So last trading day of the week and pretty much of April.
Manufacturing:
https://www.constructiondive.com/news/manufacturing-construction-boom-tracker-map/688140/
Now this is important. The US is currently reshoring manufacturing capacity. There are lots of issues: (i) skills in the workforce have been lost and are lacking, (ii) wages asked are far higher than Chinese etc equivalents. Nonetheless, long term, this is critical for the US. In the short term it will be highly inflationary.
Trump and the USD:
https://www.washingtonexaminer.com/...isers-brace-battle-dollar-policy-second-term/
Trump wants to devalue the USD. Everyone is pretty much onboard that the USD is overvalued and killing the world. Problem is, no-one is willing to revalue their currency higher.
The answer (and Yellen is rumoured to be following this path) is to devalue the USD as against Gold (as China has already done).
From JC:
You're finally seeing some of that defensive rotation with Utilities representing the only sector that is hitting new 6-month highs this week.
Here is a chart of Utilities relative to the S&P500, overlaid with Staples relative to S&Ps as well.
As you can see, both of these lines had been falling since 2022, because it's been a bull market.
But now that stocks have been correcting this year, you're seeing that outperformance coming from the most defensive sectors: |
|
I think it's important to take note of the change in leadership.
It's Consumer Staples and Utilities.
Notice how this is happening as large-cap Technology is hitting the lowest levels since January, and Small-cap Technology is hitting the lowest levels since November. See here.
We're incorporating different strategies in this market than we were last year. It's a different environment. Why wouldn't we?
Now here's the thing. We're still not seeing any action from credit spreads.
If this was an "end of the world" situation where the strategy is just to short everything, it would likely be because we're finally seeing stress in credit.
But we're not seeing that at all.
This is why the more delta neutral strategies are far more attractive than aggressively shorting stocks at this point.
Here's the OAS near it's lows for the range, and High Yield vs Treasuries up near the highs of its range: |
|
If there is real stress in the market, you're going to see it in credit.
To be clear, we have not seen it in credit.
The crash in bonds has been anything but a crash. It's honestly been more of a slow grind lower.
Stocks don't hate that.
It's more about the violent bond moves that spook the stock market.
We haven't seen that, at least not yet.
So while we've certainly seen rotation out of last year's leaders and into more defensive areas of the market, so far it's been just that.
No stress in credit at this point.
So we're acting accordingly.
Meanwhile, here's another attractive option that we have as investors right now.
Let me know what you think! |
|
Oil News:
Friday, April 26th 2024
Even if headed towards the first weekly gain since early April, oil prices have so far failed to break out above the psychologically important $90 per barrel mark. A higher-than-expected draw in US crude inventories, a notable slowdown in US manufacturing that sparked hopes of a June interest rate cut, and continuing tensions in the Middle East have added some upside with ICE Brent currently trading around $89 per barrel.
A Copper Giant Might Be in the Making. Mining major AngloAmerican (LON:AAL) said it had received an all-share buyout proposal from the world’s largest listed miner, BHP Group (ASX:AX), in a deal that would make the BHP the world’s leading force in copper. AngloAmerican rejected the first offer as “highly unattractive”.
Canada Warns of Wildfire Risks for Oil. The Canadian province of Alberta is
tightening restrictions on movement as wildfire season started earlier than usual due to an ongoing drought, only a year after suffering the worst-ever fires in 2023 that knocked out some 300,000 b/d of oil production at the time.
TMX Shippers Voice Concerns Ahead of May Launch. Shippers on Canada’s Trans Mountain Expansion pipeline
indicated the projected start date of May 1 might not be feasible as some sections of the pipeline are yet to receive regulatory approval, even though TMX seeks to receive toll fees already next month.
Iraq Promises to Commit to OPEC+ Supply Discipline. Following months of overproduction when it overshot its quota by 200,000 b/d in Q1, Iraq is now pledging to cap its oil exports at 3.3 million b/d until the end of the year regardless of the OPEC+ meeting outcome in early June.
LME Seeks to Stymie Sanction Trade Opportunities. After UK sanctions on Russian metals created loopholes for traders, resulting in a string of aluminum storage deals in LME warehouses, the London Metal Exchange
announced it would step in to halt the lucrative storage deals.
Woodside Climate Plan Gets Voted Down. Shareholders of Australia’s leading oil producer
Woodside Energy (ASX:WDS) rejected the company’s climate plan this week with 58% of the ballot finding it devoid of ambition, saying its $20 billion fossil fuel project portfolio and reliance on carbon credits is insufficient.
Egypt Halts All LNG Exports from May. Struggling to meet its domestic power needs with drastically declining domestic gas production from the Zohr offshore field, Egypt has
halted all LNG exports from May onwards, becoming a net importer for the first time since 2018.
UK North Sea to See $2.4 Billion Oil Merger. Italy’s oil major
ENI (BIT:ENI) agreed to merge its UK oil and gas assets with independent producer
Ithaca Energy (LON:ITH), set to hold a 38.5% stake in the newly formed company that will aim to become the largest British oil producer by 2030.
Higher LNG Prices Prompt Asia Buyers’ Rethink. The rally in Asia’s spot LNG prices to 10.50 per mmBtu in recent trades, up 25% since the beginning of March on the back of costlier shipping and Middle East risks, has
prompted a notable pullback in opportunistic buying from India and China.
China Wants to Take Over India’s Underbelly. China’s state-controlled oil company Sinopec is pushing for greater access into the downstream sector of Sri Lanka, a long-time core market for India, planning to build a major 160,000 b/d refinery in the Chinese-run port of Hambantota.
Airbus Gets Russia Sanctions Exemption. The government of Canada has
provided Airbus with a sanctions waiver to allow it to purchase and use Russian titanium in its manufacturing after the North American country’s titanium sanctions jeopardized the utilization of Airbus aircraft there.
Europe to Ban Russia LNG Re-Exports. According to media
reports, the European Commission’s next Russia sanctions package is expected to introduce restrictions on LNG re-exports from EU ports, shying away from an outright ban on Russian LNG imports.
Glencore Eyes Nigeria’s Mining Potential. Global mining major
Glencore (LON:GLEN) has
expressed interest in Nigeria’s untapped mining sector if the government ensures a stable business climate, emphasizing the African company’s nickel, cobalt, and zinc potential.
USD sitting in the danger zone. Yellen is working behind the scenes to weaken the USD.
We had the GDP number this week which was pretty much shrugged off by the market:
All that 'spending' resulted in an increasing deficit. An increasing deficit increases Treasury paper issuance. Which at the long end pushes rates higher. Which is why Yellen is issuing at the short end. I'll have the latest QRA data soon. My bet, Yellen has moved massively to the short end of Treasury issuance.
Gold and now silver bullion continue to be drained to the East.
The data on credit card charge offs continues to be bad.
Mr fff:
Continued on pg.2