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21 January 2021
Video commentary for January 20th 2021
Eoin Treacy's view
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Gold rebounds, yield curve control going global, Mega caps starting to play catch up with small caps, credit demand growth coming, base formation completion in tech,
Deflation Threatens to Push Yen Higher on Japan Real Yield Gain
This article by Chikako Mogi for Bloomberg may be of interest to subscribers. Here is a section:
“Japan’s real yields are high and are rising with deflation underway,” said Tohru Sasaki, head of Japan markets research at JPMorgan Chase & Co. “The real yield gap widening in the negative is very significant. It may eventually drag the yen higher.”
Consumer price growth in Japan excluding fresh food -- a measure closely watched by the country’s central bank -- has been negative or zero since April. Expectations for future inflation -- derived from 5-year breakeven rates -- sit at minus 0.12%. Equivalent U.S. breakevens are at 2.16%, up over 60 basis points and rising since November, as investors bet further stimulus under new President Joe Biden will help reflate the American economy.
Yen at 100
The result is a higher real yield in Japan, where 5-year inflation-protected notes trade around zero versus minus 1.73% in the U.S., increasing the relative attractiveness of the country’s bonds and its currency.
Eoin Treacy's view
You know you live in a funny reality when a zero or negative interest rate produces a positive real yield. Japan’s deflationary environment has been an abiding characteristic of the market for decades and the vast quantity of debt accrued in that time is a headwind to risk taking, speculation and economic activity going forward. Attempts to reinvigorate the domestic demand story with immigration were beginning to bear fruit ahead of the pandemic. Japan has weathered the storm better than most so it will face less of a challenge in recovering as the world heads towards reflation.
Jack Ma's Brief Video Chat Prompts a $58 Billion Sigh of Relief
This article by Lulu Yilun Chen, Coco Liu and Abhishek Vishnoi for Bloomberg may be of interest to subscribers. Here is a section:
Much about the future of China’s most famous businessman remains unclear. Yet analysts said Wednesday’s video was a sign that worst-case scenarios -- such as jail time for Ma or a government takeover of his companies –- are probably now off the table. It’s unlikely Ma would have participated in the event without at least tacit approval from Beijing; state-run media including the Global Times were among outlets that posted snippets of his talk or wrote stories about his appearance.
“There’s still a lot of uncertainty on regulators’ next moves, but this does mean the status of Jack Ma is much better than a lot of people speculated,” said Fang Kecheng, a professor at the Chinese University of Hong Kong.
Eoin Treacy's view
There is no getting around the fact that Ant Financial prospered in the grey area between consumer finance and traditional banking. By offering a higher interest rate than banks, it grew into a massive deposit taking operation without having to submit to banking regulation. When he publicly showed distain for banking regulators, it signalled Ma had forgotten that his success was based on the ability of Ant Financial to operate outside the regulatory umbrella of the banking sector. They dropped the hammer on him and the company will now be part of the regulatory environment. It remains to be seen if the rule breaking on deposit rates will still be tolerated.
3D Systems, ExOne Rally After Stifel Sees 3D Printing Growth
This article by Ryan Vlastelica for Bloomberg may be of interest. Here is a section:
Shares of 3D printing companies rose on Tuesday, extending their recent gains, after Stifel started
research coverage on the group with a broadly positive view.
* The firm issued buy ratings on ExOne, Stratasys and Desktop Metal
** XONE up 11%, SSYS up 7%, DM up 3.2%
* Analyst Noelle Dilts wrote that XONE is “well-positioned to benefit from increased adoption of 3D printing technology for industrial end part production,” while DM should be supported by “a dramatic increase in the use of 3D printing for end-use part production” over the coming decade
** PT $20 for XONE, $30 for DM
* On SSYS, Stifel wrote that it’s in a “mature position where it can leverage its existing infrastructure” for further growth
** The company is working to be the first choice in the polymer 3D printing marketplace, which is “expected to more than double by 2025”
Eoin Treacy's view
Veteran subscriber might remember the initial hoopla about the promise of 3D printers in 2012 and 2013. A large number of startups entered the market on the expectation that additive manufacturing creates better materials with fewer imperfections, that it would lead to mass production as economies of scale improved and that the potential for reshoring was vastly improved by the largely automated technology.
Eoin's personal portfolio - stop triggered on hedge position
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.
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