Comment of the Day
4th August 2023
AUG 15
Vimeo commentary for August 14th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: China high yield continues to trend lower, Renminbi at an important area of potential support, oil steady, gold and dollar test their MAs, Nasdaq-100 firms on strong NVDA performance and speculation China will export deflation. Treasury yields continue to firm on issuance angst.
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Email of the day on nuclear energy
I am a pre-subscriber, but I was a little underwhelmed by the portion of today's first item, from David Brown, that I have access to.
He doesn't say who the "real expert" that he quotes on the new energy system is. A nuclear power station is a controlled version of a nuclear bomb, thus the enormous amount of energy available. I fully concede that today's power stations are completely safe in their operation. But of course, there is the question of safe disposal of the waste, which the extract doesn't address; and also the security required for that waste, to prevent it getting into rogue hands.
It is irritating to have statistics such as coal being 4000×, gas 100× and hydro 30× more dangerous than nuclear, without any detail as to how these figures are calculated (although that detail would require a lot more space).
Just because someone writes in such a haughty fashion doesn't necessarily make him an expert. Top scientists usually write with courtesy, and with a degree of humility, acknowledging that they could still be wrong, since the world of atoms and nuclei may still have some surprises up its sleeve for us.
I do concede, however, that, since I do not have access to the full discussion, some of these points may have been raised there.
Many thanks Eoin, for the commentary that I do have access to. Your commentary on extracts often clarifies points which seemed obscure, and is always full of common sense!
Eoin Treacy's view
Thank you for this question and if you are interested in a deeper discussion then I encourage you to subscribe. In short, the data about nuclear safety is well understood. However, the perception of safety is very different. For example, spending your life breathing in noxious fumes is much more likely to lead to health complications than living near a nuclear power plant.
This kind of statistic is akin to the fact you are more likely to be killed crossing the road than in a plane crash. The simple fact is we are less intimidated by the familiar. If we have the will to change, it will happen. The primary question is as a society do we want to talk about decarbonizing, or do we want to do something about it?
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Email of the day on quantitative tightening
What is your opinion on the latest figures of the Fed's policy of quantitative tightening?
Eoin Treacy's view
Quantitative tightening remains a central part of the Fed’s tool kit as they attempt to bring inflationary pressures back to an acceptable level.
The Fed’s balance sheet continues to contract and moved to new reaction lows a month ago. The process is slow relative to the accumulation phase between the low in 2019 and the peak in 2022 and it will continue until deflationary forces replace inflationary fears.
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JPMorgan Sees 'Vicious Cycle' as Top China Trust Misses Payment
This article from Bloomberg may be of interest. Here is a section:
Missed payments on multiple high-yield investment products by a major Chinese shadow lender may trigger a “vicious cycle” for property developers’ financing and more delinquencies for trust products, JPMorgan Chase & Co (NYSE:JPM). warns.
Liquidity stress is intensifying for indebted developers and their non-bank creditors after a unit of Zhongzhi Enterprise Group Co., one of China’s largest private wealth managers, failed to deliver on-time payments for multiple products, the US bank’s analysts including Katherine Lei wrote in a report Monday.
About 2.8 trillion yuan ($386 billion), or 13% of China’s total trust assets, may see rising default risks, given their exposure to the property industry and local government debt, the report says. Up to 80% of local government financing vehicles may not be able to repay their debt principals, JPMorgan estimated.
“The trust defaults may set off a vicious cycle on POE (privately-owned enterprise) developers’ onshore debt,” the analysts wrote. “This follows that rising concern of developer defaults weakens investment sentiment and, as a result, trust companies may not be able or willing to roll over existing real estate-related products.”
Eoin Treacy's view
When Chinese investors talk about trusts, they are a totally different product to what most global investors are accustomed to in their home markets. Trusts in China ballooned in popularity about a decade ago. They were set up as a way for wealthy private individuals to get guaranteed and outsized returns from investing in property. The sales pitch highlighted how the government never allowed defaults, so investment was risk free. Just how inaccurate that statement is has been highlighted on several occasions over the last several years.
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Eoin's personal portfolio: two investment positions opened August 1st 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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