Comment of the Day
Video commentary for December 7th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: China pandemic surge inevitable as quarantines and testing ease, oil lower, gold stronger, Dollar weak, Chinese shares rolling over, Treasury yields lower as deflation priced in, Nasdaq-100 easing back from 200-day MA. overbought instruments susceptible to weakness.
China Considers GDP Target of About 5% in Pro-Growth Shift
This article from Bloomberg may be of interest to subscribers. Here is a section:
The Politburo on Wednesday signaled more stimulus could be on the cards next year, saying fiscal policy will be kept active with a focus on improving its efficiency, while monetary steps will be “targeted and forceful.” China will “push for overall improvement of the economy,” the official Xinhua News Agency said in a readout of the meeting.
Larry Hu, head of China economics at Macquarie Group Ltd., said the message from the Politburo meeting was “loud and clear: Zero-Covid is behind us, and growth would be the top priority for next year.” The signals suggest policymakers want to bring next year’s growth rate back to its potential of above 5%, he said.
The growth outlook for next year remains highly uncertain, given a likely surge in coronavirus infections and further disruption expected to the economy. The global economy is also at risk of falling into recession, and a recovery in China’s property market remains elusive.
Eoin Treacy's view - China has built permanent plague hospitals in several of the largest cities. That is in preparation for a significant rise in the number of COVID infections. Now that the restrictions on movement and the draconian testing regime are being relaxed, the number of cases is likely to surge.
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 (NYSE:MS) 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.”
Eoin Treacy's view - Banks like Deutsche and Morgan Stanley are taking an axe to their earnings estimates for the S&P500 next year. Corporate earnings have been resilient, even as the Fed has hiked rates faster than at any time in the last 40 years. That is unlikely to persist as the lagged effects of tightening catch up.
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.
Eoin Treacy's view - The dilemma for countries with high rates of emigration is they end up sending the most ambitious, adventurous, and well-educated abroad. The so-called “brain drain” is mourned by society and people lament that if these productive people could stay at home, they would better society. However, the reality is those people probably have better personal opportunities overseas and would not reach their full potential at home. The benefit is they send cash home which is a significant source of inward foreign currency.
Eoin's personal portfolio: stock market index positions closed at profit and shorts opened December 6th 2022
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.