Tuesday, 7 July 2015

Financial Orbit wrap 07/07/15

Five sentences or graphics which sum up the Financial Orbit output over the last 24 hours across the website, twitter account and anything else thought about...

1. Big Tuesday meeting of all the European finance ministers and heads of state…time for some movement from the creditors? I mean it does matter:

Well it would help if Greece had come up with some proposals...maybe that will be tomorrow then.  In the meantime we are at peak Grexit:


2. Turning to China we don't just have volatility...but we also have a market which increasingly is not trading (h/t @george_chen):

BREAKING: Another 173 firms announced to suspend trading tonight - in total 942, or 1/3 of all listed firms in China stock market are halted

Meanwhile commodity prices have been weak as Chinese growth has abated.

(h/t @M_McDonaugh)

Unfortunately US oil production has not yet responded to the lower rig count: 

3. A really fascinating report on Italy by the IMF (link here) who note a lack of growth historically and prospectively...

...not to mention some structural rigidity issues: 

4. I muse in my latest Share Prophets column about the potential opportunity at Rolls Royce with the shares now deep below the £8 level (link here).  

5. Finally...what a great presentation (link here) about markets in Q3.  Very tempted to put together a formal posting highlighting my favourite charts.  If you cannot find at least one chart that really interests you then let me know!

"Is Rolls Royce the new BG Group?"

I wrote a piece titled "Is Rolls Royce the new BG Group?which was uploaded just now to the ShareProphets website.  You can find a link to the piece (free sign-up) here.

A few macro and related thoughts/charts today

A few thoughts today...

Greece – big Tuesday meeting of all the European finance ministers and heads of state…time for some movement from the creditors?  I guess you have to ask the 'Banque de Merkel'...

Greece #2 – ELA rolled yesterday evening but with tighter conditions (Haircut on ELA securities increased by about 10%). ECB’s Nowotny said that “Greek Bank’s Cash Will Probably Last The Week”.  Time for a deal…

Signalling from 2 year Greek bond at a 50% yield = 50% haircut risk?!

Greece #3 – the debate about the impact if the Greeks print their own money.  Perhaps one that gets more relevance IF today's/the next week or so's talks break down...

Global markets – interesting to see which ones are ‘oversold’ as per this measure…not just China but lots of Europe too (sourced from here)

China – more volatility and Shanghai index at lowest since March. Over 200 Chinese Firms Suspend Share Trading Today (Sec Daily)

Meanwhile Chinese companies listed in the US are…coming home.  Interesting timing! 

Australia – Oz Central Bank keeps rates at 2% but calls for further FX falls (who doesn't want a weaker FX at the moment!?): “Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices”

Oil – worthwhile watching today as yesterday very poor: ‘Brent crude, the international oil standard, slid 6.3 per cent to $56.54 while West Texas Intermediate, its US counterpart, declined 7.7 per cent to $52.53. The slide was the worst since February and took both Brent and WTI into negative territory for the year’ (Fast FT)

Puerto Rico bonds. Liked this– fabulous tag line…

 (h/t @DavidTaggart)

Monday, 6 July 2015

Financial Orbit wrap 06/07/15

Five sentences or graphics which sum up the Financial Orbit output over the last 24 hours across the website, twitter account and anything else thought about...

1. Greece - well what a day...ultimately no huge market moves but so much ongoing intrigue and debate.  I used my latest Yahoo Finance Contributors column (link here) to talk again about the rationale for a compromise deal...

2. Of course there are still issues...and hence reasons why a compromise is sensible.  The troubled Greek banking system is one of them...

...so kind of interesting to read later on today that:

The eurozone's central bankers have toughened the terms of its lifeline to the Greek banking system, raising the discounts — or haircuts — on the collateral Greek banks are swapping for their emergency funding.

3. Otherwise China remains highly volatile despite all the measures over the weekend...and as shown here the system's margin requirements are still troublesome: 

(h/t @EdVanDerWalt)

4. Crikey, it did not take long for corporate bond volumes to drop. 

 5. Thankfully roll on the results season later this week.  WD-40 and PepsiCo will be especial focuses for me.

(h/t @WrigleyTom)

"Europe versus Greece: if they snooze, both lose"

My latest post as a Yahoo Finance Contributor titled 'Europe versus Greece: if they snooze, both lose' can be found here.

Greece - a few observations...and where do we go from here?

Whilst the Chinese market is pretty volatile (and Hong Kong is having its worst day since late 2011)...the focus inevitably is Greece.  So...some quick observations:

  • Lots of talk - a meetings fest over the next couple of days...but without Mr Varoufakis who has resigned.  More on that below...
  • The Greek banks cannot open without explicit ECB/ELA - I called it on Twitter yesterday the 'highest level of financial game theory now' - and this opens up a route for a compromise despite the 'no' nature of the vote;
  • Grexit? - still only a 40% chance.  Because inherently the Greeks still prefer the stability of the euro versus the old drachma;
  • A deal - has to include a bond restructuring otherwise it is not worth the paper it is written on.  This is very much a continuation of the view I gave in last Monday's Yahoo Finance Contributors column (link here);
  • Contagion? - got to take the issue off the front pages - hence the need for a compromise;
  • Mr Varoufakis - certainly his aggressive style has alienated some BUT his resignation I believe indicates a compromise is in the air
More in a further posting later...

Sunday, 5 July 2015

Stories we should be thinking about

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

Macro matters:

Well WHAT A SUNDAY with the Greek referendum.  The polls have closed as I write BUT no results yet other than an expectation that it will be close (and the early polls suggest a 'no'):

So many issues around the Greece debate which may be easier to answer once the result is known.  The weekend started off on a troubled note with some stories about a 'bail-in'...

...but there is no doubt that it is going to be a difficult transitional period whatever happens, now that the country has missed some payments to the IMF. 

(h/t @NickTimiraos)

It has certainly impacted the Greek economy and banks.  I personally still remain cautious that without further support the Greek banks are going to struggle to open Monday/Tuesday: 

(h/t @VisualCap)

Still at least Greece has started to reform a little as per this latest survey from the World Bank:
So it is going to be an interesting evening.  Is Mrs Merkel presiding over a crumbling regional economy ('Women of the ruins') as suggested by a leading German media publication?

Meanwhile the big structural issue is around an increasingly difficult backdrop for creditors.  I liked this piece comparing Greece and Puerto Rico (link here).  

'Greece should reinforce the lesson: Sovereign debt is a prime source of "systemic" danger. That is especially true of small governments in a currency union. A government is just a highly leveraged financial institution and insurance company'. 

Of course the other big macro story - arguably even more important from a global perspective - is the current volatility in the Chinese stock market.  Various stories over the weekend about further stimulus and support measures but in terms of the mentality of the local populace and the stock market I thought this was interesting: 

'A random survey of 300 university students made by the state-run China Youth Daily in April found that 33% of respondents invested in stocks. Of them, judging from the replies, 47% know how to read candlestick charts, 20% understand stock-market terminology (bull position, long sale, and so on), and more than 60% choose stocks following government policies'. Link here.  

As for the wider Chinese economy the impact of the current growth slowdown is shown nicely here: 

As for broader markets fascinating to see the lower returns / higher valuation combination in many markets today compared to a few years ago (2011): 

(h/t @Eurofaultlines)

The above makes this really interesting - on a weekend without much other macro this paper (and key graphics below) on fiscal reform would be the top MUST READ story (link here). 

Fascinating financial ranking here

'Financial Secrecy Index to show which countries are doing the most harm. The result is a completely different list than the Basel Anti–Money Laundering Index (BAMLI) or Transparency International’s Corruption Perceptions Index (CPI)'

15 problems with paper portfolios versus real world ones...(link here).  So very true...and this is why my own portfolios mentioned on these pages are 100% real...

Company-related observations:

'Potash Corp. could approach K+S' shareholders directly and submit a hostile takeover bid, which would spice things up a little' (link here).  Totally agree with that...and I said it earlier in the week here

Interesting Glaxo posting here musing about the prospects for the global pharmaceutical company (link here).

Uber's epic rise:

UK energy stocks - interesting comment in The Sunday Times that the long-awaited competition ruling will conclude that there is no need to break up the biggest power companies and 'instead bash regulator Ofgem for holding back competition in the energy market'.

Finally interesting that Monsanto are even considering ditching its 'century old brand to secure a deal' with Syngenta.  They are getting desperate as I noted a couple of weeks ago (link here).

And finally...

The secret of fulfillment is, “to choose trouble for oneself in the direction of what one would like to become.”  This is so true (link here). 

Who knew the price of beer varied so much: 

Have a good week