Australian (ASX) Stock Market Forum

DDD March 2024

well i stick ASX listed health-care stocks

and while i am trying to carefully accumulate them , the issue is M&A activity in my selections ( they even got around to CAJ )

i suspect i will be mostly pushed out of the sector as i refuse to buy the over-priced large cap healthcare stocks
SHL ;)
Largest banks:

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They look pretty impressive. Probably 50% have had a bail out. LOL.

So the market loved Mr Powell's promise of rate cuts the the FFR. Of course he is now a 'dove':

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$300B/month and accelerating.

Melt-ups what do they look like are we in one?

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Probably need 8000 in S&P500 for an epic melt-up/bubble.


jog on
So a bit of history contrasted with today.

First off:


From history:

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Is it different this time?

Of course that's just stocks. Also to take into account in 1929 there was also a 'debt' bubble post WWI which was sovereign in nature, just like today.

It is highly unlikely that the Fed will repeat the deflationary posture that was adopted in 1930 today. Today it will be out and out inflation. Fiat currencies are in the firing line.

Next post:
In high and hyper-inflationary periods:

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Will the US go hyper-inflationary?

I don't think so (I certainly hope not) but what if it is close or closer than you currently envisage?

Stocks will protect you to a point, but it's still not comfortable:

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And that assumes we get a Volcker or someone that can put the genie back in the bottle after the inflation has diminished the debt to levels where government is again solvent.


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jog on
Start with the former Bond King, Bill Gross:

For the bulls:

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Oil News:

Long positions held by hedge funds and other money managers have seen the strongest influx of bullish interest since September 2023, indicating the market believes geopolitical pressures will keep on pushing oil prices higher.

- Net long positions held in Nymex WTI rose by 50 million barrels in the week ending March 19, whilst ICE Brent net longs increased by almost 55 million barrels, the biggest positioning move of the year so far.

- With physically deliverable Nymex WTI being the riskier financial instrument to bet on, ICE Brent has seen its net length soar to the highest level since March 2023, coming in at 289 million barrels (combined with the period a year ago, short positions have tripled in size to 70 million barrels).

- Proving that oil is becoming fashionable again amidst Middle Eastern conflict and Ukrainian drone strikes on Russian refineries, the combined open interest of WTI and Brent now stands at 518 million barrels equivalent, up 14% since the beginning of this year.

Market Movers

- French oil major TotalEnergies (NYSE:TTE) restarted production at Denmark’s Tyra offshore gas field after an almost 4-year-long major redevelopment project, aiming to produce 5.7 MCm per day.

- China’s largest listed miner Zijin Mining (SHA:601899) has signaled that its global expansion will be slowed down by increased US efforts to limit China’s clout in the mining industry, despite already owning copper and gold mines from Canada to Africa.

- Colombia’s oil firm Ecopetrol (NYSE:EC) was awarded 19.9% of US infrastructure firm McDermott, ending a prolonged legal dispute that started in 2016 when it sued the latter for doubling construction costs during a refinery modernization.

Tuesday, March 26, 2024

Brent prices continue to hover around $87 per barrel, with the recent rally consolidated by Russia doubling down on its OPEC+ production cuts, the US dollar continuing to weaken, and any semblance of an Israel-Palestine truce being off the cards right now. With Brent futures seeing signs of a stellar golden cross pattern developing, it might only take one bullish piece of news for $90 per barrel to happen.

Kurdish Production Sees No Light at the End of Tunnel. One year since the shutdown of Kurdish oil flows through the Kirkuk-Ceyhan pipeline, Iraq is yet to find common ground with oil companies operating in the separatist region, with Baghdad seeking to revise production terms and rights.

US Expedites SPR Crude Replenishments. The Biden administration has shifted from its usual 3 million barrel per month solicitations and announced two additional purchases of strategic crude stocks, aiming for 4.75 million barrels in August and 4.5 million barrels in September.

Libya Gets Ready for Government Turmoil. Libya’s government watchdog has temporarily suspended oil minister Mohamed Aoun, representing the Tripoli-based Government of National Unity, for alleged legal violations, several months after he called for the removal of NOC head Bengdara.

Sudan Oil Production Stuck as War Rages On. The war between Sudan’s army and the Rapid Support Forces paramilitary has forced Khartoum to declare a force majeure on pipeline deliveries to Port Sudan, blocking some 150,000 b/d of oil production from South Sudan.

Exxon Calls for Lower Prices to Make SAF Work. According to ExxonMobil, costs are the main obstacle to ramping up production of sustainable aviation fuel (SAF) as biofuel from used cooking oil or agricultural waste is 5 times more expensive than kerosene, limiting its investment appeal.

US Natural Gas Rig Count Drops to Two-Year Low. With US natural gas prices down 34% so far in 2024, the number of active gas rigs operating across the United States dropped to 112 as per Baker Hughes, the lowest number since January 2022 as Haynesville drillers keep on curbing activity.

Pemex Keeps on Failing Its Methane Pledges. Despite a damning report from the UNEP calling for immediate readjustments at Pemex’s Zaap-C offshore platform, satellite imagery shows it is still flaring 300 MCf per day of methane, with media reports indicating the Mexican oil firm is aware of what it would take to mitigate that but does nothing.

Copper Stock Surge to Dent Price Rally. Shanghai Futures Exchange-managed copper stocks have soared to more than 285,000 metric tonnes, the strongest inventory build-up since the COVID-ridden year of 2020 and a sevenfold increase since the beginning of this year, capping the price rally.

US Urges Ukraine to Stop Striking Russia Refineries. According to the FT, the Biden administration is urging Ukraine to halt drone strikes on Russian energy infrastructure, on the heels of several refinery attacks in March, warning that they risk retaliation and ratcheting up global energy prices.

Chinese Disclosure Sheds Light on Exxon’s Huge Find. US oil major ExxonMobil (NYSE:XOM) has been reticent about the size of its Guyanese discoveries, although project partner CNOOC in its 2023 results presentation said their recent Lancetfish discovery holds 730 million barrels.

Goldman Sees Hope for Commodities in 2024. US investment bank Goldman Sachs believes commodities may return 15% over 2024 as central banks start cutting interest rates, emphasizing that gains wouldn’t be universal and that copper, aluminum, gold, and oil products will lead the way.

Russia to Prioritize Gazprom over Novatek. The Russian government greenlighted selling Shell’s (LON:SHEL) 27.5% stake in the Sakhalin-2 offshore project to state-controlled Gazprom for $1.03 billion instead of private LNG-focused producer Novatek, raising the former’s shareholding to 77.5%.

Court Suspends US Climate Disclosure Mandate. The 5th US Circuit Court of Appeals has approved a request from oilfield services firm Liberty Energy to halt enforcement of the climate disclosure mandate encompassing GHG emissions and risks, agreeing that the SEC overstepped its remit with the rule.

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jog on
Fast approaching the end of March. One more trading day left. Market closed for Good Friday. Five days off from the day job after today.

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Divergence. Also DJI and DJT (Industrials & Transports) are diverging. Warning sign.

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Most of the commodity ETFs are delisted.

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These you can still buy.

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Opened a position in the miners.

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Very interesting chart.

The MMF are still the buyers, but they will cease one the RRP goes to zero. Then, you need a new buyer. Hence the ISDA. Banks need to (once again) load up their balance sheets.

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I would say that the 'Crack Up Boom' is well underway. Can still run until vertical, which takes the market to say, oh, towards 8000 S&P500. Look at the 1929 Dow.

The Fed and Treasury just need to keep the UST market humming and avoid the blow-up. Of course it's coming, can't be avoided unless QE via the commercial banks resumes (which is highly likely).

So if the commercial banks resume QE what/where is the risk? Inflation will become highly visible.

When the Fed did QE expanding its balance sheet, the new 'high powered' money never left the system in any quantity because the commercial banks did not increase their commercial lending other than to finance corporate bonds which were then onsold to insurance companies etc. This was a 'Monetary' QE.

This time however, the new high powered money is being spent by government. It is a 'Fiscal QE' which is highly inflationary. It is also exacerbated by a weak USD (needing to get weaker) and higher commodity prices, the most important being oil/energy.

Inflation rate of change has again turned up. Remember, prices never came down, they just slowed in their ascent higher. They are preparing for another leg higher.

So equities are an inflation hedge to a point. Obviously some are better than others.

jog on


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So Ray Dalio on China:

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Wrapping up the month:

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And now the Fed's error:

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Now this chap is definitely part of the 'establishment' and politically connected and generally an apologist.

Yet here we are and he is admitting that the true picture of inflation has always been downplayed and manipulated. So most people who participate in the financial markets are well aware of this fact.

Here is the issue:

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The last time that the Debt/GDP ratio was so dangerous, the Fed kept the inflation figure (manipulated or not) high enough, long enough, to errode that Debt/GDP ratio lower. Much lower.

This time, Powell, caving into or miscalculating or simply not understanding the dangers, hiked rates through the roof ( a la Volcker) BUT unlike Volcker, the debt had not yet been eroded away. So instead of accomplishing what Volcker accomplished, Powell has simply exacerbated the problem as the higher interest rates, due to the compounding, are increasing the debt, the interest payments and inflation all at once.

Of course the only answer is to return to sky high inflation, somewhere around that 20% mark for a decade or so. Powell has failed.

Are markets pricing this in?

Equities are (an imperfect) inflation hedge. Some sectors (obviously) are better than others. Also you would need to take into account the fiscal priorities in allocating funds. It would be nice to find some charts of various sectors during the late 1960's thru to 1980 that mirror the current sectors somewhat.

Now the 'general consensus is that when rates come down, the market takes off higher. Hmmm. I'm really not down with that analysis. In my day job I earn good money. Even I am getting pissed off with the grocery bill, shipping costs of anything, etc. When rates come down inflation will re-accelerate. Sales of many things will fall because the peasants cannot afford them. The peasants are the majority.

Lowering rates may be the very catalyst that launches the recession.

If jobs are cut from falling demand and the UE rate jack-knifes higher, equities will reverse very quickly. Very quickly.

jog on