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David Fuller and Eoin Treacy's Comment of the Day
Category - Global Middle Class

Email of the day on climate change.

Regarding the Allen Brooks piece on Climate change. I have to say I find the benign conclusions of the report totally unconvincing. Over the years I have read widely on the subject and have been especially impressed by the publications and books of one of the most eminent climate scientists whose work goes back more than 50 years. I refer to Professor James Lovelock. In a recent BBC interview, he suggested that global warming may be entering an acceleration phase. As I write this reply a news story has just announced that a high-pressure dome is due to affect the Eastern states of the US with predicted city temperatures likely to exceed 40 deg C. The simple fact is that you cannot expect hydrocarbons that have been trapped in the Earth’s crust over many millions of years, to be exploited by man over a few decades with the bye products going into the atmosphere, without grave consequences.to follow. Globally we have just experienced the hottest June ever and significantly Siberia has been 7 deg C above normal for the time of year. I mention this in respect of the melting permafrost which is now releasing methane in significant amounts. A gas thirty times more significant than CO2.as a greenhouse gas Of course this topic is an extremely emotional one, simply because the decisions made now on how we collectively proceed could not be more important. On balance I think I would go with the IPCC and James Lovelock. His books on Gaia theory, by the way, are worth reading



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Email of the day on the Australian Dollar

You may have seen this but thought it worth sending as it has potentially big impact for us Aussie’s.



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Bad Loans in Europe Tumble, but They Are Never Fully Gone

This article by Patricia Kowsmann and Margot Patrick for the Wall Street Journal may be of interest to subscribers. Here is a section:

You are pushing out the door the risk, but part of this risk comes back in through the window,” said Massimo Famularo, a Milan-based adviser on bad-loan deals.

The ill-health of Europe’s banks is a drag on the economy and a factor for why the area has yet to fully bounce back from the crisis. When banks retain exposure to bad loans rather than selling them outright, they have less capital to back fresh lending to the economy.

Lending growth has been weak in countries with the most nonperforming loans, or NPLs, such as Italy, Portugal and Greece.

“The sale of NPLs is good for the balance sheets of the banks, but it doesn’t solve the NPL problem in the system,” says Giovanni Bossi, former chief executive of Italy’s Banca IFIS SpA. He estimates only a small portion of the disposed loans has been worked out by their buyers.



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Pound Sinks to Lowest Since 2017 on Threat of No-Deal Brexit

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

The beleaguered U.K. currency is finding few backers, with both leveraged funds and asset managers increasing their pound short positions, according to the latest data from the Commodity Futures Trading Commission. Deutsche Bank AG’s global head of currency research George Saravelos said the currency is not cheap enough, even after its recent slide, and that there is now close to a 50% chance of a hard Brexit.

The president-designate of the European Commission, Ursula von der Leyen, said she was ready for a further extension of the Brexit deadline “should more time be required for a good reason.” However, a meeting of Brexit negotiators last week was one of the most difficult of the last three years, according to European officials, as they brace for talks to become more hostile under the next British government.

Johnson and Hunt, who have long said they want the Irish backstop renegotiated, appeared to limit their room for compromise in a debate late on Monday.

“This leaves only two options, no-deal Brexit, or no Brexit,” said Thu Lan Nguyen, a currency strategist at Commerzbank AG. “As both Johnson and Hunt have made clear they want Brexit, chances of a no-deal Brexit are rising.”



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Walmart's Supplier Says Chinese Factories in "Desperate" State

This article by Daniela Wei and Jinshan Hong for Bloomberg may be of interest to subscribers. Here is a section:

“U.S. clients are definitely very, very worried,” Fung said in an interview with Bloomberg. “Everyone is making razor-thin margins already and most people have a huge percentage in China. So if the biggest source increases the price by 25%, they are worried,” he said, referring to the scale of tariffs threatened on all Chinese imports to the U.S. by President Donald Trump.

Though Fung didn’t specify Walmart by name, the U.S. retailer is the company’s second-biggest customer after Kohl’s, accounting for 7.6% of revenue, according to Bloomberg data. A spokeswoman for Walmart declined to comment.



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The Future of Housing Rises in Phoenix

This article by Ryan Dezember and Peter Rudegeair for the Wall Street Journal may be of interest to subscribers. Here is a section:

The house in Tolleson is one of several thousand around the city that Opendoor and two competitors—listings giant Zillow Group Inc. and Offerpad Inc.—have bought since 2014 in an attempt to perfect programmatic house flipping. Last year, they bought nearly 5,000 houses in the metro area, roughly one in every 20 existing homes sold. They’re after real-estate transaction fees and anything they can make on reselling the property. Margins are low, so volumes must be high.



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Sub-Zero Yields Start Taking Hold in Europe's Junk-Bond Market

This article by Laura Benitez and Tasos Vossos for Bloomberg may be of interest to subscribers. Here is a section:

The number of euro-denominated junk bonds trading with a negative yield -- a status until recently associated with ultra-safe sovereign borrowers -- now stands at 14, according to data compiled by Bloomberg. At the start of the year there were none. Cheap money policies since the financial crisis have kept interest rates at, or near, all-time lows for the last decade.

That’s prompted many investors to buy riskier assets that yield enough for them to meet their liabilities, driving bond markets higher and yields lower. The European Central Bank said on Monday it’s ready to add more stimulus to the euro zone, indicating that an end to the age of ultra-low borrowing costs is far from over.



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Uber Drivers



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Erdogan Draws the Line on Rates After Shock Central Bank Ouster

This article by Firat Kozok and Cagan Koc for Bloomberg may of interest to subscribers. Here is a section:

Hours after unexpectedly forcing out the central bank’s governor, Turkish President Recep Tayyip Erdogan made clear that he expects both the successor and the rest of the establishment to toe the government’s line on monetary policy.

The decision to dismiss Murat Cetinkaya, whose four-year term was due to end in 2020, was announced in the early hours on Saturday following a pause in interest rates that lasted for over nine months. Deputy Governor Murat Uysal was named as a replacement. Investors weren’t impressed -- the lira slid more than 3% in early Asian trading before paring losses.

During a closed meeting after the decree came out, Erdogan told lawmakers from his ruling party that politicians and bureaucrats all need to get behind his conviction that higher interest rates cause inflation, according to an official who was present. He also threatened consequences for anyone who defies the government’s economic policies, the official said.

Erdogan’s office of communication didn’t respond to calls and text messages seeking comment. “By abruptly dismissing Cetinkaya, Erdogan reminded everyone who is in charge of monetary policy,” said Piotr Matys, a London-based strategist at Rabobank.



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Lagarde to Succeed Draghi as ECB Chief As Economy Weakens

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

In moving from Washington to Frankfurt, Lagarde will be tasked with driving monetary policy in a 19-nation economy which Draghi has already signaled will need more help, likely in the form of lower interest rates and possibly with the resumption of quantitative easing. Inflation is running at barely half the ECB’s goal of just under 2% despite years of negative rates and 2.6 trillion euros ($3 trillion) of bond purchases.

Investors will likely bet that as a seasoned crisis-fighter, Lagarde will share Draghi’s taste for aggressive and innovative monetary policy, especially as her appointment means the more hawkish Bundesbank President Jens Weidmann misses out.

Financial markets are already pricing an ECB rate cut by September, in line with predictions by ECB watchers at Bloomberg Economics and Goldman Sachs Group Inc.

Lagarde last week described the world economy as hitting a “rough patch” and advised central banks to continue to adjust their policies in response. In June 2014, she said she would “certainly hope” the ECB would conduct QE if inflation stayed sluggish -- months before it announced it would do so.



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