Comment of the Day
Video commentary for October 3rd 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Bond yields compress, gold and silver rebound, oil steadies on OPEC supply cuts, stocks steady, Tesla weak,
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Some of Truss's Top Team Say Her UK Project May Already Be Over
This article from Bloomberg may be of interest to subscribers. Here is a section:
Speaking on the sidelines of the Tories’ annual conference in Birmingham, the ministers predicted she will survive to fight the next election, due in about two years, because there isn’t enough time to replace her. The result, they said, is likely to be more rebellions from Tory MPs pushing around a lame duck premier, just like the one that forced her into a humiliating U-turn on Monday morning.
The stark view suggests the “new economic deal for Britain” launched by Truss and her Chancellor of the Exchequer Kwasi Kwarteng may be dead in the water before it has even got going. The policy calls for a major program of deregulation in areas such as housebuilding and childcare alongside tax cuts.
One former Cabinet minister predicted Truss will be gone within a year to allow the party time to regenerate before the general election, which must be held by January 2025 at the latest. They said local votes in May, 2023, would provide a clear indication of how badly Truss is doing and predicted that her successor would have to come from outside the current Cabinet.
Eoin Treacy's view - Reversing the 5% cut to the top rate of tax was essential to avoid significant public protest. The biggest challenge for the Truss administration is their inability to fathom that the era of profligate spending with no concern for funding ended when inflation surged and forced rates higher. The reality is high rates force a reappraisal of value and in turn a questioning of values is inevitable.
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Brazilian Assets Soar as Presidential Race Goes to Runoff
This article from Bloomberg may be of interest to subscribers. Here is a section:
Brazilian assets jumped after President Jair Bolsonaro secured his way to a runoff election against Luiz Inacio Lula da Silva as investors cheered on the incumbent’s better-than-expected showing and bet his leftist challenger will be forced to moderate his stances in the second stretch of the race.
Lula, as he is universally known, took 48% to Bolsonaro’s 43%, Brazil’s electoral court said, with almost all votes counted.
That tally left Lula without the simple majority needed for an outright victory, as some opinion polls had suggested, and set the two up for a bruising face off in what has already been a divisive election campaign.
Eoin Treacy's view - The Brazilian iBovespa is the only major global index in positive territory this year; in both nominal and currency adjusted terms. 13.75% short-term interest rates, up from 2% in March 2021 have successfully got inflationary pressures under control. The central bank expects to be cutting rates by the end of the year or early in 2023.
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JPMorgan Is Worried About Who's Going to Buy All the Bonds
This article from Bloomberg may be of interest to subscribers. Here is a section:
Even if new buyers step into purchase these bonds, they’re likely to demand a higher yield for doing so — potentially adding to government deficits and mortgage rates at a time when they’re already soaring.
“All this points to a somewhat higher resting level for the mortgage/Treasury basis—and potentially for other related assets like IG corporates, which finally caught up with some of the mortgage widening over the past few days,” the analysts conclude.
Eoin Treacy's view - 2-year yields at over 4% are sufficient incentive to drag cash into the sovereign markets. When the alternative is to lose double digits in the stock market and see cash eroded by inflation, the allure of a guaranteed 4% is reason enough to invest.
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China Offers Rare Tax Rebate to Spur Home Purchase in Crisis
This article from Bloomberg may be of interest to subscribers. Here is a section:
China’s central government offered a rare tax incentive for residential purchases, ramping up support for the country’s embattled real estate sector.
Residents who buy new homes within one year after selling old homes will enjoy refunds for personal-income tax on the sale, according to a statement on the finance ministry website. The tax refunds will take effect from October till the end of 2023.
The novel tax policy comes after a yearlong slump in the housing market. To spark a turnaround, the central government is allowing nearly two dozen cities to lower mortgage rates for purchases of primary residences, while the central bank vowed to speed up delayed homes with more special loans.
“The measure may help restore some confidence,” said Xu Xiaole, a property analyst at Beike Research Institute. “It’s another demand-side policy targeting homebuyers after mortgage rate cuts.”
The tax break suggests the central government is ramping up support for people seeking to upgrade their homes. Previously, most incentives focused on first-time buyers, echoing President Xi Jinping’s mantra that “houses are for living in, not for speculation.”
Unless the person has held on to the home for at least five years, most big cities charge personal tax income on property sales when there’s a gain in value, usually 1% of the full amount or 20% of the gain.
Under the new policy, people who buy more expensive apartments will enjoy a full refund in this area. The tax break only applies to home upgrades in the same city.
Eoin Treacy's view - The range of measures China is putting in place to support the housing market continue to increase. That’s good news for the domestic property sector and commodity demand in general. By limiting the tax cut to those also selling a property, the government is attempting to avoid stimulating property speculation but more money for the sector is certainly a positive.
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Speaking Engagements - World Money Show October 2022
I have agreed to speak at The World Money Show in Orlando on October 30th.
The Chart Seminar London November 21st and 22nd 2022
We are living through fast moving markets so the next venue for The Chart Seminar will be 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.
Eoin's personal portfolio: precious metals loss taken September 23rd 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.
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