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

    China Draws Bumper Demand for Multi-Tranche Dollar Bond

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

    With the latest sale, China will have dollar securities outstanding with maturity dates ranging from 2022 to 2096 (the result of a small century bond sold in the 1990s). There will be an increasing variety of maturities off which Chinese corporate debt can price, with sovereign benchmarks at maturities from 2022 to 2048 of at least half a billion dollars each.

    The total Chinese dollar bond market now tops $740 billion, according to data compiled by Bloomberg, and issuance so far this year has run at a record pace. On a single day in early November, some six property developers were selling dollar securities.

    Earlier this month, China also sold euro debt, the first time since 2004 that it issued in that currency. That deal saw blowout demand, with a majority orders coming from European funds in a region that’s been beset by negative-yielding securities.

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    Bitcoin Pre-Halvening Dump Could Spell Disaster

    This article by Jon Buck may be of interest to subscribers. Here is a section:

    The halving occurs every 210,000 blocks and reduces the block mining reward by half—now 12.5 Bitcoin per block. Each of the adjustments is designed to continually manage inflation on the network.

    The consequence of each halvening is a massive profit slash among miners, with just half the current block reward as revenue. This leads to a massive reduction in miners, with the weak hands being forced out.

    However, as miners are no longer able to continue, the total hashrate on the network drops dramatically. This leads to a subsequent reduction in difficulty for each block mined, reducing costs for miners who make it through. In the end, the genius of Nakamoto shines.

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    Hong Kong's Pro-Democracy Forces Win Landslide, Rebuking China

    This article by Julia Fioretti, Iain Marlow and Fion Li for Bloomberg may be of interest to subscribers. Here is a section:

    Pro-democracy candidates won 86% seats of the 444 seats counted as of 9 a.m., official results showed, with eight seats still up for grabs. In the last election in 2015, they had won about a quarter of all seats. The pro-government camp won about 12% of seats this time around, versus 65% four years ago. The vote saw record turnout of 71%, with more than 2.94 million people casting ballots -- roughly double the number in the previous election.

    The vote came at a time of unprecedented political polarization in the city, with divisions hardening as the protests become more disruptive and the government refuses to compromise. While the district councils are considered the lowest rung of Hong Kong’s government, the results will add pressure on the government to meet demands including an independent inquiry into police abuses and the ability to nominate and elect the city’s leader, including one who would stand up to Beijing.

    “The government respects the results of this election,” Chief Executive Carrie Lam said in a statement on Monday. “I am aware there’s lots of analysis about the results among the community, which said the results are a reflection of the public’s dissatisfaction towards the current situation and deep-seated problems in society. The government will listen to the public’s feedback with humility and reflect on it.”

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    Why the Narratives around Oil Supply and Demand are Wrong

    This article by Goehring & Rozencwajg may be of interest to subscribers. Here is a section:

    Investors remain very concerned about the impact of slowing economic growth on global oil demand. While Q2 did show some softening, there have been several very bullish developments that most investors seem to ignore. For example, analysts focused all of their attention on the IEA’s recent downward revision of 2020 global demand projections by 100,000 b/d over the course of the last three months. However, at the same time, the IEA quietly revised historical demand higher by 190,000 b/d in 2017 and 110,000 b/d in 2018–a fact that few people wrote about. Notably, Q4 of 2018 was revised higher by a very large 300,000 b/d.

    Our models tell us that more revisions are forthcoming. As always, our analysis revolves around the “missing” barrels. For example, the IEA still claims after its latest set of historical revisions that global demand for all of 2018 equaled 99.3 mm b/d while total supply equaled 100.3 mm b/d. This suggests that inventories should have grown by 1 mm b/d or 365 mm b for the full year. Instead, the IEA reports that inventories were unchanged for the year. We refer to the “missing” barrels as oil that was produced but neither consumed nor put in storage. We have long argued that “missing barrels” are a clear indicator that the IEA will revise higher its demand figures and once again that has been correct.

    The IEA has a long history of demand underestimation. In eight of the last nine years, they have been forced to revise global demand higher by 1.1 m b/d on average (a number that is creeping higher). Despite this chronic underestimation and the continued presence of “missing barrels,” investors continue to ignore the warning signs of stronger than expected demand.

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    Bridgewater Bets Big on Market Drop

    This article by Juliet Chung and Gunjan Banerji for the Wall Street Journal may be of interest to subscribers. Here is a section:

    Bridgewater paid roughly $1.5 billion for the options contracts, or just about 1% of the Westport, Conn., firm’s $150 billion in assets under management, according to people familiar with the matter.

    The options contracts are tied to around $100 billion worth of the indexes, said people familiar with the matter. How much the firm stands to potentially make would depend on many factors, including the magnitude of any market decline and the timing of when the firm cashes in its bet.

    It couldn’t be determined why Bridgewater made the investment. Several clients said it may simply be a hedge for significant exposure to equity markets the firm has built up. Funds often hedge, or take offsetting positions, against other exposure to protect against losses.

    The massive size of the wager has prompted chatter among traders and caused the price of some options to rise.

    There has been a surge in put options outstanding tied to the S&P 500 index. The number of S&P 500 put options outstanding hit the highest level in more than four years in September, according to data provider Trade Alert. There has also been growing interest in S&P 500 put options expiring in March, the data show.

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    Corbyn Leads U.K. Election Cyber War, But Tories Improve on 2017

    This article by Joe Mayes for Bloomberg may be of interest to subscribers. Here is a section:

    The clearest difference between the parties is on how far their messages are spread by people sharing content voluntarily -- known as “organic” reach. Labour currently leads on this across the three most important social media platforms: Facebook, Twitter and Instagram.

    Posts from the Facebook pages of Labour and Corbyn -- largely focused on issues such as the National Health Service and criticizing the government’s austerity program -- have been shared more than twice as many times as those from the Conservatives and from Johnson himself, according to data from CrowdTangle, a social media analytics tool owned by Facebook.

    Labour and Corbyn have also garnered about 100% more views of their videos on Facebook and Twitter than the Tories, according to CrowdTangle and a Bloomberg analysis.

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    Gold Rush how the safe haven asset shines by enhancing portfolio returns and reducing drawdown risks

    Thanks to a subscriber for this report from Citigroup which may be of interest. Here is a section: