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

    Gazprom to Halt Nord Stream Gas Link for Three Days for Works

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

    “Upon completion of the work and the absence of technical malfunctions of the unit, gas transport will be restored to the level of 33 million cubic meters per day,” Gazprom said.

    The gas flow after works is equivalent to 20% of capacity. The pipeline can normally carry about 167 million cubic meters per day.

    The Portovaya compressor in Russia, where the pipeline begins, is designed to operate six major and two smaller turbines. While one turbine is stranded in Germany after its maintenance in Canada, others that are still in Russia need repairs either in Canada or at the venue.

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    Email of the day on bear market rallies or a sustainable low

    Eoin, why do you believe that we are seeing no more than a continuation of a short covering rally. Surely you must concede from a pure technical perspective that the charts in the US in particular look very encouraging. The high valuation names largely stopped falling in May, and trended sideways for the better part of two months, and since then have seen a succession of higher lows and higher highs in a fairly consistent pattern.

    The Nasdaq, S&P and Dow bottomed later but have very similar looking chart patterns, and all of these broke through their 50 day moving averages, and then successfully tested them before marching higher.

    They have all retraced approximately 50% of their losses now. Inflation looks to have peaked, and while that does not suggest it goes straight back down again, surely does the market more good than harm.

    Having sat on my hands when this last deep correction came and went, I am impatiently biding my time to get involved again, but I am starting to doubt whether the opportunity will come.

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    Layoffs Are in the Works at Half of Companies, PwC Survey Shows

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

    That’s a key finding from a survey released Thursday by consultant PwC, which last month polled more than 700 US executives and board members across a range of industries. Half of respondents said they’re reducing headcount or plan to, and 52% have implemented hiring freezes. More than four in ten are rescinding job offers, and a similar amount are reducing or eliminating the sign-on bonuses that had become common to attract talent in a tight job market. 

    At the same time, though, about two-thirds of firms are boosting pay or expanding mental-health benefits. The most common move: making remote work permanent for more people.

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    Email of the day on Iran oil and gas supply

    I wonder about the state of their infrastructure & would assume it will take some time for them to ratchet up production assuming an agreement is reached.  Additionally, does Iran have LNG facilities?

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    There Were Hawkish Bits in the Minutes, Too

    This note from Cameron Crise at Bloomberg may be of interest to subscribers.

    While the market has reacted as if the minutes were dovish, I am not sure if that’s the right interpretation. To be sure, they did repeat the line that a slower pace of tightening would likely be appropriate in the future, and of course there was the line about the risk of over-tightening.

    But here’s the thing-- the minutes acknowledge that growth momentum is fairly weak and the economy will expand below trend in the second half. They even note that the headline labor market data may not represent the true state of the economy. But for now, the Fed doesn’t care. Below-trend growth is a feature, not a bug, of the current policy setting, because it is required to get demand more in line with supply to curb inflation. And while the uncertainty of the data does indeed make over-tightening a risk, the possibility of high inflation becoming entrenched was a “significant risk” if the public didn’t accept the Fed’s resolve to tighten appropriately.

    In other words, fading the Fed’s commitment to tighten makes it more likely that they will fulfill it. Oh, and there is a nice bit about the need to regulate crypto as well, so perhaps the Wild West mentality of that market might find that its days are numbered.

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    Largest Bitcoin Miners Lost Over $1 Billion During Crypto Crash

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

    While the shares of crypto-mining companies have enjoyed a respite in recent weeks, they are still deep in the red this year. The miners had to shift from their Bitcoin-hoarding positions and sell coins as they struggled to repay debt and cover operational costs in the recent quarter. That continued into the third quarter.

    “Public miners are still dumping their Bitcoin holdings at a higher rate than their production rate,” Jarand Mellerud, an analyst at Arcane Crypto, wrote in a research note. “Public miners sold 6,200 coins in July, making July the second highest BTC selling month in 2022.”

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    UK Inflation Hits Double Digits for the First Time in 40 Years

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

    “UK CPI inflation surged in July amid rising food prices that helped lift the rate above market expectations. The peak is still likely come in October, when energy prices are due to be increased again -- we see annual CPI moving to a little below 13% at that point. With inflation now more than five-times the Bank of England’s target, the question isn’t whether the central bank will tighten, it’s by how much? Today’s reading makes it more likely than not that the BOE lift rates by 50 basis points in September -- our baseline ahead of the data release was for a 25-bp move.”

    Economists are growing increasingly pessimistic about the UK, with the risk of a recession now seen as far more likely than not due to rising cost pressures. The BOE expects a recession to start in the fourth quarter, lasting into the early part of 2024.

    The central bank expects inflation to surpass 13% later this year when regulators allow energy bills to rise again. That would mark the worst reading since September 1980, when Margaret Thatcher’s government struggled to bring a wage-price spiral under control.


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