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Comments of the Day
26 June 2020
Video commentary for June 25th 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: Volcker Rule easing is latest support for the market following mild weakness, Dollar susceptible, gold steady, oil firms, bases, tops and leadership discussion.
The RBC Macroscope
Thanks to a subscriber for this report from RBC 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.
The Dollar tends to attract interest because the USA is the largest capital market and the Federal Reserve is highly active in deploying support measures for the economy. The supply inelasticity argument supported its value until last year and the subsequently, desire for a safe haven has been a support.
U.K. Rejects Mooted Brexit Compromise in Setback to EU Talks
This article by Joe Mayes for Bloomberg may be of interest to subscribers. Here is a section:
“@DavidGHFrost
6/6 Finally, I want to be clear that the Government will not agree to ideas like the one currently circulating giving the EU a new right to retaliate with tariffs if we chose to make laws suiting our interests.We could not leave ourselves open to such unforeseeable economic risk.”
Frost’s comments come ahead of a fresh round of talks with the EU next week. The two sides are trying to break an impasse that risks a damaging rupture at the end of this year. Without a trade accord, Britain and the EU would default to trading on World Trade Organization terms from Jan 1. 2021, meaning steep tariffs and an economic shock.
A key sticking point in the talks has been the EU’s demand that the U.K. commits to tracking the bloc’s rules in areas such as environmental and labor protections and state aid, for fear that Britain would become a competitor on its doorstep. The British government sees the request as inconsistent with the principle of sovereignty that it argues was at the core of the vote for Brexit.
“This needs to be a real negotiation and some of the EU’s unrealistic positions will have to change if we are to move forward,” Frost said. “U.K. sovereignty, over our laws, our courts, or our fishing waters, is of course not up for discussion.”
Eoin Treacy's view
The EU is deeply concerned at the prospect of the UK competing aggressively. There is a simple reason for that. Self-determination, which the UK has just recovered, is easier to manage than decisions by committee. Any counter measures the EU uses against the UK will need to focus on broad market access and tariffs because it is incapable to taking competitive steps on its own for fear of upsetting its own internal balance of relationships. The EU’s negotiations are aimed at ensuring the status quo is maintained.
Occidental, AB InBev Lead Debt-Laden Firms Buying Back Bonds
This article by Molly Smith for Bloomberg may be of interest to subscribers. Here is a section:
Occidental Petroleum Corp. and Anheuser-Busch InBev SA/NV are seeking to buy back bonds through separate tender offers launched Thursday. Both are targeting debt due in the next three years.
Companies are seeking breathing room on debt payments as they contend with lower earnings amid the coronavirus outbreak, threatening to push leverage even higher. Credit raters are running out of patience: Occidental, already one of the largest fallen angels of this cycle, may be cut again by Moody’s Investors Service and S&P Global Ratings, while AB InBev was recently downgraded by S&P with a negative outlook.
Both companies largely amassed their massive debt loads by funding acquisitions. Much of Occidental’s nearly $40 billion of debt came from borrowing to help finance its takeover of Anadarko Petroleum Corp. last year, while AB InBev’s roughly $103 billion of obligations mostly stems from its purchase of SABMiller Plc in 2016.
While some firms are looking to buy back debt outright, others are pursuing different liability management exercises to push out maturities. Rite Aid Corp. launched a $750 million exchange offer Thursday, while Macy’s Inc. initiated one earlier this week. They’re also trying to amend certain covenants through what are known as consent solicitations.
Eoin Treacy's view
Corporate debt issuance has surged over the last three years to a new all-time high and combined total of $2.4 trillion in only a couple of months. That is all aimed at ensuring they have enough capital to see them through a particularly uncertain period.
Eoin's personal portfolio: stock market short stopped out a small profit June 16th
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.