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

    Wall Street Managers Are Learning to Love Treasury Bonds Again

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

    Morgan Stanley projects that a multi-asset income fund can now find some of the best investing opportunities in nearly two decades in dollar-denominated securities, including inflation-linked debt and high-grade corporate obligations. The interest payments on regular 10-year Treasuries, for example, has hit 4.125%, the highest since the global financial crisis.

    Meanwhile Pacific Investment Management Co. reckons long-dated securities, the biggest losers in this era of Federal Reserve hawkishness, will bounce back as a recession ignites the bond-safety trade, with government debt acting as a reliable hedge in the 60/40 portfolio complex once more.

    “People are excited, believe it or not,” said Maribel Larios, founder and CEO of Fiduciary Experts, a Murrieta, California-based registered investment advisor. “It’s all relative, as they’ve seen these fixed-income accounts pay little to nothing in the past. So, 4% — or even about 2% to 3% in some cash accounts — is relatively good now.”

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    India is set to become the first country ever to receive $100 billion a year in remittances

    This article from Quartz maybe of interest to subscribers. Here is a section:

    Inward remittances, accounting for around 3% of India’s GDP, surged 12% from 2021.

    Besides a large working population of Indians living abroad, there were other reasons, too, for this increase. For instance, students are the other big constituents of the Indian diaspora. They eventually form high-income groups, with direct implications for remittances.

    The depreciation of the Indian rupee has also helped. Since January, the currency has fallen 10% against the dollar. This has made sending money from South Africa to India cheaper by 26%, from Thailand by about 17%, and from Japan by 14% in the past year or so, the World Bank has said.

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    Investors Overseeing $5 Trillion Are Betting That an Economic Recession Can Be Avoided

    Thanks to a subscriber for this article from Bloomberg which may be of interest. Here is a section:

    Professional investors are loading up on bets that an economic recession can be avoided despite all the warnings to the contrary. It’s a dangerous bet -- for a variety of reasons.

    Money managers have been favoring economically sensitive equities, such as industrial companies and commodity producers, according to a study from Goldman Sachs Group Inc. on positioning by mutual funds and hedge funds with assets totaling almost $5 trillion. Shares that tend to do well during economic downturns, like utilities and consumer staples, are currently out of favor, the analysis shows.

    The positions amount to wagers that the Federal Reserve can tame inflation without creating a recession, a difficult-to-achieve scenario often referred to as an economic soft landing. The precariousness of such bets was on display Friday and Monday, when strong readings on the labor market and American services sectors drove speculation the Fed will have to maintain its aggressive policies, increasing the risks of a policy error.

    “Current sector tilts are consistent with positioning for a soft landing,” Goldman strategists including David Kostin wrote in a note Friday, adding that the fund industry’s thematic and factor exposures point to a similar stance. 

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    US Crude Output Set to Tap Record in 2023 Amid Rising Rigs

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

    U.S. crude oil production in 2023 is forecast at 12.34m b/d, an all-time high and revised up slightly from 12.31m b/d projected in November, EIA says in monthly Short-Term Energy Outlook

    2022 output estimated at 11.87m b/d vs 11.83m b/d

    Output to grow annually in 2023 at an average rate of 470k b/d vs prior forecast of 480k b/d

    See here the forecast for US fuel demand in 2023:

    Gasoline demand revised up to 8.77m b/d from 8.75m previous forecast
    Distillate consumption seen at 3.94m b/d from 3.93m
    Jet fuel use estimated at 1.64m b/d from 1.57m

    EIA sees contraction in US economic activity in Q4 2022 and Q1 2023, though will be shorter and milder than previously forecast

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    Amazon set to fire 20,000 employees, including top managers

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

    CEO Andy Jassy had earlier hinted about the layoff, however, he had not clearly specified the number of employees to be laid off. The New York Times had, in November, reported that the company was considering laying off employees.

    However, a recent report now claims that the number of employees likely to be fired has now increased to 20,000 and that people at all levels are likely to be fired by the company. Recently, Amazon’s CEO announced that they would continue the process of a layoff and that the employees who will be impacted will be informed after everything is assessed by the company.

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    Email of the day on video playback issues

    Video link does not work

    And

    Same from Dominican Rep...

    And

    still not working

    And

    Just like British trains over Xmas

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    Correction

    Correction: In the Friday email, commentary and, video I used an erroneous calculation of compound interest to draw exaggerated conclusions. This has now been corrected in the copy and a new big picture video has been posted. I want to explicitly apologise. I’ve been losing sleep at the enormity of shame I feel at such a schoolboy error and suffice to say it will not recure. It also tells me that stress comes at a cost, and I need to be more careful with my position sizing in my personal trading.

    Apollo, Oaktree Test $2.3 Trillion Frontier for Private Credit

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

    “There will be geographic expansion as these markets continue to evolve along a similar trajectory with a lot of the same trends we saw in the US,” Michael Arougheti, chief executive officer of Ares Management, said of private credit in an interview on Bloomberg Television. “If we continue to demonstrate durable performance through cycles then the appetite for the asset class will continue to grow significantly.”

    Yet it is not without risk. With the US economy slowing, more companies that private credit funds lend to may begin defaulting on their repayments next year as earnings decline and interest on their floating-rate loans rises.

    “Private credit is a place people can go to benefit from rising rates,” Arougheti said. “The flipside of that is that as rates are going up, debt service becomes more challenging.”

    An additional problem is the less stringent valuation process for private credit portfolios compared with assets in public markets, which can leave poor investments hidden for longer.

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