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
July 05 2018

Commentary by Eoin Treacy

Video commentary for July 5th 2018

July 05 2018

Commentary by Eoin Treacy

Email of the day on when it is best to hold cash:

I’d love to join you in China. I’ve not been there since 1996 but went frequently between 1983 and 1990. Never made money there but that did not quell my belief in China and its people. Since my last email some three months or so again when I suggested that it might make sense to hold more cash, you have (appeared to me) to become increasingly concerned about stretched values and tightening credit markets. I still hold very little cash having made the mistake of reinvesting much of what I had earlier raised. Like a rabbit in the headlights, I’m currently paralysed but feel fairly certain the sensible thing to do would be to hold cash and wait patiently. I doubt if I shall actually be able to do that. My interpretation of your views today is that you think we could see a sharp downward move in markets due to credit tightening, China and global political manoeuvring but that long term a secular bull market remains in place. What you don’t say is whether you believe it’s best to sit tight in equities or lighten, if not eliminate, equity positions and hold cash. Perhaps there’s no reason why you should. However, at times like this, I wish I had a subscription model business like yours and did not actually have to rely on my investments!

Eoin Treacy's view -

Thank you for this email and I have no reservations saying my family enjoy visiting China but we have no desire to live there. Guangzhou is my favourite city not least because of the quality of the food, friendly people and warm weather.

Your email raises a very important point about when to raise cash. First of all, however, I would like to dispel any illusion about whether our interests are aligned. A subscription business is only effective as long as it has subscribers. The only way it can survive therefore is to generate something of value, that is not easily found elsewhere, and to provide it to as wide a field as possible. We do no marketing, relying primarily on word of mouth. Therefore, I have a very clear interest in you doing well from your investments.  



This section continues in the Subscriber's Area. Back to top
July 05 2018

Commentary by Eoin Treacy

Email of the day on gold and David's health

Was that not a key-day reversal by London spot gold on July 3? Wonderful service. News about David would be welcome.

Eoin Treacy's view -

Thank you for this email and I am happy to say David is increasingly active and up to walking a few miles a day. He is as interested in the markets as ever but internet connections are not all they might be in rural Devon where he is convalescing. His heartfelt wish is to return to commenting on the market in a limited capacity at some stage but is not up to that challenge just yet.



This section continues in the Subscriber's Area. Back to top
July 05 2018

Commentary by Eoin Treacy

With Tariff Deadline at Hand, Businesses Brace for the Fallout

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

And China has been shifting soybean purchases to Brazil, from which it bought nearly 30% more beans in May than it had a year earlier, according to research firm CEIC. Chinese importers have mostly stopped buying U.S. soybeans, said Paul Burke of the U.S. Soybean Export Council, and agricultural giant Cargill Inc. worries about a longer-term shift to other suppliers.

By value, soybeans are the top item targeted by Beijing’s proposed tariffs; China imported around $14 billion in U.S. soybeans last year, according to Wind Information

In all, China’s tariffs would cover 545 categories of U.S. products, while the U.S. tariffs would cover 818 categories of products from China.

Eoin Treacy's view -

The USA and Brazil are by far the largest exporters of soybeans in the world and if China is no longer buying soybeans from the USA it will soon run out of places to buy. What happens when Brazil’s stores run out? China is not about to stop consuming tofu, soybean oil, soy sauce or other soy products. With prices at such low levels, farmers are going to be planting fewer soybeans and that will create a supply shortage at some point.



This section continues in the Subscriber's Area. Back to top
July 04 2018

Commentary by Eoin Treacy

Video commentary for July 4th 2018

Eoin Treacy's view -

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

Some of the topics discussed include: China continues to underperform with particular focus on smaller financials and brokers, copper breaks downwards, oil steady, precious metals steady, Europe continues to pause, global financial conditions are tightening. 



This section continues in the Subscriber's Area. Back to top
July 04 2018

Commentary by Eoin Treacy

China to be less interventionist on yuan than in 2015

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

While the intervention underscored Beijing’s desire to inject confidence in markets that have been roiled by the trade war fears, the sources say policymakers would tolerate a weaker yuan to help cushion a slowing economy and take some of the sting out of Washington’s proposed tariffs on its exports to the United States.

“Policymakers believe some yuan depreciation is okay, but they don’t want to see it falling below 6.9. Appropriate currency depreciation is needed given that the economy faces downward pressure,” one policy insider said.

A second policy source echoed those views: “there is no big problem with the yuan depreciation. It could be beneficial as the economy is slowing. We are able to control capital outflows. There is no need for aggressive intervention.”

Eoin Treacy's view -

China is not going to tolerate having a strong currency when it is the subject of trade tariffs aimed squarely at containing its economic and geopolitical expansion.



This section continues in the Subscriber's Area. Back to top
July 04 2018

Commentary by Eoin Treacy

Copper May Need a Very Hot Chile to Save it From a Cool China

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

Looking at LME copper's current price levels, ie near a 10-month low, it seems it would take more than the risk of labor conflict in Chile to keep the red metal from slipping further to $6,000 per tonne -- especially considering the state of the Chinese economic path, which is currently searching for answers.

Verbal intervention in the tumbling yuan and the do-or- don't nature of the deleveraging debate don't give copper longs much of a handle to grasp. In addition, there's the tense wait for the global trade-war boot to drop, and the fact that copper has risen for seven of the past ten quarters. Chilean mine strikes may have to be acrimonious and long to save Dr. Copper.

Eoin Treacy's view -

China is the world’s largest consumer of industrial resources and its markets are currently in a state of flux as measures to contain speculation are being complicated by worries about trade tariffs. Meanwhile the trend of workers demanding higher pay is not isolated to any one country so there is scope for labour disruptions but that is a not a predictable outcome.



This section continues in the Subscriber's Area. Back to top
July 04 2018

Commentary by Eoin Treacy

Replaced His Acura's Windshield. Then the Self-Driving Feature Tugged Him Into Oncoming Traffic

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

“I thought [the repair} was a pretty standard procedure,” Ash told CBC News. But after the repair was completed, when he went to drive the car, “It was actually pulling me into oncoming traffic. … it was a startling feeling to have the steering wheel actually pulling you into traffic.” Ash said he was able to control the car and get it back into lane.

According to Ash, a technician at the glass shop pointed at the camera, but Ash doesn’t recall hearing that person suggesting having the camera re-calibrated, which would most likely be at the dealership. Ash told CBC there was fine print in the invoice that talked about having the camera re-calibrated — fine print being the thing almost no one ever reads until there’s a problem. And the manual, which many people do read, says nothing about this.

Eoin Treacy's view -

It is to be hoped that assassinating the driver for using an independent vendor is a bug rather than a feature of self-driving cars. On a more serious note the obvious path to profitability for car companies is to make money on maintenance and repairs if they are constrained by the profitability of the vehicles. That is particularly relevant for electric cars where companies are losing money on every vehicle.



This section continues in the Subscriber's Area. Back to top
July 03 2018

Commentary by Eoin Treacy

Video commentary for July 3rd 2018

Eoin Treacy's view -

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

Some of the topics discussed include: China jawbones the Renminbi higher, emerging markets currencies receive some respite, platinum bounces from the $800 level following climactic decline, stock markets remain weak, bonds steadying, high yield spreads breaking out.



This section continues in the Subscriber's Area. Back to top
July 03 2018

Commentary by Eoin Treacy

China Verbally Props Up Yuan, Claims It's Not Trade-War Weaponry

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

“The PBOC is sending a verbal warning and intervention that the recent slump in the yuan was too quick,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “In the short term, the yuan could strengthen as traders take profit from the recent slide. But if the market ignores the PBOC and keeps pushing the yuan weaker quickly, the central bank may conduct heavy intervention to send a stronger signal.”

While there were no heavy-handed actions in the market, there were some signs of mild, suspected intervention during morning trading on Tuesday. Some major Chinese banks sold the dollar after the yuan slid past 6.7 per greenback, a move that strengthened the currency above that level, according to four traders who asked not to be named.

“The market sentiment is very one-sided, all the hedging and trading flows are all pointing to further weakening of the yuan," said Ryan Lam, head of research at Shanghai Commercial Bank Ltd. "The yuan is going through a very bad cycle now."

Eoin Treacy's view -

The Chinese banking sector is labouring under renewed measures to contain property market speculation and the shadow banking sector. That makes raising interest rates difficult because it would act as a headwind to the economy at a time when high yield defaults are already rising.



This section continues in the Subscriber's Area. Back to top
July 03 2018

Commentary by Eoin Treacy

Taiwan's Technology Secrets Come Under Assault From China

This article by Chuin-Wei Yap for the Wall Street Journal may be of interest to subscribers. Here is a section:

 

Taiwanese government officials and company executives say China is deliberately targeting Taiwan, whose manufacturers make chips for the biggest American companies, including Apple Inc., Nvidia Corp.and Qualcomm Inc. They say China aims both to pressure what it considers a breakaway province and to pursue its goal of reducing its reliance on foreign suppliers.

Technology-theft cases more than doubled to 21 last year from eight in 2013, according to official data. Taiwanese authorities and attorneys say they mostly haven’t indicted Chinese entities believed to be the ultimate beneficiaries, often for political reasons and because they don’t believe they would be able to enforce court judgments on the mainland.

While China manufactures most of the world’s smartphones and computers, it imports almost all the semiconductors needed to provide the logic and memory that run the gadgets. Last year, China paid $260 billion importing chips—60% more than it spent on oil. Chinese leaders want homemade chips to account for 40% of locally produced smartphones by 2025, more than quadruple current levels.

Eoin Treacy's view -

China’s Achille’s heel in a trade war is that it depends on imports of semiconductors to fuel the continued evolution of its higher value-added manufacturing sector. It can put tariffs on soybeans but it still has to import semiconductors and that is not only a business weakness but a geopolitical issue for the country.



This section continues in the Subscriber's Area. Back to top
July 03 2018

Commentary by Eoin Treacy

Email of the day on volume at major peaks and troughs

I hope this email finds you and yours in fine spirits, especially ahead of your holiday in China. In August 1982 it was pointed out to me that the Dow Jones had undergone its largest volume in transactions ever. The argument was that people had held on and held on in the hope that something would change, remembering that the Dow had traded sideways, basically between 1000 and 500 for 16 years, since the 1966 peak. That those who sold had given up the ghost and those who bought were a whole new generation of optimists. Obviously, the new generation where proved correct, as apart from a minor hiccup in 1987 the market went on a secular bull market until the year 2000.

Since that time, I have always used market volume indicators, both for stock markets and individual share prices as short and medium-term indicators of sentiment and any change therein. During today’s check through my favourite charts I noticed that 3 weeks ago the Russel 2000 and the DJ Wilshire 5000 float had their largest volume spikes in at least 5 years.

I was using your weekly charts. Do you think we might be entering a similar change in sentiment which seems to be encapsulating the majority of global stock markets at the moment?  FYI global stock market trading peaks gave me the confidence to increase my equity exposure in 2003 and 2009. Personally, I do not think that volume spikes at a low or a high are coincidence, but indicate a change of investor sentiment in this ever-intriguing global market

Eoin Treacy's view -

Thank you for this interesting observation and I agree that spikes in volume, particularly following accelerations can be indicators a panicky buying or selling.



This section continues in the Subscriber's Area. Back to top
July 03 2018

Commentary by Eoin Treacy

Email of the day on how to invest in water

With world population growing the need for clean water is growing as well. How can one invest in this sector?

Eoin Treacy's view -

Thank you for this question which comes up from time to time. Water is essential to life and in short supply where the majority of people live. However, for just that reason the majority of infrastructure is controlled by governments because it is difficult to pass through the full cost of building infrastructure to consumers. Nevertheless, there are a number of ETFs which invest in pipe, metering, waste management and utilities that offer exposure to the sector.



This section continues in the Subscriber's Area. Back to top
July 02 2018

Commentary by Eoin Treacy

Video commentary for July 2nd 2018

Eoin Treacy's view -

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

Some of the topics discussed include: China continues to underperform with banks leading lower, junk bonds break lower, emerging market currencies under pressure from higher US interest rates, Wall Street rallies off lows to finish at high of the day 



This section continues in the Subscriber's Area. Back to top
July 02 2018

Commentary by Eoin Treacy

Mexico's young democracy is facing its sternest test yet

This article by Ana Campoy for Quartz may be of interest to subscribers. Here is a section:

The most troubling and tragic threat to Mexico’s democracy is violence. Since campaigning began in September 2017, 132 politicians (jpg), including 48 official and aspiring candidates, have been killed, according to Ellekt, a consulting firm.

The most recent murder happened on June 25 in the southern state of Oaxaca. Emigdio López Avendaño, a candidate for local representative from AMLO’s party, MORENA, was gunned down along with four of his supporters.

The level of violence represents a huge spike from the run-up to last presidential election, in 2012, when less than a dozen politicians were killed, according to Ellekt. The firm’s director, Rubén Salazar, attributes the increase to state governors’ waning control over municipalities. Thanks to free elections, voters have been kicking out incumbents from governor’s offices around the country—a step forward for democracy. But at the municipal level, it’s had the perverse result of clearing the way for local strongmen to hijack the election process, sometimes at gunpoint.

“These changes have happened faster than the transformation of the political and democratic culture at the local level ,” he said in an interview in Artistegui Noticias (link in Spanish).

Eoin Treacy's view -

The three primary tenets of improving governance that we look for in an investment destination are that it have respect for minority shareholder interests, an independent judiciary and a free press. Those attributes increase the potential that economic growth will flow through to the stock market and that you will be able to get your money out when it comes time to sell.



This section continues in the Subscriber's Area. Back to top
July 02 2018

Commentary by Eoin Treacy

China Rebound's Gone Within a Day as Even Biggest Stocks Crumble

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

The list of negatives facing the $6.6 trillion stock market is growing. The economy is already showing signs of vulnerability to a U.S. trade war before new taxes are levied at the end of this week. Analysts and investors alike are struggling to keep up with the yuan’s descent, while there’s been little sign of heavy state intervention to stem the slump in either stocks or the currency. Concern is also growing over the health of the country’s massive property market.

"Sentiment will remain bad in the near term," said David Qu, economist at Australia & New Zealand Banking Group Ltd. in Shanghai. "The market doesn’t hold high hopes that China and the U.S. will find a way out before the tariffs are imposed."

The Shanghai Composite has only risen on four days out of the past 15, and on each occasion the gauge has closed lower the following trading session. A momentum indicator is near a five- year low, while losses in Chinese bourses have topped $2 trillion since January’s peak. In percent terms, the Shanghai measure is the world’s worst after Argentina with a 22 percent retreat in the period.

"It would be a bad time to buy right now as pessimism prevails," said Liang Jinxin, Shanghai-based strategist with Tianfeng Securities Co.

Eoin Treacy's view -

Prime Beijing and Shanghai Property prices are not far off the levels of the world’s most expensive property markets on a price per square metre basis. China is a large country with a middle class larger than the total population of either the USA or EU but it is also a middle-income country where the ability to buy a home is beyond the reach of an increasingly large proportion of the citizenry.



This section continues in the Subscriber's Area. Back to top
July 02 2018

Commentary by Eoin Treacy

How Tesla is doing everything to get Model 3 cars out the door

This article by Dave Gershgorn for Quartz may be of interest to subscribers. Here is a section:

In an effort to drastically ramp up production, Tesla employees are now tinkering with the core designs of the Model 3 car and the production process, detailed by a New York Times report (paywall), something that experts say is unprecedented. Executives at Tesla decided that the car didn’t need so many spot welds holding the underbody together, so engineers found 300 “unnecessary” welds and reprogrammed the welding robots cut them from the production process.

Eoin Treacy's view -

Tesla made its 5000 cars a week target but if the company is cutting corners in manufacturing what are the safety implications of that decision going to be for the thousands of people waiting in line for the Model3?



This section continues in the Subscriber's Area. Back to top
June 29 2018

Commentary by Eoin Treacy

June 29 2018

Commentary by Eoin Treacy

Now Merkel's Adversaries Face Ultimatum to Back Down on Migrants

This article by Arne Delfs, Birgit Jennen and Patrick Donahue for Bloomberg may be of interest to subscribers. Here is a section:

Merkel and other European Union leaders defied expectations to forge an accord early on Friday, putting the onus on Bavaria’s ruling CSU party that sought the clash. Its leaders must now decide at a meeting Sunday whether to risk a historic breakup of the party bloc that’s governed Germany for most of the time since World War II or beat a face-saving retreat.

With migration hard-liners Italy and Austria backing a coordinated European approach at the summit, the CSU appeared increasingly isolated before deciding whether to defy Merkel and start sending back asylum seekers at the German border who already registered in another EU country. Polls suggested public support for the Bavarians’ stance is waning.

“At this point, the CSU can’t afford to dig in against a compromise,” Juergen Falter, a political scientist at Johannes Gutenberg University in Mainz, said by phone. “They’d come across as troublemakers.”

As investors welcomed the summit result, the CSU said the deal addressed concerns about migration it has raised for a long time. Merkel’s Christian Democratic Union, the biggest party in her governing coalition, rallied behind the chancellor.

“Now these measures actually need to be implemented,” Alexander Dobrindt, the CSU caucus leader in the German parliament, said in a statement. The Bavarian party will review the summit deal “very thoroughly,” he said.

Eoin Treacy's view -

There is no more useful political manoeuvre than the “bait and switch”. It seems any politician who wants to stick around needs to master it and Italy’s populists are obviously quick studies.  By focusing on immigration rather than tax cuts and spending, the new Italian administration threw focus onto Angela Merkel’s less than comfortable position on the topic of migrants and diverted attention from the looming wall of debt Italy needs to refinance.



This section continues in the Subscriber's Area. Back to top
June 29 2018

Commentary by Eoin Treacy

"Terminal Velocity?"

Thanks to a subscriber for this note from Jeffrey Saut for Raymond James which may be of interest. Here is a section:

Eoin Treacy's view -

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

Wall Street’s relative performance this year has been driven by the parts of the technology sector which have been largely excluded from competing in China. They might be exhibiting short-term overbought conditions right now but they are largely immune to trade war fears.  



This section continues in the Subscriber's Area. Back to top
June 29 2018

Commentary by Eoin Treacy

Kevin Rudd on Xi Jinping, China and the Global Order

I view this transcript of a speech delivered at the Lee Kuan Yew School of Public Policy in Singapore on Tuesday as required reading for anyone interested in China. Here is a section:

It is deeply significant that at the 2018 Work Conference, Xi Jinping states boldly that a core component of his new ideology of a “diplomacy of socialism with Chinese characteristics” would be for China to: “lead the reform of the global governance system with the concepts of fairness and justice.” This is by far the most direct, unqualified and expansive statement on China’s intentions on this important question we have seen.

China, like the rest of the international community, is acutely conscious of the dysfunctionality of much of the current multilateral system. It also sees the US walking away from much of the system as well: from the JCPOA which was agreed to by the UN Security Council; from the UN’s Paris Agreement on Climate Change; its withdrawal from the UN Human Rights Commission; its open defiance of the Refugees Convention; and its challenging of the underlying fabric of the WTO.

Nature, as we know, abhors a vacuum. International relations even more so. And we all saw Xi Jinping’s riposte to President Trump on climate change and trade at Davos 18 months ago just after President Trump’s election. If China is indeed serious about leading the reform of global governance, its attitude to various of these multilateral institutions will be radically different to the historical posture of the US. Take for example the Human Rights Council in Geneva, which China would like to see emasculated. Mind you, so too now, apparently, does the current US administration!

Eoin Treacy's view -

I think it is fair to say that the rise of populism and the inability of the status quo to come up with anything other than a policy of appeasement is a reflection of an identity crisis evident in many Western economies. China’s Communist Party does not suffer from that kind of identity crisis. In fact, it is on the front foot and is responding to internal challenges by attempting to expand abroad not least to boost the profile the Party at home.



This section continues in the Subscriber's Area. Back to top
June 29 2018

Commentary by Eoin Treacy

Email of the day on Amazon's impact on pharmacies

Thank you for your superb service. Can you please advise your views on how vulnerable do you think the pharmacy shares are in the US after Amazon's entry to the field? Thank you in advance.

Eoin Treacy's view -

There are obvious fears that the introduction of Amazon’s business model to the pharmacy sector will have the same effect it had on the big retailers. However, I suspect the most profound effect will be felt among the smaller independent pharmacies that command about half the total US market. Here is a section from an article by bizjournals.com that may be of interest:

There are currently about 22,500 independent pharmacies in the United States, and these pharmacies dispense nearly half of the nation's retail prescription medicines, Norton says.

All told, independent pharmacies are an $81.4 billion marketplace annually. They fill 1.38 billion prescriptions a year — about 201 a day, per pharmacy — and employ 314,000 people on a full- or part-time basis.



This section continues in the Subscriber's Area. Back to top
June 28 2018

Commentary by Eoin Treacy

Video commentary for June 28th 2018

Eoin Treacy's view -

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

Some of the topics discussed include: China continues to underperform and is dragging the wider Asian region lower, Yen, Aussie and Kiwi currency weakness is supporting the nominal prices of their respective indices, oil steady, precious metals remain under pressure, Wall Street steadies from region of MA. 



This section continues in the Subscriber's Area. Back to top
June 28 2018

Commentary by Eoin Treacy

From Goldman to Deutsche Bank, What to Watch for in Stress Tests

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

In the first stage of the test, leverage ratios at Goldman Sachs Group Inc. and Morgan Stanley were projected to drop close to the minimum allowed in a stressed scenario, sounding alarm bells about their ability to increase payouts to shareholders.

That test examined hypothetical losses with dividends continuing as before. The second phase looks at requests for future stock buybacks and higher dividends. Both firms quickly issued statements after last week’s result to warn against reading too much into it, arguing their capacity to distribute capital may be greater than what the numbers suggested.

Still, analysts have grown more skeptical the firms can increase their payouts -- or in Goldman’s case, that it can even maintain last year’s level.

“We don’t get to see all the details of how the Fed gets to its numbers, but it’s still hard to fathom how they can meet pre-test expectations,” said Brian Kleinhanzl at Keefe, Bruyette & Woods. “The math just doesn’t work.”

The pair may have to lower their proposed payouts to pass, Kleinhanzl said. Goldman already took that so-called mulligan twice since 2013, when the option was introduced. Morgan Stanley has used it once. Others saw the statements as lobbying the Fed for leniency, which could work in the bank-friendly regulatory environment under President Donald Trump.

“In the past that basically fell on deaf ears,” said Gerard Cassidy, analyst at RBC Capital Markets. “The new guys might look at it a little differently.”

Eoin Treacy's view -

The results of the Fed’s stress tests are pivotal to the ability of banks to increase their dividends. The narrative behind why banks were turning to outperformance last year was that interest rates were rising which would improve margins and the tax cuts would lead to greater loan growth which was good for business and that combined this would lead to bigger dividends.



This section continues in the Subscriber's Area. Back to top
June 28 2018

Commentary by Eoin Treacy

Imperial Brands Joins Snoop Dogg as Cannabis Investment Heats Up

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

The U.K.’s medical cannabis industry is getting another boost, with cigarette maker Imperial Brands Plc investing in a British startup that’s developing treatments derived from the marijuana plant.

Imperial Brands Ventures Ltd. and rapper Snoop Dogg’s Casa Verde Capital have invested in Oxford Cannabinoid Technologies, or OCT, which focuses on researching, developing and licensing compounds and therapies based on the plant. The total investment is approaching $10 million, with pain, inflammation, cancer and gastrointestinal diseases among areas of focus, Casa Verde Capital managing partner Karan Wadhera said in a Bloomberg TV interview.

“Cannabinoid products have significant potential and our investment enables Imperial to support OCT’s important research while building a deeper understanding of the medical cannabis market,” Bristol, England-based Imperial Brands said on its website Thursday.

Belief in the potential of medical cannabis is gaining steam with the U.S. Food and Drug Administration’s approval this week of Cambridge, England-based GW Pharmaceuticals Plc’s Epidiolex epilepsy treatment. The liquid is made from a compound in the marijuana plant called cannabidiol, a different chemical from tetrahydrocannabinol, or THC, which gets users high.

The investment in OCT comes as tobacco companies look for new business lines amid slowing sales and tightening regulations for cigarettes. Imperial Brands’ stake in OCT is “the most significant move among the global tobacco players in the cannabis industry to date,” Cowen analyst Vivien Azer wrote in a note Thursday. “We continue to expect to see more activity in cannabis from both global tobacco and global alcohol.”

Simon Langelier, who had a 30-year career with Philip Morris International Inc., joined the board of Imperial Brands as non-executive director in June 2017. He is chairman of PharmaCielo Ltd., a supplier of medicinal-grade cannabis oil extracts.

Eoin Treacy's view -

Here is a link to a CNBC interview of Karan Wadhera of Casa Verde Capital discussing the medium-term outlook for cannabis. Even when I worked in Amsterdam I never had any interest in smoking cannabis so I cannot speak from personal experience about the sector. However, it is hard to argue with people who suffer from chronic pain conditions who attest to the easing of symptoms they experience when consuming cannabis products over the highly addictive and often unsatisfactory results they get from consuming opioid painkillers.



This section continues in the Subscriber's Area. Back to top
June 28 2018

Commentary by Eoin Treacy

China's Baidu Approves a Share Buyback of Up To $1 Billion

This note by Edwin Chan may be of interest.

Chinese search giant Baidu Inc. has approved a plan to buy back as much as $1 billion of its own shares over the next 12 months, a move that may help prop up its stock as global market volatility grows.

Its board has green-lit a program to use existing cash to buy shares in the open market at prevailing prices, the Beijing- based company said in a statement Wednesday. It will review that program periodically and may adjust its terms and size.

Baidu’s shares are up more than 7 percent this year, just underperforming the Nasdaq Composite’s gain but outstripping larger rival Tencent Holdings Ltd., which is down 7 percent in 2018.

Eoin Treacy's view -

Baidu has a market cap of almost $84 billion with free cash flow last year of $28 billion. A $1 billion buy back program might be a new departure for the company but it is unlikely to be large enough to influence investor interest beyond the sensational headline.



This section continues in the Subscriber's Area. Back to top
June 28 2018

Commentary by Eoin Treacy

June 27 2018

Commentary by Eoin Treacy

Video commentary for June 27th 2018

June 27 2018

Commentary by Eoin Treacy

Lithium and cobalt a tale of two commodities

Thanks to a subscriber for this report from McKinsey 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.

An industry can progress from a developmental stage to global domination if it is held hostage by commodity prices. That is the fallacy which proponents of the bull market in cobalt have been lured into accepting. The simple fact of the matter is that if cobalt is rare and the global industry needs lots of it, then either the global industrial expansion stalls or it finds a way to progress without cobalt.



This section continues in the Subscriber's Area. Back to top
June 27 2018

Commentary by Eoin Treacy

Email of the day on UK listed precious metal miners

Fresnillo’s (London) share price has been falling, among other things due to weakness in the Mexican Peso. Historically, JSE gold shares have surged on ZAR weakness with a rising USD gold price. In the event of a recovery in the USD silver price, could it be argued that FRES would do better?

Eoin Treacy's view -

Thank you for this question is something I believe a number of subscribers will be interested in. The underperformance of the UK listed precious metals sector has been something of a quandary and is now fully explained by the relative weakness of emerging market currencies. For example, the bounce in the Mexican Peso over the last couple of weeks has done nothing to arrest the decline in Fresnillo’s shares.



This section continues in the Subscriber's Area. Back to top
June 27 2018

Commentary by Eoin Treacy

Musings from the Oil Patch June 26th 2018

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

To appreciate how the energy world is changing, two charts presented by Mr. Dale set the stage.  Global energy growth last year was 2.2%, up from 1.2% in 2016, and above the 10-year average of 1.7%.  That robust growth came as a result of strong global economic growth, but also due to a decline in energy productivity.  While the International Monetary Fund is warning of potential dark clouds on the horizon for global economic growth, its forecast remains robust, meaning energy growth is likely to remain high.  

Also important is the difference in where energy growth originated.  The driver for the above-average growth was the strength of the developed economies of the OECD, but also some deterioration in energy productivity.  However, nearly 80% of the total energy growth came from the non-OECD or developing economies of the world.  That is not surprising as they benefit from the global economic recovery, especially China.  China saw energy demand grow by 3%, nearly three times its growth rate of the past several years.  That higher growth was driven by recoveries in numerous high-energy sectors such as iron, crude steel and non-ferrous minerals.  Still, the high growth rate was well below China’s 10-year average rate, even though it was helped by a decline in energy intensity that was more than twice that of the global economy.  

The picture of primary energy fuel mix highlighted the title of Mr. Dale’s remarks – Two Steps Forward and One Step Back.  He pointed to the dramatic growth in natural gas and renewables as the two steps forward.  Combined, those two fuels accounted for 60% of the total growth in energy fuels.  

The backward step was the growth in coal usage.  In 2017, global coal use rose by 1.0%, or 25 million tons of oil-equivalent, marking the first annual increase since 2012.  The increase was driven by India, although China’s consumption also rose after declines in the three prior years.  

Eoin Treacy's view -

Batteries might eventually remove the need for quite so much back up conventional power generating capacity as renewable penetration of the energy market continues, but that is still some ways off. At present natural gas represents the happy medium between reliance on coal and the fact that renewables are not yet ready to stand on their own.



This section continues in the Subscriber's Area. Back to top
June 27 2018

Commentary by Eoin Treacy

June 26 2018

Commentary by Eoin Treacy

June 26 2018

Commentary by Eoin Treacy

Email of the day on the yield curve spread:

Article in yesterday’s NYT. Is this the predictor of a recession that will follow trade wars?

Eoin Treacy's view -

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

There is an argument to be made against reading too much into the yield curve’s moves — and it hangs on the idea that, rather than the free market, central banks have had a big influence on both the long-term and short-term rates.

Since the last recession, central banks bought trillions of dollars of government bonds as they tried to push long-term interest rates lower in order to lend a helping hand to the economy.

Even though they’re reversing course now, central banks still own massive amounts of those bonds, and that may be keeping long-term interest rates lower than they would otherwise be.

Also, the Federal Reserve has been raising short-term interest rates since December 2015 and has indicated it will keep doing so this year.

So, if long-term rates were pushed lower by central bank bond buying, and now short-term rates are being pushed higher as the Fed tightens its monetary policy, the yield curve has nowhere to go but flatter.

“In the current environment, I think it’s a less reliable indicator than it has been in the past,” said Matthew Luzzetti, a senior economist at Deutsche Bank.



This section continues in the Subscriber's Area. Back to top
June 26 2018

Commentary by Eoin Treacy

The Impact of Airbus on the UK Economy

Thanks to a subscriber for this report from Oxford Economic focusing on Airbus dated June 2017. Here is a section:

Airbus’ impact is not limited to its cutting-edge manufacturing: it also makes a substantial and important contribution to the UK’s economy. This impact stems not only from the Company’s activities at its UK facilities, but also the presence of UK firms in its global supply chains and the spending of its UK-based workforce in the wider consumer economy.

Oxford Economics’ bespoke Global Economic Impact Model has been used to map Airbus’ complex, interwoven, global supply chains. This enabled us to explore how the Company’s purchases from its operations in France, for example, then trigger activity in the UK, further up the supply chain. Consequently, this unique model makes it possible to develop a comprehensive picture of the Company’s impact on the UK economy.

In 2015, Airbus’ global operations supported a £7.8 billion contribution to the UK economy. Much of this impact was generated in Airbus’ UK supply chain, which includes companies such as Rolls-Royce, GKN and BAE Systems. To put this footprint into context, in 2015, the contribution to GDP supported by Airbus was larger than Newcastle’s economy and nearly a third bigger than the economy of Oxford.

The activity supported by Airbus sustained 117,400 jobs throughout the UK in 2015. This means that more than 100,000 people who did not work for Airbus had jobs linked to the Company in some way. For some 64,000 people, their jobs were located in Airbus’ UK-based supply chain. The total number of jobs supported by Airbus’ operations in 2015 was equivalent to all of the jobs in Swansea.

Eoin Treacy's view -

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

orporations have been very clear in their messaging that they will not tolerate a no-deal outcome to the Brexit negotiations. While media attention has been focused on efforts by the House of Lords to force the government to allow parliament a say in the final agreement the decisions of major corporations in deciding how to deal with Brexit are much more important for the economy.



This section continues in the Subscriber's Area. Back to top
June 26 2018

Commentary by Eoin Treacy

How to read Turkey's election results

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

This weekend’s vote was, in short, a surprise. Contrary to predictions, Erdoğan won decisively, and his new presidential system has received a seal of approval from the electorate. However, the AKP’s failure to secure an absolute majority in parliament is an important message for Erdoğan. It remains to be seen whether Erdoğan will take this as an opportunity to address the long list of challenges facing Turkey and reconstruct its democracy and economy, and regain the respect that he once enjoyed internationally. The March 2019 municipal elections will be the next test of his performance.

Eoin Treacy's view -

The strength of a nation’s public institutions is what separates failed states from those that can evolve and weather a period of economic peril. Erdogan is an aspiring despot who wants to rule for life. The fact that Turks approved of his presidency but did not give his party an absolute majority suggests they favour limitations on presidential power which is in keeping with any democratic country’s constitution.



This section continues in the Subscriber's Area. Back to top
June 25 2018

Commentary by Eoin Treacy

Video commentary for June 25th 2018

Eoin Treacy's view -

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

Some of the topics discussed include: China continues to underperform, Turkish Lira under pressure, Europe underperforming, US Dollar eases, oil steady, copper testing important area of support, Nasdaq at risk of unwinding overbought condition, banks underperforming



This section continues in the Subscriber's Area. Back to top
June 25 2018

Commentary by Eoin Treacy

China, Europe Warn Trade War Could Trigger Global Recession

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

Later this week, the U.S. Treasury Department is expected to release fresh rules on Chinese investment in technology companies, Bloomberg reported on Monday, putting additional pressure on China -- which hit back against the plans. Chinese investment has provided jobs and tax income for the U.S., and it should view commercial activities “objectively,” Foreign Ministry spokesman Geng Shuang told reporters in Beijing on Monday.

The U.S. is due to impose tariffs on $34 billion of Chinese imports from July 6, and Trump has threatened to impose levies on another $200 billion of Chinese goods. If that threat is realized, it could cut as much as half a percentage point off China’s economic growth, and also hit the American economy, economists have said.

Anxiety over the economic fallout is cutting deep in financial markets, with China’s yuan sliding to a six-month low Monday. The S&P 500 Index fell to the lowest since May and the Dow Jones Industrial Average sank for the ninth time in 10 sessions.

As if to reinforce concerns about the economic outlook, the Dutch Bureau for Economic Policy Analysis on Monday published its latest trade monitor, showing world trade momentum dropped in April to the lowest since 2015. The measure has fallen sharply since hitting a seven-year high at the start of 2018.

Eoin Treacy's view -

The EU’s export-oriented economies along with China have been some of the greatest beneficiaries of globalisation and therefore are also likely to be the primary defenders of the “multilateral trading” regime. Nevertheless, the rise of populism which I describe as a revolt against the status quo represents a challenge to that system which is currently being led by the Trump administration but represents a significant theme in an increasingly large number of countries.



This section continues in the Subscriber's Area. Back to top
June 25 2018

Commentary by Eoin Treacy

Email of the day on central bank balance sheets:

Thanks for a wonderful service Eoin. I'm probably splitting hairs here but one thing has been bothering me lately: to me you seem a bit early in declaring the central banks' total balance sheets as contracting. The US is on a modest reducing mode while the rest are steady/still increasing. The total balance chart is USD denominated, which explains the decline that shows on the chart when dxy has rallied over the last few months. On a bigger picture scale, CB balances tend to increase as the underlying economies grow. Or am I missing something here? All the best.

Eoin Treacy's view -

Thank you for this question which highlights some important points. There is little doubt that the US Dollar has been resurgent over the last few months and that will certainly have played a role in the contraction of the total assets on central bank balance sheets.



This section continues in the Subscriber's Area. Back to top
June 25 2018

Commentary by Eoin Treacy

Supreme Court Rules States Can Collect Sales Tax on Web Purchases

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

“Many states will pick up on those details and incorporate them into their own regulatory regimes,” said Eric Citron, an attorney who represented South Dakota. He said he expected nearly every state with a sales tax to move legislation or regulations to enforce collections. “Complete compliance will become the norm within the next year or two,” he said.

Amazon originally set up its business model to avoid state sales taxes, limiting its physical presence to a handful of warehouses. But it changed strategy to build more warehouses closer to consumers as it has relied more on its Prime two-day shipping offer—and started charging sales tax on items it sells directly.

Amazon hasn’t collected the taxes for most independent merchants who sell on its platform. About $200 billion in sales originated with independent merchants selling on Amazon world-wide last year, according to Factset analyst estimates, compared with about $116 billion in direct sales by Amazon. The company declined to comment on the ruling.

Eoin Treacy's view -

The cost of compliance is rising in just about every sector. Since the credit crisis the burden of regulatory compliance has been a significant headwind for the banking sector and it has changed the nature of how they do business. The UK’s Retail Distribution Initiative resulted in the cost of doing business rising for financial advisors. The EU’s drive to introduce GDPR has seen some company email lists drop from hundreds of thousands to the tens of thousands. Asking online retailers to monitor how much and how often they sell into each state will increase compliance costs regardless of whether tax is then due.



This section continues in the Subscriber's Area. Back to top
June 22 2018

Commentary by Eoin Treacy

June 22 2018

Commentary by Eoin Treacy

Bitcoin Approaches Year Low as Japan Cracks Down on Venues

This article by Eric Lam and Todd White for Bloomberg may be of interest to subscribers. Here is a section:

Bitcoin approached its lowest price for the year after Japanese regulators hit six of the country’s biggest cryptocurrency trading venues with business-improvement orders.

The crackdown surprised investors, ending what was about to be the first winning week since early June for the largest digital coin and for the 10 most-liquid tokens. The MVIS CryptoCompare Digital Assets 10 Index tumbled as much as 11 percent on Friday. The gauge already fell in five of the past six weeks.

Some of the targets of Japan’s regulator were quick to react. Bitflyer Inc. said it would stop accepting new customers and also review identity verification for some existing users after it received an order from Japan’s Financial Services Agency. The FSA called for improved measures at all the exchanges against money laundering. The companies must submit their plans by July 23.

Peer-to-peer money has come under fresh pressure in recent weeks after two South Korean exchanges said they were hacked.

That raised fresh concerns about the security of investor holdings. New pressure in Japan, one of the most crypto-friendly jurisdictions, demonstrated the market’s fragility to regulatory moves in the absence of much positive news.

“The market is still trading on low volumes and has yet to break out of its current downtrend, leaving itself susceptible to sell-offs,” said Ryan Rabaglia, head trader with cryptocurrency dealing firm Octagon Strategy Ltd. in Hong Kong, in an email. “Although the market reacted negatively, I view this as a positive for the industry as a whole.”

Eoin Treacy's view -

Bitcoin has been trending lower since early this year and has steadied above the $6000 area over the last couple of months. However, the continued ambivalence of regulators towards the market and the liquidation of Mt.Gox’s holdings represent headwinds which the market continues to explore the full ramifications of.



This section continues in the Subscriber's Area. Back to top
June 22 2018

Commentary by Eoin Treacy

OPEC+ to Boost Oil Output After Saudis Secure Deal With Iran

This article by Wael Mahdi, Grant Smith and Nayla Razzouk for Bloomberg may be of interest to subscribers. Here is a section:

The final communique made no mention of whether the kingdom, or any other member, could compensate for losses elsewhere. Yet it said the group as a whole should strive for “overall conformity” of 100 percent, which in practice will only be achievable if those nations with spare production capacity step in to fill the gap left by others.

"The lack of specificity is bullish for prices,” said Joe McMonigle, senior energy analyst at Hedgeye Risk Management LLC. “It’s a mystery oil production increase because we don’t really know the final numbers."

Eoin Treacy's view -

OPEC is going to raise production by maybe 1 million barrels a day which is less than it could have. That probably represents the difficulty that exists in getting Saudi Arabia and Iran to agree on anything and suggests the market will be tighter than might otherwise have been the case.



This section continues in the Subscriber's Area. Back to top
June 21 2018

Commentary by Eoin Treacy

June 21 2018

Commentary by Eoin Treacy

Sector Cross-Currents: How to Surf the Swirl of Trump & Tech Disruption

This report by Maneesh Deshpande for Barclays may be of interest to subscribers. Here is a section:

Moore’s Law basically ended in 2016 and we can already see that the speeds of computer chips have remained stagnant for the last few years. Enhancements have been delivered through longer battery life, more memory and separate drives for booting and storage but the speed of the chips has not moved much.

Eoin Treacy's view -

Moore’s Law basically ended in 2016 and we can already see that the speeds of computer chips have remained stagnant for the last few years. Enhancements have been delivered through longer battery life, more memory and separate drives for booting and storage but the speed of the chips has not moved much.



This section continues in the Subscriber's Area. Back to top
June 21 2018

Commentary by Eoin Treacy

Baby Boomers Strains U.S. Welfare Programs

This article by Janet Adamy and Paul Overberg for the Wall Street Journal may be of interest to subscribers. Here is a section:

The surge of retiring baby boomers is reshaping the U.S. into a country with fewer workers to support the elderly—a shift that will add to strains on retirement programs such as Social Security and sharpen the national debate on the role of immigration in the workforce.

For most of the past few decades, the ratio of retiree-aged adults to those of working age barely budged. In 1980, there were 19 U.S. adults age 65 and over for every 100 Americans between 18 and 64, census figures show. That number—called the old-age dependency ratio—barely edged up over the next 30 years, rising to just 21 retiree-aged Americans for every 100 of working age in 2010.

But there has been a rapid shift since then. By 2017, there were 25 Americans 65 and older for every 100 people in their working years, according to new census figures released Thursday that detail age and race for every county. The ratio would climb to 35 retiree-age Americans for every 100 of working age by 2030, according to census projections released earlier this year, and 42 by 2060, though currently unforeseen factors could alter that.

Eoin Treacy's view -

The Labor Force Participation rate has been relatively static for much of the last couple of years and that is despite the pick-up in economic activity from the tax cuts and the tightness in the labour market. The retirement of baby boomers is a logical explanation for why the measure is not rising.



This section continues in the Subscriber's Area. Back to top
June 21 2018

Commentary by Eoin Treacy

Spotlight on Australia as Banks Fuel Rally to Highest in Decade

This article by Matthew Burgess and Abhishek Vishnoi for Bloomberg may be of interest to subscribers. Here is a section:

Rude Health
“There’s been a few shots on the trade side, but nothing has fully broken out,” said Dermot Ryan, a fund co-manager at AMP Capital in Sydney. “Ultimately, the stock market looks at the valuation and health of the sectors. The resources sector is in rude health at the moment.”

Not as Sensitive
“Australia sometimes acts as an EM by proxy, but with one key difference: it’s not as sensitive to the potential negative impact from increasing tariffs on Chinese and U.S. goods,” said Kerry Craig, global market strategist at JPMorgan Asset Management in Melbourne. “We’re not as crucial in the supply chain as many north Asian economies. While there would be some impact on the materials sector if Chinese growth was expected to take a hit and metals demand fell, it’s more than likely that China would respond by increased infrastructure spend to keep the ship steady.”

Pretty Cheap
“The banks look pretty cheap,” for a longer-term investor, said Don Hamson, managing director at Plato Investment Management in Sydney. “It’s been a bad 18 months, but maybe we’re coming toward the end of it.”

Eoin Treacy's view -

The Australian financial sector has been under a cloud because of the Royal Commission's focus on overcharging in the small to medium sized enterprises sector. However, the hearings are about to refocus on relations between financial firms and people living in remote areas such as Aboriginal peoples. While that is likely to represent some political risk, it is less likely to have a large impact on the stock market.



This section continues in the Subscriber's Area. Back to top
June 21 2018

Commentary by Eoin Treacy

Italian Assets Resume Slide After Euroskeptic Appointments

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

The Italian Senate picked euroskeptic economist Alberto Bagnai, author of two books advocating the dismantling of the European monetary union, as head of the finance committee.

Claudio Borghi, an adviser for the League party on the economy and on issues such as the mini-bots short-dated notes, was named the head of the budget committee in the lower house. The populist government program doesn’t include any reference to a possible option for a euro exit.

“There are a couple of high caliber League euroskeptics getting appointed to important parliamentary jobs in Italy this morning: Borghi and Bagnai,” said Antoine Bouvet, an interest- rate strategist at Mizuho International Plc. “The fact that they get roles that have to do with finance and budget has been understood by the market as a sign that the League intends on pushing its anti-euro ideas.”

Eoin Treacy's view -

There is one simple fact that overrides all of the political machinations going on in Italy right now. Italy has almost as much debt as the USA does which needs to be rolled over this year. As recently as May Italian debt out to almost 3-year maturities was trading at negative rates. Today those refinancing costs are a lot more expensive. That represents a major obstacle for Italy’s populist eurosceptics.



This section continues in the Subscriber's Area. Back to top
June 21 2018

Commentary by Eoin Treacy

Long-term themes review May 16th 2018

Eoin Treacy's view -

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

Here is a summary of my view at present:



This section continues in the Subscriber's Area. Back to top
June 20 2018

Commentary by Eoin Treacy

June 20 2018

Commentary by Eoin Treacy

Germany's Largest Auto Makers Back Abolition of EU-U.S. Car Import Tariffs

This article by William Boston and Bojan Pancevski for the Wall Street Journal may be of interest to subscribers. Here is a section:

That would mean scrapping the EU’s 10% tax on auto imports from the U.S. and other countries and the 2.5% duty on auto imports in the U.S. As a prerequisite, the Europeans want Mr. Trump’s threat of imposing a 25% border tax on European auto imports off the table.

Over the past few weeks, Mr. Grenell has held closed-door meetings with the chiefs of all major German automotive companies, including bilateral meetings with the CEOs of Daimler AG , BMW AG and Volkswagen AG , which operate plants in the U.S. Overall, Germany’s auto makers and suppliers provide 116,500 jobs in the U.S., according to the Association of German Automotive Manufacturers.

During these talks, which the ambassador initiated, the managers said they would back the scrapping of all import tariffs on trans-Atlantic trade in automotive products as the keystone of a broader deal covering industrial goods. The German government is on board and Mr. Grenell promised to support the idea, according to U.S. and German officials.

Eoin Treacy's view -

Trade tensions are ebbing and flowing on almost a daily basis. Efforts led by the German auto manufacturers to defray risks to their US business obviously highlight how seriously companies are taking the threat of trade friction and what it could mean for their businesses. That is particularly true in the aftermath of the diesel cheating scandal which continue to make headlines.



This section continues in the Subscriber's Area. Back to top
June 20 2018

Commentary by Eoin Treacy

Starbucks Delivers the Wrong Kind of Jolt

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

So I'm paying more attention to the weak comparable sales guidance the company offered for the third quarter, and the factors it says have been weighing on sales of late.

Executives said Tuesday that in the U.S. market, Starbucks struggled to draw customers in the afternoons. This has been an ongoing problem for Starbucks, and executives haven’t demonstrated they have a clear solution. They've recently put up some TV advertising emphasizing Starbucks as an afternoon destination, and perhaps we'll soon see payoff from that.

But it'd have an easier time luring people for more than just their morning caffeine fix if it could establish itself as more of a go-to for food, not just beverages. And speaking of its menu, the chain has work to do on its signature drink offerings, too. Look at what has happened to Frappuccino sales:

Perhaps this shouldn't come as a shock, given that Frappuccinos pack a lot of calories and customers are increasingly looking for healthy choices. But Starbucks needs some new hits to give people a reason to come back through its doors, especially with so many insurgent and boutique coffeehouses chasing the same customers.

Eoin Treacy's view -

Starbucks generates approximately 70% of its revenue from North America while 15% comes from China. The company’s mix of coffee, sweet and/or fatty treats and free Wi-Fi was a winning strategy before the evolution of 4G and ubiquitous web access. It used to be that you would go to Starbucks to sit down, look cool and show off your new gadget while accessing the Wi-Fi. That’s just not enough to inspire users any more.



This section continues in the Subscriber's Area. Back to top
June 20 2018

Commentary by Eoin Treacy

Investing Without People

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

It seems obvious that s formula’s application and popularization eventually will bring an end to its effectiveness. Let’s say (in an incredibly simplified example) you study of the market show that a small-company stocks have beaten the market over a given period, so you overweight them.

Since “beating the market,” “out-appreciating” and “out-performing” often are just the flip of “becoming relatively expensive”, I doubt any group of stocks can outperform for long with becoming fully- or over-priced, and thus primed for underperformance.
And it seems equally clear that eventually others will detect the same “small-cap effect” and pile into it. In that case, small-cap investing will become widespread and – by definition – no longer a source of superiority.

To reiterate, George Soros’s Theory of Reflexivity says the behavior of market participants alters the market. Thus no formula will be a winner forever. For me, that means the achievement of superior returns through quantitative investing requires the ability to constantly and correctly update the formula. Since investing is dynamic, the rules relied on in quantitative investing have to be dynamic.  

According to Raj Mahajan of Goldman Sachs, my principal tutor on these matters. “The best models today will change exposures as the environment changes and as dynamics of the factors chance (e.g. as they become cheaper or more expensive). The rules have become increasingly complex, and they are able to “learn” (that is, they are “conditional” or “contextual”) in that they understand more of the environment.” Constant renewal – not “a formula along” – seems to be a minimum requirement for any quants’ long-term success.

Eoin Treacy's view -

No trend persists indefinitely and nothing lasts forever. The more data points we have to support a trend the closer it is to being full valued. To my mind that has always been similar to Heisenberg’s Uncertainty Principle. Perhaps it is too simply described as the “more you know about the position of the particle the less you know about its trajectory and vice versa”.



This section continues in the Subscriber's Area. Back to top
June 20 2018

Commentary by Eoin Treacy

Noble's Marathon Revamp Nears Finish After Goldilocks Deal

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

The remaining equity in the new company is being split between senior creditors and management. Under the latest deal, senior creditors stand to receive 70 percent of the trader, while management’s share will be 10 percent.

In a separate statement, Noble Group said Pinpoint Asset Management Ltd. and Value Partners Ltd., holders of its perpetual securities, withdrew a lawsuit filed against the company on June 13. Perpetuals have been offered $25 million of new bonds in exchange for securities with a face value of $400 million. On Wednesday, the perpetuals rose 0.6 cent, the most in a week, to 7.8 cents.

“Obstacles to the completion of the restructuring are probably getting removed,” said Neel Gopalakrishnan, senior credit strategist at DBS Group Holdings Ltd. “But the key question is still whether, post restructuring, the company will be able to turn around operations for creditors to recover value.”

Eoin Treacy's view -

Noble Group suffered from bad commodity bets in the agriculture sector but also from the demise of coal which took a lot of people in the commodity business by surprise in terms of its ferocity. The share trended lower along with commodity prices from the 2011 peak but failed to sustain the rally that began in 2016 and it collapsed in 2017.

The biggest challenge for any trader is to avoid catastrophic failure when dealing on a leveraged basis. That is a lesson for all us.



This section continues in the Subscriber's Area. Back to top
June 19 2018

Commentary by Eoin Treacy

Video commentary for June 19th 2018

Eoin Treacy's view -

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

Some of the topics discussed include: central bank balance sheets are contracting, Wall Street continues to exhibit relative strength, yield curve continues to contract, China breaks downwards and Renminbi weakens, commodity currencies weak, Europe testing the trend mean. oil eases, gold steady, platinum at a new low.  



This section continues in the Subscriber's Area. Back to top
June 19 2018

Commentary by Eoin Treacy

Xi Can Make Life Difficult for U.S. Companies After Trump Threat

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

Pressuring companies through bureaucratic means “is a practice that the Chinese have used for a long time and our companies are on guard,” William Zarit, chairman of the American Chamber of Commerce in the People’s Republic of China, said on Bloomberg Television. “This is definitely a concern.”

South Korean and Japanese companies have all felt this effect, with their businesses in China hurt as part of a dispute between states.

In 2017, following the Seoul government’s decision to deploy an anti-missile system that China opposed, China forced South Korean retailer Lotte Shopping Co. to suspend operations at many of its hypermarkets in the country for alleged violations of fire-safety rules. The company eventually decided to pull out of China, but still can’t sell all its units and continues to rack up losses. In total due to the dispute, Lotte Group lost an estimated 2 trillion won ($1.8 billion) in the year from March 2017, according to Yonhap News Agency.

The backlash also led to boycotts, with consumers shunning cars from Hyundai Motor Co. and cosmetics from Amorepacific Group. Chinese tourists cancelled Korean vacations, forcing airlines to scrap flights and hotels to slash rates. The Bank of Korea estimated that 0.4 percentage point was cut from 2017’s gross domestic product.

Eoin Treacy's view -

China has such a wide trade surplus with the USA that it is going to be hard to meet the increased level of tariffs the USA is proposing, without greatly increasing the levels on the goods it does import. However, there are additional measures the country can take to express its dissatisfaction.



This section continues in the Subscriber's Area. Back to top
June 19 2018

Commentary by Eoin Treacy

US Oil Firms Use Shale Know-How To Revitalize Old Oilfields

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

Wildcatters first pumped oil from the Austin Chalk nearly a century ago, but output reached its peak in the early 1990s even though the formation still contains about a billion barrels of crude, according to U.S. government's Geological Survey.

That is not unusual. Oil producers have historically extracted less than half the oil from any particular field because the rest has not been accessible at a profit.

That is changing in fields like the Austin Chalk.

Based on test wells and modeling techniques, Conoco believes long, horizontal wells with multiple fracks - a technique used often in shale fields - will deliver strong results from its acreage in the Austin Chalk.

"What we were seeing with some of the newer technologies work really well in the Austin Chalk," Conoco Chief Executive Ryan Lance told Reuters.

Some wells they have fracked in the Austin Chalk have produced more prolifically than shale wells. Wildhorse's newer Austin Chalk wells produced more than three times the initial output of wells at the Eagle Ford shale field, the company said this month.

EOG also said an Austin Chalk well it drilled this year in Texas produced nearly 3,000 bpd in its first month, more than twice the first month rate of a shale well it had completed in the Permian during the same period.

Eoin Treacy's view -

One of the oldest adages in the energy business is “you find oil where your found oil” The benefit of employing new technology in proven grounds is that there is no risk the oil is not in fact there. That reduces the cost of drilling substantially if the technology can get to less accessible reservoirs.



This section continues in the Subscriber's Area. Back to top
June 19 2018

Commentary by Eoin Treacy

On Target June 19th 2018

Thanks to Martin Spring for this edition of his ever-interesting letter which may be of interest to subscribers. Here is a section:

 

I think it very doubtful that Italy will either choose to leave the Eurozone or be forced out. Britain’s tortuous Brexit negotiations have made everyone in Europe aware of the horrendous complexities of such disengagements. And the Brussels elite will go to great lengths to avoid another country exiting European membership.

They may need to do so. The new government in Rome is determined to introduce cash handouts for less-wealthy citizens, big tax cuts, and state aid for troubled banks. If investors take fright at the prospect of a spending spree in Rome, which would be a serious breach of the European Union’s fiscal rules and produce major conflict with it and the European Central Bank, that could trigger a flight out of Italian assets by both foreigners and Italians.

There would be significant risk of that ballooning into financial disaster. Italy has the biggest debt-crisis potential in Europe, with public debt of €2.3 trillion. The available lending capacity of the EU crisis rescue fund for the whole of Europe is less than €380 billion -- a panic would overwhelm the euro currency system.

Clashes over money won’t be the only source of Rome’s warfare with Brussels, Berlin and Frankfurt. Stir in a big row over forced repatriation of illegal immigrants. And possibly trouble over the union’s anti-Russian policies (which the populists oppose). It all adds up to what seems certain to be an avalanche of conflict, with the European Union seriously distracted from addressing its other major issues.

Many of those stem from the lamentable failure of European leaders to convert people to the idea of sacrificing national sovereignty to bring about strong central institutions. That’s why Europe, despite being in aggregate the world’s largest economy, has no closely co-ordinated economic policies, depends on one superpower for its defence, and depends on the other for most of its energy imports.

Eoin Treacy's view -

The European Union now appears likely to reform the immigration policy that has allowed millions of economic migrants into the region over the course of the last few years. It has taken the rise of populism in Italy and the accession of the far right leaning Alternative Fur Deutschland to the Bundestag to send a wake-up call to the status quo that the citizenry are unhappy with the course of policy.



This section continues in the Subscriber's Area. Back to top
June 19 2018

Commentary by Eoin Treacy

Email of the day on which moving average to use

On the same matter of MA average, I would like you to refresh my memory to a question I asked long time ago but unfortunately forgot the answer ( an early Alzheimer' sign ?).
In what instance do you use SMA and EMA ? Are they actually related to whatever price scale is used ? (ie. SMA for linear scale & EMA for log scale ) ...And finally, which one of the two is the most reliable ? 

I never never got bored to read your Comments of the Day and listened to your excellent audio videos as I keep learning every day.

Thank you and best regards,

Eoin Treacy's view -

Thank you for this question and I am delighted you are enjoying the service. The question of whether to use a simple or exponential moving average is a matter of taste. Personally, I think an exponential moving average makes more sense because I believe the most recent data should have a slightly greater weighting but other than that there is not much difference.



This section continues in the Subscriber's Area. Back to top
June 18 2018

Commentary by Eoin Treacy

Video commentary for June 18th 2018

Eoin Treacy's view -

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

Some of the topics discussed include: US Dollar resurgent against just about all currencies but Asian and commodity currencies are breaking downwards, MSCI emerging markets breaks downwards, Euro/US Dollar carry trade is helping increase the difference in performance between the two markets, agricultural commodities volatile, industrial resources steady and oil is firm,



This section continues in the Subscriber's Area. Back to top
June 18 2018

Commentary by Eoin Treacy

Emerging Asia Hit by Biggest Foreign Investor Exodus Since 2008

This article by Yumi Teso for Garfield Clinton Reynolds, and Adam Haigh for Bloomberg may be of interest to subscribers. Here is a section:

“It’s not a great set-up for emerging markets,” James Sullivan, head of Asia ex-Japan equities research at JPMorgan Chase & Co., told Bloomberg TV from Singapore.

“We’ve still only priced in about two thirds of the U.S. rate increases we expect to see over the next 12 months. So, the Fed is continuing to get more hawkish, but the market still hasn’t caught up.”

While many emerging-market investors and analysts have praised Asian economic fundamentals, pointing to world-leading growth rates and political stability, some are starting to raise red flags as global liquidity starts to shrink. The Bloomberg JPMorgan Asia Dollar Index sank to a 2018 low on Monday, extending two weeks of declines after the Fed and European Central Bank both took steps toward policy normalization.

Yet some still remain optimistic. Bank of America Merrill Lynch expects some of the regional currencies including the baht and the Philippine peso to appreciate slightly by the end of the year, a research note sent Monday showed. Six of 10 best- performing emerging currencies so far this year are in Asia, led by the ringgit’s 1.2 percent advance and the Chinese yuan’s 1.1 percent gain.

Eoin Treacy's view -

By tightening monetary policy after leading the world in easing, the USA is effectively exporting its monetary policy to the rest of the world. More than few of the more troubled emerging markets have had to move aggressively to support their currencies but continued selling pressure suggests they probably have more work to do to shore up investor confidence.



This section continues in the Subscriber's Area. Back to top
June 18 2018

Commentary by Eoin Treacy

Bonds Reflect Diverging Growth Prospect

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

For the first time in a very long while, the Fed’s decision was slightly more hawkish than I had been expecting. The anticipated 25 basis-points hike in the most-watched policy rate and the openness to another hike as soon as September were accompanied by a change in projections (albeit involving just one of the key “dots”) that raised the Fed’s baseline signal for 2018 to four rate hikes from three.

The next day, the ECB took over from the Fed in exerting systemic market influence. It incorporated in its announcement an unanticipated addendum related to the path of interest rates in 2019. Mario Draghi, the president of the ECB, provided an unexpectedly dovish addition to the bank's plan to reduce its monthly purchases under its quantitative easing program after September and, if the data support it, stop buying bonds entirely at the end of December. At a news conference, Draghi said the soonest the next rate hike could occur would be after the middle of next year.

Taken together, these developments added up to a greater widening of the policy differential between the Fed and ECB than had been expected by markets. This was amplified by data suggesting that U.S. economic growth continues to pick up, while Europe is hitting a soft patch, if not decelerating to a lower path.

The growth and policy differentials could widen further in the months to come, putting fully in play two notions that markets had excessively embraced last year: a synchronized pick up in global growth and more correlated central bank policies in the new era of quantitative tightening.

Economic developments in the next few months are likely to highlight more and more that U.S. growth is a major outlier in the advanced world. The U.S. is benefiting from policy actions that fuel three simultaneous and interrelated engines: higher consumption, underpinned by a strong labor market; greater business investment, supported by relatively strong balance sheets; and increased government spending, including on account of tax cuts.

Eoin Treacy's view -

The relative outperformance of Wall Street versus Europe is a clear indication of where investors see value and that has been evident since at least 2013. Economists might only be catching up to that conclusion now but it has been clear to anyone looking at charts which markets were likely to offer the best returns for years.



This section continues in the Subscriber's Area. Back to top
June 18 2018

Commentary by Eoin Treacy

Le Divorce Investment themes for the post-Transatlantic world

This report by Vincent Deluard for INTL FCStone may be of interest to subscribers. Here is a section:

Eoin Treacy's view -

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

There is a realistic possibility that the USA could become energy independent and is in fact already an exporter of oil and natural gas. The widening of the Panama Canal and receding ice around the North Pole have created new shipping lanes that did not exist a decade ago. Meanwhile if the USA is an exporter it has a reduced need to secure supply channels from the Middle East and we are already seeing greater ambivalence towards active engagement in that region.



This section continues in the Subscriber's Area. Back to top
June 15 2018

Commentary by Eoin Treacy

June 15 2018

Commentary by Eoin Treacy

Trade Angst Sinks Metals and Miners as Gold Sags Most in a Month

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

The stronger dollar and speculation that a trade war will hamper demand fueled a drop in raw materials, with the Bloomberg Commodity Index declining for a second straight day. Federal Reserve Chairman Jerome Powell said this week that trade is a “risk” to the outlook, and that concerns about changes in trade policy are rising even if the impacts aren’t yet seen in economic numbers.

The tariffs mean China “won’t be importing as much of the base metals,” said Peter Thomas, a senior vice president at Chicago-based metals broker Zaner Group. “As these tariffs take affect, we’ll see less consumption from each side until it gets settled. It started with base metals and it’s pulling on gold.” China is the biggest consumer of industrial metals.

Gold futures for August delivery fell 1.6 percent to $1,292.20 an ounce at 10:14 a.m. on the Comex in New York, on course for the biggest decline since May 15.

Eoin Treacy's view -

Donald Trump is not a conventional politician, he is in fact following through on his campaign promises even though no one seems to have believed he was serious before he was elected. As Angela Merkel pointed earlier this week, the USA enjoys a net surplus with Germany when service providers like Google and Facebook are included. However, that kind of finessing of the data is not something the base Trump is appealing to is interested in.



This section continues in the Subscriber's Area. Back to top
June 15 2018

Commentary by Eoin Treacy

Japan's coming Golden Age of Activism

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

Eoin Treacy's view -

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

Long-term trends change the fundamentals of a market and Japan is one of the most relevant examples of that in the world today. The deflationary environment has prevailed for so long that that I am reminded of the quip from the commodity markets “those who know it best, love it least because they have been disappointed the most”.



This section continues in the Subscriber's Area. Back to top
June 15 2018

Commentary by Eoin Treacy

Fund That Profited From Turkey Rout Sees Aussie Dollar Slump

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

A Sydney-based fund manager that profited from the selloff in Turkey’s bonds and currency last month now expects a slump closer to home, as a stronger greenback weighs on the Australian dollar.

The Aussie may fall more than 10 percent to the “mid-60s” U.S. cents in 12 months, said Vimal Gor, head of income and fixed interest at Pendal Group, at a conference Thursday. A hawkish Federal Reserve will continue raising rates “until something breaks,” while its Australian counterpart stands pat, he said.

“The U.S. is the only country that’s genuinely hiking rates, so the interest-rate differential story is giving a huge tailwind to the dollar,” Tim Hext, a Sydney-based portfolio manager in Gor’s team, said separately by telephone.

Pendal’s view follows the Reserve Bank of Australia’s decision to keep interest rates at a record low 1.5 percent last week after a key unemployment metric edged higher. RBA governor Philip Lowe once again highlighted concern over the outlook for household consumption amid sluggish wages growth and high debt.

Eoin Treacy's view -

China is Australia’s largest trading partner so anything that has an impact on commodity demand is not good news for the economy and therefore the currency.



This section continues in the Subscriber's Area. Back to top
June 15 2018

Commentary by Eoin Treacy

Email of the day on moving average calculations

Good afternoon, I am a long-time subscriber to your wonderful website and just have a question regarding the chart library. 

I was looking at the moving averages on daily, weekly and monthly charts in your library, and noticed that when comparing to other chart terminals like Bloomberg or sites such as StockCharts, the MA values for weekly and monthly charts don't appear to match despite the same values being inputted. As an example, I attach the weekly charts for S&P500 with the MA values of 34, 89 and 200. Interestingly, the daily charts do have MAs matching.

I was wondering what would be the cause of this discrepancy, perhaps a different formula or method for calculating the MA? I like the way that your chart library appears to calculate the MAs, so if this is indeed the case, is there a way to use the same method for calculating the MA on, say, a Bloomberg terminal? 

Thank you in advance and I look forward to hearing from you.

Eoin Treacy's view -

Thank you for this question which comes up from time to time. The discrepancy is easy to explain. We calculate moving averages on a daily basis because we include all the data at our disposal. Other chart systems calculate the moving average based on the data displayed.



This section continues in the Subscriber's Area. Back to top
June 14 2018

Commentary by Eoin Treacy

Video commentary for June 14th 2018

Eoin Treacy's view -

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

Some of the topics discussed include: Euro pulls back sharply, Europe stocks firm from MA, Wall steady, Nasdaq breaks out led my tech and small caps, silver closes above $17, China continues to underperform along with emerging markets on US Dollar strength,  



This section continues in the Subscriber's Area. Back to top
June 14 2018

Commentary by Eoin Treacy

Draghi Ends ECB Bond-Buying Era Saying Economy Can Beat Risks

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

Mario Draghi said the euro-area economy is strong enough to overcome increased risk, justifying the European Central Bank’s decision to halt bond purchases and end an extraordinary chapter in the decade-long struggle with financial crises and recession.

Policy makers agreed to phase out the stimulus tool with 15 billion euros ($17.7 billion) of purchases in each of the final three months of the year, the ECB president said after his Governing Council met on Thursday in Latvia. The central bank also pledged to keep interest rates unchanged at current record lows at least through the summer of 2019.

In doing so, officials bet that the euro-area economy is robust enough to ride out an apparent slowdown amid risks including U.S. trade tariffs and nervousness that Italy’s populist government will spark another financial crisis. Almost half of economists in a Bloomberg survey had predicted the announcement would be put off until July.

“We’ve taken these decisions knowing that the economy is in a better situation, with an increase in uncertainty,” Draghi said at a briefing in Riga, where the Frankfurt-based ECB held its annual out-of-town meeting. “We may well have this soft patch being somewhat longer than in the staff projections in some countries.”

Eoin Treacy's view -

The ECB is exiting its quantitative easing program because they believe Germany and a handful of other countries no longer need the stimulus. At the other extreme, Italy has to refinance almost as much debt as the USA this year. The lack of a central bank bond buying program is likely to represent a challenge for the government. That suggests the current contraction in yields on a waning of existential angst may not last.



This section continues in the Subscriber's Area. Back to top
June 14 2018

Commentary by Eoin Treacy

China's Economy Is Slowing Just as Trump Readies a Trade Beating

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

 

China’s economy fell short of expectations and its central bank chose not to follow the Federal Reserve in raising borrowing costs, adding fresh caution on the outlook for global growth as trade tensions with the U.S. escalate.

With President Donald Trump renewing threats to impose tariffs on the world’s second-largest economy, May data for industrial output, retail sales and investment all came in beneath economist forecasts on Thursday. The People’s Bank of China kept the cost of reverse-repurchase agreements steady, defying predictions it would track the Fed’s hike of Wednesday.

Investors now face greater uncertainty over what had been the strongest global upswing since 2011. That doubt is set to fester after Trump said on Wednesday that he’ll confront China "very strongly" over commerce in coming weeks. His administration is scheduled to announce a new list of duties on Friday.

"A slowing China will add to the challenges for the global economy," said Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong and a former International Monetary Fund researcher. "Until recently, the resilience of growth in China was an important buffer for the global economy in the face of headwinds from trade friction, slower growth in Europe, higher oil prices and issues in various emerging markets."

Both industrial output and retail sales rose less than expected in May compared to a year ago. Fixed-asset investment growth in the first five months was the slowest since the data began in 1999, as was the investment in the services sector. The decade-long decline in investment has intensified this year, as policy-makers act to reduce leverage at state-owned companies and local governments. While that’s a deliberate policy, officials risk a worse-than-desired deceleration in growth.

Eoin Treacy's view -

China might not have raised interest rates but it is definitely leaning on the shadow banking sector which is the effectively withdrawing capital from regional banks. At the same time, it is allowing defaults to occur. There have been as many defaults so far in 2018 as in all of 2016, which was the previous peak level of 21.



This section continues in the Subscriber's Area. Back to top
June 14 2018

Commentary by Eoin Treacy

Email of the day on UK listed gold shares:

Fresnillo and Hochschild, both on LSE, have had a waterfall downdraft of about 10 pc this month, whereas many gold/silver miners on the HUI or in Sydney are going sideways or upwards, and even Randgold seems to be bottoming. Would you care to comment on why this is happening? Yours anon

Eoin Treacy's view -

Thank you for this email and as it happens it is a subject I was looking into last night. There is certainly an anomaly evident where UK listed precious metal miners are underperforming while those listed elsewhere appear to be doing better on aggregate.



This section continues in the Subscriber's Area. Back to top
June 13 2018

Commentary by Eoin Treacy

Video commentary for June 13th 2018

June 13 2018

Commentary by Eoin Treacy

Fed Raises Rates; Officials Lift Outlook to Four 2018 Hikes

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

Federal Reserve officials raised interest rates for the second time this year and upgraded their forecast to four total increases in 2018, as unemployment falls and inflation overshoots their target faster than previously projected.
The so-called “dot plot” released Wednesday showed eight Fed policy makers expected four or more quarter-point rate increases for the full year, compared with seven officials during the previous forecast round in March. The number viewing three or fewer hikes as appropriate fell to seven from eight.

The median estimate implied three increases in 2019 to put the rate above the level where officials see policy neither stimulating nor restraining the economy.

The Federal Open Market Committee indicated that even though it’s stepping up the pace of interest-rate hikes, economic growth should continue apace. “The committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 percent objective over the medium term,” according to its statement following a meeting in Washington.

The statement omitted previous language saying that the main rate would remain “for some time” below longer-run levels.

Other changes included referring to “further gradual increases” instead of “adjustments.” Officials also said that “indicators of longer-term inflation expectations are little changed.”

Previously, the statement made separate references to survey- based and market-based measures of such expectations.

Eoin Treacy's view -

Unemployment is at its lowest level in years, inflation is moderate but supply constraints are appearing in the economy. The St. Louis Fed is predicting growth well in excess of the consensus and Fed is obviously worried that will eventually spill over into an inflationary environment.



This section continues in the Subscriber's Area. Back to top
June 13 2018

Commentary by Eoin Treacy

Email of the day on Total Known Holdings of Gold:

On Total Known ETF holdings of Gold. The charts are telling us that after a long period of ranging Gold and the precious metals are poised to break to the upside. I was rather alarmed therefore on the one- day plunge by about 7% of the above chart. Should I be, or is this some explainable aberration?

Eoin Treacy's view -

Thank you for this question which may be of interest to other subscribers. The Total Known ETF holdings of Gold is reported with a one-day lag but it is also prone to spikes since the data is accumulated from so many sources. I checked this out with Bloomberg this morning and adjusted the chart to the up to date value. Unfortunately, while imperfect this index is about as accurate reflection as I can find of the interest investors express in holding gold-backed ETFs.



This section continues in the Subscriber's Area. Back to top
June 13 2018

Commentary by Eoin Treacy

How Trump's Lumber Tariffs May Have Helped Increase Home Prices

This article by Peter Eavis for the New York Times may be of interest to subscribers. Here is a section:This article by Peter Eavis for the New York Times may be of interest to subscribers. Here is a section:

Want to better understand what may happen in the United States economy as President Trump pursues his combative trade policies?

Look no further than the lumber that goes into many houses in the United States.

Long before the sharp clash with Canada at the Group of 7 meeting this weekend, the Trump administration imposed tariffs on lumber imports from Canada, which American home builders use in large quantities. The United States Commerce Department contended that Canadian companies were selling lumber into the United States at unfair, subsidized prices.

Those tariffs, which took effect last year, combined with other factors to drive up the price of lumber in the United States. As a result, the anti-dumping and countervailing duties, as the tariffs are officially known, have added to the cost of housing in the United States at a time when homes are becoming less affordable. The Trump administration’s tariffs on steel and aluminum, and any others that follow, could also contribute to rising costs for businesses and consumers.

Eoin Treacy's view -

This article is representative of the narrative which has gripped the lumber market for most of the last 12 months but is also behind the CME’s decision to widen limits on a rolling basis to try and contain speculative fervour.



This section continues in the Subscriber's Area. Back to top
June 12 2018

Commentary by Eoin Treacy

Video commentary for June 12th 2018

Eoin Treacy's view -

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

Some of the topics discussed include: p&f figure chart reading for cobalt, oil and google, China steadies, Nasdaq testing its highs, industrial metals steady, trucking companies breaking out, food prices firming, while oil pauses below $80, all pointing to rising industrion pressures.



This section continues in the Subscriber's Area. Back to top
June 12 2018

Commentary by Eoin Treacy

Musings From The Oil Patch June 12th 2018

Thanks to a subscriber for this report edition of Allen Brooks’ ever interesting report for PPHB. Here is a fascinating section on energy efficiency statistics over the last 50 years:

Eoin Treacy's view -

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

There is no doubt that battery efficiency is improving and new solar innovation is being revealed on almost a weekly basis. There are laudable reasons for seeking to reduce carbon and nitrogen oxide emissions in our cities all of us can support. However, the question many people are worried about is whether this is merely transferring a problem from cities to less populated areas.



This section continues in the Subscriber's Area. Back to top
June 12 2018

Commentary by Eoin Treacy

WPM acquires cobalt stream

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

Eoin Treacy's view -

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

Generally speaking streaming companies provide funding for struggling mines when prices are low. By historical standards cobalt prices are not low. Of course, if accepts the near mania of bullish prognostications, then cobalt is cheap.



This section continues in the Subscriber's Area. Back to top
June 12 2018

Commentary by Eoin Treacy

Shadow Lending Slump Shows Deleveraging Picking Up

This note from Fielding Chen at Bloomberg may be of interest to subscribers. Here is a section:

Looking at the details, the composition of lending continued to shift toward on-balance-sheet lending from off-balance sheet:

New bank loans denominated in yuan totaled 1.14 trillion, up slightly from 1.1 trillion in April. The 41.3 billion yuan rise was slightly below the average increase of 98.1 billion yuan recorded in the same month over the past five years.

The stock of shadow bank lending -- entrusted loans, trust loans, and back acceptances -- dropped across the board. The total fell 421.5 billion yuan, the steepest monthly drop in data available back to 2016.

Net financing of corporate bonds contracted by 43.4 billion yuan, after an increase of 377.6 billion yuan in April. Rising defaults have hit sentiment in the bond market. Equity financing was more stable, falling moderately to 43.8 billion yuan from 53.3 billion yuan.

Recent policy moves have been tilted toward support for bank lending. In April, the PBOC cut the reserve requirement ratio for banks. In June, it broadened the types of collateral that could be used against central bank loans.

Eoin Treacy's view -

The Fed is raising interest rates and reducing the size of its balance sheet, the ECB is approaching the end of QE while the Bank of Japan is now yet ready for that step. Against that background the PBoC is engaged in an attempt to bring the shadow banking system out of the shadows.



This section continues in the Subscriber's Area. Back to top
June 12 2018

Commentary by Eoin Treacy

Truckers Protest High Gas Prices in Spotty Strikes Across China

This article by Te-Ping Chen for the Wall Street Journal may be of interest to subscribers. Here is a section:

While trucker protests in China have occurred in the past amid complaints of road tolls, fuel prices and excessive fees, Geoff Crothall, spokesman for the labor monitoring group, said he couldn’t recall trucker protests of a similar scale. He estimated thousands of truckers participated.

As they have the world over, gas prices have risen in China this year, by 8.6%, according to data from the Ministry of Commerce. Taxes and other fees generally make gas more expensive in China than the U.S., and on top of that the government sets the prices, lagging changes in international oil markets by 10 days or more.

China’s National Development and Reform Commission, which sets those prices, announced Friday that it would cut the retail price of gasoline and diesel by 130 yuan ($20.29) per ton for gasoline and 125 yuan per ton for diesel. The new prices, effective this past Saturday, reflect a recent retreat in global oil prices. In the central province of Anhui, a transportation hub where protests occurred, gasoline now costs $3.99 a gallon, and diesel $4.04 a gallon.

Rising fuel costs have elsewhere prompted worker frustrations to spill over, most notably in Brazil, where protesters blocked highways and halted shipments of food, fuel and medicine before the government called in the military to help end the strike. Other trucker protests have also recently broken out in Iran.

Eoin Treacy's view -

Trucking has been all over the news recently with strikes in China and Brazil over high fuel prices and low pay while the USA is in dire need of 50,000 drivers.  These trends point to the fact the USA is close to full employment so attracting workers is becoming an issue while all three countries share upward pressure on wages. Higher shipping rates are inflationary because it will put pressure on companies to cover the increasing costs by raising prices for the end customer.



This section continues in the Subscriber's Area. Back to top
June 11 2018

Commentary by Eoin Treacy

Video commentary for June 11th 2018

June 11 2018

Commentary by Eoin Treacy

Brace for the World Economy's Most Important Week of the Year

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

Trump and North Korea leader Kim Jong Un convene in Singapore for their on-off summit, the first such meeting ever.

Trump last week predicted “great success” and said it’s possible he could sign an agreement with Kim to formally end the Korean War. Back in Washington, the government releases a monthly report on inflation that will be a key gauge of how hot -- or not -- the U.S. economy is getting.

Trump, Kim Said to Be Planning One-on-One Talk at Summit Start

These Are the Dealmakers Behind Trump and Kim

What a Trump-Kim Deal May Look Like

Eoin Treacy's view -

The Trump – Kim conference is going to be short with both planning to leave Singapore tomorrow afternoon Singapore time. That means an outcome, whether positive/negative will be available by the open on European markets Tuesday. It is in both their interests to appear strong but they both need to come away with a win so the most likely scenario is to agree to meet again.



This section continues in the Subscriber's Area. Back to top
June 11 2018

Commentary by Eoin Treacy

How Fitbit is trying to transform healthcare, and itself

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

In the future, Fitbit hopes to leverage Google’s machine learning capabilities to draw even deeper insights from the combined data sets. For instance, machine learning algorithms might be able to see indications in the data that a user is at high risk for a certain disease, then proactively treat them for it.

The Google machine learning is just one of the deliverables in Fitbit’s recently-announced partnership with Google Cloud. The combined Fitbit and Twine Health services and data will be served up to healthcare providers via Google’s cloud and healthcare API. Google could also give Fitbit the scale it needs to integrate with large hospitals and insurers. It’ll also give Fitbit a HIPAA-compliant data repository that can connect with the electronic medical records (EMR) systems used by health providers.

Eoin Treacy's view -

Fitbit did not only fail to pick up on the evolution of smart watches but compromised on the quality of its products when it sought to reduce prices. That is why I personally dumped our family’s Fitbits and decamped for Garmin and Apple.



This section continues in the Subscriber's Area. Back to top
June 11 2018

Commentary by Eoin Treacy

Bitcoin Tumbles Most in Three Months Amid South Korea

This article by Eric Lam and Jiyeun Lee for Bloomberg may be of interest to subscribers. Here it is in full:

Bitcoin extended losses for a third day, tumbling 12 percent Sunday as South Korean cryptocurrency exchange Coinrail said there was a "cyber intrusion" in its system.

The largest cryptocurrency declined to $6,749 as of 2 p.m. in New York, the biggest drop since March 14, according to data compiled by Bloomberg from Bitstamp pricing. That widens Bitcoin’s losses for the year to 53 percent. Peer cryptocurrencies Ethereum and Ripple fell 11 percent and 12 percent, respectively.

Coinrail said in a statement on its website that it’s reviewing its system due to hacking attempts. The exchange says it has managed to freeze all exposed NPXS, NPER and ATX coins, and that other cryptocurrencies are now being kept in a cold wallet. The statement is the only content available on the exchange’s homepage, and contact information could not immediately be located.

The exchange trades more than 50 different cryptocurrencies and was the 98th largest, with a 24-hour volume of about $2.65 million, according to data from Coinmarketcap.com.

Eoin Treacy's view -

Cryptocurrency exchanges are hacked with uncomfortable regularity with relatively large percentages of investors having had their portfolios stolen via hacking operations at exchanges or from plain old ransomware. Here is a section from an article on CNBC from last Friday:

Roughly $1.1 billion worth of cryptocurrency was stolen in the first half of 2018, and unfortunately for owners, it's pretty easy to do, according to cybersecurity company Carbon Black.

Criminals use what's known as the dark web to facilitate large-scale cryptocurrency theft. There are now an estimated 12,000 marketplaces and 34,000 offerings related to cryptotheft for hackers to choose from, the company said in a study released Thursday.

"It's surprising just how easy it is without any tech skill to commit cybercrimes like ransomware," Carbon Black Security strategist Rick McElroy told CNBC. "It's not always these large nefarious groups, it's in anybody's hands."

The necessary malware, which McElroy said even occasionally comes with customer service, costs an average of $224 and can be priced as low as $1.04. That marketplace has emerged as a $6.7 million economy, according to the study.



This section continues in the Subscriber's Area. Back to top
June 11 2018

Commentary by Eoin Treacy

Biggest Electric-Vehicle Battery Maker Soars 44% on Debut

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

Shares of the world’s biggest maker of electric-vehicle batteries jumped on their trading debut as investors bet on rising demand for new-energy cars worldwide.

Contemporary Amperex Technology Ltd. rose by the maximum 44 percent to 36.20 yuan at 10:17 a.m. in Shenzhen, China, valuing the company at about $12.3 billion. The manufacturer sold a 10 percent stake at 25.14 yuan a share in its initial public offering on May 30.

Investors are confident that CATL, as the company is known, can fend off rivals including Panasonic Corp. and continue to win orders as automakers move toward electric vehicles. CATL, whose customers include Volkswagen AG, had reduced the size of its IPO by more than half compared with its original ambitions because of declining margins and a cap imposed by Chinese authorities on price-earnings ratios in IPOs.

 

Eoin Treacy's view -

CATL produces more batteries than Tesla and is likely to continue to do so well into the future considering the pace of factory building it has planned. China has every intention of dominating the battery sector both because it is the largest auto market but also because it has a clear aim to become globally competitive in auto exporting. Additionally, as an energy importer it has a clear reason to reduce imports of oil if at all possible. That suggests China will be investing heavily in batteries for the foreseeable future.



This section continues in the Subscriber's Area. Back to top
June 08 2018

Commentary by Eoin Treacy

June 08 2018

Commentary by Eoin Treacy

The most expensive currencies in the world right now, in one chart

This article by David Scutt for business Insider may be of interest to subscribers. Here is a section:

It’s Deutsche Bank’s Cap-PPP currency valuation model, a visual indicator on what currencies it deems to be cheap or expensive right now based on capital and trade flows.

By combining its capital-based valuation and trade-based PPP (purchasing power parity) models together, Deutsche says it provides a more complete picture of valuations, using weights that reflect the relative importance of capital and trade flows for each currency.

It believes the model has “significant predictive power for FX, both in terms of directional accuracy and the magnitude of moves, especially over longer-term horizons”.

Eoin Treacy's view -

The strength of the Dollar and its effect on emerging markets, particularly those that have historically depended on Dollar funding, highlights how much of an influence the actions of the Federal Reserve have on other central banks. The USA was the first major economy to embark on tightening and is still the only one to be both raising rates and reducing the size of its balance concurrently. That is the primary reason for both the run-up in the Dollar and rising yields despite increasing supply of the latter.



This section continues in the Subscriber's Area. Back to top
June 08 2018

Commentary by Eoin Treacy

Regulatory Concerns Dampen Bitcoin Volatility

This article by Charles Bovaird for Forbes.com may be of interest to subscribers. Here is a section:

 "It seems that a lot of activity has been suppressed," said Marshall Swatt, founder & president of Swatt Exchange, emphasizing that digital token sales are having the same experience. 

Leveraged trading appears to have declined lately, emphasized Mati Greenspan, senior market analyst for social trading platform eToro.

Marius Rupsys, a digital currency trader and investor, offered a slightly different take on the situation.

"Some traders and investors are waiting for clarity from regulators," he asserted.

However, Rupsys described both the statement made by U.S. Securities Exchange Commission (SEC) Chairman Jay Clayton that bitcoin is not a security and the government agency's decision to appoint a crypto czar as "very positive" developments.

Eoin Treacy's view -

The last week has seen volatility in the cryptocurrency markets disappear. The last time the bitcoin market, for example, has been this inert was back in June and July of last year when the price was a third of what it is today; even after the crash from the December peak.



This section continues in the Subscriber's Area. Back to top
June 08 2018

Commentary by Eoin Treacy

Inmarsat Spurns EchoStar Takeover, Calling It Lowball Offer

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

Inmarsat Plc rebuffed a takeover proposal from EchoStar Corp., saying the bid undervalued the British satellite company and its outlook as an independent business.

The “highly preliminary” offer was turned down by the board after discussions with its advisers, Inmarsat said in a statement on Friday. “It very significantly undervalued Inmarsat and its stand-alone prospects. The board remains highly confident in the independent strategy and prospects of Inmarsat.”

EchoStar, founded by billionaire Charlie Ergen, has long been seen as a potential bidder for Inmarsat, along with SoftBank Group Corp.’s OneWeb. A stock slump at the London-based company has put it at the top of analysts’ lists of potential targets for consolidation in the satellite industry, which is becoming increasingly crowded with a rising number of rigs going up to support new services such as in-flight Wi-Fi and transmission of digital photos.

A representative for EchoStar didn’t immediately respond to a request for comment. The statement from Inmarsat followed a 13 percent surge in its shares on Friday, the most in a decade. The stock is still down by more than half over the past two years and has declined 3.4 percent so far in 2018.

Eoin Treacy's view -

The legacy satellite sector has collapsed over the last 18 months. There are two primary reasons for the decline. The first is the success of SpaceX and Blue Origin in deploying resuable rockets to increase the number of satellite launches. The second is the advent of nanosatellites which cost a fraction of what conventional satellites do and fly at much lower orbits.



This section continues in the Subscriber's Area. Back to top
June 08 2018

Commentary by Eoin Treacy

Milestone claimed as experimental nuclear reactor reaches temperature of the Sun

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

The pursuit of nuclear fusion is inspired by the collision of atomic nuclei in stars, which fuse together to form helium atoms and release huge amounts of energy in the process. If we can recreate this process we could have an inexhaustible supply of energy on our hands that brings no harmful by-products, such as carbon dioxide emissions or the radioactive waste generated at nuclear fission-based power plants like Fukushima and Chernobyl.

But to do that we need to create Sun-like conditions here on Earth, which calls to mind one requirement first and foremost – incredible amounts of heat. Tokamak Energy hopes to achieve this through what's known as merging compression, where running high currents through two symmetrical magnet coils generates two rings of plasma, or electrically charged gas, around them.

Eoin Treacy's view -

The ITER tokomak being constructed in the south of France is based on technology from the 1970s. It is coming at the problem of containing plasma by building a big containment unit which is costing upwards of $30 billion. Today, much stronger magnetic fields can be attained through the use of superconductors. That means experiments can be much smaller and cost a fraction of the ITER model.



This section continues in the Subscriber's Area. Back to top
June 07 2018

Commentary by Eoin Treacy

Video commentary for June 7th 2018

June 07 2018

Commentary by Eoin Treacy

Brazil Joins Turkey With Stepped-Up Currency Defenses Amid Rout

This article by Tugce Ozsoy, Julia Leite and Ben Bartenstein for Bloomberg may be of interest to subscribers. Here is a section:

Turkey and Brazil intensified efforts to protect their currencies from speculative attacks by investors as emerging markets face their biggest test since the 2013 taper tantrum.

Turkey surprised analysts by tightening monetary policy Thursday for the third time in less than two months, while Brazil’s central bank sold extra foreign-exchange swap contracts for the second time this week, boosting investors’ protection again further declines in the currency. The lira surged and the real briefly pared losses after the actions.

Thursday’s actions are the latest in a series of efforts to shore up defenses in developing nations as policy makers from Argentina to India try to cope with higher U.S. interest rates, growing budget deficits, accelerating inflation and political instability. Emerging markets haven’t been in this precarious a position since five years ago, when concern the developed world was pulling back on monetary stimulus sparked a rout in stocks and currencies.

"The failure to act preemptively to address macro imbalances has forced those central banks to take desperate measures to stem the pressure on their currencies," said Delphine Arrighi, a money manager at Old Mutual in London. "The risk is a tightening of financial conditions in EM that could ultimately impact growth negatively."

Turkey raised its one-week repo rate by 1.25 percentage point to 17.75 percent, a bigger increase than any analyst surveyed by Bloomberg had predicted. The move signaled policy makers trying to clamp down on double-digit inflation are willing to stand up against political pressure to keep borrowing costs low.

“Is this the start of a new era of Turkish central bank policy -- actually moving ahead of the market? Let’s hope so,”

Eoin Treacy's view -

Generally speaking when a central bank intervenes to support its currency it has to persist in that policy until it achieves success, lest it be accused of wasting money. So far, Turkey’s efforts to stave off an additional near-term Lira decline have been successful and the currency has stabilized below TRY5 to the US Dollar.



This section continues in the Subscriber's Area. Back to top
June 07 2018

Commentary by Eoin Treacy

Email of the day on Indian inflation

Hi Eoin Like most of your subscribers I avidly follow your video commentaries. In yesterday’s broadcast while discussing India I was a little surprised that you did not mention the effects of the Monsoon on the economy which is starting now. Latest predictions are for an above average monsoon which is of course highly significant for food prices and thus for inflation.

Eoin Treacy's view -

Thank you for this informative email which may also be of interest to the Collective. The RBI raised rates today for the first time since early 2015 signalling what appears to be the beginning of a new tightening cycle. It is to be hoped that the monsoon will in fact come in above par which would moderate inflation, but I believe the more pressing issue right now is the relative stability of the currency which as recently as mid-May was testing its all-time lows.



This section continues in the Subscriber's Area. Back to top
June 07 2018

Commentary by Eoin Treacy

Email of the day on the first trillion-dollar company:

Apple market capitalization now is $950 billion and it seems, this time it may be able to hit $1 trillion in the foreseeable future. The stock seems to have broken up out of a six-month range and it has to rise just about 5% to reach $203.45 which will give it $1 trillion capitalization. (Though, Financial Times notes that "pinpointing the moment when Apple will officially become the first trillion-dollar public company is trickier than it may seem, largely because of the company’s mammoth stock buyback programme." $203.45 is based on Apple's latest official share count given in its quarterly filing on April 20.)

What do you think of this? I also attach recent FT article about Apple business, just in case you find it interesting.

And thank you once again for your valuable service.

Eoin Treacy's view -

Thank you for this question which may also be of interest to subscribers. Before I got a Global Entry card, when I went through passport control on the way back into the US, the border control agent would ask why I was awarded an EB-1 visa and I would tell them because I am a global strategist. Coming back from Ireland in April, the agent said “Oh really, which company do you think is going to get to a market cap of $1 billion first; Apple or Amazon?”



This section continues in the Subscriber's Area. Back to top
June 07 2018

Commentary by Eoin Treacy

Requiem for a construction bubble

This article by Pete Wargent appeared in Livewire and may be of interest to subscribers. Here is a section:

Apartment construction to fall sharply
We have significant evidence to show that new apartment projects are struggling to get finance approved, and therefore total residential construction is expected to slow in H2 2018. Dwellings approved but not yet commenced have already increased to the highest level on record, driven by apartment project approvals

Apartment default rising
Liaison with industry contracts indicates that settlement defaults for some of the major developers have increased, particularly in relation to offshore buyers. The resale market is considered healthy enough at this juncture for most developers not to be materially impacted, however there is a strong likelihood that residential construction activity will now fall

Employment growth to fall
Construction now directly employs just under 1.2 million persons in Australia, recently capturing a record high in absolute terms and, at 9.6 per cent of employment, the construction sector is at its most bloated in approximately a century4.

About ¾ of construction jobs are accounted for by the residential sector5. There is significant potential for employment growth to slow sharply over the next 12 months

Eoin Treacy's view -

The Royal Commission has been a major source of uncertainty for the banking sector in Australia over the last year as rampant overcharging across a broad swathe of their businesses has ben brought to light.

The S&P/ASX 300 Banks Index hit all-time peak in 2015 and following a rebound has been trending lower since last year. It is now approaching the 2016 lows and while oversold in the short term a break in the progression of lower rally highs will be required to question supply dominance.



This section continues in the Subscriber's Area. Back to top
June 06 2018

Commentary by Eoin Treacy

Video commentary for June 6th 2018

June 06 2018

Commentary by Eoin Treacy

Gold Investing Goes AWOL As Google Searches To 'Buy Gold' Hit 11-Year Low

Thanks to a subscriber for this article by Adrian Ash which may be of interest. Here is a section:

The giant SPDR Gold Trust (NYSE Arca: GLD) shrank 4% across May, erasing the previous two months of share issuance growth with the heaviest 1-month outflow since August last year.

The US Mint meantime reports selling 24,000 ounces of American Eagle gold coins, up sharply from April's 10-year low as dealers re-stocked inventory but still barely half the last 5 years' average for May.

Here at BullionVault, last month saw the lowest number of new precious-metal investors since May 2014. Down 27.7% from the previous 12-month average, the number of people using our online gold, silver and platinum market for the first time totalled just 57.2% of the last 5 years' average monthly count of new customers.

Overall, the number of people starting or increasing their gold holdings rose 12.1% from April's 27-month low, but the number of gold sellers on BullionVault rose 22.8% to a 4-month high.

Eoin Treacy's view -

Some people buy gold because it is the “anti-Dollar”. Some people buy gold because it is a monetary metal. Some people buy gold because it is store of value. Some people buy gold because it is in relatively short supply. Some people buy gold because it is lasts forever and cannot be printed into existence.



This section continues in the Subscriber's Area. Back to top
June 06 2018

Commentary by Eoin Treacy

Amazon vs. Alibaba: The Next Decade of Disruption

Thanks to a subscriber for this report from 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.

The footprint of ecommerce is only likely to expand if for no other reason than it is easy to shop and browse online. That doesn’t mean people will stop going to malls. We are after all a social species but the nature of shopping with definitely change.

The new Westfield mall that opened up the street from me a couple of months ago is focusing on food offerings with Eataly, Ding Tai Fung and Meizhou DongPo as well as upper middle class/luxury brands. That might be a function of its location sandwiched between the affluent neighbourhoods of Beverly Hills and Holmby Hills but equally speaks to the spending habits of Chinese shoppers.  



This section continues in the Subscriber's Area. Back to top
June 06 2018

Commentary by Eoin Treacy

Email of the day on managing contango costs

Based on your very correct predictions, I am enjoying the run on the Nasdaq by owning futures on the Nasdaq 100.   It is time to roll and I notice there is a contango of about 23 on these contracts, giving an annual contango cost of 1.3%.  Small but annoying.

A very basic question to which I have never been able to find an answer - is there any way to optimize this, for instance by timing the rollover?  I can't find a chart of contangos anywhere.

Eoin Treacy's view -

Thank you for this question which may be of interest to other subscribers and congratulations on your trading success. Generally speaking the contango reflects the interest rate. Since there is no prospect of a shortage of supply for synthetic contracts like index or interest rates futures I never looked at the contango chart before today. In fact, at only 1.3% one might think that the contango at present is a relative bargain considering the Fed Funds Rate is 1.75%.



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