President Trump just wished everyone a happy Columbus Day. As the Kurds in Syria reap the murderous whirlwind of another Trump foreign policy screw up, it is a disconcerting experience to see an icon of ignorance celebrating an icon of discovery. However, in the spirit of discovery we thought it appropriate on a Nobel prize-giving day to highlight a few developments in finance which might resonate with the curious.
Let’s start with Brexit (where else…) and then flag four other statistics which caught our eye on Columbus Day:
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- Brexit negotiations enter a crunch week. The latest research from the institutional research team at Alliance Bernstein now puts the odds of an extension to the 31st October deadline at 80%. Possibly more interesting is that, if the general election is inconclusive and a referendum ensues, the chances of a win for the Remain vote are put at 70%. Clearly, the general election is now key to how Brexit plays out, with the chances of a no-deal Brexit hovering around 50%. That elevated level of risk is definitely not priced into European share prices.
There still appears to be a significant amount of hope that Brexit will end with a deal. A deal is possible in a pragmatic informed world. One is less hopeful in a world of populist politics, ignorance of facts and a casual approach to the truth. Furthermore, beware the politicians overly dependent on hope. Perhaps Alfred Nobel himself said it best.
“Hope is nature’s veil for hiding truth’s nakedness.”
- Up until this week there had been only one female winner of the Nobel Prize for the Economic Sciences in the past 50 years. Esther Duflo became the second female winner this week and is also the youngest ever winner at 46 years of age. Her prize-winning work with two colleagues (Banerjee and Kramer) used empirical research to explore the causes of poverty and the policies which actually work. Unsurprisingly, education and gender equality hurdles feature strongly in their research but it could be argued the field of economics also shares similar challenges…
- The trials and tribulations experienced by the banking sector are well known to long-suffering shareholders. What is possibly less well known is how quickly some banks are transforming their business models to survive. It might surprise those with pre-conceptions of banking inertia to read that RBS has already closed 56% of its branches in the UK.
- We have written quite frequently on the benefits of long term investing and the powerful trifecta of time, volatility and compounding. A YouGov study in the UK found that over 52% of women have never owned an investment. The number for men was 37%. Clearly, those RBS branches missed an education opportunity!
- Trade war Twitter headlines continue to drive financial markets. As the Hong Kong protests continue to simmer there is still the possibility of an additional headwind; Capital wars. China, when it isn’t bullying the NBA or Apple, could choose to weaken its currency(Yuan) and exacerbate trade tensions with the US. This will clearly have negative implications for the world’s largest trading bloc, Europe, and its companies. So which companies would be worst affected? Nowadays, thanks to super powerful processing power and modern data crunching techniques, there are analytics available to answer that specific macro question. Surprisingly, it’s not your classic German industrial which is most exposed. The UK macro analytics firm, Quant Insight, see AIB as the most exposed large cap European company to a negative move in the Chinese Yuan(CNH) versus the USD. If ever you wanted confirmation Ireland is very much a barometer of global trade this is it.
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