How a Second Brexit Referendum Would Work: the Question, When It Will Happen And Who Would


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16 January 2019



Video commentary January 15th 2018



Eoin Treacy's view

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

Some of the topics discussed include: Brexit deal voted down, Pound steady, China fiscal stimulus beginning,, gold appreciatating in more currencies, A lot of bad news has been priced into valuations, Big Tech rallies but still has work to do to repair technical damage, oil steady, cannabis shares rebounding, biotech and cloud companies outperforming, cybersecurity is a market perform, Treasuries continue to unwind short-term overbought condition. 



How a Second Brexit Referendum Would Work: the Question, When It Will Happen And Who Would Win

This article by Harry Yorke for the Telegraph may be of interest to subscribers. Here is a section:

Who would win?

Ever since Mrs May unveiled her Chequers proposal in July, the polls have all shifted towards Remain.

Whilst Brexiteers continue to invest all of their energy railing against the Prime Minister’s deal, the campaign for a so-called ‘People’s Vote’ has been gaining momentum.

According to a recent YouGov poll, which ranks Remain, May’s deal, and no deal in order of first preferences on a constituency by constituency basis, staying in the European Union now commands a lead in 600 of 632 constituencies surveyed.

But when the various options are polled in a head-to-head scenario, known as the Condorcet method, the results are very different.

They are as follows:

Whilst these various scenarios all indicate a shift towards Remain, the results are by no means decisive.

It is also worth remembering that Remain enjoyed a comfortable lead in the polls throughout the 2016 referendum and into polling day.


Eoin Treacy's view

An historic defeat for a sitting prime minister would normally result in her ouster. A vote of no confidence will be held tomorrow but, even then, the Labour Party will need defections from the Conservative Party to force an election and that looks unlikely. The only clear conclusion is the UK is very unlikely to leave the EU at the end of March, regardless of what the outcome of political machinations over the next 48 hours will be. There simply isn’t enough time to push through an alternative, let alone a General Election or two-tiered referendum before the March 31st deadline. 



China Presses on With Tax-Cut Strategy as Lending Stabilizes

This article from Bloomberg news may be of interest to subscribers. Here is a section: 

China’s government is turning increasingly to tax cuts as the first line of defense against a slowing economy, as credit data released Tuesday showed some vindication of its gradual stimulus strategy.

Further evidence of the dominance of fiscal measures emerged, as senior policy officials pledged that tax reductions on a “larger scale” are in the pipeline, amid worsening output and trade data. JPMorgan Chase & Co. economists estimate the total impact will be around 2 trillion yuan ($300 billion), or 1.2 percent of gross domestic product.

That’s a departure from the infrastructure binges coupled with massive monetary stimulus that were deployed in the aftermath of global financial crisis. Beijing is trying to put a floor under the economic slowdown without another debt blowout, with some success: Credit growth exceeded expectations in December, and the central bank has managed to curb riskier shadow banking throughout the year.

"At the moment the room for monetary policies is limited, and fiscal policies such as tax cuts are the crucial tool," said Cui Li, head of macro research at CCB International Holdings Ltd. in Hong Kong. The high leverage and property prices have limited the chances of massive monetary stimulus, she said.

"But as a pro-growth measure, tax cuts will take effects at a slower pace compared to infrastructure binges," she said.


Eoin Treacy's view

The influence of the consumer on China’s economic future is helping to shape the policy response to the slowdown. Consumer spending now makes up a lot more of the economy than it did a decade ago. Meanwhile the consumer is considerably less levered than the corporate and semi-state sectors, so fiscal easing is less likely to create a disruptive bubble in the short term.



Gold hits an all-time high in 72 currencies

Thanks to a subscriber for this article which leads with a sensational headline that stretches the truth somewhat. However, there is no doubt gold is firming in an increasing number of currencies. Here is a section:

Using the dollar gold price, as most of us do, has disguised what is actually quite a powerful bull market. If my memory serves me right, we saw the same phenomenon - a stealth rally in minor currencies - ahead of the last major gold bull run (in dollars) in the late 1990’s. Arguably this may be a very good leading indicator.

Faulty yardsticks also takes us onto wealth management. Measuring our net worth in local currencies, we might be rather pleased with ourselves - smug even. However we chose to ignore the fact that the yardstick is not a constant … it is shrinking and sometimes really quite fast. It’s the natural corrosive effect of inflation. Knowing this, governments give us a gauge for yardstick shrinkage to use such as RPI or CPI, to reassure you that the shrinkage is minimal… and then lie about it.  

There are alternatives.

In the US, the Chapwood Index is highly regarded as it reflects the true cost-of-living increase. Plainly and simply, the Index shows that incomes can’t keep up with expenses, and it explains why people increasingly have to turn to the government for entitlements to bail them out. The basis of the Index is fully open to scrutiny and if correct suggests Americans have been losing roughly 10% of their wealth each year since 2014. Half of it gone. This compares with the official government figure of 1.9%. Ronald Reagan called inflation “the thief in the night” and it is built for times just as this. It gives the appearance of being wealthy (maintaining high nominal values) while eroding your actual position - which manifests itself in far higher costs on the other side. 

Interestingly, gold has seen an average year-on-year gain of about 10% compounded since 2000 - off-setting those real losses - which reaffirms in our mind that it continues as a reliable yardstick against which to measure costs or indeed wealth. In short, gold has maintained what economists call “purchasing power parity” for millennia. So not only is it an excellent yardstick - its actually quite a useful thing to own - especially if you fear wealth erosion. If you haven’t already read this, you must - see :Jastram’s Golden Constant

Many crises invariably start with stealth inflation and then follows currency weakness - so gold gets expensive and then it blows out significantly higher in your local currency. Then you realise that the lifeboat has sailed … the choo-choo train has left the station. 


Eoin Treacy's view

Governments’ fetish for fiscal stimulus is once again being engaged on a global basis and that is raising the same old questions about the integrity of their currencies and the loss of purchasing power associated with efforts to inflate the debt away. Gold is not making new highs against all of the currencies mentioned in this article but it is certainly firming against many of them.



German economic growth cools in 2018 to lowest rate in five years

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

The 1.5 per cent figure suggests growth was positive in the fourth quarter after the economy contracted in the third quarter. “If there are no revisions to past data, then the 1.5 per cent suggests at least 0.3 per cent quarter on quarter,” said Jörg Krämer, chief economist at Commerzbank.

Fears of a technical recession, or two-straight quarters of economic contraction, had emerged last week after industrial production plunged between October and November, highlighting the problems facing the country’s manufacturers.

Gross domestic product had fallen 0.2 per cent in the third quarter from the second, according to official data. Fourth quarter figures are due next month.

Makers have been hit by poorer sales following signs of a world economic slowdown and political uncertainty surrounding Brexit and the trade war between the US and China. The UK, US and China are all among German makers’ biggest markets.

Export sales sank in the second half of the year on the back of weak external demand — leaving import growth outpacing them and placing the trade balance into negative territory for the year. Germany is the most reliant of all of the major global economies on trade and signs that the world economic cycle is past its peak has led to an outbreak of pessimism among the country’s manufacturers.


Eoin Treacy's view

German growth disappointed but remained positive, subject to revisions of course. That’s positive but does little to hide the fact that Eurozone growth is waning at exactly the same time the ECB has ended its QE program.



Canada's Canopy Growth shares jump 11% on deal to develop industrial hemp farms in New York

This article by Thomas Franck for CNBC may be of interest to subscribers. Here is a section:

Canopy Growth has been granted a license by New York state to process and produce hemp with the help of efforts by Gov. Andrew Cuomo and U.S. Sen. Charles Schumer.

Canopy Growth hopes to establish large-scale production capabilities focused on hemp extraction and product manufacturing within the United States. Depending on board approval of a specific site, Canopy plans to invest between $100 million and $150 million in its New York operations, "capable of producing tons of hemp" on an annual basis.

The company is currently evaluating a number of sites in the Southern Tier of New York, which will become one of its first extraction and processing facilities outside Canada. Management hopes to announce the specific location within 100 days.


Eoin Treacy's view

The outlook for US Federal legalisation or reclassification of cannabis took a hit with Donald’s Trump’s electoral success, given his antipathy towards the sector. However, Canada went ahead and became the first major economy to legalise cannabis and its companies have a head start on possible US competitors in the event the political climate in the USA changes.



Transcript of the audio/video for January 14th



Eoin Treacy's view

I promised last week I would experiment with dictation software so subscribers could have the benefit of the video in written format.

I’m trying to teach Dragon Professional 15 how to take down what I say, but the results are far from perfect. Here is the original transcript and the corrected version which took a couple of hours to amend. The software can purportedly learn from documents, so I am feeding it the corrected transcripts to try and teach it how I speak.

I’ll persist through the rest of the week and hopefully I will be able to get better results with more examples to customise the natural language processor. However, it is not practical to spend two hours correcting copy that takes twenty minutes to speak.






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