Comment of the Day
2nd May 2023
Eoin Treacy
May 3
Video commentary for May 2nd 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: AI winners and losers, techology versus interest rate cycles, oil and copper weak, Treasuries and gold firm, Wall Street pares losses in late trade but recession risks rising as banks break lower.
Chegg Sinks 48% as ChatGPT Threatens Growth Outlook
This article from Bloomberg may be of interest to subscribers. Here is a section:
Chegg Inc. tumbles as much as 48%, its biggest drop since November 2021, after the online educational services company warned that ChatGPT was threatening growth of its homework-help services, making it one of the first companies to highlight generative AI’s negative impact on business. Jefferies cut the recommendation on the stock to hold from buy, saying the AI overhang is starting to impact fundamentals.
Eoin Treacy's view
I’m attending the MIT Technology Review Emerging EMTech Digital conference at present. There have been some very interesting and educative presentations. The consensus is generative AI models are an innovation on the scale of the steam engine.
With that as a background, the law of jungle is clearly in effect. Microsoft is in full move “fast and break things” mode. Other companies are playing catch up and some are trying to be measured in how they consider ethics and bias. There is a widespread acceptance that the sector would not exist without Meta’s decision several years ago to open source its data.
This section continues in the Subscriber's Area.
US Vacancies Fall, Layoffs Jump in Sign of Softer Job Market
This article from Bloomberg may be of interest to subscribers. Here is a section:
Vacancies at US employers fell in March by more than forecast and layoffs jumped, indicating softening demand for workers.
The number of available positions decreased for a third-straight month to 9.59 million from nearly 10 million a month earlier, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Tuesday. That was the lowest in nearly two years and fell short of the median estimate in a Bloomberg survey of economists.
The data point to a gradual moderation in labor demand, which should eventually bring the job market into better balance and alleviate upward pressure on wages. While some companies — notably in technology and finance — have cut employees, the labor market as a whole remains resilient and has been a stalwart between the US and recession.
Eoin Treacy's view
We are a year into the hiking cycle, so it is reasonable to see some evidence of economic slowdown around now. The stress in the banking sector is mostly focused on the convexity of bond portfolios. Loan loss provisions have not been factored in yet but that is only going to make the situation worse. JPMorgan has a big balance sheet, but it can’t buy every bank.
This section continues in the Subscriber's Area.
Oil Tumbles as Low Trading Volumes Make for an "Investor Desert"
This article from Bloomberg may be of interest to subscribers. Here is a section:
“The market is an investor desert,” said Scott Shelton, an energy specialist at ICAP. “The fundamental information that generates predictable price action doesn’t exist.”
Adding to the bearish sentiment, vacancies at US employers fell to an almost two-year low in March, a fresh sign of a softening labor market. Activity in China’s export-tilted manufacturing sector missed estimates in April, a possible sign of a recession among customers in the US and Europe. And Iranian Oil Minister Javad Owji said the country has increased output to more than 3 million barrels a day, providing additional supplies to the market.
“It’s going to take some evidence in the physical market on the tightening we see in our balances before we see any more positive or committed trading activity,” Emily Ashford, an energy analyst at Standard Chartered Bank, said by phone.
Eoin Treacy's view
OPEC+ have been proactive in attempting to curtail supply to meet declining demand. There are big outstanding questions about how sustainable that policy is against a background of competing priorities inside the cartel and economic weakness among the biggest customers. Keeping supply and demand in balance is only going to become more difficult.
This section continues in the Subscriber's Area.
Eoin's personal portfolio: commodity long breakeven stop triggered April 19th 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.
This section continues in the Subscriber's Area.
© 2023 Eoin Treacy
548 Market Street PMB 72296, San Francisco, CA 94104
Unsubscribe