David Fuller and Eoin Treacy's Comment of the Day
Category - Autonomies

    Modi Woos Voters With $13 Billion Largesse Before India Election

    This article by Abhijit Roy Chowdhury, Bibhudatta Pradhan, Shruti Srivastava and Siddhartha Singh for Bloomberg may be of interest to subscribers. Here is a section:

    The government will allocate 750 billion-rupee ($10.6 billion) a year for the cash plan for about 120 million farmers and give taxpayers 185 billion rupees of relief in the year to March 2020, Finance Minister Piyush Goyal said in his budget speech in New Delhi on Friday.

    In the process, the government will widen its fiscal deficit targets for the current financial year and next to 3.4 percent of gross domestic product and borrow more. Bonds and the rupee fell on news of the debt plans, while the tax cuts helped to buoy stocks.

    “Ongoing slippage from the government’s budgeted fiscal deficit targets over the past two years, and our expectation that the government will face challenges meeting its target again this coming fiscal year does not bode well for medium term fiscal consolidation,” said Gene Fang, an associate managing director at Moody’s Investors Service. “We view this continued slippage as credit negative for the sovereign.”

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    BAT Upgraded to Overweight at Piper; Risks Look Priced In

    This note by Lisa Pham for Bloomberg may be of interest to subscribers. Here it is in full:

    Philip Morris’s patent lawsuit against British American Tobacco in Japan, which is seeking a sales injunction of BAT’s Glo heated tobacco product, is still a risk, but BAT has “several methods of defense” and the earnings impact would probably be modest, Piper Jaffray analyst Michael Lavery writes in a note.

    Risk on possible U.S. menthol cigarette ban looks priced in and Piper doesn’t see any operational impact “for years and years”

    Also notes that consumers can adapt

    Piper doesn’t see any risk to dividend growth, allaying concerns from investors; says BAT’s cash flows don’t seem to be at risk in a way that would hurt the dividend

    Upgraded to overweight from neutral; PT kept at GBP30

    NOTE: BAT shares down 51% in last 12 months vs 19% drop for Imperial Brands, 31% decline for Philip Morris and 35% fall for Altria

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    Email of the day on reliable dividend companies

    Your copy on global pay-out ride is coming back to earth is timely. The well-regarded fund manager Neil Woodford has given Imperial Brands a significant 8% asset allocation in his flagship income fund. Imperial pays a hefty dividend, growing at 10% rate. It generates good cash, but has huge BBB+ debt outstanding. It has come down quite a bit from its peak, but it’s valued at 17 times earning which may roll back to the 10 times earnings it had around 2000. Is there a case for holding Imperial Brands as primary source for dividends for the long run? I wonder if you could review some good dividend paying companies, net cash global companies with strong balance sheets, that will not get caught in the pending investment grade bond crunch. Thanks!

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    Is an 'Apple Prime' the Answer to iPhone Troubles?

    This article by Brad Stone for Bloomberg may be of interest to subscribers. Here is a section:

    Since then, the hypothetical of a monthly subscription to All Things Apple has assumed an extremely unofficial name—Apple Prime—based on Amazon’s bundle of free shipping, movies, music, photos and various other services. Last week, the notion took on sudden urgency, as Cook sliced Apple’s sales outlook, sending the company’s stock plunging 8 percent for the week and nearly taking the rest of the stock market down with it.

    Proponents of Apple Prime are now reading tea leaves and seeing puzzle pieces moving into place. In his note to shareholders last week, Apple’s chief executive officer wrote under the heading of “other initiatives to improve our results” that Apple was working on “making it simple to trade in a phone in our stores, finance the purchase over time, and get help transferring data from the current to the new phone.”

    The idea is that instead of paying a cool grand for a new iPhone every year, devotees might pay Apple a monthly stipend for automatic access to the latest device. Apple already has an iPhone upgrade program that costs $37 a month, administered by Rhode Island-based Citizens One. Presumably Apple could then bundle this with access to music, storage, the AppleCare warranty program, and the much ballyhooed but still largely invisible stable of Apple-financed TV shows and films, like an upcoming animated movie. “This is Apple Prime. And it is coming,” tweeted investor and Apple watcher MG Siegler, after reading Cook’s letter.

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    9 Grey Swans for 2019

    Thanks to a subscriber for this report from Nomura which may be of interest to subscribers. Here is a section:

    Quality Equities: The Solution to Today's Equity Conundrum

    Thanks to a subscriber for this report by Tom Hancock for GMO. Here is a section:

    Here is the text of a bulletin from Bloomberg on today's Fed Meeting.

    Here are the Key Takeaways from today's FOMC events:

    The FOMC hiked rates a fourth time this year to a decade high, ignoring President Trump’s criticism, and lowered its outlook to two hikes from three next year.

    Powell specifically endorsed the dots, citing them in his press conference as a guideline for the committee and a useful tool.

    The committee tweaked its guidance to ``some further gradual increases’’ -- a more hawkish development compared with the alternative of dropping the guidance.

    Powell said all meetings are live for possible moves next year, but gave no strong hints as to when the Fed would raise next.

    There was unanimous support for the hike.

    Powell said that Trump's comments had no impact on policy and that the Fed is committed to doing what it thinks is best.

    Powell said financial conditions caused a slight downgrade in 2019 forecasts but no real change in the outlook.

    Markets took FOMC and Powell as hawkish, with the yield curve flattening and stocks falling.

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    One Fed official suggested on Friday delaying a December rate hike, the first to do so

    This note by Thomas Franck for CNBC may be of interest to subscribers. Here is a section: 

    St. Louis Federal Reserve President James Bullard reportedly said on Friday that the central bank could consider postponing its widely anticipated December rate hike because of an inverted yield curve.

    “The current level of the policy rate is about right,” Bullard said in a prepared presentation to the Indiana Banker’s Association, according to Reuters.

    Bullard is the first member of the Fed to speak publicly about a delay in December. The Fed president — while not a Federal Open Market Committee voter in 2018 — will be able to participate in rate hike decisions in 2019.

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    Email of the day on my central bank total assets chart:

    You have mentioned that the graph showing central bank assets is one of the most important. Consequently, I wondered how the fact that they are reducing this tied in with your moderately optimistic views on the stock market. Do you think the US Fed Reserve will continue to reduce its balance sheet given recent market turmoil?

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