Fri, 23rd June 2017

Anirudh Sethi Report


Archives of “June 13, 2017” Day

Riyadh Doubles Price of Cigarettes to Recoup Lost Oil Cash

Saudi Arabia has introduced a new tax on cigarettes and energy drinks that has led to a 100-percent price hike, as the kingdom continues to struggle with sunken oil prices.

The newly introduced tax has cranked up prices on cigarettes and energy drinks across Saudi Arabia, according to various media reports. Prices for carbonated drinks have been increased by 50 percent as well.

The introduction of what has been dubbed a “sin tax” is officially meant to discourage consumption of harmful products that are likely to cause health problems, and will eventually increase medical expenses that are paid in part by the government, according to the official website of the country’s General Authority of Zakat and Tax (GAZT).

“We’ve communicated with the business sector and have set up many workshops to introduce the selective tax both at the GAZT and the Chamber of Commerce,” GAZT spokesperson told Arab News.

Under the new regulations, a pack of cigarettes costs between $4 and $6. Days before the introduction of the tax, smokers tried to buy up as many packs as they could, while shops did all they could to hide the merchandise from customers until after the new regulations came into effect.

As for energy drinks, they are now being sold with a warning, written both in Arabic and English, that reads, “This product does not have any health benefits. Consuming more than two cans a day may negatively affect your health.”

Bill Gross: “All Markets Are Increasingly At Risk”

Picking up where he left off last week, when Bill Gross told Bloomberg that U.S. markets are at their highest risk levels since before the 2008 financial crisis “because investors are paying a high price for the chances they’re taking”, in his latest monthly investment outlook, the Janus Henderson bond manager says that investors should be wary as low interest rates, aging populations and global warming which inhibit real economic growth and intensify headwinds facing financial markets:

 Excessive debt/aging populations/trade-restrictive government policies and the increasing use of machines (robots) instead of people, create a counterforce to creative capitalism in the real economy, which worked quite well until the beginning of the 21st century. Investors in the real economy (not only large corporations but small businesses and startups) sense future headwinds that will thwart historic consumer demand and they therefore slow down investment.

Lamenting the onset of the new normal era, Gross says that “because of the secular headwinds facing global economies, currently labeled as the “New Normal” or “Secular Stagnation”, investors have resorted to “making money with money” as opposed to old-fashioned capitalism when money and profits were made with capital investment in the real economy”

OPEC cuts 2017 non-OPEC oil supply growth forecast to 840k bpd vs 950k bpd prev

OPEC out with its monthly bulletin 13 June

  • non-OPEC oil supply f/cast cut after output deal extension
  • OPEC’s 11 members with supply targets cut output in May to 29.729mln bpd
  • May oil output rises 336k pm to 32.14 mln bpd led by nations exempt from supply cut pact

As I’ve said before, what a sorry circus.

  • OECD oil inventories fell in April to stand at 3.005bln barrels,
  • 251mln barrel above 5year average
  • decline expected to continue
  • OECD and floating oil stocks indicates market rebalancing is underway but at a slower pace


Putin Meets With Ethereum Founder To Create National Virtual Currency

Two weeks ago, in our latest comparison of Bitcoin and its up and coming competitor, Ethereum, we said “step aside bitcoin, there is a new blockchain kid in town.” Actually, we said that for the first time back in February when Ethereum was still trading in the low teens (the return on ETH since then is roughly 3000%), but the most recent glance provided some perspective on where the competition between the two largest cryptocurrencies may culminate, because according to at least two venture capitalists, the market cap of Ethereum – currently roughly $35 bilion – and whose share of the market has been soaring, will surpass that of Bitcoin, at ~$43 billion although it changes by the second, sometime before the end of 2018.

Two things: first, at the current rate of gains in Ethereum market share (and loss in Bitcoin’s), the inflection point between the two will come not in months, or weeks, but perhaps days.

UBS Has Some Very Bad News For The Global Economy

At the end of February we first highlighted something extremely troubling for the global “recovery” narrative: according to UBS the global credit impulse – the second derivative of credit growth and arguably the biggest driver behind economic growth and world GDP – had abruptly stalled, as a result of a sudden and unexpected collapse in said impulse.

As UBS’ analyst Arend Kapteyn wrote then, the “global credit impulse (covering 77% of global GDP) has suddenly collapsed” and added that “as the chart below shows the ‘global’ credit impulse over the last 18 months is essentially mainly China (the green shaded bit), which even now is still creating new credit at an annualized rate of around 30pp of (Chinese) GDP. But the credit impulse is the ‘change in the change’ in credit and even the Chinese banks could not sustain the recent extraordinary pace of credit acceleration. As a result: whereas back in Jan ’16 the global credit impulse was positive to the tune of 3.8% of global GDP (of which China comprised 3.5% of global GDP) it has now fallen back to -0.1% of global GDP (China’s contribution is -0.3% of global GDP).”

Overnight US Market :Dow closed -36 points ,Nasdaq Composite -32 points.

The Nasdaq index was down nearly 100 points at the low but is ending the day down only -32.45 points or -0.52% at 6175.46.  The low for the day reached 6110.66. The high extended to 6183.809.  The other major indices did not have as volatile a ride.

  • The S&P Index fell -2.38 points or -0.10% to 2429.40. The low extended to 2419.97. The high reached 2430.38.
  • The Dow is finishing the day at 21235.67, down -36.30 points or -0.17%. The high reached 21277.08 while the low extended to 21186.15.
In he US debt market, the yields traded above and below the unchanged level.
  • 2 year 1.3510%, up 1.6 bp. The high reached 1.3551%. The low 1.3347%
  • 5 year 1.778%, up 1.1 bp. The high reached 1.7879%. The low 1.7516%
  • 10 year 2.211% up 1.0 bp. The high reached 2.215%. The low 2.1848%
  • 30 year 2.8671% up 1.1 bp. The high reached 2.872%. The low 2.835%.