Sunday, 21 August 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:

It has been generally an awesome time across all risk assets...
(h/t @TihoBrkan)

...and the technicals remain bullish for the moment...

(h/t @hmeisler)

...but meanwhile in the real world...

(h/t @rshotton)

We all know why the average citizen is not happy as noted below (link here) via @BrankoMilan 

'lower and middle-income workers in wealthy countries appear to have lost the most ground in terms of their living standard over the past few decades'

Amazing number of days an employee in Europe has to work to pay off their annual tax bill...

...or maybe we should blame the internet?!

Do you recall the graphic from earlier in the week about current 'tail risk' fears?

Well what I am really worried about are hits to trade liberalisation as nicely put in this Washington Post article (link here)

Over the course of a turbulent political year, the American political center has shifted, not only against the TPP but also against trade-expanding multilateral agreements generally.

I am so much happier (and I guess net worth richer) being a weighing machine and not a voting machine investor (link here):

Day traders—who buy and sell securities in extremely small time frames, holding them for less than a day in order to profit off short-term momentum—have a nearly 80% chance of losing “real money” over the course of a year. That figure comes from the blog CuriousGnu, which also calculated a median 12-month loss on investment of 36.3%.

Of course the above (and costs too) have led many investors to conclude they should go passive and not active: 

But again being a weighing machine investor I find the above more of an opportunity than a threat for active investors

Of course the outlook for inflation is all-critical.  I liked this via @blackrock on some of the recent composition differences.  What happens if some of the 'high volatility' aspects start to tick up?

I see on this piece that 'The Bank of Japan will not rule out deepening a cut to negative rates it introduced in February, the Sankei newspaper quoted Governor Haruhiko Kuroda as saying, even as the controversial policy has failed to spur inflation or economic growth'.

Yes, Japan remains a troubled economic zone - just look at the magnitude of fiscal packages the country's authorities have rolled out: 

(h/t @AW_Dryden)

Meanwhile whilst the world may generally be cutting interest rates I liked this graphic showing some big interest rate increases...including the move by Mongolia earlier this week:  

As for other emerging markets, Brazil, China and Turkey look potentially relatively badly exposed against certain other names: 

(h/t @cafeeconomics) 

What themes should you be excited about? No near-term plateauing due on these areas... Despite any negativity above this is something to be more excited about...

(h/t @KhalidHamdan0 )

And talking about innovation, look at the anticipated growth of electric vehicles in China: 

(h/t @e_smalldata)

Meanwhile in the UK look how renewables have increased in the energy source mix (although not as much as gas which has taken over from coal).  

Meanwhile what about nuclear? I note in this report that:

'City investment house RBC Capital Markets says no current minister starting from scratch today would ever agree to the deal George Osborne oversaw with EDF: a 35-year index-linked contract paying £92.50 per megawatt hour in 2012 money – double the current wholesale price of electricity'.

A final macro story...oh to be a fly on the wall as the European debate continues (link here): 

The leaders of Germany, France and Italy will meet on Monday to discuss how to keep the European project together in the second set of talks between the premiers of the euro zone's three largest economies since Britain's shock vote to leave the bloc.

Sector and companies: 

Interesting chart showing the relative sector performers in the US market YTD...

...certainly little correlation with recent revenue growth trends: 

I think utilities are important to watch here given the inevitable correlation with bond yields (which I think are too low).  As @JLyonsFundMgmt notes the sector is at a key support level: 

Certainly an evolving market over the last few years...much more technology-friendly: 

(h/t @brettking)

Onto some company observations.  In case you missed the chat around easyJet on Friday, this was nicely summarised in the Weekend FT
Deutsche Bank (negatively) stands out in terms of CDS pricing...

(h/t @Schuldensuehner)

Got to like this quote from Bezos the Amazon founder - very true in today's world: 

(h/t @morganhousel)

And finally...

Wow did you see this glass bottomed bridge in China...

...300 metres above ground!  Would you be brave enough to walk across?

(h/t @Jiabaochina)

Have a good week 

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