Investment Themes - General

Search all article by their themes/tags in the search area
below for example “Energy” or “Technology”.

Search Results

Found 1000 results in General
May 11 2020

Commentary by Eoin Treacy

Bet on the V; ERP on Track; Inflation Coming?

Thanks to a subscriber for this report from Mike Wilson at Morgan Stanley 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. 

Gold’s relative strength over the last year, coupled with a tight labour market were already starting to raise interest in inflation hedges a year ago. Then came the truce in the trade war, the halting of the Fed’s rate hikes, the repo liquidity crisis and finally the coronavirus recession. That has once again raised the spectre of deflation.



This section continues in the Subscriber's Area. Back to top
May 11 2020

Commentary by Eoin Treacy

Japan Stocks Rise on Optimism Over Restart of Economic Activity

This article by Min Jeong Lee and Ayaka Maki for Bloomberg may be of interest to subscribers. Here is a section:

“We can’t let our guards down, but the numbers of new infection cases are falling, allowing people to formulate some sort of outlook, which is being welcomed by the market,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. “The market is moving based on a scenario that the June quarter will be a bottom for the economy, followed by a recovery from the September quarter.”

Optimism that economic stimulus measures will help cushion the blow from the virus also buoyed sentiment. The government and the ruling party aim to finalize plans for a second supplementary budget for fiscal 2020 during the current Diet session, the Yomiuri reported.

“The 2 trillion yen being touted is sizable and the government is taking action faster than expected,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute.

 

Eoin Treacy's view -

The easing of lockdowns will allow the economies of the world to get off their knees and hopefully will allow some rationality to come back into public discourse. That’s not a guarantee by any means considering the emotionality in how coverage of the coronavirus is being reported. The equivalent of $200 billion in government supports is not all that large relative to what has been provided by other countries but it is supportive for asset prices.



This section continues in the Subscriber's Area. Back to top
May 11 2020

Commentary by Eoin Treacy

Sudden Bitcoin Crash Sparks Serious Coinbase Warning

This article by Billy Bambrough for Forbes may be of interest to subscribers. Here is a section:

The bitcoin price lost more than 10% in a matter of minutes yesterday evening, dropping to lows of $8,100 on the Luxembourg-based Bitstamp exchange before rebounding to settle around $8,600.

However, an outage on major U.S. bitcoin and crypto exchange Coinbase just after bitcoin's price plummet left many users unable to trade—the second time in less than a month Coinbase has buckled under stress.

"How many times do we have to say take your bitcoin off of Coinbase if you want to have access to it," Rachel Siegel, a bitcoin and cryptocurrency content creator, warned via Twitter, adding, "this is not the first time Coinbase has gone down and it surely will not be the last."

"Coinbase acting like the NYSE circuit breaking," joked Jason Williams, cofounder and partner at bitcoin and crypto hedge fund Morgan Creek Digital, suggesting that Coinbase outages could dampen spikes and dips in the bitcoin price.

Eoin Treacy's view -

The challenge in an illiquid market is it is often much easier to buy than sell. That is particularly true when it comes to the cryptocurrency markets because transactions times are slow at the best of times. During a high-volume selling event exchanges are not equipped to deal with the volume. That’s not a bug, it’s a feature of the market.



This section continues in the Subscriber's Area. Back to top
May 07 2020

Commentary by Eoin Treacy

May 07 2020

Commentary by Eoin Treacy

May 07 2020

Commentary by Eoin Treacy

Market Keeps Distancing Itself From Economy

This article by Mohamed A. El-Erian for Bloomberg echoes a common sentiment among institutional investors. Here is a section:

The rate of labor force dislocation, albeit distressing, appears to be moderating. The weekly 3 million jobless claims number is the lowest in the last seven weeks and less than half the worst level.

The report highlights the urgent and important policy priorities of dealing both with the implications of such a terrible shock to jobs and with ensuring that short-term problems don’t become long-term ones that are much harder to solve.

With markets focusing on the improvement in the “second derivative,” that is a reduction in the rate of labor force dislocation, U.S. stocks rose. This widens an already considerable decoupling from the real economy and will fuel the debates on Wall Street versus Main Street, companies versus people and the well-off versus the marginalized. 

Eoin Treacy's view -

Didi’s CEO was quoted today stating the company has recovered to about 70% of the number of rides taken before the Chinese lockdown began. That’s an impressive rebound, particularly as we look at what the trajectory of recovery will be for countries only beginning to ease lockdowns today.



This section continues in the Subscriber's Area. Back to top
May 07 2020

Commentary by Eoin Treacy

The Changing Value of Money

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

Then came World War I when warring countries ran enormous deficits that were funded by central banks’ printing and lending of money.  During the war years gold was international money as international credit was lacking because trust was lacking.  Then the war ended, and a new monetary order was created with gold and the winning countries’ currencies, which were tied to it, at the center of that new monetary order. 

Still, in 1919-22 the printing of money and devaluations of several European currencies were required as an extension of the debt crises of those most indebted, especially those that lost World War I.  As shown this led to the total extinction of the German mark and German mark debt in the 1920-23 period and big devaluations in other countries’ currencies including the winners of the war that also had debts that had to be devalued to create a new start.

With the debt, domestic political, and international geopolitical restructurings done, the 1920s was a boom period, which became a bubble that burst in 1929.

In 1930-45, 1) when the debt bubble burst that required central banks to print money and devalue it, and then 2) when the war debts had to increase to fund the war that required more printing of money and more devaluations. 

At the end of the war, in 1944-45, the new monetary system that linked the dollar to gold and other currencies to the dollar was created, and the currencies and debts of Germany, Japan, Italy, and China (and a number of other countries) were quickly and totally destroyed while those of most winners of the war were slowly but still substantially depreciated.  That monetary system stayed in place until the late 1960s. 

Eoin Treacy's view -

The purchasing power of fiat currencies is rapidly being debased. That is helping to support the nominal prices of stocks, property, gold and bonds. The $4 trillion surge in the total assets of central banks over the last couple of months has supported prices for just about all asset classes. The best performing assets have been those that have historically benefitted from deploying free abundant capital to fuel growth since 2009.



This section continues in the Subscriber's Area. Back to top
May 07 2020

Commentary by Eoin Treacy

Email of the day on the need for lockdowns

This is an interesting review of Neil Ferguson's pandemic model.  If true, it obviously raises some interesting questions about UK strategy. But the biggest issue for me is the way it exposes the gulf between technology specialists and political judgement. Our politicians may be ill-equipped to make good decisions in a world when so much is dependent on good data. 

Thanks for great audios recently - much appreciated.

Eoin Treacy's view -

Thank you for this educative article and I am delighted you are enjoying the service. For the many new subscribers who have joined our ranks over the last month, the daily audio/video and the Big Picture Friday version are the most expedient ways of accessing where my current thinking is residing.

 

Debate about the efficacy of the lockdowns is predictably ramping up. That’s to be expected. The pressure on businesses, personal finances and cabin fever lend credibility to anyone who wishes to defy quarantine. For example, Mrs. Treacy’s tennis circle have been discussing how to break lockdown orders to go and view the bioluminescence at the local beaches. https://www.ecowatch.com/bioluminescent-waves-california-2645933919.html?rebelltitem=3#rebelltitem3 Cabin fever is clearly taking a toll on everyone. Here is a particularly relevant section from the article:

 

 

Conclusions. All papers based on this code should be retracted immediately. Imperial’s modelling efforts should be reset with a new team that isn’t under Professor Ferguson, and which has a commitment to replicable results with published code from day one. 

On a personal level, I’d go further and suggest that all academic epidemiology be defunded. This sort of work is best done by the insurance sector. Insurers employ modellers and data scientists, but also employ managers whose job is to decide whether a model is accurate enough for real world usage and professional software engineers to ensure model software is properly tested, understandable and so on. Academic efforts don’t have these people, and the results speak for themselves.

My identity. Sue Denim isn’t a real person (read it out). I’ve chosen to remain anonymous partly because of the intense fighting that surrounds lockdown, but there’s also a deeper reason. This situation has come about due to rampant credentialism and I’m tired of it. As the widespread dismay by programmers demonstrates, if anyone in SAGE or the Government had shown the code to a working software engineer, they happened to know, alarm bells would have been rung immediately. Instead, the Government is dominated by academics who apparently felt unable to question anything done by a fellow professor. Meanwhile, average citizens like myself are told we should never question “expertise”. Although I’ve proven my Google employment to Toby, this mentality is damaging and needs to end: please, evaluate the claims I’ve made for yourself, or ask a programmer you know and trust to evaluate them for you.



This section continues in the Subscriber's Area. Back to top
May 06 2020

Commentary by Eoin Treacy

May 06 2020

Commentary by Eoin Treacy

Fund Manager's Diary May 2020

Thanks to Iain Little for these two editions of his letter. The first is a somewhat tongue-in-cheek look at fat targets for future UK taxes. The second contains a fitting reminder of David's contribution to the field of behavioural analysis and a short summary of my thinking on markets over the last while. Here is a section from the former:

This Corona Lockdown has cost the UK government a whole chunk of change, about GBP 300bn.  The cupboard’s going to be pretty bare for a dose of pre-electoral stimulus in 2023.  The Resolution Foundation says that job subsidies could cost GBP 40bn a quarter; that’s GBP 160bn a year.  But there’s a simple solution and it’ll come with a cheer from the voters that really matter to you: the working class, pro-Brexit, patriotic northerners you won over to the Tory cause in 2019.  They’re the ones you need to win the 2024 General Election.

The key is the 2 million owners of UK second homes, worth GBP 1 trillion.  They’re in the Top 5% by income and wealth, and they’ve benefitted from the second mortgage, second home boom of the last 30 years.  That’s one trillion quid to be harvested and it simply can’t be moved.  OK, wealth tax is unknown in the UK, but people have gotten pretty used to it here on the Continent.

How about a patriotic 5% “special Corona” wealth tax on second homes?  That’ll earn you about GBP 50bn.  Then, as we move towards election time, a second home wealth tax tapering from 5% down to 3%.  That’ll scoop you another GBP 40bn a year.  Legacies from the oldest Baby Boomers will add to this taxable property pile, and you’ll be able to grab some Inheritance Tax at 40% on the way through.  You can apply the wealth tax retrospectively, to reduce tax dodges like passing title into the kids’ names, or incorporating.  (The Americans can’t do this retrospective taxation thing, as it’s prohibited by the US Constitution since the Brits tried it before 1776).

Eoin Treacy's view -

As we travel further down the road of modern monetary theory, or perhaps more correctly debt monetization, the question of how it will be paid for is becoming more urgent. Raising taxes is going to be extraordinarily unpopular, but most especially in the UK where buy to let schemes have proliferated over the last 30 years. A broad swathe of the middle class has staked their retirement on the property market.



This section continues in the Subscriber's Area. Back to top
May 06 2020

Commentary by Eoin Treacy

Fed Embraces Libor Again and Risks Undermining Push to Kill It

This article by William Shaw and Alexandra Harris for Bloomberg may be of interest to subscribers. Here is a section:

Regulators on both sides of the Atlantic have spent the better part of three years trying to kill the
London interbank offered rate. Now, they’re looking to it once again to underpin hundreds of billions of dollars in loans as they seek to rescue their economies.

U.S. policy makers last week changed tack and turned to Libor as the benchmark for their $600 billion Main Street Lending Program, which will buy debt from potentially hundreds of companies. The move came a day after U.K. officials granted banks a six-month extension to keep issuing loans tied to the beleaguered reference rate, which is supposed to be phased out by the end of 2021.

The timetable to do away with the benchmark linked to trillions of dollars of financial assets appears increasingly at risk as central bankers lean on Libor to help expedite their massive stimulus efforts. As they lend legitimacy to the much-maligned rate, some market watchers say it’s highlighting the shortcomings of replacements, while others note it could ultimately lead to a more difficult transition down the road.

“The crisis does make it tougher and it will put a lot more time pressure on meeting the deadline,” said Darrell Duffie, a finance professor at Stanford University who has written extensively on Libor. He called the Fed’s decision, while necessary, “very unfortunate” and a missed opportunity to pivot
away from the benchmark, adding that it’s a sign that U.S. lenders “were not getting ready” for the transition. 

Eoin Treacy's view -

When I originally took regulatory exams back in 2003 there were quite a few areas of the financials markets in London that relied on gentleman’s agreements for regulation. Mergers & acquisitions, the law society, the gold and silver market and most of all LIBOR were all self-regulated markets. One of the biggest changes that followed the credit crisis was to try and exert greater control over the organs of the financial system.



This section continues in the Subscriber's Area. Back to top
May 06 2020

Commentary by Eoin Treacy

Buchse Der Pandora

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

Eurostat reports that there was roughly €2 trillion of outstanding German government debt at year end 2019. ALL German government bills (Bubills) and bonds (Bunds) have a negative yield, which simply means that bondholders are prepared to pay the German government an annual fee to lend their money to the German Government, be it at -0.65% for very short term debt to -0.52% for 10yr debt to -0.13% for 30 year debt.
Did the yesterday’s German Constitutional Court ruling just change the risk/reward for investors in European government bonds?
 
The current 10 year Bund yield of -0.52% can be broken down into two components:

+ 0.48% Inflation Breakeven Rate.
- 1.00% Real Yield. 

Eoin Treacy's view -

The German constitutional court’s ruling that central bank purchases are potentially illegal is mostly an internal affair. The extent to which the ECB is subject to German law is highly debatable but pressing that point has political consequences for any country. There remains ample room for legal two-stepping to avoid any official censure which is why the bond market has brushed away any concerns.



This section continues in the Subscriber's Area. Back to top
May 05 2020

Commentary by Eoin Treacy

Video commentary for May 5th 2020

Eoin Treacy's view -

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

Some of the topics discussed include: Is the ECB subject to German law? Euro weak, gold steady, oil firm, corporate profits peaking, stock markets susceptible to profit taking as they test first regions of potentila support. Bonds ease.



This section continues in the Subscriber's Area. Back to top
May 05 2020

Commentary by Eoin Treacy

Musings From The Oil Patch May 5th 2020

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

These large stock buybacks, coupled with increased debt, despite low interest rates, have contributed to a remarkable decline in corporate cash balances.  Cash balances for S&P 500 Index companies have fallen to the lowest level since 1980, while debt has soared.  Based on how volatile these two measures have become, we wonder whether, following the recession we certainly are in, cash on company balance sheets becomes a prized asset.  Likewise, will debt become toxic?  Given very low interest rates, something not likely to change anytime soon, will corporate executives adjust how they manage their balance sheets?  

Traditionally, dividends account for about 2% and share buybacks about 3% of the historical annual average stock market return of 5%.  The cessation of share buybacks would cut investor return expectations more than in half, and returns will be further reduced to the extent that dividends are eliminated and/or restricted.  That will be a huge blow to investors who sought out stock market returns to replace those lost from bonds due to low interest rates.  The neighboring chart shows that about 6% of buyback programs, representing 14% of the expected value of buybacks for energy, have been suspended so far this year.  We certainly expect these numbers to rise as the year unfolds, regardless of legal restrictions imposed by government relief payments, due to cash-preservation steps by managements following the oil price collapse.  

As Exhibit 17 shows, energy in the S&P 500 Index was the fourth lowest sector, ranked by dollars committed to share buybacks.  Not a surprise, given the oil price crash of 2014, was the sharp decline in dollars spent on share buybacks over the last five years compared to the last 10 years.  The amount of money spent on energy share buybacks for 2015-2019 was only 31% of the 10-year expenditures.  We will not be surprised to see the next 5-year period having even less money spent on stock buybacks, unless there is a miracle recovery in oil prices.  

If we consider what investor returns by sector of the S&P 500 were in the fourth quarter of 2019, energy topped the list with nearly a 10.5% yield.  That was nearly 80% greater than the yield of the S&P 500 Index.  That will change in 2020, and likely in 2021, as we expect that is how long it will take for the oil market to balance.  The unanswered question is how the risk profile for investing in energy stocks may change, as well as investing in the stock market overall?

Eoin Treacy's view -

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

Royal Dutch Shell cuts its dividend last week which was a significant departure from its long-held policy of reliable payouts. However, the move was anticipated by the significant decline in the share over the last few months and the decision did have had a measure effect on the price. The primary reason investors look at the energy sector now is because of the attractive valuations. Meanwhile, the uncertain outlook for the oil price is the reason valuations have improved.



This section continues in the Subscriber's Area. Back to top
May 05 2020

Commentary by Eoin Treacy

Peering into the post pandemic world

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

Almost every major crisis and recession has resulted in lasting implications. The 1973 oil crisis ended the Bretton Woods system and brought about the regime of floating currencies and exchange rate volatility. September 11 permanently changed the way we travel and raised the level of security in public settings and airports. Unprecedented monetary easing after the 2008 Great Financial Crisis further propelled the unlikely continuation of the 30-year rally in government bonds and facilitated the resurgence of tech stocks and credit markets. The Global Covid-19 Crisis will also leave its permanent imprints on consumers, markets and economies. Although we are only a few months into the crisis, it is key to look forward to the next economic cycle and ask: what are the structural changes created by the Covid-19 outbreak and who will be the winners and losers?

For companies, the focus will shift to building resilience
As the virus outbreak results in demand and supply shocks unprecedented in terms of speed, depth and breadth, many companies face tremendous pressure, and this will have a lasting impact on risk perception.  Companies will turn more cautious and focus on building resilience in terms of their business strategies and balance sheets, and shareholders will expect management teams to take steps to ensure that the business is strong enough to take the next big shock.

Eoin Treacy's view -

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

Consumers are wondering about what the trajectory for their earnings are going to be. Nobody knows what the outlook for their businesses is likely to be in the aftermath of the lockdowns or how long recovery is going to take. There is a temptation to think corporations are going to be as cautious as individuals.



This section continues in the Subscriber's Area. Back to top
May 05 2020

Commentary by Eoin Treacy

Hedge funds bet on gold as refuge from 'unfettered' currency printing

Thanks to a subscriber for this article by Laurence Fletcher and Henry Sanderson for the  Financial Times which may be of interest. Here is a section:

Paul Singer’s Elliott Management, Andrew Law’s Caxton Associates and Danny Yong’s Dymon Asia Capital are all bullish on the yellow metal, which has risen about 12 per cent this year. They are wagering that moves to loosen monetary policy and even directly finance government spending, intended to limit the economic damage from the virus, will debase fiat currencies and provide a further boost to gold.

“Gold is a hedge against unfettered fiat currency printing,” said Mr Yong, founding partner at Dymon Asia, which is up 36 per cent this year, helped by its bet on the gold price.

New York-based Elliott, which manages about $40bn in assets, told its investors last month that gold was “one of the most undervalued” assets available and that its fair value was “multiples of its current price”.

In a letter, Elliott cited the “fanatical debasement of money by all of the world’s central banks” as well as low interest rates and disruption to mining caused by coronavirus. Profits from gold positions helped the hedge fund to a gain of about 2 per cent in the first quarter.

Eoin Treacy's view -

Central banks are acting like the proverbial Dutch boy with his finger in the dyke. The assistance provided to date is a stop gap measure but is open ended. This might not be the most convenient time to think about deficits and how all this is going to be paid for, but gold investors are not hanging around. 



This section continues in the Subscriber's Area. Back to top
May 04 2020

Commentary by Eoin Treacy

May 04 2020

Commentary by Eoin Treacy

Leave no dark corner

Thanks to a subscriber for this article by Matthew Carney for Australia’s ABC news. Here is a section:

The Party is using the system to win back some of the control it lost when China opened up to the world in the 1980s and rapid development followed.

It’s a way to silence dissent and ensure the Party’s absolute dominance.

Already, about 10 million people have been punished in the trial areas of social credit.

Liu Hu is just one of them.

Hu lost his social credit when he was charged with a speech crime and now finds himself locked out of society due to his low score.

In 2015, Hu lost a defamation case after he accused an official of extortion.

He was made to publish an apology and pay a fine but when the court demanded an additional fee, he refused.

Last year, the 43-year-old found himself blacklisted as “dishonest” under a pilot social credit scheme.

“There are a lot of people who are on the blacklist wrongly, but they can’t get off it,” says Hu.

It’s destroyed his career and isolated him, and he now fears for his family’s future.

The social credit system has closed down his travel options and kept him under effective house arrest in his hometown of Chongqing.

In an apartment above the streets of Chongqing city, Hu tries to use a phone app to book train tickets to Xi’an. The attempt is rejected.

“[The app] says it fails to make a booking and my access to high-speed rail is legally restricted,” he explains.

Hu’s social media accounts, where he published much of his investigative journalism, have also been shut down.

Hu claims his combined Wechat and Weibo accounts had two million followers at their peak but are now censored.

Eoin Treacy's view -

Safety and stability are bywords for control. Personal prestige as a means of improving one’s living standards is the tool used to ensure compliance. The confluence of social media primping is hardly a coincidence. That is not something China has a monopoly on. The difference, however, is democracy and rule of law ensures a check on the overarching ambitions of governments to exert control over their citizens.



This section continues in the Subscriber's Area. Back to top
May 04 2020

Commentary by Eoin Treacy

Email of the day - on gold volumes

Like you, I follow the PMs, particularly gold and silver. I noticed a remarkably consistent pattern in spot gold trading volume. Going back 10 years, the volume has picked up and dropped back on alternate months. During the summer doldrums there is a hiatus, as one would expect. The alternating pattern then resumes around the end of October each year. I am very interested to hear your explanation for this.

Eoin Treacy's view -

Thanks for this question which others may have an interest in. Spot gold does not have volume data because it is an indicative price rather than a traded price. Volume data is available on futures contracts.



This section continues in the Subscriber's Area. Back to top
May 04 2020

Commentary by Eoin Treacy

Email of the day on junior gold miners

Is there any chance you can add Market Vectors Junior Gold Miners (GDXJ) LONDON quote to the chart library please? It seems to trade at a $5-$6 difference to the US quote. I assume this is the same underlying fund - I hope it’s not too dumb a question to ask why the difference? However, it looks like an interesting ETF but I can only by the London listed entity in my fund and therefore I'd like to be able to track it in your superb chart library. Thanks so much.

Eoin Treacy's view -

Thank you for this question and it is certainly not a dumb question. The fund is now available in the Chart Library and I will make a guess at the answer. Both funds do track the same index which is the MVIS Global Junior Gold Miners Total Return Index.



This section continues in the Subscriber's Area. Back to top
May 04 2020

Commentary by Eoin Treacy

India Offers Land Twice Luxembourg's Size to Firms Leaving China

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

Providing land with power, water and road access may help attract new investments to an economy that was slowing even before the virus hit, and is now staring at a rare contraction as a nationwide lockdown hit consumption.

The government has hand-picked 10 sectors -- electrical, pharmaceuticals, medical devices, electronics, heavy engineering, solar equipment, food processing, chemicals and textiles -- as focus areas for promoting manufacturing. It has asked embassies abroad to identify companies scouting for options. Invest India, the government’s investment agency, has received inquiries mainly from Japan, the U.S., South Korea and China, expressing interest in relocating to the Asia’s third-largest economy, the people said.

The four countries are among India’s top 12 trading partners, accounting for total bilateral trade of $179.27 billion. The foreign direct investments by the four nations between April 2000 and December 2019 stands at over $68 billion, government data shows.

Making unused land available in special economic zones, which already have robust infrastructure in place, is also being examined. A detailed scheme for attracting foreign investments is expected to be finalized by end of the month, the people said.

Eoin Treacy's view -

India has the most favourable demographics of any large population country in the world. May people speak English and it has a democratic imperative to deliver on improving standards of living. The missing link has always been the corrupt bureaucracy which stands in the way of infrastructure development and industrialisation. If that is finally starting to change companies will have the benefit of lower labour costs to lure them away from China.



This section continues in the Subscriber's Area. Back to top
May 01 2020

Commentary by Eoin Treacy

May 01 2020

Commentary by Eoin Treacy

Chinese yuan falls on U.S. tariff threat, Australian dollar sinks

This article by Olga Cotaga for Reuters may be of interest to subscribers. Here is a section:

The Chinese yuan fell to a one-month low versus the dollar on Friday, a day after U.S President Donald Trump accused China mishandling the outbreak of the novel coronavirus and threatened new tariffs on Beijing.

Trump said on Thursday he believed the virus may have originated in a virology lab in Wuhan, the Chinese city where the outbreak began. The Chinese state-backed Wuhan Institute of Virology has dismissed the allegations, and other U.S. officials have downplayed their likelihood.

The Chinese yuan fell in the offshore market by 0.7% to 7.1350 versus the U.S. currency, its lowest since April 2 CNH=EBS. On Friday the yuan fell to its lowest since March 25.

"Given the scale of the COVID-19 impact there is certainly a high risk of geopolitical tensions escalating considerably as lockdowns reverse," said Derek Halpenny, head of research at MUFG.

"This would clearly be another hit to global trade that would add a layer of dollar support going forward," Halpenny said.

Eoin Treacy's view -

There is no political downside during this election year of blaming China for just about anything. It’s an easy target because it is less than forthcoming about sharing information on everything from economic statistics to coronavirus infection figures. That ensures there are always going to be questions about its ulterior motives, like global domination. Meanwhile, any politician that attempts to claim the vendetta against China over reaches will be accused of being a traitor.



This section continues in the Subscriber's Area. Back to top
May 01 2020

Commentary by Eoin Treacy

Amazon Says It Risks Loss on Spending Rise for Pandemic

This article by Matt Day and Spencer Soper for Bloomberg may be of interest to subscribers. Here is a section:

“Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit,” Bezos said Thursday in a statement reporting Amazon’s results. “But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on Covid-related expenses getting products to customers and keeping employees safe.”

“Providing for customers and protecting employees as this crisis continues for more months is going to take skill, humility, invention, and money,” he said. “If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small.”

Eoin Treacy's view -

The vast majority of companies have refused to give guidance on the 2nd quarter’s earnings, probably because they don’t wish to alarm investors when they hope the third quarter will be a lot better. However, Jeff Bezos and Elon Musk have taken a different approach.



This section continues in the Subscriber's Area. Back to top
May 01 2020

Commentary by Eoin Treacy

Central Bank "EVERGREENING"

This educative article by Edward Ballsdon for his Grey Fire Horse blog may be of interest. Here is a section:

It is becoming clear that support for the time being is at best debt (or debt substitution from the market to the Fed, backstopped by the US Treasury), and not non-repayable grants. Debt dynamics on ever leveraging balance sheets suggest that CBs will have to always do more to support corporate debt, on top of the support that they will have to provide governments.

When there is a return to normality, corporate America will find itself in an even more leveraged position than the already highly leveraged position it was pre Covid19, which means that the rebound in equity and tightening of credit spreads will make these assets even more highly “valued”.

The misallocation of capital during the Japanese evergreening years had some very important consequences on growth and inflation, which are very well documented in various research papers (see BIS, NBER etc). The potential transfer of credit risk from the private to public sector through the government backstopping of bank loans, as well as the risk of good money being lent to bad, opens up Central Banks to the accusation that they will be carrying out an equivalent Evergreening of corporate debt as well as a not stemming the misallocation of capital that has allowed the rise of zombification, not only of negative but positive cashflow companies. I cannot think of anything more opposed to the doctrine of “Creative Destruction” laid out by Joseph Schumpter.

MARKET IMPLICATIONS
My core views remain that interest rates will remain “lower for longer”, supported by QE that will suppress real rates. For the time being, recent CB policy and statements don’t threaten that view, nor does the economic data being released. If anything, potential private and public sector debt increases cement that view.

The same goes for Gold – more CB intervention and support, necessitating a further increase of money supply above and beyond what the market expects, should support the value of precious metals. The significant decline in oil prices should finally allow the relative cheap miners to start outperforming gold – energy is a significant cost to gold extraction. The ratio of gold miners to gold is currently very depressed - chart below – finally there seems to be some miner outperformer (the ratio momentum has resumed its uptrend).

Eoin Treacy's view -

The moral hazard arising from bailing out badly managed companies only perpetuates the practice of running on razor thin margins and high leverage. Striving for market share and retaining zero capital on the balance sheet is an almost sure recipe for bankruptcy. However, that same practice has ensured companies are bailed out whenever the inevitable crisis strikes. Zombification is a significant risk which is only likely to be exacerbated with the current suite of policies.



This section continues in the Subscriber's Area. Back to top
April 30 2020

Commentary by Eoin Treacy

Video commentary for April 30th 2020

Eoin Treacy's view -

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

Some of the topics discussed include: Amazon expects a loss due to higher spending, Apple surprises on the upside. Where is the next piece of good news going to come from to support sentiment? Gold eases, oil firm, Bunds strong, Dollar weak. 



This section continues in the Subscriber's Area. Back to top
April 30 2020

Commentary by Eoin Treacy

Lagarde Sparks Bond Rally After ECB Eases Money Market Stress

This article by John Ainger and James Hirai for Bloomberg may be of interest to subscribers. Here is a section:

The flood of promised money initially put pressure on the euro, before month-end trading weakened the dollar and sent the common currency up as much as 0.9% to $1.0972. European stocks extended losses.

The ECB lowered the interest rate on targeted longer-term refinancing operations to 50 basis points below the average interest rate on the Eurosystem’s main refinancing operations prevailing over the same period. Italy’s front-end bonds, which reflect default risk, are most sensitive to easier lending conditions to banks, given domestic lenders tend to dominate the market.

“Unless there is a stigma attached to borrowing under TLTRO, the banks should go ballistic,” said Rishi Mishra, an analyst at Futures First. “Now, you can borrow at minus 50 basis points, and park at minus 50 basis points if you don’t find a borrower. And if you do find a borrower, even better, you can get 50 basis points extra.”

Eoin Treacy's view -

The ECB came good on its attempts to make liquidity available to Eurozone banks. However, the onus for ensuring anyone who borrows money from a bank will be able to service the debt falls on the economy. With a record contraction and domestic consumption that was paltry ahead of the coronavirus recession banks are not going to lend. Instead they are going to park any additional funds in the bonds of the one country that doesn’t need them. Germany.



This section continues in the Subscriber's Area. Back to top
April 30 2020

Commentary by Eoin Treacy

Johnson Pledges Lockdown Exit Plan, Says U.K. Is Past Peak

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

“We’ve come through the peak, or rather we have come under what could have been a vast peak, as though we have been going through some huge alpine tunnel,” Johnson said. “And we can now see sunlight and the pasture ahead of us, and so it is vital that we do not now lose control and run slap into a second and even bigger mountain.”

And

“As part of coming out of the lockdown, I do think face coverings will be useful both for epidemiological reasons and giving people confidence it’s safe to go back to work,” Johnson said. “We will be saying a lot more next week and in the coming weeks about how and when we propose to unlock the various parts of the U.K. economy.”

The government has announced more than 60 billion pounds ($75 billion) of direct aid to companies and individuals to help them weather the pandemic, and offered 330 billion pounds of loan guarantees. The Office for Budget Responsibility on Thursday said the government’s virus response has cost almost 105 billion pounds in the current fiscal year.

Asked whether the government would need a new period of austerity, including cuts to public services in order to restore the country’s finances, Johnson rejected the approach.

“I think the economy will bounce back strongly, I think that this government will want to encourage that bounce back in all kinds of ways,” he said. He added that he’d “never particularly liked” the term “austerity,” saying “it will certainly not be part of our approach.”

Eoin Treacy's view -

Very few mainstream parties have been able to evolve enough to appeal to the growing populist fringes of political discourse. The Conservatives in the UK and Republican’s in the USA have been able to co-opt the revolutionary agenda by embracing fiscal easing.



This section continues in the Subscriber's Area. Back to top
April 30 2020

Commentary by Eoin Treacy

Email of the day on gold and negative real interest rates

Eric Basmajian has much to say about the dominant deflationary forces of the past 40 years and how the recent monetary and fiscal policies are more likely to add to that problem by suppressing the velocity of money.  Most of us, more or less, understand that argument.  He then, surprisingly, includes gold in his recommended portfolio because of falling real interest rates in either deflation or inflation.  All very difficult for average investors to comprehend. Your view would be appreciated.

Eoin Treacy's view -

Thank you for this question which may be of interest to subscribers. It’s a common misconception that gold only does well during bouts of inflation or deflation. Instead, it’s really all about negative real interest rates.

Real interest rates are nominal interest rates adjusted for inflation.



This section continues in the Subscriber's Area. Back to top
April 30 2020

Commentary by Eoin Treacy

Email of the day - on how to invest in digital currencies

Eoin is there any way of investing in the digital money technologies? I do not want to buy these new currencies but I do want to own the "shovels" of this new gold mine.

Eoin Treacy's view -

Thank you for this question which others may have an interest it. Cryptocurrency trading is certainly not for everyone not least because the volatility the market experiences is out of character with what we see just about anywhere else.



This section continues in the Subscriber's Area. Back to top
April 30 2020

Commentary by Eoin Treacy

Email of the day on dividend champions and contenders

I am really enjoying Mr Treacy’s comments of the day and look forward to it every morning.

Mr Treacy in today’s update mentioned key sectors that have the most chance of trending up over the next decade – and alluded to a couple shares (e.g. Google and Apple) that may make it to dividend aristocrat list in 10-15 years.

It would be great if Mr Treacy could provide a list of top 20-50 shares that have steadily increased dividends over the last 10 years and based on trends have the highest probably on making it to dividend aristocrat list in 10-15 years.

Eoin Treacy's view -

Thank you for your kind words and this email which may be of interest. I mentioned in last night’s audio that technology companies are often among the most reliable in increasing their dividends once they eventually decide to initiate payments. That’s been true of companies like Apple and Microsoft but Google and Amazon do not pay dividends so even if they started today it would be 2045 before they become dividend aristocrats. For a list of companies with solid records of dividend increases, but which do not yet fulfil the criteria to be dividend aristocrats, take at a look at the dividend champions and contenders sections of the International Equity Library. 



This section continues in the Subscriber's Area. Back to top
April 29 2020

Commentary by Eoin Treacy

April 29 2020

Commentary by Eoin Treacy

Trump's 'Operation Warp Speed' Aims to Rush Coronavirus Vaccine

This article by Jennifer Jacobs and Drew Armstrong for Bloomberg may be of interest to subscribers. Here is a section:

The Trump administration isn’t alone in trying to fast-track a vaccine. One of the world’s most promising vaccine candidates has been developed by a team at Oxford University in London. Last month, scientists at the U.S. National Institutes of Health innoculated six rhesus macaques with the Oxford vaccine and then exposed them to the coronavirus, the New York Times reported.

All six were healthy more than four weeks later, according to the Times. The researchers are currently testing their vaccine in 1,000 patients and plan to expand to stage two and three clinical trials next month involving about 5,000 more people.

The Oxford group told the Times they could have several million doses of their vaccine produced and approved by regulators as early as September.

In the U.S., the Bill & Melinda Gates Foundation has meanwhile shifted much of its research effort to the coronavirus virus.

One of the people familiar with Operation Warp Speed drew a distinction with the Oxford group, describing the U.S. effort as broader in scope. It’s unclear which vaccine candidates would be part of Operation Warp Speed, or whether it would include the Oxford vaccine.

Eoin Treacy's view -

A broadly held assumption is we are going to have a second wave of infections like in 1918 later this year. China’s statement yesterday that they believe it will become seasonal is also feeding the belief that a solution will not be forthcoming in the short term. However, in much the same way that war efforts accelerate the pace of innovation, on a needs-must basis, we are seeing the same thing with the development of treatments for COVID-19.



This section continues in the Subscriber's Area. Back to top
April 29 2020

Commentary by Eoin Treacy

The Main Street Faces of the Fierce Rebound in Stocks

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

On their own, Kelleher’s purchases don’t amount to much. But combined with similar decisions by tiny investors around the country, the buying represents a formidable force that has helped the market claw back more than half the ground lost in its fastest bear-market drop. A trio of giant retail brokerages, E*Trade Financial Corp., TD Ameritrade Holding Corp., and Charles Schwab Corp., each saw record sign-ups in the three months ending in March, with much of it coming at the depths of the swoon.

“I’m a complete noob when it comes to stocks,” the mother of high school senior twin boys said while sheltering at home. “It’s not thousands and thousands of dollars that I invested, but it’s a start. We’ll see what happens. I hate to say it, but it’s like gambling, isn’t it?”

There may be something to that. “When the casinos/sport betting closed down, some of that action went to stock markets,” speculated Nicholas Colas, cofounder of DataTrek Research, in a note Wednesday. “Google Trends data supports that idea.”

Eoin Treacy's view -

When I started receiving stock tips from the twentysomething working at UPS a few weeks ago, my contrarian heckles rose.

The trend of zero commissions, promise of massive quick profits and the confidence built up from a decade of watching buying the dip be successful has emboldened legions of new investors into the market.



This section continues in the Subscriber's Area. Back to top
April 29 2020

Commentary by Eoin Treacy

China Rolls Out Pilot Test of Digital Currency

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

In Xiangcheng, a district in the eastern city of Suzhou, the government will start paying civil servants half of their transport subsidy in the digital currency next month as part of the city’s test run, according to a government worker with direct knowledge of the matter.

Government workers were told to begin installing an app on their smartphones this month into which the digital currency would be transferred, the worker said.

Civil servants were told that the new currency could be transferred into their existing bank accounts, or used directly for transactions at some designated merchants, the person said.

China is ahead of many other countries in preparing the launch of an official digital currency. In recent years, the use of traditional paper bills and cash has declined sharply, and smartphone payments have become so ubiquitous that many Chinese people, particularly younger urban dwellers, no longer carry their wallets or cash for shopping. Instead, they use Tencent Holdings Ltd. ’s WeChat Pay and Alipay, operated by Ant Financial Services Group, an affiliate of Alibaba Group Holding Ltd.

Eoin Treacy's view -

Parallel currencies are an oddity which highlight a government’s desire to fully control the ability of consumers to spend their own cash. The ultimate aim of these kinds of moves is to separate the use case for money so different units can be used for different purposes. The façade of wishing to curtail money laundering or terror financing is ubiquitous to all governments and this is a trend which has global appeal for heavily indebted countries.



This section continues in the Subscriber's Area. Back to top
April 28 2020

Commentary by Eoin Treacy

April 28 2020

Commentary by Eoin Treacy

'Instead of Coronavirus, the Hunger Will Kill Us' A Global Food Crisis Looms

This article by Abdi Latif Dahir for The New York Times may be of interest to subscribers. Here is a section:

The coronavirus has sometimes been called an equalizer because it has sickened both rich and poor, but when it comes to food, the commonality ends. It is poor people, including large segments of poorer nations, who are now going hungry and facing the prospect of starving.

“The coronavirus has been anything but a great equalizer,” said Asha Jaffar, a volunteer who brought food to families in the Nairobi slum of Kibera after the fatal stampede. “It’s been the great revealer, pulling the curtain back on the class divide and exposing how deeply unequal this country is.”

Already, 135 million people had been facing acute food shortages, but now with the pandemic, 130 million more could go hungry in 2020, said Arif Husain, chief economist at the World Food Program, a United Nations agency. Altogether, an estimated 265 million people could be pushed to the brink of starvation by year’s end.

While the system of food distribution and retailing in rich nations is organized and automated, he said, systems in developing countries are “labor intensive,” making “these supply chains much more vulnerable to Covid-19 and social distancing regulations.”

Eoin Treacy's view -

Transportation networks have been severely impacted by the coronavirus lockdowns and that is having a significant knock-on effect for vulnerable communities all over the world. There is no shortage of food globally, but the uncertainty the lockdowns introduced have disrupted harvest and slaughter schedules. That is putting upward pressure on some commodities prices while depressing others. The international challenge will be in ensuring commodities get to where they are needed in time to protect the lives of people in the emerging markets.



This section continues in the Subscriber's Area. Back to top
April 28 2020

Commentary by Eoin Treacy

Bank of Japan Looks to Highlight Fiscal-Monetary Double Punch

This article by Toru Fujioka and Sumio Ito for Bloomberg may be of interest to subscribers. Here is a section:

“If you look at what we’re doing from the size of our balance sheet against GDP to our measures compared to the size of the commercial paper and corporate bond markets, the scale of the Bank of Japan’s easing is far larger than any other central bank,” Kuroda said at the briefing.

And

“Impressions matter in this kind of crisis. While the BOJ’s balance sheet is, of course, much bigger than its peers, the response to this kind of crisis is very important. If you look at that, the BOJ hasn’t been as aggressive compared with the Fed,” said Masamichi Adachi, chief Japan economist at UBS Securities and a former BOJ official.

The additional measures announced by Kuroda’s board do show a greater degree of fiscal-monetary policy coordination, with Prime Minister Shinzo Abe’s administration finally submitting an extra budget Monday for its stimulus of more than $1 trillion.

“The government and the Bank of Japan are truly strengthening policy coordination,” said Japan’s economy minister, Yasutoshi Nishimura, following his attendance at the BOJ decision.

Eoin Treacy's view -

Japan was among the first countries to close schools but then did not move to close down the rest of the economy until quite recently. That has meant the number of cases has continued to rise. The benefit of lockdown early is the time to opening up again is shortened. That suggests Japan is going to have difficulty opening up swiftly.



This section continues in the Subscriber's Area. Back to top
April 28 2020

Commentary by Eoin Treacy

Don't lose sight of what you actually own

Thanks to a subscriber for this report from Canaccord Genuity focusing on Australia. Here is a section:

Eoin Treacy's view -

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

It is probably true that Australia is about to have a technical recession. The fires, lockdowns and collapse in Chinese demand are all contributing factors. However, it is also worth remembering that the medium-term response to the coronavirus is likely to be an epic infrastructure development spending spree which will be global in nature. For commodity exporters like Australia that is likely to be good news.



This section continues in the Subscriber's Area. Back to top
April 27 2020

Commentary by Eoin Treacy

Video commentary for April 27th 2020

Eoin Treacy's view -

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

Some of the topics discussed include: some evidence of rotation and risk appetite returning, major stock markets approaching the first area of potential resistance, oil remains under pressure from USO liquidation, gold steady, emerging market currencies remain under pressure. 



This section continues in the Subscriber's Area. Back to top
April 27 2020

Commentary by Eoin Treacy

Consumer Better than Feared? Earnings Revisions Bottoming

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

April 27 2020

Commentary by Eoin Treacy

Email of the day on bond market risk

Thanks for the regular coverage. I have been a subscriber for a long time, and find this really the only voice of sanity and unbiased views. So, thanks. Could you elaborate on the statement you mentioned where the bond investors should be cautious because / if majority of the bonds are held by the government. Also, could you kindly help think through and elaborate how the fed would deal with the following - exits from the agency papers the Fed is buying. Is there any limit on how much the Fed can buy in this program? - how will the fed deal with losses in the Junk bond ETFs if there were to be defaults? Are the losses guaranteed b6 the Treasury?

Eoin Treacy's view -

Thank you for your kind words and long-term support. Governments very seldom pay back their debt. Instead they are more interested in the cost of servicing the total relative to other spending priorities. As interest rates have trended lower, the cost of servicing has followed, even as the overall quantity of debt has increased. That has created a situation where if interest rates rise, for any reason, the ability of the US government to fund itself will be impaired.



This section continues in the Subscriber's Area. Back to top
April 27 2020

Commentary by Eoin Treacy

Email of the day - on dividend paying gold companies

Mr. Treacy has mentioned in one of his previous articles:

http://www.fullertreacymoney.com/general/gundlach-sounds-alarm-on-paper-gold-etfs-raking-in-billions-/    

...There are 1145 precious metals miners listed on Bloomberg and 123 of those pay dividends. Some of the largest miners have tied the size of their dividend to the gold price and almost all have All-In-Sustaining-Costs significantly below prevailing gold prices....

I searched Bloomberg for the 123 metal miners that pay dividends but could not find the list.

Would Mr. Treacy be able to point me to the list?

Eoin Treacy's view -

That you for this question which may be of interest to subscribers. If you have access to a Bloomberg try the EQS fundamentals search function. Filter for precious metals miners and then add a filter for dividend per share >0.



This section continues in the Subscriber's Area. Back to top
April 27 2020

Commentary by Eoin Treacy

Email of the day on Australian coronavirus infections

Long time since I have sent an email to you, however I have kept my subscription up (joined in 2006) and always look forward to your daily audio/video etc.

In your last audio on 24 April I believe I heard you describe Australia’s Covid-19 rate as rising. I have to say that Australia is rightly proud of its success in fighting this virus and you can see from the following chart, from the Australian Financial Review, what a great job the Australian and state governments have done. I understand we have the second highest testing rate in the world and, so far, we have had only 93 deaths, compared with 20,319 deaths in the UK and 54,161 in USA. Boris and Donald should hang their heads in shame!

Just wanted to set the record straight!

Keep well!

Eoin Treacy's view -

Thank you for this graphic which, as you say, highlights Australia’s success in curtailing infection growth before the “knee” of the exponential curve was reached. Thanks also for setting the record straight.

There has been significant dispersion between early actors and late reactors in their success rates in containing the viral spread. That was the primary reason I was so critical of the UK’s approaching more than a month ago. Since then almost every country has introduced lockdowns which has significantly reduced pressure on healthcare sectors.



This section continues in the Subscriber's Area. Back to top
April 24 2020

Commentary by Eoin Treacy

April 24 2020

Commentary by Eoin Treacy

Long-Term ratios

Eoin Treacy's view -

I have been ruminating on the interrelationships between markets over the last couple of months and that has been a significant topic of conversation in the Big Picture Friday Audios. There are changes which have taken place over the last few months that need to be viewed in the context of generational long trends because I believe they give us some perspective on what we can expect from markets over the next decade.

The Dow/Gold ratio has been a reliable barometer of the interplay between the performance of stock markets versus commodities for more than a century. Each higher high for stocks has been a factor of the reduced purchasing power of paper money coupled with improving productivity over the long-term. There were also between 35 and 37 year between the peaks with the last being in early 2000.



This section continues in the Subscriber's Area. Back to top
April 24 2020

Commentary by Eoin Treacy

Chapter 1: The Big Picture in a Tiny Nutshell

I read the first two chapters of Ray Dalio’s latest book yesterday. Here is an important section from Chapter 1:

The quicker the printing of money to fill the debt holes, the quicker the closing of the deflationary depression and the sooner the worrying about the value of money begins.  In the 1930s US case, the stock market and the economy bottomed the day that newly elected President Roosevelt announced that he would default on the government’s promise to let people turn in their money for gold, and that the government would create enough money and credit so that people could get their money out of banks and others could get money and credit to buy things and invest. 

Eoin Treacy's view -

This latest book by Ray Dalio is well worth taking the time to read. Chapters are being released weekly via LinkedIn. His focus on governance, hard money and the credit cycle will be familiar to veteran subscribers but it is always refreshing to hear an additional perspective and not least because of the study of long-term cycles which he throws fresh light on.



This section continues in the Subscriber's Area. Back to top
April 24 2020

Commentary by Eoin Treacy

For Ecuador's Guayaquil, Tides of Death and Disappearance

This article by Lise Josefsen Hermann for Undark may be of interest. Here is a section:

And yet the official numbers have been a matter of some dispute. According to public health officials, in the first two weeks of April alone — a period where the region might see 1,000 people die for any number of reasons, natural and otherwise — Guayas province registered more than 6,700 deaths. As of this week, however, Ecuador has only been able to officially confirm, through testing, that 537 people have died due to Covid-19. Another 952 are considered probable Covid-19 deaths, with the victims having shown symptoms, but without definitive testing.

But just how many of the nearly 6,700 deaths in this one province are ultimately attributable to Covid-19 is impossible to know — and may well remain so. As has been the case in Italy, Spain, and other nations where health care resources have collapsed beneath the weight of illness and death, several reports have surfaced of people dying of non-Covid-19 causes that would have, or should have, been preventable. But authorities — widely criticized for being slow to act amid the gathering crisis — insist that they now have the matter well in hand.

“It is true, that in the beginning, this got out of control,” Juan Carlos Zevallos, the health minister of Ecuador, said in an interview. “But we are handling the situation now.” He was referring to the bodies. The region had become so quickly overwhelmed by the number of deaths that no resources were available to deal with them. Hundreds of corpses and cardboard coffins accumulated in tidy rows in the streets, while in homes across the province, the dead bodies of loved ones, mothers, fathers, children — whether they perished from the coronavirus or not — lay for days on sofas and in bedrooms and across floors. And with temperatures pressing past 85 degrees (30 degrees Celsius), an almost unbearable smell rose up across Guayaquil.

It was the smell of a Covid-19 situation out of control.

Eoin Treacy's view -

Let’s put to rest the belief the virus cannot spread in hot countries. Ecuador sits on the equator. I’ve been to Guayaquil, it’s hot and sticky a lot of the time. That means everywhere is going to have to deal with the impact. No testing does not mean no infections.



This section continues in the Subscriber's Area. Back to top
April 23 2020

Commentary by Eoin Treacy

April 23 2020

Commentary by Eoin Treacy

Gold Extends Gains With Huge ETF Inflows Reflecting Growth Fears

This article by Ranjeetha Pakiam, Haidi Lun and Justina Vasquez for Bloomberg may be of interest to subscribers. Here is a section:

“With the fiscal programs that all the governments are appropriately injecting into their economies and printing money, the one currency you cannot print is gold,” Jake Klein, executive chairman at Australia’s Evolution Mining Ltd. Told Bloomberg TV. “That’s why it’s got investors’ interest.”

Next week, policy makers from the Federal Reserve, European Central Bank and Bank of Japan all meet to assess their stances, raising the possibility of further assistance. Gold futures for June delivery rose 1.1% to $1,756.90 an ounce at 10:43 a.m. on the Comex in New York after surging 3% on Wednesday. Global holdings in ETFs rose for a 23rd session on Wednesday and are at a record. Silver futures advanced on the Comex, while platinum and palladium climbed on the New York Mercantile Exchange.
 

Eoin Treacy's view -

ETF Holdings of gold have come from nowhere at the turn of the century to become the third largest in the world. The total held by ETFs eclipsed those of the IMF in March. Germany and the USA are now the only two larger official holders of the metal. No one really knows how much gold China has accumulated and the vast quantities warehoused in India’s temples are not counted in official totals because they are unlikely to ever move. 



This section continues in the Subscriber's Area. Back to top
April 23 2020

Commentary by Eoin Treacy

Email of the day on Australian banks and debt

Australia has announced they are increasing petroleum reserve stocks. Small steps in the global oil market. We have lots of gas not much Oil. Government argument oil prices are low. Think I can see political / defense US / Australian ambitions in this move.

The Governor of the RBA made a speech a few months back the RBA will support all local banks. That investors should feel confident about the security of their bank deposits and securities. Can I trust these comments? I almost fell out of my chair when Glenn Stevens made this statement

Eoin Treacy's view -

Thank you for this email which may be of interest to other subscribers. It makes sense that Australia should build up an oil reserve when prices are cheap. It certainly beats doing it when prices are high and a significant reserve is a geopolitical imperative during a time when stress between the great powers of our day is only likely to increase.



This section continues in the Subscriber's Area. Back to top
April 23 2020

Commentary by Eoin Treacy

Facebook's $5.7 Billion Bet on Jio Is a Move Beyond Ads

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

Facebook's investment of $5.7 billion in India's top telecom operator Reliance Jio highlights a broader bet on India’s online growth beyond ads. Jio has more than 388 million subscribers with reach in content, payments and ecommerce, all of which Facebook can scale up via its 380 million WhatsApp, Facebook or Instagram users in India. Plans to integrate Jio’s small businesses to enable shopping on WhatsApp shows an acceleration in e-commerce.

THESIS: Facebook will be the hardest-hit internet company in 2020 from the virus fallout as a sharp ads decline and small and medium business exposure can take growth down to low-single digits, while surging usage hits profit harder. Yet we believe exiting this uncertainty with a higher user base and new habits means diversification into new businesses and a 2021 ad rebound will make its growth emerge the strongest among peers. More than 60% of Facebook's sales are in the U.S., the U.K., Germany, Japan, France and Italy. Small and medium business make up the majority of Facebook's 7 million advertisers. Earnings in 1Q will likely reset growth expectations, creating room for longer-term sales outperformance as Facebook pushes into diversifying its business post-virus.

Eoin Treacy's view -

Where are the largest tech companies going to find the next billion users? There are only three potential options. China, Africa and India. They have been cut out of China as it champions its domestic firms. Africa is a continent rather than a country, and on aggregate is further down on the per capita income scale. That leaves India with a massive young population, large number of English- speaking consumers, an independent judiciary, financial market norms familiar to westerners and a democracy intent on raising living standards.



This section continues in the Subscriber's Area. Back to top
April 22 2020

Commentary by Eoin Treacy

Video commentary for April 22nd 2019

April 22 2020

Commentary by Eoin Treacy

Crude Collapse Concerns COMEX

This article by Craig Hemke for SprottMoney.com may be of interest to subscribers. Here is a section:

Consider now the potential for a diametrically opposite situation in COMEX gold. Why and how could this unfold?

COMEX gold also has "delivery month" contracts that serve as the "front month" for trading purposes until they go off the board and into delivery—at which time the trading volume rolls into the next scheduled month.
In delivery, anyone still long the contract can stand for delivery through the COMEX vaults in New York. (And now might also stand for fractional ownership of bullion bars in London, too.)
But global demand for physical gold outstrips supply at present, as many refineries, mines, and mints are closed worldwide due to Covid-19.
Thus, we are seeing a growing need/demand to hold COMEX contracts into delivery. For the current month of Apr20, total gold deliveries on COMEX exceed 3,000,000 ounces. This is more than 3X the usual demand for a "delivery month".
If an extreme shortage develops—or if any sort of "run" on the bullion bank fractional reserve system begins—demand for delivery through the COMEX and LBMA will soar.
Demand for the front/delivery month contract will surge. However, to buy a contract, you will also need a seller—someone interested in adding a short or selling an existing long.
And in this case, there may be NO SELLERS. Thus, what you may see is a true offerless market.
The potential result? The exact opposite of what you witnessed Monday in NYMEX crude oil.

Could this opposite scenario actually play out in COMEX gold? You may be reluctant to say yes, as this type of situation would seem unlikely and unprecedented. However, prior to Monday, April 20, the idea of negative pricing for the world's most important commodity was similarly unlikely and unprecedented.

Eoin Treacy's view -

The US Oil Fund ETF’s predictable roll schedule which has been gamed by hedge funds for years is the primary reason the April WTI crude oil contract hit -$40 this week. To the best of my knowledge there is no corresponding fund that is rolling over futures contracts in gold on a predictable basis. The vast majority of ETFs investors buy for gold exposure hold physical metal rather than futures.



This section continues in the Subscriber's Area. Back to top
April 22 2020

Commentary by Eoin Treacy

U.K. Starts Human Trials of Coronavirus Vaccine on Thursday

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

The U.K. will begin human trials of a coronavirus vaccine Thursday, Health Secretary Matt Hancock said, as he argued that the government’s strategy for fighting the disease had succeeded.

“In the long run, the best way to defeat coronavirus is through a vaccine,” Hancock told the government’s daily news conference. “The U.K. is at the front of the global effort. We have put more money than any other country into a global search for a vaccine and, for all the efforts around the world, two of the leading vaccine developments are taking place here at home.”

The trials will be of a drug developed at Oxford University. Hancock said the government would give 20 million pounds ($25 million) to support the research. “In normal times, reaching this stage would take years,” he said. Another 20.5 million pounds will go to a separate project at London’s Imperial College.

Eoin Treacy's view -

There are 70 different teams working on vaccines around the world which highlights how urgent the need for a barrier of safety from COVID-19 is. Not only do competition, money and a willingness to break-down barriers to entry increase the scope for a breakthrough but this kind of news is positive for consumer sentiment amid lockdowns.



This section continues in the Subscriber's Area. Back to top
April 22 2020

Commentary by Eoin Treacy

What is the Significance of the Bitcoin Block Halving?

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

The halving decreases the amount of new bitcoins generated per block. This means the supply of new bitcoins is lower.

In normal markets, lower supply with steady demand usually leads to higher prices. Since the halving reduces the supply of new bitcoins, and demand usually remains steady, the halving has usually preceded some of Bitcoin's largest runs.

In the image below, the vertical green lines indicate the previous two halvings (2012-11-28 and 2016-7-9). Note how the price has jumped significantly after each halving.

Eoin Treacy's view -

The bitcoin halvening is estimated for May 10th. In a market where supply inelasticity has been making headlines in a number of asset classes, the doubling of the work load to produce one bitcoin represents a noteworthy event.



This section continues in the Subscriber's Area. Back to top
April 21 2020

Commentary by Eoin Treacy

April 21 2020

Commentary by Eoin Treacy

Email of the day on buying the dip

I am adjusting my retirement income portfolio by broadening my global search for income, particularly from Investment Trusts. For the first time I am looking at Japanese markets and in particular 2 ITs, CC Japan Income & Growth and one of David’s favourites from a few years ago, Atlantis Japan Growth. I would value your thoughts on looking for income from the historically low yielding Japanese markets and your opinion of the 2 ITs: CC Japan Income & Growth only have a short history but have consistently raised their dividend over the past 4 years. Atlantis Japan Growth have altered their growth focus to some degree. I learnt from their most recent factsheet that, at the 2019 AGM, shareholders approved the Board’s recommendation to replace the redemption facility with a regular dividend paid to all shareholders on a quarterly basis set at 1% of net asset value at the close of the preceding financial year. This is an interesting approach, what is your opinion of it? Many thanks

And

I ask you, over a 12-month horizon, what are your 2 highest conviction ideas? The first from a purely technical/chart-based perspective and the second from a fundamental/macro-based view.

And

Eoin I trust this message finds you well! I have a question: I have some funds left in South Africa and I know its still early days for them in terms of the crisis, but the banking sector has been quite severely hit. I was considering buying some the banks, i.e. Nedbank, ABSA, Standard Bank and First Rand. I would love your view on that. Thanks a lot.

Eoin Treacy's view -

Here are three examples of emails I have received in the last week which are important from a number of perspectives. The first is I have received more emails in the last three weeks from subscribers, than in the preceding three months. That is normal when uncertainty prevails and was to be expected.

The tone of the emails is what I find particularly interesting and it is something that needs to be highlighted to investors. Almost everyone is in the market to buy the dip. That’s understandable. It has been the go-to investment strategy of the last decade and there is no denying there have been some exceptional value opportunities in the dividend aristocrats’ and gold miners’ sectors. However, when everyone reaches the same conclusion at the same time it is usually the time to think as a contrarian.



This section continues in the Subscriber's Area. Back to top
April 21 2020

Commentary by Eoin Treacy

Our New World 2020

Thanks to a subscriber for this report from Mary Meeker 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. 

This rise of populism has made this a more likely scenario than it was following the financial crisis. Whatever the economic medicine, the health and wellbeing of consumers is likely to be at the centre rather than the periphery of the solution. The alternative would be revolution.



This section continues in the Subscriber's Area. Back to top
April 21 2020

Commentary by Eoin Treacy

Musings From the Oil Patch April 21st 2020

Thanks to a subscriber for this report from Allen Brooks at PPHB which may be of interest. Here is a section:

As George Friedman discussed in his The Storm Before The Calm, the U.S. operates on two long cycles – the socioeconomic cycle and the institutional cycle.  The first works on a 50-year time frame, while the other is about 80-years long.  The socioeconomic cycle’s last shift “happened around 1980, when the economic and social dysfunction that began in the late 1960s culminated with a fundamental shift in how the economic and social systems functioned.”  This is referred to as the Reagan Revolution, which brought lower tax rates that addressed a crucial issue facing the U.S., which was a lack of capital.  Today, we suffer from too much capital and a lack of investment opportunities, which Mr. Friedman attributes to a decline in productivity growth as we experience a falloff in innovation.  There have been a number of studies and books written about why the nation’s productivity has declined.  

The institutional cycle deals with how the federal government’s operation and relationship to society changes.  It’s first 80-year cycle began with the Revolutionary War and the drafting of the Constitution and ended with the Civil War in 1865.  The second cycle extended to World War II.  The current cycle will end around 2025, about the same time the current socioeconomic cycle will end, leading, in Mr. Friedman’s view, to extreme chaos that will force changes on the nation that will bring social calm and economic prosperity in the 2030s, and thereafter.   

Mr. Friedman makes a compelling case in studying how our economy, government, society and geopolitical role in the world have evolved and changed since the arrival of the first colonists in the late 1500s and early 1600s.  Without expounding on his discussion, the nature of cycles, something we pay attention to in the business, investment and energy worlds, has driven us to think about how the future may evolve.  

Eoin Treacy's view -

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

There is a lot of talk in financial blogs about the prospect of a debt jubilee where governments get together and decide that the liabilities have become so large that the totals will be reduced in an abrupt manner and a new money will be created. 



This section continues in the Subscriber's Area. Back to top
April 20 2020

Commentary by Eoin Treacy

Video commentary for April 20th 2020

Eoin Treacy's view -

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

Some of the topics discussed include: WTI crude oil trades at huge contango ahead of May expiry, natural gas, uranium, nickel, wheat steady, stock market susceptible to consolidation, bonds steady, China deploys additional stimulus. 



This section continues in the Subscriber's Area. Back to top
April 20 2020

Commentary by Eoin Treacy

Oil Plunges Below Zero for First Time in Unprecedented Wipeout

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

The price on the futures contract for West Texas crude that is due to expire Tuesday fell into negative territory -- minus $37.63 a barrel. That’s right, sellers were actually paying buyers to take the stuff off their hands. The reason: with the pandemic bringing the economy to a standstill, there is so much unused oil sloshing around that American energy companies have run out of room to store it. And if there’s no place to put the oil, no one wants a crude contract that is about to come due.

Underscoring just how acute the concern over the lack of storage is, the price on the futures contract due a month later settled at $20.43 per barrel. That gap between the two contracts is by far the biggest ever.

“The May crude oil contract is going out not with a whimper, but a primal scream,” said Daniel Yergin, a Pulitzer Prize-winning oil historian and vice chairman of IHS Markit Ltd.

Eoin Treacy's view -

The May contract expires tomorrow and as of today was still trading 108,593 contracts that will need to roll or be delivered. That’s going to result in massive trading losses for anyone looking to roll and the incredible decline today suggests a surge for the exits among traders.



This section continues in the Subscriber's Area. Back to top
April 20 2020

Commentary by Eoin Treacy

Email of the day on mean reversion risk in precious metals:

Good afternoon Eoin, I am enjoying the daily video and the written commentaries. Regarding your medium and long-term view that the price of gold is and will be reflecting the increasing and competitive debasement of currencies, but that presently gold is in an overbought phase, please explain what you would consider the maximum drawdown in gold to undo the overbought situation.

Would that imply that gold should e.g., give up about $170 (10%) and reach approximately $1530 which I believe is the 200 SMA? Same question for silver. In what time frame do you expect the undoing of the overbought situation for gold (and silver) to happen? Days, weeks, months? How quickly would the bull market resume?

It seems that the script of the last financial crisis is happening at 4-5 times the speed of 2008/2009...) What likelihood do you see that governments and central banks in the end will intervene (on an international scale) to either confiscate or prohibit the private holding of gold and silver and/or otherwise make sure that the nuisance of gold and silver as uncontrolled non-fiat money disappears? Roosevelt and others like Hitler, Soviet Union already proved that this can be successfully implemented ...Second addition to my first message/questions: To what extent did the rally in stocks trigger yesterday's and today's downdraft in the PM sector? Thank you!

Eoin Treacy's view -

Thank you for this series of questions which may be of interest to subscribers. The mantra that delivers the best returns is “don’t pay up for commodities” and that applies even in a bull market. Gold and the precious metals generally are prone to volatility and often posted failed upside breaks. Chasing the market higher will only work on the relatively rare occasions when the trend accelerates; whereas more often than not precious metals trends adopt a sawtooth profile.



This section continues in the Subscriber's Area. Back to top
April 20 2020

Commentary by Eoin Treacy

Email of the day on the spread between Comex futures and London spot gold prices:

Hi Eoin, could you please comment on the pricing discrepancies between Comex and spot? It is playing havoc with the Gold ETFs which are not reflecting the underlying as well as they should be.

Eoin Treacy's view -

Thank you for this question which may be of interest to other subscribers. Speculation about what exactly is causing this arbitrage is running hot in the media. The lack of liquidity among market makers, the shortage of refined gold, the break in shipping schedules for the metal and fears about counterparty risk among London bullion banks are all contributing to the historically wide spread.



This section continues in the Subscriber's Area. Back to top
April 20 2020

Commentary by Eoin Treacy

Email of the day on the lead time to develop a vaccine

Eoin, you are an optimist. I hope you will be proven right! for another point of view read the article from today's New York Times: "The Coronavirus in America: The year Ahead". One factoid: the record time for producing a vaccine is 4 years, for mumps.

Eoin Treacy's view -

Thank you for this email and I agree the New York Times article certainly paints a gloomy picture of potential success rates with developing vaccines. I thought the most useful portion of the article was to highlight just how patchy information relating to the COVID-19 virus really is.



This section continues in the Subscriber's Area. Back to top
April 20 2020

Commentary by Eoin Treacy

Email of the day on uranium

Thanks for the insightful video, as always, Eoin. Have you had a look at the uranium sector lately? The spot price has jumped along with the miners, including Cameco and Denison which jumped 26% yesterday. Is the long-awaited supply crunch coming into play and how long will the uptrend last? Your thoughts on this will be appreciated.

Eoin Treacy's view -

Thanks for this question which may be of interest to subscribers. The shutting down of both transportation and some mining operations has created a short-term supply shortage which is supporting the outperformance of uranium. It’s the number one best performing commodity this year but the supply shortage is unlikely to last beyond the lockdown phase of the virus-induced recession.



This section continues in the Subscriber's Area. Back to top
April 17 2020

Commentary by Eoin Treacy

April 17 2020

Commentary by Eoin Treacy

A Restaurant Meal Is Going to Become a Luxury Good

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

 

Although it's true that millions of hospitality workers now are out of work and available for immediate employment, the generous unemployment benefits passed by Congress in the $2 trillion rescue bill may make some of them less interested in going back to their old jobs. Ernie Tedeschi of Evercore ISI notes that between state insurance and the federal supplements, the average weekly unemployment benefit for workers in states such as New York, California, Washington and Massachusetts will be more than $1,000. That's the equivalent of $25 an hour for a 40-hour work week. For restaurant workers who earn significant tips, returning to work may offer enough economic incentive to be worth it. For lower-paid dishwashers and line cooks, unemployment might be a better deal -- at least through the end of July, when the benefits are set to expire. That means restaurants may have to pay much higher wages than in the pre-virus market level to staff up.

Combining these two dynamics -- restaurants aren't going to be able to serve as many patrons and they will have higher labor costs -- and it's likely that many restaurants won't survive. The most obvious way for the survivors to make up for this is to charge more for the same menu offerings, perhaps much more. The good news for the restaurants that do survive is that between fewer seats available at each restaurant, and fewer restaurants competing for customers, eating out might become a scarce, coveted experience, particularly after weeks or months of much of the population sheltering in place.

Eoin Treacy's view -

Not everyone is a good cook and few are ever likely to be. If eating out and receiving full service becomes inordinately expensive then the law of supply and demand means dark kitchens will proliferate. Uber was helping to pioneer this trend ahead of the virus outbreak and the sector is likely to pick up a lot of the slack from fast casual dining.



This section continues in the Subscriber's Area. Back to top
April 17 2020

Commentary by Eoin Treacy

China Suffers Historic Economic Slump With Hard Recovery Ahead

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

Much depends now on whether consumers regain a willingness to spend amid nervousness that the virus can stage a comeback as controls are relaxed. Evidence from the epicenter of the virus, Wuhan, suggests progress will be slow.

While factories around Wuhan are working around the clock to get back up to speed, the recovery of consumer-focused businesses won’t be straightforward. People are cautiously taking to the streets again, but they remain subject to curbs on their movements aimed at keeping the virus at bay.

The nation’s per capita disposable income declined by 3.9% in real terms in the first quarter from a year ago, the first contraction since the data was available in 2014.

Consumer caution “continues to restrain demand, and thus activity more broadly,” said Frederic Neumann, co-head of Asia economic research at HSBC Holdings Plc in Hong Kong. “This is reminder also for other economies of the arduous path to full recovery even after full lockdowns are removed. All this points to the need for a more determined policy push on both the monetary and fiscal fronts to ‘shock the system’ and get activity back up to its earlier vitality.”

Eoin Treacy's view -

Personal consumption is going to take a hit because if Chinese consumers have learned anything from the six-week lockdown it is they are on their own when to comes to survival. Western countries are boosting the provision of cash to citizens to help them make it through the loss of income phase. Those kinds of support do not exist in China and therefore the key lesson is to boost savings.



This section continues in the Subscriber's Area. Back to top
April 17 2020

Commentary by Eoin Treacy

Vietnam, China Agree to Boost Border Trade Amid Virus Outbreak

This article by Nguyen Dieu Tu Uyen for Bloomberg may be of interest to subscribers. Here is a section:  

China agreed to resume normal customs procedures at its border gates after Vietnamese transport trucks endured extensive backups due to Chinese measures designed to counter the spread of the novel coronavirus, according to a statement on the website of Vietnam’s trade ministry.

Chinese authorities will ease some of the procedures to make it easier for Vietnamese trucks loaded with agricultural products to more quickly cross the border into China, according the statement. The agreement came during a conference call between Vietnam’s Minister of Industry and Trade Tran Tuan Anh and Chinese officials, it said.

Eoin Treacy's view -

Not all emerging markets are going to be evenly affected by the coronavirus in just the same way that Greece and Germany skirted the worst of the outbreak while Italy and Spain were hit particularly hard. With the infection rate cresting in a number of markets, the big question is when it will crest in the emerging markets. The relative strength of their respective currencies is about the best barometer we have for how economies are being affected. 



This section continues in the Subscriber's Area. Back to top
April 17 2020

Commentary by Eoin Treacy

April 16 2020

Commentary by Eoin Treacy

Video commentary for April 16th 2020

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 replacing short-term oversold with short-term overbought condition buy many global and mid cap sectors have experienced modest rallies. Banks continue to underpeform, competitive currency devaluation, gold steady, oil weak, emerging market risk. 



This section continues in the Subscriber's Area. Back to top
April 16 2020

Commentary by Eoin Treacy

Global Strategy Weekly April 16th 2020

Thanks to a subscriber for this note by Albert Edwards for Soc Gen which maybe of interest. Here is a section:

Eoin Treacy's view -

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

Central banks have been particularly firm in stating they will do whatever it takes to support the market. If the measures currently in place do not succeed in that ambition, I have no doubt purchasing equities will be a part of future suite of policy initiatives.



This section continues in the Subscriber's Area. Back to top
April 16 2020

Commentary by Eoin Treacy

Early peek at data on Gilead coronavirus drug suggests patients are responding to treatment

This article by Adam Feuerstein for statnews.com may be of interest to subscribers. Here is a section:

Early peek at data on Gilead coronavirus drug suggests patients are responding to treatment - This article by Adam Feuerstein for statnews.com may be of interest to subscribers. Here is a section:

A Chicago hospital treating severe Covid-19 patients with Gilead Sciences’ antiviral medicine remdesivir in a closely watched clinical trial is seeing rapid recoveries in fever and respiratory symptoms, with nearly all patients discharged in less than a week, STAT has learned.

Remdesivir was one of the first medicines identified as having the potential to impact SARS-CoV-2, the novel coronavirus that causes Covid-19, in lab tests. The entire world has been waiting for results from Gilead’s clinical trials, and positive results would likely lead to fast approvals by the Food and Drug Administration and other regulatory agencies. If safe and effective, it could become the first approved treatment against the disease.

The University of Chicago Medicine recruited 125 people with Covid-19 into Gilead’s two Phase 3 clinical trials. Of those people, 113 had severe disease. All the patients have been treated with daily infusions of remdesivir. 

“The best news is that most of our patients have already been discharged, which is great. We’ve only had two patients perish,” said Kathleen Mullane, the University of Chicago infectious disease specialist overseeing the remdesivir studies for the hospital.

Eoin Treacy's view -

One of the biggest challenges with COVID-19 is hospitals had no treatment for it so they were flying blind with how they manage patients with severe symptoms. That has resulted in prolonged stays in hospital which has gummed up the medical systems of a significant number of countries.



This section continues in the Subscriber's Area. Back to top
April 16 2020

Commentary by Eoin Treacy

GM Plots an EV Comeback Inside Its Secretive Battery Lab

This article by Bill Howard for Extreme Tech may be of interest to subscribers. Here is a section:

In 2019, about 3 million pickups were sold out of 17 million vehicles. Nobody knows the size of the EV pickup market initially, or how badly EV range suffers under a heavy load (Tesla owners have known range tanks when a Model S or Model X tows a trailer), or if buyers are willing to pay extra to get the large batteries that allow 300 t0 400 miles of range on pickups.

As for the market for all plug-in vehicles – battery electric vehicles and plug-in hybrids – the final 2019 US sales numbers for light vehicles amount to combustion-engine-only cars, 98.1 percent of the market, BEVs and PHEVs 1.9 percent.

There is some hope – among environmentalists, at least – that Americans, in the wake of the coronavirus slowdown, will appreciate the cleaner skies in major cities and adopt plug-in vehicles to keep the air clear and clean. GM’s battery R&D is for its worldwide markets, not just the US, and it may find more traction outside the US. Depending on how many people and businesses have money to spend on new cars in the next year.

At the Ultium rollout, GM cited forecasters who called for EV volumes to double between 2025 and 2030 to 3 million units annually – one in six vehicles sold – and added its belief the numbers could be “materially higher.”

Eoin Treacy's view -

The point in the above piece, that the global market influences the kind of cars US companies produce is an understatement. The most profitable market for conventional US automakers is the pick-up truck, which is a predominately North American vehicle. All other markets are heavily influenced by whatever China demands.



This section continues in the Subscriber's Area. Back to top
April 15 2020

Commentary by Eoin Treacy

April 15 2020

Commentary by Eoin Treacy

Email of the day on the size and duration of bear markets.

Hi - in light of recent stock market rise I checked how past 2 bear markets behaved and found the following:

2000 bear (2 years)

2000 Aug 2001 Mar -29%
2001 Mar 2001 May +22%
2001 May 2001 Sep -28%
2001 Sept 2002 Jan +24%
2002 Jan 2002 Aug -34%

2008 bear (18 months)
2007 Oct 2008 Mar -20%
2008 Mar 2008 May +15%
2008 May 2008 Dec -44%
2008 Dec 2009 Jan +18%
2009 Jan 2009 Mar -28%

The second (2008) bear market was deeper and shorter. How do you anticipate 2020 bear market evolving? Will it be even deeper and shorter? Thank you

Eoin Treacy's view -

Than you for this informative email which raises an important question about whether we are in medium-term correction within a broader secular bull market or is this a major market top which denotes the end of the secular bull market?

The peak in 2000 was the end of a 20-year secular bull market and represented the climax of a liquidity fuelled mania in the technology, media and telecoms sectors. The 2007 peak occurred within the context of a secular bear market which we defined a generational long process of contracting valuations and rising dividend yields.



This section continues in the Subscriber's Area. Back to top
April 15 2020

Commentary by Eoin Treacy

Email of the day - on support for the high yield debt market and who pays?

It goes beyond even this though, and the Fed now has powers to buy the actual junk rated ETFs, direct from the market. So yes, they can directly buy the debt of the fallen angels like Ford and Macy’s but pre-existing junk bond issuers also stand to benefit. There really does seem to be no end to the rescue packages served up by Governments across the world.

The question remains though as to who will ultimately pay for this? In the U.K. we have only just exited an era of deeply unpopular austerity. Do we delve straight into more of the same? With a post-election promise of massive equalisation between North and South, I can’t see how that sticks. Or are we looking at increased taxes on the wealthy through direct asset-based taxes? Someone has to pick up the tab after all.

Eoin Treacy's view -

Thank you for this question which I believe many people are asking and not just in the UK. I agree there is no appetite for higher taxes. The populist wave that has swept the status quo aside in many countries, was powered by disaffection with globalisation, austerity and the hollowing out of the middle class.



This section continues in the Subscriber's Area. Back to top
April 15 2020

Commentary by Eoin Treacy

Dalio Says Investors 'Crazy' to Hold Government Bonds Now

This article by Katherine Burton and Erik Schatzker for Bloomberg may be of interest to subscribers. Here is a section:

“This period, like the 1930-45 period, is a period in which I think you’d be pretty crazy to hold bonds,” Dalio said Wednesday on the Bloomberg Invest Talks webcast. “If you’re holding a bond that gives you no interest rate, or a negative interest rate, and they’re producing a lot of currency and you’re going to receive that, why would you hold that bond?”

Central bankers around the world are playing the most instrumental role trying to keep the coronavirus recession from deepening into a depression. Already, the Federal Reserve balance sheet has ballooned by almost 50% since the end of February to a record $6 trillion, and there may be trillions more in stimulus spending from the U.S., Europe and Asia. So far, the Fed’s buying has helped to push Treasury yields down.

While Dalio may not like bonds, he thinks governments have to employ every bit of monetary ammunition they can muster to compensate for the collapse in income and spending resulting from the pandemic. While economists are divided on how long and painful the recession will be, Dalio thinks about it differently: as a $20 trillion “hole” in the global economy that needs to be filled. “There’s no choice,” said Dalio, whose firm manages about $160 billion. “If you don’t do that, the consequences are enormous.”
 

Eoin Treacy's view -

It is looking increasingly like more of the G-7 are going to follow Japan’s lead and adopt some form of yield curve stabilisation. That suggests the spread will remain positive but only because central banks are manipulating both ends of the curve. What Ray Dalio is referring to is a loss of faith in the value of the currency in which bond coupons and maturities are being paid back in.



This section continues in the Subscriber's Area. Back to top
April 14 2020

Commentary by Eoin Treacy

Video commentary for April 14th 2020

April 14 2020

Commentary by Eoin Treacy

Gold Rallies Toward $1,800 on 'Massive Currency Debasement'

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

Overall, gold still has room to run, according to Hans Goetti, founder and chief executive officer of HG Research.

“What’s happening here is that the Fed is expanding its balance sheet and every other central bank in the world is doing the same,” he told Bloomberg TV. “What you’re looking at is massive currency debasement in the long term. That’s the major reason why gold is higher, and I would think that over the next few weeks or months, we’re probably going to retest the high that we saw in 2011.”

The Federal Reserve’s massive U.S. monetary program and the fiscal stimulus “could see long-end rates rise during the recovery phase, but not without rising inflation expectations, which should keep real rates suppressed,” TD Securities analysts said in an emailed note. “In this context, we suspect that investment demand for gold will continue to rise as capital seeks shelter from a long-term environment in which real rates are negative.”

Negative real rates boosts the appeal of non-interest-bearing bullion.

Gold’s latest upswing has come even as risk sentiment received a boost after China’s trade data beat estimates, while the pace of coronavirus infections has slowed in some countries, with the focus shifting toward how lockdowns can be eased. President Donald Trump said he has “total” authority to order states to relax social distancing and reopen their economies.

Eoin Treacy's view -

The rationale being used by governments everywhere to justify massive spending programs is “this is not the time to worry about deficits.” The stock market, particularly the FAANG sector continues to rebound on the abundance of free money but the bigger picture is this is being achieved by rapidly debasing the purchasing power of fiat currencies.



This section continues in the Subscriber's Area. Back to top
April 14 2020

Commentary by Eoin Treacy

JPMorgan, Wells Fargo Offer Reality Check as Virus Mauls Profit

This article by Michelle F. Davis and Hannah Levitt for Bloomberg may be of interest to subscribers. Here is a section:

“We haven’t actually seen the stress emerge,” she said on a call with analysts. “What we took in the first quarter was our best estimate of future losses.”

Banks also have to determine how many lending commitments will turn into funded loans as companies tap previously unused revolving credit facilities. Wells Fargo CEO Charlie Scharf said commercial clients had tapped $80 billion of loan commitments just in March. JPMorgan said customers had drawn more than $50 billion of existing revolvers and were approved for $25 billion in new credit in March.

U.S. banks have maintained that they are much better positioned for this crisis than in 2008. JPMorgan’s key capital ratio was 11.5%, within its medium-term target range. Wells Fargo’s was 10.7%, above its internal target. Still, shares of both banks slipped in New York trading by 10:30 a.m. in New York as the broader market rose, with optimism the pandemic is slowing driving up the S&P 500 more than 2%.

“We like to be conservative in reserving,” Dimon said. “Plan for the worst so you can handle it.”

Eoin Treacy's view -

The virus did not impact economic activity until about the middle of February for most countries, so 1st quarter earnings include 3 weeks at most of lockdown conditions for US companies. Ahead of the lockdowns economic activity was still expanding, after the lockdowns it will take time to recover but we won’t get 2nd quarter earnings until July. However, it is reasonable to conclude banks are going to be where some of the heaviest impacts from constraining consumer ability to service debt are going to hit.



This section continues in the Subscriber's Area. Back to top
April 14 2020

Commentary by Eoin Treacy

Email of the day on investment trust data

I am following your features on investment trusts with interest. I was hoping to be able to locate ten year average discounts on the Association of Investment Trusts Website  . Unfortunately, the format has changed since I last looked at it several years ago. However, there is a wealth of information on the site including a section on Dividend Heroes as well as performance stats on individual trusts. Thank you for your efforts.

Eoin Treacy's view -

Thanks for this informative email which I believe will be of interest to subscribers. The project I am currently working on is to create a comprehensive database of UK listed investment trusts which includes the number of years since their last dividend cut, dividend yields, discount to NAV and the 10-year average discount/premium to NAV. I’m about 75% complete. Once complete I will post the results on the site and envisage updating them monthly.



This section continues in the Subscriber's Area. Back to top
April 09 2020

Commentary by Eoin Treacy

April 09 2020

Commentary by Eoin Treacy

April 09 2020

Commentary by Eoin Treacy

Looking for Leverage to Gold; Reviewing Common Metrics Used for Equity Selection

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

As we wrote in our March 24 industry note, we see extreme monetary and fiscal stimulus leading to dollar deflation. In this environment, similar to the set up in 2008, we expect gold price to trade materially higher and we have raised our gold price forecast to $2,500/oz. With higher prices, gold miners stand to benefit from substantial margin growth, assuming that industry-specific cost inflation remains low. In our opinion, investors should be looking to build positions in gold-related equities that give them exposure to gold. In our experience, investors will gravitate to large-cap producers and select those with the largest annual production of gold. Investors will also look to published gold reserves (and resources) in the ground, and selecting those equities with the largest accumulation. While neither of these section methods is without its flaws, we have reviewed our coverage and aggregated this data. As we indicated in our January 30 gold industry note (“Strategies for Outperforming the Gold Miner ETFs”), we continue to recommend investors build a concentrated portfolio of our favorite names that offer gold leverage, but also minimize exposure to production interruptions and provide exposure to the M&A cycle that historically accompanies a gold bull market.

Eoin Treacy's view -

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

This is not the time to worry about deficits” are likely to prove fateful words 18 months from now. The measures being adopted by the world’s governments, in tandem with their respective central banks, are sowing the seeds for future inflation.

That’s not a short-term risk because the velocity of money is at an unprecedented low but stimulus often proves sticky and any improvement in economic conditions is going to result in a surfeit of money sloshing around.



This section continues in the Subscriber's Area. Back to top
April 09 2020

Commentary by Eoin Treacy

Fed Seizes Control of Entire U.S. Bond Market

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

The Federal Reserve is not leaving any corner of the U.S. bond market behind in this crisis. There’s no other way to interpret the central bank’s sweeping measures announced Thursday, which together provide as much as $2.3 trillion in loans to support the economy. It will wade into the $3.9 trillion U.S. municipal-bond market to an unprecedented degree, can now purchase “fallen angel” bonds from companies that have recently lost their investment-grade ratings, and has expanded its Term Asset-Backed Securities Loan Facility to include top-rated commercial mortgage-backed securities and collateralized loan obligations.

This is new and close to what I’ve argued for over the past year. The Fed’s facility will buy muni debt directly from issuers that’s sold for cash-flow purposes and matures no later than 24 months from the date of issuance. I had figured that for simplicity the central bank would make this available only to
states, but the Fed decided that in addition to states and Washington, D.C., it would also buy notes from cities with more than 1 million residents and counties with more than 2 million. The Treasury Department is making an initial $35 billion equity investment, and the vehicle can snap up as much as $500 billion of eligible debt.
 

Eoin Treacy's view -

The buck has to stop somewhere and the support mechanisms announced following the lockdowns resulted in the burden of fiscal supports falling unevenly on different portions of the market.



This section continues in the Subscriber's Area. Back to top
April 09 2020

Commentary by Eoin Treacy

Saudis, Russians End Oil-Price War With Deep Output Cut

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

Saudi Arabia and Russia ended a devastating oil price war on Thursday, agreeing to slash output together with other members of the OPEC+ alliance in an effort to lift the market from a pandemic-driven collapse.

The tentative deal came after strong pressure from U.S. President Donald Trump and American lawmakers, who fear thousands of job losses in the U.S. shale patch, not to mention Wall Street chaos. The price crash has also threatened the stability of oil-dependent nations and forced companies from Exxon Mobil Corp. to small independents to rein in spending.

OPEC and its allies, meeting by video conference, agreed to cut production by about 10 million barrels a day in May and June, delegates said, asking not to be identified ahead of an official statement. Saudi Arabia and Russia, the biggest producers in the group, will each take output down to about 8.5 million a day, with all members agreeing to cut supply by 23%, one delegate said.

“Both Saudi and Russia were going to have to cut anyway, and these cuts allow them to win political points too,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd.

While the headline cut equates to a historic reduction of about 10% of global supply, it makes up just a fraction of the demand loss, which some traders estimate at as much as 35 million barrels a day.

Eoin Treacy's view -

The oil price turf war is over, for now, but unfortunately the cuts announced are not near enough to rebalance the market in the near term. The very fact the Federal Reserve supplemented its stimulus with an additional $2 trillion in spending today, only a week after the last announcement is a testament to how weak economic activity is, even if it turns out to be short-term in nature.



This section continues in the Subscriber's Area. Back to top
April 09 2020

Commentary by Eoin Treacy

April 09 2020

Commentary by Eoin Treacy

Email of the day on vitamin C and tips on recovery regimes

Trust you are keeping safe in your home. Here is a bit more on Vitamin C worth reading. I have been taking 5000mg( sodium ascorbate) for years and I can’t remember getting the common cold or flu going back years. I have never had a flu jab. I am definitely a convert. I won’t bother checking the subject matter with doctors because these guys whilst they are good in their respective disciplines are not trained in the area of nutrition. 

And

IMPORTANT From a Respiratory Therapist Friend

They are calling on Respiratory therapists to help fight the Corona virus. I am a retired one, now too old to work in a hospital setting. I'm going to share some common sense wisdom for those with the virus, and trying to stay home. If my advice is followed as given, you will improve your chances of not ending up in the hospital on a ventilator.

This applies to the otherwise healthy population, so use discretion,

(1) Only high temperatures kill a virus, so let your fever run high. Tylenol, Advil, Motrin, Ibuprofen etc. will bring your fever down allowing the virus to live longer. They are saying that ibuprofen, Advil etc. will actually exacerbate the virus. Use common sense and don't let fever go over 103. If it gets higher than that, take your Tylenol, not ibuprofen or Advil to keep it regulated. It helps to keep house warm, and cover up with blankets so body does not have to work so hard to generate the heat. It usually takes about 3 days of this to break the fever.

(2) The body is going to dehydrate with the elevated temperature, so you must rehydrate yourself regularly, whether you like it or not. Gatorade with real sugar, or Pedialyte with real sugar for kids, works well. Why the sugar? Sugar will give your body back the energy it is using up to create the fever. The electrolytes and fluid you are losing will also be replenished by the Gatorade. If you don't do this, and you end up in the hospital, they will start an IV and give you D5W (sugar water) and Normal Saline to replenish electrolytes. Gatorade is much cheaper, pain free, and comes in an assortment of flavors.

(3) You must keep your lungs moist. Best done by taking long steamy showers on a regular basis, if your wheezing or congested use a real minty toothpaste, and brush your teeth while taking the steamy shower, and deep breath through your mouth. This will provide some bronchial dilation and help loosen the phlegm. Force yourself to cough into a wet wash cloth pressed firmly over your mouth and nose, which will cause greater pressure in your lungs forcing them to expand more and break loose more of the congestion.

(4) Eat healthy and regularly. Gotta keep your strength up.

(5)  Once the fever breaks, start moving around to get the body back in shape and blood circulating.

(6) Deep breathe on a regular basis, even when it hurts. If you don't, it becomes easy to develop pneumonia. Pursed lip breathing really helps. That's breathing in deep and slow; then exhaling through tight lips as if your blowing out a candle. Blow until you have completely emptied your lungs, and you will be able to breath in an even deeper breath. This helps keep lungs expanded as well as increase your oxygen level.  

(7) Remember that every medication you take is merely relieving the symptoms, not making you well.

(8) If you have difficulty breathing, chest pain or pressure go to ER. Please wear a mask.

I've been doing these things for myself and my family for over 40 years, and I've kept them out of the hospital. All are healthy and still living today.

Thank you all for sharing this with family & friends. We gotta help one another.

Eoin Treacy's view -

Thank you for this first hand account and we are all well. My girls are looking forward to getting off of online school for their Easter holiday. They are both in agreement online classes are the closest thing to make believe one might imagine. Either that or what they spend most of their time at school doing is a complete waste of time. After lockdowns end, I suspect the number of people opting for home schooling, at least in the early years, will surge.



This section continues in the Subscriber's Area. Back to top
April 08 2020

Commentary by Eoin Treacy

April 08 2020

Commentary by Eoin Treacy

China Urbanization 2.0

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

April 08 2020

Commentary by Eoin Treacy

Musings from the Oil Patch April 7th 2020

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

When we look at the company’s costs and expenses per barrel of oil equivalent (BOE), we find they totaled $14.01 for 2019.  Based on the company’s average oil price (which was not adjusted for its gas output given its low price), this translates into a cash profit margin per BOE of $36.88.  If we include the cost of depreciation, depletion and amortization expense (largely a non-cash expense), but indicative of the amount of investment the company needs to make to insure it replaces produced barrels and remains an ongoing enterprise, the cash profit per BOE falls to $19.06, or 37.4% of the average selling price after adjusting for hedging.  That is a pretty attractive return.  

With WTI oil futures prices falling to $20 per barrel, and assuming the location and quality discount remains at $6, Whiting Petroleum was looking at generating no positive cash from the oil it produced.  It also assumes cash operating expenses remain at 2019 levels.  This means Whiting Petroleum would be unable to invest in new exploration and development, which makes the company a self-liquidating entity.  In that condition, the company essentially has no value.  The bankruptcy filing indicates that reality, as current shareholders will only retain 3% of the shares of the reorganized company, as the debt holders will hold 97% in return for agreeing to cancel their bonds.  

Under today’s very depressed oil and gas prices, few producers will be able to fund operations.  If the companies have a significant amount of debt on their balance sheets, they will face serious challenges to sustain their businesses if they do not address their financial leverage.  To understand the precarious health of the producer sector, energy consultant Rystad has prepared a chart showing the debt maturity schedule and annual interest expense for a group of 29 significant producers.  While this represents only 29 producers, we believe it is indicative of the financial condition of the balance of the producer sector.  

Eoin Treacy's view -

The only way the unconventional oil sector is going to make it through the current crisis is to reduce the cost of production. There is no getting around the fact hydraulic fracturing and horizontal drilling operations are considerably more expensive than conventional drilling. Technological innovation will help improve that spread but it will be impossible to eliminate. Therefore, scale and proximity to end markets are the primary route to reducing costs.



This section continues in the Subscriber's Area. Back to top
April 08 2020

Commentary by Eoin Treacy

Eye on the Market

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

Eoin Treacy's view -

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

The most useful way of thinking about the current environment I have seen was provided by a friend, Akhil Patel, who described it as a recession in reverse.

His rationale is a recession generally begins with some portions of the economy shutting down and spreads to increasingly more as the contraction expands. The recession eventually ends when the central bank overreacts and cuts rates aggressively.



This section continues in the Subscriber's Area. Back to top
April 08 2020

Commentary by Eoin Treacy

Email of the day on vitamin C and supporting the immune system

On Coronavirus In 1970, the late eminent medical research scientist and Nobel prize winner Linus Pauling made quite a startling finding, albeit based on a fairly small sample of school children on vacation in the swiss alps. He found that there was a statistically significant group that were taking daily high doses of vitamin C which had a much lower infection rate with the common cold virus. Vitamin C has subsequently been found to help the cellular production of Interferon. Common cold viruses are also in the family of coronaviruses. Just a thought

Eoin Treacy's view -

Thank you for this insightful comment. There have been stories from hospitals that vitamin-C is effective. I have also talked to rheumatologists who dismiss the claim it is possible to affect the immune system. That definitely seems to fly in the face of the fact that people have taken everything from oranges to lemons as home remedies for colds for centuries.

For example, my mother never treated a cold or flu with anything more than a hot drink made from fresh lemon juice, honey and sugar as well as the strong belief it was going to improve her symptoms. She maybe took one ibuprofen a year.

This interview, kindly forwarded by a subscriber, with Dr. Shiva Ayyadurai, who is running for the US Senate, is on the fringe of systems biology but he is making a number of compelling arguments about the lack of systems based biology in the medical field.

I was on a conference call today with someone who has recovered from the coronavirus. He was on a ski trip in Colorado with ten families in total. Eight people contracted the virus and none passed it the other members of their families. Testing was hard to get and no one has had an antibody test yet.

Eventually, we are going to get a vaccine for the coronavirus and that will be useful for people with compromised immune systems. There is no argument to counter the advice we should be looking after our personal wellbeing through sound nutrition. The vast majority of people are going to work through an infection with little need for hospital assistance.



This section continues in the Subscriber's Area. Back to top
April 07 2020

Commentary by Eoin Treacy

April 07 2020

Commentary by Eoin Treacy

Nobody ever pressed "Stop" before

Thanks to Iain Little and Bruce Albrecht for this insightful report which may be of interest to subscribers. Here is a section:

Eoin Treacy's view -

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

Let’s set aside for the moment questions of timing and think about what changes we can expect to be durable from the virus-induced recession.

The first thing that springs to mind is a loss of income which will take a while to recover. For some that will be quite soon, for others who need to find a new job it will take longer. As we go from full employment in many countries to something less that necessarily represents lower growth overall and by extension lower corporate earnings.



This section continues in the Subscriber's Area. Back to top
April 07 2020

Commentary by Eoin Treacy

Cyclical Bear Ending; Secular Bull to Resume; Investor Feedback & FAQs

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

Eoin Treacy's view -

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

The idea of Modern Monetary Theory scandalised investors a year ago but very much the reality today as central banks fall over themselves to accommodate the efforts of governments to spend their way out of the trouble. My contention since early this year was the coronavirus will be temporary but the monetary and fiscal effects will be very long lasting.



This section continues in the Subscriber's Area. Back to top
April 07 2020

Commentary by Eoin Treacy

Welcome to the $1.5 Trillion Minefield of Defaulted Chinese Debt

One of the biggest challenges of buying Chinese corporate debt is working out the borrower’s ties to the government, says Soo Cheon Lee, chief investment officer at SC Lowy, a credit-focused banking and investment firm. “China is not about the financials, it’s about relationships,” Lee says. “That’s driving a lot of the liquidity available to a company. You really need to understand the local landscape, and it’s difficult for foreign players to understand who has that connection or support from the state.”

Sometimes a Chinese company will appear to be in dire straits, only to come up with the cash for a debt payment at the last minute, Lee says. “For most of the companies in Asia, we know two weeks before whether they have financing or if they are going to restructure,” he says. “I think it’s very unique for China to not be able to predict a default.”

Some firms are not what they appear to be, Lee says. “If you are truly a state-owned enterprise,” he says, “you will continue to get support from the government or state-owned banks. But when we look at companies that claim to be SOEs but aren’t really SOEs, we see they’re having some difficulties.”

Eoin Treacy's view -

I think a handy rule of thumb for anyone thinking of dipping a toe in China’s distressed debt markets is “state support is a precondition, not a nice to have”. $1.5 trillion in defaulted debt is a juicy target provided covenants can be enforced. The extent to which that is possible in an autocracy is to ascertain how much the ruling families might be inconvenienced by a default.



This section continues in the Subscriber's Area. Back to top
April 06 2020

Commentary by Eoin Treacy

Video commentary for April 6th 2020

Eoin Treacy's view -

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

Some of the topics discussed include: FAANGs outperform by a wide margin while other markets unwind deep oversold conditions, mortgage servicers under extreme pressure increases chance of additional stimulus, Dollar steady but gold outperforming. bond ease.



This section continues in the Subscriber's Area. Back to top