Europe Market snapshot* at lunchtime Stocks weaken in Europe, Vix rises 8% to 19.00 FTSE 100 -0.06% DAX -0.38% CAC 40 -0.03% FTSE MIB 0.21% IBEX 35 0.20% Stoxx 600 -0.21%

*Courtesy of Market Watch

Crude Oil Prices – 70 Year Historical Chart adjusted for inflation.

Interactive charts of West Texas Intermediate (WTI or NYMEX) crude oil prices per barrel back to 1946. The price of oil shown is adjusted for inflation using the headline CPI and is shown by default on a logarithmic scale. The current month is updated on an hourly basis with today’s latest value. The current price of WTI crude oil as of July 23, 2021 is $72.07per barrel.

courtesy of:

https://www.macrotrends.net/1369/crude-oil-price-history-chart

Comment:

At these levels some of the ME producing nations are breaking even at a country level i.e. they are just able at this level to fund their economies. Others such as Iran are a good distance from break even levels.

GIC reduced its bond & cash holdings to 45% of assets from 50% and plans to reduce further given the prospect for higher yields/lower prices for fixed income. GIC said bonds and cash represent “guaranteed low returns” as opposed to potentially low returns offered by other assets.

https://www.gic.com.sg

Chief Executive Officer Lim Chow Kiat said the bond market poses a universal problem for all investors, reflecting a longer-term, low-return theme that GIC NSE 1.01 % has touched on for several years.

GIC may not be the only institutional investor trying to work out how to overcome the faltering performance of traditional 60/40 portfolios, but it’s certainly one of the largest. Its leaders have repeatedly warned that both the juice and the safety bonds once promised are eroding, which in turn will hurt total returns.

Read more at:
https://economictimes.indiatimes.com/markets/bonds/one-of-the-worlds-biggest-investors-reducing-bond-holdings/articleshow/84672135.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Comment:

Reminding oneself all the time that GIC and other large sovereigns continue to hold large parts of their enormous portfolios in fixed income and cash, so it is not wise to ditch all the bonds you are invested in and it is probably unwise to get too exotic and look for alternatives which you wouldn’t have thought about investing in 5 years ago. Don’t chase rainbows!

NOTE: This commentary is not to be construed in any way to be financial advice.

Irelands competitiveness is lacking in the key areas of ICT adoption (49th place) and infrastructure (40th place) as recorded in the World Economic Forum 2019 Global Competitiveness Index of 141 economies. With Irelands tax advantage reduced basic infrastructure will matter more.

WEF Ireland Scores on Index

See WEF Index report:

http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf

Poor Broadband and General Internet Connectivity

As highlighted here previously Ireland scores poorly in broadband and general internet connectivity compared to all of the advanced nations in the EU. Connectivity is at the heart of establishing a competitive advantage in FDI as well as normal utility for users.

Poor Mobility and Transport Infrastructure

Ireland achieves poor scores on EU Mobility & Transport infrastructure indicators. A modern efficient state needs the best infrastructure.

If Ireland is to consolidate the progress made in financial services and Fintech generally the Government will need as a matter of urgency address the shortfalls in investment in these areas. As global tax rates converge this competitive advantage will disappear and Ireland will have to revert to reliance upon fundamentals. The time available to fill these gaps is rapidly being used up while others including Netherlands, France and Luxembourg and others are busy improving their infrastructure.

Irish navy is in crisis not enough staff, underpaid, not enough ships, existing ships not available and asking for EU help, Irish fisheries being exploited meanwhile Ireland sits on the UN Security Council making earth shattering decisions on Mali and Syria.

Irish navy rescuing migrants in the mediterranean

Now that the pandemic may soon start to fade from the public arena at least to some extent, reality will begin to set in again, and Irish politicians will have to look for other excuses to explain away Ireland service gaps including most importantly defence and security. It is the responsibility of the minister of Defence to ensure the security of the state and not to worry too much about security problems in the middle east or the Sahel. It is inexplicable to leave the Irish defence forces in their current state while attending meetings in New York. According to Simon Coveney “The United Nations is at the heart of Irish foreign policy”. And there you have it, Ireland would seem to be more interested in UN policy than Irish defence.

The Irish defence forces are not in good shape and government would appear to prefer to spend time around the UN Security Council in preference to paying attention to the business of defending our borders, our fisheries and our own citizens. Certainly in terms of the rhetoric reporting on the UN Security Council seems to attract more attention.

See Tom Clonans report in the Journal.ie below

https://www.thejournal.ie/readme/defence-forces-in-crisis-5213752-Sep2020/

“We are the only country in the EU that cannot monitor its own airspace by primary radar. Nor can Ireland patrol its own airspace with even the most basic jet interceptors”. 

Various reports in the media and elsewhere have already adequately covered the poor state of the Irish defence forces, the inability to attract and retain staff, the poor pay and conditions and the lack of commitment for successive governments to support our land, sea and air defences. This is extraordinary as the security of the state is the first duty of any government.

While the practice of sending one of the forces precious ships out to the Mediterranean has been discontinued it is probably true to say that if Angela Merkel mentioned the need to bring more migrants into Europe the Irish government would be the first lot to respond with offers of support and assistance.

Garda police force is one of the smallest in Europe at approx 280 per 100,000 inhabitants. Northern Ireland has 380 per 100,000. Statistics on Garda force not made available to Eurostat for 3 consecutive years.

Despite the Garda force numbers allegedly reaching an all-time high recently the force numbers are one of the lowest in Europe. In addition the numbers of armed officers is lower than the European norm.

https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Police,_court_and_prison_personnel_statistics

Clearly the population of Northern Ireland will not feel confident in the effectivenesss of the Garda in the event of any attempt to seek a united Ireland. In recent statements by Varadkar, Coveney or Martin no mention has been made about these anomalies and what the Irish government intends to do to address these gaps.

Irish grocery prices (food and beverage) are 10% higher than the European average and 23% higher than the UK.

https://ec.europa.eu/eurostat/statistics-explained/index.php?title=File:Price_level_index_for_food_and_non-alcoholic_beverages,_2020_(EU%3D100)_v1.png

Roger Bootle respected economist on Brexit: “On balance the worst fears of Remainers about our trading relationships have not been realised…with regard to the City of London…the worst fears of pessimists have not been realised and it is clear that they are not going to be”

On trade agreements Bootle said: “we have managed to roll over nearly all of the EU’s existing FTAs with other countries. The pessimists had argued we would find this extremely difficult — they were wrong”.

Overall, he says “the big picture is that Brexit has made relatively little difference”; “it is clear that, … unemployment hasn’t soared, nor has the housing market plunged into an abyss, as the 2016 Treasury assessment of Brexit warned would happen”.

Looking forward, he says “All along, I believed that the aspect where freedom from the EU’s constraints could potentially make the most difference was regulation”; “We have scope to introduce a more friendly regulatory regime governing new industries, including robotics and artificial intelligence. As the EU continues to follow the precautionary principle and to favour existing producers over new ones, and over consumers, our regulatory divergence here could eventually be of great value.“

On a different tack, The Times reports on a Deloitte study that argues there’s an “investment boom on the horizon” The study predicts that hiring and investment will hit their highest level in almost seven years. In a survey of 107 of the country’s largest companies, Deloitte found that 71% plan to increase investment and 76% plan to increase hiring.

Opponents of Brexit argued that it would present a severe and long-lasting economic shock. If there was a shock (and that is arguable), it happened in January and was over by February. Today, the short-term negative impacts on Brexit have proven almost invisible.

It’s interesting how people seem to perceive data differently. Bootle claims to have been “struck” by how many erstwhile Remainers think Brexit has already proven an “economic disaster”.

Ireland has a very poor score on broadband and general internet connectivity compared to all of the advanced nations in the EU. Connectivity is at the heart of establishing a competitive advantage in FDI as well as normal utility for users.

Digital Economy and Society Index 2020, Connectivity

In the most recent DESI report from the EU Ireland scores well in some aspects of internet services, in particular the recent improvement overall in digitisation is in the top 6 countries in the EU for the take up of this important part of normal modern society. However in the crucial area of infrastructure for broadband coverage Ireland score very poorly, situated in the bottom 6 of 26 alongside Czech republic, Hungary and Cyprus. The real rivals for example in the fintech sector such as Luxembourg and Holland are in the top 5.

See the report prepared by the EU commission entitled:

Digital Economy and Society Index (DESI) 2020

https://digital-strategy.ec.europa.eu/en/policies/desi

The Irish government should acknowledge these shortcomings and concentrate spending on this area in preference to spending money on unnecessary budgetary items in compliance with for example non essential UN mandates. Any money that the Irish government borrows should be prioritised for this type of investment over other politically preferable shorter term commitments.

Ireland achieves poor scores on EU Mobility and Transport infrastructure indicators A modern efficient state needs the best infrastructure the Irish govt should concentrate on improvements and competence in infrastructure delivery rather than posturing to electorate.

How does Ireland measure up? In comparison to the EU average Ireland generally score at the average or more often below remembering that the EU averages are dragged down by eastern European states. In comparison to for example with Portugal, Ireland scores lower than Portugal in all measured categories bar one.

https://ec.europa.eu/transport/facts-fundings/scoreboard/countries/ireland/investments-infrastructure_en

Ireland has to choose between abdicating real responsibility for the provision of state services such as the infrastructure of transport and communication rather than the easier option of funding ad nauseam unelected NGO organisations which no longer look after essential services but look after their own agendas. This will involve choices between giving €5Bn away to non governmental organisations and their overpaid CEOs and actually taking serious decisions to establish and improve the essential infra structure of a modern state using both the public service and the private sector.