Sunday, 7 February 2016

Stories we should be thinking about

A few finance and related stories we need to be thinking about before Monday morning:


Macro matters:

Not the easiest week...

(sourced from here)

Of course there are a lot of pessimists out there from a macro perspective (link here). However note the low market sentiment currently.  Panic equals opportunity...

(@hmeisler)

And correlations are high...providing dispersion opportunities for active position selectors: 
But is it that bad?  Why are US GDP estimates going up? (admittedly after a bad run)



Maybe something to do with those better wage numbers from Friday?  Important for the US economy given the 60%+ make-up of consumption in US GDP.  

(h/t @jbjakobsen)

Oil is going to be an important signal.  I like this week's Barron's front cover page which includes the wonderful mix of 'here comes $20 oil' and 'why oil should move back up to around $55 late this year'. Hedging their bets!!  In my view we end the year closer to the former than the latter. 


Of course not too much out of Asia this weekend due to the imminent onset of Chinese New Year.  I did note that Chinese reserves continued to fall (link here) but I would note the absolute residual level AND that this is a bit of a backwards variable.  

Talking about Chinese New Year will be markets 'go ape' in the year of the Monkey?  History suggests...maybe:

(h/t @callum_thomas) 

A couple of final macro stories:

Greece - keep watching the pension debate (link here)

Wealth inequality rising...


Grains out-of-favour...



Company-related observations:

Earnings backdrop mixed...


...and only utilities up YTD.  


I like this 'dogs of the Dow' outperformance observation by @HORANCapitalAdv


And the above does support insights here that defensives outperform in times of relative strife:


However - and as I have been writing up in the various Financial Orbit publications just extrapolating what has gone is dangerous.  Look at the the low sentiment / correlated world noted in the above macro charts and the role for individual equity opportunity is clear.  

On individual company news I see that the Sunday Times is running a story that HSBC will keep its domicile in the UK...


And finally...

Should follow some of these myself!
(h/t @forbes) 


Have a good week.  Don't forget to sign up for a free trial of my new macro, stocks and other reports (link here).

Friday, 5 February 2016

The last week on Financial Orbit

Not an easy week on financial markets swinging between bouts of euphoria and pessimism.  In terms of some important charts I would highlight the potentially deeply influential push down of the US dollar which has the scope to give the world a completely different risk tone as this excellent graphic contrasting the first week of January and February in various global currency markets shows:
Financial Orbit Macro chronicled every business day morning the evolving macroeconomic scene. My favourite charts of the week?  Probably the two below highlighting first the pick-up yield available even in US equities today versus medium duration bonds...


...a relationship even more apparent in other parts of the world like Europe and Japan due to the preponderance of negative bond yields as shown below.


Value (equities) and sentiment/moment (negative yielding bonds) combining with ever more dovish central bank action at a time of ever-duller headline economic growth rates versus expectations equates to a heady macroeconomic brew.  Fascinating times as covered by Financial Orbit Macro

The last week or so has been a very heavy corporate results period with multiple numbers and related updates for Financial Orbit Stocks to appraise.  Among the stocks and themes covered in the once a business day updates on the two Financial Orbit preferred lists included:
  • Thoughts on earnings season reporters GlaxoSmithKline, Royal Dutch Shell and Yum! Brands;
  • Comments on BHP Billiton, AIA and LafargeHolcim;
  • Thoughts on the bid (and numbers) from Syngenta plus the updates from Gilead and Dow Chemical;
  • Thoughts on updates from Nokia and UBS plus some further insights on BHP Billiton, Royal Dutch Shell, Wal-Mart and GlaxoSmithKline;
  • Thoughts on Royal Dutch Shell, Philip Morris International and Yum! Brands conference calls plus some observations on UBS (vs Credit Suisse) and insights on the Umicore full year numbers;
  • Thoughts on the January performance of the preferred list stocks.  Specific company mentions include Schlumberger, Gilead and Royal Dutch Shell


Finally Financial Orbit Immediate also covered the global earnings season generally outside the range of my preferred stocks.  A selection of the topics written up is below - what a busy week!
  • Some thoughts on CME, Tyson Foods and Estee Lauder;
  • Some thoughts on Statoil, Credit Suisse and Vodafone;
  • Some thoughts on Royal Dutch Shell, Philip Morris International and Yum! Brands;
  • Some thoughts on Mastercard, Honeywell and Whirlpool; 
  • Some thoughts on Novo Nordisk, ADP and Eaton Corp;
  • Some thoughts on Alphabet (i.e. Google);
  • Some thoughts on economic updates from the European Commission and a new Bank of England Quarterly report;
  • Some thoughts on BP, Royal Dutch Shell, Exxon Mobile and Dow Chemical;
  • Some thoughts from industrial or industrial agricultural names that reported today on a cash flow basis.  Stock reviewed: Emerson Electric, ADT, ADM and Agco;
  • Some thoughts on numbers from Timken, Mondelez and GlaxoSmithKline;
  • Some thoughts on Daimler, Volvo, Toyota and Arcelor Mittal;
  • Thoughts on Amazon and Visa 


If you would like to receive any of the above reports or join any of the above mailing lists then contact me (or read more here or at the tab above). 

Chris Bailey
Founder, Financial Orbit
Email: chris.bailey@financialorbit.com
Twitter: @financial_orbit

Sunday, 31 January 2016

Stories we should be thinking about

A few finance and related stories we need to be thinking about before Monday morning:


Macro matters:

How was January for you?


It really was a rough tough January for Chinese stocks:

(h/t @HaidiLun)

And another change in January: fewer rate rises expected from the US in 2016:


Not helped of course by a lack of material wage inflation still in the US: 


Of course much of the volatility was sourced from the energy markets.  I note late on Friday:

Opec increases #oil production by 48k barrel per day in Jan. Output hits fresh high at 33.113mln bbl/d.

And as Bespoke Invest observed inventories are very high still: 


Of course all of this is causing pressures:

'IMF calculations suggests Saudi Arabia could be running a deficit of around $140bn (£94bn), far above the government's own estimates of around $98bn, or 15pc of GDP'.  Interesting report here...I bet the oil price rise of the last week was celebrated in Riyadh.

So why did the oil price rise?  A good read on US oil (link here). 


German Chancellor Angela Merkel said on Saturday that she expected most of the refugees from Syria and Iraq to return home once peace has returned to their countries (link here).

Meanwhile there seems to be some slightly lunatic thinking out of the European Commission...never a good look to be looking to charge charities...


And then there are the age old problems for Europe - like debt and non-performing loans - which still have not been solved:


Brazil's per capita income will take ten years to return to 2013 levels (link here).


How you perceive gold returns probably depends on what your base currency is: 


I liked this on autonomous self-driving cars: 

'We are a LONG way from being able to buy that kind of car for less than $40,000, which is what it would take too. Some of the insiders say we’re 15 years away from such a car. Some say even more'.

Which emerging market region had the greatest champagne growth recently?  Step forward Africa:
Talking about the emerging markets interesting on the growth of financial access: 


Still, let's not forget that there is still hunger out there: 


Company-related observations:

Very good piece from @MaikeCurrie on dividend sustainability and the need to stock pick in the Weekend FT (link here). Yes I would agree that a number of these names do not have sustainable dividends...but some do:

Don't trust those analysts...do your own research.  Would have certainly been wise in 2015 as noted here by @WallStreet_rant:
 

How is this earnings season going from a sector perspective?  Energy leading something: 


I see Tesco's are reducing some overtime pay premiums (link here).

This is interesting: "What Facebook should do with the extra $30 billion in market cap it made yesterday: Buy Snapchat"

Pretty ugly IPO market: 

Consumer discretionary versus consumer staples kind of interesting.  I am currently finding many more opportunities in the former rather than the latter: 


Of course generally...got to watch corporate debt levels.  

And finally...

Here's an excellent read for the early riser fraternity (of which I have been a member for two decades plus):

“Before the rest of the world is eating breakfast,” writes Laura Vanderkam in What the Most Successful People Do Before Breakfast “the most successful people have already scored daily victories that are advancing them toward the lives they want.”

(h/t @farnhamstreet). 

Mentions of countries in Obama's first 2,000 speeches as President.  Where's the UK?


(h/t @paul1kirby)

And I finally ahead of another busy earnings season week this made me laugh via @PlanMaestro:



Have a good week.  Don't forget to sign up for a free trial of my new macro, stocks and other reports (link here).

Saturday, 30 January 2016

The last week on Financial Orbit

What a busy earnings season week!  Much more to come on that front...


It has been a very busy week on the range of Financial Orbit publications too.  

Financial Orbit Macro chronicled every business day morning the breaking macro news.  My favourite chart of the week?  The flow of money into money market funds shows the build-up of fear in recent months...but also the opportunity that is building. 


Good therefore to see global equity markets have another better week reflecting my opportunistic commentary bias as January has progressed.  


There were a number of earnings and related updates for Financial Orbit Stocks to appraise.  Among the stocks and themes covered in the once a business day updates on the two Financial Orbit preferred lists included:
  • Updates on names like Schlumberger, Barclays and Royal Dutch Shell…plus an observation that we are moving into the peak earnings season period. 
  • Some thoughts on comments by BASF, an event at Royal Dutch Shell and insights from a peer with relevance for Nokia;
  • Thoughts on Royal Dutch Shell (BG), Barclays, GlaxoSmithKline, Barclays, BHP Billiton, Gilead, Carnival and Hershey;
  • Thoughts on names such as Tiffany’s, Dow Chemical, Billiton and Royal Dutch Shell;
  • Results from preferred list stock Electrolux and another quick comment on Royal Dutch Shell

Finally Financial Orbit Immediate also covered the global earnings season generally outside the range of my preferred stocks.  A selection of the topics written up: 

  • Thoughts on Potash Corp, Mead Johnson and Harley Davidson
  • Thoughts on Facebook, eBay, PayPal and Diageo;
  • Thoughts on the Novartis and Santander numbers
  • Best bits of the Apple quarterly report as I see it
  • Thoughts on today’s numbers from P&G, Johnson & Johnson and 3M
  • Thoughts on the capital markets day from Kingfisher;
  • Some European economic thoughts post the German IFO;
  • Thoughts on Roche, Alibaba, Altria and CAT following their respective results publication today. 
  • I wrote up Halliburton one of the key peers to Schlumberger who reported on Friday (and who are a FO Preferred List stock);
  • I also wrote up – and established levels that I would buy – well-known consumer plays Kimberly-Clark and McDonald’s



If you would like to receive any of the above reports or join any of the above mailing lists then contact me (or read more here or at the tab above). 

Chris Bailey
Founder, Financial Orbit
Email: chris.bailey@financialorbit.com
Twitter: @financial_orbit

Monday, 25 January 2016

"Kingfisher – continued Gallic shrug after capital markets day yawn"

I wrote a piece titled "Kingfisher – continued Gallic shrug after capital markets day yawn" which was uploaded just now to the ShareProphets website.  You can find a link to the piece (free sign-up) here.

Sunday, 24 January 2016

Stories we should be thinking about

A few finance and related stories we need to be thinking about before Monday morning:


Macro matters:

A better week then after the bounce of the last few days...

(sourced here)

...and the bounce has been in dramatic in some sector inevitably energy and materials:

(h/t @bespokeinvest)

Still history suggests that unless we move into a recession post a bear market anything is possible (although of course technically the US did not enter a bear market so far this month): 

Consistent with such potential opportunities I enjoyed this via @jbjakobsen which indicates there are currently potential opportunities:


Talking about the US market, kind of interesting to see the share of earnings in the S&P500 which is much more manufacturing centric than perhaps you would naturally think...

(h/t @Lemieux_26)

...and of course this means that the strong US dollar is having an impact...which you can also see in the difference the GDP rank and that of PPP (recall last week's chart showing that most currencies are undervalued against the US dollar): 


So how was Davos for you?  A useful piece here highlighting six predictions from the World Economic Forum:


One of the big fears has of course been the emerging markets.  Big outflows still...

...and look at those credit rating downgrades: 


Still as this piece notes the average European strategist remains optimistic - well hopes are always high at the start of the year despite YTD volatility.

'The worst start in years for European stocks is doing little to dim the view of the region’s strategists, who are mostly holding on to calls for gains of almost 20 percent through December'


Of course much of this is centred on the continued roll-out of Eurozone QE. 

Talking about Europe kind of interesting to see some of the fiscal consolidation differentials: Greece is doing rather better than say the UK... Note the average is showing little improvement.  

(h/t @topmoneycharts)

I liked this on employment rates around the world.  Greece not looking so good on this measure: 


Talking about labour and labour markets, the below indicates that by no means is the European migrant crisis over: 

So where are you going to make money over the next little while?  Alternatives and not bonds...

(h/t @panthera_s)

...but property ranking so well?  Not obviously cheap in prime property zones... 

...and talking about the crazy London property market I noted this in today's Financial Times

Back to the markets.  Oil has been a big (negative) signalling mechanism over recent weeks so kind of interesting to see that the Russians are thinking of hedging:


 The Saudi's at Davos of course are somewhat more predictable in their views:


Of course supply and demand are much closer on oil than most people think: 


Back to Russia (and China) interesting to see their continued reserve accumulation of gold (link here): 
Meanwhile did you see just how much of the global gold production China absorbs?  Stay long gold. 

 (h/t @PopescuCo)


Company-related observations:

How has the earnings season been for you?  Still early days but the usual combination of (on average) better earnings and lower revenues on offer...


...and it is going to be a very busy next few weeks: 


Meanwhile the S&P 500's earnings look finely poised...back to the influence of that high US dollar again: 

(h/t @Not_Jim_Cramer)

Via the weekend Financial Times "after adjusting for their net cash, Alphabet was worth $424bn yesterday, compared with Apple’s $399bn"

(h/t @jackdamn)

Wow...Trefis highlight just how limited the profits for Volkswagen are from selling a VW branded car: 


A few stories from today's Sunday Times:

On Glaxo 'an activist American hedge fund has taken a secret stake in GlaxoSmithKline...Och-Ziff Capital Management has a holding of about 0.5%'

Diageo - 'will unveil a 2% slip in its crucial American market'

Standard Chartered - 'draws blank in hunt for chairman' 

'Royal Dutch Shell is expected to seal its takeover of rival oil and gas producer BG this week, with shareholders of both companies likely to vote in favour of the tie-up' 

And I have just read that:

Johnson Controls in advanced talks to combine with Tyco International; deal could be up to $20 billion  


And finally...

Very good on various germ myths (link here).


And did you know this?

Have a good week.  Don't forget to sign up for a free trial of my new macro, stocks and other reports (link here).