July 2024 DDD

[divs4ever]

firstly

i use passive index funds as 'insurance ' ( both straight index funds and sector focused ones )
now Buffet once said , diversification is for people who don't know what they are doing , and i agree in 2011 and 2012 i was a novice so took the diversification option while i learned and gained experience and started 'cherry-picking' as i learned

( i still have the profits made on VAS running )

next, are index funds a bubble or do they just compound the bubble already inflating ( i suspect the later )

the index funds rely on market cap. for weighting , so i argue dumb ( or lazy ) money following the big money

doom merchants ( i class myself as a contrarian bear )

i listened to several of these over the last 12 or so years

but did i flee the market ... NO ! , but sure i did bias more cash towards ( my idea of ) 'safe-havens '

sure i recovered the investment cash where sensible ( and redeployed it elsewhere )

if you have a ten-bagger paying dividends , why would you sell ( completely ) when earning 10% ( plus ) a year on div. returns , and hope to crack the next ten-bagger

( a bird in the hand , theory ) i often like to let the profits run ( after locking out a capital loss )

the CPI

that has been rigged for years/decades , the thing to understand is they haven't stopped rigging it , in fact they rig it more and more as years go by , so much of national economies ride on the phony CPI figures ( they just can't help themselves )

 

[ducati916]

Totally bifurcated market:






Full: https://www.zerohedge.com/markets/pepsico-warns-us-snack-demand-subdued-consumer-slowdown-worsens



So today there is a significant rotation.



Does this keep going?

The CPI number is lower. Whatever. Pepsi's numbers show the consumer can't even afford a packet of crisps.

Meanwhile:



Half the globe are moving to gold and away from the ever accelerating depreciation in fiat currencies.

Lower interest rates means accelerating inflation:

Of course, this is exactly what US finances require. High inflation to reduce the impact of all the debt that has built up in the system.



Full: https://www.truthinaccounting.org/a...3RUbTe1OqLKg24_HsQIYQms-w79QhdC4aAuyuEALw_wcB

Cash will once again become trash.

jog on
duc

 

[divs4ever]

Cash will once again become trash.

apart from my small coin ( and note ) collection , i have always considered cash as a temporary stepping stone to another asset

maybe if currency returned to being ( nearly pure ) gold and silver coinage i would change that view , but i doubt i will see that happening , in my lifetime

IF BRICS returns to a gold-backed currency , i expect it will only be something like a yearly trade balance settlement of a nation's exports/imports , which should be very interesting to observe ( there will be strong incentive for some nations to maintain a neutral trade balance ie more national self sufficiency )

 

[Chipp]

Of course, this is exactly what US finances require. High inflation to reduce the impact of all the debt that has built up in the system.

Found this yesterday and given Fed debt to GDP be around 125% in US this year not hard to do the maths and see how much of Fed govt revenue goes to paying interest . It's scary

 

[divs4ever]

Found this yesterday and given Fed debt to GDP be around 125% in US this year not hard to do the maths and see how much of Fed govt revenue goes to paying interest . It's scary View attachment 180500View attachment 180501View attachment 180499View attachment 180498

only scary if you intend to pay the capital ( and interest ) from earnings

if you plan to just print yourself more credit .. well it is all fun and games , until the music stops ( and the lights go out )

 

[Chipp]

only scary if you intend to pay the capital ( and interest ) from earnings

if you plan to just print yourself more credit .. well it is all fun and games , until the music stops ( and the lights go out )

The interest HAS to be paid to get the more credit . The point is almost 25% of Govt revenue is paying interest . AND while the debt grows and the interest rate paid rises its only getting worse . The fed aint bidding on bond auctions anymore , its rolling it of the balance sheet for now . This is all way more complicated than turning on the " printing press" as everyone calls it . Its a dumb term tbh . The US govt has never had an issue paying the interest but clearly the chances of that are rising . It isn't a problem medium term but at current rates of change its going to be a problem without a change in thinking . Only when bond yields drop below 3.3% will the interest paid metric drop away from current levels , until then it keeps rising as old debt rolls over from a lower level to a higher level . 10 year yields are the metric that matters . There is 7 years 0f US10Y to roll from an average rate of approx 2% to 4ish . . The metrics get worse before it ever gets better without even taking the massive rises in debt into account . This is my last comment on this

 

[ducati916]

only scary if you intend to pay the capital ( and interest ) from earnings

if you plan to just print yourself more credit .. well it is all fun and games , until the music stops ( and the lights go out )

Actually, it's no longer quite as easy as that:



Debt issuance at the long end has been problematic for some time. Hence the massive issuance at the short end by Yellen who knows that she cannot afford to blow out the long end.

Mr fff



The 'problem' is that while stocks are overvalued and bubblilicious, they are not THE BUBBLE that we are worried about. The bubble is in government debt world-wide, but particularly in the US which still has the hegemony via the USD and UST markets.

The last 4 or 5 crashes (immediately bailed out by the Fed) have been UST Repo market issues or specifically 'no liquidity'.

So while stocks suck balls, that is not where the risk resides.

Hence these are the 2 charts to watch:



jog on
duc

 

[Chipp]

Debt issuance at the long end has been problematic for some time. Hence the massive issuance at the short end by Yellen who knows that she cannot afford to blow out the long end.

Spot on , treasury trying to buy time till long end rates drop . Thing is the rates offered need to be higher than the long end to get buyers in so a bit of a catch 22 in an inverted curve .

Note where it has a No in the reopening column , thats new debt not old debt rolling over . CMB has similar implications

 

[divs4ever]

The interest HAS to be paid to get the more credit . The point is almost 25% of Govt revenue is paying interest . AND while the debt grows and the interest rate paid rises its only getting worse . The fed aint bidding on bond auctions anymore , its rolling it of the balance sheet for now . This is all way more complicated than turning on the " printing press" as everyone calls it . Its a dumb term tbh . The US govt has never had an issue paying the interest but clearly the chances of that are rising . It isn't a problem medium term but at current rates of change its going to be a problem without a change in thinking . Only when bond yields drop below 3.3% will the interest paid metric drop away from current levels , until then it keeps rising as old debt rolls over from a lower level to a higher level . 10 year yields are the metric that matters . There is 7 years 0f US10Y to roll from an average rate of approx 2% to 4ish . . The metrics get worse before it ever gets better without even taking the massive rises in debt into account . This is my last comment on this



View attachment 180507

indeed getting to the point of being educational , now

( i have trivial exposure to any sovereign debt )

 

[ducati916]

jog on
duc

 

[ducati916]

The Consumer Price Index for June, on a month-to-month basis, was pushed down by plunging gasoline prices, the continued historic plunge in prices of durable goods, led by used vehicles, nearly-flat food-at-home prices, and “core services” prices that rose at the smallest pace since the summer of 2021 in what looks like an outlier move of which we have seen already many in both directions.



Banks disappoint:






Nothing surprising there.

From JCP

​

It was never just large-cap Tech. That was a lie. And as it turns out, yesterday's gains were pretty much everything BUT large-cap Tech. In fact, small-caps outperformed large-caps on Thursday by 450 basis points. According to our friends Ryan Detrick & Charlie Bilello, that's a 6 standard deviation event. If markets were actually efficient, and that burton malkiel guy wasn't lying about everything he ever said, then 6 sigma events wouldn't happen as often as they do. They should come around once every 500 Million days. It happened yesterday. Because markets are not efficient. The random walk theory was just a bad theory that some weird academic blatantly made up years ago. He said in his book that he's never met a rich technician. But that's not because there aren't any rich technicians. It's just that all the rich technicians don't want to hang out with him. Because why would they? We don't like liars who hurt people for their own selfish gain. Princeton can have him. They seem to be big fans of his bull****. Meanwhile, here's the Russell2000 Small-cap Index going out at new 52-week highs yesterday

​

​

I don't want to harp on the lack of efficiencies in this market. But I do think it's worth pointing out that the market continues to prove that these sociopaths claiming markets are efficient are not here to help you. You'd think that Malkiel guy would come out after all these years and admit that everything he wrote in his book was wrong and maliciously misleading. But he has not. Because he's an asshole. Anyway, Sector rotation is the lifeblood of a bull market. We've seen it for 100+ years. We have the math. It's NOT a theory. It's fact. And we're seeing it again now. Remember last week we discussed the most bullish thing that can happen to this market? It's happening:

​

​

Towards the end of bull markets, you see important sectors like this completing tops. During bull markets, no where near the end, you tend to see buyers coming in at support in the most important sectors like this one above. So what do we do about it? We're buying stocks very aggressively. We have been the past couple months. But now there are more names to own, and different ones that are working, which we'll be going over one by one this Monday.

From Mr FFF



Pretty much everything up today.

So the Big Banks miss. Blaming high interest rates. Of course just another reason for the Fed to cut. After all, the Fed is actually owned by the Big Banks.

Rate cut fever is everywhere currently. The June rankings have probably changed after yesterday's CPI number.

Oil News:

Friday, July 12th, 2024

The beginning of this week has seen a slight downward correction for oil prices, with anticipated damages from Hurricane Beryl turning out to be less impactful than initially assumed, however, constructive macroeconomic data have reversed that downslide. With US consumer prices falling for the first time in four years last month, the September interest rate cut became a high-probability event for the Fed, lifting ICE Brent above $85 per barrel again.

IEA Sees Global Demand Weakness. The IEA reported the lowest quarterly increase in global demand in over a year as consumption rose by 710,000 b/d in Q2, saying that China’s stellar growth is coming to an end and cutting the 2025 outlook further to 970,000 b/d.

Indian State Refiners Seek Russian Term Deals. India’s Prime Minister Narendra Modi visited Russia this week, accompanied by representatives of the country’s state-controlled refiners seeking to sign long-term import deals with Russian exporters, finalizing terms such as payment currency.

South Africa Seeks to Salvage Grounded Ship. The Panama-flagged dry bulk tanker Ultra Galaxy carrying ammonium nitrates to Dar es Salaam in Tanzania ran aground off South Africa’s coast, raising the risks of a potential oil spill and pollution as salvage operations are hampered by rough sea conditions.

Taking Its Chances, US Seeks Q4 SPR Volumes. Having failed to purchase any SPR volumes below $80 per barrel in its last tender, the US Energy Department seeks to purchase up to 4.5 million barrels of oil to its Bayou Choctaw site in Louisiana, to be delivered from October through December.

Saudi Aramco Taps into Bond Market. Saudi Aramco (TADAWUL:2222), the national oil company of Saudi Arabia, attracted more than $31 billion of orders for its $6 billion bond sale, its first foray into the debt markets in three years, selling 10-, 30- and 40-year dollar-denominated bonds.

Rio Tinto’s Lithium Project Back on Track. Australian mining giant Rio Tinto (ASX:RIO) welcomed the Serbian constitutional court’s ruling this week that overturned the government’s 2022 decision to scrap the planning permission for Europe’s largest lithium mine, the Jadar project opposed by local environmentalists.

US Natural Gas Demand Soars Amidst Heatwaves. Power generators across the United States burned a record amount of natural gas this Tuesday, the hottest day of 2024 so far, some 54.2 billion cubic feet per day, surpassing the previous record of 52.8 Bcfd from July 2023.

More Bearish Than Ever, BP Sees Oil Peak in 2025. Publishing its annual Energy Outlook, UK energy major BP (NYSE:BP) announced it expects oil demand to peak in 2025 already at 102 million b/d in both its ‘Current Trajectory’ and ‘Net Zero’ scenarios, maintaining a bearish outlook on fuel consumption.

US Slaps Record Penalty for Air Pollution. The US Department of Justice fined Marathon Oil (NYSE:MRO) over alleged air pollution violations at the company’s oil and gas facilities on a North Dakota Indian reservation, with the oil producer agreeing to pay a $241 million settlement.

Gulf Coast Moves Past Hurricane Beryl. The US Army Corps of Engineers and the US Coast Guard gave the all-clear for the full reopening for the port of Houston this Thursday, lifting all draft restrictions, with other Texas ports expected to resume normal operations on July 12.

China Tightens Rules for Solar Manufacturers. China’s industry ministry issued draft rules for the solar photovoltaic industry seeking to limit the past year’s overcapacity problem, requiring a minimum capital ratio of 30% for new projects and stipulating minimum efficiency levels.

UK Court Scraps Onshore Drilling Approval. The United Kingdom’s Supreme Court reversed a 2023 decision to grant permission for an onshore well in Lincolnshire, one month after taking a similar decision over a prospective oil well near Gatwick Airport, quashing the outlook for all onshore projects.

Tanker Seized by Iran Moving Again, Without Cargo. The Marshall Islands-flagged tanker Advantage Sweet, seized by Iran more than a year ago with its 1-million-barrel cargo of Wafra crude confiscated by Tehran, is heading towards international waters after being released this week.


jog on
duc

 

[ducati916]

How it went:

Predicted:



How it actually went:





jog on
duc

 

[ducati916]

Some economic charts:



Obviously not quite up to date.



The 1970's when there was poor growth and high inflation, but low debt:








The gist of the argument is that if you have high debt, and you can't actually pay it at a market rate, you need to grow your way out of it or inflate it away.

The US has anaemic productivity that has been deteriorating for decades. The lag has been made up by financialisation.

It doesn't matter until it matters.

jog on
duc

 

[ducati916]

Leftovers from last week:



Hedge Funds run a hedged book.

It would seem that they are closing out short positions in Russell stocks and smaller S&P500 stocks and selling Mega7 stocks. How long will this continue? The consensus thinks for a while longer.

Fighting against that trend will be 'passive flows'.

jog on
duc

 

[ducati916]

Looking forward to next week:



Several financials in there of interest to me as I hold XLF and AXP (on Friday).



Retail Sales, could be market moving. I'll also be looking at Leading Indicators (non event to date).



Actually studies have shown risk management originates in your 'gut' (emotional areas of the brain).



85% cut by September.



Is the bifurcated market over?



Pretty much everything bullish. A real flippe-floppe.

I'll have my best guesses up later.

jog on
duc

 

[ducati916]

So in one of the 'best' economies and a bull market:



Consumer discretionary: I guess the consumer is cutting back.

However the question is: with all of this occurring, why no recession?

Government spending. Government spending has increased by 23% in April and 22% in May. That is driving a nominal 5.1% GDP growth just on government spending. The 'economy' is government deficit spending.

So while 'nominally' there is no recession, the reality is that there is as evidenced above. Eventually (and it's already happening) employment numbers will roll over into recessionary numbers despite new government jobs.



Does it have any effect on Monday's open?

When Reagan was shot:






Now this is the second Japanese issue around the weak Yen.



However, the Fed and Yellen have the answer: Yen/USD Swap line as they cannot have the UST market followed by the US stock market blowing up.

How does that work?



Full: https://cryptohayes.substack.com/p/shikata-ga-nai

And sure enough:



Already existing a Yen/USD Repo facility (Swap lines).

So that tsunami of Japanese UST will never hit the UST market. Instead, the Fed will issue dollars for those UST at Par price. Inflationary? Of course. Number of people aware/care? Minimal.

The takeaway:

The UST market is dead. An absolute loss making proposition.

Therefore, players in the UST market will start moving out into (better inflation hedges/assets) gold, btc and stocks. Of course this is already happening:



Despite high nominal interest rates (normally bad for gold) gold is trouncing UST. Those that know and have figured it out are moving from UST to gold, btc and stocks. All the charts look the same as this one.

UST are again certificates of confiscation.

So my guesses for next week:

XLB Bull $90-$91*
XLC Bear $86-$85*
XLRE Bull $40-$41*
XLE Bull $90.50-$93*
XLF Bull $42-$43* (+ AXP)
XLP Bull $77.50-$78 (hold PG)
XLK Bear $233.50-$229
XLI Bull $124-$126* (+ UNP)
XLU Bull $71-$73 (hold FE)
XLV Bull $148-$150* (+ MRK)
XLY Bull $190.50-$193

* denotes I hold a position

jog on
duc

 

[ducati916]

The shaded regions refer to periods during which the G20 Composite Leading Indicator (CLI) is above 100. This indicator is designed to capture fluctuations in economic activity around its long-term potential level and provide a six-to-nine-month lead on business cycle turning points. A value above (below) 100 corresponds with expectations that the level of GDP will be above (below) its long-term trend. Meanwhile, a rising (falling) CLI implies that GDP growth is anticipated to accelerate above (decelerate below) long-term trend growth.

The chart reveals that energy and industrial metal prices typically rise on a year-over-year basis when the level of GDP is expected to be above its long-term trend, regardless of whether the CLI is rising or declining. This result is intuitive given that, ceteris paribus, an above-trend GDP level likely corresponds with an above-trend level of commodity consumption.

Moreover, prices of these commodities generally decline during periods when the CLI is below 100, regardless of whether the CLI is rising or declining. This implies that commodity prices typically fall on a year-over-year basis when the level of GDP is expected to be below its long-term trend. Again, this result makes sense given that a below-trend level of GDP implies that the level of commodity consumption is also relatively weak.



After a two-and-a-half-month rally, Chinese stock prices are now aligning with the country’s subdued economic fundamentals.

Credit and money supply data remain downbeat despite recent measures to support the property market. The ongoing descend in money growth confirms that business activity remains weak, suggesting that corporate earnings will deteriorate over the next six months.

Without an improvement in corporate profits, Chinese stocks are unlikely to sustain rallies beyond two to three months.



Through the $1T mark.



Now this is what has happened. I am pretty sure that this won't be the case going forward. The professionals in this space are not stupid. They know that bonds hate inflation.



The banks sans the Fed are all insolvent. That's the reality. The other reality is that this will never come to pass, so banks trade near their all time highs.



It will matter. The question is when.

Fed days going forward:



18 Sept. slated as rate cuts at 85% probability.

Mr FFF












Interesting.

Certainly if I go back 15yrs or so, Mr fff would have some big winners and big losers depending on how stubborn he was at the time. One of the really divisive stocks was MaVIS. I forget what it actually did, something about projection of images, bloody nonsense really, but boy did it cause major arguments on the internets.

It will therefore be interesting to see if we get the 'thesis' that goes along with the return to the old style.

Mr fff is by nature not a technical trader. Neither is he a fundamental numbers chap. He is a 'story' trader. When it works...it works huge, Monster Energy Drinks was one of his BIG winners. MaVIS, not so much.

The old style is actually far more interesting. The day trade churn is over before you can even think about it.

jog on
duc

 

[ducati916]

That low VIX + Sentiment should be cautionary.

jog on
duc

 

[ducati916]

Have to be quick today:

Another rotation day similar to 11 July:





If NVDA tanks along with MSFT and AAPL the indices will crash, but stocks broadly could rise.

Strange market.

I hold AXP which has earnings Friday. Currently moving higher into earnings. With credit card defaults rising etc., I may sell down slightly late Thursday (assuming that it continues to rise) just in case earnings disappoint.

jog on
duc

 

[ducati916]

Oil News:

The OPEC+ meeting on June 1 might have disappointed markets and brought about a brief price collapse, however the oil group is working to tighten compliance and has been cutting production last month, to 40.9 million b/d.
- One of the most consistent overproducers, Iraq admitted it had produced 184,000 b/d over its OPEC+ quota in June, however it pledged to compensate for excessive output by September 2025.
- As Baghdad remains locked in a sovereignty dispute over Kurdish crude production, output in the semi-autonomous region that has been cut off from international markets soared nevertheless, believed to be as high as 300,000 b/d.
- Kazakhstan is expected to submit an updated production plan this month, whilst Russia is set to present its compensation plan this Tuesday after reporting 9.078 million b/d of oil production in June.

Market Movers

- Brazil’s national oil company Petrobras (NYSEBR) has launched a new drilling campaign in its ultra-deepwater Espirito Santo basin to the north of most of its producing assets, trying its luck with another frontier play.
- Saudi Aramco (TADAWUL:2222) announces the discovery of seven oil and gas deposits in the country’s Eastern Province and Empty Quarter, boosting its portfolio of light shale oil finds.
- US shale producer Occidental (NYSE:OXY) sold 500,000 metric tonnes of carbon dioxide removal credits to Microsoft for a period covering six years, the largest direct air capture deal to date.

Tuesday, July 16, 2024

Oil markets are increasingly counting on a September Fed interest rate cut, however, the tacit optimism coming from the United States has been somewhat muted this week on the heels of weak Chinese data. Whilst overall economic growth for H1 posted a neat 5% year-on-year move upwards, growth in the second quarter was already below the annual target at 4.7% and set to drop lower in Q3.

Kuwait Announces Giant Oil Discovery, First in Years. Kuwait has reported a giant oil and gas discovery in an offshore field estimated to contain 3.2 billion boe, with the al-Noukhitha find potentially allowing the Middle Eastern country to lift its production capacity to 4 million b/d.

Cash-Strapped NNPC Lowers Its Stake in Dangote. Africa’s largest refinery, the 650,000 b/d Dangote plant in Nigeria, saw the stake held by state oil firm NNPC reduced to 7.2% from 20% after failing to pay the full $2.7 billion balance of funding owed as it grapples with debt.

Russia May Ban Gasoline Exports Again. Russia’s deputy prime minister Alexander Novak said that Russia might reinstate its gasoline export ban from August in case of supply shortages on the domestic fuel market, just as refiners started to export again in June-July.

Chinese Coal Output Fires on All Cylinders. Chinese coal production surged to a six-month high in June, hitting 405.38 million tonnes and rising 3.6% year-on-year, as heatwaves and rising air conditioning demand across the country prompted Beijing to ease security checks on coal miners.

China Asks for WTO Arbitration on EV Dispute. China has requested arbitration from the World Trade Organization to help settle a dispute over EV subsidies under the US Inflation Reduction Act, saying the IRA sets up artificial trade barriers and pushes up the costs of green transition.

Alaska Drilling to Become Even More Difficult. The Biden administration is considering adding more areas for protection from oil and gas drilling in Alaska’s National Petroleum Reserve, beyond the 40% already covered, despite a recently launched lawsuit from the Alaska state government.

UN Seeks to Set Rules for Deep Sea Mining. The UN’s International Seabed Authority is meeting this week to discuss general rules allowing firms to extract minerals from the ocean seabed, triggered by the Pacific state of Nauru advocating for a mining code before it finalizes its 2024 seabed licensing.

Egypt’s LNG Plans Run Aground. Egypt’s Oil Ministry is looking into the possibility of converting the African country’s 7.2 mtpa Idku and 5.5 mtpa Damietta LNG export terminals into import facilities and possibly adding an FSRU at Ain Sukhna, as plummeting Zohr output will make Egypt a net importer for the first time since 2018.

Rio Tinto Might Steal the Show with Metals M&A. Following recent rumours that mining giant Rio Tinto (ASX:RIO) may consider takeover bids for smaller rivals, the Australian company is said to be looking into Teck Resources (NYSE:TECK) after the latter’s rejected a $23 billion Glencore bid last year.

TC Energy’s $15 Billion Keystone XL Claim Rejected. The US-based ICSID international tribunal rejected the $15 billion claim of Canada’s midstream giant TC Energy (TSE:TRP) against the US government over President Biden’s revoking the XL Keystone pipeline’s construction permit, arguing NAFTA was no longer in force.

South Korea and Japan Test TMX Barrels. As Canada’s new 590,000 b/d Trans Mountain Expansion pipeline ramps up operations, South Korea’s refiner GS Caltex and Japan’s Eneos will split a 550,000-barrel cargo of heavy sour Cold Lake blend, the first foray into TMX for both countries.

Houthis Go on Another Missile Spree. Yemen’s Houthi militias targeted three vessels in the Red and Mediterranean seas with missiles, drones and booby-trapped boats, including the Chios Lion tanker carrying Russian fuel oil to China and the Olvia shuttle tanker servicing Israeli ports.

Freeport LNG Eyes Full Return. Freeport LNG, the second-largest US exporter of liquefied gas, expects to restart the first train of its 15 mtpa plant this week after the terminal’s air cair-cooled exchangers were damaged during Hurricane Beryl, restarting the remaining two shortly thereafter.

So the 'rotation' continues today. More on pg. 2

Start with Mr FFF





Bodes well for AXP.



So yesterday saw a significant rotation...which continues today.



See you on pg. 2