As Dario provides the good, the news is mostly bad, which leaves me….
Godd morning, Dario
And someone made an anime of the Gaza-Israeli conflict
Including kittens roleplaying as Hamas
10:34 DGG:
Mackerel packets have risen to be the hottest trading commodity in United States prisons since tobacco products were banned. Postage stamps and soup packets — “soups” — come second and third on the value hierarchy, respectively. The commissary of the Metropolitan Detention Center (MDC) where Bankman-Fried is housed sells mackerel packets for $1.30.
Short kippers?
In other fishy news, a seemingly misleading panic about UBS was circling around the Twitter rumour mill this weekend
These rumours suggested UBS mysteriously collapsed over the weekend and froze withdrawals for customers
Three things combined to create what seems now to have been a fake news story – as we addressed on the wrap
The first was an issuer failure notice by DTCC on November 11, which claimed a UBS Securities LLC instrument had failed to settle
The second was a Reuters story from UBS CEO Sergio Ermotti on November 22, where he outlined his preferred resolution for UBS, a story spun online as a hidden way in which the bank’s CEO was signalling trouble ahead for the Swiss lender.
The third was an alleged letter by UBS signalling a halt to withdrawals. The letter, which was probably AI generated, seemed to have made the most rounds online
Unknown entities online are now building a narrative that UBS is in trouble not just because it acquired all of Credit Suisse’s troubled legacy Archegos positions but because they are the ultimate keepers of the famed “Gamestop shorts” (a.k.a operational ETF market making shorts).
From our newsletter
And as Izzy wrote:
Of course, if UBS is in trouble, neither shareholders nor AT1 bondholders seem to have picked up on it. And you’d think they would. In fact, readers may remember there was unexpectedly strong demand for UBS’s return to the AT1 bond market two weeks ago, when the bank managed to raise $3.1 billion without any trouble at all.
And now – most of the posts on Reddit have been wiped – showing the admins may have decided the whole thing was fake
But Peter Diggens – you’re onto something
We’re not saying it was a confusion about HSBC
But the point is – we can’t look at these meme-machines as if they are irrelevant. This was a very interesting and significant story – if only because one of the Credit Suisse panics was literally just like this – a series of viral memes and fake news that combined into a real panic
Thanksgiving weekend probably contributed somewhat to overall decline in vol but VIX is now at at a 46-month low
And even realised vol is declining across all asset classes
Even though, it’s not like there’s nothing happening out there
Elections in Taiwan are now only 47 days away (more on that later)
Election in Egypt 10-12th Dec, next FOMC is 12-13th Dec
Nov has been a very strong month for EM fixed-income, equity and fx. Nov PCE data due Thurs in US.
This latter now considered a very important datum given the importance of the US consumer in avoiding a recession in 2023
Mkts still seem to be reconciling a full percentage point of rate cuts in 2024 without an attendant recession but given the experience of 2023 when analysts proved to be far too bearish, that’s no surprise.
The behaviour or the resilience rather of the consumer is the primary explanation for this.
Great chart provided by John Authers on Bloomberg to demonstrate this
In other news – Toyota has surprised markets with novel announcements in these past two weeks
The first was the announcement of an ammonia-based engine
And today, they’ve announced something even more impressive – capable solid state batteries
According to Toyota, these could deliver 745miles of range on a single charge, and only take around 10 minutes for a full recharge
Apparently, these will be available starting 2027 or 2028
That would basically fix EVs for me, Julian – no problems with range and charge time = maybe I’ll buy an EV in future
This is a move that will value Elon Musks’ space firm at around $150bn after it generated preliminary
In case you missed it – there was a successful launch of SpaceX’s interplanetary vehicle that Starship launched on 18 November, which managed to fly further than its last attempt
This one entered space and even getting into its second stage before its automatic self-destruct button made the ship go kablooey.
Or is that not important?
In more news of insider sales as we reported last week
Palantir’s CFO has just unloaded 99% of all his shares on November 20, 2023. Naturally, it was planned on a 10b5-1 planned scheduled to sell.
Unlike last week’s announced insider sales – I’d say selling 99% of the shares whose finances you run is either quite bearish or an indication the CFO is out. What do you think, Julian?
Barclays has been trying to put a lid on costs including by cutting bonuses earlier this year. In its third-quarter earnings report, the bank hinted at restructuring plans, saying it was “evaluating actions to reduce structural costs to help drive future returns,” which may reflect material additional charges in the fourth quarter.
The company reported pre-tax profit for the third quarter slightly below the same period a year earlier, with a 6% drop in its core investment banking segment amid lower deal volumes. Revenue at the company’s fixed income, currency and commodities trading division declined 13% due to market volatility.
So, I mentioned earlier, just 47 days until the Taiwanese elections
Things are getting interesting. Opposition parties KMT & TPP failed to agree on a unified candidate to stand against the Democratic Progressive party (DPP), seeking 3rd term in office.
KMT and PPP are perceived as pro-China/ pro unification
It was notable during the Apec summit between Xi and joe that there was no mention made of the vote really
If there’s no unity candidate o the pro-China side the DPP likely holds onto power for the 3rd term
The problem for Xi
A ridiculous figure, with the dyed hair
Is young Taiwanese are developing a national identity, the slower a takeover of Taiwan, the harder this will be.
For the Chinese that is
I know they say they have a hundred years to unify but Xi wants it now
The new nationalism among young people, however, won’t change the eventual outcome, it’s just a question of time/difficulty and does the rest of the world get involved
Young Hong Kongese had the same feelings too and, ultimately, despite heroic resistance, this didn’t prevent the imposition of a full-on dictatorship.
China’s economic story is not as compelling as it was so selling the financial benefits of unification is not as straightforward.
Lai Ching-te leader of DPP and seeking to foster stronger ties with Washington, will be emboldened by the developments last week
Opposing Lai are Hou Yu-ih from KMT and the Taiwan People’s Party’s Ko Wen-je. Bloomberg’s poll chart makes it clear what was at stake:
TPP and KMT alliance would have been insurmountable
Hou selected television presenter and media owner Jaw Shaw-kong as his running mate.
He’s very pro-China
There’s a pun in here somewhere
To paraphrase Churchill, instead of Jaw Shaw, we may get war, war.
Terry Gou, who founded Foxconn technology, withdrew from the race. It was unclear which side he was backing anyway. He claimed to be pro-independence but it appears he may not have been all that he appeared
Metacynicism is required in all Sino-Taiwanese politics
My theory is that the Cese will simply subvert Taiwanese politics over the next electoral cycle, using money, bribery, pressure, a siege, etc. etc.
They may never need a military invasion
OR – the world goes bonkers and the invasion happens. Which is a distinct possibility
Investing in Taiwan then, in the short-term, is not a function of cross-Strait relations but rather the semiconductor cycle.
Pace Chris Wood in G&F
‘What will be the winning applications in inference is far from clear at present. But it is clear that multiple applications are coming, as suggested by the price action in Nvidia and Microsoft since the announcement of Microsoft’s investment in ChatGPT-maker OpenAI on 23 January.’
Taiwan’s mkt is +22% ytd, despite Jimmy Buffett selling down his $4bn stake in TSMC last Feb
Here’s Taiex anyway
Not bad for a country about to disappear beneath the waves
brilliant note from my favourite GS strategist, Pasquariello, at the weekend
On AAPL for example
AAPL averages $1.1bn per day in sales, $312mm per day in operating income and $266mm per day in capital returns. over the last year, AAPL generated $115bn in operating income, which is over 15% more than the next most profitable company in the market (BRK). over the same period, AAPL has returned $97bn to shareholders in the form of buybacks + dividends, which is over 60% more than the next biggest capital returner (GOOG). I should note here that most of these figures — while mind bending — are a touch lower than they were a year ago. source: Peter Bartlett, GMD.
Also fascinating was this chart on the disparity (although the word barely does it justice) between Chinese economic growth and shareholder returns
‘since 1992, Chinese GDP is up 46x. By comparison, US GDP is up just 4x. over the same period, the total return of A-shares is up 6x. By comparison, S&P is up 19x. so, despite having over 11x the GDP growth, Chinese stocks have generated less than 1/3 of the return. see chart 27 below for a bit more on this point. source: Ben Snider and Ryan Hammond, GIR.
Which is crazy – it’s just reseller policies!
And we still think the Big (‘Magnificent’ – sub-ed) 7 is the right place to be into year-end at least
And look at this chart
Who’d want to fight that just yet?
zerohedge (I repeat, I despise this outlet, but they do have interesting stuff occasionally)
On the same topic:
Signalling serious liquidity problems for the $2.9tn Chinese shadow banking sector
“ its assets are concentrated in debt and equity investments and, because they have a long duration, collection is difficult, the expected recoverable amount is low, liquidity is exhausted, and asset impairment is serious.”
In something that may be connected, the Beijing bourse has instructed major shareholders to refrain from selling, as the PBOC led a statement in which it claimed that China needs to unblock and sustain financial channels for private firms
While China’s shadow banking is in trouble, its attempts to overcome American export limitations on GPUs continued full steam ahead
News attested to China’s factories, which had designed a workaround to continue using highly export-restricted Nvidia chips for AI research
These export controls have led to the rise of a “graphics card recycling” industry, who purchase non-restricted gaming cards from Nvidia – designed for video games – and repurpose them into AI accelerators
“A user from Tieba Baidu forums recently visited a Chinese factory specializing in recycling graphic cards. The user witnessed the workers at the plant tear the RTX 4090, allowing them to extract the AD102 silicon and GDDR6X memory modules.
The workers could repurpose these components onto a “special reference” PCB with a blower-style cooler. Tom’s Hardware states that the entire process is similar to “organ traffic” since the factory only preserves the GPU and GDDR6X chips during disassembling, dumping the rest of the components to second-hand markets.”
The reverse engineering news comes after an announced delay on a NVIDIA chip for China that was meant to comply with American export rules – called the H20, was delayed due to issues with integrating semiconductors
Did you go shopping for deals this Black Friday Julian?
My dear Fritz, are we out of the woods already?!
Online buying for Black Friday hit $9.8bn in the United States and around $70 globally
“Black Friday online sales performance exceeded any retail executive’s expectations,” said Rob Garf, VP and GM of Retail at Salesforce, in a statement. “Retailers stepped up their discounting game and shoppers, in turn, clicked the buy button.”
“”It’s a lot quieter this year, a lot quieter,” said shopper Theresa Forsberg, who visits the same five stores with her family at dawn every Black Friday. She was at a nearby Kohl’s (KSS.N) store at 5 a.m.
In Paramus, New Jersey, crowds at the Garden State Plaza mall were thinner than prior years, according to Michael Brown, a partner at consulting firm Kearney, who has checked shopping activity for the past 35 years.
“It wasn’t the good, old-fashioned kick-the-doors-down-type” shopping event this year, he said. Mall goers “were carrying a bag or two, not the armfuls that you would see in pre-pandemic years. They are not blowing the budget today.”
Now – this is probably because a lot of demand for Black Friday has moved online – but I find even that quite sus
A leading consumer group called Which? found that out of a range of offers on 25 November 2022, only 2% were not available at the same price or cheaper within six months of the date on either side
In one of the worst examples Which? found, Apple AirPods (second generation) headphones at both Argos and Currys were discounted from £139 to £119. However, these products were cheaper than their Black Friday price every day between 25 May and 9 September, where the price varied between £99 and £109.
11:18 JR:we didn’t quite reach the same notorious frenzy we did about 10 years ago when people were brawling outside Ikea to buy a flatpack wardrobe
Buy now, pay later options continued to grow in popularity – with Adobe claiming this type of financing had grown by 72% on last year – up by $79m for the period.
The second was smartphone-related
Not that you need a reminder on what hardware format is taking over our lives
But still – smartphones accounted for 54% of all online sales, up 10.4% on 2022
And a record 79% of all shopping traffic took place on mobile phones
The third is novel data on credit card spending – now estimated by the Fed of New York at $1.08tn
More crucially, at the same time, commercial bank interest rates on credit card plans have skyrocketed
Excellent chart here from Jeroen Blokland on gold price performance during start of Fed easing cycles.
Silver, however, also an inflation hedge, has enjoyed a 20% rally since the Hamas attack
11:23 JR: As largely a by-product of lead and zinc, it’s hard for producers to ramp up production quickly and continued performance into YE should be expected.
One final point point from me… sanctions enforcement is again being shown up as inadequate
Very good note from robin brooks who points out the huge jump in exports to Kyrgyzstan
That are in effect, exports to Russia just avoiding controls
Nein. It means the trade still happens, consumers get hurt, and politically connected middlemen get to skim off the top
Also on the same subject today
US Undersecretary of Treasury Brian Nelson is visiting Turkey “to discuss sanctions enforcement”.
Efforts to cut off this ghost trade to Russia have been complicated as the items have both commercial and military applications.
In the first nine months of 2023, Turkey reported $158m of exports of 45 goods the US lists as “high-priority” to Russia and five former Soviet countries suspected of acting as intermediaries for Moscow.
That was three times the level recorded over the same period in 2022, when the war in Ukraine began.
Turkey once again proving itself an unreliable ally
Or, rather, Erdogan is
stans*
Why don’t we have a bigger convo on turkey later this week Julian
On that pugilistic note
Nunc tempus taciendi
