Comment of the Day
5th July 2023
Eoin Treacy
Jul 6
Video commentary for July 5th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Treasury yields advance on Fed Minutes and probability of a July hike, gold falls, oil firm, Wall Street steady, Europe eases, India new all time high, China stock market and Renminbi both fall
Fed Minutes Reveal Divisions Over Decision to Pause in June
This article from Bloomberg may be of interest to subscribers. Here is a section:
Federal Reserve officials struck a tenuous agreement to pause interest-rate increases at their June meeting, all but committing to hike again later this month in a bid to keep fighting stubborn inflation.
The minutes from the Fed’s June 13-14 meeting show that while almost all officials deemed it “appropriate or acceptable” to keep rates unchanged in a 5% to 5.25% target range, some would have supported a quarter-point increase instead.
“It was a little surprising given that the decision was sold as unanimous from Fed officials,” said Lindsey Piegza, chief economist at Stifel Nicolaus & Co. “It’s pretty clear that there was a divergence of opinions, with some officials pretty clearly giving some reluctance for a one-month pause.”
Eoin Treacy's view
The likelihood of another hike in July is being priced into the Treasury market. Meanwhile, investors are betting the July hike will be the last because manufacturing data is underwhelming and the tide of higher rates will have a negative effect on consumer behaviour in due course. Student loan debt repayments starting up in October are an additional headwind.
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UK plans to drop flagship £11.6bn climate pledge
This article from the Guardian may be of interest to subscribers. Here is a section:
To meet the £11.6bn target by 2026, government officials have calculated that it would have to spend 83% of the Foreign Office’s official development assistance budget on the international climate fund. Civil servants said in the leaked document that this “would squeeze out room for other commitments such as humanitarian and women and girls”.
It also claimed that factors such as Ukraine and debt relief could make it even more difficult to meet the target. This is because the government has cut international aid spending to 0.5% of gross national income since the announcement was made, squeezing budgets across the board, and because ministers did not spend most of the money allocated to the climate fund over the past few years, leaving the majority to be spent by 2026.
Eoin Treacy's view
It seems the number one rule of government is if you do not spend your budget, it will be taken away. The troubling reality for aspirational spending is promises are easy to make when coffers are flush and difficult to sustain when they are not. Climate change is a tomorrow problem, even if the timing of this leak coincided with the highest recorded average global temperature. The second rule of politics is timing is everything.
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Why Meta Is Launching Twitter Rival Threads
This article from Bloomberg may be of interest. Here is a section:
2. Why is Meta launching a Twitter alternative?
Meta is clear about wanting to poach Twitter’s users. Meta Chief Product Officer Chris Cox described Threads as “our response to Twitter” at a companywide meeting in June reported by The Verge. “We’ve been hearing from creators and public figures who are interested in having a platform that is sanely run,” he said. That’s a pointed reference to how Musk has been running the company since he purchased it for $44 billion in October 2022.
Eoin Treacy's view
When a social media company is as large as Meta Platforms, there are only two ways to grow. The first is how they got so big in the first place. That means capturing a demographic and holding on to them. Facebook users tend to be middle aged; Instagram users are millennials and younger, TikTok has generation Z and Roblox purports to have an even younger generation. Predicting which app today’s children will use most prolifically is a near impossible task but the aforementioned have at least demonstrated staying power.
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© 2023 Eoin Treacy
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