Don't Trade a Bear Like a Bull; Reality Check for Earnings is Good


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20 November 2018



Video commentary for November 19th 2018



Eoin Treacy's view

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



Don't Trade a Bear Like a Bull; Reality Check for Earnings is Good

Thanks to a subscriber for this report from Micheal Wilson for Morgan Stanley which may be of interest. Here is a section:



Eoin Treacy's view

A link to the full report is posted in the Subscriber's Area. 

​Leverage is quickly being squeezed out of the “new economy” shares which were among the best performers over the last 18 months. That is certainly going to lead to earnings revisions for the companies like Nvidia, Align Technologies and Netflix.

It also holds out the prospect of a lengthier period of underperformance for the segment of the technology sector which has been most aggressively bought by investors over the last few years.



Technology Megatrends Leading to the Disruption of Transportation 2020-2030

Thanks to a subscriber for this presentation by Tony Seba which may be of interest.



Eoin Treacy's view

Perhaps the most interesting part of the discussion focuses on the rate at which the cost of producing batteries is accelerating to almost 20% per annum.
That holds out the prospect of batteries becoming commoditised in the same way as solar cells when production comes on lines. For the shares of battery producers that is likely to represent a challenge but not quite yet considering the supply inelasticity argument that still prevails within the market.



Bid to Topple May Falters as Tory Lawmaker Revolt Struggles

This article by Kitty Donaldson for Bloomberg may be of interest to subscribers. Here is a section:

“My expectation is that the number will be reached and there will be a vote at some point,” Crispin Blunt said in an interview in his House of Commons office under a full-size union flag. “One could argue that it would be better that that vote comes after the vote on the deal. If one were to sequence this properly: one would wait until we had the vote on the deal and then have the vote on the prime minister’s position as leader of the Conservative Party.”

Parliament is due to debate May’s Brexit deal in early December, and politicians across the chamber say they will vote it down.


Eoin Treacy's view

Theresa May is surviving for the moment for the simple reason no one else is willing to take the job with so much uncertainty still outstanding. It is politically much more expedient to have May in place so that blame can be heaped on her administration so that whoever takes over will get a chance to start afresh. Therefore, it is very likely that once the bill has been debated in Parliament, and there is greater visibility on which two of the myriad options are most likely to be the outcome, that pressure on May’s ouster will prevail.



India and Its Central Bank Signal Truce After Marathon Meet

This article by Shruti Srivastava and Anirban Nag for Bloomberg may be of interest to subscribers. Here is a section:

India’s central bank signaled a compromise with the government by agreeing to study a demand for sharing a part of its capital -- an issue that had triggered a public spat between the monetary policy makers and their political bosses.

The Reserve Bank of India will form a panel to consider the funds transfer to the government, the central bank said in a statement after the board meeting that lasted a little over nine hours. It, however, did not immediately yield to demands for easing lending norms for weak banks while retaining capital buffers for banks at 9 percent.

“Both the RBI governor and the finance ministry walked the extra mile,” Sachin Chaturvedi, a member of the board said in an interview to Bloomberg. “They were flexible on several issues.”

The government and the RBI have been sparring over how much capital the central bank needs and how tough its lending rules should be. For a nation that relies on imported capital to fund investment, the reaching of a middle ground is key to retaining investor confidence in the world’s fastest-growing major economy.


Eoin Treacy's view

The RBI has been attempting to rein in overly aggressive lending practices in the banking sector. While necessary to tackle the bad loans issue, it has set up conflict with the government who are keen to see credit growth to boost the economy particularly with an election next year.



Long-term themes review October 29th 2018



Eoin Treacy's view

FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in terms of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

Let me first set up the background; I believe we are in a secular bull market that will not peak for at least another decade and potentially twice that. However, it also worth considering that secular bull markets are occasionally punctuated by recessions and medium-term corrections which generally represent buying opportunities.

2018 has represented a loss of uptrend consistency for the S&P500 following a particularly impressive and persistent advance in 2016 and 2017. Many people are therefore asking whether this is a medium-term correction or a top. There is perhaps no more important question so let’s just focus on that for the moment.


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