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Daily Intelligence Briefing – October 17, 2016

Featured Topic: Energy

  • Power – Heating Bills Will Get More Expensive This Winter
  • Energy Storage – After a banner year, energy storage on track to best 2015’s record-setting growth
  • Nuclear – Japanese anti-nuclear candidate wins election at site of world’s biggest atomic power station
  • Carbon – Companies Readying for New Limits to Emissions From Air Conditioners, Refrigerators
  • Renewables – 10 charts that explain America’s divide on energy and climate policy
  • Renewables – Two Charts That Show How Renewable Energy Has Blown Away Expectations

Other Highlights:

  • Markets: Stocks – Clinton or Trump? There’s An ETF for That; Bonds – Aussie Long Bond May Gain 24% If $480 Billion Fund Is Right; Gold – ICE Will Start Gold Futures for Clearing London’s Daily Auction
  • Economics: China – One of China’s Poorest Provinces Puts Nation on Track to Beat 6.5% Growth
  • Politics: Defense – Japan may accelerate missile defense upgrades in wake of North Korean tests
  • Monetary Policy: CBs – Big Central Bank Assets Jump Fastest in 5 Years to $21 Trillion
  • Finance: Banks – Watchdog says about 15 Swiss banks in money laundering ‘red zone’; Banks – UK towns and villages running out of hard cash, says report
  • Real Estate: UK – Property rentals to outstrip sales for first time since 1930s; U.S. – Wells: Good News for Homeowners; U.S. – Bring on the millennials: How the housing market is gearing up for the next generation of homebuyers
  • Services: Media – Teens are watching YouTube more often than cable TV for the first time; Retail – Alibaba CEO: Pure-play e-commerce faces ‘tremendous challenges’
  • Technology: Smartphones – U.S. bans Samsung Galaxy Note 7 from Air Travel; Smartphones – Apple Seeking Newer Screens to Make or Break Japan Suppliers
  • Logistics & Transportation:  Logistics – Feds clear RI truck-only toll, setting precedent for similar taxes
  • Commodities: Oil – Oil majors experiment with technology to weather crisis; Wheat – Hedge Funds Temper Record Bearish Wheat Wager as Demand Climbs; Zinc – Japan’s Top Producer Says Zinc Could Surge to 5-Year High
  • Biotech: HealthCare – Number of uninsured Americans drops to new low Gallup; HealthCare – Growth forecast at 11% for global health insurance market; Pharma – AHA: Inpatient drug costs skyrocketing; Pharma – How the Opioid Epidemic Is Changing 2 Drugmakers’ Fortunes; Pharma – Insulin makers become casualties of pricing war; Pharma – Use of strongest antibiotics rises to record levels on European farms
  • Endnote: U.S. – Median income for millennials by state

About the DIBs: MRP focuses on identifying transformational change in the global economy and offering an investment thesis whenever an opportunity arises that has not yet been recognized by the market. The DIBs are MRP’s compilation of articles and data from multiple sources on subjects reflecting disruptive change that have potential investment implications for an industry or group of securities. We share these with our clients who may already have or may be considering exposure in the industries affected. The subjects change daily and constitute an excellent update on featured topics. Every day, the DIBs also include links to MRP’s MARKET VIEWPOINT, THEME TRACKER and MACRO MONITOR. On many days, the DIBS will also include NEW DATA & THEME DEVELOPMENTS for active themes.

   MAJOR DATA POINTS Top

United States: Industrial Production: 0.1% from prior -0.4%
United States: NY Empire State Manufacturing Survey: -6.8 from prior -2.0
United States: CreditForecast.com Household Credit Report: 3.7% from prior 3.9%

Euro Zone: Consumer Price Index: 0.4% from prior 0.2%
Russian Federation: Industrial Production: -0.8% from prior 0.7%
World: Moody’s Analytics Survey of Business Confidence: 27.8 from prior 25.2

   MARKETS Top

Stocks – Clinton or Trump? There’s An ETF for That

With a new president and administration, investors can expect some major changes that could ripple through the stock market and potentially lead to targeted exchange traded fund opportunities… With Trump in office, investors may look more favorably on banks and financial stocks, along with sector-related ETF options like the SPDR S&P Bank ETF , which targets some of the largest U.S. banks, or the broader Financial Select Sector SPDR, which includes a hefty bank sub-sector tilt, along with other financial services names… Trump could be a boon for the aerospace and defense industry, along with related ETFs, like the iShares U.S. Aerospace & Defense ETF and PowerShares Aerospace & Defense Portfolio …

While Clinton has put a spotlight on high-priced drugs in the biotechnology and pharmaceutical space, she may continue to back Obamacare and support the broader healthcare industry, with more insured Americans using healthcare services. Investors may look to broad healthcare options like Vanguard Health Care ETF and the Health Care Select Sector SPDR for exposure to industry. FoxBusiness

Bonds – Aussie Long Bond May Gain 24% If $480 Billion Fund Is Right

Australia’s new long bond could provide investors with a gain of more than 24 percent within its first six months if a prediction by Japan’s Asset Management One Co. proves correct… The Tokyo-based firm, which oversees more than 50 trillion yen ($480 billion), bought the 30-year note at last week’s sale and reckons additional Reserve Bank of Australia easing could drive the yield down to 2.25 percent by the end of March… While bets on further interest-rate reductions by the RBA have been scaled back, Takei thinks Governor Philip Lowe will cut in December or the first few months of 2017…

Australian sovereign bonds have returned 5 percent so far in 2016, with notes due in more than 20 years climbing by 12 percent B

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Gold – ICE Will Start Gold Futures for Clearing London’s Daily Auction

Intercontinental Exchange Inc., which runs the daily London gold auction, will start a futures contract for the metal in the U.S. in February, jumping the gun on the London Metal Exchange which is also working on a London-focused product. The contract, subject to regulatory approval, will be for bullion held in London and traded on ICE Futures U.S. in New York. Each contract will be for 100 troy ounces of metal and will be used to clear the London gold auction, starting in March…

Last year, ICE started administering the electronic auction that replaced the century-old London gold fixing, a ritual that was taking place by phone. The auction is used by mining companies, refiners and central banks to trade large quantities of gold. It’s also a point of reference for derivative contracts. B

 

   ECONOMICS Top

China – One of China’s Poorest Provinces Puts Nation on Track to Beat 6.5% Growth

Guizhou posted the third-fastest growth among China’s 31 regional districts in the first half of the year, with a 10.5 percent pace. The southwestern province has focused on developing human and computing talent skilled at gathering and analyzing vast reams of information — so-called big data… Other data… is likely to reflect the nation’s transition away from investment-led growth. Industrial production is seen having risen 6.4 percent in September from a year earlier, compared with the near-10 percent average over the past five years. Retail sales, by contrast, are forecast to have expanded 10.7 percent last month. B

 

  POLITICS & FISCAL POLICY Top

Defense – Japan may accelerate missile defense upgrades in wake of North Korean tests

Japan may accelerate around $1 billion of planned spending to upgrade its ballistic missile defenses in the wake of rocket tests suggesting North Korea is close to fielding a more potent medium-range missile… Pyongyang’s apparent technological progress on missiles has been faster than anticipated, exposing Japan to a heightened threat… North Korea has test fired at least 21 ballistic missiles and conducted two nuclear tests so far this year. R

 

  MONETARY POLICY Top

CBs – Big Central Bank Assets Jump Fastest in 5 Years to $21 Trillion

The world’s biggest central banks are bulking up their balance sheets this year at the fastest pace since 2011’s European debt crisis to boost lackluster economic recoveries with asset purchases that are supporting stock and bond prices. The 10 largest lenders now own assets totaling $21.4 trillion, a 10 percent increase from the end of last year… The accelerating expansion of central banks’ balance sheets comes as debate rages over whether their asset purchases and continued low interest rates are creating bubbles, especially in the bond market. Such quantitative-easing programs are aimed at driving up the prices of the securities they purchase to lower bond yields, encourage investment and boost economic growth…

Almost 75 percent percent of the world’s central-bank assets are controlled by policy makers in four places: China, the U.S., Japan and the euro zone. B

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  FINANCE Top

Banks – Watchdog says about 15 Swiss banks in money laundering ‘red zone’

Roughly 15 Swiss banks are in a “red zone” of lenders particularly exposed to money laundering risks, the head of Swiss banking watchdog FINMA said… Swiss federal prosecutors last week said that they have opened criminal proceedings against Zurich-based Falcon Private Bank for alleged failure to prevent suspected money laundering linked to Malaysia’s scandal-tainted 1MDB fund…

the banks… are involved in asset management and often have clients from emerging markets, adding that the lenders were from all areas of the country and of various sizes. R

Banks – UK towns and villages running out of hard cash, says report

Towns and villages across the UK are running out of hard money due to bank branch closures, a shortage of cash machines and erratic service from poor quality ATMs… The study by the Federation of Small Businesses also claimed that the productivity of many small businesses was already being damaged by the accelerating pace of banks shutting branches… More than 680 UK bank branches were closed last year, in addition to the 512 that disappeared in 2014… Shops, small firms and tradespeople are among the heaviest users of bank branch counters theguardian

 

  REAL ESTATE Top

U.S. – Bring on the millennials: How the housing market is gearing up for the next generation of homebuyers

Is the generation that rented its way through the recession ready for homeownership? Some builders think so and are beginning to explore ways to capitalize on pent-up demand. But turning the youngest Gen-Xers and the oldest millennials into homebuyers won’t happen overnight… Economists predict that it could take first-time homebuyers at least three years to return to their pre-recession share of accounting for 40% of home sales. That group currently claims a 33% share, up from 29% at the market’s trough…

The number of older millennials from 25 to 34 years old looking at buying a home has grown in the last two years… driven by the economy’s continued recovery and their own life progression. “Last year, the median age of the millennial homebuyer was 30, and there were 4.4 million people turning 30 this year”…  “We’re seeing more people now forming households, getting married, having children or a second child.” Life events that were delayed during the recession are now coming online and driving consumer decisions, including homebuying…

An increase in household formations among individuals in their late 20s and early 30s has led to a surge in rental demand. Right now, household formations are at approximately 1 million a year… Those renters should soon move into the for-sale market, with most of them going into existing homes and the current owners of those existing homes trading up to larger new homes. constructiondive

U.S. – Wells: Good News for Homeowners

Wells Fargo said the amount of money it ultimately expects to collect on a portfolio of soured mortgages had declined in the third quarter by more than $4 billion, a sudden, huge drop. That is because more of those borrowers are now able to refinance and prepay mortgages that previously had been underwater, thanks to rising home prices… “We have reached a point where a lot of these buyers have gotten themselves in the money for refis…and we are experiencing and modeling faster cash flows as a result of that”…

In the past few years, however, home values have reboundednationwide, prices rose 5.1% over the 12 months ended in July, according to the S&P CoreLogic Case-Shiller Indices.  The price increases have helped bring more of those borrowers back into the money on their mortgages, enabling them to refinance, thereby reducing the amount Wells Fargo expects to collect from them over time. WSJ

U.K. – Property rentals to outstrip sales for first time since 1930s

The property rental market is booming at the expense of the sales market, making it look as if house-buying will be outstripped for the first time in eight decades next year, as home-buyers face a continued struggle to find properties they can afford.  Activity in the sales market has cooled since June’s Brexit vote and a lack of property for sale combined with rising prices are set to lead to more new lets than purchase…

“As some would-be buyers and sellers sit on their hands, Brexit-induced uncertainty has continued to boost the rental market … September saw record activity, with increasing numbers of lets agreed and tenants choosing to renew their contracts. On current trends 2017 could be the first time since the 1930s that more homes are let than sold.” theguardian

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