Where finance and media intersect with reality


Spot Markets Live, 16/11/23 (Train strikes, Attritable Weaponry, U.S. Housing)

Julian Rimmer 10:30

Good morning, Aloha and greetings fellow market wizards

you can tell that Christmas is fast approaching

not the sound of jingle bells or Christmas lights sparkling on the high street

but rather an announcement from the train unions that they are going on strike

more of this later but first, buenos dias to dario

down there in the south of spain

Dario Garcia Giner 10:32

Buenos dias Julian, and rabble!

Julian Rimmer 10:32

quick weather report from south of spain?

Dario Garcia Giner 10:33

Easy 22 degrees, some clouds in the sky today to much annoyance

Julian Rimmer 10:33

nimbostratuis of despair squatting above my house in our little microclimate here

but the good news is i’m not working in the shop this afternoon and have the freedom of the city of London to explore

which is a fancy way of saying i’m going out tonight

first things first, market miscellany

DXY contunues to soften on the ‘Fed is done’ narrative

2mth low in the VIX

XBT hits another recent high $38k, still waiting on ETF news

oil swooning again on rising inventories

and a big bad announcement from BRBY whose 3Q earnings were not greeted favourably by the City – 6%

BRBY won’t meet FY23 rev growth if trends persist but raising the div nonetheless, 4% div yield 2024 (e). Trades on a 20% disc to the luxury sector so some of this is priced in but clearly luxury goods are struggling to contend with the repricing of money. Some damaging numbers of late in luxury sector, Richemont & Kering, 2nd-hand prices for Rolex etc are falling

while mkts were euphoric after the Oct cpi data, a piece from DB this morning sounded a note of caution

‘After the downside surprise in yesterday’s US CPI report, there’s been growing anticipation about a dovish pivot from the Fed over the months ahead. For instance, futures are now pricing in an 87% chance of a cut as soon as the May 2024 meeting. But this is at least the 7th time in this cycle that markets have seen a clear reaction to a potential dovish pivot.

On the previous 6 occasions, those hopes have been dashed, since inflation has remained too fast for the Fed to be comfortable cutting rates’

of course, this time it’s different.

the yield curve is always, absolutely always, the best economist

Dario Garcia Giner 10:40

It’s always different this time isn’t it

Julian Rimmer 10:41

Clearly it’s possible that this time could be different, and the rise in unemployment and the fall in inflation is putting us closer to a position where the Fed have begun to cut rates in previous cycles. But 2023 has shown how expectations for cuts have been repeatedly pushed into the future. Furthermore, it’s worth bearing in mind that the last yards of returning inflation to target are historically the hardest ones. After all, when inflation is at its peak, it is often driven by temporary factors, as we saw with the energy shock and the supply-chain disruptions. In addition, when inflation is high there is normally a strong consensus to get it back down again and tighten policy. But as inflation begins falling, the debate increasingly turns to the risk of over-tightening, and whether policy risks being too restrictive. It is difficult to know the answer in real time, since monetary policy operates with a lag. So with markets pricing a pivot for a

Dario Garcia Giner 10:41

‘After the downside surprise in yesterday’s US CPI report, there’s been growing anticipation about a dovish pivot from the Fed over the months ahead. For instance, futures are now pricing in an 87% chance of a cut as soon as the May 2024 meeting. But this is at least the 7th time in this cycle that markets have seen a clear reaction to a potential dovish pivot.

Julian Rimmer 10:42

the S&P isn’t paying attention to DB, thjough

it broke 4500 last night, a three=month high

Dario Garcia Giner 10:42

Maybe there’s some good airs coming from GM’s contract deal with United Auto Workers that seems like it has a chance of passing

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Many longstanding General Motors workers have been voting against the tentative accord, which they feel insufficiently improves retirement benefits.

But the future for the deal is still uncertain

Julian Rimmer 10:43

oh, this brings me back to the train strike

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The Aslef union says it is “determined to win this dispute” as it announces new industrial action.

this brings out the fascist in me

Consider this: The median salary for train drivers was £59,189 per year in 2021.

 Does this reflect the difficulty of the job/ the barriers to entry/  the investment in training?

what do you think, Dario?

does it?

Dario Garcia Giner 10:45

It’s a very tricky situation – what can you do about it? They hold outsized political power, while their own individual skills become gradually more irrelevant day by day

Julian Rimmer 10:45

so I looked into the requirements to become a train driver

here’s what i found

  • Concentration: Driving a train requires impeccable concentration skills and the ability to focus on a task for long periods of time. Maintaining concentration and focus is essential for ensuring the safety of train passengers and cargo.

Decision-making: As a train driver, there may be situations where it’s necessary to make quick decisions that could affect both passenger safety and quality of service. The ability to remain calm

  • The ability to work alone: Train drivers spend much of their time alone, although there are parts of the job that require collaboration and communication with colleagues. Train driving, and particularly driving on the London Underground, can be a lonely occupation, so it’s useful to be comfortable working alone.
  • Computer literacy: As a train driver, you may use certain computer devices and software as part of your everyday duties. It’s useful to have some experience of using computers before applying for the role.

i think what this boils down to is that you need to be a sentient being with a room -temperature IQ

anything else is a bnonus

Avanti advise applicants for their trains …

  • If you can travel to your designated depot within an hour, meet the required medical standards and are over 20 ½ years old at the time of applying – then you could reach a salary of circa
  • £70,000 within just a few years

so you need to live within an hour of the depot to get £70k. the union does the rest

Dario Garcia Giner 10:48

You missed one out

Has a pulse: It is useful if train drivers are members of the living, rather than undead. Avanti does accept applicants from other forms of semi-living applicants, such as Biden supporters and fans of Andrew Tate.

Julian Rimmer 10:48

elsewhere in our market miscellany…

Joe and Xi predictable came up with very little tangible from their discussions

but both added killer lines afterwards


“Look, he is. He’s a dictator in the sense that he’s a guy who runs a country that is a communist country that’s based on a form of government totally different than ours,”

Dictionary definition: A dictator is a ruler who has complete power in a country, especially power which was obtained by force and is used unfairly or cruelly

so Biden using the right word but the wrong definition

Dario Garcia Giner 10:50

I think we’re underestimating the genius of Biden’s diplomacy. It’s high diplomatic protocol to invite a nation for peace talks because you’re inevitably steering towards a mass murdering war with them, only to then call their leader a ‘dictator’. 4D Chess

Julian Rimmer 10:50

Xi asserted: ‘Beijing will realise reunification and this is unstoppable’

sinister enough

Dario Garcia Giner 10:51

“You can’t talk about war here, this is the peace room!”

Julian Rimmer 10:51

regarding the subject of Xi’s minatory statement, ie Taiwan

quite a major announcement yesterday

in Taiwanese domestic politics

Kuomintang and Taiwan People’s Party joined force and will propose a joint candidate.

these are the more pro-Beijing parties

the Taiwanese exchange is +20% ytd

that’s mostly predicated on the AI theme boosting chip producers

(read Chris Miller’s Chip War on this subject. very important book but jesus, mary and joseph, was it dull)

The mkt’s obvious concern is about a deterioration in relations across the Straits of Formosa if ruling democratic party wins

(they are ahead in the polls)

Ko Wen Je, the leader of Taiwan People’s Party went as far as to say he hates the KMT but not as much as he hates the Demo Party.

(do you believe him? I dont but…)

Elections 13th Jan.

this is a very big date fort geopolitics

Dario Garcia Giner 10:55

Whenever I read about the Kuomingtang I’m reminded they were some of the premier heroin runners of the 20th century. Funny little factoid

Julian Rimmer 10:56

from the US Institute of Peace

Lai Ching-te (democrats) leads with about 29.7%, followed by Ko Wen-je (TPP)  at 25.6%, Hou Yu-ih (KMT) at 21.1% and Terry Guo (no one really sure) trailing far behind. It’s banal to point out how important is the outcome of these elections, peace dividend for the world if Taiwan decide under their own steam to reunify. Taiwan’s export-driven economy is coming out of a recession. The government recently forecasted full-year growth to be only 1.6%, down almost a full percent from 2022. According to Hou and Ko, better relations with the mainland may help revive the sluggish economy.

Over the last week, however, Beijing’s tone has become much more ominous: China’s top military official warned that China “will show absolutely no mercy” to anyone who supports Taiwan independence, and the head of China’s Taiwan Affairs Office called the Taiwan election a “choice between war and peace.

Regardless of who wins on January 13, Beijing likely does not expect to see a lasting change in cross-Strait relations. If Lai wins, China would continue to reject engagement with a new DPP government that, like the Tsai administration, does not acknowledge the 1992 Consensus. However, neither is the DPP likely to formally declare independence during a Lai presidency. And even if a future KMT leader establishes more open communication and connectivity with Beijing, the majority of the Taiwan people oppose unification, while Beijing remains committed to that goal. Tensions might ease in the short run under a KMT president, but no matter which party controls the presidency, Beijing will continue to pressure the island to compel the Taiwan people to choose “peaceful unification” over war.’

I’m not sure I fully understand how the Taiwanese would elect a KMT TPP candidate and not want reunification

Taiwanese will ultimately be browbeaten into it. The election of a joint candidate could be taken well by mkts. If the world think the Taiwanese want to go in that direction, it gives them an excuse to back down.

Dario Garcia Giner 10:58

It’s just a matter of time before they become reunified, forcefully or otherwise

Let’s just hope it doesn’t take us to war with it (and me into conscription)

Julian Rimmer 10:59

I suppose if the turkeys vote for Christmas it spares the resty of the world another democratic dilemma and perhaps there is a huge peace dividend to be extracted from that, irrespective of what the future would be like for the 23mill Taiwanese

another headline that caught my roving eye

Spacex to float Starlink next spring

you see this DArio?

Dario Garcia Giner 11:00

Yes – I heard Musk denied it, always a good indicator something is up

The upside to Starlink is huge

Brilliant product

If you think it’s received a bad rep in the last year because of Musks’ refusal to allow the Ukrainians its connections to strike at the Russians in Crimea, you should think again

This controversy is precisely because of how intrinsic and crucial this piece of equipment has become for Ukrianians

Current estimates hold there are between 45,000 to 100,000 Starlink terminals in Ukraine, which began arriving during the battle of Kiev – many donated by countries like Germany.

The terminals have also been evolving to counter Russian jamming attempts which they achieve by sticking their jammers up in the sky and hoping to counter the satellite signal.

Julian Rimmer 11:01

I agree on the brilliance of the product, i think the problem is Musk. I can give you an individual example

a tree fell down on the telephone wire near my house in France on the 7th July.

Four months laster and Orange Telecom have not repaired it and the obvious thing to do would be to a) firebomb a local branch of Orange Telecom and then b) have Starlink installed

However, after the Ukrainian episode I had a crisis of conscience and refused to buy his product, even though it would solve all my connectivity problems in a very remote part of France


I refused to buy it.

Dario Garcia Giner 11:05

I’ll say that while I really like Musk for now, but I can easily see him deteriorating into a full on Caesarian-like figure

One thing I like the most about him is how he understands war – starlink in question. One of the few western products that work for warfare

You’d think this year was a bonanza year for western defence. Not so much



(Mostly because it was overbought following Russia/Ukraine)

But there’s more trouble ahead for western defence majors

Get used to two new critical words that are signing the end of the western defence establishment – dual use and attritable

Dual-use is tech that is developed and sold for civilian markets that can be quickly readapted for military use

Julian Rimmer 11:06

ie drones?

Dario Garcia Giner 11:06

Something Iran and Russia have become extremely adept at

The Western model of war is based on the U.S.’s doctrine of superior firepower.

This means we’ve come to rely on massive capex for high-cost, high-maintenance technological assets

A tragically outdated philosophy

It’s essentially the modern mounted knight

And woe all defence stocks which don’t adapt, and woo investors who understand the nature of this century’s pendulum-like swing away from sophistication and towards simplicity in defence.

The iranians get this

Their loitering surface-to-air missile ‘358’ costs 30 grand. It recently downed a 4mn reaper drone

Julian Rimmer 11:08

is that the shaheed?

Dario Garcia Giner 11:08

The shaheed is ground-to-ground. This is a anti air version of much the same idea

With this engine – which is the main difference AFAIK

A little bigger than your arm

If it doesn’t look like a real jet engine that’s because it isn’t. It’s a hobby R/C jet turbine

Philip pilkington has zeroed in on the subject in his latest, arguing that adjusted for PPP Russian military might is far more cost efficient, and more aligned to the low cost imperatives of contemporary war


“What stands out from our cost-ratio metric, however, is that when the PPP-adjustment fails, it always fails in one direction: that is, even when PPP-adjusted, Russian equipment tends to be cheaper than American equip­ment. This means that, when we aggregate up to total spending, even when using a PPP-adjusted measure, we likely underestimate Russian military potential. This fits with the evidence of PPP-adjusted metrics failing when comparing British and Russian spending. The Russians—probably due to being a poorer country with lower w

wage costs—seem to get more bang for their military buck.

Julian Rimmer 11:10

However, one thing we know about Russian military expenditure is that it’s vastly exaggerated owing to the endemic corruption within the military establishment

So I think the Russians spend or were spending about ~$70bn pa (less than France for example) and so while things are cheaper in Russia they are a) poor quality in general and b) only half that money is spent on weaponry other soldiers. the rest is frittered away on moonshine vodka

Dario Garcia Giner 11:12

While that is true, endemic corruption in the West is arguably even bigger- it’s just not called corruption, it’s called defence expenditure.

Julian Rimmer 11:12

doesnt the US spend hundreds of millions on Viagra or such like?

Dario Garcia Giner 11:12

We’ve been wasting the vast majority of our military budgets on equipment that will be shown to fail or just not work, or be defeated, by the far cheaper money that Russia can afford to put into its equipment

The biggest winners out of Ukraine aren’t the Leopards or Storm Shadows

These are the equivalent of the Nazi wunderwaffe – overhyped, overexpensive, overengineered and impossible to replace at adequate pace

Julian Rimmer 11:13

thery sp[ent $84mill in 2017 on blue pills !

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More than a million prescriptions are paid for every year, and many go to retired personnel.
Dario Garcia Giner 11:13

The Pentagon has realised the quandary they are in

They have started the Replicator Initiative, an effort to build up a mass of inexpensive ‘attritable’ drones this August

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The Pentagon is launching a new effort to build up mass with inexpensive autonomous drones called the Replicator Initiative.
Julian Rimmer 11:14

by attritable you mean ‘ can be sacrificed at low cost’?

Dario Garcia Giner 11:14

Yes exactly

We’ve drunk our own kool-aid in the west. We don’t know how to fight anymore

The Russians do. Even if they drink and corrupt half their budget away, the other half is still spent on things that can go boom and get boomed and no big deal

Slightly higher on the cost scale is the Low-Cost Atrtitable Strike Demonstrator program

“The LCAAT portfolio was established to break the escalating cost trajectory of tactically relevant aircraft and provide an affordable, significantly lower cost/weight solution as an unmanned escort or wingman aircraft alongside a crewed fighter aircraft in combat.”

A perfect example of where the West is the XQ-58A Valkyrie by Kratos Defence:

Read my lips: this is sub-optimal.

Pentagon: I want a cheap strike fighter

Western defence: Say no more

Pentagon:  Thank you

Western defence: Here is an unmanned drone with STEALTH and GADGETS that can fly VERY HIGH and SUPER FAST and yes its “CHEAP’ because it costs HALF as much as your EXPENSIVE system, which this is NOT, and will ONLY cost SEVERAL MILLION, not SEVERAL TENS of millions. Attritable, right?!

Pentagon munching on defence-provided oysters: Sure. Pass the champagne

At least Kratos is using all the right language – which has served their investors very well. But they’re not the future either. Even companies like Palmer Lucky’s Anduril are going in an outdated direction – focusing on tech-heavy interconnectivity solutions.

Julian Rimmer 11:16

however, for the Pentagon this war has been very useful in the respect that it has taught them how outdated some of their military was and is. they are also learning how to fight with drones in real-time and so the minor percentage of the defence budget spent supporting Ukraine is incredibly good value, not to mention attriting the Russian military at the same time.

Dario Garcia Giner 11:17

Good value for the Americans, terrible value for the Europeans (and the Ukrainians!)

Julian Rimmer 11:17

i’d say the chances of the US engaging China militarily any time soon are much less than they are they engage the Russians whose congenital malefaction is so widespread as to be worldwide

Dario Garcia Giner 11:17

This is already getting very long, Julian. But rabble – if you’re interested in my thoughts on where defence is going, and where Western industry needs to go to build a cost-competitive arsenal, you should subscribe to our weekly newsletter the Blind Spot Wrap.

Julian Rimmer 11:18

enough eschatology, how about some markets stuff?

Dario Garcia Giner 11:18

the youngsters call it ‘scat’

Julian Rimmer 11:19

that’s very different

Dario Garcia Giner 11:19

Scat is more like a pornhub category

Oh nevermind. It’s about poop.

Moving on

Julian Rimmer 11:20

we should discuss the different etymologies of those words offline I think

Dario Garcia Giner 11:20

Mortgage rates –

30-year mortgage rates have shot back up and have returned to 8% territory this Monday, reaching 8.07%

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After wavering in the upper 7% range for a week and half, rates on 30-year mortgages jumped back to 8% territory Monday. The 5/6 ARM average also hit 8.00%.

Here are some national averages

but that’s not the only meh news for US real estate this quarter

Since a court verdict last month adjudicated against realtors, finding they conspired together to keep their commissions high, and asked the National Association of Realtors and big residential brokerages were liable for around $1.8bn in damages, the profession is in dire straits

“The federal jury in Missouri found that the National Association of Realtors and large brokerages conspired to keep costs associated with home sales artificially high by effectively locking in commission rates even as home prices have skyrocketed.”

This is on top of the chill in inventories due to high-interest rates and low home sales

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The National Association of Realtors and big residential brokerages were found liable for about $1.8 billion in damages
Julian Rimmer 11:22

I think the impact of higher mortgage rates is less in the US than it is in Europe, for example because mortgages there are so much longer, there are fewer people rolling over ontop new, expensive mortgages than UK and \europe

where 3-5 yrs is standard

Dario Garcia Giner 11:23

Lower commissions from homesales means that most homes priced under a million for sale wont’ be worth a realtors time and effort

Thats what realtors in FL claim

Julian Rimmer 11:24

a reputable body

Dario Garcia Giner 11:24

An ption for realtors is to turn to a fee-based model

But that comes with its own risks

Speaking of house prices

Zillow’s forecast model now predicts that US home prices will fall by -0.1% over the next 12 months.

3 months ago, Zillow’s estimate was +6.5%.

What made it turn so quickly?

Julian Rimmer 11:26

CISCO took a big whack last night as they explained poor numbers by the delays in tech expenditure by US corporates

who are struggling to grow the top line so focus on costs to beat eps estimates

Dario Garcia Giner 11:26

Poor numbers in tech are making their mark

After their hiring frenzy post-pandemic, here come the expected culls that have been occurring all throughout this year

Amazon, Google, Snap and Zillow all announced staff layoffs this week

Julian Rimmer 11:27

is this a fucntion of AI?

Dario Garcia Giner 11:27

Google has already been chopping through its staff numbers – 12,000 employees got the boot from January 2023. the same goes for Amazon, who axed 27,000 employees this year

Julian Rimmer 11:27

(he asks, still not really knowing what AI is)

Dario Garcia Giner 11:27

Compared to these giants, Snapchat and Zillow’s chops are minnow sized only 2 dozen each

Julian Rimmer 11:28

(downsize is the preferred euphemism)

Dario Garcia Giner 11:28

Perhaps the hype around AI means Amazon and Google have been less reticent to offload sides of the business they now judge outdated. But I think this was more tied to classic overhiring syndrome

And it’s not only tech giants doing the “”downsizing””. Bank Citigroup has announced the start of mass layoffs, as it embarked on its biggest corporate overhaul in almost two decades.

Have you ever been fired Julian?

Julian Rimmer 11:29

i worked at six companies in 32 years and left only two of them at my own volition

ING declared me ‘unmanageable’

Dario Garcia Giner 11:30

Thats quite a high compliment

Julian Rimmer 11:30

but jeff, investec and Urinalswab – that Russian bucket shop all thought they were better off without me

Dario Garcia Giner 11:30


Julian Rimmer 11:30

Urinalswab was actually a bank called Uralsib

but I never called them that

ok before I start slagging off mgmt teams at Jefferies and Investec, it’s best to call it quits there

that intemperate outburst might have been inspired by the fact today’s forum was fuelled by Martinique rum rather than the kings ginger liqueur because i’ve run out of the latter

nunc tempus taciendi

Dario Garcia Giner 11:32

Goodbye all!

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