logo-loader

Brexit Stalemate Deepens as U.K. Fails to Agree on a Way Forward

Published: 10:04 29 Mar 2019 GMT

no_picture_pai

Your free daily email from Fuller Treacy Money

Comments of the Day

29 March 2019

 

 

Video Commentary for March 28th 2019

 

 

Eoin Treacy's view

A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics covered include: predicative power of the yield curve spread, bonds ease, stock steady, Eurozone weak, Brexit drama is an indictment of the political process, palladium peaks, precious metals weak, oil firms from intraday lows, India steady, China consolidating.

 

 

Brexit Stalemate Deepens as U.K. Fails to Agree on a Way Forward

This article by Robert Hutton, Alex Morales and Tim Ross for Bloomberg may be of interest to subscribers. Here is a section:

The U.K. has two weeks to go to the EU with a plan for its next steps or face the prospect of leaving without a deal, something Parliament also opposes. The likeliest outcome is that May will ask for a longer delay to Brexit, but she will have to convince European leaders that Britain is on a path to solving its apparently intractable problems.

Hours after May promised her Conservative members of Parliament on Wednesday that she’d step down if they back her Brexit deal, she still looked short of having the numbers needed to win. It’s already been overwhelmingly defeated twice.

Meanwhile, votes in the House of Commons intended to break the deadlock by finding a consensus also saw every proposal rejected. The pound fell.

May must decide on Thursday if she is going to bring her deal back for another vote and meet the EU’s Friday deadline for getting it passed. The government declared that it was still the only option in play. Yet it too appears to be doomed despite the capitulation of some Brexit hard liners.

Liz Truss, a member of Theresa May’s cabinet, told ITV television that Wednesday’s votes show there are no other “serious options” than the one already negotiated with the EU, and that has “focused minds.”

“There has been a significant shift now of people recognizing the reality of the options,” she said. “What we have seen today is Parliament does not have an option apart from the prime minister’s deal that is really a viable option for the future.”

 

Eoin Treacy's view

This chart from Bloomberg highlighting the range of options puts me in mind of Walter Scott’s quote from Marmion “Oh what a tangled web we weave when first we practice to deceive”

 

 

Indian anti-satellite missile test meets with success

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

Anti-satellite weapons aren't new. Systems capable of destroying orbital spacecraft have been around since the 1960s and include everything from specialized anti-satellite satellites packed with explosives, to repurposed shipborne anti-missile missile systems that can take out space targets without any special modifications.

However, for various technological and diplomatic reasons, very few spacefaring nations have actually developed anti-satellite weapons. Today's test makes India the fourth to do so after the United States, Russia, and China.

The Indian government says that the test was conducted by India's Defence Research and Development Organisation (DRDO) and was fully successful, demonstrating the country's ability to knock out a satellite with a high degree of precision using indigenous technology. The missile was a DRDO Ballistic Missile Defence interceptor developed as part of India's general missile defence program. It operated as expected, but carried no explosive warhead. Instead, it was what is known as a "kinetic kill," where the hypersonic velocity of the interceptor is enough to destroy the target.

 

Eoin Treacy's view

The proximity of an Indian general election is a good explanation for the timing of this demonstration as well as the sorties over the Pakistani border. By pandering to the Hindu nationalist wing of the BJP, Modi needs to appear strong and is eager to demonstrate India’s technological prowess as a way of doing that.

 

 

Have Yield Curve Inversions Become More Likely?

Thanks to a subscriber for this note by Renee Haltom, Elaine Wissuchek, and Alexander L. Wolman for the Federal Reserve Bank of Richmond may be of interest to subscribers. Here is a section.

The flip side of the previous point is that if the term premium narrows, yield curve inversions will become more likely even if there is no increased risk of recession. And, indeed, there is reason to believe the term premium has fallen. Recently, the ACM model’s estimates of the term premium have moved persistently lower. The average values since 2006 and 2012 are 0.77 and 0.20, respectively. (See Figure 2).3

Two authors of this Economic Brief (Wissuchek and Wolman) recently evaluated how changes in the term premium affect the likely frequency of yield curve inversions.4 In principle, one could do this by conducting a statistical analysis of historical data to assess the relationship between the level of the term premium and the frequency of yield curve inversions. However, the number of inversions is too small to produce a reliable estimate using this method. Instead, Wissuchek and Wolman’s exercise involved simulating data for the short-term interest rate and then measuring how the frequency of yield curve inversions in the simulated data varies with the behavior of the term premium.

To build intuition for this simulation exercise, Figure 3 illustrates the qualitative relationship that would arise between the frequency of yield curve inversions and the level of the term premium if the term premium were fixed at different levels. For very high values of the term premium, the yield curve would never be inverted because the expected decrease in short-term rates would never be large enough to outweigh the term premium. Conversely, for very low (negative) values of the term premium, the yield curve would always be inverted because the expected increase in short-term rates would never be large enough to outweigh the term premium. And, if the term premium were fixed at zero, then over long periods the yield curve would be inverted roughly half the time. In reality, the term premium is not constant, so the simulation involves looking at how the frequency of yield curve inversion varies as the distribution of the term premium changes.

 

Eoin Treacy's view

One of the most predictable outcomes of an inverted yield curve is the discussion about whether it will be a predicative tool on this occasion because so many mitigating factors have arisen since the last inversion to suggest this time is different.

What I find particularly interesting on this occasion is other Fed economists are coming out with alternative measures which support the view we are looking at an impending recession even while they contend the yield curve spread is an imperfect measure.

 

 

Lynas looks to WA, not Wesfarmers, for its Malay solution

This article by Hamish Hastie, Colin Kruger and Darren Gray for the Sydney Morning Herald may be of interest to subscribers. Here is a section:

"These discussions are preliminary in nature and no formal submission for any change has been presented to the EPA," a spokeswoman for the agency said.

The discussions could help solve the problems in Malaysia which threaten the company's future, and made it vulnerable to what analysts and investors described as a low-ball bid from Wesfarmers on Tuesday.

Lynas faces an uncertain future after the Malaysian  government imposed strict new conditions on its billion-dollar Malaysian operation which could force it to shut down in
September.

This includes the permanent removal of a residue with naturally occurring radiation, Water Leached Purification Residue (WLP), from Malaysia.

According to institutional investors, Lynas discussed plans last month to relocate some of its rare earths processing  back to Western Australia. All processing is currently handled
in Malaysia.

Lynas chief executive Amanda Lacaze denied there was any plan to extract and retain the controversial WLP residue in WA - the state where it is mined - but did confirm it planned to expand its processing operations outside of Malaysia.

 

Eoin Treacy's view

A great deal of capital was invested in new rare earth metal projects after the price spike caused by China limiting exports in 2010. Lynas is the only one of those that made it to production and refining of heavy rare earth metals.

 

 

Eoin's personal portfolio: precious metal long initiated March 8th

 

 

Eoin Treacy's view

Details of this trade are posted in the Subscriber's Area. 

 

 

2019: The 50th year of The Chart Seminar

 

 

Eoin Treacy's view

I have had word from the inestimable Mrs. Fuller that the London Philharmonic Orchestra are planning a memorial concert on October 5th at the Royal Festival Hall. It is envisaged that there will be drinks and canapes afterwards. Since this is the 50th year of The Chart Seminar we will be conducting the event on October 3rd and 4th.

I also plan on holding a New York event, potentially in June, and am in discussions with a partner in how best to organise it.

In the meantime, if you have any questions, would like to attend, or have a suggestion for another venue please feel to reach out to Sarah at sarah@fullertreacymoney.com.  

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non-EU residents are not liable for VAT). Annual subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.

 

 

 

 

 

This is your daily comment from www.fullertreacymoney.com.
Subscribe to Fuller Treacy Money Limited for exclusive content and audio: Click here for details.

 

The information provided on this website (www.fullertreacymoney.com) is for the purposes of information only. This website and its content is not and should not be considered or deemed to be an offer of or invitation to engage in any investment activity. Nothing Fuller Treacy Money does and nothing on this website is intended to operate or be construed as the giving of advice or the making of a recommendation by Fuller Treacy Money to any investor or prospective investor. Fuller Treacy Money and any other group or associated company of it is not authorised or regulated by the Financial Conduct Authority in the UK or any other regulatory body in any other jurisdiction. By means of your login to our service you are deemed to thereby accept our current Terms of Business including this notice, Except for permission to download a single copy for personal use, the research published by Fuller Treacy Money may not be reproduced, distributed or published in whole or in part by any recipient for any purpose, without the prior express consent of Fuller Treacy Money. Information featured on the website is based upon information and data provided by Fuller Treacy Money and remains the intellectual property of Fuller Treacy Money. Some of the information may also be provided by third parties and whilst Fuller Treacy Money will seek to ensure that information featured the website is updated on a regular basis, Fuller Treacy Money does not accept any responsibility for, and disclaims any and all liability for, any such information (including the accuracy of such information) or views or opinions expressed on the website. Any person considering an investment opportunity as a result of data presented on the website should give full regard to all the content of the website, and should perform their own due diligence and obtain advice from suitably qualified professional advisers before investing. Prospective investors are also encouraged and recommended to take their own independent legal and taxation advice together with any other advice that they may consider necessary to consider the benefits and risks attached to any investment opportunity. No representation or warranty, expressed or implied, is or will be made or given by Fuller Treacy Money (including its executives, employees, agents, contractors and advisors) in relation to the accuracy or completeness of the contents of the website, save that any such liability is not excluded in respect of fraudulent misrepresentation.

 

Chesnara reports strong 2023 results with improved cash generation and...

Chesnara PLC (LSE:CSN) chief executive Steve Murray discusses the company's full-year results for 2023 with Proactive's Stephen Gunnion, describing them as strong and particularly highlighting £53 million in commercial cash generation and a dividend coverage of around 150%. The company has...

32 minutes ago