April DDD

[Sean K]

I am a bit sad as BHP has always f***ed up every grand scale scheme they ever went in,I am talking 20y plus so does that mean copper is not going to be it ..I am in Rio for that coming commodity boom....

Maybe, but I think they did the right thing going down the copper route instead of lithium. There's a crap load of lithium laying about but not so much copper.

 

[qldfrog]

Maybe, but I think they did the right thing going down the copper route instead of lithium. There's a crap load of lithium laying about but not so much copper.

Yes they could have done worse, that is the bhp motto for the last 3 decades at least, I can not say earlier as I was not there

 

[ducati916]

Market roundup:



Technically still bear. However,



Two of the hugest Mag. 7 are up big after earnings.



So looking for a close near the 50 day MA.



Premium in SGE. Will draw physical East.



Paper oil (like paper gold) diverging.



Have BHP bought trouble?

jog on
duc

 

[peter2]

BHP always buys trouble, remember when they bid for RIO. That was a hoot. They've got their timing almost right (a few months late) but it's going to be a complicated transaction throughout many countries.

This should make the copper analysts sit up straighter though. If they hadn't heard about the looming copper deficit they'll know about it now.

Unusual divergences, there are heaps of them around at the moment and I don't know what to make of them either.
Gold up as USD up (wtf?)
Physical POG up going while GDX thinks about getting out of bed.
Now you've mentioned paper Oil vs physical Oil.
ASX finance sector up while material sector down.
Huge volatility in TSLA, GOOGL, META, MSFT seemingly unrelated to actual reported numbers.

Hard to make sense of many things but happy to trade what I see not what I think.

Thanks for posting these snippets.

 

[divs4ever]

Market roundup:

View attachment 175596

Technically still bear. However,

View attachment 175594View attachment 175593

Two of the hugest Mag. 7 are up big after earnings.

View attachment 175595

So looking for a close near the 50 day MA.

View attachment 175592View attachment 175591

Premium in SGE. Will draw physical East.

View attachment 175590

Paper oil (like paper gold) diverging.

View attachment 175589

Have BHP bought trouble?

jog on
duc

well if Glencore is uninterested ( or looking elsewhere ) maybe they have

i guess the first hurdle will be all the regulatory stuff

let's see if they can bound over them

 

[ducati916]

Last update for today:



jog on
duc

 

[ducati916]

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

 

[ducati916]

So markets still have another hour of trading:



Obviously equities love low rates (from the data). But other than rates above 8% equities are fine.

So the 'higher for longer' should not impact equities.

It is however killing the long end:



Which is forcing UST issuance to the short end. Which is driving USD higher. Which will push long end higher as energy costs priced in USD force oil importing countries to sell UST for USD to buy oil. Unless they switch to the gold trade.

This week's sectors:



For April which will change as we still have 2 trading days in April:



However as you can see, there is a definite rotation underway as the defensives have outperformed this month.



Even over 3mths the defensives have been at the top of the table.

While the Mag. 7 garner the headlines and glory...the market has quietly been moving away from that Tech. exposure.

The duc's portfolio:



So I hold mostly ETFs. Out of the ETFs I might add stocks that I like to increase the exposure and volatility. So FE is my 1 stock representing Utilities. All these positions are held for 1yr to 18mths and I trade within the core holdings. So the displayed numbers do not represent my performance per se in each individual holding. Also these are the positions that I hold within my prop. trading position. They sit at just under $1M in total. I have another $500K+ buying power.

My 'cash' sits in physical gold and silver at 90%. Just enough cash to pay the bills/tax/etc.

The biggest surprise for me are the financials. Take AXP for example. So AXP tends to higher net worth individuals, so chargeoffs are less (or should be) an issue, nonetheless:



Really?

Are you getting the feeling that the duc may be short AXP and possibly long XLF or the t'other way round?

I have also noticed on other ASF threads that the financials are really outperforming, particularly against some commodity based stocks.

The financials have been at the heart of every market disaster that I can think of. Why would this time be any different?

Now I do like China via FXI:




China geopolitically is playing chess while the US plays draughts. The respective markets seem totally out of whack.



Which could (have) be(en) played as a pairs trade.



Another economic number PCE that seemingly had little to no effect on the market.

jog on
duc

 

[divs4ever]

(ii) wages asked are far higher than Chinese etc equivalents.

i would strongly suggest 'Asian ' equivalents ( including India and Pakistan ) that is a combined very large population base in a relatively condensed area , now sure there seems to be less mineral resources over there ( being extracted so far )

the US onshoring manufacturing under the current regime faces much more uncertainty ( even if you consider Trump as a loose cannon )
now what chance RFK getting to the 'steering wheel ' that would be even a trickier course to plot , but the manufacturing that is rebuilt , could easily be sensible and rational ( not chip fabs in the desert , and solar farms replacing cattle )

 

[divs4ever]

I have also noticed on other ASF threads that the financials are really outperforming, particularly against some commodity based stocks.

i hadn't noticed ( apart from the insurance sector ) wealth management in general seems to be leaking funds , the banks ( apart from CBA and MQG ) haven't caught my eye .. some M&A in the patent protection niche is muddying up that area , accounting firms seem to be getting a tailwind , and i see AI ravaging the jobs in that whole financial sector , now maybe investors are imagining large cost reductions , but i remain cautious there ( getting the right IT guy/gal in the right place can be expensive )

and credit/debt that can be a real minefield

and commodity stocks have rising costs to battle , so higher commodity prices will be accompanied by higher expenses

 

[ducati916]

Last week:




Looking forward to next week:



More big Tech. earnings with some big Dow Jones names thrown in also.

Fed on Wednesday. No cuts, no raises, just more talk. That talk however can flip markets.



Slightly bullish on the market overall. Slight upside but choppy.



Play accordingly.



Retail is back in the market. How long have they been back? Did they catch the upside or are they back for the volatility?



I like China via FXI.

jog on
duc

 

[ducati916]

Banks and financials:

From @peter2



This is not an unreasonable view given where the Banks are trading.

From history:



Reference: https://fraser.stlouisfed.org/title...378/bank-stock-performance-since-1970s-514184

How many are still with us? LOL.

The reason is that the Balance sheets of banks are made up of largely debt. Probably close to 90%+

What happens to debt when interest rates rise? It's value goes down. A lot.

Banks need a consistent rate environment. As rates rose over the last year, they ALL required bailouts. BTFP was one such boondoggle for them. There are many others that fly under the radar. Of course in 2008 they ALL went bankrupt, but were bailed out by the government.

That cannot happen this time as it is the government going bankrupt.

The Fed will inflate. It will inflate for England. Bonds do not do well in an inflation. If the banks are 90% bonds, they will not do well. Banks are a toxic asset IMO.

jog on
duc

 

[divs4ever]

Banks and financials:

From @peter2

View attachment 175754

This is not an unreasonable view given where the Banks are trading.

From history:

View attachment 175757View attachment 175756View attachment 175755

Reference: https://fraser.stlouisfed.org/title...378/bank-stock-performance-since-1970s-514184

How many are still with us? LOL.

The reason is that the Balance sheets of banks are made up of largely debt. Probably close to 90%+

What happens to debt when interest rates rise? It's value goes down. A lot.

Banks need a consistent rate environment. As rates rose over the last year, they ALL required bailouts. BTFP was one such boondoggle for them. There are many others that fly under the radar. Of course in 2008 they ALL went bankrupt, but were bailed out by the government.

That cannot happen this time as it is the government going bankrupt.

The Fed will inflate. It will inflate for England. Bonds do not do well in an inflation. If the banks are 90% bonds, they will not do well. Banks are a toxic asset IMO.

jog on
duc

so .. what happens to the banks if the Government chooses a hard default ( on their debts/bonds ) ?

now sure someone like MQG ( i hold ) will have all sorts of hedges and derivatives in place , but what of the others, a bankrupt Government can hardly rescue banks sent insolvent by worthless Government bonds
now the US Fed is owned by a consortium of banks , doesn't that cause a problem

 

[ducati916]

1. so .. what happens to the banks if the Government chooses a hard default ( on their debts/bonds ) ?

2. now sure someone like MQG ( i hold ) will have all sorts of hedges and derivatives in place , but what of the others, a bankrupt Government can hardly rescue banks sent insolvent by worthless Government bonds
now the US Fed is owned by a consortium of banks , doesn't that cause a problem

Mr divs,

1. If the government chooses a hard default, the bank is vaporised.

2. LOL. Believing that the banks are responsible risk managers is to believe in fairies.

We have had another bank in the US go under this w/e.

Regulators close Philadelphia-based Republic First Bank, first US bank failure this year

Regulators have closed Republic First Bank, a regional lender operating in Pennsylvania, New Jersey and New York

abcnews.go.com

jog on
duc

 

[finicky]

Chillax, No probs

 

[ducati916]

Of course all CBs are aware of the problem and are trying to micro manage the situation.

The result will be a secular inflation. No one will opt for an outright default. The risk is that they wait too long before acknowledging defeat and continue their nonsense policies.

jog on
duc

 

[divs4ever]

2. LOL. Believing that the banks are responsible risk managers is to believe in fairies.

i have an open mind regarding fairies , but have had several interactions with various bank staff ( including senior managers , forensic auditors , and investigators , maybe even the odd IT guy )

the stories i have heard ( which may or may not be true )

now sure the US government might try a ' soft default ' , say delay/postpone interest payments , or extend maturity dates out longer ( on the low interest-rate bonds ) , and don't forget state and municipal bonds will come under increased pressure if that happens

but no i remember the adventures of The Bank of New South Wales ( after several brand changes is currently trading as WBC ) watched NAB make a misstep in the UK ( and after that had a profitable ride on CYB/VUK before hitting the exit )

 

[ducati916]

i have an open mind regarding fairies , but have had several interactions with various bank staff ( including senior managers , forensic auditors , and investigators , maybe even the odd IT guy )

the stories i have heard ( which may or may not be true )

now sure the US government might try a ' soft default ' , say delay/postpone interest payments , or extend maturity dates out longer ( on the low interest-rate bonds ) , and don't forget state and municipal bonds will come under increased pressure if that happens

but no i remember the adventures of The Bank of New South Wales ( after several brand changes is currently trading as WBC ) watched NAB make a misstep in the UK ( and after that had a profitable ride on CYB/VUK before hitting the exit )

If they had an ounce of brains between them, they would not have allowed this situation to result.

The insult to injury is that banks have lost throughout history. This is not the first time. They never learn. They are simply too greedy.

Banks will destroy more shareholder capital, guaranteed.

jog on
duc

 

[divs4ever]

the only out i can see , is the West ( G7/NATO ) start a major war , flood the market with 'war bonds' and enact emergency measure .. and hope to win so they can ransack the vanquished ( like the Soviets did on the way to Berlin )

that will be extremely painful to the plebs , but the upper class has some chance of surviving( and flourishing )

 

[peter2]

I'm surprised by this also.
Are these the traders who missed the run up and now buying the dip? If so, then a bear rally reversal will wipe them out.

I'm unaware of the current "meme" stocks or even if there are any atm.