Your free daily email from Fuller Treacy Money
Comments of the Day
31 July 2020
Video commentary for July 30th 2020
Eoin Treacy's view
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics covered include: Fed stimulus capacity, Dollar extends downtrend, oil and copper rebound from intraday lows, precious metals ease, bond rally, equities pause.
Big Numbers Along Make No Proper Monetary Policy
This report from DWS may be of interest to subscribers. Here is a section:
In some ways, however, that was the easy bit. The U.S. economy now enters a phase that cautiously could be described as the beginning of a recovery. However, remember that the virus is still out there. This leads to the question of how QE can continue to provide support in the months ahead? In terms of mechanics, the Fed describes the main purpose of LSAP as putting "[…] downward pressure on longer-term interest rates […]" in order to stimulate economic activity by generating attractive financial conditions.5 The key word behind those mechanics would be financial conditions. Such metrics generally try to describe the "[…] financial conditions in money markets, debt and equity markets […]" as the Federal Reserve of Chicago puts it.6 In other words, measures of financial conditions gauge the effectiveness of monetary policy.
Deriving a metric that summarizes the stance of monetary policy once the policy rate hits the Zero Lower Bound (ZLB) is not a trivial task, however. The monetary stimulus, as a combination of rates at the ZLB and asset purchases, is not directly observable. Our preferred methodology to overcome this problem would be the so called shadow short rate (SSR) as provided through the Reserve Bank of New Zealand.7 This concept mathematically derives a theoretical policy rate which is based on the evolution of the whole yield curve, therefore accounting for the impact of QE once the true policy rate is at the ZLB (see Chart 2).
Eoin Treacy's view
Using the inflation of financial assets as a way of measuring the success of monetary accommodation is a recipe for bubble inflation. Nevertheless, it is the most expedient way to measure the impact of a central bank’s actions in fostering growth.
Confessions of a California Covid Nurse
This article by Michael Lewis for Bloomberg may be of interest to subscribers. Here is a section:
Unfortunately, the vast majority of the tests were done at the big new Optum site, or inside local hospitals, and processed by Quest Diagnostics and LabCorp. Five months into the pandemic, the two giant private testing companies were taking more than a week to send back results. “If I look at Optum I always ask, ‘What am I going to do with this, because the result is eight to 10 days old?’” said Erica. “Your ability to contain is over.” By the time she got a hold of people to inform them that they had Covid-19, they no longer had Covid-19. There was no point in isolating them.
Eoin Treacy's view
I think the rest of the world must be bemused at the resistance many Americans have to cooperating with public health officials, wearing masks and social distancing. As far as I can see there are a couple of reasons that simply are not getting discussed.
When I was tested in early May it took 11 days to get the results. That’s frankly ridiculous and timelines have not improved. I was feeling flu symptoms for about 24 hours and I quarantined myself away from my family for two days but it was a 24-hour bug so maintaining distance when you feel fine is difficult. In the end my results were negative. However, if I was positive, I would probably have passed it one to multiple people before I got my results. That pretty much means that testing is futile and everyone who has been tested knows it.
Conoco Plunge Shows U.S. Oil Struggling to Exit Crisis Mode
This article by Kevin Crowley for Bloomberg may be of interest to subscribers. Here is a section:
On the bright side, Chief Executive Officer Ryan Lance said he’s encouraged by low premiums for shale acquisitions, citing Chevron’s recent agreement to buy Noble Energy.
When asked if Conoco also looked into buying Noble, Lance said “we did look,” but he was worried that Noble’s Israel assets might have been the source of political tension, since Conoco operates in other areas of the Middle East.
“The gem is certainly the Middle Eastern gas position,” he said. “With some of the other things we’re doing in the Middle East, that creates maybe a little bit of an issue and problem for us politically.”
Conoco’s earnings miss followed reports from three shale-focused explorers on Wednesday that signaled a grim rest of 2020 for the broader U.S. oil industry. QEP Resources Inc. cut its production outlook, WPX Energy Inc. further reduced its capital spending budget, while Concho Resources Inc. stuck with plans to keep crude volumes flat from 2019 levels, ending years of growth.
Eoin Treacy's view
Bankruptcies in the oil patch are likely to continue to trend higher because so many projects have break-evens in the $60 area. That is creating buying opportunities for the majors and the chance to rationalise the onshore domestic US production landscape. That will be necessary in order to survive because global demand will take time to recover from the virus hiatus.
Eoin's personal portfolio: stock market long closed 22/7
Eoin Treacy's view
One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change. I'll change the title to the date of publication of new details so you will know when the information was provided.
This is your daily comment from www.fullertreacymoney.com.
Subscribe to Fuller Treacy Money Limited for exclusive content and audio: Click here for details.
The information provided on this website (www.fullertreacymoney.com) is for the purposes of information only. This website and its content is not and should not be considered or deemed to be an offer of or invitation to engage in any investment activity. Nothing Fuller Treacy Money does and nothing on this website is intended to operate or be construed as the giving of advice or the making of a recommendation by Fuller Treacy Money to any investor or prospective investor. Fuller Treacy Money and any other group or associated company of it is not authorised or regulated by the Financial Conduct Authority in the UK or any other regulatory body in any other jurisdiction. By means of your login to our service you are deemed to thereby accept our current Terms of Business including this notice, Except for permission to download a single copy for personal use, the research published by Fuller Treacy Money may not be reproduced, distributed or published in whole or in part by any recipient for any purpose, without the prior express consent of Fuller Treacy Money. Information featured on the website is based upon information and data provided by Fuller Treacy Money and remains the intellectual property of Fuller Treacy Money. Some of the information may also be provided by third parties and whilst Fuller Treacy Money will seek to ensure that information featured the website is updated on a regular basis, Fuller Treacy Money does not accept any responsibility for, and disclaims any and all liability for, any such information (including the accuracy of such information) or views or opinions expressed on the website. Any person considering an investment opportunity as a result of data presented on the website should give full regard to all the content of the website, and should perform their own due diligence and obtain advice from suitably qualified professional advisers before investing. Prospective investors are also encouraged and recommended to take their own independent legal and taxation advice together with any other advice that they may consider necessary to consider the benefits and risks attached to any investment opportunity. No representation or warranty, expressed or implied, is or will be made or given by Fuller Treacy Money (including its executives, employees, agents, contractors and advisors) in relation to the accuracy or completeness of the contents of the website, save that any such liability is not excluded in respect of fraudulent misrepresentation.