Comment of the Day
Travel Schedule - Future Minerals Forum 2023
I have accepted the Saudi Arabian government's invitiation to attend the Future Minerals Forum again this year. I am due to fly out Monday evening and will arrive in Riyadh on Tuesday evening with a stop in Frankfurt along the way. I expect to be back in Dallas Friday afternoon. I expect to keep up with the publishing schedule but the time I post articles will be affected by travel.
At present, I have meetings arranged with the CEOs of Polymetal, Alien Metals, Perseus Mining, Pyx Resources, Aurora Minerals Group, Silver X Mining, Goviex Uranium, Kuya Silver, Esper Satellite Imagery, Saudi Gold Refinery with more to come. If subscribers have any questions they would like me to ask just let me know.
Video commentary for January 3rd 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: China bounce led by autos, Nasdaq declines led by autos, Europe and UK bounce one lower energy prices, Dollar strong, gold holds half advance, bonds firm,
IMF's Georgieva Expects Third of World to Suffer Recession
This article from Bloomberg may be of interest to subscribers. Here is a section:
“We expect one-third of the world economy to be in recession,” Georgieva told CBS (NYSE:CBS)’s ‘Face the Nation’ in an interview aired Jan. 1. “Why? Because the three big economies — US, EU, China — are all slowing down simultaneously.”
The IMF already warned in October that more than a third of the global economy will contract and that there is a 25% chance of global GDP growing by less than 2% in 2023, which it defines as a global recession.
Examining the three biggest economies on CBS, Georgieva painted a mixed picture of their ability to withstand the downturn.
While “the US may avoid recession,” the European Union has been “very severely hit by the war in Ukraine — half of the EU will be in recession next year,” she said. At the same time, China faces a “tough year.”
Eoin Treacy's view - The negative economic consequences of the war in Ukraine were rapidly priced into European stocks last year. However, a crisis needs to be seen to be getting worse, if it is to continue to exert an influence on prices.
How Early Exercise Order Flow Impacts Equity Option Put/Call Ratios
Thanks to a subscriber for this article from the Cboe which may be of interest. Here is a section:
Historically, dividend related ITM [Ed. In-the-money] call exercises have resulted in some of the highest call volume days of the year, including March 15, 2012, when a record 9M calls traded in SPY, but changes to the clearing process since then have dampened that activity.
Mathematically, the decision to exercise a call or put early is related to the extrinsic value of the contract. For calls, if the dividend(s) amount exceeds the extrinsic value, a long holder is usually better off exercising. For puts, the decision is a bit more subtle, with extrinsic value compared to the carry cost on the strike. As U.S. interest rates have increased sharply to decade-highs this year, the cost of carry for deep positions has increased, while the selloff in many popular stocks has resulted in large blocks of deep put open interest. Unlike dividend-related call exercises, which tend to happen quarterly, put exercise dynamics may repeat daily if positions are open. In practice, put exercises are more common on Wednesdays based on the timing of settlement. Puts exercised on a Wednesday result in a stock sale on Thursday, which settles Monday.
Fortunately, early-exercise candidate call and put strikes for all listed products are calculated intraday and available in a subscription product on the Cboe DataShop.
A sample from the file for December 7 shows that all the active Amazon deep put strikes were considered optimal to exercise as of 2 p.m.
Eoin Treacy's view - Large volumes of options traded in single stock names is a function of how much liquidity is still circulating the market. Massive volume in Tesla was a major factor in the stock’s ability to defy gravity in 2021. The opposite condition has been evident in Amazon, where outsized appetite for shorts has resulted in the share being among the worst performers in Q4.
War and Currency Statecraft
Thanks to a subscriber for this report by Zoltan Pozsar for Credit Suisse. Here is a section:
Eoin Treacy's view - A link to the full report is posted in the Subscriber's Area.
The topic of geopolitics and the world order is endlessly surprising because it does not submit readily to a formulaic approach. In fact, it is just when one thinks the future is most visible, that events transpire to muddy the outlook.
Eoin's personal portfolio: stock market index positions closed at profit and shorts opened December 6th 2022
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.