Comment of the Day
Video commentary for September 5th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Liz Truss is the new UK prime minister, now the hard work starts, Pound and Gilts stabilise, natural gas initially surges but eases on recession fears, carbon credits rolling over, copper's circular argument, China slowing down, Asia Dollar Index hits new low,
New UK Prime Minister
This note from Bloomberg may be of interest:
Thanks for joining us as we took you through the results of the Conservative leadership race. Liz Truss will take office Tuesday and give a speech outside her new home -- No. 10 Downing Street. In the meantime, these are the key takeaways so far:
Liz Truss won the race to be the UK’s next prime minister, but achieved a smaller-than-expected margin of victory over Rishi Sunak, with 57.3% of Tory members’ votes.
She vowed to cut taxes, grow the economy, and address the crises in energy and the National Health Service.
Truss will visit Queen Elizabeth II in her Scottish castle to be formally appointed on Tuesday, after which she will make a speech to the nation and appoint members of her cabinet.
She inherits a forbidding in-tray: surging inflation, predictions of a recession and a record squeeze on living standards spurred by soaring energy prices.
Truss has promised to announce how she would help Britons through the cost-of-living crisis in her first week -- reports suggest she could freeze energy bills and offer targeted financial help to low-income households and pensioners.
My view - The Pound and Gilts have sold off aggressively over the last month as traders priced in the rising potential Liz Truss would succeed Boris Johnson. The most urgent issue is the massive impending jump in electricity costs. No prime minister can survive through that kind of living standard decline, so price caps are inevitable.
Revving Exports to US Keeps India in Race to Be Next China
This article from Bloomberg may be of interest to subscribers. Here is a section:
“We have started to see green-shoots of this with India’s exports in FY22 reaching around $420 billion, far higher than earlier years,” Jain said. “This was driven by a combination of external as well as internal factors.”
India also managed to surpass El Salvador to become one of the top 5 suppliers of cotton t-shirts to the US this year.
The apparels sector, where India competes with nations like Bangladesh, saw an up-tick owing to multiple factors including a ban of all cotton products from China’s Xinjiang region over alleged ill-treatment of its ethnic Uighur Muslim minority, said Gautam Nair, managing director at Matrix Clothing Pvt., a medium-sized garment export firm. “The surge also further accentuated due to huge boom in buyers’ purchase and supply chain diversification.”
Medium- and large-export firms saw a jump of 30%-40% in their order books last fiscal year and the upswing would be more visible in the current financial year ending March 2023, Nair said. Matrix Clothing, which exports apparels to global brands including Superdry, Ralph Lauren, Timberland, and Napapijri, has seen orders climb by 45% last fiscal year compared to the pre-covid year.
Still, there are hurdles to the growth of low-value added manufacturing in the form of non-labor costs, warn analysts.
“The bigger problems are the legacy issues of contract enforcements, tax transparency etc.,” said Priyanka Kishore, an economist at Oxford Economics. “These do pose a challenge to India’s manufacturing ambitions and need to be addressed for the country to fully tap its potential as a manufacturing hub.”
My view - India doesn’t do lockdowns. It can’t afford to and doesn’t have to because the population is so young. With several hundred million people under the age of 25, job creation is a more urgent concern. Ensuring manufacturing is allowed to prosper and grow without being stifled by overbearing bureaucracy will need to become the national priority.
China's Currency Struggles Spell Trouble Across Emerging Markets
This article from Bloomberg may be of interest. Here is a section:
“With the yuan set to weaken further, other emerging markets will face downward pressure on their currencies,” said Per Hammarlund, the chief emerging markets strategist at Skandinaviska Enskilda Banken AB. “The impact will be felt the most by nations which compete directly with China on exports.”
The yuan declined for a sixth consecutive month in August, capping the longest losing streak since the height of the US-led trade war in October 2018. It will fall even more and cross the psychological mark of 7 per dollar this year, banks including Societe Generale SA, Nomura Holdings Inc. and Bank of America Corp (NYSE:BAC). say.
It’s a stunning reversal for a currency that stood out for its resilience at the outbreak of Russia’s war in Ukraine. In the days following the Feb. 24 invasion, the yuan was the only emerging-market exchange rate to avoid a decline, trading at an almost four-year high against MSCI Inc.’s benchmark index. Global demand for it deepened -- from countries like Russia and Saudi Arabia looking to reduce their reliance on the dollar to US bond investors seeking new havens.
My view - China is the destination for most industrial commodity exports, so a weaker currency boosts domestic inflation. At the same time many countries in China’s hinterland compete with it for exports. A cheaper Renminbi forces them to also depress their currencies.
Speaking Engagements - World Money Show October 2022
I have agreed to speak at The World Money Show in Orlando on October 30th.
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.