Email of the day on the VIX
Hi Eoin, isn't the VIX approaching a level or is already at a level where it is very attractive to go long the VIX? how much downside could there still be?
David Fuller and Eoin Treacy's Comment of the Day
Category - Global Middle Class
Amazon Signs Deal With Games Workshop for Warhammer 40k Films
This article from Bloomberg may be of interest to subscribers. Here is a section:
The announcement Friday was “very exciting news for Games Workshop,” said Andrew Wade, an analyst at Jefferies in a research note, noting that licensing income has built strongly in recent years. “A mainstream TV/film product could be game-changing in terms of Warhammer’s brand reach and awareness.”
Shares in Games Workshop rose 11% in early trading on Friday, the most in almost nine months. The stock — a pandemic market darling as lockdowns boosted demand for home-based hobbies — had previously fell about a quarter year-to-date.
Amazon is gearing up to spend more than $1 billion a year to produce movies that it will release in theaters, following the $8.5 billion acquisition of MGM, a 98-year-old Hollywood studio that released Ben-Hur and Legally Blonde. I
The ex-superman actor Henry Cavill is likely to star and executive produce a series adaption of Warhammer 40k, a franchise he’s made no secret of his love for, according to a report the Hollywood Reporter Thursday.
Sea Change
Thanks to several subscribers for sending through Howard Marks’ latest memo. Here is a section:
As I’ve written many times about the economy and markets, we never know where we’re going, but we ought to know where we are. The bottom line for me is that, in many ways, conditions at this moment are overwhelmingly different from – and mostly less favorable than – those of the post-GFC climate as described above. These changes may be long-lasting, or they may wear off over time. But in my view, we’re unlikely to quickly see the same optimism and ease that marked the post-GFC period.
We’ve gone from the low-return of 2009-21 to a full-return world, and it may become more so in the near term. Investors can now potentially get solid returns from credit instruments, meaning they no longer have to rely as heavily on riskier investments to achieve their overall return targets. Lenders and bargain hunters face much better prospects in this changed environment than they did in 2009-21. And importantly, if you grant that the environment is and may continue to be very different from what it was over the last 13 years – and most of the last 40 years – it should follow that the investment strategies that worked best over those periods may not be the ones that outperform in the years ahead.
That’s the sea change I’m talking about.
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.
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.
CATL to Deepen Ties With Honda on Battery Development
This note from Bloomberg may be of interest. Here is a section:
China’s Contemporary Amperex Technology, the world’s biggest maker of electric-car batteries, signs a global partnership agreement with Honda Motor, according to an exchange filing to Shenzhen Stock Exchange.
Investors Overseeing $5 Trillion Are Betting That an Economic Recession Can Be Avoided
Thanks to a subscriber for this article from Bloomberg which may be of interest. Here is a section:
Professional investors are loading up on bets that an economic recession can be avoided despite all the warnings to the contrary. It’s a dangerous bet -- for a variety of reasons.
Money managers have been favoring economically sensitive equities, such as industrial companies and commodity producers, according to a study from Goldman Sachs Group Inc. on positioning by mutual funds and hedge funds with assets totaling almost $5 trillion. Shares that tend to do well during economic downturns, like utilities and consumer staples, are currently out of favor, the analysis shows.
The positions amount to wagers that the Federal Reserve can tame inflation without creating a recession, a difficult-to-achieve scenario often referred to as an economic soft landing. The precariousness of such bets was on display Friday and Monday, when strong readings on the labor market and American services sectors drove speculation the Fed will have to maintain its aggressive policies, increasing the risks of a policy error.
“Current sector tilts are consistent with positioning for a soft landing,” Goldman strategists including David Kostin wrote in a note Friday, adding that the fund industry’s thematic and factor exposures point to a similar stance.
Amazon's Biggest Revenue Driver AWS Falls Prey To Macro Slowdown
This article from Benzinga may be of interest. Here is a section:
Amazon is aware of the macro challenges, and hence AWS employees are reaching out to clients to see how it can help optimize spending, said David Brown, AWS' vice president.
"If you're looking to tighten your belt, the cloud is the place to do it," AWS CEO Adam Selipsky said during his keynote presentation.
However, an investment firm Andreessen Horowitz analysis last year, painted a different picture. It showed that a company could trim its computing costs by half or more by bringing workloads from the cloud back to on-premises data centers.
Amazon is also offering a cheaper alternative, Graviton computing instances based on energy-efficient Arm-based chips alternative to standard Advanced Micro Devices, Inc (NASDAQ:AMD) and Intel Corp (NASDAQ: INTC) processors.
"We do see some customers who are doing some belt-tightening now," Selipsky told CNBC. Expedia Group, Inc (NASDAQ: EXPE) CEO Peter Kern sees the cloud as an area where his company can reduce its fixed costs.
Housing Tumbles Down Under as Soaring Borrowing Costs Take Toll
This article from Bloomberg may be of interest to subscribers. Here is a section:
In Australia, where the pace of housing declines has eased, the outlook for mortgagees is similarly tough: borrowing capacity has fallen and monthly repayments have surged. In addition, a large chunk of loans that were fixed at record-low rates during the pandemic are due to roll over in 2023 at a much higher rate.
With the full impact of past hikes yet to be felt, rates still rising and the economy set to weaken, there’s likely still some way to go before prices bottom, said Shane Oliver, chief economist at AMP Capital Markets in Sydney.
Given expectations that rates will rise higher in both countries, some economists see home values dropping more than 20% from their peaks.
Email of the day on the big turn:
Since returning from the Chart seminar in London I have spoken to several people who work in the Israeli high-tech industry, They all tell me that about 10% of their colleagues have lost their jobs recently. Today you referred to your MIIN index. How can we invest in these countries?