Market update: Once mighty GE dropping like a stone, India set to become a major energy consumer

14 Nov

by Mihály Tatár

 

Good Morning!

 

  • Trading remained slow even on Tuesday (SPX +0.10%, DAX -0.40%, Nikkei +0.11%, Shanghai +0.06%, EURUSD 1.1670), as investors were waiting for signals from the US (CPI figures, a Yellen speech, and a returning Trump commenting on the tax reform process). With no geopolitical news, oil traders gradually locked in more profits (WTI 56.60, Brent 63 USD), also attributed to a Citi analysis that without prolonged Saudi-Russia supply cuts, prices will collapse (typical analyst talk, in my personal opinion, the better question is whose interest would be a significantly lower oil price, and I just can’t see anybody out there). While mostly unnoticed, the Turkish Lira quietly weakened further (EURTRY 4.53, it used to trade at 2.20 in 2012), and the victim of the day was the once mighty General Electric, dropping 8.5% (-40% YTD), as it cut its divinded for only the second time since 1938 and the CEO delivered a massively underwhelming turnaround plan. (’The reset’ basically means that GE will concentrate on much fewer areas, mostly on industrial manufacturing like medical equipment, making large divestments from locomotives to oil-field equipment producer Baker Hughers. Even its traditional lighting products, started by Thomas Edison, will be abandoned). In the meantime, as expected, Venezulea defaulted even officially (S&P cut its rating to SD), after even the hard-to-shock creditors of the country called the Monday meeting ’surrealistic’. (It is somewhat ironic, by the way, that the country with the world’s largest oil reserves defaults on missed 200 million USD payments. One has to wonder what had happened with socialism without the oil.)

 

  • In its annual report, the International Energy Agency argued that renewable energy (mostly wind and solar power) will continue to grab a bigger market share and overtake coal in electricity generation by 2040. (This would be big news – renewables enjoyed a much better press than their actual industrial weight). The IEA also noted that input prices are dropping dramatically in renewables (solar panels, wind farm parts, batteries), and that electricity drew more investment than fossil fuel last year for the first time. It’s also worth mentioning – somewhat contradicting the report, in my view – that India’s energy demand is forecasted to rise dramatically, to 11% of world energy (!), including its oil demand, which will soon surpass China’s. This will be hard to cover, even if firms start to lay solar panels on the Moon.

 

  • In a show of the shape of things to come, as overly generous pension plans start to unravel in the US (of all places!), Democrats are now proposing legislation that would allow struggling pension funds to borrow from the US Treasury to remain solvent. While it’s doubtful Republicans would back such a dangerous project (the bill would even create a Pension Rehabilitation Administration within the US Treasury), the growing pressure on lawmakers won’t go away as demographics bites – and of course the US is in a much better shape than Europe in this regard.

 

Have a nice day,

Mihály

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