Comment of the Day
Video commentary for October 26th 2022
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: dollar index breaks 110, gold steadies, crypto extends rebound, Treasuries test 4%, 10yr-3mth inverts, megacap earnings disappoint. China supports currency supporting copper.
Fed's Yield-Curve Barometer Starts Flashing Recession Risk
This article from Bloomberg may be of interest to subscribers. Here is a section:
Inversions of this segment of the Treasury curve typically occur late in Fed tightening cycles as three-month bills track the policy rate while longer-term borrowing costs reflect expectations for economic growth and inflation. While other widely-watched yield curve segments such as the two- to 10-year and five- to 30-year have been deeply inverted for much of this year, the Fed follows this one more closely.
“We are certainly in territory with the Fed’s official barometer of the yield curve that will raise concerns,” said Gregory Faranello, head of US rates trading and strategy at AmeriVet Securities. “The Fed will definitely watch this, and there is a sense in the bond market that they will soon throttle back the pace of rate hikes and take a step back.”
Eoin Treacy's view - The 10-year – 3-month spread spent part of today inverted following an 11.65 basis-point contraction. The spread was at 223 basis points in May so this tightening has been the fastest in decades. The fact there was such a wide divergence between the 10-year – 2-year and the 10-year – 3-month was regarded as an oddity but reflected the stresses in the bond market.
Tech's Big Day Tarnished as Microsoft, Google, TI Disappoint
This article from Bloomberg may be of interest to subscribers. Here is a section:
The demand outlook was particularly dire in the semiconductor industry, which had been one of the hottest sectors during the pandemic. Texas Instruments, whose chips go into everything from home appliances to missiles, saw shares tumble after its weak forecast signaled that the chip slump is spreading beyond computing and phones into other businesses. The stock lost 5%, while Analog Devices Inc., ON Semiconductor Corp (NASDAQ:ONNN)., and Marvell Technology Inc. also dipped.
South Korean chipmaker SK Hynix Inc. reported a 60% decline in profit and said it would cut capital expenditures by more than half. It warned of “an unprecedented deterioration in market conditions.” Hynix is joining fellow memory makers Micron Technology Inc. and Kioxia Holdings Corp. in slashing production plans as chip prices tumble.
The silver lining for investors is that the eventual pullback in supply may ultimately prove beneficial for profits -- and stock prices. Hynix shares, which have lost 28% this year, were up as much as 2.1%. Samsung Electronics (KRX:005930) Co. climbed 3%, while Taiwan Semiconductor Manufacturing Co. added 1.4%.
“Inventory will decrease accordingly and demand will rise again,” said Greg Roh, head of technology research at HMC Investment & Securities.
Eoin Treacy's view - At the NAAIM conference yesterday the manager of a commodity ETF quoted the statistic that there have been more backwardations in commodities this year than ever before. The point I think most people are missing is the monetary and fiscal response boosted demand for everything. New homes, stocks, bonds, commodities, semiconductors, toilet paper and a host of other products saw demand balloon between April 2020 and early 2022.
Eoin's personal portfolio: stock market index short initiated
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.
Copper Buyers Want Longer-Term Deals on Supply Concerns, Codelco Says
This article from Bloomberg may be of interest to subscribers. Here is a section:
Copper buyers are so worried about future availability of the metal that they’re seeking to secure longer-term deals than normal, according to top miner Codelco.
The Chilean state-owned company recently signed some contracts for three to five years with customers in Europe, in contrast to the more standard annual deals, Chairman Maximo Pacheco said in an interview.
Eoin Treacy's view - With battery metal prices like lithium still making new highs, the question of where to source affordable component materials is a pressing concern for many companies. Signing long-term offtake agreements is desirable from that perspective but it also represents hedging on behalf of the miners. That’s not a bad idea at this stage since prices are falling and the global economic outlook is uncertain, particularly with China slowing down.
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: profit taken on Index short October 13th
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.
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.