Month: December 2020

Authored by Lance Roberts via RealInvestmentAdvice.com,

In February, Institutional Investor published a brilliant piece entitled “Asset Manager B.S. Decoded.” As we approach the year-end of 2020, succeeding in 2021 may come down to navigating the “market lingo” successfully.

“A handy translation guide to the sales jargon and IR excuses that one family office chief is sick of hearing.” – Institutional Investor 

What They Say Versus Mean

• Now is a good entry point = Sorry, we are in a drawdown.

• We have a high Sharpe ratio = We don’t make much money.

• We have never lost money = We have never made money.

• We have a great backtest = We are going to lose money after we take your money.

• We have a proprietary sourcing approach = We invest in whatever our hedge fund friends do

• We are not in crowded positions = We missed all the best-performing stocks.

• We are not correlated = We are underperforming while the market keeps going up.

• We invest in unique uncorrelated assets = We have an illiquid portfolio that can’t be valued.

• We are soft-closing the fund = We want to raise as much money as we can right now.

• We are hard-closing the fund = We are definitely open for you.

• We are not responsible for the bad track record at our prior firm = We lost money but are blaming all our ex-colleagues

• We have a bottom-up approach = We have no idea what markets are going to do.

• We have a top-down process = We think we know what markets will do but really, who does?

• The markets had a temporary mark-to-market loss = Our fundamental analysis was wrong, and we don’t know why we lost money.

• We don’t believe in stop-loss limits = We have no risk management.

There is a lot of truth to the list and many more examples from IPO’s to SPAC’s. To successfully navigate the markets in 2021, we need to understand what we are dealing with.

Wall Street Is A Business.

The “business” of any business is to make a profit. Wall Street makes profits by building products to sell you, whether it is the latest “fad investment,” an ETF, or bringing a company public. While Wall Street tells you they are “here to help you grow your money,” three decades of Wall Street shenanigans should tell you differently.

I know you probably don’t believe that, however, but take a look at a survey of Wall Street analysts. It is worth noting where “you” rank in terms of their concern and compensation.

Not surprisingly, you are at the bottom of the list.

While the translation is satirical, it is also more than truthful. Investors often only hear what they “want” to hear. However, actions are often quite different, along with the eventual outcomes.

So, what can you do about it?

The 2021 Investing Guidelines.

You can take actions to curb those emotional biases, which lead to eventual impairments of capital. The following activities are the most common mistakes investors repeatedly make, mostly by watching the financial media, and what you can do instead.

1) Refusing To Take A Loss – Until The Loss Takes You.

When you buy a stock, it should be with the expectation that it will go up – otherwise, why would you buy it?. If it goes down instead, you’ve made a mistake in your analysis. Either you’re early or just plain wrong. It amounts to the same thing.

There is no shame in being wrong, only in STAYING wrong.

Such goes to the heart of the familiar adage: “let winners run, cut losers short.”

Nothing will eat into your performance more than carrying a bunch of dogs and their attendant fleas, both in terms of actual losses and in dead, or underperforming, money.

2) The Unrealized Loss

From whence came the idiotic notion that a loss “on paper” isn’t a “real” loss until you actually sell the stock? Or that a profit isn’t a profit until you sell the stock? Nonsense!

Your portfolio is worth whatever you can sell it for, at the market, right at this moment. No more. No less.

People are reluctant to sell a loser for a variety of reasons. For some, it’s an ego/pride thing, an inability to admit they’ve made a mistake. That is false pride, and it’s faulty thinking. Your refusal to acknowledge a loss doesn’t make it any less real. Hoping and waiting for a loser to come back and save your fragile pride is just plain stupid.

Realize that your loser may NOT come back. And even if it does, an investment down 50% has to regain 100% to get back to even. Losses are a cost of doing business, a part of the game. If you never have losses, then you are not trading correctly.

Take your losses ruthlessly, put them out of mind and don’t look back, and turn your attention to your next trade.

3) More Risk

It is often touted the more risk you take, the more money you will make. While that is true, it also means the losses are more severe when the tide turns against you.

In portfolio management, the preservation of capital is paramount to long-term success. If you run out of chips, the game is over. Most professionals will allocate no more than 2-5% of their total investment capital to any one position. Money management also pertains to your total investment posture. Even when your analysis is overwhelmingly bullish, it never hurts to have at least some cash on hand, even if it earns nothing in a “ZIRP” world.

Such actions give you liquid cash to buy opportunities and keep you from having to liquidate a position at an inopportune time to raise cash for the “Murphy Emergency:”

This is the emergency that always occurs when you have the least amount of cash available – (Murphy’s Law #73)

4) Bottom Feeding Knife Catchers

Unless you are adept at technical analysis and understand market cycles, it’s almost always better to let the stock find its bottom on its own and then start to nibble. Just because a stock is down a lot doesn’t mean it can’t go down further. A significant multi-point drop is often just the beginning of a more considerable decline. It’s always satisfying to catch the low tick, but it’s usually by accident when it happens. Let stocks and markets bottom and top on their own and limit your efforts to recognizing the fact “soon enough.”

Nobody, and I mean nobody, can consistently nail the bottom or top ticks.

5) Averaging Down

Please don’t do it. For one thing, you shouldn’t have the opportunity as a losing investment should have already gotten stopped out.

The only time you should average into any investment is when it is working. If you enter a position on a fundamental or technical thesis that proves correct, it is generally safer to increase your stake in that position on the way up.

6) Don’t Fight The Trend

Yes, some stocks will go up in bear markets and stocks that will go down in bull markets, but it’s usually not worth the effort to hunt for them. The vast majority of stocks, some 80+%, will go with the market flow. And so should you.

It doesn’t make sense to counter trade the prevailing market trend. Don’t try and short stocks in a strong uptrend and don’t own stocks that are in a strong downtrend. Remember, investors don’t speculate – “The Trend Is Your Friend”

7) A Good Company Is Not Necessarily A Good Stock

Some great companies are mediocre investments, while some poor quality companies have been great stocks over a short time frame. Try not to confuse the two.

While fundamental analysis will identify great companies, it doesn’t take into account market and investor sentiment. Analyzing price trends, a view of the “herd mentality,” can help determine the “when” to buy a great company that is also an outstanding stock.

8) Technically Trapped

Amateur technicians regularly fall into periods where they tend to favor one or two indicators over all others. No harm in that, so long as the favored indicators are working, and keep on working.

But always be aware of the fact that as market conditions change, so will the efficacy of indicators. Indicators that work well in one type of market may lead you badly astray in another. You have to be aware of what’s working now and what’s not, and be ready to shift when conditions change.

There is no “Holy Grail” indicator that works all the time and in all markets. If you think you’ve found it, get ready to lose money. Instead, take your trading signals from the “accumulation of evidence” among ALL of your indicators, not just one.

9) The Tale Of The Tape

I get a kick out of people who insist that they’re long-term investors, buy a stock, then anxiously ask whether they should bail the first time the stock drop a point or two. More likely than not, the panic was induced by listening to financial television.

Watching “the tape” can be dangerous. It leads to emotionalism and hasty decisions. Try not to make trading decisions when the market is in session. Do your analysis and make your plan when the market is closed. Turn off the television, get to a quiet place, and then calmly and logically execute your plan.

10) Worried About Taxes

Don’t let tax considerations dictate your decision on whether to sell a stock. Pay capital gains tax willingly, even joyfully. The only way to avoid paying taxes on a stock trade is not to make any money.

“If you are paying taxes – you are making money…it’s better than the alternative”

The Law Of Change

Don’t confuse genius with a bull market.

It’s hard not to make money in a roaring bull market. Keeping your gains when the bear comes prowling is the hard part. The market whips all our butts now and then, and that whipping usually comes just when we think we’ve got it all figured out.

Managing risk is the key to survival in the market and ultimately in making money. Focus on managing risk, market cycles, and exposure.

The law of change states: Change will occur, and the elements in the environment will adapt or become extinct, and that extinction in and of itself is a consequence of change. 

Therefore, even if you are a long-term investor, you have to modify and adapt to an ever-changing environment; otherwise, you will become extinct.

To navigate through this complex world, we suggest investors need to be open-minded, avoid concentrated risks, be sensitive to early warning signs, constantly adapt and always prepare for the worst.”

– Tim Hodgson, Thinking Ahead Institute

Investing is not a competition.

It is a game of long-term survival.

Start by turning off the mainstream financial media. You will be a better investor for it.

I wish you a prosperous and happy 2021.

US index futures and global stocks rose for a fourth straight day, hitting new all time highs on Tuesday after the Democrat-controlled House sided with Trump and passed a bill boosting stimulus payments for most Americans from $600 to $2,000 (which will almost certainly die in the Republican-controlled senate). The dollar dropped while oil and 10Y yields rose.

At 07:30 am ET, Dow E-minis rose 129 points or 0.43%, S&P 500 E-minis gained 16 points or 0.43% and Nasdaq 100 E-minis added 46.25 points or 0.36%.

Boeing added 0.6% in pre-market trade as American Airlines was set to restart U.S. 737 MAX commercial flights on Tuesday morning. Apple was up 0.6% before the bell, set to open at $137.44 and extending a rally that has returned it near record levels. The stock rose 3.6% on Monday and closed at a record, though it fell short of an intraday peak of $137.98 set in September. The iPhone maker has gained 86% this year, and it is set to close out a second straight year with a gain above 80%

The late December rally comes just as expected, with a seasonal analysis conducted at the start of the month showing that the last 10 days of December – already the strongest month for stocks which are up 74% of the time with an average return of 1.3%…

… tend to be the most bullish for stocks.

US cash indexes closed at a new all-time highs on Monday, with pandemic-battered stocks leading the gains after Trump signed a long-awaited $2.3 trillion fiscal bill, restoring unemployment benefits to millions of Americans and averting a federal government shutdown. Goldman Sachs Group Inc. upgraded its first-quarter U.S. economic growth forecast because of the measure. The S&P is looking at its best fourth-quarter performance since 2011 as investors returned to economically-sensitive stocks from the so called ‘stay-at-home’ plays on hopes of economic recovery.

Adding to stimulus optimism, on Monday the Democratic-led House of Representatives approved a proposal to increase the COVID-19 payment checks to $2,000 from $600, sending the measure for a vote in the Republican-controlled Senate on Tuesday, where it faces a much tougher path for approval.

“Where we are right now in the equity market is somewhat of a sweet spot,” Michael Cuggino, president and portfolio manager at Permanent Portfolio Family of Funds, said on Bloomberg TV. “We’ve got stimulus, likely more on the way. You’ve got great comps on earnings going into next year with respect to equities, and you have a pent up demand situation as the economy both in the U.S. and globally comes out of Covid.”

On the coronavirus front, more restrictions are being imposed to fight the spread of the new, more infectious strain. Covid-19 hospitalizations in the U.S. reached new highs, while Southern California plans to extend a regional stay-at-home order. South Korea’s daily toll of fatalities rose to a record, while Thailand reported its first virus death since November.

The MSCI World Index was up 0.4% with US futures tracking broad-based gains in Europe and overnight in Asia.

In Europe, the Stoxx 600 rose 0.9%, with every subsector apart from banks in the green. The FTSE 100 rose 2.1%, on course for its fourth straight day of gains in the first session since the U.K.’s Christmas Eve trade deal with the European Union. Lenders including Lloyds Banking Group Plc and NatWest Group posted losses amid an uncertain future for the City of London. Britain’s blue-chip shares led regional markets higher.

“Multinationals, who are the likeliest beneficiaries of frictionless, tariff-free trade, and overseas currency earners are generally leading the charge in the FTSE 100,” said Russ Mould, investment director at AJ Bell. Propping up the London market were banks and other financial services. “This suggests that nerves remain over what deal will be struck in 2021 when it comes to financial services and indeed services overall.”

Analysts have gotten more upbeat on the FTSE 100, raising their 12-month forward price target by about 2.2% this month versus about 1.6% for the DAX.

Also among the gainers was drugmaker AstraZeneca buoyed by news its COVID-19 vaccine is set to be granted emergency use approval within a few days by the UK government. The launch of the European Union’s vaccination program, hoping to end the widespread lockdowns that have stalled economies across the bloc, saw that positive sentiment shared with the continent, where beaten-down travel and leisure stocks rose 2.3%.

Earlier in the session, Asian stocks also rose for a third day, helped by a rebound in Chinese internet stocks and bullish sentiment, most notably in Japan, following the passage of a U.S. stimulus bill. A recovery in shares of Tencent and Meituan, which had been falling amid antitrust scrutiny of Alibaba, helped the MSCI Asia Pacific Index gain 1%, the most since Dec. 1. Japan’s Nikkei 225 rallied 2.7% to surpass the 27,000 yen mark for the first time in three decades. It was the best day for the gauge in more than six months, with gains contributed by SoftBank Group and Uniqlo operator Fast Retailing, which hit another record high. New Zealand’s benchmark jumped 1.6%, while stocks in Australia also rose as both markets resumed trading after a holiday. The Philippines’ benchmark index rose in its last trading day for 2020, but finished the year down 8.6%. Malaysia was among the few markets that bucked the region’s rising trend, falling 0.5% as shares in glove makers dragged the index lower. Indonesian shares also declined.

In rates, treasuries were cheaper but traded inside Monday’s ranges as U.S. trading got under way amid gains for stocks globally fueled by U.S. stimulus agreement and Brexit relief; S&P 500 futures set a new record. Treasury 10-year notes were cheaper by less than 2bp at 0.94%. Yields are higher by less than 3bp across the curve ahead of record $59b 7Y auction at 1pm ET, final event in this week’s coupon supply cycle. Yields on European government debt edged lower, with blue-chip 10-year German bond yields at 0.57% and riskier Italian, Spanish and Portuguese yields also lower.

In FX, demand for riskier assets weakened the U.S. dollar, which is often seen as a safe-haven asset. It was down 0.2% against a basket of currencies and eyeing the 18-month low hit in November. Shorting the dollar has been an extremely popular trade, with Reuters reporting that short positions on the dollar swelled in the week ended Dec. 21 to $26.6 billion, the highest in three months. Among other currencies, sterling rose 0.4% against the dollar, reversing two days of losses, while the euro climbed for the third day in a row, up 0.3%, also buoyed in part by talk of an EU-China trade pact.

In commodities, the prospect of even more stimulus and higher demand helped boost oil prices with Brent crude futures and U.S. West Texas Intermediate both up around 1.2%.  A sluggish dollar bolstered gold prices, which rose 0.4%.

No major economic data releases or U.S. company earnings are expected

Market Snapshot

• S&P 500 futures up 0.5% to 3,745.75
• MXAP up 1% to 196.89
• MXAPJ up 0.5% to 645.95
• Nikkei up 2.7% to 27,568.15
• Topix up 1.7% to 1,819.18
• Hang Seng Index up 1% to 26,568.49
• Shanghai Composite down 0.5% to 3,379.04
• Sensex up 0.5% to 47,608.42
• Australia S&P/ASX 200 up 0.5% to 6,700.29
• Kospi up 0.4% to 2,820.51
• Brent Futures up 0.9% to $51.32/bbl
• Gold spot up 0.5% to $1,882.77
• U.S. Dollar Index down 0.3% to 90.08
• STOXX Europe 600 up 1.1% to 403.06
• German 10Y yield fell 0.6 bps to -0.571%
• Euro up 0.2% to $1.2241
• Brent Futures up 0.9% to $51.32/bbl
• Italian 10Y yield fell 4.6 bps to 0.428%
• Spanish 10Y yield fell 0.9 bps to 0.041%

Top Overnight News

• Republicans will likely block Democrats’ attempts to have the Senate follow the House in boosting stimulus payments for most Americans to $2,000, even though President Donald Trump backs the bigger checks.
• The trade deal that both sides of the English Channel say reflects a new era of cooperation is essentially a sideshow for the City of London, which is still awaiting its own seal of approval from the European Union.
• European governments are planning to track the number of people getting Covid-19 vaccines to help chart a path out of the crisis.

US Event Calendar

• 9am: S&P CoreLogic CS 20-City MoM SA, est. 1.0%, prior 1.27%; YoY NSA, est. 6.95%, prior 6.57%

Submitted by Cointelegraph

Major cryptocurrency exchange Coinbase will suspend trading for XRP in response to the SEC taking legal action against Ripple.

According to a blog post published late on Monday by Coinbase chief legal officer Paul Grewal, the exchange will fully suspend XRP trading starting on Jan. 19 at 10:00 am PST. Coinbase clarified that “trading may be halted earlier as needed” to maintain the exchange’s market health metrics. In addition, the suspension will reportedly not affect Ripple-backed Flare Network’s upcoming Spark (FLR) token airdrop.

“The trading suspension will not affect customers’ access to XRP wallets which will remain available for deposit and withdraw functionality after the trading suspension,” said Grewal. “We will continue to support XRP on Coinbase Custody and Coinbase Wallet.”

The U.S.-based exchange is the largest so far to take a position on XRP following the Dec. 22 announcement that the SEC will charge Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen with conducting an “unregistered, ongoing digital asset securities offering.”

Earlier today, crypto exchange OKCoin announced that it will suspend XRP trading and deposits beginning on Jan. 4. Bitstamp stated it will halt XRP trading for U.S. residents, while smaller exchanges including OSL, Beaxy and CrossTower announced they will take similar actions against trading the token.

Some crypto users are anticipating other exchanges falling in line like dominoes to delist or suspend trading of XRP now that a major player like Coinbase has taken a position on the token.

“You will soon see Kraken, Bittrex, Genesis, Grayscale and other members of the Crypto Rating Council delist it too,” said Twitter user PratikKala. “Liquidity will dry up and the remaining market makers in Asia will have to exit it too.”

Grayscale Investments may have already have distanced itself from XRP. According to Twitter user “ShardiB2,” the firm is reportedly ending subscriptions for its XRP Trust by announcing it would no longer accept new subscriptions or process pending ones. The Grayscale website declares that “The Grayscale XRP Trust private placement is currently closed.”

Following the Coinbase announcement, the price of XRP immediately dropped nearly 30%, falling from $0.28 to $0.20 at the time of publication. This is the latest in a series of bearish movements for the token, the price of which has fallen more than 50% since the SEC announcement.

 

Authored by Peter Koenig via GlobalResearch.ca,

The Middle East Eye reports there are no gold mines under Dubai’s sands with artisanal miners or children toiling away trying to strike gold. But there is the Dubai Gold Souk and refineries that vie with the largest global operations as the United Arab Emirates (UAE) strives to expand its position as a major gold hub.

In recent years, the UAE, with Dubai in particular, has established itself as one of the largest and fastest-growing marketplaces for the precious metal, with imports rising by 58 percent per annum to more than $27bn in 2018, according to data collated by the Observatory for Economic Complexity.

With no local gold to tap, unlike neighboring Saudi Arabia, the UAE has to import gold from wherever it can, whether it be legitimately, smuggled with no questions asked, sourced from conflict zones, or linked to organized crime.

Blood Gold

The Sentry’s investigation (Sentry Investigations specialize in private and corporate investigations in the UK) found that 95 percent of gold officially exported from Central and East Africa, much of it mined in Sudan, South Sudan, the Central African Republic and the Democratic Republic of Congo, ends up in the Emirates.

Gold has become so important to Dubai’s economy that it is the emirate’s highest value external trade item, ahead of mobile phones, jeweler, petroleum products and diamonds, according to Dubai Customs.

And it is the UAE’s largest export after oil, exporting $17.7bn in 2019. 

Gold’s importance has only increased as Dubai’s oil reserves have dwindled and the UAE has tried to diversify its economy.

The Swiss connection

Dubai is not the only gold player with dirt, and even blood, on its hands.

“It is not just Dubai, it’s also Switzerland. The Swiss get large quantities of gold from Dubai. The Swiss say they are not getting gold from certain countries [connected to conflict gold], but instead from Dubai, yet the gold in Dubai is coming from these countries. Dubai is complicit, but Swiss hands are equally dirty as they can’t cut Dubai from the market,” said Lakshmi Kumar, policy director, at Global Financial Integrity (GFI) in Washington DC.

Switzerland is the world’s largest refiner, while [more than half] of all gold goes through the country at some point, according to anti-corruption group Global Witness. Switzerland’s trade is tied to the UK, which imports around a third of all gold.

 

PressTV: Gold has become such an important commodity for the UAE, that it is the largest export after oil, exporting $17.7bn in 2019. But there is the other side to this story. A report by the UK’s Home Office and Treasury earlier in December also named the UAE as a jurisdiction vulnerable to money laundering by criminal networks because of the ease with which gold and cash could be moved through the country. Is this the case?

Peter Koenig: First, International Gold Laundering is a gigantic Human Rights abuse, foremost because laundered gold stems from many countries in Africa and South America where massive child labor is practiced. Children not only are put at tremendous risk working in the mines, in narrow rickety underground tunnels that could collapse anytime, and often do – but they are also poisoned on a daily basis by chemicals used in extracting gold ore from the rock, notably cyanide and mercury – and others.

Second, Gold laundering is an international crime, because it illegal and it is mostly run by mafia type organizations – where killing and other type of violence, plus sexual abuse of women – forced prostitution – is a daily occurrence.

There should be an international law – enforceable – issued by the UN – and enforced by the International Criminal Court against anything to do with gold laundering. Infractions should be punished. And countries involved in gold laundering should be held responsible – put on a black list for illegal financial transactions and for facilitating human rights abuses.

The United Arab Emirates – has no gold, so all of the $17.7 billion of their gold exports is being imported and “washed” by re-exporting it mainly through the UK into Switzerland and other gold refining places, like India.

With a worldwide production of about 3,500 tons, there are times when Switzerland imports more gold than the annual world production, most of it coming from the UK, for further refining or re-refining, for “better or double laundering” – erasing the gold’s origins.

From the refinery in Switzerland, it goes mostly into the banking system or is re-exported as “clean” gold coming from Switzerland. And its origins are no longer traceable.

Worldwide about 70% of all gold is refined in Switzerland.

Gold mine production totaled 3,531 tons in 2019, 1% lower than in 2018. About 70% of all gold, worldwide is refined in Switzerland. So, it is very likely that the UK, receiving gold from United Arab Emirates, re-exports the gold to Switzerland, for re-refining, for further export to, for ex. India. – Coming from Switzerland it has the “label” of being clean. How long will this reputation still last?

Metalor is the world’s largest gold refinery – established in Switzerland. And they are absolutely secretive, do not say where they buy their gold from, because the Swiss Government does not require the origin when gold enters Switzerland.

Once it is refined – the origin can no longer be determined, because gold does not have a DNA.

PressTV: The Sentry’s investigation found that 95 percent of gold officially exported from Central and East Africa, much of it mined in Sudan, South Sudan, the Central African Republic and the Democratic Republic of Congo, ends up in the emirate, through what’s known as blood gold:  gold obtained through brutal mining practices and illicit profits, including the use of children, how do you see this?

PK: Yes, this is absolutely true.

As mentioned already before – much of the gold from Africa / Central Africa, Ghana and South America, notably Peru, is blood gold. Of course, it passes through many hands before it lands in a refinery in the UK, Switzerland or elsewhere, and therefore is almost untraceable.

But, the company that buys the gold, like Metalor, they know exactly where the gold is coming from, but, as mentioned before, since the Swiss government does not require the importing company to divulge the origin of the gold – the human rights abuses will never come to light, or better – to justice.

It is estimated that up to 30% of all gold refined in Switzerland is considered blood gold. Imagine the suffering, disease, and even death – or delayed death through slow reacting chemicals like cyanite and mercury.

However, if there is no international law – a law that is enforced – that puts the criminals to justice – and put countries that facilitate gold laundering on an international list – for the world to see – and hold them accountable, with for example financial sanctions, little will change.

EU nations unanimously backed the deal worked out by negotiators from London and Brussels, a sign that the last-minute deal – the text of which was released on Saturday – is on track to become binding international law.

Or at least, so one might think.

Brussels bureaucrats (along with a chorus of sell-side analysts covering the pound) have pointed out in the days since the deal was struck that it isn’t over yet. And as at least one top British official pointed out earlier today, UK businesses might be in for a “bumpy ride” (especially the financial services industry).

As we await a pair of last minute Dec. 30 votes in Brussels and London, here’s a rundown of the biggest unresolved issues that could potentially upend the deal, either before the vote, or after it has been approved.

* * *

Level Playing Field

A deal over the so-called level playing field, creating the conditions for fair competition between businesses, was one of the thorniest parts of negotiations. The agreed compromise means the U.K. doesn’t have to align with EU laws, but the bloc can impose proportionate tariffs, subject to arbitration, if it can show Britain’s actions have distorted fair competition.

This means the question of levies on U.K.-EU trade is still far from settled and is a live issue. One of the central arguments of the campaign to leave the bloc was that Britain would “take back control” of its own laws, and euroskeptic members of Boris Johnson’s Conservative Party have called on the prime minister to seize the opportunity to slash regulations.

The deal also contains a “review” clause which allows either side to periodically re-negotiate this part of the treaty if they are unhappy with how it is being used. The trade deal could therefore still collapse in future if the U.K. or EU decide it isn’t working out.

Finance

The deal offers little clarity for financial firms. There is no decision on so-called equivalence, which would allow firms to sell their services into the EU’s single market from the City of London. The agreement only features standard provisions on financial services, meaning it doesn’t include commitments on market access. Johnson told the Sunday Telegraph the deal “perhaps does not go as far as we would like“ on financial services, in a rare admission his strategy in the talks had fallen short.

The Treasury is due to negotiate a memorandum of understanding with the EU as an urgent priority in 2021 and London will continue discussions with Brussels over access and equivalence for financial services, Chancellor of the Exchequer Rishi Sunak said on Sunday.

Data The U.K. and EU have only agreed a temporary solution to keep data flowing between their territories. For an interim period of a maximum of six months, data can continue to be transferred until a separate legal agreement is reached. EU officials have said a so-called data adequacy decision, which would certify that U.K. data protection standards are comparable with the bloc’s, could be made in early 2021.

Fish

The Brexit trade deal contains a five-and-a-half year transition period for fisheries, during which British fleets will see an uplift equal to 25% of the catch previously caught by EU boats in U.K. waters. After that, access will be subject to annual negotiations.

The agreement gives both the U.K. and EU the right to levy duties on each other’s fish if they can show that any future reduction in access to waters causes economic or social harm.

There was an angry response from fisherman to the compromise, with the National Federation of Fishermen’s Organisations describing it as a “betrayal.” Fishing was a totemic issue in the Brexit campaign and they will pressure the U.K. government to drive a hard line when the next talks come around.

Gibraltar

The U.K. and EU are still yet to come to an agreement over Gibraltar, the British territory connected to mainland Spain. Without a deal, crossing the frontier could be more difficult, which could cause long queues for commuters and significant economic disruption. About 15,000 workers cross the border every day.

Any attempt by Spain to erode or even end British control of the territory has long raised the hackles of Conservative lawmakers, including former leader Iain Duncan Smith, and they will fight hard to stop the U.K. giving any concessions.

* * *

Source: Bloomberg