Journal Wed Nov 17


Trades

  • Worth noting these are just trades for the US session (I tend to close them out at the end of the day vs carrying them overnight)
  • Overall the Japanese data is in the territory of so bad it is good. Exports imploding will put pressure on Kishida to kick back in crazier forms of QE. At the same time, the fact Japan is a big auto maker gives it some optionality on the electric vehicle bubble. The overnight move decreasing geopolitical tensions and cheaper oil makes it more appealing as well
  • Shorting USDHKD - continue to think China detente / consumer transition lowers the risk of something terrible happening in China so nice pop overnight
  • Long Russia (RSX), Long Japan (EWJ), Short S&P 500 (SPY), Short NOKSEK
  • Keeping it simple, reading through Putin’s clean energy commentary as dovish for european war theater, which is partly why NOKSEK is elevated (Equinor gas flows).
  • I think inflation mania probably makes US equities a bit dangerous especially combined with the crazy dollar run going into Brainard so am happy to be short some USD synthetically on the JPY and RUB crosses

General Summary

  • Animal spirits in electric vehicles continue. Lucid motors up 9% pre market, GOEV surging etc. Honestly – really need to ensure you don’t miss bubbles like this! Was screening on top of data for past week.
  • I think it is interesting there is a veritable surge of inflationary headlines overnight. I especially find the Russian detente to be interesting and appealing for European risk assets (Putin playing nice on climate)
  • The hike cycles in Eastern europe given this dynamic and ECB dovishness make them potentially appealing near term - especially with turkey looking like a nightmare due to its dovish policies
  • Overall economic data keeps being incredibly strong. Things like Targets comparable sales at 12.7% and massive Lowes spend suggests a strong consumer. It is hard, therefore to fade US equities
  • The biggest disconnect to me is between Biden’s approval rating being down only even after the infrastructure bill and the animal spirits demand for electric vehicles. If we saw another Trump presidency do we really imagine that EVs would do well? From that perspective I prefer the metaverse as a bubble thematic

Substantial overnight moves

  • USDTRY continues its journey to the moon (up 1.5% overnight), notably overnight though USDRUB traded lower.
  • Gold is higher
  • Natural gas is nearly 3% lower, dragging oil down with it
  • Bonds down small
  • Bitcoin recovering back above $60k

Overnight News

  • Biden 538 approval disapproval is still at 51.7% which seems pretty insane
  • Yesterday CAD housing starts were pretty bad
  • ““Solving the methane problem would be a real chance for Russia to reduce emissions over the next decade,” said Alexei Yablokov, a climate specialist at Greenpeace Russia.” It sort of seems like Putin is playing nice if he’s abiding by climate talks
  • Overnight drop in the KOSPI of almost 1%
  • Debt Ceiling is back: Janet Yellen is warning that the Treasury could be left with insufficient resources to keep financing the government beyond Dec. 15, while a shutdown could come as soon as Dec. 3. Democrats are also aiming to approve a $1.75T spending measure to expand the social safety net and deal with threats posed by climate change.
  • Tesla tolerating elon musk share sales
  • Amazon chad move, cuts Visa in the UK: Visa (NYSE:V) stock slides 3.3% in premarket trading after Amazon.com (NASDAQ:AMZN) said it will stop accepting purchases made with Visa credit cards issued in the U.K. starting next year, the ecommerce giant’s latest push against transaction fees charged by payment networks, Bloomberg reports.
  • Target earnings, people are really really spending: Comparable sales grew 12.7%; Store comparable sales increased 9.7%; Digital comparable sales grew 29%.
  • Yesterday reopening trades got massacred, Norwegian down 7.5%
  • Covid forever: Dr. Anthony Fauci declared. “In my opinion boosters are ultimately going to become a part of the standard regimen and not just a bonus.”
  • Morgan Stanley note on Lucid, lol: “On valuation: “The current share price values the company just shy of $100bn which is approximately $2bn per unit delivered so far. While the EV ‘TAM’ is vast, we believe the market is pricing in extraordinarily high probabilities of success and/or very low levels of risk.””
  • Xi’s new document implicitly guiding down growth: “With unswerving resolve, we will pursue common prosperity for all,” the landmark historical resolution published by Chinese state media Tuesday said. It affirmed that the pace of gross domestic product could no longer be “the sole yardstick of success for development,” adding that “shared growth is the ultimate goal.”
  • Some of those points were echoed by another heavyweight in the financial world. “Let’s remember inflation is at a 31-year high, at least the data that came out of the U.S., and it’s clearly going to remain high for the foreseeable future,” John Studzinski, managing director and vice chairman, PIMCO said. There will be “a period of time where inflation is going to be very volatile,” he said.
  • Iceland hiked - the rest of the region are displaying increasing alarm, most recently with Iceland’s 50-basis point hike on Wednesday.
  • A proxy for U.S. trucking freight rates jumped in October by more than 36% from a year earlier, the biggest annual increase in data back to the early 1990s, according to the latest figures from Cass Information Systems. The calculation is derived by dividing the Cass freight-expenditures index by its shipments gauge. -“We’re definitely protecting price,” Fiddelke said in a briefing. “We’re seeing cost increases that are higher than our retail increases.” - Target earnings
  • That followed Hungary’s doubled pace of increase on Tuesday, capping a series of weeks where central banks delivered moves remarkable for their aggression. Earlier this month, the Czechs confounded expectations by raising the benchmark there by 1.25 percentage point, after Polish and Russian hikes that were each 50 basis points more than anticipated.
  • “We believe the U.S. is entering the tightest labor-market conditions since the 1950s,” Aneta Markowska, chief financial economist at Jefferies Group LLC, wrote in a note this week. As a result, wage pressures are unlikely to ease next year, keeping inflation elevated.
  • UK - syncronized inflation fears. More worryingly, the hotspots are seen across the economy and not confined to high-profile areas. All 12 of the broader categories in the basket have at least one element where inflation is running above 5%, with restaurants and hotels and transport making up the biggest proportions.
  • David Solomon saying there are going to be hikes ““Chances are interest rates will move up, and if interest rates move up that in of itself will take some of the exuberance out of certain markets,” Solomon said. “
  • Solomon quotes on China pretty bullish ““I think China wants to grow its capital markets, they want more listing activity in Hong Kong and onshore,” Solomon said. The participation of global institutions “strengthens their capital markets and so my guess is they’ll continue to support that, but the world can change,” he said.”
  • Worth reading entire Bloomberg Economic report
  • Baltic Dry index down another 6%
  • Lowe’s beat earnings – “Lowe’s Companies (NYSE:LOW) smashes consensus estimates with its Q3 earnings report after comparable sales increased 2.2% during the quarter against a tough comparable. Comparable sales were also 34% higher than the mark from 2019 and ahead of the consensus estimate of -2.5%. Comparable sales were up 2.6% for the U.S. business during the quarter.”
  • US retail sales and capacity utilization were good. Industrial produciton was pretty good. US housing market index pretty good
  • Crude stock much lower than expected
  • Japanese machinery order was horrendous at 12.5% vs 17.4% expects
  • Singapore big export number
  • Big beat at UK CPI, inflation is here. Same on PPI but probably more important Eurozone Core CPI printed 2% less than 2.1% expects
  • Massive beat on SOuth africa retail sales at 2.1% vs -.2% expects
  • US Mortgage index a tiny bit slow - will see housing number at 8:30