Sunday, 2 October 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:

So excitements in UK/EU policy...


As @faisalislam noted 'big news is PM concedes that EU 27 have so far refused Brexit "preparatory work" - by announcing Article 50 timing designed to smoke it out (and) When asked if article 50 would take two years, PM said "that's what the process says" which is not quite "yes" '

Going to be a busy next couple of years in UK/European policy. This felt relevant from @lindayueh (who I believe will be talking about these concepts at the Conservative Party conference fringe shortly):

'Trade policy alone is unlikely to address the myriad of distributional effects from trade. So it is more efficient – and also likely to be more effective – to use domestic policy like taxes and government spending to address inequality' (link here). 

Of course some believe popular political angst against incumbent centre-right parties...


...is not really a worry as the Economist front page notes this week: 

(h/t @ianmksmith)

On a related point I published on Friday (link here) my most recent piece on Yahoo titled:

Here's how the UK stays competitive...and keeps you wealthy

Of course the UK economy of course is not in the rudest health...

(h/t @pelias01)

...all the more reason in my view to focus on proper supply side reform.  However...stimulus may well be preferred.  On a related basis a good read from @notayesmansecon titled 'UK Money Supply data contradict the Bank of England Bank Rate cut':

M4Lex is defined as M4 lending excluding intermediate OFCs. M4Lex increased by £5.0 billion in August, compared to the average monthly increase of £12.1 billion over the previous six months. The three-month annualised and twelve-month growth rates were 7.2% and 6.6% respectively.

Even if central banks are playing a bit fast and loose there may be reasons as the Financial Times notes that 'The global economy is faltering again with growth rates “sliding back into the morass [they have] been stuck in for some time”, according to the Brookings Institution-Financial Times tracking index'

Still, that does not mean lower growth beneficiaries are still flawless. As I noted on Twitter in response to the chart below: 

Yes, let's all turn Japanese.  Still believe 'Emperor's New Clothes' moment for bond markets upon us.  No-one else has closed cap Japan equiv


Brilliant series of cartoons on central banking and related here (h/t @jasonstaggers).  Here is one of my favourites...
Turning to Asia and the Chinese yuan - not bad for a currency that's not fully convertible yet:

(h/t @Yogi_Chan)

Amazing China annual Financial Stability Report from the PBoC (link here).  

Thanks to @MacroPru for highlighting this report.  Here are a few of my favourite charts covering consumption...
...growth of income...

...and rising banking assets (and of course liabilities): 


Meanwhile via @jiabaochina an indication that at least one measure of the Chinese economy is improving (check out the note below for sector-derived insights).  No need to panic too much about the Chinese economy in my view...


A few other interesting stories...

Ten future themes to get your head around...

Nice chart on Africa country-by-country growth: 
(@TonysAngle)

Automation...not a disaster for jobs/wages...


Global defaults the most fruity since 2009: 

(h/t @SPGlobalRatings)

Strong views from Russia on the recent tentative oil 'deal' 

"I don't really believe OPEC. They have broken their quotas so many times. OPEC members are extremely undisciplined, and there is a complicated relationship between Iran and Saudi Arabia."

Meanwhile via @pierpont_morgan another reason to be a bit cautious about bonds...

Leading Saudi broker advises clients to watch for signs of Kingdom dumping US Treasuries & "mass repatriation of funds back to Saudi Arabia"


Sector and companies: 

What a great longer-term valuation chart...


...nevertheless despite the firm valuation at least seasonally it is a positive time for the S&P: 

(h/t @topdowncharts)

High vol stocks have really fallen out of favour...

(h/t @PlanMaestro)

Of course we have to mention Deutsche Bank and apparently '‏German Chancellor Angela Merkel cannot afford to bail out Deutsche Bank (DBKGn.DE) given the hard line Berlin has taken against state aid in other European nations and the risk of a political backlash at home' (link here)

Meanwhile via @Schuldensuehner a couple of great Deutsche Bank charts...lower market cap than Twitter...


...but as a proportion of German GDP nothing compared to the global financial crisis of 2008...


Meanwhile in terms of valuation space...

Price-to-book value
Tier one capital ratio
Return on equity (%)
Deutsche Bank
0.22x
14.7%
-11.1%
Royal Bank of Scotland
0.39x
19.1%
-5.7%
European peers
0.53x
15.5%
2.8%
Source: S&P Capital IQ



I liked this via @Conkers3 on the Twitter/Google rumours.  My thoughts on the issue:

Have always thought integration with $GOOGL makes the most sense - powerful real time content to populate search functionality.  We'll see!

Fair point here on two stocks that I own: 

I reiterate my position that I will short Disney if it buys Twitter. Buying Twitter will cost more than the $15.5 billion that Disney spent on Marvel, Pixar, and Lucasfilm. Those three acquisitions are complementary to Disney’s entertainment content-driven business. Ad-dependent Twitter is not.

As per the Financial Times, 'Tesco faces legal action from 60 large investors that claim to have suffered £150m in losses because of accounting irregularities at the British retailer. It marks the first collective lawsuit against the supermarket in the UK'

Meanwhile if your startup is acquired...it is probably by an American company: 

And finally...

'The key is to make the very most of your time, regardless of which skills you choose to cultivate (link here)'.  Very true (via @dailyzen)


Have a good week 

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