(MENAFN- ProactiveInvestors)Modi Seeks Russian Crown Jewel in Biggest Defense Deal Here is the opening from this interesting article from Bloomberg: Indian Prime Minister Narendra Modi heads to Moscow after approving what's set to be his nation's biggest weapons deal with Russia since 2001 reaffirming a military partnership that newer suppliers like the U.S. will find difficult to dislodge. The S-400 air defense missile systems which India plans to buy are among the "crown jewels" of Russia's defense capability according to Jon Grevatt Asia-Pacific defense-industry analyst for IHS Jane's. The two-day visit starting Dec. 23 will also include a private dinner with Russian President Vladimir Putin and an event at the Kremlin with Russian and Indian chief executives. "Russia and India have a very strong partnership that the U.S. can only aspire to" said Grevatt. "Sales from America may ebb and flow but the sales from Russia will remain strong because there are so many ongoing programs between the two countries." The $150 billion that Modi plans to spend to upgrade his military could be a welcome diversion for Putin who's bracing for a second year of recession amid Western sanctions. Although the U.S. emerged as India's biggest defense supplier last fiscal year the Asian nation's links with Russia stretch back to their Soviet-era ties. David Fuller's view This is bold of Modi who is clearly a global player leading a country that is likely to become the next superpower before 2025. I assume price was a factor because the Dollar is currently the world's strongest currency while the Ruble has weakened considerably losing over half its value against the Greenback since the oil price collapse. Finland Should Never Have Joined Euro Foreign Minister Says Here is the opening of this informative report from Bloomberg: Finland should never have signed up to the single currency union according to its foreign minister. With the northernmost euro member now set to become the bloc's weakest economy the question of currency regime continues to resurface as Finland looks for explanations for its lost competitiveness. Time Soini who is also the leader of one of three members of the ruling coalition the anti-immigration The Finns party says the country could have resorted to devaluations had it not been for its euro membership. The comments come as a former foreign minister gathers signatures in an effort to force the government to hold a referendum on euro membership. While polls still show most Finns don't want to go through the process of exiting the currency bloc there are signs that a plurality of voters think they would be better off outside the euro. Debate on the subject 'will gather steam' Soini who rose to power on a platform of euro-skepticism said in Helsinki on Tuesday. But he also warned that a referendum 'wouldn't provide solutions' here and now to Finland's economic woes. 'The fact is that Finland is a member of the euro area.' The country has seen its economy sink following the decline of a consumer electronics business once led by Nokia Oyj and a faltering paper industry with political efforts to create new growth motors so far failing. David Fuller's view Is the Euro popular within any EU country I have not seen a regional poll on this topic but I doubt it. Sure people like the freedom of travel within the EU without having to use a different currency in the countries visited. That is a good argument for retaining the Euro as a financial or commercial currency as I have mentioned before. However I suspect that most EU citizens feel that their own countries would be better off they reintroduced their previous currencies while remaining members of the former European Free Trade Association. National currencies would inevitably range in value against the Euro in line with domestic circumstances. For instance a reintroduced Finnish Markka would depreciate against the Euro to help Finland's economy regain its economic momentum. The former German Deutschmark would most likely appreciate against the Euro particularly when inflationary pressures next increase. I do not expect a reintroduction of former national currencies within the EU at least not anytime soon because it does not fit the zeitgeist of the region's unelected bureaucrats. Moreover elected politicians within the EU appear resigned to masochistically running their losses. Nevertheless criticisms of the EU by its member states once unheard of are now commonplace. Similarly rebellion against EU policies is increasing within member countries as we recently saw with France abandoning deficit constraints in addressing terrorist attacks in Paris. Many EU countries are now making up their own rules regarding the mishandled migrant crisis. Governments which ignore their electorates in following EU regulations are punished in the polls. We are witnessing the beginning of a potentially lengthy breakup of the EU perhaps before it even reaches its federal stages which few people support. Email of the day On the SNP: A brief note to wish you and your family a happy Christmas and a not too exacting 2016. Up here the SNP's record since 2007 continues to hit the buffers with the latest disaster being the closure of the Forth Road Bridge as a result of some questionable decisions by the Transport Minister. Of more interest from a political standpoint was an article in The Scottish Daily Mail which suggested that SNP candidates in one of its heartlands were worried at the performance of the Conservatives in a local election. It is early days to call a change in direction but it would appear that the fall in the oil price is having an effect along with a recovery in the fortunes of the Conservatives. With best wishes David Fuller's view Many thanks for your Christmas greetings which I return in kind and also for this update on events in Scotland which is much appreciated. I do not see how the SNP can build an enticing future on Scotland's oil the removal of Trident or the Eurozone's appeal. Anti-English sentiment has a longer history but Scotland's Conservative Party has a good leader in Ruth Davidson. The Weekly View: 2016 Outlook Highlights: Shifting Gears My thanks to Rod Smyth for his excellent timing letter. It is posted in the Subscriber's Area but here is a brief sample: US STOCKS: We believe the bull market in US stocks will remain in place but we only expect single-digit annual returns. We anticipate a prolonged but slow expansion which is shifting gears as wages start to grow. This is better for economic growth than for earnings as higher wages pressure already high margins and the strong dollar remains a headwind for global companies. We expect mid-single-digit returns from the S&P 500 as we believe current valuations put a restraint on the upside potential. Within our portfolios we currently like homebuilders and bank stocks; we recently added oil services to increase our energy holdings which we underweighted in 2015. In contrast we are avoiding utilities and REITS which are highly sensitive to interest rates. We are cautious on retailers and healthcare stocks. David Fuller's view So how does this forecast tally with subscribers' views and our own outlook This item continues in the Subscriber's Area. The Markets Now Monday 18th January 2016 5:30pm to 8:30pm followed by refreshments and conversation. Note - this Markets Now will be held at The Caledonian Club 9 Halkin St London SW1X 7DR. David Fuller's view Here is the brochure for the next Markets Now session and just click on the map to see The Caledonian Club location in more detail. Iain Little's sessions on Investment Trusts have become increasingly interesting and relevant he will also address the last two bullet points in the brochure. Iain's partner Bruce Albrecht will also be attending. David Brown will be talking about the dramatic transformation underway in the Healthcare sector to which he is a hands-on contributor. When I last saw David he had just returned from South Tibet with many photos of the charity for orphans which he co-founded. He had also written a paper on the latest anti-aging research findings. He was so interesting on these subjects that I persuaded him to show a few of the photos from Tibet and also briefly mention anti-aging which has a 30-year swing factor which most people can control for themselves. I will be asking delegates to help me with my challenging talk of opportunities and risks for markets in 2016 plus the Eurozone and 'Grexit' questions in the first three bullet points. What the Fed rate hike could mean to mortgage borrowers This informative article by Kathy Orton at the Washington Post may be of interest to subscribers. Here is a section: It is likely that uncertainty in the global economy will continue to put downward pressure on long-term rates. The Mortgage Bankers Association is predicting the interest rate for 30-year fixed-rate mortgage will be around 4.8 percent at the end of 2016 that's an increase of less than one percent. "We have a fairly weak global economy right now" said Michael Fratantoni MBA's chief economist. "You have many global investors parking their money in U.S. Treasury securities or other safe assets and that is keeping our longer term rates lower than they otherwise would be." Despite those concerns Fratantoni is optimistic about next year's real estate market. "At some point you could get to a level of rates 6 to 6 1/2 percent that would really begin to crimp affordability and then that would be a real negative" he said. "But at this point it's going to be just a very modest headwind. Most of the other fundamentals are suggesting a very strong housing market in the year ahead." Waters agrees. Although he demurred when asked what he thought the interest rate on a 30-year fixed-rate mortgage would be at the end of the year he didn't think it would be significantly higher. "I tend to think from a 30-year fixed mortgage standpoint there's not going to be an extraordinary change" he said. "I don't think they'll go up or down more than a quarter percent at least not initially. It's not going to five [percent] and it's not going to three [percent]. We're going to stay in a tight band." Eoin Treacy's view 30-year Treasury yields moved to a new low in January and spent the rest of the year moving higher in a rangey uptrend characterised by a progression of higher reaction lows. A sustained move below 2.8% would be required to question current scope for continued higher to lateral ranging. Soaring Debt Yields Suggest Oil M&A Could Happen in 2016 This article by Liam Denning for Bloomberg may be of interest to subscribers. Here is a section: Mergers haven't taken off in the oil patch this year largely because potential targets have been banking on a rebound and potential buyers have been expecting further falls. The spike in yields for borrowers in the energy sector along with the growing acceptance that oil and gas prices likely face another year on their back should mean those opposing views finally converge in 2016 prompting some deals. What's more this chart suggests the advantage should lie with large strategic buyers like the oil majors for two reasons. First one way potential targets have been shoring up balance sheets is to sell assets rather than the entire company. But a thriving asset market requires buyers being able to raise capital at reasonable rates be they other E&P companies or private equity firms looking to snap up bargains. Asset sales have slowed already this year with just $29 billion worth in North America compared with $107 billion in 2014 according to data compiled by Bloomberg. Second with the cost of capital rising and cash harder to come by any deals struck will require at least the promise of synergies and will favor those buyers able to use their own stock as a credible acquisition currency. One reason Anadarko's approach to Apache met with such scorn was that it scattered rather than tightened the company's focus. The majors diversified anyway bring the benefit of bigger balance sheets which both alleviate any credit pressures weighing on the target and provide a clearer path to developing a smaller E&P company's reserves. Paying with shares also means that selling shareholders get to participate to some degree in the eventual recovery in oil and gas prices. Eoin Treacy's view Major oil companies have slashed exploration budgets with the result they have more capital to pick up promising assets as prices decline. Private Equity firms have amassed sizable war chests to invest in troubled energy companies but have so far been slow to make large purchases. Meanwhile sellers are hoping for a rebound so they can get a better price. With everyone appearing to bide their time a catalyst is required to encourage deal making. New compound triggers immune response to range of RNA viruses including Ebola and hep C This article by Nick Lavars for Gizmag may be of interest to subscribers. Here is a section: So a team led by scientists from the University of Washington set out to better equip the body's immune system to fight off viral RNA. It has developed a compound that targets a molecule contained in the body's cells called RIG-1. This molecule is a pathogen recognition receptor which means that it detects the presence of viral RNA and sets off an innate immune response inside the cell. This includes the expression of antiviral genes pro-inflammatory cytokines chemokines and interferons which work in collaboration to suppress and control the viral infection. By activating this immune response and promoting these weapons against infection the team was able to "significantly decrease" viral RNA in cells and suppress infectious virus reproduction. "Our compound has an antiviral effect against all these viruses" says Michael Gale Jr. University of Washington professor of immunology referring to a range of RNA viruses including West Nile dengue hepatitis C influenza A respiratory syncytial Nipah Lassa and Ebola. Eoin Treacy's view Low interest rates abundant credit and tight spreads have definitely had an impact on how successful small companies have been in raising capital to fund expansion and in seeking listings. A jump in high yield borrowing costs is likely to weigh on the ability of such companies to thrive and may offer larger better capitalised companies the opportunity to acquire promising technologies at reasonable prices. In any case the pace of technological innovation is unlikely to be affected by interest rates.
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