Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

<p><strong><em>A Deep (big) Blue Wave will be bad for markets, empowering the Democratic left which will pursue an inflationary strategy that hurts equities. Despite Biden's seemingly widening lead in the polls, the likeliest outcome is a narrow presidential win and a Light Blue Wave, which obliges the Democratic Congress to hew to the centre (Biden's preference). After an initial sell-off amid uncertainty in November, a Light Blue Wave will be good for equities, bad for bonds as the yield curve steepens and growth prospects improve into 2021. </em></strong> </p><p>President Trump's Covid-positive diagnosis, and his subsequent behaviour in and upon leaving the Walter Reed military hospital, did not help his poll numbers. Instead, the undecided or swing voters have begun tilting toward Biden, raising the increased possibility of a "blue wave", with the Democrats winning the Presidency, Senate and the House, hence ending divided government. Biden's current national lead is 9.4 percentage points (3.6pp ahead of where Hillary Clinton was at this stage in 2016), and Biden leads in all the swing states (albeit narrowly in Ohio and Florida). Last week's rival townhalls also saw slightly higher viewership for the sedate and wonkish Biden than the always-colourful Trump. </p><p>The bigger the Blue Wave, however, the worse for markets. A big Blue Wave will hand the initiative to the left of the Democratic Party, enabling more of the Green New Deal to be enacted, and for legislators to push for aspects of the Medicare for All proposals. And the Democrats would also seek to "pack the Supreme Court" (i.e., expand it beyond 9 members). Despite Biden's promised tax increases, such an agenda will be severely negative for markets and the economy -- likely resulting in a big Republican backlash in the 2022 mid-term Congressional election. The greater the Blue Wave, the more negative we would be about the outcome for markets (especially equities). </p><p>However, the likelier outcome is a soft Blue Wave, i.e., with the Democrats winning no more than 51 seats in the Senate, and a narrow victory for Biden in the Electoral College. If that is the outcome, November will be a month of uncertainty and chaos, with a substantial sell-off in markets. But thereafter, once the electoral outcomes are clear, the narrow Senate majority (with the Class of 2020 dominated by moderate/centrist Democrats) will curtail any thoughts of a radical leftward shift. It would instead provide the ideal ground for a President Biden to govern from the centre -- in keeping with his natural instinct. Taxes on corporates and the top 1% of personal-income earners will rise sharply, but the moderate agenda will see enhanced spending on infrastructure, subsidies for green-technology, and a mild expansion/reform of Obamacare. While the program will be moderately inflationary (resulting in Fed Funds rates rising by mid-2021), it will be good for the economy and equities after the November sell-off. On a 3-6 month view, we would recommend switching from bonds to equities by the end of November. </p>

A Deep (big) Blue Wave will be bad for markets, empowering the Democratic left which will pursue an inflationary strategy that hurts equities. Despite Biden's seemingly widening lead in the polls, the likeliest outcome is a narrow presidential win and a Light Blue Wave, which obliges the Democratic Congress to hew to the centre (Biden's preference). After an initial sell-off amid uncertainty in November, a Light Blue Wave will be good for equities, bad for bonds as the yield curve steepens and growth prospects improve into 2021.  President Trump's Covid-positive diagnosis, and his subsequent behaviour in and upon leaving the Walter Reed military hospital, did not help his poll numbers. Instead, the undecided or swing voters have begun tilting toward Biden, raising the increased possibility of a "blue wave", with the Democrats winning the Presidency, Senate and the House, hence ending divided government. Biden's current national lead is 9.4 percentage points (3.6pp ahead of where Hillary Clinton was at this stage in 2016), and Biden leads in all the swing states (albeit narrowly in Ohio and Florida). Last week's rival townhalls also saw slightly higher viewership for the sedate and wonkish Biden than the always-colourful Trump. The bigger the Blue Wave, however, the worse for markets. A big Blue Wave will hand the initiative to the left of the Democratic Party, enabling more of the Green New Deal to be enacted, and for legislators to push for aspects of the Medicare for All proposals. And the Democrats would also seek to "pack the Supreme Court" (i.e., expand it beyond 9 members). Despite Biden's promised tax increases, such an agenda will be severely negative for markets and the economy -- likely resulting in a big Republican backlash in the 2022 mid-term Congressional election. The greater the Blue Wave, the more negative we would be about the outcome for markets (especially equities). However, the likelier outcome is a soft Blue Wave, i.e., with the Democrats winning no more than 51 seats in the Senate, and a narrow victory for Biden in the Electoral College. If that is the outcome, November will be a month of uncertainty and chaos, with a substantial sell-off in markets. But thereafter, once the electoral outcomes are clear, the narrow Senate majority (with the Class of 2020 dominated by moderate/centrist Democrats) will curtail any thoughts of a radical leftward shift. It would instead provide the ideal ground for a President Biden to govern from the centre -- in keeping with his natural instinct. Taxes on corporates and the top 1% of personal-income earners will rise sharply, but the moderate agenda will see enhanced spending on infrastructure, subsidies for green-technology, and a mild expansion/reform of Obamacare. While the program will be moderately inflationary (resulting in Fed Funds rates rising by mid-2021), it will be good for the economy and equities after the November sell-off. On a 3-6 month view, we would recommend switching from bonds to equities by the end of November. 

A "Blue Wave" Is Better than the Worst Outcome, but Won't Be Great for Markets

Founder & CEO Bond Angle, LLC, Bond Angle, LLC

Vicki Bryan

Founder & CEO Bond Angle, LLC

Bond Angle, LLC

Insightful commentary and analysis on bond markets and market movers, including financial, economic, and industry catalysts and management shenanigans. 

High yield market investment research

Credit

<p><strong><a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> w</strong>ill <a href="https://ir.tesla.com/press-release/tesla-announces-date-third-quarter-2020-financial-results-and-webcast" target="_blank" rel="noopener">report third quarter results</a> after the market closes <strong>Wednesday</strong>, <strong>October 21st</strong>.</p><p>Tesla recently reported <strong>third quarter deliveries up 43% </strong>versus last year, again thanks to <strong>incremental sales from market expansion </strong>which continue to offset <strong>sharply lower same-store sales I've been tracking since last year </strong>(as I last discussed in <a href="https://www.smartkarma.com/insights/things-people-believe-flat-earth-faked-moon-landings-and-tesla-2100" target="_blank" data-smartkarma-citation="insights:42439" rel="noopener">Things People Believe: Flat Earth, Faked Moon Landings, and Tesla $2100</a> <span class="dummy">on 8/23/20).</span></p><p>That distinction is a major reason Tesla goes to so much trouble to keep comparable numbers muddled so <strong>demand erosion is harder to spot</strong>. <strong>Severe price cuts and weaker mix</strong> over the past year also mean <strong>revenue growth from auto sales significantly trails reported deliveries</strong>.</p><p>This will figure heavily into how much padding Tesla will likely add with energy credit sales, nonoperating &amp; unusual items, and accounting maneuvers to inflate <strong>consolidated revenue and "profits"</strong> it reports for the quarter.</p><p>After all, another creatively reported profit could set up another <a href="https://markets.businessinsider.com/news/stocks/tesla-stock-elon-musk-payout-earnings-pocket-billions-hits-goals-2020-10-1029657370?utm_campaign=browser_notification&amp;utm_source=desktop" target="_blank" rel="noopener">$3 billion payday</a> for CEO Elon Musk and finally get Tesla into the <strong><a href="https://www.smartkarma.com/entities/s-p-500" target="_blank" data-smartkarma-citation="entities:22886:1" rel="noopener">S&amp;P 500 (SPX INDEX)</a></strong>.</p><div class="content-highlight"><p><strong><em>Continue reading for Bond Angle revenue and profit estimates for Tesla's third quarter.</em></strong></p></div>

Tesla Motors (TSLA US) will report third quarter results after the market closes Wednesday, October 21st.Tesla recently reported third quarter deliveries up 43% versus last year, again thanks to incremental sales from market expansion which continue to offset sharply lower same-store sales I've been tracking since last year (as I last discussed in Things People Believe: Flat Earth, Faked Moon Landings, and Tesla $2100 on 8/23/20).That distinction is a major reason Tesla goes to so much trouble to keep comparable numbers muddled so demand erosion is harder to spot. Severe price cuts and weaker mix over the past year also mean revenue growth from auto sales significantly trails reported deliveries.This will figure heavily into how much padding Tesla will likely add with energy credit sales, nonoperating &amp; unusual items, and accounting maneuvers to inflate consolidated revenue and "profits" it reports for the quarter.After all, another creatively reported profit could set up another $3 billion payday for CEO Elon Musk and finally get Tesla into the S&amp;P 500 (SPX INDEX).Continue reading for Bond Angle revenue and profit estimates for Tesla's third quarter.

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

<p>Buy levels for US equities remains just above pivotal breakout levels that represent fresh inflection support in the SPX, NDX and DJI.</p><p>SPX 3,410 and NDX 11,600 remain the key inflection levels and supports to initiate buy levels above this support threshold. Below supports would be a negative.</p><p>Delayed stimulus measures are the key risk factor in coming weeks that will provide buying opportunities for new highs in the US and outperforming Europe and Asia.</p>

Buy levels for US equities remains just above pivotal breakout levels that represent fresh inflection support in the SPX, NDX and DJI.SPX 3,410 and NDX 11,600 remain the key inflection levels and supports to initiate buy levels above this support threshold. Below supports would be a negative.Delayed stimulus measures are the key risk factor in coming weeks that will provide buying opportunities for new highs in the US and outperforming Europe and Asia.

Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

Macroeconomics

<p>US economic growth since Q2 has been heavily driven by strength in big-ticket items, such as housing and light truck sales in stark contrast to the last recovery. Converse to the view of pessimists, the sharp rise in household thrift in Q2 has not presaged a subsequent collapse in consumer spending.</p>
<div>Pessimists are currently focused on elevated levels of initial unemployment claims as being a harbinger that the economy is about to sink into the abyss, but this metric has been heavily influenced by the sheer volume of new claimants during the lockdown and a lack of capacity at the state level to process applications. Meanwhile, the incidence of layoffs in the economy according to the monthly JOLTS (Job Openings and Labour Turnover Survey) report has returned to pre-pandemic levels.</div>
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<div>Chair Powell has repeated his call for fiscal stimulus, but some critics claim the Trump Administration has little to gain politically from this initiative due to the proximity of the Presidential Election. Meanwhile, House Speaker Pelosi recently rejected a proposed Administration stimulus allegedly due to its insufficient magnitude. </div>
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<div>The US Treasury is sitting on an unprecedented pile of cash at the Fed in the aftermath of very high borrowing during Q2 and Q3 that can readily be deployed, pending Congressional approval, under the auspices of fiscal stimulus. Lower future borrowing by the Treasury will ease pressure on banks' reserves, thereby raising their capacity to boost outstanding bank credit.</div>
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<div>Investors believe further fiscal stimulus will eventually be forthcoming, thereby implying some impending changes to the slope of the US Treasury yield curve. Inflationary expectations embedded in Treasury Inflation-Protected Securities (TIPS) have recovered since their plunge during the early stages of the pandemic, while real yields have been stuck in negative territory since Q1, thereby implying that investors believe policy measures will eventually boost inflation while economic growth will remain very weak.</div>
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US economic growth since Q2 has been heavily driven by strength in big-ticket items, such as housing and light truck sales in stark contrast to the last recovery. Converse to the view of pessimists, the sharp rise in household thrift in Q2 has not presaged a subsequent collapse in consumer spending.
Pessimists are currently focused on elevated levels of initial unemployment claims as being a harbinger that the economy is about to sink into the abyss, but this metric has been heavily influenced by the sheer volume of new claimants during the lockdown and a lack of capacity at the state level to process applications. Meanwhile, the incidence of layoffs in the economy according to the monthly JOLTS (Job Openings and Labour Turnover Survey) report has returned to pre-pandemic levels.


Chair Powell has repeated his call for fiscal stimulus, but some critics claim the Trump Administration has little to gain politically from this initiative due to the proximity of the Presidential Election. Meanwhile, House Speaker Pelosi recently rejected a proposed Administration stimulus allegedly due to its insufficient magnitude. 



The US Treasury is sitting on an unprecedented pile of cash at the Fed in the aftermath of very high borrowing during Q2 and Q3 that can readily be deployed, pending Congressional approval, under the auspices of fiscal stimulus. Lower future borrowing by the Treasury will ease pressure on banks' reserves, thereby raising their capacity to boost outstanding bank credit.



Investors believe further fiscal stimulus will eventually be forthcoming, thereby implying some impending changes to the slope of the US Treasury yield curve. Inflationary expectations embedded in Treasury Inflation-Protected Securities (TIPS) have recovered since their plunge during the early stages of the pandemic, while real yields have been stuck in negative territory since Q1, thereby implying that investors believe policy measures will eventually boost inflation while economic growth will remain very weak.















US Economy Defies Doomsayers as Treasury's Record Cash Balance Prepares Ground for Further Stimulus

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

<p>In last week’s <em>Compass</em> we posited that the bulls were back in control as the bullish gap from Sept. 28 was left unfilled despite the president and first lady getting COVID-19. With breadth continuing to improve and several cyclical areas of the market breaking out to new highs, our outlook remains bullish and we believe a “buy the dip” mentality is warranted.  In today’s report we highlight attractive Groups and stocks within Materials &amp; Manufacturing: Metals, Steel Integrated, U.S., Specialty Chemicals, Petro/Basic/Commodity, Cement/Aggregates, and Agricultural Equipment.</p>

In last week’s Compass we posited that the bulls were back in control as the bullish gap from Sept. 28 was left unfilled despite the president and first lady getting COVID-19. With breadth continuing to improve and several cyclical areas of the market breaking out to new highs, our outlook remains bullish and we believe a “buy the dip” mentality is warranted.  In today’s report we highlight attractive Groups and stocks within Materials &amp; Manufacturing: Metals, Steel Integrated, U.S., Specialty Chemicals, Petro/Basic/Commodity, Cement/Aggregates, and Agricultural Equipment.

U. S. Equity Strategy: Bullish Outlook Intact; Buy Dips

United States

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

S&P 500 INDEX (SPX INDEX)

A "Blue Wave" Is Better than the Worst Outcome, but Won't Be Great for Markets

A big Blue Wave will be bad for markets, empowering the left's radical agenda. But the likelier outcome is a light Blue Wave, with 50-51 Dem...

Prasenjit K. Basu

What To Expect in Tesla's Critical Q3

Tesla will report revenue and earnings this week which likely mask far weaker underlying core performance. Best to read between the lines and...

Vicki Bryan

US Equity Buy Levels

Buy levels for US equities remains just above pivotal breakout levels that represent fresh inflection support in the SPX, NDX and DJI and will...

Thomas Schroeder

US Economy Defies Doomsayers as Treasury's Record Cash Balance Prepares Ground for Further Stimulus

As the economy recovers, US equity and bond investors hold very divergent views about the economic outlook and consequently the implications for...

DeSaque Macro Research

U. S. Equity Strategy: Bullish Outlook Intact; Buy Dips

With breadth continuing to improve and several cyclicals breaking out to new highs, our outlook remains bullish and we believe a “buy the dip”...

Vermilion Research