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Mortgages Hit Zero for First Time in Danish Rate History

Denmark introduced negative rates in 2012 as investors seeking refuge from Europe’s debt crisis piled into AAA-rated krone assets, threatening to destabilize the country’s euro peg. Back then, when Nodgaard was head of the Financial Supervisory Authority, he said negative rates were unlikely to hurt banks since lower impairments would offset a decline in interest income.

Mortgages.

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Comments of the Day

13 August 2019

 

 

Video commentary for August 12th 2019

 

Eoin Treacy's view

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

Some of the topics discussed include: Argentinean Peso collaposes, commodities currencies retreat, copper and oil remain weak, China steady but it is a manipulated market, India steady, Wall Street eases back but remains a relative strength leader, bonds firm, gold back above $1500, silver playing catch up.

 

 

Holidays

 

Eoin Treacy's view

I will be travelling to Guangzhou and Taiwan between August 5th and 19th. I don't anticipate any issues with posting a limited Comment of the Day and Subscriber's video but I may be posting at odd times because of the timezone. If subscriber's would like to submit copy of general interest to the Collective we will be happy to publish it over the coming couple of weeks. 

 

 

Economic Compass A primer on protectionism

Thanks to a subscriber for this report from RBC Asset Management which may be of interest. Here is a section:

Second, production costs between countries are converging, in part due to all of the globalization that has already happened. Demonstrating this, U.S. wages have managed only limited growth in recent decades at the same time that Chinese wages have surged. The result is greater competitive parity: the savings from producing something in China and selling it to the U.S. have shrunk. A more homogenous world simply doesn’t need to trade as much.

Third, prior trade tailwinds have faded. All of the grand trade achievements of the past several decades – NAFTA, the EU, the opening of ex-Soviet bloc countries and China – have now been mostly absorbed into the global economy. Few major countries remain outside the global economic system, waiting to jolt the world forward with their entry. In turn, there is no reason for trade growth to continue substantially outpacing economic growth. To be sure, there are still a smattering of new free trade agreements being struck, but they are fewer in number, and by definition smaller in achievement given that tariff rates had already been whittled down by prior efforts (Exhibit 3).

Fourth, and finally, there are new trade headwinds now blowing from the spate of populist governments recently installed around the world.

 

Eoin Treacy's view

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

The magnanimous ideal of giving up antiquated industries in service to building a global economy which could lift millions of people out of poverty is something the whole world got behind.

 

 

Mortgages Hit Zero for First Time in Danish Rate History

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

Denmark introduced negative rates in 2012 as investors seeking refuge from Europe’s debt crisis piled into AAA-rated krone assets, threatening to destabilize the country’s euro peg. Back then, when Nodgaard was head of the Financial Supervisory Authority, he said negative rates were unlikely to hurt banks since lower impairments would offset a decline in interest income.

But no one expected negative rates to last this long. While banks initially benefited from lower impairments and inflated asset prices, their business models are struggling to withstand persistently low rates.

Last year Denmark’s banking and mortgage industry reported its lowest operating profit in at least five years, while return on equity hit a three-year low. Some banks are now looking into passing on the cost of negative rates to retail customers, broaching a subject that was once considered taboo.

The interest rate on current-account deposits at the central bank and the amount that lenders can place there are among a handful of levers that the central bank uses to maintain the krone’s peg to the euro.

The central bank has raised its current-account limit before, most notably back in 2015 when Switzerland’s decision to send its franc into a free float fanned speculation Denmark would be next. Back then, the Danish central bank raised its current account limit to 174 billion kroner.

 

Eoin Treacy's view

Ben Bernanke’s fateful words “Deflation, making sure it doesn’t happen here” must be ringing through the halls of central banks the world over as $15 trillion in negative yielding bonds are pricing in a deflationary spiral the like of which the world has seldom seen. What Denmark’s experience with negative rates tells us is that traditional banking is doomed without some form of exaggerated assistance from the government. Perhaps more importantly, once accepted negative rates seem like a hard habit to kick.

 

 

Mysterious radiation leak, 100x larger than Fukushima disaster, traced to Russian facility

This article from the Bigthink.com may be of interest to subscribers. Here is a section:

"Today most of these European networks are connected to each other via the informal 'Ring of Five' (Ro5) platform for the purpose of rapid exchange of expert information on a laboratory level about airborne radionuclides detected at trace levels," it says. "In October 2017, an unprecedented release of ruthenium-106 into the atmosphere was the subject of numerous detections and exchanges within the Ro5."

State-owned Russian nuclear corporation Rosatom denied the findings of the recent study.

"We maintain that there have been no reportable events at any Rosatom-operated plants or facilities," Rosatom said. "Both the national regulator and experts from an independent international inquiry inspected the Mayak facility back in 2017 and found nothing to suggest that the ruthenium-106 isotope originated from this site, nor found any traces of an alleged accident, nor found any evidence of local staff exposure to elevated levels of radioactivity."

 

Eoin Treacy's view

This kind of headline, regardless of whether it originally occurred in 2017 is bad news for uranium miners. We can make the case for the viability of next generation reactors until we are blue in the face, but one headline grabbing accident kills any progress make in rehabilitating perceptions.

 

 

Eoin's personal portfolio: crypto long increased July 15th 2019

 

Eoin Treacy's view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change. I'll change the title to the date of publication of new details so you will know when the information was provided. 

 

 

2019: The 50th year of The Chart Seminar

 

Eoin Treacy's view

The London Philharmonic Orchestra is holding a concert in David’s memory on October 5th October at the Royal Festival Hall. There is a reception between 5.30 and 6.45 in the Foyle Pavilion, Level 3, Green Side and subscribers are well to join David’s family there for light refreshments. Following the reception, we will move to the Beecham Bar, Blue Side, Level 5 for a short talk by Tim Walker, Chairman of the LPO. 

If you wish to attend the concert as well, which includes a performance of Elgar’s Cello Concerto by the Young Musician of the Year, it begins at 7.30 and you may book tickets (£67) by telephone on 020 7840 4242 quoting the code Fuller Concert.

Since this is the 50th year of The Chart Seminar we will be conducting the event on October 3rd and 4th to coincide with the memorial on the Saturday.

In the meantime, if you have any questions, would like to attend, or have a suggestion for another venue please feel to reach out to Sarah at [email protected]  

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non-EU residents are not liable for VAT). Annual subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.

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