Sunday, 28 June 2015

Stories we should be thinking about

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

Macro matters:

Some big macroeconomic stories over the weekend...but there is only one place to start: Greece where some element of a compromise seemed primed to bring a deal with 'the institutions' but the events of the last 48 hours have (to say the least) reshuffled the agenda.

So you want to know what on earth happened regarding Greece over the last 48 hours?  To hear one side check out the write-up by Mr Varoufakis here in his 'as if happened' blog posting.  A phenomenal read...

...the other great summary read I came across was this one by @paulmasonnews with the observation that 'did the euro just die...but anyone who thinks they can predict the outcome is wrong'.  Very true words.

I liked @Mick_Peel's use of Mr Varoufakis' quote 'We tried democracy as a means of breaking a deadlock' and this use of an image here:

Some element of high volatility in Monday's markets seems inevitable, but at least today's announcement that the ECB has decided to continue the extra liquidity ELA provisions for the Greek banks until after the referendum, will add a touch of calm.  There are still so many unanswered questions as this 'Greek investment banking analyst' noted:

(h/t @RobinWigg)

Grexit as a panacea then? Proponents of that view should think about some of the broad equivalence with Argentina (as per this link here)

'If we in fact get Grexit then my forecast is that we will have a couple of quarters of negative GDP growth (as a result of the bank run we already have seen), but then Greece will see the mother of all recoveries as the New Drachma plummets (likely 70-80%)...This will be the positive result of ending the monetary strangulation of the Greek economy. However, structurally and politically it is hard to be positive - and hence Greece will then again within the next decade face another crisis likely in the form of weak growth and this time around high inflation as public finance problems will likely remain unsolved. At least this is how it played out in Argentina…'

A couple of final points on Greece.  Of course the country is not the only one in Europe with debt...

Already for the Bank for International Settlement, Greece is already not in the euro zone!

There will be more on the Greece debate on on Monday.

**Postscript - as I was publishing this announced that the Greek market/banks would not open on Monday - no great surprise.  Now the question is: 'when will they re-open'? ***

Now turning to the loosening of Chinese policy announced over the weekend, hard not to agree with this excellent link from @EM_Equity here

“A plunge at that pace could have forced margin calls and another round of selling, leading to a stampede,” Lu Ting, Chief Economist at Huatai Securities told Bloomberg. “So avoiding panic in the financial market and protecting market confidence is part of the consideration.”.  

Still the anticipation is that by 2030 China will still add the greatest amount of absolute GDP over the next fifteen years: 

So what is important for both Greece, China and many other countries around the world?  That would be structural reform - making this observation important: 

'The BIS said in its annual report that monetary authorities from the US to Japan had been handed too much responsibility to steer the global recovery and that much more of the weight had to fall on governments, which were failing to pass vital structural reforms (link here)'. 

Thoughtful piece on luck and investment management here.  

Company-related observations:

Useful Greek bank capital position graphic via @AlastairWinter

Fascinating Q&A session with an employee of Alibaba who left a few years ago and wrote about his experiences.  I particularly liked this quote:

'Competing against other Chinese companies, I don't think most internet leaders in China have gotten to where they are today due to having the right government friends (for the most part). The one area that Alibaba and local internet companies in China have now a small advantage is versus foreign internet companies. But during the time I was at Alibaba (2000-2008) I believe that Alibaba succeeded because it came up with better ways of enabling e-commerce than any of its competitors'.

With agricultural grade prices rising John Deere shares have broken up as shown in the chart below. Good write-up here

Interesting infographic on Google...biggest acquisitions, future targets and some random facts.  No matter how long you have been looking at the company you will undoubtedly learn something.  Link here.

A good read for utilities/related investors: 'The Way Humans Get Electricity Is About to Change Forever These six shifts will transform markets over the next 25 years'

Finally excellent chart on the world's largest employers via @jsblokland and @themoneygame: 

And finally...

Here's an interesting claim: 'Wall Street’s Must-Read Books of the Summer'.  A good list too (link here

And fascinating that the proportion of American adults using the internet has stalled since 2013!

Have a good week

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