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

    China's Cautious Growth Target Limits Help to World Economy

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

    China set a modest economic growth target of around 5% for the year, with the nation’s top leaders avoiding any large stimulus to spur a consumer-driven recovery already underway, suggesting less of a growth boost to an ailing world economy.

    Premier Li Keqiang announced the goal for gross domestic product in his final report to the Communist Party-controlled parliament, which kicked off its annual meeting on Sunday. Economists had expected a more ambitious target of above 5% following a rebound in consumer spending and industrial output after the end of coronavirus restrictions.

    Having missed the GDP goal last year by a wide margin for the first time ever, a more cautious aim this year could restore Beijing’s credibility and give President Xi Jinping and a line up of new top economic officials more room to focus on long-term policies. 

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    Germany's Sleepy Savings Banks Play Wall Street With LBO Bets

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

    LBO lending offered Germany’s savings banks a higher-margin business in the years when ultra-low interest rates were crimping the amount they could earn from retail loans. It also opened up a new customer base in the form of acquisitive private equity firms and gave them a way to maintain historical ties with local businesses being taken over. 

    “Nearly half of the family-owned businesses in the Cologne-Bonn region will undergo a generational change in the next few years,” said Uwe Borges, head of corporate banking at Sparkasse KölnBonn, one of Germany’s biggest savings banks with an LBO book in the high double-digit millions of euros. “Where there are no successors, leveraged buyouts are an option.”

    His comments are echoed by Kai Scholze, a board director at Kreissparkasse Esslingen-Nürtingen, who said his bank operates LBO financing in part because it doesn’t want to lose customers that get acquired to competing banks. “The margins are of course higher in this business than with corporate financing, but this is also associated with a higher risk.”

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    JPMorgan Is in Direct Lending for the 'Long Run'

    This interview of Kevin Foley, Global Head of Debt Capital Markets at JPMorgan. Here is a section. 

    80% of the leveraged finance market does not have a maturity until 2026 or beyond, so they have a lot of runway, a lot of liquidity, you got a well telegraphed recession as you talked about, they are cutting expenses and conserving cash. They are well set up to buy themselves time to see how this market unfolds…you just don’t have that crunch. We are coming off the greatest financing wave in history and so maturity has been pushed out and this plays out in that 80% stat I referenced. 

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    Eoin' personal portfolioin-the-money stop triggered in commodity position

    Clueless Wall Street Is Racing to Size Up Zero-Day Options Boom

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

    Discovered by retail investors as a cheap way of gambling during the meme-stock era in 2021, zero-day options got a fresh boost on index trading after firms like Cboe Global Markets Inc. last year expanded S&P 500 options expirations to cover each weekday. The offerings became an instant hit among institutions as daily reversals ruled the market, spurred by the Federal Reserve’s most aggressive monetary tightening in decades. 

    By the third quarter of 2022, 0DTE contracts accounted for more than 40% of the S&P 500’s total options volume, almost doubling from six months earlier, data compiled by Goldman Sachs Group Inc. show. 

    Behind the explosive rise, according to JPMorgan, are likely high-frequency traders — the computer-driven firms present at virtually every node of the modern equity landscape — as market makers and fast-moving seekers of an investing edge. 

    It’s a match made in quantitative heaven: For firms known to measure the life cycle of trades in thousandths of a second, zero-day options hold obvious benefits as tools to balance exposure and otherwise hone strategies designed to harvest fleeting profits by darting in and out of positions. 

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    Shell CEO Says Cutting Oil and Gas Production Is Not Healthy

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

    “We’ve seen of course through 2022 the fragility of the energy system,” Sawan said. “To see prices start to skyrocket, that’s not healthy for anyone, particularly consumers.”

    But at the same time, CO2 emissions rose to a record last year, meaning the world will need to move even faster if it wants to achieve its climate targets and avoid the worst impacts of global warming. To do that would require a steep cut in demand for oil and eventually gas as well.

    Under Sawan’s predecessor, Ben van Beurden, Shell had a target to reduce oil production by 1% to 2% per year, a pace that it’s more than achieved. Much of those declines are attributed to a reconfiguring of Shell’s production portfolio to shed lower-margin assets. That approach will continue under Sawan, who’s committed to boosting value for shareholders.

    “We focus on value over volume,” Sawan said. “So it’s not how many barrels we’re producing, but the margin that we extract from the barrels we produce.”

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    Silvergate Exodus Worsens After Bank Questions Own Survival

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

    “In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate,” Coinbase said on Twitter. “Coinbase will be facilitating institutional client cash transactions with our other banking partners.”

    Galaxy Digital, the crypto financial services firm founded by Michael Novogratz, said it continues to have no material exposure to Silvergate. The company took the action “to ensure client and firm assets are secure as part of our vigorous risk-management process,” its spokesperson said in an email.

    Paxos issued a similar statement, and Gemini Trust Co., Crypto.com and Cboe Clear Digital LLC are all suspending transfers with Silvergate as well. Circle Internet Financial Ltd. said it’s “unwinding certain services” with Silvergate.

    Bitstamp Ltd. went a step further, warning customers of potential losses if they make fresh deposits via Silvergate. “Bitstamp cannot be responsible for any funds deposited into the Silvergate bank account,” the crypto exchange said in a blog post Thursday. “If you do choose to deposit funds into this account, you do so at your own risk.”

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    Eoin's personal portfolio: commodity long initiated and stock option long initiated February 14th 2023