November 1 – 6 2021Where have we been and where are we going? Join our weekly market thread on Traders Community…
FEAR NOT Brave Investors
Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.
Record Highs, Fed and Jobs
The Week That Was – What Lies Ahead?Editorial
Another week of no fear for US stock markets, risk on is oblivious to cracks appearing. The major indices all closed at record levels to end the month of October. S&P and NASDAQ posted their best month since November 2020. Tesla’s market capitalization surpassed $1.1 TN this week, the first junk-rated company with a trillion-dollar valuation. Now the richest individual in the world, Elon Musk’s wealth this week reached a staggering $300 billion. The Dow and S&P were higher for the fourth straight week. All 11 S&P sectors higher for October. You would think all is golden, but we had tech monsters Amazon and Apple both miss earnings.
Mortgage rates rose to an 8-month high. The average 30-year fixed-rate mortgages increased to 3.30% from 3.23%. Refinance share of mortgage activity decreased. Over in China, while Evergrande may have made another payment the property market is collapsing all around. The Brazilian central bank raised rates again, Bank of Canada brought QE buying down to zero and inflation reports globally surged. The yield on the ten-year Australian government bond pushed through 2 per cent for the first time since March 2019.
Energy constraints tighten, meanwhile world leaders fly over in private jets to tell us the whole problem is climate change. Clearly a massive distraction play from the Covid lockdown and vaccination disasters, the inflation crushing everyone and the global supply shortage brought on by shocking leadership foresight from governments and many corprorate. There is an excuse born every minute in this current climate. Sadly there is still a sucker born every minute also!Extra focus was on the big technology earnings ahead this week from Apple, Amazon, Alphabet and Microsoft being among the 30% of the S&P 500 companies who reported earnings in the week ahead. We also had Facebook and Twitter, which report in the week ahead. A mixed bag with MSFT top of the class and AMZN bottom. A key guage of Commodities prices, Bloomberg Commodity Spot Index. which tracks 23 energy, metals and crop futures contracts continued to surge higher over record highs set in 2011. Incredibly since hitting a four-year low in March 2020 the index has surged more than 90%. Inflation is transitory we are led to believe. How much are energy prices up? Well we got a hint from Australia’s trade balance for August which revealed a massive surplus of AUD15,077 million (expected surplus AUD10,650 million a record high. Exports climbed 4.1% in the month to A$48.5 billion led by LNG, hard coking coal and thermal coal. Imports fell 1.5% in August to A$33.4 billion Taper is the buzz word, but a reminder it is a taper of a massive $120 billion in monthly bond purchases that have supported the recovery. In plain English there will be still huge amounts of bond purchases. Valuations defy gravity, the S&P 500’s price-to-earnings ratio on a forward 12-month basis stands at 21.3, a 35% premium to its 20-year average, according to Refinitiv Datastream. The discount of risk continues; “Private equity firms are offering the highest premiums for listed companies in more than two decades, paying almost 70% above the prior share price in some cases, in a sign of the widening gap between cash-rich buyout groups and public market investors. Buyout groups paid an average premium of 45% for European companies in 2021, the highest since the data company Refinitiv’s records began in 1980. In the US, the premiums hit 42% this year, the highest since 1999.” Financial Times In Fed Chair Powell’s Jackson Hole speech he feels substantial further progress has been met on inflation but not yet employment, which suggested tapering will start later this year and is data dependant. Powell also differentiates tapering criteria from rate-hike criteria.
Some sage advice from your parents, “Know what’s under your hood, not what they tell you, learn to drive a manual first before driving an automatic”Powell is struggling to justify ongoing historic monetary inflation as transitory with intense inflationary moves abound. Perhaps with so many destroyed economically and living on the breadline the Fed is well away they are surviving at best and aware such lack of demand will become deflationary as supplies normalise. Public confidence is eroding sharply with the US Administration and the Fed seems to be the last hope for many. What happened if the insular American masses gather what is unfolding globally?
ETF Market ManiaThis is a market like no other with more wide spread participation than at any time in history ETFGI reported om September 10 that inflows into exchange traded funds are above 2020’s record total globally. Worldwide net investor inflows reached $834.2bn at the end of August, already surpassing the last year’s total of $762.8bn. Global assets held in ETFs have soared to $9.7tn, more than double the $4.8tn managed in the funds and products at the end of 2018. The bulk of the $9tn exchange traded funds industry consists of plain vanilla index trackers focused on mainstream assets. However higher risk such as Cryptocurrency ETFs have taken off in non US other jurisdictions including Canada, Switzerland, Germany and Jersey. Total assets in these funds tripled from $3bn at the end of last year to $9bn as of June. The sums committed to leveraged and inverse exchange traded products,designed to amplify gains from market rises or conversely profit from falling asset prices has risen from $79bn at the end of 2019 to a record $109bn, ETFGI reported
The three credit events that have our attention remain our key watches.Inflation U.S. high-yield spreads (to Treasuries) and CDS have also turned more closely correlated to Chinese Credit developments. The New York Fed’s one-year inflation expectations reading rose to 5.3%, the high for data going back eight years. Excluding the summer of 2008, the University of Michigan one-year consumer inflation expectations (4.8%) were the highest since 1982. The five-year Treasury “break even” inflation rate this week jumped 15 bps (23bps in two weeks!), surpassing 2.9% for the first time in at least two decades. Ignoring May, June and July 2008, consumer inflation expectations have not been higher since 1982. It’s worth noting that 10-year Treasury yields traded up to 4.25% in the summer of 2008, were above 4.6% in November 2005, and sat at 14% in June 1982. The second the world’s most indebted developer, China Evergrande Group shares and bonds. Evergrande has over $300 billion of debt. Creditors are banks and non-bank financial institutions, domestic and international bond holders, suppliers and apartment buyers. It has bank borrowings of $90 billion, including from Agricultural Bank of China, China Minsheng Banking Corp and China CITIC Bank Corp (reports have 128 banks with exposure). Thousands of suppliers are owed around $100 billion. Evergrande and the faltering apartment Bubble remain a clear danger. Acute instability for bonds of a sector that, according to Nomura analysts, has accumulated a frightening $5 TN of debt. October 15 – CNN (Michelle Toh): “Evergrande’s unraveling is still commanding global attention, but its troubles are part of a much bigger problem. For weeks, the ailing Chinese real estate conglomerate has made headlines as investors wait to see what will happen to its enormous mountain of debt. As the slow-moving crisis unfolds, analysts are pointing to a deeper underlying issue: China’s property market is cooling off after years of oversupply… Mark Williams, chief Asia economist at Capital Economics, estimates that China still has about 30 million unsold properties, which could house 80 million people… On top of that, about 100 million properties have likely been bought but not occupied, which could accommodate roughly 260 million people, according to Capital Economics estimates. Such projects have attracted scrutiny for years, and even been dubbed China’s ‘ghost towns.’” . After trading to 75% earlier in the week, Evergrande bond yields dropped to 67.4% after holding default at bay. An index of Chinese high-yield dollar bond yields dropped from 20% to 17.8%, after beginning September at 12%. China’s sovereign CDS fell from 49 to 46.5 bps, with most Chinese bank CDS also declining moderately. The third is massive monetary inflation, the Fed’s Q2 2021 Z.1 “flow of funds” report. Treasury borrowings continue to command system Credit growth. Outstanding Treasuries gained nominal $359 billion during Q2 to a record $24.302 TN. Treasuries surged $6.487 TN, or 36%, over the past two years. Treasuries to GDP slipped slightly during the quarter to 107%. This ratio ended 2007 at 41% and was up to 87% prior to the pandemic. Agency (GSE) Securities gained another $181 billion during the quarter to a record $10.408 TN. At $663 billion, one-year growth was the strongest since 2007. Agency Securities jumped $1.144 TN over the past two years. Combined Treasury and Agency Securities swelled an unparalleled $7.631 TN over two years to a record $34,709 TN (153% of GDP). Total Mortgage borrowings rose $308 billion during the quarter, more than double Q2 2020 growth to the largest increase since Q3 2006 ($343bn). Home Mortgages rose $238 billion during Q2 (strongest since Q3 ’06) and $687 billion for the year (largest since 2006). Household Assets jumped $6.196 TN, or 16.2% annualize, during Q2 to a record $159.342 TN. Household Assets inflated $24.269 TN over the past year. Household Liabilities rose $347 billion during the quarter to $17.674 TN, the strongest growth since Q1 2006. Liabilities were up $1.093 TN over four quarters, the strongest annual growth since 2006. After last week’s FOMC it’s worth reminding ourselves of this insight from the The Economic Affairs Committee of the U.K.’s House of Lords report, “Quantitative Easing: A Dangerous Addiction?” “No central bank has managed successfully to reverse quantitative easing over the medium to long term. In practice, central banks have engaged in quantitative easing in response to adverse events but have not reversed the policy subsequently. This has had a ratchet effect and it has only served to exacerbate the challenges involved in unwinding the policy. The key issue facing central banks as they look to halt or reverse quantitative easing is whether it will trigger panic in financial markets, with effects that might spill over into the real economy.” In light of recent ECB and FOMC meet and greets an important realisation that the Central Bankers are well of aware of the consequenses here. “We have a market trying to interpret the Fed who is trying to find out how they can interpret their long-only portfolio at a risk parity where rates cannot rise.” – MoneyNeverSleeps There is the prospect of an overheating U.S. economy, but remember we are coming off a low base and the lockdown has decimated many sectors of the economy and people’s lives. The relevaton from the speed of technology adapting and disrupting to a new world with the lockdown is transformative. The shift has enabled and transformed the traditional economy that we measure future outcomes off. We still need to add almost 20 million jobs in the US alone to get back to par. Europe is in worse shape, so overheating at this point isnt a concern for most policymakers. The unparalleled government monetary inflation has inflated many price levels and distorted asset markets BUT that was intended as to increase confidence in the ‘guts’ of the economy, homeowners and 401k holders. This point is missed by the uber bear community. From here is the big question. The RBA stability report gives us an insight into central banker thinking, they concluded Australian banks are in strong financial position coming out of pandemic and have abundant liquidity and funding, The downside is clear with the absence of moral hazard from repeated Federal Reserve market bailouts in an environment of some would say obscene liquidity pumps. Pure greed is the other part, not wanting to miss out on fees. The obvious question is, how deeply ingrained is this attitude through the markets? How do we ween the markets off tis continuos dip feed? At this point the Central Banks have kicked that answer down the road. After the monthly and weekly employment data the market will be going though whether the recent stimulus rounds are working with in the background of the Federal Reserve Continuing to downplay inflation risk.
Of note during the Arctic Blast with the EV mania and the Biden Admin Green deal push we noted the spike in spot Texas electricity prices pushing the cost of electricity not on fixed plans to unheard of levels. Bloomberg reported on recharging a Tesla from about $18 to $900. Yes the price spike was fleeting but it should remind the sane amongst us the broader issue of the disconnect between the push toward electrification and our massively inadequate energy infrastructure. This is the area that needs investment, not just for our glorious EV but for all energy and possible disasters like we just saw.Comments from Yellen and others on the same page suggest that low rates conveniently push potential debt instability far out into the future. The Fed is poised to expand its balance sheet, by adding liquidity to the tune of $1.5 TN this year with no regard for rampant asset price inflation and bubbles. Now the new administration has control of the blank checkbook and is determined to us it with no long-term thinking or planning; everything is short-term focused. Washington is gambling with our nation’s future, from kicking cans down the road to rolling drums down a hill. Contents
- Part A: Stockmarkets
- Part B: Bonds
- Fed and Banks
- Part C: Commodities
- Energy – Oil and Gas
- Gold and Silver
- Part D: Foreign Exchange
- Geopolitics and Economics
- Economy Week ahead
PART A – Stock MarketsHighlights – USA
- The S&P500 rose 1.3% (up 22.6% y-t-d)
- Dow added 0.4% (up 17.0%).
- Nasdaq100 advanced 3.2% (up 23.0%).
- S&P 400 Midcaps were little changed (up 21.1%)
- Small cap Russell 2000 increased 0.3% (up 16.3%)
- Utilities slipped 0.3% (up 7.1%).
- Transports gained 0.9% (up 27.2%).
- Semiconductors rose 2.4% (up 23.5%).
- Biotechs gained 1.1% (down 1.1%).
- Banks dropped 2.8% (up 41.6%)
- Broker/Dealers fell 2.1% (up 30.2%).
- With bullion down $9, the HUI gold index sank 4.2% (down 16.9%).
Highlights – Europe Stocks
- U.K.’s FTSE equities index added 0.5% (up 12.0% y-t-d).
- France’s CAC40 rose 1.4% (up 23.0%).
- German DAX equities index gained 0.9% (up 14.4%).
- Spain’s IBEX 35 equities index rallied 1.7% (up 12.2%).
- Italy’s FTSE MIB index rose 1.1% (up 20.9%).
Germany’s benchmark Blue Chip DAX 30 index (Deutscher Aktienindex) expanded to 40 companies on 20 September adding 10 new members to the German stock index from the MDAX which will be reduced from 60 to 50 members.Highlights – Asia Stocks
- Japan’s Nikkei Equities Index increased 0.3% (up 5.3% y-t-d).
- South Korea’s Kospi index declined 1.2% (up 3.4%).
- India’s Sensex equities index sank 2.5% (up 24.2%).
- China’s Shanghai Exchange fell 1.0% (up 2.1%).
- Australia’s S&P/ASX200 Friday fell 107 points or 1.44% to its heaviest loss since the start of the month, wiping out its gains for the month.
- The monthly fall meant back-to-back monthly losses for the first time since last year’s initial pandemic sell-off.
- The catalyst was long-term interest rates surged and Iron ore fell 6%.
- Australian 10-year yield to 1.83% verus US 1.57% and Germany -0.14%.
- The yield on the ten-year Australian government bond pushed through 2 per cent for the first time since March 2019.
- Late in the session the yield had climbed an extraordinary 25 basis points to 2.11%.
- EM equities soft.
- Brazil’s Bovespa index dropped 2.6% (down 13.0%)
- Mexico’s Bolsa fell 1.1% (up 16.4%).
- Turkey’s Borsa Istanbul National 100 index jumped 2.8% (up 3.1%).
- Russia’s MICEX equities index slumped 1.1% (up 26.2%).
Stock valuations, as measured by forward price-to-earnings ratios are near their highest level since the 2000 dot-com boom.
Biggest SPX Stock Winners and Losers Last Week
S&P 500 Index Technical Analysis via @KnovaWaveSPX continued from the power impulse 3 to the bottom of the daily cloud after it broke the Tenkan and back to rejected channel to new ATH. Bulls this is a 3 of degree off a C, Bears this a B flat We watch if this low was a (a) or C Will determine if sharp ABC completed to all time highs around +2/8. We have to respect the number of alternatives of degree of 5. With such trends keeps it simple support is Tenkan and Kijun and watch for ABC. No fear is the driving element The break up was from above the 200dma. The balance from sharp reversal after the initial 3 wave down from the SPX wave 5 extension as Covid19 fed impulse accelerated under the Tenkan. From there we had seen the ABC or 1-2-3 spinning around the 61.8% of the move. Support began at the October 2019 lows. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in
Reenergized after #SPX tripped in 3 to test recent break up at Tenkan from there we have had a powerful rally to ATH. Each new high has evolved after testing Tenkan key support. We watch for a spit of a spit Extensions are difficult to time, keep it simple.
Key for the impulse higher was the spit or retest of MM 8/8 and Tenkan San, which held with the previous highs and Tenkan. To repeat “We look for 3 waves down and reactions to keep it simple with the alternatives in the daily.” Keep an eye on the putcall ratio with recognition to the sheer size of contracts AND keep in mind the stimulus distortion. The spit per channel fractal and Adams rule launched back over the cloud where we were encased AND we are back testing it. Watch if a spit or clear break support as chickou rebalances
A reminder that Apple Inc $AAPL, Microsoft Corp $MSFT, Amazon.com Inc $AMZN, Facebook Inc $FB, and Google-parent Alphabet Inc $GOOGL make up approximately 23% of the total weight of the S&P 500. With that comes gyrations that are an outsized impact on broader markets.
NASDAQ 100Nasdaq tested and held the weekly Tenkan to close testing swing channel but short of ATH which both DJIA and SPX saw Support Tenkan to Kijun. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.
Russell 2000The small cap Russell RUT has been developing a large flag which it spat though last week, only to close above the Tenkan. We need Kijun to close thru to get power to retest highs. Support the cloud should it fail.
Semiconductors SMHSemiconductors SMH clean with Murray Math levels & Tenkan keys. Previous high above +4/8 & Chikou rebalance patterning. Powered by Kijun spit to reaction from above reverted with the retest at triple top patterning. Earnings from above $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX
Following the announcement of NVDA 4/1 split some levels off the energy break. NVidia hasn’t looked back since the $NVDA 4/1 split, We saw a power move off the $200 retest (old $800)! It is a clear leader of #SOX #SMH look for cues there and ABC failures for changes.
Apple $AAPLApple’s Friday dump appears to be a healthy rinse on the weekly. Support from previous highs, resistance is ATH. Potential impulse from upcoming #AppleEvent Remember the impact $AAPL has, at least short term on all the major indices.
Amazon high locked at Kijun seems …MM +3/8 and from there has built a large weekly flag after failing near the previous high. Watch Tenkan through Kijun for a bigger move down. Support is weekly cloud and resistance previous flag and Tenkan.
ARKK ETFThe ARKK ETF trading clinically, tested triangle breakdown. Tenkan after bouncing off 50 WMA. Support cloud, needs to clear Tenkan to test Kijun for bulls. We saw ATH in DOW & SPX a – needs to flow through to ARKK to break up soon rather than later.
US Stocks Watch
Earnings Week Ahead
This three-month period is the second to be compared to year earlier profits that were affected by the pandemic. According to Refinitiv, earnings for the second quarter are looking to be up 78.1%. With the US stock markets at record highs the downside to increasing profit expectations is the potential for some disappointments and that could cause adverse or stalled markets potentially.Investors (and algos) will focus on the conference calls and outlooks. Last quarter everyone expected the worse, we saw critical updates on production in coronavirus impacted regions and if there is extended halting of operations weighing on multi-nationals. Last week we heard from: Kimberly-Clark, Facebook, Restaurant Brands, Otis Worldwide, Owens-Illinois, HSBC, TrueBlue, Alphabet, Microsoft, Visa, Advanced Micro Devices, Texas Instruments, Twitter, Chubb, 3M, General Electric, Robinhood, Eli Lilly, UPS, Novartis, JetBlue, Lockheed Martin, Raytheon, Archer Daniels Midland, Sherwin-Williams, Invesco, Hasbro, Boston Properties, Teradyne, Fortune Brands, Hawaiian Holdings, NCR, Boyd Gaming Corning Pinterest,Coca-Cola, McDonald’s, Boeing, General Motors, Ford, Bristol-Myers Squibb, Kraft Heinz, Norfolk Southern, Glaxo SmithKline, General Dynamics, Brink’s, Automatic Data, CME Group, International Paper, Penske Auto Group, eBay, Cognizant, Extra Space Storage, KLA Corp, Aflac, Harley-Davidson, Flex, Suncor, BioMarin, Community Health Systems, iRobot Boston Scientific Hess ServiceNow Spotify Apple, Amazon, Caterpillar, Comcast, Merck, Northrop Grumman, Altria, Intercontinental Exchange, Sirius XM, Yum Brands, American Tower, Gilead Sciences, Starbucks, Molson Coors, T. Rowe Price, Airbus, Anheuser-Busch InBev, Sanofi, STMicroelectronics, Volkswagen, Royal Dutch Shell, Stanley Black & Decker, AllianceBernstein, Check Point Software, Brunswick, Oshkosh Stryker US Steel Corporation Comcast MasterCard VeriSign Shopify,Phillips 66 Exxon Mobil Colgate-Palmolive,Chevron, AbbVie, Lazard, Booz Allen Hamilton, Weyerhaeuser, Church and Dwight, CBOE Global Markets, Newell Brands, W.W. Grainger, Cerner, Aon, Charter Communications, Phillips 66, Daimler, Nomura, Eni, BNP Paribas
This week we hear from:Monday starts us off with
- Analyst meeting:
- Analyst meeting:
- Analyst meeting:
- Analyst meeting:
- Analyst meeting:
“U.S. companies are rushing to cash in on soaring stock prices. It isn’t just the white-hot market for initial public offerings. Companies are returning to the public markets to issue shares and raise cash from investors at the same time that existing shareholders are tapping the public market to unload their stockholdings at a record clip. Companies including Zoom Video Communications Inc. and Norwegian Cruise Line Holdings Ltd. have sold billions of dollars of shares this year… There have been 556 follow-on offerings, or stock sales by companies or existing shareholders, among U.S. companies this year, the most since 1996, according to Dealogic… They have raised a total of $133 billion. Behind the boom in share issuance? An ascendant stock market.” August 25 – Wall Street Journal (Gunjan Banerji):
Semiconductors and energy storage lead a spooky 14 IPO weekThe IPO market remained active this past week as 13 IPOs raised $6.3 billion. SPAC activity kept steady with 13 blank check IPOs raising $2.1 billion. New filers continued to pour into the IPO pipeline, with eight IPOs and seven SPACs submitting initial filings. Semiconductor foundry GlobalFoundries (GFS) priced at the high end to raise $2.6 billion at a $26 billion market cap. Backed by Abu Dhabi’s Mubadala, US-based GlobalFoundries is one of the world’s leading specialty semiconductor foundries. Unprofitable with lumpy growth, the company states that it is the only scaled pure-play foundry with a global footprint that is not based in China or Taiwan. GlobalFoundries finished up 4%. Energy storage provider Fluence Energy (FLNC) priced well above the range to raise $868 million at a $4.7 billion market cap. Formed as a JV between industrial conglomerate Siemens and power distributor AES, this company provides energy storage products to utilities, power producers, and commercial and industrial customers. Fast growing but unprofitable, the company generated about 90% of revenue in the FY20 from five customers. Fluence Energy finished up 27%. Enterprise cloud data management platform Informatica (INFA) priced at the low end to raise $841 million at a $8.3 billion market cap. Taken private by Permira and CPP Investments for $5.3 billion in 2015, Informatica offers a leading enterprise data management platform for large enterprise. Although it will be highly leveraged post-IPO, Informatica is a recognized leader in the global data management market and saw strong subscription ARR growth in the 1H21. Informatica finished up 2%. Hiring solutions provider HireRight Holdings (HRT) priced below the range to raise $422 million at a $1.5 billion market cap. Backed by General Atlantic and Stone Point, this company is one of the leading US providers of background checks for corporate customers. Although revenue fell due to COVID, HireRight operates in a multibillion market benefiting from secular trends. HireRight finished down 9%. Online education marketplace Udemy (UDMY) priced at the high end to raise $421 million at a $4.4 billion market cap. Backed by Insight Partners, Udemy operates an online learning marketplace with over 183,000 courses serving 44 million free and paid learners and 8,700 enterprise customers. Fast growing but unprofitable, the company operates it in crowded online learning market. Udemy finished down 5%. Designer fashion rental platform Rent the Runway (RENT) upsized and priced at the high end to raise $357 million at a $1.5 billion market cap. This apparel rental company originally focused on a-la-carte rentals of dresses for events, but has gradually transitioned to mostly generating revenue from monthly subscription boxes. While the company has seen active subscribers and revenue rebound in the last two quarters, it is unprofitable and leveraged post-IPO. Rent the Runway finished down 18%. Fire put brand Solo Brands (DTC) priced at the high end to raise $219 million at a $1.6 billion market cap. Solo Brands sells fire pits, camp stoves, and other outdoor gear through its DTC platform. Fast growing and profitable, this outdoor e-commerce has an installed base of more than 2.3 million customers. Solo Brands finished up 8%. Rare disease biotech Entrada Therapeutics (TRDA) upsized and priced at the midpoint to raise $182 million at a $637 million market cap. The company is initially focused on developing Endosomal Escape Vehicle therapeutics for rare neuromuscular diseases. Its most advanced candidate, ENTR-601-44, is being developed for patients with Duchenne muscular dystrophy that are exon 44 skipping amenable. Entrada plans to submit an IND application for ENTR-601-44 in 2022. Entrada Therapeutics finished up 20%. Root canal therapy system maker Sonendo (SONX) priced well below the range to raise $94 million at a $340 million market cap. Sonendo has developed what it states is the first and only FDA-cleared system for root canal therapy (RCT), called the GentleWave System. Sonendo began scaling commercialization of its current technology in 2017, and as of June 30, 2021, it had an installed base of over 700 GentleWave Systems and has treated more than 600,000 patients. Sonendo finished down 23%. Body contouring provider AirSculpt Technologies (AIRS) priced at the low end to raise $77 million at a $612 million market cap. This company provides minimally-invasive body contouring procedures through 16 centers across 13 states in the US. AirSculpt Technologies is profitable with solid growth, and has seen an increase in same-center case volume as a result of lessening effects of COVID-19. AirSculpt Technologies finished up 45%. Solid tumor biotech Aura Biosciences (AURA) upsized and priced at the low end to raise $76 million at a $428 million market cap. AU-011, its first Virus-Like Drug Conjugate candidate, is being developed for the first line treatment of primary choroidal melanoma, a rare disease with no drugs approved. Aura plans to present six to twelve-month safety and efficacy data from its Phase 2 dose escalation trial in 2022, and, if favorable, initiate a pivotal trial in the 2H22. Aura Biosciences finished up 6%. Technology firm Arteris (AIP) priced at the low end to raise $70 million at a $518 million market cap. This technology company develops and licenses interconnect intellectual property that manages the on-chip communications in System-on-Chip semiconductor devices. Arteris is unprofitable but saw growth accelerate in the 1H21. Arteris finished up 60%. Documentation software provider Augmedix (AUGX) priced its uplisting at $4 to raise $40 million at a $167 million market cap. Delivering over 35,000 notes to our customers each week, Augmedix provides remote documentation software to the healthcare industry. The company is growing but unprofitable with negative cash flow. Augmedix finished down 6%. Micro-cap managed health platform Marpai (MRAI) priced below the range to raise $25 million at a $76 million market cap. Marpai provides and manages a health plan platform for self-insured employers that pay for their employees’ healthcare benefits. Growing but highly unprofitable, this health plan platform uses AI to predict costly events to optimize employee care and employer savings. Marpai finished up 40%. 13 blank check companies raised $2.1 billion this past week led by industrial tech-focused Perception Capital II (PCCTU), which raised $200 million.
US IPO Week Ahead:Steady IPO deal flow set to continue with 11 IPOs slated for next week Drug discovery company Evotec (EVO) plans to raise $576 million at a $9.2 billion market cap. The company aims to accelerate and improve the efficiency of the drug discovery process for biotechs, utilizing fee-for-service, milestone and royalty, and equity interest agreements. Growing and profitable, Evotec’s free cash flow swung negative in the FY20. Home furnishing retailer Arhaus (ARHS) plans to raise $355 million at a $2.2 billion market cap. Originating as a single show room and Cleveland, Ohio, the company now offers its premium home furnishing products online and in over 75 showrooms across 27 states. Arhaus experienced high double-digit revenue growth in the 1H21 as homeowners invest in their homes in the wake up of the pandemic. Russian real estate platform Cian (CIAN) plans to raise $269 million at a $1 billion valuation. The company claims to be one of the ten most popular real estate classifieds markets, addressing the underpenetrated Russian market. Fast growing in the 1H21, Cian believes it is leading the digitization of the $238 billion Russian real estate market. Eco-friendly shoe maker Allbirds (BIRD) plans to raise $250 million at a $2 billion valuation. The company rose to fame when its flagship shoe, the Wool Runner, which uses New Zealand-sourced Merino wool, was named “The World’s Most Comfortable Shoe” by TIME Magazine in 2016. Though not yet profitable, the company expects the expansion of its retail footprint to drive brand awareness and eventual profitability. Russian car-sharing platform Delimobil (DMOB) plans to raise $220 million at an $836 million market cap. The company offers convenient and affordable transportation alternatives in Russia, with a long-term rental fleet of almost 600 vehicles and 461k monthly active users. The company more than doubled revenue in the 1H21, which is partly due to its acquisitive activity. Permian Basin-focused mineral and royalty company Desert Peak Minerals (DPM) plans to raise $215 million at a $215 million market cap. The company owns 104,000 acres of net royalty acres, 99% of which are located in West Texas. Completing 177 acquisitions since 2016, the company had shrinking revenue and turned unprofitable in the FY20. Commercial mortgage REIT Claros Mortgage Trust (CMTG) plans to raise $134 million at a $2.7 billion valuation. The company is primarily focused on transitional commercial real estate assets, which require repositioning, renovation, rehabilitation, leasing, development, or other value-added elements. Claros Mortgage Trust has raised $2.6 billion and originated, co-originated, or acquired 86 investments since its 2015 inception. Personal finance company NerdWallet (NRDS) plans to raise $131 million at a $1.3 billion valuation. The company operates a free personal finance platform that provides educational tools as well as various financial products. While the company is still unprofitable, its platform had attracted 20 million monthly unique users as of 9/30/21. Health-conscious food brand The Real Good Food Company (RGF) plans to raise $80 million at a $375 million market cap. The company makes low-carb, high-protein, gluten and grain-free food meals and products using a range of ingredients including plant-based proteins and fibers. While the company nearly doubled revenue in the 1H21, it grew even more unprofitable in the last twelve months. Prostate cancer diagnostic company MDxHealth (MDXH) plans to raise $50 million at a $2.1 billion market cap. The company uses clinical modeling and genomic data to give patients a more accurate and actionable result than traditional risk factors such as prostate specific antigen (PSA). MDxHealth is growing but highly unprofitable. Molecular cancer diagnostics company Mainz Biomed (MYNZ) plans to raise $10 million at a $59 million valuation. The company will acquire and operate as PharmGenomics and aims to commercialize its product portfolio, which includes a molecular prostate and pancreatic cancer test.
Part B : Bond MarketsHighlights – Treasuries Why the angst in the bond market? The After the FOMC presented new economic projections including a forecast of 6.5% for gross domestic product this year with PCE inflation going to 2.4% this year, but falling to 2% next year. Powell reiterated that the Fed sees only a temporary pickup in inflation this year because of the base effects against last year’s numbers when prices fell. The Fed will target an average range of inflation around 2%, meaning it could exceed that threshold for some time which is a change to the Fed’s ground rules. The majority of Fed officials did not see any interest rate hikes through 2023. What concerns bond holders and impacts stocks over the past weeks is the Fed appears to be too Blaise about inflation. This view got added weight when crude oil hit the highest prices since 2019 after OPEC decided to stay pat on production for April. But since then Crude has fallen over 12% in just a week from those highs. Hence why Powell has said “We’re going to wait to see signs of actual inflation or the appearance of other risks that could threaten the achievement of our goals. And we’ve seen that the economy can sustain exceptionally low levels of unemployment without inflation.” There is a view that Powell also refuses to be dictated to and set the bond bullies up for failure. The V reversal this month suggests that. Air needs to come out of the market, particularly Tech, this is best illustrated by the ARK Funds and Semi-Conductor SMH ET’s (see below). From here we have another massive $1.9 Trillion stimulus. Is that enough to keep asset prices elevated, hard to fight the Fed and that kind of cash floating around. Watch the argument from analysts that higher yields mean the economy is growing, stocks are value versus hyperinflation is on its way. Raise your eyes and look at the stopped car in front of you you may want to hit the brakes.The pandemic is not close to our greatest worry, nor is energy it seems. The runaway credit bubble in the era of delusion and entitlement has multiple unintended consequences or are they intended? The stockmarket has lost rationality the danger is should the bubble pop the consequences of a historic debt crisis in a deeply divided nation and unprepared social and geopolitical backdrops could be earth shattering as the Fed disregards asset inflation and bubble dynamics. Investment-grade bond funds saw outflows of $1.11 billion, while junk bond funds posted positive flows of $1.187 billion (from Lipper).
- Three-month Treasury bill rates ended the week at 0.0475%. Two-year government yields rose four bps to 0.50% (up 38bps y-t-d). Five-year T-note yields dipped one basis point to 1.19% (up 82bps). Ten-year Treasury yields fell eight bps to 1.56% (up 64bps). Long bond yields sank 14 bps to 1.93% (up 29bps). Benchmark Fannie Mae MBS yields dropped 11 bps to 2.00% (up 66bps).
All good while markets hold up but take note that the loosest financial conditions in history have supported a record $1.4 trillion of corporate debt issuance. While easy credit availability has supported economic activity, funding new investment whilst keeping vulnerable companies afloat. THe combination of urban shifts through virus and riots fears has fueled a booming MBS market and record low mortgage rates pushing strong housing markets into Bubble risk territory.Highlights – Mortgage Market Unprecedented cash payments by the U.S. government to households, changing consumer preferences and lowest mortgage rates in history have fueled a pandemic boom in housing, the fastest pace of increase on record in data from 1988 and prices surpassing the peak from the last property boom in 2005. The S&P CoreLogic Case-Shiller U.S. National Home Price Index rose 14.6% in the 12 months through April, according to the latest available numbers, marking the fastest pace of increase on record in data from 1988.
- Freddie Mac 30-year fixed mortgage rates rose another five bps to a six-month high 3.14% (up 33bps y-o-y).
- Fifteen-year rates gained four bps to 2.37% (up 5bps).
- Five-year hybrid ARM rates added two bps to 2.56% (down 32bps).
- Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down five bps to 3.13% (up 10bps).
- Federal Reserve Credit last week expanded $21bn to a record $8.538 TN. Over the past 111 weeks, Fed Credit expanded $4.812 TN, or 129%. Fed Credit inflated $5.728 Trillion, or 204%, over the past 468 weeks.
- Fed holdings for foreign owners of Treasury, Agency Debt last week gained $5.3bn to $3.487 TN.
- “Custody holdings” were up $92bn, or 2.7%, y-o-y.
- Total money market fund assets jumped $41.2bn to $4.559 TN.
- Total money funds increased $211bn y-o-y, or 4.8%.
- Total Commercial Paper declined $10.1bn to $1.180 TN. CP was up $206bn, or 21.2%, year-over-year.
- Greek 10-year yields surged 29 bps to 1.31% (up 69bps y-t-d).
- Ten-year Portuguese yields gained 11 bps to 0.52% (up 49bps).
- Italian 10-year yields jumped 17 bps to 1.17% (up 63bps).
- Spain’s 10-year yields rose eight bps to 0.61% (up 56bps).
- German bund yields were unchanged at negative 0.11% (up 46bps).
- French yields increased four bps to 0.27% (up 61bps).
- The French to German 10-year bond spread widened four to 38 bps.
- U.K. 10-year gilt yields dropped 11 bps to 1.03% (up 84bps)
- Japanese 10-year “JGB” yield added a basis point to 0.09% (up 8bps y-t-d).
Part C: CommoditiesHighights
- The Bloomberg Commodities Index slipped 0.4% (up 32.4% y-t-d).
- WTI crude slipped 19 cents to $83.57 (up 72%).
- Gasoline dropped 4.5% (up 68%), while Natural Gas rallied 2.8% (up 114%).
- Copper dropped 2.9% (up 24%).
- Wheat rose 2.2% (up 21%),
- Corn surged 5.6% (up 17%).
- Bitcoin gained $1,790, or 3.0%, this week to $62,411 (up 115%).
BDI Freight Index
- The Baltic Exchange Dry Index extended losses to a seventh straight session, falling 3.1% to 3,519 on Friday, its lowest since September 12th, pressured by the ongoing concerns over demand and supply issues, as well as China’s intervention in coal markets. The BDI was down 20.2% this week and fell more than 30% in October, its biggest monthly decrease since January of 2020.
- The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, slipped 4.3% to 4,349, its lowest since August 10th
- The panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, fell 1.7% to 3,896, its lowest in over two weeks.
- Among smaller vessels, the supramax index shed 86 points to 3,104, its lowest since August 13th and extending declines to a sixth consecutive session.
CopperCopper rebounded sharply off the 50wma pulled up by the flattening Tenkan and Kijun to close right at the channel break – a key juncture. #HG shrugged off demand concerns from resurgence in Covid-19 supply disruptions. The power spits of +8/8 and +2/8 were rebalanced by the Tenkan breaking the Kijun with 50wma and cloud below. Copper had been a leader in the risk on movement for commodities.
SoybeansSoybeans keep hitting weekly lows well into weekly cloud and well under 50wma. – Ahead of USDA’s October #WASDE report analysts expect higher 2021 production from 4.374 billion bushels in September up to 4.415 billion bushels. – Watch for impulse
US Crude Oil (WTI)
4 Hour:: WTI oil stayed above the 240 cloud after testing the old channel break to new highs. This is a market that is reflective of fear and greed, note the reaction when Kijun and Tenkan cross or touch and support of the 50ma around Murrey Math confluence.
Daily: Potent WTI price action indicative of 3rd wave energy highlighted by spits of the Tenkan to new highs. Continued from daily cloud twist retest to close back at Chikou & ATH. Support Tenkan, 50dma and Kijun, fractals continue with #oil Important to grasp the move continued from last week’s WTI completing its correction of the May breakup in 3 waves (or X) Rebounded from daily cloud twist to close back at Chikou. Support Tenkan, 50dma and Kijun, fractals continue with oil.
The key is crowd behavior to help tell the story which in energy is often around geopolitics. A great example of why we watch ABC corrections and from here we get the energy from the break being balanced. This move that was powered by 50 dma Tenkan spit of a spit – hence the fractal energies reverberations. Support is previous lows, Murrey Math levels and Fib cluster. Support is the 50dma, kijun, tenkan and prev high confluence. ;
Weekly:WTI crude #Oil futures continued with it’s measured move & settled at fresh 7-year high. Long term 61.8% target fueled by ABC bull flag after rebalanced Chikou. Weekly Tenkan Kijun gave support & power to take out new high It must retain this energy to take out new high
These are special times, recall “After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all time lows to negative pricing we have seen mirror replications.” Support is previous channels, tenkan and Kijun. Above we have Murrey Math time and price
US Natural Gas (Henry Hub)
4 Hour:: A look at that daily ABC on the 240 shows the waves clearly in the Murrey Math grid with the cloud the guide for higher (the IV) or Lower the A – meaning this is a B. Note impulses off Kijun/Tenkan crosses Recall natural gas spitting to +8/8 than +1/8 240 before retreating in 3 waves to spit violently the 50 4hr ma stayed above the cloud until the completive 5 and back in the channel in a continuation pattern since regaining the 240 cloud to rebalance the Chikou to close the week. Continue to watch Kijun reactions and Murrey Math confluence.
Daily: US Natural Gas has completed 3 waves correcting the daily 8/8 spit after a classic euphoria wave 5 to comeback to test Kijun and bounce between it and Tenkan with power before spitting the 50dma in a corrective ABC pennant of a (IV). Alts are IV or A at this juncture Notice the fractals of the move after completing the C of 4 bullish scenario has played out the consolidation phase since it completed its IV ( Bull Case) last year since then a series of 3 waves. Should the highs be a (iii) looking at possibilities we have the 161.8% at 7.026 if we get ‘silly’ 50dma support.
Like the larger wave on the way up it accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs. We successfully tested that break in a pennant ABC. Previous highs (flat topped triangle energy) and 8/8 and new highs underscore the structure that fed the move and is key longer term.
Weekly: Going out further we see a spit of the weekly Tenkan for Natural gas continued off it’s major target, the double top potential from 2014 which equated nicely to over 8/8 Weekly and showed true impulse off that to rebalance Chikou. It’s now a question of degree, 3 or 5? Impulse just shy of the 8/8 and Tenkan confluence. Recall the impulse wave powered from the spit of 50wma to get over weekly Kijun and Tenkan. This was energized with a series of fractals between old 38 and 50% channel, as you would expect in a seasonal commodity with weather a prime mover. Resistance is Fib/Murrey confluence, support Tenkan, Kijun – as always count your ABC’s
Key Energy Reports
- Around The Barrel – US Crude Oil Builds +6088Kbbl But WTI Cushing Around 2018 Lows
- Into The Vortex – EIA Reports Build of 81 Bcf in Natural Gas Inventories
- EIA Forecasts U.S. Natural Gas Inventories To Enter Winter Heating Season Below Average
- U.S. Natural Gas Consumption Down With Switch to Coal Due To Higher Gas Prices
- Desperate China Orders Inner Mongolia Coal Mines To Boost Production by 55%
- Natural Gas Flowing on Nord Stream 2 From Russia to Germany
- Natural Gas Volatilty a Lesson in The Reversal of Fortunes
- Record High Chinese Coal Futures Prices After Biggest Coal Producing Region Floods
- East China Manufacturing Hub Zhejiang Orders Production Suspensions to Meet Energy Targets
- ConocoPhillips Buys Shell’s Delaware Basin Assets for $9.5 bln in Cash.
- Europe Energy Crisis Years in the Making With Reactionary Environmental policy
- Oil Supply is Tighter Than Industry Estimates Morgan Stanley Says
- Spot Gold declined $9 to $1,783 (down 6.1%).
- Silver fell 1.7% to $23.90 (down 9.5%)
GoldGold vulnerability remains, hanging on at base of weekly cloud after another rejection of the tenkan, Kihun and 50wma after wave (ii) alt gains favor. Still listless after manic rise to +5/8 weekly rebalance of Chikou in 5 waves. To be bullish we would need to get and stay above the cloud. Murrey Math resistance, watch Fibs & Chikou.
Silver is back at the cloud spitting 50wma providing support after reversed with a double top. The weekly Tenkan crossing the Kijun signaled downside and is now resistance. Major support is the 50wma
Part D: Forex Markets
John Maynard Keynes, 1920: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”Highlights
- For the week,the U.S. Dollar Index gained 0.5% to 94.13 (up 4.7% y-t-d)
- Majors for the week For the week on the upside, the Australian dollar rose 0.7%, on the downside, the euro 0.7%, the British pound 0.5%, the Japanese yen 0.4%, and the Canadian dollar 0.2%. The Chinese renminbi declined 0.32% versus the dollar (up 1.90% y-t-d).
- Minors for the week For the week on the upside the South Korean won increased 0.7%, the Brazilian real 0.2% and the New Zealand dollar 0.2%. For the week on the downside, the South African rand declined 2.7%, the Mexican peso 1.9%, the Norwegian krone 1.0%, the euro 0.7%, the British pound 0.5%, the Japanese yen 0.4%, the Swedish krona 0.2%, and the Canadian dollar 0.2%. The Chinese renminbi declined 0.32% versus the dollar (up 1.90% y-t-d).
Australian Dollar – AUDUSD
The Aussie dollar has corrected in 3 waves since completing a 5 at the pysch 80 level and it back break retest of wave 1 and the weekly cloud as one would expect after it completed 5 waves in emotive fashion. The Australian dollar fell to its lowest value since December under 73 US cents. Resistance the Tenkan and Kijun like many commodities. The AUDUSD old three year high of 0.7820 from January 6 is a key option energy point playing out.
New Zealand Dollar – NZDUSD
The Kiwi mirrored the AUD in its wave (iii) spit and has corrected at the cloud much of the FOMO muster wave and retested the 50% Fib & 4/8 confluence. Kijun and Tenkan Resistance, which is pivotal. Support previous break spits.
Canadian Dollar – USDCAD
The Loonie is holding the tenkan after a 3 year high in June and corrected that in 3 waves led by the AUD and NZD. #oil price impacting direction. Watch flat Kijun and Tenkan at -1/8. Use Fibs for support and resistance.
Euro – EURUSD
Euro continues to correct in what seems like eternal flags in the channel. We watch if Kijun (pink) testing Tenkan (orange) creates any impulse as #EURUSD consolidates in the cloud. Watch 3 waves to see development for continuation. Watch for impulse off Chikou rebalance. Again governed by EURGBP and Bund volatility.
British Pound – USDGBPBritish pound classic retest of daily cloud break with magnet pull of cloud twist after ABC correction – will need Tenkan to break through Kijun for more strength. The upcoming week will be heavy on UK data, which could mean an eventful week for the British pound.
EuroPound – EURGBP
Back testing tenkan in a C or 3 after inconclusive X – symbolic of BREXIT? Kijun, 50wma and clouds resistance.
Japanese Yen – USDJPY
USDJPY continues to test wave i after the recent weakness with Treasury yields. The 108.00 level should remain massive support for dollar-yen. Any change will come from the weekly Kijun as it breaks through the old channel. Use your #USDJPY Murrey 4/8 8/8 grid for now. #EURJPY #AUDJPY will determine risk on/off
Mexican Peso USDMXN
The Peso continues in the long triangle and consolidated despite outside uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise.
Turkish Lire USDTRY
The Turkish Lire reversed after falling in 3 waves to explode over the Tenkan with the weekly cloud Kijun and 50wma below. The cloud and gap below offer targets with the Lire at all time lows resistance equates tp Murrey Math and Fibonacci possibilities
Impulse begets inpulse. Bitcoin corrected impulsively since completing 5 waves up at +2/8 Each Tenkan and Kijun tap saw an explosive kiss of death until we completed 3 waves to around 28,000. From there we saw extreme volatility. Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking . (Recall what happened after the CME and CBOE futures starts). From that high we have 2 alternatives a iii of a 1 down or (C) of IV meaning the recent high was a (ii) or 1 of a (v)
We have seen what you would expect from a 5 wave impulse peak, a violent correction or completion. Use Murrey Math levels for corrections and targets as algos control the herd here, support is the cloud and sharp ABC, 1-2 moves. From there prices agitted towards those ATHs as news of a Bitcoin ETF fueled the rally, sound familar?
On the Risk Radar
Geopolitical Tinderbox Radar
Economic and Geopolitical Watch
Each Thursday the Labor Department reports high numbers of Americans that applied for unemployment benefits. With the Covid shutdown we lost over 22 million jobs in March and April. Still a huge shortfall in jobs, and the big question is will they come back?
- October 22 – Financial Times (James Politi, Demetri Sevastopulo and Andy Bounds): “President Joe Biden vowed to defend Taiwan from Chinese military action, in comments that contradicted US policy to maintain an ambiguous stance over whether it would come to its rescue. Asked whether the US military would defend the country in the event of a Chinese attack, the president said: ‘Yes, we have a commitment to do that.’ Biden made the comments during a wide-ranging CNN town hall… They appeared to upend a decades-long policy of ‘strategic ambiguity’, under which the US refuses to say whether it would defend it from a Chinese attack. The policy is designed to discourage Taipei from declaring independence and to give Beijing pause about taking military action to seize the country, which it views as Chinese territory.” October 18 – Associated Press (Jonathan Lemire and Zeke Miller): “President Joe Biden is entering a crucial two weeks for his ambitious agenda, racing to conclude contentious congressional negotiations ahead of both domestic deadlines and a chance to showcase his administration’s accomplishments on a global stage. Biden and his fellow Democrats are struggling to bridge intraparty divides by month’s end to pass a bipartisan infrastructure bill and a larger social services package. The president hopes to nail down both before Air Force One lifts off for Europe on Oct. 28 for a pair of world leader summits, including the most ambitious climate change meeting in years. But that goal has been jeopardized by fractures among Democrats, imperiling the fate of promised sweeping new efforts to grapple with climate change.” October 16 – Wall Street Journal (Richard Rubin and Ken Thomas): “Many Democrats are willing—even eager—to enact tax increases on high-income households and big businesses and campaign on them in next year’s midterm elections, embracing a stance that the party has struggled with in the past. Although Democrats’ slim majorities have forced them to abandon some of their most sweeping tax proposals, President Biden and congressional Democrats are still seeking to raise about $2 trillion over a decade from businesses and high-income households. Democrats say their focus on the top tier of households would help combat growing wealth inequality. The money would help pay for the healthcare, education and climate-change programs…”
The virus and psychological affect on domestic and trade relationships have impacted growth strategies with unexpected consequences In a fully fledged stock mania, nothing matters until it does. That is the feral nature of greed.
Drought WatchSeptember 1 – Reuters (Gabriel Stargardter and Lisandra Paraguassu): “Brazilian Vice President Hamilton Mourao said… a severe drought could lead to energy rationing in Brazil, contradicting other officials who have said that such a step would not be necessary. Brazil, one of the world’s agricultural superpowers, is suffering from one of its worst droughts in a century. The lack of rainfall has emptied hydroelectric reservoirs, fanned inflation and hurt farmers. The government has given incentives to use less energy but says rationing is not expected. ‘There may have to be some rationing,’ Mourao told reporters in Brasilia, although he said the government had taken necessary measures to prevent blackouts.” August 24 – Wall Street Journal (Kirk Maltais): “Drought is blistering key U.S. cash crops, further elevating prices for staples including corn and wheat. The punishing dynamics of a torrid summer were evident this month on the Pro Farmer Crop Tour… Driving along state Route 14 outside of Verdigre, Neb., Randy Wiese turned to see a farmer harvesting hay. The piles were small. ‘That farmer is sick to his stomach,’ said Mr. Wiese, who farms 800 acres of soybeans and corn… Extreme heat is baking most of the U.S. North Dakota, South Dakota, Minnesota, Iowa and Nebraska all contain areas of extreme drought… North Dakota and Minnesota, in particular, are experiencing near-record lows in soil moisture… As a result, many crops planted this spring are wilting. Some 63% of the U.S. spring wheat crop is in poor or very poor condition, versus 6% at this time last year…” August 23 – Bloomberg (Lauren Coleman-Lochner): “The extreme drought that has gripped much of the western United States has shriveled crops, stoked wildfires, and drained reservoirs across several states. According the U.S. Drought Monitor, more than 60 million people are currently living under drought conditions in the region. For some cities, lack of water could be a fiscal as well as an environmental disaster: Prolonged droughts are threatening the creditworthiness of local governments, utilities and irrigation districts. According to a new report from S&P Global Ratings…, drought-struck municipalities may generate less income from their water systems because there’s less to sell or they may have higher costs to provide adequate supplies.” August 8 – Axios (Rebecca Falconer): “More than 100 large wildfires are burning across nearly 2.3 million acres of the U.S. West, as forecasters warn Americans to brace for another extreme heat wave this week. Driving the news: ‘Widespread air quality alerts and scattered Red Flag Warnings stretch from the Northwest and Northern Rockies to the High Plains, as well as throughout parts of central California,’ the National Weather Service said…” August 11 – Associated Press (Nicholas K. Geranios): “The wheat harvest on Marci Green’s farm doesn’t usually begin until late August, but a severe drought stunted this year’s crop and her crews finished harvesting last week because she didn’t want what had grown so far to shrivel and die in the heat. It’s the same story across the wheat country of eastern Washington state, a vast expanse of seemingly endless stretches of flatlands with rolling hills along its edges that produces the nation’s fourth largest wheat crop. It’s been devastated by a drought the National Weather Service has classified as ‘exceptional’ and the worst since 1977. ‘This is definitely the worst crop year we have had since we started farming 35 years ago,’ said Green, whose family is the sixth generation on the same farming land just south of the city of Spokane.” July 24 – Bloomberg: “Extreme weather is slamming crops across the globe, bringing with it the threat of further food inflation at a time costs are already hovering near the highest in a decade and hunger is on the rise. Brazil’s worst frost in two decades brought a deadly blow to young coffee trees in the world’s biggest grower. Flooding in China’s key pork region inundated farms and raised the threat of animal disease. Scorching heat and drought crushed crops on both sides of the U.S.-Canada border. And in Europe, torrential rains sparked the risk of fungal diseases for grains and stalled tractors in soaked fields.” June 4 – CNBC (Emma Newburger): “Nearly three-fourths of the U.S. West is grappling with the most severe drought in the recorded history of the U.S. Drought Monitor, as hot and arid conditions are set to exacerbate the threat of wildfires and water supply shortages this summer. Parts of California, Nevada and Washington experienced sweltering triple-digit temperatures over the past week amid the drought… Conditions this spring are much worse than a year ago. In fact, nearly half of the continental U.S. is in a moderate to exceptional drought, marking the most significant spring drought in the country since 2013, according to… the National Oceanic and Atmospheric Administration.” June 10 – Reuters (Andrea Januta and Daniel Trotta): “The reservoir created by Hoover Dam… has sunk to its lowest level ever, underscoring the gravity of the extreme drought across the U.S. West. Lake Mead, formed in the 1930s from the damming of the Colorado River at the Nevada-Arizona border about 30 miles (50 km) east of Las Vegas, is the largest reservoir in the United States. It is crucial to the water supply of 25 million people including in the cities of Los Angeles, San Diego, Phoenix, Tucson and Las Vegas. As of 11 p.m. PDT Wednesday, the lake surface fell to 1,071.56 feet above sea level, dipping below the previous record low set on July 1, 2016.” June 18 – Wall Street Journal (Katherine Blunt and Jim Carlton): “States across the West are at risk of electricity shortages this summer as a crippling drought reduces the amount of water available to generate hydroelectric power. Some of the region’s largest reservoirs are at historically low levels after a dry winter and spring reduced the amount of snowpack and precipitation feeding rivers and streams. The conditions are especially dire in drought-stricken California, where officials say the reservoir system has seen an unprecedented loss of runoff this spring—800,000 acre-feet, or enough to supply more than a million households for a year.” June 16 – CNBC (Emma Newburger): “An extreme heat wave gripping the western United States will intensify and spread this week, creating dangerous conditions amid the worst drought in the last two decades and raising concerns about severe wildfires and electrical grid failures. More than 40 million people in the country are forecast to experience triple-digit temperatures this week, and roughly 200 million people are projected to see temperatures over 90 degrees Fahrenheit. More than three-fourths of the West is in severe drought… Temperatures in some areas could surpass 120 degrees, and excessive-heat warnings are in place for several states. Nevada and Arizona are forecast to see record temperatures of 125 and 128 degrees, respectively.”
Global WatchHot Spots
- September 16 – Bloomberg: “China slammed a move by the U.S. and U.K. to help Australia build nuclear submarines, saying the new partnership will stoke an ‘arms race’ as tensions heat up in Asia-Pacific waters. Prime Minister Scott Morrison joined with U.S. President Joe Biden and the U.K.’s Boris Johnson… to announce a new security partnership that will see Australia acquire nuclear-powered submarines. While it could take more than a decade for Australia to build one, the agreement shows the U.S. joining with key English-speaking allies to form a more cohesive defense arrangement to offset China’s rising military prowess. The partnership ‘greatly undermines regional peace and stability, aggravates the arms race and hurts the international non-proliferation efforts,’ Chinese Foreign Ministry spokesman Zhao Lijian told reporters… He also questioned Australia’s commitment to forgoing nuclear weapons, and said the U.S. and U.K. were ‘using nuclear exports as geopolitical gaming tool and applying double standards.’”
- September 16 – Reuters (Ben Blanchard and Yimou Lee): “Taiwan proposed… extra defense spending of T$240 billion ($8.69bn) over the next five years, including on new missiles, as it warned of an urgent need to upgrade weapons in the face of a ‘severe threat’ from giant neighbor China. Taiwan President Tsai Ing-wen has made modernizing the armed forces – well-armed but dwarfed by China’s – and increasing defense spending a priority, especially as Beijing ramps up military and diplomatic pressure against the island it claims as ‘sacred’ Chinese territory.”
- September 12 – Financial Times (Henry Foy and Richard Milne): “Russia plans to use war games this week with Belarus to deepen its control over its neighbour’s armed forces and increase its military capabilities on the borders of Nato member states, western defence officials have warned. The seven-day Zapad-2021 exercise, which began on Friday, involves tens of thousands of troops from both countries and conventional and strategic weapons tests to simulate conflict with a western enemy, and comes amid increased pressure from the Kremlin for deeper integration with Minsk. ‘Zapad fits into a broader pattern: a more assertive Russia, significantly increasing its military capabilities and its military presence near our borders,’ said Jens Stoltenberg, Nato secretary-general.”
- September 15 – Reuters (Hyonhee Shin and Josh Smith): “North Korea and South Korea test fired ballistic missiles on Wednesday, the latest volley in an arms race in which both nations have developed increasingly sophisticated weapons while efforts prove fruitless to get talks going on defusing tensions… North Korea fired a pair of ballistic missiles that landed in the sea off its east coast…, just days after it tested a cruise missile that analysts said could have nuclear capabilities. Japan’s defence ministry said the missiles landed inside Japan’s exclusive economic zone (EEZ)…”
- Trade wars persist between Australia and China. The largest exporter of commodities and the worlds largest importer of commodities. China is experiencing record cold weather and it’s beligerance is hurting shooting itself in the foot. Regional partners such as Japan and India have supported Australia’s standing up to Chinese bullying.
- September 3 – Bloomberg (Jonathan Tirone): “U.S. and European efforts to coax Iran back into nuclear negotiations as soon as this month are being blunted by support the Islamic Republic’s already emboldened leaders are receiving from China and Russia. The result is that three years after former President Donald Trump imposed his ‘maximum pressure’ policy, Iran has enriched uranium close to weapons grade while its economy is showing some signs of stabilizing with the help of Beijing and Moscow, even as crucial oil exports remain heavily sanctioned.”
Coronavirus Fat Tail Virus Risk
- October 21 – CNBC (Holly Ellyatt): “A newly-discovered mutation of the delta variant is being investigated in the U.K. amid worries that it could make the virus even more transmissible and undermine Covid-19 vaccines further. Still, there are many unknowns surrounding this descendent or subtype of the delta variant — formally known as AY.4.2 — which some are dubbing the new ‘delta plus’ variant.” October 19 – Yahoo Finance (Aarthi Swaminathan): “The coronavirus pandemic hit the education sector exceptionally hard, and college enrollments plunged in 2020 to the lowest level since 2007. According to… the U.S. Census Bureau…, enrollment in schools dropped by 2.9 million from 2019 to 2020 and colleges by 615,000. Enrollment among those aged 35 and below has also dipped to the lowest level in over 20 years, with community colleges leading the decline.””
- Fauci believes 70%-85% of the population must be vaccinated to reach herd immunity.
BanksMajor US Banks Deliver Stoic Results in Q3, 2021 The major money cents banks released earnings with many record results for Q3. Mainly from trading and loss reserve releases from the pandemic kitty. Rising interest rates also help the bottom line.
- Goldman Sachs Advice on Mergers and Acquisitions Brought in a Record $1.65 billion Last Quarter
- Wells Fargo Earnings Suffer From Less Interest Income on Lower Loans
- JPMorgan Earnings Boosted By Trading and Release of Loan Loss Reserves
- Blackrock Earnings Beat Expectations With Record $ 9.5 Trillion Assets and ETFs Under Management
- PNC Bank Revenue Rises, Expects $900 million in Cost Savings From BBVA
- Citigroup Earnings Rise on Equity Trading and Loss Reserve Release
- Bank of America Earnings Lift With Higher Long Term Interest Rates And Steady Costs
- Morgan Stanley Acquisitions of E-Trade and Eaton Vance Boosted Wealth and Asset Management
“Negative yields on long-dated government securities are more reflective of distorted market conditions than of stronger sovereign credit profiles, Fitch Ratings says. Lower interest service costs support sovereign creditworthiness, but this must be weighed against the impact of the economic conditions leading to lower yields and historically high government debt levels in a number of countries.- Fitch”
The Week Ahead – Have a Trading Plan
Keys focus this week is the Federal Reserve’s policy statement due Wednesday and the US jobs report on Friday. Keys will also be monetary policy action by central banks in the UK, Australia, Malaysia, Poland and Norway. Worldwide PMI surveys and in the US the ISM PMI, foreign trade, factory orders, construction spending, ADP employment change, third-quarter productivity, IBD/TIPP Economic Optimism, and the final readings of Markit PMIs.
Busiest third-quarter earnings season with reports from Pfizer, Moderna, Qualcomm Inc, Airbnb, and Uber.Central Banker and Geopolitics Watch speeches, reports and rate moves. Monday October 25, 2021
- 06:00 German Buba Monthly Report
- 09:00 MPC Member Tenreyro Speaks
- None Seen
- 10:00 BoC Monetary Policy Report
- 10:00 BoC Rate Statement
- 10:00 BoC Interest Rate Decision
- 11:00 BOC Press Conference
- 17:00 BRL Interest Rate Decision
- Tentative JPY BoJ Monetary Policy Statement
- Tentative JPY BoJ Outlook Report (YoY)
- 23:00 JPY BoJ Interest Rate Decision
- 07:45 ECB Deposit Facility Rate (Oct)
- 07:45 ECB Interest Rate Decision (Oct)
- 08:30 ECB Press Conference
- 12:00 Dallas Fed PCE (Sep)
- 15:00 Dallas Fed Services Revenues
- 17:30 AUD AIG Manufacturing Index (Oct)
- 20:00 KRW Exports (YoY) (Oct)
- 20:00 KRW Imports (YoY) (Oct)
- 20:00 KRW Trade Balance (Oct)
- 20:00 AUD MI Inflation Gauge (MoM)
- 20:30 KRW Nikkei Manufacturing PMI (Oct) 52.4
- 20:30 AUD ANZ Job Advertisements (MoM)
- 20:30 AUD Home Loans (MoM)
- 20:30 JPY Manufacturing PMI (Oct)
- 21:45 CNY Caixin Manufacturing PMI (Oct)
- 23:45 JPY 10-Year JGB Auction
- All Day Holiday South Africa – Election Day
- 01:00 INR Nikkei Markit Manufacturing PMI (Oct)
- 01:30 AUD Commodity Prices (YoY)
- 02:00 RUB Markit Manufacturing PMI (Oct)
- 03:00 EUR German Retail Sales (MoM) (Sep)
- 04:30 CHF procure.ch PMI (Oct)
- 04:30 HKD GDP (QoQ) (Q3)
- 05:30 GBP Manufacturing PMI (Oct)
- 08:00 RUB CBR Monetary Policy Meeting Minutes
- 09:00 BRL Markit Manufacturing PMI (Oct)
- 09:30 CAD Manufacturing PMI (Oct)
- 09:45 USD Manufacturing PMI (Oct)
- 10:00 USD Construction Spending (MoM) (Sep)
- 11:00 USD ISM Manufacturing PMI (Oct)
- 11:00 USD ISM Manufacturing Prices (Oct)
- 11:30 USD 3-Month Bill Auction
- 11:30 USD 6-Month Bill Auction
- 14:00 USD Loan Officer Survey
- 17:45 NZD Building Consents (MoM) (Sep)
- 19:00 KRW CPI (MoM) (Oct)
- 19:50 JPY BoJ Monetary Policy Statement
- 19:50 JPY Monetary Base (YoY)
- 20:00 USD Total Vehicle Sales
- 23:30 AUD RBA Interest Rate Decision (Nov)
- 23:30 AUD RBA Rate Statement
- All Day Holiday Brazil – All Souls’ Day
- 01:50 AUD RBA Assist Gov Debelle Speaks
- 03:20 EUR ECB’s Enria Speaks
- 03:30 CHF Retail Sales (YoY) (Sep)
- 03:30 CHF CPI (MoM) (Oct)
- 04:15 EUR Spanish Manufacturing PMI (Oct)
- 04:30 HKD Retail Sales (YoY) (Sep)
- 04:45 EUR Italian Manufacturing PMI (Oct)
- 04:50 EUR French Manufacturing PMI (Oct)
- 04:55 EUR German Manufacturing PMI (Oct)
- 05:00 EUR Manufacturing PMI (Oct)
- 07:20 EUR ECB’s Elderson Speaks
- 08:30 CAD Building Permits (MoM) (Sep)
- 08:55 USD Redbook (YoY)
- 09:00 EUR German Buba Balz Speaks
- 09:00 SGD Manufacturing PMI (Oct)
- 10:00 USD IBD/TIPP Economic Optimism
- 10:30 NZD GlobalDairyTrade Price Index
- 11:30 USD 52-Week Bill Auction
- 16:00 NZD RBNZ Financial Stability Report
- 16:30 USD API Weekly Crude Oil Stock
- 17:00 KRW FX Reserves – USD (Oct)
- 17:30 AUD AIG Construction Index (Oct)
- 7:45 NZD Employment Change (QoQ) (Q3)
- 17:45 NZD Labor Cost Index (QoQ) (Q3)
- 17:45 NZD Unemployment Rate (Q3)
- 18:00 AUD Services PMI
- 18:00 NZD RBNZ Gov Orr Speaks
- 20:30 AUD Building Approvals (MoM) (Sep)
- 20:30 AUD Private House Approvals (Sep)
- 20:30 AUD RBA Chart Pack Release
- 20:30 HKD Manufacturing PMI (Oct) 7
- 21:45 CNY Caixin Services PMI (Oct)
- All Day Holiday Japan – Culture Day
- 03:00 GBP Nationwide HPI (MoM) (Oct)
- 03:45 EUR French Government Budget Balance (Sep)
- 04:00 EUR Spanish Unemployment Change
- 04:00 EUR ECB’s Elderson Speaks
- 05:00 EUR Italian Monthly Unemployment Rate (Sep)
- 05:30 GBP Composite PMI (Oct)
- 05:30 GBP Services PMI (Oct)
- 06:00 EUR Unemployment Rate (Sep)
- 06:15 EUR ECB President Lagarde Speaks
- 06:15 EUR ECB’s Elderson Speaks
- 07:00 USD MBA 30-Year Mortgage Rate
- 07:00 USD MBA Mortgage Applications (WoW)
- 07:00 USD MBA Purchase Index
- 07:00 USD Mortgage Market Index
- 07:00 USD Mortgage Refinance Index
- 08:15 USD ADP Nonfarm Employment Change (Oct)
- 09:00 USD All Car Sales (Oct)
- 09:00 USD All Truck Sales (Oct) 0
- 9:00 CAD BoC Deputy Governor Gravelle Speaks
- 09:45 USD Markit Composite PMI (Oct)
- 09:45 USD Services PMI (Oct)
- 10:00 USD Durables Excluding Defense (MoM)
- (Sep) 10:00 USD Factory Orders (MoM) (Sep)
- 10:00 USD ISM Non-Manufacturing PMI (Oct)
- 10:30 USD Crude Oil Inventories
- 10:30 USD Gasoline Production
- 10:30 EUR ECB’s Elderson Speaks
- 12:30 EUR German Buba Mauderer Speaks
- 14:00 USD FOMC Statement
- 14:00 USD Fed Interest Rate Decision
- 14:30 USD FOMC Press Conference
- 20:00 NZD ANZ Commodity Price Index (MoM)
- 20:30 AUD Retail Sales (QoQ) (Q3)
- 20:30 AUD Trade Balance (Sep)
- 20:30 JPY Services PMI (Oct)
- All Day Holiday Russia – Unity Day All Day Holiday India – Diwali
- 03:00 EUR German Factory Orders (MoM) (Sep)
- 04:00 CHF SECO Consumer Climate (Q4)
- 04:15 EUR Spanish Services PMI (Oct)
- 04:45 EUR Italian Composite PMI (Oct)
- 04:45 EUR Italian Services PMI (Oct)
- 04:50 EUR French Markit Composite PMI (Oct)
- 04:50 EUR French Services PMI (Oct)
- 04:55 EUR German Composite PMI (Oct)
- 04:55 EUR German Services PMI (Oct)
- 05:00 USD OPEC Meeting
- 05:00 EUR Markit Composite PMI (Oct)
- 05:00 EUR Services PMI (Oct)
- 05:30 GBP Construction PMI (Oct)
- 06:00 EUR PPI (MoM) (Sep)
- 07:00 EUR German Buba Mauderer Speaks
- 07:30 USD Challenger Job Cuts (Oct)
- 08:00 GBP BoE Inflation Report
- 08:00 GBP BoE QE Total (Nov)
- 08:00 GBP BoE Interest Rate Decision (Nov)
- 08:30 USD Continuing Jobless Claims
- 08:30 USD Initial Jobless Claims
- 08:30 USD Jobless Claims 4-Week Avg.
- 08:30 USD Nonfarm Productivity (QoQ) (Q3)
- 08:30 USD Trade Balance (Sep)
- 08:30 USD Unit Labor Costs (QoQ) (Q3)
- 08:30 CAD Trade Balance (Sep)
- 09:00 EUR ECB President Lagarde Speaks
- 10:00 EUR ECB’s Elderson Speaks
- 10:15 GBP BoE Gov Bailey Speaks
- 10:30 USD Natural Gas Storage
- 11:30 USD 4-Week Bill Auction
- 11:30 USD 8-Week Bill Auction
- 12:50 GBP BoE MPC Member Cunliffe Speaks
- 13:00 EUR German Buba Beermann Speaks
- 14:15 EUR ECB’s Schnabel Speaks
- 17:30 AUD AIG Services Index (Oct)
- 19:00 KRW Current Account (Sep)
- 19:30 JPY Household Spending (MoM) (Sep)
- 19:50 JPY Foreign Bonds Buying
- 19:50 JPY Foreign Investments in Japanese Stocks
- 21:30 AUD RBA Monetary Policy Statement
- All Day Holiday India – Diwali
- 01:00 SGD Retail Sales (MoM) (Sep)
- 03:00 GBP Halifax House Price Index (MoM) (Oct)
- 03:00 EUR German Industrial Production (MoM) (Sep)
- 03:30 EUR ECB’s De Guindos Speaks
- 03:45 EUR French Industrial Production (MoM) (Sep)
- 03:45 EUR French Non-Farm Payrolls (QoQ) (Q3)
- 04:00 EUR Spanish Industrial Production (YoY) (Sep)
- 04:15 EUR German Buba Wuermeling Speaks
- 04:30 EUR IHS Markit Construction PMI (Oct)
- 04:30 EUR ECB’s De Guindos Speaks
- 05:00 EUR Italian Retail Sales (MoM) (Sep)
- 06:00 EUR Retail Sales (MoM) (Sep)
- 07:00 EUR ECB’s Panetta Speaks
- 08:15 GBP MPC Member Ramsden Speaks
- 08:30 USD Average Hourly Earnings (MoM) (Oct)
- 08:30 USD Average Weekly Hours (Oct)
- 08:30 USD Government Payrolls (Oct)
- 08:30 USD Manufacturing Payrolls (Oct)
- 08:30 USD Nonfarm Payrolls (Oct)
- 08:30 USD Participation Rate (Oct)
- 08:30 USD Private Nonfarm Payrolls (Oct)
- 08:30 USD U6 Unemployment Rate (Oct)
- 08:30 USD Unemployment Rate (Oct)
- 08:30 CAD Employment Change (Oct)
- 08:30 CAD Full Employment Change (Oct)
- 08:30 CAD Part Time Employment Change (Oct)
- 08:30 CAD Participation Rate (Oct)
- 08:30 CAD Unemployment Rate (Oct)
- 09:00 GBP MPC Member Tenreyro Speaks
- 10:00 CAD Ivey PMI (Oct)
- 13:00 USD U.S. Baker Hughes Oil Rig Count
- 15:00 USD Consumer Credit (Sep)
- 15:30 USD CFTC speculative net positions
Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2020. One suspects it will be a year long Groundhog day for Trump, the GOP and the Democrats.
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