Sunday, 11 September 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:


What a Friday and as Fast FT noted the "VIX...shot up by almost 40% on Friday in its biggest jump since the late-June Brexit vote sent global markets reeling"

(h/t @MktOutperform) 

Friday was the first time after 42 sessions that S&P 500 trades in a trading range of more than 1.5% after the longest stretch since 1964...


...but the bond markets fell off sharply too as observed by the aforementioned @MktOutperform: 

'5th time in history $SPY & $TLT both down >1.6% on same day (since $TLT launched in July '02)...'

Yes, it was not a good day for bonds either...


...as that little bit of inflation (lapping higher energy prices etc.) feeds into the system...


...among other service sector focused aspects: 
(h/t @Mark_J_Perry, @DominicScriven) 

Well both asset classes are not exactly cheap...
(h/t @WorthWray) 

Now the question is...on a pullback do you buy the higher bond yield friendly rotation areas (financials, commodity, industrial) as the traditional bond proxy / dividend heavy areas are rather expensive...?

My gut is that you do.  Of course as @Callum_Thomas notes such a VIX uplift is not seasonally strange...

...although the next iteration is - after a difficult month or so - an ultimately higher equity market: 


Now that sounds much better for alpha than beta to me...and if you are a bond investor, check who owns your bonds...not everyone has that flow of recycled domestic flows as say a Japan does: 

So even though it feels like a time to know your investments, don't be scared of being global either.  Home bias may be holding back your returns even if the earnings sources from 'domestic' listed companies in markets like the UK are inherently very international:

Let's move onto a few other issues.  A very nice cartoon in the Weekend FT summarises the labyrinth style Brexit negotiations...

...meanwhile it is fair to include that London house prices may prospectively be a bit under pressure: 

Did you listen/watch Thursday's press conference from the European Central Bank? Well it was not particularly exciting...but take a look at when the next expected Eurozone rate rise is anticipated to be:
(h/t @jsblokland)

Super piece on supply side evolutions in China: "officials... lamenting a lack of enthusiasm at all levels"(link here and h/t @jiabaochina)  Hmm...

Meanwhile there is some evidence that the China is trying to circumnavigate some aluminium trade restrictions: 

Otherwise...I was shocked by this: 

'The melting of the Arctic ice cap last week accelerated to one of the fastest rates ever seen, with more than 46,000 square miles lost in one day — three times the usual rate.
Scientists have confirmed that surging temperatures and violent storms have ripped apart the floating ice so its area has plummeted to the second lowest ever recorded — with a week of melting still to go. The 46,000 square miles of ice lost over September 6-7 is almost the area of England' (link here - although there is a paywall). 

Meanwhile 'Bill Gates is no longer the richest person in the world, at least for now. The Microsoft founder has been outstripped by Amancio Ortega, the famously frugal Spanish founder of clothing chain Zara, according to the Forbes real-time billionaires list. Mr Ortega’s net worth was said to have increased to $78 billion, overtaking Mr Gates’ estimated net worth of $77.4bn' (link here)

And penultimately in this section: 'Driverless cars have the potential to be a win-win, for drivers and the economy as a whole' according to this report here


Wow, look at the lead Israel has in the drone business (link here):



Sector and companies: 

Not too much earnings growth in the US market anticipated in 2016...but as normal next year is anticipated to be different:
Apparently a “$70 tonne move in coking coal prices in since the beginning of July has added $3bn to Billiton's mark-to-market earnings”


British luxury brand Burberry has cut Hong Kong and mainland prices of its leather handbags by up to 20 per cent in a low profile move, as the pound depreciates in the aftermath of Brexit (link here).  Just sounds like global price arbitrage to me...


Container shipping rates are cruising up as the Hanjin bankruptcy has caused some supply chain imbalances...


...and a really fascinating Disney insight: 
(h/t @PlanMaestro) 

Time for natural gas prices to lift off? (link here).  Would be not too inconsistent with my general thoughts that energy prices/inflation are going up...

(h/t @seeitmarket)



And finally...

I like being born in an unfashionable month:


(h/t @YouGov)

Meanwhile, do you agree with this list?

And if you like this mix of macro charts and company/sector insights don't forget to apply for the week-long trial of Financial Orbit Macro and Financial Orbit Stocks...and if you are interested in success and not doubt...



...then put this in your diaries:

Confused about markets? Want some new stock ideas? Our next & Stocks is on Thurs 15th at 3pm UK/10 ET. Registration details to follow in the next 24 hours on www.financialorbit.com but if you want to book a place/get sent directly the registration details please just email me at chris.bailey@financialorbit.com

Have a good week 

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