PDD in recent years has used promotions to grab market share from more established Chinese rivals including Alibaba Group Holding Ltd. and JD.com Inc. In an attempt to replicate that success abroad, it created Temu, which was introduced with much fanfare during this year’s Super Bowl.

Since it launched last year, Temu has exploded into one of the top US apps, targeting cash-strapped Americans with cheap unbranded products shipped directly from Guangzhou, China. In just seven months, the app has been downloaded 50 million times.

The roll-out hasn’t been without hiccups. Temu is burning through money and squeezing its suppliers in a bid to take on Amazon.com Inc. It’s also involved in lawsuits with rival Shein over antitrust matters.

The question Temu is exploring is where the interchange between price and convenience resides. Amazon delivers convenience better than anyone else and charges a premium. Target, Wal-Mart, or Costco supply cheaper products, but nowhere near the same level of convenience. Temu supplies bargain basement prices that appear too good to be true. It does not have in-country fulfilment centres, so convenience is not measurable, and returns will inevitably be problematic.

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Some of the topics covered include: bitcoin weakness, oil's rebound, China still waiting for stimulus, interest rate dependent base formations, 

Russia has agreed with its OPEC+ partners on further cuts to its crude exports, Deputy Prime Minister Alexander Novak told President Vladimir Putin.

“We have agreed, but we’ll announce main parameters next week,” Novak said at a televised government meeting with Putin.  

Russia has pledged to curb its crude exports by 500,000 barrels a day in August, then taper the curbs to 300,000 barrels a day next month. On Wednesday, Novak said that Russia was discussing extending the September export reduction into October, according to media reports.

OPEC+ have announced production cuts close to the first of the month for each of the last three months and there does not appear to be an end in sight. Most OPEC+ members cannot afford prices to fall much below $75. That suggests they will continue to do what is necessary to ensure prices remain above that price point.

Today you wrote about the heat in the Sahara Dessert. Watergen is an Israeli company that converts air into drinking water. Its products are sold in the USA, Latin America, India, Vietnam, Uzbekistan and on the African continent. Let's share some positive news on break the monopoly of pessimistic news in the various media.  

Thank you for highlighting this innovation. Coupled with a solar panel, Watergen’s system is truly a life saver in remote or underserved areas. Africa is where most population growth can be expected over the next several decades. Key innovations like mobile communications and the app economy are spreading quickly across the continent. That is providing large numbers of people with digital services before they have access to clear water, sanitation, and power provision.

During the pandemic the metaverse was all the rage and NFTs of whimsical characters were selling for millions. Today most have lost all their value but what of the companies that are pioneering the online neighbourhood marketplaces?

The Solactive Metaverse Select Index peaked in early 2022 and found a medium-term low at the end of the year. Since then, it has held a sequence of higher reaction lows and is currently firming from the region of the 200-day MA.

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3. Why has West Africa been so prone to coups?
The events in Niger followed two coups each in neighboring Mali and Burkina Faso and another in nearby Guinea. The leader of Sudan in the eastern Sahel was overthrown in 2021, the same year Chad’s military replaced its late president with his son, an army general. All these takeovers have been rooted in economic malaise and weak governance that have fed frustration among civilians and — in West Africa in particular — the spread of extremist violence. However, despite claims by the new strongmen that they are tackling insecurity, the number of people killed in the Sahel region surged in the first half of the year.  

It’s impossible to walk across the Sahara during the summer. That trek is a lot easier in the autumn,  winter and spring. Political instability, vendetta settling mobs, human traffickers and religious extremists will all fuel migrant flows over the next 12 months as they are pushed northward. That’s all part of the unconventional war effort being propagated by Russia in the Sahel.

Europe not only needs to boost defense spending but border security is going to be a related urgent concern. The necessity of boosting defense outlays is undeniable even as finding money for it is challenging.

Cocoa futures rallied in New York and London amid signs of weak forward sales from producing countries in West Africa that have been slammed by deteriorating crops. 

Even as heavy rains that wrought havoc on cocoa farms across West Africa have finally subsided, crop development continues to be very poor. Reports of swollen-shoot disease in top grower Ivory Coast and a shortage of fertilizers in the second-largest producer, Ghana, are among key concerns.

“Trees have not recovered as expected,” said Marex co-head of agriculture Jonathan​ Parkman, noting more research is needed to understand why the trees haven’t recovered better after the end of the rains.

Forward sales are also getting hit by confusion over new European deforestation regulations, Parkman said. Some sellers are afraid of getting hit with penalties if they can’t prove their beans come from a deforestation-free area. 

Europe’s efforts to enforce its climate doctrine on other countries are inevitably going to have unintended consequences. That’s particularly true for agriculture producers where producers don’t have the resources to produce according to extraterritorial rules. The commonality across crops where these kinds of rules are threatening to be enforced suggests cocoa is not an isolated incident.

Around 20,000 new homes a year have been put on hold as a result legal protections to clean and protect our precious water ways. This report explores the challenges that councils and other stakeholders are facing and sets out recommendations for action.

The idea of delaying home construction because of the impact on waterways gives the impression these are riverside apartments. That seems quite unlikely.

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GBTC had been trading at a significant discount to the value of the Bitcoin it holds. That gap is likely to close as traders anticipate an ETF approval.

The judges' decision won't allow GBTC to convert into an ETF automatically. The federal government can appeal the decision to the Supreme Court or the SEC could attempt to deny the application to convert to an ETF for another reason.

Still, the decision makes it an uphill battle for the SEC to keep spot Bitcoin ETFs from coming to market. In addition to Grayscale, BlackRock (BLK), Fidelity and other companies have also applied to launch a spot Bitcoin ETF.

The SEC is expected to give a ruling on the applications for spot priced ETFs before the Labor Day holiday which is this weekend. It is unclear whether today’s announcement will influence that decision, but the odds are improving that the SEC’s reluctance to grant permission for spot price ETFs will eventually be overcome.

The drivers most likely to be stung by the ULEZ expansion are commercial van owners. Unlike cars, the van market is still dominated by diesel —  more than 90% of vans are diesel-fueled. Data suggests that just under half of vans registered to addresses in the outer boroughs of the city are not ULEZ compliant, though the mayor’s office disputes the relevance of this data, arguing that many of those vehicles are not actually driven in London. It uses data collected from road-monitoring cameras, which suggests 80% of vans are ULEZ compliant.

Some small business groups have raised opposition to an extra charge on vans, citing the financial burdens this can create for their business. In response to concerns, Khan expanded a vehicle scrappage scheme, once only available to a limited number of recipients, to all drivers of non-compliant vehicles. Still, this only covers those people living in London and not those on the borders who may need to commute into the capital daily.

I was living in Zone 1 when the congestion zone was introduced. We bought our first car just before my daughter was born and I was penalized for late payment 3 times in a week as I shuttled back and forth to the maternity ward.

Living inside the congestion zone was a stressful experience. I found it difficult to figure out when I was about to cross a toll barrier. I was unfamiliar with driving in the city and its one-way systems even though I had been living in London for five years at the time. I expect many people living in the new, expanded low emissions zones will have a similar experience. I felt like I was being robbed every time I sat in my car.

I am asking why the next expiry in Silver futures is so much higher than it seems to me than in the past, is it simply because rates are higher?

Thank you for this question. You are correct the spread between the 1st and 2nd month contracts is wider than at any point since the 2020 panic of 2007. Interest rates do tend to affect the cost of margin which is reflected in the contango. Volatility and the extent of hedging activity are additional considerations.

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Some of the topics discussed include: China jumps then reverses intraday to finish close to unchange. Sufficient stimulus to create demand looking more likely, Renminbi weaker, Dollar steady, gold and silver pause, Treasury yields ease mildly.  

“The measures over the past weekend are not enough to stem the downward spiral” and their impact will be short lived if not followed by measures for supporting the real economy, Ting Lu, chief China economist at Nomura Holdings Inc., wrote in a note. “Without additional and more aggressive policy stimulus, these stock-markets-focused policies alone have little sustainable positive impact.”

Earlier this year, it looked like there could be a run on a large number of regional banks. The Federal Reserve waded into the market and backstopped every deposit. That was a strong clear signal that no one should worry about the security of their bank accounts. The sector rebounded emphatically over the next several months despite the Fed continuing to raise rates. Did the Fed’s action contribute to moral hazard? Yes. Was it the right decision at the time. Also yes.

Venture capital funding was overly abundant in the latter half of 2020 and all of 2021. There were nearly 19,000 deals done that year, according to PitchBook, until things started to taper off in 2022.

Stanford points out that the average time between funding rounds is now around 1.5 years. – basically what it was before the pandemic boom times. So, hypothetically, if a company last raised capital in the first quarter of 2022 (one of the most active in terms of deal count, PitchBook data shows), many startups will be on the hunt for new capital in the fourth quarter of 2023.

Every company's situation is a little different based on their operating expenses and whether they've gotten fresh funding already. Though, unless you're an AI startup, the chance of a VC check has been slim to none. So what are their options? Likely a sale or shutting down.

But it's not just VCs who are being stingy. All those crossover firms that wanted to get in on the action like Tiger Global (which by the way, did 335 deals in 2021, according to Crunchbase) and Coatue, aren't doing the kind of deals that they used to. Participation has dropped from more than 550 deals and a quarterly peak of nearly $50 billion in 2021 to fewer than 200 deals and a quarterly peak of around $15 billion in 2023, Stanford wrote.

"We believe that a large portion of the supply-side deficit is derived from the crossover and other nontraditional investors that have pulled back from VC to more traditional strategies," he wrote.

China is not the only play where unprofitable enterprises have been starved of investment capital. Higher for longer interest rates are taking a toll everywhere and the breadth of what is capable of securing funding continues to contract. It’s AI or nothing at present.

The exact spot Idalia will come ashore isn’t certain. “It cannot be emphasized enough that only a small deviation in the track could cause a significant change in Idalia’s landfall location,” Brown wrote. 

If it reaches forecast strength, Idalia would be the first major hurricane to hit Florida since last September when Hurricane Ian struck the western part of the state as a Category 4 storm, killing at least 150 people and causing more than $112 billion in damage, the hurricane center said. 

Idalia is expected to stay in the eastern Gulf, away from offshore oil and natural gas production. Most of the key citrus areas in central Florida would not be seriously impacted, World Weather Inc. President Drew Lerner said.

This has been a quiet hurricane season so far. It delivered the earliest named storm ever even before the official season began but since then there has been very little storm activity. That is now changing. Idalia is likely to strengthen to category 3 and will strike somewhere in the middle of the Florida peninsula. The trajectory of the storm will have a strong bearing on how much damage the citrus groves take. 

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As is often the case, we are navigating by the stars under cloudy skies. In such circumstances, risk-management considerations are critical. At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks. Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data.

Restoring price stability is essential to achieving both sides of our dual mandate. We will need price stability to achieve a sustained period of strong labor market conditions that benefit all.

The 2% target is still official. Judging by the response of the market to Powell’s statement today, traders are beginning to give that statement some additional weight. Larry Summers’ remark on Twitter this morning helps to put the dilemma into fresh perspective.

“It is sobering to recall that the shape of the past decade’s inflation curve almost perfectly shadows its path from 1966 to 1976 before it accelerated in the late 1970s.”

"At just over three years old, our Micro E-mini S&P 500 futures have become some of the most actively traded and deeply liquid equity index products at CME Group, averaging more than 1.1 million contracts traded per day," said Paul Woolman, Global Head of Equity Index Products at CME Group. "At one-tenth the size of their benchmark E-mini counterpart, these micro-sized futures allow market participants to hedge or trade with enhanced flexibility around major market-moving events by executing trading strategies more nimbly and scaling index exposure up or down."

"The S&P 500 is widely regarded as the best single gauge of the U.S. equity market and serves as the foundation for a wide range of liquid investment vehicles around the world," said Bruce Schachne, Chief Commercial Officer at S&P Dow Jones Indices. "S&P DJI extends its sincere congratulations to CME Group for reaching another significant market milestone, the first to cross this threshold within its complex. We are proud of the growth that we've seen within our indices business and look forward to continuing to provide leading index solutions across varying geographies and asset classes."

This is a substantial milestone. It reflects significant growth in risk appetite as the margins demanded for a position were decreased. That’s doubly true as demand for options of the stock market has ballooned since the advent of extraordinary monetary and fiscal accommodation.

Danaher Corp. has emerged as the leading bidder for biotechnology supplier Abcam Plc, according to people familiar with the matter. 

Danaher has pulled ahead of other bidders and is negotiating with the Cambridge, England-based company to reach a deal, the people said, asking not to be identified because the matter is private.

Nothing is finalized and talks could still fall apart. It’s still possible another bidder could prevail, the people said.

A representative for Abcam declined to comment. A representative for Danaher couldn’t immediately be reached for comment. 

Bloomberg reported in June that Abcam had attracted initial interest from US life sciences company Danaher and Agilent Technologies Inc.

Abcam said in June that it was starting a process to explore strategic options including a sale after receiving interest from multiple parties.

Abcam’s success in listing in the USA and impending sale at a premium to Danaher is a testament to the depth of the US capital markets. If other markets are to compete in hosting promising companies, the scale of regulation to comply with will need to decrease and the welcome offered to companies will need to improve.

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Some of the topics covered include: Nasdaq-100 downside key reversal, bond yields firm, dollar firm, precious metals pause, stock market futures point to weak opens in Asia and Europe. 

Expanding intra-BRICS local currency settlement. In our view, the conversation around the creation of a BRICS currency is a sidenote to the real topic, which is the expanded use of the Chinese RMB in BRICS commercial exchanges. China is keen to push for change in the international monetary system, eager to expand the geographical reach of the RMB. This objective is uncontested amongst the BRICS. We expect to see concrete policies emerging from the summit, creating mechanisms and avenues for greater use of RMB in transactions and promoting direct trading between RMB and BRICS currencies.

China’s towering role in the BRICS remains a strength, and a risk. Except for the surge in India’s crude and coal imports from Russia, which pushed India’s imports up from USD8.6bn in 2021, to USD41bn in 2022, trade with China accounts for the vast majority (75%) of intra-BRICS trade. China is the largest bilateral trade partner for three BRICS members: SA, Brazil, and Russia. Indeed, China’s participation in BRICS imbues the group with much of its broader influence, and potential. And yet, for the group to be a legitimate and collaborative reflection of the interests of the Global South (and of each of its members) it must push against the agenda being singularly established by Beijing. How this tension is navigated will not only be a defining feature of the upcoming summit, but the group’s future relevance and capacity for cohesion more broadly.

China’s towering influence relative to each of the individual members of the BRICS group is not something that can be ignored when the practicalities of trade are considered. Any commitment to creating a common currency is overshadowed by China’s desire to settle trade in Renminbi. That of course begs the question whether China is willing to increase the supply of the currency to allow it to be an international medium of change beyond bilateral ties?

3. Stuff That May Matter More Than Ever In the category of stuff that doesn't matter until reaching extremes: the inverted US yield curve and leading indicators. Our bias is to heed the warnings, particularly in the context of the unprecedented aberrations that got us here. The graph shows the leading index of 10 economic indicators at minus 7.5% and the New York Fed's probability of recession from the Treasury spread at the most since 1982. What might be most significant is the elongated period of near-zero interest rates that buoyed the roughly 600% advance in the S&P 500 from the March 2009 low to the 2022 peak. This period of exceptional risk-asset appreciation may face some normal reversion, particularly because the primary fuel has turned around. The fed funds upper-bound target of 5.5% is the highest since 2001 and may portend headwinds for risk assets.

The time when people worry most about an inverted yield curve is at the point it first inverts. What surprises many people is markets then rally because central banks are finally doing something about resurgent inflationary fears. That’s exactly what has happened over the last year.

“Things are changing right in front of our eyes,” said Thayne Larson, who has grown alfalfa, hay, corn in Kansas for 50 years. “It’s so disappointing when you have what you thought could be a healthy crop, and then the conditions just become extremely, extremely challenging.”

Crops Go ‘Backwards’ 
With food security already under threat from Europe to Asia, the world has been counting on a big corn harvest to help keep food inflation at bay. A disappointing US harvest could have ripple effects on markets across the globe.

Much will come down to Iowa, the No. 1 US corn grower and where sixth-generation farmer Ben Riensche is for the first-time ever watching his crop go “backwards” because of the heat. 

His corn stalks went from bright and green to slightly gray. Instead of sitting tight against the plant, the corn ears are flopping down, the husk has turned brown and the bottom of the stalk — where the plants connects to the roots that go deep underground — looks like it’s been burned. It means that the plant is dead.

It’s been a particularly warm summer on the border of the great plains here in Dallas. I know people complain about the heat, but it is nothing compared to a summer in Melbourne, Australia. Selling cable phone and TV service door to door around Vicotria 24 years ago inured me to the heat but there is no doubt it has been very dry and hot in Texas.

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Nvidia Corp. (NASDAQ:NVDA) strong positioning in artificial intelligence technology is taking the chipmaker into the stratosphere Wednesday.

Santa Clara, California-based Nvidia’s second-quarter non-GAAP earnings per share rose 422% year-over-year from 51 cents to $2.70. Sequentially, the measure improved 148% from the previous quarter’s $1.09 per share.

Analysts, on average, expected the bottom-line result to come in at $1.91.

The earnings growth reflected strong revenue, which climbed 101% year-over-year and 88% sequentially to $13.51 billion. The topline came ahead of the consensus estimate of $10.3 billion and the company’s guidance of $11 billion plus or minus 2%.

Wall Street began its rebound in early trading as the bond market rallied in response to downgraded expectations of job growth. The tech sector in particular firmed, as optimism around Nvidia’s earnings built. Following the strong results and upgraded guidance, the share jumped above $500 in after hours trading. The 10% advance was exactly what the options market had priced in before the announcement. 

Arm’s prospective transition to the public realm is no small development, as Wall Street impatiently awaits the return of capital markets activity. Conventional IPO fundraising (i.e., excluding special purpose acquisition companies) stands at $10.2 billion in the year-to-date per Dealogic, double the full-year tally logged last year but a fraction of the $39.7 billion and $105.5 billion outputs seen during 2020 and 2021, respectively. “Recent summer weakness is clearly pushing [SoftBank] to list Arm sooner rather than later,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, tells Reuters.

On the bright side for SoftBank and its teeming roster of 28 investment banks leading the offering, recent events in the IPO market suggest that risk appetite remains robust despite the August selloff.  Last Tuesday, shares in Sacks Parente Golf, Inc. vaulted 624% in their Nasdaq debut, briefly conferring a $400 million market cap on the micro-cap manufacturer of putting equipment, which lost $3.5 million on $190,000 in net revenues a year ago.

Noting that the Sacks Parente priced its offering at $4 per share, the bottom of its indicated $4 to $5 per share range, while reducing the allotment to 3 million shares from 4.4 million, Renaissance Capital senior strategist Matt Kennedy marveled to Bloomberg that “in a typical IPO, it would be bizarre for a company to price at the low end of its range and then pop 600%. . . There’s still a sub-segment of the IPO market where the casino is open.”  Sacks Parente’s hot streak soon abated however, as the stock finished today south of $3, completing a round trip and then some.

Then there’s VinFast Auto Ltd., which also began trading on the Nasdaq last Tuesday via a merger with blank-check firm Black Spade Acquisition Co. The Vietnam-based electric vehicle maker has since enjoyed a hotter ignition, with shares ripping higher by 109% today, building on a 280% rally in its first trading day one week ago. VinFast, which remains under 99% control by its founder Pham Nhat Vuong and which posted a $599 million net loss in the first quarter on $84 million in sales, ended the day with a market cap of roughly $85 billion, nearly equivalent to that of Ford and General Motors combined.

The water’s warm, Masa and Co."

The trend of rising rates damped down speculative activity in the IPO market in 2022. Now, as expectations that central bank hiking cycles are nearing an end enthusiasm is rising once more. The scale of the moves in the IPO market is much more concentrated at present, which is a reflection both of the smaller number of new listings and tightening liquidity.

In 2021, Urenco had no plans to expand in the US. But standing in a vast storeroom in Eunice crammed with ready-to-ship canisters, each filled with more than 2 tons of enriched uranium and worth $1 million, Keith Armstrong, the company’s chief of staff, said orders have increased almost 25% in the past year as the world tries to avoid Rosatom. 

Armstrong, who has worked at Urenco for 11 years, said Moscow’s militarism had jolted the industry and exposed gaping vulnerabilities. “The invasion of Ukraine changed the market dramatically,” he said. “It went from a static state to ‘we need to expand now.’”

There has been a great deal of speculation about Russia’s potential to enforce an embargo on oil and gas exports. That ignores the country’s clear need to earn foreign income as well as the difficulty in capping supply from oil wells drilled into permafrost. It is much more likely Russia could use its dominant position as a nuclear fuel provider to squeeze the US and European economies.

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Some of the topics discussed include: global banks review, Japan and European financial outperforming, China, Singapore, Australian financials under pressure, US banks rolling over, stocks susceptible to further mean reversion and significant impact from tightening credit likely to be evident in Q3.  

“Our updated estimates suggest that households held less than $190 billion of aggregate excess savings by June,” San Francisco Fed researchers Hamza Abdelrahman and Luiz Oliveira said in a blog post published Wednesday on the bank’s website.

“There is considerable uncertainty in the outlook, but we estimate that these excess savings are likely to be depleted during the third quarter of 2023.”

There are substantial events coming up in Q3 that are worth considering now. Depleted personal savings are one factor. The resumption of student loan payments for 40 million people is another. Continued upward pressure on rental costs are another. Yet, the Federal Reserve is still raising rates and does not expect to cut until well into 2024.

Smith and Nowak “used their positions as some of the most powerful traders in the worldwide precious metals markets to engage in an egregious effort to manipulate prices for their benefit,” Acting US Assistant Attorney General Nicole M. Argentieri said in a statement, adding the Justice Department was committed to holding “accountable those who engage in fraud and manipulation that undermines the investing public’s trust in the integrity of our commodities markets.”

Gold investors have been suspicious of the activities of institutional traders for decades. Rumours of active manipulation have been circulating for as long as I have been active in markets. The fact those rumours have been proved true further enhances the belief the system is rigged against the small investor. However, it is also worth considering that the volatility of the sector has not improved since spoofing cases have made headlines. Precious metals are still important and still trade in a very choppy manner.

The awkward 11-party alliance emerged after both camps saw their interests align in the wake of a May election that produced a stunning win for Move Forward, a party that advocated changes to a law forbidding criticism of King Maha Vajiralongkorn and other top royals. The royalist parties wanted to keep Move Forward out of power, while Thaksin sought to strike a deal that would allow him to return to Thailand after 15 years of shuttling between Hong Kong, Singapore, Dubai, and London.

“Pheu Thai is the most powerful party to battle the emergence of Move Forward, after the electoral defeat of the conservative parties,” said Yuttaporn Issarachai, a political scientist at Sukhothai Thammathirat Open University. “As the saying goes, the enemy of my enemy is my friend.”

Thaksin’s return will mark a full-circle moment in Thailand’s political drama, which has seen a cycle of coups and deadly street protests erodes the nation’s competitiveness as a Southeast Asian manufacturing destination since the turn of the century. Foreign investors have dumped about $3.8 billion of Thai stocks this year, triggering an almost 9% slump in the main stock index to rank it among Asia’s worst performers.

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The source mentions that the launch is "imminent" and only a few weeks away which jibes with Elon Musk's "end of Q3" Cybertruck release date promise back in April. There are a few other signs that point towards a Cybertruck launch in September, too.

For one, Tesla has been filmed loading multiple units on trailers and shipping them out of Giga Texas just this past week alone, as the parking lot there seemingly gets new production batches every few days. They seem heading to the Fremont factory while some stop for crash tests on the way.

Moreover, Tesla has reportedly been filming what could turn out to be the first Cybertruck launch ad up in the glaciers of Iceland. Locals have taped the Cybertruck surrounded by camera equipment there, or doing laps on the glacier fronted by a black Land Rover with its tailgate open as if for capturing footage.

It is quite likely the Cybertruck units being loaded onto trailers are for crash tests. That suggests the final design is confirmed and Tesla is ready to begin ramping up production. There is clear potential the Cybertruck has cannibalized some demand for Tesla’s other models, as well as successfully attracting new adherents to the brand. If that assumption is correct, sales should surprise on the upside in the coming quarters.

But where Biden has opted to run his economy hot, spending trillions of dollars on household stimulus and infrastructure to goose the economy, Xi is running his cold in a bid to finally break China’s addiction to fueling growth with speculative apartment construction and low-return projects funded by opaque local borrowing. If China is a “ticking time bomb,” Xi’s aim is to defuse it.

The clash of economic philosophies between the world’s two largest economies is already shifting investment flows and may delay the date at which China overtakes the US, or perhaps mean that moment will never arrive. The risk for Xi and his team, led by Premier Li Qiang and Vice Premier He Lifeng, is that the determination to avoid excessive stimulus undermines confidence across the nation’s 1.4 billion people. 

China’s banks are organs of the state so they will have to make loans if so directed. Today’s data suggests they are not going to do so until directed. When credit is withheld from the property sector it has a self-reinforcing effect. If consumers can’t get loans, they can’t buy homes and developers are unable to finance construction. China is looking at a very dangerous environment because property development and infrastructure represent a massive chunk of the economy. That has potential repercussions in every commodity exporting country.

Strike action in Australia’s LNG sector could begin as early as Sept. 2 if new talks between Woodside Energy Group Ltd. and union officials on pay and conditions fail to resolve disputes. Ballots are also taking place on potential walkouts by workers at Chevron Corp. facilities.

Any outages would threaten about 10% of global supply and a local export sector that generated an estimated A$92 billion ($59 billion) in earnings in the year to June 30.

European storage is 90% full. Australian strike action is not going to spark a repeat of the price-insensitive buying seen last year. Eventually LNG workers will be placated and gas will flow in plenty of time for the Northern hemisphere winter. 

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Speculation about a Modi-Xi meeting has grown following a series of high-level contacts between India and China in recent weeks. Both National Security Adviser Ajit Doval and external affairs minister S Jaishankar have met top Chinese diplomat Wang Yi, who is currently the foreign minister, on the margins of multilateral gatherings in recent weeks.

The joint statement issued after the latest meeting between Indian and Chinese military commanders on the standoff on the Line of Actual Control (LAC) has also fuelled speculation about a Modi-Xi meeting in Johannesburg. The statement, issued after the talks held during August 13-14, had described the discussions as positive and constructive.

There is rampant speculation the BRICS countries are preparing to announce the creation of a gold-backed currency unit. I’m still at a loss as to how that will work. The five members are hardly bosom buddies and any monetary co-operation is more likely to involve greater use of the Renminbi in trade with  China. I do expect a memorandum of understanding to be signed amid plenty of photo ops. Six months from now there will be little evidence of progress.

Crypto traders are now focusing on the $25,000 level for Bitcoin, below which options positioning suggests another cascade of liquidations could hit. 

“With limited catalysts to push Bitcoin higher in the short term, a fall below $25,000 could put bears in charge, and if the rout in global risk assets continues, Bitcoin could face further downside,” said Josh Gilbert, market analyst at trading and investing firm eToro.

A Wall Street Journal report citing documents that Elon Musk’s SpaceX has sold off its Bitcoin holdings after writing down $373 million also weighed on sentiment. It wasn’t clear from the Journal report when SpaceX had sold its Bitcoin.

Bitcoin is volatile. It is prone to large moves and these are to be expected when dealing with the asset. That means position sizing has to take account of the potential for volatility. The price is now testing the region of both the 200-day and 1000-day MAs as well as the upper side of the underlying base formation. This is a major decision point for the price.

Still, Hilary is expected to bring widespread heavy rain to California and the US Southwest, raising risks of power outages, mudslides and flooding along with disruptions to ground transportation and air travel. The rain could start in the region as early as Saturday, with the worst of it arriving late Sunday into Monday.

A wide area could get 2 to 4 inches, Douty said, which would be similar to the powerful winter storms that sometimes hit California and bring flooding. Desert communities, such as Palm Springs, as well as the many railroad lines that cross the area and pass through the mountains could also be imperiled, he said.

Flood watches cover parts of California, Arizona, Nevada, and Utah, including Los Angeles, San Diego and Las Vegas. Flooding could be worst across Southern California, especially around San Diego, the California Governor’s Office of Emergency Services said in a statement.

The cold (bone chilling) water off the coast of California is usually enough to deter the formation of hurricanes in the region. By the time Hilary makes it to Southern California it will have lost intensity. The biggest challenge from storms over the last several years has been rain rather than wind speed. On this occasion, the storm could drop anywhere from 2 to 4 inches of rain on Southern California. 

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

Some of the topics discussed include: Bticoin breaks lower, gold holds decline, oil fails to hold rebound, Nasdaq-100 extends decline, China supports the Renminbi but not in a dynamic manner, risk-off fuelled by real yields hitting new highs, Treasuries are short-term oversold so some consolidation is likely but the trend is higher. yield curve beginning to trend higher.  

So, how do those who reduce the debt burdens do it? It primarily depends on whether the debt is in one’s own currency or a foreign currency (if it’s in one’s own currency like China’s debt is, it’s easier to manage) and whether it is held by one’s own citizens or foreigners (if it’s held by one’s own citizens like China’s debt is, it’s easier to manage)—though it is never easy. Given these circumstances, it also depends on how the restructuring is done. A well-done restructuring happens in a balanced way. I call that a “beautiful deleveraging.” It balances deflationary defaults/restructurings with inflationary printing of money/debt monetization to spread out the burden. The mechanics of this process are explained in the first chapter of the book linked above, so I won’t try to squeeze them in here.

China is overdue in doing this, so in my opinion, it needs to follow this beautiful deleveraging process now because the debt-burdened balance sheets and burdensome debt service payments are freezing the economy, especially at the provincial level and most especially in some of the poorest provinces. One day the United States, Europe, and Japan will probably have to do their own deleveragings, which I expect to follow this process. Because the stabilities of orders (also known as “Mandates of Heaven”) in all countries are driven by the interrelated forces of 1) the credit/debt/economic dynamic, 2) the internal political dynamic, 3) the external geopolitical dynamic, 4) acts of nature (i.e., droughts, floods, and pandemics), and 5) human inventiveness (especially of new technologies), and because how this deleveraging process is handled has a big effect on the overall order or disorder of the system, it’s worth keeping in mind how this deleveraging dynamic works, which is why I’m passing along Principles for Navigating Big Debt Crises to you now. I hope it’s of some help.

We can assume China’s policy makers have a better understanding of the country’s debt issues that we do. There is no doubt having the majority of debt denominated in the domestic currency and having few external liabilities provides China with a strong position to deal with excess debt.

If deleveraging is performed flawlessly, the process could take a decade or longer of subpar growth. The importance of construction and property to the economy will need to shrink. That represents an existential threat to the global commodity sector which depends on Chinese demand growth to support production aspirations.

Contributing to the selloff in the asset class, Japan — which has the developed world’s lowest interest rates thanks to its ultra-easy monetary policy — saw weak investor interest when selling 20-year notes Thursday.

The yield on a Bloomberg index for total returns on global sovereign debt rose to 3.3% Wednesday, the highest since August 2008. Sovereign bonds worldwide have handed investors a loss of 1.2% this year, making the asset class the worst performer across Bloomberg’s major debt indexes. 

It’s a reversal from the start of the year, when optimism that rate hikes were close to ending sent global bonds soaring, with the Bloomberg Global Aggregate benchmark jumping more than 3% in January for its best opening month to a year on record. The gauge slid Wednesday to be down 0.1% for the year.

Treasury yields have been up for six consecutive days so a pause in the region of the October 2022 peak is quite likely. That would help to unwind the short-term oversold condition.

However, the medium-term challenge is GDP Now is at 5.75%, unemployment is still very low and inflationary pressures are still well above target. There is not much to stop the Fed from continuing to raise rates.

Indonesian President Joko Widodo set a modest growth outlook next year as he underscores a narrowing window to get the country’s young population rich before it grows old.

Gross domestic product is expected to grow 5.2% in 2024, Jokowi — as the president is known — said in his annual budget speech to parliament on Wednesday. That’s toward the lower end of a 5.1%-5.7% initial estimate.

Fiscal deficit is projected to be 2.29% of GDP next year, in line with the government’s latest outlook for this year’s shortfall at 2.28%, lower than the figure in the 2023 budget. That’s still well below the legal limit of 3%.

Indonesia is a significant potential beneficiary of the increasingly acrimonious relationship between China and the USA. Diversification of manufacturing capacity is an increasingly important theme and with a large young population Indonesia is in a positive position. The country’s primary challenge will be in continuity of rule when Jokowi hands over control to the next generation.  A successful transition of power would be a major indicator of improving standards of governance.

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

Some of the topics discussed include: real yields hit new recovery highs, gold and silver break lower, dollar firm, 10-year yields exceeed 4.25%, stock markets under pressure, oil unwinding short-term overbought, 

The minutes also conveyed optimism about the outlook for the US economy as the Fed’s influential staff economists “no longer judged that the economy would enter a mild recession toward the end of the year.”

Still, they expected economic growth over the next two years “would run below their estimate of potential output growth, leading to a small increase in the unemployment rate relative to its current level.”

This long-term chart of the core services less housing index helps to highlight why the Fed is so focused on getting inflation back down to trend now rather than later. The rate bottomed near 2% in 1963 and trended higher until 1970.

The closing of the gold window in 1971 temporarily got the inflation issue under control but the demise of the Dollar was one of the primary causes of the oil embargo. Inflation came roaring back, and it was a decade before the rate dropped back below 6%.

The main argument is the Treasury is now increasing the quantity of debt issued so it more closely approximates the deficit.

Until now, the difference between spending and revenue raising, via debt, has been met with cash pulled from other areas of the government. That is now reaching its conclusion, so debt issuance has to increase to bridge the gap in funding. That siphons money out of the banking system and further tightens liquidity.

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 on a daily basis until there is a change.

Indeed, while one could suggest that LLMs will subsume many apps on one axis, I think it’s equally likely that they will enable a whole new wave of unbundling on other axes, as startups peel off dozens more use cases from Word, Salesforce and SAP, and build a whole bunch more big companies by solving problems that no-one had realised were problems until LLMs let you solve them. That’s the process that explains why big companies already have 400 SaaS apps today, after all.

More fundamental, of course, there is the error rate. ChatGPT can try to answer ‘anything’ but the answer might be wrong. People call this hallucinations, making things up, lying or bullshitting - it’s the ‘overconfident undergraduate’ problem. I think these are all unhelpful framings: I think the best way to understand this is that when you type something into a prompt, you’re not actually asking it to answer a question at all. Rather, you’re asking it “what sort of answers would people be likely to produce to questions that look like this?” You’re asking it to match a pattern.

Hence, if I ask ChatGPT4 to write a biography of myself, and then ask it again, it gives different answers. It suggests I went to Cambridge, Oxford or the LSE; my first job was in equity research, consulting or financial journalism. These are always the right pattern: it’s the right kind of university and the right kind of job (it never says MIT and then catering management). It is giving 100% correct answers to the question “what kinds of degrees and jobs are people like Benedict likely to have done?” It’s not doing a database lookup: it’s making a pattern.

This gels with my experience of using ChatGPT. In market terms, the AI answer is a moving average. It gives you a general idea of what the market is doing without exact accuracy about what is happening right now, or whether something important is happening at the margin. The difficulty, of course, is that all the interesting details are at the margin because that it is the marginal buyer which sets the price.

I am considering holding a Chart Seminar in London in November. Please contact Sarah at [email protected] to register your interest. 

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

Some of the topics discussed include: China cuts rates and renminbi tests lows, miners and industrial commodities under pressure, UK wages surprise on the upside downward pressure on the stock market as BoE hikes priced in, Wall Street weakens further as retail sales suggest more scope for rate hikes. 

The move is the latest example of how President Xi Jinping’s government is limiting access to information in order to more closely guard data it deems sensitive and manage the narrative about the weakening economy.

China has over the past year limited access to corporate data, court documents, academic journals and raided expert networks serving businesses, hampering investors’ ability to assess the economy. Officials have also been downplaying economic risks like deflation, with some Chinese-based analysts saying they were instructed by regulators and their companies not to discuss the matter publicly.

When everything is going well the opacity of data is ignored. There have been doubts about the accuracy of China’s data for decades, so it is hardly surprising they have given up on printing data which does not gel with the official position. It is being viewed as a negative today because the problems are deep and the response is not what investors have come to expect. Cutting interest rates has only confirmed the depth of the issues facing the Chinese property/infrastructure sectors.

Whole-economy regular wage growth accelerated to 7.8% in the three months to June, from 7.5% previously. That was well above our estimate for 7.5% and consensus expectations for 7.4%. The surprise, relative to our forecasts, was almost fully accounted for by revisions to the data rather than news about the monthly pace of growth in June.

Whole-economy wage gains including bonuses ticked up faster, to 8.2% in June from 7.2% previously, largely due to one-off payments made to National Health Service workers on that month.

More important for the BOE is regular pay growth in the private sector, which climbed to 8.2% in the three months to June, from 7.9% in May. We expected it to rise to 7.8%, while the BOE was projecting it to come in at 7.6% in its August forecast. One thing to note is that the reading is still affected by April’s near-10% rise in the national minimum wage.

UK CPI will be updated tomorrow. The ex-food, alcohol and tobacco measure was still close to the peak level of around 7% at the last update in late June. With wage growth picking up, the Bank of England will be hoping inflationary pressures don’t reaccelerate and contribute to a dreaded wage-price spiral.

The latest data illustrate how American households — supported by a strong labor market and rising wages — are so far buttressing the economy against recession in the face of high interest rates. Too much strength, however, could force the Federal Reserve to pursue more aggressive policy should inflationary pressures prove sticky. 

“This will boost optimism that because of the resilience of the consumer we can achieve that soft landing,” Lindsey Piegza, chief economist at Stifel Financial Corp., said on Bloomberg Television. At the same time, “this simply means the Fed will have to be more aggressive raising rates higher and keeping rates higher for longer,” she said.

This is another example of how the excess liquidity in the economy has not yet been burned off. That is going to put further pressure on the Fed to continue to tighten and suggests the soft landing hype needs to find more data points to support the argument.

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 on a daily basis 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: China high yield continues to trend lower, Renminbi at an important area of potential support, oil steady, gold and dollar test their MAs, Nasdaq-100 firms on strong NVDA performance and speculation China will export deflation. Treasury yields continue to firm on issuance angst. 

I am a pre-subscriber, but I was a little underwhelmed by the portion of today's first item, from David Brown, that I have access to.

He doesn't say who the "real expert" that he quotes on the new energy system is.    A nuclear power station is a controlled version of a nuclear bomb, thus the enormous amount of energy available. I fully concede that today's power stations are completely safe in their operation. But of course, there is the question of safe disposal of the waste, which the extract doesn't address;  and also the security required for that waste, to prevent it getting into rogue hands.

It is irritating to have statistics such as coal being 4000×, gas 100× and hydro 30× more dangerous than nuclear, without any detail as to how these figures are calculated (although that detail would require a lot more space).

Just because someone writes in such a haughty fashion doesn't necessarily make him an expert.   Top scientists usually write with courtesy, and with a degree of humility, acknowledging that they could still be wrong, since the world of atoms and nuclei may still have some surprises up its sleeve for us.

I do concede, however, that, since I do not have access to the full discussion, some of these points may have been raised there.

Many thanks Eoin, for the commentary that I do have access to.   Your commentary on extracts often clarifies points which seemed obscure, and is always full of common sense!

Thank you for this question and if you are interested in a deeper discussion then I encourage you to subscribe. In short, the data about nuclear safety is well understood. However, the perception of safety is very different. For example, spending your life breathing in noxious fumes is much more likely to lead to health complications than living near a nuclear power plant.

This kind of statistic is akin to the fact you are more likely to be killed crossing the road than in a plane crash. The simple fact is we are less intimidated by the familiar. If we have the will to change, it will happen. The primary question is as a society do we want to talk about decarbonizing, or do we want to do something about it?

What is your opinion on the latest figures of the Fed's policy of quantitative tightening?

Quantitative tightening remains a central part of the Fed’s tool kit as they attempt to bring inflationary pressures back to an acceptable level.

The Fed’s balance sheet continues to contract and moved to new reaction lows a month ago. The process is slow relative to the accumulation phase between the low in 2019 and the peak in 2022 and it will continue until deflationary forces replace inflationary fears.

Missed payments on multiple high-yield investment products by a major Chinese shadow lender may trigger a “vicious cycle” for property developers’ financing and more delinquencies for trust products, JPMorgan Chase & Co. warns.

Liquidity stress is intensifying for indebted developers and their non-bank creditors after a unit of Zhongzhi Enterprise Group Co., one of China’s largest private wealth managers, failed to deliver on-time payments for multiple products, the US bank’s analysts including Katherine Lei wrote in a report Monday.  

About 2.8 trillion yuan ($386 billion), or 13% of China’s total trust assets, may see rising default risks, given their exposure to the property industry and local government debt, the report says. Up to 80% of local government financing vehicles may not be able to repay their debt principals, JPMorgan estimated.

“The trust defaults may set off a vicious cycle on POE (privately-owned enterprise) developers’ onshore debt,” the analysts wrote. “This follows that rising concern of developer defaults weakens investment sentiment and, as a result, trust companies may not be able or willing to roll over existing real estate-related products.”

When Chinese investors talk about trusts, they are a totally different product to what most global investors are accustomed to in their home markets. Trusts in China ballooned in popularity about a decade ago. They were set up as a way for wealthy private individuals to get guaranteed and outsized returns from investing in property. The sales pitch highlighted how the government never allowed defaults, so investment was risk free. Just how inaccurate that statement is has been highlighted on several occasions over the last several years.

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

The decision offers reassurance on “the health of the Credit Suisse non-core portfolio,” Citigroup analysts said in a note. “The early voluntary repayment could potentially also help in other matters, such as negotiating the retention of the Credit Suisse Swiss business.” 

The fate of the Swiss bank has been widely watched as Swiss-based companies and politicians have voiced concerns over the market power that the combined bank would exercise. UBS plans to make a decision in the third quarter on whether it will fully integrate it with its own Swiss unit or seek another option such as spinning it off or listing it publicly.

The Swiss government essentially gifted Credit Suisse to UBS. In so doing they have given the impression that UBS is now too big to fail since it is the only remaining Swiss bank with global heft. Regardless of whether the rump of Credit Suisse is spun off, the dominant position now held by UBS is unassailable within the Swiss market.

But in the meantime, world markets are tightening, leaving oil inventories in developed nations about 115 million barrels below their five-year average, according to the report. Global stockpiles are set to deplete by a hefty 1.7 million barrels a day in the second half of the year, and preliminary data appears to confirm declines in July and August, the IEA said.

Major consuming nations have criticized the Saudis and their allies in OPEC+ for constricting supplies, warning that a renewed inflationary spike would squeeze consumers and endanger the global recovery. Nonetheless, Riyadh has said it could deepen current cutbacks if necessary. 

Output from the Organization of Petroleum Exporting Countries and its partners plunged last month to near a two-year low as the Saudis implemented a unilateral cut of 1 million barrels a day. Russia, a fellow member of the coalition, is also reducing exports.

Saudi Arabia has ambitious infrastructure construction underway and that does not come cheap. They have a vested interest in sustaining a higher for longer price environment to supplement the budget and ensure social harmony. Russia also has an obvious incentive to support prices.

Meanwhile, non-OPEC investment in additional supply has been meagre over the last several years. Companies have been cautious about announcing production investment because of the potential for backlash from the media. That changed over the last several months with both BP and Shell announcing more investment but that takes time to come to fruition.

Thank you for this sweeping overview mid-week. Your conclusion that the next decade will be more about honing our trading instinct begs the question, what sectors would make the best tradeable core in this scenario? Would it continue to be technology where volatility provides outsized moves, or commodities where the underlying asset would be a store of value? As a follow-on question, would growth vs value become an obsolete paradigm, replaced perhaps by “cyclical sectors are king” paradigm? Thank you!

Thank you for this question which may be of interest to the Collective. For anyone who missed the post on Tuesday, here is a link. 

There are several conflicting themes emerging for the remainder of the 2020s. Debt will be a big one because the secular trend of total return on bonds has been broken. The dalliance with modern monetary theory was the last hurrah for unbridled money printing. From here on out central bankers are likely to be a lot more cautious because an inflationary mindset is a very difficult psychological trend to break.

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

Some of the topics discussed include: 30-year Treasury auction disappoints, yields rise, equities reverse early gains, dollar steadies, China property continues to disappoint, oil eases back.  

It was a memorable 3 days with you last week. It gave us time to discuss several things in depth, including our new industrial revolution. Thank you for capturing some of the key points in your recent writings. I gave a lengthy presentation on our new 3rd Industrial Revolution at David Fuller's Markets Now meeting in London, February 2015, and Forbes interviewed me a few weeks later. Here is an extract from the article:

"We clearly have the new communication system, the internet, and I suggest we can reasonably date the beginning of this industrial revolution to the mid 1990s when desktop PCs became linked for the first time by Tim Berners-Lee’s World Wide Web and Marc Andreesen’s Mosaic/ Netscape system. The internet is well ahead of the other two factors."

This was some years before Klaus Schwab and the World Economic Forum took up the theme. And yes, I do rank it as the 3rd, not 4th as Schwab does: the development of computer tech in the 1970s-1980s hardly constituted a revolution. It did not drive a massive increase in productivity because it lacked most of the key factors required for an industrial revolution.

Back then, we did not have the internet, the first of the 3 new factors required, and which more recently has given a massive change in communication and in distribution of information and goods. That became feasible from 1994 when Netscape appeared and especially from 2007 with the first iPhone followed by other smartphones.

However, the other two required breakthroughs are still missing today. Our new industrial revolution has stalled with just 1 of the 3 essential factors in place. Our financial system is completely unreformed and inefficient; and we have not rolled-out a viable new energy source.

In fact, in my opinion, the Western world has gone seriously off-track in the eight years since I first presented on this in 2015. You captured the issue very succinctly when wrote "The basic assumption is technological innovation allows us to do more with less". "The challenge in the energy and financial sectors is the solutions being proposed do less with more." The current direction of travel on renewable energy is worrying. In addition to the gross inefficiency, unreliability, and cost-ineffectiveness, of wind and solar power, we have the bizarre belief in shipping wood chips across the Atlantic to fuel 'green' energy in the UK. Apparently, returning to the energy source that pre-dated our 1st and 2nd revolutions constitutes progress!

I do not have much idea about the new financial system, but the new energy system is obvious and that is the topic of this note to you today, Eoin. From our discussions last week, I believe you are of the same view, and it would be good to pass this on to all subscribers of Fuller Treacy Money. I recommend this article. At last we are beginning to see writing by experts in the energy sector, real experts, with factual information. This article on nuclear power will (hopefully) be followed by many more.

Here are some key points from the article:

The only viable and scalable low-carbon power technology is nuclear. Today, more than 400 reactors generate about 10 per cent of world electricity. They are emissions free and reliable. Their only problem is that they are perceived to be dangerous and are violently opposed by some groups.

Dangerous, nuclear is not. Per unit of energy generated, nuclear power has proved to be much safer than any other major power generating technology. Coal, gas and hydropower are respectively 4000, 100 and 35 times more dangerous.

In the event of an accident where all power supply is lost, all modern reactors will shut down safely. Over the last 60 years the only nuclear powerplant accident with directly measurable health consequences has been at Chernobyl. The reactor there was operated in defiance of all safety principles and used obsolete technology without shielding: its failure has no relevance to a discussion of normal nuclear reactor safety.

Many different designs of small modular reactors which are built on a production line basis are proposed and several are now under construction. None of them can melt down and release radiation.

A rapid switch from expensive, impractical wind and solar power to reliable nuclear is the only way of meeting the net zero goal while keeping the lights on and society in general functioning.

Nuclear power needs to be recognised as a low emissions source of electricity that is superior to wind and solar power. Subsidies, mandates and other enormously expensive policies intended to promote wind and solar power must be abandoned and the money switched to expediting nuclear power.

Governments need to face the fact that wind and solar power can never deliver their net zero dreams of low cost, reliable, emissions free electricity. They have only two realistic options: switch to nuclear power, or abandon net zero.

The article is referring to current fission technology, and - as you mentioned recently - we may soon have even more powerful and efficient fusion energy to follow.

I am hoping that we are past peak nonsense about so-called 'green technologies' and that realism will begin to reassert itself. Eoin, it would be good if you can periodically update us on investment themes related to nuclear power. And let's return to the topic of what might constitute "doing more with less" in a much-needed new financial system.

Thanks and best wishes to Aisling and family. It truly was wonderful to host you last week.

Thank you for this generous email and it was very enlightening to spend several days discussing the outlook for the markets and the world. Thank also for your wonderful hospitality in hosting us at Cambridge and sharing your insights on the practical use of AI.

Energy is the most vital sector in the world and comes with vested interests we are only partially aware of. The trend of investment in renewable energy is still alive and well. Just yesterday Germany announced another investment package. The €58 billion will focus on retrofitting buildings to be more energy efficient as well as new construction, investment in new green energy projects (€12 billion) and additional money for building semiconductor factories. 

The biggest challenge for nuclear energy is large political parties have made their opposition to the technology a part of their manifesto and that has been the case for decades. To turn that around both sides of the political divide will need to agree on the solution.

The probe comes as the US National Highway Traffic Safety Administration is in the midst of a series of investigations targeting Tesla, its products and its chief executive officer, Elon Musk. Federal regulators are looking into possible problems with the company’s seat belts, steering wheels and driver-assistance features. 

The Florida collision is the 54th included in NHTSA’s Special Crash Investigation of advanced driver-assistance systems like Tesla’s Autopilot. The broader probe began in 2016 after a fatal accident in Florida involving a Model S that was being operated with its automated driving system activated.

Tesla vehicles have been involved in all but nine of the incidents that have been added to NHTSA’s investigation. The automaker, which has disbanded its media relations department, didn’t respond to a request for comment.

There are also pending cases focusing on Tesla’s claims on the range of its vehicles. Tesla has ridden a wave of enthusiasm centred on delivering the first desirable all electric vehicles. The company’s success has prompted both new upstarts and forced legacy companies to alter their business models. They did not have much choice because one of the primary factors that allowed Tesla to survive was its dominance of carbon credit sales.

One of the leading crypto mining publicly traded companies Riot Platforms Inc (NASDAQ: RIOT) released its Q2 2023 earnings on Wednesday. According to the announcement, Riot Platforms produced 1,775 Bitcoins during the quarter that ended on June 30, compared to 1,395 Bitcoins that were generated during the same period last year. As a result, the company announced that its total revenue for the quarter came in at $76.7 million, compared to approximately $72.9 million for the same period last year. However, analysts surveyed by FactSet expected the crypto mining company to report revenue of about $84.6 million.

Riot Platforms was punished today for the earnings miss but I am encouraged by the fact that it has successfully reduced the cost of mining a new bitcoin and has additional revenue streams which ensure it has the ability to weather crypto winters. Selling electricity credits back to the grid was a significant money spinner in the 2nd quarter for example. 

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

Some of the topics discussed include: Nasdaq-100 breaks short-term uptrend, oil extends rebound, bond yields steady ahead of CPI, Cjhina deflation, gold eases and dollar at potential resistance,

 Workers at offshore facilities serving Woodside’s North West Shelf LNG project are seeking a strike, according to results of the voting published Wednesday by Australia’s Fair Work Commission. 

The Australian Workers’ Union voted for protected action options, according to the document

NOTE: That follows a vote to strike by workers at two of Chevron’s LNG facilities in Australia earlier this week; no clarity on timing of a possible action yet
A Woodside spokesperson said Wednesday the “positive progress” is being made in negotiations and that “parties have reached an in-principle agreement on a number of issues”

Australia is one of the largest exporters of LNG so any threat to supply sends a shiver through the global market. The reaction in European markets this morning was swift. The price of natural gas in the Netherlands jumped by 40%. On the chart it looks like a blip relative to the size of the move posted in the aftermath of Russia’s invasion of Ukraine.

Array Technologies jumps as much as 26%, the most intraday in a year, after boosting its annual adjusted EPS and Ebitda projections, though the maker of renewable energy equipment also lowered its revenue expectations for the year. Analysts are encouraged by Array’s focus on profitability and rebound in bookings.

In June, a hailstorm in Scottsbluff Nebraska resulted in the single biggest insurance claim in the solar sector to date. Premiums doubled for the entire sector as a result. Array Technology installs mechanisms on solar panels so they are always pointing directly at the sun. That enhances energy output so they pay for themselves over time. They are also supposd to flip the panels away from oncoming weather when needed. The facility was fitted with Array’s optimization technology but there is some doubt as to whether it was operational at the time of the storm. Today’s announcement suggests the episode has no effect on sales.

For the past four years, WeWork Inc. has been trying to deliver a turnaround story — one in which the rowdy co-working startup transforms into a stable, profitable public company. It sloughed off Adam Neumann, its rambunctious co-founder and former chief executive officer, and replaced him with an industry veteran boasting a reputation of saving troubled real estate companies.

WeWork was not saved, and the co-working company now says there’s “substantial doubt” it will even be able to stay in business.

The New York-based company is bleeding cash, and customers of its office rentals are canceling their memberships in droves, WeWork said in a statement Tuesday. Its shares fell 26% in the first minutes of trading Wednesday morning.

WeWork has looked like a bankruptcy candidate for quite some time. The primary reason it has survived is because its landlords are fearful that the loss of a primary tenant would bring down values in a whole building and contribute to the re-rating of commercial real estate. WeWork has been bargaining hard to renegotiate leases on just that assumption. They have been making the argument landlords would be better getting something rather than nothing. That doesn’t seem to be working any more.

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

Some of the topics discussed include: stocks ease back but close off lows. oil rebounds from intraday lows, gold steady, industrial metals weak, China weak, bonds steady, bitcoin eases following yesterday's surge. 

I had the great pleasure of spending several days last week with David Brown talking about the drug discovery process, how artificial intelligence can be harnessed to speed it up, and how that all fits into the discussion around the evolution of a 3rd (some say 4th) industrial revolution. I discussed some of my updated thoughts on the subject in the Friday Big Picture audio/video. Here are some more; hopefully in a clearer format.

Before digging into the weeds, there is an important question to answer. Can you have a secular bull market without an industrial revolution? Of course the answer is yes. Industrial revolutions evolve over decades and can last a century. In that time there will be several long-term bull and bear market cycles through various asset classes.

For example, the evolution of China’s economy over the last 30 years was about the adoption of capitalistic economic policies and harnessing the labour of a billion people. That was a political decision to deploy lessons already learned elsewhere rather than new thinking. Secular bull markets in commodities develop because demand leaps higher before supply can adjust.

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

Some of the topics discussed include: oil prices steady and chances of an embargo, stocks steady, biotech ETF lower but large caps breaking higher, Apple extends decline but Dow Industrials firms. Japan firms on weaker Yen. 

A 5.5-magnitude earthquake that hit the Eastern Chinese province of Shandong in the early hours of Sunday caused the collapse of 126 buildings and injured at least 21 people, according to early reports from state media.

The quake struck the county of Pingyuan in the Dezhou city at 2:33am Sunday, Xinhua News Agency reported. No leaks were found in oil and gas pipelines and power supply was normal, the report said. 

State-run CCTV later said the quake may have had a maximum magnitude of 7 at a depth of 10 kilometers and warned that there may be more casualties, citing data from the China Earthquake Administration. 

The slew of natural disasters in China over the last week, from record floods to earthquakes, offers ample scope for the government to change course and provide the fiscal stimulus the economy needs. How China decides to deal with the slowdown in the property sector will have global repercussions.

Block Inc., Jack Dorsey’s payments company, tumbled as much as 14% after reporting results that fell short of some analysts’ expectations.

Jefferies Financial Group Inc.’s Trevor Williams said in a note that Block’s earnings report “lacks oomph,” even after the company increased its adjusted profit outlook for the rest of the year when it reported second-quarter results Thursday. BTIG LLC analyst Lance Jessurun called Block’s July trends “disappointing.”

Shares of the San Francisco-based company fell 11% to $65.14 at 12:32 p.m. in New York, after dropping to as low as $63.38 in the biggest intraday plunge since March.

Williams cited limited upside for Block’s Cash App, which started as a person-to-person payments app and now offers access to a variety of financial products. He also called “tepid” one measure of how many dollars are processed by Block’s payments systems. 

Both Cash App and Square, a payments platform geared toward small and midsize businesses, beat expectations in the second-quarter.

Block is growing and is profitable but not enough to justify the valuation. That’s problematic in a high interest rate environment where the hurdle for investor interest is above zero.

Wage levels are also set to rise for non-salaried workers. A labor ministry advisory panel agreed in late July to target lifting the national average for the minimum wage by 4.3% to above 1,000 yen ($7.05) for the first time, in what would be the largest boost since the ministry began keeping records in 1978. That change, which is expected to kick in from October, would affect about 20% of the labor force, according to JPMorgan.

Advances on incomes bode well for the Bank of Japan, where Governor Kazuo Ueda is watching income trends closely as a key factor that will determine the long-range likelihood of achieving 2% inflation on a sustained basis. Ueda has said repeatedly that for now there remains some distance to reaching that goal, implying that the bank will maintain its accommodative stance for a while. 

Wage demand growth is a central component in sustaining inflationary pressures, so this is good news from the perspective of central bankers who seek to defeat the deflationary mindset. That’s not good news for the currency but the stock market is reflecting the inflationary bias.

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The high-yield bond market is becoming a favorite of companies that once raised cash using leveraged loans, luring borrowers with lower costs and a wealth of investor demand.

US firms have sold $55 billion of secured notes in the junk-bond market so far in 2023, marking a 17% year-over-year increase, according to CreditSights data. It’s the biggest issuance jump in more than a decade — and an indication that companies are replacing floating-rate debt in the wake of the Federal Reserve’s most-aggressive monetary tightening cycle in decades.

“It’s a good way to balance each of these markets off each other, and honestly, a better cost of capital,” said John Cokinos, global head of leveraged finance at RBC Capital Markets. “You can hedge naturally by just having fixed-rate debt.”

The conclusion that now is the time to issue fixed rate debt is an interesting one. It reflects the acceptance of the view that rates are going to stay high indefinitely and are unlikely to contract. The good news for borrowers is they can always refinance when yields decline but that does come with costs. The cheaper option would be to issue floating rate debt today on the expectation rates are unlikely to stay high forever and seek to refinance with fixed rates later.

Wheat futures rose, paring a weekly loss, after a major Russian grain-shipping hub was temporarily closed. 

Traffic from Novorossiysk port was halted for several hours on Friday after a Ukrainian drone attack on a naval vessel. The overnight assault was repelled without damage to port facilities, according to the Russian Defense Ministry. 

Although the closure was short-lived, it adds to uncertainty about Black Sea trade flows as the war escalates in the midst of this year’s harvests. Russia is the world’s top wheat shipper, and its farmers are collecting a second bumper crop. 

Chicago futures climbed as much as 3.5%, before paring the advance. Prices have been increasingly volatile after Russia attacked Ukrainian sea and river ports following its withdrawal from the agreement to allow Ukrainian crop shipments through the Black Sea last month.

Ukraine’s supporters and military donors fervently hope the country can continue to mount a stout defence, but they are cautious about the potential for escalation. However, the nature of war is tit-for-tat attacks that seek to deprive adversaries of the tools necessary to persist in resistance.

Colombian President Gustavo Petro said that an investigation into whether his son took money from organized crime must be allowed to follow its course, since “no one can be above the law.” 

A prosecutor said Thursday that Petro’s eldest son Nicolás put some of the tainted money to his father’s successful 2022 campaign and kept some of it for himself. 

Gustavo Petro, center, waves to supporters alongside his son Nicolas Petro Burgos, right, on election night in Bogota, Colombia, on May 29, 2022.

The scandal is likely to further weaken the leftist government’s ability to pass its radical health, pension and labor reforms, and may also hurt its performance in upcoming regional elections in October. 

“The Petro administration lost a lot of leverage with this,” said Sergio Guzman, the director of Colombia Risk Analysis, a Bogota-based consultancy. “It was going to have a difficult time to move things through in congress, but this makes it all the more difficult.”

Even so, people who think Petro is now finished are “jumping the gun”, Guzman said. 

Investors often welcome developments that hinder Petro’s welfare reforms, fearing these will blow out the fiscal deficit. The peso was 1.9% stronger at 10.40 a.m. in Bogota, the best performance in emerging markets. 

The point that immediately came to mind is seeing the above story. The first is how many leaders in the so-called developed world would be willing to allow their son to stand trial for corruption? My suspicion is it would be dealt with well before it ever became mainstream news.

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Some of the topics discussed include: bond yield extend breakout, yield curve inversion tightening, high yield bonds and stocks testing their recent lows, dollar pauses, gold eases and oil rebounds. 

In late trading, a $207 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) whipsawed after Amazon.com Inc.’s bullish revenue forecast and Apple Inc.’s disappointing iPhone sales. Longer-dated Treasuries are now set for their worst week of 2023 amid signs of unexpected economic strength and concern over a widening budget deficit.

A report Thursday underscored resilient demand for workers, while separate numbers showed labor productivity climbed, helping to offset rising labor costs. Those figures preceded the government’s employment data — forecast to show the US added 200,000 jobs in July. While that would be the weakest print since the end of 2020, it’s still a strong advance historically.

The 10-year yield continues to extend its breakout. This is less about inflation fears and more about profligate spending and no plan to rein it in. The higher the return demanded by investors to buy Treasuries the worse the relative return from other asset classes looks.

First came the tacky influencers, broadcasting raucous yacht parties to their followers caught in pandemic lockdowns. Then came Russian wealth, from cash to crypto, looking for a home unbothered by pesky sanctions after the invasion of Ukraine.

Now Dubai’s latest well-heeled digital-nomad demographic is the wealthy Western hedge-funder, judging by a recent flow of talent from the likes of Millennium Management and ExodusPoint Capital Management, as the emirate and its neighbor Abu Dhabi court the rich and powerful with tax-free status, lighter regulation and an Asia-friendly time zone.

This may feel like “deja vu” for some — and perhaps out of whack with the hedge fund industry’s stagnant growth, poor performance and worsening environment for raising money last year — but there’s a good chance the Gulf is going to become a test case in the race for rich talent in a world dominated by geopolitics and war. It will also likely raise the hackles of tax authorities across the West at a time of stretched budgets.

The big question for global investors is whether Dubai or Abu Dhabi is a viable alternative to Switzerland? That suggestion is not as risible as it initially sounds. Twenty years ago, Switzerland was a banking haven where the secrecy of clients was prized, the rule of law was unquestioned and geopolitical neutrality was assured. Today’s none of that is as secure as it was in the past. Meanwhile, the reception global investors receive in the UAE is warm, the security of deposits and geopolitical neutrality are all improving.  

Saudi Arabia extended its unilateral oil production cut by another month, and said it could be prolonged further or even deepened. 

The leader of the Organization of Petroleum Exporting Countries will continue the cutback of 1 million barrels a day — launched last month — into September, according to a statement on state Saudi Press Agency. That will hold output at about 9 million barrels a day, the lowest level in several years. Crude futures jumped. 

The measure — which comes on top of supply curbs Riyadh was already making with others in the OPEC+ producers group — is intended “to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets.” Its ally Russia also said it will extend its export curbs, but taper them slightly.

The global oil market has been finely balanced but that is now changing. The USA’s Strategic Reserve is largely empty. As suppliers reduce the availability of crude oil, the ability of alternative sources to boost production is limited. Meanwhile, global economic activity is not falling quick enough to reduce demand to keep the market balanced.

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Some of the topics discussed include: US debt downgrade and positive employment weighs on bonds, stocks and boosts the dollar. Brazil surprises with a 0.50% rate cut and guidance for further moves,Japan, China, Europe all pullback in a broad risk off day.

The bump in issuance showcases the rising borrowing needs that contributed to Tuesday’s decision by Fitch Ratings to lower the sovereign US credit rating by one level, to AA+. Fitch said it expects US finances to deteriorate over the next three years. That’s from an already enlarged position — the Treasury is pencilling in some $1 trillion worth of issuance in all this quarter.

Ahead of the announcement, dealers had also laid out expectations for stepped-up issuance of other securities, and for the boosts in sales to stretch into 2024, which the Treasury confirmed on Wednesday.

“While these changes will make substantial progress towards aligning auction sizes with intermediate- to long-term borrowing needs, further gradual increases will likely be necessary in future quarters” the department said in a statement.

The original downgrade in 2011 was a non-event for the bond market because demand was ample. This time around the Treasury is increasing borrowing and expects to issue more than the market expected. The fact this event was followed by stronger employment numbers suggests scope for higher rates. Bonds are a market like any other and more supply against a low demand environment is negative for prices.

Thai government considers suspension of rice farming in central region to save water amid drought, Bangkok Post reports, citing Surasri Kidtimonton, secretary-general of the Office of the National Water Resources.

Rainfall this year has been lower than average triggering an expectation of drier rainy season

Hardest areas will likely to be the central provinces, which is considered the country’s main rice growing region

Region may face 40% drop in accumulated precipitation this rainy season, likely causing widespread water shortages

Water levels are also at low level at four main dams including Bhumibol in Tak province and Sirikit in Uttaradit province

Pressure on rice harvests across India, Pakistan and now Thailand have the potential to be a potent source of inflation in the region over the next several months. That’s not good news for regional central banks that were hoping to be able to ease policy.

Solar plants and wind farms are crucial weapons in the battle against greenhouse gas emissions. So it’s a cruel irony that their effectiveness is often hobbled by damage from storms, floods, wildfires and other disasters amplified by global warming. That’s making them harder to insure. Property insurance premiums for US solar facilities have soared as much as 50% over the past year, threatening to slow their rollout and derail global efforts to cut carbon emissions.

Contradiction is a central theme in crowd psychology. It is the most obvious sign a mania is in play. The logic of hedging the risk of climate change with the climate dependent energy sources does not make sense to me. The fact that the media consensus calls for a greater weighting of solar and wind energy without making allowances for the risk that weather is variable and likely to become more so is evidence of a mania.

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There’s a shift in tone happening across Wall Street.

Oppenheimer Asset Management’s Chief Investment Strategist John Stoltzfus lifted his target on the S&P 500 index to a Street high, a day after Morgan Stanley’s Michael Wilson, one of the market’s leading doomsayers, sounded less bearish than usual. 

Stoltzfus now sees the S&P 500 index hitting 4,900 by the end of the year, leaving room for another 7% gain. The target would mark a new record for the gauge, and one that plays out against bearish predictions by bigwigs such as Wilson, JPMorgan Chase & Co.’s Marko Kolanovic and Bank of America Corp.’s Michael Hartnett. They were all blindsided by the resilience of the US economy and the sudden emergence of the artificial intelligence-driven tech rally.

US equities have soared this year as investors looked past the earnings recession, growing confident that the economy would avoid any serious slowdown while anticipating less hawkish monetary policy. Even so, the most recent median forecast among Wall Street strategists tracked by Bloomberg still showed a decline for the index by year-end.

The time to be most cautious is when all of the bears throw in the towel and become bullish. That suggests the available cash on the sidelines, waiting for a pullback has given up, and conceded now is the time to take big bets.

British home prices fell further last month as borrowing costs held back demand, one of the largest mortgage lenders said, although the rate of decline showed a chance that the market could yet avoid a hard landing.

The Nationwide Building Society said prices fell 3.8% in its July survey from a year ago, quicker than a 3.5% drop in the previous month. While economists expected a slightly larger decline of 4%, it was the third straight month that prices had fallen at their fastest pace since the global financial crisis
in 2009.

The first hard data about July home prices indicate the 13 interest-rate increases from the Bank of England since the end of 2021 have strained consumer’s ability to pay for properties. Values based on Nationwide’s data have fallen about 4.5% since they peaked in August and now average £260,828 ($334,000).

Still, prices have so far avoided the collapse that appeared possible last autumn, when then-Prime Minister Liz Truss’s ill-fated budget sent borrowing costs soaring to 14-year highs. In November, Nationwide warned of a potential 30% drop in prices in a worst-case scenario.

It is well understood that quantitative easing causes asset price inflation. Over the last 15 years, artificially low rates and abundant credit supported concurrent bull markets in bonds, equities, property, crypto and collectibles. It is logical to then conclude that quantitative tightening and higher rates results in asset price disinflation/deflation.

The decision by policymakers to cut rates by a consensus-busting 100bp to 10.25% on Friday made Chile the first major EM to lower its key policy rate since the aggressive post-pandemic tightening cycle across the emerging world. With the economy struggling, a marked improvement in the outlook for inflation encouraged policymakers to get on with the job of reversing past hikes that saw Chile’s policy rate climb from just 0.5% in mid-2021 to a peak of 11.25% in late-2022.

As we noted earlier this year, further steep declines in inflation, led by food, should make space for additional easing in the months ahead.

Who’s next?
Attention now turns to which EM central banks are likely to be the next to start cutting rates. Prior to lowering rates on Friday, the CBC was one of a handful of EM central banks that had already been on pause for longer than usual. Others in that category include Brazil and the Czech Republic, where monetary policy announcements are due this week on Wednesday and Thursday respectively.

Brazil’s central bank is expected to cut by at least 0.25% tomorrow. With a positive real rate in excess of 10% they have ample room to cut rates to support flagging economic activity.

Since several Latin American countries were both early and aggressive in their efforts to tame inflation. The trajectory of their policy offers a picture of what we can expect from countries that were slower to act.

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There are very few conditions in which we have any specific expectations for near-term market action. The exceptions are when the market is strenuously overextended in a “trap door” situation combining rich valuations with unfavorable internals, or when the market is strenuously compressed following a material improvement in valuations.

Over the past four decades, I’ve developed scores of interesting “syndromes” and relationships, many that I’ve discussed in these market comments. A subset of these capture features of “overextension” and “compression” that occur at major market extremes.

The chart below shows one such syndrome that emerged in mid-April as the S&P 500 advanced above 4400, and again last week, which I consider part of the same overextended advance. The criteria are intended to capture a certain “relentlessness” of speculation that often precedes abrupt market losses. This particular syndrome is among several that I monitor to identify speculative “blowoffs.”

In this case, “relentlessness” is defined by periods when the S&P 500 is at least 4.5% above its 50-day average, with a relative strength index (RSI) above 70 – indicating a preponderance of advancing days relative to declining days in recent weeks, a 14-day rate of change (ROC) greater than 4% in the S&P 500, and at least a mildly bullish tilt in advisory sentiment, based on Investors Intelligence data. Periods like this look briefly parabolic, as investors increasingly buy every dip, in fear of missing out.

The Nasdaq-100 is back testing its all-time peak and the dominance of the FANGMANT shares is now both more concentrated and dominant relative to the wider market than at the peak in late 2021. That alone is grounds for caution but it is not a timing indicator, the overbought conditions can progress even further. It is, however, a very good time to have one’s stop strategy in place.

The purchases are another reminder that Japan’s slow retreat from ultra-loose monetary policy brings a heightened risk of volatility and intervention across multiple asset classes globally. It also underscores the challenge in interpreting a rates regime that is built on gray lines to let the BOJ be flexible rather than clarity for markets.

“That flexibility is obtained with opaqueness on when they intervene,” said Calvin Yeoh, portfolio manager at hedge fund Blue Edge Advisors Pte in Singapore. “Flexibility is another word for optionality, which potentially manifests as volatility. No one knows exactly when, between 0.5 to 1%, does the BOJ step in meaningfully, which is an awfully wide range.”

Japan has been engaged in a version of modern monetary theory for decades. They have been issuing oodles of debt with no real plan to pay it back because deflation prevailed and there was no urgency. While inflation is the stated desired outcome, it does not come without risk.