Sunday, 17 January 2016

Stories we should be thinking about

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

Macro matters:

It is going to be another big week in the markets..but some think there should be radical change (link here):

'The power of financial markets needs to be constrained. Credit growth needs to be managed by direct controls'

I really am not sure that it has got as bad as this... anyway we are at an important level market-wise as @RaoulGMI points out with this chart on the S&P:

Middle Eastern markets were very poor (link here) on Sunday and US industrial production signalling is hardly positive thanks to the strong US dollar...

...of course with fading US rate hopes just maybe the latter may start to roll over helping general global balance:

In the meantime another big tactical debate is the whole momentum / contrarian sentiment debate.  For the moment as this great chart via @eurofaultlines shows momentum is thematically winning...

...but as @HORANCapitalAdv point out fear is pretty skewed at the moment too.  

And my view?  Well I bought exposure on Friday afternoon. 

Moving onto other matters, I was slightly surprised by this observation about the fledgling AIIB which opened for business on Saturday (link here):

'The China-led Asia Infrastructure Investment bank has ruled out lending in currencies other than the dollar'

That's a signal that the Chinese want to keep on building strength before pushing the internationalisation of the yuan too far...

Meanwhile staying with China as noted here, lock-up shares worth about 78.3 billion yuan (11.9 billion U.S. dollars) will become eligible for trade on China's stock market in the coming week. The value was much higher than the previous week's 36.2 billion yuan.  That's going to be an interesting influence for next week.  

In UK property, this is not going to end well in my view: 

'A gauge of demand for buy-to-let lending over the next three months climbed to the highest level since 2007, the central bank’s quarterly survey of credit conditions showed on Thursday. The data suggest borrowers are rushing to beat the future tax increases that Chancellor of the Exchequer George Osborne announced in November'.

Talking about history repeating itself I liked this about the ongoing debate about the European referendum debate in the UK including some fascinating insights/parallels with the mid-1970s referendum and also some recent polling indicating concerns about the European project (link here). 

Great chart on oil this time in real terms...

meanwhile this was nteresting from Ron Patterson (link here) on US onshore oil production with this chart...

...and this observation: "North Dakota production has been basically flat for 14 months. Both North Dakota and Bakken production is still below their September 2014 levels"

Hmm, does make you wonder about the huge current pessimism re the oil markets and how that is spilling onto other related asset the Canadian dollar: 

(h/t @VisualCap)

Quite a surprising headline bringing together the oil theme and another big recent headline story: 

'Germany's finance minister proposes petrol tax to fund refugees. Finance Minister Wolfgang Schäuble says an EU-wide tax on petrol could help finance refugees and strengthen the bloc's borders' (link here). 

Africa and the mobile phone sector: nice report here

Back to market volatility.  I thought this was smart and absolutely correct: 

'Here’s my theory. If you have such a high allocation to equities that market declines make you anxious, you own too much stock. Find the allocation at which severe bear market losses won’t keep you up at night'.  

Company-related observations:

The Sunday Times notes that there is an 'EU threat to £10bn O2 mobile takeover...Hutchison may be forced to sell part of network to push through Three deal'.  No surprises there...always get issues when you move to a three player telecoms market.  

Interesting list of top 50 brands here

(h/t @JacquiAlexis)

'Amazon And The Fantastic FANGs——A Bubblicious Breakfast Of Unicorns And Slippery Accounting'. Interesting report here (especially as I concluded that stocks like Amazon were a sell late last year - see the link here).  

A few other stories from The Sunday Times included: 

Home Retail chief executive John Walden re a takeover by Sainsbury's. "If there's a way for us to realise this in a faster way with a partner or multiple partners, that's certainly something we and the board would consider."

Clydesdale Bank's owners will almost halve their pricing of the Glasgow-based lender's planned London initial public offer (IPO) due to the recent stock market turmoil. The flotation was expected to be valued at about £2bn-2.5bn but the investment banks handling the float have said the shares will be sold for half the targeted price.  

And finally...

I cannot wait to see The Big Short film (opens later in January here in the UK) but - of course - there is an even wider story as noted here:

'So what’s missing from “The Big Short”?  For starters: Dodd-Frank, Elizabeth Warren, Occupy Wall Street and Bernie Sanders.  We’ll get to those in a bit'

Have a good week.  Don't forget to sign up for a free trial of my new macro, stocks and other reports (link here).

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