Baltic
Dry Index. 2093 -01 Brent Crude 75.74
Spot
Gold 2064 US
2 Year Yield 4.33 +0.10
A
large Bank is exactly the place where a vain and shallow person in authority,
if he be a man of gravity and method, as such men often are, may do infinite
evil in no long time, and before he is detected. If he is lucky enough to begin
at a time of expansion in trade, he is nearly sure not to be found out till the
time of contraction has arrived, and then very large figures will be required
to reckon the evil he has done.
Walter Bagehot. Lombard Street, 1873.
In the global
stock casinos, a wobbly start as some reality finally creeps in.
South Korea and Taiwan lead declines in Asia
markets as tech firms slide after Apple downgrade
UPDATED WED, JAN 3 2024 12:13 AM EST
Asia-Pacific markets fell Wednesday, with stocks
in South Korea and Taiwan leading declines as major tech firms including
chipmakers came under pressure after Barclays downgraded Apple.
Apple shares dropped 4%
on Tuesday, after Barclays
cut the iPhone maker’s rating to underweight and
trimmed its price target to $160 from $161. Apple suppliers in major Asia
markets fell, weighing down indexes in Taiwan and South Korea.
South Korea’s Kospi dropped
1.78%, while the small-cap Kosdaq fell 1%. Most technology and chip stocks
including Samsung Electronics, LG Corporation and SK Hynix fell more than 2%.
The Taiwan Weighted
Index shed
1.18%, with shares of Taiwan
Semiconductor Manufacturing Company down
1.85% and Hon Hai, known internationally as Foxconn, shedding 0.48%.
Investors in Asia await India’s
factory activity data from S&P Global for December, while oil prices will
also be closely watched following Iran’s deployment of a destroyer to the Red
Sea that has ratcheted up tensions in the region.
In Australia, the S&P/ASX 200 retreated
1.1% after hitting an all-time high on
Tuesday.
Hong Kong’s Hang Seng index fell
1.23%, while China’s CSI 300 struggled for direction.
Japan’s markets are closed until
Thursday. A Japan Airlines flight collided with a coast guard aircraft at
Tokyo’s Haneda airport on Tuesday, causing five deaths.
The Coast Guard aircraft was
headed to Niigata prefecture to provide relief for the recent earthquake that
hit Japan on New Year’s Day, according to initial reports.
Overnight in the U.S. the tech-heavy Nasdaq Composite dropped
1.63% and the S&P500 slid 0.57%.
Apple shares fell more than
3% after Barclays downgraded the
Magnificent Seven stock to “underweight.”
The Dow Jones Industrial Average managed
to stay afloat as defensive stocks such as Johnson &
Johnson and Merck gained.
Asia markets today:
Live updates, India PMI, oil prices, Apple suppliers (cnbc.com)
Stock futures fall overnight after Nasdaq
registers worst day since October: Live updates
UPDATED WED, JAN 3 2024 12:19 AM
EST
Stock futures slipped in overnight trading after
the Nasdaq Composite registered its worst session since October.
Futures tied to the Dow Jones
Industrial Average slipped
35 points, or 0.08% while S&P 500
futures and Nasdaq-100 futures also
fell 0.09% and 0.14% respectively.
In after-hours trading, Outback
Steakhouse owner Bloomin’ Brands jumped
more than 5% after it added
two new members to its board. The additions are in accordance with an agreement Bloomin’ reached with
activist investor Starboard Value.
Stocks started the new calendar
year on a sour note, with the S&P 500 falling
0.6% and the 30-stock Dow finishing
less than 0.1% higher in regular trading. The Nasdaq Composite dropped
more than 1.6% for its worst day since October, dragged down by major
technology stocks and a nearly 4% decline in Apple after
Barclays downgraded the iPhone maker.
Artificial intelligence beneficiaries Nvidia, Advanced
Micro Devices slumped 2.7% and 6%, respectively, while chatbot
challengers Alphabet and Microsoft lost more than 1%. The VanEck
Semiconductor ETF (SMH) dropped 3.4%, while Intel shed 4.9%.
More
Stock
market today: Live updates (cnbc.com)
Next
up, commodities. With the Fed led central banks about to start cutting interest
rates from March, how high will the gold price go in 2024?
Gold Prices
Predicted to Hit Record Highs of $2,300 in 2024
The
U.S. Fed’s rate cuts, elevated central bank gold buying, and geopolitical and
economic uncertainties are expected to boost the yellow metal.
1/1/2024 Updated: 1/2/2024
After prices
jumped in 2023, gold is entering 2024 with many experts suggesting the safe
haven asset could hit record highs this year.
In 2023, gold prices jumped from around $1,823 per oz. to $2,062 per
oz.—an increase of over 13 percent—making it the best year for the yellow metal
since 2020. On Dec. 4, gold hit a record-high price of $2,135.40 per oz. For
2024, experts predict gold prices to move higher.
“Following on from a
surprisingly robust performance in 2023, we see further price gains in 2024,
driven by a trifecta of momentum chasing hedge funds, central banks continuing
to buy physical gold at a firm pace, and not least renewed demand from ETF investors,”
said Saxo Bank’s Ole Hansen, according to Reuters.
JP Morgan
predicts gold to see a “breakout rally” starting in the middle of this year due
to Federal Reserve’s interest rate cuts. The bank expects gold to hit a peak of
$2,300. Meanwhile, UBS projects gold prices to hit $2,150 by the end of this
year if the rate cuts were to take place.
Gold saw major
ups and downs in 2023, as one event after another affected investor perception.
In May, the U.S. banking crisis pushed gold down to a low of $1,810 per oz. by
early October. However, the Hamas attack on Israel that month triggered
tensions and gold prices have been rising since then.
In November,
the SPDR Gold Shares ETF, a popular exchange-traded fund tracking gold, saw net
inflows of more than $1 billion, breaking five consecutive months of outflows.
This was also the strongest month of net inflow since March 2022, highlighting
growing investor confidence in gold amid uncertain conditions.
An
Oct. 31 update by the World Gold Council (WGC) revealed that
global central banks collectively bought “an astonishing” 800 tons of gold in
the first three quarters of 2023. This is a 14 percent increase in gold buying
compared with the same period last year.
A May 30 survey published by the
organization found that a majority of central banks expect the proportion of
their total reserves denominated in gold to increase over the next five years,
thus contributing to upside pressure on gold prices.
More
Gold
Prices Predicted to Hit Record Highs of $2,300 in 2024 | The Epoch Times
In
other news, that wider Middle East all in war gets closer. President Biden’s
irrelevance rises with each passing week.
Killing of Hamas
deputy leader in Beirut raises risk of Gaza war spreading
January 3, 2024 3:21 AM GMT
BEIRUT/CAIRO/GAZA,
Jan 3 (Reuters) - Israel killed Hamas deputy leader Saleh
al-Arouri in a drone strike in Lebanon's capital Beirut on
Tuesday, Lebanese and Palestinian security sources said, raising the potential
risk of war in Gaza spreading well beyond the Palestinian enclave.
Arouri, 57, was the
first senior Hamas political leader to be assassinated since
Israel launched a shattering air and ground offensive against the group almost
three months ago after its shock assault and rampage into Israeli towns.
Lebanon's heavily armed Hezbollah group, a Hamas ally, has been
exchanging near-daily fire with Israel across Lebanon's southern border since
the war in Gaza began in October.
Hezbollah leader Hassan Nasrallah has warned Israel against carrying out
any assassinations on Lebanese soil, vowing a "severe reaction."
Hezbollah said on Tuesday it had targeted a group of Israeli soldiers in
the vicinity of Marj with missiles, following Arouri's killing.
Israel has long accused Arouri of lethal
attacks on its citizens, but a Hamas official said he was also "at the
heart of negotiations" conducted by Qatar and Egypt over the outcome of
the Gaza war and the release of Hamas-held Israeli hostages.
More
Killing of Hamas deputy leader in Beirut raises risk of Gaza war spreading | Reuters
Finally, from the FT, an ugly truth. More bank bailouts coming from the Feckless Fed? What happens to the dollar if they do?
Though
the FT headline features 117 billion of debt, there’s an 800 billion CMBS
iceberg collision too.
US office owners face $117bn wall of debt repayments
Pain
likely to be widely spread as landlords struggle to refinance at current
interest rates
Jannuary 1, 2024
Billions of dollars of debt will fall due this year on hundreds of big US office buildings that their owners are likely to struggle to refinance at current interest rates.
There are $117bn of commercial mortgages tied to offices which either need to be repaid or refinanced in 2024, according to data from the Mortgage Bankers Association.
Many of those were taken out a decade ago in an era when interest rates were far lower. Since then, commercial mortgage rates have nearly doubled, while the performance of many buildings has sunk, raising the prospect of billions of dollars of losses for investors.
“It’s going to be a problem to get some of these refinancings done,” said John Duncan, who heads the real estate finance practice at law firm Polsinelli. “We’re seeing deals where even sophisticated borrowers are calling it a day and asking their lenders whether they would like to take the keys.”
Unlike US home loans, commercial mortgages are almost entirely interest- only. That means developers of large properties tend to have low monthly payments, but face a balloon payment equal to the original loan the day the mortgage comes due.
---- The expected losses at this point are on a much smaller scale than during the 2008 housing crisis. But soured loans could cause billions in losses for investors, wipe out some property developers — such as the unravelling of Austrian property owner Signa — and lead to forced sales in the already struggling office market. In December, Signa’s insolvency administrator put the company’s ownership of half of New York’s Chrysler Building up for sale in order to raise urgently needed cash.
“We are in the very beginning of trying to weather the office market downturn,” said Richard Hill, the head of real estate strategy at Cohen & Steers. “This is not driven by fundamentals; this has everything to do with financing costs going back up.”
Interest rate expectations have moderated since the start of November, when investors feared inflation was proving stickier than expected and the US Federal Reserve would adopt a policy of “higher for longer”. That has provided a chink of light for some office owners.
Even as investors wait for the Fed to start cutting rates again, refinancings are getting done, eventually. Last month developer Aby Rosen secured a deal for New York’s iconic Seagram building, which stands set back from Park Avenue 10 blocks north of Grand Central station, following months of negotiations and after the $760mn of mortgage debt on the building had already been extended once.
About two-thirds of the soon-to-be due mortgages are held by banks. Delinquencies on those loans — which tend to be backed by higher-quality or lower-leveraged buildings — are rising, but are still very low. Data from the Federal Deposit Insurance Corporation shows it remained at a rate of just 1.5 per cent at the end of the third quarter.
Despite the low default rates, losses on those loans could be significant. In December, a group of US economists found that 40 per cent of office loans on bank balance sheets were under water, potentially causing problem for dozens of regional banks holding them.
“People should realise that regional banks are still very much exposed to the troubles in commercial real estate,” said Leo Huang, head of commercial real estate at Ellington Management.
The rest of the expiring loans on office properties are funded with commercial mortgaged backed securities (CMBS), a type of bond that typically pays more than government debt or similarly rated corporate bonds and are held by insurance companies, pension funds and individual investors.
There are now roughly $800bn in CMBS in the US. Delinquencies on office loans financed by CMBS topped 6 per cent at the end of November, up from 1.7 per cent a year earlier, according to real estate data firm Trepp.
“The CMBS market has done a good job of spreading out the risk,” said Huang. “But that means there will be pain to go around.”
Of the 605 buildings with mortgages expiring soon, there are 224 that Moody’s Analytics estimates owners will have trouble refinancing this year, either because the properties carry too much debt or because their rental performance is poor.
The former Sears Tower in Chicago, the tallest building in the world for more than two decades after its completion in 1974, is one of those on the list.
Now known as the
Willis Tower, there is $1.3bn in debt secured against the building due in
March. Its recent annual income before interest payments was 7 per cent of its
debt. Moody’s predicts that, in light of higher interest rates, owners of
buildings not generating at least 9 per cent of their debt in annual income
will have trouble refinancing this year.
More
US office owners face $117bn wall of debt repayments (ft.com)
The true costs of very low interest rates
Artificial distortions can cause ‘clusters of
errors’ by businesses
Caitlin Long August 11, 2010
Markets
tend to cheer falling interest rates. Low interest rates, however, can entail
real economic costs that become evident over time.
During
the earlier period of monetary stimulus, from 2001-04, many businesses made
economic calculation errors that later led to losses. Examples include
investments in housing, commercial real estate and mining exploration, as well
as the provision of defined benefit pensions to employees.
Interest
rates are the most important prices in the economy, according to Nobel laureate
F.A. Hayek, because they reflect the collective time preference of individuals
to consume either now or later. Accordingly, interest rates co-ordinate
allocation of capital across the economy by signalling to businesses whether
they should invest. Distortions in interest rates can cause “clusters of
errors” in which large swathes of businesses unwittingly miscalculate at the
same time.
More
https://www.ft.com/content/2838c142-a560-11df-a5b7-00144feabdc0
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.
‘Systemic
shocks should be anticipated’: how will the financial system fare in 2024?
TUESDAY 02 JANUARY 2024 6:00 AM
Financial
regulators were kept on their toes in 2023 as the financial system weathered
the worst banking crisis since 2008.
The collapse of
Silicon Valley Bank (SVB) in March sent shock waves through the banking sector
and hammered home the risks of a sudden shift in monetary policy and financial
conditions.
Although there have
been no further major blowups, it can take a while for the impact of higher
rates to filter through to the economy.
Harvey Knight,
partner and UK head of the Financial Services Regulatory Group at Withers
warned that the financial system would face “ongoing stresses and strains”
stemming from the “definitive shift away from a decade and more of low interest
rates”.
“Systemic shocks
and individual firm collapses should be anticipated as we go into 2024,” he
said.
Regulators reckon
the traditional banking system is far more secure than in the run-up to the
2008 crisis thanks to post-crisis reforms.
However, stricter
regulation on traditional lenders has pushed risk into less regulated areas of
the financial system.
Events like the
dash-for-cash in 2020 and the LDI crisis in 2022 showed how risks in niche
areas of the financial sector can cause widespread instability.
With those events
still fresh in the memory, regulators are trying to get ahead of the issue.
In June, the Bank of
England launched its first ‘system-wide‘ stress test to explore risks in the non-bank sector. In
October it suggested that money market funds should hold more liquid assets to
prevent risks from emerging.
Policymakers are also
in the process of designing tools that will enable them to lend
directly to pension funds and insurance
firms if instability should emerge.
Going into next year
Michael Sholem, financial services regulation partner at Macfarlanes,
suggested that regulators would be paying close attention to money
market funds, liquidity
mismatches in open-ended funds and the
broader “implications of interest rate movements” on the financial system.
More
'Systemic shocks should be anticipated': how will the financial system fare in 2024? (cityam.com)
Covid-19 Corner
This section will continue until it becomes unneeded.
Today, who knew experimental vaccines come with consequences?
Over 200 service members demand Biden's military
leadership be court-martialed and FIRED for forced 'experimentation' on troops
with COVID-19 vaccine mandate leaving 'significant' physical and mental scars
January
1, 2024
Over
200 active duty and retired service members are vowing to hold the Biden
administration accountable for 'trampling' on their rights by enforcing
the COVID-19 vaccine mandate.
The
mandate enacted in August 2021 led to the forced firing of over 8,000 service
members who refused the shot on religious or medical grounds.
On
New Year's Day, over 200 service members declared that they will do
'everything' in their power to get accountability since not a single leader has
resigned or been held to account despite the rollback of the vaccine mandate
last year.
In
a letter obtained by DailyMail.com, the current and former troops accuse
Biden's military brass of 'continuing to ignore' their pleas to correct the
'injuries and laws that were broken.'
They are threatening to even force
Biden's top leaders to be brought out of retirement so they can be
court-martialed and held to account.
'While implementing the COVID-19
vaccine mandate, military leaders broke the law, trampled constitutional
rights, denied informed consent, permitted unwilling medical
experimentation, and suppressed the free exercise of religion,' the letter
states.
It
goes on to say both service members and their families were 'significantly
harmed' and their 'suffering continues to be felt financially, emotionally, and
physically.'
'Some
service members became part of our ever-growing veteran homeless population, some developed
debilitating vaccine injuries, and some even lost their lives,' the letter
continues.
The mandate was eventually rescinded
in the December 2022 defense authorization bill, but it did not reinstate
service members who were fired for not receiving the shot nor provide any other
compensation.
In the open letter, they explicitly
name now-retired and still serving top commanders that they are demanding
accountability from.
More
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.
Why
2024 will be the year of the big battery
Jan 2, 2024 – 4.56pm
Big batteries are emerging as
backstops to a faltering energy transition that can help avoid blackouts, balance supply and
demand and smooth out volatile prices to a surprising extent that is only just
starting to be captured by official projections.
This year is set to be the first
in which the capacity of new big – or utility scale – batteries starting
construction in Australia exceeds the combined capacity of new wind and solar
farms breaking ground, according to data from Rystad Energy, a consultancy.
One of their roles is to
“firm” wind and solar energy by soaking up surpluses and discharging during
shortages. The more larger batteries with longer “duration” – the length of
time they can discharge at full capacity – get built and connected to the grid,
the better they will be able to replace rapidly retiring coal plants in that
role, experts say.
By the 2026-27 financial year – three years away – Rystad expects the
aggregate capacity of utility-scale storage operating in the grid, under
construction or at the pre-construction stage to exceed 10 gigawatts.
That’s about a fifth more than the aggregate storage capacity projected by
the Australian Energy Market Operator in its draft 2024 Integrated System Plan released last
month – and more than twice the amount projected in AEMO’s 2022 Integrated System Plan.
“Do we have
enough dispatchable capacity to start replacing some of the coal power stations
during those peak periods? It certainly looks like we’re now getting pretty
close to that point,” says David Dixon, senior analyst for Australian
renewables at Rystad.
Big batteries have been
getting steadily larger, and their duration – how long they can run at full
power – has been growing, too. Last month, Equis Energy and Victoria’s State
Electricity Commission signed off on the $1.1 billion first stage of the Melbourne Renewable Energy Hub, a 600 megawatt battery array with 1600 megawatt hours
of energy capacity – enough to run for just over two and a half hours at full
power.
A second 600 MW stage could
have as much as 12 hours of energy storage – enough to power households through
the night.
A week earlier, Blackrock’s
Akaysha Energy won federal Capacity Investment Scheme backing for its Orana
battery, a 415 MW, four-hour (1660 MWh) battery at Wellington, in NSW’s Central
West Orana Renewable Energy Zone. Akaysha is also developing the 850 MW/1680
MWh Waratah Super Battery at Lake Munmorah. Nearby, Origin Energy and AGL
Energy are developing batteries with 460MW to 500 MW capacity.
All in all, there are about 5
gigawatts of big batteries under construction, Dixon says, enough to replace
the recently retired Liddell coal-fired power station and Eraring, due to retire in 2025. This makes them the best performing part of the energy
transition – alongside the unstoppable juggernaut of rooftop solar.
The bulging pipeline – at a
time when few large wind and solar projects are getting final investment
decisions – suggests there
is more “firming” capacity coming into the grid than AEMO has assumed in recent
reports warning of increased risks of blackouts and brownouts as
coal-fired power exits the grid at
an accelerating rate.
There’s an important caveat
to this. Big batteries with up to about four hours of storage will increasingly
be able to deal with hot summer evening peaks – when everyone comes home and
turns on their air conditioners, electric stoves and TVs and demand surges for
a few hours.
But much longer duration storage will be needed
to deal with long winter lulls – rare periods of low wind and sun that last for
days, if not weeks.
More
Big batteries are beginning to add up for the
electricity grid and developers (afr.com)
“The boom can last only as long as the
credit expansion progresses at an ever-accelerated pace. The boom comes to an
end as soon as additional quantities of fiduciary media are no longer thrown
upon the loan market.”
“But it [the boom] could not last forever
even if inflation and credit expansion were to go on endlessly. It would then
encounter the barriers which prevent the boundless expansion of circulation
credit. It would lead to the crack-up boom and the breakdown of the whole
monetary system.”
Ludwig
von Mises.
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