Friday, 30 September 2016

10 key points from the S&P Dow Jones Indices 10th Annual Commodities Seminar

I had the opportunity to attend the S&P Dow Jones Indices 10th Annual Commodities Seminar yesterday...

...so what did I learn from the event with general applicability to investment markets?  

1. It has been a bad recent performance run - Jodie Gunzberg of S&P Dow Jones Indices noted 'the most widely-recognised passive commodity index...lost about 10% annualised over the past 10 years'. Nevertheless Larry Antonatos of Brookfield thought that having '10-20% in real assets...made the efficient frontier (of a portfolio) better', a point supplemented by Viktor Nossek of WisdomTree Europe who said if you 'mix them all up' then a commodity combination can bring volatility levels down to FTSE-100 equivalents. Meanwhile Kevin Norrish of Barclays said they had 'raised the price targets of all of the commodities we cover in the last few weeks' and that the usual bad Q4 performance run will be 'different this time' in 2016. 

2. Asia is still all-critical.  Michal Meidan of Energy Aspects noted the region was responsible for additional demand of 1m boe/d but on China specifically she took the view that shifting political sands meant that 'if the market had been paying more attention it would have been spooked more'.  Kevin Norrish of Barclays also thought that the 'upward revision to Asian growth was very important' for commodity demand. 

3. Big picture on flows included the comment by Kevin Norrish of Barclays that non-gold commodity sector inflows were the best since 2010.  2016's flows had been approximately half into gold...but historically this proportionately was not unusual.  

4. Oil was uppermost in people's minds especially so close to the Algiers disclosures.  Blu Putnam of CME Group observed he 'didn't believe the Saudi deal means anything'.  Michal Meidan of Energy Aspects however said the deal potentially 'accelerates a rebalancing that is clearly underway' and that a lack of current investment meant that US$70/80 oil in 2017-18 was 'plausible'.  Kevin Norrish of Barclays agreed and also noted that he was 'inclined to think that US supply would be sticky on the way up'.  

5. Other commodity calls included Kevin Norrish of Barclays saying that 'the big laggard is copper' due to the lagged impact of high investment levels, Fiona Boal of Fulcrum would be long hogs.  David Donora of Columbia Threadneedle would be short sugar.  Michael Jansen of Red Kite would be long zinc but short nickel whilst Dave Ernsberger of S&P Global Platts would be long European diesel.  

6. Flows matter.  Otto Van Hemert of Man AHL said  that 'who else is participating in the market is important'.  Meanwhile Arun Assumall of Macquarie observed that he is 'obsessed about the positioning data' and that 'liquidity means more opportunity'.  David Donora of Columbia Threadneedle noted thinner markets due to tougher regulation 

7. Weather was a constant theme.  Blu Putnam of CME Group said La Nina was not forming as strongly as anticipated but he was still thinking less rain in Brazil (impacting hydroelectricity/agri production) but more moisture/a colder winter in the US.  Abdolreza Abbassian of the UN also agreed that 'La Nina is basically not existent for the US'.

8. Agricultural issues were also widely discussed.  Abdolreza Abbassian of the UN thought that China's 'mountains of grain' probably was not wholly usable but disclosures remained low but also noted - thanks to the weather - record production in a variety of places in the world including Kazakhstan.  Blu Putnam thought that high US production was aided by 'amazing big data use'.  Fiona Boal of Fulcrum thought the markets needed a 'weather disaster' to get going. 

9. As for trading Blue Putnam of the CME Group observed that institutionally they were seeing much more 24 hour trading of commodity contracts due to greater interest from the Asian time zones.

10. So where do we go from here?  Blu Putnam of CME Group called the 'next decade a trading decade'.  Kevin Norrish of Barclays said that the critical tipping point for a structurally positive commodity view was when the world grew by more than 3.5%. 


A really useful conference so congratulations to all involved - and it also helped me discover the Indexology blog (link here) which looks like a great resource. 

Looking forward to participating in the 11th annual commodities seminar next year.

Thursday, 29 September 2016

London Investor Show offer: attend for free and let me answer all your 2016-17 investment queries

Do you want to come and hear for free some thoughts about what investment themes will influence your portfolio in 2017?  Then come along to the London Investor Show on Friday 14th October.


You can read all about the London Investor Show here but there are three key opportunities for you, for free to take specific advantage of. 

First, come and hear me speak just after the show opens at 9.35am

TEN BIG INVESTMENT THEMES FOR THE NEXT 12 MONTHS
Speaker: Chris Bailey, Financial Orbit


Drawing on his experience of 20 years in the fund management industry, Chris Bailey of Financial Orbit will discuss the ten big global investment themes that will impact your portfolios over the next year.  Covering asset allocation, sector selection and even individual share level insights, Chris will take you on a whistle stop tour of the global financial markets to help you prepare your portfolios for the opportunities and challenges ahead as well as answering your questions and addressing your concerns in a free for all Q&A session.

Second, come and meet me and the rest of the team and talk about your investment concerns at the Financial Orbit stand at the London Investor Show.  Ask about whatever is on your mind...and for everyone who comes to the stand and provides their contact details you can pick up your limited edition free gift

Third, do all of this for free by using the special offer I have negotiated for any readers of this message.  

A really nice infographic with all the details to attend the show can be accessed here




It is going to be a fascinating day on the 14th October - looking forward to see as many of you as possible there! 




"Sainsbury’s: piling it high and selling it cheap (so treat the shares the same)"

I wrote a piece titled "Sainsbury’s: piling it high and selling it cheap (so treat the shares the same)" which was uploaded just now to the ShareProphets website.  A link to the piece (free sign-up) is here.


Tuesday, 27 September 2016

Come and meet us at the London Investor Show!

Do you want to come and hear for free some thoughts about what investment themes will influence your portfolio in 2017?  Then come along to the London Investor Show on Friday 14th October.


You can read all about the London Investor Show here but there are three key opportunities for you, for free to take specific advantage of. 

First, come and hear me speak just after the show opens at 9.35am

TEN BIG INVESTMENT THEMES FOR THE NEXT 12 MONTHS
Speaker: Chris Bailey, Financial Orbit


Drawing on his experience of 20 years in the fund management industry, Chris Bailey of Financial Orbit will discuss the ten big global investment themes that will impact your portfolios over the next year.  Covering asset allocation, sector selection and even individual share level insights, Chris will take you on a whistle stop tour of the global financial markets to help you prepare your portfolios for the opportunities and challenges ahead as well as answering your questions and addressing your concerns in a free for all Q&A session.

Second, come and meet me and the rest of the team and talk about your investment concerns at the Financial Orbit stand at the London Investor Show.  Ask about whatever is on your mind...and for everyone who comes to the stand and provides their contact details you can pick up your limited edition free gift

Third, do all of this for free by using the special offer I have negotiated for any readers of this message.  

Anyone can book a complimentary ticket to the London Investor Show, saving them 25GBP on the door.  The code is "FINORBIT" - this code should be entered into the box asking for a voucher code at the foot of the registration page (which can be accessed here). 


It is going to be a fascinating day on the 14th October - looking forward to see as many of you as possible there! 

Sunday, 25 September 2016

Stories we should be thinking about

Ahead of the new working week here are a few finance and related stories to be thinking about.

Macro matters:

After last week's Federal Reserve and Bank of Japan non action (and fairly positive market reaction - all nicely summarised here by @kurterozde)...all eyes on the OPEC meeting in Algeria.  However don't get your hopes up...



(h/t @chigrl)

Actually my personal view is that oil prices are going up...but as always it depends a lot on demand from China: 

Meanwhile fascinating to see this on the impact of lower oil prices on the US economy...


...no wonder US rates are not normalising soon although I feel it is likely they will edge up in December: 

Reflecting this 'new normal' sentiment towards the US equity market remains suppressed...

 
(h/t @TopdownCharts)

...but of course as with a compressed insider transactions ratio caution can be bullish: 
Really good on the failure of the Asian pivot under the Obama Presidency:

Obama’s impotence has intensified questions in Japan and elsewhere about the credibility of the American security umbrella, encouraging nationalists who argue that Tokyo should re-arm in earnest – or even deploy its own nuclear weapons. But their main concern is not North Korea – it is China.

(h/t @jiabaochina)

Chat that Germany is becoming exasperated with the UK negotiating stance over Brexit (link here)...and also with a QE extension inevitable exasperation with the ECB/Mario Draghi is also building (link here). Fun times in Europe...at least the euro is weakish...
(h/t @planmaestro)

Want to guess which is the top overnight visitor destination city?  Maybe it might surprise you...

(h/t @tradegovukASEAN)

Apparently we just lived through the hottest summer in recorded history...And possibly the hottest in “thousands of years.” (link here

With statistics like this and general technological advances just maybe the rise of autonomous cars is inevitable (link here)

The average vehicle is used only 4% of the time and parked the other 96%


Sector and companies: 

Why do companies go bust?  Imminently due debt is the biggest reason...

(h/t @NoonSixCap)

Anticipated FY16 S&P 500 earnings growth almost nothing now...although of course the hopes for FY17e are still for double digit growth...

Zero Hedge highlighted the rather firm price/revenue ratio of the S&P 500 constituents...


As Goldman Sachs announce Asian job losses, is it the end of the suitcase banker? "Mainland securities companies occupy seven of the top 10 positions in advising on Hong Kong initial public offerings this year" (link here)

Nice report here on a stock that is in my Financial Orbit Stocks preferred list: 

Marriott International closed Friday morning on its $13 billion acquisition of Starwood Hotels & Resorts Worldwide, bringing together its Marriott, Courtyard and Ritz Carlton brands with Starwood's Sheraton, Westin, W and St. Regis properties.

In total, 30 hotel brands now fall under the Marriott umbrella to create the largest hotel chain in the world with more than 5,800 properties and 1.1 million rooms in more than 110 countries. That's more than 1 out of every 15 hotel rooms around the globe.


Marriott now eclipses Hilton Worldwide's 773,000 rooms and the 766,000 that are part of the Intercontinental Hotels Group family, according to STR, a firm that tracks hotel data.

Is Twitter about to be taken over?  I do own a few in my pension fund as I love the 'realtime, context rich news':

I also own shares in Carnival which is benefiting from this structural theme...


So why have companies like Next, M&S and Primark had shabby UK clothing retail sales?  I liked this in this weekend's Financial Times


Good news for Boeing versus Airbus: 



Ouch...look at that evolution of the Deutsche Bank market cap: 


And finally...

The rise of the smartphone...
(h/t @khalidHamdan0)

...meanwhile this feels familiar!




Have a good week 

Sunday, 18 September 2016

Stories we should be thinking about

Ahead of the new working week here are a few finance and related stories to be thinking about.

Macro matters:

Not the greatest week in global markets...



(via www.dshort.com)

In Europe the Bratislava summit was the big political event of the last few days but apparently 'the controversial issues driving the political debate in many member countries were left aside' (link here)

Meanwhile showing continued pan-European migration angst: 'a group of Central European EU members known as the Visegrad Four is ready to veto any Brexit deal that would limit people's right to work in the UK, Slovakian PM Robert Fico says' (link here)

And reflecting these issues Mrs Merkel is likely to face some pressures in the latest German state election being held this weekend: 


Apparently 'Asset managers intend to cut their analyst research budgets by 30 per cent, heaping more pain on the investment banking industry that has already been forced to make thousands of people redundant on the back of falling profitability' (link here - however including a paywall)

Certainly there is too much commodity research out there which is not value-added and/or simply expensive (neither point can be made against the Financial Orbit research outputs I would argue!)  Additionally though the fund management industry is changing. To show this here are a couple of fascinating insights from massive investors. First this from Larry Fink of Blackrock: 

Putting this into practice is the firm’s risk-mitigation platform, Aladdin, which enjoys a ubiquity within the firm — it tracks everything from bond trades to head count — that evokes HAL 9000, the sentient computer in the movie “2001: A Space Odyssey.” Some employees even use Aladdin as a verb, as in, “Has the new portfolio manager been Aladdinized yet? (link here)

And then some complementary insights from quant fund AQR: "We need active management but whether you are getting a good deal is a separate question. Index [investing] is raising a competitive force. On average fees have been too high." (link here). 

I am a strong supporter of active management but certainly acknowledge that unless it is performing and/or good value for money people correctly will wonder if they should bother...

Based on where the Labor Day polling was, Clinton should be a gimme for the US Presidency: 


Still political fears are still impacting general business confidence: 


Look how 'certain cities in America are better for upward mobility' 


Good news that the 'People's Bank of China surveys showed the business confidence index rising to 51.2% in the third quarter. That was 2.2 percentage points higher than in the second quarter'

Not so good news though that global trade appears to be rolling over: 


(as i have talked about before latent protectionism is a real double negative for the global economy)

Interesting to see that even with a continuation of limited short-term earnings growth...

... higher valued areas are still favoured.  The only parts of the market that are actually generating growth?
Or winners from the recent historic ever lower bond yield run...which of course makes the bump up of yields in recent weeks so supportive of sector rotation... 
(h/t @kurterozde)

Sector and companies: 

'Investors haven't been hurt not owning banks for the past five years. It is unlikely that they will be hurt not owning them five years from now either' (link here).  Maybe...but my gut feel is that selected financials are beneficiaries of rotation...and it really would not take much to get a sector bounce/bump from here: 

Burberry will unveil its first ever “see now, buy now” show at London Fashion Week on Monday, heralding a new era for the industry in which fans can get their hands on "seasonless" items immediately after they are presented on the runway (link here

Gold watchers should be all over the Denver Gold Forum agenda and webcasts over the first part of the week (link here) (h/t @MarkBrant1KM)

As per Seeking Alpha, 'Yum Brands (YUM +0.2%) names who it expects to comprise the board of directors at Yum China.Seven of the nine directors will be independent from the company. Primavera Capital Group founder Fred Hu is slated to serve as non-executive chairman of the Yum China Board. The Yum China distribution is expected to occur on October 31'.

Wow, look at the world's largest company evolution...from a little bit of tech to a lot: 


And the cheapest electrical vehicle from a cost per mile of battery range perspective is: 


And finally...

Well can you identify them?

(h/t @rshotton) 

Next year will be a decade since 'screen time' led the way.  I cannot say I am too surprised: 


Have a good week 

Friday, 16 September 2016

Listen to a recording of the latest Financial Orbit webinar


And if you missed yesterday’s Financial Orbit Macro and Stocks webinar…

You can listen/watch at this link:


If you would like a copy of the presentation then please send me an email at chris.bailey@financialorbit.com