Sunday, 16 August 2015

Stories we should be thinking about

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


Macro matters:

Possibly far too much written on the Chinese yuan over the last week.  Pretty clear to see what Barrons think is going to happen next...
 
...following the halt to the Chinese yuan's appreciation over the last 20 years or so.  As I noted in my latest Financial Orbit Speaks (link here) this feels like easy extrapolation to me and would not be my conclusion at all.


Also worthwhile to note more generally about the emerging markets and currencies that high shorter-term volatility is rarely reflected in more medium-term returns: 


(h/t @WallStreet_Rant)

Staying with China and in the aftermath of the Tianjin explosions a striking NBER graphic:


Finally I will be writing up separately this report by the IMF on the Chinese economy over the next 24 hours.  

Turning to Europe @asentance noted: 'Eurozone GDP still over 1% below 2008 peak. GDP increase since 2000 just half 30%+ achieved in UK & US'
A subject I have much sympathy with as I wrote on Friday:

Europe: low growth and difficult decisions ahead


As for inflation in Europe it is super low...thanks to low aggregate demand and low oil supply. 


Talking about the oil price, this was good from @elerianm: 

'At the end of the day, no swing producer controls the fate of today’s oil prices. A sustained price recovery requires a healthier global economy that combines faster inclusive growth and greater financial stability. And this will not occur quickly, especially given the policy shortcomings in both advanced and emerging countries'.

Talking about less influence @minefornothing observed this:

Bloomberg: Our model shows that at a realized oil price of $29.42, half of wells in the Bakken formation will generate returns exceeding 10%

Back to Europe, an excellent graphic highlighting why Greece is different/on its own...linguistically speaking: 


(h/t @JSaryuszWolski)

This does not sound good about the conflict in Ukraine (link here):

'Military authorities in Ukraine believe the number of Russian troops within and close to its borders has risen to more than 50,000, raising fears of a substantial escalation in the conflict raging in Ukraine's eastern regions'.

Interesting signal (and historic linkage) from the junk bond market...


...of course important to differentiate between the energy and non-energy markets:


(h/t @ukarlewitz)

US rents are taking up more US pay... 

...but if you have a mortgage as this report notes it actually is not as burdensome (thanks to lower interest rates). 

The graph below shows the average percent of income people spent on mortgages from 1985 to 2000, in blue, beside the current average, in red.




Talking about the US economy it is impossible not to find an interesting chart here

Must be a good week for chartbooks as this excellent selection from Evergreen Gavekal co-authored by @WorthWray was also issued.  Really liked a number of the insights...



Wonderful chart from @jsblokland on the sheer proportional extent of Brazilian exports to China:


Good innovation paper on the mobile phone business which concluded: 

'Our research of the vibrant mobile-phone industry of the last decade shows that there is no obvious advantage to moving first —second-movers can be just as successful. What matters most is understanding that the two entry-timing positions differ in terms of uncertainty and size of returns. You need to build an innovation strategy to match your timing preference'.

That's what you call structural change


Donald Trump continues to lead from the front in the Republican party candidate race: 
(h/t @MarkBrant1KM)


Company-related observations:

I still own Smith & Wesson shares.  I liked this report which highlighted the rising firearm checks which historically has correlated well with company revenues:
Interesting on Qualcomm who are changing their focus a little (link here). 



Meanwhile from The Sunday Times:

Glencore is set to reveal a calamitous plunge in profits as the world’s largest commodity trader comes under unprecedented pressure from the price rout in raw materials.

One of the North Sea’s biggest contractors will this week reveal that it has shed more than 4,000 jobs in just six months, laying bare the ravages of the slump in the crude price. The cuts by Wood Group — at least 1,000 of them in Britain — are understood to have been made in the six months to June. They are set to be detailed at the FTSE 250 giant’s half-year results on Tuesday.

Shire Pharmaceutical will have to offer $35bn (£22.4bn) to entice American rival Baxalta into takeover talks. The Dublin-based drug giant last month offered about $30bn, or $45.23 a share. It will have to go to $50 to interest Baxalta’s board, said people working on the deal — and even that would only be a starting point for negotiations.

And finally...



Have a good week

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