Comment of the Day
Video commentary for August 23rd 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Brazilian inflation trending lower following wide positive real rates, Dollar eases and gold steadies in response, oil stable at $100, natural gas eases, stock markets extend retreats and bond yields extend advances.
Australia's Pensions Suffer Worst Year Since Financial Crisis
This article from Bloomberg may be of interest to subscribers. Here is a section:
Australia’s pensions posted their worst annual performance since the global financial crisis as markets were roiled by central banks’ aggressive rate hikes and the war in Ukraine.
Guardians of the world’s fifth largest pension pot shed A$92.8 billion ($64 billion) on investments in the fiscal year through June 30, the biggest loss for the period since 2009, according to Australian Prudential Regulation Authority data released Tuesday. That saw the pool of savings fall to A$3.3 trillion, wiping out a year’s growth.
The performance was largely due to a A$140 billion loss in the June quarter as equity markets were roiled by fears of a slowing global economy. The funds had boosted their stocks allocations toward the end of last year, before global equity markets slumped following Russia’s war in Ukraine and central banks’ efforts to stamp out rampant inflation.
Australia’s pensions are bracing for more volatility in anticipation that the global economy could be heading into recession. They’ve lifted their holdings of fixed income and cash, while their stock allocations are now at the lowest level since December 2020.
My view - Australia’s pension system is the envy of anyone who cares to look at such things. However, that does not insulate it from the universal challenge of bonds and equities falling in tandem. That’s something every pension fund has had to contend with this year. The biggest question by far is whether this is an anomaly or something we should be prepared to deal with for much of the next decade?
Saudi Arabia Makes a Push for $100 Oil
This article for Bloomberg may be of interest to subscribers. Here is a section:
For long, Saudi Arabia pretended it didn’t target oil prices. The job of OPEC+ was all about matching supply with demand. Focus on fundamentals, and leave prices to the market, it used to say.
On Monday, in an unusual intervention, Saudi Energy Minister Prince Abdulaziz bin Salman indicated he didn’t like the yo-yo pricing he saw in the oil market. The problem, he said in a written interview with Bloomberg News, is that the physical and financial markets have “become increasingly more disconnected.”
Left unsaid, but clearly implied, is the real concern: oil prices were getting too low – and in the view of Riyadh, for no good reason.
With Brent falling toward a six-month low of $90 a barrel last week, Prince Abdulaziz said “cutting production at any time” was an option for OPEC+. The Saudi royal is a veteran policymaker, who knows very well the impact of those words. If there was any doubt, when the state-run Saudi Press Agency published its own version of the interview, it elevated the “cutting production” remark into the headline.
My view - The release from the USA’s strategic reserve began in March and is due to end in early October; less than six weeks from now. On Monday, the reserve hit its lowest level since 1985. That suggests ability of OPEC+ to influence the market will improve soon and the USA will need to buy a lot of oil when prices are cheaper to rebuild the reserve.
Brazil Central Bank Sees Slower 2022 Inflation, More Price Falls
This article from Bloomberg may be of interest to subscribers. Here is a section:
Brazil central bank President Roberto Campos Neto expects consumer prices to fall for three consecutive months through September and close the year with a smaller increase than most economists forecast.
“Inflation this year will be around 6.5%, perhaps a bit lower,” he said Tuesday at an event organized by Moneda Asset Management in Santiago de Chile.
Brazil posted in July its biggest monthly drop in consumer prices in over four decades, as President Jair Bolsonaro pushed for tax cuts to lower fuel prices that were eroding his popularity ahead of October’s election. Economists surveyed by the central bank estimate inflation at 6.82% this year and 5.33% in 2023.
While prices regulated by the government are providing some inflation relief, services costs are still going higher, according to Campos Neto.
“There’s still a very hard job to do,” he added, to bring inflation near the bank’s targets of 3.5% and 3.25% for this year and next, respectively.
My view - If Brazil’s inflation rate drops to 6.5% by the end of the year, it will have the strongest real rates in the world. That leaves ample scope for interest rate cuts which would boost the outlook for the financial sector and support demand growth in the economy.
Eoin's personal portfolio: stock market index short opened August 11th 2022
One of the questions subscribers ask 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.
The Chart Seminar London November 21st and 22nd 2022
We are living through fast moving markets so I am gauging interest for The Chart Seminar on November 21st and 22nd this year in London.
In the meantime, if you have any questions, would like to attend, or have a suggestion for another venue please feel to reach out to Sarah at sarah@fullertreacymoney.com.
The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non-EU residents are not liable for VAT). Annual subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.