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Comments of the Day
12 March 2021
Video commentary for March 11th 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: Dow Theory suggests a new bull market but short-term overbought, ECB yield curve control, Dollar weakens on stimulus passing, value opportunities in Asia rebounding, Europe STOXX 600 on cusp of breaking out.
Remit For The Monetary Policy Committee (MPC)
This letter and response between the UK’s Chancellor of the Exchequer and the Governor of the Bank of England may be of interest to subscribers.
To achieve this objective, the government’s economic strategy consists of:
• operationally independent monetary policy, responsible for maintaining price stability and supporting the economy;
• a credible fiscal policy, maintaining sustainable public finances, while providing the flexibility to support the economy;
• structural reform to level up opportunity in all parts of the UK and to transition to an environmentally sustainable and resilient net zero economy, including through regulation, and an ambitious programme of investment in skills, infrastructure and innovation, in order to sustain high employment, raise productivity and improve living standards;
• maintaining a resilient, effectively regulated and competitive financial system that supports the real economy through the provision of productive finance and critical financial services, while protecting consumers, safeguarding taxpayer interests and supporting the transition to a net zero economy. 6
ACCOUNTABILITY
The Monetary Policy Committee is accountable to the government for the remit set out in this letter. The Committee’s performance and procedures will be reviewed by the Bank of England’s Court on an ongoing basis (with particular regard to ensuring the Bank is collecting proper regional and sectoral information). The Bank will be accountable to Parliament through regular reports and evidence given to the Treasury Committee. Finally, through the publication of the minutes of the Monetary Policy Committee meetings and the Monetary Policy Report, the Bank will be accountable to the public at large.
Eoin Treacy's view
Central banks are “operationally” independent. All that means is politicians do not get involved in their day-to-day affairs. The central bank still takes orders from politicians. When elected officials feel the “need” for change they simply announce it in the budget. Today we “need” to save the planet so it is now the central bank’s job to do that.
Worst-Performing Asia Stock Index Turns Winner on Value Love
This article by Ishika Mookerjee for Bloomberg may be of interest to subscribers. Here is a section:
“Singapore stocks look attractive because of their relatively better valuations and high dividend yields,” said Stuart Rumble, a multi asset investment director at Fidelity International. The large share of property firms and banks also make the market “highly geared” to economic re-opening, he added.
The Straits Times Index closed up 1.2% on Tuesday to the highest in more than a year. The gauge is trading at 14.7 times 12-month forward earnings, behind most of its regional peers and the MSCI Asia Pacific Index’s 16.8 multiple, according to Bloomberg-compiled data. The Singapore gauge’s dividend yield is estimated at 3.8% for the next 12 months, higher than the regional benchmark’s 2.3%.
The export-oriented economy suffered its biggest contraction since independence last year due to the global pandemic. Now, new daily Covid-19 infections locally are hovering near zero and the government expects growth to rebound to between 4% and 6% in 2021.
The three local banks -- DBS Group Holdings Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. -- that make up nearly half of the index’s weight, contributed the most to the benchmark index’s rise amid higher yields, climbing more than 10% each this year. Investors are awaiting the easing of a regulatory cap on bank dividends introduced last year.
Eoin Treacy's view
The Singapore Dollar is a strong regional currency that does best in periods of economic growth led by Asia. The rate has been ranging between S$1.3 and S$1.45 since 2015 but that situation may now be coming to a conclusion as Asian growth ramps up following a milder contraction than the rest of the world and with a rebound fuelled by positive demographics.
Shell Plans to Take Virtual Power Plant to the Next Level
This article by Nelson Nsitem for Bloomberg may be of interest to subscribers. Here it is in full:
Royal Dutch Shell Plc agreed to buy Next Kraftwerke, the operator of a virtual power plant that brings together clean-energy capacity across Europe to sell the electricity into the market.
Next Kraftwerke remotely connects and manages more than 10,000 off-grid units -- including solar, hydropower and bioenergy facilities -- across eight countries, the Hamburg-based company said Thursday in a statement. The deal expands Shell’s footprint in low-carbon technologies as the Anglo-Dutch oil major seeks to slash its emissions.
“The acquisition of Next Kraftwerke will accelerate Shell’s strategy to grow by adding smaller renewable assets to our portfolio,” David Wells, vice president of Shell Energy Europe, said in the statement. The terms of the deal, which is expected to complete in the second quarter of this year, were not disclosed.
Power is a key part of Shell’s ambition to become a “net-zero” company by 2050 and one of the world’s largest providers of green electricity. Shell aims to double electricity sales to 560 terawatt-hours by 2030.
Eoin Treacy's view
European oil majors have been delivered a clear message to evolve or die. The political tide of support for green energy and decarbonisation continues to favour reduced emphasis on fossil fuels. Royal Dutch Shell is at the forefront of that regional energy transition.
Email of the day on China and the coronavirus:
I am shocked at your remarks about China. It is not the China I know, and have seen develop over the last 40 years. A country where Harvard (Ash Center 9 July 2020) surveys found 95.5 percent of respondents were either “relatively satisfied” or “highly satisfied" with their government compared with 38% in the US.
The article from Politico is am interesting read, but does not mention that a partner of the Wuhan Institute was the US Galveston National Laboratory, of whose activities we know very little too.
Bad things happen in every country, including China and the US, but it behooves us to have a sense of proportion and get the facts both right and complete. Take one example: you mention a man in China who altered a gene to suppress HIV - he ended up in jail for breaking the rules.
I am sure you would embrace Deng Xiao Ping's instruction "find the truth through facts", and please recognize that most of the almost 1.5 billion people in China have just finished a perfecting satisfactory day!
And this from David Brown:
Thank you for this article and comment Eoin. On February 13 2020 I gave a presentation at my company's All Hands meeting about the viral epidemic in China. I made slides describing the evidence trail going back many years that indicated it was manufactured in the Wuhan lab. I removed those slides at the last moment as the meeting organiser gave me just 10 minutes for a 30 minute presentation - as you can imagine, the remaining content of the 1 hour meeting was trivia. Staff reaction to my presentation could be described as 'has he gone crazy!' They thought I was exaggerating. Nevertheless, I had them practice 3 days working from home, and we have not returned to the office since those days. I am sad to say that woke culture has come into the company as it has expanded over the past year with naive virtue-signalling new recruits, and I would be causing a storm if I now presented those slides showing the likely origin of the virus or showed them your comments. It's a sad world that has emerged in the past couple of years. I am glad I do not have many years to live.
Eoin Treacy's view
Thank you both for these comments which are representative of the divide in perception. I might also add we all wish a mind such as David Brown’s will be with us for years to come.
No country is perfect and most have some part of their history they are embarrassed about. However, there is the world of difference between countries with an independent judiciary and free press compared to authoritarian regimes. Freedom to discuss alternatives and to openly air grievances is the basis for western liberal society.
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