October 2024 DDD

[ducati916]

LBO's now called 'Private Equity'



Really not doing so well.



Mr FFF

The Generative AI Rollout Rings a Bell​

Mon Oct 28, 2024 10:22am EST 1


Back in 1994 I started my first investment in internet companies. At the time it was nascent, almost conceptional, and people thought the smaller start ups didn’t stand a chance against $MSFT and some of the larger companies.

When I became a stockbroker it was all I fixated on and early on in my career, I was wrong. The internet stocks were going down, but I wasn’t dissuaded because I felt convinced, eventually, I’d be proven right.

When the dot coms turned around and went up, you could not stop them. We enjoyed daily 10-20% gains in the next fiber play or the next company to announce a website from which they’d sell their trinkets. But, at least in the beginning, the big money was made in the companies charged with building out the infrastructure for the internet.

Fast forward to today and generative AI is all the rage. We are in the infrastructure buildout phase involving fiber and active copper and servers and switches for the datacenters needed to power the AI applications that everyone is building.

I suppose there is a chief difference between then and now, which is back then most of the dot coms were cash burning start ups, whereas the AI field is being taken up by more mature start ups and essentially every Fortune 500 company in existence.

But the similarities are striking and it makes you wonder if the industry learned from their prior experiences in overbuilding?

Back at the beginning of the internet, there were haters too, people who said it wad all a fad. The eventual winners were the major web 2.0 plays, like $META, $MSFT and $AMZN. I suspect this time will be similar, with AI 2.0 analytics and web apps working in lucrative SAAS models into market, collecting gigantic sums of money.

But we still need to build the infrastructure and from my vantage point we have a solid 3 years of growth ahead of us, akin to 1997-2000.


Meanwhile:



USD higher, UST Yields higher,



Bond market vol. higher.

Not a good combination.

Either we get additional liquidity pretty soon or stocks may well swoon.

jog on
duc

 

[ducati916]

An upside resolution of this base will mark the beginning of a new bull market for crypto. I believe we right there. Get ready. https://stockmarkettv.com/alfonsos-daily-note/2024-10-28/cryptos-next-bull-run…#Bitcoin


12:51 PM · Oct 29, 2024
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10-year yields and crude oil are breaking from their relationship (red box).This divergence started around October 6.


4:05 AM · Oct 29, 2024
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What else started Around Oct 6? Trump began to pull ahead.The election is now dominating the bond market.A Trump victory and the potential of massive financial stimulus (cut taxes and deregulation) combined with tariffs (inflation) are strong drivers of yields higher than even a down 5% day on crude oil (today) cannot get the bond market to rally.


4:05 AM · Oct 29, 2024
·

​

Long-term bond yields continue to march higher with 10-year now at 4.33% and the 30-year at 4.57%. These are the highest yields since the start of the summer and substantially above the September lows when the Fed cut interest rates by 50 bps.​

​ ​

Bond market investors seem to be going on strike, protesting the profligate fiscal policies in place with the expectation of higher inflation to come.​

The US National Debt continues to explode to the upside, increasing by $840 billion in just the last 3 months. Over the past five years, we’ve seen a 56% increase with National Debt moving from $22.9 trillion up to $35.8 trillion.​

​ ​

​

All about NFLX:

​

In April 2022, Bill Ackman told his Pershing Square investors that he had sold his Netflix shares which were purchased just a few months earlier, taking a $400 million loss in the process.​

​ ​

At the time, Netflix was in the midst of a major growth slowdown and a drawdown in its share price over over 70%.​

​ ​

​ ​

What happened next?​

A 180 degree turnaround.​

Netflix shares hit another all-time high last week after reporting earnings, rising 251% from the date of the Ackman sale. For comparison, the S&P 500 was up 38% over the same time period.​

​ ​

After stumbling in 2022, Netflix found new growth engines and their revenues and profits resumed their upward trajectory. In their latest quarterly release, Netflix reported record revenues ($9.83 billion, +15% YoY), record net income ($2.36 billion, +41% YoY), and record net profit margins (20.7%, up from 13.8% a year ago).​

​ ​

​ ​

Netflix now has a record 283 million paid subscribers, a 14% increase from a year ago.​

​ ​

The lesson: stock picking is hard, even for the greatest investors. ​

Back to the USD, UST and $MOVE



The only price keeping somewhat of a lid on this:



If oil was higher or starts rallying, there will be problems.

Current predictions:



Couple in there that have market impact.

Mr FFF

NOVEMBER LOOMS​

Mon Oct 28, 2024 4:08pm EST 1


As we ebb towards November and Americans gird themselves for large platters filled with turkey and vats of brown gravy, I’d like to remind you that stocks do not fall during the month of November. People often as me why and I simply reply “why the **** not?”
You think too much and know too little.



For the session, I gained +48bps, down from an intraday high of +100bps. We dove into the ******* close, as is customary these days. I have been rather static in my approach, trading less, and applying normal levels of risk, so pardon me if I don’t return 4% on a day when the ******* NASDAQ is flat.



I’d like to be up triple my current level for 2024 but the Gods are preferring that I wait. It’s simply a matter of time before I bust loose again, skipping over the inevitable COLLAPSE of markets which will assuredly take those of you boasting about 10% daily gains directly into the garbage compactor to be chewed up and flushed into the ******* sewers, never to be seen or heard from again.

GOOD DAY

Rates Up Here is a Problem​

Tue Oct 29, 2024 10:14am EST 0


These are likely the very final blogs of the site, so I want to make them useful. We are bullish providing the conditions are right. One of those conditions is lower rates. I cannot sit here and tell you that the US 10YR at 4.30% is a nothing burger. The fact that the Fed cannot assuage markets to fall in line is always troubling. I have seen this play out before and the Fed ALWAYS wins. But, make no mistake, the jitters you’re sensing in the tape with this overhang is due to the bond market ******* off.

There are many things to like about this tape, two of which are not valuations and the cost of capital. In order to justify the higher valuations under the auspices of ‘valuation expansion’, we need the cost of capital to come down.



Preparing to push higher?

Sure, as long as the UST market doesn't blow-up first.

If all you look at are the technicals of the stock market, all would seem well. Technically, it looks pretty good. Problem is, that chart pattern means nothing if the UST market goes into convulsions. Currently it is close. If the Fed takes note and adds liquidity, all will be fine. If not and they are asleep at the wheel, then we will have a moment.

As I said earlier, probably the only thing keeping a lid on it atm is the really weak POO. The chart of POO suggests further weakness. That could all change very quickly if something happens in the Ukraine or ME.

But even more of an issue than the above is the issue of Shale Oil and the cost per barrel of production. Shale oil needs +/- $70/barrel to make it economic to produce. If POO stays below that for any length of time, production will be cut and POO rises on supply issues. Shale cannot just be turned back on.

jog on
duc

 

[qldfrog]

To add to Mr Ducati's info on oil:

BRICS: India Passes Saudi Arabia as Europe’s Top Fuel Supplier

BRICS member India has surpassed Saudi Arabia as Europe's biggest supplier of refined fuel, according to global trade intelligence firm Kplr.

watcher.guru

Funny how i feel these oil barrels might have cyrillic labels!

 

[divs4ever]

To add to Mr Ducati's info on oil:

BRICS: India Passes Saudi Arabia as Europe’s Top Fuel Supplier

BRICS member India has surpassed Saudi Arabia as Europe's biggest supplier of refined fuel, according to global trade intelligence firm Kplr.

watcher.guru

Funny how i feel these oil barrels might have cyrillic labels!

... but 'value-added' Cyrillic labels

unlike the planned over-priced US labels

but i have biased my international exposure towards India ( and Indonesia and NZ ) so am not so irate as some might be

 

[ducati916]

Oil News:

The sudden de-escalation of tensions between Israel and Iran led to a widespread cancellation of call options held by market participants who wanted to hedge their exposure against sudden upward price swings.

- In the immediate aftermath of Iran’s attack on Israel in early October, trade in call options has soared to unprecedented levels, tripling compared to September’s average of 129,000 contracts per day.

- By now, however, the call skew that was in place throughout October has all but disappeared and the net length in WTI Nymex positions held by hedge funds has been falling for four straight weeks, back to early September levels of 113,773 contracts.

- Open interest held by all market participants in ICE Brent and WTI Nymex contracts remains subdued at 4.08 million contracts, equivalent to a 5% decline in positions taken since this year’s peak market interest was reached in early June.

Market Movers

- Mining giant Rio Tinto (NYSE:RIO) has halted operations at its Simandou iron ore in Guinea after a contractor’s death, stalling progress at the world’s biggest mining project once it starts its first production next year.

- Portugal state oil firm GALP (ELI:GALP) has played down expectations of an imminent farm-out at its Mopane offshore discovery in Namibia, saying it would first complete its four-well-appraisal programme at the 10 Bbbls prospect.

- Malaysia’s national oil company Petronas is planning an ‘aggressive’ expansion in Indonesia, seeking to develop the deepwater Bobara block and build on new infrastructure in the East Java area.

Tuesday, October 29, 2024

Israel’s much-anticipated retaliatory attack on Iran finally happened, however, its severity was so underwhelming that right after the markets reopened on Monday, ICE Brent futures slid $5 per barrel during Monday’s trading session. Temporarily buoyed by news of another US SPR solicitation, the current $71 per barrel price for Brent seems to be capped by macroeconomic concerns again. Unless the Israel-Iran standoff is rekindled, the upside for crude is quite limited.

Russia’s Gas Giant Keeps on Piling Losses. Russia’s national gas company Gazprom reported a $3.2 billion net loss in January-September 2024 compared to a $4 billion profit in the same period of 2023 (not accounting for subsidiaries), despite seeing revenues edge higher by 8% year-on-year.

US Commits to Last Pre-Election SPR Purchase. The US Department of Energy announced a new round of SPR solicitation for up to 3 million barrels for delivery from April through May 2025, potentially taking the total of replenished volumes to 58 million barrels, bought at an average price of $76 per barrel.

Mexico’s Oil Output Decline Continues. Crude output by Mexico’s national oil company Pemex plunged to a 45-year low of 1.452 million b/d in September, down more than 100,000 b/d year-over-year, with further declines expected on the back of Q4 2024 upstream capex curtailments.

Qatar Wants a Share of Iraq’s Solar Energy Pie. QatarEnergy, the world’s leading supplier of LNG, has agreed to a 50% stake in the 1.25 GW Basrah solar energy project developed by French oil major TotalEnergies (NYSE:TTE), designed to provide electricity to some 350,000 homes in the south by 2027.

JPMorgan Warns of AI Demand Straining Water Supplies. Leading US bank JPMorgan Chase (NYSE:JPM) has warned of artificial intelligence jeopardizing the country’s water resources as the cooling needs of large data centres can demand as much as 5 million gallons of water per day.

Mexico Seeks to Blackout-Stricken Cuba. Mexico is sending a tanker of 400,000 barrels of oil to Cuba where an acute energy crisis has led to a series of nationwide blackouts that were aggravated by tropical storms, stepping in as the island nation’s long-time ally Venezuela failed to react in time.

European Majors Return to Libya. Undeterred by Libya’s recent oil blockade that shut in most of the production, Italy’s state oil firm ENI (BIT:ENI) and the UK’s oil major BP (NYSE:BP) have announced their exploration return to Libya, resuming appraisal works after onshore drilling was halted in 2014.

Russia’s Latest LNG Project Halts Production. The Novatek-operated sanctioned Arctic LNG 2 plant has stopped liquefying natural gas due to high inventories and restrained shipping options as its dedicated fleet has been placed under US sanctions in May, shutting in 6.6 mtpa of capacity.

Chinese Margin Squeeze Hits State Refiners. China’s largest oil company PetroChina (SHA:601857) is set to shut its largest domestic refinery in the summer of 2025, shuttering the 410,000 b/d Dalian Petrochemical plant as it’s too close to the city center, seeking to ramp up refinery runs elsewhere.

Permian Drilling Restrictions to Curb Output. Recent legislative changes by New Mexico – banning drilling within 2,250ft of residential, educational, or health facilities as well as near bodies of water – are expected to impact 15% of producing wells and reduce the US state’s production by 5-6% from 2026.

Mali Threatens to Disengage World’s Top Gold Miner. Mali’s military junta threatened to take back the Loulo mine concession operated by Barrick Gold (NYSE:GOLD) once its permit lapses in February 2026, accusing the Canadian miner of financial crimes and even briefly jailing some of its executives last month.

Japan Eyes Restart of Key Nuclear Plant. Japan is preparing to restart the 796 MW Unit 2 of the Unagawa nuclear plant, the closest to the epicenter of the 2011 Tohoku earthquake and subsequent tsunami that debilitated Fukushima, with the government taking 13 years to retrofit the unit.

Houthis Strike Again, Targeting Three Ships. After more than a week-long lull, Houthi militias claimed they targeted three ships in the Red and Arabian Seas, allegedly en route to Israel, however, two Liberia-registered vessels were sailing to Oman and one was moving from Egypt to Shanghai.


So two posts from Mr FFF, which may well be some of the last.

Rates Down, Stocks Up​

Tue Oct 29, 2024 4:08pm EST 4


My trepidation this morning about rates was somewhat resolved for the session, with a sharp drop in rates from its highs and the resumption of the AI Datacenter/Energy trade in tow.

This morning we had great numbers out of $GLW, as the build from the datacenter to civilization continues.

Now along this path there will be pops and drops, moments of discord and operational inefficiencies. But the AI network will be build, going from 400g to 800g to 1.6t datacenters; there will be bountiful profits to be enjoyed. The trick from now until then is to not get completely shaken out and know when to pull some into cash and know when to buy dips. This is when a professional, such as myself, enters the foray.

You have been reading this blog for free for many years and you’ve accumulated untold riches FEEDING like a parasite off of those, particularly me, without end. Very soon all of that, and this, will cease and I will bid you adieu.

+54bps for the session, now in a 50% cash position due to various external factors which will be revealed soon.

AI FRAUD ALERT: $SMCI COLLAPSES AFTER AUDITOR RESIGNS​

Wed Oct 30, 2024 10:09am EST 0


Shares of $SMCI plunged today after their auditor Ernst and Young resigned. This coming after the company fired Deloitte back in March of 2023 raises some serious eyebrows and in my opinion means the death of the company. But on that news, competitors $DELL and $HPE ripped higher and all is well in AI cloud world again, except for the fact that $SMCI might have been committing wanton acts of FRAUD.

I view this event in the most sanguine of ways: part and parcel of the market. You are going to have these unfortunate events and maybe just maybe it’ll create an atmosphere of trust in the industry, once $SMCI is buried.

I view any pullback in the space due to this event as a buying opportunity.

Questions In Regards to $SMCI​

Wed Oct 30, 2024 12:00pm EST 0


Yesterday shares of $SOFI plunged after reporting better than expected results. Today the stock is +8% on very heavy volume because Wall Street isn’t always efficient. The conference call was great. Management is extremely bullish on their BNPL and credit card businesses and the stock is relatively inexpensive.

Today it was revealed that a MAJOR AI server company, $SMCI, might in fact be a fraud. The market is yawning at the resignation of E&Y and only taking down $SMCI by 30%, whilst jacking up $DELL and $HPE, who will likely take share because of this. But is everyone forgetting that $SMCI isn’t an island and that there is an entire ecosystem that goes with building servers and connecting them into the data centers?

$SMCI also is in the liquid cooling space, a field currently dominated by $VRT. Why isn’t the market bidding that up as well.
If $SMCI does $10b in annual sales, how much in sales will $NVDA lose if they go away, or is it a zero sum game, now that $DELL and $HPE will take all of their share?

My point is, the efficient market theory isn’t always exact. It’s more of a mere approximation of things as people attempt to gain information, peering into the future, trying to profit from what other people might not know.



Which will only get worse as the Treasury needs to inflate away the debt.



Until they have to roll over that debt at far higher rates.



LOL.



Backwards.

USD strength and POO combine to drive demand for USD to purchase oil for those who are not BRICKS and cannot currently purchase in their native currency. To obtain these USD they sell UST. Japan is the poster child for this.

US Fiscal deficits reduces USD liquidity. To purchase UST you need USD. In circumstances of less USD liquidity, there will be less UST demand, pushing yields higher.

Higher POO increases USD demand from oil supplying nations which are NOT now recycling those USD into UST, rather, it flows into gold.

Low POO currently keeps UST yields lower than they might otherwise be:




This is likely the bottom because US Shale needs $70/barrel to maintain production. US Shale is the marginal supply.

The 'range' is +/- $70-$90. This is now an easy trade: buy circa $70 and sell circa $90.

The world cannot sustain $100+ oil for any length of time. In the 1970's the US could allow oil to spike 10X to bleed off inflationary pressure. Not today.

Today GOLD soaks up the inflationary pressure.



jog on
duc