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World News

China’s authorities bonds are in a ‘candy spot’ after unload, says portfolio supervisor

China’s government bonds are in a ‘sweet spot' after sell off, says portfolio manager

Chinese Treasuries are in a “sweet spot” after last year’s sell-off – and now offer higher yields and much lower volatility compared to US Treasuries, a portfolio manager said.

The yield on China’s 10-year government bond rose nearly 1 percentage point last year to a high of around 3.4% in November as the country was “way ahead” in getting the Covid-19 outbreak under control, said Wilfred Wee, portfolio manager at asset management firm Ninety One on Friday.

The yield on 10-year Chinese government bonds has settled at 3.2% to 3.3% in the past few weeks. In contrast, the yield on 10-year US Treasuries ranged from 1.65% to 1.75% despite the recent surge.

“I think China Fixed Income is in a (a) sweet spot for this part of the cycle,” Wee told CNBC’s Street Signs Asia.

China is clearly … way ahead in terms of treating Covid and is now facing some structural issues like debt overhang, trying to revitalize consumption, etc.

Wilfred Wee

Portfolio manager, ninety-one

“The Chinese bond market sold out last year and that was due to a better economy that came first during the crisis … I think China is clearly, and is, clearly ahead of the game when it comes to dealing with Covid. ” Now we are dealing with some structural problems like debt overhang, trying to stimulate consumption, etc., “he said.

China was the first country to report the coronavirus outbreak and the only major economy to grow over the past year when it expanded 2.3% year over year. According to estimates by the Bureau of Economic Analysis, the US economy contracted 3.5% in 2020 compared to the previous year.

The prospect of better growth rates – and a pick-up in inflation – has led to higher US Treasury bond yields in recent weeks, narrowing the gap to their Chinese counterparts.

China’s “cleverness”

Still, China’s fiscal and monetary “caution” adds to the attractiveness of government bonds, said Daryl Ho, an investment strategist from Singapore Bank DBS.

“China set an example of fiscal caution by being one of the first economies to hold back further lost spending and launch debt relief efforts to curb systemic debt accumulation,” Ho said in a statement Thursday.

“This position is expected to continue through 2021, when the economy continues to recover, in stark contrast to countries that continue to spend wastefully due to poorer virus management results,” he added.

On the money front, Chinese policymakers have started tightening policies – “against the grain of restrained policies around the world,” said Ho.

With both fiscal and monetary policy in the US still loose, the Chinese yuan could appreciate, the strategist said. This would help investors protect the higher yields on Chinese bonds from currency fluctuations, added Ho.

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Business

Disney inventory has ‘excellent stay-at-home story,’ portfolio supervisor says

Disney stock has ‘perfect stay-at-home story,’ portfolio manager says

One Dow stock rebounded at a record high this week.

Disney stock hit an all-time high for three days in a row. This is the most recent surge due to the company’s streaming success. Disney launched its international streaming service Star in Europe, Canada and Australia this week.

The total number of paid subscribers for the Disney + streaming platform rose to nearly 95 million in the last quarter, counteracting significantly lower revenue in the pandemic-hit parks segment.

“The streaming business is the perfect home stay story and provides stability for the company during the shutdown,” Federated Hermes portfolio manager Steve Chiavarone told CNBC’s Trading Nation on Wednesday.

Chiavarone said investors are also pricing in high expectations for a post-pandemic recovery.

“They are in this reopening phase where theme parks, cruises – all of these are activities we expect for the next year or so – are returning. This diversified business model is paying off,” said Chiavarone.

Netflix’s subscriber base dwarfs that of Disney +, but New Street Advisors founder Delano Saporu points to the new content and strong growth to explain the stock’s high value.

“You saw how you beat your four year old subscriber [projection] in 14 months, “he said in the same interview.” They’ve also released new content, the new Star Wars series is out in May and they have some Marvel series in June as well. So investors are looking for this original content. They appreciate that. “

The combination of a strong streaming offering and a future reopening is the recipe for success, said Chiavarone.

“It’s a perfect example of a company using the pandemic to invest in technology and become more productive and stronger in the future,” he said.

Disclosure: New Street Advisors holds DIS.

Disclaimer of liability

Categories
World News

Fund supervisor warns Biden’s spending plan might pop inventory market bubble

Fund manager warns Biden’s spending plan could pop stock market bubble

People gather on Wall Street in front of the New York Stock Exchange, October 25, 1929.

Ullstein picture | Getty Images

President-elect Joe Biden’s Covid spending plan could restore financial conditions leading up to the Wall Street crash of 1929, with rising inflation possibly causing the bursting of an “epic” stock market bubble, according to a hedge fund manager.

The comments come shortly after Biden outlined the details of a $ 1.9 trillion bailout to help households and businesses through the coronavirus pandemic.

David Neuhauser, executive director of the small Chicago-based hedge fund Livermore Partner, said Biden’s spending plan was an attempt to mimic the “roaring 20s” by getting people back on the workforce quickly.

“But be careful, the ‘roaring 20s’ led to the stock market crash and the Great Depression in 1929. So be careful what you want,” he added.

If the American Rescue Plan is passed by the new democratically-controlled Congress, it will include $ 1 trillion in direct aid to households, $ 415 billion to fight the virus, and approximately $ 440 billion to small businesses.

“We don’t just have an economic need to act now – I think we have a moral obligation,” Biden said Thursday as he announced his plan from his interim headquarters in Delaware.

The former vice president is due to be inaugurated on January 20th.

US President-elect Joe Biden speaks out on January 14, 2021 at the Queen Theater in Wilmington, Delaware, on the public health and economic crises.

Jim Watson | AFP | Getty Images

When asked if investors should be concerned that the president-elect’s spending plan could lead to an event like the stock market crash of 1929, Neuhauser replied, “I think so.”

“You are seeing this massive $ 1 trillion deficit spending due to a pandemic that the world has naturally stopped for the past nine months, and the goals, of course, are, ‘We’re going to get a vaccine (and) we’re going to get through this,” said Neuhauser opposite CNBC’s “Squawk Box Europe”.

“We still don’t know how quickly and how quickly we can get through this. We also don’t know what global growth will look like in the years to come.”

After the stock market crash of October 29, 1929, the S&P 500 fell 86% in less than three years and did not exceed its previous high until 1954.

Neuhauser cited the expectation that US GDP (gross domestic product) could grow by 6% in 2021, but warned that growth is likely to normalize at a rate between 2% and 3% in subsequent years. An aging US population and massive corporate and national debt would also mean it’s likely a “hard road”, he said.

Neuhauser’s view, however, is not a consensus. James Sullivan, head of Asia Ex-Japan Equity Research at JPMorgan, told CNBC on Friday that Biden’s plan was more than double what the bank had expected.

So it was a “positive surprise” for the market and for general US growth in the years to come.

Separately, Goldman Sachs analysts increased their estimates of US household spending in the news in a release on Friday.

They noted that Biden’s proposal on individual stimulus payments, unemployment benefits, state tax subsidies and public health funding went further than expected, but stressed that he faced hurdles in going through Congress.

Inflation warning

US stock futures were lower Friday morning, with contracts linked to the Dow Jones Industrial Average falling 89 points while the S&P and Nasdaq both traded in negative territory. The major US indices are currently on track to close the lower week to date.

Even so, the Dow and Nasdaq posted new all-time highs for the day in the previous session, while the S&P closed around 0.81% of its record high.

“The market is trying to figure out which narrative they should go with. And in the past nine months it has risen almost in a straight line in relation to the stock markets,” said Neuhauser.

“I think what happens in the end is that (there) so much is going to be built into the market and (we) will eventually start inflationary factors coming in. Those are the things that will ultimately burst the epic bubble.”

Earlier this week, data showed that US consumer prices rose in December on a spike in gasoline prices, but underlying inflation remained relatively low. The U.S. Department of Labor announced Wednesday that its consumer price index rose 0.4% last month, after rising 0.2% in November.

In the 12 months to December, the CPI rose 1.4% after rising 1.2% in November. The numbers were largely in line with economists’ expectations.

Categories
Politics

Diana DeGette: Impeachment Supervisor Has Deep Expertise within the Home

Diana DeGette: Impeachment Manager Has Deep Experience in the House

WASHINGTON – When Spokeswoman Nancy Pelosi was looking for someone to lead the historic debate on the indictment against President Trump in late 2019, she chose a veteran Democrat who had impressed her with a tough, skilled parliamentary hand: Colorado Representative Diana DeGette.

“When I sit here in the speaker’s chair, I can only think how serious this debate is for the future of our republic,” she wrote on Twitter at the time. “The fact that I have been asked to preside over the House for this important moment in our nation’s history is truly an honor.”

Now Ms. Pelosi has reached out to Ms. DeGette again, this time as the impeachment manager, to pursue the case against Mr. Trump in the Senate. In selecting the Colorado Congressman, she selected someone with years of experience in the House of Representatives and in the Chairmanship of the Chairman.

Ms. DeGette, first elected in 1996, was the Democrats’ deputy whip for 14 years – the member of the leadership responsible for counting votes, known in Congress as the whip. She often holds the hammer in the house and turns in and out of the chair as usual.

On Capitol Hill, she carved out a niche in health policy and as a reproductive rights advocate – a legislative portfolio that dates back to her legislature in the 1990s when she wrote what was called the “Bubble Bill”, an eight-foot-long privacy bubble any person within 30 meters of a Colorado health facility, including abortion clinics. The bill survived a challenge from the Supreme Court.

She is also the author of the 21st Century Cures Act, a 2016 measure designed to help accelerate the development of medical products and bring new innovations and advances to patients who need them faster and more efficiently. It was among the last bills that President Barack Obama signed.

When the Democrats recaptured a majority of the House in 2018, Ms. DeGette announced her intention to run for the top whip, which would have made her the number 3 Democrat in the House. But she eventually withdrew from the race, referring to the “internal pressure” of the Democrats to align themselves behind the existing leadership triumvirate of Ms. Pelosi. Representative Steny H. Hoyer of Maryland, the majority leader; and Representative James E. Clyburn of South Carolina, the current whip.

On Tuesday, she said she was “honored” to help with this second impeachment.

“Trump has shown that he is a real threat to this country,” she wrote on Twitter. “I look forward to doing my part to remove him from office immediately.”