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Daily Intelligence Briefing – November 29, 2016

Featured Topic: Cybersecurity & other Tech

  • Cybersecurity – You Can Now Rent a Mirai Botnet of 400,000 Bots
  • Cybersecurity – Ransomware Took San Francisco’s Public Transit for a Ride
  • Cybersecurity – NSA Chief Michael Rogers Talks Cybersecurity
  • Cybersecurity – Managers might see cybersecurity regulations soon
  • Cybersecurity – DHS hiring puts into question the cybersecurity skills shortage
  • Cybersecurity – What Trump’s win means for cybersecurity
  • Solar – Print flexible solar cells
  • Quantum Dots – Samsung bets big on quantum dot TV, snaps up QD Vision

Other Highlights:

  • Markets: FX – Venezuela currency tanks 60 percent in month on black market; Stock/FX – Russia’s rehabilitation trade prompts delight and skepticism; Stocks – Italian Lenders Sit Out Bank Stocks Rally Ahead of Vote; Stocks – Strategists Shun Aging U.S. Bull Market for a New One in Japan
  • Economics and Trade: Japan – Japan data wrap: Signs of turning point emerging; U.S. – Move Over, Cyber Monday: Here Comes “Black November”; Brazil – Economists cut Brazil’s 2017 growth view below 1 percent: poll; E.U. – Growth stalling would be biggest risk to Europe’s economy: ECB’s Draghi; China – China regulator warns risks increasing for insurers’ credit assets; Vietnam – The TPP Is Changing Vietnam’s Economy, No Matter What Trump Does
  • Politics and Policy: Brexit – Investor Who Backed Brexit Sees Euro Breaking Up Within 5 Years; Fuel Standards – Final Renewable Fuel Standards for 2017, and the Biomass-Based Diesel Volume for 2018
  • Monetary Policy: PBOC – China will stick to ‘going out’ strategy amid outflow concerns
    Fed Dot Plot – Markets and the Federal Reserve Finally Agree on Something
  • Real Estate: Canada – Canada watchdog lays down warning to mortgage lenders; Spain – Spanish Millennials Spurn Owning Homes as They Shift to Rentals
  • Transportation:  AVs – Self-driving trucks will hit the road in Ohio; AVs – Self-driving cars coming to public roads of Ontario, Canada; Planes – Airlines Launch Flights From U.S. to Havana
  • Commodities: Oil – Hedge funds raise bullish bets on U.S. crude ahead of OPEC meeting; Oil – Energy Firms Step Up Business Investment; OPEC – Saudi Arabia sets high bar for Opec supply deal; Shale – Shale Fracking Rebound With Costlier Grains of Sand; Food Prices – Christmas pudding pricier after Brexit hits pound; Coal – Finland plans to completely phase out coal by 2030; Joins growing list of countries
  • Energy & Environment: Power – France and Britain In Danger of Winter Power Shortages
  • Biotech: CRISPR – Blood Diseases could show CRISPR’s potential as therapy; H5N8 – France finds H5N8 bird flu in wild ducks; Zika – Texas reports first case of Zika spread by local mosquitoes
  • Endnote: Where white voters mattered in the presidential election

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.


United States: GDP, QoQ: 3.2% from prior 1.4%
United States: S&P/Case-Shiller� Home Price Indexes, YoY: 5.1% from prior 5.1%
United States: S&P/Case-Shiller� Home Price Indexes, MoM: 0.4% from prior 0.3%

THEME RELEVANCE: The Case-Shiller Home Price Index has now reclaimed the index high set before the housing crisis. Portland, Dallas, Seattle, and Denver lead the pack. Recently, mortgage rates have shot higher and could constrain the rate of growth in the housing sector. Still, continued YoY growth in housing prices in an undersupplied housing market fuels the need to accelerate home building — comporting with our theme to be long homebuilders

France: GDP, QoQ: 0.2% from prior 0.1%
Colombia: GDP, QoQ: 1.2% from prior 2.0%
Brazil: Unemployment Rate, OCT: 11.8% from prior 11.8%
Chile: Manufacturing Production, YoY: -6.9% from prior 1.4%

   MARKETS Top   

FX – Venezuela currency tanks 60 percent in month on black market

Venezuela’s bolivar currency has depreciated an unprecedented 60 percent in a month against the U.S. dollar on the black market to trade at nearly 3,500 on Monday, according to the widely-tracked web site DolarToday.  That makes the largest-denomination note of 100 bolivars now worth less than 3 U.S. cents in the crisis-hit OPEC nation.  Such is the currency chaos that Venezuelans often carry rucksacks full of cash for basic transactions, cashpoints are constantly running out, and some people are disparagingly using bolivar notes like scrap paper…

Venezuela’s official inflation rate hit 181 percent in 2015 and economists predict it will be far worse this year and next, though authorities have long stopped publishing monthly data. R

Stock/FX – Russia’s rehabilitation trade prompts delight and skepticism

There is no mistaking the delight with which investors in Russia regard Donald Trump’s ascension to US presidency.  And after more than two years near the top of the list of countries to avoid, international equity and bond traders are placing bets Mr Trump’s victory will not just improve ties between the historic adversaries, but facilitate Russia’s rehabilitation on the global stage…

Andrei Kostin, chief executive of state-run VTB, Russia’s second-largest bank, released a statement hours after Mr Trump’s victory saying he expected “new possibilities for restoring constructive relations between Russia and the US, [and] improving the geopolitical situation in general. If that happens, then we could soon see an easing or even the repeal of US financial sanctions.”…

Even before Mr Trump’s election win, Russia’s fortunes had been looking healthier. Within the country there are hopes that a stagnant financial services industry will be fired up with an influx of new investment. UBS has made buying Russian debt one of its top trades for 2017 while Moscow’s stock index is at a record high. FT * *

Stocks – Italian Lenders Sit Out Bank Stocks Rally Ahead of Vote

The reflation trade has boosted banks around the world. Unless, that is, they are Italian.  The sector has a list of problems keeping investors at bay, including large inventories of non-performing loans and political risk from an upcoming referendum… So far this year, Italian banks have underperformed their European peers by 40%… Sunday’s referendum in Italy seemingly has little to do with the banking sector… Some analysts suggest that Mr. Renzi’s departure could open the door for the Five Star Movement, a populist party that could stop a government led attempt to recapitalize the beleaguered banking sector…

Italian banks have high levels of non-performing debt, with around 10 times as many loans going unpaid as in the U.S. The government has led efforts to recapitalize the sector, helping to set up a rescue fund which can buy shares issued by troubled banks, as well as riskier parts of their loan books.  Still, unlike other electoral upsets this year – Brexit and Mr. Trump’s victory – the risks to Italian banks may already be reflected in their share prices. That’s because most analysts now expect that the Italian electorate will reject the constitutional reform plan. WSJ *

Stocks – Strategists Shun Aging U.S. Bull Market for a New One in Japan

Strategists are coming around to the idea that Japan is the place to be in 2017, with Morgan Stanley the latest to embrace one of the year’s biggest comeback stories at the expense of America’s aging bull market. Morgan Stanley joins Japan’s largest brokerage Nomura Holdings Inc. in saying that the country’s bull run will continue into 2017 and recommends selling U.S. shares to fund the trade. It’s a dramatic turnaround after investors fled one of the worst performing markets earlier this year as traders lost faith in Abenomics. The Topix index has rallied for a 12th straight day to the highest level since January…

The premise of Morgan Stanley’s bullish stance comes from an expectation for further weakness in the yen, stronger-than-consensus growth in Japan’s economy and a firmer global economic expansion. The Topix index is still down 5 percent in 2016, despite a 23 percent surge from its lows in February. B *


Japan – Japan data wrap: Signs of turning point emerging

It’s still early days, but signs of Japan’s economy reaching a potential turning point look to have surfaced in October.  Data out today showed the likes of retail sales and household spending shrinking at reduced rates last month, and continued tightness in the labour market.  Retail sales grew 2.5 per cent month-on-month in October, their quickest pace since May 2014 when they rebounded from an increase in the national sales tax the previous month. October’s result comfortably beat the revised 0.3 per cent gain in September (previously zero) and exceeded the average of 1.1 per cent predicted by economist…

Additionally, Japan’s jobless rate was shown this morning to have held steady at 3 per cent in October, its lowest level in 21 years. The job-to-applicant ratio rose to 1.4, the highest level since August 1991. FT

U.S. – Move Over, Cyber Monday: Here Comes “Black November”

Black November got a kick-start a few years ago when Amazon began offering special discounts well before Thanksgiving. It continued this year with Amazon launching Black Friday discounts every five minutes starting the Friday before Thanksgiving, and with the world’s largest retailer, Walmart, offering the same deeply discounted deals online that shoppers can get in stores…

E-commerce remains just about 8 percent of all U.S. retail sales, according to Census Bureau statistics, but during the holidays more Americans shop online. According to Forrester Research analyst Susan Wu, online sales make up 16 percent of holiday shopping during the months of November and December, an expected $112 billion this year. MIT

Brazil – Economists cut Brazil’s 2017 growth view below 1 percent: poll

Brazil’s economy will probably grow less than 1 percent in 2017, emerging from a harsh recession more slowly than previously expected, a weekly central bank poll showed on Monday.  Economists cut their median forecasts for Brazil’s gross domestic product in 2017 for a sixth straight week, to 0.98 percent, the central bank said.  A Reuters poll on Friday also showed economists forecasting growth to be under 1 percent next year. R

E.U. – Growth stalling would be biggest risk to Europe’s economy: ECB’s Draghi

Stalling recovery would be the greatest risk facing the euro zone’s economy, the head of the European Central Bank said on Monday, underscoring, before an important policy decision next week, the ECB’s focus on supporting growth.  The ECB is due to decide next week on whether to extend beyond March its 1.74-trillion-euro ($1.84-trillion) bond-buying program, the centerpiece of its much-criticized stimulus policy, that some say has created bond and property price bubbles and should be wound down…

After over 1-1/2 years of aggressive bond-buying, the ECB owns over a quarter of the debt of countries such as Germany and faces the threat of running out of paper to buy that fits the many constraints of its scheme.  Draghi said the program could be adjusted. Sources have told Reuters the ECB might buy fewer bonds from countries where scarcity is starting to emerge or buy more of each bond issue. 

“We are in a position to address this problem,” he said. “The program is sufficiently flexible that can be revisited.” R

China – China regulator warns risks increasing for insurers’ credit assets

China’s insurance regulator said on Monday that risks are rising for insurers’ credit assets, according to a post on the official website of the regulator.  The China Insurance Regulatory Commission (CIRC) has adopted a slew of measures this year to reduce risks from insurers, from reining in aggressive acquisitions to investing in long-term assets using short-term funds. R

Vietnam – The TPP Is Changing Vietnam’s Economy, No Matter What Trump Does

As Donald Trump prepares to kill the Trans-Pacific Partnership, the 12-nation trade pact is helping to spur the biggest overhaul of Vietnam’s economy in decades. The Communist government in Hanoi plans to push ahead with more than 30 separate pieces of legislation proposed to comply with the trade deal, including rules on labor, business, foreign trade, and small-and-medium enterprises…

Since a new Constitution was adopted in 2013, Vietnam’s lawmakers have passed more than 100 laws — a scale of change unseen since the nation introduced the market-oriented “doi moi” reforms in the 1980s… Vietnam has long been seen as one of the biggest potential winners from the TPP, with increased market access for everything from clothing to electronics to footwear. The deal also stood to complement a growing strategic relationship between the U.S. and Vietnam, which opposes China’s territorial claims in the South China Sea…

Yet all isn’t lost: The TPP also helped serve as an impetus for long-needed structural changes in a nation with 90 million people that’s forecast to grow more than 6 percent this year — one of the fastest rates in Asia. While Vietnam first announced plans to reform its state-owned enterprises in 2011, progress has been slow, with the stakes sold often too small and many companies pulling back on plans to list on exchanges. B


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