Comment of the Day
Video commentary for March 17th 2022
A link to today's video commentary. is posted in the Subscriber's Area.
Some of the topics discussed include: quantitative tightening creates deflation, questions remain about the extent of China's stimulus, Renminbi is too firm for large stimulus and the dollar is too weak if the market actually believes supply is going to be constrained. stocks continue to steady.
Bridgewater Executive Says Markets Pricing In "Magical Scenario"
This article from Bloomberg may be of interest to subscribers. Here is a section:
Stock and bond markets are betting on a “magical scenario” where economic expansion continues even while the Federal Reserve raises rates to combat inflation, said Bridgewater Associates executive Karen Karniol-Tambour.
“If you look at history, that looks pretty unlikely,” Karniol-Tambour, the firm’s co-chief investment officer for sustainability, said Thursday in a Bloomberg Television interview.
She recommended that investors buy Treasury inflation-protected securities as well as commodities to hedge against rising prices and said nominal bonds are the “worst possible thing” investors can hold.
Last month, Karniol-Tambour said the Fed would struggle to contain inflation even if it decided to raise rates five times this year. The central bank hiked by a quarter of a point Wednesday and signaled it would raise rates at each of its six remaining meetings this year.
She added that current economic and financial conditions echo those of the 1970s, when high inflation was coupled with a geopolitical shock.
“It’s just not pleasant to be in the Fed’s shoes and tighten into an exogenous supply shock in commodities that has to do with geopolitical events,” she said.
My view - If the Fed begins to reduce the size of its balance sheet next month at a faster pace than the last time they attempted it, deflation will follow. There have only been a couple of examples of central banks reducing the size of their balance sheets. Every one has resulted in deflationary fears and sharply lower growth.
Trafigura Seeks PE Funding as Commodity Surge Triggers Margin Calls
This article from Bloomberg may be of interest to subscribers. Here is a section:
Trafigura Group, one of the world’s top oil and metals traders, has been holding talks with private equity groups to secure additional financing as soaring prices trigger giant margin calls across the commodities industry.
Trafigura has in recent weeks stepped up efforts to seek new funding from beyond its traditional group of bank lenders, according to people familiar with the matter.
The trader held talks with Blackstone Inc. for an investment of around $2 billion to $3 billion in preference shares or a similar hybrid instrument, but those talks ended without a deal, said the people, who asked not to be identified as the discussions were private. Trafigura has also approached Apollo Global Management (NYSE:APO) Inc., BlackRock Inc (NYSE:BLK). and KKR & Co., the people said.
The discussions with private equity firms have been broad-based, ranging from financing for specific projects to raising funding at a company level, the people said. There’s no certainty any of the discussions will progress to a deal, they said.
My view - Trafigura emerged from the last commodity bull market as the leader in commodity trading. As investment banks closed desks, sold warehouses and ships, the trading house stepped in and took market share. Today, most of the big trading houses for commodities are privately owned. They also do not have the balance sheets of banks. When volatility steps out to multiple standard deviations, models go awry.
Moderna Therapeutics Inc (NASDAQ:MRNA) kicks off Phase 1 trial of 3 different mRNA HIV vaccines
This article from NewAtlas may be of interest to subscribers. Here is a section:
“Finding an HIV vaccine has proven to be a daunting scientific challenge,” said NIAID director Anthony Fauci, in a statement announcing the Phase 1 trial. “With the success of safe and highly effective COVID-19 vaccines, we have an exciting opportunity to learn whether mRNA technology can achieve similar results against HIV infection.”
The Phase 1 trial will enroll around 100 healthy adults, with the initial goal of evaluating the safety and immune responses to three different mRNA vaccine formulations. Each subject will receive three doses of their assigned mRNA formulation over a six-month period.
In the same way mRNA COVID-19 vaccines are designed to train the immune system to respond to the spike protein on the surface of SARS-CoV-2, these experimental vaccines focus on the HIV equivalent of the spike protein antigen target, known as an envelope glycoprotein trimer.
This protein on the surface of HIV particles is much more complex that the coronavirus spike protein, so Moderna has developed three different mRNA formulations to test, each encoding for a slightly different protein architecture.
The trial is expected to run until mid-2023. By that point it is hoped one of the three formulations will have demonstrated robust immune responses and Phase 2 trials can commence.
My view - This announcement holds out promise that an intransigent health issue can be addressed with a shot. It also highlights the fact that rushed permitting for COVID-19 vaccines is not about to be repeated. If the trials schedule discussed in the above article is followed, it will be a decade before a potential solution reaches market. It is also likely to be held to a much higher standard of proof.
The Chart Seminar June 6th & 7th in London
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Eoin's personal portfolio: equity index long closed at a small loss March 1st
One of the questions subscribers as most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.