Comment of the Day
Video commentary for January 31st 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: further evidence of growth slowing down, bond yields remains steady in the UK, rising in the UK, oil firm, the threat of stagflation reduces the potential for sharp interest hikes so gold and stocks firm. bitcoin reverses early decline.
BOE's First Back-to-Back Hikes in 17 Years May Just Be the Start
This article from Bloomberg may be of interest to subscribers. Here is a section:
The Bank of England, one of the first movers in what looks set to be a rapid global tightening of monetary policy, this week will give a big clue about how far and fast it will move in combating inflation.
Policy makers led by Governor Andrew Bailey are expected to hike interest rates to 0.5% on Thursday, according to a survey of economists by Bloomberg. That would complete the first back-to-back increase since 2004 and open the question of whether more increases will follow.
The central bank’s latest forecasts also due with the decision will be key part of the answer. Analysts also are looking for words from Bailey at a press conference about how policy makers will respond to a surge in energy costs that’s helping drive up the prices at the fastest pace in three decades.
“More hikes are likely given the scale and persistence of inflation,” said Sanjay Raja, an economist at Deutsche Bank AG (NYSE:DB), who expects two hikes this year and another two in 2023. The risk is, he said, that “more will be needed and perhaps at a faster pace.”
My view - UK Gilt yields are trending higher. A sequence of higher major reaction lows has been evident since mid-2020 and the rate broke out to new highs this month. The bond market has judged this inflationary spike is at least as powerful as the pre-GFC commodity-led move. It’s forcing the BoE to step in and raise rates.
Big Ideas 2022
This aspirational report from ARK Invest highlights the arguments they have been making for the last couple of years about the promise of the innovation sector.
When has investing not been about the future? Change appears to happen slowly and then all at once. Over time, innovation should displace industry incumbents, increase efficiencies, and gain majority market share. With the right understanding of disruptive innovation and a long-term time horizon, we believe investors will capture exponential growth opportunities, which deserve a strategic allocation in their portfolios. For this reason, ARK focuses on opportunities likely to scale as technologies converge, transforming entire industries.
To enlighten investors on the impact of breakthrough technologies we began publishing Big Ideas in 2017. This annual research report seeks to highlight our most provocative research conclusions for the coming year. We hope you enjoy our Big Ideas for 2022.
My view - I’m not going to spend the time required to poke through the holes and validity of the arguments laid out in this report. It would take too much time and I’m not sure if it would add any value.
From an investment perspective innovation and momentum are analogous. Investors are willing to give the benefit of the doubt to incredibly optimistic visions of the future, provided the discount rate is close to zero. When rates rise the duration of optimism shortens and potential for profits comes back into focus.
Brazil Analysts See Inflation Further Above Central Bank Target
This article from Bloomberg may be of interest to subscribers. Here is a section:
Brazil analysts raised their 2022 inflation expectations further above target for the third week in a row as the central bank prepares to lift its interest rate into double digits at Wednesday’s policy meeting.
Inflation will hit 5.38% in December, above the prior estimate of 5.15%, according to a weekly central bank survey published on Monday. Analysts also lifted their 2023 year-end consumer price forecast to 3.50% from 3.40%.
Policy makers led by Roberto Campos Neto are expected to deliver their third consecutive 150-basis point rate hike this week, lifting the benchmark Selic to 10.75%. Inflation slowed less than expected in mid-January, as factors including global supply-chain disruptions pressured prices of transportation and
durable goods. Analysts see borrowing costs at 11.75% in December.
The central bank risks missing this year’s inflation target of 3.5%, which has a tolerance of plus or minus 1.5 percentage points.
My view - Brazil has some of the highest short-term interest rates in the world and they are about to get even higher. Emerging markets do not have the luxury of time to wait and see what happens. They have much more recent history of inflationary problems and have tended to act much quicker to curtail growth opportunities to bring inflation under control. That’s exactly what Brazil is doing with its aggressive hikes.
The Chart Seminar 2022
With global vaccination rates rising, the prospect of anti-COVID pills on the horizon and the promise of travel restrictions being dropped, it is time to start thinking about venues for The Chart Seminar in 2022.
Please drop sarah@fullertreacymoney.com a line if you would be interested in attending an event next year, as well as your preferred location.
At present I am looking at a late May date for a London seminar and I am open to other times and locations subject to demand.
Eoin's personal portfolio: one short stopped out and profit taken January 25th 2022
One of the questions subscribers as most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.
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