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Metra fares hold steady for 2022 but budget shortfall looms as ridership stagnates

Metra proposed a $900 million operating budget for 2022 that has no fare increases, but requires an additional $93 million in federal funding as ridership remains stalled at less than a third of pre-pandemic levels.Metra proposed a $900 million operating budget for 2022 that has no fare increases, but requires an additional $93 million in federal funding as ridership remains stalled at less than a third of pre-pandemic levels......»»

Category: topSource: chicagotribuneOct 13th, 2021

Futures Jump On Profit Optimism As Oil Tops $85; Bitcoin Nears $60,000

Futures Jump On Profit Optimism As Oil Tops $85; Bitcoin Nears $60,000 One day after the S&P posted its biggest one-day surge since March, index futures extended this week’s gains, helped by a stellar bank earnings, while the latest labor market data and inflation eased stagflation fears for the time being. . The 10-year Treasury yield rose and the dollar was steady. Goldman Sachs reports on Friday. At 715 a.m. ET, Dow e-minis were up 147 points, or 0.42%, S&P 500 e-minis were up 16.5 points, or 0.37%, and Nasdaq 100 e-minis were up 42.75 points, or 0.28%. Oil futures topped $85/bbl, jumping to their highest in three years amid an energy crunch that’s stoking inflationary pressures and prices for raw materials. A gauge of six industrial metals hit a record high on the London Metal Exchange.  Energy firms including Chevron and Exxon gained about half a percent each, tracking Brent crude prices that scaled the 3 year high. Solid earnings in the reporting season are tempering fears that rising costs and supply-chain snarls will hit corporate balance sheets and growth. At the same time, the wider debate about whether a stagflation-like backdrop looms remains unresolved. “We don’t sign up to the stagflation narrative that is doing the rounds,” said Hugh Gimber, global strategist at the perpetually optimistic J.P. Morgan Asset Management. “The economy is being supported by robust consumer balance sheets, rebounding business investment and a healthy labor market.” “After a choppy start to the week, equity markets appear to be leaning towards a narrative that companies can continue to grow profits, despite the combined pressures of higher energy prices and supply chain disruptions,” said Michael Hewson, chief market analyst at CMC Markets in London. Bitcoin and the crypto sector jumped after Bloomberg reported late on Thursday that the Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading in a watershed moment for the cryptocurrency industry. Bitcoin traded off session highs having tested $60k during Asian hours, but will likely rise to new all time highs shortly. Also overnight, Joe Biden signed a bill providing a short-term increase in the debt limit, averting the imminent threat of a financial calamity. But it only allows the Treasury Department to meets its financial obligations until roughly Dec. 3, so the can has been kicked for less than two months - brace for more bitter partisan battles in the coming weeks. This week’s move into rate-sensitive FAAMG growth names looked set to continue, with their shares inching up. Moderna rose 3.0% after a U.S. FDA panel voted to recommend booster shots of its COVID-19 vaccine for Americans aged 65 and older and high-risk people. Western Digital slipped 2.5% as Goldman Sachs downgraded the storage hardware maker’s stock to “neutral” from “buy”. Here are some of the key premarket movers on Friday morning: Virgin Galactic (SPCE US) shares slump as much as 23% in U.S. premarket trading as the firm is pushing the start of commercial flights further into next year after rescheduling a test flight, disappointing investors with the unexpected delay to its space tourism business plans Cryptocurrency-exposed stocks rise in U.S. premarket trading after a report that the Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading.  Bit Digital (BTBT US) +6.7%, Riot Blockchain (RIOT US) +4.6%, Marathon Digital (MARA US) +3.6% Alcoa (AA US) shares jump 5.6% in thin volumes after co. reported profits that beat the average analyst estimate and said it will be paying a dividend to its shareholders Moderna (MRNA US) extends Thursday’s gains; Piper Sandler recommendation on Moderna Inc. to overweight from neutral, a day after co.’s Covid-19 booster got FDA nod for use in older, high-risk people Duck Creek Technologies (DCT US) shares fell 12% in Thursday postmarket trading after the software company projected 2022 revenue that fell short of the average analyst estimate 23andMe Holdings (ME US) soared 14% in Thursday postmarket trading after EMJ Capital founder Eric Jackson called the genetics testing company “the next Roku” on CNBC Corsair Gaming (CRSR US) shares fell 3.7% in post-market trading after it cut its net revenue forecast for the full year Early on Friday, China's PBOC broke its silence on Evergrande, saying risks to the financial system are controllable and unlikely to spread. Authorities and local governments are resolving the situation, central bank official Zou Lan said. The bank has asked lenders to keep credit to the real estate sector stable and orderly. In Europe, gains for banks, travel companies and carmakers outweighed losses for utilities and telecommunications industries, pushing the Stoxx Europe 600 Index up 0.3%. Telefonica fell 3.3%, the most in more than four months, after Barclays cut the Spanish company to underweight. Temenos and Pearson both slumped more than 10% after their business updates disappointed investors. Here are some of the biggest European movers today: Devoteam shares rise as much as 25% after its controlling shareholder, Castillon, increased its stake in the IT consulting group to 85% and launched an offer for the remaining capital. QinetiQ rises as much as 5.4% following a plunge in the defense tech company’s stock on Thursday. Investec upgraded its recommendation to buy and Berenberg said the shares now look oversold. Hugo Boss climbs as much as 4.4% to the highest level since September 2019 after the German apparel maker reported 3Q results that exceeded expectations. Jefferies (hold) noted the FY guidance hike also was bigger than expected. Mediclinic rises as much as 7.7% to highest since May 26 after 1H results, which Morgan Stanley says showed strong underlying operating performance with “solid metrics.” Temenos sinks as much as 14% after the company delivered a “mixed bag” with its 3Q results, according to Baader (sell). Weakness in Europe raises questions about the firm’s outlook for a recovery in the region, the broker said. Pearson declines as much as 12%, with analysts flagging weaker trading in its U.S. higher education courseware business in its in-line results. Earlier in the session, Asian stocks headed for their best week in more than a month amid a list of positive factors including robust U.S. earnings, strong results at Taiwan Semiconductor Manufacturing Co. and easing home-loan restrictions in China.  The MSCI Asia Pacific Index gained as much as 1.3%, pushing its advance this week to more than 1.5%, the most since the period ended Sept. 3. Technology shares provided much of the boost after chip giant TSMC announced fourth-quarter guidance that beat analysts’ expectations and said it will build a fabrication facility for specialty chips in Japan. Shares in China rose as people familiar with the matter said the nation loosened restrictions on home loans at some of its largest banks.  Conditions are good for tech and growth shares now long-term U.S. yields have fallen following inflation data this week, Shogo Maekawa, a strategist at JPMorgan Asset Management in Tokyo. “If data going forward are able to provide an impression that demand is strong too -- on top of a sense of relief from easing supply chain worries -- it’ll be a reason for share prices to take another leap higher.”  Asia’s benchmark equity gauge is still 10% below its record-high set in February, as analysts stay on the lookout for higher bond yields and the impact of supply-chain issues on profit margins.  Japanese stocks rose, with the Topix halting a three-week losing streak, after Wall Street rallied on robust corporate earnings. The Topix rose 1.9% to close at 2,023.93, while the Nikkei 225 advanced 1.8% to 29,068.63. Keyence Corp. contributed the most to the Topix’s gain, increasing 3.7%. Out of 2,180 shares in the index, 1,986 rose and 155 fell, while 39 were unchanged. For the week, the Topix climbed 3.2% and the Nikkei added 3.6%. Semiconductor equipment and material makers rose after TSMC said it will build a fabrication facility for specialty chips in Japan and plans to begin production there in late 2024.  U.S. index futures held gains during Asia trading hours. The contracts climbed overnight after a report showed applications for state unemployment benefits fell last week to the lowest since March 2020.  “U.S. initial jobless claims fell sharply, and have returned to levels seen before the spread of the coronavirus,” said Nobuhiko Kuramochi, a market strategist at Mizuho Securities in Tokyo. “The fact that more people are returning to their jobs will help ease supply chain problems caused by the lack of workers.” Australian stocks also advanced, posting a second week of gains. The S&P/ASX 200 index rose 0.7% to close at 7,362.00, with most sectors ending higher.  The benchmark added 0.6% since Monday, climbing for a second week. Miners capped their best week since July 16 with a 3% advance. Hub24 jumped on Friday after Evans & Partners upgraded the stock to positive from neutral. Pendal Group tumbled after it reported net outflows for the fourth quarter of A$2.3 billion. In New Zealand, the S&P/NZX 50 index fell 0.3% to 13,012.19 In rates, the U.S. 10-year Treasury yield rose over 3bps to 1.54%. Treasuries traded heavy across long-end of the curve into early U.S. session amid earning-driven gains for U.S. stock futures. Yields are higher by more than 3bp across long-end of the curve, 10- year by 2.8bp at about 1.54%, paring its first weekly decline since August; weekly move has been led by gilts and euro-zone bonds, also under pressure Friday, with U.K. 10-year yields higher by 3.3bp. Today's bear-steepening move pares the weekly bull-flattening trend. U.S. session features a packed economic data slate and speeches by Fed’s Bullard and Williams.   In FX, the Bloomberg Dollar Spot Index was little changed even as the greenback weakened against most of its Group-of-10 peers; the euro hovered around $1.16 while European and U.S. yields rose, led by the long end. Norway’s krone led G-10 gains as oil jumped to $85 a barrel for the first time since late 2018 amid the global energy crunch; the currency rallied by as much as 0.6% to 8.4015 per dollar, the strongest level since June. New Zealand’s dollar advanced to a three-week high as bets on RBNZ’s tightening momentum build ahead of Monday’s inflation data; the currency is outperforming all G-10 peers this week. The yen dropped to a three-year low as rising equities in Asia damped demand for low-yielding haven assets. China’s offshore yuan advanced to its highest in four months while short-term borrowing costs eased after the central bank added enough medium-term funds into the financial system to maintain liquidity at existing levels. In commodities, crude futures trade off best levels. WTI slips back below $82, Brent fades after testing $85. Spot gold slips back through Thursday’s lows near $1,786/oz. Base metals extend the week’s rally with LME nickel and zinc gaining over 2%. Today's retail sales report, due at 08:30 a.m. ET, is expected to show retail sales fell in September amid continued shortages of motor vehicles and other goods. The data will come against the backdrop of climbing oil prices, labor shortages and supply chain disruptions, factors that have rattled investors and have led to recent choppiness in the market. Looking at the day ahead now, and US data releases include September retail sales, the University of Michigan’s preliminary consumer sentiment index for October, and the Empire State manufacturing survey for October. Central bank speakers include the Fed’s Bullard and Williams, and earnings releases include Charles Schwab and Goldman Sachs. Market Snapshot S&P 500 futures up 0.3% to 4,443.75 STOXX Europe 600 up 0.4% to 467.66 German 10Y yield up 2.4 bps to -0.166% Euro little changed at $1.1608 MXAP up 1.3% to 198.33 MXAPJ up 1.2% to 650.02 Nikkei up 1.8% to 29,068.63 Topix up 1.9% to 2,023.93 Hang Seng Index up 1.5% to 25,330.96 Shanghai Composite up 0.4% to 3,572.37 Sensex up 0.9% to 61,305.95 Australia S&P/ASX 200 up 0.7% to 7,361.98 Kospi up 0.9% to 3,015.06 Brent Futures up 1.0% to $84.83/bbl Gold spot down 0.5% to $1,787.54 U.S. Dollar Index little changed at 93.92 Top Overnight News from Bloomberg China’s central bank broke its silence on the crisis at China Evergrande Group, saying risks to the financial system stemming from the developer’s struggles are “controllable” and unlikely to spread The ECB has a good track record when it comes to flexibly deploying its monetary instruments and will continue that approach even after the pandemic crisis, according to policy maker Pierre Wunsch Italian Ministry of Economy and Finance says fourth issuance of BTP Futura to start on Nov. 8 until Nov. 12, according to a statement The world’s largest digital currency rose about 3% to more than $59,000 on Friday -- taking this month’s rally to over 35% -- after Bloomberg News reported the U.S. Securities and Exchange Commission looks poised to allow the country’s first futures-based cryptocurrency ETF Copper inventories available on the London Metal Exchange hit the lowest level since 1974, in a dramatic escalation of a squeeze on global supplies that’s sent spreads spiking and helped drive prices back above $10,000 a ton A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded higher amid tailwinds from the upbeat mood across global peers including the best day for the S&P 500 since March after strong US bank earnings, encouraging data and a decline in yields spurred risk appetite. The ASX 200 (+0.7%) was positive as the tech and mining sectors continued to spearhead the advances in the index in which the former took impetus from Wall St where the softer yield environment was conducive to the outperformance in tech, although mining giant Rio Tinto was among the laggards following weaker quarterly production results. The Nikkei 225 (+1.8%) was buoyed as exporters benefitted from the JPY-risk dynamic but with Fast Retailing failing to join in on the spoils despite an 88% jump in full-year net as its profit guidance underwhelmed with just 3% growth seen for the year ahead, while Taiwan's TAIEX (+2.2%) surged with the spotlight on TSMC earnings which reached a record high amid the chip crunch and with the Co. to also build a factory in Japan that could receive JPY 500bln of support from the Japanese government. The Hang Seng (+1.5%) and Shanghai Comp. (+0.4%) were initially indecisive amid the overhang from lingering developer default concerns although found some mild support from reports that China is to relax banks' mortgage limits through the rest of 2021. Focus was also on the PBoC which announced a CNY 500bln MLF operation, although this just matched the amount maturing this month and there are mixed views regarding prospects of a looming RRR cut with ANZ Bank's senior China strategist recently suggesting the potential for a 50bps cut in RRR or targeted MLF as early as today, although a recent poll showed analysts had pushed back their calls for a RRR cut from Q4 2021 to Q1 2022. Finally, 10yr JGBs marginally pulled back from this week’s advances after hitting resistance at the 151.50 level, with demand hampered amid the firm gains in Japanese stocks and the lack of BoJ purchases in the market today. Top Asian News Hong Kong Probes Going Concern Reporting of Evergrande U.S. Futures Hold Gains as Oil Hits 3-Year High: Markets Wrap Toyota Cuts November Outlook by 15% on Parts Shortage, Covid Yango Group Wires Repayment Fund for Onshore Bond Due Oct. 22 Bourses in Europe have held onto the modest gains seen at the cash open (Euro Stoxx 50 +0.4%; Stoxx 600 +0.3%), but the region is off its best levels with the upside momentum somewhat faded heading into the US open, and amidst a lack of fresh newsflow. US equity futures have remained in positive territory, although the latest leg lower in bonds has further capped the tech-laden NQ (+0.2%), which underperforms vs the ES (+0.3%), YM (+0.3%) and RTY (+0.7%), with traders on the lookout for another set of earnings, headlined by Goldman Sachs at 12:25BST/07:25EDT. Back to Europe, bourses see broad-based gains, whilst sectors are mostly in the green with clear underperformance experienced in defensives, with Telecoms, Utilities, Healthcare and Staples at the foot of the bunch. On the flipside, Banks reap rewards from the uptick in yields, closely followed by Travel & Leisure, Autos & Parts and Retail. Renault (+4%) drives the gains in Autos after unveiling a prototype version of the Renault Master van that will go on sale next year. Travel & Leisure is bolstered by the ongoing reopening trade with potential tailwinds heading into the Christmas period. Retail meanwhile is boosted by Hugo Boss (+1.8%) topping forecasts and upgrading its guidance. Top European News Autumn Heat May Curb European Gas Demand, Prices Next Week Bollore Looking for Buyers for Africa Logistics Ops: Le Monde U.K. Offers Foreign Butchers Visas After 6,000 Pigs Culled Europe’s Car-Sales Crash Points to Worse Year Than Poor 2020 In FX, the Greenback was already losing momentum after a relatively tame bounce on the back of Thursday’s upbeat US initial claims data, and the index failed to sustain its recovery to retest intraday highs or remain above 94.000 on a closing basis. However, the Buck did reclaim some significant and psychological levels against G10, EM currencies and Gold that was relishing the benign yield environment and the last DXY price was marginally better than the 21 DMA from an encouraging technical standpoint. Nevertheless, the Dollar remains weaker vs most majors and in need of further impetus that may come via retail sales, NY Fed manufacturing and/or preliminary Michigan Sentiment before the spotlight switches to today’s Fed speakers featuring arch hawk Bullard and the more neutral Williams. GBP/NZD/NOK - Sterling has refuelled and recharged regardless of the ongoing UK-EU rift over NI Protocol, though perhaps in part due to the fact that concessions from Brussels are believed to have been greeted with welcome surprise by some UK Ministers. Cable has reclaimed 1.3700+ status, breached the 50 DMA (at 1.3716 today) and yesterday’s best to set a marginal new w-t-d peak around 1.3739, while Eur/Gbp is edging closer to 0.8450 having clearly overcome resistance at 1.1800 in the reciprocal cross. Similarly, the Kiwi continues to derive impetus from the softer Greenback and Aud/Nzd flows as Nzd/Usd extends beyond 0.7050 and the Antipodean cross inches nearer 1.0500 from 1.0600+ highs. Elsewhere, the Norwegian Crown is aiming to add 9.7500 to its list of achievements relative to the Euro with a boost from Brent topping Usd 85/brl at one stage and a wider trade surplus. CAD - The Loonie is also profiting from oil as WTI crude rebounds through Usd 82 and pulling further away from 1.5 bn option expiry interest between 1.2415-00 in the process, with Usd/Cad towards the base of 1.2337-82 parameters. EUR/AUD/CHF/SEK - All narrowly mixed and rangy vs the Greenback, or Euro in the case of the latter, as Eur/Usd continues to straddle 1.1600, Aud/Usd churn on the 0.7400 handle, the Franc meander from 0.9219 to 0.9246 and Eur/Sek skirt 10.0000 having dipped below the round number briefly on Thursday. In commodities, WTI and Brent front month futures remain on a firmer footing, aided up the overall constructive risk appetite coupled with some bullish technical developments, as WTI Nov surpassed USD 82/bbl (vs 81.39/bbl low) and Brent Dec briefly topped USD 85/bbl (vs 84.16/bbl low). There has been little in terms of fresh fundamental catalysts to drive the price action, although Russia's Gazprom Neft CEO hit the wires earlier and suggested that reserve production capacity could meet the increase in oil demand, whilst a seasonal decline in oil consumption is possible and the oil market will stabilise in the nearest future. On the Iranian JCPOA front, Iran said it is finalising steps to completing its negotiating team but they are absolutely decided to go back to Vienna discussions and conclude the negotiations, WSJ's Norman. The crude complex seems to have (for now) overlooked reports that the White House is engaged in diplomacy" with OPEC+ members regarding output. UK nat gas prices were higher as European players entered the fray, but prices have since waned off best levels after Russian Deputy PM Novak suggested that gas production in Russia is running at maximum capacity. Elsewhere, spot gold has been trundling amid yield-play despite lower despite the Buck being on the softer side of today’s range. Spot gold failed to hold onto USD 1,800/oz status yesterday and has subsequently retreated below its 200 DMA (1,794/oz) and makes its way towards the 50 DMA (1,776/oz). LME copper prices are on a firmer footing with prices back above USD 10,000/t – supported by technicals and the overall risk tone, although participants are cognizant of potential Chinese state reserves releases. Conversely, Dalian iron ore futures fell for a third straight session, with Rio Tinto also cutting its 2021 iron ore shipment forecasts due to dampened Chinese demand. US Event Calendar 8:30am: Sept. Retail Sales Advance MoM, est. -0.2%, prior 0.7% 8:30am: Sept. Retail Sales Ex Auto MoM, est. 0.5%, prior 1.8% 8:30am: Sept. Retail Sales Control Group, est. 0.5%, prior 2.5% 8:30am: Sept. Retail Sales Ex Auto and Gas, est. 0.3%, prior 2.0% 8:30am: Oct. Empire Manufacturing, est. 25.0, prior 34.3 8:30am: Sept. Import Price Index MoM, est. 0.6%, prior -0.3%; YoY, est. 9.4%, prior 9.0% 8:30am: Sept. Export Price Index MoM, est. 0.7%, prior 0.4%; YoY, prior 16.8% 10am: Aug. Business Inventories, est. 0.6%, prior 0.5% 10am: Oct. U. of Mich. 1 Yr Inflation, est. 4.7%, prior 4.6%; 5-10 Yr Inflation, prior 3.0% 10am: Oct. U. of Mich. Sentiment, est. 73.1, prior 72.8 10am: Oct. U. of Mich. Current Conditions, est. 81.2, prior 80.1 10am: Oct. U. of Mich. Expectations, est. 69.1, prior 68.1 DB's Jim Ried concludes the overnight wrap A few people asked me what I thought of James Bond. I can’t say without spoilers so if anyone wants my two sentence review I will cut and paste it to all who care and reply! At my age I was just impressed I sat for over three hours (including trailers) without needing a comfort break. By the time you email I will have also listened to the new Adele single which dropped at midnight so happy to include that review as well for free. While we’re on the subject of music, risk assets feel a bit like the most famous Chumbawamba song at the moment. They get knocked down and they get up again. Come to think about it that’s like James Bond too. Yesterday was a strong day with the S&P 500 (+1.71%) moving back to within 2.2% of its all-time closing high from last month. If they can survive all that has been thrown at them of late then one wonders where they’d have been without any of it. The strong session came about thanks to decent corporate earnings releases, a mini-collapse in real yields, positive data on US jobless claims, as well as a further fall in global Covid-19 cases that leaves them on track for an 8th consecutive weekly decline. However, inflation remained very much on investors’ radars, with a range of key commodities taking another leg higher, even as US data on producer prices was weaker than expected. Starting with the good news, the equity strength was across the board with the S&P 500 experiencing its best daily performance since March, whilst Europe’s STOXX 600 (+1.20%) also put in solid gains. It was an incredibly broad-based move higher, with every sector group in both indices rising on the day, with a remarkable 479 gainers in the S&P 500, which is the second-highest number we’ve seen over the last 18 months. Every one of the 24 S&P 500 industry groups rose, led by cyclicals such as semiconductors (+3.12%), transportation (+2.51%) and materials (+2.43%). A positive start to the Q3 earnings season buoyed sentiment, as a number of US banks (+1.45%) reported yesterday, all of whom beat analyst estimates. In fact, of the nine S&P 500 firms to report yesterday, eight outperformed analyst expectations. Weighing in on recent macro themes, Bank of America Chief, Brian Moynihan, noted that the current bout of inflation is “clearly not temporary”, but also that he expects consumer demand to remain robust and that supply chains will have to adjust. I’m sure we’ll hear more from executives as earnings season continues today. Alongside those earnings releases, yesterday saw much better than expected data on the US labour market, which makes a change from last week’s underwhelming jobs report that showed the slowest growth in nonfarm payrolls so far this year. In terms of the details, the weekly initial jobless claims for the week through October 9, which is one of the most timely indicators we get, fell to a post-pandemic low of 293k (vs. 320k expected). That also saw the 4-week moving average hit a post-pandemic low of 334.25k, just as the continuing claims number for the week through October 2 hit a post-pandemic low of 2.593m (vs. 2.670m expected). We should get some more data on the state of the US recovery today, including September retail sales, alongside the University of Michigan’s consumer sentiment index for October. That optimism has fed through into Asian markets overnight, with the Nikkei (+1.43%), the Hang Seng (+0.86%), the Shanghai Comp (+0.29%) and the KOSPI (+0.93%) all moving higher. That came as Bloomberg reported that China would loosen restrictions on home loans amidst the concerns about Evergrande. And we also got formal confirmation that President Biden had signed the debt-limit increase that the House had passed on Tuesday, which extends the ceiling until around December 3. Equity futures are pointing to further advances in the US and Europe later on, with those on the S&P 500 (+0.30%) and the STOXX 50 (+0.35%) both moving higher. Even with the brighter news, inflation concerns are still very much with us however, and yesterday in fact saw Bloomberg’s Commodity Spot Index (+1.16%) advance to yet another record high, exceeding the previous peak from early last week. That was partly down to the continued rise in oil prices, with WTI (+1.08%) closing at $81.31/bbl, its highest level since 2014, just as Brent Crude (+0.99%) hit a post-2018 high of $84.00/bbl. Both have posted further gains this morning of +0.58% and +0.61% respectively. Those moves went alongside further rises in natural gas prices, which rose for a 3rd consecutive session, albeit they’re still beneath their peak from earlier in the month, as futures in Europe (+9.14%), the US (+1.74%) and the UK (+9.26%) all moved higher. And that rise in Chinese coal futures we’ve been mentioning also continued, with their rise today currently standing at +13.86%, which brings their gains over the week as a whole to +39.02% so far. As well as energy, industrial metals were another segment where the recent rally showed no sign of abating yesterday. On the London metal exchange, a number of multi-year milestones were achieved, with aluminum prices (+1.60%) up to their highest levels since 2008, just as zinc prices (+3.73%) closed at their highest level since 2018. Separately, copper prices (+2.56%) hit a 4-month high, and other winners yesterday included iron ore futures in Singapore (+1.16%), as well as nickel (+1.99%) and lead (+2.43%) prices in London. With all this momentum behind commodities, inflation expectations posted further advances yesterday. Indeed, the 10yr US Breakeven closed +1.0bps higher at 2.536%, which is just 3bps shy of its closing peak back in May that marked its highest level since 2013. And those moves came in spite of US producer price data that came in weaker than expected, with the monthly increase in September at +0.5% (vs. +0.6% expected). That was the smallest rise so far this year, though that still sent the year-on-year number up to +8.6% (vs. +8.7% expected). That rise in inflation expectations was echoed in Europe too, with the 10yr UK breakeven (+5.6bps) closing at its highest level since 2008, whilst its German counterpart also posted a modest +0.7bps rise. In spite of the rise in inflation expectations, sovereign bonds posted gains across the board as the moves were outweighed by the impact of lower real rates. By the end of yesterday’s session, yields on 10yr Treasuries were down -2.6bps to 1.527%, which came as the 10yr real yield moved back beneath -1% for the first time in almost a month. Likewise in Europe, yields pushed lower throughout the session, with those on 10yr bunds (-6.3bps), OATs (-6.2bps) and BTPs (-7.1bps) all moving aggressively lower. To the day ahead now, and US data releases include September retail sales, the University of Michigan’s preliminary consumer sentiment index for October, and the Empire State manufacturing survey for October. Central bank speakers include the Fed’s Bullard and Williams, and earnings releases include Charles Schwab and Goldman Sachs. Tyler Durden Fri, 10/15/2021 - 07:50.....»»

Category: personnelSource: nytOct 15th, 2021

Futures Reverse Losses Ahead Of Key CPI Report

Futures Reverse Losses Ahead Of Key CPI Report For the second day in a row, an overnight slump in equity futures sparked by concerns about iPhone sales (with Bloomberg reporting at the close on Tuesday that iPhone 13 production target may be cut by 10mm units due to chip shortages) and driven be more weakness out of China was rescued thanks to aggressive buying around the European open. At 800 a.m. ET, Dow e-minis were up 35 points, or 0.1%, S&P 500 e-minis were up 10.25 points, or 0.24%, and Nasdaq 100 e-minis were up 58.50 points, or 0.4% ahead of the CPI report due at 830am ET. 10Y yields dipped to 1.566%, the dollar was lower and Brent crude dropped below $83. JPMorgan rose as much as 0.8% in premarket trading after the firm’s merger advisory business reported its best quarterly profit. On the other end, Apple dropped 1% lower in premarket trading, a day after Bloomberg reported that the technology giant is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units due to prolonged chip shortages. Here are some of the biggest U.S. movers today: Suppliers Skyworks Solutions (SWKS US), Qorvo (ORVO) and Cirrus Logic (CRUS US) slipped Tuesday postmarket Koss (KOSS US) shares jump 23% in U.S. premarket trading in an extension of Tuesday’s surge after tech giant Apple was rebuffed in two patent challenges against the headphones and speakers firm Qualcomm (QCOM US) shares were up 2.7% in U.S. premarket trading after it announced a $10.0 billion stock buyback International Paper (IP US) in focus after its board authorized a program to acquire up to $2b of the company’s common stock; cut quarterly dividend by 5c per share Smart Global (SGH US) shares rose 2% Tuesday postmarket after it reported adjusted earnings per share for the fourth quarter that beat the average analyst estimate Wayfair (W US) shares slide 1.8% in thin premarket trading after the stock gets tactical downgrade to hold at Jefferies Plug Power (PLUG US) gains 4.9% in premarket trading after Morgan Stanley upgrades the fuel cell systems company to overweight, saying in note that it’s “particularly well positioned” to be a leader in the hydrogen economy Wall Street ended lower in choppy trading on Tuesday, as investors grew jittery in the run-up to earnings amid worries about supply chain problems and higher prices affecting businesses emerging from the pandemic. As we noted last night, the S&P 500 has gone 27 straight days without rallying to a fresh high, the longest such stretch since last September, signaling some fatigue in the dip-buying that pushed the market up from drops earlier this year. Focus now turn to inflation data, due at 0830 a.m. ET, which will cement the imminent arrival of the Fed's taper.  "A strong inflation will only reinforce the expectation that the Fed would start tapering its bond purchases by next month, that's already priced in," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. "Yet, a too strong figure could boost expectations of an earlier rate hike from the Fed and that is not necessarily fully priced in." The minutes of the Federal Reserve's September policy meeting, due later in the day, will also be scrutinized for signals that the days of crisis-era policy were numbered. Most European equities reverse small opening losses and were last up about 0.5%, as news that German software giant SAP increased its revenue forecast led tech stocks higher. DAX gained 0.7% with tech, retail and travel names leading. FTSE 100, FTSE MIB and IBEX remained in the red. Here are some of the biggest European movers today: Entra shares gain as much as 10% after Balder increases its stake and says it intends to submit a mandatory offer. Spie jumps as much as 10%, the biggest intraday gain in more than a year, after the French company pulled out of the process to buy Engie’s Equans services unit. Man Group rises as much as 8.3% after the world’s largest publicly traded hedge fund announced quarterly record inflows. 3Q21 net inflows were a “clear beat” and confirm pipeline strength, Morgan Stanley said in a note. Barratt Developments climbs as much as 6.3%, with analysts saying the U.K. homebuilder’s update shows current trading is improving. Recticel climbs 15% to its highest level in more than 20 years as the stock resumes trading after the company announced plans to sell its foams unit to Carpenter Co. Bossard Holding rises as much as 9.1% to a record high after the company reported 3Q earnings that ZKB said show strong growth. Sartorius gains as much as 5.9% after Kepler Cheuvreux upgrades to hold from sell and raises its price target, saying it expects “impressive earnings growth” to continue for the lab equipment company. SAP jumps as much as 5% after the German software giant increased its revenue forecast owing to accelerating cloud sales. Just Eat Takeaway slides as much as 5.8% in Amsterdam to the lowest since March 2020 after a 3Q trading update. Analysts flagged disappointing orders as pandemic restrictions eased, and an underwhelming performance in the online food delivery firm’s U.S. market. Earlier in the session, Asian stocks posted a modest advance as investors awaited key inflation data out of the U.S. and Hong Kong closed its equity market because of typhoon Kompasu. The MSCI Asia Pacific Index rose 0.2% after fluctuating between gains and losses, with chip and electronics manufacturers sliding amid concerns over memory chip supply-chain issues and Apple’s iPhone 13 production targets. Hong Kong’s $6.3 trillion market was shut as strong winds and rain hit the financial hub.  “Broader supply tightness continues to be a real issue across a number of end markets,” Morgan Stanley analysts including Katy L. Huberty wrote in a note. The most significant iPhone production bottleneck stems from a “shortage of camera modules for the iPhone 13 Pro/Pro Max due to low utilization rates at a Sharp factory in southern Vietnam,” they added. Wednesday’s direction-less trading illustrated the uncertainty in Asian markets as traders reassess earnings forecasts to factor in inflation and supply chain concerns. U.S. consumer price index figures and FOMC minutes due overnight may move shares. Southeast Asian indexes rose thanks to their cyclical exposure. Singapore’s stock gauge was the top performer in the region, rising to its highest in about two months, before the the nation’s central bank decides on monetary policy on Thursday. Japanese stocks fell for a second day as electronics makers declined amid worries about memory chip supply-chain issues and concerns over Apple’s iPhone 13 production targets.  The Topix index fell 0.4% to 1,973.83 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.3% to 28,140.28. Toyota Motor Corp. contributed the most to the Topix’s loss, decreasing 1.3%. Out of 2,181 shares in the index, 608 rose and 1,489 fell, while 84 were unchanged. Japanese Apple suppliers such as TDK, Murata and Taiyo Yuden slid. The U.S. company is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units as prolonged chip shortages hit its flagship product, according to people with knowledge of the matter Australian stocks closed lower as banks and miners weighed on the index. The S&P/ASX 200 index fell 0.1% to close at 7,272.50, dragged down by banks and miners as iron ore extended its decline. All other subgauges edged higher. a2 Milk surged after its peer Bubs Australia reported growing China sales and pointed to a better outlook for daigou channels. Bank of Queensland tumbled after its earnings release. In New Zealand, the S&P/NZX 50 index rose 0.2% to 13,025.18. In rates, Treasuries extended Tuesday’s bull-flattening gains, led by gilts and, to a lesser extent, bunds. Treasuries were richer by ~2bps across the long-end of the curve, flattening 5s30s by about that much; U.K. 30-year yield is down nearly 7bp, with same curve flatter by ~6bp. Long-end gilts outperform in a broad-based bull flattening move that pushed 30y gilt yields down ~7bps back near 1.38%. Peripheral spreads widen slightly to Germany. Cash USTs bull flatten but trade cheaper by ~2bps across the back end to both bunds and gilt ahead of today’s CPI release. In FX, the Bloomberg Dollar Spot Index fell by as much as 0.2% and the greenback weakened against all of its Group-of-10 peers; the Treasury curve flattened, mainly via falling yields in the long- end, The euro advanced to trade at around $1.1550 and the Bund yield curve flattened, with German bonds outperforming Treasuries. The euro’s volatility skew versus the dollar shows investors remain bearish the common currency as policy divergence between the Federal Reserve and the European Central Bank remains for now. The pound advanced with traders shrugging off the U.K.’s weaker-than-expected economic growth performance in August. Australia’s sovereign yield curve flattened for a second day while the currency underperformed its New Zealand peer amid a drop in iron ore prices. The yen steadied after four days of declines. In commodities, crude futures hold a narrow range with WTI near $80, Brent dipping slightly below $83. Spot gold pops back toward Tuesday’s best levels near $1,770/oz. Base metals are in the green with most of the complex up at least 1%. To the day ahead now, and the main data highlight will be the aforementioned US CPI reading for September, while today will also see the most recent FOMC meeting minutes released. Other data releases include UK GDP for August and Euro Area industrial production for August. Central bank speakers include BoE Deputy Governor Cunliffe, the ECB’s Visco and the Fed’s Brainard. Finally, earnings releases include JPMorgan Chase, BlackRock and Delta Air Lines. Market Snapshot S&P 500 futures up 0.1% to 4,346.25 STOXX Europe 600 up 0.4% to 459.04 MXAP up 0.2% to 194.60 MXAPJ up 0.4% to 638.16 Nikkei down 0.3% to 28,140.28 Topix down 0.4% to 1,973.83 Hang Seng Index down 1.4% to 24,962.59 Shanghai Composite up 0.4% to 3,561.76 Sensex up 0.8% to 60,782.71 Australia S&P/ASX 200 down 0.1% to 7,272.54 Kospi up 1.0% to 2,944.41 Brent Futures down 0.4% to $83.12/bbl Gold spot up 0.5% to $1,768.13 U.S. Dollar Index down 0.23% to 94.30 German 10Y yield fell 4.2 bps to -0.127% Euro little changed at $1.1553 Brent Futures down 0.4% to $83.12/bbl Top Overnight News from Bloomberg Vladimir Putin wants to press the EU to rewrite some of the rules of its gas market after years of ignoring Moscow’s concerns, to tilt them away from spot-pricing toward long-term contracts favored by Russia’s state run Gazprom, according to two people with knowledge of the matter. Russia is also seeking rapid certification of the controversial Nord Stream 2 pipeline to Germany to boost gas deliveries, they said. Federal Reserve Vice Chairman for Supervision Randal Quarles will be removed from his role as the main watchdog of Wall Street lenders after his title officially expires this week. The EU will offer a new package of concessions to the U.K. that would ease trade barriers in Northern Ireland, as the two sides prepare for a new round of contentious Brexit negotiations. U.K. Chancellor of the Exchequer Rishi Sunak is on course to raise taxes and cut spending to control the budget deficit, while BoE Governor Andrew Bailey has warned interest rates are likely to rise in the coming months to curb a rapid surge in prices. Together, those moves would mark a simultaneous major tightening of both policy levers just months after the biggest recession in a century -- an unprecedented move since the BoE gained independence in 1997. Peter Kazimir, a member of the ECB’s Governing Council, was charged with bribery in Slovakia. Kazimir, who heads the country’s central bank, rejected the allegations A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mixed following the choppy performance stateside with global risk appetite cautious amid the rate hike bets in US and heading into key events including US CPI and FOMC Minutes, while there were also mild headwinds for US equity futures after the closing bell on reports that Apple is set to reduce output of iPhones by 10mln from what was initially planned amid the chip shortage. ASX 200 (unch.) was little changed as gains in gold miners, energy and tech were offset by losses in financials and the broader mining sector, with softer Westpac Consumer Confidence also limiting upside in the index. Nikkei 225 (-0.3%) was pressured at the open as participants digested mixed Machinery Orders data which showed the largest M/M contraction since February 2018 and prompted the government to cut its assessment on machinery orders, although the benchmark index gradually retraced most its losses after finding support around the 28k level and amid the recent favourable currency moves. Shanghai Comp. (+0.4%) also declined as participants digested mixed Chinese trade data in which exports topped estimates but imports disappointed and with Hong Kong markets kept shut due to a typhoon warning. Finally, 10yr JGBs were steady with price action contained after the curve flattening stateside and tentative mood heading to upcoming risk events, although prices were kept afloat amid the BoJ’s purchases in the market for around JPY 1tln of JGBs predominantly focused on 1-3yr and 5-10yr maturities. Top Asian News Gold Edges Higher on Weaker Dollar Before U.S. Inflation Report RBA Rate Hike Expectations Too Aggressive, TD Ameritrade Says LG Electronics Has Series of Stock-Target Cuts After Profit Miss The mood across European stocks has improved from the subdued cash open (Euro Stoxx 50 +0.5%; Stoxx 600 +0.3%) despite a distinct lack of newsflow and heading into the official start of US earnings season, US CPI and FOMC minutes. US equity futures have also nursed earlier losses and trade in modest positive territory across the board, with the NQ (+0.5%) narrowly outperforming owing to the intraday fall in yields, alongside the sectorial outperformance seen in European tech amid tech giant SAP (+4.7%) upgrading its full FY outlook, reflecting the strong business performance which is expected to continue to accelerate cloud revenue growth. As such, the DAX 40 (+0.7%) outperformed since the cash open, whilst the FTSE 100 (-0.2%) is weighed on by underperformance in its heavyweight Banking and Basic Resources sectors amid a decline in yields and hefty losses in iron ore prices. Elsewhere, the CAC 40 (+0.3%) is buoyed by LMVH (+2.0%) after the luxury name topped revenue forecasts and subsequently lifted the Retail sector in tandem. Overall, sectors are mixed with no clear bias. In terms of individual movers, Volkswagen (+3.5%) was bolstered amid Handelsblatt reports in which the Co was said to be cutting some 30k jobs as costs are too high vs competitors, whilst separate sources suggested the automaker is said to be mulling spinning off its Battery Cell and charging unit. Chipmakers meanwhile see mixed fortunes in the aftermath of sources which suggested Apple (-0.7% pre-market) is said to be slashing output amid the chip crunch. Top European News The Hut Shares Swing as Strategy Day Feeds Investor Concern U.K. Economy Grows Less Than Expected as Services Disappoint Man Group Gets $5.3 Billion to Lift Assets to Another Record Jeff Ubben and Singapore’s GIC Back $830 Million Fertiglobe IPO In FX, the Dollar looks somewhat deflated or jaded after yesterday’s exertions when it carved out several fresh 2021 highs against rival currencies and a new record peak vs the increasingly beleaguered Turkish Lira. In index terms, a bout of profit taking, consolidation and position paring seems to have prompted a pull-back from 94.563 into a marginally lower 94.533-246 range awaiting potentially pivotal US inflation data, more Fed rhetoric and FOMC minutes from the last policy meeting that may provide more clues or clarity about prospects for near term tapering. NZD/GBP - Both taking advantage of the Greenback’s aforementioned loss of momentum, but also deriving impetus from favourable crosswinds closer to home as the Kiwi briefly revisited 0.6950+ terrain and Aud/Nzd retreats quite sharply from 1.0600+, while Cable has rebounded through 1.3600 again as Eur/Gbp retests support south of 0.8480 yet again, or 1.1800 as a reciprocal. From a fundamental perspective, Nzd/Usd may also be gleaning leverage from the more forward-looking Activity Outlook component of ANZ’s preliminary business survey for October rather than a decline in sentiment, and Sterling could be content with reported concessions from the EU on NI customs in an effort to resolve the Protocol impasse. EUR/CAD/AUD/CHF - Also reclaiming some lost ground against the Buck, with the Euro rebounding from around 1.1525 to circa 1.1560, though not technically stable until closer to 1.1600 having faded ahead of the round number on several occasions in the last week. Meanwhile, the Loonie is straddling 1.2450 in keeping with WTI crude on the Usd 80/brl handle, the Aussie is pivoting 0.7350, but capped in wake of a dip in Westpac consumer confidence, and the Franc is rotating either side of 0.9300. JPY - The Yen seems rather reluctant to get too carried away by the Dollar’s demise or join the broad retracement given so many false dawns of late before further depreciation and a continuation of its losing streak. Indeed, the latest recovery has stalled around 113.35 and Usd/Jpy appears firmly underpinned following significantly weaker than expected Japanese m/m machinery orders overnight. SCANDI/EM - Not much upside in the Sek via firmer Swedish money market inflation expectations and perhaps due to the fact that actual CPI data preceded the latest survey and topped consensus, but the Cnh and Cny are firmer on the back of China’s much wider than forecast trade surplus that was bloated by exports exceeding estimates by some distance in contrast to imports. Elsewhere, further hawkish guidance for the Czk as CNB’s Benda contends that high inflation warrants relatively rapid tightening, but the Try has not derived a lot of support from reports that Turkey is in talks to secure extra gas supplies to meet demand this winter, according to a Minister, and perhaps due to more sabre-rattling from the Foreign Ministry over Syria with accusations aimed at the US and Russia. In commodities, WTI and Brent front-month futures see another choppy session within recent and elevated levels – with the former around USD 80.50/bbl (80.79-79.87/bbl) and the latter around 83.35/bbl (83.50-82.65/bbl range). The complex saw some downside in conjunction with jawboning from the Iraqi Energy Minster, who state oil price is unlikely to increase further, whilst at the same time, the Gazprom CEO suggested that the oil market is overheated. Nonetheless, prices saw a rebound from those lows heading into the US inflation figure, whilst the OPEC MOMR is scheduled for 12:00BST/07:00EDT. Although the release will not likely sway prices amidst the myriad of risk events on the docket, it will offer a peek into OPEC's current thinking on the market. As a reminder, the weekly Private Inventory report will be released tonight, with the DoE's slated for tomorrow on account of Monday's Columbus Day holiday. Gas prices, meanwhile, are relatively stable. Russia's Kremlin noted gas supplies have increased to their maximum possible levels, whilst Gazprom is sticking to its contractual obligations, and there can be no gas supplies beyond those obligations. Over to metals, spot gold and silver move in tandem with the receding Buck, with spot gold inching closer towards its 50 DMA at 1,776/oz (vs low 1,759.50/oz). In terms of base metals, LME copper has regained a footing above USD 9,500/t as stocks grind higher. Conversely, iron ore and rebar futures overnight fell some 6%, with overnight headlines suggesting that China has required steel mills to cut winter output. Further from the supply side, Nyrstar is to limit European smelter output by up to 50% due to energy costs. Nyrstar has a market-leading position in zinc and lead. LME zinc hit the highest levels since March 2018 following the headlines US Event Calendar 8:30am: Sept. CPI YoY, est. 5.3%, prior 5.3%; MoM, est. 0.3%, prior 0.3% 8:30am: Sept. CPI Ex Food and Energy YoY, est. 4.0%, prior 4.0%; MoM, est. 0.2%, prior 0.1% 8:30am: Sept. Real Avg Weekly Earnings YoY, prior -0.9%, revised -1.4% 2pm: Sept. FOMC Meeting Minutes DB's Jim Reid concludes the overnight wrap So tonight it’s my first ever “live” parents evening and then James Bond via Wagamama. Given my daughter (6) is the eldest in her year and the twins (4) the youngest (plus additional youth for being premature), I’m expecting my daughter to be at least above average but for my boys to only just about be vaguely aware of what’s going on around them. Poor things. For those reading yesterday, the Cameo video of Nadia Comanenci went down a storm, especially when she mentioned our kids’ names, but the fact that there was no birthday cake wasn’t as popular. So I played a very complicated, defence splitting 80 yard through ball but missed an open goal. Anyway ahead of Bond tonight, with all this inflation about I’m half expecting him to be known as 008 going forward. The next installment of the US prices saga will be seen today with US CPI at 13:30 London time. This is an important one, since it’s the last CPI number the Fed will have ahead of their next policy decision just 3 weeks from now, where investors are awaiting a potential announcement on tapering asset purchases. Interestingly the August reading last month was the first time so far this year that the month-on-month measure was actually beneath the consensus expectation on Bloomberg, with the +0.3% growth being the slowest since January. Famous last words but this report might not be the most interesting since it may be a bit backward looking given WTI oil is up c.7.5% in October alone. In addition, used cars were up +5.4% in September after falling in late summer. So given the 2-3 month lag for this to filter through into the CPI we won’t be getting the full picture today. I loved the fact from his speech last night that the Fed’s Bostic has introduced a “transitory” swear jar in his office. More on the Fedspeak later. In terms of what to expect this time around though, our US economists are forecasting month-on-month growth of +0.41% in the headline CPI, and +0.27% for core, which would take the year-on-year rates to +5.4% for headline and +4.1% for core. Ahead of this, inflation expectations softened late in the day as Fed officials were on the hawkish side. The US 10yr breakeven dropped -1.9bps to 2.49% after trading at 2.527% earlier in the session. This is still the 3rd highest closing level since May, and remains only 7bps off its post-2013 closing high. Earlier, inflation expectations continued to climb in Europe, where the 5y5y forward inflation swap hit a post-2015 high of 1.84%. Also on inflation, the New York Fed released their latest Survey of Consumer Expectations later in the European session, which showed that 1-year ahead inflation expectations were now at +5.3%, which is the highest level since the survey began in 2013, whilst 3-year ahead expectations were now at +4.2%, which was also a high for the series. The late rally in US breakevens, coupled with lower real yields (-1.6bps) meant that the 10yr Treasury yield ended the session down -3.5bps at 1.577% - their biggest one day drop in just over 3 weeks. There was a decent flattening of the yield curve, with the 2yr yield up +2.0bps to 0.34%, its highest level since the pandemic began as the market priced in more near-term Fed rate hikes. In the Euro Area it was a very different story however, with 10yr yields rising to their highest level in months, including among bunds (+3.5bps), OATs (+2.9bps) and BTPs (+1.0bps). That rise in the 10yr bund yield left it at -0.09%, taking it above its recent peak earlier this year to its highest closing level since May 2019. Interestingly gilts (-4.0bps) massively out-performed after having aggressively sold off for the last week or so. Against this backdrop, equity markets struggled for direction as they awaited the CPI reading and the start of the US Q3 earnings season today. By the close of trade, the S&P 500 (-0.24%) and the STOXX 600 (-0.07%) had both posted modest losses as they awaited the next catalyst. Defensive sectors were the outperformers on both sides of the Atlantic. Real estate (+1.34%) and utilities (+0.67%) were among the best performing US stocks, though some notable “reopening” industries outperformed as well including airlines (+0.83%), hotels & leisure (+0.51%). News came out after the US close regarding the global chip shortage, with Bloomberg reporting that Apple, who are one of the largest buyers of chips, would revise down their iPhone 13 production targets for 2021 by 10 million units. Recent rumblings from chip producers suggest that the problems are expected to persist, which will make central bank decisions even more complicated over the coming weeks as they grapple with increasing supply-side constraints that push up inflation whilst threatening to undermine the recovery. Speaking of central bankers, Vice Chair Clarida echoed his previous remarks and other communications from the so-called “core” of the FOMC that the current bout of inflation would prove largely transitory and that underlying trend inflation was hovering close to 2%, while admitting that risks were tilted towards higher inflation. Atlanta Fed President Bostic took a much harder line though, noting that price pressures were expanding beyond the pandemic-impacted sectors, and measures of inflation expectations were creeping higher. Specifically, he said, “it is becoming increasingly clear that the feature of this episode that has animated price pressures — mainly the intense and widespread supply-chain disruptions — will not be brief.” His ‘transitory swear word jar’ for his office was considerably more full by the end of his speech. As highlighted above, while President Bostic spoke US 10yr breakevens dropped -2bps and then continued declining through the New York afternoon. In what is likely to be Clarida’s last consequential decision on monetary policy before his term expires, he noted it may soon be time to start a tapering program that ends in the middle of next year, in line with our US economics team’s call for a November taper announcement. In that vein, our US economists have updated their forecasts for rate hikes yesterday, and now see liftoff taking place in December 2022, followed by 3 rate increases in each of 2023 and 2024. That comes in light of supply disruptions lifting inflation, a likely rise in inflation expectations (which are sensitive to oil prices), and measures of labour market slack continuing to outperform. For those interested, you can read a more in-depth discussion of this here. Turning to commodities, yesterday saw a stabilisation in prices after the rapid gains on Monday, with WTI (+0.15%) and Brent Crude (-0.27%) oil prices seeing only modest movements either way, whilst iron ore prices in Singapore were down -3.45%. That said it wasn’t entirely bad news for the asset class, with Chinese coal futures (+4.45%) hitting fresh records, just as aluminium prices on the London Metal Exchange (+0.13%) eked out another gain to hit a new post-2008 high. Overnight in Asia, equity markets are seeing a mixed performance with the KOSPI (+1.24%) posting decent gains, whereas the CSI (-0.06%), Nikkei (-0.22%) and Shanghai Composite (-0.69%) have all lost ground. The KOSPI’s strength came about on the back of a decent jobs report, with South Korea adding +671k relative to a year earlier, the most since March 2014. The Hong Kong Exchange is closed however due to the impact of typhoon Kompasu. Separately, coal futures in China are up another +8.00% this morning, so no sign of those price pressures abating just yet following recent floods. Meanwhile, US equity futures are pointing to little change later on, with those on the S&P 500 down -0.12%. Here in Europe, we had some fresh Brexit headlines after the UK’s Brexit minister, David Frost, said that the Northern Ireland Protocol “is not working” and was not protecting the Good Friday Agreement. He said that he was sharing a new amended Protocol with the EU, which comes ahead of the release of the EU’s own proposals on the issue today. But Frost also said that “if we are going to get a solution we must, collectively, deliver significant change”, and that Article 16 which allows either side to take unilateral safeguard measures could be used “if necessary”. Elsewhere yesterday, the IMF marginally downgraded their global growth forecast for this year, now seeing +5.9% growth in 2021 (vs. +6.0% in July), whilst their 2022 forecast was maintained at +4.9%. This masked some serious differences between countries however, with the US downgraded to +6.0% in 2021 (vs. +7.0% in July), whereas Italy’s was upgraded to +5.8% (vs. +4.9% in July). On inflation they said that risks were skewed to the upside, and upgraded their forecasts for the advanced economies to +2.8% in 2021, and to +2.3% in 2022. Looking at yesterday’s data, US job openings declined in August for the first time this year, falling to 10.439m (vs. 10.954m expected). But the quits rate hit a record of 2.9%, well above its pre-Covid levels of 2.3-2.4%. Here in the UK, data showed the number of payroll employees rose by +207k in September, while the unemployment rate for the three months to August fell to 4.5%, in line with expectations. And in a further sign of supply-side issues, the number of job vacancies in the three months to September hit a record high of 1.102m. Separately in Germany, the ZEW survey results came in beneath expectations, with the current situation declining to 21.6 (vs. 28.0 expected), whilst expectations fell to 22.3 (vs. 23.5 expected), its lowest level since March 2020. To the day ahead now, and the main data highlight will be the aforementioned US CPI reading for September, while today will also see the most recent FOMC meeting minutes released. Other data releases include UK GDP for August and Euro Area industrial production for August. Central bank speakers include BoE Deputy Governor Cunliffe, the ECB’s Visco and the Fed’s Brainard. Finally, earnings releases include JPMorgan Chase, BlackRock and Delta Air Lines. Tyler Durden Wed, 10/13/2021 - 08:13.....»»

Category: blogSource: zerohedgeOct 13th, 2021

Futures Slide, Nasdaq Plunges As Yields Surge And Oil Tops $80

Futures Slide, Nasdaq Plunges As Yields Surge And Oil Tops $80 For much of 2021, a vocal contingent of market bulls had claimed that there is no way the broader market could sell off as long as the gigacap tech "general" refused to drop. Well, it looks like that day is finally upon us because this morning US equity futures are sliding again, continuing their Monday drop as yields from the US to Germany again, the 10Y TSY rising as high as 1.55%, driven to an extent by Fed tapering fears but mostly by the surge in oil which has pushed Brent above $80, the highest price since late 2018. The dollar gained amid the deteriorating global supply crunch from oil to semiconductors. The surge in oil sparked a new round of stagflation fears, sending Nasdaq futures down 240 points or 1.3% as the yield on the benchmark 10-year U.S. Treasury climbed sharply. S&P 500 and Dow Jones futures also retreated, with spoos sliding below 4,400 as to a session low of 4,390. Rising bond yields prompted a shift from growth to cyclical stocks in the United States, in a move that analysts expect could become more permanent after a prolonged period of supressed bond yields. The premarket selloff was led by semiconductor stocks which tracked similar falls for European peers, as a rising 10-year Treasury yield puts pressure on the tech sector. Applied Materials Inc. led a slump in chip stocks in New York premarket trading while Nvidia was down 2.6%, AMD -2.1%, Applied Materials -2.9%, Micron -1.6%. Meanwhile retail trader favorite meme stock Naked Brand Group, an underwear and swimwear retailer, rises again after having surged 40% in the past two trading sessions after Chairman Justin Davis-Rice said in a letter to shareholders that he believes the company has found a “disruptive” potential acquisition in the clean technology sector. Frequency Electronics also soared after being awarded a contract by the Office of Naval Research to develop an atomic clock. Chinese stocks listed in the U.S. were mixed and semiconductor stocks declined. Here are some of the other notable U.S. movers today: iPower (IPW US) shares rise as much as 61% in U.S. premarket trading after the online hydroponics equipment retailer posted 4Q and FY21 earnings Alibaba (BABA US) rises 2.5% in U.S. premarket trading after the company’s shares listed in Hong Kong rose, adding to the Hang Seng Tech Index’s gains Frequency Electronics (FEIM US) soars 20% in U.S. premarket trading after being awarded a contract by the Office of Naval Research to develop an atomic clock Concentrix (CNXC) jumped 5.9% in Monday after hours trading after setting its first dividend payment and buyback program since being spun off from from Synnex in December Brookdale Senior Living (BKD US) shares fell in extended trading on Monday after announcing a $200 million convertible bond offering Altimmune (ALT US) rose as much as 4.2% in Monday postmarket trading on plans to announce results for an early stage study of ALT-801 in overweight people on Tuesday Ziopharm Oncology (ZIOP US) fell in extended trading after company said it cut about 60 positions, or a more than 50% reduction in personnel, to extend its cash runway into 1H 2023 Montrose Environmental Group (MEG US) was down 2.8% Monday postmarket after offering shares via JPMorgan, BofA Securities, William Blair The main catalyst for the stock selloff was the continued drop in Treasurys which sent the 10-year Treasury rising as high as 1.55% while shorter-dated rates surged toward pre-pandemic levels. This in turn was driven by the relentless meltup in commodities: overnight Brent roared above $80 a barrel - on its way to Goldman's revised $90 price target - on louder signs that demand is running ahead of supply and depleting inventories as the world finds itself in an unprecedented energy crisis. The international crude benchmark extended a recent run of gains to hit the highest since October 2018, while West Texas Intermediate also climbed. Oil’s latest upswing has come with a flurry of bullish price predictions from banks and traders, forecasts for surging demand this winter, and speculation the industry isn’t investing enough to maintain supplies. The jump to $80 also is adding inflationary pressure to the global economy at a time when prices of energy commodities are soaring. European natural gas, carbon permits and power rose to fresh records Tuesday, with little sign of the rally slowing. As Bloomberg notes, traders have begun reassessing valuations amid multiplying global risks, while Fed officials have communicated increasingly hawkish signals in recent days as supply-chain bottlenecks threaten to keep inflation elevated. China’s growth slowdown which saw Goldman lower its q/q Q3 GDP forecast to a flat 0.0%, and a debt crisis in the nation’s property market.have also fueled the risk-off shift. "Central bankers have set out how they want to normalize monetary policy for some time,” Chris Iggo, chief investment officer for core investments at AXA Investment Managers, said in a note. “That process could start soon. The realization of this has the potential to provoke some volatility in rates and equities." Elsewhere, European stocks also declined with the Stoxx Europe 600 dragged down most by technology shares. Europe’s Stoxx Tech Index drops as much as 2.8% to a five-week low after falling 1.5% on Monday having previously touched its highest level since 2000 earlier in the month. Single-stock downgrades also weighed. Stocks which performed particularly well this year are among the biggest fallers, with chip equipment makers BE Semi -4.6% and ASML -4.4%, and chipmaker Nordic Semi down 4.2%. Among other laggards, Logitech drops as much as 8.5% after being downgraded to underweight at Morgan Stanley. Earlier in the session, Asian stocks fell for the first time in four days as declines in technology names overshadowed a rally in energy shares.  The MSCI Asia Pacific Index dropped as much as 0.7%, with a jump in U.S. Treasury yields weighing on richly-valued tech stocks. That’s even as the region’s oil and gas shares climbed amid signs of a global energy crunch. Chipmakers Taiwan Semiconductor Manufacturing and Samsung Electronics were the biggest drags on the Asian benchmark. “The climb in yields led to the selling of growth stocks that have been strong, with investors rotating into names that are sensitive to business cycles - not unlike what happened in U.S. equities,” said Shutaro Yasuda, an analyst at Tokai Tokyo Research Center.  Asian equities have been recovering after being whipsawed by concerns over any fallout from China Evergrande Group’s debt troubles. As worries over the distressed property developer abate, the pace of rise in Treasury yields and global inflation data are being closely watched for clues on the U.S. Federal Reserve’s policy stance. Australia’s equity benchmark was among the biggest losers in Asia Tuesday, dragged down by losses in mining and healthcare stocks. Still, broad-based gains in oil explorers and refiners helped mitigate the Asian market’s retreat. In South Korea, importers and distributors of liquefied petroleum gas and liquefied natural gas rallied as the price of natural gas jumped. The future of Evergrande is being forensically scrutinized by investors after the company last Friday did not meet a deadline to make an interest payment to offshore bond holders. Evergrande has 30 days to make the payment before it falls into default and Shenzen authorities are now investigating the company's wealth management unit. Without making reference to Evergrande, the People's Bank of China (PBOC) said Monday in a statement posted to its website that it would "safeguard the legitimate rights of housing consumers". Widening power shortages in China, meanwhile, halted production at a number of factories including suppliers to Apple Inc and Tesla Inc and are expected to hit the country's manufacturing sector and associated supply chains. Analysts cautioned the ongoing blackouts could affect the country's listed industrial stocks. "What we see in China with the developers and the blackouts is going to be a negative weight on the Asian markets," Tai Hui, JPMorgan Asset Management's Asian chief market strategist told Reuters. "Most people are trying to work out the potential contagion effect with Evergrande and how far and wide it could go. We keep monitoring the policy response and we have started to see some shift towards supporting homebuyers which is what we have been expecting." In rates, as noted above, the selloff in Treasuries gathered pace in Asia, early Europe session leaving yields cheaper by 3.5bp to 5.5bp across the curve with 20s and 30s extending above 2% and 10-year through 1.50%. Treasury 10-year yields traded around 1.53%, cheaper by 4.5bp on the day after topping at 1.55%, highest since mid-June; in front- and belly, 2- and 5-year yields remain near cheapest levels in at least 18 months; in 10-year sector, gilts lag by 3bp vs. Treasuries while German yields are narrowly richer. Gilts underperformed further, where long-end yields are cheaper by up to 7.5bp on the day. Treasury futures volumes over Asia, early European session were at more than twice usual levels, with most activity seen in 10-year note contract; eurodollar futures volumes were also well above recent average. With recent aggressive move higher in yields, threat of convexity hedging has exacerbated moves as rate hike premium continues to filter into the curve after last week’s FOMC. Auctions conclude Tuesday with 7-year note sale, while busy Fed speaker slate includes Fed Chair Powell. In FX, the Bloomberg dollar index reached the highest level in more than a month as rising energy costs drove up Treasury yields for a fourth session. The dollar gained against all its peers; Japan’s currency slid for a fifth day against the greenback before a speech Tuesday from Fed Chair Jerome Powell who will say inflation is elevated and is likely to remain so in coming months, according to prepared remarks. Treasury two-year yields rose to the highest since March 2020. “Dollar-yen saw the clearest expression of Treasury yield increases and we attributed this divergence to the surge in energy prices,” says Christopher Wong, senior foreign-exchange strategist at Malayan Banking in Singapore. U.S. natural gas futures soared to their highest since February 2014 on concern over tight inventories. Brent oil topped $80 a barrel amid signs demand is outrunning supply. The euro slipped to hit its lowest level since Aug. 20, nearing the year-to-date low of $1.1664. The Treasury yield curve bear steepened; euro curves followed suit, with the yield on U.K. 10-year notes soaring past 1% for the first time since March 2020 on the prospects for Bank of England policy tightening. In commodities, Crude futures extend Asia’s gains. WTI rises as much as 1.6% to highs of $76.67 before stalling. Brent holds above $80. Spot gold trades around last week’s lows near $1,740/oz. Base metals are mixed: LME aluminum outperforming, rising as much as 1.1%; nickel and copper are in the red. Looking at the day ahead, one of the main highlights will be the appearance of Fed Chair Powell, and Treasury Secretary Yellen at the Senate Banking Committee. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Schnabel, Panetta and Kazimir, along with the BoE’s Mann and the Fed’s Evans, Bowman and Bostic. US data highlights include the US Conference Board’s consumer confidence indicator for September and the FHFA house price index for July. Market Snapshot S&P 500 futures down 0.7% to 4,403.50 STOXX Europe 600 down 1.2% to 456.83 MXAP down 0.4% to 200.06 MXAPJ down 0.4% to 641.05 Nikkei down 0.2% to 30,183.96 Topix down 0.3% to 2,081.77 Hang Seng Index up 1.2% to 24,500.39 Shanghai Composite up 0.5% to 3,602.22 Sensex down 1.4% to 59,209.94 Australia S&P/ASX 200 down 1.5% to 7,275.55 Kospi down 1.1% to 3,097.92 Brent Futures up 0.8% to $80.15/bbl Gold spot down 0.4% to $1,742.61 U.S. Dollar Index up 0.20% to 93.57 German 10Y yield rose 2.7 bps to -0.196% Euro down 0.1% to $1.1681 Top Overnight News from Bloomberg Chinese authorities are striving to signal to traders that whatever happens to China Evergrande Group, its debt crisis won’t spiral out of control or derail the economy Brent oil roared above $80 a barrel, the latest milestone in a global energy crisis, on signs that demand is running ahead of supply and depleting inventories As the dust settles on Germany’s election, control over the finances of Europe’s largest economy could fall to a 42-year-old former tech entrepreneur who wants to lower taxes and tighten spending Wells Fargo agreed to pay $37 million in penalties and forfeiture to settle U.S. claims that it overcharged almost 800 commercial customers that used its foreign exchange services, the latest in a series of scandals at the bank A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed following on from a Wall Street lead where value outperformed growth and tech suffered as yields rose. ASX 200 (-1.5%) was the laggard with losses in healthcare, gold miners and tech frontrunning the declines which dragged the index beneath 7300. Nikkei 225 (-0.2%) was lacklustre and briefly approached 30k to the downside but then bounced off worse levels amid a softer currency, while the KOSPI (-1.1%) also declined following a suspected North Korean ballistic missile launch and with a recent South Korean court order to sell seized Mitsubishi Heavy assets as compensation for wartime forced labour, threatening a flare up of tensions between Japan and South Korea. Hang Seng (+1.2%) and Shanghai Comp. (+0.5%) were underpinned after the PBoC continued to inject liquidity ahead of the approaching National Day holidays and with Hong Kong led higher by strength in property names after the PBoC stated it will safeguard legitimate rights and interests of housing consumers which also provided Evergrande-related stocks further reprieve from their recent sell-off. Finally, 10yr JGBs retreated on spillover selling from T-notes after yields rose on the back of further Fed taper rhetoric and with prices not helped by the uninspiring 2yr and 5yr auctions stateside, while weaker results at the 40yr JGB auction also provided a headwind for prices. Top Asian News Top-Performing Global Luxury Stock Seen Cooling After 680% Gain China Power Price Hike Sought Amid Supply Crunch: Energy Update Macau Evacuates Airport Quarantine Hotel After Outbreak Iron Ore Dips Again as China Power Crisis Adds to Steel Curbs Bourses in Europe extended on the losses seen at the cash open and trade lower across the board (Euro Stoxx 50 -1.7%; Stoxx 600 -1.7%) as sentiment retreated from a mixed APAC handover as month-end looms alongside tier 1 data and a slew of central bank speakers. US equity futures have also succumbed to the mood in Europe alongside the surge in global yields – which takes its toll on the NQ (-1.5%) vs the ES (-0.8%), YM (-0.4%) and RTY (-0.3%). From a more technical standpoint, ESZ1 fell under its 50 DMA (4,431) and tested the 4,400 level to the downside, whilst NQZ1 briefly fell under 15k and the YMZ1 inches towards its 100 DMA (34,489). Back to Europe, the FTSE 100 (-0.4%) sees losses to a lesser extent vs its European peers as energy prices and yields keep the index oil giants and banks supported – with some of the top gainers including Shell (+2.8%), BP (+2.1%). Sectors in Europe are predominantly in the red, but Oil & Gas buck the trend. Sectors also portray more of a defensive bias, whilst the downside sees Tech, Real Estate, and Travel & Leisure at the foot of the bunch, with the former hit by the rise in yields, which sees the US 10yr further above 1.50%, the 20yr above 2.00% and the UK 10yr hitting 1.00% for the first time since March 2020. In terms of individual movers, Smiths Group (+3.8%) is at the top of the Stoxx 600 following encouraging earnings. ING (+0.3%) holds onto gains after sources noted SocGen's (-0.6%) interest in ING's retail banking arm. Finally, chip-maker ASM International (-3.5%) has succumbed to the broader tech weakness despite upping its guidance and announcing capacity expansion by early 2023. Top European News U.K. 10-Year Yield Rises Past 1% for First Time Since March 2020 Goldman’s Petershill Unit Valued at $5.5 Billion in U.K. IPO Go-Ahead Sinks as U.K. Takes Over Southeastern Rail Franchise Hedge Funds and Private Equity Are Targeting European Soccer In FX, It took a while for the index to breach resistance ahead of 93.500, but when US Treasuries resumed their bear-steepening run and the intensity of the moves in futures and cash picked up pace the break beyond the half round number was relatively quick and decisive. Indeed, the DXY duly surpassed its post-FOMC peak (93.526) and a prior recent high from August 19 (93.587) on the way to reaching 93.619 amidst almost all round Dollar gains, as 5, 10, 20 and 30 year yields all rallied through or further above psychological levels (such as 1%, 1.5% and 2% in the case of the latter two maturities). However, petro and a few other commodity currencies are displaying varying degrees of resilience in the face of general Greenback strength that is compounded by buy signals for September 30 rebalancing on spot month, quarter and half fy end. Ahead, trade data, consumer confidence, more regional Fed surveys, speakers and the 7 year auction. NZD/CHF/JPY/AUD - The Kiwi was already losing altitude above 0.7000 vs its US counterpart and 1.0400 against the Aussie on Monday, so the deeper retreat is hardly surprising to circa 0.6975 and 1.0415 awaiting some independent impetus that may come via NZ building consents tomorrow. Meanwhile, the Franc has recoiled towards 0.9300 in advance of comments from SNB’s Maechler and the Yen continues to suffer on the aforementioned rampant yield and steeper curve trajectory on top of a more pronounced 1+ sd portfolio hedge selling requirement vs the Buck, with Usd/Jpy meandering midway between 110.94-111.42 parameters irrespective of renewed risk aversion due to same bond rout dynamic. Back down under, Aud/Usd has faded from around 0.7311 to the low 0.7260 area, though holding up a bit better in wake of not quite as weak as forecast final retail sales overnight. CAD/EUR/GBP - All softer against their US rival, but the Loonie putting up a decent fight with ongoing help from WTI crude that has now topped Usd 76.50/brl, and Usd/Cad also has decent option expiry interest to keep an eye on given 1.2 bn rolling off at 1.2615 and an even heftier 3 bn at 1.2675 compared to current extremes spanning 1.2693-1.2652. Elsewhere, the Euro has lost its battle to stay afloat of multiple sub-1.1700 lows even though EGBs are tumbling alongside USTs and the same goes for Sterling in relation to the 1.3700 handle irrespective of the 10 year Gilt touching 1% for the first time since March 2020. SCANDI/EM - Brent’s advances on Usd 80 brl have been offset to an extent by soft Norwegian retail sales data, as the Nok pares more of its post-Norges Bank gains, while the Sek looks somewhat caught between stalls following a recovery in Swedish consumption, but big swing in trade balance from surplus to larger deficit. However, the Try is taking no delight from the costlier price of oil or remarks from Turkey’s Deputy Finance Minister contending that interest rates can move lower by reducing the current account and budget deficits, or conceding that Dollarisation is a problem and steps need to be taken to enhance confidence in the Lira. Conversely, the Cnh and Cny are still holding a firm line following another net injection of 2 week funds from the PBoC and the Governor saying that China will lengthen the period for the implementation of normal monetary policy, adding that it has conditions to keep a normal and upward yield curve, as it sees no need to purchase assets at present. In commodities, WTI and Brent futures have extended on the gains seen during APAC hours, which saw the Brent November contract topping USD 80/bbl, albeit the volume and open interest has migrated to the December contract – which topped out just before the USD 80/bbl mark. WTI November meanwhile advanced past the USD 76/bbl mark to a current peak at USD 76.67/bbl (vs low USD 75.21/bbl). Desks have been attributing the leg higher to tight supply – with the UK fuel situation further deteriorating amid a shortage of drivers coupled with panic buying. It's worth bearing in mind that the demand side of the equation has also seen supportive, with the US announcing the lifting of international travel curbs recently alongside the economic resilience to the Delta variant heading into the winter period. Traders would also be keeping an eye on the electricity situation in China, which in theory would provide tailwinds for diesel demand via generators, although this could be offset by a slowdown in economic activity due to power outages. There has also been growing noise for OPEC+ to hike output beyond the monthly plan of 400k BPD, with some African nations also struggling to ramp up production due to maintenance issues and lack of investments. Ministers recently noted that the plan would be maintained at next week's confab. As a reminder, the OPEC World Oil Outlook is set to be released at 13:30BST/08:30EDT, although the findings may be stale given the recent developments in crude dynamics. Major banks have also provided commentary on Brent following Goldman Sachs' bullish call recently, with Barclays upping its forecast for both benchmarks due to supply deficits, whilst Morgan Stanley maintained its forecast but suggested that the USD 85/bbl Brent scenario clearly exists. MS also noted that oil inventories continue to draw at high rates and suggest that the market is more undersupplied than generally perceived; the analysts see the market undersupplied into 2022 amid its expectation for further OPEC discipline. Nat gas also remains in focus, with prices +11% at one point, whilst Russia's Kremlin said Russia remains the safeguard of natural gas to Europe and Gazprom is ready to discuss new gas supply contracts with increased volumes to meet rising European demand. It's also worth being aware of the increasing likelihood of state intervention at these levels as nations attempt to save or at least cushion consumers and company margins. Elsewhere, precious metals are under pressure as the Buck remains buoyant, with spot gold still under USD 1,750/oz as it inches closer to the 11th August low of USD 1,722/oz. Spot silver remains within recent ranges above USD 22/oz. Overnight Chinese nickel and tin prices extended losses with traders citing subdued demand, whilst coking coal and coke futures leapt on tight supply. US Event Calendar 8:30am: Aug. Advance Goods Trade Balance, est. -$87.3b, prior -$86.4b, revised -$86.8b 8:30am: Aug. Retail Inventories MoM, est. 0.5%, prior 0.4%; Wholesale Inventories MoM, est. 0.8%, prior 0.6% 9am: July S&P CS Composite-20 YoY, est. 20.00%, prior 19.08% 9am: July S&P/CS 20 City MoM SA, est. 1.70%, prior 1.77% 9am: July FHFA House Price Index MoM, est. 1.5%, prior 1.6% 10am: Sept. Conf. Board Consumer Confidence, est. 115.0, prior 113.8 Expectations, prior 91.4 Present Situation, prior 147.3 10am: Sept. Richmond Fed Index, est. 10, prior 9 Central Bank Speakers 9am: Fed’s Evans Makes Welcome Remarks at Payments Conference 10am: Powell and Yellen Appear Before Senate Banking Panel 1:40pm: Fed’s Bowman Speaks at Community Bank Event 3pm: Fed’s Bostic Discusses the Economic Outlook 7pm: Fed’s Bullard Discusses U.S. Economy and Monetary Policy DB's Jim Reid concludes the overnight wrap What a difference a week makes. You hardly hear the word Evergrande now. We asked in a flash poll last week whether we would still be talking about it in a month or whether it would be a distant memory by then. Maybe we should have narrowed the time frame to a week! We’ve quickly moved on to rate hikes and rising bond yields as the topic de jour. A further rise in the Bloomberg Commodity Spot Index (+1.87%) to a fresh high for the decade helped reinforce the move. Indeed, sovereign bond yields moved higher once again yesterday amidst a sharp rise in inflation expectations, with those on 10yr Treasury yields rising +3.6bps to 1.487%, their highest level in over 3 months. Meanwhile the 2yr yield rose +0.8bps to 0.278%, its highest level since the pandemic began, which comes on the back of last week’s Fed meeting that prompted investors to price in an initial rate hike from the Fed by the end of 2022. The moves in Treasury yields were almost entirely driven by higher inflation breakevens, with 10yr breakevens up +3.7bps. That echoed similar moves in Europe, where the German 10yr breakeven (+4.7bps) hit a post-2013 high of 1.653%, and their Italian counterparts (+3.9bps) hit a post-2011 high. The biggest move was in the UK however, where the 10yr breakeven (+13.2bps) reached its highest level since 2008, which comes amidst a continued fuel shortage in the country, alongside another rise in UK natural gas futures, which were up +8.20% yesterday to £190/therm, exceeding the previous closing peak set a week earlier. We were waiting for the wind to blow in this country to get alternatives back on stream and boy did it blow yesterday but with no impact yet on gas prices. Lower real rates dampened the rise in yields across the continent, though yields on 10yr bunds (+0.5bps), OATs (+0.9bps), BTPs (+1.3bps) and gilts (+2.7bps) had all moved higher by the close of trade. Those spikes in commodity prices were evident more broadly yesterday, with energy prices in particular seeing a major increase. Brent crude oil prices were up +1.84% to $79.53/bbl, marking their highest closing level since late-2018, and this morning in trading they have now exceeded the $80/bbl mark with a further +0.94% increase. It was much the same story for WTI (+1.99%), which closed at $75.45/bbl, which was its own highest closing level since 2018 too. And those pressures in UK natural gas prices we mentioned above were seen across Europe more broadly, where futures were up +8.92%. With yields moving higher and inflationary pressures growing stronger, tech stocks struggled significantly yesterday, with the NASDAQ down -0.52%. The megacap tech FANG+ index fell -0.15% on the day, but was initially down as much as -1.7% in early trading. The NASDAQ underperformed the S&P 500, which was only down -0.28%, but that masked significant sectoral divergences, with interest-sensitive growth stocks struggling, just as cyclicals more broadly posted fresh gains. More specifically, energy (+3.43%), bank (+2.29%) and autos (+2.19%) led the S&P, while biotech (-1.65%) and software (-1.39%) shares were among the largest laggards. European equities were also pretty subdued, with the STOXX 600 down -0.19%, though the DAX was up +0.27% following the results of the German election, which removed the tail risk outcome of a more left-wing coalition featuring the SPD, the Greens and Die Linke. Staying on the political scene, we are now less than 72 hours away from a potential US government shutdown as it stands. As was expected, Republicans in the Senate blocked the House-passed measure to fund the government for another 2 months and raise the debt ceiling for 2 years. While Democrats have not put forward their alternative strategy if Republicans refuse to vote to lift the debt ceiling, their only option would be to attach it to the budget reconciliation plan that currently makes up much of the Biden economic agenda. In an effort to keep all party members on board, Speaker Pelosi moved the vote on the $550bn bipartisan infrastructure bill to Thursday in order to give all sides more time to finish the larger budget bill and pass both together. It is a going to be a very busy Thursday, since Congress will have to also pass the funding bill that day. Republicans and Democrats already agree on a funding bill to keep the government open that does not include the debt ceiling increase so it is just a matter of how exactly the debt ceiling provision goes through without a Republican Senate vote. Overnight in Asia, equity indices are seeing a mixed performance. On the one hand, most of the region including the Nikkei (-0.24%) and KOSPI (-0.80%) are trading lower as investors begin to price in tighter monetary policy from the Fed. However, the Hang Seng (+1.50%), Shanghai Composite (+0.53%) and CSI (0.38%) have all advanced after the People’s Bank of China said that they would ensure a “healthy property market”. Looking forward, US equity futures are pointing to little change, with those on the S&P 500 down just -0.05%, and 10yr Treasury yields have risen +1.9bps this morning to trade above 1.50% again. Back to the German election, where the aftermath yesterday saw various party leaders assess the results and stake their claims to participate in a new coalition. As a reminder, the SPD came in first place with 25.7%, but the CDU/CSU weren’t far behind on 24.1%, making it mathematically possible for either to form a government in a coalition with the Greens and the FDP. The SPD’s chancellor candidate, Finance Minister Olaf Scholz, appealed for the Greens and FDP to join him in forming a government, and told the media that he wanted to form a coalition before Christmas. Meanwhile Green co-leader Robert Habeck said that “Of course there is a certain priority for talks with the SPD and the FDP”, but said that this didn’t mean they wouldn’t speak with the CDU/CSU either. As the SPD were calling for an alliance, the tone sounded more negative from the CDU’s leadership, even though Armin Laschet said that he had not given up on the idea of forming a government. Notably, Laschet said that no party was able to draw a clear mandate from the result, including the SPD, and this echoed remarks from the CSU leader Markus Söder, who said that the conservatives had no mandate to form a government, though they could “make an offer out of a sense of responsibility for the country.” Meanwhile, attention will turn to the FDP and the Greens to see which way they’re leaning when it comes to forming a government. FDP leader Lindner said that he would hold preliminary talks with the Greens, after which they would be open to invitations from either the SPD or the CDU/CSU for further discussions. Back on the UK, there was an interesting speech from BoE Governor Bailey yesterday, where he echoed the line from the MPC minutes last week, saying that “all of us believe that there will need to be some modest tightening of policy to be consistent with meeting the inflation target sustainable over the medium-term”. However, he also said that their view was that “the price pressures will be transient”, and that “monetary policy will not increase the supply of semi-conductor chips … nor will it produce more HGV drivers.” He then further added that tighter policy “could make things worse in this situation by putting more downward pressure on a weakening recovery of the economy”. So a bit of a mixed message of backing rate hike expectations but warning about its impact on growth. Over in the US we heard from a host of Fed speakers with Governor Brainard saying that while “employment is still a bit short of the mark” of “substantial further progress”, she expects that the labour market will recover enough to start tapering asset purchases soon. Separately on the inflation debate, Minneapolis Fed President Kashkari argued that this year’s pickup in US inflation has been a byproduct of the supply disruptions associated with Covid and that policy makers should not react to it just yet. He cited the need to get US employment back up as the Fed’s “highest priority”. New York Fed President Williams agreed with his colleague, saying that “this process of adjustment may take another year or so to complete as the pandemic-related swings in supply and demand gradually recede.” And Chicago Fed President Evans is even worried about downside inflation risks, as he is " more uneasy about us not generating enough inflation in 2023 and 2024 than the possibility that we will be living with too much.” Lastly, news came out yesterday that Boston Fed President Rosengren will retire this week due to health concerns. He was due to step down in June regardless as there is a mandatory retirement age of 65. Dallas Fed President Kaplan also announced his retirement yesterday, which will take effect October 8th. Both officials have drawn scrutiny in recent days stemming from their recent disclosure of trading activity over the last year, though the activity did not violate the Fed’s ethics code even as Fed Chair Powell announced an official review of those rules. The Boston Fed President will be a voting member on the FOMC next year, and the Dallas Fed President in 2023. Running through yesterday’s data, the preliminary reading for US durable goods orders in August showed growth of +1.8% (vs. +0.7% expected), and the previous month was also revised up to show growth of +0.5% (vs. -0.1% previously). Meanwhile core capital goods orders grew by +0.5% (vs. +0.4% expected), and the previous month’s growth was revised up two-tenths. Finally, the Dallas Fed’s manufacturing activity index for September came in at 4.6 (vs. 11.0 expected) – its lowest reading since July 2020. To the day ahead now, and one of the main highlights will be the appearance of Fed Chair Powell, and Treasury Secretary Yellen at the Senate Banking Committee. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Schnabel, Panetta and Kazimir, along with the BoE’s Mann and the Fed’s Evans, Bowman and Bostic. US data highlights include the US Conference Board’s consumer confidence indicator for September and the FHFA house price index for July. Tyler Durden Tue, 09/28/2021 - 07:52.....»»

Category: blogSource: zerohedgeSep 28th, 2021

Futures Bounce On Evergrande Reprieve With Fed Looming

Futures Bounce On Evergrande Reprieve With Fed Looming Despite today's looming hawkish FOMC meeting in which Powell is widely expected to unveil that tapering is set to begin as soon as November and where the Fed's dot plot may signal one rate hike in 2022, futures climbed as investor concerns over China's Evergrande eased after the property developer negotiated a domestic bond payment deal. Commodities rallied while the dollar was steady. Contracts on the S&P 500 and Nasdaq 100 flipped from losses to gains as China’s central bank boosted liquidity when it injected a gross 120BN in yuan, the most since January... ... and investors mulled a vaguely-worded statement from the troubled developer about an interest payment.  S&P 500 E-minis were up 23.0 points, or 0.53%, at 7:30 a.m. ET. Dow E-minis were up 199 points, or 0.60%, and Nasdaq 100 E-minis were up 44.00 points, or 0.29%. Among individual stocks, Fedex fell 5.8% after the delivery company cut its profit outlook on higher costs and stalled growth in shipments. Morgan Stanley says it sees the company’s 1Q issues getting “tougher from here.” Commodity-linked oil and metal stocks led gains in premarket trade, while a slight rise in Treasury yields supported major banks. However, most sectors were nursing steep losses in recent sessions. Here are some of the biggest U.S. movers: Adobe (ADBE US) down 3.1% after 3Q update disappointed the high expectations of investors, though the broader picture still looks solid, Morgan Stanley said in a note Freeport McMoRan (FCX US), Cleveland- Cliffs (CLF US), Alcoa (AA US) and U.S. Steel (X US) up 2%-3% premarket, following the path of global peers as iron ore prices in China rallied Aethlon Medical (AEMD US) and Exela Technologies (XELAU US) advance along with other retail traders’ favorites in the U.S. premarket session. Aethlon jumps 21%; Exela up 8.3% Other so-called meme stocks also rise: ContextLogic +1%; Clover Health +0.9%; Naked Brand +0.9%; AMC +0.5% ReWalk Robotics slumps 18% in U.S. premarket trading, a day after nearly doubling in value Stitch Fix (SFIX US) rises 15.7% in light volume after the personal styling company’s 4Q profit and sales blew past analysts’ expectations Hyatt Hotels (H US) seen opening lower after the company launches a seven-million-share stock offering Summit Therapeutics (SMMT US) shares fell as much as 17% in Tuesday extended trading after it said the FDA doesn’t agree with the change to the primary endpoint that has been implemented in the ongoing Phase III Ri-CoDIFy studies when combining the studies Marin Software (MRIN US) surged more than 75% Tuesday postmarket after signing a new revenue-sharing agreement with Google to develop its enterprise technology platforms and software products The S&P 500 had fallen for 10 of the past 12 sessions since hitting a record high, as fears of an Evergrande default exacerbated seasonally weak trends and saw investors pull out of stocks trading at lofty valuations. The Nasdaq fell the least among its peers in recent sessions, as investors pivoted back into big technology names that had proven resilient through the pandemic. Focus now turns to the Fed's decision, due at 2 p.m. ET where officials are expected to signal a start to scaling down monthly bond purchases (see our preview here).  The Fed meeting comes after a period of market volatility stoked by Evergrande’s woes. China’s wider property-sector curbs are also feeding into concerns about a slowdown in the economic recovery from the pandemic. “Chair Jerome Powell could hint at the tapering approaching shortly,” said Sébastien Barbé, a strategist at Credit Agricole CIB. “However, given the current uncertainty factors (China property market, Covid, pace of global slowdown), the Fed should remain cautious when it comes to withdrawing liquidity support.” Meanwhile, confirming what Ray Dalio said that the taper will just bring more QE, Governing Council member Madis Muller said the  European Central Bank may boost its regular asset purchases once the pandemic-era emergency stimulus comes to an end. “Dovish signals could unwind some of the greenback’s gains while offering relief to stock markets,” Han Tan, chief market analyst at Exinity Group, wrote in emailed comments. A “hawkish shift would jolt markets, potentially pushing Treasury yields and the dollar past the upper bound of recent ranges, while gold and equities would sell off hunting down the next levels of support.” China avoided a major selloff as trading resumed following a holiday, after the country’s central bank boosted its injection of short-term cash into the financial system. MSCI’s Asia-Pacific index declined for a third day, dragged lower by Japan. Stocks were also higher in Europe. Basic resources - which bounced from a seven month low - and energy were among the leading gainers in the Stoxx Europe 600 index as commodity prices steadied after Beijing moved to contain fears of a spiraling debt crisis. Entain Plc rose more than 7%, extending Tuesday’s gain as it confirmed it received a takeover proposal from DraftKings Inc. Peer Flutter Entertainment Plc climbed after settling a legal dispute.  Here are some of the biggest European movers today: Entain shares jump as much as 11% after DraftKings Inc. offered to acquire the U.K. gambling company for about $22.4 billion. Vivendi rises as much as 3.1% in Paris, after Tuesday’s spinoff of Universal Music Group. Legrand climbs as much as 2.1% after Exane BNP Paribas upgrades to outperform and raises PT to a Street-high of EU135. Orpea shares falls as much as 2.9%, after delivering 1H results that Jefferies (buy) says were a “touch” below consensus. Bechtle slides as much as 5.1% after Metzler downgrades to hold from buy, saying persistent supply chain problems seem to be weighing on growth. Sopra Steria drops as much as 4.1% after Stifel initiates coverage with a sell, citing caution on company’s M&A strategy Despite the Evergrande announcement, Asian stocks headed for their longest losing streak in more than a month amid continued China-related concerns, with traders also eying policy decisions from major central banks. The MSCI Asia Pacific Index dropped as much as 0.7% in its third day of declines, with TSMC and Keyence the biggest drags. China’s CSI 300 tumbled as much as 1.9% as the local market reopened following a two-day holiday. However, the gauge came off lows after an Evergrande unit said it will make a bond interest payment and as China’s central bank boosted liquidity.  Taiwan’s equity benchmark led losses in Asia on Wednesday, dragged by TSMC after a two-day holiday, while markets in Hong Kong and South Korea were closed. Key stock gauges in Australia, Indonesia and Vietnam rose “A liquidity injection from the People’s Bank of China accompanied the Evergrande announcement, which only served to bolster sentiment further,” according to DailyFX’s Thomas Westwater and Daniel Dubrovsky. “For now, it appears that market-wide contagion risk linked to a potential Evergrande collapse is off the table.” Japanese equities fell for a second day amid global concern over China’s real-estate sector, as the Bank of Japan held its key stimulus tools in place while flagging pressures on the economy. Electronics makers were the biggest drag on the Topix, which declined 1%. Daikin and Fanuc were the largest contributors to a 0.7% loss in the Nikkei 225. The BOJ had been expected to maintain its policy levers ahead of next week’s key ruling party election. Traders are keenly awaiting the Federal Reserve’s decision due later for clues on the U.S. central banks plan for tapering stimulus. “Markets for some time have been convinced that the BOJ has reached the end of the line on normalization and will remain in a holding pattern on policy until at least April 2023 when Governor Kuroda is scheduled to leave,” UOB economist Alvin Liew wrote in a note. “Attention for the BOJ will now likely shift to dealing with the long-term climate change issues.” In the despotic lockdown regime that is Australia, the S&P/ASX 200 index rose 0.3% to close at 7,296.90, reversing an early decline in a rally led by mining and energy stocks. Banks closed lower for the fourth day in a row. Champion Iron was among the top performers after it was upgraded at Citi. IAG was among the worst performers after an earthquake caused damage to buildings in Melbourne. In New Zealand, the S&P/NZX 50 index rose 0.3% to 13,215.80 In FX, commodity currencies rallied as concerns about China Evergrande Group’s debt troubles eased as China’s central bank boosted liquidity and investors reviewed a statement from the troubled developer about an interest payment. Overnight implied volatility on the pound climbed to the highest since March ahead of Bank of England’s meeting on Thursday. The British pound weakened after Business Secretary Kwasi Kwarteng warnedthat people should prepare for longer-term high energy prices amid a natural-gas shortage that sent power costs soaring. Several U.K. power firms have stopped taking in new clients as small energy suppliers struggle to meet their previous commitments to sell supplies at lower prices. Overnight volatility in the euro rises above 10% for the first time since July ahead of the Federal Reserve’s monetary policy decision announcement. The Aussie jumped as much as 0.5% as iron-ore prices rebounded. Spot surged through option-related selling at 0.7240 before topping out near 0.7265 strikes expiring Wednesday, according to Asia- based FX traders.  Elsewhere, the yen weakened and commodity-linked currencies such as the Australian dollar pushed higher. In rates, the dollar weakened against most of its Group-of-10 peers. Treasury futures were under modest pressure in early U.S. trading, leaving yields cheaper by ~1.5bp from belly to long-end of the curve. The 10-year yield was at ~1.336% steepening the 2s10s curve by ~1bp as the front-end was little changed. Improved risk appetite weighed; with stock futures have recovering much of Tuesday’s losses as Evergrande concerns subside. Focal point for Wednesday’s session is FOMC rate decision at 2pm ET.   FOMC is expected to suggest it will start scaling back asset purchases later this year, while its quarterly summary of economic projections reveals policy makers’ expectations for the fed funds target in coming years in the dot-plot update; eurodollar positions have emerged recently that anticipate a hawkish shift Bitcoin dropped briefly below $40,000 for the first time since August amid rising criticism from regulators, before rallying as the mood in global markets improved. In commodities, Iron ore halted its collapse and metals steadied. Oil advanced for a second day. Bitcoin slid below $40,000 for the first time since early August before rebounding back above $42,000.   To the day ahead now, and the main highlight will be the aforementioned Federal Reserve decision and Chair Powell’s subsequent press conference. Otherwise on the data side, we’ll get US existing home sales for August, and the European Commission’s advance consumer confidence reading for the Euro Area in September. Market Snapshot S&P 500 futures up 0.4% to 4,362.25 STOXX Europe 600 up 0.5% to 461.19 MXAP down 0.7% to 199.29 MXAPJ down 0.4% to 638.39 Nikkei down 0.7% to 29,639.40 Topix down 1.0% to 2,043.55 Hang Seng Index up 0.5% to 24,221.54 Shanghai Composite up 0.4% to 3,628.49 Sensex little changed at 59,046.84 Australia S&P/ASX 200 up 0.3% to 7,296.94 Kospi up 0.3% to 3,140.51 Brent Futures up 1.5% to $75.47/bbl Gold spot up 0.0% to $1,775.15 U.S. Dollar Index little changed at 93.26 German 10Y yield rose 0.6 bps to -0.319% Euro little changed at $1.1725 Top Overnight News from Bloomberg What would it take to knock the U.S. recovery off course and send Federal Reserve policy makers back to the drawing board? Not much — and there are plenty of candidates to deliver the blow The European Central Bank will discuss boosting its regular asset purchases once the pandemic-era emergency stimulus comes to an end, but any such increase is uncertain, Governing Council member Madis Muller said Investors seeking hints about how Beijing plans to deal with China Evergrande Group’s debt crisis are training their cross hairs on the central bank’s liquidity management A quick look at global markets courtesy of Newsquawk Asian equity markets traded mixed as caution lingered ahead of upcoming risk events including the FOMC, with participants also digesting the latest Evergrande developments and China’s return to the market from the Mid-Autumn Festival. ASX 200 (+0.3%) was positive with the index led higher by the energy sector after a rebound in oil prices and as tech also outperformed, but with gains capped by weakness in the largest-weighted financials sector including Westpac which was forced to scrap the sale of its Pacific businesses after failing to secure regulatory approval. Nikkei 225 (-0.7%) was subdued amid the lack of fireworks from the BoJ announcement to keep policy settings unchanged and ahead of the upcoming holiday closure with the index only briefly supported by favourable currency outflows. Shanghai Comp. (+0.4%) was initially pressured on return from the long-weekend and with Hong Kong markets closed, but pared losses with risk appetite supported by news that Evergrande’s main unit Hengda Real Estate will make coupon payments due tomorrow, although other sources noted this is referring to the onshore bond payments valued around USD 36mln and that there was no mention of the offshore bond payments valued at USD 83.5mln which are also due tomorrow. Meanwhile, the PBoC facilitated liquidity through a CNY 120bln injection and provided no surprises in keeping its 1-year and 5-year Loan Prime Rates unchanged for the 17th consecutive month at 3.85% and 4.65%, respectively. Finally, 10yr JGBs were flat amid the absence of any major surprises from the BoJ policy announcement and following the choppy trade in T-notes which were briefly pressured in a knee-jerk reaction to the news that Evergrande’s unit will satisfy its coupon obligations tomorrow, but then faded most of the losses as cautiousness prevailed. Top Asian News Gold Steady as Traders Await Outcome of Fed Policy Meeting Evergrande Filing on Yuan Bond Interest Leaves Analysts Guessing Singapore Category E COE Price Rises to Highest Since April 2014 Asian Stocks Fall for Third Day as Focus Turns to Central Banks European equities (Stoxx 600 +0.5%) trade on a firmer footing in the wake of an encouraging APAC handover. Focus overnight was on the return of Chinese participants from the Mid-Autumn Festival and news that Evergrande’s main unit, Hengda Real Estate will make coupon payments due tomorrow; however, we await indication as to whether they will meet Thursday’s offshore payment deadline as well. Furthermore, the PBoC facilitated liquidity through a CNY 120bln injection whilst keeping its 1-year and 5-year Loan Prime Rates unchanged (as expected). Note, despite gaining yesterday and today, thus far, the Stoxx 600 is still lower to the tune of 0.7% on the week. Stateside, futures are also trading on a firmer footing ahead of today’s FOMC policy announcement, at which, market participants will be eyeing any clues for when the taper will begin and digesting the latest dot plot forecasts. Furthermore, the US House voted to pass the bill to fund the government through to December 3rd and suspend the debt limit to end-2022, although this will likely be blocked by Senate Republicans. Back to Europe, sectors are mostly firmer with outperformance in Basic Resources and Oil & Gas amid upside in the metals and energy complex. Elsewhere, Travel & Leisure is faring well amid further upside in Entain (+6.1%) with the Co. noting it rejected an earlier approach from DraftKings at GBP 25/shr with the new offer standing at GBP 28/shr. Additionally for the sector, Flutter Entertainment (+4.1%) are trading higher after settling the legal dispute between the Co. and Commonwealth of Kentucky. Elsewhere, in terms of deal flow, Iliad announced that it is to acquire UPC Poland for around USD 1.8bln. Top European News Energy Cost Spike Gets on EU Ministers’ Green Deal Agenda Travel Startup HomeToGo Gains in Frankfurt Debut After SPAC Deal London Stock Exchange to Shut Down CurveGlobal Exchange EU Banks Expected to Add Capital for Climate Risk, EBA Says In FX, trade remains volatile as this week’s deluge of global Central Bank policy meetings continues to unfold amidst fluctuations in broad risk sentiment from relatively pronounced aversion at various stages to a measured and cautious pick-up in appetite more recently. Hence, the tide is currently turning in favour of activity, cyclical and commodity currencies, albeit tentatively in the run up to the Fed, with the Kiwi and Aussie trying to regroup on the 0.7000 handle and 0.7350 axis against their US counterpart, and the latter also striving to shrug off negative domestic impulses like a further decline below zero in Westpac’s leading index and an earthquake near Melbourne. Next up for Nzd/Usd and Aud/Usd, beyond the FOMC, trade data and preliminary PMIs respectively. DXY/CHF/EUR/CAD - Notwithstanding the overall improvement in market tone noted above, or another major change in mood and direction, the Dollar index appears to have found a base just ahead of 93.000 and ceiling a similar distance away from 93.500, as it meanders inside those extremes awaiting US existing home sales that are scheduled for release before the main Fed events (policy statement, SEP and post-meeting press conference from chair Powell). Indeed, the Franc, Euro and Loonie have all recoiled into tighter bands vs the Greenback, between 0.9250-26, 1.1739-17 and 1.2831-1.2770, but with the former still retaining an underlying bid more evident in the Eur/Chf cross that is consolidating under 1.0850 and will undoubtedly be acknowledged by the SNB tomorrow. Meanwhile, Eur/Usd has hardly reacted to latest ECB commentary from Muller underpinning that the APP is likely to be boosted once the PEPP envelope is closed, though Usd/Cad is eyeing a firm rebound in oil prices in conjunction with hefty option expiry interest at the 1.2750 strike (1.8 bn) that may prevent the headline pair from revisiting w-t-d lows not far beneath the half round number. GBP/JPY - The major laggards, as Sterling slips slightly further beneath 1.3650 against the Buck to a fresh weekly low and Eur/Gbp rebounds from circa 0.8574 to top 0.8600 on FOMC day and T-1 to super BoE Thursday. Elsewhere, the Yen has lost momentum after peaking around 109.12 and still not garnering sufficient impetus to test 109.00 via an unchanged BoJ in terms of all policy settings and guidance, as Governor Kuroda trotted out the no hesitation to loosen the reins if required line for the umpteenth time. However, Usd/Jpy is holding around 109.61 and some distance from 1.1 bn option expiries rolling off between 109.85-110.00 at the NY cut. SCANDI/EM - Brent’s revival to Usd 75.50+/brl from sub-Usd 73.50 only yesterday has given the Nok another fillip pending confirmation of a Norges Bank hike tomorrow, while the Zar has regained some poise with the aid of firmer than forecast SA headline and core CPI alongside a degree of retracement following Wednesday’s breakdown of talks on a pay deal for engineering workers that prompted the union to call a strike from early October. Similarly, the Cnh and Cny by default have regrouped amidst reports that the CCP is finalising details to restructure Evergrande into 3 separate entities under a plan that will see the Chinese Government take control. In commodities, WTI and Brent are firmer this morning though once again fresh newsflow for the complex has been relatively slim and largely consisting of gas-related commentary; as such, the benchmarks are taking their cue from the broader risk tone (see equity section). The improvement in sentiment today has brought WTI and Brent back in proximity to being unchanged on the week so far as a whole; however, the complex will be dictated directly by the EIA weekly inventory first and then indirectly, but perhaps more pertinently, by today’s FOMC. On the weekly inventories, last nights private release was a larger than expected draw for the headline and distillate components, though the Cushing draw was beneath expectations; for today, consensus is a headline draw pf 2.44mln. Moving to metals where the return of China has seen a resurgence for base metals with LME copper posting upside of nearly 3.0%, for instance. Albeit there is no fresh newsflow for the complex as such, so it remains to be seen how lasting this resurgence will be. Finally, spot gold and silver are firmer but with the magnitude once again favouring silver over the yellow metal. US Event Calendar 10am: Aug. Existing Home Sales MoM, est. -1.7%, prior 2.0% 2pm: Sept. FOMC Rate Decision (Lower Boun, est. 0%, prior 0% DB's Jim Reid concludes the overnight wrap All eyes firmly on China this morning as it reopens following a 2-day holiday. As expected the indices there have opened lower but the scale of the declines are being softened by the PBoC increasing its short term cash injections into the economy. They’ve added a net CNY 90bn into the system. On Evergrande, we’ve also seen some positive headlines as the property developers’ main unit Hengda Real Estate Group has said that it will make coupon payment for an onshore bond tomorrow. However, the exchange filing said that the interest payment “has been resolved via negotiations with bondholders off the clearing house”. This is all a bit vague and doesn’t mention the dollar bond at this stage. Meanwhile, Bloomberg has reported that Chinese authorities have begun to lay the groundwork for a potential restructuring that could be one of the country’s biggest, assembling accounting and legal experts to examine the finances of the group. All this follows news from Bloomberg yesterday that Evergrande missed interest payments that had been due on Monday to at least two banks. In terms of markets the CSI (-1.11%), Shanghai Comp (-0.29%) and Shenzhen Comp (-0.53%) are all lower but have pared back deeper losses from the open. We did a flash poll in the CoTD yesterday (link here) and after over 700 responses in a couple of hours we found only 8% who we thought Evergrande would still be impacting financial markets significantly in a month’s time. 24% thought it would be slightly impacting. The other 68% thought limited or no impact. So the world is relatively relaxed about contagion risk for now. The bigger risk might be the knock on impact of weaker Chinese growth. So that’s one to watch even if you’re sanguine on the systemic threat. Craig Nicol in my credit team did a good note yesterday (link here) looking at the contagion risk to the broader HY market. I thought he summed it up nicely as to why we all need to care one way or another in saying that “Evergrande is the largest corporate, in the largest sector, of the second largest economy in the world”. For context AT&T is the largest corporate borrower in the US market and VW the largest in Europe. Turning back to other Asian markets now and the Nikkei (-0.65%) is down but the Hang Seng (+0.51%) and Asx (+0.58%) are up. South Korean markets continue to remain closed for a holiday. Elsewhere, yields on 10y USTs are trading flattish while futures on the S&P 500 are up +0.10% and those on the Stoxx 50 are up +0.21%. Crude oil prices are also up c.+1% this morning. In other news, the Bank of Japan policy announcement overnight was a non-event as the central bank maintained its yield curve target while keeping the policy rate and asset purchases plan unchanged. The central bank also unveiled more details of its green lending program and said that it would immediately start accepting applications and would begin making the loans in December. The relatively calm Asian session follows a stabilisation in markets yesterday following their rout on Monday as investors looked forward to the outcome of the Fed’s meeting later today. That said, it was hardly a resounding performance, with the S&P 500 unable to hold on to its intraday gains and ending just worse than unchanged after the -1.70% decline the previous day as investors remained vigilant as to the array of risks that continue to pile up on the horizon. One of these is in US politics and legislators seem no closer to resolving the various issues surrounding a potential government shutdown at the end of the month, along with a potential debt ceiling crisis in October, which is another flashing alert on the dashboard for investors that’s further contributing to weaker sentiment right now. Looking ahead now, today’s main highlight will be the latest Federal Reserve decision along with Chair Powell’s subsequent press conference, with the policy decision out at 19:00 London time. Markets have been on edge for any clues about when the Fed might begin to taper asset purchases, but concern about tapering actually being announced at this meeting has dissipated over recent weeks, particularly after the most recent nonfarm payrolls in August came in at just +235k, and the monthly CPI print also came in beneath consensus expectations for the first time since November. In terms of what to expect, our US economists write in their preview (link here) that they see the statement adopting Chair Powell’s language that a reduction in the pace of asset purchases is appropriate “this year”, so long as the economy remains on track. They see Powell maintaining optionality about the exact timing of that announcement, but they think that the message will effectively be that the bar to pushing the announcement beyond November is relatively high in the absence of any material downside surprises. This meeting also sees the release of the FOMC’s latest economic projections and the dot plot, where they expect there’ll be an upward drift in the dots that raises the number of rate hikes in 2023 to 3, followed by another 3 increases in 2024. Back to yesterday, and as mentioned US equity markets fell for a second straight day after being unable to hold on to earlier gains, with the S&P 500 slightly lower (-0.08%). High-growth industries outperformed with biotech (+0.38%) and semiconductors (+0.18%) leading the NASDAQ (+0.22%) slightly higher, however the Dow Jones (-0.15%) also struggled. Europe saw a much stronger performance though as much of the US decline came after Europe had closed. The STOXX 600 gained +1.00% to erase most of Monday’s losses, with almost every sector in the index ending the day in positive territory. With risk sentiment improving for much of the day yesterday, US Treasuries sold off slightly and by the close of trade yields on 10yr Treasuries were up +1.2bps to 1.3226%, thanks to a +1.8bps increase in real yields. However, sovereign bonds in Europe told a different story as yields on 10yr bunds (-0.3bps), OATs (-0.3bps) and BTPs (-1.9bps) moved lower. Other safe havens including gold (+0.59%) and silver (+1.02%) also benefited, but this wasn’t reflected across commodities more broadly, with Bloomberg’s Commodity Spot Index (-0.30%) losing ground for a 4th consecutive session. Democratic Party leaders plan to vote on the Senate-approved $500bn bipartisan infrastructure bill next Monday, even with no resolution to the $3.5tr budget reconciliation measure that encompasses the remainder of the Biden Administration’s economic agenda. Democrats continue to work on the reconciliation measure but have turned their attention to the debt ceiling and government funding bills.Congress has fewer than two weeks before the current budget expires – on Oct 1 – to fund the government and raise the debt ceiling. Republicans yesterday noted that the Democrats could raise the ceiling on their own through the reconciliation process, with many saying that they would not be offering their support to any funding bill. Democrats continue to push for a bipartisan bill to raise the debt ceiling, pointing to their votes during the Trump administration. If Democrats are forced to tie the debt ceiling and funding bills to budget reconciliation, it could limit how much of the $3.5 trillion bill survives the last minute negotiations between progressives and moderates. More to come over the next 10 days. Staying on the US, there was an important announcement in President Biden’s speech at the UN General Assembly, as he said that he would work with Congress to double US funding to poorer nations to deal with climate change. That comes as UK Prime Minister Johnson (with the UK hosting the COP26 summit in less than 6 weeks’ time) has been lobbying other world leaders to find the $100bn per year that developed economies pledged by 2020 to support developing countries as they reduce their emissions and deal with climate change. In Germany, there are just 4 days to go now until the federal election, and a Forsa poll out yesterday showed a slight narrowing in the race, with the centre-left SPD remaining on 25%, but the CDU/CSU gained a point on last week to 22%, which puts them within the +/- 2.5 point margin of error. That narrowing has been seen in Politico’s Poll of Polls as well, with the race having tightened from a 5-point SPD lead over the CDU/CSU last week to a 3-point one now. Turning to the pandemic, Johnson & Johnson reported that their booster shot given 8 weeks after the first offered 100% protection against severe disease, 94% protection against symptomatic Covid in the US, and 75% against symptomatic Covid globally. Speaking of boosters, Bloomberg reported that the FDA was expected to decide as soon as today on a recommendation for Pfizer’s booster vaccine. That follows an FDA advisory panel rejecting a booster for all adults last Friday, restricting the recommendation to those over-65 and other high-risk categories. Staying with the US and vaccines, President Biden announced that the US was ordering 500mn doses of the Pfizer vaccine to be exported to the rest of the world. On the data front, there were some strong US housing releases for August, with housing starts up by an annualised 1.615m (vs. 1.55m expected), and building permits up by 1.728m (vs. 1.6m expected). Separately, the OECD released their Interim Economic Outlook, which saw them upgrade their inflation expectations for the G20 this year to +3.7% (up +0.2ppts from May) and for 2022 to +3.9% (up +0.5ppts from May). Their global growth forecast saw little change at +5.7% in 2021 (down a tenth) and +4.5% for 2022 (up a tenth). To the day ahead now, and the main highlight will be the aforementioned Federal Reserve decision and Chair Powell’s subsequent press conference. Otherwise on the data side, we’ll get US existing home sales for August, and the European Commission’s advance consumer confidence reading for the Euro Area in September. Tyler Durden Wed, 09/22/2021 - 08:05.....»»

Category: blogSource: zerohedgeSep 22nd, 2021

I flew JetBlue between New York and London and found the food in economy class to be surprisingly tastier than in business class

JetBlue is offering a culinary experience in both cabins but those paying more for a business class seat might want to request an economy class meal. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider JetBlue Airways has brought in-flight dining to both cabins of service on its new London flights. Dig is crafting the economy class menu while Delicious Hospitality Group is tasked with catering in Mint business class. Italian food was a big focus on my flights with options like meatballs, cavatelli, and chicken Milanese offered. JetBlue is offering more than cheap fares on its London routes, it's also offering a full culinary experience. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Travelers in both economy and business classes receive complimentary hot meals on European flights. It's the first time in economy class that JetBlue flyers receive any meals. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider Here's what flying on JetBlue's first-ever flight to London was like in economy class.  The choice to provide meals aligns JetBlue with all the current airlines flying between the US and London. Meals are standard in economy on transatlantic flights to the UK and the offering shows that JetBlue isn't taking the budget carrier route of charging extra for meals. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider The meal service is an important part of any flight as it passes the time, entertains, and breaks up the boredom of a long-haul flight. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider I flew JetBlue to London in economy class and back in business class. Here's what dining on the airline was like in both cabins. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider My restaurant for the outbound flight to London was the economy class cabin onboard JetBlue's first Airbus A321neoLR, and I even scored a table near the window. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Here's why JetBlue flies one of the best aircraft between New York and London, despite its small size.  Instead of perusing a paper menu, however, all meals are on display through the seat-back entertainment screen. I was immediately brought back to the times of Virgin America, which had a similar ordering style. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider JetBlue chose Dig, a New York City-based eatery with an emphasis on healthy farm-to-table dining, to cater the economy class meals. I hadn't yet tried Dig's offering, despite working in New York City, and was eager to sample it. Eliza McKelvey/Business Insider "Dig has earned a big following in New York, Boston, and Philadelphia, where customers love the fresh ingredients and customizable concept," Jayne O'Brien, JetBlue's head of marketing and loyalty, said in a statement. "We wanted customers in the air to have the same freedom to design their own meal, just like they would if they were dining at a Dig restaurant." Madeline Stone / Business Insider Ordering was quite simple and intuitive, starting with the main. Three options were available from which to choose only one, with two meat/poultry options and a vegetable option. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Each choice, to my surprise, had a list of the ingredients and a short description. I don't think I've ever seen that level of detail on an economy class food menu. On offer for the dinner service was charred chicken with brown rice in a lime juice with herbs…. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Beef and chicken meatballs in a tomato ragu with farro and basil... Flying JetBlue Airways from New York to London. Thomas Pallini/Insider And spiced eggplant with turmeric cauliflower rice and toasted quinoa. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Next came the list of sides to accompany the main. Two sides could be selected from three choices available. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider The options included a Dig Acres tomato salad with soft farm cheese, pickled onions, and mint… Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Chilled sheet tray carrots with garlic, herbs, and a lemon peel… Flying JetBlue Airways from New York to London. Thomas Pallini/Insider And mac and cheese in a three-cheese blend with whole-wheat pasta and crispy panko breadcrumbs. To be honest, it was hard to pick since all three seemed ideal to accompany the main. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider But just like that, I had the perfect meal queued up and ready to go. There was nothing more I had to do or say, and the anticipation was already building before takeoff. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider The empty middle seat in my row also presented another opportunity: use the screen to order an additional meal. My rowmate, a JetBlue employee, and I decided to test out the system and ordered an additional meal to the empty seat. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider I also took a look at the interactive drink menu that listed all the beverages available on our flight. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider JetBlue offers complimentary soft drinks, beers, wines, and liquors in economy class. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider The in-flight service began once the mood lighting in the cabin turned pink. Two flight attendants geared with service trolleys walked up and down the aisle to serve the cabin. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider I opted for the traditional gin and tonic in honor of JetBlue's first flight to London. The classic drink consisted of Bombay Sapphire gin and Canada Dry tonic water. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Next came the part we were all waiting for, the meal service. Flight attendants once again started at both ends of the cabin, making their way towards the middle. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider A large black insulator case on top of the service trolley served to keep all the meals warn. It reminded me of a pizza delivery box but it did the trick. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider The presentation was also unlike anything I had seen in economy, with the food served in small reusable containers. It was certainly presented better than the traditional microwaveable dinner-style packaging to which I'm accustomed on other airlines. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Here's what dining was like on an American Airlines flight from New York to Madrid, Spain was like in August.  Also on the meal tray was a water bottle and two sauce cups containing sriracha and garlic mayonnaise. This differs from, say, the dinner roll, small side salad, cheese and crackers, and perhaps a dessert that other airlines will pack onto the tray. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider I opened the lids, however, and found more than enough food to satisfy, and everything looked delicious. I quickly dug in, no pun intended, and effectively cleaned my plate. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider The highlight was the mac and cheese which was the perfect comfort food for a long flight. I didn't love the cold carrots and was surprised by their temperature in comparison with the hot food but it was still tasty. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Next came the meatball main and while the presentation was similarly delightful, I do have to say that I didn't love the meatballs. They were alright but as someone that takes joy in making meatballs from scratch, I thought I could have made a better meatball. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider The tomato salad, however, was incredibly fresh and delightful. It was a perfectly healthy option for the flight. I was too full to clean the tray but I made sure to enjoy the second serving of mac and cheese. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider An ice cream cookiewhich capped off the evening meal service, which was the highlight of the meal. And with that, it was off to bed for the rest of the transatlantic crossing. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider For those still hungry, though, the JetBlue "pantry" was open for business with a selection of the carrier's signature snacks. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider I was woken up just a few hours later by a JetBlue flight attendant, at my request, during the morning meal service. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider There weren't any choices this time around and all passengers were given the same box of breakfast goods, including a pain au chocolate served warm and fruit salad. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Once again, the light meal hit the spot and prepared me to take on the day in London. Chocolate bread is also a personal favorite when in Europe and I'm glad JetBlue thought it would be ideal for London flights. Flying JetBlue Airways from New York to London. Thomas Pallini/Insider Landing in London completed the culinary journey that accompanied the flight, and the next few days were spent enjoying the local UK cuisine. Eating at Nando's in London, UK. Thomas Pallini/Insider Here's what it was like eating at Nando's, the South African chicken chain that's popular in the UK. Soon enough, though, it was time to head back to New York on JetBlue. This time, I'd be flying in the Mint business class cabin for a taste, quite literally, of how the other half lives. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider Read the full report here from the Mint business class flight home to New York. JetBlue has been working with the Delicious Hospitality Group to cater Mint business class flights since November. Any traveler that's flown Mint since then has had the opportunity to test out its culinary offering. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider Here's how JetBlue overhauled its Mint business class offering in November.  DHC under chef Ryan Hardy is known for its New York City restaurants including Pasquale Jones, Legacy Records, and Charlie Bird. Each restaurant has its turn onboard and Pasquale Jones was up for my flight to New York. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider Ordering meals in business class is slightly different than in economy, and traditional menus were left on each seat. Dinner was served on the 2:05 p.m. flight to New York, with five options from which to choose including baby greens, roasted carrots, shrimp curry, chicken Milanese, and cavatelli. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider Before the meal, however, a blood orange mimosa was served for the pre-departure beverage. It was quite refreshing and set a positive tone for the flight ahead. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider A beverage menu also listed which cocktails, beers, and liquors were available to order. Traditional cocktails were on offer including an old fashioned, margarita, and a dirty martini, as well as JetBlue concoctions. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider The meal service began shortly after takeoff with a tasting trio of olives, cashews, and anchovies. I'm not an anchovy fan but I can't hold that against JetBlue, especially as the other two snacks were delightful. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider I also ordered a "mint condition," consisting of gin or vodka with ginger, lime, cucumber, and mint. It reminded me of a mojito and I very much enjoyed it. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider Next came the main course, with four plates and a lot of food. Travelers can choose three of the five main course choices and I opted for the chicken Milanese, cavatelli, and baby greens. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider The baby greens served as the salad for the meal and included sweet potato and buttermilk dressing. It was light, fresh, and delicious. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider The chicken Milanese was basically a plain chicken cutlet, a dish I've eaten since I was a kid, accompanied with lemon and some greens. It was quite tasty but a bit bland without any sauce or cheese. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider I was the most nervous about the cavatelli since I've never had a great experience with tomato sauces on airplanes. It wasn't my favorite dish on the tray but it was quite the Sunday gravy with a full bowl of pasta with sausage ragu with pecorino romano on top. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider And finally, a dinner roll was served on the side with an "emergency kit," as chef Ryan Hardy calls it, of olive oil, spicy olive oil, and salt. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider "I think we can really fix just about anything. If we have great salts, great olive oil, some hot pepper, and some lemon," Hardy said when debuting the new Mint offering in November, "because those are critical to the cooking that we do in our restaurants." Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider Dessert immediately followed dinner and flight attendants rolled the desert cart down the aisle. On offer were a cheese plate and vanilla gelato with blackberries and almond crunch. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider A cheese plate, in my opinion, is the best way to end a meal and I'm glad to see that JetBlue recognizes that. My only complaint was that there weren't enough crackers to accompany the delicious cheeses. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider While certainly tasty and well-presented, I can't say it was among the best in-flight meals I've ever had. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider A selection of coffee and English tea was also available but I was fully content after the meal. The next few hours were spent working and resting. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider The good food continued as we crossed the Atlantic with flight attendants passing around a selection of snacks, including Walker's shortbread cookies. I was glad to see it wasn't JetBlue traditional snack basket and had premium brands. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider I also tested out the dirty martini and found it a little too dirty for my taste. But I did appreciate the odd number of olives in the drink. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider The pre-landing "supper small plates" were served just under an hour before landing as we approached New York. A selection of three choices was provided, from which I could select two, including Italian clam soup, panzanella, and a panini. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider I opted for the panzanella and panini, which were accompanied by a pretzel roll. It was a surprisingly good amount of food and I didn't even think I was hungry enough to eat again. But I was and I did. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider Flight attendants also brought over the before-landing snack from economy, purely for demonstration purposes, consisting of a warm pretzel and fruit salad. I didn't indulge but both definitely would've sufficed had I been in the back. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider Landing in New York came all too soon and it was safe to say that I didn't need to have dinner that night at home. But if I had to choose between the two JetBlue meals I had, I think I'd choose the meal I had on the flight I took in economy class. Flying JetBlue Airways from London to New York in Mint business class. Thomas Pallini/Insider Read the original article on Business Insider.....»»

Category: smallbizSource: nyt17 hr. 23 min. ago

It"s not a buyer"s or a seller"s market in housing: It"s a builder"s market

America needs homes, but builders aren't rushing. "People want an oversupplied market, and we just don't do that in America," an expert told Insider. Getty Images/Joe Readle The US faces a dire housing shortage, but builders are enjoying their biggest rally in 15 years. Builders aren't rushing to bring supply online - they're delicately balancing supply with booming demand. "The builders do not care anything about the existing-home-sales market and they don't care about the housing shortage," an expert says. See more stories on Insider's business page. The current US housing market is definitely not one for buyers. And despite soaring prices, it's not necessarily a sellers' market, either.The ones really doing fine in the housing market are the homebuilders. They're enjoying the biggest rally in 15 years, and the housing shortage is giving them unprecedented business.The housing market has been on an absolute tear for nearly two years. Lockdowns in spring 2020 sparked a moving spree as Americans capitalized on record-low mortgage rates and the shift to remote work. Buyers snapped up homes at a voracious pace, and prices surged at the fastest rate in 45 years. Home inflation has started to cool off, but the housing shortage still looms over the market. The National Association of Realtors estimated in June that the US has a deficit of 6.8 million homes. And while housing starts have edged higher, they're still way below what's needed to fill the gap.Contractors are key to solving the shortage, but they're in no rush. Home construction and new home sales show "beautiful symmetry," Logan Mohtashami, lead analyst at HousingWire, told Insider about how, when sales dip, housing starts follow, and when home demand ramps up, builders increase supply."The builders do not care anything about the existing-home-sales market and they don't care about the housing shortage," Mohtashami added. "They'll always go slow and steady ... People want an oversupplied market, and we just don't do that in America."Builders want to avoid another bubbleThere was a time not so long ago when builders rushed to flood the market with supply: right before the Great Recession. Builders who contributed to the housing bubble found themselves with an abundance of homes but nobody to sell them to. Prices collapsed, contractors across the US were burned, and many were forced to close their doors. From the 2006 peak to 2011, employment in residential construction shrank by 46%, and it still hasn't fully recovered."The last cycle left a lot of people in the homebuilding industry scarred," Ali Wolf, chief economist at housing data firm Zonda, told Insider. "Developers, builders, and banks became much more prudent in pursuing and approving new deals.""I get what they're doing," Mohtashami said. "If you look at the builders' margins, they're excellent."The rising tide lifted some ships - and left others to sinkThat's not to say every contractor thrived in the pandemic market. Firms with inventory in popular markets and those who could quickly bring more houses to market enjoyed stronger pricing power, since they were sitting on a product in high demand with very little competition, Wolf said. Others were less fortunate, finding themselves entangled in supply-chain disarray. Timelines are critical in residential construction, and falling behind on schedule can crush a business, Wolf said."Builders have the power in sales, but have little power when trying to get homes built," she added.Economists expect the market to cool throughout 2022, giving buyers, sellers, and builders a reprieve from the frenzy of the pandemic. A slowdown in home sales and a reversal of the labor shortage should help builders better match supply with demand, Wolf said.Until then, some firms will sink and others will swim."The pandemic provided the best of times and the worst of times for homebuilders," Wolf said. "It's really easy to say 'Why don't builders just build more homes?' But the reality is a lot more complicated."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 14th, 2021

Pandemic Wiped Out Entire Savings Of 20% Of US Households

Pandemic Wiped Out Entire Savings Of 20% Of US Households Over the weekend, we showed a staggering wealth distribution statistic cementing the US status as a banana republic: according to Fed data which breaks down the distribution of wealth according to income quintile (or 20% bucket) the middle 60% of US households by income saw their combined assets drop from 26.7% to 26.6% of national wealth as of June, the lowest in Federal Reserve data, while for the first time the super rich had a bigger share, at 27%. While especially true for the top 1%, it is all the rich that have benefited from the Fed's generous liquidity pump at the expense of the extinction of the US middle class - as the next chart shows, over the past 30 years, 10 percentage points of American wealth has shifted to the top 20% of earners, who now hold 70% of the total. The bottom 80% are left with less than 30%. But while we have extensively discussed the destructive impact of the Fed on the middle class - while enriching the top 1% - a view espoused recently by Stan Druckenmiller who in May called the Fed the single "greatest engine of wealth inequality" in history (to which we would also add the end of the gold standard under Nixon), some have asked what about the sub-middle class? After all one can argue (correctly) that the swing voter in the US is not in the top 1%, but rather in the bottom 50%. Well, as we previously pointed out, the bottom 50% own just 2% of all net worth, or a paltry $2.8 trillion. What is even more sad is that the wealth of the bottom 50% is virtually unchanged since 2006, while the net worth of the Top 1% has risen by 132% from $17.9 trillion to $41.5 trillion. But to get a sense of just how precarious the everyday existence of the lower classes is, consider the following stunning fact: Bloomberg reports that according to a poll of 3,616 adults aged 18 and older from NPR, the Robert Wood Johnson Foundation and the Harvard T.H. Chan School of Public Health released on Tuesday, for many Americans the Covid lockdowns - with nowhere to go and nothing to do - was a time to save. But for almost 20% of U.S. households, the pandemic wiped out their entire financial cushion. The share of respondents who said they lost all their savings jumped to 30% for those making less than $50,000 a year, the poll found. Black and Latino households were also harder hit. Avenel Joseph, a vice president at the Robert Wood Johnson Foundation, said many people dipped into their savings to cover child or health care expenses. “When crisis hits, or anything goes out of the norm—your child is sick, for example—you are sacrificing wages,” she said. Almost two thirds of households earning less than $50,000 a year said they had trouble affording rent, medical care, and food. While about two-thirds of people surveyed said they received financial assistance from the government in the past few months, 44% said those programs only “helped a little.” “We always knew there was going to be an uneven recovery,” Joseph said. “The safety net always had holes, and the pandemic ripped those holes even wider.” Lawmakers in Congress are currently debating how much to spend on shoring up the safety net going forward. While the staggering social divide is truly sad, and largely a byproduct of the Fed's catastrophic policies in the past decade, it does bring up an important point: while much has been said about the $2 trillion or so in excess savings created during the covid pandemic (assuming most if not all of that has not already been spent to fund the resurgent household spending in the US)... ... the reality is that the distribution of savings was also extremely skewed to benefit the wealthiest. And according to Morgan Stanley, the top 20% of US income groups benefited from two-thirds of all savings. The rest, or the "bottom 80%", retained just a third of this (debatable) $2 trillion in excess savings. Here is Morgan Stanley: The Fed's Distributional Financial Accounts provide insight on who is holding this tremendous stock in savings: Looking at cash holdings (checkable deposits and currency) from 1Q20-1Q21 across the income distribution shows that 65% of excess cash (cash accumulated above the 4Q19 level) is held among the top 20%, while 35% is spread across the bottom 80% (top 80% holds ~$1.4tn in excess savings and bottom 80% holds ~$800bn, Exhibit 4). And, judging by the poll referenced above, the lower 80% have already spent most if not all of their savings! What are the implications? Well, higher income households that hold a tremendous amount of excess savings make up a majority of consumer spending – the top 40% income group represents over 60% of expenditures (Exhibit 5). However, spending by higher income households is not very sensitive to income changes. This is why it is important that the lower-middle income group hold excess savings and have a steady income stream. The transition from government transfer income (unemployment insurance benefits, rebate checks, child tax credits) to labor market income is critical and is expected to support continued spending even as the fiscal impulse fades. The Opportunity Insights credit and debit card spending tracker by income tercile shows that consumer spending among the lowest tercile has consistently been higher relative to pre-Covid than middle and higher income groups. This holds even through mid- August where we have moved past the immediate bump from rebate checks, when the $600 federal supplemental UI benefits expired last summer, and during the second and third waves of Covid (Exhibit 6). To summarize: the rich not only got richer, but managed to save up over a trillion. Meanwhile, the "lower 80%" retained just a third of the $2 trillion in excess savings with many if not all cohorts within this segment have already spent all of their savings. As such, any optimistic GDP forecast which assumes that GDP will continue to grow in 2022 as a result of continued spending of "excess savings" by the bulk of the population, such as that done over the past weekend by Goldman (see gray bar in the chart below)... ... is terribly incorrect, for one simple reason: that many is gone, all gone. And while the rich still are holding a major portion of their "excess savings", they are far more likely to keep holding to it, or simply invest it in risk assets, which will bring absolutely no benefits to the US economy. It will however, ramp stocks even higher. Tyler Durden Thu, 10/14/2021 - 13:29.....»»

Category: personnelSource: nytOct 14th, 2021

American States Water"s (AWR) Capex, Customer Base Bode Well

American States Water (AWR) is likely to continuously gain from consistent customer wins and strategic investments. Also, its unit, ASUS supports its earnings. American States Water Company’s AWR planned investments in strengthening its aging water infrastructure along with a sturdy utility customer base and consistent contribution from its American States Utility Services (ASUS) unit support its operations.The Zacks Consensus Estimate for 2021 and 2022 earnings is pegged at $2.48 and $2.59 per share each, indicating respective growth of 6.44% and 4.44% from the corresponding year-ago reported figures. The company has a trailing four-quarter earnings surprise of 4.35%, on average.What’s Aiding the Stock?The company invested $75 million in the first two quarters of 2021and plans to spend in the range of $125-$135 million for the year toward regulated utilities. In July 2020, Golden State Water Company (GSWC) filed a general rate case application for all the water regions and also applied for new rates at the general office for the years 2022, 2023 and 2024.The new application includes capital budget requests of $450.6 million for the 2021-2024 time period and another $11.4 million worth of capital projects will be filed for revenue recovery once those projects are completed. Along with American States Water Company, other water utilities are investing heavily in their infrastructure for maintenance, upgrade and enhancement. These include Middlesex Water MSEX, American Water Works AWK and California Water Service CWT.Moreover, the company has a solid customer base and is adding electricity and water utility customers at a slow but steady pace through acquisitions and organic means. American States Water Company’s Water segment is a major contributor to its total revenues.ASUS has long-term contracts with military bases, which are 50-year fixed-price deals. Prices are determined by the military outfits. The long-term defense contracts lend stability to the company’s earnings. This unit is expected to contribute 45-49 cents per share to its current-year earnings.HeadwindsAmerican States Water Company’s dependence on a single state (California) for recognizing a significant chunk of its earnings is a huge downside. Also, the company operates in a highly regulated environment and any changes in the existing laws and conditions could affect its business. Further, the aging water infrastructure and the risk of contamination of groundwater could adversely impact its operations. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. You know this company from its past glory days, but few would expect that it's poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks' Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Water Works Company, Inc. (AWK): Free Stock Analysis Report California Water Service Group (CWT): Free Stock Analysis Report American States Water Company (AWR): Free Stock Analysis Report Middlesex Water Company (MSEX): Free Stock Analysis Report To read this article on Zacks.com click here......»»

Category: topSource: zacksOct 13th, 2021

Here"s Why It is Worth Betting on Murphy USA (MUSA) Now

Murphy USA's (MUSA) unique high-volume, affordable business model aids in sustaining strong profitability levels despite operating on a severely competitive retail landscape. A discreet investment decision leads to buying healthy stocks at the opportune time while getting rid of those that are prone to risk. Price upsurge and strong fundamentals substantiate a stock’s bull run.Shares of Murphy USA Inc. MUSA are likely to exhibit an uptrend on the back of a solid operational performance and robust retail margins.Therefore, if you are still contemplating on leveraging this stock price rally, it’s time that you tap the investment opportunity at your disposal. Let’s weigh the factors why Murphy USA has enough momentum to carry on with.What Makes It a Promising Pick? An OutperformerA glance at the company’s price trend shows that the stock had an impressive show on the bourses in the past 3 months. Shares of Murphy USA have rallied 20.5% compared with the industry’s 8.3% growth.Image Source: Zacks Investment ResearchTop Rank & Attractive VGM Score This leading independent retailer of motor fuel and convenience merchandise in the United States currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research suggests that stocks with a VGM Score of A or B when combined with a Zacks Rank of 1 or 2 offer the best investment opportunities. Thus, the company appears a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.Excellent Q2 PerformanceMurphy USA reported second-quarter 2021 earnings per share of $4.79, which beat the Zacks Consensus Estimate of $3.39. The outperformance could be attributed to higher retail gasoline price and contribution from the QuickChek acquisition.Northward Estimate RevisionsThe direction of estimate revisions serves as a key indicator when it comes to stock movement. The Zacks Consensus Estimate for 2021 earnings has been revised 11.7% upward over the past 60 days while the same for 2022 has moved 6.9% north.Positive Earnings Surprise HistoryMurphy USA has an encouraging surprise record. Its earnings surpassed the Zacks Consensus Estimate in three of the preceding four quarters, meeting the same on one occasion, the average beat being 18.66%.Strong Balance SheetThe company exited the second quarter with cash and cash equivalents of $165 million.Key DriversMurphy USA’s unique high-volume and low-cost business model helps it retain solid profitability despite a fiercely competitive retail environment. The company, which sells more than 4 billion gallons of retail fuel, annually, owns above 90% of its gasoline stations. This enables it to contain its operating expenses. The proximity of Murphy USA’s fuel stations to Walmart WMT supercenters aids the company to gain traction from the steady flow of traffic that these stores attract, thus driving its above-average fuel sales volume.The company’s outsourcing of raw materials is another key catalyst. With its access to pipelines and product distribution terminals, Murphy USA is able to avail of fuel at a cheaper cost than most can buy. This, in turn, allows the company to sell retail gasoline at a discount.Through its shareholder-friendly capital allocations, Murphy USA is committed to return a portion of its free cash flow to its shareholders through continued and ongoing share repurchases. As evidence, the company spent 48% of its capital budget from 2015 to 2019 on stock buybacks.The company has been building up to 50 larger-format stores, annually, since the start of this year as well as 25 raze-and-rebuilds. In the last reported quarter, Murphy USA’s 2021 guidance included 34-38 new stores and up to 31 raze-and-rebuilds. The motor fuel retailer added that it is open to grow inorganically as well.Management believes that the company’s strong operational performance and positive trends will allow its stock to achieve a sustainable EBITDA of more than $500 million in 2021, two years earlier than expected.Other Key PicksSome other top-ranked stocks in the energy space are CNOOC Limited CEO and SilverBow Resources Inc. SBOW, each carrying the same Zacks Rank as Murphy USA at present. Tech IPOs With Massive Profit Potential In the past few years, many popular platforms and like Uber and Airbnb finally made their way to the public markets. But the biggest paydays came from lesser-known names. For example, electric carmaker X Peng shot up +299.4% in just 2 months. Think of it this way… If you had put $5,000 into XPEV at its IPO in September 2020, you could have cashed out with $19,970 in November. With record amounts of cash flooding into IPOs and a record-setting stock market, this year’s lineup could be even more lucrative.See Zacks Hottest Tech IPOs Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CNOOC Limited (CEO): Free Stock Analysis Report Walmart Inc. (WMT): Free Stock Analysis Report Murphy USA Inc. (MUSA): Free Stock Analysis Report SilverBow Resources (SBOW): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 12th, 2021

Is The Great "Bear Market" Of 2021 Finally Over?

Is The Great "Bear Market" Of 2021 Finally Over? Authored by Lance Roberts via RealInvestmentAdvice.com, In last week’s newsletter, we stated: “It is worth noting there are two primary support levels for the S&P. The previous July lows (red dashed line) and the 200-dma. Any meaningful decline occurring in October will most likely be an excellent buying opportunity particularly when the MACD buy signal gets triggered. The rally back above the 100-dma on Friday was strong and sets up a retest of the 50-dma. If the market can cross that barrier we will trigger the seasonal MACD buy signal suggesting the bull market remains intact for now.“ Chart updated through Friday Notably, the very short-term moving average convergence divergence (MACD) indicator (lower panel) did trigger this past week. With markets not yet back to extremely overbought territory, and sentiment still very negative, the bulls are trying to reclaim the 50-dma. Our seasonal MACD indicator (next to the bottom panel) also triggered, but just barely. We need to see some follow-through buying action next week. Money Flow Buy Signal Also Positive The RIAPRO Money Flow indicator also triggered a buy signal, becoming more robust support for a short-term rally this past week. So, do all these signals mean the “Great Bear Market Of 2021” is behind us? After a harrowing 5% decline, sentiment is now highly negative, supporting a counter-trend rally in the markets. Thus, we think there is a tradeable opportunity between now and the end of the year. But, as we will discuss below, significant headwinds continue to accrue, suggesting higher volatility in the future. I want to reiterate our conclusion from last week: “If you didn’t like the recent decline, you have too much risk in your portfolio. We suggest using any rally to the 50-dma next week to reduce risk and rebalance your portfolio accordingly. While the end of the year tends to be stronger, there is no guarantee such will be the case. Once the market “proves” it is back on a bullish trend, you can always increase exposures as needed. If it fails, you won’t get forced into selling.“ That advice remains apropos this week as well. The biggest mistake investors make is allowing emotion to dominate their investment decision-making process. Such is why “buy and hold” investing is appealing during a bull market because it removes decisions from portfolio management. However, as we discussed this past week in “The Best Way To Invest.” “Buy and hold” strategies are the “best way” to invest until they aren’t.“ The Debt Ceiling Non-Crisis As discussed in the “Debt Ceiling Non-Crisis,” the hyperbole surrounding the debt limit was on full display, culminating with this tweet from Bernie Sanders: The major corporations want Congress to lift the debt ceiling. Yet, they continue to make massive campaign contributions to the Republican Party which refuses to pay the debt incurred under Trump, and is prepared to plunge the economy into a depression. Bullshit! — Bernie Sanders (@SenSanders) September 28, 2021 While “Ole’ Bernie” is trying to coerce his counterparts to raise the debt limit, his statement is full of misinformation to scare individuals. As noted in our article: “In 1980, that all changed, and seven administrations and four decades later, Government debt surged, deficits exploded, and the debt ceiling rose 78 times. (49 times under Republicans and 29 times under Democrats.) As Congress lifts the debt ceiling for the 79th time, the runaway spending and deficit increases continue to accelerate. The consequence of increasing debts and deficits is evident in the declining economic growth rates over the past 40-years.” In other words, this isn’t about paying bills from the Trump Administration, but also every President before him back to Ronald Reagan. For each year that we amass more enormous debts and deficits, the interest payments increase along with the growing burden of “mandatory spending.” The problem today, as discussed in the “Insecurity Of Social Security,” “In the fiscal year 2019, the Federal Government spent $4.4 trillion, amounting to 21 percent of the nation’s gross domestic product (GDP). Of that $4.4 trillion, federal revenues financed only $3.5 trillion. The remaining $984 billion came from debt issuance. As the chart below shows, three major areas of spending make up most of the budget.” In 2019, 75% of all expenditures went to social welfare and interest on the debt. Those payments required $3.3 Trillion of the $3.5 Trillion (or 95%) of the total revenue collected. Given the decline in economic activity during 2020, those numbers become markedly worse. For the first time in U.S. history, the Federal Government will have to issue debt to cover the mandatory spending.“ Only A Temporary Fix Think about that for a moment. In 2021, we will spend more on our “mandatory spending” than “revenue” will cover. Such means the Government will continue to go further into debt every year just to run the country. On top of the required spending, our politicians now want to add another $5 trillion in debt for “infrastructure.” See the problem here. The “debt ceiling” was always a “non-crisis.” It was just political brinksmanship playing out on national television. The resolution, as expected, came last week with Senate Minority Leader, Mitch McConnell, proposing a debt limit ceiling lift to $29 trillion. Such will fund the government through December. “Senate leaders reached a bipartisan agreement Wednesday to defuse the impending debt limit crisis by allowing for a short-term increase in the statutory borrowing cap while lawmakers negotiate a longer-term solution. Democrats said they would agree to an offer from Minority Leader Mitch McConnell that would pave the way for an increase in the debt limit into December. But the two parties still disagreed on any long-term strategy.” – Roll Call While raising the debt ceiling may look like a victory for the Democrats, it may not be. “While raising the debt ceiling just once is proving to be a challenge, the only thing worse would be having to vote to raise it twice ‘From a political perspective, the only thing less attractive than voting to raise the debt limit to $31 trillion is voting to raise it to $29 trillion and then voting a second time to raise it to $31 trillion’” – Zerohedge Odds Increasing We’ve Seen The Highs For This Year There are reasons to be optimistic as we head into the seasonally strong period of the year. However, while the seasonal and technical backdrop is improving short term, we should not dismiss the numerous headwinds. Valuations remain elevated. Inflation is proving to be sticker than expected. The Fed will likely move forward with “tapering” their balance sheet purchases in November. Economic growth continues to wane. Corporate profit margins will shrink due to inflationary pressures. Earnings estimates will get downwardly revised keeping valuations elevated. Liquidity continues to contract on a global scale Consumer confidence continues to slide. While none of these independently suggest a significant correction is imminent, they will limit the market’s advance making new highs less attainable. Furthermore, given the “debt crisis” will return in December, the risk of volatility remains elevated. Much of the mainstream media overlooks the rapid decline in liquidity that supported the market over the last year. While the “human infrastructure” bill will provide some support, the difference is the spending is spread out over 10-years versus the “checks to households” in 2020. Furthermore, that liquidity drain is rapidly deteriorating the outlook for economic growth. Here is the latest report from the Atlanta Federal Reserve: “The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2021 is 1.3 percent on October 5, down from 2.3 percent on October 1. “ As BCA Research shows, as we head into the last quarter of the year and 2022, the slower economic growth rates will coincide with corporations’ weaker revenue and earnings growth. As noted, with valuations already elevated, a reversal in earnings growth will likely limit a stronger advance. Tyler Durden Sun, 10/10/2021 - 10:30.....»»

Category: dealsSource: nytOct 10th, 2021

Housing isn"t a seller"s market after all - it"s a builder"s market

America needs homes, but builders aren't rushing. "People want an oversupplied market, and we just don't do that in America," an expert told Insider. Getty Images/Joe Readle The US faces a dire housing shortage, but builders are enjoying their biggest rally in 15 years. Builders aren't rushing to bring supply online - they're delicately balancing supply with booming demand. "The builders do not care anything about the existing-home-sales market and they don't care about the housing shortage," an expert says. See more stories on Insider's business page. The current US housing market is definitely not one for buyers. And despite soaring prices, it's not necessarily a sellers' market, either.The ones really doing fine in the housing market are the homebuilders. They're enjoying the biggest rally in 15 years, and the housing shortage is giving them unprecedented business.The housing market has been on an absolute tear for nearly two years. Lockdowns in spring 2020 sparked a moving spree as Americans capitalized on record-low mortgage rates and the shift to remote work. Buyers snapped up homes at a voracious pace, and prices surged at the fastest rate in 45 years. Home inflation has started to cool off, but the housing shortage still looms over the market. The National Association of Realtors estimated in June that the US has a deficit of 6.8 million homes. And while housing starts have edged higher, they're still way below what's needed to fill the gap.Contractors are key to solving the shortage, but they're in no rush. Home construction and new home sales show "beautiful symmetry," Logan Mohtashami, lead analyst at HousingWire, told Insider about how, when sales dip, housing starts follow, and when home demand ramps up, builders increase supply."The builders do not care anything about the existing-home-sales market and they don't care about the housing shortage," Mohtashami added. "They'll always go slow and steady ... People want an oversupplied market, and we just don't do that in America."Builders want to avoid another bubbleThere was a time not so long ago when builders rushed to flood the market with supply: right before the Great Recession. Builders who contributed to the housing bubble found themselves with an abundance of homes but nobody to sell them to. Prices collapsed, contractors across the US were burned, and many were forced to close their doors. From the 2006 peak to 2011, employment in residential construction shrank by 46%, and it still hasn't fully recovered."The last cycle left a lot of people in the homebuilding industry scarred," Ali Wolf, chief economist at housing data firm Zonda, told Insider. "Developers, builders, and banks became much more prudent in pursuing and approving new deals.""I get what they're doing," Mohtashami said. "If you look at the builders' margins, they're excellent."The rising tide lifted some ships - and left others to sinkThat's not to say every contractor thrived in the pandemic market. Firms with inventory in popular markets and those who could quickly bring more houses to market enjoyed stronger pricing power, since they were sitting on a product in high demand with very little competition, Wolf said. Others were less fortunate, finding themselves entangled in supply-chain disarray. Timelines are critical in residential construction, and falling behind on schedule can crush a business, Wolf said."Builders have the power in sales, but have little power when trying to get homes built," she added.Economists expect the market to cool throughout 2022, giving buyers, sellers, and builders a reprieve from the frenzy of the pandemic. A slowdown in home sales and a reversal of the labor shortage should help builders better match supply with demand, Wolf said.Until then, some firms will sink and others will swim."The pandemic provided the best of times and the worst of times for homebuilders," Wolf said. "It's really easy to say 'Why don't builders just build more homes?' But the reality is a lot more complicated."Read the original article on Business Insider.....»»

Category: smallbizSource: nytOct 10th, 2021

Futures Drift Before Taper-Triggering Jobs Report

Futures Drift Before Taper-Triggering Jobs Report US equity-index drifted in a tight range overnight, in a tight range before key jobs data that could provide clues on the Federal Reserve’s policy. As noted in our preview, unless the jobs report is a disaster, it will virtually assure the Fed launches tapering in one month. Markets drifted higher on Thursday after the Senate averted the risk of an immediate default, pushing global stocks on course for their best week since early September, but a late day selloff wiped away most gains and closed spoos below the critical 4400 level. At 07:30 a.m. ET, Dow e-minis were up 35 points, or 0.10%, S&P 500 e-minis were up 5.00 points, or 0.1%, and Nasdaq 100 e-minis were up 10.75 points, or 0.07%. Treasury Yields were 1 point higher after earlier tagging 1.60%, the highest since June. The dollar was flat while Brent topped $83 before paring gains. Bitcoin traded above $55,000. Uncertainty over the debt ceiling negotiations and a run-up in U.S. Treasury yields over elevated inflation were major concerns among investors earlier this week, injecting volatility in equity markets this week. High-growth FAAMG stocks slipped in premarket trading following sharp gains in previous session. Energy firms including Chevron Corp and Exxon Mobil gained about 0.8% tracking crude prices, while major U.S. lenders also edged up as the benchmark 10-year yield hit its highest level since June 4. Here are some of the biggest movers and stocks to watch today: Tesla (TSLA US) shares in focus after Elon Musk says a global shortage of chips and ships is the only thing standing in the way of the company maintaining sales growth in excess of 50% Sundial Growers (SNDL US) shares rise as much as 19% in U.S. premarket after the Canadian cannabis producer said it will buy liquor and pot retailer Alcanna for $276m in stock Allogene Therapeutics (ALLO US) plunges 36% in U.S. premarket trading after an early-stage study of its cell therapy was put on hold by U.S. regulators Prelude Therapeutics (PRLD US) fell in U.S. premarket trading, adding to Thursday’s 40% plunge on early- stage data for the company’s experimental cancer treatments that Barclays says came in below expectations Vaxart (VXRT US) rises 8% in U.S. premarket trading after its oral tablet vaccine candidate cut transmission of Covid-19 in animals, according to data from a study led by Duke University Faraday Future (FFIE US) slides 4% in U.S. premarket trading after J Capital says it is short on the stock. The short-seller says they don’t think the company “will ever sell a car” Codiak Biosciences (CDAK US) shares fell 6% in Thursday postmarket trading after disclosing that Sarepta Therapeutics is terminating a research license and option agreement Agile Therapeutics (AGRX US) tumbled Thursday postmarket after the women’s health-care company said that it intends to offer and sell shares of its common stock, as well as warrants to purchase shares of its common stock, in an underwritten public offering Looking to today's main event, economists expect September hiring to have surged by 500,000 jobs as the summer wave of COVID-19 infections began to subside, and as millions of Americans no longer receive jobless benefits, positioning the Fed to start scaling back its monthly bond buying.  “All roads lead to non-farm payrolls data which will decide, in the market’s minds, whether the start of the Fed taper is a done deal for December,” said Jeffrey Halley, senior market analyst at OANDA. “I do not believe that markets have priced in the Fed taper and its implications to any large degree yet. Even a weak number probably only delays the inevitable for another month.” Even “reasonably soft” payrolls and unemployment figures wouldn’t be enough to change the minds of its officials, according to Ipek Ozkardeskaya, senior analyst at Swissquote. “Only a shockingly low figure could do that,” she said. “The persistent rise in oil prices can only continue boosting inflation fears and the central bank hawks, limiting the upside potential in case of a further recovery in stocks.” “As soon as you start thinking about tapering it’s really hard to not then think about what that means for the Fed funds rate and when that might start to increase,” Kim Mundy, currency strategist and international economist at Commonwealth Bank of Australia in Sydney, said on Bloomberg Television. “We do see scope that markets can start to price in a more aggressive Fed funds rate hike cycle.” In Europe, tech companies led the Stoxx Europe 600 Index down 0.2%, with energy stocks and carmakers being the only industry groups with meaningful gains. Chip stocks fell, especially Apple suppliers, following a profit warning from Asian peer and fellow supplier AAC Technologies. On the other end, European travel stocks rose after U.K. confirmed the travel “red list” will be cut to just seven countries; British Airways parent IAG and TUI led the advances. Here are some of the biggest European movers today: Daimler shares gains as much as 3.2%, outperforming peers, after UBS upgrades stock to buy from neutral, calling it an earnings momentum story that stands to gain from strong demand, electrification trends and its future focus on passenger cars. Adler shares rise as much as 13% after shareholder Aggregate sells a call option to Vonovia for a 13.3% stake in the German real estate investment firm at a strike price of EU14 per share. Cewe Stiftung shares jump as much as 4.2%, their best day in over three months, after the photography services firm gets a new buy rating at Hauck & Aufhaeuser. Weir shares fall as much as 6.3%, to the lowest since Nov. 13, after the U.K. machinery maker announced that a ransomware attack will affect full-year profitability; Jefferies says it’s unlikely that guidance beyond that will be revised. Zur Rose slumps as much as 9.2% after Berenberg downgrades the Swiss online pharmacy to hold from buy, citing the expected negative impact from a delay in the implementation of mandatory e-prescriptions in Germany. Czech digital-payments provider Eurowag shares slide as much as 10% as it starts trading in London, after pricing its IPO below an initial range and making its debut a day later than planned. Asian stocks rose for a second day as China’s market reopened higher and the U.S. Senate approved a short-term increase in the debt ceiling. The MSCI Asia Pacific Index advanced as much as 1% in a rally led by consumer discretionary shares. Alibaba and Tencent were among the biggest contributors to the gauge’s climb. Shares in mainland China surged more than 1% as investors returned from the Golden Week holiday. Chinese property shares fell after a report that more than 90% of China’s top 100 property developers’ sales declined in September by an average of 36% from the same period last year, while investor concerns about developers’ liquidity rose after Fantasia bonds were suspended from trading. In mainland: CSI 300 Real Estate Index drops as much as 2%, Seazen Holdings falls as much as 5%, Poly Developments -4%. Asia’s stock benchmark is slightly down for the week, as rising bond yields weighed on tech-heavy indexes in South Korea, Taiwan and Japan. The gauge is down more than 1% this month amid an energy shortage in China and India.  “Markets may not want to commit directionally” given that we have non-farm payrolls data on the docket, making a follow-through of today’s rally suspect, said Ilya Spivak, the head of Greater Asia at DailyFX. Traders are expecting today’s U.S. employment data to provide clues on the direction of the world’s largest economy. On Thursday, the U.S. averted what would have been its first default on a debt payment. Most major benchmarks in Asia climbed, led by Japan, Indonesia and Australia. India’s central bank kept its lending rates at a record low at a policy meeting today. In Australia, the S&P/ASX 200 index rose 0.9% to close at 7,320.10. All industry groups edged higher. The benchmark rose 1.9% for the week, the biggest weekly gain since early August. Miners led the charge, having the best week since July, banks the best since the start of March. EML Payments tumbled after an update on its Ireland subsidiary from the country’s central bank. Chalice Mining continued its rebound, finishing the session the strongest performer in the mining subgauge.  There is a risk of excessive borrowing due to low interest rates and rising house prices, Reserve Bank of Australia said in its semiannual Financial Stability Review released Friday. In New Zealand, the S&P/NZX 50 index fell 0.1% to 13,086.60 In rates, Treasury futures remained under pressure after paring declines that pushed 10-year yield as high as 1.5995% during European morning, highest since June 4; the 1.60% zone is thought to have potential to spur next wave of convexity hedging. U.K. 10-year is higher by 4bp, German by 2.3bp - gilts underperformed, weighing on Treasuries as money markets continue to bring forward BOE rate-hike expectations. During U.S. session, September jobs report may seal case for Fed taper announcement in November.  In FX, the greenback traded in a narrow range versus G10 peers while 10-year Treasury yields approached 1.6%, outperforming Bunds.  Gilt yields rose 5-6bps across the curve; demand for downside protection in the pound eases this week as the U.K. currency moves off cycle lows amid money markets repricing. U.K. wage growth rose at its strongest pace on record in a survey of job recruiters, indicating strains from a shortage of workers are persisting. Turkish lira initially weakens above 8.96/USD before recouping half of its losses In commodities, oil extended a rebound, on track for a seventh weekly gain. Crude futures pushed to the best levels for the week. WTI rises 1.5% near $79.50, Brent pops back on to a $83-handle. Spot gold trades a $5 range near $1,757/oz. Base metals are mostly positive, with LME nickel gaining over 3.5%. Looking at the day ahead, the highlight will be the aforementioned September jobs report. Central bank speakers include ECB President Lagarde and the ECB’s Panetta. Market Snapshot S&P 500 futures little changed at 4,389.50 STOXX Europe 600 down 0.3% to 457.18 MXAP up 0.4% to 194.72 MXAPJ up 0.2% to 636.80 Nikkei up 1.3% to 28,048.94 Topix up 1.1% to 1,961.85 Hang Seng Index up 0.6% to 24,837.85 Shanghai Composite up 0.7% to 3,592.17 Sensex up 0.7% to 60,070.61 Australia S&P/ASX 200 up 0.9% to 7,320.09 Kospi down 0.1% to 2,956.30 Brent Futures up 1.4% to $83.09/bbl Gold spot up 0.0% to $1,756.25 U.S. Dollar Index little changed at 94.29 German 10Y yield up +3.4 bps to -0.151% Euro little changed at $1.1549 Top Overnight News from Bloomberg Global talks to reshape the corporate tax landscape are set to resume on Friday after Ireland’s decision to adhere to the world consensus on a minimum rate removed one hurdle to an agreement that still hangs in the balance Germany’s Social Democrats hailed a positive start in their effort to form a government after their first meeting with the Greens and the pro-business Free Democrats A U.S. nuclear-powered attack submarine struck an object while submerged in international waters in the Indo- Pacific region last week, the Navy said, adding that no life- threatening injuries were reported China drained the most short- term liquidity from the banking system in a year on a net basis as it reduced support after a week-long holiday. Government bond futures slid by the most since August China’s central bank will continue to push for the reform of its benchmark loan rate and make deposit rates more market-based, according to a senior official India’s central bank surprised markets by suspending its version of quantitative easing, signaling the start of tapering pandemic-era stimulus measures as an economic recovery takes hold U.K. government bond yields have climbed to levels last seen before the Brexit referendum in 2016 relative to German peers, as traders brace for inflation in Britain over the next decade to far outpace the rate in Europe’s largest economy A detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mostly higher as the region conformed to the global upbeat mood after the agreement in Washington to raise the debt ceiling which the Senate approved, with the overnight bourses also invigorated by the return of China and strong Caixin PMI data. The ASX 200 (+0.9%) was led higher by strength in mining names with underlying commodity prices boosted as Chinese buyers flocked back to market which helped the ASX disregard a record increase in daily COVID-19 cases in Victoria state. Nikkei 225 (+1.3%) was the biggest gainer and reclaimed the 28k level as exporters benefitted from a softer currency, while attention turns to PM Kishida who will outline his policy program today and is reportedly planning to present an additional budget after the election. Furthermore, there were recent comments from an ally of the new PM who suggested that capital gains tax could be raised to 25% from the current 20% without affecting stock prices, although this failed to dent the mood in Tokyo and weaker than expected Household Spending was also brushed aside. The gains for the KOSPI (-0.1%) were later reversed alongside the tentative price action in index heavyweight Samsung Electronics after its Q3 prelim. results showed oper. profit likely rose to its highest in three years but missed analysts’ forecasts. Hang Seng (+0.6%) and Shanghai Comp. (+0.7%) were mixed with the latter jubilant on reopen from the Golden Week holiday after improved Caixin Services and Composite PMI data which both returned to expansionary territory. This helped mainland stocks overlook the recent developer default fears and largest daily liquidity drain by the PBoC since October last year, although Hong Kong initially lagged amid heavy Northbound Stock Connect trade. Finally, 10yr JGBs declined on spillover selling from T-notes and with havens shunned amid the gains across riskier assets, although downside in JGBs was limited given the BoJ’s presence in the market for nearly JPY 1.5tln of JGBs with up to 10yr maturities. Top Asian News Gold Steadies Ahead of Key U.S. Jobs Report as Yields Climb Investors Fear Tax Talk in Kishida’s ‘New Japanese Capitalism’ China Coal Prices Plunge as Producers Vow to Ease Shortages China Developer Stocks Fall After Report of Monthly Sales Drop An initially contained to marginally-firmer European cash open followed an upbeat APAC handover (ex-Hang Seng) was short-lived with bourses coming under moderate pressure; Euro Stoxx 600 -0.3%. As such, major indices are all in the red, except for of the UK FTSE 100 which is essentially unchanged and bolstered by strength in heavy-weight energy and mining names given broader price action the return of China. Sectors were initially mixed at the open, but in-fitting with the action in indices, has turned to a predominantly negative performance ex-energy. Crossing to the US, futures have directionally been following European peers, but the magnitude has been more contained, with the ES unchanged as we await the September labour market report for any read across to the Fed’s policy path; however, officials have already made it clear that it would have to be a very poor report to spark a deviation from its announced intentions, where it is expected to announce an asset purchase tapering in November. Returning to Europe, Daimler (+2.5%) stands out in the individual stocks space, firmer after a broker upgrade and notable price target lift at UBS; Marks & Spencer (+1.5%) is also supported on broker action. To the downside lies Weir Group (-3.0%) after reports of a ransomware attack. Top European News Adler’s Largest Shareholder Sells Option on Stake to Vonovia; A Controversial Tycoon Sits on Adler’s $9 Billion Pile of Debt Chip Stocks Drag Tech Gauge Lower as Asian Apple Supplier Warns European Gas Rises as Bumpy Ride Continues With Cold Air Coming Lira Weakens to Fresh Low as Rising U.S. Yields Add Pressure In FX, the Dollar is trying to regroup and firm up again after its latest downturn amidst a further rebound in US Treasury yields, more pronounced curve re-steepening, and perhaps some relief that the Senate finally passed the debt ceiling extension bill, albeit by a slender margin and only delaying the issue until early December. Looking at the DXY as a benchmark, a marginally higher low above 94.000 and lower high below 94.500 is keeping the index contained as the clock ticks down to September’s jobs report that is expected to show a recovery in hiring after the prior month’s shortfall, but anecdotal data has been rather mixed to offer little clear pointers for the bias around consensus - full preview of the latest BLS release is available via the Research Suite under the Ad-hoc Economic Analysis section. From a technical perspective, near term support for the DXY resides at 94.077 (vs the current 94.139 base) and resistance sits at 94.448 (compared to a 94.338 intraday high). TRY - A double whammy for the already beleaguered Lira as oil prices come back to the boil and ‘sources’ suggest that Turkish President Erdogan’s patience is wearing thin with the latest CBRT Governor as the Bank waited until September to cut rates. Recall, Erdogan has already ousted a CBRT chief for not loosening monetary policy in his belief that lowering the cost of borrowing will bring inflation down, and although the reports have been by a senior member of his administration there is a distinct feeling of no smoke without fire in the markets as Usd/Try remains bid having only held below 9.0000 by short distance between 8.9707-8.8670 parameters. CHF/JPY - No real surprise that the low yielders and funders are underperforming, even though broadly upbeat risk sentiment during APAC hours has not rolled over to the European session. The Franc has retreated to 0.9300 vs the Buck and Yen is trying to fend off pressure on the 112.00 handle after failing to sustain momentum through 111.50 before weaker than expected Japanese household spending data overnight. However, decent option expiry interest from 111.85-75 (1.4 bn) may weigh on Usd/Jpy pending the aforementioned US payrolls outcome. AUD - Some payback for the Aussie after Thursday’s outperformance, as Aud/Usd loses a bit more momentum following its rebound beyond 0.7300 and with hefty option expiries at 0.7335 (2.7 bn) capping the upside more than smaller size at the round number (1.1 bn) cushions the downside. In commodities, WTI and Brent remain on an upward trajectory after the mid-week pullback; as it stands, crude benchmarks are near fresh highs for the week, with WTI for November eyeing USD 80/bbl once again. Fresh news flow for the complex has been sparse, aside from substantial UK press focus on the domestic energy price cap potentially set to increase next year. More broadly, US officials have largely reiterated commentary from the Energy Department provided on Thursday around not currently intending act on energy costs with a reserve release. The session ahead has just the Baker Hughes rig count specifically for crude scheduled, though the complex may well get dragged into a broader risk move depending on the initial reaction to and analysis on NFP. For metals, spot gold and silver are contained around the unchanged mark and haven’t been affected by any significant amount by the firmer USD or elevated yield space thus far. Elsewhere, base metals are buoyed by China’s return and strong Caixin data from the region, although it is worth highlighting that the likes of LME copper are well off earlier highs. US Event Calendar 8:30am: Sept. Change in Nonfarm Payrolls, est. 500,000, prior 235,000 Change in Private Payrolls, est. 450,000, prior 243,000 Change in Manufact. Payrolls, est. 25,000, prior 37,000 Unemployment Rate, est. 5.1%, prior 5.2% Sept. Underemployment Rate, prior 8.8% Labor Force Participation Rate, est. 61.8%, prior 61.7% Average Weekly Hours All Emplo, est. 34.7, prior 34.7 Average Hourly Earnings MoM, est. 0.4%, prior 0.6% Average Hourly Earnings YoY, est. 4.6%, prior 4.3% 10am: Aug. Wholesale Trade Sales MoM, est. 0.9%, prior 2.0%; Wholesale Inventories MoM, est. 1.2%, prior 1.2% DB's Jim Reid concludes the overnight wrap I’ve never quite understood why you’d go to the cinema if you’ve got a nice telly at home but such has been the nature of life over the last 19 months that I was giddy with excitement last night at booking tickets for James Bond at the local cinema next week. We’ve booked it on the same night as our first ever physical parents evening where I’ll maybe have the first disappointing clues that my three children aren’t going to be child prodigies and that maybe they’ll even have to settle for a career in finance! Markets have been stirred but not completely shaken this week and yesterday they continued to rebound thanks to the near-term resolution on the US debt ceiling alongside subsiding gas prices, which took the sting out of two of the most prominent risks for investors over the last couple of weeks. That provided a significant boost to risk appetite, and by the close of trade, the S&P 500 had recovered +0.83% in its 3rd consecutive move higher, which put it back to just -3.0% beneath its all-time high in early September, whilst Europe’s STOXX 600 was also up +1.60% and closed before a later US sell-off. Attention will today focus squarely on the US jobs report at 13:30 London time, which is the last one before the Fed’s next decision in early November, where a potential tapering announcement is likely bar an extraordinarily poor number today, or an exogenous event in the next few weeks. Starting with the debt ceiling, yesterday saw Democratic and Republican Senators agree to pass legislation to raise the ceiling by enough to get to early December, meaning we won’t have to worry about it for another 8 whole weeks. The Senate voted 50-48 with no Republicans blocking the legislation to increase the debt limit by $480bn, with House Majority leader Hoyer saying that the House would convene on Tuesday to pass the measure as well. To raise it for a longer period, the chatter out of Washington made it clear that Democrats would need to need to raise the debt ceiling in a partisan manner as part of the reconciliation process. As we mentioned in yesterday’s edition, this extension means that a number of deadlines have now been punted into the year end, including the government funding and the debt ceiling (both now expiring the first Friday of December), just as the Democrats are also seeking to pass Biden’s economic agenda through a reconciliation bill containing much of their social proposals, alongside the $550bn bipartisan infrastructure package. And on top of that, we’ve also got the decision on whether Chair Powell will be re-nominated as Fed Chair, with the decision 4 years ago coming at the start of November. So a busy end to the year in DC. The other main story yesterday was the sizeable decline in European natural gas prices, with the benchmark future down -10.73% to post its biggest daily loss since August. Admittedly, they’re still up almost five-fold since the start of the year, but relative to their intraday peak on Wednesday they’ve now shed -37.5%. So nearly a double bear market all of a sudden! The moves follow Wednesday’s signal that Russia could supply more gas to Europe. However, even as energy prices were starting to fall back from their peak, the effects of inflation were being felt elsewhere, with the UN’s world food price index climbing to its highest level in a decade in September. Looking ahead, today’s main focus will be on the US jobs report for September later on. Last month the report significantly underwhelmed expectations, coming in at just +235k, which was well beneath the +733k consensus expectation and the slowest pace since January. That raised questions as to the state of the labour market recovery, and helped to complicate a potential decision on tapering, with nonfarm payrolls still standing over 5m beneath their pre-Covid peak. This month, our US economists are expecting a somewhat stronger +400k increase in nonfarm payrolls, which should see the unemployment rate tick down to a post-pandemic low of 5.1%. On the bright side at least, the ADP’s report of private payrolls for September on Wednesday came in at an above-forecast 568k (vs. 430k expected), while the weekly initial jobless claims out yesterday for the week through October 2 were beneath expectations at 326k (vs. 348k expected). Ahead of that, global equities posted a decent rebound across the board, with cyclicals leading the march higher on both sides of the Atlantic. As mentioned at the top, the S&P 500 advanced +0.83%, which was part of a broad-based advance that saw over 390 companies move higher on the day. That said the index was up as much as +1.5% in early US trading before slipping lower in the US afternoon. The pullback was partly due to new headlines that China’s central bank plans to continue addressing monopolistic actions in internet companies that operate in the payments sector. Nonetheless, Megacap tech stocks were among the big winners yesterday, with the FANG+ index up +2.08%, whilst the small-cap Russell 2000 index was also up +1.58%. In Europe, the STOXX 600 (+1.60%) posted its strongest daily gain since July, and the broader gains helped the STOXX Banks index (+1.61%) surpass its pre-pandemic high, taking it to levels not seen since April 2019, even as sovereign bond yields moved lower. Speaking of sovereign bonds, yesterday saw a divergent set of moves once again, with yields on 10yr Treasuries up +5.2bps to 1.573%, their highest level since June, whereas those across the European continent moved lower. The US increase came against the backdrop of that debt ceiling resolution, and there was a noticeable rise in yields for Treasury bills that mature in December, which is where the debt ceiling deadline has now been kicked to. Elsewhere in North America, the Bank of Canada’s Macklem joined the global central bank chorus and noted inflation pressures were likely to be temporary, even if they’ve been more persistent than previously expected. Meanwhile over in Europe, lower inflation expectations helped yields move lower, with those on 10yr bunds (-0.3bps), OATs (-1.1bps) and BTPs (-3.6bps) all moving back. Overnight in Asia, all markets are trading in the green with the Nikkei (+2.16%) leading the way, along with CSI (+1.34%), Shanghai Composite (+0.60%), KOSPI (+0.22%) and Hang Seng (+0.04%). Chinese markets reopened after a week-long holiday so the focus will again be back on property market debt, and today the PBOC injected just 10bn Yuan with its 7-day reverse repos, resulting in a net liquidity withdrawal of 330bn Yuan. That comes as the services and composite PMIs did see a pickup from August level, with the services PMI up to 53.4 (vs. 49.2 expected), moving back above the 50 mark that separates expansion from contraction. In Japan however, household spending was down -3.0% year-on-year in August (vs. -1.2% expected) which came amidst a surge in the virus there. There’s also some news on the ESG front, with finance minister Shunichi Suzuki saying that the country would introduce ESG factors when considering the finance ministry’s foreign reserves. Looking forward, S&P 500 futures (+0.06%) are pointing to a small move higher. In Germany, as talks got underway today on a potential traffic-light coalition, it was reported by DPA that CDU leader Armin Laschet had signalled his willingness to stand down, with the report citing unidentified participants from internal discussions. In televised remarks last night, Laschet said that his party needs fresh voices across the board and that new leadership will be in place soon. This moves comes as Germany’s Social Democratic Party held talks with the Greens and the Free Democratic Party to enact a new three-way ruling coalition, which would leave the CDU out of power entirely. There wasn’t a massive amount of data yesterday, though German industrial production fell by -4.0% in August (vs. -0.5% expected), which follows the much weaker than expected data on factory orders the previous day. Elsewhere, the Manheim used car index increased +5.3% in September, its first positive reading in 4 months. Our US economics team points out that there tends to be around a two month lag between wholesale prices and CPI prints, so we aren’t likely to see this impact next week’s CPI print but it will likely prevent a bigger fall towards the end of the year. To the day ahead now, and the highlight will be the aforementioned September jobs report from the US. Central bank speakers include ECB President Lagarde and the ECB’s Panetta. Tyler Durden Fri, 10/08/2021 - 07:50.....»»

Category: smallbizSource: nytOct 8th, 2021

Ted Cruz said these Democratic mayors support "abolishing the police." His office wouldn"t provide any evidence.

Cruz says "abolishing the police is insanity." He should take comfort in the fact that even America's liberal mayors have no intention of doing it. Sen. Ted Cruz, R-Tex. Ken Cedeno/AFP via Getty Images "Abolish the police" is an activist slogan, not a policy embraced by elected Democrats. In New York City, for example, the police budget is once again on the rise. Police reform is popular. Activist slogans are not. Some Republicans want to conflate the two. At a hearing last month, Sen. Ted Cruz, a Republican from Texas, made an astonishing claim: Leading members of the Democratic Party don't just want to reform policing, he said - they want to get rid of law enforcement altogether."There are multiple elected Democrats who vocally embrace abolishing the police," Cruz claimed. "It's not just the mayor of New York City. It's not just the mayor of Minneapolis. It's not just the mayor of Portland that advocated abolishing the police." As Cruz told it, it was getting damn near impossible to find an elected Democrat who doesn't support "getting rid of the men and women in blue that keep us safe."The problem is that it's not true, of course, and Cruz's office could not provide any proof that it is. This is something the senator said was not a mere inference but a position these mayors had been vocal about endorsing. Asked for such evidence, Dave Vasquez, a spokesperson for the senator, told Insider he'd be "following up shortly." He never did.An activist slogan, not a Democratic positionThe truth is that while some activists have embraced the slogan, "Abolish the police," few of them would be happy if they were identified as Democrats, positioning themselves far to the left of any mere liberal. And none of them hold public office, much less the top job in cities where police played an active role in both inciting and quelling civil unrest last summer.Fewer still truly believe what Republicans like Cruz would have people think."Defund does not mean abolish policing," notes Rashawn Ray, a senior fellow at the Brookings Institution. "And, even some who say abolish, do not necessarily mean to do away with law enforcement altogether."For better or worse, these activists have chosen revolutionary rhetoric for what is essentially a reformist demand: not that we abolish the entire concept of upholding the law, but that we end policing as it exists today - where officers from outside the community enjoy "qualified immunity" for wrongdoing on the job - and replace it with a system where cops with guns are, for example, not the first responders to every mental health crisis.At most, elected Democrats support shifting some money from law enforcement to other priorities. Bill de Blasio, the New York City mayor that Cruz accused of wanting to abolish blue lives, embraced that after nationwide protests against police killings. The result was the country's largest police department receiving $10.2 billion in 2021, down from $10.5 billion the year before - much of it due to a "one-time reduction in overtime expenses," according to the nonpartisan Citizens Budget Commission.Indeed, for 2022, the New York police budget is going back up to $10.4 billion. Abolition this is not.Abolish cops? Democrats say 'that's a bad idea'In Minneapolis, Mayor Jacob Frey - another proponent of "abolishing the police," per Cruz - has discussed a "structural revamp" of the police department that employed Derek Chauvin, the officer convicted of murdering George Floyd. "But abolishing the police department? No, I think that's a bad idea," he told NPR. In Portland, meanwhile, the police budget under Mayor Ted Wheeler - another alleged proponent of abolition - went from $214.9 million in 2017, his first year in office, to $244.6 million this year.Sen. Cruz says he thinks "abolishing the police is insanity." He should take comfort, then, in the fact that even America's liberal mayors have no intention of doing it.Last month, Sen. Tim Scott, a Republican from South Carolina, said negotiations over a bipartisan police reform bill had fallen apart because his Democratic colleagues had sought to "defund" law enforcement.That was too much for even the Fraternal Order of Police, which represents more than 356,000 members of law enforcement, and the International Association of Chiefs of Police. "[A]t no point did any legislative draft propose 'defunding the police,'" the groups said in a joint statement. Indeed, the opposite: "the legislation specifically provided additional funding."The truth is that, to the chagrin of some on the left, the number of Democrats who support significant cuts to police spending is few, and the number who support abolishing law enforcement altogether is zero. And the truth is Republicans know this.They also know that, as slogans go, defunding or abolishing police (whatever nuance activists might intend) poll terribly, and one way to derail overwhelmingly popular police reform - and hurt the Democratic Party - is by tying it to something that it is not.The Senate is no stranger to grandstanding or demagoguery - to politics - but extraordinary claims require at least something in the way of evidence. When asked for some, Cruz and his staff came up empty.Have a news tip? Email this reporter: cdavis@insider.comRead the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 7th, 2021

Black Bear Value Partners 3Q21 Commentary

Black Bear Value Partners commentary for the third quarter ended September 30, 2021. Q3 2021 hedge fund letters, conferences and more “There are two mistakes one can make along the road to truth…not going all the way, and not starting.” – Buddha To My Partners and Friends: Black Bear Value Fund, LP (the “Fund”) returned […] Black Bear Value Partners commentary for the third quarter ended September 30, 2021. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more “There are two mistakes one can make along the road to truth…not going all the way, and not starting.” - Buddha To My Partners and Friends: Black Bear Value Fund, LP (the “Fund”) returned -3.3%, net, in September, -3.7% for the 3rd quarter and +23.8% YTD. The S&P 500 returned -4.7% in September, +0.8% for the 3rd quarter and is +15.9% YTD. The HFRI index returned +0.2% in September, -0.3% for the 3rd quarter and is +15.7% YTD. We do not seek to mimic the returns of the S&P 500 and there will be variances in our performance. In 2016, when I was considering the timing of Black Bear’s launch, I was given great advice from a fellow fund manager. He told me “Don’t wait…there’s no perfect time. Just go.” As we approach our 5-year anniversary I am thankful for that advice as well as the trust and support of my family and our LP’s. It continues to be of utmost importance that all LP’s feel a true sense of the word “Partnership”. I have tried to reflect that with both a significant personal investment in the Fund as well as a lower-fee structure. As discussed below, it was paramount that as the Fund scales, our early investors stood to benefit from a lower-fee structure. Please read below for more details as we are closing the Founders Class as of year-end and turning the page towards our next chapter. Very little has changed in our overall portfolio construction. The businesses we own are of a higher quality than the overall market and are both cheap in relative and absolute terms. The bonds and lower-quality companies we are short remain extremely expensive. It is interesting to me that when markets start to drop, some investors question their portfolio. Price action should not inform your value of an investment. It should merely serve as a measurement of current investor emotions. I welcome negativity as it allows us to act rationally and take advantage of others overreactions. I think others would be better served to think about their investments during both up and down markets and consider their prospects independent of the emotions of the day. The recent market weakness has allowed us the opportunity to concentrate further in our holdings. There are thousands of companies to choose from…we just need a handful. I’ve been finding new investments that are which we will disclose in our year-end letter. On a personal front, Lauren and I welcomed our newest cub, Max Alexander Schwartz. Sydney and Zoey are thrilled to have a little brother and we feel extremely fortunate to have him join our family. Top 5 Businesses We Own (Alphabetical) Brief descriptions of the top 5 long positions follow as of 9/30/2021 in alphabetical order, AutoNation Auto dealers have been over-earning on car sales due to a lack of inventory because of the semiconductor shortage. They have been able to increase prices despite lower volumes and benefit from reduced operating expenses. It seems obvious that when the semiconductor shortage is resolved, more cars will become available and unit profitability will be reduced. In short, their earnings will likely decline in the 12 months following the inventory shortage and then resume their rise. Our longer-term horizon allows us the ability to own the business and not focus on a short-term issue. The semiconductor issue is likely to persist thru 2022 though this is a guess. Ultimately our long-term thesis on the business remains intact. If the business can extend its moat, maintain their pricing power, and remain important to both their customers and suppliers we will do fine. AutoNation, Inc. (NYSE:AN) can generate a range of $6-$8 in free cash flow per year. This implies a 5-7% yield to us presuming limited growth. Additionally, if AutoNation achieves modest levels of success with AutoNation USA (new used-car supercenters) it could add another $5-$10 of per share value to the business. Note that at current prices, very little in the way of AutoNation USA success is priced in. Berkshire Hathaway (same summary as Q1) Please see Q1 letter for our Berkshire Hathaway Inc. (NYSE:BRK.B) on a Napkin investment exercise. We have written on it extensively and will save your eyeballs from extraneous reading. Berkshire is very cheap for owning such high-quality businesses and will continue to grind higher and compound value for us. Homebuilding Basket (2 unnamed companies). Given the concentrated nature of the portfolio I am going to keep the names of our 2 companies out of this discussion. There is a long-term fundamental supply/demand imbalance in housing inventory. This is a direct result of underproduction of new homes amid a challenging mortgage financing environment over the last 10+ years since the Great Financial Crisis. Looking forward we should have increased housing demand from millennials as they enter the family-phase of life and desire more space. Rates are still near historic lows and people are desiring more personal space as remote work becomes more acceptable. One of our investments is a small-cap homebuilder with a unique ownership/board who takes a more land-heavy approach. The benefit of being smaller is the ability to be nimble. The downside is that you cannot be as capital efficient as the 10,000 lb. gorilla (NVR) and get options on land as easily. As I’ve gotten to know the management team and fellow owners, I am confident in their business strategy and areas of the country they are focused on. They are focusing more on the 1st time and 2nd time homebuyers in areas with rapid demographic expansion. I think we own this business at a 10-15% steady state free-cash flow yield with extremely high growth prospects. Currently the company is reinvesting their cashflow back into the business which means their net cash available to shareholders looks low. So long as they are reinvesting into high IRR projects this is a great use of cash. With the shareholders/board members and management team currently in place I think the odds are in our favor to do well over the next 5-10 years as shareholders of this business. Texas Pacific Land Trust We continue to own Texas Pacific Land Corp (NYSE:TPL) as it still looks reasonable to me with asymmetric upside if energy inflation takes hold. As a reminder, TPL is a royalty company with 100% of their acreage located in the Texas Permian Basin. In a nutshell they make money when drilling activity occurs but DO NOT have the capital needs. The incremental amount of work on TPL’s part is minimal as the extraction and movement of the oil/natural gas is undertaken by others. They are merely a toll collector with Returns on Capital of 80+%. In an inflationary environment, businesses that have lower capital intensity both in capital assets and people, stand to benefit. In other words, if oil goes up a lot, the incremental cost to TPL is close to 0 so it is all incremental profit. This is a business that should benefit in a massive way if we have energy inflation. In the meantime, we likely own it at a 3-5% free cash flow yield with massive upside. Closing of the Founders Class and Next Chapter I am excited to share some details of the next chapter for Black Bear Value Partners. We will be closing the Founders Class to new investors after the 12/1/2021 subscription date. I will be introducing 2 new (but familiar) share classes starting in 2022. Most importantly, we will be reducing the incentive fee for all existing Founders Class investors to 10% starting in 2022. As I have communicated in the past, I believe those who made an earlier commitment and investment in our partnership (YOU) should be a beneficiary of our business success as it scales. Earlier in our Funds’ lifecycle, I lowered the management fee from 1% to 0.5% to increase alignment and reduce non-performance based-annual costs to our LP’s. The 0.5% management fee/15% incentive fee aligns us (in addition to most of our net worth invested alongside you). I want to keep that fee structure going forward beyond the Founders Class but have always felt our Founders should have the best deal of all our LP’s. So, in short, all LPs in the Founders Class will have their incentive fees reduced beginning in 2022. Please read below for the updates/changes coming in 2022. The Founder’s Class (0.5% management fee/15% incentive fee/2Y lockup + 1Y rolling redemption) will close to new investors after the 12/1/2021 subscription date. This allows existing investors sufficient time to add to their capital and be grandfathered in at the lower fee structure. Beginning in 2022, the Founders Class will have its fee structure reduced to 0.5% management fee and a 10% incentive fee. As a reminder, you have matching rights for all capital you have invested and that will remain at the new fee structure (0.5%/10%) Beginning in 2022 our new Class B and Class C will be as follows: Class B – 1.5% management fee / 20% incentive fee / 1Y rolling redemption Class C – 0.5% management fee / 15% incentive fee / 2Y lockup + 1Y rolling redemption Note: Per the note, above you have matching rights on all capital committed thru 12/1/2021 at 0.5% management fee and 10% incentive fee. Thank you for your trust and support. Black Bear Value Partners, LP Adam@BlackBearFund.Com www.blackbearfund.com Updated on Oct 7, 2021, 4:09 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 7th, 2021

Would Americans Benefit From A Government Default?

Would Americans Benefit From A Government Default? Authored by Ryan McMaken via The Mises Institute, The Biden administration's rhetoric on the debt ceiling has become nothing short of apocalyptic. The Treasury Department has announced that a failure to increase the debt ceiling "would have catastrophic economic consequences" and would, as NBC news claims, constitute a "doomsday scenario" that would "spark a financial crisis and plunge the economy into recession." Apparently, the memo went out to the debt peddlers that they are not to hold back when sowing maximum fear over the thought that the US might government might pause its incessant debt accumulation even for a few days.  The reality, however, is quite something else.  While a failure to raise the debt ceiling would no doubt cause short-term disruptions, the fact is the medium- and long-term effects would prove beneficial by reining in the regime's chokehold on the American economy and financial system.  This is explained in a recent column by Peter St. Onge in which he examines just how much of a problem default really is: In 2021 the US government plans to spend $6.8 trillion. Of which about half is borrowed -- $3 trillion. So if they can’t raise the ceiling, they’d have to cut that $3 trillion. Mainstream media, naturally, claims this is the end of the world. CBS estimates it would cost 6 million jobs and $15 trillion in lost wealth—comparable to the 2008 crisis, which was also caused by the federal government. CNN, more colorfully, claims cascading job losses and “a near-freeze in credit markets.” They conclude, falsely, that “No one would be spared.” Considering the source, we can guess these predictions are overblown. So what would happen? Well, $3 trillion is a lot of money—roughly 15% of America’s GDP. But we have to remember where that $3 trillion came from. The government, after all, doesn’t actually create anything, every dollar it spends came out of somebody else’s pocket. Whose pocket? Part of the $3 trillion was bid away from private borrowers like businesses, and the rest was siphoned from peoples’ savings by the Federal Reserve creating new money. This means that, yes, GDP would decline sharply. But wealth would actually grow, perhaps substantially. The businesses would be able to buy things they need, while the savers keep their money that was doing useful things like paying their retirement. So GDP drops, wealth soars. Now, there will be near-term pain, simply because the GDP drop comes before the private borrowing ramps up, while those retirement savings are no longer being siphoned to pay for parties at strip clubs or, say, another trillion for farting cows. So, yes, it will be a sharp drop in GDP. But so long as government stays out of the way, choosing the prudent 1920 response of doing nothing, the recovery will be very rapid. Why would they do nothing? After all, governments don’t like staying out of the way these days. Because a government that suddenly loses half it’s budget is going to find a lot of things not worth doing. Given a choice between defunding government workers’ pensions or defunding economy-crushing Green New Deals, governments will choose their own. So that’s short-term: pain, but less than it seems. And that’s where the magic begins. Because ending deficits fundamentally reduces governments’ long-term ability to prey on the people’s wealth. This is because debt and money printers are much less obvious than taxes, which are painful and make more enemies. So a default becomes a “back door” to move government back towards its traditional “parasite” role rather than the “predator” role it’s taken on since Nixon unleashed the money printers. Especially since Covid-19, when lockdowns were bought with fresh money and deficits. I wrote about this predatory evolution a few months ago, but the bottom line is government default is a tremendous investment in our future prosperity. Ultimately, when a media pundit or Janet Yellen predicts the end of the world if debt doesn't continue to skyrocket ever upward, they are simply calling for a continuation of the status quo. And what does the status quo mean? It means a world in which the US government continues to spent trillions of dollars it doesn't have, made possible through monetizing massive amounts of debt and forcing taxpayers to devote ever more of their own wealth and income to paying off an ever-more-huge chunk of interest.  It also means more government spending, which—regardless of whether it's funded by debt or by taxes—causes malinvestment and, through the redistribution of wealth, rewards the politically powerful at the expense of everyone else. In other words, its keeps Pentagon generals and Big Pharma executives living in luxury while the taxpayers are lectured about the need to "pay America's bills."  Rather, as Mark Thornton noted in  2011, the right thing to do is lower the debt ceiling. Thornton explains the many benefits, ranging from effective deregulation to freeing up capital for the private sector:  If Congress passed legislation that systematically reduced the debt ceiling over time, the economy could be rebuilt on a solid foundation. Entrepreneurs in the productive sectors would realize that an ever-increasing proportion of resources (land, labor, and capital) would be at their disposal, while companies that capitalized on the federal budget would have an ever-declining share of such resources. Congress would have to cut the pay and benefits of its employees (FDR cut them by 25 percent in the depths of the Great Depression) as well as the number of such employees. Real wage rates would decline, allowing entrepreneurs to hire more employees to produce consumer-valued goods. Congress would have to cut back on its far-flung regulatory operations, which are in fact one of the biggest drags on the economy due to the burden and uncertainty that Obama and Congress have created in terms of healthcare, financial-market, and environmental regulations. A recent study by the Phoenix Center found that even a small reduction of 5 percent, or $2.8 billion, in the federal regulatory budget would result in about $75 billion in increased private-sector GDP each year and the addition of 1.2 million jobs annually. Eliminating the job of even a single regulator grows the American economy by $6.2 million and creates nearly 100 private-sector jobs annually. Under a reduced debt ceiling, the federal government would also have to sell off some of its resources. It has tens of thousands of buildings that are no longer in use and tens of thousands of buildings that are significantly underused—about 75,000 buildings in total. It also controls over 400 million acres of land, or over 20 percent of all land outside of Alaska, which is almost wholly owned by the government. There is also the Strategic Petroleum Reserve and many other assets that could be sold off to cover short-term budget shortfalls. Of course, reducing the debt ceiling would force the government to stop borrowing so much money from credit markets. This would leave significantly more credit available for the private sector. The shortage of capital is one of the most often cited reasons for the failure of the economy to recover. Lowering the debt ceiling would force federal-government budget cutting on a large scale, and this would free up resources (labor, land, and capital) and force a cutback in the federal government's regulatory apparatus. This would put Americans back to work producing consumer-valued goods. Unfortunately, the public has been fed a steady diet of rhetoric in which any reduction in government spending will bring economic Armageddon. But it's all based on economic myths, and Thornton concludes: Passing an increase in the debt ceiling merely perpetuates the myth that there is any ceiling or control or limit on the government's ability to waste resources in the short run and its willingness to pass the burden of this squander onto future generations. Tyler Durden Wed, 10/06/2021 - 20:10.....»»

Category: blogSource: zerohedgeOct 6th, 2021

Here"s everything Biden has done so far to address the $1.7 trillion student debt crisis

From extending the student-loan payment pause to cancelling student debt for some borrowers, here's everything Biden has done on student debt to date. Shutterstock.com Since Biden took office, he's taken a number of actions to address the $1.7 trillion student-debt crisis. They include cancelling debt for borrowers with disabilities and extending the payment pause on loans. Democrats are pushing for him to cancel $50,000 in student debt per person, which the DOJ is reviewing. See more stories on Insider's business page. Forty-five million Americans have a $1.7 trillion student-debt burden in the country. And many of them, alongside Democrats and advocates, want President Joe Biden to forgive $50,000 of their debt.He hasn't done that yet, but the president has taken steps to lessen the burden and provide relief during the pandemic.As one of his first actions in office, Biden extended the pause on student-loan payments through September, coupled with zero growth in interest, to ensure borrowers suffering financially would not have to worry about paying off their loans. That is now running through January 2022.Since then, Education Secretary Miguel Cardona has cancelled billions in student debt for borrowers with disabilities and borrowers defrauded by for-profit schools. He's also started conducting reviews of student loan forgiveness programs that don't work as they should.But Democrats want Biden to do more.They have been keeping the pressure on the president to cancel $50,000 in student debt per person using his executive authority. Biden has expressed hesitancy to do so, and although he has asked the Education and Justice Departments to review his executive abilities to wipe out that debt, Democrats remain adamant that he can, and should, cancel student debt immediately with the flick of a pen."Student loan cancellation could occur today," Massachusetts Sen. Elizabeth Warren told Insider. "The president just needs to sign a piece of paper canceling that debt. It doesn't take any act of Congress or any amendment to the budget."Detailed below is everything Biden has done to date to confront the student debt crisis: Extended the pause on student-loan payments Evan Vucci/AP On his first day in office, Biden asked the Education Department to extend the pause on federal student loan payments through September 30, following Education Secretary Betsy DeVos' extension of it through the end of January 2020. This was accompanied by a 0% interest rate during that time period.National Economic Council Director Brian Deese said at the time that the extension would alleviate burdens on many households. "In this moment of economic hardship, we want to reduce the burden of these financial trade-offs," Deese said.This extension, however did not apply to the more than 7 million borrowers with loans held by private companies. In August, nearly two months before the pause was set to expire, Education Secretary Miguel Cardona announced the pause would be extended through January 31, 2022. This is the fourth extension of the pause during the pandemic, and Cardona said in a statement that it will be the "final" one."The payment pause has been a lifeline that allowed million of Americans to focus on their families, health, and finances  instead of student loans during the national emergency," Cardona said.The announcement of the extension was welcomed by many Democrats and advocacy groups who have been pushing for additional student debt relief for borrowers. Expanded the scope of the student loan payment pause Reuters/Andrew Burton Biden's payments pause on student loans initially only applied to borrowers with federal loans, meaning those with privately-held loans had to continue making payments during the pandemic.But on March 29, Cardona expanded the scope of that pause to apply to loans under the Federal Family Education Loan (FFEL) Program, which are privately held. This helped 1.14 million additional borrowers. The FFEL Program ended in 2010, but according to Education Department data, 11.2 million borrowers still have outstanding FFEL loans totaling over $248 billion. And while the department acquired some of the outstanding FFEL loans, many are still privately owned and were not affected by the earlier pause on federally owned student loan payments.According to a press release, any FFEL borrower who made a payment in the past year will have the option to request a refund.  Asked the Justice and Education Departments to review his authority to cancel student debt REUTERS / Jonathan Ernst At a CNN town hall in February, Biden said he doesn't have the executive authority to cancel up to $50,000 in student debt per person, but said he is prepared to cancel $10,000 — something he campaigned on. The same month, White House Press Secretary Jen Psaki told reporters that Biden will ask the Justice Department to review his legal authority to cancel $50,000 in student debt. Biden's administration has not yet commented on the status of the Justice Department's review.However, Insider reported that he has yet to deliver on that campaign promise, and while Biden said he would support legislation brought to him to cancel $10,000 in student debt, Democrats argue that legislation takes too long, and the president can cancel debt immediately using his executive authority."We have a lot on our plate, including moving to infrastructure and all kinds of other things," Warren said in a February press call. "I have legislation to do it, but to me, that's just not a reason to hold off. The president can do this, and I very much hope that he will."And White House Chief of Staff Ron Klain told Politico in April that Biden had asked Cardona to create a memo on the president's legal authority to forgive $50,000 in student loans per person.Biden will "look at that legal authority," Klain said. "He'll look at the policy issues around that, and he'll make a decision. He hasn't made a decision on that either way, and, in fact, he hasn't yet gotten the memos that he needs to start to focus on that decision." Reversed a DeVos methodology for determining loan forgiveness Secretary of Education Betsy DeVos. Alex Wong/Getty Images On March 18, Cardona reversed a Trump-era policy that gave only partial relief to defrauded students.The debt-cancellation methodology, known as the "borrower defense to repayment" — approved by Education Secretary Betsy DeVos — compared the median earnings of graduates with debt-relief claims to the median earnings of graduates in comparable programs. The bigger the difference, the more relief the applicant would receive.But compared to a 99.2% approval rate for defrauded claims filed under President Barack Obama, DeVos had a 99.4% denial rate for borrowers and ran up a huge backlog of claims from eligible defrauded borrowers seeking student debt forgiveness.Cardona said that process did not result in appropriate relief determination and needed to be reversed, and a judge recently ruled that DeVos must testify over why so few borrowers were approved for loan forgiveness. Cancelled student debt for some defrauded borrowers Nirat.pix/Getty Images So far, Cardona has cancelled over $2.6 billion in student debt for borrowers defrauded by for-profit schools.For-profit institutions that shut down years ago, such as Corinthian Colleges and ITT Technical Institutes, were accused of violating federal law by persuading their students to take out loans, and Cardona's new policy helped approximately 72,000 of those students receive $1 billion in loan cancellation in March."Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution's misconduct," Cardona said in a statement. "A close review of these claims and the associated evidence showed these borrowers have been harmed and we will grant them a fresh start from their debt."On June 16, Cardona cancelled student debt for 18,000 additional borrowers defrauded by ITT Technical Institutes, totaling to about $500 million in debt relief.The Education Department announced in a press release that 18,000 borrowers who attended ITT Tech will get 100% of their student debt forgiven, and the department will begin notifying borrowers of their approvals for loan forgiveness in the coming weeks and will work quickly to discharge those borrowers' loan balances."Our action today will give thousands of borrowers a fresh start and the relief they deserve after ITT repeatedly lied to them," Cardona said in a statement.An additional 115,000 defrauded ITT borrowers got $1.1 billion in student debt relief on August 26, applicable for those who did not complete their degree and left ITT on or after March 31, 2008.And in the first time since 2017 that borrower defense claims have been approved for borrowers outside of ITT Tech, Corinthian Colleges, and American Career Institute, on July 9, Cardona cancelled student debt for 1,800 borrowers who attended the for-profit schools Westwood College, Marinello Schools of Beauty, and the Court Reporting Institute. Cancelled student debt for some borrowers with disabilities Getty Images / Dan Kitwood On March 29, Cardona cancelled $1.3 billion of student debt for about 41,000 borrowers with disabilities.He also waived an Obama-era requirement for those borrowers to submit documentation during a three-year monitoring period to verify that their incomes did not exceed the poverty line of $12,880 annually for a single person.A 2016 report from the Government Accountability Office found that 98% of reinstated disability discharges occurred because borrowers did not submit the required documentation — not because their incomes were too high."Borrowers with total and permanent disabilities should focus on their well-being, not put their health on the line to submit earnings information during the COVID-19 emergency," Cardona said in a statement. "Waiving these requirements will ensure no borrower who is totally and permanently disabled risks having to repay their loans simply because they could not submit paperwork."But experts said this action did not make up for the significant number of borrowers who never received loan forgiveness simply due to paperwork."Today's announcement is not cause for celebration but rather for outrage," Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said in a statement at the time. "It is scandalous that the Department revoked the loan discharges for 41,000 borrowers with total and permanent disabilities due to paperwork issues during a pandemic."Then, on August 19, Cardona wiped out student debt for 323,000 additional borrowers with disabilities, resulting in $5.8 billion in student-debt relief, and he "indefinitely" waived the requirement to provide proof of income."We've heard loud and clear from borrowers with disabilities and advocates about the need for this change and we are excited to follow through on it," Cardona said. "This change reduces red tape with the aim of making processes as simple as possible for borrowers who need support."Cardona also said the department will consider further waiving the three-year monitoring period. Started a review of student-loan forgiveness programs Suzanne Kreiter/The Boston Globe via Getty Images On May 24, the Education Department announced it is beginning the process of issuing new higher education regulations, mainly concerning student debt-forgiveness programs. The first step of the process will be through holding hearings in June to receive feedback on "regulations that would address gaps in postsecondary outcomes, such as retention, completion, student loan repayment, and loan default," according to a press release.The department will also seek comments on rules regarding student loan forgiveness for borrowers in public service and borrowers with disabilities, among other things.The main topics the department plans to address concern the methods for forgiving debt for defrauded borrowers and borrowers with disabilities, along with looking into the Public Service Loan Forgiveness (PSLF) program, which has rejected 98% of eligible borrowers. Forbes reported that the process to implement new rules could be lengthy, though. After the hearings in June, there will be "negotiated rulemaking," during which stakeholders meet with the department to review proposed regulations, and it could take a year or longer until changes are implemented. Biden's regulatory agenda also included plans to review loan forgiveness programs, but Insider reported on June 15 that details for those reviews remain unclear, and an Education Department spokesperson told Insider there is not yet a timeline for when improvements will be implemented.  Waived interest on student loans for service members Members of the United States Marine Corps stand listening to the 45th President Donald J. Trump's address of the crowd for the opening ceremony of the New York City 100th annual Veterans Day Parade and wreath-laying at the Eternal Light Flag Staff. Ira L. Black/Corbis via Getty Images The Education Department announced on August 20 that 47,000 former and active-duty service members will get the interest on their student loans retroactively waived.The relief will happen automatically, removing the requirement for service members to make individual requests to access the benefit, which, according to the press release, will make service members eight times more likely to receive the benefit than in 2019."Brave men and women in uniform serving our country can now focus on doing their jobs and coming home safely, not filling out more paperwork to access their hard-earned benefits," FSA Chief Operating Officer Richard Cordray said in a statement. "Federal Student Aid is grateful for our strong partnership with the Department of Defense, and we will seek to reduce red tape for service members wherever possible."Service members deployed to areas that qualify them for "imminent danger or hostile fire pay," according to the Higher Education Act, should not accrue interest on student loans that were first disbursed on or after October 1, 2008. But since the process was not previously automated, only a small proportion of eligible service members were able to access the benefit, with only about 4,800 of them getting relief in 2019. Overhauled a student-loan forgiveness program for public servants Andreas Rentz/Getty Images The Education Department on October 6 announced a major overhaul of the Public Service Loan Forgiveness (PSLF) program. It's supposed to wipe out student debt for public servants after 120 qualifying monthly payments, but to date it has rejected 98% of applicants due to deep flaws within the program.According to the department's press release, it will implement a limited-time waiver through October 31, 2022, that will allow borrowers to count payments from any federal loan programs or repayment plans toward loan forgiveness through PSLF, including programs and plans that were not previously eligible.The department said this waiver alone would bring 550,000 borrowers closer to student-debt relief automatically, including 22,000 borrowers who will be immediately eligible for relief without any action on their part, totaling $1.74 billion in forgiveness. An additional 27,000 borrowers could also qualify for $2.82 billion in forgiveness if they certify additional periods of employment."Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness," Education Secretary Miguel Cardona said in a statement. "The system has not delivered on that promise to date, but that is about to change for many borrowers who have served their communities and their country."Other changes, to be rolled out in the next few months, include making payments easier to qualify for the program and reviewing denied applications and correcting errors. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 6th, 2021

Futures Tumble As Nat Gas Prices Explode, Stagflation Fears Surge

Futures Tumble As Nat Gas Prices Explode, Stagflation Fears Surge In our market comments on Tuesday we were stunned by the resilient surge in tech names and the broader market, even as yields soared on the biggest jump in breakevens since the presidential election, noting that something is very broken with this picture. Well, one day later normalcy is back: US stock index futures tumbled as much as 1.3% on Wednesday before paring some losses, after soaring oil and gas prices (rising as much as 40% in Europe today alone) fed into fears of higher inflation and fueled concerns of sooner-than-expected tapering, which in turn pushed 10Y yields just shy of 1.57%. At 730 a.m. ET, Dow e-minis were down 309 points, or 0.9%, S&P 500 e-minis were down 49 points, or 1.12%, and Nasdaq 100 e-minis were down 181 points, or 1.23%, to the lowest level since June 25 on a closing basis, signaling more downside for tech shares after Tuesday’s short reprieve Up to Tuesday’s close, the S&P 500 index logged its fourth straight day of 1% moves in either direction. According to Reuters, the last time the index saw that much volatility was in November 2020, when it rose or fell 1% or more for seven straight sessions. The selloff was much more severe in Europe, with the Stoxx 600 falling as much as 2% to a 2 month low, with every industry sector firmly in the red as the region’s natural gas prices soared to catastrophic levels... ... even as the European Union pledged swift action to ensure the spiking costs don’t stifle the economy (it just didn't explain precisely what it would do). Asian stocks also dropped amid continued China property contagion fears. The 10-year TSY yield touched their highest since June, slamming shares of mega-cap FAAMGs; tech shares led the stocks selloff Apple (AAPL US -1.5%), Facebook (FB US -1.6%), Microsoft (MSFT US -1.6%), Tesla (TSLA US -1.4%) down in U.S. premarket trading. Economy-sensitive parts of the market also came under pressure, with lenders such as Bank of America Corp , JPMorgan Chase & Co and Morgan Stanley shedding more than 1% each. Boeing and industrial conglomerates Caterpillar Inc and 3M Co dropped between 0.8% and 2.0%. Ironically, even though Brent remained well above $82, energy names also slumped with Exxon sliding 1% on what appears to be profit taking to plug margin holes elsewhere. American Airlines’ shares fell 3.7% in U.S. premarket session after Goldman cut its recommendation for the stock to sell. Meanwhile, Palantir Technologies extended its gains to rise 9.3% as the company said it won a U.S. Army contract to supply data and analytics services. Here are some of the other notable market movers: Gogo (GOGO US) drops 5.3% in U.S. premarket trading after Morgan Stanley downgrades to underweight, with competitive landscape expected to pressure valuation and free cash flow over coming year American Airlines (AAL US) slides 3.6% in U.S. premarket trading on Goldman Sachs downgrade, according to Bloomberg data U.S. Steel (X US) down more than 5% in U.S. premarket trading on Goldman Sachs downgrade, according to Bloomberg data Calyxt (CLXT US) shares jump 5.4% premarket after the company said it will focus on engineering synthetic biology solutions for customers across the nutraceutical, cosmeceutical, pharmaceutical, advanced materials, and chemical industries Indus Realty Trust (INDT US) fell postmarket Tuesday after launching a 2 million stock offering Noodles & Co. (NDLS US) shares rose 2% in Tuesday postmarket trading after Stephens started coverage with an overweight rating, saying the restaurant chain is poised for strong growth that should lead to higher multiples Allison Transmission (ALSN US) is accelerating the development of electrification technology for integration into the U.S. Army’s ground combat vehicle fleet Palantir (PLTR US) shares rise 14% in U.S. premarket trading after the the software company said Tuesday it was selected by the U.S. Army to provide data and analytics for the Capability Drop 2 program "Right now you’re seeing inflation risk really start to percolate and I do think that you’re going to see that really eat into margins as we go through the fourth quarter into 2022,” Erin Browne, multi-asset portfolio manager at Pimco, said on Bloomberg Television. “The energy crisis that’s starting to loom in Europe is a real risk that is being underestimated by the market right now." “The spike in energy prices continue fueling expectations of higher inflation for longer. Therefore, central banks will be forced to cool down the overheating in inflation rather than trying to boost recovery,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “Any weakness in the jobs figure could send the U.S. equities back below their 100-dma levels, as soft economic data could no longer revive the central bank doves." As such, all eyes will be on the U.S. private payrolls data, due at 8:15 a.m. ET. The numbers come ahead of the more comprehensive non-farm payrolls data on Friday, which is expected to cement the case for the Federal Reserve’s slowing of asset purchases. Meanwhile, a stalemate over Republicans and Democrats about the debt limit showed no sign of abating, with President Joe Biden saying that his Democrats might make an exception to a U.S. Senate rule to allow them to extend the government’s borrowing authority without Republican help. European stocks fell even more, with the Stoxx Europe 600 index plunging 2% to lowest since July 20; Travel, autos and retail names are the weakest sectors although all Stoxx 600 sub-indexes are off at least 1%, tech was also underperforming. As noted above, gas prices remain a focal pressure point with several measures hitting record levels. Here are some of the biggest European movers today: Adler shares extend decline to 21% in Frankfurt after Viceroy Research publishes a report saying it is short Adler Group SA and its listed subsidiaries. Deutsche Telekom shares fall 4%, close to the level at which Goldman Sachs offered about EU1.5b worth of shares, as part of a deal to swap some of Softbank’s T- Mobile stake for one in Deutsche Telekom. Ambu shares fall as much as 8.1%, most since Aug. 17, after company cut its FY financial outlook. IP Group shares drop as much as 8.1%, their worst day in nine months, after CEO Alan Aubrey and CIO Mike Townend retire. GN Store Nord shares rise as much as 7.5% as it agrees to buy SteelSeries, a maker of software-enabled gaming gear, from Nordic private equity company Axcel for an enterprise value of DKK8b on a cash and debt-free basis. Tesco shares rise as much as 4.6% to an eight-month high after Britain’s biggest supermarket operator said it will buy back GBP500m of stock and raised its FY profit forecast. HSBC rises as much 2.5% as UBS upgrades the Asia-focused lender to buy from neutral, saying the market is taking a risk by being underweight. PageGroup shares jump as much as 6.9%, most since April, as the staffing firm boosts its profit forecast. Peer Hays also gains. Dustin shares jump as much as 11%, most since April 13, after the IT solutions provider’s Ebit for the fourth quarter beat the average analyst estimate. Atlantic Sapphire gains as much as 15% as Pareto sees improvements ahead. Asian stocks headed for their longest losing streak since August as a selloff in the heavyweight tech sector deepened amid rising Treasury yields. The MSCI Asia Pacific Index declined as much as 0.8%, in its fourth day of decline, with Samsung and Tencent among the biggest drags. A benchmark tracking Chinese technology stocks in Hong Kong closed at a record low. Japan’s Nikkei 225 and South Korea’s Kospi were the biggest losers, sliding more than 1% each. China Tech Stock Gauge Falls to Test Record Low as Yields Rise Investors have yet to digest issues such as the inflation outlook, among other concerns including gridlock over the U.S. debt ceiling and higher global energy prices. The MSCI Asia Pacific Index is approaching year-to-date lows seen in August.  “At the moment, given all the uncertainties regarding the growth, inflation and policy outlooks, we are still in the middle of the tempest, so to speak,” Kyle Rodda, an analyst at IG Markets, said by email.  Indonesian, Malaysian and Philippine stock benchmarks were among the region’s best performers. In Japan, the Topix closed 0.3% lower while the Nikkei225 capped its worst daily losing streak since July 2009 and entered a technical correction, as Japanese equities tumbled while Treasury yields climbed. Fast Retailing Co. and Tokyo Electron Ltd. were the largest contributors to a 1.1% loss in the Nikkei 225, which fell for an eighth-straight day. The gauge, which had risen as much as 1.4% earlier in the day, closed more than 10% down from its September high. The broader Topix dipped 0.3%, erasing an early 1.6% advance, driven by losses in automakers. Banks climbed on the spike in Treasury yields. Japanese stocks had opened the day higher, following a rebound in U.S. shares. Both major gauges fell for a seventh day Tuesday amid market disappointment with the new government and a host of threats to global economic growth. ‘Kishida Shock’ Hits Japan Markets Wary of Redistribution Plan “Technicals such as RSI and Bollinger are showing that these moves may have been overdone in the short term, but Japan is hostage to the continued global concerns regarding inflation, supply chains and Chinese credit along with PM Kishida’s ‘new capitalism’ concept,” said Takeo Kamai, head of execution services at CLSA Securities Japan Co Australia's S&P/ASX 200 index fell 0.6% to close at 7,206.50, reversing an earlier advance of as much as 0.4%. Banks contributed the most to the benchmark’s decline after Australia’s banking regulator raised loan buffers in a bid to cool the nation’s booming housing market. a2 Milk was the worst performer after a class action lawsuit was filed against the company. Whitehaven was the top performer, rising for a fourth straight day.  In New Zealand, the S&P/NZX 50 index fell 0.3% to 13,166.44. The nation’s central bank raised interest rates for the first time in seven years and signaled further increases will likely be needed to tame inflation. The RBNZ lifted the official cash rate by a quarter percentage point to 0.5%. In rates, Treasuries were off their worst levels of the day after the 10Y yield rose briefly topped 1.57%, and remained cheaper by more than 2bps across long-end. The 10-year yield was around 1.55%, cheapest since June 17; U.K. 10-year cheapens by further 1.8bp vs U.S., German 10-year by 0.5bp. In the U.K., the 10-year breakeven rate climbed above 4%, twice the Bank of England’s target, spurred by soaring energy costs. Money markets have almost fully priced a rate hike as soon as December, in what would be the central bank’s first increase in over three years. Peripheral spreads widen to core with long-dated BTPs widening ~3bps to Germany. In FX, USD is well bid with risk assets trading poorly. Bloomberg dollar index rises 0.5%, pushing through last Friday’s highs. NZD, NOK and AUD are the weakest in G-10. Crude futures trade a narrow range near Asia’s opening levels. WTI is down 0.4% near $78.60, Brent briefly trades above $83 before dipping into the red. Spot gold extends Asia’s weakness to print fresh lows for the week near $1,745/oz. Base metals are in the red. LME copper the worst performer, dropping 1.9% to trade near the $9k mark. In commodities, crude futures trade a narrow range near Asia’s opening levels. WTI is down 0.4% near $78.60, Brent briefly trades above $83 before dipping into the red. Spot gold extends Asia’s weakness to print fresh lows for the week near $1,745/oz. Base metals are in the red. LME copper the worst performer, dropping 1.9% to trade near the $9k mark Elsewhere, Bitcoin traded around the $51,000 mark. Looking at the day ahead, data releases include German factory orders for August, the German and UK construction PMIs for September, Euro Area retail sales for August, and the ADP’s September report on private payrolls from the US. From central banks, we’ll also hear from the ECB’s Centeno. Market Wrap S&P 500 futures down 0.9% to 4,294.75 STOXX Europe 600 down 1.5% to 449.34 MXAP down 0.7% to 191.25 MXAPJ down 0.8% to 622.40 Nikkei down 1.1% to 27,528.87 Topix down 0.3% to 1,941.91 Hang Seng Index down 0.6% to 23,966.49 Shanghai Composite up 0.9% to 3,568.17 Sensex down 0.2% to 59,596.78 Australia S&P/ASX 200 down 0.6% to 7,206.55 Kospi down 1.8% to 2,908.31 Brent Futures up 0.1% to $82.67/bbl Gold spot down 0.7% to $1,747.69 U.S. Dollar Index up 0.32% to 94.28 German 10Y yield up 2 bps to -0.168% Euro down 0.3% to $1.1560 Top Overnight News from Bloomberg Boris Johnson’s insistence that higher pay for U.K. workers is worth the pain of supply chain turmoil is generating buzz among Conservative Party members that he’s planning to raise the minimum wage in a keynote speech on Wednesday European energy prices extend their blistering rally as the supply crunch shows no sign of easing and the European Union pledged a quick response to keep the crisis from damaging the economy Chinese Fantasia Holdings Group Co., which develops high-end apartments and urban renewal projects, failed to repay a $205.7 million bond that came due Monday. That prompted a flurry of rating downgrades late Tuesday to levels signifying default. The stumble stirred broader angst in volatile markets amid public holidays in China and uncertainty about Evergrande President Emmanuel Macron nominated Bank of France Governor Francois Villeroy de Galhau for a second term, opting for stability in one of the most important appointment decisions on European Central Bank policy making for years to come The German Green Party is seeking to start exploratory talks with the SPD and liberal FDP party on forming a governing coalition, Green Party co-leader Annalena Baerbock said Saudi Arabia reduced oil prices for its main buyers, a day after OPEC+ sent crude futures surging by sticking to a plan for slow and steady supply increases A more detailed look at global markets courtesy of Newsquawk: Asia-Pac bourses traded mostly lower after failing to sustain the initial momentum from Wall St, where all major indices gained as investors bought back into tech and with sentiment helped by better-than-expected ISM services PMI, while continued upside in oil prices and a higher yield environment also underpinned energy and financials. This initially lifted the overnight benchmark indices although gains in the ASX 200 (-0.6%) were later reversed as the strength in energy and tech was overshadowed by weakness in the broader market including underperformance in the top-weighted financials sector after the regulator announced a loan curb measure targeting mortgage lending. Nikkei 225 (-1.1%) faded its opening gains and brief foray into 28k territory with auto names among the laggards amid ongoing production disruptions and with PM Kishida’s new cabinet beginning on shaky ground as polls showed his approval rating was at just 55% heading into the upcoming election, which was also the lowest for a new leader in 13 years, while KOSPI (-1.8%) gave up initial spoils with firmer than expected CPI data supporting the case for another hike by the BoK this year. Hang Seng (-0.6%) conformed to the soured mood amid weakness in property and biotech with participants also focusing on Chief Executive Lam’s final policy address of her current term where she proposed measures to address the housing issue, although this failed to lift the property sector as Evergrande concerns lingered after Hong Kong property agencies sued the Co. to recover overdue commissions and with shares in its New Energy Vehicle unit suffering double-digit percentage losses. Finally, 10yr JGBs were lower on spillover selling from T-notes and despite the downturn in stocks, while the absence of BoJ purchases in the market today added to the lacklustre demand with the central bank instead offering to buy JPY 125bln in corporate bonds from October 11th with 1yr-3yr maturities. Top Asian News China Tech Stock Gauge Falls to Record Low as Yields Rise Top Glove Says Cooperating in Investigation Over Worker’s Death China Resources Unit Said to Be in Talks for JLL China Business Asian Stocks Drop as Tech Selloff Deepens Amid Rising Yields Stocks in Europe have extended on the losses seen at the cash open (Euro Stoxx 50 -2.4%; Stoxx 600 -1.8%) with risk aversion intensifying from a downbeat APAC session as markets grapple with the prospect of stagflation, the energy crunch, Evergrande woes, and geopolitics. US equity futures have conformed to the losses across stocks with the ES (-1.3%) RTY (-1.5%), NQ (-1.5%) and YM (-1.0%) all softer, whilst the former two dipped under 4,300 and 2,200 respectively. From a news-flow standpoint, fresh catalysts have been light. Euro-bouses see broad-based losses whilst the FTSE 100 (-1.6%) is somewhat cushioned (albeit under 7k) by a softer sterling alongside some heavyweight individual stocks including HSBC (+3.3%) following a broker move, and Tesco (+4.5%) after topping H1 forecasts, raised guidance and a GBP 500mln share buyback scheme. Sectors in Europe are all in the red. Banks are the best of the bunch amid the favourable yield environment. On this note, SocGen suggested that the banking sector should benefit from the rise in yields and limited exposure to China, higher energy and supply-chain bottlenecks, while that market consolidation offers some opportunities in the European tech and industrial sectors. Back to sectors, the downside sees some of the more cyclical sectors including Travel & Leisure and Auto names. In terms of some individual movers, Deutsche Telekom (-5.6%) is hit after a bookrunner noted a share offering of some 90mln shares priced at a discount to yesterday’s close. Top European News German Greens Seek Talks With SPD, FDP on Post-Merkel Government European Industry Buckles Under a Worsening Energy Squeeze Polish Central Bank Unbowed Despite Price Spike: Decision Guide Bayer Shares Turn Lower After Initial Gains on Roundup Win In FX, the Dollar is firmly back in the driving seat and the index is eyeing YTD highs having reclaimed 94.000+ status amidst another sharp downturn in risk appetite just a day after what some pundits were dubbing as a ‘turnaround Tuesday’. Instead, Asia-Pacific bourses were reluctant to pick up the baton from Wall Street and the failure to keep the ball rolling against the backdrop of ongoing strength in gas and oil prices has rattled EU equities to the extent that the Dax has lost grip of the 15k handle and FTSE is down below 7k regardless of the fact that the UK benchmark has some positive impulses beyond the obvious revenue implications for the energy sector. Back to the DXY 94.448 is the best so far ahead of 94.500 for sentimental reasons and the current y-t-d peak just a fraction above at 94.504. In terms of fundamentals, next up for the Greenback is ADP as one of the usual pointers for NFP, while Fed speak comes from Bostic who is down to talk twice today. NZD/AUD - Ironically perhaps, the Kiwi is underperforming even though the RBNZ matched market expectations with a 25 bp OCR hike overnight, and this could well be described as a classic ‘buy rumour, sell fact’ reaction given that the move was all priced in. Moreover, the accompanying statement has not altered expectations for further measured tightening and this could compound the inclination to re-position/take profit/cut longs to the detriment of the Nzd. Indeed, the Kiwi has retreated from around 0.6980 vs its US rival to circa 0.6878 and is struggling to tread water on the 1.0500 mark against the Aussie that is also losing out to its US rival on the aforementioned risk dynamic, as Aud/Usd hovers towards the bottom end of 0.7295-0.7227 parameters ahead of AIG’s services sector index. CAD/GBP - Also somewhat perverse, though a measure of the degree that the market mood has changed since yesterday, the Loonie and Sterling are both struggling to derive much from the latest advances in WTI or Brent. In fact, Usd/Cad approached 1.2650 having breached the 50 DMA (1.2626) and pulling away from a cluster of decent option expiries that start at 1.2520-25 (1 bn) and continue through 1.2550-60 (2.1 bn) to 1.2600 (1 bn) and end between 1.2720-30 (1.5 bn, while Cable has reversed through 1.3600 and the 10 DMA (1.3592) with little assistance from a sub-consensus UK construction PMI. EUR/CHF/JPY - All unable to escape the Buck’s clutches, with the Euro down to a minor new 2021 low and probing barriers at 1.1550, while the Franc is treading water around 0.9300 and the Yen is thriving to keep tabs on 111.50 due to its renowned safe-haven properties, and with the prop of JGB yields reaching multi-month peaks, albeit in catch-up trade with US Treasuries and other global bonds. SCANDI/EM - Little solace for the Nok via Brent almost touching Usd 83.50/brl at one stage, though it is holding a firm line following its ascent beyond 10.0000 vs the Eur, while the Sek has largely taken mixed Swedish data and Riksbank rhetoric from Skingsley in stride (caution warranted and now is not the time to change monetary policy), but EM currencies are all floundering with the Try sliding to yet another record trough and on course to hit 9.0000. Ahead, the Zar will be looking for something supportive from SARB Governor Kganyago via a webinar on the economy, jobs and growth. RBNZ hiked the OCR by 25bps to 0.50% as expected and the committee noted further removal of monetary policy stimulus is expected over time. RBNZ added that it is appropriate to continue reducing the level of stimulus and that future moves are contingent on the medium term outlook for inflation and employment, while policy stimulus will need to be reduced to maintain price stability and maximum sustainable employment over the medium term. Furthermore, it noted that cost pressures are becoming more persistent and capacity pressures are still evident, but added that demand shortfalls are less of an issue than the economy hitting capacity constraints and that economic activity will rebound quickly as alert level restrictions ease. (Newswires) In commodities, WTI and Brent front month futures are choppy in early European trade with a downside bias amid the risk tone, but ultimately, prices remain near recent highs with the WTI Nov contract north of USD 78.50/bbl (78.25-79.78/bbl) and Brent Dec around 82/bbl (vs USD 81.92-83.47/bbl range) at the time of writing. Nat gas has once again been the focus in the energy complex, with the UK Nat Gas future surging some 40% intraday at one point, although its US counterpart has lost some steam. A lot of attention has been the Nord Stream 2 pipeline to alleviate some of the supply/demand imbalances in the gas market heading into the winter period. Yesterday, an EU lawmaker suggested that the pipeline does not comply with EU rules, although an EU court adviser noted that Nord Stream 2 could challenge the energy rule and the decision is not final. European natural gas futures climbed to a fresh all-time high. Back to crude, it’s worth being cognizant of the underlying demand that could be fed via the higher gas prices as other energy sources are more sought after, including diesel generators for electricity usually produced by Nat Gas. Over to metals, spot gold and silver are pressured by the firmer Buck with the former back under USD 1,750/oz and at session lows at the time of writing. The downbeat tone has also taken a toll on the base metals complex, with LME copper again dipping below the USD 9,000/t from a USD 9,135/t intraday peak. US Event Calendar 7am: Oct. MBA Mortgage Applications, prior -1.1% 8:15am: Sept. ADP Employment Change, est. 430,000, prior 374,000 DB's Jim Reid concludes the overnight wrap Risk appetite returned to markets yesterday, but not without some astonishing moves in commodities and inflation markets alongside a selloff in bonds. On top of that, we also had a fresh round of signals that supply-chain issues and inflation were beginning to have real economic impacts, thanks to the global September PMI readings. The most eye catching stat of the last 24 hours is probably that the UK’s index linked bonds are now implying that the April 2022 YoY UK RPI print will be c.7%. Thanks to DB’s Sanjay Raja for pointing this out to me. That’s the point in time where Ofgem next updates its price cap for utility bills. This comes after further astonishing moves in natural gas. In the UK, gas prices were up +19.54%, marking the biggest daily percentage increase in over a year and a +183.3% move since the start of August. 10 year UK breakevens closed at an incredible 3.979% (+9.6bps on the day). To be fair this is based on RPI not the CPI that other index linked markets are. As of early next year the UK is moving to a CPI-H benchmark so these numbers will come down but it’s still an astonishing reflection on expectations for 10-year average inflation numbers. Benchmark European natural gas futures weren’t much different and were up by +20.04% to a record €116.02 per megawatt hour. That’s also the biggest daily percentage increase in over a year, and the absolute increase of €19.37 is actually more than the level at which natural gas was trading as recently as Q1 this year! That leaves natural gas prices up more than six-fold since the start of the year, and up more than three-fold since the start of July. In comparison the US gas future was “only” up +9.20%, but still reached its highest closing level since December 2008. And oil itself saw another round of gains, with Brent Crude (+1.60%) rising to its highest in almost 3 years, at $82.56/bbl, whilst WTI was up +1.69% to $78.93/bbl, its highest since 2014. This fresh round of price surges has led to another spike in inflation expectations across multiple countries even in 10 year markets, so way beyond the transitory stage. We’ve already highlighted the UK number but the 10yr German breakeven (+7.6bps) saw its biggest daily increase in nearly a year, hitting a fresh 8-year high of 1.796%. Its Italian counterpart (+8.3bps) hit a new high for the decade at 1.715%. Even in the US, where breakevens have been trading in a fairly tight band recently, we saw a +6.8bps rise to 2.460%, which is its highest closing level in 4 months. With breakevens moving sharply higher, this was clearly bad news for sovereign bonds, which sold off on both sides of the Atlantic across different maturities. Yields on 10yr Treasuries were up +4.7bps to 1.53%, with the entirety of that move resulting from higher inflation expectations rather than real rates, which actually fell on the day (-2.0bps). Over in Europe, gilts saw the biggest declines as investors continue to anticipate a potential BoE rate hike in the coming months, with 10yr yields rising by a further +7.3bps, whilst the spread of UK 10yr yields over bunds actually widened to its biggest level since the day of the Brexit referendum in 2016. That said, yields were also moving higher on the continent, with those on 10yr bunds (+2.6bps), OATs (+2.5bps) and BTPs (+3.0bps) all moving to their highest level in 3 months. The case for inflation was given further support by the September PMI releases, which pointed to supply-chain issues across multiple countries. In the Euro Area, the composite PMI was revised up a tenth to 56.2, but the release said that input prices were rising at the joint-fastest on record. Over in the US, the composite PMI was also revised up half a point from the flash reading to 55.0, but the release similarly mentioned labour shortages and capacity constraints holding back growth. The US composite PMI of 55.0 was its lowest level in a year, albeit still above the 50-mark that separates expansion from contraction. The September US ISM services reading rose 0.2 to 61.9 (59.9 expected) with the report suggesting that delta variant concerns are easing as 17 of the 18 industries reported growth over the last month. However, there were still comments in the report highlighting supply chain issues and some inability to retain or hire labour. In spite of the renewed inflation concerns clouding the Q4 outlook, the major equity indices managed to post a decent rebound from Monday’s losses, although it’s worth noting that many were only recouping those declines rather than advancing to new heights. The S&P 500 was up +1.05%, so still just beneath where it started the week after Monday’s -1.30% decline, whilst the NASDAQ was up +1.25% and the FANG+ recovered +2.23%. It was the 4th straight day that the S&P 500 moved more than 1% in either direction, the longest such streak since November 2020. While yesterday saw a broad-based rally with 21 of the 24 S&P 500 industries gaining, financials were the big outperformer thanks to higher yields. The US Financials sectors added +1.78%, whilst in Europe the STOXX Banks index (+3.99%) hit a post-pandemic high, well outpacing the broader STOXX 600 (+1.17%). Overnight in Asia, most markets continued to slide with the Nikkei (-1.00%), Kospi (-1.00%), Hang Seng (-0.71%) and Australia’s ASX (-0.68%) all moving lower on the back of higher energy prices and inflation concerns. In Japan the Nikkei extended losses for an eighth consecutive session on concerns that new PM Fumio Kishida could be outlining a redistribution plan that includes higher taxes, including on capital gains, although he’s yet to outline the specifics of the policy. Separately the Reserve Bank of New Zealand joined the club of central banks raising rates, hiking by 25bps in a move that was the first rate rise in seven years, as they also indicated more hikes might be warranted. In terms of the latest on Evergrande, the firm is still yet to release details of the “major transaction” we mentioned on Monday, with the company’s shares still suspended, whilst Fantasia saw its long-term rating cut to selective default by S&P yesterday, down from CCC. US futures are pointing to further declines later with those on the S&P 500 down -0.39%. Turning to the ongoing debt ceiling saga, the US Senate has a cloture vote scheduled for today to suspend the ceiling, but Republican leadership are confident they can block the measure and force the Democrats to raise the debt ceiling unilaterally using the budget reconciliation process (which only requires a simple majority of votes in the Senate). So this would tie a move on the debt ceiling into the reconciliation bill that includes President Biden’s “Build Back Better” economic plan. However, the Democrats are maintaining that the reconciliation process takes too long, with the Treasury estimating it will run out of funding around October 18, and have made the case that both parties have a duty to raise the ceiling, since it reflects debts racked up under administrations of both parties rather than just the Democrats. Irrespective of the debt ceiling though, it does continue to sound like there’s movement toward a deal amongst Congressional Democrats on the size of the plan, withSenator Manchin (a key Democratic moderate) reportedly not ruling out a $1.9-2.2 trillion spending plan price tag, which is also the level that President Biden had been floating to House Democrats last week. Speaking of the Senate, yesterday Senator Elizabeth Warren had yet more strong words for Fed Chair Powell. Warren has already said she opposes giving Powell a second term as the Fed Chair, and yesterday’s speech criticised him for his lack of oversight of the trading activity of Federal Reserve officials. She said Powell has “failed as a leader” and that there are “legitimate questions about conflicts of interest and insider trading” around the actions of certain Fed Officials. This follows her actions on Monday, when she called the SEC to investigate Federal Reserve officials for insider trading. At the same time, Chair Powell asked its inspector general to conduct a review of trades made by Federal Reserve members to ensure they complied with the law and Fed rules. While a White House spokesperson said yesterday that President Biden continues to have confidence in Chair Powell, Senator Warren may be setting up to float an alternative candidate for Chair in the coming weeks ahead of Powell’s term ending early next year. To the day ahead now, and data releases include German factory orders for August, the German and UK construction PMIs for September, Euro Area retail sales for August, and the ADP’s September report on private payrolls from the US. From central banks, we’ll also hear from the ECB’s Centeno. Tyler Durden Wed, 10/06/2021 - 08:07.....»»

Category: dealsSource: nytOct 6th, 2021

21 Investing Myths That Just Aren’t True

With all of humanity’s collective knowledge available at our fingertips, you’d think investing myths would have disappeared by now. Q3 2021 hedge fund letters, conferences and more Yet they persist, largely because too many people consider money a “taboo” subject and avoid talking about it. Many of us also never question these assumptions, so we […] With all of humanity’s collective knowledge available at our fingertips, you’d think investing myths would have disappeared by now. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Yet they persist, largely because too many people consider money a “taboo” subject and avoid talking about it. Many of us also never question these assumptions, so we don’t bother running a quick web search in the first place. These persistent investing myths cost you money though, in a very real sense. Once you move past these myths, a wider world of investing opportunities open up for you. Myth: You Can Time the Market to Earn Higher Returns When it comes to new investors learning how to invest their money one of the biggest myths is that you can time the market and earn better returns. To profitably time the market, you need to get it right twice. You need to buy at or near the bottom of the market, just as it turns upward. Then you need to sell at or near the top of the market, just as it prepares to plunge. The most experienced, best-informed professionals can’t do this predictably. If they can’t do it, you certainly can’t. Imagine you’re standing on the sidelines, telling yourself that you’ll invest “once the market drops.” But the market continues to rise for the next year or two before its next dip. When the dip does come, its low point might still cost more than today’s price. And that’s assuming you were able to buy at the low point, which you almost certainly won’t time properly. In the meantime, you’ve missed out on years of passive income from dividends or rents, or interest. Rather than trying to time the market, practice dollar-cost averaging. While it sounds complicated, it simply involves investing a set amount every month into the same diversified investments, based on what your budget allows for each month. You ignore timing and just mimic the broader upward trend, to earn better returns in the long run. Myth: You Need a Lot of Money to Start Investing A common myth that many people assume is investing a little bit of money doesn’t make sense. They think that investing $5 a month is pointless so they never even bother to start. That couldn’t be further from the truth. And it leads to wasted opportunities to save and invest over time. The truth is, investing a small amount of money can grow into large sums of money. Jon Dulin, owner of MoneySmartGuides, offers this example: “Let’s say you are 25 years old and invest $20 a month for 25 years. During this time you earn an average 8% return — nothing spectacular, just average returns. “At the end of 25 years, your $20 monthly investment has grown to nearly $19,000. If that doesn’t sound impressive, consider that your measly $20 each month could help your child or grandchild pay for college. Or it could pay for a family reunion vacation that you have on a tropical island. “If you instead keep the money invested for another 25 years, when you reach age 75, you’ll have close to $149,000. This can cover several years’ worth of living expenses during retirement.” Don’t make the mistake of assuming a small amount of money is a waste of time. Thanks to compounding, your money will grow into far larger sums over time. Literally anyone can get started even with little capital. Take the first step now and start investing any excess money you have, regardless of the amount. Read more: Invest in Art like the Ultra Wealthy Without Spending Millions Myth: I’m Too Young (or Too Old) to Start Investing The sooner you start and the longer you keep the money invested, the more it will grow. At an 8% return, you’d have to invest $5,467 each month to reach $1 million in 10 years. But it only takes $287 invested each month to reach $1 million in 40 years. That means that even people working for minimum wage can become millionaires if they invest consistently over time. On the other end of the spectrum, some older adults look at those numbers and despair, wondering why they should bother investing at all. But that’s the price of delaying: you need to save and invest more each month to reach the same goal. As the proverb goes, the best time to plant a tree was 20 years ago. The second best time is now. Start investing today with what you have, and let compounding work its magic for you. Read more: Don’t Miss These 12 Stocks Pay Monthly Dividends Myth: It Takes Decades to Save Enough to Retire In personal finance, the concept of “financial independence” means being able to cover your living expenses with passive income from investments. To make your day job optional, in other words, allowing you to retire if you like. It takes hard work and an enormous savings rate, of course. If you plod along with a 10-15% savings rate, then yes, it will take you decades to save enough to retire. My wife and I got serious about financial independence at 37, three years ago. We’re on track to reach financial independence within the next two or three years, in our early  40s. How? With a savings rate of 60-65% of our annual income and aggressive investing. Neither of us earns a huge salary either, but we still enjoy a comfortable lifestyle with plenty of international travel. We can save so much of our income because we house hack for free housing, avoid owning a car by living in a walkable area, and get full health insurance through my wife’s job. Nor are we alone. Read up on the FIRE movement (financial independence, retire early) to see how thousands of other people are achieving fast early retirement. Myth: Popular Companies Make Better Stock Picks The idea that popular companies make for good stocks sounds appealing on its surface. After all, if a company is popular, it’s probably growing its business. But the popularity and even the quality of a business only tell half the story. The other side is the price you pay for it. “Imagine someone approached you with two offers,” illustrates Ben Reynolds of Sure Dividend. “The first offer is to buy a $100 bill for $150. The second offer is to buy a $1 bill for $0.50. We all know the $100 bill is worth much more than the $1 bill… But any rational person would rather buy $1 for $0.50 than $100 for $150.” Two Warren Buffett quotes sum this up nicely: “For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.” “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.” The reason it is difficult to do well investing in popular stocks is because they tend to be overvalued. Everyone already “knows” the business is going to be wildly successful, and that’s baked into the price. If there’s any hiccup in results, the price is likely to decline significantly. Also, as evidenced by the GameStop fiasco, amateur traders can make a significant impact on popular investments. Just because something is popular doesn’t make it a good investment. Read more:  Discover these 19 Blue Chip Dividend Stocks Myth: You Need to Spend Time Researching Stocks or Frequently Trading Many people believe that it takes a lot of time to research stock and make frequent trades to make money, resulting in people leaving their investments with a professional or relying on expensive mutual funds. But individual investors don’t need expensive investment advisors or managed mutual funds (more on them shortly). “For most retail investors, utilizing low-cost passive index ETFs is the easiest and cheapest approach,” explains Bob Lai of Tawcan.com. “These index ETFs track a special index, like the S&P 500 or the NASDAQ Composite Index. Because of index-tracking nature, you get to own all the stocks listed in that index.” There’s no need to spend time determining the earning trend of companies like Apple, Facebook, Amazon, or Pfizer because you own them all. By owning all these stocks in the index ETFs, you are also not making frequent trades. Counterintuitively, frequent trades generally lead to lower returns. Think of your investment portfolio like a bar of soap: the more you touch it, the smaller it gets. Read more: Related read: Diversify Your Portfolio With These Top 10 International ETFs Myth: Expensive Managed Mutual Funds Outperform Passive Index Funds Experienced, professional investors with the best data available to them still can’t pick stocks or time the market better than passive index funds. Need proof? Over the last 15 years, nearly 90% of managed mutual funds underperformed compared to their respective benchmark index. “The best investment strategy would be to invest in index funds of stocks or bonds that track an entire segment of the market — so you don’t have to worry about which specific security will give you the best return over short investing periods,” offers Kelan Kline, cofounder of The Savvy Couple. “My personal favorite low cost broad market index fund is Vanguard’s VTSAX.” Myth: Only the Wealthy Can Hire Investment Advisors A survey from JPMorgan Chase found that 42% of people who aren’t investing are staying out because they don’t think they have enough to invest. On some level, this isn’t surprising. After all, historically people had to work with private wealth managers who require $100,000 or more. Even many popular index funds required a minimum of $10,000 to get started, just 20 years ago. “That is changing with algorithm-driven investment tools such as robo-advisors,” says Jeremy Biberdorf of ModestMoney.com. “In many cases, robo-advisors have no minimum investment and allow you to invest for a small fee. Even investing a small amount every year can make a big difference.” Robo-advisors also won’t run off with your money or engage in insider trading. Many investors let their guard down and trust human investment advisors without doing any due diligence on them, especially when referred to them by friends of family members. “This makes investors vulnerable to conflicting advice in even the best-case scenarios. In the worst-case scenarios, they are easy prey for scammers. That’s why I call this blind faith in financial professionals the worst investment advice I hear everywhere,” explains Chris Mamula of Can I Retire Yet?. Read more: Can I Retire at 62 With 400k In My 401(k)? Myth: Bonds Are Inherently Safer than Other Asset Classes Bonds offer one type of safety — but leave you exposed to other types of risk. When an investor buys a bond from the US Government or most municipalities, there’s little risk of the borrower defaulting. So investors can sleep at night knowing that as long as they hold that bond, they’ll probably receive their modest interest payments. But bond values gyrate on the secondary market just like stock prices. Investors who plan to sell their bonds rather than hold them can find themselves with paper that’s gone down in value, not up. Which says nothing of the corroding effect of inflation on bond interest payments. When inflation runs at 3% in a year, a bond paying 3% interest-only generates a 0% real return. That in turn means that bonds may not actually protect retirees against running out of money before they die. Sure, the stock market is volatile, but in the long term, it generates an average return of 10% per year. At a 4% withdrawal rate, investors will see their stock portfolio go up in value rather than down, in most years. Even conservative income stock investing, such as in dividend kings, can yield 3-4% in dividends alone, on top of share price growth. But bonds paying paltry 3-4% interest will cause a slow decay in your nest egg. None of that means that you should never invest in bonds. But every investor should understand all the risks — not just the risk of default. Myth: Options Trading is Risky For many, selling options is a risky business.  And strategies such as Iron Condors add to the complexity.   “However, when managed correctly, options trading can be a handy addition to an overall portfolio”, explains Gavin McMaster of IQ Financial Services, LLC. An iron condor is a delta-neutral option strategy that consists of both call options, and put options.  The strategy works if the underlying stock stays within a specific range during the course of the trade. The key with iron condors is trading an appropriate position size (never risk your whole account on an iron condor) and knowing how to manage them. Here are a few quick tips to reduce the risks with iron condors: Never risk more than 2-3% of your account size on any one trade Close the trade before the stock breaks through one of the short strikes Avoid earnings announcements Have one or two adjustment strategies ready in case the trade moves against you Focus on stocks and ETF’s with a high IV Rank “While iron condors can be risky if you don’t know what you are doing, using appropriate position sizing and risk management rules can reduce the risks”, adds McMaster.  Generating income from iron condors can be a superb way to increase the returns on your portfolio. Myth: Pay Off Your Student Loans Before Buying a Home Paying off student loans before buying a home is a common misconception. While there is no “one size fits all approach,” many people believe their student loan debt will prohibit them from purchasing a home, however, this isn’t always the case. “For example, doctors and dentists often carry large amounts of student debt, and typically have relatively high debt to income ratios. Therefore, exploring a Physician Mortgage, which allows individuals to carry more debt, may be a better fit than a traditional mortgage”, explains Kaitlin Walsh-Epstein with Laurel Road. For those nonhealthcare professionals looking to purchase a home while managing high outstanding student loan balances, refinancing their student loans can be a good option. By refinancing to a longer-term mortgage, the borrower may lower their monthly payments. However, this may also increase the total interest paid over the life of the loan. “Refinancing to a shorter-term mortgage may increase the borrower’s monthly payments, but may lower the total interest paid over the life of the loan.”, adds Walsh-Epstein. Questions to consider: What is your current student loan interest rate? (Calculate the true cost over the life of your loan) What are mortgage interest rates and are they projected to go up or down?  (Currently mortgage rates are low) Do you pay rent each month and if so, how will your rent payment compare to a mortgage payment?  (As well as carrying costs of owning a home) Is the home (or real estate) projected to appreciate in value? The first step is to review and understand your credit score, student loan terms, and financial goals. Working towards making payments to lower your overall debt will help to raise your credit score, yet again increasing your chances of getting into your dream home faster! Myth: The “Rule of 100” In the 20th Century, investment advisors droned out the same advice to most clients: “Subtract your age from 100, and that’s the percent of your portfolio that should be invested in stocks.” They pushed clients to move their money into bonds instead, as they grew older. A sound strategy — back when Treasury bonds paid 15% interest. This century has seen perpetual low-interest rates, and bonds have offered poor returns compared to stocks. This says nothing of the fact that people are living and working longer, so they both have more risk tolerance and need their nest eggs to last longer. Today, investment advisors tend to instead advise subtracting your age from 110 or 120 instead, if they bother issuing such generic advice at all. Everyone has their own unique risk tolerance and needs; as a real estate investor, I can earn safer, higher returns from real estate than bonds, so I avoid bonds altogether. A high earner nearing retirement might appreciate the tax benefits and security of municipal bonds and tailor their portfolio accordingly. Be careful of anyone peddling such a broad rule of thumb as the “Rule of 100.” Read more: Find Expert Tax Preparers Now! Myth: You Must Pay Off All Debt Before Investing There are plenty of great reasons to pay off consumer debt early. You earn an effective return equal to the interest rate, and it’s a guaranteed return on your money when you use it to pay off debt early. Mark Patrick of Financial Pilgrimage explains it like this: “Our family even went so far to pay down our mortgage debt despite record low-interest rates. With that said, throughout the entire process we invested in our retirement accounts, such as our 401(k) account. The benefits are just too good to pass up. “The company that I work for provides a 401k match of up to 6% plus an additional 1% that every employee receives regardless. Therefore, if I contributed 6% of my salary to my 401(k) I would receive an additional 7% in contributions from my employer. I was more than doubling my money right away! “If you decide to wait to pay down all of your consumer debt instead of starting to invest for your retirement you’ll miss out on years of compound interest. Compound interest is one of the most powerful forces in personal finance. The earlier you can get started, the better. For example, if someone invests $5,000 per year from age 25 to 35 and then never invests another dollar, they would likely have more money at age 65 than someone that invests the same amount every month from age 35 to 65. “While I am a huge proponent of paying down debt, it shouldn’t come at the expense of forgoing investing. Especially when you want that money to grow until retirement. Try to find the balance between paying down debt and investing. We certainly could have paid down our debt faster if we decided not to invest throughout the process, but after 15 years in the workforce I’m sure glad we didn’t. Those dollars invested early on have compounded into much larger amounts over the years. Read more: Should you Pay off Debt or Save for Retirement Myth: You Should Pay Off Your Student Loans Before Buying a Home It might make more sense to pay off student loans before buying a house. Or it might not. Ultimately it depends on your goals, your housing market, your loan interest rates, and your other finances. For example, you might live in a housing market where it’s cheaper to rent than own a home. In that case, it makes sense to pay off your student loans rather than rush into buying. Alternatively, if you plan on buying a duplex and house hacking, and thereby eliminating your housing payment, it probably makes more sense to buy. Just think about how much faster you could pay off your student loans, with no housing payment! Think holistically about how owning versus renting for another year or two would affect your finances. Don’t rush into buying a home — but don’t avoid it without deep analysis, either. Myth: Buying Is Always Better than Renting Despite having owned dozens of properties as a real estate investor, I live in a rental apartment. In some markets, renting makes more sense than buying. Look no further than San Francisco, where the median home price is $1,504,311, but the median rent for a three-bedroom home is $4,567. After adding in property taxes and homeowners insurance, it would cost roughly double the monthly payment to buy a median home as rent, despite all the perennial complaints by San Francisco tenants. And that says nothing of maintenance and repair costs, which average thousands of dollars each year for the typical homeowner. Renters don’t have to pay those costs or do that labor. They delegate them to the landlord. Nor do renters need the fiscal discipline to budget money each month for those irregular, but inevitable expenses. Not everyone has that discipline, and they’re better off with the steady, predictable housing cost of monthly rent. Finally, renting allows flexibility. Tenants can sign a month-to-month lease agreement and move out with a few weeks’ notice. Homeowners don’t have the flexibility; it takes months to sell a home, and typically tens of thousands in closing costs. Myth: Your Home Is an Investment Buyers love to delude themselves that they’re buying an “investment” rather than spending money on shelter. It helps them justify overspending on the biggest, fanciest house they can possibly afford. But make no mistake: housing falls under the “Expenses” category in your budget, not the “Investments” category. It costs you money every month, rather than generating it. House hacking marks a notable exception however, since your home helps you avoid a housing payment. Sure, real estate often goes up in value. So do baseball cards, but that doesn’t justify hobbyists spending as much as they possibly can on them, while patting themselves on the back for their wise “investments.” By all means, invest in real estate. But do it by buying true investment properties, or REITs, or real estate crowdfunding investments. The more you spend on housing, the less you can put toward true investments. Read more: House Hacking – 18 Ways to Never Pay Rent Again Myth: You Should Put the Bare Minimum Down When You Buy a Home Making the bare minimum down payment often enables buyers to overspend on housing. They end up overleveraging themselves, mortgaged to the hilt with an enormous monthly payment and little money left to actually furnish the place, or to enjoy any social life. It also leaves homeowners vulnerable to becoming upside-down on their home, owing more than the home is worth. At that point, they become prisoners in their own homes, unable to sell without the lender’s permission. They end up stuck there until the housing market either improves or they pay their loan balance down enough to be able to afford seller closing costs without coming out of pocket. While it sounds nice to put down next to nothing on a home, look at the bigger picture. If you spend far less on a home than you can afford, then a low down payment can serve you well. But if you’re straining against the limits of your budget, beware of putting every last penny into a tiny down payment with a huge monthly bill. Myth: You Should Put Down as Much as Possible on a Home The common wisdom was once to put down as much as possible when you buy a home, and 20% at the very least. However, this locks up a good portion of the money that could be growing at a faster rate with other investments. “Putting down less than 20% does increase the monthly mortgage payment due to the higher interest rate and PMI (private mortgage insurance),” explains Andy Kolodgie of The House Guys. “However, you should compare your expected returns on that extra down payment if you were to invest it elsewhere, to the annual savings on your mortgage. For example, investing in stocks and bonds could allow you to earn more money while providing the added benefit of easy liquidity. “A lesson learned from the 2008 mortgage crisis was you can’t eat equity in your home. During the recession, it was nearly impossible to refinance the equity out of any home, as home prices dropped below most people’s mortgage balance. Putting less than 20% down to stay more liquid and investing in alternative assets diversifies your portfolio, keeping buyers more risk-averse.” Again, look holistically at your personal finances. As you near retirement, it makes more sense to play conservatively with a larger down payment to avoid PMI and reduce your monthly mortgage bill. For younger borrowers looking to buy a first home, it often makes more sense to put down 3-10%, and invest their other cash more aggressively in the stock market or other assets with high return potential. Myth: You Need 6-12 Months’ Living Expenses in an Emergency Fund To hear the pundits crying from their soapboxes, we all need at least a year’s worth of living expenses parked in a savings account in cash to protect us from a financial apocalypse. And some people do. But not everyone. Those with either irregular incomes, irregular expenses, or both do need a deep cash cushion. For example, as an entrepreneur, there have been months where I didn’t earn enough to take a personal distribution for myself from the company, so I earned $0 in personal income those months. Someone like me does need 6-12 months’ worth of living expenses saved in an emergency fund. Salaried employees with safe jobs at stable employers don’t need as much cash in an emergency fund. That goes doubly if they live a predictable middle-class lifestyle with the same expenses month in and month out. They may only need 2-3 months’ expenses set aside in cash. I go a step further with my emergency fund and think of it as tiered levels of defenses, like a medieval castle. The first level comprises cash savings — you can tap it if you need it. I also keep several unused credit cards with low-interest rates, that I can also draw on in a pinch. Then I keep several low-volatility, short-term investments that I can also turn to if needed. All of which means I don’t actually need 6-12 months’ living expenses in cash after all. Myth: More Education Inherently Means a Higher Income From a statistical standpoint, education level correlates strongly with income. People with college degrees earn more than those with high school diplomas on average, and those with advanced degrees earn a higher average income still. On a personal level, it often doesn’t work out that way. I have plenty of friends and family members with advanced degrees, and most of them earn modest, middle-income salaries. Salaries with ceilings, and little room for advancement beyond their specialized niche. I can’t tell you how many teachers I know with several master’s degrees, who earn little or nothing more than their colleagues with bachelor’s degrees. In fact, my friends and family with the highest incomes all stopped at bachelor’s degrees and while some got high-paying jobs, others went into business in some capacity. This doesn’t mean you shouldn’t pursue an advanced degree if it’s required for your dream job. By all means, pursue your passion. But don’t assume that an advanced degree inherently means an advanced salary. Read more: How to Make $100k/yr As A Brand Ambassador Myth: Gold Offers the Best Hedge Against Inflation Many investors flock to gold when they fear inflation. But historically, gold often performs badly during times of high inflation. From 1980-1984, for instance, gold lost around 10% in value, even as inflation raged at a 6.5% annual rate. Historically repeated itself in the late 1980s as well. Gold actually works best as a hedge against a weakening currency — compared to other world currencies. When investors think the US dollar is about to crumble in value compared to the euro, pound, or yen, that marks a good moment to grab some gold. But investors more generally worried about inflation should consider better hedges against it. Real estate offers an excellent hedge against inflation, for example. It has inherent value: people will pay the going rate, regardless of the value of the currency. The same goes for commodities like food staples; no one stops eating just because inflation surges. Most professional investment advisors recommend holding no more than 5% of your portfolio in precious metals, if that. I personally own none, preferring to invest in stocks, real estate, and the occasional speculative gamble such as cryptocurrency. Article By G. Brian Davis, The Financially Independent Millennial Updated on Oct 5, 2021, 5:10 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 5th, 2021

Camber Energy: What If They Made a Whole Company Out of Red Flags? – Kerrisdale

Kerrisdale Capital is short shares of Camber Energy Inc (NYSEAMERICAN:CEI). Camber is a defunct oil producer that has failed to file financial statements with the SEC since September 2020, is in danger of having its stock delisted next month, and just fired its accounting firm in September. Its only real asset is a 73% stake […] Kerrisdale Capital is short shares of Camber Energy Inc (NYSEAMERICAN:CEI). Camber is a defunct oil producer that has failed to file financial statements with the SEC since September 2020, is in danger of having its stock delisted next month, and just fired its accounting firm in September. Its only real asset is a 73% stake in Viking Energy Group Inc (OTCMKTS:VKIN), an OTC-traded company with negative book value and a going-concern warning that recently violated the maximum-leverage covenant on one of its loans. (For a time, it also had a fake CFO – long story.) Nonetheless, Camber’s stock price has increased by 6x over the past month; last week, astonishingly, an average of $1.9 billion worth of Camber shares changed hands every day. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2021 hedge fund letters, conferences and more Is there any logic to this bizarre frenzy? Camber pumpers have seized upon the notion that the company is now a play on carbon capture and clean energy, citing a license agreement recently entered into by Viking. But the “ESG Clean Energy” technology license is a joke. Not only is it tiny relative to Camber’s market cap (costing only $5 million and granting exclusivity only in Canada), but it has embroiled Camber in the long-running escapades of a western Massachusetts family that once claimed to have created a revolutionary new combustion engine, only to wind up being penalized by the SEC for raising $80 million in unregistered securities offerings, often to unaccredited investors, and spending much of it on themselves. But the most fascinating part of the CEI boondoggle actually has to do with something far more basic: how many shares are there, and why has dilution been spiraling out of control? We believe the market is badly mistaken about Camber’s share count and ignorant of its terrifying capital structure. In fact, we estimate its fully diluted share count is roughly triple the widely reported number, bringing its true, fully diluted market cap, absurdly, to nearly $900 million. Since Camber is delinquent on its financials, investors have failed to fully appreciate the impact of its ongoing issuance of an unusual, highly dilutive class of convertible preferred stock. As a result of this “death spiral” preferred, Camber has already seen its share count increase 50- million-fold from early 2016 to July 2021 – and we believe it isn’t over yet, as preferred holders can and will continue to convert their securities and sell the resulting common shares. Even at the much lower valuation that investors incorrectly think Camber trades for, it’s still overvalued. The core Viking assets are low-quality and dangerously levered, while any near- term benefits from higher commodity prices will be muted by hedges established in 2020. The recent clean-energy license is nearly worthless. It’s ridiculous to have to say this, but Camber isn’t worth $900 million. If it looks like a penny stock, and it acts like a penny stock, it is a penny stock. Camber has been a penny stock before – no more than a month ago, in fact – and we expect that it will be once again. Company Background Founded in 2004, Camber was originally called Lucas Energy Resources. It went public via a reverse merger in 2006 with the plan of “capitaliz[ing] on the increasing availability of opportunistic acquisitions in the energy sector.”1 But after years of bad investments and a nearly 100% decline in its stock price, the company, which renamed itself Camber in 2017, found itself with little economic value left; faced with the prospect of losing its NYSE American listing, it cast about for new acquisitions beginning in early 2019. That’s when Viking entered the picture. Jim Miller, a member of Camber’s board, had served on the board of a micro-cap company called Guardian 8 that was working on “a proprietary new class of enhanced non-lethal weapons”; Guardian 8’s CEO, Steve Cochennet, happened to also be part owner of a Kansas-based company that operated some of Viking’s oil and gas assets and knew that Viking, whose shares traded over the counter, was interested in moving up to a national exchange.2 (In case you’re wondering, under Miller and Cochennet’s watch, Guardian 8’s stock saw its price drop to ~$0; it was delisted in 2019.3) Viking itself also had a checkered past. Previously a shell company, it was repurposed by a corporate lawyer and investment banker named Tom Simeo to create SinoCubate, “an incubator of and investor in privately held companies mainly in P.R. China.” But this business model went nowhere. In 2012, SinoCubate changed its name to Viking Investments but continued to achieve little. In 2014, Simeo brought in James A. Doris, a Canadian lawyer, as a member of the board of directors and then as president and CEO, tasked with executing on Viking’s new strategy of “acquir[ing] income-producing assets throughout North America in various sectors, including energy and real estate.” In a series of transactions, Doris gradually built up a portfolio of oil wells and other energy assets in the United States, relying on large amounts of high-cost debt to get deals done. But Viking has never achieved consistent GAAP profitability; indeed, under Doris’s leadership, from 2015 to the first half of 2021, Viking’s cumulative net income has totaled negative $105 million, and its financial statements warn of “substantial doubt regarding the Company’s ability to continue as a going concern.”4 At first, despite the Guardian 8 crew’s match-making, Camber showed little interest in Viking and pursued another acquisition instead. But, when that deal fell apart, Camber re-engaged with Viking and, in February 2020, announced an all-stock acquisition – effectively a reverse merger in which Viking would end up as the surviving company but transfer some value to incumbent Camber shareholders in exchange for the national listing. For reasons that remain somewhat unclear, this original deal structure was beset with delays, and in December 2020 (after months of insisting that deal closing was just around the corner) Camber announced that it would instead directly purchase a 51% stake in Viking; at the same time, Doris, Viking’s CEO, officially took over Camber as well. Subsequent transactions through July 2021 have brough Camber’s Viking stake up to 69.9 million shares (73% of Viking’s total common shares), in exchange for consideration in the form of a mixture of cash, debt forgiveness,5 and debt assumption, valued in the aggregate by Viking at only $50.7 million: Camber and Viking announced a new merger agreement in February 2021, aiming to take out the remaining Viking shares not owned by Camber and thus fully combine the two companies, but that plan is on hold because Camber has failed to file its last 10-K (as well as two subsequent 10-Qs) and is thus in danger of being delisted unless it catches up by November. Today, then, Camber’s absurd equity valuation rests entirely on its majority stake in a small, unprofitable oil-and-gas roll-up cobbled together by a Canadian lawyer. An Opaque Capital Structure Has Concealed the True Insanity of Camber’s Valuation What actually is Camber’s equity valuation? It sounds like a simple question, and sources like Bloomberg and Yahoo Finance supply what looks like a simple answer: 104.2 million shares outstanding times a $3.09 closing price (as of October 4, 2021) equals a market cap of $322 million – absurd enough, given what Camber owns. But these figures only tell part of the story. We estimate that the correct fully diluted market cap is actually a staggering $882 million, including the impact of both Camber’s unusual, highly dilutive Series C convertible preferred stock and its convertible debt. Because Camber is delinquent on its SEC filings, it’s difficult to assemble an up-to-date picture of its balance sheet and capital structure. The widely used 104.2-million-share figure comes from an 8-K filed in July that states, in part: As of July 9, 2021, the Company had 104,195,295 shares of common stock issued and outstanding. The increase in our outstanding shares of common stock from the date of the Company’s February 23, 2021 increase in authorized shares of common stock (from 25 million shares to 250 million shares), is primarily due to conversions of shares of Series C Preferred Stock of the Company into common stock, and conversion premiums due thereon, which are payable in shares of common stock. This bland language belies the stunning magnitude of the dilution that has already taken place. Indeed, we estimate that, of the 104.2 million common shares outstanding on July 9th, 99.7% were created via the conversion of Series C preferred in the past few years – and there’s more where that came from. The terms of Camber’s preferreds are complex but boil down to the following: they accrue non- cash dividends at the sky-high rate of 24.95% per year for a notional seven years but can be converted into common shares at any time. The face value of the preferred shares converts into common shares at a fixed conversion price of $162.50 per share, far higher than the current trading price – so far, so good (from a Camber-shareholder perspective). The problem is the additional “conversion premium,” which is equal to the full seven years’ worth of dividends, or 7 x 24.95% ≈ 175% of face value, all at once, and is converted at a far lower conversion price that “will never be above approximately $0.3985 per share…regardless of the actual trading price of Camber’s common stock” (but could in principle go lower if the price crashes to new lows).6 The upshot of all this is that one share of Series C preferred is now convertible into ~43,885 shares of common stock.7 Historically, all of Camber’s Series C preferred was held by one investor: Discover Growth Fund. The terms of the preferred agreement cap Discover’s ownership of Camber’s common shares at 9.99% of the total, but nothing stops Discover from converting preferred into common up to that cap, selling off the resulting shares, converting additional preferred shares into common up to the cap, selling those common shares, etc., as Camber has stated explicitly (and as Discover has in fact done over the years) (emphasis added): Although Discover may not receive shares of common stock exceeding 9.99% of its outstanding shares of common stock immediately after affecting such conversion, this restriction does not prevent Discover from receiving shares up to the 9.99% limit, selling those shares, and then receiving the rest of the shares it is due, in one or more tranches, while still staying below the 9.99% limit. If Discover chooses to do this, it will cause substantial dilution to the then holders of its common stock. Additionally, the continued sale of shares issuable upon successive conversions will likely create significant downward pressure on the price of its common stock as Discover sells material amounts of Camber’s common stock over time and/or in a short period of time. This could place further downward pressure on the price of its common stock and in turn result in Discover receiving an ever increasing number of additional shares of common stock upon conversion of its securities, and adjustments thereof, which in turn will likely lead to further dilution, reductions in the exercise/conversion price of Discover’s securities and even more downward pressure on its common stock, which could lead to its common stock becoming devalued or worthless.8 In 2017, soon after Discover began to convert some of its first preferred shares, Camber’s then- management claimed to be shocked by the results and sued Discover for fraud, arguing that “[t]he catastrophic effect of the Discover Documents [i.e. the terms of the preferred] is so devastating that the Discover Documents are prima facie unconscionable” because “they will permit Discover to strip Camber of its value and business well beyond the simple repayment of its debt.” Camber called the documents “extremely difficult to understand” and insisted that they “were drafted in such a way as to obscure the true terms of such documents and the total number of shares of common stock that could be issuable by Camber thereunder. … Only after signing the documents did Camber and [its then CEO]…learn that Discover’s reading of the Discover Documents was that the terms that applied were the strictest and most Camber unfriendly interpretation possible.”9 But the judge wasn’t impressed, suggesting that it was Camber’s own fault for failing to read the fine print, and the case was dismissed. With no better options, Camber then repeatedly came crawling back to Discover for additional tranches of funding via preferred sales. While the recent spike in common share count to 104.2 million as of early July includes some of the impact of ongoing preferred conversion, we believe it fails to include all of it. In addition to Discover’s 2,093 shares of Series C preferred held as of February 2021, Camber issued additional shares to EMC Capital Partners, a creditor of Viking’s, as part of a January agreement to reduce Viking’s debt.10 Then, in July, Camber issued another block of preferred shares – also to Discover, we believe – to help fund Viking’s recent deals.11 We speculate that many of these preferred shares have already been converted into common shares that have subsequently been sold into a frenzied retail bid. Beyond the Series C preferred, there is one additional source of potential dilution: debt issued to Discover in three transactions from December 2020 to April 2021, totaling $20.5 million in face value, and amended in July to be convertible at a fixed price of $1.25 per share.12 We summarize our estimates of all of these sources of potential common share issuance below: Might we be wrong about this math? Absolutely – the mechanics of the Series C preferreds are so convoluted that prior Camber management sued Discover complaining that the legal documents governing them “were drafted in such a way as to obscure the true terms of such documents and the total number of shares of common stock that could be issuable by Camber thereunder.” Camber management could easily set the record straight by revealing the most up- to-date share count via an SEC filing, along with any additional clarifications about the expected future share count upon conversion of all outstanding convertible securities. But we're confident that the current share count reported in financial databases like Bloomberg and Yahoo Finance significantly understates the true, fully diluted figure. An additional indication that Camber expects massive future dilution relates to the total authorized shares of common stock under its official articles of incorporation. It was only a few months ago, in February, that Camber had to hold a special shareholder meeting to increase its maximum authorized share count from 25 million to 250 million in order to accommodate all the shares to be issued because of preferred conversions. But under Camber’s July agreement to sell additional preferred shares to Discover, the company (emphasis added) agreed to include proposals relating to the approval of the July 2021 Purchase Agreement and the issuance of the shares of common stock upon conversion of the Series C Preferred Stock sold pursuant to the July 2021 Purchase Agreement, as well as an increase in authorized common stock to fulfill our obligations to issue such shares, at the Company’s next Annual Meeting, the meeting held to approve the Merger or a separate meeting in the event the Merger is terminated prior to shareholder approval, and to use commercially reasonable best efforts to obtain such approvals as soon as possible and in any event prior to January 1, 2022.13 In other words, Camber can already see that 250 million shares will soon not be enough, consistent with our estimate of ~285 million fully diluted shares above. In sum, Camber’s true overvaluation is dramatically worse than it initially appears because of the massive number of common shares that its preferred and other securities can convert into, leading to a fully diluted share count that is nearly triple the figure found in standard information sources used by investors. This enormous latent dilution, impossible to discern without combing through numerous scattered filings made by a company with no up-to-date financial statements in the public domain, means that the market is – perhaps out of ignorance – attributing close to one billion dollars of value to a very weak business. Camber’s Stake in Viking Has Little Real Value In light of Camber’s gargantuan valuation, it’s worth dwelling on some basic facts about its sole meaningful asset, a 73% stake in Viking Energy. As of 6/30/21: Viking had negative $15 million in shareholder equity/book Its financial statements noted “substantial doubt regarding the Company’s ability to continue as a going ” Of its $101.3 million in outstanding debt (at face value), nearly half (48%) was scheduled to mature and come due over the following 12 months. Viking noted that it “does not currently maintain controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified by the Commission’s rules and forms.” Viking’s CEO “has concluded that these [disclosure] controls and procedures are not effective in providing reasonable assurance of compliance.” Viking disclosed that a key subsidiary, Elysium Energy, was “in default of the maximum leverage ratio covenant under the term loan agreement at June 30, 2021”; this covenant caps the entity’s total secured debt to EBITDA at 75 to 1.14 This is hardly a healthy operation. Indeed, even according to Viking’s own black-box estimates, the present value of its total proved reserves of oil and gas, using a 10% discount rate (likely generous given the company’s high debt costs), was $120 million as of 12/31/20,15 while its outstanding debt, as stated above, is $101 million – perhaps implying a sliver of residual economic value to equity holders, but not much. And while some market observers have recently gotten excited about how increases in commodity prices could benefit Camber/Viking, any near-term impact will be blunted by hedges put on by Viking in early 2020, which cover, with respect to its Elysium properties, “60% of the estimated production for 2021 and 50% of the estimated production for the period between January, 2022 to July, 2022. Theses hedges have a floor of $45 and a ceiling ranging from $52.70 to $56.00 for oil, and a floor of $2.00 and a ceiling of $2.425 for natural gas” – cutting into the benefit of any price spikes above those ceiling levels.16 Sharing our dreary view of Viking’s prospects is one of Viking’s own financial advisors, a firm called Scalar, LLC, that Viking hired to prepare a fairness opinion under the original all-stock merger agreement with Camber. Combining Viking’s own internal projections with data on comparable-company valuation multiples, Scalar concluded in October 2020 that Viking’s equity was worth somewhere between $0 and $20 million, depending on the methodology used, with the “purest” methodology – a true, full-blown DCF – yielding the lowest estimate of $0-1 million: Camber’s advisor, Mercer Capital, came to a similar conclusion: its “analysis indicated an implied equity value of Viking of $0 to $34.3 million.”17 It’s inconceivable that a majority stake in this company, deemed potentially worthless by multiple experts and clearly experiencing financial strains, could somehow justify a near-billion-dollar valuation. Instead of dwelling on the unpleasant realities of Viking’s oil and gas business, Camber has drawn investor attention to two recent transactions conducted by Viking with Camber funding: a license agreement with “ESG Clean Energy,” discussed in further detail below, and the acquisition of a 60.3% stake in Simson-Maxwell, described as “a leading manufacturer and supplier of industrial engines, power generation products, services and custom energy solutions.” But Viking paid just $8 million for its Simson-Maxwell shares,18 and the company has just 125 employees; it defies belief to think that this purchase was such a bargain as to make a material dent in Camber’s overvaluation. And what does Simson-Maxwell actually do? One of its key officers, Daryl Kruper (identified as its chairman in Camber’s press release), describes the company a bit less grandly and more concretely on his LinkedIn page: Simson Maxwell is a power systems specialist. The company assembles and sells generator sets, industrial engines, power control systems and switchgear. Simson Maxwell has service and parts facilities in Edmonton, Calgary, Prince George, Vancouver, Nanaimo and Terrace. The company has provided its western Canadian customers with exceptional service for over 70 years. In other words, Simson-Maxwell acts as a sort of distributor/consultant, packaging industrial- strength generators and engines manufactured by companies like GE and Mitsubishi into systems that can provide electrical power, often in remote areas in western Canada; Simson- Maxwell employees then drive around in vans maintaining and repairing these systems. There’s nothing obviously wrong with this business, but it’s small, regional (not just Canada – western Canada specifically), likely driven by an unpredictable flow of new large projects, and unlikely to garner a high standalone valuation. Indeed, buried in one of Viking’s agreements with Simson- Maxwell’s selling shareholders (see p. 23) are clauses giving Viking the right to purchase the rest of the company between July 2024 and July 2026 at a price of at least 8x trailing EBITDA and giving the selling shareholders the right to sell the rest of their shares during the same time frame at a price of at least 7x trailing EBITDA – the kind of multiples associated with sleepy industrial distributors, not fast-growing retail darlings. Since Simon-Maxwell has nothing to do with Viking’s pre-existing assets or (alleged) expertise in oil and gas, and Viking and Camber are hardly flush with cash, why did they make the purchase? We speculate that management is concerned about the combined company’s ability to maintain its listing on the NYSE American. For example, when describing its restruck merger agreement with Viking, Camber noted: Additional closing conditions to the Merger include that in the event the NYSE American determines that the Merger constitutes, or will constitute, a “back-door listing”/“reverse merger”, Camber (and its common stock) is required to qualify for initial listing on the NYSE American, pursuant to the applicable guidance and requirements of the NYSE as of the Effective Time. What does it take to qualify for initial listing on the NYSE American? There are several ways, but three require at least $4 million of positive stockholders’ equity, which Viking, the intended surviving company, doesn’t have today; another requires a market cap of greater than $75 million, which management might (quite reasonably) be concerned about achieving sustainably. That leaves a standard that requires a listed company to have $75 million in assets and revenue. With Viking running at only ~$40 million of annualized revenue, we believe management is attempting to buy up more via acquisition. In fact, if the goal is simply to “buy” GAAP revenue, the most efficient way to do it is by acquiring a stake in a low-margin, slow- growing business – little earnings power, hence a low purchase price, but plenty of revenue. And by buying a majority stake instead of the whole thing, the acquirer can further reduce the capital outlay while still being able to consolidate all of the operation’s revenue under GAAP accounting. Buying 60.3% of Simson-Maxwell seems to fit the bill, but it’s a placeholder, not a real value-creator. Camber’s Partners in the Laughable “ESG Clean Energy” Deal Have a Long History of Broken Promises and Alleged Securities Fraud The “catalyst” most commonly cited by Camber Energy bulls for the recent massive increase in the company’s stock price is an August 24th press release, “Camber Energy Secures Exclusive IP License for Patented Carbon-Capture System,” announcing that the company, via Viking, “entered into an Exclusive Intellectual Property License Agreement with ESG Clean Energy, LLC (‘ESG’) regarding ESG’s patent rights and know-how related to stationary electric power generation, including methods to utilize heat and capture carbon dioxide.” Our research suggests that the “intellectual property” in question amounts to very little: in essence, the concept of collecting the exhaust gases emitted by a natural-gas–fueled electric generator, cooling it down to distill out the water vapor, and isolating the remaining carbon dioxide. But what happens to the carbon dioxide then? The clearest answer ESG Clean Energy has given is that it “can be sold to…cannabis producers”19 to help their plants grow faster, though the vast majority of the carbon dioxide would still end up escaping into the atmosphere over time, and additional greenhouse gases would be generated in compressing and shipping this carbon dioxide to the cannabis producers, likely leading to a net worsening of carbon emissions.20 And what is Viking – which primarily extracts oil and gas from the ground, as opposed to running generators and selling electrical power – supposed to do with this technology anyway? The idea seems to be that the newly acquired Simson-Maxwell business will attempt to sell the “technology” as a value-add to customers who are buying generators in western Canada. Indeed, while Camber’s press-release headline emphasized the “exclusive” nature of the license, the license is only exclusive in Canada plus “up to twenty-five locations in the United States” – making the much vaunted deal even more trivial than it might first appear. Viking paid an upfront royalty of $1.5 million in cash in August, with additional installments of $1.5 and $2 million due by January and April 2022, respectively, for a total of $5 million. In addition, Viking “shall pay to ESG continuing royalties of not more than 15% of the net revenues of Viking generated using the Intellectual Property, with the continuing royalty percentage to be jointly determined by the parties collaboratively based on the parties’ development of realistic cashflow models resulting from initial projects utilizing the Intellectual Property, and with the parties utilizing mediation if they cannot jointly agree to the continuing royalty percentage”21 – a strangely open-ended, perhaps rushed, way of setting a royalty rate. Overall, then, Viking is paying $5 million for roughly 85% of the economics of a technology that might conceivably help “capture” CO2 emitted by electric generators in Canada (and up to 25 locations in the United States!) but then probably just re-emit it again. This is the great advance that has driven Camber to a nearly billion-dollar market cap. It’s with good reason that on ESG Clean Energy’s web site (as of early October), the list of “press releases that show that ESG Clean Energy is making waves in the distributive power industry” is blank: If the ESG Clean Energy license deal were just another trivial bit of vaporware hyped up by a promotional company and its over-eager shareholders, it would be problematic but unremarkable; things like that happen all the time. But it’s the nature and history of Camber/Viking’s counterparty in the ESG deal that truly makes the situation sublime. ESG Clean Energy is in fact an offshoot of the Scuderi Group, a family business in western Massachusetts created to develop the now deceased Carmelo Scuderi’s idea for a revolutionary new type of engine. (In a 2005 AP article entitled “Engine design draws skepticism,” an MIT professor “said the creation is almost certain to fail.”) Two of Carmelo’s children, Nick and Sal, appeared in a recent ESG Clean Energy video with Camber’s CEO, who called Sal “more of the brains behind the operation” but didn’t state his official role – interesting since documents associated with ESG Clean Energy’s recent small-scale capital raises don’t mention Sal at all. Buried in Viking’s contract with ESG Clean Energy is the following section, indicating that the patents and technology underlying the deal actually belong in the first instance to the Scuderi Group, Inc.: 2.6 Demonstration of ESG’s Exclusive License with Scuderi Group and Right to Grant Licenses in this Agreement. ESG shall provide necessary documentation to Viking which demonstrates ESG’s right to grant the licenses in this Section 2 of this Agreement. For the avoidance of doubt, ESG shall provide necessary documentation that verifies the terms and conditions of ESG’s exclusive license with the Scuderi Group, Inc., a Delaware USA corporation, having an address of 1111 Elm Street, Suite 33, West Springfield, MA 01089 USA (“Scuderi Group”), and that nothing within ESG’s exclusive license with the Scuderi Group is inconsistent with the terms of this Agreement. In fact, the ESG Clean Energy entity itself was originally called Scuderi Clean Energy but changed its name in 2019; its subsidiary ESG-H1, LLC, which presides over a long-delayed power-generation project in the small city of Holyoke, Massachusetts (discussed further below), used to be called Scuderi Holyoke Power LLC but also changed its name in 2019.22 The SEC provided a good summary of the Scuderi Group’s history in a 2013 cease-and-desist order that imposed a $100,000 civil money penalty on Sal Scuderi (emphasis added): Founded in 2002, Scuderi Group has been in the business of developing a new internal combustion engine design. Scuderi Group’s business plan is to develop, patent, and license its engine technology to automobile companies and other large engine manufacturers. Scuderi Group, which considers itself a development stage company, has not generated any revenue… …These proceedings arise out of unregistered, non-exempt stock offerings and misleading disclosures regarding the use of offering proceeds by Scuderi Group and Mr. Scuderi, the company’s president. Between 2004 and 2011, Scuderi Group sold more than $80 million worth of securities through offerings that were not registered with the Commission and did not qualify for any of the exemptions from the Securities Act’s registration requirement. The company’s private placement memoranda informed investors that Scuderi Group intended to use the proceeds from its offerings for “general corporate purposes, including working capital.” In fact, the company was making significant payments to Scuderi family members for non-corporate purposes, including, large, ad hoc bonus payments to Scuderi family employees to cover personal expenses; payments to family members who provided no services to Scuderi; loans to Scuderi family members that were undocumented, with no written interest and repayment terms; large loans to fund $20 million personal insurance policies for six of the Scuderi siblings for which the company has not been, and will not be, repaid; and personal estate planning services for the Scuderi family. Between 2008 and 2011, a period when Scuderi Group sold more than $75 million in securities despite not obtaining any revenue, Mr. Scuderi authorized more than $3.2 million in Scuderi Group spending on such purposes. …In connection with these offerings [of stock], Scuderi Group disseminated more than 3,000 PPMs [private placement memoranda] to potential investors, directly and through third parties. Scuderi Group found these potential investors by, among other things, conducting hundreds of roadshows across the U.S.; hiring a registered broker-dealer to find investors; and paying numerous intermediaries to encourage people to attend meetings that Scuderi Group arranged for potential investors. …Scuderi Group’s own documents reflect that, in total, over 90 of the company’s investors were non-accredited investors… The Scuderi Group and Sal Scuderi neither admitted nor denied the SEC’s findings but agreed to stop violating securities law. Contemporary local news coverage of the regulatory action added color to the SEC’s description of the Scuderis’ fund-raising tactics (emphasis added): Here on Long Island, folks like HVAC specialist Bill Constantine were early investors, hoping to earn a windfall from Scuderi licensing the idea to every engine manufacturer in the world. Constantine said he was familiar with the Scuderis because he worked at an Islandia company that distributed an oil-less compressor for a refrigerant recovery system designed by the family patriarch. Constantine told [Long Island Business News] he began investing in the engine in 2007, getting many of his friends and family to put their money in, too. The company held an invitation-only sales pitch at the Marriott in Islandia in February 2011. Commercial real estate broker George Tsunis said he was asked to recruit investors for the Scuderi Group, but declined after hearing the pitch. “They were talking about doing business with Volkswagen and Mercedes, but everything was on the come,” Tsunis said. “They were having a party and nobody came.” Hot on the heels of the SEC action, an individual investor who had purchased $197,000 of Scuderi Group preferred units sued the Scuderi Group as well as Sal, Nick, Deborah, Stephen, and Ruth Scuderi individually, alleging, among other things, securities fraud (e.g. “untrue statements of material fact” in offering memoranda). This case was settled out of court in 2016 after the judge reportedly “said from the bench that he was likely to grant summary judgement for [the] plaintiff. … That ruling would have clear the way for other investors in Scuderi to claim at least part of a monetary settlement.” (Two other investors filed a similar lawsuit in 2017 but had it dismissed in 2018 because they ran afoul of the statute of limitations.23) The Scuderi Group put on a brave face, saying publicly, “The company is very pleased to put the SEC matter behind it and return focus to its technology.” In fact, in December 2013, just months after the SEC news broke, the company entered into a “Cooperative Consortium Agreement” with Hino Motors, a Japanese manufacturer, creating an “engineering research group” to further develop the Scuderi engine concept. “Hino paid Scuderi an initial fee of $150,000 to join the Consortium Group, which was to be refunded if Scuderi was unable to raise the funding necessary to start the Project by the Commencement Date,” in the words of Hino’s later lawsuit.24 Sure enough, the Scuderi Group ended up canceling the project in early October 2014 “due to funding and participant issues” – but it didn’t pay back the $150,000. Hino’s lawsuit documents Stephen Scuderi’s long series of emailed excuses: 10/31/14: “I must apologize, but we are going to be a little late in our refund of the Consortium Fee of $150,000. I am sure you have been able to deduce that we have a fair amount of challenging financial problems that we are working through. I am counting on financing for our current backlog of Power Purchase Agreement (PPA) projects to provide the capital to refund the Consortium Fee. Though we are very optimistic that the financial package for our PPA projects will be completed successfully, the process is taking a little longer than I originally expected to complete (approximately 3 months longer).” 11/25/14: “I am confident that we can pay Hino back its refund by the end of January. … The reason I have been slow to respond is because I was waiting for feedback from a few large cornerstone investors that we have been negotiating with. The negotiations have been progressing very well and we are close to a comprehensive financing deal, but (as often happens) the back and forth of the negotiating process takes ” 1/12/15: “We have given a proposal to the potential high-end investors that is most interested in investing a large sum of money into Scuderi Group. That investor has done his due-diligence on our company and has communicated to us that he likes our proposal but wants to give us a counter ” 1/31/15: “The individual I spoke of last month is one of several high net worth individuals that are currently evaluating investing a significant amount of equity capital into our That particular individual has not yet responded with a counter proposal, because he wishes to complete a study on the power generation market as part of his due diligence effort first. Though we learned of the study only recently, we believe that his enthusiasm for investing in Scuderi Group remains as strong as ever and steady progress is being made with the other high net worth individuals as well. … I ask only that you be patient for a short while longer as we make every effort possible to raise the monies need[ed] to refund Hino its consortium fee.” Fed up, Hino sued instead of waiting for the next excuse – but ended up discovering that the Scuderi bank account to which it had wired the $150,000 now contained only about $64,000. Hino and the Scuderi Group then entered into a settlement in which that account balance was supposed to be immediately handed over to Hino, with the remainder plus interest to be paid back later – but Scuderi didn’t even comply with its own settlement, forcing Hino to re-initiate its lawsuit and obtain an official court judgment against Scuderi. Pursuant to that judgment, Hino formally requested an array of documents like tax returns and bank statements, but Scuderi simply ignored these requests, using the following brazen logic:25 Though as of this date, the execution has not been satisfied, Scuderi continues to operate in the ordinary course of business and reasonably expects to have money available to satisfy the execution in full in the near future. … Responding to the post- judgment discovery requests, as a practical matter, will not enable Scuderi to pay Hino any faster than can be achieved by Scuderi using all of its resources and efforts to conduct its day-to-day business operations and will only serve to impose additional and unnecessary costs on both parties. Scuderi has offered and is willing to make payments every 30 days to Hino in amounts not less than $10,000 until the execution is satisfied in full. Shortly thereafter, in March 2016, Hino dropped its case, perhaps having chosen to take the $10,000 per month rather than continue to tangle in court with the Scuderis (though we don’t know for sure). With its name tarnished by disgruntled investors and the SEC, and at least one of its bank accounts wiped out by Hino Motors, the Scuderi Group didn’t appear to have a bright future. But then, like a phoenix rising from the ashes, a new business was born: Scuderi Clean Energy, “a wholly owned subsidiary of Scuderi Group, Inc. … formed in October 2015 to market Scuderi Engine Technology to the power generation industry.” (Over time, references to the troubled “Scuderi Engine Technology” have faded away; today ESG Clean Energy is purportedly planning to use standard, off-the-shelf Caterpillar engines. And while an early press release described Scuderi Clean Energy as “a wholly owned subsidiary of Scuderi Group,” the current Scuderi/ESG Clean Energy, LLC, appears to have been created later as its own (nominally) independent entity, led by Nick Scuderi.) As the emailed excuses in the Hino dispute suggested, this pivot to “clean energy” and electric power generation had been in the works for some time, enabling Scuderi Clean Energy to hit the ground running by signing a deal with Holyoke Gas and Electric, a small utility company owned by the city of Holyoke, Massachusetts (population 38,238) in December 2015. The basic idea was that Scuderi Clean Energy would install a large natural-gas generator and associated equipment on a vacant lot and use it to supply Holyoke Gas and Electric with supplemental electric power, especially during “peak demand periods in the summer.”26 But it appears that, from day one, Holyoke had its doubts. In its 2015 annual report (p. 80), the company wrote (emphasis added): In December 2015, the Department contracted with Scuderi Clean Energy, LLC under a twenty (20) year [power purchase agreement] for a 4.375 MW [megawatt] natural gas generator. Uncertain if this project will move forward; however Department mitigated market and development risk by ensuring interconnection costs are born by other party and that rates under PPA are discounted to full wholesale energy and resulting load reduction cost savings (where and if applicable). Holyoke was right to be uncertain. Though its 2017 annual report optimistically said, “Expected Commercial Operation date is April 1, 2018” (p. 90), the 2018 annual report changed to “Expected Commercial Operation is unknown at this time” – language that had to be repeated verbatim in the 2019 and 2020 annual reports. Six years after the contract was signed, the Scuderi Clean Energy, now ESG Clean Energy, project still hasn’t produced one iota of power, let alone one dollar of revenue. What it has produced, however, is funding from retail investors, though perhaps not as much as the Scuderis could have hoped. Beginning in 2017, Scuderi Clean Energy managed to sell roughly $1.3 million27 in 5-year “TIGRcub” bonds (Top-Line Income Generation Rights Certificates) on the small online Entrex platform by advertising a 12% “minimum yield” and 16.72% “projected IRR” (based on 18.84% “revenue participation”) over a 5-year term. While we don’t know the exact terms of these bonds, we believe that, at least early on, interest payments were covered by some sort of prepaid insurance policy, while later payments depend on (so far nonexistent) revenue from the Holyoke project. But Scuderi Clean Energy had been aiming to raise $6 million to complete the project, not $1 million; indeed, this was only supposed to be the first component of a whole empire of “Scuderi power plants”28 that would require over $100 million to build but were supposedly already under contract.29 So far, however, nothing has come of these other projects, and, seemingly suffering from insufficient funding, the Holyoke effort languished. (Of course, it might have been more investor-friendly if Scuderi Clean Energy had only accepted funding on the condition that there was enough to actually complete construction.) Under the new ESG Clean Energy name, the Scuderis tried in 2019 to raise capital again, this time in the form of $5 million of preferred units marketed as a “5 year tax free Investment with 18% cash-on-cash return,” but, based on an SEC filing, it appears that the offering didn’t go well, raising just $150,000. With funding still limited and the Holyoke project far from finished, the clock is ticking: the $1.3 million of bonds will begin to mature in early 2022. It was thus fortunate that Viking came along when it did to pay ESG Clean Energy a $1.5 million upfront royalty for its incredible technology. Interestingly, ESG Clean Energy began in late 2020 to provide extremely detailed updates on its Holyoke construction progress, including items as prosaic as “Throughout the week, ESG had met with and continued to exchange numerous e-mails with our mechanical engineering firm.” With frequent references to the “very fluid environment,” the tone is unmistakably defensive. Consider the September update (emphasis not added): Reading between the lines, we believe the intended message is this: “We didn’t just take your money and run – honest! We’re working hard!” Nonetheless, someone appears to be unhappy, as indicated by the FINRA BrokerCheck report for one Eric Willer, a former employee of Fusion Analytics, which was listed as a recipient of sales compensation in connection with the Scuderi Clean Energy bond offerings. Willer may now be in hot water: a disclosure notice dated 3/31/2021 reads: “Wells Notice received as a preliminary determination to recommend disciplinary action of fraud, negligent misrepresentation, and recommendation without due diligence in the sale of bonds issued by Scuderi Holyoke,” with a further investigation still pending. We wait eagerly for additional updates. Why does the saga of the Scuderis matter? Many Camber investors seem to have convinced themselves that the ESG Clean Energy “carbon capture” IP licensed by Viking has enormous value and can plausibly justify hundreds of millions of dollars of incremental market cap. As we explained above, we find this thoroughly implausible even without getting into Scuderi family history: in the end, the “technology” will at best add a smidgen of value to some generators in Canada. But track records matter too, and the Scuderi track record of failed R&D, delays, excuses, and alleged misuse of funds is worth considering. These people have spent six years trying and failing to sell power to a single municipally owned utility company in a single small city in western Massachusetts. Are they really about to end climate change? The Case of the Fictitious CFO Since Camber is effectively a bet on Viking, and Viking, in its current form, has been assembled by James Doris, it’s important to assess Doris’s probity and good judgment. In that connection, it’s noteworthy that, from December 2014 to July 2016, at the very start of Doris’s reign as Viking’s CEO and president, the company’s CFO, Guangfang “Cecile” Yang, was apparently fictitious. (Covering the case in 2019, Dealbreaker used the headline “Possibly Imaginary CFO Grounds For Very Real Fraud Lawsuit.”) This strange situation was brought to light by an SEC lawsuit against Viking’s founder, Tom Simeo; just last month, a US district court granted summary judgment in favor of the SEC against Simeo, but Simeo’s penalties have yet to be determined.30 The court’s opinion provided a good overview of the facts (references omitted, emphasis added): In 2013, Simeo hired Yang, who lives in Shanghai, China, to be Viking’s CFO. Yang served in that position until she purportedly resigned in July 2016. When Yang joined the company, Simeo fabricated a standing resignation letter, in which Yang purported to “irrevocably” resign her position with Viking “at any time desired by the Company” and “[u]pon notification that the Company accepted [her] resignation”…Simeo forged Yang’s signature on this document. This letter allowed Simeo to remove Yang from the position of CFO whenever he pleased. Simeo also fabricated a power of attorney purportedly signed by Yang that allowed Simeo to “affix Yang’s signature to any and all documents,” including documents that Viking had to file with the SEC. Viking represented to the public that Yang was the company’s CFO and a member of its Board of Directors. But “Yang never actually functioned as Viking’s CFO.” She “was not involved in the financial and strategic decisions” of Viking during the Relevant Period. Nor did she play any role in “preparing Viking’s financial statements or public filings.” Indeed, at least as of April 3, 2015, Yang did not do “any work” on Viking’s financial statements and did not speak with anyone who was preparing them. She also did not “review or evaluate Viking’s internal controls over financial reporting.” Further, during most or all of the Relevant Period, Viking did not compensate Yang despite the fact that she was the company’s highest ranking financial employee. Nevertheless, Simeo says that he personally paid her in cash. Yang’s “sole point of contact” at Viking was Simeo. Indeed Simeo was “the only person at Viking who communicated with Yang.” Thus many people at Viking never interacted with Yang. Despite the fact that Doris has served as Viking’s CEO since December 2014, he “has never met or spoken to Yang either in person or through any other means, and he has never communicated with Yang in writing.” … To think Yang served as CFO during this time, but the CEO and other individuals involved with Viking’s SEC filings never once spoke with her, strains all logical credulity. It remains unclear whether Yang is even a real person. When the SEC asked Simeo directly (“Is it the case that you made up the existence of Ms. Yang?”) he responded by “invoking the Fifth Amendment.”31 While the SEC’s efforts thus far have focused on Simeo, the case clearly raises the question of what Doris knew and when he knew it. Indeed, though many of the required Sarbanes-Oxley certifications of Viking’s financial statements during the Yang period were signed by Simeo in his role as chairman, Doris did personally sign off on an amended 2015 10-K that refers to Yang as CFO through July 2016 and includes her complete, apparently fictitious, biography. Viking has also disclosed the following, which we believe pertains to the Yang affair (emphasis added): In April of 2019, the staff (the “Staff”) of the SEC’s Division of Enforcement notified the Company that the Staff had made a preliminary determination to recommend that the SEC file an enforcement action against the Company, as well as against its CEO and its CFO, for alleged violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder [laws that pertain to securities fraud] during the period from early 2014 through late 2016. The Staff’s notice is not a formal allegation or a finding of wrongdoing by the Company, and the Company has communicated with the Staff regarding its preliminary determination. The Company believes it has adequate defenses and intends to vigorously defend any enforcement action that may be initiated by the SEC.32 Perhaps the SEC has moved on from this matter and will let Doris and Viking off the hook, but the fact pattern is eyebrow-raising nonetheless. A similarly troubling incident came soon after the time of Yang’s “resignation,” when Viking’s auditing firm resigned, withdrew its recent audit report, and wrote a letter “advising the Company that it believed an illegal act may have occurred” – because of concerns that had nothing to do with Yang. First, Viking accounted for the timing of a grant of shares to a consultant in apparent contradiction of the terms of the written agreement with the consultant – a seemingly minor issue. But, under scrutiny from the auditor, Viking “produced a letter… (the version which was provided to us was unsigned), from the consultant stating that the Agreement was invalidated verbally.” Reading between the lines, the “uncomfortable” auditor suspected that this letter was a fake, created just to get him off Viking’s back. In another incident, the auditor “became aware that seven of the company’s loans…were due to be repaid” in August 2016 but hadn’t been, creating a default that would in turn “trigger[] a cross-default clause contained in 17 additional loans” – but Viking claimed it “had secured an oral extension to the loans from the broker-dealer representing the lenders by September 6, 2016” – after the loans’ maturity dates – “so the Company did not need to disclose ‘the defaults under these loans’ after such time since the loans were not in default.” It’s easy to see why an auditor would object to this attitude toward financial disclosure – no need to mention a default in August as long as you can secure a verbal agreement resolving it by September! Against this backdrop of disturbing behavior, the fact that Camber just dismissed its auditing firm three weeks ago on September 16th, even with delisting looming if the company can’t become current again with its SEC filings by November, seems even more unsettling. Have Camber and Viking management earned investors’ trust? Conclusion It’s not clear why, back in 2017, Lucas Energy changed its name to “Camber” specifically, but we’d like to think the inspiration was England’s Camber Castle. According to Atlas Obscura, the castle was supposed to help defend the English coast, but it took so long to build that its “advanced design was obsolete by the time of its completion,” and changes in the local environment meant that “the sea had receded so far that cannons fired from the fort would no longer be able to reach any invading ships.” Still, the useless castle was “manned and serviced” for nearly a century before being officially decommissioned. Today, Camber “lies derelict and almost unheard of.” But what’s in a name? Article by Kerrisdale Capital Management Updated on Oct 5, 2021, 12:06 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 5th, 2021

Futures Rebound As Energy Prices Soar

Futures Rebound As Energy Prices Soar US equity futures and European markets rebounded from a tech rout on Monday that was triggered by fears of soaring energy costs, stagflation, tech overvaluation and escalating Chinese property distress even as Asian shares tracked Monday's broad Wall Street sell-off to weaken for a third straight session. The dollar rose and yields rebounded back ato 1.50% as the rise in oil continued, pushing Brent above $82/bbl. At of 7:15am ET, S&P futures were up 16.25 points, or 0.38%, to 4,307; Dow futs were up 116 points and Nasdaq futures rose 47.25 points as technology shares bounced in Europe. Bitcoin jumped above $50,000 for the first time since Sept 7. The “market correction, initially sparked by tapering expectations and China’s property sector worries, is now being driven by record energy prices as well as lingering political uncertainties in the U.S. about the crucial question of the debt ceiling,” said Pierre Veyret, a technical analyst at ActivTrades. “Markets are likely to stay volatile this week and with no clear direction until there is significant progress on the existing concerns.” Additionally, the recent calm in global markets which hit an all time high as recently as a few weeks ago, has been shattered by a growing wall of worry spanning a debt crisis in China, elevated inflation on the back of commodity supply shocks, fading economic recovery and U.S. political bickering. Meanwhile, investors brace for a tapering of stimulus by the Federal Reserve. Nerves eased on Tuesday, however, led by a tech rebound following Monday's Facebook-led rout, and big bank stocks were higher in premarket trading as 10-year Treasury yields climbed to about 1.5% led again by breakevens as oil not only held onto recent impressive gains - along with most other commodities after a gauge of commodities soared to an all-time record - but Brent rose above $82 . As to the insanity in Europe's gas sector, European natural gas contracts soared on Tuesday to an unprecedented 111.70 euros per megawatt-hour, compared with 15.49 euros in February. The continent is bracing for a winter crunch in energy supply, with German front-month power contracts also jumping to record levels. Global shortages of gas and coal are pushing energy prices higher, disrupting markets from the U.K. to China, as economies emerge from the pandemic. Surging costs are threatening to raise inflation and starting to weigh onindustrial production, with some companies in Europe forced to cut output. “The fiercely nervous sentiment on the market continues due to fears of reduced supply during the winter,” trader Energi Danmark wrote in a note Tuesday. “Everything looks set for another week of price climbs.” In U.S. premarket trading, Facebook found dip buyers in premarket trading after a 4.9% plunge on Monday amid an hours-long service disruption. The stock added 1.6% in the early New York session. Lordstown Motors shares declined as much as 4.6% after the electric vehicle automaker was downgraded to underweight by Morgan Stanley, while the PT was also cut to $2 from $8. Uphealth fell after pricing its share offering at a discount. And Facebook was up 1.5% following Monday’s slump after it blamed a global service outage that kept its social media apps offline for much of yesterday on a problem with its network configuration. Here are some other notable premarket movers: Amplify Energy (AMPY US) rises 10% in U.S. premarket trading, paring some of Monday’s 44% plunge tied to an oil spill from a California offshore pipeline operated by the company Comtech Telecom (CMTL US) slid more than 7% Monday postmarket after it reported adjusted earnings below average analyst estimates It is “the period of a multiplicity of shocks percolating through the financial markets leaving them in the fog, with many watching from the sidelines for clarity,” Sebastien Galy, a senior macro strategist at Nordea Invetsment, wrote in a note. The technology subgroup in Europe’s benchmark Stoxx 600 advanced for the first time in eight days. European natural-gas contracts jumped as much as 16% and West Texas Intermediate crude headed for a seven-year high. Earlier in the session, MSCI's broadest index of Asia-Pacific shares outside Japan dropped as much as 1.3%, declining for a third consecutive session. Japan stocks were down 2.5%, South Korea gave up 2% and Australia shed 0.4%. The drop in markets took MSCI's main benchmark to 619.77, the lowest since November 2020 but it pared losses to be down 0.6% in late Asia trade. The index has shed more than 5% this year, with Hong Kong and Japanese markets among the big losers. "Investors are clearly worried about inflation due to supply chain disruptions and the rally in energy prices," said Vasu Menon, executive  director of investment strategy at OCBC Bank.  "We have seen tech stocks outperform value stocks, so if inflation remains a worry, then tech stocks tend to get hit," Menon said. In rates, Treasuries were under pressure with yields near session highs, cheaper by up to 2.5bp across belly of the curve. Yields rose not only on the continued surge in commodities, but about the total chaos over the debt ceiling D-Date which will be hit in two weeks. Gilts lag amid bond auctions, adding to upside pressure on yields, while S&P 500 futures pare about a third of Monday’s 1.3% slide. The RBA kept monetary policy unchanged as expected.  In FX, the dollar rose against most Group-of-10 currencies near a one-year high versus major peers ahead of key U.S. payrolls data due at the end of the week; the pound bucked the trend, advancing for a fourth session. The euro fell 0.25% to $1.1592, while the yen rose 0.29% to $111.18. Leveraged funds sold the kiwi aggressively after a New Zealand business survey showed weak third-quarter economic sentiment.  Sentiment on the euro over the next year reached its most bearish since June 2020 on Friday amid a widening policy divergence between the Federal Reserve and the European Central Bank. In commodities, oil prices reached a three-year high on Monday (and continued higher on Tuesday) after OPEC+ confirmed it would stick to its current output policy as demand for petroleum products rebounds, despite pressure from some countries for a bigger boost to production. Underscoring the rise in commodity prices, the Refinitiv/CoreCommodity CRB index rose to 233.08 on Monday, the highest in more than six years. U.S. oil rose 1.15% to $78.51 a barrel, a day after hitting its highest since 2014. Brent crude stood at $82.2 after rising to a three-year top. Gold prices eased to $1,757 per ounce, after rising on Monday to the highest since Sept. 23. "OPEC+ may inadvertently cause oil prices to surge even higher, adding to an energy crisis that primarily reflects very tight gas and coal markets," said Commonwealth Bank of Australia's commodities analyst Vivek Dhar. "That potentially threatens the global economic recovery, just as global oil demand growth is picking up as economies re‑open on the back of rising vaccination rates," Dhar said in a note. Traders are now turning their attention to Friday’s nonfarm-payrolls data to gauge the timing of the Fed’s taper. In the latest Fed comments, St. Louis President James Bullard said elevated price pressures may be changing the mentality of businesses and consumers by making them more accustomed to higher inflation. Australia’s central bank kept its monetary settings unchanged. Looking at the day ahead now, the main data highlight will be the services and composite PMIs for September from around the world. We’ll also get the Euro Area PPI reading for August, and from the US there’s the August trade balance and the September ISM Services index. Otherwise, central bank speakers include ECB President Lagarde, the ECB’s Holzmann, and the Fed’s Quarles. Market Snapshot S&P 500 futures up 0.2% to 4,301.00 STOXX Europe 600 up 0.4% to 452.37 MXAP down 0.7% to 192.58 MXAPJ down 0.3% to 626.41 Nikkei down 2.2% to 27,822.12 Topix down 1.3% to 1,947.75 Hang Seng Index up 0.3% to 24,104.15 Shanghai Composite up 0.9% to 3,568.17 Sensex up 0.4% to 59,531.35 Australia S&P/ASX 200 down 0.4% to 7,248.36 Kospi down 1.9% to 2,962.17 Brent Futures up 0.7% to $81.86/bbl Gold spot down 0.6% to $1,758.11 U.S. Dollar Index up 0.15% to 93.92 German 10Y yield fell 1.2 bps to -0.225% Euro down 0.2% to $1.1603 Top Overnight News from Bloomberg China’s heavily leveraged property firms saw their stocks and bonds tumble after a failure by developer Fantasia Holdings Group Co. to repay notes deepened investor concerns about the sector’s outlook A steep surge in inflation in the euro area has started to take its toll on the economy, according to a survey by IHS Markit China will strictly prevent bank and insurance funds from being used in speculating commodities in a push to maintain market order and stabilize prices The Federal Reserve said that its internal watchdog plans to open an investigation into trading activity by senior U.S. central bank officials, following revelations about transactions in 2020 Facebook Inc. blamed a global service outage that kept its social media apps offline for much of Monday on a problem with its network configuration, adding that it found no evidence that user data was compromised during the downtime A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were pressured following the tech sell-off in the US and amid several headwinds for global markets including US-China trade frictions, China's record incursion into Taiwanese airspace and with higher oil prices stoking inflationary concerns. ASX 200 (-0.6%) was dragged lower after the losses in tech rolled over into the region and following somewhat mixed Trade and PMI data releases, but with downside stemmed by resilience in gold miners and the energy sector, after gains in the underlying commodity prices including the rally in oil to a seven-year high. Nikkei 225 (-2.2%) slumped below the 28k level and briefly entered into correction territory as it suffered intraday losses of as much as 3% and with index heavyweights Fast Retailing and SoftBank dominating the list of worst performers, while KOSPI (-1.9%) also fell into a correction with the index at least 10% below the record highs registered earlier this year despite efforts by South Korea’s antitrust regulator to dispel fears of a harsh tech crackdown. Hang Seng (+0.3%) was pressured at the open amid tech woes and default fears after reports that Fantasia Holdings missed payments due yesterday for USD 206mln of bonds, although the Hong Kong benchmark then pared its losses with notable strength seen in Chinese oil majors as they benefit from the rising energy prices. Finally, 10yr JGBs were initially kept afloat by the risk aversion but then reversed course amid the uninspired mood in T-notes and Bund futures, as well as weaker metrics from the 10yr JGB auction which attracted a lower bid to cover despite a decline in accepted prices. Top Asian News Gold Drops After Three-Day Gain as Yields and Dollar Push Higher ‘Kishida Shock’ Hits Japan Markets Wary of Redistribution Plan China Orders Banks to Ramp Up Funding to Boost Coal Output S.Korea’s NPS Could Lose $3.5m From Evergrande Stock Investment European equities (Euro Stoxx 50 +0.9%; Stoxx 600 +0.7%) have extended on the marginal gains seen at the open as indices attempt to claw back some of yesterday’s losses. Incremental macro newsflow since the close has not provided much cause for optimism and therefore it remains to be seen how durable any recovery will be. Overnight, the APAC session was mostly downbeat as the region contended with the negative US lead, ongoing US-China trade frictions, China's record incursion into Taiwanese airspace and higher oil prices stoking inflationary concern. Final PMIs for the Eurozone saw the composite revised very modestly higher to 56.02 from 56.1 with IHS Markit noting “the current economic situation in the eurozone is an unwelcome mix of rising price pressures but slower growth”. Stateside, futures are exhibiting gains of a similar magnitude to their European counterparts with the ES +0.2% and no real discernible theme across the US majors as traders await further progress in Washington. Sectors in Europe are mostly higher with clear outperformance in banking names with JP Morgan bullish on the sector; Credit Agricole sits at the top of the CAC after launching a new EUR 500mln share repurchase scheme. To the downside, laggards include Construction & Materials and Autos. Individual movers include Greggs (+8.7%) at the top of the Stoxx 600 after raising its profit outlook for the FY despite concerns over supply chain disruptions and staffing issues. Elsewhere, Infineon (+2.8%) has provided some support for the IT sector after confirming its FY 21 forecasts and being confident about the FY22 outlook. Finally, Melrose (-2.2%) is a notable laggard after the Co. cautioned on the fallout of the global chip shortage which has prompted a surge in client cancellations. Top European News European Banks Have Upside on Capital Returns, Yields, JPM Says Romania Edges Toward First Rate Hike Since 2018: Decision Guide Romania Approves Partial Compensation for Higher Energy Costs Morgan Stanley Expands Diversity-Focused ‘Shark Tank’ to Europe In FX, the broader Dollar and index remain firmer on the session, with the latter on either side of 94.000 from a 93.804 overnight base, but still within yesterday’s 93.675-94.104 range which marks the first immediate points of support/resistance. State-side, US President Biden spoke with 12 progressive members of Congress in which they agreed to follow through on key priorities, while it was also reported that President Biden told House progressives the spending package needs to be between USD 1.9tln-2.2tln. Biden will meet with moderate House Democrats virtually today. It is also worth keeping an eye on the Fed’s review of trading activities which could lead to a shift in the balance between hawks and doves, following the parting of hawks Rosengren (2022 voter) and Kaplan (2023 voter), who were set to be voters during the projected rate hike period. Ahead, the US ISM Services PMI will likely be the focal point from a state-side data standpoint. EUR, GBP - The EUR and GBP continue to diverge. Sterling extends on earlier gains, seemingly a function of the EUR/GBP cross topping out just before its 50 DMA (0.8546) before taking out yesterday’s 0.8529 low on its way towards 0.8500. The Sterling strength has helped Cable regain 1.3600+ status from a 1.3585 low. EUR/USD meanders around 1.1600 in a relatively narrow 1.1591-1.1622 current intraday band – with yesterday’s low at 1.1586 ahead of the 200 WMA at 1.1572. Europe saw the release of final Services and Composite PMIs, which continue to highlight the theme of rising prices and spillover into demand. AUD, NZD, CAD - he non-US Dollars see mild losses but trade off worst levels as the Dollar recedes and as market sentiment holds an upside bias. The AUD/NZD cross meanwhile remains in focus amid this week’s RBA/RBNZ central bank standoff. The RBA overnight provided no surprises and did not contain any significant new observations, with the currency experiencing choppiness upon the release. The RBNZ, meanwhile, is poised for a 25bps OCR hike at its announcement at 02:00BST/21:00EDT tomorrow. The AUD/NZD cross resides around session lows near 1.0455, whilst OpEx sees some AUD 2.1bln at strike 1.0410. The Loonie sees an underlying bid from crude prices, with USD/CAD back under its 50 DMA at 1.2600 ahead of Canadian trade data. JPY, CHF - The traditional havens are at the foot of the G10 bunch in what is seemingly a risk-influenced move. USD/JPY within a tight 110.88-111.25 band vs yesterday’s 110.50-112.07 range. USD/CHF, meanwhile, has popped above its 21 DMA (0.9250) and trades towards the top of its current 0.9238-70 parameter. In commodities, WTI and Brent front month futures are choppy but ultimately hold an upside bias in the aftermath of the OPEC+ meeting yesterday. Nonetheless, the benchmarks remain near yesterday’s highs which saw Brent Dec test USD 82.00/bbl to the upside. Brent resides around USD 81.50/bbl at the time of writing whilst WTI Nov hovers just under USD 78/bbl. With OPEC out of the way and until the next meeting, traders will be eyeing developments (if any) regarding the Iranian nuclear talks, alongside the electricity situation in China. Furthermore, traders must be cognizant of potential intervention by governments in a bid to control rising energy prices. As a reminder, the White House held talks with Saudi counterparts before the recent OPEC+ meeting and expressed concern on prices. Aside from that, news flow for the complex has been light during the European morning. Elsewhere, precious metals are softer on the day but spot gold and silver trade off worst levels with the yellow metal still holding into USD 1,750/oz-status and spot silver back above USD 22.50/oz. Over to base metals, LME copper remains pressured in what seems to be a continuation of the lacklustre trade seen during APAC hours amid a lack of demand as China remains on holiday. US Trade Calendar 8:30am: Aug. Trade Balance, est. -$70.8b, prior -$70.1b 9:45am: Sept. Markit US Composite PMI, prior 54.5 9:45am: Sept. Markit US Services PMI, est. 54.4, prior 54.4 10am: Sept. ISM Services Index, est. 59.8, prior 61.7 DB's Jim Reid concludes the overnight wrap I’m hoping you all survived without WhatsApp, Instagram and Facebook yesterday after the outage. We actually had to resort to a conversation over dinner last night. It was a bit weird without hearing pings go off every few minutes. Once the conversation dried up we went on Twitter and then watched Netflix so it wasn’t a total disaster for US tech in our household. Oh and I’m writing this on my iPad while looking up a few things on Google. Tech led the sell-off last night that stretched to both equities and bonds. One of the noticeable features of the recent weakness in equities is that bonds have struggled to rally. This hints at technicals being nowhere near as strong as they were in the summer and also a realisation that bonds aren’t a great haven if the sell-off is partly inflation related. By the close of trade yesterday, the S&P 500 had shed another -1.30%, making it the 3rd time in the last 5 sessions that the index has lost more than 1%, with the latest move now taking it -5.21% beneath its all-time closing high back in early September. However, unlike some of the other declines of the last month, which have been quite obviously connected to a particular concern like Evergrande or the impact of higher yields, the latest selloff looks to be coming from a more generalised set of concerns, with those worries given a fresh impetus by yet another rise in energy prices yesterday as oil hit multi-year highs. In turn, that spike in energy prices has led to renewed fears about inflation accelerating even further than current forecasts are implying, with knock-on implications for central banks and the amount of monetary stimulus we can expect over the coming months. We’ll start with those moves in energy given the effects they had elsewhere. Yesterday saw Brent Crude oil prices (+2.50%) close above $81/bbl for the first time in nearly 3 years, and this morning it’s up another +0.42%. On top of that, WTI (+2.29%) oil prices hit a 6-year high of its own at $77.62/bbl, which saw its YTD gains rise above +60%. The latest advance for oil has come as the OPEC+ group agreed yesterday that they’d stick to their planned output hike of +400k barrels per day in November, in spite of some speculation that there could be a larger increase in supply. However, it wasn’t just oil moving higher, with European natural gas prices (+2.07%) taking another leg up after their recent surge, which leaves them just shy of their recent peak last Thursday. And what’s also concerning from an inflationary standpoint is that the moves in commodities were broader than simply energy, with metals including copper (+1.17%) seeing sizeable gains as well. Overall, that meant Bloomberg’s Commodity Spot Index (+1.12%) finally exceeded its 2011 high yesterday, and brings the index’s gains since the post-pandemic low in March 2020 to +94.7%. Against this backdrop, equities took another tumble as the major indices on both sides of the Atlantic moved lower, including the S&P 500 (-1.30%) and Europe’s STOXX 600 (-0.47%). Tech stocks saw the brunt of the declines, with the NASDAQ down -2.14% and the FANG+ index down -3.00%, while Europe’s STOXX Technology Index (-2.39%) fell for a 7th consecutive session. Facebook was one of the bigger laggards yesterday as it fell -4.89% - its worst day since November 2020. The company is dealing with whistleblower allegations that their internal research doesn’t match what executives have been saying about the effect the social media company has on its users. The equal weight S&P 500 was only down -0.63% so the big tech stocks definitely led the way. European equities were less affected than their US counterparts however, having missed out on Friday’s late US equity rally following the European close, with the DAX (-0.79%), the CAC 40 (-0.61%) and the FTSE 100 (-0.23%) all seeing declines of less than 1%. A lower tech weighting probably also helped. Those concerns about stagflation represented further bad news for sovereign bonds yesterday, as investors moved to upgrade their expectations of future inflation. In Europe, 10yr German breakevens were up by +2.0bps to an 8-year high of 1.72%, while their Italian counterparts hit their highest level in over a decade, at 1.63%. Meanwhile in the US, 10yr breakevens were also up +1.3bps to 2.39%. Those moves in inflation expectations supported higher yields, with those on 10yr Treasuries up +1.7bps to 1.479% by the close of trade, as yields on bunds (+1.0bps), OATs (+1.3bps) and BTPs (+1.8bps) similarly moved higher. Overnight in Asia, equities have mostly followed the US lower, with the Nikkei (-2.77%), KOSPI (-1.71%), and Australia’s ASX 200 (-0.74%) all losing ground, though the Hang Seng (+0.20%) has recovered slightly thanks to energy stocks, and S&P 500 futures (+0.13%) are also pointing to a modest recovery. Those declines for the Nikkei and the KOSPI leave them just shy of a 10% correction from their recent peaks. In terms of the latest on Evergrande, there are signs that risks are spreading to other property developers, as China’s Fantasia Holdings missed a repayment worth $205.7m on a bond that matured Monday. Unsurprisingly, the developments are continuing to affect China’s HY dollar bond prices, with a Bloomberg index now down by -14.3% since its high back in May. Elsewhere in Asia, we got confirmation shortly after we went to press yesterday from new Japanese PM Fumio Kishida that there’d be a general election on October 31. Interestingly, that will actually be the 3rd general election in a G7 economy in the space of just six weeks, following the votes in Canada and Germany in late September. Back to the US, and Treasury Secretary Yellen’s estimated deadline to raise the debt ceiling – 18 Oct – is now under 2 weeks away, and during a press conference yesterday President Biden called on Republicans to join with Democrats to raise the debt limit, arguing that over a quarter of the US debt was accumulated during the Trump administration and that it should not be tied to “any new spending being considered. It has nothing to do with my plan for infrastructure or building back better, zero.” Senate Majority Leader Schumer plans to hold a vote this week to lift the debt ceiling, though Republicans are set to block the legislation and are forcing Democrats to use the partisan budget reconciliation process that is currently the vehicle of the Biden “Build Back Better” plan. Whilst time was running out to deal with the debt ceiling, President Biden also met with progressive House Democrats yesterday to discuss the budget reconciliation package and about potentially limiting the scope of the bill that makes up much of the President’s economic agenda. Press Secretary Psaki said that there is a “recognition that this package is going to be smaller than originally proposed,” but that the President is looking to get it across the goal line. Initial estimates could see the final package closer to $2 trillion over 10 years versus the current $3.5 trillion plans. Meanwhile on trade, the Biden administration also announced yesterday that they would hold direct talks with Chinese officials in the coming week seeking to enforce prior commitments and start fresh talks to exclude some goods from US tariffs. US Trade Representative Katherine Tai will meet with Chinese Vice Premier Liu He, and is expected to focus on how to add and adjust to the Trump administration’s most recent deal with the Chinese government rather than starting from scratch. There wasn’t much in the way of data yesterday, though US factory orders in August rose by +1.2% (vs. +1.0% expected), and the previous month’s growth was revised up to +0.7% (vs. +0.4% previously). To the day ahead now, and the main data highlight will be the services and composite PMIs for September from around the world. We’ll also get the Euro Area PPI reading for August, and from the US there’s the August trade balance and the September ISM Services index. Otherwise, central bank speakers include ECB President Lagarde, the ECB’s Holzmann, and the Fed’s Quarles. Tyler Durden Tue, 10/05/2021 - 07:45.....»»

Category: blogSource: zerohedgeOct 5th, 2021