October 2024 DDD

[ducati916]

Oil News:

The September monthly average refining margin fell to its lowest for the month since 2020, indicating that the downstream supercycle that was boosted by COVID-related disruptions and Russia sanctions is now ending.

- Disappointing diesel demand remains a headache for refiners as US product supply of distillate fuel oil dipped 6% year-over-year in 2024 to date amidst declining manufacturing activity and higher biofuel consumption.

- The International Energy Agency has revised its global refinery runs forecast for this year to 82.8 million b/d, down by 180,000 b/d from its previous estimate, also expecting a mere 0.6 million b/d year-over-year increase in 2025.

- Weaker seasonal maintenance works have also added downward pressure to refining margins, prompting coastal refiners to cut runs; Asian import-dependent refiners in Taiwan and South Korea started the trend, and now Spanish and Italian refiners are slashing throughput, too.

Market Movers

- US oil major ExxonMobil (NYSE:XOM) is moving on with the second stage of exploration in a block it operates offshore the Greek island of Crete, after an extensive seismic survey found several prospective plays.

- US refiner Phillips 66 (NYSESX) has completed its divestment of retail stations across Central Europe, selling its 49% stake in its Swiss joint venture with Coop for $1.24 billion in an all-cash deal.

- Brazil’s state oil company Petrobras (NYSEBR) is planning to cut its capital expenditures for 2025, down to $17 billion from the previously assumed $21 billion, despite government requests to invest more.

Tuesday, October 15, 2024

Following ten heated days of geopolitical speculation, the risk of seeing the Israel-Iran standoff degenerate into an oil price rally is evaporating, as Prime Minister Netanyahu vowed to strike military targets and not oil ones. This has brought macroeconomics back into the limelight with OPEC cutting its 2025 forecast again and China continuing to report weak import numbers. All of that saw ICE Brent slump back to $74 per barrel and WTI fall to within touching distance of the $70 mark.

US Tightens Sanctions on Iranian Exports. The US Treasury and State Departments slapped sanctions on 23 tankers and 16 entities involved in the ghost fleet enabling Iranian crude oil flows to China, expected to lower the 1.6 million b/d of oil flowing to China’s teapot refiners in Shandong.

OPEC Cuts Crude Demand Forecasts Again. For the third consecutive month, OPEC slashed its forecast for global crude oil demand growth in both 2024 and 2025 to reflect weaker Chinese consumption, however even now its annual increment is above consensus at 1.93 million b/d.

Chinese Oil Major Quits TMX Term Deal. China’s national oil company PetroChina (SHA:601857) will no longer be a committed shipper on the 590,000 b/d Trans Mountain Expansion pipeline after it had assigned its contract to another party, without naming the recipient of its term capacity.

Pemex’s US Refinery Leaks Toxic Substance. The 313,000 b/d Deer Park refinery operated by Mexico’s state oil firm Pemex discharged some 43,500 pounds of highly toxic hydrogen sulfide gas into the atmosphere, several hours after a deadly incident that killed two contract workers.

Iraq Claims OPEC+ Quota Compliance. According to Iraqi officials, the country produced 3.94 million b/d of oil in September, less than its 4 million b/d OPEC+ output target for the first time this year, although it seems to be based on the debatable claim that Kurdistan halved its production to 140,000 b/d.

Japan Mulls Expanding LNG Reserve Stocks. Japan is considering ramping up purchases of LNG for emergency needs to at least 12 cargoes per year from its current pace of 3 cargoes annually, equivalent to more than 0.6 million tonnes of LNG of additional demand to safeguard against price shocks.

Norwegian Courts Side with Oil & Gas Projects. A Norwegian appeals court had ruled in favor of the government against environmental activist groups that sought to halt three upcoming oil projects – Yggdrasil, Tyrving, and Breidablikk – boosting the production outlook of Equinor and Aker BP.

The Fight for The Largest Zinc Smelter Begins. Tension is piling up around the world’s largest zinc smelter Korea Zinc after buyout investment firm MBK Partners bought a 5.34% stake in the company amidst a multi-billion-dollar succession feud, eyeing a future takeover of operations.

Chinese EV Sales Hit All-Time High. China’s new energy vehicle sales reached 1.29 million units last month, up 17% month-over-month and 42% year-over-year, with the new record high indicating Beijing’s stimulus measures might stimulate non-fossil cars more than conventional ones.

US Major to Recover Billions of Venezuela Arrears. US upstream firm ConocoPhillips (NYSE:COP) has received a US government license to recoup the almost $10 billion owed by Venezuela, enabling it to pursue legal action against PDVSA in countries where the latter holds financial assets.

Congo Cancels Upstream Licensing Round. The Democratic Republic of Congo canceled a licensing round for 27 oil blocks it launched two years ago, citing weak competition and inappropriate offers, easing fears that oil drilling could expand into Africa’s second-largest rainforest.

Malaysia Doubles Down on South China Sea Exploration. Malaysia’s Prime Minister Anwar Ibrahim confirmed that the country’s state oil company Petronas would continue oil and gas exploration activities in the South China Sea, defying recent dissatisfactory remarks from China.

China Reports Wind Technology Breakthrough. Chinese power generation manufacturer Dongfang Electric (SHA:600875) rolled out a wind turbine with a capacity of 26 MW, surpassing any existing or announced model and beating the previous record capacity of 18 MW by a wide margin.



Today's Chart of the Day was shared by Larry Thompson (@HostileCharts).

• Larry points out that the S&P 500 Top 50 ETF ($XLG) closed at all-time highs after gapping above resistance from the July peak, around $48.
• When price gaps above a well-defined resistance level like this, it's called a Breakaway Gap, the most bullish type of breakout.
• $XLG is resolving higher out of a three-month Ascending Triangle pattern. This bullish pattern is defined by horizontal resistance at $48 and rising trendline support.

Takeaway: It's hard to be bearish when the heaviest stocks in the market are resolving higher.

New one to me XLG.



Generally speaking, we've seen dividend stocks outperform when longer-term Treasury yields are falling and underperform when Treasury yields are rising. As you can see in the chart, dividend stocks outperformed quite dramatically from early April through September ahead of the Fed's recent 50 basis point rate cut, but they've taken a pause in the last few weeks as the yield on the 10-year Treasury has actually risen in response to the cut in the fed funds rate. If you think Treasury yields will continue higher from here, dividend stocks will likely remain weak relative to the rest of the market. If you're of the opposite view and think Treasury yields will pull back, dividend stocks will have that as a tailwind.

• Small Caps have lagged all year, but the Russell 2000 ($IWM) has set the stage for a year-end rally. It closed slightly positive today, while the other three major indices fell.
• Over the past three months, the index has coiled into a narrow range as pressure builds for an explosive move in either direction. Yesterday, Chris pointed out that Friday was a 90% up day for the Russell 2000.
• Regional Banks ($KRE) are the largest industry group within the Russell 2000, representing 10% of the index. Chris adds that $KRE and $IWM look ready to run if they can clear $60 and $225, respectively.

Random Market Thoughts​

Wed Oct 16, 2024 10:00am EST 1


I covered my shorts and upped cash to nearly 70%, watching from the tall grass. My longs consist of non tech stocks, financials and REITs, mostly immune to the volatility present in the tape. But if we get a rout, nothing will be immune.

A few thoughts

Amazon inked an energy deal for nuclear today and we are seeing these deals almost non stop. As a result, nuclear plays like $CCJ and $SMR are taking off. This is a long term bullish trend of note.

Anything related to energy and the efficiency by which the energy is handled and maintained is a good play. This spills over into data centers and who cools them, namely $ETN and $VRT.

On the Orwellian front, I’ve been looking into $YOU recently and learned they’re expanding past the TSA pre clear checkins to facial recognition in retail stores to fight shrinkage, casinos to fight cheats, and have targeted financial services to combat fraud. In other words, identity via your face is being used to reduce friction and combat crime. This is the brave new world and it’s extremely profitable .

Last thing I’ll touch on is $HOOD. Many only view this as a low brow brokerage play, but it’s much more than that. They have more millennial and gen z clients than all other online brokers combined. What this means for when the boomers pass on and pass down their wealth is a tailwind. They’re also getting competitive in the credit card biz, margin lending and subscription services via their gold package. Naturally this all works in a strong market environment, which I think for the most part is a safe bet.



jog on
duc

​

 

[ducati916]

• The US Dollar Index ($DXY) has closed higher virtually every day this month. It's up +2.75% in October, putting it on track for its best month in two years.
  
• Jamie points out that $DXY is approaching its 200-Day Moving Average after bouncing directly off its 200-Week Moving average. Crude Oil and the 10-year Yield were bouncing with $DXY, but both are pulling back this week.
  
  
• Stocks have been immune to Dollar strength this year. Even after the Dollar's recent bounce, the S&P 500 is barely off a record high during a seasonally weak period. Imagine what stocks would be doing if the dollar wasn't ripping.
  

Takeaway: The Dollar ($DXY) has risen every day this month, bouncing from its 200-WMA to its 200-DMA. However, risk assets have shrugged off this potential headwind.





Mr FFF

Power is the Next Big Trade​

Wed Oct 16, 2024 4:25pm EST 2


I want to word this blog carefully, so pardon the lack of prose. I’ve mentioned the rally in AI Energy related names before and discussed datacenters and the private deals these nuclear plays are cutting with large corporations. But I don’t think you understand the gravity, since you’re all largely retarded.

Here is the growth in electricity the past decade.



The projected growth into 2027 is between 8 to 10% per annum, driven by AI applications. How are these applications processed? Datacenters, such as $DELL, $AMZN, $MSFT, EQIX, $GOOGL, $SMCI and others.

Who facilitates this?

$NVDA and $AMD chips, amongst others.

Which form of energy is the best for these companies?

Nuclear. The plays there include $CCJ, $SMR, $BWXT, $NXE, $UEC, $UUUU, OKLO amongst others.
Which utilities are in play?

$CEG $TLN $PEG $AES $D $ETR $DUK $NEE $WEC and $VST
Who builds these plants?
$FLR $GEV, J, $GE

There are also ancillary plays, such as $FSLR proving solar to utilities, or $AMSC making chips geared for smart grids, or $VRT and $ETN for liquid cooling at data centers, and to a smaller extent $SMCI. There is a daisy chain of companies in play due to this new paradigm, which is saving the semis from a large pullback, judging by the abysmal numbers out of $ASML yesterday.

Random Market Thoughts​

Wed Oct 16, 2024 10:00am EST 1


I covered my shorts and upped cash to nearly 70%, watching from the tall grass. My longs consist of non tech stocks, financials and REITs, mostly immune to the volatility present in the tape. But if we get a rout, nothing will be immune.

A few thoughts

Amazon inked an energy deal for nuclear today and we are seeing these deals almost non stop. As a result, nuclear plays like $CCJ and $SMR are taking off. This is a long term bullish trend of note.

Anything related to energy and the efficiency by which the energy is handled and maintained is a good play. This spills over into data centers and who cools them, namely $ETN and $VRT.

On the Orwellian front, I’ve been looking into $YOU recently and learned they’re expanding past the TSA pre clear checkins to facial recognition in retail stores to fight shrinkage, casinos to fight cheats, and have targeted financial services to combat fraud. In other words, identity via your face is being used to reduce friction and combat crime. This is the brave new world and it’s extremely profitable .
Last thing I’ll touch on is $HOOD. Many only view this as a low brow brokerage play, but it’s much more than that. They have more millennial and gen z clients than all other online brokers combined. What this means for when the boomers pass on and pass down their wealth is a tailwind. They’re also getting competitive in the credit card biz, margin lending and subscription services via their gold package. Naturally this all works in a strong market environment, which I think for the most part is a safe bet.

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



Both stock and bond vol. are rising.


Either choice (more rate cuts, no rate cuts, or rate hikes) will likely increase volatility across markets in the short term as it does play out;

That volatility will ultimately have to be addressed with more USD liquidity once it affects UST markets;

With MOVE at 124 this week, it will likely not be long until that USD liquidity comes, and;

When USD liquidity does come, it will likely be good for gold, BTC, stocks (esp. industrials), nominal GDP growth, and inflation, and negative for the USD.



So it is good for gold, despite the USD also rising precipitously.

The Treasury needs a weaker USD to prevent $MOVE vol. Too high a USD forces Japan and others to sell UST to obtain USD. Selling UST forces 10yr higher.




As USD has moved higher, UST has moved higher (yield up prices down) reflected in higher $MOVE vol. Higher $MOVE vol. has (I believe) forced stock $VIX higher, although prices have continued to move higher in stocks. PUT prices via IV have also risen, making downside protection that much more expensive.

You could argue that it's the election and nothing to do with the Fed cutting 50bps. The USD should be weaker. It's not and that is a concern.

The reason Powell cut rates was to reduce Treasury interest payments on the debt. Treasury deficits are growing rapidly. They can't issue 10yrs at 4%. That means they have to continue at the short end. The only buyers are Hedge Funds. Their appetite is finite? Remember they are buying at x100 leverage and more. When rate are volatile in debt markets, bad things happen.

The short point is: stuff is happening that you would not expect to see. Why?


jog on
duc

 

[ducati916]

I'd be looking for a bit of a sell-off tomorrow:



All 3 major indices are at PP resistance and were rejected pretty hard today.

jog on
duc

 

[ducati916]

This will be a double, possibly triple post there are that many charts:



So the idea of a recession has pretty much disappeared from the conversation currently.

Labour data however should be keeping it on the table.

Remember, stocks hate recessions.

 

[ducati916]

The Envy of the World​

JC PARETS
OCTOBER 18, 2024
This is why we can't have nice things...

Did you notice that the journalists are catching on to these trends that have been in place for so long?

And not just any journalists. The most reliable contrarian indicators in the history of financial publications are telling you that the U.S. is the Envy of the World and they expect it to keep going - even after a decade and a half of this...

Here's the exact quote:

"The American economy has left other rich countries in the dust. Expect that to continue" - The Economist
So cringe.


Those of you who have been following along know how much money we've all made by using this publication as a contrarian indicator.

Not only are they journalists - which are a great fade to begin with.

But they are journalists parading around as economists.

Double whammy.

We've discussed this at length over the years. Here's an example. And here's another one. But there are plenty more.
Here's how timely this current magazine cover is.

We're looking at U.S. stocks compared to Developed Markets, as represented by $EFA. And we're looking at U.S. stocks compared to Emerging Markets, as represented by $EEM.

Here's how this works.

The journalists catch on to a trend that is obviously not a new trend.

Journalists are not traders. They are not investors. They don't know the things we know. They don't see the world the way we do.

But they are the best in the business at understanding what traders and the investing community are thinking about and discussing the most, particularly when it is at consensus.

And that's why we love them.

So think about it like this. By the time a trend becomes consensus, and then by the time the journalists come to this realization, it's probably not early in the cycle.

Then the journalist needs to write their article, and in many cases they have to put together a team and a plan in order to execute on this article.

They have to submit the art work for the magazine cover.

The articles and cover approvals are next and it doesn't happen overnight, as you can imagine.

By the time this all goes to actual print and hits the wires, do you think it's probably early in the cycle? Or do you think that cycle is probably over?

We've seen the economist pick so many key tops and bottoms over the years, in so many different assets, that it's almost like they have information from the future.

They're that good.

So are you going to bet that they don't nail this one?

Are you betting that the U.S. continues to dominate on all fronts as it has over the past 15 years or so?



jog on
duc

 

[ducati916]

Oil News:

Friday, October 18th, 2024

IEA Expects Age of Electricity to Start Soon. The International Energy Agency warned that the world will soon hit peak fossil fuel demand, by the end of this decade, following which the surplus in fossil fuel supplies would enable countries to spend more on renewables, kickstarting the ‘age of electricity’.

Californian Refiners React to Hostile Environment. US refinery Phillips 66 (NYSESX) will shut its 140,000 b/d Los Angeles refinery in Q4 2025, claiming the future of refining in the state is uncertain, with Gavin Newsom’s hostile regulatory environment prompting an exodus of oil investment.

Chevron’s Oil Find Resurrects Nigeria’s Exploration. Whilst Shell, ExxonMobil and Eni have all sought to leave the conflict-prone Niger Delta, US oil major Chevron (NYSE:CVX) has just announced a new discovery in the PML 49 block next to the Meji field in the shallow offshore area of the Western Niger Delta.

Gold Soars to Another All-Time High. Up more than 30% in 2024 alone, gold has reached a new record high of $2,696 per ounce this week as investors flock into the bullion ahead of the US presidential elections where both candidates pose risks to the economy just as the Fed started its interest rate-cutting cycle.

Ecuador to Build a LNG Import Terminal. After one failed attempt to operate an LNG import terminal, the government of Ecuador has authorized domestic firm Pacific Terminal to build an import facility in Monteverde, as domestic gas production from the Amistad fields is gradually declining, now at 20.6 MMscf/d.

ExxonMobil Loses Interest in Bakken. US oil major ExxonMobil (NYSE:XOM) is reportedly gauging market interest for its assets in the Bakken shale basin of North Dakota, comprising 137 operated and 676 non-operated wells across 49,000 net acres, as part of the company’s portfolio optimization drive.

Algeria Seeks to Attract Upstream Investors. Algeria has launched its first oil and gas licensing round in more than a decade as it seeks to boost its portfolio of upcoming projects, offering six onshore permits, with US majors ExxonMobil and Chevron reported to be eyeing shale gas opportunities.

India to Quadruple Power Generation Capacity. India will expand its power generation capacity more than fourfold from the current 453 GW to 2,100 GW over the next two decades to meet rising domestic demand, prioritizing solar energy as it is expected to rise from 91 GW now to 1,200 GW by 2047.

Chinese Coal Imports Shoot Through the Roof. China’s coal imports soared to a new all-time high in September as the world’s largest coal producer also imported 47.59 million tonnes as regional prices dipped below domestic quotes, with preliminary Kpler data showing another monthly record in October.

Shell Might Get Stuck in Nigeria. Nigeria’s oil regulator NUPRC has rejected Shell’s (LON:SHEL) proposed $1.2 billion sale of its onshore oil assets in the country to Renaissance Group because it found the buyer not suitable to manage the assets, as rival majors ExxonMobil or TotalEnergies managed to sell sooner.

Smelter Fire Dents Indonesia’s Copper Ambition. US mining giant Freeport McMoRan (NYSE:FCX) will need to postpone sales of refined copper from Indonesia until at least Q2 2025 after a fire at its newly built Manyar smelter damaged the plant’s sulphur acid unit, narrowing an expected 2025 surplus of the metal.

Pemex Slashes Its Upstream Budget. The new chief of upstream for Mexico’s state oil firm Pemex, Nestor Martinez, has instructed the firm’s upstream units to immediately implement a 20% cut in the Q4 upstream budget of the company, curbing activities such as well repairs and seismic surveying.

Libyan Politics Turn Jittery Again. Libya’s Oil Ministry denied rumours that the CEO of the national oil company Farhat Bengdara was resigning due to health reasons, with speculation growing that one of Khalifa Haftar’s sons could soon replace him, just a couple of weeks after the lifting of the oil embargo.

More Oil:



From last week:



For next week:



I hold 2: UNP and PM so I'll be watching.



So a bullish posture remains.

There are so many hidden risks, it's just unbelievable. I will through the coming week be going through some/most of them. None of them are act tomorrow types of risks, but they are 're-pricing' risks.

I have already looked at the employment data on the 1'st post of this series. The market is definitely no longer pricing in a hard landing of a recession.

The issue of course is the attention fatigue that afflicts Wall St. If it's not happening right now, not interested. There is far less money to be earned in a bear than a bull, therefore Wall St is incentivised to bull prognostications ignoring the mounting risks.

Energy is seriously mis-priced. SERIOUSLY. More on this later.

I have been highlighting USD strength and the risk it poses all last week. USD is coming to a head. It MUST go down or we will enter a liquidity crisis in short order.

Sure the Fed will come galloping to the rescue, but timing is everything: better a bit early than a bit late. ATM they are looking at being a bit late. That needs to change. So the 50bps was not actually enough. LOL.

jog on
duc

 

[Sean K]

Energy is seriously mis-priced. SERIOUSLY. More on this later.

I'm thinking of tilting my 'PM Fund' to an 'Energy Fund'. More on that later.

 

[peter2]

Energy is seriously mis-priced. SERIOUSLY. More on this later.

Yes, yes, tell me more. I'll start buying when WTI < $66 again ($68.8 now). Israel v Iran isn't de-escalating.

Uranium is at a bargain price, $83 now, could jump to $100 pretty quickly.

Data -centre demand is driving urgent need for more electricity production (and cooling systems).

 

[ducati916]

So let's start with Mr FFF

THE SILVER SQUEEZE IS ON​

Fri Oct 18, 2024 5:29pm EST 2


Gold and silver stocks took off today, with silver jumping an outrageous 6.5%. Some of you might view this as a temporary phenomena, but you’d be wrong. What this speaks to on more of a macro level is the lack of confidence people have in the dollar. Do not look at the $UUP vs other fiat currencies, but instead look at the buying power of that currency and what is can buy you in terms of food, housing, healthcare, insurance, tuition etc.

Back in 2000, $250,000 in income registered at the 39.6% tax bracket. Today the 37% bracket is for income more than $578,000. That should tell you all you need to know about what the value of the dollar has done since then.
To offset this obvious denigration, we must invest, whether it be stocks, real estate, or collectibles. If we do not invest, our money loses value and the buying power diminishes, tossing us into the poor house.

Today’s move in silver is especially interesting but I will not make predictions, because we’ve seen this play out before, with speculators trying to squeeze JP Morgan and causing them to cover their alleged shorts. But at the same time, $BTC is near RECOURD highs and we have stocks at RECOURD highs and the values of real estate are unmoored, in spite of the higher rates that have racked American over the past 2 years.

Well, those things are about to change and rates will come much lower, which should lend credence to the precious metal, Bitcoin, and stock trade for the foreseeable future.

For the session, I managed just a 15bps gain, mostly due to being positioned in some of the outlier pockets of the market; but closed strong and fully long into what I believe will be a Monday rally.
Ciao.

Even MOAR

Market Rotates into a Power Theme​

Sat Oct 19, 2024 12:42pm EST 0


If you weren’t quick on your feet or in a diversified portfolio, you had trouble last week, as markets shifted away from the usual cool stocks and into nuclear/airlines/gold/silver/retail and out from EVs, semis, oils, China and solar.




It is clear to me we have several prevailing trends:

1. Denigration of the dollar, buoying precious metals/$BTC
2. Data center expansion caused by AI adaptation, powered by $NVDA, creating a scarcity of power, leading to massive demand for nuclear energy.
3. With the expansion of the data centers, traders are positioned into every aspect of this trade, from the server makers to the HVAC companies who cool these buildings to the construction companies who are building power plants and/or in the process of converting antiquated coal facilities to nuclear.

I am speaking of names like $CARR and $TT, who are old school HVAC but also help cool datacenters and have a massive tailwind in creating electric heat pumps for the EU, who is mandated to move away from fossil fuel generated heat by 2030. I am also talking about construction firms like FLR and J, or little known datacenter plays like $IRM who have been expanding feverishly into the space and using their decades of experience in archiving documents for Fortune 1000 companies and upselling them for hyperscale services. You also have companies like $POWL growing at a 50% clip, who are servicing both the power generation and datacenter markets.

I almost feel like this story is too good to be true and that it might be late; but then I view the numbers and listen to the conference calls and it becomes apparent that electricity demand is soaring and not coming down and machine learning technologies are quite literally ‘just getting started.’

Inside Stocklabs, I am building extensive lists to help me better understand the gravity of this shift and I feel this theme will be longer lasting than most people believe, which of course will be helped by a reduction in the cost of capital thanks to the FOMC.




Full: https://www.reuters.com/markets/us/...ely-exacerbating-funding-pressure-2024-10-11/



So we are going to have consistently large deficits moving forward. Only the Hedge Funds are buying and they only want short dated paper. These trades have certain funding pressures and these funding pressures are transacted in the Repo market.

How much capacity do the Hedge Funds have left, they already leverage x100+

How fast can the Fed stop a contagion from occurring if one of these blows-up?

Pressure building in the system:



The '125 level' is where the Fed has previously stepped in with additional liquidity. Pretty close currently.

Market:



Looking fragile atm.

I'll be interested to see if the Fed supplies more liquidity today.

jog on
duc

 

[ducati916]

From Mr FFF

The Damn Bond Market is Getting in the Way of a Nice Rally​

Mon Oct 21, 2024 2:56pm EST 0


The US 10yr is +10bps to 4.18% and the 30yr mortgage is once again at 7%. News of famous hedge fund managers shorting bonds at the same time gold and silver are busting loose to the upside, accompanied by Fed statements regarding moderate data dependent rate cuts, has investors on edge. You can feel the air leak out from the market at the bond market gets lit up.



The way this ought to work is, markets are supposed to accept the fact that the Fed wants to avoid a Lehman style collapse by averting a major debt collapse by 2028, preparing in advance for that and lowering rates to 3.5% to get ahead of the curve. The curve I speak of is the $7.2T debt wall coming due by 2028.

So why are rates soaring? Is this real?

In the short term, nothing about the market is real. This is all emotions and men positioning into asset classes to ruin others or those on the other side getting ruined. We have all of the makings of a bull market, yet the bond market and its infinite wisdom keep getting in the way of progress.

I see no reason to believe this tape is unique in any shape or manner and the Stocklabs mean reversion and intelligence algorithms should be in a position to produce false positives. While it’s true, the efficient market theory says the all knowing market cannot possibly be wrong. I am also keenly aware of innumerable times when it was wrong, and by a lot.

Today is a poor breadth day, with many stocks in the dumps. This coming after we had some micro cap stocks surge last week and today has me thinking this is a garden varietal risk off trade, which will resolve itself once the sellers have exhausted themselves.



Through the looking glass:



Debt in fiscal dominance is inflationary, no longer deflationary.

The 'neutral rate' will be HIGHER to reflect higher yield to offset inflationary pressures.

The Fed never controlled or broke inflation. They simply played the roll off from the highs of covid inflation and claimed victory. Clowns. Certain members of the Fed are now obviously breaking ranks with the party line and coming clean.

The manipulated employment numbers will at some point break wide open. At that point we have a stock meltdown. What remains to be seen is when the liquidity pump is turned on, whether it actually has an effect this time.

jog on
duc

 

[ducati916]

Oil News:

Europe is considering its options to tighten sanctions vis-à-vis Russian LNG imports into Europe, having banned LNG transshipment operations from 2025 onwards, whilst gas importers keep on buying more.

- Thanks to higher utilization rates and the recent (surreptitious) launch of Arctic LNG 2, Russia increased its total LNG exports by 5% year-over-year in January-September 2024, to 24.4 million tonnes.

- The share of Russian LNG in the European Union’s total LNG imports rose ton 20% in the first half of 2024 compared to 14% a year earlier, with France becoming the main destination country for Yamal LNG flows.

- TotalEnergies, the national oil firm of France, holds a 20% stake in Yamal LNG which it did not relinquish as opposed to its stake in Arctic LNG2 and its membership in the board of directors of Novatek.

- According to Kpler data, France-bound flows are almost guaranteed to reach an all-time high this year, with only 7 more cargoes required to surpass 5.27 million tonnes from 2022.

Market Movers

- Norway’s state oil firm Equinor (NYSE:EQNR) has shut production from its Sleipner B gas platform due to a smoke alert in its power supply unit, although it said it would produce more from other fields to keep Europe-bound flows intact.

- UK oil major BP (NYSE:BP) is reportedly considering selling a minority stake in its offshore wind business, seeking to reduce the financing needs of its upcoming projects as it refocuses on the high-margin oil segment.

- US oil major ExxonMobil (NYSE:XOM) saw its proposed $1.28 billion sale of Nigerian onshore assets to local producer Seplat Energy finally approved by Nigeria’s oil regulator, formalizing its departure.

Tuesday, October 22, 2024

Oil prices were rising on Tuesday morning, even though Israel’s retaliation against Iran is yet to materialize. Hopes of a recovery in Chinese demand for crude have been pushing prices higher, with ICE Brent trading at over $75 per barrel. In the coming week, a combination of geopolitics and new macroeconomic data will likely decide where crude goes next.

Saudi Aramco Pins Hopes on Chinese Recovery. Amin Nasser, the top executive of Saudi Aramco (TADAWUL:2222), reiterated his belief in the strength of the Chinese market, saying Aramco still wants to increase its liquids-to-chemicals capacity to 4 million b/d, with a focus on China.

Canada’s CNR Takes on More TMX Exposure. Canada’s largest oil producer Canadian Natural Resources (TSO:CNQ) has reportedly taken over the 20-year term contract of PetroChina to ship oil via the 590,000 b/d TMX pipeline, increasing its total allocation by about 75% to 164,000 b/d.

Industry Warns of Delays in Next Wave of LNG Supply. French energy firm TotalEnergies (NYSE:TTE) predicted that the next wave of LNG supply would only come online from 2027, later than the earlier forecast of 2025, due to project delays, including its very own Papua LNG project.

IEA Expects Southeast Asian Demand to Soar. Despite a bearish outlook on global oil demand in general, the International Energy Agency expects Southeast Asia’s consumption to increase from 5 million b/d to 7 million b/d by 2050, second only to India in contributing to global energy growth.

Maduro Arrests Oil Minister on Treason Charges. Venezuela’s President Nicolas Maduro arrested Pedro Tellechea, the former oil minister of the country, after an ’exhaustive probe’ for serious crimes against the country’s highest interests.

Sudan Ready to Resume Exports After Repairs. The government of Sudan expressed its readiness to resume exports of South Sudan’s heavy sweet Dar Blend crude, shut in since February 2024 after clashes between government forces and the RSF militias damaged and ruptured the 100,000 b/d Petrodar pipeline.

India Expands LNG Import Capacity. India’s Hindustan Petroleum (NSE:HINDPETRO) is reportedly in the market to buy the first-ever cargo for its soon-to-be-commissioned 5 mtpa capacity LNG import terminal in Chhara, western India, as previous attempts to launch it earlier failed due to bad weather.

Port Workers’ Strike Threaten to Disrupt Brazilian Ports. Brazil’s National Federation of Dockworkers, Repair Workers, and Port Security launched a nationwide strike to protest against recent changes to the country’s labor law, delaying operations at both export and import terminals.

Future of US Hydrogen Hinges on Tax Credits. Darren Woods, the CEO of US oil major ExxonMobil (NYSE:XOM), stated that the company would scrapped its flagship Baytown hydrogen and ammonia plant in Texas is US federal hydrogen tax credits are not implemented in a technology-neutral way.

China Builds Inventory When It Shouldn’t. As China’s refinery runs posted the sixth consecutive year-on-year decline, averaging 14.29 million b/d, the Asian nation’s refiners have started to build inventory as the pace of imports and domestic production exceeded demand by 930,000 b/d.

Argentina Builds Oil Pipeline to Chile. Amidst continuously increasing Argentinian oil production from its shale Vaca Muerta play, the country’s leading producer YPF (NYSE:YPF) completed a 160,000 b/d pipeline to Chile that would feed ENAP’s Bio Bio refinery on the Pacific Coast with light crude.

Cuba Restoring Power After Multi-Day Blackout. Electricity supply across all of Cuba has been heavily restricted after the island country entered its third day of widespread blackouts, as Tropical Storm Oscar damaged power lines and lowered generation capacity to just 700 MW, a quarter of a day’s demand.

Hybrids Come to Dominate European Car Sales. Hybrids surpassed petrol-powered automobiles in EU new car sales for the first time on record last month, accounting for 32.8% of the 809,163 vehicles sold in September, benefitting from a 6% year-over-year decline in total registrations.



USD and UST markets under a lot of strain.





Were they not sanctioned? LOL.

Stocks:




Mr FFF



The UST market needs liquidity and it needs it now. If nothing is forthcoming pretty soon, stocks will swoon. It's on the Fed. Yellen could drain the TGA but that's generally too slow and that assumes she has something to drain.



Yes she does.

Watching.

jog on
duc

 

[ducati916]

MCD hit with E-Coli scare off 5%. CSTM had earnings, off nearly 30%. Interesting day.



USD running hard.



$MOVE just about at the 'panic' level.

No sign of the Fed atm. LOL. Asleep at the wheel as usual.

So from the Fed:

Lorie Logan, president of the Dallas Fed, is a leading voice on the technicalities of the Fed’s balance sheet and QT. Prior to the current job, she was an executive VP of the New York Fed, managing the System Open Market Account (SOMA) which handles the operations of the Fed’s securities portfolio. Her hawkish commentary on Monday about the future of QT, the balance sheet composition, and liquidity contributed to roiling the bond market, with longer-term yields and mortgage rates spiking to multi-month highs.

On Monday, she gave another speech on the balance sheet, titled “Normalizing the FOMC’s monetary policy tools” – at the Securities Industry and Financial Markets Association annual meeting. Here are the salient points on the future of QT and the balance sheet.

QT will continue despite rate cuts. QT and “gradually lowering the policy rate toward a more normal or neutral level” are both part of monetary policy normalization, she said, and added:

“Normalizing the fed funds rate means bringing it down from the elevated levels that were needed to restore price stability and returning to a level that will be consistent with sustaining maximum employment and price stability over time.”

“Normalizing our balance sheet means bringing our asset holdings down from the elevated quantity that was necessary to support the economy during the pandemic and returning to a balance sheet size that will be consistent with implementing monetary policy efficiently and effectively.”

Liquidity is still “more than ample.” The purpose of QT is to reduce liquidity from “abundant” to “ample.” Since no one knows where “abundant” ends and “ample” begins, Logan is looking at clues that money markets are giving off.

“One sign liquidity remains in abundant supply, and not merely ample, is that money market rates continue to generally run well below IORB [the interest rate the Fed pays the banks on reserves, currently 4.9%]. The tri-party general collateral rate (TGCR) on repos secured by Treasury securities has been averaging 8 basis points below IORB [currently at 4.82%]. Because reserves and Treasury repos are both essentially risk-free overnight assets – and reserves are, if anything, more liquid – the spread of IORB over TGCR indicates reserves remain in relatively excess supply compared with other liquid assets.”

“Unsecured funding conditions [in the federal funds market] also continue to reflect abundant liquidity. The effective federal funds rate has been running 7 basis points below IORB and remains insensitive to short-term fluctuations in reserve levels.”

“And the continuing substantial balances in the Fed’s overnight reverse repo (ON RRP) facility provide another sign that liquidity remains more than ample.”

Clearly the UST market does not agree.

Flippe-floppeing employment:



Mr FFF





Full: https://issuesinsights.com/2024/10/...g-for-first-time-in-history-thank-you-kamala/



Meanwhile Mr Putin:



From the Kiel Institute:


Beyond the war in Ukraine, the diversification of the Russian hypersonic arsenal is a significant problem for Europe. It is certain that replenishing and expanding this strategic asset will be a priority for the Kremlin. A sufficiently large stockpile, distributed across aircraft, surface warships, submarines, and ground launchers, opens the possibility of a "decapitation strike” that causes major damage to the other side's military capabilities and infrastructure in the opening phase of a conflict.


Given the military asymmetry between NATO and Russia, a devastating first strike has long been part of the Russian toolkit (c.f. Seddon and Cook, 2024). Stock piling hypersonic missiles would unlock the potential for a conventional rather than nuclear first strike. As there is no near-term defensive solution, a different approach would be the acceleration of Europe's own hypersonic capabilities to provide a measure of mutual deterrence with Russia.


One proposed plan is that the US Army will station its own ground-launched LRHW missile system (Long-Range Hypersonic Weapon) in limited numbers in Germany starting in 2026 (Judson, 2024). However, this deployment is politically controversial. Furthermore, American attempts to develop a working hypersonic capability face repeated failures and cancellations (IISS, 2023). Furthermore, the LRHW is an extremely high priority system for the Indo Pacific.


Therefore, the development of a multinational European hypersonic capability should be a consideration. Such a development can build on existing programmes, which include a number of French projects for hypersonic glide vehicles and Germany's SHEFEX civilian space technology demonstrator, as we discuss in the conclusion.
Which throws into the sandpit the Chinese strategy recently unveiled further East. Which is stimulus, but not so much stimulus so as to weaken the Yuan.

See: https://www.ft.com/content/008443cd-bb44-4b4f-b60e-17894fdba221


Which sentiment is closer to the truth: euphoria or despair? The answer is, neither.

Markets were right to see the stimulus announcement as an inflection point and an opportunity to venture back into oversold Chinese assets. But they misjudged the underlying intent, which is to stabilise the economy rather than generate a major reacceleration. And they underestimated the constraints on stimulus imposed by Xi Jinping’s long-run strategy and by policymakers’ desire not to repeat past errors.

Xi’s strategic aims have not changed. He wants to shift capital from the property sector into technology-intensive manufacturing, which he sees as the basis of China’s future prosperity and power. Long-term economic growth, he believes, is driven by investment in technology, which will eventually generate high-wage jobs and rising incomes.

China’s core task is not to maximise GDP growth but to create a self-sufficient, technologically powerful economy immune to efforts by the US to stunt its rise. In sum, the economy and financial returns are likely to pick up in the coming months. In the long run, though, China’s vision is unchanged: technology and self-sufficiency matter more than growth and profits.
And:

Just to make sure the US ramp up spending on defence and expand the deficit even further:



Full: https://edition.cnn.com/2024/10/15/asia/record-china-warplanes-taiwan-drills-intl-hnk/index.html

Full: https://www.newsweek.com/china-news-stages-blockade-taiwan-1968392

Full: https://www.reuters.com/world/asia-pacific/china-starts-new-round-war-games-near-taiwan-2024-10-13/

jog on
duc

 

[peter2]

Quality post by Fly outlining the growth of data-centres in the US (and around the world) and their need for electrical power. Included in the post was a very useful watchlist of companies that are involved in this sector.



I'll be monitoring these codes for BTD trading opps. as I think there'll be plenty. Thank you Fly.

 

[greggles]

Quality post by Fly outlining the growth of data-centres in the US (and around the world) and their need for electrical power. Included in the post was a very useful watchlist of companies that are involved in this sector.

View attachment 186558

I'll be monitoring these codes for BTD trading opps. as I think there'll be plenty. Thank you Fly.

If there's not one already, there needs to be a Data Center Infrastructure ETF to easily get diversified in what looks like an industry with strong growth prospects.

 

[peter2]

Global X has one, DTCR. I haven't looked at its holdings but note that the current price is at highs. Price looks to be opening gap up tonight.

 

[divs4ever]

If there's not one already, there needs to be a Data Center Infrastructure ETF to easily get diversified in what looks like an industry with strong growth prospects.

tread carefully not all data centres are the same

i helped clean up two of the in the Goodna ( QLD ) floods , and another was cut off from workers for four days ( the workers didn't understand the back-up systems could handle five days without external power .. so took an extra two days holiday to let things 'dry out ' ( unnecessarily ) , and another i visited had a possum problem ( i kid you not )

 

[ducati916]

So let's start with Mr FFF

There is No Second Best​

Fri Oct 25, 2024 12:17pm EST 0


Much of our time is dedicated towards the craft of proper money management, with the attempt to find a salient or a mega theme that can ride us towards new unbound riches.

In my investment career I’ve had several notable epiphanies, the first of which was the dot coms. I’ve mentioned this here before, but it’s worth noting again, I was quite literally one of the first people to take note of internet stocks back in the early 90s. I made fledgling investments in AOL at a time when everyone said MSFT would dominate them. There was a period of time from 94 to 97 where these stocks did nothing but trade lower. The market thought it was pie in the sky, until Dell and Gateway scaled PC sales and AOL became a mainstream story. The rest is history.

Fast forward to today, $NVDA is the most valuable company in the world. Everyone knows about GPUs and the cloud and have bid up the hyperscalers to levels never thought possible. But ask yourselves: “is this over?”

The idea that this is ‘just getting started’ isn’t hyperbole, when taking into consideration the 500 hyperscale centers today and the 150 to be built every year for at least the next 5, and that’s just America.

My point: there is no second best narrative or theme. We often hear about “AI” but barely 5% of database traffic is AI related. In other words, this is the second inning of an extra innings game.

The only issue to concern ourselves with is valuation and overall market sentiment. There will be down 4% days in the future and ripping days to the upside. Markets will fluctuate. But there isn’t anything even remotely as interesting as the relationship between transmitting data and procuring the power necessary to keep the centers going.

Oil News:

Friday, October 25th, 2024

The elevation of the Israel-Iran conflict into the main oil market narrative for October is by no means over, the closer we get to the US presidential elections the wilder speculation will get regarding future escalation scenarios. At the same time, Brent and WTI will only post minor week-over-week increases, trending around $75 and $71 per barrel respectively, as a stronger dollar and a larger-than-expected US inventory spike limited the upside.

ExxonMobil Gets 3-Year Extension for Golden Pass. The US Federal Energy Regulatory Commission has granted the ExxonMobil-QatarEnergy JV a 3-year extension to finish building their Golden Pass LNG plant, signaling further delays after the project was derailed by the bankruptcy of contractor Zachry.

Chevron’s Nigeria Find Disappoints Oil Enthusiasts. According to Nigerian media, the lauded Meji discovery of US oil major Chevron (NYSE:CVX) in Nigeria’s OML 90 block, boasting a 690-feet hydrocarbon pay, contains a disproportionately more natural gas than oil, potentially delaying its rollout.

UK’s Largest Oil Producer Eyes North Sea Exit. The largest oil producer in the UK North Sea, London-based Harbour Energy (LON:HBR) said it would seek to sell stakes in at least five UK offshore fields and has revived plans to list on the New York Stock Exchange to end its streak of undervaluation.

Offshore Drilling Firms Gear Up For Record Merger. The world’s leading offshore drilling companies, Transocean (NYSE:RIG) and Seadrill (NYSE:SDRL), are discussing a merger to improve synergies amidst a strong drilling outlook that didn’t improve their stock performance, down 35% and 26%, respectively.

Mexico Eyes Exploration Drive to Lift Reserves. According to internal Pemex communication, Mexico’s national oil firm aims to boost its hydrocarbon reserves and ensure their timely replenishment, particularly focusing on deepwater drilling, despite a recent 20% cut to its Q4 upstream budget.

Brazil to Finally Settle Brumadinho Catastrophe. Following years of litigation, Brazilian authorities signed a $30 billion compensation deal for the 2015 Mariana dam collapse with mining giants Vale (NYSE:VALE) and BHP (NYSE:BHP) on Friday, marking the end of one of iron mining’s worst catastrophes.

Industry Sees No New Permian Pipeline. Top executives of Enterprise Products (NYSE:EPD) and Plains All American (NASDAQAA) stated that they will not be building any new crude oil pipelines out of the Permian shale play, believing optimization would be the next step for crude evacuation capacity.

Norway’s Largest Field to Start Declining Next Year. Norway’s largest oil field Johan Sverdrup, operated by the country’s state oil firm Equinor (NYSE:EQNR) will start to come off its production plateau as early as next year, currently pumping 756,000 b/d and accounting for 7% of Europe’s total oil consumption.

Zinc Prices Soar After Fire in Teck’s Smelter. Zinc prices soared to a 20-month high after one of the leading suppliers of the metal, Canada’s Teck Resources (NYSE:TECK), shut down part of its Trail smelting plant in British Columbia, sending three-month LME prices to $3,284 per metric tonne this week.

India Mulls Scrapping Windfall Taxes on Oil. Lowering regulatory pressure on India’s upstream producers, the Indian government has declared itself ready to scrap the windfall tax ($22 per metric tonne or $3 per barrel) as the levy no longer makes sense amidst ‘softened’ oil prices.

US Refining Giant Mulls California Shutdown. Less than a week after Phillips66 announced the closure of its LA refinery, the US’ leading downstream firm Valero Energy (NYSE:VLO) is reportedly considering shuttering some of its California capacity, currently operating the Benicia and Wilmington refineries.

China Expands Commodity Trade with Taliban. China will offer tariff-free access to its construction, energy, and consumer sectors to the Taliban, controlling Afghanistan since 2021, seeking to tap into the Central Asian country’s largely undeveloped copper, iron, lithium, and petroleum reserves.

Boeing Suffers Setback after Setback. US aircraft manufacturer Boeing (NYSE:BA) fell again this week after striking employees rejected a tentative labor deal negotiated by the company’s unions, promising a 35% wage increase spread over four years, with total strike-related losses already surpassing $4.5 billion.






The opinion immediately above is from the Ritholtz RIA crew.

Rates going higher could be bad for stocks: it really depends on why and how high. Rates are going higher because as Druckenmiller correctly surmises, the US is going broke, ie. fiscal dominance. The only way to avoid this is a slow motion default, inflation.

How high will that inflation be? Double digits for sure.



Meanwhile stocks remain bullish.



New one for me.



LOL.



So with the value of Bonds being inflated away, where does that leave a stablecoin value?



So picking up the theme:



From NYT


Amazon, Google, and Microsoft are investing in nuclear power – 10/16/24 Amazon, Google and Microsoft Are Investing in Nuclear Power - The New York Times (nytimes.com)

Technology companies are increasingly looking to nuclear power plants to provide the emissions-free electricity needed to run artificial intelligence and other businesses.

Microsoft, Google and Amazon have recently struck deals with operators and developers of nuclear power plants to fuel the boom in data centers, which provide computing services to businesses large and small. The demand has accelerated because of the big investments these and other tech companies have made in A.I., which requires far more power than more conventional technology businesses like social media, video streaming and web searches.

This field is already dominated by the MSFT, GOOG, etc. as far as datacentres go. Energy supply would be a far better way to play this.

jog on
duc

 

[ducati916]

For next week:



U/E data.



Earnings of note, couple in there for me to watch: MCD and META.



jog on
duc

 

[ducati916]

Starting with Mr FFF

Bond Shorts Need to be Destroyed​

Fri Oct 25, 2024 4:12pm EST 1


Since the Fed cut rates, rates have gone straight up. Part of this is due to the statements out of the Fed talking about being moderate in their actions and the other part, the much larger problem, is you the unwashed pleb obsessed with inflation, stacked to the gils with gold and other precious metals, singing the inflation boogeyman story over and over again. This is the same story which has been told many a drunken nights, as you permanently fixed yourselves to a bearish, crossing your political beliefs with finance. These ideas are pervasive and the bond shorts need to be stoped, and destroyed.

Here we have the chart of the 20yr treasury, $TLT, fixed lower again.



And here we have the intraday chart of the NASDAQ. Notice the resemblance?



We should not have to live this way and deserve more. The fact that there are monsters out there shorting the govt debt and causing rates to jack up based on their notions of inflation is both madness and with criminal intent. I propose we find these people and draw and quarter them, up until they close out their shorts and stocks recover.

All jokes aside, this market wants higher, but the bastard bond shorts have other things in mind and we’re now all hostages to it and them.

I had gains of +130bps early on and gave it all up, closing down 3bps, losing a grande total of 1.4% for the week. My MTD gains have shrunk from +6% to +2.7% and because my portfolio of stocks sported a beta of 1.9 into the close, I was forced to hedge with a 10% $TZA position, since the $IWM is the weakest of the indices. All of my indicators are saying we go higher and I too feel this way; but it’s hard to ignore intraday fades like this, into the weekend where anything can happen. Worst case I’ll give back 20 or 30bps of gains on an opening rip via the hedge, but still end up nicely.

From Yellen



So the inescapable conclusion is:

(a) GDP must grow faster than the compounding of the debt and/or
(b) Interest payments must fall.

Clearly with the Fed cutting rates, the fastest option is cutting rates. They will need to cut even further.

What if unemployment starts to rise?



Already is.

A double whammy. US Govt. jobs up, which are paid through tax revenues and private jobs down, which provide the tax revenues.





Pretty much common knowledge now. Should not be a surprise at all.

Full earnings calendar:



jog on
duc

 

[ducati916]

More data:



jog on
duc