Sunday, 19 January 2014

Stories we should be thinking about

Ahead of the new working week, here are a few finance-centred stories before the markets open on Monday, to think about:

Macro matters:

The MUST READ was this article (on Seeking Alpha so a free membership of the site required to see the full article) about the low levels of gold inventories at the Comex (the commodities exchange) with, in my view, the key quote being (with my emphasis added):

'considering the huge drawdown in registered gold stocks, the owners-per-registered ounce ratio surged to an all-time high of 111.6 claims per registered gold ounce! Yes that means if less than 1% of COMEX outstanding contracts stand for delivery there will not be enough gold to meet the delivery requirements. Of course gold could be transferred from eligible stocks to meet this request, but that cannot be depended on since eligible gold has no obligation to be used to fulfil delivery'.

Gold remains good risk-reward here

'Commodity currencies' under pressure with a weak commodity index performance over the last year

Of course there are alternative/other explanations for currency weakness such as this amazing chart about divergent Canadian / US debt progression...if you wanted to know why the Canadian Dollar has weakened against the US Dollar recently, here's a good reason why:

Commodities, of course, perform best at times of inflation.  We know all about the money supply growth in the last few years via QE.  So when the velocity of money picks up, will we get higher prices as the Quantity Theory of Money suggests?  The answer is yes in my view...a key statistic to watch



The European banking sector remains a head-scratching subject, so this article on capital shortfall under stressed conditions (link here) is a good read.  That's quite a lot of GDP at risk under a 'systemic' crisis (with France particularly standing out):


Of course any volatility in the banking sector would lead to some volatility in bond spreads.  This chart from the weekend edition of The Financial Times struck me as being useful.  Compression of the spread against bunds all-around, but (arguably) isn't the French/Belgian spread the most interesting juxtaposition given the above chart?

A bit of an expose on some UK tracker funds hereRegular readers will know I believe we are now moving into a time for active management

A thoughtful article (as always) from John Mauldin here with some earnings charts akin to my own observations about the corporate earnings cycle.  The chart which really caught me eye though was this one on the VIX'Back to pre-crisis levels', eh?  Hmmm.

Talking about corporate earnings, low dispersion today = high dispersion tomorrowIn a stock-picker's market absolutely...

International ultra high net worth (UHNW) international property market flows clipped from the property section of the Weekend FT. For the average value of property holdings, who would have thought Scotland outpointed Monaco.  You definitely get more acreage in the former for your money...however not as warm, higher taxes and no Formula 1 race on your doorstep

China and pollution...this from Bloomberg:

'The city published a draft of a pollution prevention plan on Jan. 18 with new penalties, according to a Beijing Morning Post report yesterday. They include fines of 10,000 yuan ($1,653) to 100,000 yuan and possible closures for companies exceeding national or city emission limits. Owners of vehicles who exceed emission rules will face penalties of as much as 3,000 yuan, the newspaper said.
The National Meteorological Center issued a yellow alert for smog yesterday, the fourth straight day, the official Xinhua News Agency reported. The warning covered areas in 10 provinces and municipalities including Shanghai and Tianjin, a coastal city neighboring Beijing'.

You did see that the Beijing authorities have introduced a huge TV to help show residents when the sun is rising/setting?

Good to hear that the World Economic Forum in Davos has identified the gap between the rich and poor as an important theme for this year’s gathering.  Lots of rich people in Davos...not too many poor ones

A thoughtful piece by an ex hedge fund trader entitled 'For the love of money'.  Link here
Talking about money...a great picture chart showing each global currency:

Overwhelmed by social media?  So you should be...


Company-related observations:

CME - 'CME Group Inc. is stuck between its past and future, dragged back by industry traditionalists as it struggles to expand a global electronic futures exchange'. Link here

Morrisons - a second activist investor emerges.  Link hereI remain long of the share...the second weekend press in a row talking about activism and the company can only be good news

Apple Turns To Old iPhone Models, And Lower Prices, To Woo Users In India at this linkPremium prices have to come under pressure to shift volumes
Deutsche Bank to issue a profits warning?  Multiple mentions in the weekend press that this is what the company will say on Monday.  Too many mentions for it not to be true.  Regulation and fixed income blamed.  Let's see how much is factored into the current share price

Softbank and Deutsche Telekom are attempting to resolve obstacles to Sprint's possible acquisition of the German carrier's 67% holding in T-Mobile USA, Bloomberg reports.
Vodafone and BSkyB 'in talks to halt BT broadband blitz' as per the Sunday TimesMakes sense to me.  Vodafone should use their cash balances to consider a bid for BSkyB in my view
'Tesco eyes Mothercare' is a headline in the Sunday Times

And finally...

(h/t  @bondvigilantes)

Although I note an alternative chart appeared on Bespoke Invest...

I am going to see the Wolf of Wall Street film on Monday (it opened on Friday here in the UK)...the inaugural Financial Orbit film review to follow in due course
 Have a good week

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