Friday, 25th of May 2018
The “Event of the week” is clearly Trump’s decision to forsake a Nobel- President Trump’s summit meeting with North Korean leader Kim Jong-un is off, for now. In any business deal – and this is one way to look at the once-scheduled meeting between the two heads of state – there is always jockeying to get the best deal. So, was this just two CEO’s trading mutual insults and insinuations to gain the upper hand? And could it be put back together, as the president hints in his letter to Kim? It might happen, but any summit meeting will still have to confront many difficult issues – and it is more likely that Kim has deliberately pulled the plug on the meeting to protect his equities and to set the stage for a later, possibly more successful meeting. In the first place the two sides were far apart in their expectations. The U.S. expected an immediate denuclearization, including Pyongyang giving up nuclear tipped ICBMs in return for U.S. promises, while Kim expected immediate lifting of economic sanctions in return for his promises to eventually “denuclearize,” with emphasis on the eventually. These disparate expectations were unsatisfactory for both sides, because there is no basis for trust by either party. Kim has seen what happened to Libyan dictator Muammar Gadhafi after he gave up his nuclear program and more recently, as in the Iran nuclear deal, that the U.S. is capable of walking away from a solemn agreement if it chooses to do so. On the other side, for years the North Korean regime has made promises and agreements, most of which it violated in secret or openly. No basis for trust. Both sides need to back away and recalibrate what they hope to achieve in the long term, and then put in place, through lower level working groups, a possible road map for getting there. Such a road map would be couched in terms of discrete steps, and verifiable basis. It would include military, economic, diplomatic and humanitarian steps, with each side moving cautiously and gauging the response of the other during implementation.
In other news, Bitcoin slumped Below $7,500. The drop from the recent peak tops 20%. Bitcoin fell to a six-week low, as selloff that began in early May. Wednesday’s decline came after OKEx, the most active fee-charging exchange over the past day, suspended withdrawals and fiat trading to fix an error that was leading to inaccurate account balances, according to a statement on its website. The declines on Wednesday also coincided with a selloff in financial markets, with stocks and commodities falling on fading optimism over the U.S.’s talks with North Korea and China. Ethereum was also down 5% on Wednesday, while Bitcoin Cash fell 9%. Oh, and this week Robert Shiller the Nobel laureate reiterated his warning about cryptocurrencies… worthless he says…
Also, this week a real currency has melted away, without being a Crypto anything- The Turkish lira hit a record low, down 20% against the dollar this year. Now at 4.75 and not looking very appetizing…”We are bearish on the lira and always have been given its very weak external balances and with macroeconomic policy moving in the wrong direction as well,” said Kiran Kowshik, emerging markets forex strategist at UniCredit. A self-described “enemy of interest rates”, Erdogan wants borrowing costs lowered to spur credit growth and construction, and he said last week he would seek greater control over monetary policy after elections set for June 24.
Federal Reserve officials would be content to let inflation briefly run above their 2% target as the economy continues to recover, according to minutes from the central bank’s most recent meeting. Following the May 1-2 session, the policymaking Federal Open Market Committee said it wasn’t raising rates yet but added the word “symmetric” to describe its inflation goal. Market participants since have puzzled over what the change in language might imply. Well, these words should have pulled the handbrake on the Dollar’s recovery, but didn’t as we seethe “DXY”, the trade weighted Dollar index at 93.90 climbing up the chart to its highest level this year. Though Fed officials indicated in March that a total of three rate hikes this year were likely, traders in the fed funds futures market in recent days briefly put chances of a fourth hike above 50%. That probability has since declined to about 43%. The minutes indicate that central bank officials remain determined to keep increasing rates, but with the gradual approach that it has repeatedly pledged to take. US 10-year yield dipped below 3% after those Fed minutes showed willingness to let inflation tick up. The benchmark US ten-year note is trading at a gnat’s whisker under 3% yield, 2.977% to be precise…
The other corner of the market is oil- Oil prices have climbed in recent weeks, but whether that rise will continue for longer could be in doubt. “On a 12-month basis, which is the horizon we take, we think we’re more likely to be in sort of a $55 to $75 range, which is a little bit lower than where we are today,” Manpreet Gill, head of fixed income, currencies and commodities investment strategy at Standard Chartered Private Bank, told CNBC. “The reason for that is simply, when we look out beyond the next few months and really take that one-year view, we’re looking at the basic demand-supply fundamental. That’s what causes our bullish view all the way coming in over the past year or two. That’s what’s causing us to say, how much can this go if we start really looking beyond the next three months?” Gill said. Prices have risen recently amid concerns over the impact of potential U.S. sanctions on Venezuela’s oil exports following a disputed election which saw Venezuelan President Nicolas Maduro re-elected. Also, an executive order that prohibited U.S. citizens from participating in the sale of Venezuelan receivables linked to oil was signed by U.S. President Donald Trump on Monday, Reuters reported.
All this said and done, we remain optimistic on the global economy, still hold to our views of Amazon holding down inflation and that the Fed in its wisdom will ignore this and raise more, possibly in June, reigniting the US$ rally. Bonds seem comfortable where they are but we have a growing soft-spot for oil and energy. We would favor a further creeping up in prices. But this said, “We are here and it is now. Further than that, all human knowledge is moonshine.” H. L. Mencken
Market Weekly Highlights
Currencies & Commodities
Fixed Income
Equities
DISCLAIMER
Information included in this newsletter is intended for those investors who meet the Financial Conduct Authority definition of a Professional Client or an Eligible Counterparty or for those investors who meet the CISA/CISO definition of a Qualified Investor. The content of this newsletter has been approved and issued by Bedrock S.A., Bedrock Monaco SAM, and Bedrock Asset Management (UK) Ltd. (jointly, hereafter, referred to as “Bedrock”) for information purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this newsletter or its accuracy or completeness. Any opinions contained in this newsletter may be changed after issue at any time without notice. No information in this post should be construed as providing financial, investment or other professional advice. The information contained herein is for the sole use of its intended recipient and may not be copied, distributed or published without Bedrock’s express consent. No representation or warranty of any kind, implied, expressed or statutory, is given in conjunction with the information and data. Bedrock expressly disclaims liability for errors or omissions in the information and data contained in this newsletter. The value of all investments and the income derived therefrom can fluctuate due to market movements. Past performance is no guide to, or guarantee of, future performance. Bedrock accepts no liability for any loss or damage arising out of the use or misuse of or reliance on the information provided in this newsletter including, without limitation, any loss of profits or any other damage, direct or consequential. You agree to indemnify and hold harmless Bedrock and its affiliates, and the directors and employees of Bedrock and its affiliates from and against any and all liabilities, claims, damages, losses or expenses, including legal fees and expenses arising out of your access to or use of the information in this newsletter, save to the extent that such losses may not be excluded pursuant to applicable law or regulation. This newsletter and the information contained herein are confidential. The copyright, trademarks and all similar rights of this newsletter and its contents are owned by Bedrock.
In March's news roundup, we look at some of the big deals and trends in the London office market, which has seen a very active month driven by the return of private equity (PE) buyers seeking to take advantage of discounted pricing. We highlight some of the biggest deals and what these mean for the capital.
As families expand, diverse perspectives, voices, and expectations emerge. Each generation brings unique dynamics and values, shaping the family business's future. We offer three key considerations for grooming future leaders within the family business context.
In this market update, we discuss the strength of the equity rally this year, the end of ultra-easy monetary exceptionalism in Japan, and the investment case for gold.