Sunday, 19 February 2017

Stories we should be thinking about

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

Macro matters:

So an expensive... 

The forward price-to-earnings ratio on the S&P 500 hit 17.6, the highest level since 2004, according to FactSet.

...but excitable market at the moment: some better optimism...
...but as shown by this great chart via @Callum_Thomas, surely the VIX cannot adhere to the normal seasonal pattern and go deep (as per the left hand side) into single digits?!

Keep watching Treasury yields too: 

Remember that chart from last week's Fund Manager Survey document?  Sub 3% I would agree is ok...

...of course inflationary pressures are rising as per this link here (and nice chart below): 

Meanwhile in Europe...some fascinating polling data in France.  Clearly a lot riding on 'anyone' beating Le Pen in round two...

...and not easy in Germany too for Mrs Merkel's ruling CDU:

And talking about Mrs Merkel:

"We have at the moment in the eurozone of course a problem with the value of the euro," Angela Merkel told reporters at the Munich Security Conference.

"The ECB has a monetary policy that is not geared to Germany, rather it is tailored (to countries) from Portugal to Slovenia or Slovakia... But this is an independent monetary policy over which I have no influence as German chancellor."

So why does Germany still love the Euro?  Well of course it is because the currency is cheap for a highly productive country like Germany and hence helpful for the country's exports at the moment:

Meanwhile this from the Financial Times on Brexit: 

'The EU’s Brexit negotiators expect to spend until Christmas solely discussing Britain’s divorce from the bloc, denying London any trade talks until progress is made on a €60bn exit bill and the rights of expatriate citizens...A narrow divorce-first approach favoured by Michel Barnier, the EU’s chief negotiator, would represent a big setback for Britain’s aim for a fast-track EU trade deal, completed by the end of 2018'

As I observed on Twitter:

Quelle surprise. & then the 2 year deadline gets extended to 3 as lots of new legislation for Brexit looks kind of akin to what exists now!

And talking about the UK economy and this chart below I observed:

Oh well could be worse, could be 2011-13 again. More interesting is to contrast valuations today of consumer names with valuations back then

And you want some more views?  Well my latest Yahoo Finance piece entitled...

What your pension fund manager is worried about (and why you should do the opposite)

...can be found here.

Also you can listen to my latest presentation here at a conference in Cardiff yesterday which I titled the 'Mad, bad and opportunistic global stock markets'. 

And finally for this section a great piece on robotisation:  

Sectors and companies: 

Busy earnings week awaits again (but not as busy as a few weeks ago thankfully):

Nice summary on earnings season here (h/t @jiabaochina for highlighting it) which includes the observation that: 

More than 80% of the S&P 500 has reported earnings this season with gains tracking at 4.6% from a year ago, in what would be the first two season of consecutive year-over-year earnings growth since early 2015

Yes, lots of retail focus this week: 
Retailer% change since election% change since inauguration
Home Depot14.4%4.5%
Macy’s Inc. M, +1.51%  -15.8%8.1%
TJX Cos. TJX, +0.47%  4.8%2.3%
Nordstrom Inc. JWN, +3.42%  -14.7%2.9%
Kohl’s Corp. KSS, +1.06%  -5.3%3.2%
L Brands Inc. LB, +0.05%  -12.5%-5.7%
As for aggregate earnings...getting better: 

Meanwhile breaking corporate news:

Kraft Heinz Co. withdrew its $143 billion bid for Unilever two days after the approach became public amid stiff opposition from the Anglo-Dutch target to engage in discussions.
“Unilever and Kraft Heinz hold each other in high regard,” the companies said in a statement Sunday. “Kraft Heinz has the utmost respect for the culture, strategy and leadership of Unilever.”

Well that's view is that Kraft Heinz are playing a long game.  They will be back at some point. 

Apparently UK financial RBS’s aggregate losses since the 2008 crisis, which triggered the bank’s collapse and taxpayer bailout, have ballooned to more than £50bn (link here).  Yes, it has been underperforming.  I still like it here.  

Have a great week...

Friday, 17 February 2017

"What your pension fund manager is worried about (and why you should do the opposite)"

Since last Autumn I am really pleased to have started writing a regular column for Yahoo UK/Ireland on finance and the investment markets.  You can find at this link here    my latest column titled:

"What your pension fund manager is worried about 

(and why you should do the opposite)"

Some more recent media appearances

A few more recent media appearances.

First, on the VOX Markets podcast I mused about stocks including Cobham, Laura Ashley, Coca-Cola Hellenic Bottling, M&S and Whitbread. You can listen here. 

On the today Chris covers

I then appeared on Share Radio this morning (you can listen here) talking about the following:

'The four indices had each closed at record highs every day for the past four trading days — a feat last achieved in June 1995, according to FactSet data. But the risk-on rally came to an end on Thursday as investors appeared to pause and take stock as they awaited more details on Donald Trump’s tax policies. To get a sense of the market mood at the end of another trading week, Nigel Cassidy was in the company of top Share Radio Breakfast analyst Chris Bailey of Financial Orbit'

Thursday, 16 February 2017

Listen to me talking about global equity news and opportunities

Listen to me talking about global equity news and opportunities here. 

"Life insurer Prudential PLC is bidding for a slice of the £12.5bn of Bradford & Bingley mortgages being sold by the government, Nex has just released its Q3 statement announcing that Trump effect boosted revenues by 11%, and Qinetiq's revenues are ‘steady’ as it looks to end a 5 years of decline. Chris Bailey, Founder of Financial Orbit, joined Share Radio's Ed Bowsher to look at these and other important company news"

Tuesday, 14 February 2017

Appearance on the Morning Macro podcast

I appeared again on the Morning Macro podcast.  You can listen here to my latest appearance where I talked about...

Why have foreign holdings of US government debt dropped; how many Fed interest rate rises should we expect in 2017; and what can we learn from the current season of corporate earnings?

Sunday, 12 February 2017

Stories we should be thinking about

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

Macro matters:

What a last week, eh?  At last count Friday closed with...

S&P 500: All-time High
Dow: All-time High
Nasdaq: All-time High
Russell 2000: All-Time High 

But in this chart from @KurterOzde's very insightful weekly macro (link here) shows the real debate in the world today...that rising gap between uncertainty and low volatility in markets:

Maybe February's typically muted/poor returns (especially after an election) will impact: 

Thoughtful historical review article here on how the evolution of the British Empire may provide some insights on what to do in the Brexit negotiations. 

And my favourite line?

'the lesson of empire is that a generous payment here and there can go a long way'

And I am also not surprised that apparently: 'Just 35% of the public said they backed Britain leaving the EU without an agreement with other states' (link here).  

Onto other European matters and this on Greece here  is fascinating: 

'Tsipras said that bailout talks would close positively, but that he wasn’t sure if the fund would have a central role'

As I noted on the Greek PM's comment on Twitter: 

Ha, someone's not going be re-elected too...

Meanwhile rising French debt...

...has led to wonderful observation about the relative attractiveness of Unilever versus French government bonds: ' Do you prefer Marmite debt over La Belle France?' (link here)

BUT European stocks are cheap.  As I observed on Twitter earlier in the weekend: 

You have always got to love 40+ year long charts

(h/t @TihoBrkan)

You know my view, as expressed in my most recent Yahoo Finance column (link here)

Populists are not going to crash and 

burn global stock markets

Meanwhile talking about populism, I thought this was kind of interesting from Europe's most traditional country on not having lower corporate taxes

'Switzerland’s attempts to overhaul its corporate tax regime have suffered a setback after voters decisively rejected reforms to bring the country’s practices in line with international standards.
The government had hoped to secure approval for changes that would keep corporate tax rates globally competitive while abolishing special treatment for many multinational companies.
In a referendum on Sunday, however, the plan was rejected by 59.1 per cent of voters — a much larger margin of defeat than opinion polls had suggested' (link here). 

So how about global markets...well I do think it is healthy that the US dollar positioning has fallen recently...I still note the big net long though and hence I stick with my view that better global balance via a lower dollar is likely: 

Yes, I still prefer equities given where bond yields/spreads are.  More relative idiosyncratic value in the former...

I just don't know why more fund management companies are not more aggressively active: 

'List of 80 investment companies that have potentially sold funds that charge high fees for active management but closely mimic their benchmark' (link here

Especially as dispersion is rising as correlations fall in this nice chart cited by @Callum_Thomas:

Who is paying their way in NATO?

Big themes out there in the world for 2020: which one do you like?

Sectors and companies: 

Another biggish earning week: 

Wow, via @PlanMaestro fascinating insight into how energy earnings drag can impact: 

My feeling is that you probably have to own in a global portfolio at least one of these names.  In the Financial Orbit Stocks preferred list Tencent is a constituent: 

Meanwhile looking at the US technology names I see a couple of familiar companies at the top of this list: 

Amazon is pretty amazing too: 

Turning to financials, a few thoughts on Dodd-Franks (link here) including extensive quotes from me on behalf of one of my corporate clients. 

Got to love this re Yum China (link here):

'eating a taco is “a whole new way of learning.” '

From today's Sunday Times a few UK corporate stories including: 

Royal Bank of Scotland will be forced to slash up to 15,000 jobs as it scrambles to cut costs in the face of a ninth consecutive year of losses

A secretive hedge fund backed by the financier who waged activist campaigns against Volkswagen and Deutsche Börse is lobbying for a sale of William Hill. Parvus is William Hill’s biggest shareholder with about 14% of the stock, which it has built up through derivatives. The fund opposed the gambling giant’s attempts to merge with Amaya, the Canadian owner of the PokerStars website, last October. It said the deal would destroy shareholder value.

Rolls-Royce is set to crash to a record loss of about £4bn as sterling’s slump and its £671m corruption fine erase profits. The fall in the pound since the Brexit vote will force it to write down profits by about £3bn. The engineer struck derivatives deals to protect it from currency swings, which have pushed it into a paper loss. Even stripping out the currency gyrations, it will report a dire performance for 2016 on Tuesday — with profits halving.

Can you spot one of the problem parts of BT Group?

Have a great week...

Live in the Cardiff area? Come and hear me speak on 18 February

Exciting news if you live around the Cardiff can come and hear me speak on 18 February!
A few weeks ago Share Talk - who are organising a free investors evening seminar on 18 February details of which you can find here - announced that:

'Global investing specialist @Financial_Orbit will headline the Cardiff event' 

And what will I be talking about?  

"Chris will be presenting on global investment opportunities for the rest of 2017 and promises, in under 30 minutes, to not only give us his views on the investing outlook for all major geographies and asset classes plus highlight some of his current individual stock favourites but to also answer any questions you have about the markets".  

Looking forward to seeing some of my readers there...