Comment of the Day
19th January 2023
Video commentary for January 19th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: stocks weak, dollar hits news low so commodities steady, bonds yields likely to contracat over the balance of the year.
This section continues in the Subscriber's Area.
Email of the day on volatility and the difference between trading versus investing
Just six or seven days ago you commented that the recovery could go on for two to three months, now (apparently) you are waiting for the Vix to hit 50 so indicating a bottom of the market.
Sometimes your commentary is as volatile as the markets you are reporting on!
Eoin Treacy's view
Thank you for this email and I apologise for mixed messaging. Let me take this opportunity to try and be clearer.
In last night’s audio and video commentary I highlighted the fact that major lows don’t generally form until the VIX Index spikes to around 50. By major low I mean the ultimate low in a medium-term downtrend; as in 18-month to 3-year bear market. Along the way there will be several short covering rallies and they can last for a couple of months at a time.
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Nearly 2% of Global Copper Supply at Risk in Peruvian Unrest
This article from Bloomberg may be of interest. Here it is in full:
Protests in Peru are threatening to choke off access to almost $4 billion worth of copper just as China’s emergence from Covid lockdowns promises to boost demand.
Peru’s third-largest copper mine, Las Bambas, hasn’t dispatched copper concentrate since Jan. 3 due to security concerns. Glencore PLC (LSE:GLEN)’s Antapaccay is also facing restrictions. The mines, which share the same highway access to ports, together account for nearly 2% of the world’s copper output.
Unrest has rattled Peru since the ouster and arrest of former President Pedro Castillo, upending commodity supply chains from metals to organic coffee. The disruption comes at a particularly precarious moment for copper markets. Inventories stand at historically low levels while miners warn demand for the world’s most critical metal is poised to skyrocket with the growing electrification of vehicles.
Base-metal prices have been on a bull run since New Year’s after China, a top consumer, abruptly abandoned Covid-19 controls. Prices settled Wednesday at a seven-month high on the London Metal Exchange. Goldman Sachs (NYSE:GS) Group Inc. predicts ongoing deficits and forecast a record price of $11,000 a ton within 12 months.
Las Bambas, whose operator MMG Ltd. is controlled by state-owned China Minmetals Corp., has been the target of multiple demonstrations since it opened in 2016 as indigenous groups seek greater compensation for land and roads used by mining companies.
Eoin Treacy's view
Social unrest is a significant issue in several Latin American countries. The reality on the ground is local communities have learned to agitate for better deals from miners through tapping into global activist talking points.
Buzzwords like indigenous rights, climate activism, environmental laws, water use, remediation, road congestion and social services funding all represent themes for protestors.
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US Poised for Dutch, Japanese Help on China Chip Crackdown
This article from Bloomberg may be of interest to subscribers. Here is a section:
“I commend the Biden administration for working with our partners to apply export controls on equipment used to make advanced semiconductors and am eager to scrutinize the specifics of what comes out of these talks,” Texas Representative Michael McCaul, who chairs the House Foreign Affairs Committee, said in a statement to Bloomberg News. “A Republican Congress is ready to use its authorities to protect U.S. national security and defend human rights, should the outcomes not substantially match the controls currently in place.”
McCaul is set to meet with Raimondo to discuss the matter on Thursday. It’s uncertain how long it will take the other countries to implement their measures.
“It could even be something which just happens without big announcements,” Rutte said in the interview. “It’s still not clear. It depends a bit on how the discussions with various countries will evolve.”
After the US announcement in October, some American companies were forced to warn investors that they may lose out on billions of dollars in future China revenue. Since then, they’ve argued it also exposes them to losing market share, if overseas competitors are allowed to continue to operate in China relatively unrestricted.
Tokyo Electron has said the general clampdown on its Chinese customers is already hurting business, while ASML has said that demand elsewhere in the world for its most advanced products can make up for any revenue shortfall from China.
Eoin Treacy's view
Despite the friendlier sounds coming from Chinese and American diplomats, the trajectory of the trade war has not changed. It is still the clear ambition of the US government to curtail China’s ability to compete technologically. It is viewed by both sides of the political divide as a national security priority.
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Eoin's personal portfolio: trading long stopped out and reversed, commodity long closed, bond investment position increased January 18th 2023.
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.
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