Comment of the Day
23rd May 2023
Eoin Treacy
May 24
Video commentary for May 23rd 2023
A link to today''s video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Luxury puling back on weakening consumer demand. gold and oil steady, dollar firms, Wall Street and Treasuries weak, China breaking lower, India steady.
Mexico's Foreign Investment Surges 48% as Nearshoring Booms
This article from Bloomberg may be of interest to subscribers. Here is a section:
Aside from the capital, no state received more money than Nuevo Leon’s $2.3 billion. Jalisco received $1.2 billion, while Puebla and Mexico State followed with $0.9 billion each. The majority of the investment growth came from companies that expanded existing operations in Mexico.
“The greatest part of the foreign direct investment was reinvestment in utilities, which is related to the increase in the capacity of plants already installed by companies, and explained by the long-term perspective on export growth,” said Gabriela Siller, director of economic analysis at Banco Base.
The movement of companies from other parts of the world to just south of the US — a practice known as nearshoring — has generated buzz around Mexico’s production possibilities. Nearly $10 billion of the investment went to the manufacturing sector, while $6 billion went into financial services.
If the current pace continues, total investment for the year could reach $43 billion, Siller said. That would represent a 51% gain in total foreign direct investment from 2022 after $6.9 billion from the media merger and Aeromexico restructuring is excluded.
Eoin Treacy's view
https://en.wikipedia.org/wiki/Isthmus_of_Tehuantepec Mexico’s GDP is around $1.27 trillion so inward investment approaching $100 billion in a year moves the needle for economic growth. At present Mexico is growing at around the pre-pandemic trend rate of 4%, and inflation (6.25%) continues to trend lower. Fiscal constraint has been a hallmark of AMLO’s presidency and that has helped to support the peso. In turn that has improved the perception of upside potential for foreign investors in the stock market.
This section continues in the Subscriber's Area.
LVMH, Hermes Spark $30 Billion Luxury Stocks Rout on US Slowdown
This article from Bloomberg may be of interest to subscribers. Here is a section:
Confidence in that view has now been dented, however, with attendees at a luxury conference in Paris organized by Morgan Stanley (NYSE:MS) flagging a “relatively more subdued” performance in the US, according to Edouard Aubin, an analyst at the investment bank. That reflects “weakness in the aspirational consumer in particular.”
That was counterbalanced by more buoyant demand elsewhere, according to Morgan Stanley. “Overall, we found corporate commentary resilient, pointing to an ongoing soft landing in the US largely offset by strength in other markets.”
Both Asia and the US are important markets for European luxury companies. Asia excluding Japan accounted for 30% of LVMH’s sales in 2022, while the US made up 27%, according to the company’s annual report.
Deutsche Bank AG (NYSE:DB) analysts have also said that a slowdown in the US is now a growing concern. While the rebound in Chinese demand has been among the key drivers of strong sales, investors are likely to be picky from here on, they added.
Eoin Treacy's view
Hermes doubled in less than a year. For a “limited supply” champion that’s an impressive performance. The share’s trend has been supported by the low float and its status as a vehicle for playing China’s post pandemic consumer rebound, without in fact investing in China.
This section continues in the Subscriber's Area.
Technology Was Supposed to Transform Insurance Pricing. It Hasn't.
This article from the Wall Street Journal may be of interest. Here is a section:
At first, the insurance pricing process -- heavily reliant on algorithms and mathematical modeling -- seemed ripe for upending, thanks to advances in the sheer amount and variety of data digitally-native companies could suddenly collect on customers.
But the Silicon Valley axiom to move-fast-and-break-things hasn't been enough to transform an industry built on centuries of observed human behavior, massive marketing budgets and a savvy grasp of the regulatory environment.
Founded in 2015, Lemonade initially aimed to sell renters and homeowners insurance. It was worth $9.87 billion at its peak in 2021; it's now worth $1.23 billion. Root Insurance, also founded in 2015, began with the idea of using telematics -- or in-car data -- to offer personalized auto insurance based on how people drive. In 2020, it was worth roughly $6.8 billion, and has since swooned to about $67 million. Property and casualty insurance startup Hippo went public at a $5 billion valuation in 2021. It is now worth around $425 million.
So far, the insurtechs have been slow to gather and contextualize enough data to actually build better models. Regulations have restricted the use of some of their data and differentiated pricing. And it has been difficult to chip away market share from established industry giants.
Eoin Treacy's view
I have been a beneficiary of the insurtech market, so perhaps I am more positively disposed towards the sector than others. As a user of MyFitnessPal, I was provided with a life insurance policy (at my peak pre-pandemic fitness point) at a rate that was far below anything available elsewhere. The home insurance premium I pay Lemonade is half what other companies have quoted. The big question is whether these companies can achieve profitability before they run out of money.
This section continues in the Subscriber's Area.
Eoin personal portfolio: commodity position increased May 19th 2023
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.
This section continues in the Subscriber's Area.
Pledge your support
Share
Thanks for reading Fuller Treacy Money! Subscribe for free to receive new posts and support my work.
© 2023 Eoin Treacy
548 Market Street PMB 72296, San Francisco, CA 94104
Unsubscribe