazil pauses, India weak and led lower by its financials, oil at the lower side of a short-term range. 



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January 28 2019

Commentary by Eoin Treacy

Fed Officials Weigh Earlier-Than-Expected End to Bond Portfolio Runoff

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

The latest discussions indicate the runoff could end much sooner.

The shrinking portfolio faced new scrutiny last month after some market commentators and President Trump blamed it for increasing market volatility. While many Fed officials don’t see much evidence to support those claims, the balance sheet is nevertheless getting increased attention inside the central bank.

Some officials have contemplated whether Mr. Powell or other top officials, short of announcing a complete road map for when the portfolio wind-down would end, could provide an update.

As officials reach agreement on their plans, “we may be able to say upfront, ‘Hey, the destination is going to be ‘X,’” said Minneapolis Fed President Neel Kashkari in a Jan. 17 interview. “Or we might say, ‘Hey, this is the plan [for how] we’re going to go to explore where that destination is.’”

Mr. Powell will hold a press conference after next week’s meeting. Whether he provides such a road map will depend on the progress of discussions at the meeting. Mr. Powell said this month he doesn’t think the Fed’s portfolio changes are a major culprit in recent volatility but that the central bank would change its drawdown, if officials came to a different conclusion.

Eoin Treacy's view -

The primary indices were volatile today following negative earnings from both Caterpillar and Nvidia. The first is largely due to fears about the Chinese economy, the latter probably more to do with declining interest in bitcoin mining. However, the much bigger question is monetary policy



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January 28 2019

Commentary by Eoin Treacy

Industrial Metals & Precious Metals

Thanks to a subscriber for this report from Eight Capital which may be of interest. Here is a section on battery related resources:

Eoin Treacy's view -

A link to the full report and a section from its are posted in the Subscriber's Area.

There are very clear logical reasons for why lithium demand should continue to trend higher for the foreseeable future and they were equally relevant six years ago when it was a truly supply constrained market. Since then there has been a great deal of investment in additional lithium recovery projects with the result supply has increased substantially.



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January 28 2019

Commentary by Eoin Treacy

GMO Quarterly Letter Q4 2018

Thanks to a subscriber for ths report which may be of interest. Here is a section on the outlook for 2019:

Eoin Treacy's view -

A link to the full report and a section from it are posted in the Subscriber's Area.

There are two particularly pervasive views among institutional investors right now. The first is that emerging markets are due a period of outperformance and are cheap on relative value measures, particularly versus the USA. The second is the Dollar is going down in a big way from here, which of course would boost the prospects for emerging market currencies



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January 25 2019

Commentary by Eoin Treacy

January 25 2019

Commentary by Eoin Treacy

Email of the day on reliable dividend companies

Your copy on global pay-out ride is coming back to earth is timely. The well-regarded fund manager Neil Woodford has given Imperial Brands a significant 8% asset allocation in his flagship income fund. Imperial pays a hefty dividend, growing at 10% rate. It generates good cash, but has huge BBB+ debt outstanding. It has come down quite a bit from its peak, but it’s valued at 17 times earning which may roll back to the 10 times earnings it had around 2000. Is there a case for holding Imperial Brands as primary source for dividends for the long run? I wonder if you could review some good dividend paying companies, net cash global companies with strong balance sheets, that will not get caught in the pending investment grade bond crunch. Thanks!

Eoin Treacy's view -

Thank you for this question which I’m sure is something a number of subscribers are pondering. More than half of all investment grade bonds are rated BBB and approximately $600 billion are up for refinancing this year. Against a background of tightening liquidity conditions that represents a risk some companies are going to have issues sourcing funding at the highly attractive rates which have been on offer for the last decade.
 



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January 25 2019

Commentary by Eoin Treacy

Email of the day on the Rand and governance:

Hello Eoin, First of all I would just like to say I have no problem with the way you have organised your video commentaries. I find them very perceptive and thought provoking. I would hazard a guess that 95% of your subscribers are of the same opinion.

On your comments on South Africa, having spent the past 16 years here, I would advise investors not to hold their breath as regards the new president Cyril Ramaphosa instituting much in the way of improved governance here. Corruption in this country is all pervasive and is now penetrating certain personnel in the judiciary. I know this from various contacts I have with regards to the Rhino poaching problem. The Zuma faction still wields huge influence within the ANC. The black economic empowerment policy has led to totally unsuitable and unqualified people being placed in key positions both in government and in the private sector. Given the current state of the world economy, I would indeed be surprised if the ZAR is not the currency to lose most in value among the emerging markets over the next year.

Eoin Treacy's view -

Thank you for this informative email and your on the ground perspective from South Africa.

The simple conclusion reached by investors is Ramaphosa is better than Zuma which is good news. The monumental challenge of tackling corruption is a long-term challenge and if the trend toward deterioration can be allayed that can be considered progress. It is too early to conclude whether the new administration can make progress on that front but I think everyone is aware of just how difficult that could be.



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January 25 2019

Commentary by Eoin Treacy

Email of the day on gold and key reversals

Would today's precious metal charts indicate weekly key reversals?

Eoin Treacy's view -

Thank you for this question. An upside weekly key reversal occurs when the price moves to a new low intraweek but rallies to close above the high of the previous week. If that were the only consideration then this week would fulfil those characteristics. However, for a reversal to occur you need first to have had a decline and gold has been ranging between $1280 and $1300for the last four weeks. Therefore, this is a clear upward dynamic and, technically speaking, an outside week rather than a reversal which reasserts demand dominance.



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January 25 2019

Commentary by Eoin Treacy

Tencent Scores Twin Game Approvals After Months-Long Freeze

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

China’s gaming industry, which generates more than $30 billion of revenue, was hammered in 2018 after regulators froze approvals for new games, preventing companies from making money off their hits. That spurred Tencent’s first profit drop in at least a decade and helped wipe about $200 billion off its market value at one point. Regulators are now working through a backlog of thousands of games that accumulated as a result -- more than 350 have been cleared since December.

“Although the news flow on game approvals remains positive, we view the most important games in the pipeline are PUBG and Fortnite,” Mizuho analysts led by James Lee wrote. “These games are likely in the back of the queue due to political tension with Korea and the U.S.”

Eoin Treacy's view -

Computer games are engrossing but more importantly the trend of online play creates diverse communities of people that identify with one another outside of racial, class, gender, age or other stereotypes. The banning of the Nei Han Duan Zi jokes site last April was initiated because it offered an outlet for people who laugh at authority and it had become a forum for nonconfirmism. The banning of new computer games was less about protecting childrens’ eyesight and more about controlling social interaction. 



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January 24 2019

Commentary by Eoin Treacy

Video commentary for January 24th 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: Eurozone comparison with Japan and potential for ECB QE3, stock markets generally steady with semiconductorsr and homebuilders doing well, continued demand for Treasuries, the Dollar and gold is steady, Governance is Everything.



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January 24 2019

Commentary by Eoin Treacy

Mario Draghi Is Watching His ECB Rate Hike Slip Over the Horizon

This article by Brian Swint and Carolynn Look for Bloomberg may be of interest to subscribers. Here is a section:

With the economy threatened by trade tensions, European politics and temporary factors such as a slump in German car production, “we’ll probably have to wait until the June meeting before the dust has settled,” said Carsten Brzeski, an economist at ING. “However, it will require a very benign outcome on all these risk factors to see Draghi hiking rates before he leaves office.”

UBS Group AG President Axel Weber, a former ECB policy maker and Bundesbank president, said at the World Economic Forum in Davos this week that the ECB has already missed its chance to normalize policy in this cycle.

Eoin Treacy's view -

Mario Draghi is unlikely to raise rates during his tenure at the ECB and his successors are going to have equally grim prospects of returning to normal monetary policy



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January 24 2019

Commentary by Eoin Treacy

Wilbur Ross on the trade Negotiations

This quote may be of interest to subscribers:

...We're miles and miles from getting a resolution and that shouldn't be too surprising. Trade is complicated. There are lots and lots of issues, not just how many soybeans and how much LNG but even more importantly, structural reforms that we really think are needed in the Chinese economy. And then, even more important than that, enforcement mechanisms and penalties for failure to adhere to whatever we agree to.

People shouldn't think the events of next week will be the solution to all of the issues between the United States and China. It's too complicated a topic. Too many issues. That's different from saying we won't get to a deal. I think there's a fair chance we do get to a deal.

Eoin Treacy's view -

How confident is China in its claims to be a global superpower? That’s the only real question in measuring how likely they are to agree a meaningful trade deal with the USA.



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January 24 2019

Commentary by Eoin Treacy

The Investor Seth Klarman, in a Rare Interview, Offers a Warning. Davos Should Listen

Thanks to a subscriber for this article by Evan Osnos for The New Yorker may be of interest.

In his view, companies that operate with integrity rarely get enough credit for it from investors or the press. “You have people who are princes, who have good values, who treat people right. We don’t tend to pay a lot of attention; we don’t get a lot of stories about them. The surveys of the most admired businesses—how much do those evolve over time based on your market cap? What’s in vogue and in favor is ‘admired.’ ” He has watched, with chagrin, as Wall Street firms pocketed billions in fees and commissions by steering clients to bad deals that they dismiss as “O.P.M.”—Other People’s Money. “Talking about clients as though they are to be taken advantage of rather than to be honored, and respected, and cherished, as your lifeblood—it’s disgusting, but you see that in individual behavior.” He added, “When one person does that, it’s bad for all the rest of us.”

He told me, “I don’t think it’s too late for business leaders to start doing the right thing for their employees, their clients, and their communities.” And if they don’t? It could lead to regulations that, in his mind, would go too far in constraining corporate behavior. In his speech, he said, “When capitalism goes unchecked and unexamined, and management is seduced by a narrow and myopic perspective, the pendulum can quickly swing in directions where capitalism’s benefits are discounted, and its flaws exaggerated.” Klarman hopes that politicians in Washington will hear his message, but, more to the point, he wants fellow-practitioners to hear him. “If every businessperson, or enough businesspeople, don’t act as stewards of more than just the bottom line, somebody’s going to come along and do it for them.

Eoin Treacy's view -

The rising tide of progressives, socialists, unions, social justice advocates and totalitarians are all clambering for the mantle of biggest redistributionist in a crowded field. That’s not a trend individual to a single country, it’s a global phenomenon.



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January 23 2019

Commentary by Eoin Treacy

Video commentary for January 23rd 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: stock markets quiet with positive earnings counter balancing trade and growth fears. Central Bank assets tick higher, 2019 outlook for Wall Street, ASEAN markets continue to outperform, crude oil and gold quiet, Bonds steady, discussion of risks in China.



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January 23 2019

Commentary by Eoin Treacy

The $1.8 Trillion Global Payout Ride Is Coming Back to Earth

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

In the new era of prudence, shareholders who’ve enjoyed fatter and fatter dividend checks can rest easy no longer.

IHS Markit Ltd. last week projected a “significant slowdown” in global dividend growth this year, at 5.9 percent, totaling $1.8 trillion, according to a bottom-up analysis of over 9,500 firms. Thanks in part to mounting geopolitical risks, that’s a shift from the 14.3 percent boom in 2018 and 9.4 percent the year before.

The business-information provider reckons about 11 percent of firms will announce a dividend cut this year -- an uptick of almost 100 names relative to 2018.

“I believe that dividends of leveraged companies can suffer more,” said Willem Sels, a London-based chief market strategist at HSBC Private Bank. “The excessive focus on the shareholder
value at the expense of bondholder value will be more muted.”

Eoin Treacy's view -

2017 represented the best of all possible worlds for investors. The tax cuts had been passed and investors got busy pricing that into the market. There was money for everything from buybacks to dividend increases and it was being paid for with tax savings, repatriated profits from overseas and fresh debt.



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January 23 2019

Commentary by Eoin Treacy

China Risks Real Hard Landing This Time

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

In other words, in the past year, banking-system liquidity has risen by about a fifth, but net credit growth has fallen by about a third. The reason is clear. Shadow finance outstanding fell by a full 10% in 2018—by far the sharpest contraction on record.

Regulators realize they have a problem. They are now trotting out new central bank lending facilities to goad banks into extending credit to small enterprises. And the economy still has some cushions. Infrastructure investment is rising again. Consumers are struggling, but less than headlines would suggest.

Both of these bulwarks aren’t as strong as a couple of years ago—consumers are more indebted and a separate campaign against off-balance sheet infrastructure fundraising is still crimping investment. If the property market falls apart, China will be in serious trouble.

China’s inefficient financial system has long needed surgery. By excising the shadow banking system without a proper transplant to replace it, regulators risk killing the patient.

Eoin Treacy's view -

China’s headline government debt is comparatively small by international standards. However, its private sector debt is larger than the USA’s government debt. By first cutting off access to funding from the state banks, then cutting off shadow banking, then banning US Dollar loans, successive windows for funding have limited access of businesses to capital.



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January 23 2019

Commentary by Eoin Treacy

Lego: The Toy of Smart Investors

This report by Victoria Dobrynskaya and Julia Kishilova may be of interest to subscribers and answers the question why Lego prices have been the subject of asset price inflation.  

It is posted without further comment but here is a section:

We study a new alternative investment asset - LEGO sets. A huge secondary market for LEGO sets with tens of thousands of transactions per day has developed since the turn of the century. We find that LEGO investments outperform large stocks, bonds, gold and other alternative investments, yielding the average return of at least 11% (8% in real terms) in the sample period 1987-2015. Small and huge sets, as well as seasonal, architectural and movie-based sets, deliver higher returns. LEGO returns are not exposed to market, value, momentum and volatility risk factors, but have a unit exposure to the size factor, suggesting that this asset performs similarly to small stocks. A positive multifactor alpha of 4-5%, a Sharpe ratio of 0.4, a positive return skewness and a low exposure to standard risk factors make the LEGO toy an attractive alternative investment with a good diversification potential.

Eoin Treacy's view -

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January 23 2019

Commentary by Eoin Treacy

Musings from the Oil Patch January 23rd 2019

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

Eoin Treacy's view -

A link to the full report and a section from it is posted in the Subscriber's Area. 

OPEC’s supply cuts and US shale’s continued growth are already in the market. The question of how fast global growth will be, and therefore the demand outlook, is a movable feast but the trajectory of interest rates and the trade war are obviously important factors.



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January 22 2019

Commentary by Eoin Treacy

Video commentary for January 22nd 2019

January 22 2019

Commentary by Eoin Treacy

Stocks Tumble on Growing Trade-Tension Pessimism

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

U.S. stocks extended the biggest drop in almost three weeks as rising pessimism that trade tensions with
China will persist sent technology and multinational companies tumbling. Treasuries climbed, oil fell and the yen strengthened.

The S&P 500 sank to session lows after the Financial Times reported that the U.S. turned down an offer of preparatory discussions. Chipmakers plunged more than 3 percent, with every member of the Philadelphia Semiconductor Index in the red.

Caterpillar and DowDuPont led declines in the Dow Jones Industrial Average of more than 400 points. “Investors obviously are still a little bit edgy and therefore we would expect periods of volatility to continue,” said Mark Hackett, chief of investment research at Nationwide Funds Group, which manages $60 billion. “As the headlines continue to get more nerve wracking with regards to a global slowdown and trade wars and government shutdowns, it’s easy to spook investors, but we think those are temporary versus permanent.”

Eoin Treacy's view -

It has been a constant refrain in the Subscriber’s video and audio over the last week that a short-term overbought condition has replaced a short-term oversold condition so the risk of at least consolidation is high.



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January 22 2019

Commentary by Eoin Treacy

Email of the day on global liquidity conditions

You have been emphasising the importance of liquidity as a determinant of equity market performance.  You have asked, “What is the source of liquidity to support future market gains?”.

Lawrence Fuller, publisher of “The Portfolio Architect” has provided a thorough analysis of the present unwinding of global liquidity and equity performance. On Page 4 there is a diagram showing a direct correlation in January 2019. (see attached).  I cannot locate the source of the liquidity data.

Yardeni Research Inc, January 2019 edition of its “Global Economic Briefing: Central Bank Balance Sheets” on Page 7 may be lagging but it only partially reflects the picture presented by Mr. Fuller.

Are you able to help in any way?

Eoin Treacy's view -

Thank you for the attached reports and this question which the whole world is asking. I have to say I find it gratifying more people are using my chart of total central bank assets. I first created the measure on July 10th 2014 and immediately wished I had included it in Crowd Money.



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January 22 2019

Commentary by Eoin Treacy

Email of the day on UK shale gas

I have just discovered the following page from the UK Gov regarding shale gas exploration/production.

I am reminded by how President Obama tried to block shale oil and shale gas production in the US with worries about water pollution, earth tremors and many other PC excuses. Luckily corporate America ignored him and the US is now totally energy self-sufficient. I hope that British companies have the same attitude and can deliver what would be a real game changing energy situation for the UK. Oil is now circa 18% cheaper in the US than the global price, combined with their corporate tax rate, gives them a massive global advantage. With the UK being so gas dependent, I really hope we can overcome these political shenanigans and give the UK the industrial and consumer advantage that the US currently enjoy. 

Eoin Treacy's view -

The UK became a net energy importer in 2006. It’s hard not to draw a conclusion that the difficulties the country has experience since, from falling living standards, reduced competitiveness in manufacturing, the calls for disintegration of the union and Brexit were all exacerbated by the fact the UK used to be a major exporter and now sees its imports of oil and natural gas rise every year. There is absolutely no doubt the UK needs an energy policy that makes independence a priority. The trouble is there is not much sign of urgency to tackle this issue.



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January 22 2019

Commentary by Eoin Treacy

Email of the day on disenfranchisement:

business was based on, out of a whim? E.g. who told them to get out of the custom union? How dare them taking that prerogative?

The vote against the Deal is a gentle reminder to those people that the prerogative is with the parliament, thank you very much. I think this was another reason for the GBP to be up... a reestablishment of some normality in governance. Conversely, hijacking the country out of the EU seeking a no deal to deprive the parliament of its authority must be avoided at all costs, needless to say that; in that case I am sure the GBP would fall hard, and the citizens represented in that parliament (or investors relying on that governance) would be greatly impoverished.

Was it for gross incompetence or because of a conscious design to move towards an illiberal regime, I maintain that the referendum and the attitude of the government until now has represented a very substantial breach of trust in UK institutions. It will take a much more competent political establishment and some time to mend the damage that has been done.

Finally, I would be very wary of someone claiming the will of the people of Norway was overridden: the country is a perfectly well functioning parliamentary democracy. And it is in parliaments were the will of the people ought to be represented. This is a lesson learnt several times in human history, and usually the hard way. Let’s please never, not even for one moment, forget that.

Eoin Treacy's view -

Thank you for this email which I’m sure will be of interest.

If you have a vote and your side wins you feel gratified. If your side loses you understandably feel disappointed. If you lose you can campaign for the decision to be overturned. That is your right in a liberal democracy and that right needs to be protected. However, it would not be correct to say that because you lost your have been disenfranchised.

On the other hand, if you win and the decision is not then acted upon then I believe you have just cause to feel disenfranchised since your right to self determination has not been upheld.

There are legitimate arguments about whether first past the post is the right way of dealing with such a momentous issue as whether to bring about the biggest economy and political change in decades. There are also legitimate arguments about the veracity of the claims made by both sides during the campaign. However, both of these issues while serious are the equivalent of semantics when we consider the right of self-determination. I don’t remember anyone complaining about first past the post before the referendum. I agree we need much higher quality of political institutions but that is totally reliant on people voting. If we look at the trend of political discourse however, I suspect it is going to get worse before it gets better.  

I’m a believer in referenda because Parliament is not wholly reliable in getting the best people into the best positions. If it really were a true reflection of the will of the people there would be no such thing as safe seats. However, citizens have the right to a fair and honest debate on the pros and cons of any question.



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January 21 2019

Commentary by Eoin Treacy

Video commentary for January 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: London home prices, palladium is susceptible to mean reversion, China at a crossroads, major indices have replaced short-term oversold conditions with overbought conditions, Treasuries steady and oil steady



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January 21 2019

Commentary by Eoin Treacy

Asking Prices for London Homes Slump to Lowest Since 2015

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

 

London home asking prices fell to their weakest level in 3 1/2-years in January as sellers spooked by
Brexit held off putting their properties up for sale.

Asking prices in the capital slipped 1.5 percent from December to 593,972 pounds ($765,000), the lowest level since August 2015, according to Rightmove. New listings in the first two weeks of the year were 10 percent lower than in 2018 as owners were deterred by the cost of moving and concern about the political backdrop, the property website said.

After years of outsize gains in home values, London and its surrounding areas have so far borne the brunt of Brexit, with a lack of clarity over the future relationship with Europe causing both households and firms to hold off on investment decisions.

Listing prices in the capital have declined from a peak of almost 650,000 pounds in May 2016, the month before Britons voted to leave the European Union.

Nationally, values rose 0.4 percent to 298,734 pounds, with the biggest gains in the north of England. Rightmove’s data is compiled from 70,068 properties put on sale by agents across the country from Dec. 9 to Jan. 12.

A separate report by Acadata, which incorporates all house transactions, showed national home prices rose 0.6 percent in the year to December. Excluding London and the south east, values climbed 1.4 percent.

Eoin Treacy's view -

There was another news story today on how Citadel Investment Management’s CEO Ken Griffin paid, a discounted £95 million, for 3 Carlton Gardens which is about half a mile of open park land from Buckingham Palace.



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January 21 2019

Commentary by Eoin Treacy

Brazil Is Back in the Game, New Leader Will Tell Davos Investors

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

“Brazil is a hot topic for foreign investors,” said Fabio Alperowitch, portfolio manager and founder of Fama Investimentos, a Sao Paulo-based fund manager. “But no one will change their opinion just because of his speech. Investors’ level of skepticism with emerging markets is still high.”

On his long flight to Davos, Bolsonaro will carry the most crucial plan to tackle a budget deficit that hovers around 7 percent of gross domestic product -- a draft proposal to cut pension outlays and save as much as 1 trillion reais over 10 years. Whether he will attract enough congressional support for the bill when lawmakers reconvene in February will be a make or break moment for his administration.

Eoin Treacy's view -

Bolsonaro will not have to compete for airtime at Davos this year. However, as the above article suggests the big test of whether the enthusiasm which greeted his administration is warranted will be in how successful he is in pushing through reform and combatting corruption.



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January 21 2019

Commentary by Eoin Treacy

The Future Is Now for LNG as Derivatives Trading Takes Off

This article by Stephen Stapczynski and Dan Murtaugh for Bloomberg may be of interest to subscribers. Here is a section:

About 27 percent of LNG was sold under spot- or short-term deals in 2017, up from 12 percent in 2003, according to the International Group of LNG Importers.

That just increased the need for a reliable price benchmark and liquid futures market for hedging. Regional gas benchmarks such as Louisiana’s Henry Hub, the U.K.’s National Balancing Point or Dutch Title Transfer Facility reflect local fundamentals and therefore may not be ideal proxies for the global LNG trade, where the vast majority of sales are in Asia.

So that’s where LNG futures come in. JKM “is much more trusted, much more accurate, and the
paper market is helping make it be more responsive to price movements,” Gordon D Waters, the global head of LNG at ENGIE, said by phone on Friday. JKM contracts could reach the level of NBP or TTF “most likely within the next 5 years.” NBP and TTF volumes both averaged about 37,000 contracts a day in 2018.

There’s still a long way to go. ICE JKM is still much smaller than other global oil and gas benchmarks. Exchange open interest, or the amount of outstanding bets at the end of every day, accounted for about $2 billion at the end of 2018, compared with $36 billion for U.S. natural gas and more than $100 billion for Brent oil, according to Bloomberg estimates.

Eoin Treacy's view -

It is only a matter of time before natural gas is a futures traded international market. LNG infrastructure continues to be built out. Canada in particular needs another export avenue while Australia is also now a major exporter, as is the USA. Meanwhile Europe, Japan and much of Asia are major demand growth centres. It makes sense this is going to be a major market.  



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January 18 2019

Commentary by Eoin Treacy

January 18 2019

Commentary by Eoin Treacy

Transcript for January 17th

Eoin Treacy's view -

Here is a link to both the unedited and edited versions of the Subscriber’s Video from January 17th.

This has been  an educative but incredibly time-consuming experiment and I’m afraid it is not within our capabilities to persist.

What I am attempting to do is articulate the three most important points within the first five minutes of the broadcasts. Additionally, it is worth remembering that there is a lot of cross pollination between the content covered in the videos and the written commentary.


 



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January 18 2019

Commentary by Eoin Treacy

Elections in 2019

Eoin Treacy's view -

I’ve been discussing the rise of populism, for two years, as a revolt against the status quo which is leading to a lurch to the fringes of political opinion. The clarion call for people everywhere demanding change is “What about me?” The only way governments know how to placate disaffected people is to give them more money. That is why we have seen so many countries pursuing fiscal stimulus/deficit spending measures.



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January 18 2019

Commentary by Eoin Treacy

Billionaire Zell Buys Gold for First Time in Bet on Tight Supply

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

For the first time in my life, I bought gold because it is a good hedge,” Sam Zell, the founder of Equity Group Investments, said in a Bloomberg TV interview. “Supply is shrinking and that is going to have a positive impact on the price.”

Spending on new mines began to dry up after prices of the metal tumbled from a record in 2011, clouding the outlook for production. With gold still down by almost a third from its peak, the biggest miners are just looking at buying their competitors in a bid to bolster their output pipeline.

“The amount of capital being put into new gold mines is a most nonexistent,” Zell said. “All of the money is being used to buy up rivals.”

Eoin Treacy's view -

Tightening global liquidity and the slowdown in China is restricting the capital available to the mining sector. Additionally, prices for many commodities have been under pressure this year so it is more difficult for miners to make the case to lenders that they should be afforded more leeway. That has led to reduced spending on exploration and development. The fact that when prices are high and liquidity available banks line up to extend credit to miners contributes to the cyclicality of the sector.



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January 18 2019

Commentary by Eoin Treacy

China Is Said to Offer Path to Eliminate U.S. Trade Imbalance

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

China has offered to go on a six-year buying spree to ramp up imports from the U.S., in a move that would reconfigure the relationship between the world’s two largest economies, according to officials familiar with the negotiations.

By increasing annual goods imports from the U.S. by a combined value of more than $1 trillion, China would seek to reduce its trade surplus -- which last year stood at $323 billion -- to zero by 2024, one of the people said. The officials asked not to be named as the discussions aren’t public.

The offer, made during talks in Beijing earlier this month, was met with skepticism by U.S. negotiators who nonetheless asked the Chinese to do even better, demanding that the imbalance be cleared in the next two years, the people said.

Economists who’ve studied the trade relationship argue it would be hard to eliminate the gap, which they say is sustained in large part by U.S. demand for Chinese products.

Eoin Treacy's view -

On the face of it this is good news because it at least suggests the USA and China are engaging in productive discussions and some initiatives to end of the impasse are being discussed. The stock market continues to unwind the overextension relative to the trend mean as it prices in optimism that a deal with be struck.



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January 17 2019

Commentary by Eoin Treacy

Video commentary for January 17th 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: short-term bought condition replaces short-term oversold conditions. what does a higher reaction low look like, palladium accelerating higher, Pound firms and Brexit commentary, China's global ambitions, Emerging markets remain steady, Dollar steady, gold steady, high yield spreads continue to contract.



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January 17 2019

Commentary by Eoin Treacy

Email of the day on reading the Brexit tealeaves

It seems to me that the little move up in GBP and some "local" plays (banks, home builders) reflects higher chances of the UK remaining in the EU custom union.

Eoin Treacy's view -

The Telegraph is reporting Philip Hammond told business leaders Article 50, which is the bill to remove the UK from the EU, will be extended and even be shelved in coming days. Meanwhile, close colleagues of the Prime Minister are floating the idea of a Norwegian solution which is effectively EU membership in all but name.

The Labour Party are still hoping for an election, (of course they are), but are calling for a potential hard exit to be taken off the table and Jeremy Corbyn said today he could be willing to consider another referendum. The Cabinet office estimates a fresh referendum could take 14 months to organise. That’s seems rather long but, in any case, this saga is not going to end soon.



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January 17 2019

Commentary by Eoin Treacy

Palladium Reaches Another Record as JPMorgan Sees More Upside

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

 

Palladium rose as much as 5.4 percent to $1,439.29 an ounce. It traded at $1,394.97 by 1:39 p.m. in New York. At the Comex exchange, palladium for March delivery climbed 2.3 percent.

Investors are shrugging off signs of automotive weakness in key markets, with annual car sales in Europe falling for the first time since 2013. China also declined last year and sales in the U.S. barely rose.

The metal will remain in a supply deficit for an eighth straight year, according to Metals Focus Ltd. Palladium’s status as a byproduct of mines in South Africa and Russia means output levels aren’t adjustable to meet short-term demand, despite the surging price.

“Investors appear to be ignoring the fact that weak sales figures have been reported for all major auto markets in recent days,” Commerzbank analysts including Daniel Briesemann said in a note. “Instead, they are seeing news such as the planned widening of a strike to include the platinum mines of a major South African gold and platinum producer as being a good reason to buy.”

Eoin Treacy's view -

Palladium has been rallying impressively while the other precious metals have been side-lined in terms of investor interest for the last couple of years. The collapse of platinum demand following the diesel scandal made the case for more gasoline vehicles and a demand growth cycle for palladium. However, that is not a sufficient reason for the scale of the move in palladium.



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January 17 2019

Commentary by Eoin Treacy

Defense Intelligence Agency Chinese Military Power Report

This report on China’s military readiness may be of interest to subscribers. Here is a section:

China’s double-digit economic growth has slowed recently, but it served to fund several successive defense modernization Five-Year Plans. As international concern over Beijing’s human rights policies stymied the PLA’s search for ever more sophisticated technologies, China shifted funds and efforts to acquiring technology by any means available. Domestic laws forced foreign partners of Chinese-based joint ventures to release their technology in exchange for entry into China’s lucrative market, and China has used other means to secure needed technology and expertise. The result of this multifaceted approach to technology acquisition is a PLA on the verge of fielding some of the most modern weapon systems in the world. In some areas, it already leads the world.

Chinese leaders characterize China’s long-term military modernization program as essential to achieving great power status. Indeed, China is building a robust, lethal force with capabilities spanning the air, maritime, space and information domains which will enable China to impose its will in the region. As it continues to grow in strength and confidence, our nation’s leaders will face a China insistent on having a greater voice in global interactions, which at times may be antithetical to U.S. interests. With a deeper understanding of the military might behind Chinese economic and diplomatic efforts, we can provide our own national political, economic, and military leaders the widest range of options for choosing when to counter, when to encourage, and when to join with China in actions around the world.

Eoin Treacy's view -

China is building aircraft carriers and a daisy chain of military bases from the Persian Gulf back home. No one would engage in that kind of expense unless they wish to project power and protect their interests internationally.



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January 17 2019

Commentary by Eoin Treacy

January 16th transcript of the Subscriber's video

Eoin Treacy's view -

Here is a link to the automated transcript. Unfortunately, due to time constraints we haven’t managed to get the edited version ready for today but I will have it for tomorrow.

Sometimes one can’t help but get a giggle out of the automated transcript. This appeared in the fourth line today “dead people are increasingly turning ever more bullish”. I’m not at all sure how it inserted the word dead before people but you never know it may be the universe telling us a short-term overbought condition has replaced a short-term oversold condition.



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January 16 2019

Commentary by Eoin Treacy

Video commentary for January 16th 2019

Eoin Treacy's view -

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

Some of the topcis discussed include: consistency of the Dow Jones' chart, bank earnings, investors seem to have adopted a wait and see approach to Brexit, individual emerging markets outperforming, China quiet, Tin and palladium clearly outperforming while aluminum is trending down, Dollar remains firm, differrence between now and 2016 is the Fed is tightening. discussion of the origins of populism.



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January 16 2019

Commentary by Eoin Treacy

Pound Holds Steady as U.K. Government Wins No-Confidence

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

With May successfully seeing off the immediate threat to her government, she now has to turn her attention to plan B, which could involve bringing the divorce deal back to another vote. She invited rival parties to start talks following the Wednesday vote.

“The pound fallout should be contained as the prime minister is safe from a leadership contest,” Kamal Sharma, head of Group-of-10 currency strategy at Bank of America, wrote in a note before the confidence vote. “There is scope for sizable pound appreciation once the political risk premium is priced out.”

The U.K. currency has weakened about 14 percent since the result of the June 2016 Brexit referendum, and analysts in a Bloomberg survey see scope for a rally to $1.34 if a divorce deal is finally agreed on.

Eoin Treacy's view -

There are three primary interested parties in Theresa May’s new appetite for cross party talks. Some Conservatives want no deal but the majority do want a deal. The Labour Party wants to be in power so it will not endorse a fresh referendum while there is any chance the government will fall; triggering a general election which it hopes to win. The smaller Liberal Democrats, Scottish Nationalists and Plaid Cymru want a second referendum which they believe the Remain side will win. Meanwhile Theresa May probably still wants her deal to make its way through Parliament.



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January 16 2019

Commentary by Eoin Treacy

Morning Tack - "Valuations?!"

Thanks to a subscriber for this report by Jeffrey Saut for Raymond James 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. .

In last night’s video I shared this graphic of where the major markets are trading relative to their historic P/Es since 1990. The depth of the pullback seen to date has led to a P/E contraction which has contributed to demand as bargain hunters stepped in.



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January 16 2019

Commentary by Eoin Treacy

BofA and Goldman Crush Earnings, Lifting Bank Sector Stocks

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

Earnings per share beat on higher fees and lower taxes, Morgan Stanley analyst Betsy Graseck wrote in a note, with the bank’s net interest margin beat showcasing that BofA’s “asset sensitivity is coming through.” Trading fees and investment banking topped her estimates as well, and she sees BofA generating “strong positive operating leverage, even in a weak revenue environment” -- which isn’t priced into its stock.

Goldman’s fourth-quarter net revenue, investment banking revenue and equities sales and trading revenue all topped estimates. The bank’s release highlighted the highest net revenues in financial advisory since 2007.

Goldman’s results weren’t all positive, though, as FICC and equities sales and trading revenue missed, its investment banking transaction backlog dropped from the end of the third quarter while questions about 1MDB will likely hang over the bank.

JMP’s Devin Ryan said in a note that “relief” for Goldman’s shares is “warranted following disproportionate pressure over the past year.” He also sees Goldman’s slide deck presentation with more detail around the quarter as likely to be “much appreciated by investors and viewed as a sign that the firm is moving toward a greater level of transparency.” He’s listening for color on 1MDB on the call, which started at 9:30am, though he’s “not expecting much.” CEO David Solomon has so far said, “We apologize to the Malaysian people.”

Eoin Treacy's view -

The S&P500 Banks Index dropped abruptly in December and has rebounded to unwind about two thirds of the decline. It is now within striking distance of the trend mean which represents the first area of potential resistance. A higher reaction low and sustained move above the trend mean will be required to question the overall downward bias. There is no doubt the relief rally seen to date is encouraging but a great deal of technical damage has been done and even in a best-case scenario it will take time to repair.



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January 16 2019

Commentary by Eoin Treacy

Transcript of the Subscriber's video on January 15th

Eoin Treacy's view -

There was a lot of talk about yesterday and the video ran to almost 40 minutes. That has resulted in a transcript of more than 5000 words which is about double the transcript for the 14th.

Here is a link to the unedited version and the edited version. Sarah has kindly volunteered to edit the transcript. Here is her feedback from doing so today.

That has taken considerably longer to do today. A good few hours.

The problems are:

The software doesn’t always put a full stop or comma in and without punctuation, it’s going to be a difficult read.

It also doesn’t recognise the difference between Rupee and Rupiah, which might be corrected, but if it doesn’t “learn” to recognise it, it could be a confusing read for subscribers!

It doesn’t recognise context so there/their/they’re pretty much all need correcting. Also, we’ve/we’re.

I imagine it’s almost impossible to speak as you do, without a script, and not um and ah, but when you do, the software inserts “at” so you can imagine how many there were to correct.

I am actively trying to educate the system to adapt to my speech but with little success yet. I plan on pursuing this experiment till the end of the week and then we will make a judgement on whether to persist. However, if it takes multiple hours to edit a transcript, that is simply not something we are able to justify.

 



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January 15 2019

Commentary by Eoin Treacy

Video commentary January 15th 2018

Eoin Treacy's view -

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

Some of the topics discussed include: Brexit deal voted down, Pound steady, China fiscal stimulus beginning,, gold appreciatating in more currencies, A lot of bad news has been priced into valuations, Big Tech rallies but still has work to do to repair technical damage, oil steady, cannabis shares rebounding, biotech and cloud companies outperforming, cybersecurity is a market perform, Treasuries continue to unwind short-term overbought condition. 



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January 15 2019

Commentary by Eoin Treacy

How a Second Brexit Referendum Would Work: the Question, When It Will Happen And Who Would Win

This article by Harry Yorke for the Telegraph may be of interest to subscribers. Here is a section:

Who would win?

Ever since Mrs May unveiled her Chequers proposal in July, the polls have all shifted towards Remain.

Whilst Brexiteers continue to invest all of their energy railing against the Prime Minister’s deal, the campaign for a so-called ‘People’s Vote’ has been gaining momentum.

According to a recent YouGov poll, which ranks Remain, May’s deal, and no deal in order of first preferences on a constituency by constituency basis, staying in the European Union now commands a lead in 600 of 632 constituencies surveyed.

But when the various options are polled in a head-to-head scenario, known as the Condorcet method, the results are very different.

They are as follows:

Whilst these various scenarios all indicate a shift towards Remain, the results are by no means decisive.

It is also worth remembering that Remain enjoyed a comfortable lead in the polls throughout the 2016 referendum and into polling day.

Eoin Treacy's view -

An historic defeat for a sitting prime minister would normally result in her ouster. A vote of no confidence will be held tomorrow but, even then, the Labour Party will need defections from the Conservative Party to force an election and that looks unlikely. The only clear conclusion is the UK is very unlikely to leave the EU at the end of March, regardless of what the outcome of political machinations over the next 48 hours will be. There simply isn’t enough time to push through an alternative, let alone a General Election or two-tiered referendum before the March 31st deadline. 



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January 15 2019

Commentary by Eoin Treacy

China Presses on With Tax-Cut Strategy as Lending Stabilizes

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

China’s government is turning increasingly to tax cuts as the first line of defense against a slowing economy, as credit data released Tuesday showed some vindication of its gradual stimulus strategy.

Further evidence of the dominance of fiscal measures emerged, as senior policy officials pledged that tax reductions on a “larger scale” are in the pipeline, amid worsening output and trade data. JPMorgan Chase & Co. economists estimate the total impact will be around 2 trillion yuan ($300 billion), or 1.2 percent of gross domestic product.

That’s a departure from the infrastructure binges coupled with massive monetary stimulus that were deployed in the aftermath of global financial crisis. Beijing is trying to put a floor under the economic slowdown without another debt blowout, with some success: Credit growth exceeded expectations in December, and the central bank has managed to curb riskier shadow banking throughout the year.

"At the moment the room for monetary policies is limited, and fiscal policies such as tax cuts are the crucial tool," said Cui Li, head of macro research at CCB International Holdings Ltd. in Hong Kong. The high leverage and property prices have limited the chances of massive monetary stimulus, she said.

"But as a pro-growth measure, tax cuts will take effects at a slower pace compared to infrastructure binges," she said.

Eoin Treacy's view -

The influence of the consumer on China’s economic future is helping to shape the policy response to the slowdown. Consumer spending now makes up a lot more of the economy than it did a decade ago. Meanwhile the consumer is considerably less levered than the corporate and semi-state sectors, so fiscal easing is less likely to create a disruptive bubble in the short term.



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January 15 2019

Commentary by Eoin Treacy

Gold hits an all-time high in 72 currencies

Thanks to a subscriber for this article which leads with a sensational headline that stretches the truth somewhat. However, there is no doubt gold is firming in an increasing number of currencies. Here is a section:

Using the dollar gold price, as most of us do, has disguised what is actually quite a powerful bull market. If my memory serves me right, we saw the same phenomenon - a stealth rally in minor currencies - ahead of the last major gold bull run (in dollars) in the late 1990’s. Arguably this may be a very good leading indicator.

Faulty yardsticks also takes us onto wealth management. Measuring our net worth in local currencies, we might be rather pleased with ourselves - smug even. However we chose to ignore the fact that the yardstick is not a constant … it is shrinking and sometimes really quite fast. It’s the natural corrosive effect of inflation. Knowing this, governments give us a gauge for yardstick shrinkage to use such as RPI or CPI, to reassure you that the shrinkage is minimal… and then lie about it.  

There are alternatives.

In the US, the Chapwood Index is highly regarded as it reflects the true cost-of-living increase. Plainly and simply, the Index shows that incomes can’t keep up with expenses, and it explains why people increasingly have to turn to the government for entitlements to bail them out. The basis of the Index is fully open to scrutiny and if correct suggests Americans have been losing roughly 10% of their wealth each year since 2014. Half of it gone. This compares with the official government figure of 1.9%. Ronald Reagan called inflation “the thief in the night” and it is built for times just as this. It gives the appearance of being wealthy (maintaining high nominal values) while eroding your actual position - which manifests itself in far higher costs on the other side. 

Interestingly, gold has seen an average year-on-year gain of about 10% compounded since 2000 - off-setting those real losses - which reaffirms in our mind that it continues as a reliable yardstick against which to measure costs or indeed wealth. In short, gold has maintained what economists call “purchasing power parity” for millennia. So not only is it an excellent yardstick - its actually quite a useful thing to own - especially if you fear wealth erosion. If you haven’t already read this, you must - see :Jastram’s Golden Constant

Many crises invariably start with stealth inflation and then follows currency weakness - so gold gets expensive and then it blows out significantly higher in your local currency. Then you realise that the lifeboat has sailed … the choo-choo train has left the station. 

Eoin Treacy's view -

Governments’ fetish for fiscal stimulus is once again being engaged on a global basis and that is raising the same old questions about the integrity of their currencies and the loss of purchasing power associated with efforts to inflate the debt away. Gold is not making new highs against all of the currencies mentioned in this article but it is certainly firming against many of them.



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