Hi Eoin - re the Chart Seminar, which I haven't done for nearly 40 years!! - can you remind us/me the significance of filling the gap (down) - see, for instance, latest movement on CDE US Equity. Thanks and Happy Christmas.
Hello Eoin What is your opinion on Cannabis stocks? All the best from Switzerland, I enjoy your comments every day with greatest interest
This article by Tom Hancock and Enda Curran for Bloomberg may be of interest to subscribers. Here is a section:
One reason it hasn’t leaned on its balance sheet as much as global peers is the PBOC largely handed the task of increasing money supply and lowering interest-rates to state-owned banks. It cut bank reserve-requirements, meaning they had more cash to dole out in loans.
With the economy growing again, policy makers have signaled they want a more sustainable pace of credit expansion. By contrast, the Fed, European Central Bank and Bank of Japan have all announced plans to maintain and step-up stimulus into the next year.
“Advanced economy central banks will try to use negative real interest rates and inflation to erode the real value of their sovereign debt,” said Andrew Sheng, chief adviser to China’s Banking and Insurance Regulatory Commission. “This is why real money flows will go to the economies that show growth, higher productivity” and steady monetary and exchange rate policy, he said.
The difference in yield between Chinese government bonds and U.S. Treasuries is already near record levels, with many market players expecting the gap to widen further next year
This article by Krystal Chia and James Attwood for Bloomberg may be of interest to subscribers. Here is a section:
Once the biggest iron ore miner in the world, Brazil’s Vale SA fell back to second spot last year after the devastating tailings dam collapse that killed about 270 people and triggered an overhaul of its waste storage facilities.
Vale is still about 100 million tons short of meeting the 400 million tons in output promised prior to the Brumadinho dam disaster. The recovery has been slower than expected, depriving the market of much-needed ore. Like its Australian rivals -- Rio Tinto Group, BHP Group and Fortescue Metals Group Ltd. -- Vale has prioritized value over volume. With current prices above $150 a ton and mining costs as low as $12 a ton, it’s an approach that has reaped rich rewards.
This article by Ben Bartenstein for Bloomberg may be of interest to subscribers. Here is a section:
That strategy includes reducing restrictions on travel, investment and remittances for the island nation that are perceived to disproportionately hurt Americans and ordinary Cubans, said the people, who requested anonymity because the new administration is still coming together. Other measures that target Cuba for human rights abuses would remain in place, the people said.
The prospect of a détente between Washington and Havana rekindles memories of the thaw that Biden helped champion during the Obama administration, when the two nations restored diplomatic ties that had been broken for decades following Fidel Castro’s rise to power.
But the president-elect is returning to an even messier scene: the Cuban economy is suffering its worst crisis since the collapse of the Soviet Union amid fallout from Covid-19 and U.S. sanctions. At the same time, Cuban intelligence officers have helped prop up Nicolas Maduro in Venezuela, allowing his regime to consolidate its grip on power in defiance of demands for free and fair elections.
This edition of John Authers newsletter for Bloomberg may be of interest to subscribers. Here is a section:
Edwards expected CAPE to be around 10 by now, given the moves in bond yields, and admits he was guilty of a “forecasting error of epic proportions.” But his Ice Age thesis has played out as predicted in Europe, and he has also been correct to predict that stocks would look ever cheaper relative to bonds in the U.S. For now, his judgment is clear: “In my Ice Age view of the world, Robert Shiller is dead wrong. In my view, US equity valuations are a QE-fueled bubble waiting to burst.”
Now the question is whether this is really so different from the Shiller view. His model plainly suggests that stocks will do badly over the next 10 years, and that bonds will do even worse. This was the way Shiller put it in a research piece for Barclays Plc in October, (which can be found on SSRN here):
In summary, investors expect a certain return in equities as compensation for investing in a riskier asset class, and as interest rates have declined, the relative expected return for equities has increased dramatically. We believe this may quantitatively help to explain investors current preference for equities over bonds, and as such the quick recoveries we are observing (with the exception of the UK), whilst still in the midst of a pandemic. In the US in particular, we are once again observing stretched valuations and high CAPE ratios compared to history.
Bond arithmetic may help to show that Edwards and Shiller aren’t as far apart as they appear.
When yields are this low, moving to a higher yield involves serious losses. To get from the current 10-year yield of 1% back to the 3% that 10-year Treasuries were offering as recently as two years ago, the Treasury price would have to drop by two-thirds. (If yields were a more normal 4%, then a two-percentage-point increase would require a fall in the bond price of only one-third.) At this point, bonds offer low income, little upside, and risk of massive downside.
Maybe it isn’t that big an act of apostasy for someone who remains dubious about the future for stocks to predict that they should still do better than bonds.
This article from Bloomberg may be of interest to subscribers. Here is a section:
“A 3% increase in global wheat feed demand should add another layer of price support,”Jacquie Holland, an analyst at Farm Futures, said in a note.
On Friday, consultant SovEcon cut its Russian wheat-output estimate 5.2% to 76.8 million tons on adverse weather. Government officials are considering an export tax in addition to a proposal to set a grain-shipment quota for a few months next year, according to an industry group. This week, Putin expressed surprise at sharp price increases for staples including bread and sunflower oil.
This article by Mike Bird for Bloomberg may be of interest to subscribers. Here is a section:
China’s household debt ballooned in the first half of the year, rising by about $380 billion, according to new Bank for International Settlements data. That increase was almost four times as large as the second-place U.S. And it compounds one of China’s biggest economic vulnerabilities.
It has been widely reported that China’s industrial production and exports have helped to power its recovery this year. But the other leg of the recovery is the continued rapid rise of real-estate investment, which is set to outstrip GDP growth again in 2020, as it has in 16 of the past 17 years.
Interest rates this year fell sharply in most countries, but the People’s Bank of China has resisted this trend. That means that whereas borrowers in the U.S. were at least able to refinance real-estate loans, Chinese borrowers are left with largely unchanged debt-servicing costs.
You periodically remind us of some of David’s good advice, such as “Don’t fight The Fed”. The Gold Hub recently reported that central banks around the world were net sellers of gold in Q3. (See attached chart.) It is easy to see why these institutions want to discourage gold investors. Are we fighting not only the Fed but every other government in the world?
This note from Bloomberg may be of interest to subscribers. Here is a section:
Uranium stocks outperformed as House and Senate lawmakers revealed a compromise version of the annual National Defense Authorization Act. Meanwhile, industrial metals continued their rally with the global equity markets.
S&P Global reported that the bill effectively provides for the military to continue a policy under President-elect Joe Biden that classifies the domestic supplies of certain minerals such as uranium, graphite and lithium as vital to national security
