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India Equities Post Best Run in Seven Months on Lockdown Exit

India Equities Post Best Run in Seven Months on Lockdown Exit This article by Abhishek Vishnoi for Bloomberg may be of interest to subscribers. Here is a section: India’s phased loosening of restrictions will see malls, restaurants and places of worship reopening as of June 8 after the world’s toughest stay-at-home curbs to stem the Covid-19 pandemic muted economic growth.

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Comments of the Day

03 June 2020

 

 

Video commentary for June 2nd 2020

 

Eoin Treacy's view

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

Some of the topics discussed include: Dollar weak, Yen weak, Euro, Pound commodity currencies rebounding, that is helping internaitonal markets recovery, Wall Street remains firm and is boosted by the currency's weakness, gold steady, oil firm, 

 

 

Adam Tooze on the pandemic's consequences for the world economy

This article is a month old but it raises a number of important questions which I believe are worth addressing. Here is a section: 

The worry about China is the sustainability of its debt-fuelled economic growth. The basic weaknesses of the Eurozone are that it still doesn’t have a backstop for its rickety banking system and that it lacks a shared fiscal capacity; what’s more, Italy’s finances are so weak that they continually threaten to upset European solidarity. In the US, the national institutions of economic policy actually work: they demonstrated this in 2008 and are doing so again now. The Fed and the Treasury exert a huge influence not only over the US economy but the entire global system. The question is how they stand in relation to a profoundly divided American society and how their technocratic style of policymaking is received by the know-nothing nationalist right wing of the Republican Party and its champion in the White House.

Over recent years, each of these weaknesses has at various times seized the attention of the fund managers and business leaders who direct global business, and the experts and technicians who advise them. It isn’t a secret that China’s debt bubble, Europe’s divisions and America’s irrational political culture pose a challenge to the functioning of what we know as the world economy. What caused the panic last month was the realisation that Covid-19 has exposed all three weaknesses simultaneously. Indeed, in Europe and the US the failure of government has been so severe that we now face a public health catastrophe and an economic disaster at the same time. And to make matters worse, Donald Trump appears tempted to juggle the two.

 

Eoin Treacy's view

This article decries the reliance of economies on central banks largesse. I think most of us have some sympathy with the fact that the swamping of asset markets in liquidity is not the most ideal scenario because of the risk of mispricing and misallocation of resources. However, it is the reality we are dealing with.

 

 

Email of the day - on precious metals

Hello Eoin, if "liquidity trumps everything else" and assuming that governments worldwide will continue New Monetary Theory with massive deficit spending financed by monetization by central banks at essential cero or negative real interest rates, then this wall of liquidity should further propel the ongoing general "melt up" of stock and debt markets allowing a prolonged, demand driven risk-on rally.

In this case precious metals would lose their supposed unique "safe haven" status/advantage until such time that serious inflation or stagflation or a likely collapse or reset of the monetary system becomes visible to a large part of investors - if at all.

Until such (far-off?) day of reckoning, precious metals would neither be needed as protection against systemic crisis as "NMT would be working beautifully" nor for return purposes as stocks and other assets will be pushed up by abundant liquidity. For investors in precious metals/mining stocks the critical questions therefore is:

How long will stocks and other financial assets outperform and "unneeded" precious metals correct or even collapse? Looking back at 2011 and onwards, precious metals collapsed and stayed low until mid-2019 whilst continuing QE1- QEn (the predecessor for NMT) around the world made stock and debt markets boom for the next 9(!) years.

As this time round central banks and governments "shot before asking" by IMMEDIATELY providing unlimited liquidity and fiscal deficits instead of slowly finding and providing relief to financial markets as they did in 2008-2012 and onwards, the best part of the run-up in precious metals may be behind us and the place to invest is in stock markets without much regard to old fashioned valuation discipline.

Most of the performance of the past 10 years has been by way of a multiple expansion - why not have the S&P 500 trade at 25+ trailing earnings if real interest rates are negative and there is a worldwide "Powell/central bank put" as a guarantee against any serious losses?

My questions to you: 1. Why stay invested in PMs NOW and risk a serious corrections/collapse in PMs? 2. When will investors at large recognize - if at all (?!) - that NMT is and will be seriously debasing the currency and nominal values of all assets and that PMs are relatively better or at least, competitive investments/stores of value than say quality stocks (which pay at least a small dividend)?

Thank you for reflecting on the above and sharing your views with the collective. All the best, B

 

Eoin Treacy's view

Thank you for this summary of the questions many investors are asking. The rationale behind any bubble is valuations don’t matter. The evolution of ETFs as trackers of indices is the clearest evidence anyone might wish for that this trend is already well underway. Market cap weighted indices are closet momentum strategies so tracking them turns everyone into a momentum investor.

 

 

Eoin's personal portfolio: profits taken in commodity longs

 

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.

 

 

 

India Equities Post Best Run in Seven Months on Lockdown Exit

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

India’s phased loosening of restrictions will see malls, restaurants and places of worship reopening as of June 8 after the world’s toughest stay-at-home curbs to stem the Covid-19 pandemic muted economic growth.

“The gradual easing of the lockdown has boosted sentiment,” Ajit Mishra, vice president of research at Religare Broking Ltd., wrote in a note Monday. “The recent surge indicates markets are focusing more on the optimistic side and anticipating a favorable scenario.”

Still, Moody’s Investors Service on Monday reduced the country’s sovereign rating by a notch to the lowest investment grade, which may undermine India’s efforts to attract foreign capital into its debt market to fund a ballooning fiscal gap and avoid the first economic contraction in more than four decades.

 

Eoin Treacy's view

With the RBI easing and stimulative measures from the government, the biggest uncertainty has been about the impact the coronavirus would have on the Indian economy. The lockdown is now easing and the country’s youthful demographics has helped it weather the storm better than many. That is helping investors look beyond the downgrade of sovereign debt. 

 

 

Email of the day on the uranium price

One of your tickers (UXA3 COMB Comdty) Uranium Spot hasn't been refreshed since a week. Can you please look into this?

 

Eoin Treacy's view

Thanks for letting us know. Bloomberg is no long updating this price so I have replaced it with the 1st month continuation chart.

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