Good morning, Aloha and greetings fellow market wizards
Welcome to November as we bid good riddance to October which was a painful month for markets.
Unfortunately, after hosting friends for dinner last night, November is off to a painful start from a personal perspective
Dario – I hope you are feeling more sprightly than me
Absolutely. I celebrated yesterday by finally managing to get rid of my good friend who was staying over. Feeling very sprightly
The blissfulness of solitude
Are you celebrating All Saints Day? or All Hallows Day?
It’s big in Europe, I’m told
Yes – with a friendly barbeque
Lots of chorizos
Was there a St Darius?
But I’m named after the Emperor. My parents were heretics
Julian is the patron saint of innkeepers, and ferrymen and would you believe it…
(Sorry to hear, John, lmao)
Lion tamer or clown? The website I consulted did not specify.
Do you know where financial Svengali, Izzy is this morning?
The Izabella had a delightful anecdote this morning
She apparently met a fields medal winner yesterday, but being a classicist (not to be confused with classist) she didn’t know what that was and asked if it was “some sort of track and field accomplishment”
Now apparently her husband, who has a chemistry degree, wants to disown her
That would have been my gambit too
(And yes she’s seen Good Will Hunting but that was 25 years ago)
I’ve heard you also have something to give us Julian. A haiku?
Yes, I was inspired yesterday by the Japanese maple outside my window as we were typing
blaze of beauty burning out
you’ve not long left.
3 lines, 5, 7, 5 beat scheme and a forlorn ending. That’s a haiku
Well, it’s a lot better than Bard’s attempts at the Haiku. I tried to do the same with the Snapchat AI today. But we have a little SNAFU
So this morning, Dario I will be leaning very heavily on you.
(no change there then).
Well we can start off with an easy meme
The wonders of AI image generation
(John: It’s actually not bad!)
So the Biden White House just dropped a new AI rule this Monday
It didn’t seem to make HUGE waves in the news cycle
This Executive Order signed to:
“seeks to balance the needs of cutting-edge technology companies with national security and consumer rights, creating an early set of guardrails that could be fortified by legislation and global agreements.”
In short, the Biden White House claims to want to make sure the AI is gonna be saying his “please and thank you’s”
Rather than the more ominous: “YOUR CIVILISATION IS OUTDATED PREPARE TO BE DELETED”.
The wording of the legislation underlined the very much work-in-progress nature of the regulation
executive order* not legislation
““any model trained with ~28M H100 hours, which is around $50M USD or – any cluster with 10^20 FLOPs, which is around 50,000 H100s, which only two companies currently have “
For those like me, who don’t know what this means, H100 is a graphics card or GPU from Nvidia
For context: Meta’s large language model, Llama 2, required 1.7 million GPU hours on A100s. And H100 is far more powerful than the A100. So, in short, one of the world’s most powerful open-source models is still miles away from this benchmark.
Meta is +141% YTD
I presume there aren’t many ways to play AI that are listed so by default people end up buying META?
I’d actually warn everyone to stay well away from AI – it makes logical sense that we’re far too early in the adoption curve, hype is everywhere, and investors/VC’s, even most tech people, have no clue what they’re developing or investing in
As the White House admits:
“The Secretary of Commerce, in consultation with the Secretary of State, the Secretary of Defense, the Secretary of Energy, and the Director of National Intelligence, shall define, and thereafter update as needed on a regular basis”
It’s going to be very difficult for Congress to legislate on AI if most members of Congress don’t know what it is
The way things are going, my pet theory is that soon even the AI developers won’t know what AI is
Now, what does the online crowd think about this?
Here’s one interesting summary
Alright, let’s break it down, Reddit-style:
Biden: “I’m making rules about AI before Congress gets their act together.”
- Keep AI safe.
- Protect our private info.
- Make sure AI doesn’t have a bias problem.
- Help folks who might lose jobs because of robots.
- Keep America on the AI leaderboard.
- Big AI names like OpenAI? Show us your safety homework.
- No sneaky AI stuff in government.
- Privacy rules? Congress, get on that.
But hold up: executive orders are like Snapchat stories. They don’t last forever. So Congress still needs to make some long-term rules. Meanwhile, AI peeps are like, “Nice move, Joe. At least you’re doing something.”
So, in a nutshell? Biden’s trying to make sure our robot overlords are nice and don’t spill our secrets. Progress? Yes. Perfect? No. But hey, at least someone’s steering the ship. ????????”
What’s the problem with that, Julian?
It was written by an AI
I saw no problem
So this EO was written with the largest tech companies – OpenAI, Anthropic, Google, and Microsoft, having already signed off
Good morning AIs
Good morning, Neil and welcome
I hope you’re not shareholders in Aston Martin
The company announced yesterday that it intends to launch a “fulsome refinancing exercise”
Fulsome, in my book, means gushing.
Share price looks a bit like this.
Speed does not appear to have been a factor. It was a slow-motion car crash. Down 98% in the five years since it floated
Thanks. I’d lost track of the number of share consolidations, write-offs and promises of new dawns since the disastrous float.
Speaking of car crashes and failing cars
California has ordered the General Motors Cruise unit, its autonomous cars division, to remove its driverless cars from state roads
California’s Department of Motor Vehicles suspended GM’s license, calling their vehicles a “risk to the public” and stating the company “misrepresented” the tech’s safety.
Don’t you need a driverless car, Dario, not being able to drive yourself?
Dario Garcia Giner 11:48
Well, I was trying to hide that from our readers who may still think something of me.
That is after GM admitted on Tuesday the company lost roughly $1.9bn on Cruise vehicles from January to September 2023, including more than $732mn in Q3.
You’re saving the planet, obv
Billion with a B!
The number is huge
The suspension follows a series of accidents involving Cruise vehicles in the state. One egregious example had the self-driving vehicle which braked but didn’t avoid striking a pedestrian which had previously been struck by a hit-and-run driver, pulling the pedestrian along the road.
This is a Cruise traffic jam, for example, in San Fran
And: a Glasgow man was forced to ring 999 after his Tesla took control of the vehicle and started to dodge red lights and roundabouts. The Tesla also decided to deactivate the brakes. The situation only stopped when a police vehicle rammed the Tesla off the road.
So what I thought, Neil and Julian
a likely story
What if the autonomous cars story will be like the self-checkout machines
A promise for automation comes at a hidden cost: with higher maintenance fees, poor customer service, and significant anomalous downsides (higher theft / quirky automation glitches).
DING “Unexpected person under driving area. Please remove this person to continue.”
A friend came round for a drink last evening. From the expression on his face, I knew immediately something was very wrong.
It wasn’t difficult to guess: he’d just been on the receiving end of a new mortgage offer
and it was apparent that his fortunes had taken on the trajectory of Icarus’ last flight.
But hey! House prices are rising again! It’s official, from Nationwide, so it must be right
I think his payments were rising from £350 pcm to £1950 or something)
That is NUTS
Disposable income as he knew it was now suddenly a thing of the past. New mortgages are now well in excess of 5% and the average burden, as old deals fall off, is above 3% and set to rise towards 4% over the next year.
Unsurprisingly, therefore, UK mortgage approvals have slumped accordingly and dipped to ~40k per month versus a run rate of 60-70k for the previous decade.
I’m not sure about Nationwide’s numbers, Neil
Did your friend really think that the rate would stay at 3 per cent indefinitely?
Not many marks for financial planning
I don’t think he’d prepared for it, put it that way. He’s a journalist
Oh. That explains it. Probably writes the money advice pages
Zoopla reckons house prices falling in 80% of postcodes, among them Colchester is suffering the worst. One pocket of strength is Motherwell in Scotland. I’ve visited both and see no reason to favour either.
I remember my first and only visit to Scotland our train stopped in Motherwell. My ex’s uncle picked us up in a Range Rover. The first car that went by was a bunch of bald lads speeding in a BMW who flipped us off and shouted ” c*nts!”
That’s a friendly greeting in Motherwell.
Speaking of calamitous falls in personal income, there’s some interesting stuff coming from the Dallas Fed’s manufacturing survey
They’re a far cry from what you’d expect for a nation growing at 4%.
I gotta go, guys, but can’t resist another poke at BP. They are lucky that Exxon is distracted, otherwise, they would be sitting duck now, especially after the latest figures. Still, the buyback programme will go a bit further now the shares have fallen.
2% of next year’s FTSE return will come from share buybacks I think I read
Buy-back: a process where you give your brokers a shedload of money and tell them to keep buying until it’s all gone, regardless of the price
Execs should read Simon Wolfson on this subject:
He applies logic.
But since the execs just want the share price to go up to help their options, I doubt whether they would follow his lead.
That sounds unusual
(The application of logic, I mean)
Coming back to Texas factories, here’s some of the anecdotes
“In a consumer business, we are hearing a lot more “I can’t afford this” than we ever have before.”
“Six months from now is actually quite scary. The economy is uncertain, and customers cannot predict with any certainty what they see. Political pressure and the wars are now forcing customers to reevaluate their business activities and reduce their outlook. It’s very uncertain.”
“We are seeing a pronounced slowdown in owners going forward with new projects. There is too much uncertainty in the economy and globally.”
Now, a lot of survey respondents are reporting factories, orders, and profits going strong. the key drag seems to be consumer sentiment and future orders
I’m familiar with this phenomenon
Things in China aren’t better either – a long-awaited report on Chinese industrial activity for October was just released
“China’s official purchasing managers index for the manufacturing sector fell to 49.5 in October from 50.2 in September, the National Bureau of Statistics said Tuesday. A reading above 50 indicates an expansion in activity while a reading below 50 signals a contraction.”
“Gauges of activity in China’s services and construction sectors also weakened, pushing a composite gauge of economywide activity to 50.7—its lowest reading this year.
The weak results contrasted with economists’ more upbeat forecasts after an improvement in growth in the third quarter. Manufacturing activity recorded its first expansion in September after five months of contraction, according to the index.
The readings were “a slight shock,” said Robert Carnell, head of research for Asia Pacific at ING. “This suggests that the economy is still struggling,” he said.”
The lower confidence trend worldwide goes further than just manufacturing. A recent report showed that American consumer confidence was dropping at increasing amounts
““consumers continued to be preoccupied with rising prices in general, and for grocery and gasoline prices in particular,” Dana Peterson, chief economist at the Conference Board, said in a statement on Tuesday. “Consumers also expressed concerns about the political situation and higher interest rates.”
But there are nuances
Meanwhile, consumers with a household income between $25,000 to $35,000 saw the biggest decline in confidence about the economy over the past month. In contrast, consumers with a household income between $100,000 to $125,000 saw the biggest jump in confidence over the past month.
How can we make ourselves feel better about any of this, Julian?
Well, I turn the consolations of the bottle
That was last night, he writes, by way of justifying his poor contributions this morning:
A friend came round who’s a recovering alcoholic which explains the solitary bottle of de-alcoholised lager. The 1967 port was the highlight but, of course, it’s the worst for a hangover.
Anyway, so this made me feel better but then worse.
Well, speaking of hangovers, we may be in for a big one
I dno about you, but I had (and still have) little idea about what an ETF is:
All I know is it’s a place on a trading app where you can click “buy” and “sell” and the button clicks don’t mean your portfolio immediately turns very red or very green
It’s a relaxing “buy” button, one I can press and feel chill.
So it turns out that this little relaxing habit may be more problematic than I knew.
I’m not sure this is what the designers had in mind
or maybe it was…
A Redditor uploaded a brilliant little analysis that compiled all of Michael Burry’s old thoughts on the problematic nature of ETFs:
Is he the Big Short guy?
The very same – the glassy-eyed one
“Passive investments such as index funds and exchange-traded funds are inflating stock and bond prices in a similar way that collateralized debt obligations did for subprime mortgages more than 10 years ago, Burry told Bloomberg News in an email. When the massive inflows into passive vehicles reverse, “it will be ugly,” he said.
“Trillions of dollars in assets globally are indexed to these stocks,” Burry said. “The theater keeps getting more crowded, but the exit door is the same as it always was. All this gets worse as you get into even less liquid equity and bond markets globally.”
The Redditor also included his perspective on the formerly serious stock market transforming into a market where “regards” like myself meander about
“The conventional wisdom, embodied in the efficient-market hypothesis, holds that market prices reflect the fundamental value of the underlying asset. But increasingly, research is identifying another force as being important: investor demand that may or may not be informed.
At the heart of their argument is a new description of the stock market, which has been transformed over the past few decades by the rise of index funds and other large, slow-moving investors.
In the inelastic markets hypothesis, money that flows into the stock market leads to stronger price effects because there are essentially a set number of available shares, and many of those are not being actively traded. Pairing their theory with an empirical analysis, the researchers estimate that every $1 put into the market pushes up aggregate prices by $5.
The inelastic markets hypothesis raises questions, one of which is: If flows have a larger impact on prices than standard theories allow, how many of those flows are still made on the basis of fundamentals?”
Uninformed investor demand? I and my deeply red Trading 212 account feel personally attacked.
Here’s the thread if anyone’s interested:
Do you have any money in an ETF?
No. No, 31 years as a trader and salesman convinced me not to make any investments myself. It was too hard to make money working and then too easy to lose it.
I was not a good advertisement for the stockbroking industry. I prefer to leave it to my pension manager so I can blame someone else for my failings.
(You’re far from the only rabble on here today John. And remember, John Snow is also lurking in the comments – but he knows nothing)
Well, that seems wise Julian.
And I’m glad (I don’t either) – it turns out a generation we can both safely hate is responsible for whatever upcoming calamity may befall us – at least as far as Bond ETFs go.
“45% of millennial ETF portfolios dedicated to bonds: Schwab Asset Management”
That is a staggering number
Between you and me, I fucking hate millennials. They’re the worst
They’re the reason John Oliver is popular, they really like Save the Children and whales
They also invented political correctness in its modern form
Don’t let me stop you,
I say we do a Boomer-Zoomer alliance to wipe this miscreant generation from the face of the earth
@johndc77 – I always like those disclaimers that say ‘Share prices can go down as well as up’
which was news to me who did not know they could go up
Speaking of problematic news regarding ETFs, there was an interesting article in the cointelegraph.
Bloomberg ETF analysts have claimed SEC Chair Gary Gensler could pull an “amazingly sadistic” move and pull the plug on spot Bitcoin
“In an Oct. 31 tweet directed at senior Bloomberg ETF analysts James Seyffart and Eric Balchunas, ETF commentator Dave Nadig posed whether Gensler may be allowing for spot Bitcoin ETF applications to pile up just to deny them all at once in a “semi-comedic rug-pull.”
“I’m sure it will be much more boring than this — but sometimes it does feel like this is all a setup for a giant Gensler semi-comedic rug-pull,” said Nadig.”
‘A semi-comedic rug-pull’ is a beautiful locution.
The scenario is listed as unlikely by the analysts – their major point is to underline that there’s still a lot going on behind the SEC-scenes and that a last-minute denial cannot be off the cards
To remind u all: SEC has been denying Bticoin ETCs since 2017
In 2022 Grayscale, a crypto asset manager sued the SEC
Millennials would be most irate
The court found the SEC’s decision “arbitrary and capricious”, a decision not appealed by the SEC
It’s unclear if their original reasoning, that crypto spot products don’t have sufficient safeguards to protect investors from market manipulation, continues to be at the forefront of their decisionmaking.
Back to real markets…
Eurozone CPI yesterday would have brought a sigh of relief to the ECB with Oct’s 2.9% reading the lowest in 2 yrs.
Do you know who would appreciate a datum point like that?
What’s he dealing with atm?
Probably counting his money in his 600-room mansion above Istanbul but inflation in Turkey is still comically high. On Friday a figure of 4.1% mom (yes, month on month) is expected, taking the annual rate to 62.5%.
That’s actually insane
Erdogan’s attempts to restore economic credibility are doomed to failure, even with his ex-Merrill finance minister Simsek talking a good game.
How do they even survive?!
most Turks keep most of their savings in hard currency – and estimates of wealth in Turkey are always conservative because gold or hoarded cash always accounts for more than economists can measure accurately.
But clearly it’s not enough to protect everyone.
What do you think the Fed will do about their own inflation?
Well, I reckon The Fed will observe ‘a hawkish pause’ today, allowing themselves the possibility of another hike in Dec if data demands it.
I saw a Stanley Druckenmiller interview in which he announced a big bet he’s made on 2yr notes. He forecasts a bear-steepening of the curve and criticised Jerome Powell because
“When rates were practically zero, every Tom, Dick, Harry, and Mary in the United States refinanced their mortgage,” Druckenmiller said. “Unfortunately, we had one entity that did not, and that was the US Treasury.”
(I can also add my journalist friend to that list)
He’s nervous about swelling govt debt issuance
with good reason, remember that 1.7 plus a lot of zero numbers from last week?
Before the Fed announces its decision, the treasury will publish its borrowing schedule for the next quarter detailing the size of Treasury auctions as well as the duration mix of the debt
The treasury offered a preview on Monday, when the department promised/ threatened to auction off $776 billion of debt 4Q23
I have a mini question for you Julian
What is this picture
It looks very much like the stilton which accompanied my 1967 Taylors port last night
Wrong. Everyone loves it or hates it, it appears everywhere around the world, and it’s relatively smooth except for the bits that aren’t rotten
It’s France’s foreign policy
Look at the smiling chaps
So that Kazakh leader is a short-arse too
Macron made a little pit stop in Kazakhstan today – just before his ongoing trip through the Central Asian nations, as he’s about to go to Uzbekistan afterwards
Mind you this visit came while the Central Asian giant is now two years into being the West’s replacement supplier of crude oil
But Kazakhstan’s large uranium exports – as we overviewed yesterday – are likely another big reason for Macron’s visit
France’s Orano (its uranium miner) is already operating a joint venture with Kazatomprom
And that’s not all, of course
“Since gaining its independence in 1991, the former Soviet Union country has boasted of having “all the ores and elements on Mendeleev’s table” in its subsoil. According to the United States Geological Survey, it is the world’s leading producer of uranium (with 40% of global production), the second largest producer of chromite (13%) and the fifth largest producer of cadmium (5.9%). It is also reported to have abundant rhenium, zinc and manganese mines.”
The meeting unveiled that mutual trade between France and Kazakhstan grew 30% to over $4bn last year, with France investing nearly $18.7bn in the country
@johnk – I think it was purely a generational, internal power struggle
Funny you should mention that John Kingston. I don’t know. But an investigation Izabella led at the FT and that I aided with once I joined the Blind Spot had us speaking to a fascinating and well-connected man, who was accused online of being behind Qanon. We don’t think he was, but he was certainly connected in close circles
Anyways, funnily enough when the coup attempt or protests or what may have you was happening, he called me to tell me that Kazakhstan had already swapped its geopolitical masters from Russia to the West (mind you, this was just a few months after the Russian invasion – and way before we had official media pieces suggesting that Kazakhstan was considering switching sides – which only happened this summer.)
And that only time was needed for the rulers or what may have you of Kazakhstan to slowly make this move towards the West
I wrote on this too
The last thing about France and Kazakhstan
Notably, the meeting unveiled that Paris is in line to participate in the construction of Kazakhstan’s first nuclear plant.
(John – sounds like it could’ve been a good time to double down. But don’t listen to my advice. Please)
And with that last bit of frog-bashing, it’s time to bring this episode to a close. Have a wonderful November everyone. Come on in. The water’s lovely!