Baltic Dry Index. 1797 -22 Brent Crude 92.53
Spot Gold 1651 US 2 Year Yield 4.50 +0.01
Coronavirus
Cases 02/04/20 World 1,000,000
Deaths 53,100
Coronavirus Cases 25/10/22 World 633,247,821
Deaths 6,584,151
You can always count on the UK Conservative Party to do the right thing after they have tried everything else.
With apologies to Sir Winston Churchill and Americans.
In the stock casinos, a tepid bounce. We are approaching year end Santa Claus rally season.
To the bulls, the inflation causing the great interest rate surge is nearly over. What comes next is a great relief rally positioning for the Great Biden Boom of 2023.
For the bears, inflation is far from beaten and any Santa Clause rally is merely another exit rally ahead of the Great Biden Bust of recession in 2023.
My take, this is perfect trading conditions to try holding a few synthetic stock index double options into the year-end early 2023.
I expect the bears to be right but 2022 is such an exceptional year, anything can happen including an exceptional stock short squeeze. Whatever else it is, it’s financialised gambling far from orthodox capitalism.
In the UK, the Not the Conservative Party finally did the right thing and endorsed a leader with a better than 50:50 chance of reading the UK and global economy right.
During the difficult coming winter ahead, rolling
power cuts are expected from 4 to 7 pm during the months of December through
early March, PM Sunak is going to need all his young enthusiasm and common
sense he can muster.
Hong Kong markets
rebound slightly after plunge, Asia-Pacific markets rise
UPDATED TUE, OCT 25 2022 12:12 AM
EDT
Hong Kong
stocks were volatile while mainland China markets continued to slide Tuesday,
while other major Asian markets rose after Wall Street’s second straight
positive session.
The Hang Seng index in
Hong Kong recovered slightly to trade 0.87% higher after falling earlier in the
session. Hang Seng Tech was nearly 4% higher after losing more than 3% at the
open.
Chinese tech stocks in the
U.S. and the Hang
Seng index and dropped sharply to start the week with investor
sentiment turning following the conclusion of the China’s party congress and the
release of a slew of delayed economic data.
Mainland China’s Shanghai Composite also
reversed its direction to rise 0.74% while the Shenzhen Component added 0.524%.
The Nikkei 225 added
1.21% and the Topix climbed 1.25%. In Australia, the S&P/ASX 200 was
up 0.25%.
South Korea’s Kospi was
0.35% higher, while the Kosdaq gained 0.17%. The MSCI’s broadest index of
Asia-Pacific shares outside Japan ticked up 0.44%.
Singapore is due to release inflation data on Tuesday.
Overnight in the U.S., the
Dow Jones Industrial Average climbed 417.06 points, or 1.3%, to close at
31,499.62. The S&P 500 rose about 1.2% and closed at 3,797.34. The Nasdaq
Composite added nearly 0.9% to end at 10,952.61.
Japan’s finance
minister declines to comment on suspected currency intervention
Japan’s finance
minister Shunichi Suzuki again refused to comment on whether authorities
intervened in the currency market, according to a Reuters report.
Suzuki’s repeated
refusal to comment on the matter comes after speculation that a sharp
strengthening on Monday morning followed another intervention reported by
numerous media outlets, citing people familiar with the matter.
The minister was
quoted as saying excessive volatility must be smoothed out, and that the
government is ready to take appropriate actions when necessary.
“If we leave sharply
volatile currency moves, driven by speculative trading, unattended, that would
affect companies and households,” Suzuki said.
The Japanese yen was last slightly stronger at 148.84 per dollar.
Asia markets: Hong Kong stocks recover slightly after sharp falls (cnbc.com)
Stock futures are
flat as investors await big tech earnings
UPDATED MON, OCT 24 2022 7:10 PM
EDT
Stock futures were flat in overnight trading
Monday as investors looked ahead to big technology earnings for further clues
into the health of the U.S. economy.
Futures tied to the Dow Jones
Industrial Average traded marginally higher, while S&P 500 and Nasdaq 100
futures added 0.09% and 0.02%, respectively.
Shares of Amazon slipped slightly
in after hours trading on reports of a hiring freeze, while Discover
Financial shed more than 1% on disappointing earnings results.
-----Investors this week remain
laser-focused on earnings from the biggest technology companies, with reports
from Alphabet and Microsoft due Tuesday. Meta Platforms reports Wednesday,
followed by Amazon and Apple on Thursday. Given their sheer size and market
capitalization, any moves are likely to drive the market going forward.
So far this season, companies
have proven they may be faring better than anticipated. That’s due in part to
the fact that analysts’ earnings estimates have come down in recent months as
companies faced foreign exchange headwinds and other growth concerns. This
could set up stocks for rallies on potentially better-than-feared outcomes.
″’Earnings really have come down
quite a bit,” said Sam Stovall, chief investment strategist at CFRA. “Maybe
investors are happy because it’s up 2% and not down 2% but we’ve also been
seeing reductions in 2023 forecasts. This bear market probably has to play
itself out even if we do get a near-term bear market rally.”
Reports from UPS, General
Electric, Coca-Cola and General Motors are due out before the bell on Tuesday.
Chipotle Mexican Grill and Texas Instruments will report after the Tuesday
close.
On the economic data front,
S&P/Case-Shiller August home prices, FHFA August home prices and October
consumer confidence are slated for release Tuesday.
Stock
futures are flat as investors await big tech earnings (cnbc.com)
Stagflation is Coming (Part II)
October 24, 2022.
Today, we continue our
two-part series from Justice Litle, editor of TradeSmith Decoder.
Yesterday, Justice explained why investors are at risk of
a lost decade in the stock market.
Today, we build on that.
Justice walks us through the last four decades, highlighting each decade’s
unique tailwind that supported a rising stock market.
nfortunately, none of those tailwinds
exist today. And in their absence, here’s a preview of what Justice sees
coming:
If you think
markets are tough now, just wait until we reach a point where the United
States, and the world, enters full-blown recession conditions with unemployment
climbing, corporate profit margins tanking, and politicians screaming — and
inflation pressures yet remaining high.
This is an important essay for all
investors to take seriously. If Justice’s forecast plays out as he expects, the
broad, bullish stock market conditions we’ve enjoyed for decades is a thing of
the past.
---- Four Unique Decades
The optimists don’t want to hear
this, of course.
The idea of a 1968-1982 period, in
which stocks do nothing with a whole lot of volatility — while losing to
inflation the whole time — sounds like a waking nightmare for the long-only
investor.
And “waking nightmare” might not be
far off given that, in 1974, even Warren Buffett had a 50% down year. Ouch!
Instead of facing this possibility,
hopeful investors want to believe the stock market will soon be back to “the
good old days,” meaning something like the decade of the 1980s… or the 1990s…
or the 2000s… or the 2010s.
Any decade of the past four will do,
in fact, because all of them — barring the occasional crisis scare here and there
— were great for stocks.
Here is the thing though: That which
investors believe is the baseline “normal” for stocks, based on 40 years of
lived experience, was not actually “normal” at all.
For markets “normal” does not exist.
The stock market is not guaranteed to behave a certain way — it merely responds
to the prevailing set of general conditions, which can vary widely depending on
the decade.
The typical investor today assumes
stocks always go up, as a rule of thumb, because they have somewhere between
one to four decades’ worth of lived experience that tells them so.
This makes sense, kind of: If you
experience the same set of prevailing conditions for 40 years, it is logical to
assume, without thinking about it, that “things will always be this way.”
But if we take a closer look at the
historical drivers of the past four decades, we can see it just ain’t so.
Each of the past four bullish decades
for the stock market — the 1980s, the 1990s, the 2000s, and the 2010s — were
bullish for their own unique set of circumstances, and thus bullish in their
own way.
And guess what — all those bullish
drivers are now gone. Let’s take a quick tour.
The 1980s: Volcker Payoff and
Shadow Banking
The great bull market that
encompassed both stocks and bonds alike, and which defined the conditions that
a majority of investors have known for their entire careers, began in 1982.
That was no accident, because Federal
Reserve Chair Paul Volcker, a.k.a. “the man who broke the back of inflation,”
took office in 1979.
Volcker put the U.S. economy through back-to-back recessions, taking the federal funds rate to 20% in the process, in order to kill off inflation. The cost was brutal, but the payoff was evident in the decade that followed.
Because of what Volcker did, the 1982
bull market was able to kick off in an environment of falling inflation,
falling interest rates, and extremely low levels of leverage and debt in the
U.S. economy (because the recessions under Volcker’s watch had cleaned them
out).
In addition to that, Wall Street
invented shadow banking in the 1980s. This was the rise of high yield debt
instruments — think Michael Milken and junk bonds — and leveraged buyouts and
other means of credit exploitation.
That ability to exploit new credit instruments,
starting from a base of low leverage with inflation and interest rates falling,
helped drive the boom of the 1980s, as did Reagan administration Cold War
deficit spending (counterbalanced by tight monetary policy) and the birth of
Silicon Valley legends like Microsoft and Apple.
More
Stagflation is Coming (Part II) (msn.com)
Global Inflation/Stagflation/Recession
Watch.
Given
our Magic Money Tree central banksters and our spendthrift politicians,
inflation now needs an entire section of its own.
"Why are the economists almost always wrong?"
George Goodman.
Fundamentals 'flashing
red' as last pillar of credit crumbles
Corporate credit conditions are
worsening, says Janus Henderson Investors
Oct 24, 2022
Corporate credit conditions are worsening, with
the last of three key measures now “flashing red,” according to a traffic-light
system used by Janus Henderson Investors.
The outlook for cash flow and earnings was
downgraded from amber in the third quarter, the US$300-billion asset manager
said on Monday. The other two measures — access to capital and debt load — were
already red.
Conditions are deteriorating
globally as central banks around the world raise interest rates to try to reign
in inflation, pushing the cost of refinancing debt to a record. They’re
especially bad in Europe, where higher energy costs are fuelling a
cost-of-living crisis that threatens to reduce consumption and earnings,
leading to a drop in credit quality and ultimately more defaults.
“What started as a liquidity-induced downturn
for credit is likely to become a fundamental downturn as credit quality is
impacted by central banks’ relentless pursuit of combating inflation,” Janus
Henderson said in a report. “Positioning portfolios for recession, heightened
volatility and a deterioration in credit quality is prudent.”
The ability of companies to make money and
service their debt was previously seen as the only pillar of support for credit
markets in a year of record losses. Companies had strong balance sheets after
taking advantage of pandemic support measures and ultra-low borrowing rates to
push out maturities on their debt.
Those buffers are
eroding as economic risks rise, but there’s no imminent risk of a crisis, the
report said. Janus Henderson prefers higher-quality, non-cyclical companies.
That echoes investors who’ve been drawn to the investment-grade market
recently, where yields are at multiyear-high yields and defaults are low.
Riskier parts of
the credit market are another story. Interest coverage — a metric of how
comfortably earnings cover debt interest expenses — could fall to its lowest
level in a decade for euro leveraged loan borrowers within the next six to 12
months, UBS Group AG strategists led by Kamil Amin wrote in a note to clients
last week.
And zombie firms, a
term typically used for companies unable to cover a single year’s interest with
earnings, have made a comeback in credit discussions this year.
“As interest rates
and company cash cushions move in inverse directions, some corporates will
struggle to repay their debts,” Janus Henderson said in the report. However,
“we see a shallower default cycle and this will help underpin significant
dispersion in performance across different industries and sectors — which
presents challenges but also opportunities to investors.”
More
Fundamentals
'flashing red' as last corporate credit pillar crumbles | Financial Post
Mortgage rates surge
to a 20-year high, leading to steep decline in home sales
The
30-year mortgage rate is averaging at 6.94%, Freddie Mac said in its latest
weekly survey
The
numbers: Mortgage rates have
risen to the highest level in 20 years.
The 30-year fixed-rate mortgage
averaged 6.94% as of October 20, according to data released
by Freddie Mac.
That’s the highest since April
2002.
Rates are up 2 basis points from the previous week — one
basis point is equal to one hundredth of a percentage point, or 1% of 1%.
Last week, the 30-year was at 6.92%. Last year, the
30-year was averaging at 3.09%
It’s worth noting that Mortgage News Daily, which follows day-to-day movement
in mortgage rates, is noting that the 30-year is at 7.22%.
More
Mortgage
rates surge to a 20-year high, leading to steep decline in home sales -
MarketWatch
Euro zone October business activity takes another inflation hit -PMI
October 24, 2022
LONDON (Reuters) - Euro zone business activity contracted at the fastest pace in nearly two years in October as the cost-of-living crisis kept consumers cautious and sapped demand, according to a survey that added to evidence the bloc is entering a recession.
Factories have been particularly hard
hit by energy price rises and due to supply chains still recovering from the
coronavirus pandemic taking a hit from Russia's invasion of Ukraine.
S&P Global's flash Composite
Purchasing Managers' Index (PMI), seen as a good guide to overall economic
health, fell to 47.1 from 48.1 in September, below expectations for 47.5 in a
Reuters poll.
October was the fourth month below
the 50 mark separating growth from contraction and was the lowest reading since
November 2020.
"The euro zone economy looks set
to contract in the fourth quarter given the steepening loss of output and
deteriorating demand picture seen in October, adding to speculation that a
recession is looking increasingly inevitable," said Chris Williamson,
chief business economist at S&P Global.
"Demand is falling sharply and companies
are increasingly growing worried over high inventories and weaker than expected
sales, especially as winter approaches. The risks are therefore tilted towards
the downturn accelerating towards the year-end."
Inflation was a record 9.9% in
September, data showed last week, and with prices rising sharply, demand
weakened considerably. The composite new business index dropped to a near
two-year low of 45.0 from 46.3.
To try and combat inflation running
at nearly five times its target, the European Central Bank has begun raising
interest rates and is expected to do so by another 75 basis points on Thursday,
depleting the spending power of indebted consumers.
A PMI covering the bloc's dominant
services industry dropped to 48.2 from September's 48.8, in line with the
Reuters poll but the lowest point in 20 months.
Suggesting inflation won't fall
significantly anytime soon, both the services input and output prices indexes
were close to record highs. The input prices one nudged up to 77.5 from 77.4.
The manufacturing PMI fell to 46.6
from 48.4, its lowest since May 2020 and below all forecasts in the Reuters
poll, which had predicted 47.8. An index measuring output, which feeds into the
composite PMI, sank to 44.2 from 46.3.
More
Euro zone October business activity takes another inflation hit -PMI (msn.com)
Below, why a “green energy” economy may not be possible, and if it is, it won’t be quick and it will be very inflationary, setting off a new long-term commodity Supercycle. Probably the largest seen so far.
The
“New Energy Economy”: An Exercise in Magical Thinking
https://media4.manhattan-institute.org/sites/default/files/R-0319-MM.pdf
Mines,
Minerals, and "Green" Energy: A Reality Check
https://www.manhattan-institute.org/mines-minerals-and-green-energy-reality-check
"An
Environmental Disaster": An EV Battery Metals Crunch Is On The Horizon As
The Industry Races To Recycle
by Tyler Durden Monday, Aug 02, 2021 - 08:40 PM
Covid-19 Corner
This section will continue until it becomes unneeded.
With Covid-19 starting to become only endemic,
this section is close to coming to its end.
Please share! This Dangerous Research must
be stopped.
Due to its importance, we will leave this YouTube clip up all week.
New
Boston [SARS] virus Approx. 19 minutes.
[Kills
80 percent of humanised mice.]
Next, some vaccine links
kindly sent along from a LIR reader in Canada.
NY Times Coronavirus Vaccine
Tracker. https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html
Regulatory Focus COVID-19
vaccine tracker. https://www.raps.org/news-and-articles/news-articles/2020/3/covid-19-vaccine-tracker
Some other useful Covid links.
Johns Hopkins Coronavirus
resource centre
https://coronavirus.jhu.edu/map.html
Centers for Disease Control
Coronavirus
https://www.cdc.gov/coronavirus/2019-ncov/index.html
The
Spectator Covid-19
data tracker (UK)
https://data.spectator.co.uk/city/national
Technology
Update.
With events happening fast in the
development of solar power and graphene, among other things, I’ve added this
section. Updates as they get reported.
Archer Materials develops liquid-gated graphene field
effect transistor for use in medical diagnostics
By Imelda Cotton October 24, 2022
Archer
Materials (ASX: AXE) has
achieved a long-term biochip technology development goal of fabricating an operational
liquid-gated graphene field effect transistor (gFET).
The gFET device is a sensing
component which will be used for digitising biologically-relevant signals such
as those from target analytes of viruses or bacteria.
It is a foundational feature
of Archer’s ‘lab-on-a-chip’ biochip technology which is designed to enable the
complex detection of some of the world’s most deadly communicable diseases.
The company aims to integrate the
gFET into advanced microfluidic systems to create miniaturised lab-on-a-chip
device platforms for use in medical diagnostics.
It has been specially fabricated to
prevent liquids from shorting the integrated circuit, while simultaneously
obtaining electronic signals using liquid as part of the device.
Archer said the gFET could
potentially enable multiplexing, which is the ability to parallelise the
detection of multiple biologically-relevant targets in droplet-sized liquid
samples on a chip.
The innovation offers an
ultrasensitive approach to analyte detection over conventional electronic
sensors used in current lab-on-a-chip devices.
Technological progress
Archer has made significant
technological progress over the last year in the lead-up to the liquid-gated
gFET.
The company’s advanced
lithography was used to integrate a single-atom-thick sheet of graphene in
silicon electronics, while hair-thin microfluidic channels have been fabricated
on a silicon wafer for sample processing and transportation to smaller built-in
sensors for analysing biochemical targets.
The company has also
engineered biochemical reactions with the potential for on-chip detection and
quantification of specific DNA or RNA fragments relevant to viruses and
bacteria.
In other technological
achievements, Archer’s foundry has fabricated a magnitude of component feature
sizes reaching sub-10 nanometres on a silicon wafer which would potentially
allow for high performance sensing.
Significant step forward
Archer chief executive
officer Dr Mohammad Choucair said the gFET innovation was a significant step
forward for the materials technology company.
“Our graphene-based
transistor consists of a single-atom-thick sheet of graphene to act as an
ultrasensitive sensor intended to operate alongside other bio-functional
regions fabricated on the same miniaturised chip,” he said.
“The work is an exciting
development towards realising an operational biochip technology at Archer.”
More
"Markets are only a tiny facet of society,
but being made by mass psychology, they are a good litmus paper for what is
going on. Markets only work when they believe, and this confidence is
based on the idea that men can manage their affairs rationally. If that
belief fades, then so do the markets. They do not merely dive, they dive
and then they disappear. It happened here in the blight of the spirit
from 1930 - 1933, and it happened in other countries."
“Adam Smith” aka George Goodman.
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