Comment of the Day
Video commentary for September 21st 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Fed is going to cause a recession to get inflation under control. Wall Street reverses early gain, Treasuries stable, Dollar firm, Asia to open weak, Renminbi breaking lower. Another downleg in asset prices appears likely.
Unspoken Rules
My view - I have been thinking a lot about the aspects of the market we all tend to take for granted. The types of conclusions we have been conditioned to draw, because that is always how markets work. It strikes me as a big question because we should be asking if these market norms are the result of the decades-long process of disinflation or are they rules that transfer between big secular themes.
The basic working hypothesis of the markets is the Fed will rescue its stock market. The EU will rescue its bond market and China will rescue its property market. The rationale for all three is the same. That’s what they have always done because those are the biggest asset classes owned by consumers in all three jurisdictions.
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OPEC, SPR May Make $80 the New $60 for Oil
This note from Dow Jones may be of interest.
Tightly managed supplies by the OPEC-plus group and signs Washington will start restocking crude siphoned off from its Strategic Petroleum Reserve if oil falls to $80 suggests oil prices will stay relatively high despite a global economic slowdown, BofA Global Research says. "As spare capacity dwindles and capex lags, we think $80/bbl is now the new $60 for Brent Crude Oil," it says in a note. "Said differently, the 'OPEC-plus put' on average oil prices is higher today." It adds that a recent signal by OPEC-plus to reduce production even as oil traded above $90 was unprecedented, and a good indication it'll do what it takes to keep a floor on prices.
My view - The USA is now an energy exporter. It no longer has a vested interest in permanently lower prices. Viewed from that perspective, the Norwegian policy suite comes into sharper focus.
Norway relies on hydro for most of its electricity production. That option is not open to the USA but domestic demand for natural gas will increasingly have to compete with global demand as LNG becomes a globally fungible commodity. That will be doubly true as new exporters become less reliant on fixed term contracts. Afterall, that was the practice more than a decade ago when consumers needed to be convinced of the need to build the necessary infrastructure. Today, the need is self-evident.
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Top Banks Pull Back From China Metal Financing After Crises
This article from Bloomberg may be of interest to subscribers. Here is a section:
JPMorgan Chase & Co (NYSE:JPM). and ICBC Standard Bank Plc are cutting back on financing to China’s troubled metals trade, adding pressure to a sector already hit hard by a struggling economy.
At least three Chinese metal trading companies have had credit lines frozen or reduced by either of the banks in recent weeks, according to people familiar with the matter. The lenders have pulled back after a liquidity crisis emerged at top copper trader Maike Metals International Ltd., said the people, who asked not to be identified discussing private information.
Both JPMorgan and ICBC Standard Bank have financing relationships with Maike. It’s not clear whether the banks’ pullback from the Chinese metals market is a temporary freeze while they assess their situation, or a more permanent retreat.
Maike’s admission last month that it asked for government help with liquidity issues is further shaking confidence in the industry, coming after the nickel short squeeze that almost bankrupted Tsingshan Holding Group Co. in March, and two recent cases of missing metal used as collateral for financing deals.
My view - Copper is a difficult market. We have clear narrative on the case for growth in demand over the next decade. What we do not have is clear visibility on current demand. China’s economy is slowing down and demand growth is unlikely to return to its pre-economic reorientation trajectory anytime soon. That suggests more weakness now and a possible stiff recovery later.
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Speaking Engagements - World Money Show October 2022
I have agreed to speak at The World Money Show in Orlando on October 30th.
Eoin's personal portfolio: stock market index short opened August 11th 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 daily until there is a change.
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The Chart Seminar London November 21st and 22nd 2022
We are living through fast moving markets so I am gauging interest for The Chart Seminar on November 21st and 22nd this year in London.
In the meantime, if you have any questions, would like to attend, or have a suggestion for another venue please feel to reach out to Sarah at sarah@fullertreacymoney.com.
The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non-EU residents are not liable for VAT). Annual subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.