One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.

A link to today's video commentary is posted in the Subscriber's Area. 

Swelling protests against China’s virus-induced curbs may end up supporting asset prices by encouraging President Xi Jinping to accelerate the nation’s exit from Covid Zero, according to some market watchers.

“I don’t expect Xi to publicly admit error or show weakness, but this wave of protests could cause the leadership to decide privately that the exit needs to proceed more quickly than previously planned,” said Gabriel Wildau, managing director at advisory firm Teneo Holdings LLC in New York.

Most risk assets slid in early Asian trade Monday on concern the unrest in China, coupled with surging daily infections, may convince the authorities to introduce further Covid restrictions. At the same time, the country’s focus after last month’s Communist Party congress has been on supporting the economy on a wide array of issues from reopening and the property crisis to relations with the US.

There are two big questions at the heart of the Chinese protests against COVID-zero. The first is how long they will be tolerated for before remedial action is taken. The second is how swiftly the COVID-zero mechanism will be dismantled.

According to Central Election Commission, KMT won 13 out of 21 cities and counties, while DPP only managed to secure five cities in the southern part of Taiwan, the least since its founding in 1986. KMT candidates took 50% of votes in the contests, versus 41.6% for the DPP, 11.39 million votes counted as of 11:53 pm in Taipei, according to the official election website.

That prompted President Tsai Ing-wen to step down as party leader, saying in televised remarks: “In the face of these results, there are many areas where we need to engage in self-reflection.”

The elections represented the last major test of Tsai’s DPP before her second and final term draws to a close and Taiwan picks a successor in early 2024. The KMT, or Nationalist Party, hopes the gains in local races will help it mount a comeback after defeats in presidential elections in 2016 and 2020.

The results will be closely watched in Washington and Beijing, since the DPP’s rise to power has prompted China to cut off communications with Taiwan and ramp up diplomatic and military pressure on the island. The KMT, which favors eventual unification with China, had previously overseen a historic expansion of ties with Beijing, easing travel, trade and investment across the Taiwan Strait. 

The Tsai administration has actively escalated tensions with China and the electorate does not want to be in a war with China. That does not mean they want to be part of China but not do they wish to do anything to antagonise China. Taiwan’s citizens are very much aware of the fine balance that needs to be maintained when squeezed between two great powers.

“But crypto is here to stay as there are several investors who still have faith in it,” said Mobius, who spent more than three decades at Franklin Templeton Investments. “It’s amazing how Bitcoin prices have held up” despite the FTX fallout, he added.

Even though may die-hard investors will never sell their cryptocurrency regardless of what happens to the price, that does not negate the fact it is a highly cyclical asset.

A link to this week's Big Picture Long-Term video commentary is posted in the Subscriber's Area. 

Global bond yields will likely fall slightly in 2023 as the balance between demand and supply will improve by $1 trillion, strategists at J.P. Morgan said in a note.

There will be a $700 billion contraction in global bond demand next year compared to 2022, while bond supply will likely drop by $1.6 trillion, J.P. Morgan strategists, led by Nikolaos Panigirtzoglou, estimated in the note issued on Thursday.

"Based on the historical relationship between annual changes in excess supply and the Global Aggregate bond index yield, a $1 trillion improvement in the demand/supply balance would imply downward pressure on Global Aggregate yields of around 40 basis points," the Wall Street bank said.

J.P. Morgan said that while major central banks trimming their balance sheets in 2022 was the single largest contributor to deterioration in bond demand, sell-offs by commercial banks and retail investors were also much higher than estimates.

There is a strong likelihood inflationary pressures will fall next year. There are three major reasons for believing that.

We believe the likelihood that the USD has peaked and expected further strong official sector and coin & bar and jewellery demand present compelling arguments for higher gold prices in 2023 and beyond. That said, until the end of the Fed’s rate hike cycle is complete, and institutional demand for gold increases, prices may be constrained. This leads us to look for weakish prices in early 2023 with increases more likely as the year unfolds.

Generally speaking gold requires a series of catalysts to spur a significant uptrend. The first is negative real interest rates. That’s when interest rates are deliberately held below inflation for a prolonged period to denude savers of the opportunity to profit from conservative investments. That policy also inflates asset prices and decreases the purchasing power of cash. However, negative real rates are not a sufficient catalyst for outsized performance by gold.

At issue are two South Korean-made components: thermal shields built by SFA Engineering Corp. and vacuum vessel sectors made by Hyundai Heavy Industries Co. Neither company responded to Bloomberg requests for comment outside of business hours. 

The thermal shield, which is lined with 5 tons of pure silver and designed to contain heat 10 times hotter than the sun, showed cracks along cooling pipes, ITER reported. The vacuum vessel sectors, each weighing the equivalent of 300 cars and as tall as a telephone pole, show slight differences in manufacturing that complicates the welding process used to put them together. 

So far, ITER’s governing board has taken the setbacks in its stride. At an extraordinary meeting convened this month, it ordered Barabaschi to come up with a new budget and time line to be presented next year. 

“What was remarkable at the ITER council was the lack of finger pointing,” ITER spokesman Laban Coblentz said Friday in an interview. “It has been a very solutions-oriented discussion.”

 And

“Companies have been learning enormously from this first-of-its kind project,” said ITER’s Coblentz, dismissing suggestions that the delays could dampen enthusiasm. “The goal here isn’t to build just a single machine but to show that fusion power is feasible and to make that happen.”

The quantity of money being poured into fusion continues to grow. Companies hope to repeat the success of private companies in beating the Human Genome Project to the prize of completing the first sequence of the human genome. The primary technology innovation is the shrinking of superconductors which means new reactor designs can be much smaller and therefore cheaper. The range of challenges that still need to be overcome is still quite high so while this is an exceptionally interesting sector, it is not going to provide the abundant cheap energy we require for quite some time.

Meanwhile the 5 tons of silver required for the ITER experiment suggests a new source of demand for the metal in future designs too. 

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: Gold rebounds, silver failed downside break, Dollar rolling over, if this continues non US assets will outperform, European and Australian banks steadying, China property boosted by almost $1 trillion in stimulus. 

China’s mega banks, led by Industrial & Commercial Bank Ltd., pledged financing support of at least 925 billion yuan ($129 billion) to property developers as part of a push to ease turmoil in the nation’s real estate market. 

ICBC, the world’s largest bank by assets, on Thursday said it would provide 655 billion yuan in credit lines to 12 developers, including Country Garden Holdings Co. That came after Bank of China Ltd., Bank of Communications Co., Postal Savings Bank of China Ltd. and Agricultural Bank of China Ltd. also disclosed they would also extend credit lines. 

 

The fix is in. With almost $1 trillion in additional credit provided to the struggling property developers sector, no further bankruptcies are likely. With COVID cases at a record high, this action suggests the government’s efforts to squeeze leverage out of the property sector have run their course.

old rose for a third day as the dollar continued to decline, with the Federal Reserve’s latest meeting minutes showing officials support moderating the pace of interest-rate increases. 

A “substantial majority” of policymakers believe slowing the pace of rate hikes will probably soon be appropriate, the minutes show. Investors now expect the Fed to opt for a 50-basis-point increase next month, instead of the super-sized increases seen at previous meetings.

Aggressive monetary tightening by the US central bank has weighed on bullion throughout the year by pushing up the dollar and bond yields. The metal has recovered about 8% this month, driven by bets on a slowdown in rate hikes following two cooler-than-expected inflation prints.

The willingness of the Federal Reserve to hike rates faster than just about every other major central bank has been the primary support for the US Dollar. As the persistency of that hiking policy is now in doubt, the Dollar Index has been rolling over.

Equinor ASA, Norway’s biggest energy company, said a European Union proposal to cap natural gas prices is unlikely to dampen exports of the fuel to the region.

“The intention behind the proposed mechanism is to avoid episodes of excessively high gas prices and not to implement a permanent intervention in market mechanisms,” Equinor spokesperson Magnus Frantzen Eidsvold said in an email Wednesday. “Our immediate assessment is that this will not have substantial consequences for our exports.”

Norway is Europe’s biggest supplier of natural gas, after Russian flows were slashed following the invasion of Ukraine. Norwegian Oil and Energy Minister Terje Aasland said in October that the country expects to sell about 8% more gas this year than it did in 2021, much of it to continental Europe.

After months discussing how to prevent gas from skyrocketing again, the European Commission on Tuesday proposed an emergency brake on prices. However, the cap is only triggered when benchmark Dutch futures exceed €275 per megawatt-hour for two weeks and the gap between TTF and liquefied natural gas prices is greater than €58 for 10 trading days.

Dutch futures are currently trading at €130 which is a fraction of the peak values over €300 in August. The big question going forward is whether the price cap will be enforceable in the event of a fresh energy crisis. Additionally, the reliable suppliers like Norway would also be penalized through no fault of their own.

A link to today's video commentary is posted in the Subscriber's Area.

Here is a section oil declines, gold and sliver steady, dollar eases, stocks steadty, China coronavirus cases rising. 

The manufacturing PMI sank nearly 3 points to 47.6 this month. And when excluding the early months of the pandemic, the production and orders measures both retreated at the steepest rates since 2009.

On a more comforting note, the composite measure of input prices eased for a sixth-straight month, though it remains historically elevated. The prices-received gauge fell for a seventh month.

Output expectations over the next year picked up, the report showed, in part reflecting more stability in supply chains. The index, however, remains softer than it was a year ago.

“November even saw increasing numbers of suppliers, factories and service providers offering discounts to help boost flagging sales,” Williamson said. 

“In this environment, inflationary pressures should continue to cool in the months ahead, potentially markedly, but the economy meanwhile continues to head deeper into a likely recession,” he said.

Today’s PMI figure was S&P’s estimate. The University of Michigan figure is due out on December 1^st. The one thing PMI figures are useful for is a reading below 50 is a necessary condition for a US recession. That doesn’t mean every reading below 50 leads to a recession but there has never been a recession with a reading below 50.

Oil stumbled as traders assessed a higher-than-expected price cap on Russian crude between $65 and $70 a barrel and a surprising build in US products.

The European Union’s proposed range would be well above Russia’s cost of production and higher than some countries have been paying for its oil. As Russia is already selling its crude at discounts of $20 a barrel in recent months, a high cap may have minimal impact on trading, keeping the nation’s supplies flowing into the global market.

West Texas Intermediate traded around $77 a barrel as investors digested rising US product stockpiles, accelerating a selloff in thin trading. Gasoline stockpiles rose by 3 million barrels, the largest build since July, with demand plunging by the most in nearly two months heading into the Thanksgiving holiday.  

“The effectiveness of price caps as a mechanism to tighten the screws on Russia remains a big question for the market,” said Michael Tran, an analyst at RBC Capital Markets. “What such policy measures does do is raise the degree of positioning paralysis for oil traders that are already grappling with an anti-risk taking period of low liquidity.”

Russia has previously said that it won’t sell crude to nations that use the cap, which is designed to punish Moscow for its invasion of Ukraine while keeping the nation’s oil flowing. 

EU ambassadors are meeting on Wednesday with the aim of approving the cap mechanism and a proposed price level. On Tuesday, the EU already watered down its latest sanctions proposal by delaying its full implementation and softening key shipping provisions.

Crude prices have suffered several sharp downturns in recent days. Demand in China, the world’s largest importer, remains weak as the country presses on with Covid-Zero curbs. Beijing asked residents not to leave the city unless necessary, to stem the spread of the virus.

As the oil market has softened in recent days, both Brent and WTI have at times traded in a bearish contango structure for the first time in months. WTI’s nearest timespread flipped back into contango once again. 

The EU disputing what they are willing to pay for Russian oil seems to be an example of rebellion of a wish to tell the world how reality should be versus the unconvertible reality. The wish is to pay only $70 but how is that going to be enforced?

In one video, irate workers surrounded a silent, downcast manager in a conference room to voice grievances and question their Covid test results. It wasn’t clear when the meeting took place.

“I’m really scared about this place, we all could be Covid positive now,” a male worker said. “You are sending us to death,” another person said.

The Zhengzhou campus was operating normally as of Wednesday evening, a Foxconn spokesperson said. The violence had erupted after a portion of recently arrived employees raised complaints about “work subsidies” -- bonuses or payments on top of usual wages, Foxconn said in a statement. But the company stressed that it handles all such compensation in strict accordance with its contractual obligations. 

“With regards to the violence, we are continuing to communicate with workers and the government, to avoid a recurrence,” the company said without elaborating.

The challenge of COVID is behind most governments internationally but ahead of the Chinese government. The success of domestic quarantine versus the acceptance of mass infections virtually everywhere else suggests China has to accept that it is impossible to avoid the spread of the virus eventually.

A link to today's video commentary is posted in the Subcsriber's Area.

Some of the topics discussed include: Wall Street steady but monetary conditions continue to tighten, Hang Seng easing back from the first area of the first area of potential resistance. 

Technicals over Fundamentals for now…our tactically bullish call was always more about the technicals than the fundamentals. Today, we provide an update to those factors, some of which no longer justify higher prices although they provide support at current levels. The deciding factor is market breadth, which has improved greatly over the past month and argues for us to remain bullish into year end before the fundamentals take us to lower lows next year. Feedback on our call for the S&P 500 to reach a price trough of 3,000-3,300 in Q1 '23…we've gotten a fair amount of pushback on that our forecast on this front is too aggressive both from a magnitude and timing standpoint. While directionally bearish, many investors struggle to see even a retest of 3,500. In our view, what was priced at the October lows was peak Fed hawkishness, not material earnings downside. If we were forecasting a modest 5% forward EPS decline and a reacceleration off of those levels, we'd concede that the earnings risk is probably priced, but we're modeling a much more significant 15-20% forward earnings downdraft, which should demand a more recessionary type 13.5-15x multiple on materially lower EPS.

A link to the full report is posted in the Subcsriber's Area.

This coincides with my view. The US yield curve is heavily inverted and the pace of tightening has been surprisingly quick. That suggests it is not unusual for the corporate profits to have been immune because there is a significant lag between tightening and when it shows up in the economy.

“There were a lot of entrepreneurs that grew up in this field and chose to be noncompliant,” Mr. Gensler said in an interview last month at the S.E.C. headquarters in Washington. “We will be a cop on the beat.”

Mr. Gensler’s central claim is simple: For all their novel attributes, most cryptocurrencies are securities, like stocks or other investment products. That means the developers who issue cryptocurrencies must register with the U.S. government and disclose information about their plans. In Mr. Gensler’s view, exchanges like Coinbase and FTX, where customers buy and sell digital coins, should also have to obtain S.E.C. licenses, which come with increased legal scrutiny and disclosure obligations.

The crypto industry has fought the government’s efforts to classify digital assets as securities, arguing that the legal requirements are overly burdensome. Even before FTX’s collapse, the debate was reaching an inflection point: A federal judge is expected to rule in the coming months in a lawsuit brought by the S.E.C. that charges the cryptocurrency issuer Ripple with offering unregistered securities. A victory for the government would strengthen Mr. Gensler’s hand, establishing a precedent that could pave the way for more lawsuits against crypto companies.

The tech sector has an aspiration to “move fast and break things”. In practice that means ignoring regulations until sufficient scale has been achieved to shape them. For example, that is exactly what Uber did in ignoring taxi laws. China’s ANT Financial was allowed to prosper in a very grey area of banking regulation until it was eventually neutered by the government.

By March, it will be a year since the Bank of Canada began raising interest rates — meaning ever more of the record number of people who took out short-term or floating-rate mortgages at historically low rates will find themselves fully exposed to the roughly fourfold jump in borrowing costs since then, a potentially catastrophic shock to their personal finances.

The fate of Canada’s housing market will depend on whether or not they can hold on. And just as the country was a leader in the years-long global real estate frenzy, how its downturn plays out — a relatively orderly correction, or a brutal crash — may be a harbinger for what awaits the rest of the world.

Housing markets around the globe are wobbling under the weight of central bank rate-hike campaigns, with a handful of frothy countries joining Canada in already seeing precipitous price declines. More than a dozen developed economies, from Australia to Sweden to the US, are in the midst of downturns — defined as two consecutive quarters of falling prices — or will be by the beginning of next year, according to Oxford Economics. If those slumps prove worse or more widespread than expected, it would deepen a potential global recession. 

 

The Canadian 10-year yield appears to have reached a near-term peak in the region of 3.5%. The rate is coming back towards the trend mean so this will be a significant region to test whether demand dominance has returned beyond short-term steadying.

A link t today's video commentary is posted in the Subscriber's Area.

Some of the topics discussed include: China COVID cases rise, copper eases back, dollar firms, gold eases oil reverses initial decline, Wall Street eases. 

Saudi Arabia denied a report that it is discussing an oil-production increase for the OPEC+ meeting next month, and said it stands ready to make further cuts if needed. 

Crude futures pared earlier losses, trading 1.8% lower at $86.04 a barrel as of 5:18 p.m. in London. 

“The current cut of 2 million barrels per day by OPEC+ continues until the end of 2023,” Saudi Energy Minister Prince Abdulaziz bin Salman said in a statement via the Saudi Press Agency. “If there is a need to take further measures by reducing production to balance supply and demand, we always remain ready to intervene.”

Oil futures earlier dropped as much as 6.1%, dipping below $85 a barrel for the first time since September, after the Wall Street Journal reported that the kingdom and other members of the group were considering raising output by as much as 500,000 barrels a day. 

That would have been a major reversal after the Organization of Petroleum Exporting Countries and its allies decided in October to cut production by 2 million barrels a day. US President Joe Biden has slammed the move, saying it endangers the global economy and aids fellow OPEC+ member Russia in its war in Ukraine.

After an initial rally following the cuts agreement, crude prices have declined as the economic outlook deteriorates and China continues to grapple with Covid-19 outbreaks. OPEC twice reduced its forecasts for global oil demand, and Prince Abdulaziz has said the group will remain cautious due to “uncertainties” about the health of the global economy. 

Saudi Arabia has already cut oil exports sharply this month to deliver on the OPEC+ agreement, according to data from energy analytics firm Kpler Ltd. The cartel’s next meeting is scheduled for Dec. 4.

The oil market is very finely balanced so it is unlikely there will be a unanimous agreement to cut or increase supply. The global economy is slowing and China will be grappling with the coronavirus for at least the next 18 months. At the same time, European sanctions on Russian oil are due to go into effect in the next coupe of weeks and that is likely to be a significant source of volatility.

Gold fell to the lowest in over a week as the dollar advanced amid concern China may reverse its lighter-touch approach to the coronavirus. Copper also fell.

Worsening Covid-19 outbreaks across China and the first deaths in Beijing for six months are stoking concerns that authorities may again resort to harsh restrictions. That would be bearish for the copper market, where a squeeze in global supplies just appears to be easing. US equities declined, while the dollar rose on haven buying, pressuring gold and copper as they’re priced in the greenback. 

Commodities have been pressured in recent months by the Federal Reserve’s aggressive monetary tightening to fight inflation, with a gauge of the raw materials recording two consecutive quarterly losses by the end of the third quarter. 

Traders are now waiting for fresh clues about the Fed’s interest-rate hiking path from the central bank’s minutes due on Wednesday. 

San Francisco Fed President Mary Daly said that officials will need to be mindful of the lags with which monetary policy work, while repeating that she sees interest rates rising to at least 5%. Her counterpart at the Cleveland Fed, Loretta Mester, said she has no problem with slowing down the central bank’s rapid rate increases when officials meet next month.

Spot gold slipped 0.7% to $1,739.10 an ounce as of 4:06 p.m. in New York. Copper for three-month delivery on the London Metal Exchange fell 2.4% to settle at $7,880.50 a metric ton. All other main LME metals declined. The Bloomberg Dollar Spot Index gained 0.7%. Silver and palladium spot prices dropped, while platinum gained.

The big question circling about China is how willing they are to tolerate deaths from COVID. The government has successfully instilled a deep sense of caution in the population about the threat represented by COVID and easing up on quarantine rules may not result in a large increase in mobility. As cases and deaths rise, the potential for a significantly slower return to economic activity is a base case scenario.

A lnk to the full report is posted in the Subscriber's Area. 

The big question for investors is whether this is a cyclical or structural bear market. The exogenous shocks that come to mind are COVID, the response to it, and the Russian invasion of Ukraine. The private sector leverage is not focused in the consumer sector, but there has been extensive use of leverage in private investment, crypto and institutional investment areas not least in pensions and endowments.

A link to this week's Big Picture Long-Term video is posted in the Subscriber's Area. 

Banks will return €296.3 billion ($308 billion) of cheap loans to the European Central Bank after their terms were toughened to help the battle against record inflation. 

The repayment represents just under 15% of the total outstanding amount of so-called TLTRO loans, which were used during the pandemic to keep credit flowing to households and businesses. The median forecast in a Bloomberg poll this month was for €600 billion to be given back. The projections ranged from €200 billion to €1.5 trillion.

German two-year bonds erased losses and outperformed equivalent interest-rate swaps after the data. The spread between yields and swap rates widened two basis points to around 84 basis points.

Christine Lagarde was very clear in stating today that the ECB is recommitting to their sole official mandate of getting inflation back to target and avoiding “secondary effects”. The threat of inflation becoming entrenched is non-trivial because the solutions to the region’s energy crisis all imply paying more than before the crisis. That means killing demand is the only way to get inflation under control and it is not yet clear the ECB has the stomach for that kind of action.

Traders are increasingly turning to near-obsolete oil tankers to transport cargoes of Russian crude as sanctions targeting the nation’s petroleum revenues draw ever closer.

Since June, a total 17 crude cargoes have been collected from Russian ports by tankers that are at least 20 years old.

That’s an age when they reach the end of their normal working lives and owners consider selling them for scrap. It’s more than double the number of such shipments during the same period in 2021, according to data compiled by Bloomberg from Vortexa Ltd. The market is preparing for sanctions from Dec. 5 that will make shipping Russian crude trickier for owners, and insurance harder to obtain. There has been uncertainty about how the country will get its barrels to market, with an increase in
second-hand vessel transactions thought to be earmarked for the trade.
 

The retirement plan for old tankers always means scraping them because the metal was often worth more than the ship. Today retirement means be sold to a Russian friendly company and extending the life of the vessel past its serviceable date.

Bitcoin is up about 3% this week, topping global stocks and bucking the chaos sparked by FTX’s chaotic bankruptcy.  

Democratic lawmakers who received millions of dollars in campaign donations from Sam Bankman-Fried say they will be ready to grill the former FTX CEO about the exchange’s collapse. 

Liquidators appointed by a Bahamian court to take over FTX Digital Markets Ltd.’s affairs said there’s “significant” concern that FTX management lacked authority to put the crypto businesses into bankruptcy in the US.

The embattled cryptocurrency mogul and two other top FTX executives received massive loans from affiliated trading arm, Alameda Research. Advisers overseeing the bankruptcy of FTX Group are struggling to locate the company’s cash and crypto, citing poor internal controls and record keeping. 

The collapse of FTX is revealing a web of activity that will eventually be made into a movie. However the broader point is the collapse of this crypto exchange is a symptom of the broader tightening of liquidity in the international capital markets.

We are living through fast moving markets so the next venue for The Chart Seminar will be November 21st and 22nd this year in London.

In the meantime, if you have any questions, would like to attend, or have a suggestion for another venue please feel to reach out to Sarah at [email protected]. 

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non-EU residents are not liable for VAT). Annual subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics covered include: Chinese stocks reverse declines, Vietnam follows through on the upside, Brazilian Real pulls back, UK budget supports bonds, weighs on Pound, US retail sales positive but oil, copper and nickel continue to pullback. Rail worker's strike could be seriously inflationary so worth monitoring. 

On the income side, if you earn more than £100,000, you really should be looking at how to put as much of your salary as you can above that amount into a pension via salary sacrifice. Why’s that? Because contrary to what you might think, you’re not paying a 40% marginal tax rate. As the team at tax advisors Blick Rothenberg point out, your marginal tax rate is in fact closer to 60%, because £100,000 is the point at which your personal allowance starts to get whittled away. (This is also why the 45% rate was cut to £125,140 rather than £125,000 — so that it aligns with the point at which your personal allowance is all gone.)

As a result, any money you can shield from this rate is doing a great deal more work than any other pound you save. That said, given that your mortgage is probably going up, and your heating bill is through the roof, it’s quite possible that you are already doing as much as you can on that front without causing a major liquidity crisis in your household.

On the investment side, falling squarely into the “be thankful for small mercies” category, at least the chancellor didn’t mess around with the annual allowances for tax-efficient “wrappers” — you can still put up to £20,000 a year into an individual savings account, and up to £40,000 a year into a pension (assuming you earn that much each year). The latter of course is still subject to the (frozen) lifetime allowance, so do be careful if you’re in danger of breaching that £1.073 million lifetime cap.  

So if you have grown a bit sloppy with your admin, and you are holding any shares outside a tax wrapper (i.e. an Individual Savings Account or a pension), then now is the time to get a handle on that and move them. At least then you’ll be shielded from dividend or capital gains taxes. If you have already exhausted these allowances, you might want to start looking at venture capital trusts or enterprise investment schemes, though those are a topic for another day. 

Government rules tend to change investor behaviour. The perversion, that is the tax system, means the incentive to make a lot of money from working is actively under attack. Instead one is being encouraged to invest as much as possible to shield assets from the tax regime. That basically means outsourcing the job of making money to companies rather than individuals. That’s not great news for hard workers, but it certainly benefits the asset management sector.

The disruption to oil flows caused by Moscow’s missile attack on Ukraine underscored the need for Europe to find alternative sources of energy. But the LNG that the continent is seeking as a long-term replacement for Russian natural gas won’t come cheap.

There’s already a shortage of vessels to deliver liquefied natural gas due to a surge in demand, and a cold snap would increase global competition for tankers. Traders are paying at least 50% more to secure the ships, meaning higher costs for importing nations. Some of the newest, energy-efficient vessels are reportedly fetching up to $200,000 a day - almost double current rates.

A record 40 LNG tankers are now at sea, waiting for European prices to increase once winter sets in, according to shipowner Flex LNG Ltd. There are already bottlenecks at some ports, mainly in the UK and the Netherlands. That’s due to a limited number of facilities to handle the influx and storage tanks that remain near full with mild weather muting demand.

This congestion has caused ships to be tied up in floating storage, removing tankers from the spot market, Flex LNG Chief Executive Officer Oystein Kalleklev said.

Germany is one step closer to providing some relief for the continent. On Tuesday officials said work was complete on the first jetty for a floating terminal near Wilhelmshaven on the North Sea. Firms including energy giant Uniper SE are now doing additional construction, with the idea of having the terminal operational this winter.

Still, supply could be tight during the coming months, just when Europe needs it most. The continent has relied on the US for much of its imports, and the return of Freeport LNG facility in Texas - following an explosion in June - was set to provide some relief. Now, it looks like the facility will remain offline as repairs continue and it awaits regulatory approvals to restart.

An extended outage at an LNG complex in Malaysia could further tighten the market, increasing spot cargo demand from North Asia. Spot LNG prices in the region surged Wednesday on higher freight costs.

Replacing reliable pipelines supplies with ship borne cargoes is far from ideal but it is a necessity for most of Europe. Even if the war in Ukraine ended tomorrow, politicians have learned their lesson, overreliance on a single suppler is ill advised. That ensures LNG will be a well-supported market in Europe regardless of any other events over the next decade.

Bank of China said it would contain losses and actively pursue relatively secure investments. Industrial Bank Co. and China Zheshang Bank Co. also sent similar posts on their official WeChat accounts, encouraging investors to “buy at lows” and position for longer-term return after the sharp losses in bond market.

The PBOC injected a net 123 billion yuan ($17.3 billion) of seven-day liquidity via its open-market operations on Wednesday. The central bank said in a statement earlier this week that injections topped 1 trillion yuan this month, through a combination of short-, medium- and long-term policy tools. 

The yield on China’s one-year government bond was little changed at 2.17% on Thursday, ending a seven-day climb that took it to highest since January. The yield on the 10-year note fell 3 basis point to 2.80%, after jumping 10 basis points earlier this week in its worst drop since 2016. The CSI 300 Index of stocks fell 0.4%.

Banks’ wealth management products have drawn increased scrutiny from regulators in past few years, amid concern about a host of risks from implicit guarantees and leverage, to duration mismatches and a lack of transparency around where the money is invested.

There is nothing quite like the government telling investors to buy the dip to initiate a wave of buying. The fact that the bond market is seeing outflows because retail investors are so eager to buy stocks suggests the message has been received. It’s OK to speculate in the markets again.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: yield curves continue to contract putting pressure on liquidity plays, Wall Street pauses, bonds advance, Vietnam government support, China pauses, India steady, Brazil in danger of rolling over. 

A link to the full report is posted in the Subscriber's Area. 

The yield curve spread is about the easiest way to monitor the progression of the bearish cycle. Whether one looks at the 10-year-2-year or the 10-year – 3-month is less important than the fact that contracting yields curves imply liquidity is becoming progressively less accommodative.

Vietnam's State Securities Commission (SSC) has carried out measures to strengthen the local stock market following strong fluctuations triggered by investors' cautious sentiment and global stock market, local media reported on Wednesday.

The recent market corrections were caused by investors' cautious sentiment while facing uncertainties and less positive prospects in the world economy and politics, local newspaper Vietnam News reported.

As part of an effort to ensure a stable, sustainable and transparent development of the Vietnamese stock market, the SSC has strengthened inspection and supervision to address violations on the stock market, the newspaper said.

It has also proposed amending regulations regarding private offering and trading of corporate bonds in the domestic and international markets to improve the management mechanism for the private placement of corporate bonds.

In the short term, domestic investor sentiment is still strongly influenced by information, wrong handling of enterprises, and fluctuation in the corporate bonds market.

However, given Vietnam's long-term macroeconomic growth and the profit gains of listed companies, long-term investment opportunities will appear quite clearly, investment strategist Thai Huu Cong told local newspaper Saigon Investment.

The Dong tends to be the Vietnamese government’s first recourse in attempting to stimulate the economy. The currency has been falling all year and only began to steady over the last couple of weeks.

Lula said that he won’t give any details on his cabinet before returning from an international trip to attend COP27 in Egypt.

“The stakes are high in terms of fiscal uncertainty, in terms of cabinet composition, in terms of key appointments in the economic team,” said Joel Virgen Rojano, director for Latin America strategy at TD Securities. “All of that for now has a really big question mark and the markets are becoming impatient.” 

Emerging-market investors from Neuberger Berman LLC to Franklin Templeton had bet on the South American nation ahead of the election as they saw little distinction between Lula and President Jair Bolsonaro’s fiscal agenda. Neuberger wasn’t immediately available to comment on its current recommendations in Brazil.

“Markets tend to hate uncertainty,” Dina Ting, head of global index portfolio management for Franklin Templeton exchange-traded funds, wrote in an emailed response to questions. “From a long-term perspective, the fundamentals and macro factors have not changed. Brazil is still trading at a discount to historical averages and helped by both elevated commodity prices and favorable demographics, including its young workforce.”

Brazil faces many of the same issues as everywhere else. There is a clear need to enact some type of fiscal control but the population are already impatient with the pace of economic recovery. Those are two opposing perspectives and the new administration will need to tread very carefully if the currency is to remain stable.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: China extends rebound, Wall Street steady, Singapore Financials breaking higher, gold steady, bond yield contract, high yield spreads rolling over, bitcoin steady, 

Interested in your investment purchase of DoubleLine Income Solutions Fund. as a long term subscriber I’ve now moved into another investment age whereby I am now an income & growth investor and the timing of your purchase appears to be potentially beneficial.

I have checked with a number of UK online investment portals and they do not appear to offer access to this closed end fund and therefore my question is whether you accessed this via a US trading platform or direct?

Any help will be appreciated.

Thank you for this question which may be of interest to the Collective. Growing up in Ireland in the last 1970s and early 1980s interest rates were very high. My grandmother used to buy national savings certs for all her grandchildren. They automatically rolled over the interest at maturity. As a teenager, I cashed them in and found they had risen by over 300%. That taught me the simple lesson. Buying bonds when rates are high and before inflation peaks is very attractive.

Singapore doesn’t provide detailed statistics about where its wealthy immigrants come from. But the explosive rise in family offices are symptomatic of the attraction for Chinese tycoons. The number of these offices almost doubled to about 700 at the end of 2021 from the previous year. While China’s wealthy aren’t the only drivers of the growth, some service providers say they are by far the largest market.

Michael Marquardt, whose firm IQ-EQ Asia helps set up family offices, said the number of inquiries from Chinese clients jumped about 25% to 50% just before and after the Party Congress. Vikna Rajah, head of tax and trust at law firm Rajah and Tann Singapore LLP, said in June that more than 30% of the clients he’s helped apply for family office tax exemptions are from Greater China, including Hong Kong.

“There’s definitely been an increase in interest,” Marquardt said. “Entrepreneurs who have done well and taken their companies public are interested in parking their international wealth in a place like Singapore.”

The natural comparison is between Singapore and Hong Kong because they are both in Asia with majority Chinese populations. However, the better comparison for Singapore is with Switzerland and Luxembourg. The city state’s economy is much more focused  wealth management and the buy side than the sell side/capital markets expertise of Hong Kong.

For lower-earning families unaffected by the child benefit clawback, but perhaps struggling even more, it is usually possible to transfer £1,260 of a non-working spouse’s personal income tax allowance to the working partner. This can potentially save £252 a year. Again though, this is not automatic, it must be claimed.

And these are far from the only tax anomalies. Since 2009, those earning more than £100,000 a year have had their personal income tax allowances clawed back at the rate of £1 for every £2 earned above the threshold. Worse still, the threshold has been unchanged for more than 13 years. Anyone earning £125,140 or more loses the entirety of their personal income tax allowance. 

Here again, making additional pension contributions is a good option for reducing your taxable income — and for those earning more than £100,000, it might be a more realistic option. The sweetener is that the effective tax relief for those affected can be up to 60%. For these people, the government effectively contributes £60 for every £40 they pay into their pensions.

Stealth taxes make things more complicated for everyone. Many lower-earners end up paying far more tax than necessary, or not receiving a benefit to which they might otherwise be entitled, often both.

Unfortunately, especially during periods of rapid inflation, such tax strategies are the gift that keeps on giving for governments, raising additional revenue without having to increase tax rates. .

As an old ad for Morgan Stanley once claimed, “You must pay taxes. But there’s no law that says you have to leave a tip.”

I saw this chart from Eurostat yesterday and it surprised me that the European aggregate tax haul had risen so much ahead of the pandemic.

With the overwhelming spending patterns of the pandemic and the resulting inflation, there is clear need to fiscal consolidation. At present that is focusing on tax hikes but the ultimate nettle that needs to be grasped is spending cuts. That’s not just true of the UK, it’s an issue most European countries and the USA have to deal with eventually.

A link to today's video is posted in the Subscriber's Area. 

Some of the topcis discussed include: Bitcoin stock-to-flow charts suggests both a crypto winter and a low soon. stocks pause following last week's fireworks, Dollar and bonds pause, gold and silver steady, oil weak. 

Even though markets gained on Zhao’s tweet, such a fund may not be best for the industry, said Quantum Economics founder and Chief Executive Officer Mati Greenspan. Binance already has too much control in a decentralized market, he said.

“That sort of concentration of power makes me uncomfortable,” said Greenspan. “It’s the kind of thing crypto was designed to avoid and one of the lessons we should have learned from last week.”

Meanwhile, Elon Musk’s tweet that Bitcoin “will make it” also gave crypto markets a boost, said Greenspan. Dogecoin, a token the Tesla CEO has touted in the past, gained as much as 7.9%.

This is yet another example of the paradox of decentralized finance. It’s appealing in theory but the benefits of centralized control become evident during crises. A truly decentralized system does not have a buffer against bank runs. It is looking likely Binance will come through this crisis with a dominant position in the “decentralized” finance market.

Thanks a lot for another very informative Friday video. Could you please kindly comment on the Chinese Construction Companies’ default situation. How serious and general are the defaults of their international bonds. Thanks in advance.

Thank you for this topical question which may be of interest to the Collective. This Reuters article, dated September 2nd, included a table of the biggest bond defaults up to that point in 2022.
 

That was a terrible idea. As I’ve written before on this subject, people just aren’t meant to talk to one another this much. They shouldn’t have that much to say, they shouldn’t expect to receive such a large audience for that expression, and they shouldn’t suppose a right to comment or rejoinder for every thought or notion either. From being asked to review every product you buy to believing that every tweet or Instagram image warrants likes or comments or follows, social media produced a positively unhinged, sociopathic rendition of human sociality. That’s no surprise, I guess, given that the model was forged in the fires of Big Tech companies such as Facebook, where sociopathy is a design philosophy.

Dancing on the grave of social media has begun but it seems to me that the rumours of the sector’s death are greatly exaggerated. There is no doubt social media has issues that range from content moderation to promoting social anxiety and depression among teenagers. However, that does not detract from the reality billions of people spend several hours a day perusing social media forums.

A link to this week's Big Picture Long-Term video commentary is posted in the Subscriber's Area.

Traders who have for long been seeking clear signals of a pivot away from the staunch Covid Zero policy cheered the slew of changes announced on Friday, which included a cut in the amount of time travelers and close contacts must spend in quarantine, and a pullback on testing. The decisions by the National Health Commission followed a meeting by the nation’s top leaders on Thursday, where a more targeted approach was encouraged to tackle outbreaks.

“This is a huge positive for the market,” said Wang Yugang, a fund manager at Beijing Axe Asset Management Co. “Of course how much efficacy these measures have for the economy we will need to observe.”

In a display of broad market optimism, every stock on the 50-member Hang Sang China gauge was up on Friday. On the mainland, the CSI 300 Index ended 2.8% higher.

The Chinese government is wrestling with the opposing challenges of rising cases and the slowdown in the economy. The reality is quarantines cannot stop the spread, only slow it down, when COVID is endemic everywhere else. At some stage China will have to grasp the nettle and tolerate higher numbers of infections for longer. How willing they will be to tolerate millions of cases a day remains an open question. Of course the answer, supplied by India’s experience, would be to simply stop counting.

Binance holds $74.7 billion worth of tokens of which around 40% are in its own stablecoin and native coin, according data shared by Nansen.  

The world’s largest exchange released the information after its co-founder Changpeng Zhao announced earlier this week that Binance would provide proof-of-reserves to be more transparent.

The demise of Sam Bankman-Fried’s FTX.com, has raised concerns over the opacity of exchange balance sheets and is prompting companies increase disclosures. Crypto.com has also publicly shared its reserves pool on Friday.

Of the $74.6 billion termed as net worth, about $23 billion was in its own stablecoin BUSD and $6.4 billion in its Binance Coin, according to Nansen. 

The exchange has also allocated 10.5% of its holdings in Bitcoin and 9.8% in Ether, Nansen data shows. 

Binance is the first unlisted crypto exchange to come out with the details, since FTX collapsed, the latest in a series of crypto businesses to go bust this year. Crypto exchanges including OKX, KuCoin, Poloniex, Huobi this week vowed to increase transparency and provide greater clarity on their holdings. 

The promise of the fintech revolution is decentralized finance. That implies no further need for intermediaries. The ambition is consumers, businesses, creditors, and borrowers will be able to transact with one another over the network at will. That will be facilitated by whatever token is relevant to the network as a medium of exchange.

ASML hasn’t been able to sell its most advanced extreme ultraviolet lithography machines to China as the Dutch government refused to give it a license to do so, but the company has been able to sell its other machinery to the country. The Dutch company sees the total indirect impact from the new US measures to be about 5% of its backlog, it said on a call with investors in October. 

Meanwhile, major governments around the world have come up with subsidies and incentives to expand chip production capacities at home to avoid another round of semiconductor shortages that shaved off hundreds of billions from their economies during the pandemic. 

Even though the global chip industry is now facing a severe downturn, countries including the US and Japan have not slowed their pace in readying new plants to prepare for the next boom cycle. Taiwan Semiconductor Manufacturing Co. is even considering adding another advanced facility next to a $12 billion dollar plant that’s under construction in the US state of Arizona. 

Efforts by governments to build chip plants at home have just started and will accelerate, Wennink said Friday. “The drive for technological sovereignty is going to be very important driver for our business going forward.”

The one thing everyone learned during the pandemic is the global supply chain is lot more fragile than previously believed. That is truer of the semiconductor sector than anything else and not least because many countries gave up domestic manufacturing capacity in favour of cheaper overseas production. Reversing that trend is both expensive and time consuming.

A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics discussed include: 10yr-3-month spread sharply inverts on lower inflation, stocks, gold, copper, bonds rebound emphatically to break near-term downtrends. Dollar rolls over which should boost emerging markets tomorrow, last hurrah rally now beginning before a recession next year. 

A cooling in US consumer prices offered cheer to households, investors and Federal Reserve officials, but there’s still a long way before high inflation becomes history. 

At 7.7%, annual inflation in October was the slowest since January -- before the start of Russia’s war in Ukraine that triggered a worldwide surge in commodities and pump prices. Even more importantly for the Fed, a closely watched measure that excludes food and energy decelerated by more than economists anticipated.

With slowdowns across categories including food, apparel and used cars, the report suggests that the fastest price increases in decades may finally be starting to ebb in the world’s largest economy. And it probably gives the US central bank enough assurance to moderate its aggressive interest-rate hikes if the trend is sustained.

Inflation is rolling over as predicted and it will continue to do so. The pace of tightening this year has been historic in nature and most particularly, the peak in money supply growth was in February 2021. There is a significant lag between money supply growth and tightening conditions and when they show up in the economy. That is now at hand.

Yields in the world’s biggest bond market spiraled downward as traders slashed their outlook for just how high the Federal Reserve will need to hoist its policy rate after consumer-price pressures slowed more than estimated last month.

Swaps traders downgraded the odds of another three-quarter-point rate increase in December almost to nil, while continuing to price in a half-point hike. On the prospect of a slower tightening trajectory the five-year yield tumbled as much as 31 basis points, putting it on track for its biggest one-day drop since 2009. The benchmark 10-year yield fell as much as 27 basis points to 3.82%. US stocks soared and the Bloomberg dollar index plunged.

The so-called terminal rate, or the expected peak for the Fed’s policy rate, was cut to under 4.9%, sometime around May. Before the latest CPI readings the peak rate in swaps referencing the central bank’s policy meetings was around 5.09%.

“Markets are reacting aggressively to the CPI release,” said Gregory Faranello, head of US rates trading and strategy at AmeriVet Securities. “After a year like we’ve had, people are very anxious for some good news.”

The convexity of bonds (their sensitivity to interest rates) declines the higher yields move. The reason yields surged earlier this year was because prices were high, yields were low and the market was especially sensitive to interest rates hikes. The higher yields go, the more attractive they become. Obviously 4% is more attractive than 0.5% and compounds at a much more impressive rate.

As impressive as this year’s updates are, IBM is looking to next year as the real turning point. The company’s roadmap says that next year’s quantum processor, the Condor, will boast a stunning 1,121 qubits. Also on the cards is a modular processor called the Heron, which can stack multiple 133-qubit units together to make more powerful quantum processors.

And finally, the IBM Quantum System Two will be released towards the end of 2023. This modular system will form the framework of the company’s quantum supercomputers, housing multiple processors with communication links between them. These are all stepping stones on the path towards IBM’s plans of building a quantum system with over 4,000 qubits by 2025.

Alphabet’s Hartmut Neven, claimed a few years ago was that quantum computing was progressing at a double exponent pace. To put that in context an exponential pace is 1,2,4,8,16,32. An exponential exponential pace is 1.2,4,16, 256, 65,536.  

A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics discussed include: bitcoin extends downward break, Mega-caps breaking lower in absolute and relaitve terms, gold steady, oil weak, China supports property developers, Dollar steadies, bonds steady, 

The EV maker Lucid turned in respectable third-quarter earnings and stuck with its forecast for vehicle shipments this year, but the stock is dropping. Reservations are the issue.

Tuesday evening, Lucid (ticker: LCID) reported a per-share loss of 40 cents from $195 million in sales. Wall Street was looking for a 31-cent loss from $209 million in sales., but earnings and sales don't matter much at this point.

The company is just ramping up production of its first model, the Lucid Air. Importantly, the company didn't change its full-year guidance for vehicle shipments from the 6,000 to 7,000 cars it told investors to expect back in August. The prior guidance, given in May, was for 12,000 to 14,000 units.

What seems to be raising investors' eyebrows is that management says Lucid has 34,000 reservations for its vehicles. The number given in August was 37,000.

Shares were down 3% in after-hours trading.

Lucid delivered 1,398 vehicles in the third quarter, up from 679 in the second quarter of 2022. Lucid produced 2,282 vehicles in the third quarter, which was more than triple the second-quarter production, according to the company.

The company also ended the quarter with almost $4 billion in cash.

Management scheduled a conference call for 5:30 p.m. Eastern time to discuss the results. Investors and analysts will be interested in the reservation number and whatever management has to say about demand for Lucid vehicles.

Through Tuesday trading, Lucid stock was off more than 60% so far this year, while the S&P 500 and Dow Jones Industrial Average had dropped about 20% and 9%, respectively.

Lucid stock has been hit harder than most. The cut to the forecast for deliveries didn't help. Rising interest rates, which reduce the current, discounted value of earnings expected to arrive in coming years, are an additional problem.

Flashy ads and attentional grabbing statistics, like the longest range and best battery, encouraged consumers to pay trivial down payments to secure a spot in delivery queues. Now, the question whether one does in fact have the resources to spend six figures on a car are more pressing. For Lucid it represents a significant issue because they are quite a ways from delivering a more affordable model. The share continues to trend lower.

As the hosts point out, the best time to buy bonds is when yields are high and inflation is peaking. The higher yield offers a margin for error even if it takes time for the macro details to work themselves out.

The strikes could start before the end of this year and last until May 2023, the RCN said in a statement. The historic ballot came after nurses were unhappy when the government offered them a package in July that would see the average nurse’s pay increasing 4%.

Strikes are currently sweeping across the UK from rail to ports as the worst inflation in four decades is eroding workers’ real income and living conditions. Workers in the country’s health sector are under particular pressure as the Covid-19 pandemic enters its third year and with many hospitals struggling to cope with long waiting lists of patients needing treatment and packed Accident & Emergency departments. 

Industrial action will only take place in health-care settings that met the relevant legal requirements but the majority of NHS employers will be affected, the RCN said. 

“Anger has become action - our members are saying enough is enough,” said Pat Cullen, RCN General Secretary & Chief Executive. “Our members will no longer tolerate a financial knife-edge at home and a raw deal at work.” 

Unison is currently balloting 350,000 other NHS employees across England, Wales and Northern Ireland to strike over pay. The Royal College of Midwives and the Chartered Society of Physiotherapy are also organizing ballots for their members in November, raising the possibility of the UK facing coordinated strikes across different health unions.

Strike action from the NHS was inevitable. It’s a large worker group with strong union representation in a vital sector. That means workers are in a better position to pressure the government into concessions than other interest groups which is all the incentive required to push the issue. 

One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: bitcoin breaks lower, gold, silver, platinum and gold shares break higher, Dollar eases, bonds steady, VIX rises for time in weeks, oil pulls back and high yield spread contract. 

“A million ounces of gold was bought in under two minutes moving the price nearly a percent - this suggests fresh buying,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York. “Gold holding above the 50-day moving average for the first time since August added to the positive sentiment.”

Aggressive Federal Reserve monetary tightening aimed at cooling inflation has weighed on metal prices this year by driving up the greenback and hurting demand prospects. Higher interest rates tend to diminish the investor appeal of commodities, which bear no interest.

Traders are eyeing the upcoming US inflation reading due Thursday, after the core consumer price index rose more than forecast to a 40-year high in September. Another hot print could further curb hopes of an impending slowdown in the Fed’s monetary tightening.

It is often said that the only hard fundamental in currency markets is the interest rate differential. In raw terms, the interest rate differential between the USA and the Eurozone exceeded 250 basis points in the late 1990s. Since then, spread peaked at 250 basis points in 2006 and 2019 and is now testing the 200 basis point level. It is reasonable to question whether it is likely move much beyond the current band in this cycle as the ECB plays catch up with tightening policy.

Retirement-plan providers have moved ahead, and some of the 24,500 401(k) plans that Fidelity Investments administers began offering bitcoin in their investment menus this fall, the company said. ForUsAll Inc., a San Francisco-based 401(k) provider that caters to small companies and has $1.4 billion in retirement-plan assets, says 50 of its 550 clients began allowing workers to invest some of their retirement savings in cryptocurrency, including bitcoin and ether, about eight weeks ago.

The 401(k) companies are launching their crypto offerings amid a bear market that has caused steep selloffs in many cryptocurrencies. Since hitting a high of more than $66,000 in November 2021, bitcoin has fallen to $20,092.

The U.S. Labor Department, which regulates company-sponsored retirement plans, earlier this year cautioned employers to "exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan's investment menu," guidance that has had a chilling effect on some employers and providers.

Fidelity, the nation's largest 401(k) plan provider -- with $3.3 trillion in the plans it administers -- declined to provide details about companies offering its cryptocurrency option. It announced the offering earlier this year, citing demand from employers and workers.

My first reaction is what could go wrong? Afterall, we are talking about what amounts to the most volatile asset class in history. Fidelity has led the market by offering custody services for cryptocurrencies. In opening up pension assets for investment in bitcoin, a significantly larger pool of potential buyers is now exposed to an exceptionally volatile asset class. It is to be hoped positions are sized accordingly, though that is seldom the case for individual investors.

JPMorgan Chase & Co. and Citigroup Inc. are maintaining some ties with Russian companies for strategic reasons on directives behind the scenes from the U.S. State Department and Treasury Department, Bloomberg reported on Monday. The country's biggest banks are caught between Congress, which is pushing for strict sanctions against Russia for its invasion of Ukraine, and the Biden administration, which has urged banks to continue doing business with strategic Russian companies, Bloomberg reported, citing people familiar with the situation. Nnedinma Ifudu Nweke, a lawyer at Akin Gump Strauss Hauer & Feld LLP who specializes in economic sanctions, told Bloomberg that some pockets of business are still allowed with Russia, particularly in the humanitarian space as well as facets of the financial system that would pose a systemic risk. A spokesperson from the Treasury Department told Bloomberg that it has issued guidelines to banks to assure that humanitarian aid, energy and agriculture activities continue.

This would be a news grabber on its own but when it comes in tandem with the story that the USA asked Ukraine to at least act like they are open to negotiations with Russia it is potentially even more significant. 

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Some of the topics discussed include: global money supply contracting, Dollar at risk of breaking down, bond yields continue to march higher and stocks recovery rally remains in force, oil pauses at $100 and platinum breaks higher. 

Capital calls are not the only problem for investors in private markets. Even their successes are creating headaches.

As many alternative assets outperformed public markets in recent years, institutions have broken past fixed limits on the proportion of their portfolios that can be allocated to private markets.
 
While this so-called denominator effect may be exaggerated -- because there is a lag in revaluing private assets to reflect the very latest market conditions -- it does have the potential to trigger increased selling at a time when it is least wanted.

And the sums involved could be huge. A significant amount of the easy money pumped into the financial system by central banks during the pandemic found its way into unlisted assets, which grew to $10 trillion globally by September 2021, a fivefold increase from 2007, according to figures from investment data firm Preqin.

“There’s a regime change of sorts in the macro world and in markets that we need to take hold of,” Stephen Klar, president and managing partner of Wellington Management Co., said at the Global Financial Leaders’ Investment Summit in Hong Kong on Nov. 3. “We’re working with our clients on thinking through how to really get that asset allocation back to a more diversified and rebalanced manner.”
 

There are two separate issues affecting the private asset/alternatives markets. The first is tightening liquidity. As global money supply growth contracts the weight of money argument for supporting private asset prices is much less compelling. The second is the technical issue described above.

Treasury bill supply could rise by $1 trillion by the end of 2023, but the impending debt ceiling episode will complicate the timing, according to Bank of America strategists. 

Strategists Mark Cabana and Katie Craig estimate Treasury will issue about $193 billion of bills in 4Q 2022 and $257 billion in 1Q 2023, with particularly strong months of supply in November, February and March because they are typically heavy deficit months that require additional issuance to sustain the cash balance

However, bill supply projections and the associated market impact are complicated by uncertainty around the timing of the debt limit, another round of money-market reform and the Federal Reserve’s quantitative tightening

Positive quarters of bill supply should help cheapen bills relative to overnight index swaps, and strategists estimate spreads should narrow by 10 basis points or more

Still, the monthly path of bill issuance is “much less clear” because of the debt ceiling, which could become constraining as early as December 2022

At that point Treasury would enter a debt issuance suspension period, which would restrict their ability to issue debt -- likely cutting bills to keep coupon sizes unchanged

Strategists project the potential default, or x-date, would be in August or September 2023. After that, there would be a surge of bill supply to replenish the cash balance

The big question for anyone issuing debt is whether there is a sufficiently large pool of willing buyers to support the market. The Bank of Japan has been buying bonds for so long that it has largely crowded out the domestic market. Liquidity in the 10-yeasr is at an all time low. This condition raises important questions for the US government because $1 trillion deficits appear to be the norm.

The light at the end of the tunnel?
China’s Zero-Covid Policy (ZCP) has kept Covid cases at low absolute levels but at rising economic costs as the virus becomes more transmissible. Reported cases are rising but more signs of Covid policy relaxation have been made available post the Party Congress, and our economists expect China could start to reopen in 2Q23 on political and public health considerations.

China could rally 20% on (and before) reopening
Cross-country empirical analysis shows that equity markets tend to pre-trade reopening (as defined by the peak of activity disruptions) about a month in advance and the positive momentum typically lasts for 2-3 months. We estimate that a full reopening could drive 20% upside for Chinese stocks based on empirical, top-down, and historical sensitivity analyses. Importantly, equity markets usually react more positively to local policy relaxation than to international reopening, with Domestic Cyclicals and Consumer sectors outperforming.

The prospect of China opening up has enlivened risk appetites among traders who are tempted by the low absolute valuations on Chinese stocks listed in Hong Kong. The Beijing marathon went ahead as planned over the weekend and is being taken as evidence of some easing of COVID restrictions. It will be interesting to see if the Shanghai and Chengdu marathons pass off as planned later this month.  

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The focus now appears to have moved to step two, with senior leaders recently asking regulators to draw up a game plan for easing the circuit breaker rule. The third step would be facilitating a full return to normal aviation traffic, the people said. It’s unclear what the timeline is for the implementation of these two steps.

The State Council and CAAC didn’t immediately respond to requests for comment. Evidence China is even considering changes that would ease its global isolation would be scrutinized by investors, with Chinese equities near multi-year lows because of the economic damage wrought by Covid Zero’s snap lockdowns, testing drives and border restrictions. 

Shares of airlines, including China Eastern and China Southern, extended gains in Hong Kong on the flight ban news, while the yuan climbed in offshore trading. 

An unverified screenshot circulating on social media claiming a broad reopening plan was being considered sparked a $450 billion speculative rally in stock markets this week. Soon after, China’s top health body reaffirmed its commitment to the zero-tolerance virus approach. 

Investors are interpreting the commitment to ZERO-COVID as “zero-covid” or at least they really want to reach that conclusion. Valuations are so attractive that people are latching onto any sign of reopening to repeat the rebounds seen in Western assets post March 2020. That’s particularly true of Hong Kong shares where the acceleration lower is giving way to a short covering rally.

So most investors, whether they own stocks or bonds, should have plenty of opportunities to harvest losses between now and the end of the year. And that means there will be more selling pressure ahead.

"There will be pretty high tax loss selling I would think. I even got a white paper from somebody saying this was the greatest tax loss selling opportunity of a generation. I would say it might be two generations," Gundlach said.

Tax-loss selling is a tax optimization strategy that investors and financial advisors often take advantage of in taxable accounts heading into year-end. The strategy involves realizing losses by selling out of losing positions, and then buying back those portfolio positions 31 days later to avoid the tax wash-sale rule.

The strategy allows investors to realize losses that can offset future realized gains, ultimately helping reduce tax liabilities in the long term.

In a year where most people were unprepared for the severity of declines in popular shares like the mega-caps and the innovation sector, investors will be eager to preserve what benefit they can. Realising a loss reduces the tax payable on gains and stores up losses to write off on gains in the future too.

Zambia, too, has ambitious expansion plans. The region could add nearly 1 million tons of annual copper production over the next decade, according to Adam Khan, copper supply analyst at CRU Group, and others are more optimistic still.

“Copper is the new oil,” Zambian Finance Minister Situmbeko Musokotwane said in an interview. “This is a very good opportunity for us.”

There’s no doubt that the region’s copper will be needed. To meet the global target of net-zero by 2050, the world may need to double supplies of what S&P Global calls “the metal of electrification.” “The green-energy transition is the biggest purchase order in history for the commodities industry,” said Benedikt Sobotka, chief executive officer of miner Eurasian Resources Group.

To be sure, logistics are not the only impediment. Corruption is rife, and disputes with governments are common. One of the largest copper and cobalt mines, Tenke Fungurume, hasn’t been allowed to export any material since July because of a dispute between its owner CMOC Group and Congolese state mining company Gecamines.

The COP27 Conference opened in Egypt today and the number of articles highlighting the plight of climate affected populations both domestically and internationally has increased significantly over the last week. The above article focuses on the supply issues of transporting resources to the coast and the additional challenge posed by the plans to increase supply before infrastructure has been built. Meanwhile Glencore was fined £281 million for bribing officials in Africa. Never mind that it is impossible to do business in the region without local partners.

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But in an usually blunt comment on investors’ outlook for future hikes, it stressed the peak in rates will be “lower than priced into financial markets.”

Staying on the market path used in the forecasts, which peaks at around 5.25% next year, would knock 3% off GDP and ultimately push inflation to zero, the BOE said. An outlook based on rates staying at their current 3% level implies a shorter, shallower recession and sees inflation fall close to target in two years’ time.

“We think bank rate will have to go up less than what’s currently priced into financial markets,” BOE Governor Andrew Bailey said at a press conference. “That is important because, for instance, it means that the rates of new fixed-term mortgages should not need to rise as they have done.”

The remarks mark a sharp contrast with Federal Reserve Chair Jerome Powell, who said Wednesday that US rates will probably go higher than people are thinking. UK government bonds and the pound fell after the BOE’s decision. Investors had already tempered their view for UK rates, suggesting a peak around 4.75%.

The Bank of England has no choice than to attempt a lengthier glide path to bring inflation down because of the unique attributes of the UK economy. 2 million mortgage fixes roll over next year. That’s going to be a significant shock to the economy at current interest rates never mind if they are higher six months from now.

In the post-Covid environment, global CEOs appear more comfortable with both work from home and work from India. The emergence of distributed delivery models, along with tighter labor markets globally, has accelerated outsourcing to India. The number of global in-house captive centers that opened in India over the last two years was almost double that of the prior four years. During the two pandemic years, the number of people employed in this industry in India rose from 4.3 million to 5.1mn,and the country's share of global services trade rose 60bps to 4.3%. In the coming decade, the number of people employed in India for jobs outside the country is likely to at least double to over 11mn,and we estimate global spending on outsourcing could rise from US$180bn per year to around US$500bn by 2030. This will have significant effects on both commercial and residential real estate demand.

If India is already the 'office to the world', it is increasingly becoming its factory as well. We anticipate a wave of manufacturing capex owing to government policies aimed at lifting corporate profits' share of GDP via tax cuts and hard dollars for investing in specific sectors, and we note that performance-linked incentive (PLI) schemes now total US$33bn across 14 sectors. Multinationals are more optimistic than ever about investing in India, as the all-time high on our MNC Sentiment Index shows (Exhibit 39),and the government is encouraging investment by both building infrastructure and supplying land for factories. The trends outlined in Morgan Stanley’s multipolar world thesis and cheap labor add to the mix. We estimate that manufacturing's share of GDP will rise from 15.6% currently to 21% by 2031, which implies nominal output jumping from US$447bn to about US$1.49trn.

 

A llnk to the full report is posted in the Subscriber's Area.

Apple got a bad shock this week when its most significant iPhone production facility was shut down as part of a COVID lockdown in China. For a company that prides itself on forcing suppliers to compete with one another, that was a significant hiccup. Apple has already been building more products in India and that trend is likely to accelerate over the next decade.

“With prices at record levels, farmers decided to reduce applications to protect their margins,” Marina Cavalcante, an analyst at Bloomberg’s Green Markets said. Farmers are able to skip application of phosphate fertilizers without compromising yields since the soil can retain this nutrient for more than a year, she said.

Nutrien reported disappointing earnings today amid “demand destruction”. That highlights some of the same issues that occurred with high fertilizer prices in 2007. Farmers rebelled and food insecurity killed off the market of biodiesel.

One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: Fed hikes rates and releases a very hawkish statement, bond yields rise, Dow downside key, gold weakens, oil steady, 

“This is a devil’s bargain,” said Steve Chiavarone, senior portfolio manager at Federated Hermes. “Size of rate hikes will likely fall, but terminal rate is likely higher -- the implication is a greater number of smaller rate hikes. That is not dovish.” 

Jay Powell said in plain English it is better to overtighten, and cut later, than to under tighten and risk allowing inflation to become entrenched. That’s about as hawkish as it gets. The Fed wants a recession and they will keep going until they kill demand.

Turkey was the biggest buyer of gold during the quarter, followed by Uzbekistan (26.13 tons) and India (17.46 tons). Not all countries report their gold purchases regularly, so it’s difficult to know how much, for example, China and Russia bought during this same period.

India is also shoring up its gold reserves.

Indian consumers habitually purchase gold jewelry ahead of the festive season every October. But that aside, the Reserve Bank of India (RBI) bought 13 tons of gold in July and 4 tons in September, pushing its reserves to 785 tons, according to the WGC.

Any foreign exchange and gold reserves Russia had overseas have been confiscated. That’s a big lesson for every country that is suspicious of NATO’s motives now and in the future. It is therefore reasonable for countries to favour gold over holding foreign currency because at least the gold is a physical entity that can be held internally. Nuclear weapons are now also a must have to defend against invasion for any country that holds opposing views to NATO.

To understand the advantage of Chastain's move, a little knowledge of racing physics comes in handy. Typically, when taking a tight turn on a racetrack, drivers brake to counteract forces that push their cars toward the outside of the track. This braking action dramatically slows them down on the turn. This time, instead of slowing down for the turn, Chastain kept his car in fifth gear, hugged the wall, let go of the wheel, and allowed the wall to hold his car in place—no brakes necessary. That's how he passed five cars and set a 75-year lap record.

I have all kinds of admiration for a guy who knew of a winning strategy from a computer game as a child and was willing to test the theory in real life at the potential cost of his own life.

A link to today's video commentary is posted in the Subscriber's Area.

Some of the topics discussed include: unfounded speculation China will ease COVID-zero rules sparks rebound in resources, UK begins to run down the balance sheet, Fed meeting tomorrow which I expect to be hawkish, Amazon breaks lower. 

Brazil’s stocks and its currency rallied on signs that President Jair Bolsonaro’s administration is preparing for a peaceful transfer of power after losing Sunday’s election to Luiz Inacio Lula da Silva.

The president’s communications chief said that Bolsonaro won’t contest the election, according to Reuters. Meanwhile, a press official for Lula’s Worker’s Party said Bolsonaro’s top aide, Ciro Nogueira, offered a meeting place for transition teams from the outgoing and incoming presidents. 

That would be a relief for investors who have been waiting for the incumbent, who had cast doubt on the integrity of the election during campaigning, to concede defeat. 

It is looking increasingly likely that Jair Bolsonaro will move into a vigorous opposition rather than contest the election result. Unruly trucker protests notwithstanding, this is a clear positive for the trajectory of governance, although the bar for what constitutes good governance has been lowered significantly over the last decade.

The latest moves have dragged even more junk dollar notes from Chinese property companies into distress, with 94% now trading below 70 cents on the dollar. That market was until just years ago one of the most lucrative bond trades globally. But it all began to unravel after a nationwide clampdown started in 2020 on leverage and real estate speculation, and has snowballed into record defaults by developers including China Evergrande Group. 

The contagion is even reaching property giants that still have investment-grade ratings including China Vanke Co., the nation’s second biggest developer by sales. Its note due 2027, which was trading above 80 cents just a month ago, fell 4 cents Tuesday in the worst two-day drop ever to an all time-low of 40.3 cents.

“Now with some presumably better-off developers getting into trouble, people start to worry about a contagion to non-state developers,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities. “It’s not just a confidence issue, and developers’ liquidity conditions are only getting tighter in the future given sales have been slower than expected.”

And

As refinancing costs surge in global debt markets, China’s property sector has at least $292 billion of onshore and offshore borrowings coming due through the end of 2023, raising the specter of even worse payment pressure to come. There’s $53.7 billion borrowings still due the rest of 2022, followed by $72.3 billion of maturities in the first quarter of next year. 

“We have seen no improvement in terms of the funding for private-sector developers,” Bank of America Corp. economist Helen Qiao said on Bloomberg Television Tuesday. “The stimulus was not strong enough to get them out of the current liquidity trap, and therefore how exactly they can really survive raises many questions.”

It is reasonable to expect that most of the property debt issued through Hong Kong in US Dollars will be defaulted on. Any stimulative measures designed to prop up the property market and local developers will be aimed exclusively at domestic investors. Foreign investors are way down the line in terms of priorities for China. 

The surprise pickup in vacancies highlights unrelenting demand for workers despite mounting economic headwinds. The persistent imbalance between labor supply and demand continues to underpin robust wage growth, adding to widespread price pressures and reinforcing expectations for yet another large rate hike on Wednesday.

The latest increase in openings erased much of August’s slide, which, at the time, had suggested a notable moderation in labor demand.

“After the shock of last month’s report, the September JOLTS data is returning to a familiar story: demand for workers remains robust,” Nick Bunker, head of economic research at Indeed Hiring Lab, said in a note. “By all the key metrics in this report, the labor market is resilient.”

There is no easy way to address a shortage of workers because someone is going to be upset by whatever solution is suggested. Immigration is the most expedient but it comes with significant political pitfalls and will invariably change the culture of wherever migrants congregate most.

Eoin - does the source of daily volume in the stock market (buying or selling) influence your opinion of market strength or weakness at any point in time? Are there particular data sources you review which help you determine if institutional buyers/sellers are especially active? Does the trade-off between retail and institutional demand matter?

I always look forward to reviewing your insights on where markets may be heading in the near term...particularly in this ongoing era of excessive central bank intervention and manipulation.

Thank you.

Thank you for your kind words and this email which may be of interest to the Collective. I don’t look at specific volume data but part of my mental process is to think about the market from the perspective of as many market participants as possible.

One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: India continues to outperform China by a wide margin but is China is very oversold, Brazil bounces following Lula victory, Dollar firms, bonds yields rise, Wall Street pauses. 

“The first thing you have to realize with these stocks is there’s no rhyme or reason,” said Keith Lerner, chief market strategist at Truist Advisory Services Inc. “They don’t trade based on the big macro trends normally. They trade on speculation and liquidity.”

A basket of so-called meme stocks tracked by Bloomberg rose 1.4%, while the De-SPAC index is lower by about 0.2%. Both gauges have plunged this year as concerns about a possible US recession diminished investor demand for shares of riskier assets.

The sudden resurgence in interest for the group comes ahead of what is likely to be a bumpy two weeks for the stock market. A Federal Reserve rate decision on Wednesday will kick off a span of seven trading sessions that will feature four major events including a key jobs report, mid-term elections and inflation data for October.

Let’s set rationale aside for the present and think instead about what kind of message this spike in speculative activity says about how much liquidity is still in the market. In nominal terms, consumer spending is way above trend. Adjusted for inflation it is back on trend.

Crop traders have been focused for weeks on the approaching deadline of Nov. 19 for renewing the grain-corridor agreement, particularly as senior Russian officials repeatedly criticized the deal, suggesting that any extension would require difficult negotiations. Exports have also been slowed by a swelling backlog of vessels waiting to be inspected as part of the agreement -- Ukrainian President Volodymyr Zelenskiy said some ships had been waiting for three weeks. 

Vessel and insurance rates to Ukraine stand to rise, said Michael Magdovitz, a senior commodity analyst at Rabobank. New deals from the country had already been drying up as traders didn’t want to risk getting caught short of the deal’s deadline, said Matt Ammermann, commodity risk manager at StoneX. 

Russia, which leads global wheat exports, stands to offset some of the lost sales. Still, it will be key to watch how shipping costs across the entire Black Sea region are affected by the latest developments, Ammermann said.

At best this is a fresh example of brinksmanship by Russia in seeking to extract maximum benefit from the uncertainty around secure supply of wheat. At worst it is a prelude to intensifying the unconventional war effort by holding the world hostage with food insecurity.

In some ways this represents an important generational change in the way China will interact with the rest of the world. As far as we know, the term “international circulation” originated in 1988 when a government researcher, Wang Jian, made the case that China should adopt an export-led growth strategy, making use of its huge surplus labor to plug the economy into the international manufacturing process. In that sense, the de-emphasis of international circulation is an important historical shift. In a People’s Daily article in November 2020, Vice Premier Liu He set out a number of objectives relating to the DCS including: (1) the priority of upgrading of China’s technological capacity, including an enhancement of China’s supply chain resilience (though referred to in this article as “optimizing the structure of supply”); (2) the need for finance to serve the needs of the real economy; and (3) the promotion of further urbanization. Any mention of external demand comes last

A link to the full report is posted in the Subscriber's Area.

China’s stock markets are accelerating lower so that is a trend ending signal. The big question for all investors is at what point will the risk premium be fully priced in? The USA’s more aggressive attitude towards China is about the only bipartisan topic in the current administration. In fact the two parties seem to be competing for the mantle of biggest China hawk. China’s response to more activist counterparty risk is to look inwards and many people fear a repeat of the Cultural Revolution is already in play.

A link to this week's Big Picture Long-Term video is posted in the Subscriber's Area. 

Dear Eoin, I am one of your long term subscribers from Singapore from back when David started the service. I have been shared this hypothesis regarding the reason why China is keeping to the zero covid measures and it is less to do with the disease but something else. Firstly with the reason for covid, they have managed to track the movement of all individuals in China with the Green Code, which coupled with their country wide camera surveillance, allow the state to monitor constantly all citizens. This is especially important in the fight against corruption. Secondly and more importantly, China is still trying to deflate their large property bubble which is 30-40% of the countries economy. Besides Evergrande, there are systemic risk to the over investment in real estate which is a huge Ponzi scheme. Fortunately most of the debt are on-shore, and China needs to keep its borders closed. This is because if re-opened, the increased spending from in-bound and outbound tourism will cause inflation, and this will force The Central bank to raise interest rates. China Central Bank wants inflation to still be low so that the economy can be stimulated and the growth in local jobs help keep the confidence for the population to invest in the property market. If inflation rises, then interest rates have to increase and it will delay the clean up of the property market which has so far been very well controlled. China is doing far more in the real estate cleanup then the US did with Sub-Prime Crisis in 2007-2008. Due to the trade offs, the real estate recovery is more important that the risk to public health although China could simply mandate all citizens especially the elderly to be vaccinated which they have not. It cannot be due to the lack of vaccines or preparation for the hospital and ICU beds capacity as China could have allowed Moderna and Pfizer to be registered locally without asking for the IP to be disclosed. Hope to hear from you. Thanks 

Thank you for this informative email and your long-term patronage of the Service. At a time when many consumers are taking a hard look at expenses, I want to give special thanks to every one of our subscribers.

I have discussed this exact issue in the big picture long-term videos on several occasions, most recently last Friday. Let’s address it from first principals. China’s is a single party state, so they have the luxury of equating the Party with the country. Whatever is good for the Party is therefore considered good for the country.

In September, a sharp slide in the yen following the policy statement and dovish comments by Kuroda prompted Finance Minister Shunichi Suzuki to order Japan’s first entry into markets to prop up the currency in 24 years. While the governor moved the market again during Friday’s briefing, his tone was more cautious and his remarks weren’t preceded by falls in the currency like the previous month. 

Kuroda continues to hold firm as the last anchor of low global rates just a day after the European Central Bank went ahead with another jumbo rate hike. But the governor is walking on a tightrope as his stance risks putting further downward pressure on the yen despite billions of dollars spent by the government to support the currency.  

“The likelihood of the BOJ pivoting toward tightening is still small as Japan’s inflation is not broad based at all and is only rising about a third of the pace seen in Europe and US,” said Kyohei Morita, chief Japan economist at Nomura Securities.

The speed of the Yen’s decline since March has alarmed politicians and not least because the price of oil is in the region of the 2008 peak when redenominated into the currency. The Bank of Japan’s challenge is much of the inflation is imported. Domestic demand needs a cultural change and that will not be achieved by transient price pressures.

Shares of Gilead Sciences ticked up Friday morning after the company’s latest earnings report exceeded Wall Street’s expectations.

The results were, in part, tied to growing sales from Gilead’s cell therapy business, which consists of the marketed cancer drugs Yescarta and Tecartus. Together, sales from the two drugs totaled $398 million in the third quarter, a nearly 80% increase from the same three-month period a year prior.

Gilead’s work in cell therapy, catalyzed by the $12 billion acquisition of Kite Pharma in 2017, hasn’t always sat well with investors. Early sales from Yescarta were slower than some had hoped, and Gilead ultimately acknowledged that some assets from the Kite deal were overvalued.

But in recent months, the company’s cell therapy business has ballooned. Third quarter sales of Tecartus were up 72% year over year, reaching $81 million, while those for Yescarta rose 81% to $317 million. Gilead cited the approval of Yescarta as a “second-line” therapy for a type of hard-to-treat lymphoma, which happened in April, as a main reason for the uptick.

Immunoncology involves re-educating the immune system to target cancers which typically avoid detection by the body’s defenses. Related stocks blossomed in 2015 with a huge rally. They had a brief second coming in 2018 but subsequently collapsed as the route to commercialization proved to be anything but easy.

A link to today's video commentary is posted in the Subcsriber's Area. 

Some of the topics discussed includes: total addressable market assumptions are proving illusory for cloud, advertising and retail, bonds yields compress, dollar firms, supply inelasticity misrepresents inflation whereas the liquidity-fuelled demand surge explains it better.  

Jefferies (buy, PT $200)
There are “no signs of expense discipline,” and this is “going against what investors want”

Vital Knowledge
The expense outlook is “the big negative” of the report; “investors were hoping for mgmt. to aggressively slash costs, but it doesn’t seem like that’s happening”

The results and outlook “weren’t great, but neither was any worse than SNAP or GOOGL”

Truist Securities (buy, PT $240)
The revenue outlook is “still decent all things considered,” but the guidance for total expenses is “materially higher than our estimate”

There is only so much money available to be spent on advertising. Over the last decade, the number of companies seeking to suckle on the ad spend of the corporate sector has grown considerably. The net effect today is many new companies are basing their business models on offering advertising space.

Tesla is the subject of two defect investigations by the National Highway Traffic Safety Administration and headed for the first of several potential trials over crashes blamed on Autopilot, its driver-assistance system. California accused the company in August of misleading consumers, and a Golden State resident who sued last month is proposing class-action status for his claims that Musk has been stringing the public along with perpetual promises that the company is on the cusp of perfecting the technology.

Fans of the world’s richest man have gotten accustomed to frequent posts from the soon-to-be Twitter owner about new iterations of FSD beta software beaming to their vehicles. After Musk tweeted recently about a next major release coming this week, one follower replied with relief, writing that he’d been hesitant to use the latest version of FSD after his Tesla veered toward an oncoming car.

Elon Musk very publicly moved his company out of California and built his latest gigafactory in Texas. In all the time Tesla was headquartered in California, there was very little talk of policing the company’s claims to have delivered autonomous driving. The company moved to Texas 11 months ago and the number of lawsuits is growing by the day.

doubled to $9.45 billion, because it was making big investments in North Sea fields. 

The fact that Shell wasn’t liable for the levy, which was designed to allow companies to reduce their payments if they invest in new production, nevertheless threatens to amplify the controversy about record oil-company earnings at a time when most people are struggling with soaring energy bills. 

There are growing calls for British Prime Minister Rishi Sunak, who imposed the windfall tax in May when he was Chancellor of the Exchequer, to hit the sector with additional levies as he tries to fill a £35 billion hole in the country’s finances. Even Shell’s boss acknowledged the possibility of further government intervention. 

“They will be looking at companies like us, who benefit of course from the volatility and the prices that we see, to fund the programs that they are rolling out,” Chief Executive Officer Ben van Beurden said on a call with reporters Thursday morning. “We have to accept it and we have to embrace that.”

One of the first measures Rishi Sunak took when he became prime minister was to reimpose the ban on fracking. That’s putting more focus on boosting oil and gas supply from the North Sea. Shell expects to spend £23-27 billion on capital expenditure this year which is at least 20% more than last year and on par with years like 2018 and 2019.

One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary daily until there is a change.

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: dollar index breaks 110, gold steadies, crypto extends rebound, Treasuries test 4%, 10yr-3mth inverts, megacap earnings disappoint. China supports currency supporting copper.