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

    China's Covid Pivot Set to Worsen the Global Energy Crunch

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

    China’s pivot away from Covid Zero is poised to boost natural gas demand in the world’s biggest importer, potentially curbing supply to Europe and other Asian nations.

    China National Offshore Oil Corp. is now looking to secure more shipments of the super-chilled fuel for next year. The return to the market of one of the nation’s largest liquefied natural gas buyers follows a period of subdued demand, due to virus curbs suppressing economic activity, and may herald a rebound in imports. 

    Beijing’s move to reopen its economy and live with Covid-19 has seen most internal restrictions being dismantled over the last few weeks. Provided that’s not rolled back as cases surge, that will increase the challenge for Europe next year as it prepares for the winter of 2023/24 with little or no natural gas from Russia. 

    Chinese gas imports are likely to be 7% higher in 2023 than this year, according to Wang Zhen, president of Cnooc’s Energy Economics Institute.

    The forecast belies still-weak industrial demand. Many factories will send workers home earlier-than-usual for the Lunar New Year holidays, while local production and Russian pipeline flows are rising.

    There are already signs China will need to increase LNG purchases to prepare for next year, however. Inventories at northern ports are depleting faster than normal amid cold weather and have dropped to the mid-to-low level, according to ENN Energy’s research group, while domestic LNG prices are trending higher.

    Read entire article

    Stocks Pare CPI-Fueled Rally With Fed Set to Hike

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

    “While the war against inflation is turning, we are a long way off declaring victory and the Fed will keep its hawkish stance for a while longer, even if it does potentially force a recession,” said Richard Carter, head of fixed interest research at Quilter Cheviot.

    The CPI-fueled stock rally fails to recognize that corporate earnings are just starting to see the impact of tight monetary policy, James Athey, investment director at Abrdn.

    “As the full effects of the Fed’s aggressive actions this year play out next year, it seems inevitable that we will see a significant repricing lower in EPS forecasts and thus the broad market,” Athey said.

    Read entire article

    Collateralised fund obligations: how private equity securitised itself

    This article from the Financial Times may be of interest. Here is a section:

    The product is known as a “collateralised fund obligation” and its aim is to diversify risk by parceling up the companies’ providing returns. CFOs are, in some ways, a private equity variant of “collateralised debt obligations”, the bundles of mortgage-backed securities that only reached the public consciousness when they wreaked havoc during the 2008 financial crisis.

    So far, CFOs have flown largely under the radar. Although some of private equity’s largest names such as Blackstone, KKR, Ares and the specialist firm Coller Capital have set up versions, this is often done privately with little or no public disclosure of the vehicle’s contents — or even, in some cases, of its existence, making it all but impossible to build a full picture of who is exposed and on what scale. CFOs introduce a new layer of leverage into a private capital industry already built on debt. Their rise is one illustration of how post-crisis regulation, rather than ending the use of esoteric structures and risky leverage, has shifted it into a quieter, more lightly regulated corner of the financial world.

    Read entire article

    Tesla Stock Is the Cheapest Ever After This Year's 52% Slump

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

    “My biggest concern is the slowdown they’re seeing in China,” Matt Maley, chief market strategist at Miller Tabak + Co. said, adding that “as long as Elon Musk is spending a lot of time with Twitter, it’s going to keep a lid on the stock.”

    Bloomberg News reported Friday that Tesla plans to suspend output in stages at its Shanghai electric car factory from the end of the month until as long as early January, amid production line upgrades and slowing consumer demand. 

    Meanwhile, Twitter is more than a distraction. Musk’s bankers are considering replacing some of the high-interest debt he layered on Twitter with new margin loans backed by Tesla, people with knowledge of the matter told Bloomberg.   

    Read entire article

    MSN Fired Its Human Journalists and Replaced Them With AI That Publishes Fake News About Mermaids and Bigfoot

    This article for Futurism may be of interest. Here is a section:

    "I spend all my time reading about how automation and AI is going to take all our jobs, and here I am," one fired MSN staffer told The Guardian at the time. "AI has taken my job."

    That anonymous staffer imparted a prescient warning: that though the human team had employed close editorial guidelines to vet the material that appeared on MSN's site, the new automated system would likely struggle to bring the same level of nuance and skepticism.

    MSN makes lofty promises that there's still "human oversight" over the stories it syndicates, but given the desultory deluge of fake nonsense it appears to run constantly, it seems very unlikely that the site's remaining skeleton crew is accomplishing much at all.

    And with its dwindling human staff, fewer still are left to hear readers' concerns, effectively erecting a brick wall that imposes a worrying opacity. Requests for comments go unanswered, and MSN publishes more bogus stories all the time.

    Read entire article

    Felix Zulauf: 'A Decade of Roller Coaster Markets'

    This interview may be of interest to subscribers. Here is a section:

    Saudi Arabia will be part of it. Russia will be part of it. Iran may be part of it. India may be part of it. And that currency will be—unlike all other currencies—not be a fiat currency, but a currency backed by commodities these member nations produce. And what I hear is, I think, it will come to the market in the mid-’20s or something like that. So, in a few years’ time. It’s another two to three years away.

    Once that comes and becomes reality, then I think this is an important source and currency unit to settle trade and to store certain reserves for countries that are not very close friends with the US. And once that currency unit gets established, that could be a big problem for the US dollar.

    I don’t think it will happen overnight. I think it will happen step by step, but it’s a first step. So, I’m concerned that the US dollar is in a topping process. They could stretch into next year and then begin a decline. I do not believe that the decline will be dramatic in the first next few years, but I think from the second half of the ‘20s onwards, I think we could see the dollar in an accelerating decline, yes.

    Read entire article

    EU Nears Deal on Landmark Carbon Levy as Trade Tensions Rise

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

    A deal on the carbon measure would be a major victory for one of the EU’s more controversial proposals, when it was announced last year as part of the bloc’s package to cut emissions by 55% by the end of the decade. The proposal tabled by the European Commission in 2021 envisaged that the importer would be entitled to account for the pollutions costs paid in country of origin if it has carbon pricing.

    The EU plans have already caused diplomatic unease in China and India and there’s concern that Russia may not comply with it. The EU mechanism also comes amid growing tensions over the US government’s Inflation Reduction Act, the country’s $369 billion green package, which provides subsidies only to American manufacturers to develop some clean technologies, including electric vehicles. The EU sees that as a possible contravention of WTO rules.

    For its part, the EU argues that the CBAM is in line with international trade rules as an environmental measure, designed to stop industry from moving carbon emissions outside of the bloc as it imposes stricter climate measures on industry. A potential preliminary deal among negotiators on Monday would need the endorsement of ministers from national governments and the full EU Parliament to enter into force. That may be done only after policy makers iron out the details of a link with a broader carbon market reform.

    Read entire article

    Fusion energy breakthrough by US scientists boosts clean power hopes

    This article from the Financial Times may be of interest to subscribers. Here is a section:

    The federal Lawrence Livermore National Laboratory in California, which uses a process called inertial confinement fusion that involves bombarding a tiny pellet of hydrogen plasma with the world’s biggest laser, had achieved net energy gain in a fusion experiment in the past two weeks, the people said.

    Although many scientists believe fusion power stations are still decades away, the technology’s potential is hard to ignore. Fusion reactions emit no carbon, produce no long-lived radioactive waste and a small cup of the hydrogen fuel could theoretically power a house for hundreds of years.

    The US breakthrough comes as the world wrestles with high energy prices and the need to rapidly move away from burning fossil fuels to stop average global temperatures reaching dangerous levels. Through the Inflation Reduction Act, the Biden administration is ploughing almost $370bn into new subsidies for low-carbon energy in an effort to slash emissions and win a global race for next-generation clean tech.

    The fusion reaction at the US government facility produced about 2.5 megajoules of energy, which was about 120 per cent of the 2.1 megajoules of energy in the lasers, the people with knowledge of the results said, adding that the data was still being analysed.

    Read entire article