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April DDD

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Oil News:

Friday, March 29th 2024

The oil markets are increasingly putting their trust into OPEC+ production cuts to remain in place throughout this year, a feat which combined with an improving macroeconomic outlook could bring $90 per barrel sooner than assumed. A better-than-expected Q4 for US GDP will most probably consolidate market expectations around a June interest rate cut, leaving behind the demand woes of early 2024. ICE Brent is set to close the week around the $87 per barrel mark, whilst WTI is trading around $83 per barrel.

Baltimore Closure Weighs Heavily on US Coal. The indefinite closure of the Port of Baltimore after the Francis Scott Key bridge collapsed this week will impact US thermal coal exports as Baltimore accounted for 28% of all seaborne outflows, affecting key shippers Arch Resources, Consol and Javelin.

US SPR Replenishment Cost Increasingly More. The latest round of strategic petroleum stock replenishments in the US, totalling 2.8 million barrels in September, has seen the average price hit $81.32 per barrel, above the $79 per barrel threshold that the White House mandated for refilling crude SPRs.

Iraq Extends Iran Gas Supply Deal for 5 Years. Iran agreed on an extension of a gas supply deal with Iraq for another five years, with Tehran sending up to 50 million cubic meters per day, accounting for approximately one-third of Iraq’s electricity generation in the peak-demand summer months.

Libya Oil Minister Fired Amidst Corruption Probe. Libya’s oil minister Mohamed Aoun was replaced within hours of his suspension with a replacement named from within the board of the state oil firm NOC, with Libya’s Tripoli government seeking to greenlight several multi-billion projects that he blocked.

Chile Urges SQM-Tianqi to Settle Scores. After China’s lithium giant Tianqi Lithium (SHE:002466), holding 20% in Chile’s SQM (NYSE:SQM), raised concerns over transparency in the Chilean company’s relationship with copper producer Codelco, the spat escalated to a governmental level with Chile’s Energy Ministry calling for a peaceful resolution.

UK’s Best Oil Eyes Eni Link-Up. UK offshore oil producer Ithaca Energy (LON:ITH), the majority owner of the controversial Cambo heavy oil project, is reportedly in talks with Italian major ENI (BIT:ENI) in a deal that would see Ithaca gain 40-45,000 b/d of producing assets whilst ENI would get a 38-39% stake in Ithaca.

US Treasury Targets Iran Oil Trade. In its sixth round of targeted Iran sanctions, the US Department of Treasury sanctioned Sa’id al-Jamal, a Houthi-linked network of companies that allegedly moves Iranian commodities through forged documents, as well as the Panama-flagged tanker Dawn II.

Nigeria Prompts Oil Producers to Keep Their Crude at Home. Representatives of Nigeria’s oil regulator NUPRC have met with the African country’s crude producers as their commitments to supply Nigerian crude to domestic refineries have been disappointing, with oil firms bemoaning the lack of payment guarantees.

Brazil Sees Buildup of Russian Diesel Tankers. Bloomberg reports that over 3.7 million barrels of Russian diesel has been idling in waters near the Brazilian coast, underscoring the growing bottlenecks in Russian energy deliveries as at least two tankers belong to sanctioned shipper Sovcomflot.

Mexico’s Crude Output Falls to Lowest Since 1979. Crude production of Mexico’s state oil company Pemex fell to its lowest monthly level in 45 years this February, pumping 1.55 million b/d of oil, with the world’s most indebted firm coming well below the government-set output target of 1.9 million b/d.

Kenya and Uganda Settle Their Import Spat. Kenya will allow landlocked Uganda to import oil products through its port of Mombasa, ending a longstanding dispute between the two neighbours, as Uganda’s government handed over exclusive oil product supply rights to global trading firm Vitol.

New Senegal President Questions Oil Deals. Senegal’s newly elected President Bassirou Faye intends to revisit the contractual terms offered to oil companies BP (NYSE:BP), Kosmos Energy (NYSE:KOS) and Woodside Energy (ASX:WDS), making good on his pre-election pledge to increase the state’s ownership of the Grand Tortue and Sangomar projects.

Vietnam Draws Closer to Qatari LNG. Vietnam will be ramping up LNG imports after the July 2023 commissioning of its Thi Vai LNG import terminal, signing its first ever LNG supply deal with Qatar for an April-delivery cargo as the South Asian country’s power demand is expected to grow 10-12% per year.

Staying on the topic of oil:

These 3 charts show the inverted currency as against oil:

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On the gold thread I opined that when the BoJ raised rates and the Yen FELL as opposed to RISING, the reason was that Japan was now buying oil in Yen. As are India and China. This is bullish for gold. Gold has broken out of a high base that was 3/4yrs in the making. As gold increasingly becomes THE oil currency, gold will continue to move higher.

With a higher market share in energy (more oil purchased) these economies will grow (much) faster than the US economy, already at the point of collapse.

Screen Shot 2024-03-30 at 8.09.56 AM.png

Assuming that demand for USD continues to grow, but that the size of the US economy continues to fall relative to the rest of the world:

(a) there will be a run on the USD;
(b) which will morph into one or more alternatives: gold, Euro, Yuan;
(c) is what happened in 1931 when the pound sterling was abandoned and from USD in 1933 (USD then devalued as against gold)
(d) the result being that the US would default on foreign liabilities.

International financial markets (all tightly interlinked) would enter a major crisis.

There seem to be a number of issues that Wall St. have a consensus on:

(i) a weaker Yuan. Incorrect. The Yuan will (need) to grow stronger as against USD. China is after joining the WTO, hollowed out US manufacturing to such a point that the US is almost helpless. It is unbelievable that US politicians were so stupid/greedy/venal/dishonest/corrupt to the point where the US now finds itself.

(ii) that falling FFR will result in an even higher rally in US equities. So acute is the US/China issue re. trade imbalances, that unemployment, currently believed to be a solid data point, will ramp up and explode higher.

(iii): Bonds will rally (falling yields)

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The long end of the curve is not fixed. The long end of the curve is fuc*ed and looking to become far worse. The Treasury is issuing Bills (short end of the curve) because currently the MM funds can and will buy as they shift out of RRP into short dated UST paper. That RRP is almost empty. When it is empty, Yellen could run down (again) the TGA ($800B) which could see the US into the Presidential elections, assuming nothing else blows up in the interim.

(iv): Oil will stay in range or fall

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Looking to go higher.

A higher oil price in USD bought by the US when all others are buying in their own currencies and settling in gold creates a high gold price to Yuan/Rupees/Yen but a low gold price (relative) to USD. The US becomes a victim in that gold/USD buys them less oil priced in gold. Everyone else gets more oil for their gold/Yuan/Yen/Rupee.

Also posted in the gold thread, the diminishing productivity of shale over time. Not an issue today, but going forward when the rest of the world's oil production is increasingly demanded and bought by China and India, both with huge populations. Africa waiting in the wings.

So last week and next week:

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Check out last weeks rankings and you'll see that the ranked sectors did well.


Economic news for next week:

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Next week's rankings:

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Of these: XLB, XLI, XLE are the most bullish charts. The rest are +3 but their charts are not as strong. Possibly XLU having just broken out higher could join the first 3.

jog on
duc
 
Debt issue maturities:

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The shorter the duration the closer to money the credit instrument is, hence the preference. Fiat money after all is simply a 0% interest zero duration bill.

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Which rather suggests that the Fed absolutely will cut the FFR. Then as they continue to issue short dated paper, they can maintain a lower rate of interest for debt servicing.

The shorter the duration the closer it gets to outright money printing. Which because it is fiscal policy, passes directly into the economy (rather than slowly leaking out of the high powered money circuit of the banking system) and is highly inflationary.

This will have a secondary impact on gold.

Gold currently is rising primarily because gold is becoming an oil currency. It is replacing UST as the reserve asset. Gold has not yet picked up its more traditional function of preserving purchasing power into a (secular) inflation because the inflation risk is still so underappreciated.

The gold as an oil currency is being driven by China, Russia, OPEC, India and some South American countries.

The gold as inflation trade, which involves Joe Public, is not yet happening. It will likely be seen as: (i) gold mining stocks and (ii) silver bullion, as gold bullion is getting too expensive for Joe Public.

I bought gold miners last week (GDX) as the time is drawing close for them to catch fire.

jog on
duc
 

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Debt issue maturities:

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The shorter the duration the closer to money the credit instrument is, hence the preference. Fiat money after all is simply a 0% interest zero duration bill.

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Which rather suggests that the Fed absolutely will cut the FFR. Then as they continue to issue short dated paper, they can maintain a lower rate of interest for debt servicing.

The shorter the duration the closer it gets to outright money printing. Which because it is fiscal policy, passes directly into the economy (rather than slowly leaking out of the high powered money circuit of the banking system) and is highly inflationary.

This will have a secondary impact on gold.

Gold currently is rising primarily because gold is becoming an oil currency. It is replacing UST as the reserve asset. Gold has not yet picked up its more traditional function of preserving purchasing power into a (secular) inflation because the inflation risk is still so underappreciated.

The gold as an oil currency is being driven by China, Russia, OPEC, India and some South American countries.

The gold as inflation trade, which involves Joe Public, is not yet happening. It will likely be seen as: (i) gold mining stocks and (ii) silver bullion, as gold bullion is getting too expensive for Joe Public.

I bought gold miners last week (GDX) as the time is drawing close for them to catch fire.

jog on
duc
 
USD entering the danger zone:

Screen Shot 2024-04-02 at 7.58.03 AM.png

No issues in UST market...yet

Screen Shot 2024-04-02 at 7.58.53 AM.pngScreen Shot 2024-04-02 at 7.59.27 AM.pngScreen Shot 2024-04-02 at 8.00.53 AM.pngScreen Shot 2024-04-02 at 8.01.08 AM.png


Speculative froth returning:

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Now I don't have access to this chap, just the teaser (he used to be on the Fed trading desk).

QT needs to slow to provide (or stop removing) liquidity. The rise in USD signals lower liquidity. MOVE is not yet showing that that USD demand is creating UST turbulence.

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Currently a bit of the chicken or the egg re. USD & yields.

Equities on hold in trading today.

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Cutting the FFR will signal to all that the Fed has caved and will allow (actively pursue) inflation. Keeping rates where they are at least extends the pretence that the Fed is fighting inflation.

Cutting rates may well cause an equity sell-off, completely the opposite of what is generally being expected.


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Tether's (USDT) aim is to provide a less volatile digital currency by pegging its value to the US dollar at a 1:1 ratio. USDT is one of the most widely adopted stablecoins, which are blockchain-based currencies that are tied - or tethered - to fiat currencies.

Tether generates revenue through a combination of mechanisms. Primarily, Tether Limited, the company behind USDT, generates income by holding reserves of fiat currency equivalent to the total amount of Tether tokens in circulation. The interest earned on these reserves acts as a revenue stream for the company.

Tether offers a solution by allowing users to send USDT quickly and often with lower fees than traditional bank transfers. The recipient can convert USDT to their local currency or use it directly. Earning Interest: Some crypto platforms and wallets offer interest-bearing accounts for stablecoins like Tether.

Tether is a cryptocurrency that attempts to maintain a value peg to an underlying currency such as the dollar or euro. It does this by keeping enough actual currency or equivalents in reserves that the cryptocurrency holds the same value as the fiat currency.

Cash Out USDT in a Few Clicks. MoonPay offers a simple, fast, and safe checkout to turn your USDT (Tether) into cash. Trade your stablecoins for fiat and choose from 3 different supported blockchains to sell USDT: Ethereum, Tron, and Binance Smart Chain.

Concerns were intensified when Tether and Bitfinex, its corporate sibling, agreed to pay $18.5 million in 2021 to settle allegations from New York state, which said: "Tether's claims that its virtual currency was fully backed by U.S. dollars at all times was a lie."13 Dec 2023

So why is Tether speculating in BTC? As 'earnings'?

What happens if there is another BTC sell-off and conversion back into USD? Does USDT maintain the 1:1 peg? Too many questions not enough answers. Far too opaque.


jog on
duc
 
Start with oil news:

Energy stocks have started to outperform the wider stock market as Brent is nearing 89 per barrel this week, with energy leading the S&P 500’s eleven market sectors in March thanks to a 10% rise.

- The oil markets are anticipating the OPEC monitoring meeting on April 3, looking for potential clues on the directionality of pricing, with JPMorgan already predicting Brent to be in the $90s by May on Russia’s production cuts.

- The ongoing tightness in refined products has seen refiners outperforming pure upstream-focused companies by some 5 percentage points as the Red Sea shipping disruptions and refinery drone strikes in Russia kept supply restricted.

- According to Reuters, OPEC production declined to 26.42 million b/d in March, down 50,000 b/d compared to February, and the oil group is expected to see lower output in April still as Iraq vowed to offset its lack of compliance.

Market Movers

- Japanese trading house Mitsubishi (TYO:8058) agreed to buy an unspecified minority stake in MidOcean Energy, a LNG developer owned by US investment firm EIG, seven months after Saudi Aramco did the same.

- US oil refiner Phillips 66 (NYSE:pSX) is exploring a sale of its 25% stake in the Rockies Express Pipeline, a gas pipe connecting Wyoming to Ohio, seeking to garner more than $1 billion from the divestment.

- Oilfield services giant Schlumberger (NYSE:SLB) signed a landmark deal with Iraq to utilize associated natural gas for electricity production instead of routine flaring, covering some 120 MCf/day in the first six months and an additional 120 MCf/day within one year.

Tuesday, April 02, 2024

Brent oil futures peaked at $89.08 per barrel in early Tuesday trading, signaling that the triple threat of Middle Eastern tensions, lower Mexican crude supplies, and Ukrainian drone strikes on Russian refineries could lift crude above the $90 per barrel mark. The last time that Brent settled above $90 per barrel was 27 October 2023, and with OPEC widely expected to maintain its conservative stance, it’s not that difficult to imagine Brent surging higher again.

Mexico Curbs Exports in Preparation for Refinery Launch. According to Bloomberg, Mexico’s national oil company Pemex plans to halt some crude exports to the US, Europe, and Asia as it seeks to start commercial operations at the 340,000 b/d Dos Bocas refinery later this year.

Baltimore Reopening Not Happening Soon. As demolition crews have started to dismantle the collapsed Francis Scott Key Bridge in Baltimore, port authorities are preparing to open a temporary channel for commercial essential vessels, although it seems to be dedicated only to ships taking part in salvage operations.

Kimmeridge-SilverBow Merger Falls Through Again. Eagle Ford-focused US oil producer SilverBow Resources (NYSE:SBOW) rejected another takeover bid of asset manager Kimmeridge Energy that valued it at $2.1 billion including debt, despite the latter owning 12.9% of the company.

Ukraine Drone Strikes on Russian Refineries Continue. Ukraine struck the Taneco refinery in Russia on Tuesday, located 800 miles from the front lines in Ukraine and boasting a capacity of 360,000 b/d, with regional media saying the drones were intercepted but still triggered a fire.

Chevron Starts Venezuela Drilling Program. Petroindependencia, the joint venture of US oil major Chevron (NYSE:CVX) and Venezuela’s national oil firm PDVSA, has started a new drilling campaign that will see 17 exploration wells spudded this year, seeking to add 65,000 b/d of production.

Qatar Keeps the Shipbuilding Frenzy. QatarEnergy top executive Saad al Kaabi announced the LNG giant has signed charter contracts with Asian shippers to operate a fleet of an additional 19 LNG carriers, to be built at South Korea’s Samsung Heavy Industries, taking the total number of contracted ships to 104.

French Nuclear Output Rebounds Strongly. After three years of disrupted nuclear power supply, French power generators ramped up nuclear production to just over 4 million kWh in the first three months of 2024, up 13% year-on-year, easing the pressure on electricity prices.

Goldman Predicts Fuel Demand to Peak in 2032. US investment bank Goldman Sachs (NYSE:GS) forecasts that global road fuel demand will increase by 5% from now to 2032, peaking then at 50 million b/d and then sticking to a protracted plateau all the way until 2040.

Shale Oil Looks for Nuclear Boost. As shale oil producers are increasingly moving away from diesel generators to local power grids, the unreliability of Texas’ stretched has prompted some drillers, notably Diamondback Energy (NYSE:FANG) signing a LOI with Oklo, to look to small nuclear reactors.

SLB Starts Oilfield Service M&A Drive. The world’s largest oilfield services firm SLB (NYSE:SLB) agreed to buy rival ChampionX (NASDAQ:CHX) in an all-stock deal valued at $7.75 billion that’s expected to close before end-2024, with the latter surging 10% in pre-market trading on Tuesday.

Kazakhstan Might be in Oil Spill Trouble. The Globus environmental group reported that a European satellite spotted an oil spill near Kazakhstan’s giant Kashagan oil field, producing some 400,000 b/d of light crude in the shallow waters of the Caspian Sea.

Shell Takes to Courts to Appeal Dutch Landmark Case. UK-based energy major Shell (LON:SHEL) started its appeal hearings this week, defying a 2021 Dutch order prompting it to cut GHG emissions by 45%, arguing the decision lacks a legal basis and would limit its transition strategy.

Gold Records Another All-Time High. Gold prices have reached another record high this week, hitting $2,265.70 per ounce, fortifying the metal’s standing as the number one pick in commodity markets in 2024 as the markets are building a mainstream position on a June Fed interest rate cut.

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Because the higher FFR is eating the US alive as compounding just keeps adding to the debt requiring interest payments.

Tax receipts are directly correlated to the equity markets. Equity markets are clamouring for cuts in the FFR.



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BTC tightly correlated to the QQQs.

Obviously the 9 new BTC ETFs would have nothing to do with that? You create 'paper' anything and you provide the powers that be (JPM/Blackrock) the ability to control prices, unless the demand for the physical (in this case digital) becomes overwhelming.

It took France to break the 1960's Gold Pool, it has taken Xi and Putin to break the latest iteration of the Gold Pool via physical demand to the East. Eventually the speculators and general public wake up to the reality.

Now equity markets are ready for a bit of a pull-back. Well over due. What will be tested is the resilience of BTC for when equities fall apart. Will it provide a hedge?


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Obviously TSLA is fuc*ed in China. China has their own EV industry. TSLA is going to zero sales there. The rest of the stuff, who knows. What is known is that relations between China and the US are pretty frosty. Probably not great for business.

Now earnings is one thing, but actually not that important except for the fact as it relates to 'employment'. Tech has been leading the way in layoffs. But some of these other industries have not really (started) with the layoffs. Not yet.

Meanwhile SPY

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Only energy holding up. Everything else having an off day.

What will be interesting to see is whether BTD is still strong. Certainly BTD has over the last few days been apparent in the markets and has contributed to keeping the indices higher than than they should have been.

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This area is/was important. SPY could re-test the 510 area. I think that the BTD has already been in play and failed to hold the high base just broken.

With Powell and the Fed waffling tomorrow, the message may not be well received.

Powell can see that inflation is heating up again. To cut into accelerating inflation is just not a good look. But of course what really matters are tax revenues. Whether Joe six-pack can afford his greasy take-away is irrelevant. The market wants rate cuts (or at least it thinks it does) to stay elevated.

Insider selling has been off the charts. All time highs. Leverage is high. Those coming late to the party...high. Employment is the only economic indicator (always a lagging indicator) that is still positive (after some particularly egregious manipulations) for the economy. How long until that number disappoints?

Gold as a signal, ie. rising in the face of (relatively) high interest rates, (relatively) strong dollar, which are both huge negatives for the USD. This is a signal in of itself. It has been flashing for at least a year. And the message is: secular inflation is inevitable.

Equity markets that have pretty much, in every sector, just gone up, will become far more volatile. Some (many) will just go down. A lot.

The problem is in the exact timing. Is this the top? Who knows. You can usually only pick the top in hindsight. Recognising the bottom is far easier. One thing to keep track of with tops is that good news starts to be sold. We had a little of that yesterday.

Returning to BTC:

One of us is a Director General at the European Central Bank with a focus on payment systems and market infrastructure.
This past February Ulrich and a colleague published a viral blog post on the ECB website questioning whether Bitcoin had any fundamental value and listing other reasons to be skeptical of its promise as currency. The blog post was a follow-up to an initial critique on the same blog written by Ulrich and his colleague back in 2022.
The other one of us clearly disagrees.
Omid has been working in the crypto industry for years and teaches it at Columbia Business School. As argued on his own blog and in his books, he believes Bitcoin has unique and appealing properties that will eventually make it a backup reserve currency.
And yet: we consider each other friends, colleagues at a distance, and are conducting research together.
We first connected shortly after Ulrich’s initial blog post. Omid presented a list of rebuttals to Ulrich’s arguments — which to his credit Ulrich wanted to hear. Ulrich asked thoughtful questions and volunteered to read Omid’s book. He then invited Omid to present to his colleagues on digital currencies and cited Omid’s writing in his own research. Along the way we learned that we share a passion for the plumbing of finance and the likelihood of it being revolutionized by modern technology.

Unlike Ulrich, other experts in finance often dismiss all blockchain-based innovation, on account of the speculative nature of crypto assets, not to mention the combative nature of crypto believers.

Unlike Omid, many crypto professionals dismiss the most important lessons from the history of finance, dooming themselves to repeat them.

We’ve learned a lot from each other by putting our differences aside. We’ve even discovered that there’s a lot we agree on when it comes to the power of decentralized settlement networks, smart contracts, and tokenization.
We agree that Bitcoin is a novel invention created by a genius, and that it will lead to lasting innovation.
We also think that decentralization comes with major tradeoffs, one of which is a difficulty to evolve.
The next few halvings are going to test Bitcoin’s economic security.

Bitcoin has an illicit use problem. The illicit use of it needs to be addressed — as it needs to be addressed for every other payment solution. Its unique properties require new tools for combating illicit use, but society has to manage the tradeoffs between catching bad actors and censoring good ones. Where to fall on this spectrum is a political decision.

We agree that the energy impact of Bitcoin is significant and must be acknowledged, even as it trends towards renewables. Whether the environmental impact is worth it will ultimately depend on its utility beyond pure speculation. We both think the appeal of Bitcoin is greater in places with high inflation, political oppression, or a lack of basic financial services.


That said, we both think stablecoins might be even more useful to such people for day-to-day use. They might also be disruptive in developed markets as a more sophisticated and programmable payment instrument, one that can be coupled with other tokenized assets to improve capital markets and invent new instruments. [BU1]
Lastly, we both think the high volatility and lack of generally accepted valuation framework of Bitcoin add to the controversy surrounding it. Omid believes that one of his students (or even Ulrich) might someday make a name for themselves by proposing one. Ulrich believes he already found the answer but will try hard to come with a different solution.

Most of all, we both consider ourselves better off for challenging each other’s views and would encourage others to try the same.
Author’s note: This piece was originally written as a back-and-forth debate about Bitcoin before it morphed into the post above. Below is Omid’s rebuttal to Ulrich’s post on the ECB blog as well as Ulrich’s response to the rebuttal. We share this in the spirit of provoking further debate.

Omid Malekan: (emphasis ours)
Whether Bitcoin or any other asset should have value is for markets to decide. The more interesting question — for any asset — is whether there’s utility, but that lives in the eye of the beholder. I have no interest in collectible tennis shoes, but enough other people do for it to have a multi-billion dollar market [source]. My lack of interest is undecisive.
Bitcoin is an algorithmically minted digital currency with its own censorship-resistant payment system. Anyone can use it and be protected from inflation, repression, & forfeiture. This utility isn’t appreciated in the developed world where currencies are stable, and banking reliable. But countless people all over the world lack these financial amenities. Tellingly, Bitcoin adoption is highest in such countries [source].
In an ideal world, nobody would need Bitcoin. But in this one 25 countries are still experiencing double-digit inflation [source] and several had hyperinflation last year [source]. High inflation is often accompanied by financial repression. Bitcoin served as an effective store of value in these countries, despite its volatility.

A skeptic could argue almost any asset — including dollars, stocks, and real estate — do well when currencies collapse. But these assets are often unavailable to ordinary people, or live on untrustworthy infrastructure. Bitcoin has stronger property rights.
As the original blog post points out, those protections have a cost. Bitcoin is too slow and expensive to be used as a day-to-day currency & is seldom used as originally intended. But many technologies evolve beyond their original intent — the internet was original meant for academia and didn’t allow commercial activity until 1993. Tech evolves to serve users, not the other way around.

Bitcoin’s strong protections require energy. Setting aside the nuances, the environmental impact is significant. But many things use a lot of energy when measured in aggregate — like video games or the US Military. The question is whether the benefits are worth the cost. Bitcoin’s are, at least to women in Afghanistan or expats with family in Venezuela. Corporations and governments might someday find similar utility due to rising geopolitical tensions.

Bitcoin’s censorship-resistance does mean that it can be used for illicit activity. But so can smartphones, the internet, or banking. The existing financial system still accommodates significant illicit activity [source] — despite ever tightening restrictions, the cost of which is borne by everyone, including those who can afford it lease, like the underprivileged in so-called high-risk countries. The total amount of illicit activity in Bitcoin fell last year [source], possibly due to new forensic tools built on the transparency of the blockchain. Banking remains as opaque as ever, and fines for AML-violations jumped 50% in 2022. [source]
What do these benefits have to do with people who invest in Bitcoin ETFs? Very little. But it’s perfectly rational for one group of investors to bet that others will appreciate the utility of an asset. People who invest in Lithium ETFs don’t build batteries, they bet that someone else will.
Ulrich Bindseil: (emphasis ours)
Although it would be nice, I fear that the idea of women in Afghanistan improving their conditions with Bitcoin is largely a romantic wish. And if crypto-assets could support them, wouldn’t a US stablecoin relying on a faster, cheaper, and more efficient blockchain not provide a better store of value or payment mechanism than Bitcoin?

One can easily acknowledge that the technical design of the Bitcoin network appears to be a masterpiece. But that doesn’t mean that it’s not already outdated or on its way to being soon. How can the protocol be changed sufficiently to gain the efficiency it needs to survive in the medium term? Wouldn’t substantial changes betray the narrative of Bitcoin being immutable and having a fixed supply, making it indistinguishable from newer cryptocoins, reminding everyone its design is one of countless possibilities, and therefore not scarce?

We admire the technical designs of the 1944 Colossus computer of Max Newman, but it did not have commercial viability for long. Can we really imagine that Bitcoin will be around in 50 years? Why should it, given the incredible pace of change in computing and crypto technology? And if it’s not around in 50 years, can it have value today without remarkable utility? Proof of work has high energy consumption — proof of stake consumes 99% less energy and centralized ledgers even less. The negative climate effects are experienced by everyone, but perhaps they should be charged to Bitcoin holders, most of whom don’t seem to care so long as prices go up. Ironically, many of them only access Bitcoin through centralized intermediaries, as is the case with the official wallet offered by the government of El Salvador [source]
The “HODL” vision of many Bitcoin owners, predicated on ever-higher prices despite so many question marks and no way to derive a fair value, is a poor basis for a trillion-dollar asset. Unlike the technical resilience of the network, it’s inelegant. It leads to endless promotion by large holders who understate the risks, putting other investors at risk. Having a fundamental value anchor for any asset class isn’t just a side issue, it’s a necessary condition for trust.
The worlds of crypto and finance were always going to merge, so we might as well open our minds and learn from each other.


The energy requirement requires 'renewables'. LOL. Renewables are dead on arrival. The quantity of commodities required to generate the power required is far in excess of that being produced or, more importantly, that which can be produced moving forward based on the investment required and provided for.

Day-to-day use: too complicated. Given that a significant percentage of the world's population is 'older', they just are not interested in the complexity. Sure geeks love it. Outside of the geeks...who else?

Protection against inflation: jury is out on this one currently.

Designed by a genius: ie. the NSA. Hmmm. Would you trust the NSA?

You are either a convert and a believer or you are not. I am not.

Can you trade it and make money? Of course. No issues with that at all. Much easier now with all of the ETFs.


jog on
duc
 
Article on 'passive' (index) investing:


Reverse Stacking: https://rogersplanning.blogspot.com/2024/03/incorporating-return-stacking.html

Doing less: https://abnormalreturns.com/2024/03/31/better-investors-make-fewer-decisions/


All about interest rates and silver

Screen Shot 2024-04-04 at 6.30.55 AM.pngScreen Shot 2024-04-04 at 6.31.49 AM.pngScreen Shot 2024-04-04 at 6.32.11 AM.png

Powell was in the market today: not today, but some time this year...blah,blah.

The 10yr is moving higher. The yield curve, while still negative, could, if the 10yr continue to rise, dis-invert (if that's even a word).

Now what is DIFFERENT (and you should always take heed when things change)

Screen Shot 2024-04-04 at 6.32.45 AM.pngScreen Shot 2024-04-04 at 6.33.02 AM.png

Gold and now silver are rising into higher interest rates. That is different.

The reason is that higher interest rates are driving inflation higher. That is the inescapable truth of the matter. The debt is so high that fiscal dominance has taken over. The result is that high interest rates = higher inflation.

Powell I'm sure realises this, but must try and maintain the facade that higher interest rates will bring inflation down.

Inflation also contains a psychological element: if everyone believes that inflation is moving higher, their individual transactions will accelerate the inflation.

Joe six pack has finally woken up to the deception. Silver due to it's price, is more accessible than gold. It is Joe six pack's gold.

So BTC.

Here is the NSA paper: https://groups.csail.mit.edu/mac/classes/6.805/articles/money/nsamint/nsamint.htm

IF this is accurate, can you trust BTC?

Now for me, the whole issue of who created BTC, who can actually control it, how it is powered, transacted in, asset backed with Tether, etc, etc, just make BTC a complete headache.

Silver:

Screen Shot 2024-04-04 at 7.15.48 AM.png

Now I hold physical silver and trading positions in silver. Silver will not reach and HOLD a permanently high valuation. It may well on speculative fever move much higher, but at some point, it will be forced back lower.

The reasons for this:

(i). Central Banks (for the most part are not buying silver for a monetary function);

(ii). Silver has (high) industrial application. Changing the price of silver will create industrial issues (unlike gold which has limited industrial applications and is therefore ideal as a monetary asset as it disrupts nothing). It is far more important therefore to keep the POS within more 'reasonable' ranges.

(iii). Speculation is rife in silver which makes its price far more volatile.

Screen Shot 2024-04-04 at 6.33.21 AM.png

I like China currently. Some fundamentals to follow later.


Screen Shot 2024-04-04 at 6.10.35 AM.png


jog on
duc
 
Start with debt: https://creditnews.com/policy/a-million-simulations-predict-a-dire-ending-to-americas-debt-problem/

Fundamentals: https://www.howardlindzon.com/p/long-live-chart-artand-fundamental-analysis-dead

Screen Shot 2024-04-05 at 5.43.31 AM.pngScreen Shot 2024-04-05 at 5.43.43 AM.pngScreen Shot 2024-04-05 at 5.57.17 AM.pngScreen Shot 2024-04-05 at 5.57.50 AM.pngScreen Shot 2024-04-05 at 5.59.14 AM.pngScreen Shot 2024-04-05 at 5.59.48 AM.png

So the internets are getting bullish on gold and silver. Zero interest when prices were lower and much better value. Nevermind, better late than never. That being said, it is still very early in the bull market.

Meanwhile crypto:

Screen Shot 2024-04-05 at 6.00.09 AM.png

This is James Alturer's (check spelling) pick of the cryptos. More than BTC, he says ETH.

China:

Screen Shot 2024-04-05 at 5.45.54 AM.pngScreen Shot 2024-04-05 at 6.02.42 AM.pngScreen Shot 2024-04-05 at 6.03.42 AM.png

A cold war and a hot war are quite different. But they are both inflationary. The point above and made previously is: China produces stuff at a fraction of the price than the US.

The US is frantically trying to reshore. Ultimately (if they succeed) a good thing. While it is underway, VERY inflationary.

Add in the debt issues that will require further QE (forget QT LOL) to keep their heads above water and the US situation is dire. Also very inflationary.

The world is again a multi-polar world. Inflationary.

Highly inflationary economies do not pay PE ratios of 30+. PE ratios are 10 and below.

Screen Shot 2024-04-05 at 6.20.26 AM.png

Screen Shot 2024-04-05 at 6.23.47 AM.png

Can of soup measure of inflation:

In January 2023, we find the prevailing average sale price for this food product over the past 12 months is $1.23 per can. That figure has risen by over 29% from the trailing 12 month average of $0.95 per can we recorded in January 2022.

We've seen a major change over the past two years with respect to the discounted sale pricing of Campbell's Condensed Tomato Soup by U.S. retailers. Discounting of its sale price has become both smaller and less frequent. Before March 2021, which marks Month 0 for when President Biden's inflation got started, it was rare to see the regular sale price of a can of Campbell's Condensed Tomato Soup above one dollar. In January 2023, that's now the lowest price at which American consumers can buy a can, where it has been temporarily reduced to that level by Kroger-affiliated grocery stores from their regular sale price of $1.29 per can during the week of 10 January through 17 January 2023.

Here's the January 2023 update for our periodic sampling of Campbell's Condensed Tomato Soup sale prices at 10 major U.S. grocery-selling retailers, where we're indicated the change in price since our previous update in October 2022:

  • Walmart: $1.26/each, unchanged
  • Amazon: $1.59/each, increase of $0.33 (+26.2%)
  • Kroger: $1.00/each, decrease of $0.29 (-22.5%)
  • Walgreens: $1.99/each, unchanged or $1.50/each when you buy two cans
  • Target: $1.39/each, unchanged
  • CVS: $2.29/each, increase of $0.50 (+27.9%)
  • Albertsons: $1.29/each, unchanged
  • Food Lion: $1.25/each, unchanged
  • H-E-B: $1.29/each, decrease of $0.01 (-0.8%)
  • Meijer: $1.29/each, unchanged
Prices of Campbell's Condensed Tomato Soup are converging toward a level of $1.25-$1.30 per can. We anticipate the trailing 12 month average price will breach the lower end of that range in February 2023.

When it does, it will cost 12.5 times more than the original price American grocery shoppers paid when Campbell's began selling their just-invented condensed soup products in 1898. Because its price history now spans more than a full order of magnitude, showing the price history in logarithmic scale gives a better sense of how much and when inflation has affected the prices American consumers pay for a can of Campbell's Condensed Tomato Soup.

Everyone knows that the politicians are lying because their lips are moving. It's frustrating that the mainstream media are so spineless and not calling them out on it.



jog on
duc
 
Oil News:

Friday, April 5th 2024

Aided by a whirlwind of bullish news, Brent prices surpassed the $90 per barrel threshold and surged past the $91 per barrel mark on Friday morning. The anticipation of Iran’s retaliatory strike on Israel, a developing Mexico export shortage, and the continuation of OPEC+ cuts have boosted sentiment in the oil market recently. On the other hand, the potential of the Fed not cutting interest rates this year could pour some cold water on the oil price rally.

US Government Cancels SPR Repurchases. The US Energy Department announced it would “keep the taxpayer’s interest at the forefront” and scrapped its tender to buy 3 million barrels of strategic petroleum stocks in August and September as WTI rose to $86 per barrel this week.

Official TMX Pipeline Launch Sooner than Expected. The Trans Mountain Expansion pipeline announced it would start commercial operations on May 1, one month before market expectations, as Canada’s government wants to start the $25 billion project as soon as possible.

Investors Flee Diesel as Gasoline Reigns Supreme. Hedge funds and other money managers have been quitting their diesel positions, with CFTC data showing 25 million barrels sold in the NYH ULSD and ICE gasoil contracts the week ending March 26, as gasoline has become the product of preference.

Russia to Scale Back LNG Ambition. Russia’s LNG exporter Novatek might scale back its ambition of building a 19.8 mtpa liquefaction facility at the Arctic LNG 2 plant and only build two trains instead of three, reusing one for a new project that would be built in ice-free waters.

Senegal’s New President Launches State Probe. Bassirou Faye, the newly elected President of Senegal, has oil companies on tenterhooks after he called for a nationwide audit of the oil, gas and mining sectors, potentially affecting the launch of Woodside’s (ASX:WDS) Sangomar project.

Shell Asks for Long-Term Venezuela Guarantees. UK-based oil major Shell (LON:SHEL) asked the US government for a long-term license before it takes an FID on the 4.2 TCf Dragon offshore gas field in Venezuela, with the current White House waiver running out in October 2025.

Mexico Goes on an Oil Export Cancellation Spree. Mexico’s state oil firm Pemex asked its trading unit to cancel up to 436,000 b/d of crude exports in April to have enough crude for the Dos Bocas refinery, just as the country’s crude production has fallen to a 45-year low in recent months.

Some Fields Are Too Good to Give Up. The Dutch parliament’s vote on a bill that would permanently ban gas production from the giant Groningen field has been delayed indeterminately, and despite a preliminary shutdown in October 2023 it could still be reactivated in exceptional cases.

US to See Extremely Active Hurricane Season in 2024. The annual hurricane forecast released by CSU sees the Atlantic season well above average hurricane activity, expecting 23 named storms out of which 5 could transform into major hurricanes, higher than the 3.2 per season average.

Petrobras Readying for Corporate Turmoil. Brazilian media are reporting that the top executive of Brazil’s national oil company Petrobras (NYSE:pBR) Jean Paul Prates might be replaced in the coming days amid an ongoing dividend spat between him and the country’s Energy Minister.

US Tightens Screws on Iranian Oil Tankers. The US Treasury Department sanctioned 13 oil tankers and their UAE-based operator Oceanlink Maritime for allegedly transporting Iranian oil on behalf of the country’s military, bringing the number of sanctioned ship to 258 tankers.

Copper Rallies on Resurging Supply Risks. The price of copper has jumped to the highest since January 2023 above $9,360 per metric tonne as reports of Ivanhoe Mines’ (TSE:IVN) giant DRC Kamoa-Kakula complex seeing a 6.5% drop in Q1 production alerted the market to the risks of tight supply.

Myanmar Conflict Might Threaten Chinese Infrastructure. Internecine strife in Myanmar might soon endanger Chinese crude supply as separatist militias from the Arakan Army have seized territory only miles away from Kyaukpyu port, feeding Petrochina’s 260,000 b/d Anning refinery in southwest China.


Screen Shot 2024-04-05 at 6.24.52 PM.pngScreen Shot 2024-04-05 at 8.37.35 PM.pngScreen Shot 2024-04-05 at 8.40.22 PM.pngScreen Shot 2024-04-06 at 5.10.05 AM.pngScreen Shot 2024-04-06 at 5.14.00 AM.png

Market bouncing back after a 'strong' jobs report.



Screen Shot 2024-04-06 at 5.21.46 AM.pngScreen Shot 2024-04-06 at 5.22.50 AM.png

As long as bank reserves keep above that $1500 level, liquidity should not enter a crisis. But the RRP is approaching zero. It is currently a supplier of liquidity.


Screen Shot 2024-04-06 at 5.33.26 AM.pngScreen Shot 2024-04-06 at 5.33.38 AM.png
All indicating for a strong Yuan and weak USD. That actually requires China to allow the Yuan to rise. The Treasury can try and weaken the USD, but unless China allow the Yuan to rise (unpeg) not much will change.

The flip side to a strong jobs report is still the consumer: ie. can/does the consumer still consume? The McDonald's article (example) rather suggests that even with 'good' employment, businesses (due to rising costs) are raising prices past the point of consumer comfort and that they are pulling back in their spending. If you spend $400 on groceries when you used to spend $200, that's $200 that you don't spend somewhere else. Possibly you cut back on the groceries, whatever, it makes no difference.

Poor spending = declining revenues = job losses. It's a matter of time.

This is the effect of a secular and pernicious inflation. For equities it is uniformly bad.

This is the weekly heat map.

Screen Shot 2024-04-06 at 5.55.46 AM.png

After the McDonald's article, look at restaurants: not great. Look at consumer: not great. Early warning signs?

Heat map 3mths:

Screen Shot 2024-04-06 at 5.59.06 AM.png

Restaurants still not great. They represent discretionary spending (for the most part, I know some people live on takeaways) for most people. An easy expense to cut back on, take some home made sandwiches for lunch rather than buy a takeaway.

Screen Shot 2024-04-06 at 6.03.27 AM.png

The shift is underway. Which is why the job numbers requires a context. Of course the inflation number is just complete BS.

Add a weaker USD and stronger Yuan, prices go up on previously cheap Chinese products. Check out WMT. The single largest importer of Chinese goods. Of course you still have to buy them, no option, the US has no manufacturing base left. China benefits even more, accumulating even more USD.

Where are those USD allocated? Into UST? LOL.

Gold.


jog on
duc
 
From last week:

Screen Shot 2024-04-06 at 12.20.41 PM.png

Energy the big winner.

Moving into next week:

Screen Shot 2024-04-06 at 12.20.05 PM.png

Downgraded. No longer a +3 market. Down to +1

Sectors:

Screen Shot 2024-04-06 at 12.24.25 PM.png

Screen Shot 2024-04-06 at 2.04.47 PM.pngScreen Shot 2024-04-06 at 2.07.34 PM.png

Looks to be ready to move lower. Markets do not like court cases.

Screen Shot 2024-04-06 at 7.37.06 AM.png



Screen Shot 2024-04-07 at 9.40.45 AM.png

SLV looking at a legitimate breakout higher.

Mining sector:

Screen Shot 2024-04-07 at 7.46.59 PM.pngScreen Shot 2024-04-07 at 7.47.13 PM.png

I'll be adding this Monday.

jog on
duc
 
Jamie Dimon's Letter: https://reports.jpmorganchase.com/investor-relations/2023/ar-ceo-letters.htm

Definitely worth a read.

ChinaScreen Shot 2024-04-09 at 6.11.19 AM.pngScreen Shot 2024-04-09 at 6.11.41 AM.pngScreen Shot 2024-04-09 at 6.12.01 AM.png
Russia: https://www.reuters.com/markets/europe/russias-net-fx-interventions-be-near-zero-april-2024-04-03/

Screen Shot 2024-04-09 at 6.30.18 AM.png

This will not just be Russia. More and more other countries will transact in their own fiat currencies, settle trade balances in gold.


Screen Shot 2024-04-09 at 5.54.08 AM.png

I have been holding FXI for a couple of weeks now. Getting ready to breakout technically. Fundamentally, strong.

Employment:

Screen Shot 2024-04-09 at 5.58.54 AM.png

Actually Trade Union membership is at highs not seen since the early 1970's. No way the Unions sit back and get shafted. They will be agitating for pay rises as inflation will be on the rise as we move forward. Powell is totally boxed in. Lose - lose.

Silver:

Screen Shot 2024-04-09 at 6.03.33 AM.png

Chinese will buy silver as money. Their preference may well be gold, but historically silver was used as currency for hundreds of years in China. Obviously far cheaper than gold for the average person. 1.4 billion persons buying 100oz silver each....hmm.

Mr flippe-floppe-flye:

Screen Shot 2024-04-09 at 6.05.00 AM.png

Oil will be volatile. Oil is also moving higher. The move higher in oil will be offset by a higher price of gold. The inflation of fiat currencies will this time be absorbed by gold which will stabilise POO. Until that happens, POO will rise driving some nasty inflation on top of the debt issue.

jog on
duc
 
From today:

Screen Shot 2024-04-09 at 1.52.04 PM.png

If you want physical gold but as a security with convertibility...Sprott PHYS.

Screen Shot 2024-04-09 at 2.47.17 PM.png

NASDAQ topping out?

This weeks releases:

Screen Shot 2024-04-09 at 2.50.31 PM.png

Wednesday CPI and then Friday we are back into earnings with the Financials.

Bad news is now bad news I'd say. Disappointing earnings or more likely forward guidance will be punished.

Screen Shot 2024-04-09 at 2.51.32 PM.pngScreen Shot 2024-04-09 at 2.51.42 PM.pngScreen Shot 2024-04-09 at 2.53.09 PM.png

So far, not great.

Screen Shot 2024-04-09 at 2.53.25 PM.png

And it will be hot.

Screen Shot 2024-04-09 at 6.46.06 AM.png

Energy is going to increasingly become an issue.

jog on
duc
 
Screen Shot 2024-04-10 at 4.52.54 AM.pngScreen Shot 2024-04-10 at 4.53.18 AM.png

CEOs buyback stock because their massive Option awards dilute the stock. Nothing to do with profitability.

Screen Shot 2024-04-10 at 4.53.40 AM.pngScreen Shot 2024-04-10 at 4.54.48 AM.png

And essentially the Chinese told her to fuc* off and mind her own business. LOL.


Screen Shot 2024-04-10 at 4.58.13 AM.pngScreen Shot 2024-04-10 at 4.58.40 AM.png


The US military is in disarray. 30yrs after the shock & awe of Desert Storm, a shadow of themselves. Can't even manufacture the ammunition.

Oil News:

German industrial production finally broke through the cycle of gloom after it posted a 2.1% increase in February, well above the consensus expectation of a 0.5% rise month-over-month.

- Although Germany’s manufacturing is still below its pre-pandemic levels, the surprise hike in activity fuelled this week’s copper rally and reinforced the expectation of the ECB cutting rates from June onwards.

- In contrast to actual figures, business sentiment in Germany remains sour as the S&P Global PMI index dropped as low as 41.6 in March, from 42.5 in February, suggesting the country’s manufacturers don’t necessarily share the optimism.

- Europe has been the laggard continent in terms of rising commodity demand as oil demand keeps on trending flat, electricity demand has now declined for two consecutive years, and steel production has fallen to its lowest level on record.

Market Movers

- UK-based oil major Shell (LON:SHEL) and Saudi Aramco (TADAWUL:2222) are reportedly vying for the LNG assets of Pavilion Energy, a trading firm set up by Singapore’s Temasek, in a deal that could be worth 2 billion.

- UK oil major BP (NYSE:BP) is reportedly nearing an agreement with Anglo-French upstream firm Perenco to divest its Amherstia, Cashima, and Immortelle gas fields in Trinidad and Tobago.

- French energy major TotalEnergies (NYSE:TTE) has postponed a final investment decision on its Papua LNG project to 2025, saying more alignment would be required with engineering contractors.

Tuesday, April 09, 2024

Brent crude futures have established a firm footing over the $90 per barrel mark and not even a brief opening for a potential ceasefire in Gaza managed to pull it lower. Mexico cutting oil exports will ensure bullish sentiment continues to build in the coming weeks, with further directionality set by the US and Chinese inflation numbers this week, potentially even paving the way for a climb closer to $95 per barrel.

LNG Prices Keep Calm Despite Strong Asian Buying. Spot LNG prices in Asia have been rangebound in recent weeks around $9 per mmBtu despite higher-than-usual buying from China and Japan as European LNG imports are set to drop to a 7-month low of 8 million tonnes on high gas inventories.

Mexico Keeps on Cutting Oil Exports. Having withdrawn 436,000 b/d of crude oil exports in April, Mexico’s state oil firm Pemex intends to cut its May exports by 330,000 b/d. The country has refrained from declaring force majeure on its supply contracts despite stretched crude production.

Guyana Struggles to Launch Its Gas Bonanza. Whilst Guyana’s oil production has been surging recently, its $1.9 billion gas-to-power project is running at least six months behind schedule, with operator ExxonMobil (NYSE:XOM) forced to halt 400,000 b/d of production for a month in Q3.

Iraq Mulls Restart of Idled Pipeline. The restart of Kurdish crude exports to the Turkish coast is unlikely to materialize anytime soon, but Baghdad is repairing the 350,000 b/d Kirkuk-Ceyhan pipeline destroyed by ISIS in 2014, potentially re-routing some of its exports as soon as next month.

Hedge Funds Embrace the Bullish Mood. Portfolio investors purchased the equivalent of 37 million barrels in key oil-related futures and options in the week ending April 2, with net length in Brent now standing at 300 million barrels whilst the outlook on WTI is more cautious, at 208 million barrels of net length.

Nigeria’s Fuel Woes Bubble to the Surface. Nigeria’s national oil company NNPC is reported to owe $3 billion to fuel traders in the African country as the reimposition of fuel subsidies makes retail sales a loss-making business for the NOC, with payments taking more than 130 days to come through.

Shell Mulls Delisting from London Exchange. UK-based energy major Shell (LON:SHEL) is reportedly looking at all options including switching its listing from London to New York, saying that if the European valuation gap doesn’t improve by mid-2025, the company could make a move.

Fierce Pipeline Dispute Moves to FERC. US midstream firm Energy Transfer (NYSE:ET) has asked the Federal Energy Regulatory Commission to look into the activities of Williams Cos Inc., saying it builds interstate pipelines without approval whilst the latter claims ET is blocking other operators from building new projects by not allowing them to cross existing pipes.

Guinea Is Running Out of Electricity. The African country of Guinea is facing an electricity market collapse as the state-owned utility firm announced it would deepen power cuts as energy sources get depleted, stemming from extremely low hydropower generation as well as breakdowns at thermal plants.

Copper Bulls Are Riding High Again. The three-month LME copper benchmark contract reached $9,450 per metric tonne for the first time since January 2023 as a steady inflow of hedge fund investments keeps the bullish momentum going, buoyed by improving manufacturing data from the EU.

Panama Canal Water Levels to Rise. The Panama Canal Authority indicated that water levels in the Gatun Lake should gradually increase from the end of May as the rainy season takes over in Latin America, with drought-heavy El Nino conditions giving way to La Nina, bringing more rainfall.

Leaking Gulf of Mexico Pipeline to Restart Soon. The Main Pass Oil Gathering (MPOG) pipeline has successfully undergone a line integrity test and will be restarted soon after transportation was halted for more than six months, shutting 61,000 b/d of offshore production, following a November spill.

Floods Prompt Russian Refinery Shutdown. Russian oil company Forteinvest shut its 135,000 b/d Orsk refinery in southern Russia because of unprecedented flooding on the Ural River, halting ongoing maintenance works as its product stocks would be enough to cover 10 days of regional fuel consumption.

Screen Shot 2024-04-10 at 5.08.49 AM.png

Adds to the inflationary pressure (reduced manufacturing from Germany).

Screen Shot 2024-04-10 at 5.16.49 AM.png

USD still looking dangerous.

With a failure from Yellen in China (if she failed here also) the USD moves higher. Bad. Very bad. Possibly where she has offended the Chinese, they let the USD rise against CNY. The Chinese (to date) have been since San Francisco, helping a weaker USD. If they take the brakes off and USD rises ....watch out, Gold higher EVERYTHING else lower.

Screen Shot 2024-04-10 at 5.15.39 AM.png

The Gold/Copper ratio, historically has been the most accurate guide as to where interest rates should be. This has diverged massively recently (last 2 yrs or so) as the Fed plays a different game. This market is not a healthy market. It is a market predicated on lots of liquidity being provided.

Equity VIX mumbling:

Screen Shot 2024-04-10 at 5.13.02 AM.png

More importantly Bond VIX

Screen Shot 2024-04-10 at 5.13.46 AM.png

CPI data out tomorrow. It's not going to be lower. It will be higher, but how much higher and will that matter?

Before I leave for work

Screen Shot 2024-04-10 at 5.27.18 AM.png

Equities are struggling the last week or so.

jog on
duc
 
Screen Shot 2024-04-11 at 7.24.55 AM.png

So inflation ran hot (even excluding food and energy LOL, pathetic) and the Fed's credibility is shot.

Can the Fed now 'lower' rates saying that inflation is under control? Clearly not. The Fed will now have to wait for the recession, which is slowly building to lower the rates.

The equity markets are unimpressed.

The question really is: are they down for a day and all the BTD FOMO show up or, are we heading lower?

Screen Shot 2024-04-11 at 7.28.58 AM.pngScreen Shot 2024-04-11 at 7.51.37 AM.png

Well long end bonds are looking weak and yields are again looking to move higher (lower prices). The long end of the curve never really bought the Fed is cutting narrative.

Screen Shot 2024-04-11 at 7.34.30 AM.pngScreen Shot 2024-04-11 at 7.36.33 AM.pngScreen Shot 2024-04-11 at 7.36.45 AM.png

It's just not a good look.

Screen Shot 2024-04-11 at 7.37.06 AM.png

Which is why we still have liquidity and have not yet had a major tumble lower.

The MMF were heavily, $2T+ in the Fed RRP. When that closed down, they moved en masse to the SHORT END of the curve, buying the Treasury paper:

Screen Shot 2024-04-11 at 7.57.32 AM.png

So Yellen made a good move, buying more time for the government, the Fed and equity markets. The RRP money is running low. Next up to keep the liquidity in the UST market: run down the TGA. There is another $600B in there.

Then we have new taxes: of course CEO's have been selling stock hand over fist. The tax take should be pretty good.

After that...we have issues. The ISDA is one way out. Banks can create cash to buy UST that never have to be marked-to-market, have no effect on reserves etc. Free money. QE.

This QE will leak out into the economy because it is not QE = monetary policy, it is QE = fiscal policy. Fiscal QE does flow into the economy.

So today's inflation numbers are the continuation of the secular inflation to come.

Screen Shot 2024-04-11 at 8.05.30 AM.png

So what does an HVAC company in the Industrials space have to do with AI? Well, investors seem to have quickly caught on to the fact that powering AI takes A LOT of hardware in the form of servers and other electrical equipment. And those servers get HOT.

That's where a company like MOD -- which specializes in industrial thermal management (keeping server warehouses cool) -- comes in. On Modine's website, Data Centers is now at the top of the fold.

Along with keeping AI cool, Modine has broader infrastructure tailwinds with its HVAC business, and it also has solutions for thermal management of commercial EVs.

Given the fact that MOD has ALREADY been a 10-bagger, it would be hard to stomach a long trade in the name now. Instead, use this example to remember to always think outside of the box when it comes to finding new ideas. Often times the biggest winners come from areas that are off the beaten path of the consensus.

So the market is now closed:

Screen Shot 2024-04-11 at 8.07.34 AM.pngScreen Shot 2024-04-11 at 8.07.54 AM.png

No BTD appeared today. Tomorrow will be a test. Also we have bank earnings on Friday.

Screen Shot 2024-04-11 at 8.09.59 AM.png

SPY is not looking good. QQQ looks even worse.

jog on
duc
 
Follow up post:

For tomorrow:

Screen Shot 2024-04-11 at 10.08.23 AM.png

Screen Shot 2024-04-11 at 10.10.25 AM.pngScreen Shot 2024-04-11 at 10.10.35 AM.pngScreen Shot 2024-04-11 at 10.11.24 AM.png

This illustrates the effect of 'Passive Flows'. What happens in reverse? We may be about to find out.

Screen Shot 2024-04-11 at 10.12.31 AM.pngScreen Shot 2024-04-11 at 10.13.17 AM.png

Jobs being created that are a fuckin* waste of time: government jobs.

Screen Shot 2024-04-11 at 10.14.57 AM.pngScreen Shot 2024-04-11 at 10.15.31 AM.pngScreen Shot 2024-04-11 at 10.15.59 AM.png

Which of we knew. After all we pay the bills on this.

Screen Shot 2024-04-11 at 10.16.31 AM.png

Which is courtesy of all those Options awards and share buybacks to prevent over-dilution of the stock.

Screen Shot 2024-04-11 at 10.16.46 AM.png

Buy yield at market bottoms. Not at the tops.

Screen Shot 2024-04-11 at 10.18.40 AM.png

jog on
duc
 
View attachment 174534

So inflation ran hot (even excluding food and energy LOL, pathetic) and the Fed's credibility is shot.

Can the Fed now 'lower' rates saying that inflation is under control? Clearly not. The Fed will now have to wait for the recession, which is slowly building to lower the rates.

The equity markets are unimpressed.

The question really is: are they down for a day and all the BTD FOMO show up or, are we heading lower?

View attachment 174532View attachment 174537

Well long end bonds are looking weak and yields are again looking to move higher (lower prices). The long end of the curve never really bought the Fed is cutting narrative.

View attachment 174531View attachment 174530View attachment 174529

It's just not a good look.

View attachment 174528

Which is why we still have liquidity and have not yet had a major tumble lower.

The MMF were heavily, $2T+ in the Fed RRP. When that closed down, they moved en masse to the SHORT END of the curve, buying the Treasury paper:

View attachment 174538

So Yellen made a good move, buying more time for the government, the Fed and equity markets. The RRP money is running low. Next up to keep the liquidity in the UST market: run down the TGA. There is another $600B in there.

Then we have new taxes: of course CEO's have been selling stock hand over fist. The tax take should be pretty good.

After that...we have issues. The ISDA is one way out. Banks can create cash to buy UST that never have to be marked-to-market, have no effect on reserves etc. Free money. QE.

This QE will leak out into the economy because it is not QE = monetary policy, it is QE = fiscal policy. Fiscal QE does flow into the economy.

So today's inflation numbers are the continuation of the secular inflation to come.

View attachment 174540

So what does an HVAC company in the Industrials space have to do with AI? Well, investors seem to have quickly caught on to the fact that powering AI takes A LOT of hardware in the form of servers and other electrical equipment. And those servers get HOT.

That's where a company like MOD -- which specializes in industrial thermal management (keeping server warehouses cool) -- comes in. On Modine's website, Data Centers is now at the top of the fold.

Along with keeping AI cool, Modine has broader infrastructure tailwinds with its HVAC business, and it also has solutions for thermal management of commercial EVs.

Given the fact that MOD has ALREADY been a 10-bagger, it would be hard to stomach a long trade in the name now. Instead, use this example to remember to always think outside of the box when it comes to finding new ideas. Often times the biggest winners come from areas that are off the beaten path of the consensus.

So the market is now closed:

View attachment 174542View attachment 174541

No BTD appeared today. Tomorrow will be a test. Also we have bank earnings on Friday.

View attachment 174543

SPY is not looking good. QQQ looks even worse.

jog on
duc
Dr Fly never disappoints
 
USD strength will cause issues:

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USD looking bullish, despite Yellen and Treasury talking USD lower. We have the San Francisco accord with China. Still USD moving higher.

More countries have moved off the USD for energy, notably China. Europe not so much so currently. Japan. Maybe. If not, then USD higher is going to be a problem for the UST market.

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UST market vol. picking up. 130+ is the danger zone.

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BTD?

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Short end jumping.

That is different.

I'm guessing that many were holding short end in anticipation of rate cuts, and price goes higher (yield goes down) and this CPI number put the nail in the coffin of rate cuts this year. Unless a recession hits prior.

We do know that the MMF have (to date) moved from the Fed's RRP to the short end. In huge size. To watch closely.

jog on
duc
 
Screen Shot 2024-04-12 at 5.02.47 AM.pngScreen Shot 2024-04-12 at 5.11.56 AM.png
The debt issue is still under-appreciated by the equity market.

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Interest payments are moving to $1.6T making interest the largest single cost. With yields rising due to the bond market realising that inflation coming down was a fantasy, that cost could (will) move even higher.

The only way to prevent this is YCC. Which means of course any pretence of holding inflation below double digits is gone.




Screen Shot 2024-04-12 at 5.18.36 AM.png

Full: https://unherd.com/2024/04/its-time-to-send-nato-troops-to-ukraine/

The US can no longer fight a protracted war. Particularly one that will be funded by China against them. The vaunted military/industrial base is gone, off-shored to China.

Even what does remain is compramised: https://www.defensenews.com/naval/2...twitter&utm_medium=social&utm_campaign=tw_dfn

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SPY is close to a short term BTD type of scenario.

But

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USD is making a move higher, which is trouble.

Screen Shot 2024-04-12 at 5.24.22 AM.png

MOVE is EOD and not registering the USD move higher currently. But assuming USD does not fall back, MOVE will be higher EOD. 130 is the danger zone.

Screen Shot 2024-04-12 at 5.28.17 AM.png

Yields are up across the curve.

The CPI number is forcing a group re-think at least in the bond market.


jog on
duc
 
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