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

    Email of the day on who takes the hit

    I would be grateful if Mr Treacy could provide comment on which casualty will government and central banks choose

    The way I see the situation now is:

    Printing money to save banks = increasing inflation + sinking small people
    Raising interest rates = reducing inflation + sinking banks + sinking small people with adjustable/variable mortgages
    EQUALS
    government and central banks caught in vicious circle of their own making

    Which casualty will in Mr Treacy's opinion governments + central banks choose going forward?

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    Eoin's personal portfolio: stock market short profit taken March 13th 2023

    Banks Rush to Backstop Liquidity With $165 Billion From Fed

    This article from Bloomberg may be of interest. Here is a section: 

    Analysts at JPMorgan Chase & Co. estimated $2 trillion as an upper level for how much liquidity the new backstop could ultimately provide, although they also developed a smaller calculation of around $460 billion based on the amount of uninsured deposits at six US banks that have the highest ratio of uninsured deposits over total deposits.

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    Email of the day on refilling the US Strategic Petroleum Reserve:

    any comments from US officials as-to when they start to replenish the US strategic oil reserve…….?

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    Volkswagen Joins China Price War With Discounts on Full Lineup

    This note may be of interest. Here it is in full:

    Volkswagen’s China joint venture with SAIC Motor is offering 3.7 billion yuan ($540 million) in cash subsidies to boost sales, according to a statement on the company’s Wechat account, making the German automaker the latest participant in the ongoing price war. 

    The venture will provide a subsidy of between 15,000 yuan and 50,000 yuan on any model in its lineup until April 30, which includes brands like Teramont, Lavida, Lamando, Tiguan, Passat, Touran, and the all-electric ID. series

    Other incentives include short-tern interest-free loans, lifelong service packages, upgraded components and buy-back guarantees.

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    Credit Suisse Default Swaps Widen, Bonds Sink as Optimism Fades

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    Support from the Swiss National Bank, which offered as much as 50 billion francs ($54 billion) from its liquidity facility, had brought some temporary relief to Credit Suisse and risk gauges for the broader European banking sector. That fizzled amid comments from the European Central Bank that some of the region’s lenders could be vulnerable to monetary policy tightening, followed by its decision to proceed with a planned half-point increase in interest rates.

    The continued selloff signals more action may be needed to arrest a collapse in confidence that’s prompted clients to step back from the Swiss lender and banks to shield their finances from the potential fallout. While the panic surrounding Credit Suisse has so far shown little sign of infecting the broader financial system, any further turmoil would pose a significant risk for markets already on edge amid soaring interest rates and rampant inflation.

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    ECB Feared That Ditching Half-Point Hike Might Panic Investors

    This article may be of interest to subscribers. Here is a section: 

    Fears that anything but a half-point hike would trigger panic among investors helped settle the European Central Bank’s interest-rate decision on Thursday, according to people familiar with the talks.

    As officials met over the past two days, traders were scouring financial markets for signs that other lenders might suffer the same strains that had hammered Credit Suisse Group AG and Silicon Valley Bank. ECB Vice President Luis de Guindos already warned European finance ministers earlier in the week that banks could be vulnerable to rising borrowing costs.

    While the ECB dropped language in their Thursday statement on the future path for rates, there remains a live discussion on the need for more increases to bring inflation under control once market turmoil subsides, said the people who declined to be identified because such deliberations are confidential.

    Several hawkish officials still see the terminal rate well above the current 3%, the people said, pointing to President Christine Lagarde’s remark that the ECB “would have more ground to cover” if its baseline outlook for the economy were to be confirmed. Yet, some are questioning whether the peak in borrowing costs might now be lower than previously thought. 

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    Chip Globalization Is Over and Sanctions Work, Says TSMC Founder

    This article from Bloomberg may be of interest. Here is a section: 

    Taiwan Semiconductor Manufacturing Co. founder Morris Chang declared globalization for the chip industry over and expressed support for US efforts to limit China’s tech advancement through export curbs and company sanctions.

    “In the chips sector, globalization is dead. Free trade is dead,” Chang said at an event in Taipei Thursday. “Just look at the way China has been embargoed and the entity list. I agree with that.” 

    The 91-year-old industry pioneer said that the global chip supply chain will grow even more bifurcated as the US acts to curtail China’s access to the most advanced technology, and “I certainly support that part of American industrial policy to slow down China’s progress.”

    Chang said China is at least five to six years behind Taiwan in chipmaking technology, but he also cautioned Taiwan should not be naive about its position relative to the US. When American leaders speak of “friend-shoring” high-tech manufacturing, Taiwan is not included in that policy, Chang said, as they’ve repeatedly voiced concerns about relying on Taiwan. 

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