David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Wall Street Sees 'Devil's Bargain' in Powell's Rate Comments

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    “This is a devil’s bargain,” said Steve Chiavarone, senior portfolio manager at Federated Hermes. “Size of rate hikes will likely fall, but terminal rate is likely higher -- the implication is a greater number of smaller rate hikes. That is not dovish.” 

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    Central banks haven't bought this much gold since 1967

    This article from Quartz may be of interest to subscribers. Here is a section:

    Turkey was the biggest buyer of gold during the quarter, followed by Uzbekistan (26.13 tons) and India (17.46 tons). Not all countries report their gold purchases regularly, so it’s difficult to know how much, for example, China and Russia bought during this same period.

    India is also shoring up its gold reserves.

    Indian consumers habitually purchase gold jewelry ahead of the festive season every October. But that aside, the Reserve Bank of India (RBI) bought 13 tons of gold in July and 4 tons in September, pushing its reserves to 785 tons, according to the WGC.

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    NASCAR driver stuns racing world with a move learned from Nintendo GameCube

    This article from arstechnica may be of interest to subscribers. Here is a section:

    To understand the advantage of Chastain's move, a little knowledge of racing physics comes in handy. Typically, when taking a tight turn on a racetrack, drivers brake to counteract forces that push their cars toward the outside of the track. This braking action dramatically slows them down on the turn. This time, instead of slowing down for the turn, Chastain kept his car in fifth gear, hugged the wall, let go of the wheel, and allowed the wall to hold his car in place—no brakes necessary. That's how he passed five cars and set a 75-year lap record.

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    Brazil Markets Rally on Signs of Peaceful Transition of Power

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    Brazil’s stocks and its currency rallied on signs that President Jair Bolsonaro’s administration is preparing for a peaceful transfer of power after losing Sunday’s election to Luiz Inacio Lula da Silva.

    The president’s communications chief said that Bolsonaro won’t contest the election, according to Reuters. Meanwhile, a press official for Lula’s Worker’s Party said Bolsonaro’s top aide, Ciro Nogueira, offered a meeting place for transition teams from the outgoing and incoming presidents. 

    That would be a relief for investors who have been waiting for the incumbent, who had cast doubt on the integrity of the election during campaigning, to concede defeat. 

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    China's Last Offshore Property Bond Havens Are Crumbling

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    The latest moves have dragged even more junk dollar notes from Chinese property companies into distress, with 94% now trading below 70 cents on the dollar. That market was until just years ago one of the most lucrative bond trades globally. But it all began to unravel after a nationwide clampdown started in 2020 on leverage and real estate speculation, and has snowballed into record defaults by developers including China Evergrande Group. 

    The contagion is even reaching property giants that still have investment-grade ratings including China Vanke Co., the nation’s second biggest developer by sales. Its note due 2027, which was trading above 80 cents just a month ago, fell 4 cents Tuesday in the worst two-day drop ever to an all time-low of 40.3 cents.

    “Now with some presumably better-off developers getting into trouble, people start to worry about a contagion to non-state developers,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities. “It’s not just a confidence issue, and developers’ liquidity conditions are only getting tighter in the future given sales have been slower than expected.”

    And

    As refinancing costs surge in global debt markets, China’s property sector has at least $292 billion of onshore and offshore borrowings coming due through the end of 2023, raising the specter of even worse payment pressure to come. There’s $53.7 billion borrowings still due the rest of 2022, followed by $72.3 billion of maturities in the first quarter of next year. 

    “We have seen no improvement in terms of the funding for private-sector developers,” Bank of America Corp. economist Helen Qiao said on Bloomberg Television Tuesday. “The stimulus was not strong enough to get them out of the current liquidity trap, and therefore how exactly they can really survive raises many questions.”

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    US Job Openings Post Surprise Increase, Keeping Pressure on Fed

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    The surprise pickup in vacancies highlights unrelenting demand for workers despite mounting economic headwinds. The persistent imbalance between labor supply and demand continues to underpin robust wage growth, adding to widespread price pressures and reinforcing expectations for yet another large rate hike on Wednesday.

    The latest increase in openings erased much of August’s slide, which, at the time, had suggested a notable moderation in labor demand.

    “After the shock of last month’s report, the September JOLTS data is returning to a familiar story: demand for workers remains robust,” Nick Bunker, head of economic research at Indeed Hiring Lab, said in a note. “By all the key metrics in this report, the labor market is resilient.”

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    Email of the day on institutional versus retail volume

    Eoin - does the source of daily volume in the stock market (buying or selling) influence your opinion of market strength or weakness at any point in time? Are there particular data sources you review which help you determine if institutional buyers/sellers are especially active? Does the trade-off between retail and institutional demand matter?

    I always look forward to reviewing your insights on where markets may be heading in the near term...particularly in this ongoing era of excessive central bank intervention and manipulation.

    Thank you.

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