Markets mull a softer spanking
When the belt came off, (my belt) I knew my mom meant business. But sometime between tiny hiney and adolescent attitude, I learned how to cut a belt whipping short. I’d take the first wallop like a champ, whimper quietly on the second one, bring out the ugly cry, and -- voila! Spanking over. (Note: Actual tears here are very helpful – and might produce cake).
Speaking of spankings, as we wound down the week on a positive note, we read this uptick explanation from Factset:
- “… partial rate reprieve via… article in WSJ that Fed set to go 75 bp this month but could debate whether and how to signal for a less aggressive pace in December.”
- Translation: An influential writer muses whether maybe after the next sharp Fed rate rise, the following Fed rate rise might be preceded by discussions about a slightly less big rate rise. (Expect one more good hard spanking then hope for a softer spanking if it’s decided that almost enough spanks were already spunk).
Stockholm syndrome in China. In another inflation-related comment today, Factset says:
- “No Xi pivot on zero Covid at the China party congress…”
- Translation: Chinese Mao-to-be, Xi, while drinking deeply this week at the Party’s party, hasn’t hinted a de-strangling of the world’s factory, currently crippled with his extreme Covid closures. This (stunted supply) is another inflation-driver, and helps explain some of the weirdly empty retail shelves way over here in Prince George. My guess is that Xi is flexing, like one of Mao’s famous swims. When he’s ready, he’ll capriciously release the Covid freeze-up, declare victory, and take credit for the market upswing resulting from not quite choking the economy to death. Thank-you Master - feels so good when the choking stops!
Friday Charts:
U.S. 10-year Treasury yield streak
(see chart on the right):
The benchmark of all interest rates
have risen for 11 consecutive weeks,
the longest streak in 40 years.
LNG vessels (see chart – left) The demand to charter ships remains high. In 2021, rates were in a range from $30,000 to $300,000, but now approach $500,000.
Nice Price: Far from a pernicious price gouging moment, the freely increased rate is a clear signal for shipbuilders. The global fleet of 650 ships, will increase over the next three years by 285 vessels. (reference VesselsValue).
Cool Trivia: The storage and transport of natural gas requires it being cooled to a liquid at roughly minus 260 degrees Fahrenheit
Truss Fall: Hopefully the UK Prime Minister still has her movers’ phone number. After comparing herself to Maggie Thatcher, she put forward a brief set of ideas which the market interpreted as inflationary, and she basically got gonged. She’ll exit No. 10 just 44 days into the job, a new record for British PM brevity. The Wall Street Journal notes that this episode displays how the maneuverability of governments is becoming fiscally restricted by financial reality. Maybe the fever is cresting.
Question: Can financial markets come visit Ottawa next week, and bring their financial reality for a chat? Oh, and bring your gong. Hey, thanks.
Observation: Stalin stood atop the USSR for nearly 30 years, bungling financially at every step. But leadership constancy is much enhanced when you can shoot anyone you want. I’ll take our goofy, messy, capricious Western democracy over the tidy certainty of a dictator any time.
Weekly synopsis:
- Are earnings the next shoe to drop? - Amid what seems to be a never-ending barrage of headwinds, market uncertainty has zeroed in on the U.S. corporate profit outlook. We look at how investors can expect the 2023 earnings picture to take shape, and what that means for U.S. equity exposure in portfolios.
- Regional developments: Canadian housing market remains under pressure; U.S. economic data signal growing recession risks; UK Prime Minister Truss resigns; China’s Party Congress shows policy continuity
More here:Global Insight Weekly
Enjoy your weekend!
Mark