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

    Euphoria Sweeps China Stocks as Signs of Covid Zero Pivot Emerge

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

    Traders who have for long been seeking clear signals of a pivot away from the staunch Covid Zero policy cheered the slew of changes announced on Friday, which included a cut in the amount of time travelers and close contacts must spend in quarantine, and a pullback on testing. The decisions by the National Health Commission followed a meeting by the nation’s top leaders on Thursday, where a more targeted approach was encouraged to tackle outbreaks.

    “This is a huge positive for the market,” said Wang Yugang, a fund manager at Beijing Axe Asset Management Co. “Of course how much efficacy these measures have for the economy we will need to observe.”

    In a display of broad market optimism, every stock on the 50-member Hang Sang China gauge was up on Friday. On the mainland, the CSI 300 Index ended 2.8% higher.

    This section continues in the Subscriber's Area.

    Binance Reserves Show Almost Half of Holdings Are Its Own Tokens

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

    Binance holds $74.7 billion worth of tokens of which around 40% are in its own stablecoin and native coin, according data shared by Nansen.  

    The world’s largest exchange released the information after its co-founder Changpeng Zhao announced earlier this week that Binance would provide proof-of-reserves to be more transparent.

    The demise of Sam Bankman-Fried’s FTX.com, has raised concerns over the opacity of exchange balance sheets and is prompting companies increase disclosures. Crypto.com has also publicly shared its reserves pool on Friday.

    Of the $74.6 billion termed as net worth, about $23 billion was in its own stablecoin BUSD and $6.4 billion in its Binance Coin, according to Nansen. 

    The exchange has also allocated 10.5% of its holdings in Bitcoin and 9.8% in Ether, Nansen data shows. 

    Binance is the first unlisted crypto exchange to come out with the details, since FTX collapsed, the latest in a series of crypto businesses to go bust this year. Crypto exchanges including OKX, KuCoin, Poloniex, Huobi this week vowed to increase transparency and provide greater clarity on their holdings. 

    This section continues in the Subscriber's Area.

    ASML Shrugs Off China Chip Curbs Amid Strong Demand Elsewhere

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

    ASML hasn’t been able to sell its most advanced extreme ultraviolet lithography machines to China as the Dutch government refused to give it a license to do so, but the company has been able to sell its other machinery to the country. The Dutch company sees the total indirect impact from the new US measures to be about 5% of its backlog, it said on a call with investors in October. 

    Meanwhile, major governments around the world have come up with subsidies and incentives to expand chip production capacities at home to avoid another round of semiconductor shortages that shaved off hundreds of billions from their economies during the pandemic. 

    Even though the global chip industry is now facing a severe downturn, countries including the US and Japan have not slowed their pace in readying new plants to prepare for the next boom cycle. Taiwan Semiconductor Manufacturing Co. is even considering adding another advanced facility next to a $12 billion dollar plant that’s under construction in the US state of Arizona. 

    Efforts by governments to build chip plants at home have just started and will accelerate, Wennink said Friday. “The drive for technological sovereignty is going to be very important driver for our business going forward.”

    This section continues in the Subscriber's Area.

    US Inflation Finally Offers Relief, But There's a Long Way to Go

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

    A cooling in US consumer prices offered cheer to households, investors and Federal Reserve officials, but there’s still a long way before high inflation becomes history. 

    At 7.7%, annual inflation in October was the slowest since January -- before the start of Russia’s war in Ukraine that triggered a worldwide surge in commodities and pump prices. Even more importantly for the Fed, a closely watched measure that excludes food and energy decelerated by more than economists anticipated.

    With slowdowns across categories including food, apparel and used cars, the report suggests that the fastest price increases in decades may finally be starting to ebb in the world’s largest economy. And it probably gives the US central bank enough assurance to moderate its aggressive interest-rate hikes if the trend is sustained.

    This section continues in the Subscriber's Area.

    Treasury Yields Plunge as Traders Run With 'Good News' on CPI

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

    Yields in the world’s biggest bond market spiraled downward as traders slashed their outlook for just how high the Federal Reserve will need to hoist its policy rate after consumer-price pressures slowed more than estimated last month.

    Swaps traders downgraded the odds of another three-quarter-point rate increase in December almost to nil, while continuing to price in a half-point hike. On the prospect of a slower tightening trajectory the five-year yield tumbled as much as 31 basis points, putting it on track for its biggest one-day drop since 2009. The benchmark 10-year yield fell as much as 27 basis points to 3.82%. US stocks soared and the Bloomberg dollar index plunged.

    The so-called terminal rate, or the expected peak for the Fed’s policy rate, was cut to under 4.9%, sometime around May. Before the latest CPI readings the peak rate in swaps referencing the central bank’s policy meetings was around 5.09%.

    “Markets are reacting aggressively to the CPI release,” said Gregory Faranello, head of US rates trading and strategy at AmeriVet Securities. “After a year like we’ve had, people are very anxious for some good news.”

    This section continues in the Subscriber's Area.

    IBM releases Osprey, the world's most powerful quantum computer

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

    As impressive as this year’s updates are, IBM is looking to next year as the real turning point. The company’s roadmap says that next year’s quantum processor, the Condor, will boast a stunning 1,121 qubits. Also on the cards is a modular processor called the Heron, which can stack multiple 133-qubit units together to make more powerful quantum processors.

    And finally, the IBM Quantum System Two will be released towards the end of 2023. This modular system will form the framework of the company’s quantum supercomputers, housing multiple processors with communication links between them. These are all stepping stones on the path towards IBM’s plans of building a quantum system with over 4,000 qubits by 2025.

    This section continues in the Subscriber's Area.

    Lucid Stock Is Falling as Reservations for Cars Drop

    This article from Barron’s may be of interest to subscribers. Here it is in full:

    The EV maker Lucid turned in respectable third-quarter earnings and stuck with its forecast for vehicle shipments this year, but the stock is dropping. Reservations are the issue.

    Tuesday evening, Lucid (ticker: LCID) reported a per-share loss of 40 cents from $195 million in sales. Wall Street was looking for a 31-cent loss from $209 million in sales., but earnings and sales don't matter much at this point.

    The company is just ramping up production of its first model, the Lucid Air. Importantly, the company didn't change its full-year guidance for vehicle shipments from the 6,000 to 7,000 cars it told investors to expect back in August. The prior guidance, given in May, was for 12,000 to 14,000 units.

    What seems to be raising investors' eyebrows is that management says Lucid has 34,000 reservations for its vehicles. The number given in August was 37,000.

    Shares were down 3% in after-hours trading.

    Lucid delivered 1,398 vehicles in the third quarter, up from 679 in the second quarter of 2022. Lucid produced 2,282 vehicles in the third quarter, which was more than triple the second-quarter production, according to the company.

    The company also ended the quarter with almost $4 billion in cash.

    Management scheduled a conference call for 5:30 p.m. Eastern time to discuss the results. Investors and analysts will be interested in the reservation number and whatever management has to say about demand for Lucid vehicles.

    Through Tuesday trading, Lucid stock was off more than 60% so far this year, while the S&P 500 and Dow Jones Industrial Average had dropped about 20% and 9%, respectively.

    Lucid stock has been hit harder than most. The cut to the forecast for deliveries didn't help. Rising interest rates, which reduce the current, discounted value of earnings expected to arrive in coming years, are an additional problem.

    This section continues in the Subscriber's Area.

    Jeffrey Gundlach with David Rosenberg 10-11-22 Podcast

    This video is a little outdated, particularly with regard to crypto, but it does highlight the fact bond investors finally have a yield they can base a total return strategy on.