May 2024 DDD

peter2 said:

Thanks I thought that content on the performance of sector ETFs vs their indices very valuable also. It's so important to know the holdings and makeup of each ETF we decide to trade. Much more important if we're going the hold them for a while.

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That is what i discovered with them

Carson on inflation:

There’s no question that the inflation data in the first quarter was uncomfortably hot. But as we highlighted over the past several months, there were good reasons not to panic about another sustained upswing in inflation. I wrote about this when the January, February, and March consumer price index (CPI) reports were released. It was reassuring to see that Federal Reserve (Fed) officials took a similar view. As Fed Chair Powell noted after their May meeting, they didn’t think the hot inflation data in Q1 negated the progress made in the second half of 2023. All it did was make them realize that it would take longer to gain confidence that inflation was headed to their target of 2%.

The April CPI report confirmed that there was no need to panic after the hot inflation data in Q1. Headline inflation rose 0.3% in April, below expectations. On a year-over-year basis, CPI eased to 3.4%. That’s still elevated but as you can see below, shelter inflation is the main cause of that (the dark green bars in the chart). If you exclude shelter, headline CPI is up 2.2% since last April.



The heat in the prior inflation reports was mostly due to post-pandemic catch-up effects, rather than renewed demand or supply-side side pressures.

Shelter is a classic case in point. As we’ve written and talked about on Facts vs Feelings, the podcast Ryan Detrick and I host, official shelter inflation runs with significant lags to what we see in actual rental markets. Shelter inflation matters a lot for CPI, as it makes up 35% of the basket. Rents of primary residence account for 8% of that, while “owners’ equivalent rent” (OER) accounts for 27%. OER is the “implied rent” homeowners pay, and it’s based on market rents as opposed to home prices.

However, there’s good news with respect to shelter. Rents of primary residences rose at an annualized pace of 4.3% in April. That’s the slowest pace since August 2021 and not far above the 2018-2019 average of 3.6%. OER remains elevated but it’s easing (albeit slowly). It rose at an annualized pace of 5.2% in April, below the Q1 average of 5.9% but well above the 2018-2019 average of 3.2%. You can see why OER is keeping CPI elevated.



Another example of post-pandemic catch-up effects is auto insurance. Core CPI inflation, which excludes food and energy, was up 3.6% year over year in April. Of that, auto insurance accounted for 0.73%-points. What’s amazing is this: auto insurance makes up just over 3% of the core inflation basket of goods but accounted for about 20% of the year-over-year increase. That’s because vehicle prices and repair costs surged after the pandemic and insurance premiums rose as a result. Official data is just about catching up to that, even as actual real-time vehicle prices are now easing.

Combine the contribution from auto insurance (0.73%-points) to that from rents and OER (2.37%-points), and the three categories account for about 85% of the year-over-year increase in core inflation. Of course, that’s all backward looking because none of this is really capturing what’s happening in real time, and what’s likely to happen going forward.

The good news is that several forward-looking indicators of underlying inflation don’t give us any cause for concern.

• Wage growth for workers is running at the pre-pandemic pace of around 3%, which means there’s no underlying demand-side pressure on inflation.
• Broad commodity prices are not surging like they did in 2022 (in fact, oil prices have fallen close to 10% since early April), which means a commodity-driven supply shock is not on the cards for now.
• Market-implied expectations for future inflation are consistent with the Fed’s 2% target, and well off their 2022 peak.
• Consumer expectations for inflation are not far above what we saw before the pandemic, and this should ease further as gas prices pull back (which has happened recently).
• Business expectations for inflation in the year ahead are running at 2.3%, which is also close to pre-pandemic levels.

An Inflation Bellwether Is Cause for Optimism​

As I’ve written previously, one category I like to keep a close eye on is inflation at full-service seated restaurants (the official category is “full service meals and snacks”). It’s technically not in the core CPI basket, but interestingly, it’s historically tracked core inflation fairly closely. I find it useful because full-services restaurant meals combine several demand- and supply-side elements that drive inflation, including:

• Commodity prices – food, but also energy (since food has to be transported across the country)
• Wages – for restaurant workers
• Rents – for restaurant premises

Inflation for restaurant meals has eased significantly over the past year and half. It peaked at 9% year over year in August 2022, but is now running at 3.4%. That’s similar to the pace we saw in 2019. The message is that underlying inflationary pressures are quite benign. If you look at the chart below, you can see that it’s quite unusual for inflation of full services meals (blue line) to run below core CPI inflation (green line), as is the case now. But that’s only because shelter inflation is elevated, going back to what I discussed earlier.

Still On Track for Interest Rate Cuts in 2024​

As Fed Chair Powell recently reiterated, recent inflation data has yet to give them confidence that inflation is headed back to their 2% target, which means they’re unlikely to cut rates at their June, or even July, meeting. The April inflation data was a step in the right direction, and the forward-looking data suggests we should continue to see disinflation ahead. That means we may still be on track for at least a couple of 0.25%-points of interest rate cuts in 2024.

Markets clearly read optimism in the April CPI data – the one-year Treasury yield, which is a close proxy for policy rates over the following year, fell from 5.16% to 5.09% over the day, and the S&P 500 rose more than 1% to a new record high. We could see more of this if the inflation picture evolves as we expect it will over the next several months, keeping the bull market alive and well (as Ryan Detrick, Carson’s Chief Market Strategist recently wrote).


To which I completely disagree.

The reason is that the inflation isn't being driven by consumers, it is being driven by the Treasury and the level of debt.

Yen:



The blue box is where the BoJ stepped in to defend the Yen. The correlation is pretty tight: strong USD = higher rates = weaker Yen (or whatever currency you want to enter).

The US Treasury and Yellen et al, are actively working for a weaker USD = higher inflation. Yellen cannot have volatile, unstable UST markets.

The only way the US debt is managed is via inflation. A straight default = Great Depression II.

The instability within the UST market is driven by the dishoarding of UST:



Not a good thing:





China's timing looks good. Lower yield = higher nominal price. Sell USD buy gold:





Off to work.

jog on
duc

So a bit of a history making week:



Considering that the book was written in 1999 it has taken some time to come to fruition.



Probably a little overheated. I took some profits on FE.



Still running hot. I'm reaching that FOMO point with this. The thing with commodities they run counter to stocks in as much as volatility. You get low vol. when price is low and high vol. with high prices. Stocks are pretty much the opposite.

pg. 2

I would include the Copper chart in here with PMs.

The USD is the critical chart. USD up everything except gold down. USD down, EVERYTHING higher.

Inflation pressures are set to rise:



The US is in a cold war with China. The US is desperately reshoring, but this takes time. In the meantime, spend more with a close ally...Japan. So Japanese manufacturing is also on the rise.



Building out the infrastructure requires liquidity in the private sector, which is being supplied by the public sector. The result of this is demonstrated below by the charts.

The reason that this has become such an issue:

China de-hording due to Cold War II, China buying gold and other currencies of the BRICs. + OPEC+ (see chart earlier this week re. China selling UST).

Is China Dumping US Treasuries and Buying Gold? Bloomberg Says Yes, Pettis Uncertain​

May 17, 2024


Bloomberg reported that China is selling a record amount of US debt while buying gold. Previous reports of debt selling were false. Let’s check in with Michael Pettis at China Financial Markets for another opinion.

China Sells Record Sum of US Debt

Bloomberg reports China Sells Record Sum of US Debt Amid Signs of Diversification

China sold a record amount of Treasury and US agency bonds in the first quarter, highlighting the Asian nation’s move to diversify away from American assets as trade tensions persist.

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Beijing offloaded a total of $53.3 billion of Treasuries and agency bonds combined in the first quarter, according to calculations based on the latest data from the US Department of the Treasury. Belgium, often seen as a custodian of China’s holdings, disposed of $22 billion of Treasuries during the period.

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China’s investments in the US are garnering renewed investor attention amid signs that tensions between the world’s largest economies may worsen. President Joe Biden has unveiled sweeping tariff hikes on a range of Chinese imports, while his predecessor Donald Trump said he might impose a levy of more than 60% on Chinese goods if elected.

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“As China is selling both despite the fact that we are closer to a Fed rate-cut cycle, there should be a clear intention of diversifying away from US dollar holdings,” said Stephen Chiu, chief Asia foreign-exchange and rates strategist at Bloomberg Intelligence. “China’s selling of US securities could speed up as US-China trade war resumes” especially if Trump returns as president, he said.

Click to expand...

China is Buying Gold

One part of the story is not in question. That part pertains to China buying gold.

Is China Dumping US Debt?
I asked Michael Pettis that question yesterday. Pettis graciously replied with an email this morning plus a five-part Tweet.


Contrary to Popular Belief, Interest Rates Not Impacted

“If China were swapping US assets for assets of developing countries (which is unlikely), this would be a win-win-win, as it would likely lead to an increase in domestic investment in those countries.”
There is no doubt about that.
So, Who Pays the Price?

Data Muddied
By Email: “It’s possible, but the data are so muddied that it’s hard to tell. I hope its true.”
Since we have had this discussion before, by muddied, I believe he means China can mask it US debt holdings by parking them in State Owned Enterprises rather than official government holdings.

Another thing China has done in the past is to sell US treasuries as part of an effort to shore up the yuan. Selling dollars and buying yuan on the foreign exchange markets would tend to strengthen the yuan.
Is that going on?

I do not claim that is what’s going on now, but China has done this in the past. And if so, it’s not exactly a sign of strength, nor does the word “dumping” remotely apply.

Masking holdings in SOEs and efforts to shore up the yuan are two ways the lead chart might not be as it appears.

Contrary to the idea that “dumping treasuries is some sort of nuclear option by China that will wreck the US” it isn’t. Nonetheless, expect to see a lot of silly comments on that idea in many places.

It will be win-win-win if China assists other developing countries. Otherwise, China may be attempting to shift the pain away from the US to the EU, while buying gold as a hedge against sanctions.

China Shock II Is Coming, the EU Will Be Hit Hard, Then the US

This morning, before I saw the reply from Pettis, I commented China Shock II Is Coming, the EU Will Be Hit Hard, Then the US
Please click on the above link for discussion.

Made in Mexico is another way China tries to maintain export mercantilism. China and the US would both be better off if China did more to support Chinese consumption than exports.

Finally, please see Joe Biden vs Joe Biden on Tariffs, a Green Trade War Is Underway

I have been calling for an escalation of global trade wars for months. All the pieces are in place. In fact, escalation is clearly underway already. It will get worse no matter who wins the election.

So, returning to the lead question one more time, I give the nod to Michael Pettis: “It’s possible, but the data are so muddied that it’s hard to tell. I hope its true.”


................................................................................................

So private sector liquidity high, Public sector liquidity critical.

UST:



UST volatility is high. Indicating that liquidity issues are always just below the surface.



Equity vol. ie. VIX., is below UST vol. US corporate liquidity is high, hence stock market liquidity is high.

The evidence in the headlines:





The net net is going to be secularly rising inflation.

jog on
duc

Probably 3 pages of round-up charts this week.






NVDA is the only one that has market moving potential.

pg. 2

My Experience with White Flight​

Dr. Fly Sat May 18, 2024 2:53pm EST Leave a comment


I had what you can call a ‘Tom Sawyer like childhood’, in a middle class suburban neighborhood in Flatlands, Brooklyn. I lived in a 3BR apartment, with my Mother and sister, across the street from my Grandparents, who we visited daily. My Father was murdered when I was 4, so it was just us. My Mother worked two jobs to keep us fed and clothed and I spent the majority of my time in the parking lots with dozens of kids my age playing baseball, tag, manhunt, kick the can, midnight madness (based off the movie), football, hockey or a simple game of hardball errors (IYKYK). My Mother also made sure I got involved with the Catholic Church and made me become an altar boy, which I did about 3 days per week.

During the summers we’d go to the pool club that belonged to our buildings. We’d hang out there from morning to night, playing swimming games (Marco Polo), racing, doing cannonball contests, or diving for money when the managers would create events for the kids. There were pinball machines inside and shuffleboard courts outside, but we more or less focused on swimming. At the end of each swimming season, the managers would throw quarters into the pool for the kids to get and then everyone would take their mats and toss them into the pool and have a great big floating party, amidst the music and laughter of people genuinely happy. When that event happened, I always knew it was time to go back to school.

My elementary school was mixed race because just down the block were the housing projects. I got along great with my black classmates and grew up with them and considered them friends. There weren’t many fights in the school, but there were some. I’d get into plenty of fights with my own friends, but that’s just the way it was back then, or at least where I grew up. If you had an argument with someone, you settled it there and after the fight ended you shook hands and became friends again.

Then in 1989 the building I lived in and the 4 associated with it turned condo. While this might sound great, it actually destroyed the neighborhood. They offered tenants money to leave and most did, including my Mother. I think they gave her $15,000, which was a decent sum back then. My Grandparents didn’t take the offer because they were old and couldn’t care less about moving. This is when the white flight occurred, in earnest.

Moving in were middle class west indian families, mostly from Jamaica and Trinidad. From my vantage point, they were great people and I made good friends with many of whom were my age when visiting my grandparents and friends on the weekends. And then the cultural rot of the 1990s took hold, with gangster rap music, crack, and glorified bad behavior. Many of my friends’ parents bought their apartments instead of taking the money to move, so I still had the majority of my childhood friends there. Like many kids who turn into teenagers, my friends fell into smoking pot, drinking beer, and chasing girls are their primary objective.

The housing projects that I mentioned earlier got inexorably worse, in terms of safety, and I no longer walked around there. Before the 90s, it was about 20 to 30% white, and it was considered by other housing projects to be “soft.” The group of buildings my Grandparents lived in were considered beyond soft and often times teenagers from the housing projects would visit to rob and fight with the newly arrived west indians and the whites. In my experience, the west indians were far less violent than some of the more vocal American blacks in the neighborhood. There was once a lad dubbed “Livewire” who terrorized the neighborhood, akin to Omar from The Wire, robbing people with either an ax or box cutter and was known to cut people when they resisted.

I’ll cut to the chase and tell you what transpired from 1990 to 1999.

The buildings were unable to sell condos and the company who owned it went bankrupt. The new owners made the apartments rentable again, opening it to low income black families.

The neighborhood went from 90% white to 95% black, all this inside of a decade.

One of the stores I used to frequent as a boy for candy got bought and the new owners sold drugs from it.

Car thefts and robberies skyrocketed. I once knew someone (west indian) who’d steal cars all the time, just for the pleasure of joyriding. He never sold them and just wanted to ride in a nice car. He came from a good family, and was raised well by an educated Mother, but chose to be a criminal for reasons that I still cannot understand.

One day 5 of my friends were shot, 1 through the chest, by two gunmen in a totally random but deliberate attack. They walked down the block where my friends were and opened fire. Thankfully all survived. It was only by chance that I was not there.

One of the car thieves got into a high speed chase from cops and accidentally ran over an elderly white woman, killing her. He got 10 years in prison.

One of my friends was shot in the head and killed over a dispute over a girl.

I was robbed for my jacket by gunpoint at 13 years of age, on Thanksgiving.

Our local shopping mall, where we used to frequent on weekends, became unsafe and was targeted by mobs of black teens for acts of wanton criminality.

The new generation of kids did not play outside like we did and the parking lot was quiet and abandoned by the youth. The pool club closed and became a CVS. Most of my friends who stayed got into drugs and many died. It was because my Mother moved out of there when I was 13, and the fact my Grandparents died in the late 90s, that I wasn’t really around there to enjoy the full splendor of the neighborhood collapsing into ruin. For example, our local high school, South Shore, was shuddered by the city because students were being killed, maimed, and grades were failing.


South Shore is now used by the NYPD to train. It used to house over 3,000 students.
FIN.

pg. 3

So this final page is more to do with commodities.

Oil News:

Friday, May 17th 2024

Crude prices continue to trend within a very narrow range, confined within $82 and $84 per barrel over the course of May, and despite this week’s improving macroeconomic outlook Brent futures continue to be rangebound. That said, a slight US oil inventory drop and US inflation slowing down to a monthly rate of 0.3% might provide support for a breakout next week.

ADNOC Eyes US Trading Expansion. ADNOC, the national oil company of the UAE, is planning to expand its operations into the US market by setting up a trading desk in the States while also looking for larger LNG exposure in the shale patch with ongoing talks on Rio Grande LNG.

Colombia Turns Off Pipeline Due to Theft. The chief executive of Colombia’s Ecopetrol (NYSE:EC) confirmed that the state-controlled oil firm would shut the Transandino oil pipeline running to Ecuador’s Pacific port of Tumaco until at least year-end, citing rampant theft.

Chevron to Quit UK North Sea. US oil major Chevron announced it would exit its UK offshore business in the North Sea, starting the process of selling its remaining assets in the area, claiming that its decision to quit is not related to the UK windfall tax on energy profits and a worsening political environment.

Brazil Fires Market-Friendly Petrobras CEO. The Brazilian government ousted the chief executive of the national oil firm Petrobras (NYSEBR) Jean Paul Prates, opting for the former ANP official Magda Chambriard, who is expected to cut the major’s dividend and push for lower fuel prices.

IEA Downgrades 2024 Crude Demand Outlook. The International Energy Agency lowered its crude oil demand forecast for 2024 by 140,000 b/d to 1.06 million b/d, half of OPEC’s 2.25 million b/d call for this year, citing poor industrial activity and weaker diesel consumption.

Poland Probes $400 Million Missing Payments. Prosecutors in Poland are investigating the trading arm of national oil company Orlen (WSEKN) as some $400 million went missing after Orlen Trading paid two Dubai-based intermediaries as prepayment for Venezuelan crude that never loaded.

Moscow Eyes Power of Siberia 2 Deal with China. Russia’s deputy PM Alexander Novak said that Moscow and Beijing should sign a supply deal on the Power of Siberia-2 gas pipeline very soon, even though Gazprom’s CEO has not accompanied Putin on his official visit to China.

Rains Alleviate Wildfire Fears Across Alberta. The threat of ravaging wildfires in Alberta’s Fort McMurray area, home to around 1 million b/d of oil sands production, subsided as two days of wet weather helped containment efforts, alleviating the risk of shutdowns for the time being.

Trafigura Warns of ‘Overdone’ Aluminium Rally. Global trading major Trafigura warned that aluminum prices should decline by at least 6% to a range of $2100-2400 per metric tonne over the next six months amidst higher supply and worsening global demand for the base metal.

Exxon Strikes Oil in Offshore Angola. US oil major ExxonMobil (NYSE:XOM) has discovered oil in Angola‘s Block 15 with its Likembe-1 exploration well, two years after the last oil find in the African country’s most prolific offshore license as Luanda is seeking to reverse structural declines.

US Shale M&A Frenzy Still Not Over. Creating the second-largest producer in the Eagle Ford basin, US driller Crescent Energy (NYSE:CRGY) agreed to buy rival SilverBow Resources for $2.1 billion, pre-empting the takeover of the latter company by private equity firm Kimmeridge Energy Management.

OPEC+ Meeting Shifted Online Amidst Quota Spat. The much-anticipated OPEC+ ministerial meeting on June 1 will most probably be held online as tensions start to rise over compensation plans for Iraq and Kazakhstan, two countries that have failed to comply with their targets.

Copper Futures Diverge as NY Steals Limelight. Copper prices traded at the LME and Comex exchanges started to diverge in a spectacular fashion, with the latter trading at a $1,300/metric tonne premium as the Comex July futures soared 10% this week whilst London traded flat.

Uranium:



BTC:



Lots of institutional buying of BTC ETFs.

Do what Goldman does:



CB's will always try to buy without moving the price.

BRICS have adopted this policy, which is gold:



They got shafted the first time around.

Not this time.





jog on
duc

Let's open with Mr fff

Zero Price Memory Up Here​

Dr. Fly Mon May 20, 2024 1:07pm EST Leave a comment


Now that it looks like Hello Kitty is gone and the $GME nonsense behind us, it appears markets are legging up and without any resistance or price memory in its way. What I mean by that is, you are no longer waiting for your down stocks to break even to sell them because they’re probably all at or near record highs. Stocks at record highs tend to make new record highs. That’s how it works.

Markets can always pause or become affected by external events. But for the most part, and this will piss off some of you out there, the FOMC did a superb job in managing rates back over 5%.

I understand costs are higher and inflation was/is an issue for some. No one likes to pay more for things, and I do not want to come across as elitist here since I too grew up lower middle class, but those of us with some money who played in the market the past few years made a great deal of money. More than that, most government workers benefitted greatly via their retirements plans, and 401ks. The inflation monster is in fact TRANSITORY, even though you pretend it isn’t. This doesn’t make up for the fact that our currency lacks buying power. I am not suggesting everything is great.

This is what I am suggesting.

The FOMC managed to provide Americans, pension funds, foreign investors with a 5.25% riskless return in Tbills and at the same time keep markets at RECORD highs. You might hate the Fed but you have to admit that was clutch. If the economy tails off, the Fed has plenty of fire power to fight against recession.

Into the afternoon hours, I am 157% leveraged long.

So sectors:



I sold some XLB, XLI, SLV, XLF, PG, AXP.

No change to: XLE, XLC, XLRE, XLV, GDX, MRK, UNP

Closed out EWA.

This is how the company places trades:







When I see 'Bears' throw in the towel, I get nervous.



Another consumer 'stimmy'?

• Over the last 12 years, FNM and FRE’s balance sheets have been whittled down to ~$300 billion, combined.
• Treasury and the FHFA (FNM/FRE’s regulator) control them; both would need to agree to release FNM/FRE from conservatorship.
• FNM & FRE have ~$100B of retained earnings between the two of them; if they raised another $25-50 billion from the markets (or from private investors), they would essentially have ~$125-150B of equity capital in total.
• FHFA, their regulator, mandates a 3% capital ratio, which would mean that $125-150B in equity capital could be levered up to 33x, creating total balance sheet capacity of up to $4-5 trillion, virtually overnight.

Why, if the economy is so strong?

Full: https://www.vox.com/money/24159281/consumer-spending-economy-inflation-interest-rates




Will likely be inflationary.



So a second missive from Mr fff:

Stuck Between Growth and a Hard Place​

Dr. Fly Mon May 20, 2024 10:04am EST Leave a comment


Contemplating macro moves, I’m having a hard time accepting dividend paying stocks are a worthwhile venture. Value guys are endlessly jabbering about them and many are at 52 week highs. But let’s be honest, risk free returns are over 5% now. Barely any of the really interesting divvy plays are yielding more. Why bother?

On the other hand we have growth and the overvalued nature of it, placing investors in between growth and a hard place. Should we just continue to buy up growth and ignore value, hoping the gravy train continues? Just by saying that I sound like a bearshitting skeptic. Anyone who is against the orthodoxy of $NVDA and $MSFT is simply wrong.

And what about cryptos? Everyone trips over themselves to describe to me how great $BTC is but on nearly every time horizon, $SOL does better.

Looking for “value” growth might land you in odd places, such as China. On the surface level, China should be good. It’s the biggest and fastest economy in the world. Everyone says it’s the future. Yet, all of their stocks suck. I suppose the fact it is a communist state might have something to do with it. But they really don’t act communist, given the profits the companies retain. The stocks aren’t very reliable and the risks associated with holding Chinese stocks, given the tenuous nature of US relations, is palpable.

This leads me back to $NVDA and the semis and the crowded AI trade, with all of its bells and whistles. Aside from the occasional rally in basic materials, which is extremely fickle, the semis have been the most consistent area of the market to make money. There are others, such as industrials, which lead all sectors in sales growth TTM. There are an array of industrial stocks crushing and most are under the radar. But are you going to make 50% per year on those?

We are nearly midway through 2024 and gains have been tapered. Both the NASDAQ and SPY are up around 11%, Russell +4%. If you think about the 100 year return of 8% and then the +15% annual return the market has provided us with since 2009, you can see how ******* spoiled rotten we are and how making 20% per year on investments isn’t all that attractive anymore.



Banks need to reduce capital requirements. I'm still waiting on the ISDA to be passed. That will allow banks to buy as many UST as they want with zero impact on their Balance Sheet.

The whole market rests on this:



NVDA earnings.

A bad miss or major disappointment and we could have some red candles in the market.

S&P500 at ATH. But looking tired.

USD is off it's recent highs and UST market loves that:



So any pullback in stocks from a NVDA miss is likely a flesh wound and can be shrugged off as another opportunity to BTD. Of course if for some reason the USD rallies hard, then maybe not.

jog on
duc

Some background commentary:

European Central Bank President Lagarde did, after all, offer policy comments yesterday—in an Irish TV interview. Lagarde signaled a June Euro area rate cut is coming, because inflation is under control. Markets already expect this. Currently, US inflation is the same as that of Europe when measured on a like-for-like basis, so why is the Federal Reserve delaying rate cuts?

Politicization may be part of the problem. Politicians (in all countries) like things kept simple. For years US politicians focus on the headline consumer price index, despite its flaws as a price measure. Since the policy errors of mid-2022, Fed Chair Powell clearly wants to hang out with the cool kids in Congress rather than the geeks of the economics club. This means other inflation measures are overlooked, despite signaling that cuts might be appropriate.

Bank of England Governor Bailey suggested a UK summer rate cut may be coming, with more confidence that inflation will stay low. Various consumer inflation numbers published today should show a sizeable drop, as the weirdness of UK energy prices goes through one of its periodic lurches.

Crashes:



Rather begs the question who and how is a recession declared or recognised?

URA





Mr fff

COLLAPSE THE COMMODITIES!​

Dr. Fly Wed May 22, 2024 2:17pm EST Leave a comment


I see no reason to take today very seriously. It’s evident to me that the market is merely ******* with people, ebbing in and flowing out of hot trades, such as silver and copper. More that that, most of the FANG stocks are lower, more than 1.2% in the aggregate, ahead of earnings from $NVDA.

Interestingly, this comes off a blog I wrote last night declaring there weren’t any bear cases to be made AT ALL and that stocks had a trajectory upward, based off the success of the FOMC and looming euro carry trade. I sometimes feel like saying things out loud like that, instead of the inside voice, manifests terrible things. It’s not to suggest that I am contrarian indicator. I know that I’m not, based off my results. However, I have been known to get quite excitable and my core strength lies in my adaptability, not some hard coded mantra that causes me to obstinately invest based off principle.

That said, I had reduced losses to 60bps via some proficient trading, went to the gym, and came back to COLLAPSE, as markets swooned lower so did my 100% long book, now off by 107bps.

Two schools of thought are coarsing though my mind now and I don’t want to be too rash, jumping in and out of positions based off hourly moves.

One thing is for certain, the entire commodity complex has been upended and is getting tossed into flaming barrels of garbage. I haven’t hedged because I endeavor to remain long and I’m long because I want to believe.


Oil News:

European crude differentials have dipped this week after the continent’s return from maintenance has not seen a recovery in crude buying, with ample crude inventories allowing refiners to stave off purchases.

- The North Sea’s Forties grade fell to a -$1 per barrel discount to Dated Brent, the physical benchmark in Europe, whilst WTI Midland dropped to a -$0.70 per barrel discount, the lowest since it became part of the Brent basket.

- Short-term Brent swaps flipped into contango in the past few days, with crude for prompt delivery traded at a more than $1 per barrel discount to the July ICE Brent futures contract, a stark change after months of backwardation.

- Refinery curtailments in Asia, US refinery throughputs consistently trending lower year-over-year, and now European demand concerns indicate there might be too much oil amidst weakening global demand.

Market Movers

- US refiner Phillips 66 (NYSESX) agreed to acquire pipeline company Pinnacle Midland Parent from PE firm Energy Spectrum Capital for $550 million in cash, expanding its midstream gas and processing footprint.

- Leading US natural gas producer Chesapeake Energy (NASDAQ:CHK) started laying off employees after its divestment of Eagle Ford assets, having missed Q1 earnings estimates after its announced production cuts.

- ADNOC, the national oil company of the United Arab Emirates, has acquired an 11.7% stake in NextDecade’s (NASDAQ:NEXT) Rio Grande LNG facility in Texas, simultaneously signing a supply agreement.

Tuesday, May 21, 2024

The death of Iranian President Ebrahim Raisi has failed to awaken oil prices from their slumber, with ICE Brent sticking to the $83-84 per barrel range so far this week. As several Fed officials managed expectations regarding a potential interest rate cut, market sentiment has been souring, with hedge funds continuously cutting their long positions in both Brent and WTI. OPEC+ might be the last hope of oil bulls out there.

Copper Prices Hit New LME Record. Copper prices have soared to a record high this week, with intra-day LME quotes surpassing $11,000 per metric tonne for the first time, prompted higher by last week’s Comex short squeeze as market participants anticipate supply shortages down the line.

Australia’s Power Woes Turn Ugly. Delays in installing transmission lines tied to wind and solar farms might trigger blackouts across Australia between 2024 and 2028 as the country continues to mothball gas- and diesel-powered generation capacity in southern states.

Russia Lifts Gasoline Export Ban. Russia’s government suspended a ban on gasoline exports until June 30 after inventories of the fuel started to build up in the country’s ports on the back of higher refinery run rates across the country, reimposing the ban from July 1 to August 31.

Mexico’s New Refinery Sees Another Delay. The pet project of Mexico’s outgoing president Andres Manuel Lopez Obrador, the 340,000 b/d Dos Bocas refinery, is unlikely to be commissioned before the country’s elections this week as Pemex is supplying only 5% of the plant’s total capacity.

Shell Shareholders Reject Tighter Climate Goals. Shell (LON:SHEL) shareholders rejected a resolution filed by activist shareholder Follow This, urging the UK-based energy major to include Scope 3 end-user emissions in its targets, with 78% of votes backing the firm’s current climate goals.

Tankers Start to Move Out of Baltimore. The refloating and removal of the 116,851 dwt Dali tanker from the Port of Baltimore has made it possible for deep-draft commercial vessels to resume movement in and out of the port, with Consol Energy (NYSE:CEIX) already loading a coal tanker this week.

Niger Joins Rank of Oil Exporters. Benin’s port of Seme has approved the loading of Niger’s first crude cargo after the country’s government sought to normalize relations with the military junta in Niamey, with the Front Cascade vessel carrying a cargo of heavy sweet Meleck crude to Spain.

Oil Discovery Lifts Suriname Outlook. Malaysia’s national oil firm Petronas found oil with its Fusaea-1 exploration well, marking the third commercial hydrocarbon discovery in the offshore Block 52, developed jointly with US oil major ExxonMobil (NYSE:XOM), increasing the likelihood of a floating LNG unit.

TMX to Load First Cargo This Week. The port of Vancouver will see the first-ever loading of a cargo from the expanded Trans Mountain (TMX) pipeline this week, with the Emirati tanker Dubai Angel expected to load 550,000 barrels of China-bound Access Western Blend this weekend.

Chile Allows Lithium Giant to Boost Production. Chile’s government reached an agreement with the world’s largest lithium producer Albemarle (NYSE:ALB) to expand its output in the country by 240,000 mt provided it complies with its National Lithium Strategy, using cleaner energy and reducing water usage.

Russia Wants Another Pipeline to China. Russia’s president Vladimir Putin wants to build an oil pipeline alongside the Power of Siberia-2 gas pipeline, using a mainland route via Mongolia, despite still not having agreed on commercial terms for the long-anticipated 50 BCm/year gas conduit.

Nigeria’s Refining Jewel Seeks US Barrels. Nigeria’s 650,000 b/d Dangote refinery, the largest plant coming online this year, seeks to sign a 12-month supply contract for the delivery of 2 million barrels of US light sweet WTI each month as it continues to prefer third-party barrels to domestic oil.

Turkey Becomes Europe’s Largest Coal Market. Turkey surpassed Germany as Europe’s largest producer of coal-fired electricity in January-April 2024, having generated 36 TWh against Germany’s 34.6 TWh, largely due to the latter’s steep 32% year-over-year decline.


VIX



So NVDA earnings come out now (after the bell). This is going to move markets for tomorrow.

Market obviously thinks they will be good/great and big. Pretty much erased today's decline.

jog on
duc

NVDA reports as expected - huge growth with bucket loads to come as spending on chips explodes and will continue to.

Welcome to the new world. Get on!!!!

A bit of a surprise after NVDA blow-out earnings.




Off to work

jog on
duc

From JC:





Oil News:

Friday, May 24th 2024

Oil prices have been declining for four consecutive days, driven lower by the Federal Reserve’s reluctance to commit to interest rate cuts this year as well as weak physical sentiment in the markets that saw backwardation in both WTI and ICE Brent drop to the lowest level seen this year. Notably improving US gasoline demand and the OPEC+ meeting might provide some upside next week, but Brent is unlikely to break out from its current $80-85 per barrel range.

Russia Struggles to Cut Production. In a rare admission of non-compliance, the Russian Energy Ministry stated that it failed to fully comply with its OPEC+ production targets citing technical difficulties of cutting production in the winter, with OPEC putting the country’s output level at 9.29 million b/d in April.

Chevron-Hess Merger Hits Shareholder Roadblock. An increasing number of investment funds owning stock of Hess Energy (NYSE:HES) have been voicing concerns about the firm’s planned $53 billion sale to US oil major Chevron (NYSE:CVX), wary of potential litigation with Exxon over the former’s Guyanese assets.

US Hurricanes Loom Large on the Agenda. US government agencies are warning of higher-than-usual hurricane activity this year as warm sea temperatures and falling wind shear conditions could result in seven major hurricanes in the season beginning June 1, more than double last year’s three hurricanes.

Spanish Major Clinches Venezuela Waiver. Spain’s largest oil firm Repsol (BME:REP) has received a license from the US Treasury Department, allowing it to continue and expand operations in Venezuela despite the April 18 sanctions snapback, aiming to double production at the Ceiba and Tomoporo fields to 40,000 b/d.

Guyana Pushes ExxonMobil for More Gas. The government of Guyana set an October deadline for the ExxonMobil (NYSE:XOM) consortium developing the offshore Stabroek block to decide whether it wants to commercialize the gas-rich Haimara discovery, warning that otherwise it would reallocate the find.

BHP’s Third Bid for Anglo Rejected Again. Having rejected BHP’s third takeover proposal that valued mining major AngloAmerican (LON:AAL) at $49.2 billion, the London-based firm nevertheless agreed to a one-week extension so that the Australian giant can make a binding takeover offer, bringing this year’s largest M&A bid to its endgame.

EPC Bankruptcy to Slow Down Texas LNG Buildout. Zachry Holdings, the main contractor for the Golden Pass LNG project jointly developed by QatarEnergy and ExxonMobil (NYSE:XOM), has filed for bankruptcy protection citing cost overruns, potentially delaying the export terminal’s planned H1 2025 launch.

US Midstream Giant Sees Value in Depleted Fields. US pipeline operator Kinder Morgan (NYSE:KMI) purchased mature oil and gas-producing assets in West Texas, planning to tap into carbon capture incentives under the IRA, most notably a $60 per metric tonne tax credit for carbon sequestration.

World’s Leading Miner Pressured to Leave Europe. The world’s second-largest mining conglomerate Rio Tinto (ASX:RIO) is under pressure from key shareholders who believe the company’s dual listing in Sydney and London complicates future M&A activity, suggesting Rio switches its primary listing to Australia.

White House Seeks to Ease Gasoline Concerns. The US Department of Energy is expected to release nearly 1 million barrels of gasoline from the Northeast Gasoline Supply Reserve, created after Superstorm Sandy in 2014, and to be soon shut as part of President Biden’s March government funding package.

China Launches Huge Cobalt Stockpiling Drive. Marking the largest-ever state stockpiling move for cobalt, China is reported to be purchasing 15,000 metric tonnes of the transition metal from local Chinese producers over the next couple of months, reducing the supply surplus expected in 2024.

Nigeria Cannot Agree on Its Own Output Figures. Nigerian government agencies report widely diverging crude production numbers with the Upstream Regulatory Commission putting April output at 1.28 million b/d whilst the national oil firm reported 1.7 million b/d, highlighting the lack of transparent information from the country.

Canada Still Eyes Full Pipeline Sale. As TMX loaded its first cargo this week, Canada’s government is amending regulations that would facilitate divestment of the pipeline’s stock to Indigenous groups without federal regulatory approval, seeking to sell the $25 billion project as soon as possible after a fourfold cost overrun.

Markets Careen Lower in Post $NVDA Earnings Panic​

Dr. Fly Thu May 23, 2024 4:17pm EST 1 Comment


Apathy has officially gripped the minds of traders. We no longer cling to Hello Kitty’s $GME tweets, nor do we press higher off the back of better than expected results at $NVDA. We, instead, COLLAPSE into the ******* graveyard, down by 600 ******* Dow points, and a lot worse in the trenches.

High beta stocks got racked for 3.3% and breadth was abhorrent 15%. If you don’t mind, I’d like to roast myself, once again, and remind readers that it was just the other day when I declared “THERE WASN’T A BEAR CASE TO BE MADE”, good Sirs. If you must know, I wrote that blog under the influence of plenty of coffee and I wore a powdered white wig while doing it, as you would expect from a man in my station.

So what next? Well I don’t have any more magic tricks in my hat, as my bullish fervor, once displayed like a ******* peacock on a highway, has been Mack Trucked with my guts now splayed out across the earth.

I tried my best to stem the flow of blood from my trading account and managed to limit my losses to just 23bps. However little it might appear, I am mentally down 90% this month and although my losses are in fact less than 1% for May, it isn’t a consolation for a person, such as myself, who is not only accustomed to the rarefied air of success but in fact a person who creates his own environ.
I will need to meditate on these items and direct my energy into more profitable venues in the not too distant future.

In about a two days I will be turning 48, an abhorrent age and I’d be lying to you if I said “time just flew by.” Only idiots say that, who cling onto yesterday because tomorrow looks bleak. I have, in fact, a very bright future ahead of me, in spite of the obvious limited numbers of years, actuarially speaking, left in my timeline. Some of us die sooner than others and although my life, at times, seems to be filled with nothing but chaos and tumult, I sincerely give an effort to improve myself and the people I influence. I do not covet others and wish my fellow man well in his endeavors. However, that will not stop me from posting videos of black people stealing **** at Target, or discussing the cuckholds in our government who appear to be working at the behest of anyone but America.

I am merely a ripple in a very large body of water with wild currents and storm systems overhead, manifesting my small piece of equanimity and success, in my remote corner of the world, reaching out to you now with the message to **** yourselves and to clear the **** out of my way, for my revenge is coming soon and my gains will be fantastical and all of you will regret making memes about my person (Stocklabs), for when I do achieve the elusive success I speak of, It will be ominous for you, for I will directly inflict bodily harm onto you (Minecraft) and make sure your hands are cleaved the **** off and you’re never able to make memes again.

Have a pleasant evening.

So this week:



Of the above I hold: XLRE, XLE, XLF, XLC, XLB, XLI, XLV. For XLU I hold FE.

Other stocks:



I could go through the individual charts, but they all show essentially the same thing: weakening.

Why?



USD is again looking bullish.

Yellen and the Treasury have been actively trying to talk, sell the USD lower. A strong USD plays havoc in the UST market:



No issues yet.

Another problem:



Over time, the total supply of U.S. Treasury securities outstanding has increased faster than the daily trading volume of Treasuries. During the past decade, for example, the Treasury security supply outstanding soared 122% from $11.8 trillion to $26.3 trillion, while the daily trading volume only inched up 39% from $546 billion to $760 billion:



Source: SIFMA

As a result, the ratio of daily trading volume to the size of the market decreased considerably.

But under the hood, liquidity is worse than that, because there are a lot of different types of Treasury securities (various durations from 4 weeks up to 30 years, and either inflation-adjusted or not), and each one of those sub-markets has its own smaller less-liquid market. Off-the-run securities are the most problematic in terms of liquidity.

The entire REPO market is predicated on supplying liquidity to the UST market. The data above evidences just how impossible that task is and why there have been at least 4 mini crashes, bailed out by the Fed since 2019.

No longer are Central Banks the primary buyers of UST. Private investors.

CBs will sit on losses, pretty unconcerned. Not so private investors. They will dump at first opportunity if losses start to accumulate.

In the Treasury market, following several consecutive days of deteriorating conditions, market participants reported an acute decline in market liquidity. A number of primary dealers found it especially difficult to make markets in off-the-run Treasury securities and reported that this segment of the market had ceased to function effectively. This disruption in intermediation was attributed, in part, to sales of off-the-run Treasury securities and flight-to-quality flows into the most liquid, on-the-run Treasury securities.
–March 2020 FOMC Meeting Minutes

Click to expand...

Treasury markets experienced extreme volatility in mid-March, and market liquidity became substantially impaired as investors sold large volumes of medium- and long-term Treasury securities. Following a period of extraordinarily rapid purchases of Treasury securities and agency MBS by the Federal Reserve, Treasury market liquidity gradually improved through the remainder of the intermeeting period, and Treasury yields became less volatile. Although market depth remained exceptionally low and bid-ask spreads for off-the-run securities and long-term on-the-run securities remained elevated, bid-ask spreads for short-term on-the-run securities fell close to levels seen earlier in the year.
Several participants remarked that a program of ongoing Treasury securities purchases could be used in the future to keep longer-term yields low. A few participants also noted that the balance sheet could be used to reinforce the Committee’s forward guidance regarding the path of the federal funds rate through Federal Reserve purchases of Treasury securities on a scale necessary to keep Treasury yields at short- to medium-term maturities capped at specified levels for a period of time.
–April 2020 FOMC Meeting Minutes

Click to expand...

LOL.




On the move higher.

I think the divergence between the Dow Industrials and Transports is important and might be the only relevant signal within the indices that are now so influenced by a very narrow range of mega-stocks. All week I have been trimming positions, taking some profits in anticipation of a dip.



As noted by I believe Mr Chipp, market tops are unlike market bottoms. They are a process, a rounding off of. The new ATH could turn out to be a swan song for equity markets in the next few years.



That is not currently a bullish looking chart.

For the hardcore:



For the perma bulls:



Trouble is that encompasses two or three lifetimes.


jog on
duc

ETFs eating fund managers' breakfast, lunch and dinner.


Unbelievable, that these fundies are still being paid huge fees and bonuses.

peter2 said:

ETFs eating fund managers' breakfast, lunch and dinner.

View attachment 177592
Unbelievable, that these fundies are still getting paid huge fees and bonuses.

Click to expand...

that depends if the fund is ( usually ) making the returns , not just creating some outlandish benchmark to 'out-perform'

in a bull market ' a rising tide lifts all boats ' ( or at least it should ) , a solid fund should be able to adapt quickly to reduce losses , maybe even make small gains in turbulent times

not all ETFs are 'a certainty ' several have resorted to consolidations ( to stay viable ) , or had a strategy change to mitigate the damage done

( i hold a selection of ETFs , LICs one managed fund and some listed fund managers )

one issue with funds/fund managers is 'key person risk '

So a number of charts.

Hedge Funds:



pg. 2

For next week (short week):



I don't have XLC as a +3.

Nor XLU:



Market:



Looks to be rolling over to me.

I'd personally be careful with long positions. As stated previously I spent most of last week selling down positions reducing risk and taking some profits.

jog on
duc

Very boring when US markets are closed.

While we wait:



If you have read the gold thread:


“For the first time ever, that dollar recycling is not occurring. And what is replacing it? I like to call it gold recycling,” says Currie. “It explains a lot, why gold prices are as strong as they are. And what is the evidence of that is that the emerging markets — the BRIC countries — all met with Saudi Arabia and other key participants [in] November of last year, and discussed how they’re going to trade with one another using local currencies. And then whatever it nets out in settling, they would settle in gold.”
The Saudi's are not recycling into UST. LOL. Not interested. They are purchasing manufactures and any surplus flows into gold.




jog on
duc

Oil News:

The latest forecast from the US National Oceanic and Atmospheric Administration (NOAA) confirmed that this year’s Atlantic hurricane season is expected to be above normal, with the potential for 17 to 25 named storms from June to November.

- With 8 to 13 of those storms likely to develop into hurricanes, almost double the past year’s average, 2024 might see heightened risks for production from the US Gulf of Mexico and refineries across the Gulf Coast.

- Offshore oil fields in the US Gulf of Mexico account for 15% of total crude production in the country (1.8 million b/d) and the overwhelming majority of medium sour supply, while for natural gas the same metric stands at 5%.

- The concentration of US refining along the Texas and Louisiana Gulf Coast is even stronger, corresponding to almost half of US downstream capacity, while the same strip accounts for 90% of all US seaborne crude exports.

Market Movers

- Rating agency Moody’s downgraded Colombia’s state energy company Ecopetrol (NYSE:EC) into junk territory, citing increasing debt levels amidst higher dividends and a hefty investment plan.

- Spanish oil major Repsol (BME:REP) is reportedly seeking to sell a stake in its 800 MW renewable asset portfolio in the United States, with Saudi Aramco seemingly keen to farm in.

- Chinese offshore specialist CNOOC (HKG:0883) signed oil exploration and production deals with Mozambique’s energy ministry to develop five offshore blocks covering a total area of 29,000 km2.

Tuesday, May 28, 2024

Oil prices have been trading rangebound for the fourth consecutive week, staying within the $81-83 per barrel range for Brent, as priced-in expectations of OPEC+ maintaining production curbs have failed to lift sentiment any higher. While improving consumption figures from the US and an increasingly bullish picture for hurricanes in the US Gulf Coast provide some medium-term hope for oil bulls, the macro outlook is still weak and the prospect of Fed interest rate cuts in June is getting slimmer.

EU Approves Stringent Methane Controls. The European Union approved a law this week to impose methane emission limits on Europe’s oil and gas imports from 2030, setting maximum methane intensity values on all fossil fuels that would trigger financial penalties, if flouted.

Saudi Aramco Could Launch SPO in June. According to media reports, Saudi Arabia’s national oil company Saudi Aramco (TADAWUL:2222) could launch a multi-billion-dollar share sale as soon as June, with the presumed offering aiming to generate some $10 billion for the state coffers.

Russia to Build Nuclear Plant in Uzbekistan. The Central Asian Republic of Uzbekistan is set to become the next addition to the list of countries developing nuclear energy, the first in the region, agreeing to build six smaller 55 MW reactors instead of the initial plan for 2.4 GW capacity.

Iran Keeps on Dreaming Big. The recent death of President Raisi notwithstanding, the Iranian government has approved a plan to increase oil production to 4 million b/d from the current target of 3.6 million b/d, however without providing a time frame for the capacity uptick.

Mexico’s Production Is Collapsing Amidst Debt. As Mexico’s crude output dropped to a 40-year low of 1.47 million b/d last month, the country’s state oil firm Pemex has been struggling to repay service providers including drillers, with the NOC reporting $21.9 billion in pending payments in its Q1 results.

Hedge Funds Turn Ultra Bullish on Gold. The net length held by hedge funds and other large speculators in Comex gold futures and options rose by a further 21,030 contracts in the week ending May 21, bringing the totals to the highest level since mid-April 2020 as gold boosts its safe-haven credentials.

BlackRock Wants Anglo to Merge. US asset management giant BlackRock (NYSE:BLK) has encouraged London-based mining firm AngloAmerican (LON:AAL) to continue engaging in negotiations with BHP over its proposed 50 billion merger, with a final bid expected by May 29.

Shell, BP Quit South African Refining. Europe’s energy majors Shell (LON:SHEL) and BP (NYSE:BP) have agreed to sell their 180,000 b/d Sapref refinery in Durban, out of operation since a 2022 flooding, to the South African government for a symbolic one rand.

Australia’s CCS Ambition Takes a Huge Hit. Australia’s Queensland state government rejected a pilot CCS project developed by Glencore (LON:GLEN) in the Surat Basin, arguing that permanent storage of carbon dioxide from a coal-fired power station could impact groundwater resources.

New Petrobras CEO Seeks to Assuage Markets. Magda Chambriard, the newly anointed head of Brazil’s national oil company Petrobras (NYSEBR), has vowed to keep investor returns in mind after her predecessor Jean-Paul Prates was ousted amidst government pressure to spend on job creation.

US to Continue Buying Venezuelan Asphalt. Global Oil Terminals, a US oil trading company owned by Harry Sargeant III, has received a US Treasury waiver to continue importing Venezuelan asphalt to the United States and to interact with PDVSA over the next two years.

Majors’ Bids Lift Outlook on Trinidad’s Upstream. Trinidad and Tobago said it received bids from BP (NYSE:BP), Shell (LON:SHEL), and EOG Resources (NYSE:EOG) as part of its 2023 shallow water licensing round, all bidding for the Modified UC block, with the winner to be announced soon.

Congo Boasts First Offshore Discovery in Decades. The Congolese subsidiary of Africa-focused upstream firm Perenco discovered oil with its Moke-East exploration well off the coast of the Democratic Republic of Congo, the first offshore oil find there in almost three decades.





SPY and DIA not looking too flash. QQQ up on NVDA.

All of my short positions are suddenly working really well. Gold & Silver having a good day. Feels a bit like risk off.

Off to work.

jog on
duc

An anecdotal one for Mr @ducati916

So let's start with Mr fff:



A day later:



The market seemingly flippe-floppeing



The sectors are the clue



Highlighted a few days ago by JC.



Obviously the two are correlated. Watch at least one of them.



It is actually the USD that is the catalyst. But the moves in the UST market are responding with greater amplitude to smaller moves in the USD.

That should be a concern.




And



jog on
duc