Independent Insight Provider

Stewart Paterson

Taurus Advisors LLP

Macroeconomics

Turkey is not the only emerging market in the early stages of what could be a classic emerging market financial crisis (see: <a href="https://www.smartkarma.com/insights/money-matters-turkey-on-the-brink" target="_blank" data-smartkarma-citation="insights:7953">Money Matters: Turkey on the Brink?</a>). Mexico has found itself at the sharp end of rhetoric from the US president-elect but the economy was already in trouble.  Is another Tequila crisis brewing (or distilling)?Mexico's current account deficit has been widening since 2010 and stands at around 3.5% of GDP. External debt has roughly doubled since 2009 and stands at about…

Turkey is not the only emerging market in the early stages of what could be a classic emerging market financial crisis (see: Money Matters: Turkey on the Brink?). Mexico has found itself at the sharp end of rhetoric from the US president-elect but the economy was already in trouble.  Is another Tequila crisis brewing (or distilling)?Mexico's current account deficit has been widening since 2010 and stands at around 3.5% of GDP. External debt has roughly doubled since 2009 and stands at about…

Money Matters: Could Tequila Mixed with Moutai Be Explosive.

FX Strategist

Greg Gibbs

Fundamental analysis of topical themes in FX

Amplifying Global FX Capital

Amplifying Global FX Capital was founded in 2015 and is fully owned by Greg Gibbs. It is a registered company both in Australia and Colorado, USA and is a licensed in Australia to provide financial services.

We are producing a regular trading view orientated macroeconomic analysis of topical themes in global financial markets, with a particular focus on foreign exchange. We invite you to view an “executive summary” of these reports in “AmpGFX Reports” under our “Research” menu.

These reports are drawn from the analysis of Greg Gibbs and inform the capital management he undertakes on behalf of the company. The trading performance is posted periodically on our website. We aim to build our company into both a research and capital management business. We are currently in the planning phase for managing capital for wholesale customers.

Greg Gibbs has spent his working life of more than 26 years in financial markets, beginning in 1989 at the Reserve Bank of Australia, after completing a Bachelor of Economics Degree (Honours) at the Australian National University. He has been a CFA Charterholder since 2005. He has worked in Sydney, Singapore, New York and London for major global banks and presented on foreign exchange markets to major financial institutions and companies around the world, and maintained a high profile in the financial media.

Before Amplifying Global FX Capital, Greg was the Head of Asia Pacific Market Strategy at the Royal Bank of Scotland based Singapore. He now resides in Breckenridge Colorado.

In our first note for 2017 we are not ready to draw any significant conclusions for global currency markets.  It is evident that a significant correction in the USD has occurred in the first week of the year.  This may reflect significantly stronger than expected economic indicators in a range of countries other than the USA, suggesting that a cyclical upswing in the global economy is underway since around Q4 last year, helping lift support for global asset prices and investment outside of the USA.  It may reflect a natural cooling in the outlook for the Trump-effect on the USA economy after a surge of optimism late last year.  It may reflect a spillover from a rebound in Chinese yuan engineered by a squeeze in offshore CNH liquidity.  CNH volatility around the turn of the year is starting to look like a regular occurrence, after similar developments a year earlier.

In our first note for 2017 we are not ready to draw any significant conclusions for global currency markets.  It is evident that a significant correction in the USD has occurred in the first week of the year.  This may reflect significantly stronger than expected economic indicators in a range of countries other than the USA, suggesting that a cyclical upswing in the global economy is underway since around Q4 last year, helping lift support for global asset prices and investment outside of the USA.  It may reflect a natural cooling in the outlook for the Trump-effect on the USA economy after a surge of optimism late last year.  It may reflect a spillover from a rebound in Chinese yuan engineered by a squeeze in offshore CNH liquidity.  CNH volatility around the turn of the year is starting to look like a regular occurrence, after similar developments a year earlier.

Broadening Evidence of Global Economic Recovery

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Equity Bottom-Up

Australia & New Zealand Bankin / Equity Bottom-Up

Our AUD 29 fair value estimate for wide-moat-rated Australia and New Zealand Banking Group, or ANZ Bank, is unchanged following the sale of its 20% stake in Shanghai Rural Commercial Bank, or SRCB. The sale will increase ANZ Bank’s common equity Tier 1 capital ratio by around 40 basis points to 10% on a pro forma basis as at Sept. 30, 2016, well above its target of around 9.0% and above the regulatory minimum of 8%.The divestment is consistent with the bank’s strategy of simplifying its business and narrowing the focus of its Asian operations on institutional business. The sale follows divestures of five Asian retail and wealth businesses in Singapore, Hong Kong, China, Taiwan, and Indonesia at the end of October 2016. We expect ANZ Bank’s four remaining retail and wealth businesses in the Philippines, Vietnam, Cambodia, and Laos, which are under review, to eventually be sold. Following the sale of the SRCB stake ANZ Bank will have minority stakes in three Asian financial services groups in Malaysia, Indonesia, and China, with a combined book value around AUD 3 billion as at Sept. 30. We would not be surprised if these investments were also divested.Analysts: David Ellis &amp; Ravi Reddy

Our AUD 29 fair value estimate for wide-moat-rated Australia and New Zealand Banking Group, or ANZ Bank, is unchanged following the sale of its 20% stake in Shanghai Rural Commercial Bank, or SRCB. The sale will increase ANZ Bank’s common equity Tier 1 capital ratio by around 40 basis points to 10% on a pro forma basis as at Sept. 30, 2016, well above its target of around 9.0% and above the regulatory minimum of 8%.The divestment is consistent with the bank’s strategy of simplifying its business and narrowing the focus of its Asian operations on institutional business. The sale follows divestures of five Asian retail and wealth businesses in Singapore, Hong Kong, China, Taiwan, and Indonesia at the end of October 2016. We expect ANZ Bank’s four remaining retail and wealth businesses in the Philippines, Vietnam, Cambodia, and Laos, which are under review, to eventually be sold. Following the sale of the SRCB stake ANZ Bank will have minority stakes in three Asian financial services groups in Malaysia, Indonesia, and China, with a combined book value around AUD 3 billion as at Sept. 30. We would not be surprised if these investments were also divested.Analysts: David Ellis &amp; Ravi Reddy

ANZ Continues to Derisk Asian Business and Strengthen Capital Position

Transport Sector, China and Asia-focused Research

Charles De Trenck

Thematic (Sector/Industry)

I was working on a bigger piece on HK vs Singapore which I will put out later, and reviewing political classifications of economies, when I saw a good comment from Ray Dalio on Trump and his invocation of Ayn Rand. I was also in the middle of reading the history of Athens and re-reading Aristotle’s Constitution of Athens, which added perspective to Dalio. There is a lot to apply to today which I think is worth noting.Quick conclusions before delving deeper:<ul><li>Ray Dalio is right to invoke Ayn Rand and flag the positives Trump could bring about;</li><li>But Let’s also keep in mind how deep the recent hole banks, Bernanke and Obama dug;</li><li>Looking at Aristotle as well, we might say that Trump’s partial democratic election has been to install an Aristocracy…this will certainly be interesting;</li><li>There are some really good free reads to turn to for a quick study of Ayn Rand;</li><li>When we listen back to Ayn Rand, we see that she disliked MNCs/Corporations because of their manipulation of government…Let’s see where Trump takes this.</li></ul>

I was working on a bigger piece on HK vs Singapore which I will put out later, and reviewing political classifications of economies, when I saw a good comment from Ray Dalio on Trump and his invocation of Ayn Rand. I was also in the middle of reading the history of Athens and re-reading Aristotle’s Constitution of Athens, which added perspective to Dalio. There is a lot to apply to today which I think is worth noting.Quick conclusions before delving deeper:Ray Dalio is right to invoke Ayn Rand and flag the positives Trump could bring about;But Let’s also keep in mind how deep the recent hole banks, Bernanke and Obama dug;Looking at Aristotle as well, we might say that Trump’s partial democratic election has been to install an Aristocracy…this will certainly be interesting;There are some really good free reads to turn to for a quick study of Ayn Rand;When we listen back to Ayn Rand, we see that she disliked MNCs/Corporations because of their manipulation of government…Let’s see where Trump takes this.

Trump Not Likely to Halt Decline of US. But Ray Dalio Makes Good Case in Bringing Back Ayn Rand

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

<ul><li>Since the financial crisis, high risk assets had been buffeted by a discount rate shock, notably a lift in the equity risk premium (ERP).  This was consistent with widening corporate bond spread and a divergence between the yield to maturity on US Treasuries and the earnings yield on the S&amp;P500 companies.  The higher ERP has been associated with under-performance from high beta stocks, as predicted by valuation theory.</li><li>Since July 2016, the dangers of safety have emerged and become more evident since early November.  The fact that the risk free rate has lifted by 100 basis points during this time while the S&amp;P500 earnings yield has remained broadly unchanged points to a reversal of the rising ERP.  Accordingly, the lower ERP has driven strong returns from high beta securities. </li><li>In this report, Evidente updates the performance of its model portfolio launched in July and adds to the portfolio's cyclical budget.  The addition of ANZ is designed to shift the large underweight in the major banks to a small overweight, reflecting compelling valuation support <a href="https://www.smartkarma.com/insights/australia-s-major-banks-shrinking-to-greatness-expanding-to-safety" target="_blank" data-smartkarma-citation="insights:7309">Australia’s Major Banks - Shrinking to Greatness, Expanding to Safety</a>.</li></ul>

Since the financial crisis, high risk assets had been buffeted by a discount rate shock, notably a lift in the equity risk premium (ERP).  This was consistent with widening corporate bond spread and a divergence between the yield to maturity on US Treasuries and the earnings yield on the S&amp;P500 companies.  The higher ERP has been associated with under-performance from high beta stocks, as predicted by valuation theory.Since July 2016, the dangers of safety have emerged and become more evident since early November.  The fact that the risk free rate has lifted by 100 basis points during this time while the S&amp;P500 earnings yield has remained broadly unchanged points to a reversal of the rising ERP.  Accordingly, the lower ERP has driven strong returns from high beta securities. In this report, Evidente updates the performance of its model portfolio launched in July and adds to the portfolio's cyclical budget.  The addition of ANZ is designed to shift the large underweight in the major banks to a small overweight, reflecting compelling valuation support Australia’s Major Banks - Shrinking to Greatness, Expanding to Safety.

Australia

Australia and New Zealand Banking Group Limited provides banking services. The Bank offers accounts checking, savings  deposits, money market, mortgage, and term loans services, as well as card facilities and Internet  banking services. Australia and New Zealand Banking Group serves customers in New Zealand and Australia.

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Australia & New Zealand Bankin (AN3 AU)

Money Matters: Could Tequila Mixed with Moutai Be Explosive.

Turkey is not the only emerging market in the early stages of what could be a classic emerging market financial crisis (see: Money Matters: Turkey...

Stewart Paterson

Broadening Evidence of Global Economic Recovery

In our first note for 2017 we are not ready to draw any significant conclusions for global currency markets. It is evident that a significant...

Greg Gibbs

ANZ Continues to Derisk Asian Business and Strengthen Capital Position

Our AUD 29 fair value estimate for wide-moat-rated Australia and New Zealand Banking Group, or ANZ Bank, is unchanged following the sale of its 20%...

Morningstar, Inc.

Trump Not Likely to Halt Decline of US. But Ray Dalio Makes Good Case in Bringing Back Ayn Rand

I was working on a bigger piece on HK vs Singapore which I will put out later, and reviewing political classifications of economies, when I saw a...

Charles De Trenck

The Dangers of Safety

Since the financial crisis, high risk assets had been buffeted by a discount rate shock, notably a lift in the equity risk premium (ERP). This...

Sam Ferraro

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