Comment of the Day
Video commentary for October 12th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: BoE defends 5% on the 30yr, Fed Minutes see a long slog to control inflation, stocks ease, bonds steady, Bank of Japan recommits to QE so Yen extends decline, rise of asset heavy businesses versus intangible assets.
UK 30-Year Yield Tops 5%, Pound Jumps as Confusion Grips Market
This article from Bloomberg may be of interest to subscribers. Here is a section:
“Bailey’s words did sound harsh but from the BOE’s perspective they need to sound stern,” said Pooja Kumra, rates strategist at Toronto-Dominion Bank. “The BOE has been very receptive to markets. If chaos continues we doubt that they will run away.”
Eoin Treacy's view - The Bank of England is in a very difficult position. They desperately need to act against inflationary pressures but are constrained from using the tools at their disposal because of the risk posed by leverage in the financial system, not least in the pension sector.
FOMC Minutes for September Meeting
This excerpt of commentary following the release of the Fed Minutes may be of interest. Here is a section:
It will take years to see inflation pressures completely recede, according to the minutes. That’s also apparent in the Fed forecasts, which don’t see headline inflation returning to 2% until 2025, and core still above that then.
Catarina Saraiva Fed Reporter
10/12 19:26
Regarding QT, several officials said it would be “appropriate” to consider sales of agency MBS at some point so the Fed’s long-term portfolio can be composed primarily of Treasury securities.
Ian Lyngen at BMO Capital Markets (NYSE:BMO) comments:
“Not new information per se, but nonetheless reinforcing the idea that for the time being the status quo of QT will be maintained. Especially after the volatility experienced in the gilt market, and liquidity in both mortgages and Treasuries already becoming an issue, we don’t expect MBS sales from SOMA will be a near term issue.”
Ye Xie Markets Reporter, New York
10/12 19:25
Here’s something to keep in mind when looking at tomorrow’s CPI report:
“Participants commented that they expected inflation pressures to persist in the near term.”
Catarina Saraiva Fed Reporter
10/12 19:25
The median estimate of Fed officials’ projections in the September SEPs was for unemployment to climb to a high of 4.4% next year. Many economists have said this is wishful thinking, and that it will likely rise much higher if the Fed keeps raising rates. It sounds like some at the Fed are concerned about this as well.
“A few participants particularly stressed the high uncertainty associated with the expected future path of the unemployment rate and commented that the unemployment rate could rise by considerably more than in the staff forecast.”
The highest unemployment rate forecast among the 19 policymakers for 5% in 2023.
Eoin Treacy's view - The steadier action focusing on the “calibrate” statement implies the Fed will slow down the pace of interest rate hikes after the November meeting. The thing I find most interesting about this evolving environment is the willingness of investors to pre-empt what the federal reserve will do. It’s a symptom of relying on past experience to inform future decisions. We know what has happened on every other occasion, so why not this time? That’s why buying the dip works after all.
Putin Says All Infrastructure at Risk After Nord Stream Hit
This article from Bloomberg may be of interest to subscribers. Here is a section:
Russia’s President Vladimir Putin said any energy infrastructure in the world is at risk after the explosions on the Nord Stream gas pipelines.
The attacks were an act of terror that set “the most dangerous precedent,” the Russian president told a Moscow energy forum on Wednesday. “It shows that any critically important object of transport, energy or utilities infrastructure is under threat” irrespective of where it is located or by whom it is managed, he said.
Putin blamed the sabotage on the US, Ukraine and Poland, calling them “beneficiaries” of the blasts that caused major gas leaks in the Baltic Sea. The US and its allies have rejected those allegations and suggest Russia may have been behind the underwater blasts.
The attacks on two strings of Nord Stream and one string of Nord Stream 2 at the end of September have raised concerns over the future of Europe’s gas supplies. Other critical infrastructure in the region has also suffered damage in recent weeks.
Earlier this month, an act of sabotage halted train services across northern Germany and the government has said it can’t rule out foreign involvement. A pipeline that carries Russian oil through Poland was found to be leaking on Tuesday. Investigations continue, and Poland’s top official in charge of strategic energy infrastructure said he assumed it was an accident.
Eoin Treacy's view - This is a none too subtle threat to expect escalation of attacks on energy infrastructure for as long as the EU is supporting Ukraine’s resistance efforts. The sabotage of Germany’s rail network with specialized interruptions conducted simultaneously at locations 200km apart is a display of Russia’s extraterritorial ability to sow disruption.
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.