Sunday, 8 May 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:

Not exactly the easiest last week in the global markets: 

(chart via

Despite the above as I have discussed many times over recent months the key to the prevailing global risk environment is the level of the US dollar.  As the chart below shows still a little before the speculative positioning in the US dollar can deteriorate further...but we are closer to the end than the beginning of US dollar weakness...
(h/t @Lemieux_26)

...but overall we are still in a positive opportunity environment helped by the contrarian observation of a lack of inflows currently (also apparent in the US too): 

In short there are opportunities out there in the equity markets. And also as the extrapolation of the current oil price suggests higher stated inflation - which obvious implications for multi-asset investing (and low/no yielding fixed income markets): 

And maybe you should not even worry about 'sell in May and go away' in year four of a Presidential cycle!
(h/t @JLyonsFundMgmt)

Now whilst Friday's big non farm payrolls numbers were not great the edging up of wages are slightly better too: 

And what's soon to be the largest sector on current trends in the US economy?  Turning from one type of consumer economy (retail) to another (health care): 

Meanwhile in Europe this intervention from a leading German politician on the Greek debt situation is correct in my view even though it may look surprising to some: 

'German Vice Chancellor Sigmar Gabriel urged eurozone finance ministers to start talks on debt relief for Greece, saying it made no sense to crush the green shoots of economic recovery with further austerity measures'

And elsewhere in Europe I read in The Sunday Times that 'Carney prepares for rate cut if Britain quits EU...Bank of England gives private warning to lenders as it readies report on Brexit' 

And how are the economies of Asia looking?  Well we know that Japan continues to look difficult:

As for China the formal economic statistics remain workable but it clearly is not easy.  I mean, look at the decline in freight shipments...

...and from a recent credit boost basis the influence of the China Development Bank:
Talking about China this article titled 'The titillating and terrifying collapse of the dollar. Again'
 is worth a read.  

'They have systematically enhanced the reserve role of the US dollar. Had Beijing done otherwise, it would either have undermined China’s economic development or it would have created significantly higher domestic political pressures in the past two decades'

And the weekend's trade data was hardly the strongest: 

 What an amazing heat chart of London property prices (value? - not!)

What a smartphone trend...

Sector and companies: 

'Value' is back...

...and of course much of this can be attributed to the energy sector.  I found this an interesting global chart showing supply constraints ongoing (link here).

And I read in the Financial Times that: 

'Oil discoveries slump to 60-year low...Slowdown in exploration as energy groups seek to conserve cash'

This is why I think the oil price is US$50+ by the end of the year. And maybe this via Seeking Alpha will also be influential:

'Saudi Arabia replaced its oil minister on May 7th with the Chairman of its state oil company. The previous oil minister advocated keeping production high and oil prices low. The new oil minister may restrict oil production to raise prices, since high oil prices will benefit the upcoming IPO of Saudi Aramco. Saudi Arabia fired its long serving oil minister Ali al-Naimi on May 7th. Naimi, who held his position since 1995, was recently a loud voice in favor of maintaining high Saudi oil production despite falling prices'

You would probably put 'retail' in the 'neither' rather than 'growth' or 'value' categories.  Maybe more 'value' nowadays in the UK given Brexit/slowing growth concerns...

Something of interest for all tobacco companies developing next generation products: 

'The Food and Drug Administration (FDA) published long-awaited rules Thursday that could ban 99 percent of e-cigarette products and wreck industry innovation for years to come.

Passed in 2009, the Tobacco Control Act says all e-cigarette products released after February 15, 2007, (predicate date) will have to go through the Pre-Market Tobacco Applications process (PMTA). FDA officials claim they cannot change the predicate date.

The PMTA is ruinously expensive and can cost millions of dollars per product and by the FDA’s own admission will take more than 1,700 hours for an applicant to complete'.

And finally...

The march of English...

...and the problem with consultants! 

Have a good week