Good morning, Aloha and greetings fellow market wizards
Morning. How are you today? I have a bit of a headache I confess.
I’m very sorry to hear this
.Not just because I had to do three back-to-back panels at a Politico event yesterday, but because I ended up having drinks afterwards and the beverage of choice was Kylie Minogue’s sparkling prosecco.
I suspect this horrifies you, Julian.
Yes it does.
Celebrity drinks rarely work out well.
Ian Botham’s red wine
same for Ernie Els
Although Miraval by Brangelina is not bad
the problem is not the prosecco, Izzy, it’s how much you have of it.
I guess this is true. Anyway…
where should we start?
Suspect we should reference the 30yr treasury auction wobbler which coincided with a hack at ICBC.
ICBC is one of the largest UST cash-clearing banks.
And as one treasury market watcher noted in a chat: “Some would have to wonder about the timing of this “hack” on the same day as an important 30 year auction”.
This isn’t very diplomatic ahead of the Biden-Xi summit
maybe sending a not-so-subtle message to the Americans.
Market Watch has the story about the bond auction:
Thursday afternoon’s $24 billion sale of 30-year Treasury bonds drew weaker-than-expected demand, according to Greg Faranello, head of U.S. rates trading and strategy at AmeriVet Securities in New York, citing the bid-to-cover ratio and yield concession which came in. The 1 p.m. Eastern time auction caps a trio of sales that have taken place since Tuesday, totaling $112 billion, and which were seen as important tests of demand. Treasury yields moved up slightly after the Thursday’s auction results came out, reflecting a further selloff in underlying government debt.
Here meanwhile is the FT story about the ICBC hack:
Repo watcher Scott Skyrm had this assessment, which I found quite interesting:
Rumors started flying around the market this morning about a Chinese
bank that had a cyber attack overnight and their systems were down. When
they realized they were hacked, they shut down all of their connections to
the market. This meant they and their customers were forced to stop trading.
They need an “attestation” that their systems are working correctly before they
are allowed to reestablish their connections to FICC and Bank of New York. As of
now, there is still no connection.
In order to get trades settled, they sent a messenger with a USB flash drive to
deliver their settlement details to BONY* and it seems their settlements were
If the broker-dealer is able to get direct funding from their bank parent, it
means they financed their securities though the interbank market and not in the
Repo market. This should mean there are fewer securities in the Repo market – less
supply – and Repo rate should move lower. Overnight Repo rates were slightly
more volatile today and they closed soft. In general, the event had a limited impact
on the market.
Sounds like a mission impossible
for Tom C
Exactly, the idea of a flash drive being couriered to BONY in the nick of time definitely has a Tom Cruise aspect to it
(Although given the franchise is on No 6 or No 7 it’s clear by now that they are all frankly mission quite possibles)
Of course, not to over-promote my panels yesterday, this is what we were discussing in the last session with respect to banks being Quantum secure. And how really once someone builds a quantum computer the only way to guarantee that financial transactions can be settled properly is by direct transfer of data in flash drives.
Quantum risk, who knew eh.
This is all very well, Izzy, but what about the climate emergency? “The climate emergency is a race we are losing, but it is a race we can win.” “A nation that destroys its soils destroys itself. Forests are the lungs of our land, purifying the air and giving fresh strength to our people.” “We can do this”
Oh, do F**k off JR.
Ah right, I’m going to tell Greta you said that
Don’t worry, we haven’t really fallen out. That is of course our own dramatization of this famous episode from last night:
“Just closing the fucking door”.
For those who didn’t see it, Powell was interrupted by some climate protestors
This episode may have done more for Powell’s image as an “in-touch man of the people” than anything he’s ever done.
If he were English he would have done a Larry Grayson and said ‘Ooh, shut that door’
Also interesting as they floated this image when the disturbance occurred:
I didn’t realise they were holding a “celebrating Ken Rogoff’s contributions to international economics” day
The man who famously made the world’s worst Excel spreadsheet error.
Ken Rogoff resembles Philip Larkin but he’s made more contributions to intl economics
I’ve met him quite a few times. Super smart. chess player. Etc etc.
Huge self-promoter though.
When I worked at CNBC and was a gatekeeper for media appearances, he would invite me to lunch and bring gifts and all that malarky. When I stopped being at CNBC, that kinda went away.
My favourite media fiasco yesterday was when Putin turned up in Astana to meet the Kazakhs and obviously simply expected his underlings to speak to him in Russian.
Tokaev demonstrating that he is no vassal any longer surprised the Russian delegation by speaking in Kazakh.
Cue much confusion and embarrassment.
This is both interesting, amusing, satisfying and most importantly emblematic of a real change in the geopolitical dynamic in Kazakh.
Kazakhstan is likely to be a big bone of contention between China and Russia as the emergent superpower looks for resource security close to home and the broken, disintegrating empire tries to preserve its influence over its former satellite.
The Chinese are trying to pull Kazakh into its orbit, and the Kremlin Ripper trying to maintain Russia’s stranglehold
Resources are obviously the reason why, and Tokaev is doing what any leader should, playing off one side against the other and getting the best deal possible
Putin in 2014: “Kazakhs never had any statehood” and “their desire for closer ties with Russia is profound”, now even Macron is over there trying to secure decent line of uranium.
France values … the path you are following for your country, refusing to be a vassal of any power and seeking to build numerous and balanced relations with different countries,” Macron said at a meeting with Kazakh counterpart Kassym-Jomart Tokayev
Reminder Kazakh has 45% of the world’s uranium.
Kazakhstan is endowed with abundant mineral resources including coal, ferrous and non-ferrous metals. Kazakhstan is the world’s largest uranium producer (33% of world output in 2021, USGS), as well as having extensive coal, gold, and manganese reserves. Kazakhstan also ranks third in the world in terms of titanium production, seventh for zinc, eighth for lead, and eleventh for gold. More than 230 separate enterprises produce or process coal, iron and steel, copper, lead, zinc, manganese, gold, aluminum, titanium sponge, uranium, and barites among others. The mining sector accounts for an estimated 17% of GDP and in 2021 hard minerals and metals made up approximately 16% of the country’s exports by value. For example, in 20201r the country earned USD 2.5 billion from exports of refined copper to non-EAEU countries, USD 792 million from zinc exports, USD 538 million from silver, USD 369 million from aluminum, USD 251 million from lead and USD 121 million from titanium.
The country has the world’s 8th largest reserves of iron ore with 12.5 billion tons. The nation ranks second, globally, in manganese ore reserves, estimated at 600 million tons. The country’s current reserves of copper are estimated at 36 million tons. Kazakhstan also hosts 30% of the worldwide chromite ore deposits, as well as 95% of the total chromium reserves.
Changing topics a little bit…
The larger-than-life docu-drama that is the life of Adam Glapinski, president of the national bank of Poland continues on.
For those who missed it, the NBP held rates yesterday at 5.75%, but the real story was the evolving spat between Glapinski and fellow PiS appointee Pawel Mucha.
On Wednesday, the NBP put up a note on its website accusing Mucha of unbecoming and intimidating behaviour. But the details of what happened were sketchy. Mucha then took to Xitter, and dumped a load of documents he sent to the MPC, but it was all very convoluted and confusing.
I see what you did there
You know pronounced like President Xi.
Somebody of course asked Glapinski about the drama at the press conference, and it turns out – at least according to Glapinski – that it was all about wages. So Mucha wants a higher salary but according to Glapinski he doesn’t deserve it.
Now to be fair, I didn’t watch the whole conference, as I was myself moderating panels – and interviewing City Minister Andrew Griffith at the time.
(Very sparkly eyes, despite getting off a red-eye)
I didn’t realise the govt has a cabinet member dedicated to the city.
Actually, I don’t know why people always call him that. His formal title is economic secretary to the Treasury. And all his aides call him EST.
(Too late to help me)
He used to be a big wig at SKY.
Economic secretary to the treasury 🙂
Anyway, the Polish NBP presser was in Polish with no translation. So I outsourced the job of monitoring what was going on to my dad who provided me with this seamless real-time update
That sounds like a reasonable commentary so far
He also provided graphic support
Relative to the usual cryptography that Dad sends, I thought his reporting wasn’t too bad
That’s much more coherent than my mum would offer.
But he did miss the more interesting element, which is that Glapinski confirmed the MPC wants to buy even MORE GOLD.
They bought 48t in 2q23.
Yeah, so according to Glapinski, they are aiming to have at least 20% of reserves in gold
“We do buy gold, we are making intense purchases, we want to get to 20% of reserves in gold. because the market is looking at how much gold a cbank has as reserves. A cbank with a lot of gold is trustworthy”
Putting the zloty in zloty basically.
But that’s enough about Poland.
What did my old mate, Griffo tell you about the City?
So it was all about regulatory expectations, and how the UK can better differentiate itself as a big draw for finance.
He’d just returned from the US where he was advocating for the UK and City.
anyway the big question relates to …. PENSION REFORM
Oh lordy, a subject on which I am very weak
Well, it’s not really that complex. Dario will be pleased as I asked about meme stocks.
right for you to say
So basically Jeremy Hunt outlined in July in his mansion house speech, which became – as all these govt declarations seem to become – an official “compact”.
That the UK needs to mobilise capital that is locked in pension schemes, mostly by re-equitising pension holdings and allowing them to invest in less liquid assets.
They have a very low limit on equities and alternatives, right?
Specifically private equity and such.
Everything skews towards gilts at the moment. So ironically the government is talking itself out of a Gilt bid. But whatever. (Exact opposite of what all the hard-up Europeans are doing, which is trying to encourage more local bond purchases).
But the idea really is to get the UK into the same capital market mindset that the average US holder of a 401k already has.
So that Dario for example goes to the pub and talks about his memestock investments with his mates.
Now he has a driving licence, he can drink and drive.
Anyway, luckily my colleague wrote the interview. Here’s the quick POLITICO story on it:
UK pension tweaks don’t need ‘long and slow’ legislation: Griffith
By Bjarke Smith-Meyer · Nov 9, 2023, 5:37 PM · View in your browser
Plans to give pension fund managers in the U.K. more leeway when it comes to picking riskier assets can be done without legislation, according to the Treasury’s economic secretary.
“Legislation is long and slow,” Andrew Griffith said at POLITICO’s U.K. Financial Services Summit in London. “I’m very, very comfortable and happy with a world where we get on and do everything that we can within the existing legislative environment.”
Part of Griffith’s planned changes would allow pension funds to go beyond fixed-income securities for the sake of satisfying daily liquidity thresholds.
A small percentage of those institutional investments should be reserved for less liquid assets in energy and infrastructure, for example, “where you’re going to see outsized growth,” he told Izabella Kaminska, POLITICO’s senior finance editor.
These plans didn’t make it into the King Speech on Tuesday, precisely because new rules won’t be needed. More details are due in the Treasury’s autumn statement on November 22.
Griffith’s vision involves more risk-taking and encouraging British citizens to become more involved in investing, much like in the U.S., where he had just jetted back from.
“If you go to a barbecue in America, they’ll talk about their soccer game. But they may well also talk about what’s in their 401k,” he said. “We’ve got a good pensions system but very, very few people know what’s in their pensions.”
The angle here is that everyone was expecting the pension reform to be flagged in the King’s speech, but it wasn’t.
And that’s because, as EST told me, they don’t think they need legislative change to get through. So more details will come in the Autumn statement.
There’s a bit of conlfict, because on one hand they want to encourage the removal of frictions to trade, make it easier to list etc etc,… and trade in and out of stocks. ON the other hand they want pension capital to be mobilised into very illiquid investments for the sake driving “UK GROWTH COMPANIES”.
seems a bit conflicting.
@johndc77 – Rishi needs some very big rabbits but has a very small hat
Anyway, I didn’t get to ask him about fintech and crypto regulation. Which is a shame. But I did sneak in a closer question about whether he owns Bitcoin.
The answer is no.
That does surprise me
Ok, so talking UK economy
I remember Gordon Brown being ridiculed in the House of Commons for announcing ‘growth of 0.0%’ when he was chancellor.
No danger of that from Jeremy Hunt but the message is the same with the UK flatlining in 3Q and expected to do the same in 2024.
The problem for the Tories ahead of the autumn statement, however, is that it feels like a recession and that’s enough to condemn Sunak’s govt in elections a year from now.
Feels is the keyword
“The Autumn Statement will focus on how we get the economy growing healthily again by unlocking investment, and so on and so forth
Good luck with that…
Not sure what the chancellor can do, given the limited tools at his disposal and Andrew bailey’s commitment to ‘restrictive policies’. No chance of a rate cut until summer next year at the earliest.
Unfortunately, As Capital Economics points out this morning, the situation is tricky to manage. While economic growth is clearly feeling the weight of higher rates, the economy is still ‘not weak enough to reduce core inflation and wage growth quickly’.
that’s the essential dilemma the govt faces
I remember you wrote a piece recently for the blind spot, Izzy, about Ozempic
what now about it? I am seriously frustrated with the market mania about it. Totally overhyped IMHO.
Yes, it’s having a big impact on the stock market, however
Otherwise known as a terrible misallocation of capital
The impact of GLP-1s on food and restaurant stocks is not favourable. There have been downgrades to Krispy Kreme, for example, on the popularity of Wegovy and Ozempic
So now we are getting serious – restos are having to change their menus.
And include all sorts of awful stuff like salads, apparently
Story on bberg:
and yesterday a note from UBS on the subject
Yesterday, the US FDA approved Eli Lilly’s drug Zepbound for the treatment of obesity. Zepbound is the second once-weekly injectable GLP-1 drug approved for obesity in the US, following last year’s approval and launch of Novo Nordisk’s Wegovy. Like Daily Europe 02 Wegovy, Zepbound was previously launched as a diabetes treatment (under the brand name Mounjaro), but widely used off-label for obesity. The approval was widely expected. According to media reports, Zepbound’s list price will be approximately USD 1,060 per month, although we note that obesity drugs are heavily discounted and the net price is not yet available
On a list basis, this is slightly lower than Wegovy. Due to high media coverage and the large number of untreated obesity patients in the US, demand for obesity drugs has soared this year and both manufacturers are currently supply-constrained
So, this is total hysteria nonsense
The idea that “obesity” is solved is just completely incredulous.
I’m with the Oreo boss: https://www.barrons.com/articles/mondelez-ceo-weight-loss-drugs-ozempic-sales-eaf31b4b
I prefer Krispy Kreme. not a fan of Oreos.
And exhibit A for my standing on this… is Gemma Collins
@johndc77 – I have a stetson
on Oct 19, 2020… this was the narrative about Gemma who had used these drugs
Reality TV star Gemma Collins, 39, has had a serious transformation over lockdown, shedding three stone using the weight loss injections, SkinnyJab. After battling with brutal fad diets for years, Gemma seems to have found a weight loss method that works for her.
Gemma has tried lots of different slimming methods in the past, from a £5,000-a-week juice camp to a hypnotherapist that convinced her she had a gastric band fitted, but none of them allowed her to keep the weight off. Gemma has also revealed her battle with Polycystic Ovary Syndrome (PCOS) which she was diagnosed with in her 20s, which she claims has been a contributing factor to her weight gain.
At the time they were sub-branding it as SkinnyJab, but it was Ozempic.
This was Gemma earlier this year tho
Let me guess, she is very slender now?
Izzy consulting the Bodliean Library archives
ah, so not slender
Now to be fair, she has had a bit of another go. And her latest celebrated instagram weightloss is this:
she looks like she has her packed lunch in her hat
But here’s the kicker!
I never thought I’d discuss Gemma Collins in a financial forum
The point is, Ozempic doesn’t work. It’s not a miracle drug. I tried it, TWICE, im fatter than ever.
Maybe at the margin, a few people might benefit from it. But on a mass scale, it’s not the revolution that justifies those sorts of equity allocations IMHO.
UBS are diametrically opposed in their opinions at present…
Their view: Without commenting on individual securities, we see investment opportunities in tackling obesity. More than half the world population is forecast to be overweight (and near a quarter obese) by 2035, according to World Obesity Foundation data. The direct and indirect cost of obesity may reach USD 4.3tr by 2035, absent improvements in treatment and prevention (based on World Obesity Atlas analysis). Our Obesity Long Term Investment Theme identifies investible opportunities with mid- to high single-digit annual growth prospects. We see particular value in health and wellness, food and beverage, sportswear, dialysis products and services, prescription weight-loss drugs, and diabetes drugs to tackle this long-term trend.
I guess the point is, even if these things don’t work, there is plenty of money to be made by exploiting people in the process
There will always be demand for M&S eclairs.
Choc or coffee?
Only the M&S ones.
There’s only one sort there. Cream/choc.
Perhaps this informs the amazing share price performance of M&S this year?
the stock is up +94% on a resurgence in food sales and clothing, predicated on its value proposition and now reinstating a tiny dividend
that’s a lot of eclairs.
The interesting thing about the outperformance is the relative underperformance of John Lewis, right?
Which recently lost its exec, because it turned out she didn’t really know what she was doing.
I wouldn’t hold that against anyone
And was put in a position arguably that she was not competent, and I think she herself has kind of admitted it.
It all went pearshaped JL around 2019 after her appointment, and suddenly all the stuff you could trust JL on, like getting your carpets measured right, stopped working. All staff were very pissed off, and blamed everything on irrational “Centralisation”.
So you couldn’t call a local store and deal with a salesperson locally.
And JL’s loss, I think was M&S’ gain. Tho the latest boost, who knows.
@johnk – the only explanation i saw on DGE was a slump in the caribbean and so sales of hard liquor fell. fewer pirates, I guess
Anyway, good excuse to put up the latest John Lewis Christmas ad:
I’ll end with an anecdote to match that of your father, Izzy
when I started at Salomon bros in 1989, one of my first days on Wall st occasioned a huge drop in the dow a mini-crash.
and when I got back to my apartment that night, my mum had left a message on my answering machine asking me 3 things:
1) what time is it there? standard enquiry
2) is it cold – standard enquiry
and 3. Who is this dow jones bloke anyway?
I’ve had time to watch the John Lewis ad in the meantime, and it’s very weird and focused on a plot about a little boy and a Venus fly-trap that grows and grows.
I think someone is obviously having a bit of a veiled laugh at the recent JL horror show with that ad, as it seems to be emulating the plot of “Little Shop of Horrors”
which if you haven’t seen involves a Venus fly trap.
@johnk – Salamander Brothers was more like a reptilian environment
On that note, it’s goodbye from me…
And adios amigos from here
nunc tempus taciendi