Sunday, 24 April 2016

Stories we should be thinking about

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

Macro matters:

An interesting observation from FT.com: 'China’s total debt rose to a record 237 per cent of gross domestic product in the first quarter, far above emerging-market counterparts, raising the risk of a financial crisis or a prolonged slowdown in growth, economists warn'.


Debt build up is never good especially when it is above that of GDP.  So therefore worth a read is this piece in the Japan Times titled 'China's $5 trillion opportunity'.  As I noted on Twitter:

Agree with the suggested medicine but IMO the country currently adopting the greatest supply side reform is...China

China remains as divisive as ever - personally I remain on the side of the cautious bulls...and just to show that all of this really matters for the global economy take a look at this proportional use of the internet chart: 
 (h/t @paul1kirby)

After reading this piece on Greece with the headline...

Athens works on contingent fiscal plan to satisfy lenders and complete review


...it seemed to me that the key line was:

"Govt officials spent the weekend trying to decide how to identify another 3.6 bn euros in fiscal measures"
I still believe that just asking the Greeks for fiscal measures is not going to be enough and that some form of debt rescheduling/restructuring is going to be required.  

Of course Greece is not the only European country with overt economic challenges.  The below graphic shows why the proposed Italian bank bailout is so important: 

This week's Stories we should be thinking about is a Brexit/EU referendum free zone but even excluding this it is fascinating to see how issues such as the rise of student loans...


...could potentially negatively impact on the already stretched house price to earnings multiples: 


Still at least EU's travails have not meant a country appearing in the top 10 largest GDP contractors in 2016.  Much of this is oil-led of course...


...and undoubtedly one of the more fascinating dynamics in the ongoing oil supply-demand debate is how Iran will try to scrabble back the market share lost over the last five or six years: 
(my own view is still to be moderately optimistic about the oil sector - even after the recent run - and I am targeting a US$50+ oil price by the end of the year given I think many underestimate how relatively tight the demand-supply backdrop is especially with capex being spent by the industry falling so rapidly). 

I liked this via @RonStoeferle about hedge funds:


Of course the next iteration should be hedge funds outperforming in 2017-18...

Finally, remember how lucky you are: 



Sector and companies: 

The importance of stock picking is rising...


(h/t @Callum_Thomas and @AlastairWinter)

...and just look at the negative working capital apparent in the Canadian mining sector: 



And just to show how tricky it is out there for company selection I saw this story in the Financial Times

'In total 312 UK public companies warned analysts to lower forecasts in the 12 months to the end of March, against 302 in the previous 12 months. That is the highest level since 2008'.

Of course there are still thinks to be doing.  For example via Seeking Alpha there were some comments on one my Financial Orbit Stocks preferred stocks (i really agree with the implied sentiment in the last line): 

Marriott International (NASDAQ:MAR) looks attractive to Barron's with revenue growth and profits both heading in the right direction. The strong management team and the ample cost savings from the Starwood pickup should support share price gains of as much as 30%. The Marriott model of generating most of its revenue from fees makes it "recession-resistant," adds Nomura.
Marriott closed at $66.54 on Friday which is roughly 18X this year's earnings per share forecast. However, on a 2018 post-merger look the multiple falls to 13X.

A few stories from today's Sunday Times

BHS (a private company - but a big UK retailer) on brink as rescue talks fail...(could be) the worst high street crisis since Woolworths went bust in 2008

Barclays has come under attack from top investors over it plummeting share price and confusing turnaround plans

American hedge fund giant Paulson has launched a scathing attack on the Premier Foods board after the breakdown of the Bisto maker's takeover talks with American rival McCormick...accused the board of corporate arrogance


And finally...

How many of the top and bottom parts of the list have you read / listened to / watched?


Ahead of a new working week...never forget this: 



Have a good week

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