Comment of the Day
Video commentary for October 10th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: bond yields continues to march higher, UK yield curve control will soon be tested, stocks and high yield bonds under pressure, China weak, renminbi at risk of devaluation.
Email of the day - on synthetic biology
In the section of the Wired article, you post there is this: "...and production is on the cusp of becoming biological". Any ideas what this means? Is it the "synthetic biology" that you refer to in your view?
Eoin Treacy's view - Thank you for this question. Yes, they use some poetic license with the language but what they are talking about is synthetic biology. Most people are familiar with the Human Genome Project. It’s what led to the birth of the genetic revolution which has been underway for the last twenty years.
Taiwan Tensions Spark New Round of US War-Gaming on Risk to TSMC
This article from Bloomberg may be of interest to subscribers. Here is a section:
That doomsday scenario injects a new dynamic to Washington’s war-gaming that highlights an uncomfortable dilemma: For all the talk of strong support for the government in Taipei, the US has concluded that it’s too dependent on Taiwan for the kind of advanced chips that are essential for the latest smartphones and next-generation military hardware, and is working to build more domestic capacity as a result.
“The focus among policymakers — and this is true of the US and elsewhere — is of understanding where risks are or concentration is,” said Chris Miller, an associate professor at Tufts University and the author of Chip War: The Fight for the World’s Most Critical Technology. The chip industry’s concentration in Taiwan, he said, “has raised red flags.”
The following account of the contingency planning being undertaken was provided by multiple officials and former officials who requested anonymity to speak candidly. They stressed that plans are purely hypothetical and many details remain unresolved.
Eoin Treacy's view - There is a lot of talk about the possibility of war over control of Taiwan. The island economy’s dominance of the semiconductor sector is often associated with TSMC. However, Taiwan’s network of smaller essential component companies is equally important. That’s not going to be solved by expatriating a relatively small number of engineers.
Was That The Whale?
Thanks to a subscriber for this article from GaveKal which may be of interest. Here is a section:
On this last point, an old Gavekal trope has it that liquidity crises resemble dynamite fishing. When a stick of dynamite is detonated under the sea (let alone 200kg equivalent, as seems to have occurred off Denmark’s coast this week), everything in the vicinity is killed. The coral dies, little fish die and so do any whales in the vicinity. The tiddlers quickly come up to the surface, but it takes longer for any whale carcasses to emerge. Historically speaking, it is when the whales show up that policymakers shift gear and reinject liquidity. In my career, whales have included Mexico in 1994, Asia, Long-Term Capital Management and Russia in 1998, Enron and MCI-Worldcom in 2001-02, Lehman, AIG and Bernie Madoff in 2008 and the US repo market in 2018.
Now, in the past few weeks, the financial markets’ waters were undeniably troubled. We have seen surging currency volatility, huge moves in government bond markets, especially in the US and the UK, and collapsing equity prices. The waters were sufficiently turbulent to suggest that a whale may soon show up. Indeed, on Monday, I speculated that the underfunded US pension fund system could be the surprise whale, whose troubles would force the Fed to change course (see The US Dollar Wrecking Ball)? I was wrong—by one letter. It turns out that the whale was most likely the UK pension fund system.
Eoin Treacy's view - The margin call on UK pensions was a big deal and has painted the Bank of England into a difficult position.
Email of the day - on an online version of The Chart Seminar
Why not do the Chart Seminar by Vimeo? I don't want to travel to London from California for this valuable seminar. I attend John Mauldin's seminar online, which are quite helpful. Why not yours, also?
Eoin Treacy's view - Thank you for this suggestion and I can understand the reluctance to travel when so much is online today. There are several reasons I am reluctant to do an online seminar.
The first is I have done online seminars for private organisations in the past and they turn into lectures very quickly. It is virtually impossible to practice the Socratic method with a group of strangers online who are unfamiliar with the material being covered.
The second reason is time zones. This is a truly global service with subscribers coming from all over. If I were to schedule a seminar, what time zone would I pick, or should I do three? One each for the Americas, Europe/Middle East and Asia/Australia?
Lastly, I do my best work in person. That’s why I refused to participate in the Money Show’s online seminars. When I give a seminar, I want to deliver the best of what I can offer and I believe that is in person.
Speaking Engagements - World Money Show October 2022
I have agreed to speak at The World Money Show in Orlando on October 30th.
The Chart Seminar London November 21st and 22nd 2022
We are living through fast moving markets so the next venue for The Chart Seminar will be 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.
Eoin's personal portfolio: precious metals loss taken September 23rd 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.