Business, Econ and Markets etc:
- Credit Suisse is reportedly weighing options to attract outside capital to pursue a spinoff advisory and investment banking business. But it is also selling a five-star Savoy Hotel in Zurich.
- Vanguard Group’s ETF business is closing in on Blackrock with $ 45bn of inflows in the third quarter.
- Ray Dalio has given up control of Bridgewater, finally letting go of his role in the business.
- Dollar-holding tourists will enjoy a bargain experience once Japan re-opens its borders to vaccinated tourists on October 11.
- Average two-year fixed rate UK mortgages have increased to above 6 per cent, breaching a level unseen since 2010.
- Germany’s finance minister has blamed the United States and other gas suppliers for the significant price increases in natural gas.
- Apollo Global Management and Sixth Street Partners are no longer looking to provide financing for Musk’s Twitter buyout.
- Saudi energy minister refuses to answer question from Reuters.
- Louisiana state divests $794m from Blackrock in ESG boycott, as net zero would harm the state’s fossil fuel industry.
- Japan’s foreign reserves drop by record on market shakeout, FX intervention.
Japan supposedly spent about $20bn intervening to support the yen vs the dollar. Was it worth it? On Friday, USDJP was testing the pivotal 145 zone yet again. The long term chart tells the story best:
There’s so much going on in the world it’s easy to underplay what’s going on with the yen. Markets remain distracted by Russian Ukrainian affairs, potential nuclear conflict, the collapse of Credit Suisse and of course the “anti-growth” witchhunt in the UK. But the yen’s collapse is really the thing to watch given that QE was largely a Japanese invention, but also because Japan is now the largest foreign holder of US Treasuries. Since beginning its quantitative easing path in Japan since at least 2001, the BoJ has gobbled up an insane amount of domestic assets too, from JGBs to almost every ETF under the sun.
Here’s the latest snap shot of the assets on the BoJ balance sheet for context:
With the BoJ stubbornly refusing to lift its way out of negative interest rate territory, the revival of the yen carry trade — where investors borrow yen to sell it against higher yielding currencies — has become a key driver of yen weakness. The process drives up demand for anything but yen.
It may be time to start wondering what sort of corporates have taken advantage of the arbitrage to avoid higher cost of funding at home, and what the risks are if and when the BoJ finally does lift rates and the yen’s weakness reverses abruptly. Inflation is already rising. But this trend could get more pronounced if there’s a cold winter in Europe. The biggest competition for free-float LNG cargoes is likely to come from Japan. The government has already said it will provide support through public financial institutions to help utilities to acquire the sums they need from the spot market. Most recently it has offered nearly a £1bn in loans to the country’s biggest power generator to help secure those supplies. If most of the price rises are absorbed by the government, however, that may weaken the yen even further adding to import inflation. – IK
Political Pivots:
- The White House is reportedly panicking over OPEC+ production cuts ahead of the midterms, according to CNN.
- The operators of Nord Stream are protesting that Danish and Swedish authorities are forbidding them from inspecting damaged sections of the pipelines.
- The US looks to Venezuela to increase oil supply, easing Venezuelan sanctions.
Sino Affairs:
- A tale of three tier 3 Chinese cities. Kenneth Rogoff says after decades of building at a breakneck pace, the stock of real estate in China is now quite large for what is still a lower-middle-income country.
- Rumours of an anti-Xi coup spreading last week were pushed by Falun Gong-backed media outlets.
One CBDC to Rule Them All:
- Swift lays out blueprint for CBDC network.
Military and Space:
- SpaceX astronauts blast off with Russian astronauts.
- Poland nukes up.
- The first T-14 Armata spotted doing maneuvers in the field, suggesting they may yet see conflict in Ukraine.
- British soldier recalls a claimed UAP sighting in the fighting fields of Ukraine, around the 30-minute mark.
- FOIA-released National Reconnaissance Organisation report on UAP is entirely redacted.
Following the slew of UAP-related moves in the US government these past few weeks, the FOIA-prompted released of the NROs report on UAP should make everyone perk up. The report as disclosed is entirely redacted from the public – with only the slide dates and the presentation’s title unclassified. The U.S. government claims UAP are not directly classified – as an unknown phenomenon cannot be classified. When matters related to UAP are classified, governmental entities point to one overriding classifying factor; the classified source/unit the intelligence came from. The classification of this entire report goes a long way to suggesting that if matters of UAP are not directly classified, they may be treated as such regardless of the intelligence’s origin. – DGG
