Archive for the ‘Investment Timing’ Category

Is Discrimination Legal?

 

Here is something a little different this week. It is still investment related and I venture to suggest that it may be something that will surprise and even shock you. Particularly if you have investments within an offshore fund which makes investments into the UK or perhaps work for an offshore fund!

Long story short, I had the mis-fortune, along with many others of investing into a UK regulated trading platform that went bust. Despite all of the “comforting reassurance” that surrounded the Financial Services Authority (FCA) such as “segregated accounts under the client cash rules” and access to the Financial Services Compensation Scheme (FSCS) should the regulated entity go into “default” the actuality turned out to be nothing more than “comforting rubbish:”

 

  • The FSA were notable in their absence when the liquidator required guidance on which clients were “segregated,” and therefore protected under the client money rules and who were “non-segregated” and shown to the back of the queue of other creditors, such as the UK Inland Revenue. As such the liquidator sought guidance from a civil Judge, who after great cost and further anguish to the creditors, deemed that the majority of them were non-segregated despite being informed otherwise when they opened accounts with the UK regulated entity.

 

 

  • It gets worse in that after submitting a claim to the FSCS for redress once the trading platform company was placed in default under the UK regulatory rules, it took the FSCS a near six-months to produce a 1-page rejection letter stating that as the investment was made by a Bermuda domiciled mutual fund (actually the term is an OEIC,) which they label as an “overseas financial institution,” it is an ineligible claimant!

As it was a UK regulated entity that went into default, regardless of the reason, surely ALL classes of creditor should be treated fairly and equal under the same rules, otherwise it is akin to saying “if you are below 6 feet in height you are covered, anyone over 6 ft hard luck.” Discriminatory!

Furthermore, if you are an investor into a UK regulated entity via a non-financial services company, even if in say Panama, you’re covered should the regulated entity go into default, whereas IF your investment is held within an offshore fund, whether it’s domiciled within the EU or a British Overseas Territory, you are not. Discriminatory and legal?

As many of you as loyal readers of my are either employed within the fund management industry, either UK or offshore, or are private investors with an interest in market analysis, I have a favour to ask of you:

If you would kindly complete the simple poll

As a thank-you I will provide you with the relevant ruling that is buried deep within the now FCA rulebook, thereby saving you the time and effort in finding it yourself. Please provide your email address.

Thank you in anticipation.

 

 

 

 

 

 

 

 

 

 

 

Investment Markets Overview – W/E 26th May 2017

Spain……officially know as the Kingdom of Spain, is the second largest country by size and the 4th largest economy within the European Union. Its 46m population reside within 17 “autonomous regions,” including two archipelagos, the Balearic Islands and the Canary Islands, with Madrid being its capital city. Spain suffered badly following the financial crisis with unemployment rising to 27% as the property bubble burst, with the subsequent downturn witnessing a polarising society as has been the case elsewhere. Catalonia, by far the richest region in Spain and therefore an increasing source of Government revenue to prop-up the rest of the country, pushed for an “independence referendum” in 2011, just as the stock-market, the best “barometer” of Spain’s “collective social mood, was approaching its nadir. The demand was rebuffed by the government and has subsequently “waned” as stocks recovered with Spain out-performing the Euro-Area economic growth rate of late, following the tighter fiscal policies implemented in 2012 and with unemployment easing to about 17% now. However, a glance at the nation’s main stock-index, the IBEX 35, which remains some 30% below its 2007 all-time-high, notes it to be stalling once more. Our analysis suggests that the mood is about to darken and with it the Catalonia independence demand will return to centre-stage.

Confusion reigned in respect of crude oil this week, as the price was buffeted by the conflicting desires of OPEC and America. A timely “knowledge share” was posted on Wednesday, Critically Crude” which hopefully provides some guidance for you. For the rest of this week’s major economic and market news, with interesting charts and some geopolitical insights, please continue, with a reminder for non-subscribers of the limited-time offer “at your discretion”:

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US economic data included further evidence of a slow down in manufacturing, as the May PMI eased to 52.5 versus April’s 52.8, whilst the services sector inched higher, from 53.1 to 54. Consumer sentiment fell to 97.1 from 97.7, according to the final University of Michigan survey for May, but there was better news in respect of GDP, where the second reading for Q117 saw an improvement to 1.2% from the initial 0.7% reported, buoyed by personal consumption. On the housing front, prices eased to 0.6% in March versus February’s 0.8%, according to the FHFA, whilst April new home sales contracted by -11.4% as the more important existing home sales fell by a more modest -2.3%, It’s of interest to compare the average price of existing homes against the falling level of stock for sale, where the lower line shows the decline of inventories on a rolling annualised basis:

The Dow rose by 1.3% whilst the SPX and the NASDAQ were higher by a respective 1.4% and 2.1%.

Euro-Zone economic data was scarce this week but did include the provisional May PMI numbers, where manufacturing came in at 57 against April’s 56.7 as services eased to 56.2 from 56.4.

UK housing loans fell in April according to the British Bankers Association, whilst the estate agent consolidator, Rightmove, reported a pick-up in prices in May, rising by 3% annualised versus the 2.2% it stated for April. The public sector net borrowing was above forecasts for April but our focus this week is on the second reading of the Q117 GDP figures, revised lower to 0.2% and 2% annualised. In the main this was due to private consumption, which halved to 0.3% Q on Q against the initial 0.7% reported. A comparison of the two variables shows a close correlation and it doesn’t auger well:

The FTSE 100 gained 1% with the French CAC inching higher by 0.2% as the German DAX eased by 0.3%.

Out East, Japan’s trade surplus fell in April as exports grew by 7.5% annualised following March’s 12%, whilst imports grew by 15.1%, albeit a slight fall from the prior 15.8%. April department store sales rose by 0.7% year-on-year after the -0.9% contraction of March, whilst the April PPI services rate grew by 0.7% following March’s 0.8%.  CPI inflation was reported at the expected 0.4% for April, double the 0.2% reported for March, which will have please policy-makers, although it’s of interest to note that Abe’s preferred CPI ex fresh food & energy gauge (as it used to rise by more than CPI) is now under-performing, coming in at 0% annualised and remains a far cry from the Bank of Japan target rate of 2% annualised:

Elsewhere, annualised CPI in Hong-Kong jumped to 2% in April versus March’s 0.5% rate, whilst for Singapore it was 1.7% versus 1.2% as the Island state also reported Q117 GDP at 2.7% annualised following the 2.5% of Q416.

The Nikkei rose by 0.5%, whilst the Hang Seng added 1.8%.

The $US index rose by 0.3% to 97.4, with other risers including the $KIWI and the Yen, higher by 0.5% and 0.45%, whilst fallers included the British Pound and the Euro, lower by a respective 1% and 0.2%. Sovereign bond yields were in the main lower as Japan’s JGB 10-year yield was unchanged at 0.03%, the UK 10 year yield fell by 8bps, at 1.01% whilst the German yield fell by 0.4bps, to 0.32%. Spain’s 10-year yield gave-up 4bps, at 1.51% with Italy’s lower by 4bps at 2.08%, as the Irish 10-year yield gave up 0.05bps to 0.75%. Portugal’s 10-year ended lower by 4bps at 3.11% whilst the Greek yield gained 31bps to 5.85%. US 5 and 10-year yields inched higher by a respective 0.2%, with the 5 closing at 1.79% and the ten at 2.25%.

Commodities were mixed as $Oil fell by 1.7% to $49.8 a barrel, whilst the CRB slipped by a similar 1.7% and Copper by 0.6%. Within the precious metals space $Gold gained 1.2%, at $1268, $Silver was ahead by 3.1%, at $17.3, whilst in the paper-market, the XAU eased by 0.6%:

Economic data due for release during the holiday-shortened trading week for the US and the UK includes confidence readings for the US, the UK plus the Euro-Zone and Japan. Housing data is scheduled for the US, the UK and for Japan, with the US and Japan also updating on vehicle sales. The UK and the Euro-Zone provide the latest money-supply numbers, with the former also updating on consumer credit and the E-Z PPI. The April unemployment rate for Japan, the E-Z and the US will be released, with the US as the highlight of the week as it includes the closely watched non-farm payrolls.

Sicily has been an autonomous region of Italy since 1946 and is the largest Mediterranean island, with a population of 5m. Aside of having Mount Etna, the tallest active volcano in Europe, it is famed as the birthplace of the Cosa Nostra, or Sicilian mafia, hence it was a suitable venue for this week’s G7 (gang of seven) heads of state meeting. It formed part of a busy week for “the Donald’s” first trip abroad as the US President and after securing huge US investments from Saudi Arabia, including weapons of course, then meeting with the Pope, he pitched-up in Europe to give his fellow NATO members’ a roasting over not paying their fair share, a fact highlighted during his election campaign. Of the 28 members it appears that only 5 contribute the 2% of GDP agreed, with the US leading the pack at 3.6%, followed by bankrupt Greece at 2.4% with the German locomotive contributing just 1.2%, which possibly explains why it is Europe’s locomotive! As for the G7 meeting itself, German Chancellor Merkel was the longest-serving head at the summit with 4 leaders including DT attending their first one, they “agreed to dis-agree” on the thorny issues of climate change and trade. The Italian host, Paolo Gentiloni, said that an ‘equilibrium point” was found in the shape of a commitment to “keep our markets open and to fight protectionism,” while acknowledging that “trade has not always worked to the benefit of everyone.” It should be an interesting week ahead to watch the share price of the German car manufacturers.

                                                    “I’m gonna make them an offer they can’t refuse

NB the IMA indices are £GBP adjusted

 

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Critically Crude

The cross-winds are swirling in respect of the Oil price, as confusion reigns.

In the words of a typical economist, “on the one hand,” OPEC appear likely to renew their recent production cuts, in particular from Saudi Arabia and Russia who are desperate for higher prices, whilst “on the other hand” is the new swing producer, the United States, who are equally keen to ramp up the shale production, if for nothing more than to alleviate the debt and job-losses seen within that sector.

So what’s an Investor or end-user to do?

At its simplest ignore the chit-chat, views (economist or otherwise) and even the fundamentals, as they are speculation at best and guest-work at worse.

We set out within our “Oil Price Collapse….Why the Surprise” just why we like charts, because they never lie, whereas fundamental analysis, although useful, is open to conjecture and extrapolation of the past into the future, with the overview going on to demonstrate how our charts gave ample warning before the Oil price slump.

So what of these cross-winds?

First up we show a chart of the long-term price of West Texas Light Crude, monthly data points since 1997:

Aside of it reminding just how severe was the 2008 price crash, note the black-dashed-line, as it’s very important. It’s effectively a support-line, which gave way last year and is now under threat once again.

This uncertainty was evident within our 5-year weekly data chart below, which provides colour- coded signals indicating Buy /higher Oil price (green), Neutral/uncertain (neutral) or Sell/lower Oil price (pink), which are supported by other technical observations  not shown here:

 

As can be seen, the dip below the aforementioned $30 black-dashed-line of early 2016, was flagged as a sell but quickly turned to neutral, which suggested a false-alarm. Also note, the most recent colour-coded signals have repeated this.

Adding to the mix is the $US Index, which of course is Oil’s currency, and in itself is throwing up shorter-term cross currents:

 

By inverting the Dollar index (turning it upside down) shows the negative-correlation between these two asset classes of the past few years, albeit that the relationship is breaking down of late.

Fortunately for investors or for those within industry sectors who need to make decisions based on currency moves and/or the price of Oil, we provide a very cost-effective service, which can be accessed via Here OR Here

Taking the guesswork out of your decision making may be critical to your business and to your financial health, so why not give these a try?

 

 

 

 

 

 

 

Investment Markets Overview — W/E 19th May 2017

“Bread and circuses” was how the government kept the Roman populace happy by distributing free food and staging huge spectacles, whereas today’s equivalent is the welfare state and to bomb someone as a means of distraction during problematic periods. Well, stock-markets took a hit this week, following the release of a memo by former FBI Director James Comey which alleges an obstruction of justice by President Trump, the man who sacked Comey a week earlier. The airwaves and financial media were full of speculation over possible “impeachment proceedings” against “the Donald,”

when surprise, surprise the US administration decided to bomb Syria. They could have saved themselves and perhaps more importantly the lives of innocents who always end up as “collateral damage” by browsing our mid-week socionomic comment, “Impeachment? Wrong time, wrong mood!” Interestingly, this week also observed the President’s first overseas visit since taking office, to none other than Saudi Arabia, the number one arms buyer from the US, the Brits and the French. The Washington and its tribune “swamp(s)” appear to be getting murkier, albeit that the attack on Syria may have appeased “elite” Republican Trump critics like John McCain who has yet to name a country that he doesn’t wish to bomb.

Adding to the uncertainty this week was Brazil, where the Ibovespa stock-index tumbled by 8.8% and its currency, the real, by 7.3% on Thursday alone, as political crisis returned to the country despite last year’s impeachment process to clear its swamp. To continue reading the main economic and market events of the week, supported by interesting charts, please read on and for a limited time period non-subscriber’s can access the full report via the “at your discretion” pay what you think it’s worth offer:

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

 Returning to the “bread” analogy to today’s welfare state, this week also saw the release of the UK political parties’ election manifestos ……

Charts:
1.  Indices Weekly
2. US GDP & CPI V US Ave Weekly Wage
3. UK Retail Sales V UK Ave Wages
4. Japan GDP V Japan Deflator
5. Commodities Weekly

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

                         “What goes up, invariably Falls at a quicker Pace” 

Click Here to view Details of the full version of this Newsletter which includes full text and detailed

 

Inpeachment? Wrong time, wrong social mood!

Impeachment…..Is defined as a charge of misconduct made against the holder of a public office and they do not get any higher in the United States of America than the office of The President.

The airwaves and financial talk-shops are abuzz today following the allegation that President “the Donald” Trump asked the former FBI Director James Comey to drop a criminal investigation into one of his former top aides and, if true, did this amount to an obstruction of justice? A memo penned by Comey comes a week after he was fired by Trump and relates to a meeting they had last December, as the FBI was examining the role of Michael Flynn, who subsequently resigned as the National Security Adviser in February. The memo, as cited by the New York Times, suggests that Trump told ComeyI hope you can let this go,” going on to say, Flynn was a “good guy.” The memo follows a recent Washington Post report that Donald Trump had breached the trust of one of its allies during a meeting in the Oval Office with Russian foreign minister Sergei Lavrov and Russia’s ambassador in the US, by revealing information regarding a possible Isis plot to target airliners using laptop computers.

The allegations within both the memo and report were denied by White House officials but either way it’s upset the markets and over-shadowed any upbeat expectations following recent Trump initiatives such as the tax reform plans.

As for the impeachment speculation we look to the charts, as charts never lie, plus they do a pretty good job on analysing the collective social mood, and to a student of Socionomics, mood governs events, so charts are a very useful tool. In fact we used charts of the Dow within the March 2016 “Trump Card” overview, which observed the following:

“The mid-1970s was also a turbulent time for American politics, as Republican President Richard Nixon resigned from office in 1974 whilst facing an almost certain impeachment over the “Watergate scandal.” It is also interesting to note that oil prices were rocketing, following the 1973 Arab oil embargo, whereas today they have collapsed, following a debt-fueled over-capacity binge. “Tricky Dickey” picked a bear market to orchestrate the break-in, whereas the philandering “I did not have sex with that women Clinton, Bill that is,” picked the near peak of the 1990s mega bull-market, in December 1998, to avoid impeachment and acquitted on a lack of votes, particularly from the Democrats:”

:

At its simplest, for Nixon the social mood was negative, hence the chances of impeachment were high, whilst for “Teflon Bill” stocks were high, mood was positive and frankly the herd was making to much money to worry about Clinton’s alleged philandering.

Fast forward to today and stocks are at all-time highs, akin to Clinton’s impeachment talk:

 

So there you have it, it’s the wrong time and the wrong collective social mood to think about impeachment, but that’s not to say that we are not in a period of market correction, in fact our colour-coded guides are suggesting just that.

Perhaps now, dear reader, is a good time to try the “At your discretion” option in respect of our Investment Markets Overview. You pay what you think its worth.

 

 

 

 

 

 

 

 

The £Pound in Your Pocket!

When Harold Wilson commenced his first stint as the British Labour Party Prime Minister in 1964, he inherited an unusually large external deficit on the balance of trade from the Conservative administration and despite fighting the markets for a couple of years, the inevitable devaluation of the £GBP came in 1967, when Wilson famously assured the public that the “pound in your pocket had not lost its value,” stating within his next sentence that “prices will rise!”

Fast forward to today and, aside of awaiting the monthly “Dog and Pony Show” called the Bank of England Monetary Policy Meeting, an interesting report from Lloyds Bank PLC hit the cyber-waves. Entitled “Value of the fiver declines by 96% in the past sixty years,” the report states that “£5 in 1957 would provide same spending power as £113 today.

So who’s to blame?

Politicians’ of course and in particular the intervening governments of the day, as ultimately they are responsible for economic policy, albeit as evident from Wilson’s remark above, most of them are clueless about the true workings of the economy and the markets in general, deluding themselves that ever increasing levels of debt and stifling regulation are the way to prosperity.

Of equal and perhaps more responsibility for the devaluation is the Bank of England, who for 20-years now have been “independent” of  political influence over monetary policy, including the setting of interest rates, inflation targets and financial stability, three areas over which the 4500+ team of “highly qualified” individuals employed at the bank have consistently failed in their objectives

Exhibit 1 above shows the UK base-rate, the rate that the MPC decide on and the one that no-one outside of the banking industry under certain conditions can borrow at, Yet everyone eagerly await to identify change.

The purple-line is the UK year-on-year inflation rate, aka CPI, where its obvious that the 2% annualised inflation rate has hardly ever been achieved, whilst the red blue and black lines show the “market- lending rate” for a term of 3-months, 2-years and 10-years, the latter being the anchor for UK mortgage rates if taken on a typical variable rate contract.

The main take-away from this chart, aside of the failures alluded to, is the fact that the MPC base-rate “follows” the market rate, both up and down. In other words the Bank of England has never made a pro-active decision in decades, they “re-act” to market rates, and market-rates, dear reader, are set by us, the human herd made up of borrowers and lenders who decide what an acceptable risk/return number is.

Exhibit 2 below zooms in on the base-rate versus the 2 and 10-year market rate where you will note that the market-rates are changing trend. In fact they have risen by a respective 70% and 80% since August 2016

That tells you that the return on lending was too low versus the risk of lending  and one look at the massive increase of UK government, corporate and personal debt over the past decade in particular, should surprise nobody.

With the UK in the middle of an election campaign it’s likely to be no policy change from the Bank of England today, which actually poses a question on its so called independence when the market-rate is calling for change. Either way, the UK interest-cycle has changed and the pace of the change will likely accelerate and have implications for inflation, house and stock-market values and of course that “£pound in your pocket.”

I

 

 

 

 

 

 

 

Investment Markets Overview — W/E 5th May 2017

“793”…… Global merger and acquisition (M&A) deals have been completed this year as of the end of April 2017, according to “dialogic” who collates the data involving publicly traded corporations. This is 20% lower than the comparable period of 2016 and is the lowest number since 1998, which given that stock and bond markets are not far off their all-time highs is a surprise. The hesitancy is muted to be due to Brexit and the uncertainty over US tax-reform, which may have some merit, although a “look under the bonnet” reveals that the “value of deals,” is up by 13.9% YTD, at $US480BN, much due to acquirers’ having to pay a higher multiple of about 6% more than at this time last year. Talking of deals, the “art” of which played so favourably for “the Donald,” when it was candidate Trump, was left wanting during the negotiations and settlement with the US house and Senate over the $US1.1 TR spending bill. Whilst it keeps government open until the end of September,  the Democrats achieved most of their priorities whilst rejecting most of the President’s, including money to begin building a wall along the U.S.-Mexican border and $18 billion in cuts to domestic agencies. Time will tell whether the “Washington swamp,” really is too set in its corrupt ways or if the deal-maker is biding his time within a wider game-plan. Either way, whilst it will unsettle the markets it will be the markets that provide the catalyst to “clear the swamp.”

European stocks led the parade this week, belying any French election concerns, whilst the major US indices were dragged higher by an ever narrower handful of stocks. As shown below, it’s been another brutal week for commodities and in particularly for the “economy bellwethers’,” Copper & Silver.” For more on the week’s main data, supported by interesting charts and comment, please read on and for those who missed our last minute French election socionomic comment, it’s HERE:

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

 So, the Federal Reserve officials left its “target” interest rate on hold this week, within the bounds of 0.75% – 1%, whilst providing little direction  ……

Charts:
1.  Indices Weekly
2. US SPX Index V US Citi Surprise Index
3. UK London Rental Price V EU Rentals
4. OZ Base Rate V OZ 10-year yield
5. Commodities Weekly

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

                         “Interest rates Fall and then they Rise” 

Click Here to view Details of the full version of this Newsletter which includes full text and detailed