Five Global Currencies That Are Closely Tied To Commodities

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Some of the major countries in the world are commodity based economies.Heavy dependence on commodity exports affects the relative value of their currencies. The five currencies that are closed tied to commodities are:

1.Australian Dollar – Australia is the world’s largest producer and exporter of iron ore. Demand for the ore strongly impacts the Australian dollar value.

2.Canadian Dollar – Crude oil is the largest export product in terms of revenues to the government. Rising oil prices positively impact the Canadian currency.

3.Russian Ruble – As one of the largest exporters of oil and natural gas, the prices of these commodities directly impact the Russian Ruble.

4.Colombia Peso – Oil is the major export product and the major contributor of revenue to the government.

5.Peruvian Sol – Peru is a major copper producing and exporting country. The country is the second largest exporter of Copper after Chile. Copper price movements have an impact on the Sol.

Source: 5 World Currencies That Are Closely Tied to Commodities, U.S. Funds

Interest Payments on National Debt: Chart

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The current US National Debt is over $15.7 Trillion or 15,760,417,329,521.12 to be exact as of Sept 20, 2018 according to the US Treasury. The interest due on this huge mountain of debt is also huge. According to an article, the interest on this debt accounts for 7.4% of the US Federal Budget making it the fifth largest budget item. The only four expenses that are larger than the interest payments are Social Security benefits ($987 billion), military spending ($874.4 billion), Medicare ($582 billion), and Medicaid ($400 billion) according to a piece in The Balance.

As the accumulated debt continues to grow year after year so does the interest paid. The chart below shows the interest payments since 1950:

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Source: FRED, St. Louis Fed

Here is another chart with recessions noted:

Source: Palisade Research

Rising interest rates should further exacerbate the interest issue. As the economy continues to grow the US should try to payoff and reduce outstanding public debt.

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Robot Density in Emerging and Developed Countries

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Automation is being embraced by many industries across the world. No longer automation simply involved using robots to perform complex physical and dangerous tasks in the industrial sector. Today robots are used not only for physical tasks but also for cognitive tasks according to a report on automation by Deutsche Bank. The author Jim Reid notes the following in the fascinating report:

There are differences with this coming automation revolution. Today’s robots are automating cognitive tasks rather than the physical tasks they have done in the past. But given the weight of historical evidence in favour of automation, the burden of proof  should lie on those who argue against automation improving our lives rather their those who embrace it in the hope of higher living standards.

So we say, learn to love your robot colleague. In this edition of Konzept we look at the future of automation from different angles. Our cover feature expands on the macroeconomic discussion but a common thread throughout is that robots and automation will complement humans and make the world a different place. They will not destroy the fabric of work. One statistic to consider: In 1907, Britain had 40,000 cars on the road. By 1939, this had risen to 2,000,000. Today, it is ten times that number. Could robots be the 21st century version of the car?

In terms of robot density China leads the emerging world. Robot usage has grown significantly from 2009 to 2016 as shown in the chart below:

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In the developed world, South Korea leads in robot density followed by Germany and Japan. US still lags in the use of robots. 

 

Though robot use is growing in China and other developing countries, they still have a long way to go before catching up with the developed world.

Source: Automation – not a job killer, Will I take your job …… or work with you?, June 2018, Konzept, Deutsche Bank

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Foreign Stocks To Watch: Money-Laundering Danske and Declining Deutsche Bank

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Foreign stocks in the news and to watch for the following week are listed below. Additional links for items of interest are also included.

  • Denmark’s Danske Bank(DNKEY) is involved in a massive money-laundering fraud at its Estonian branch. The CEO quit and the stock may suffer for months to come.
  • The German government is in favor of merging problem-ridden Deutsche Bank(DB) with Commerzbank AG.
  • Investors need to keep an eye on rising oil prices and oil stocks. The OPEC meeting held today in Algiers ended without any commitment to increase supply. Oil producers’ stocks may continue their upward trend.
  • Indian stocks plunged dramatically last week only to recover strongly on the same day. Banks were especially hit hard with some crashing as much as 50%.

Click to enlarge

Museu Nacional d’Art de Catalunya, Barcelona

Disclosure: Long DNKEY

U.S. Stocks Are Overvalued based on Price to Sales Ratio: Chart

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U.S. equities are reaching record highs and some investors are wondering how long the current bull market will last. The S&P 500 is up by over 9% on price basis YTD. Currently the P/E ratio of the index is 25.38. Based on the price to sales ratio stocks are reaching the levels last reached during the dot-com era as the chart below shows:

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The S&P 500’s price-to-sales (P/S) multiple is approaching dot-com era highs, suggesting the market may be expensive at current levels. Its trailing 12-month price-to-sales ratio surged to 2.25 recently, the highest since early 2000. And it’s not just tech giants skewing the data: The median P/S ratio for index members is more than twice the level of the dot-com peak.

Source: Fidelity

Related ETFs:

  • SPDR S&P 500 ETF (SPY)
  • S&P MidCap 400 SPDR ETF (MDY)
  • SPDR Consumer Discretionary Select Sector SPDR Fund (XLY)
  • SPDR Consumer Staples Select Sector SPDR Fund (XLP)
  • SPDR Energy Select Sector SPDR Fund (XLE)
  • SPDR Financials Select Sector SPDR Fund (XLF)
  • iShares Dow Jones Select Dividend ETF (DVY)
  • SPDR S&P Dividend ETF (SDY)
  • Vanguard Dividend Appreciation ETF (VIG)

Disclosure: No Positions