Sunday, 21 August 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:

It has been generally an awesome time across all risk assets...
(h/t @TihoBrkan)

...and the technicals remain bullish for the moment...

(h/t @hmeisler)

...but meanwhile in the real world...

(h/t @rshotton)

We all know why the average citizen is not happy as noted below (link here) via @BrankoMilan 

'lower and middle-income workers in wealthy countries appear to have lost the most ground in terms of their living standard over the past few decades'

Amazing number of days an employee in Europe has to work to pay off their annual tax bill...

...or maybe we should blame the internet?!

Do you recall the graphic from earlier in the week about current 'tail risk' fears?

Well what I am really worried about are hits to trade liberalisation as nicely put in this Washington Post article (link here)

Over the course of a turbulent political year, the American political center has shifted, not only against the TPP but also against trade-expanding multilateral agreements generally.

I am so much happier (and I guess net worth richer) being a weighing machine and not a voting machine investor (link here):

Day traders—who buy and sell securities in extremely small time frames, holding them for less than a day in order to profit off short-term momentum—have a nearly 80% chance of losing “real money” over the course of a year. That figure comes from the blog CuriousGnu, which also calculated a median 12-month loss on investment of 36.3%.

Of course the above (and costs too) have led many investors to conclude they should go passive and not active: 

But again being a weighing machine investor I find the above more of an opportunity than a threat for active investors

Of course the outlook for inflation is all-critical.  I liked this via @blackrock on some of the recent composition differences.  What happens if some of the 'high volatility' aspects start to tick up?

I see on this piece that 'The Bank of Japan will not rule out deepening a cut to negative rates it introduced in February, the Sankei newspaper quoted Governor Haruhiko Kuroda as saying, even as the controversial policy has failed to spur inflation or economic growth'.

Yes, Japan remains a troubled economic zone - just look at the magnitude of fiscal packages the country's authorities have rolled out: 

(h/t @AW_Dryden)

Meanwhile whilst the world may generally be cutting interest rates I liked this graphic showing some big interest rate increases...including the move by Mongolia earlier this week:  

As for other emerging markets, Brazil, China and Turkey look potentially relatively badly exposed against certain other names: 

(h/t @cafeeconomics) 

What themes should you be excited about? No near-term plateauing due on these areas... Despite any negativity above this is something to be more excited about...

(h/t @KhalidHamdan0 )

And talking about innovation, look at the anticipated growth of electric vehicles in China: 

(h/t @e_smalldata)

Meanwhile in the UK look how renewables have increased in the energy source mix (although not as much as gas which has taken over from coal).  

Meanwhile what about nuclear? I note in this report that:

'City investment house RBC Capital Markets says no current minister starting from scratch today would ever agree to the deal George Osborne oversaw with EDF: a 35-year index-linked contract paying £92.50 per megawatt hour in 2012 money – double the current wholesale price of electricity'.

A final macro story...oh to be a fly on the wall as the European debate continues (link here): 

The leaders of Germany, France and Italy will meet on Monday to discuss how to keep the European project together in the second set of talks between the premiers of the euro zone's three largest economies since Britain's shock vote to leave the bloc.

Sector and companies: 

Interesting chart showing the relative sector performers in the US market YTD...

...certainly little correlation with recent revenue growth trends: 

I think utilities are important to watch here given the inevitable correlation with bond yields (which I think are too low).  As @JLyonsFundMgmt notes the sector is at a key support level: 

Certainly an evolving market over the last few years...much more technology-friendly: 

(h/t @brettking)

Onto some company observations.  In case you missed the chat around easyJet on Friday, this was nicely summarised in the Weekend FT
Deutsche Bank (negatively) stands out in terms of CDS pricing...

(h/t @Schuldensuehner)

Got to like this quote from Bezos the Amazon founder - very true in today's world: 

(h/t @morganhousel)

And finally...

Wow did you see this glass bottomed bridge in China...

...300 metres above ground!  Would you be brave enough to walk across?

(h/t @Jiabaochina)

Have a good week 

Friday, 19 August 2016

A chat through some stocks...and a banking sector article

I was very happy to appear on the London South East mid and large cap share discussion earlier in the week discussing a number of FTSE 100 and FTSE 250 names.  You can watch the video in full here.

I also appeared in the latest copy of the UK Investor Magazine which you can download (free sign-up) here.  And the article I wrote?  About the UK banking sector...

Thursday, 18 August 2016

Another appearance on the Vox Podcast

Earlier today I made another appearance on the Vox Podcast which you can listen to here.   I talked about Brexit related matters and then stocks including Kingfisher and DS Smith.  

Tuesday, 16 August 2016

"BHP Billiton: make billions in losses… and the shares correctly go up"

I wrote a piece titled "BHP Billiton: make billions in losses and the shares correctly go up" which was uploaded just now to the ShareProphets website.  A link to the piece (free sign-up) is here.

Sunday, 14 August 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:

With the Jackson Hole conference still the thick end of a couple of weeks away, the dog days of August await?  Well with US markets hitting new highs during the last week August has provided an unusually positive backdrop as noted below...

(h/t @LPLResearch) 

...but with the volatility VIX index at 2016 lows investors have been taking the opportunity to build up their volatility insurance exposure.  Interesting times...

(h/t @McClellanOsc) shown best by the widespread fixed interest outperformance so far this year.  

I am not convinced there is any real value in fixed interest and certainly super compressed yields have an impact - as discussed with relation to a £400 billion pension deficit crisis here

(h/t @OscarWGrut)

Akin to the above is this piece highlighted by @bahamasexile which noted: 

'...the Bank of England's bid to boost the economy has left pensioners with incomes of just £6 a day after a lifetime of saving'

And I have mused before about shifts towards fiscal stimulus...

...and future inflation (at the very least due to higher energy prices than a year ago - let alone if there is any inflationary impact from all the stimulus enacted over recent years) which of course is a very out-of-favour concept currently: 

 More generally amazing what some developed market stimulus can do...
(h/t @Callum_Thomas)

...and even Chinese corporate acquirers have been much overseas centric: 

I highly recommend reading the IMF report (link here) on China published on Friday. Lots of fascinating data including the below on the scope for higher consumption...
 ...and lower savings:

Meanwhile here's a strategically important story.  We'll be hearing much more about SDR debt in renminbi's.  

It appears my anticipation of a higher oil price before the end of the year (US$50+) is historically seasonally contrarian...
(h/t @chigrl)

...but lower production despite a recent uptick in oil rigs is better for global balance: 

Time for some Europe and related analysis.  Yes Brexit is likely to have an impact on the UK economy...

(h/t @IIF)

...but maybe the actual exit from the European Union may be delayed for the UK.  This from The Sunday Times today: 

"Britain might not invoke article 50 until France has voted next May or even until after the German poll in Sept"

Good or bad for 2017 growth?  It probably kicks out the uncertainty a bit longer...interesting though to see as per a report in The Financial Times that directors have turned net sellers: 

Britain’s bosses are selling more shares than they are purchasing in a dramatic swing since the June 23 Brexit vote, when they were active buyers of their own companies’ equities.

In the week following the Brexit vote, directors at large listed UK companies sought their own shares, picking up £14.3bn. But the latest trading data show that FTSE 100 and FTSE 250 directors have taken advantage of the equity rally, disposing of a net £10.5m worth of stocks, say brokers Olivetree.

Talking about uncertainty the need for further assistance to southern Europe is apparent.  At the next ECB meeting in September will Germany have few other options to nod through more stimulus in order - at the very least - to protect their own financial claims?

And finally for the macro selection look at Cardiff go in terms of future anticipated energy needs.  The UK is much more than just London...

(h/t @PatriciaLilyS)

Sector and companies: 

The earnings season is over 90% done but looking at S&P500 earnings they are underlying flat for FY16e...but the usual +1 year mid-teens EPS optimism for 2017...

...that feels like a stock picking world to me. 

Internet search market share is very different in China to the rest of the world...

...and on a related front a fascinating report here on the schisms between China and the US on key internet economy matters: 

In many ways, the split is like 19th century railroads in the United States, when rails of different sizes hindered a train’s ability to go from one place to another.
“The barrier to entering the U.S. or China market is becoming higher and higher,”
(h/t @Jiabaochina)

Meanwhile via an excellent tweet via @TheRudinGroup video on Facebook is rampantly growing: 

Makes you think what market cap a YouTube spin-out might create for Alphabet/Google...

I see the founders of Facebook and Google are both on the list of the richest tech billionaires...

...and talking about technology action, you can see why Wal-Mart bought

Turning to UK corporates and the staff turnover at Sports Direct is maybe an insight into the angst (and sharp share price fall) suffered by the company: 

A few other corporate stories in today's Sunday Times

Anglo American pressed to break up £12bn empire...South Africa's Public Investment Corporation (PIC) has begun turning the screw on chief executive Mark Cutifani, and is demanding a shake-up of the FTSE 100 stalwart understood to have held talks with Entertainment One's biggest shareholder, the Canadian pension fund CPPIB, about taking the company private - prior to ITV's offer

BHP Billiton expected £5bn plunge into the red, to be revealded at the annual results on Tuesday, would be the first loss since BHP and Billiton merged in 2001...most of the loss is down to write-downs on the value of its American shale gas and oil division

Casino giant Rank and online gaming outfit 888 are poised to return with a higher offer for William Hill

And finally...

What a cool word cloud £2 coin...

(h/t @cgledhill) 

Have a good week