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23 October 2018

23/10/2018

Morning Chat & Market Chat

Morning Chat

Having second thoughts: The pound dropped below $1.30 yesterday – and briefly €1.13 – amid speculation Prime Minster Theresa May is on the cusp of a no confidence motion over her handling of the Brexit negotiations. Meanwhile, Brexit Secretary Dominic Raab told the Tory party to hold their nerve as “the prize we want” is close. Indeed, Brexiteers may have been shaken by the sight of 700,000 protesters seeking a second referendum in London over the weekend, making some wonder if the Chequers proposal – warts and all – may well be better than a full-on reversal.   

Total Recall: A much maligned investment conference begins today in Saudi Arabia, with numerous drop-outs from its once star-studded roster given the murder of columnist Jamal Khashoggi in Istanbul. Nonetheless, some notable attendees are still going, headlined by the CEO of French oil major Total, Patrick Pouyanné, and Imran Khan, PM of Pakistan, on the prowl for cash to plug a gaping current account deficit. Still, the global condemnation runs deep; the Summit's official website was even defaced by hackers. Things may well get worse, with Turkish PM Recep Erdogan promising to unveil the "naked truth" today.

Feeling pretty content: Netflix shares are up over 600% over the past five years compared to 60% or so for the S&P 500. That phenomenal performance has been fuelled by wildly popular original content. However, producing it is also wildly expensive: since 2014, free cash flow has fallen from -$128 million to -$2.1 billion.  To fill the hole, Netflix is again issuing bonds, asking for another $2 billion of "BB-" debt, pushing its total indebtedness to $10 billion. Compared with $144 billion of equity, that&';s not so bad... as long as this investment doesn't flop like a House of Cards. 

Dear Readers, For over five years, I have been producing the Morning Chat on a near daily basis. This has been incredibly fun; or was it pun? In any event, on Thursday, Senior Portfolio Manager Nick Lowson will take over the daily KH missive until the end of the year as I focus on new responsibilities. All the best, and happy punning...(T - 2 and counting)...

Market Data

Selected Global Aggregates (Total returns, unhedged)

MSCI AC World Equities down -2.13 (-0.18%) at 1,167 (YTD*: -0.04%; 5YR**: 53.2%)
Barclays Global Aggregate Bonds down -0.43 (-0.09%) at 469 (YTD*: -3.23%; 5YR**: 1.6%)

Selected Equity Indices

S&P 500 down -11.90 (-0.43%) at 2,756 (YTD: 3.08%; 5YR: 57.1%)
NASDAQ up +19.60 (+0.26%) at 7,469 (YTD: 8.19%; 5YR: 90.1%)
Euro STOXX 50 down -20.73 (-0.65%) at 3,190 (YTD: -8.96%; 5YR: 4.7%)
FTSE 100 down -7.00 (-0.10%) at 7,043 (YTD: -8.39%; 5YR: 5.2%)
CAC 40 down -31.35 (-0.62%) at 5,053 (YTD: -4.88%; 5YR: 17.6%)
DAX down -36.21 (-0.31%) at 11,553 (YTD: -10.56%; 5YR: 29.1%)
Nikkei 225  up +82.74 (+0.37%) at 22,615 (YTD: -0.66%; 5YR: 53.7%)
Hang Seng up +591.75 (+2.32%) at 26,153 (YTD: -12.59%; 5YR: 12.2%)
MSCI Emerging Markets up +11.39 (+1.17%) at 983 (YTD: -15.16%; 5YR: -5.9%) 

Selected Government Bond Yields

US 10 Year unchanged at 3.20 (began the year at 2.40; 5 years ago it was 2.54)
US 2 Year down -0.02 at 2.90 (began the year at 1.88; 5 years ago it was 0.31)
UK 10 Year down -0.04 at 1.51 (began the year at 1.19; 5 years ago it was 2.48)
Germany 10 Year up +0.06 at 0.47 (began the year at 0.47; 5 years ago it was 1.86)
Japan 10 Year up +0.00 at 0.15 (began the year at 0.05; 5 years ago it was 0.63)
Barclays EM Basket unchanged at 5.89 (began the year at 4.51; 5 years ago it was 4.95)

Selected Currencies

€/$ down -0.003 (-0.23%) at 1.147 (YTD: -4.48%; 5YR: -16.7%)
£/€ down -0.004 (-0.32%) at 1.131 (YTD: 0.40%; 5YR: -3.9%)
£/$ down -0.007 (-0.55%) at 1.297 (YTD: -4.10%; 5YR: -20.0%)
$/¥ up +0.36 (+0.32%) at 112.86 (YTD: 0.18%; 5YR: 15.0%)

Selected Commodities

Brent Crude ($/bbl) up +0.01 (+0.01%) at 79.82 (YTD: 19.62%; 5YR: -27.3%)
WTI Crude ($/bbl) up +0.26 (+0.38%) at 69.42 (YTD: 14.82%; 5YR: -28.9%)
Gold ($/ozt) down -5.55 (-0.45%) at 1222.30 (YTD: -5.32%; 5YR: -8.3%)
Copper ($/mt) up +92.50 (+1.49%) at 6284.00 (YTD: -12.20%; 5YR: -13.4%)

Data sourced from Factset as of the close of last trading day.
*YTD: Year-to-date return; **5YR: five year return
 
SOURCES: BBC; The New York Times; FactSet; Al Jazeera; Financial Times; The Economist; Reuters; CNN; Wall Street Journal; CNBC; Google Finance; Seeking Alpha; The Idea Farm; Bloomberg, Twitter; Wikipedia; Investopedia; The Guardian; The Times of London; Google News; Numerous academic sources and journals; Trade bodies; Government institutions (e.g The Bank of England, The Federal Reserve).