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

    Email of the day on dividend champions and contenders

    I am really enjoying Mr Treacy’s comments of the day and look forward to it every morning.

    Mr Treacy in today’s update mentioned key sectors that have the most chance of trending up over the next decade – and alluded to a couple shares (e.g. Google and Apple) that may make it to dividend aristocrat list in 10-15 years.

    It would be great if Mr Treacy could provide a list of top 20-50 shares that have steadily increased dividends over the last 10 years and based on trends have the highest probably on making it to dividend aristocrat list in 10-15 years.

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    China Rolls Out Pilot Test of Digital Currency

    This article by Jonathan Cheng for the Wall Street Journal may be of interest to subscribers. Here is a section:

    In Xiangcheng, a district in the eastern city of Suzhou, the government will start paying civil servants half of their transport subsidy in the digital currency next month as part of the city’s test run, according to a government worker with direct knowledge of the matter.

    Government workers were told to begin installing an app on their smartphones this month into which the digital currency would be transferred, the worker said.

    Civil servants were told that the new currency could be transferred into their existing bank accounts, or used directly for transactions at some designated merchants, the person said.

    China is ahead of many other countries in preparing the launch of an official digital currency. In recent years, the use of traditional paper bills and cash has declined sharply, and smartphone payments have become so ubiquitous that many Chinese people, particularly younger urban dwellers, no longer carry their wallets or cash for shopping. Instead, they use Tencent Holdings Ltd. ’s WeChat Pay and Alipay, operated by Ant Financial Services Group, an affiliate of Alibaba Group Holding Ltd.

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    Consumer Better than Feared? Earnings Revisions Bottoming

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

    Email of the day on bond market risk

    Thanks for the regular coverage. I have been a subscriber for a long time, and find this really the only voice of sanity and unbiased views. So, thanks. Could you elaborate on the statement you mentioned where the bond investors should be cautious because / if majority of the bonds are held by the government. Also, could you kindly help think through and elaborate how the fed would deal with the following - exits from the agency papers the Fed is buying. Is there any limit on how much the Fed can buy in this program? - how will the fed deal with losses in the Junk bond ETFs if there were to be defaults? Are the losses guaranteed b6 the Treasury?

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    Chapter 1: The Big Picture in a Tiny Nutshell

    I read the first two chapters of Ray Dalio’s latest book yesterday. Here is an important section from Chapter 1:

    The quicker the printing of money to fill the debt holes, the quicker the closing of the deflationary depression and the sooner the worrying about the value of money begins.  In the 1930s US case, the stock market and the economy bottomed the day that newly elected President Roosevelt announced that he would default on the government’s promise to let people turn in their money for gold, and that the government would create enough money and credit so that people could get their money out of banks and others could get money and credit to buy things and invest. 

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    Email of the day on Australian banks and debt

    Australia has announced they are increasing petroleum reserve stocks. Small steps in the global oil market. We have lots of gas not much Oil. Government argument oil prices are low. Think I can see political / defense US / Australian ambitions in this move.

    The Governor of the RBA made a speech a few months back the RBA will support all local banks. That investors should feel confident about the security of their bank deposits and securities. Can I trust these comments? I almost fell out of my chair when Glenn Stevens made this statement

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    Email of the day on mean reversion risk in precious metals:

    Good afternoon Eoin, I am enjoying the daily video and the written commentaries. Regarding your medium and long-term view that the price of gold is and will be reflecting the increasing and competitive debasement of currencies, but that presently gold is in an overbought phase, please explain what you would consider the maximum drawdown in gold to undo the overbought situation.

    Would that imply that gold should e.g., give up about $170 (10%) and reach approximately $1530 which I believe is the 200 SMA? Same question for silver. In what time frame do you expect the undoing of the overbought situation for gold (and silver) to happen? Days, weeks, months? How quickly would the bull market resume?

    It seems that the script of the last financial crisis is happening at 4-5 times the speed of 2008/2009...) What likelihood do you see that governments and central banks in the end will intervene (on an international scale) to either confiscate or prohibit the private holding of gold and silver and/or otherwise make sure that the nuisance of gold and silver as uncontrolled non-fiat money disappears? Roosevelt and others like Hitler, Soviet Union already proved that this can be successfully implemented ...Second addition to my first message/questions: To what extent did the rally in stocks trigger yesterday's and today's downdraft in the PM sector? Thank you!

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    Nobody ever pressed "Stop" before

    Thanks to Iain Little and Bruce Albrecht for this insightful report which may be of interest to subscribers. Here is a section:

    Cyclical Bear Ending; Secular Bull to Resume; Investor Feedback & FAQs

    Thanks to a subscriber for this report by Mike Wilson at Morgan Stanley. Here is a section:

    Coronavirus mortgage bailout: 'There is going to be complete chaos,' says industry CEO

    This article by Diana Olick for CNBC may be of interest to subscribers. Here is a section:

    “This is a crisis so easily correctable,” he said. “The GSEs [Fannie Mae and Freddie Mac] for years have always assured the servicing community that in the event of a major credit event, they’ll be there to make sure they provide the liquidity. From what we are hearing, and we can’t verify it, the FHFA director instructed the GSEs not to set up a liquidity or advance facility.”

    When asked for a response to the industry plea, Calabria on Monday declined to comment.

    Both Stevens and Bray said that because of this new and momentous risk in the mortgage market, it is suddenly much harder for borrowers to get new loans or refinance current mortgages. Wells Fargo is already placing restrictions on jumbo lending to its customers.

    “It’s just going to create more fear within the nonbank servicing sector. The banks that service them are going to start to not lend,” said Bray. “Ultimately that impacts homeowners. They won’t be able to be served because these companies will be in the middle of a crisis. We’ve seen a lot of businesses close their doors, and if you start closing the doors of servicers, you’re impacting people’s lives much more than other sectors. You’re talking about their homes. It’s the largest asset they have.”

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